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Cleantech: Renewables Firms Will Look To Corporate Investors To Grow

by Melody M. Bomgardner
January 12, 2012 | A version of this story appeared in Volume 90, Issue 2

Credit: Dynamic Fuels
Solazyme will provide algal oil for this Dynamic Fuels facility in Louisiana.
Dynamic Fuels renewable jet and marine fuel facility in Geismar, La., which will take in used vegetable oil and algae oil from Solazyme for U.S. Navy contract.
Credit: Dynamic Fuels
Solazyme will provide algal oil for this Dynamic Fuels facility in Louisiana.

In 2012, cleantech firms will have to cope with lowered venture capital investment and shaky support from government, industry watchers say. On the other hand, corporate investors will seek out promising technology in sectors such as biobased chemicals, drop-in alternative fuels, water treatment, and agriculture.

The high-water mark for venture investing in cleantech was 2008. According to Dallas Kachan of consultant firm Kachan & Co., 2011 will yield the second-highest investment total, about $8.8 billion globally. He anticipates that 2012 will bring less funding to green technologies, especially those in the early stages of development.

“There are more indications than ever that some [large investors] are becoming increasingly reluctant to fund cleantech,” Kachan says. “They’ve been grousing about cleantech for years. But the politicizing of the Solyndra bankruptcy has amped the rhetoric higher than ever and will foster a self-fulfilling prophecy in 2012.”

Andrew Soare, a senior analyst at advisory firm Lux Research, cites Solyndra and defunct cellulosic ethanol maker Range Fuels as two strikes that lower the industry’s likability among government stakeholders. Calls for austerity will also give policymakers reason to cut cleantech spending, he adds.

“It will be necessary to wean off of government support to be viable,” Soare says. “Though not a death knell for industry, it could slow developers and less qualified companies looking to build facilities.” He suggests that private financing will be available but only for the least risky projects.

Biobased chemical firms, including Solazyme, Amyris, and Gevo, went public in 2011, but turning to the capital markets is not always the best move for firms that have little or no revenue, Soare warns. Many are taking advantage of the hype around cleantech or biotech but are still years away from commercialization.

Companies focused on alternative fuels and biobased chemicals will need to develop partnerships with corporate investors to help construct commercial-scale facilities. “There will be favorable terms for corporate investors to get technology or a stake in cleantech companies,” Soare predicts.

Soare’s research suggests that corporate investors are more interested in biobased chemicals than fuel-only technologies. But firms supplying renewable drop-in fuels such as diesel or jet fuel also look promising.

Meanwhile, Kachan says marine energy from waves or tides, sustainable agriculture, and water treatment technologies will grow from a small base this year.



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