Progressive Investor Sample Article
2007 Year in Review, Cleantech Portfolio, Promise of Air Capture
Issue 50: December 2007
2007 Year in Review
2007 was a watershed year for the environment. The fourth report from the Intergovernmental Panel on Climate Change (IPCC) confirmed and deepened the urgency to address climate change, coupled with Gore’s movie, “An Inconvenient Truth.”
Along with graphic images showing the arctic ice retreating 30 years ahead of projections, the IPCC report warned we’re nearing the tipping point of no return - a couple of years into a 10-year window to seriously address climate change. We also learned that reducing emissions by 20% or even 50% isn’t enough – we face the huge challenge of constraining emissions by a daunting 80%.
Along with steeply rising gas prices and the volatile Mid-East, we saw the perfect environment created for the world to embrace energy efficiency and clean energy.
Highlights of the year include - on a national level:
* The EU approved a target to cut greenhouse gases 20% from 1990 levels by 2020. Six G8 nations agreed to voluntarily cut emissions by at least 50% by 2050.
* Germany signed laws to cut greenhouse gases by 40% by 2020, raising targets for renewable energy to 25-30% (up from 12%).
* Australia ratified the Kyoto Protocol.
* Inefficient incandescent light bulbs were banned in the EU, Australia, Ontario and the U.S.
* The U.S. Supreme Court ruled the EPA has the authority to regulate greenhouse gases.
The meeting in Bali didn’t accomplish much, but industrialized nations agreed in principle that they must pay developing nations to preserve their forests and to transfer clean technologies.
In the U.S.:
* For the first time, a handful of states rejected construction of new coal plants.
* San Francisco banned plastic bags at supermarkets.
* New York City launched a multi-billion dollar sustainability plan, which has already resulted in all hybrid taxi fleet and clean bus fleet. The courageous plan is the first to propose congestion pricing.
* California passed the first law to reduce the carbon intensity of transportation fuels - 10% by 2020.
* The Clinton Climate Initiative launched a $5 billion effort to retrofit buildings for energy efficiency.
As you know, the very diluted Energy Bill recently passed, which omitted the national RPS, and solar and wind incentives – the funding for which would have come by depriving oil companies of their subsidies. But the auto industry finally accepted the inevitable – they must produce more efficient vehicles. The Green Jobs Act of 2007 passed as part of the bill, authorizing $125 million for green job training programs across the country!
About $125 a year was appropriated for demand-response and SmartGrid initiatives, which should boost companies in that sector.
Corporations Add Their Voice
Many of the world’s largest corporations formed the U.S. Climate Change Partnership to lobby the federal government to immediately enact mandatory national cap and trade legislation. Members include GE, DuPont, Duke Energy, Alcoa, BP America, Johnson & Johnson, Dow Chemical, ConocoPhillips, Deere & Company, General Motors, Shell and Siemens.
* Citigroup committed $50 billion over 10 years for investments and projects in low carbon technologies.
* NewsCorp, one of the word's largest media companies and led by ultraconservative Rupert Murdoch, announced it would be carbon neutral by 2010.
* IBM announced it would spend $1 billion to become more energy efficient across global operations.
* Dell is tripling its recycling of electronic products and supporting federal legislation to mandate electronics recycling.
* Google launched RE<C to develop renewable energy sources that will be cheaper than coal.
Public Markets
55 of the largest U.S. institutional investors, representing $4 trillion in assets, joined Ceres' Investor Network on Climate Risk, scrutinizing how the companies they invest in are managing the financial risks and opportunities of climate change. Solar and wind stocks zoomed, pushing clean energy indexes to sky high levels. Ardour’s Global Composite Index shot up 70%, for example; the bellweather Powershares Clean Energy Portfolio (PBW) rose 36.09%.
Iberdrola Renovables went public on December 13. It is the largest publicly traded renewable energy company in the world with a market cap of over EUR 22 billion.
While 2006 was the year of the solar IPO, 2007 was the year of thin film solar – marking the beginning of an industry transition to next generation solar technologies. First Solar (FSLR) exceeded anyone’s expectations, rising from its IPO in late 2006 to the current $269 a share - the company’s $17 billion market cap exceeds General Motors or Ford’s!
Overall, investments in renewable energy stand at about $85 billion for 2007, according to the United Nations Environment Program (UNEP).
It was also the year of green funds. We’re now seeing a proliferation of mutual funds, indexes and ETFs, including those from heavyweights like HSBC and Standard and Poor's. Every major investment house from Morgan Stanley to Goldman Sachs covers the field.
Project Development
The wind industry is on track to install 4000 megawatts (MW) of new wind capacity in the U.S. this year, shattering the American Wind Energy Association’s (AWEA) previous record-setting projection of 3000 MW. Over 5000 MW are in various stages of construction.
The 64 megawatt Nevada Solar One plant came online near Las Vegas – marking a strong return for the concentrating solar industry. Recurrent Energy closed a $200 million staged solar project fund with Morgan Stanley. Finavera got the go-ahead to build the first commercial wave energy plant in the U.S. The global PV market grew by more than 40% this year - about 2.3 gigawatts of new capacity, according to the European Photovoltaic Industry Association.
Private Side Investment
Investments in clean technologies reached an all-time high in North America and Europe - $1.74 billion for the third quarter of 2007. Year-to-date that brings the total to $3.64 billion, a 13% increase from 2006. The UN calls it the new “gold rush.”
Large venture capital funds, such as Swiss Re’s EUR 329 million European Clean Energy Fund, the EURO 200 million Climate Change Capital fund, and the $300 million Technology Partners fund closed. Solar and biofuels were the leading investing sectors. With the large VC firms now firmly entrenched in cleantech, that means larger checks for later stage companies, leaving earlier stage companies for smaller firms.
Leading cleantech venture capital investors for 2007: (Thomson Financial)
* Draper Fisher Jurvetson: 11 companies, $43 million invested
* KPCB: 8 companies, $77 million
* Khosla Ventures: 8 companies, $63 million
* Goldman, Sachs & Co.: 7 companies, $46 million
* NGEN Partners: 7 companies, $26 million
* VantagePoint Venture Partners: 5 companies, $48 million
* New Enterprise Associates: 5 companies, $41 million
* Good Energies Inc.: 4 companies, $67 million
* Technology Partners, 4 companies, $28 million
* Sigma Partners, 4 companies, $23 million
Top investments in private companies:
* A123Systems: $132 million
* GreatPoint Energy: $115 million
* GridPoint: $88 million
* HelioVolt: $77 million
* Advent Solar: $76 million
* SolFocus: $56 million
* Amyris Biotechnologies: $52 million
* Solaria Corp.: $50 million
* Serious Materials: $50 million
* BrightSource Energy: $47 million
* Konarka Technologies: $45 million
* Tesla Motors: $45 million
* Innovalight: $28 million
* Optimal Technologies: $25 million
What’s on tap for 2008? No doubt, cleantech will continue to surge, after all it’s just begun to find its footing. We’d like to believe it will be the year of the “consumer” – where the average person gets seriously interested in greening their lifestyle and the average business does the same. We’re likely to see major announcements from many more multinationals as they green their companies and product lines reaching out to “consumers” with a green face.
We believe IPOs will continue, but not at the torrid rate we saw last year. Larger venture funds will form, focused on larger players, and we'll start to see consolidation. In a December National Venture Capital Association survey, investors picked cleantech as the highest growth sector for 2008!
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