"Power Struggle" - Part 1 (Investing in the Alternative)
Tuesday, November 28, 2006SUSIE GHARIB: Call it a power struggle, the challenge of finding renewable energy sources that will be still viable decades, even centuries from now. And it's a power play that's attracting big bucks. Last year, venture capitalists poured almost $1 billion into clean energy startup firms. So we're taking a look at the renewable energy industry in a three-part series called, appropriately, "Power Struggle." Tonight, Stephanie Dhue looks at how light and wind could meet our energy needs in the future.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Using lenses and mirrors to concentrate sunlight, Silicon Valley start-up Solfocus is working to generate more energy for less money. Solfocus CEO Gary Conley wants to make solar power as ubiquitous as the PC.
GARY CONLEY, CEO, SOLFOCUS: Everything in our design does multiple duty. And then we use automotive type techniques to get that very low cost and very high reliability.
DHUE: Solar energy now costs about four times as much as conventional fuels.
CONLEY: We're trying to produce energy from the sun that is as cheap or as competitive as classic energy, which means oil, even coal. We want to approach this from an economic basis to where we can compete with other energy sources directly without subsidy.
DHUE: Some investors are betting Solfocus can cash in on its design. The firm planned to raise $10 million in venture funding, but investor enthusiasm brought it $32 million. That level of investor interest may be reminiscent of the dot com boom. But some investors are undeterred. Stephan Dolezalek is in charge of choosing alternative energy projects for Vantagepoint Venture Partners. He says there is great potential for renewable energy and energy efficient technologies.
STEPHAN DOLEZALEK, MANAGING DIRECTOR, VANTAGEPOINT VENTURE PARTNERS: If you're watching just one technology, you may well see a bubble-like behavior. If you watch the entire, what we call clean tech sector, what you're likely to see is a series of those waves moving forward and the whole sector will become much, much larger. And so there's a lot of money to be made in the sector. You just have to be careful as to which portion you're playing at, at which time.
DHUE: For example, wind power may already be largely played out. Michael Garland heads up the energy infrastructure group for financier Babcock and Brown. One of the projects he's working on now is this wind farm in the Altamont Pass in California. He says renewable projects are often more complicated then they appear and can take decades to generate returns. Still, he expects the market to grow but investors' returns to be lower.
MICHAEL GARLAND, ENERGY INFRASTRUCTURE, BABCOCK & BROWN: It really is going to be limited by the amount of the equipment and the ability to manufacture the subcomponents. Everything from last year we had issues with steel availability and towers and this year and for the next year or two we're going to see turbine limitations, in terms of the ability to manufacture enough turbines to meet the demand.
DHUE: Lower energy prices from traditional sources could also dampen enthusiasm for renewable projects. But even with lower oil and natural gas prices, many predict a sustained interest in renewables and clean technology. For example, Tesla Motors, which developed this fully electric sports car, expects interest to remain high even if prices at the pump are low.
MARTIN EBERHARD, CHAIRMAN & CEO, TESLA MOTORS: The fact of the matter is that we are deeply dependent now on oil from countries not only in the Middle East, but let's toss in Venezuela while we're at it, that don't like us particularly and that's from a national security perspective, not a good position to be in.
DHUE: Eberhard also points out electric cars have zero emissions so don't contribute to global warming, a point that remains regardless of the price of crude. The return for investors in renewable energy will be measured not just in dollars, but also by what new technologies, engineering and designs are developed. Stephanie Dhue, NIGHTLY BUSINESS REPORT, San Francisco.
