The Race for Small Cleantech IPOs Continues

Small cap cleantech IPOs have been especially hot lately, and definitely global. The big cleantech news seems like that the whole world is getting in on the IPO game. It’s not just in the US, the equity markets in Australia, on the ASX, and the London AIM exchange have lots of activity.

The other striking thing is this activity is not being done by the big banks, nor for the market leaders in each energy or environment technology sector. Many of these recent IPOs have been definitely “emerging” businesses.

IPOs in recent news include a biodiesel company announcing it will raise A$37 mm in Australia,
Axiom Energy IPO. Hoku Scientific went public a few months ago in the US. An early stage fuel cell membrane company, it is up 100% since then. Polyfuel, another emerging US competitor to Hoku, has also looked at plans to IPO on the AIM, Polyfuel IPO.

Babcock & Brown is affiliated with a recent wind energy company listing in Australia, now raising US $275 mm for growth.

In solar in the US we have seen micro IPOs in CIGS from Daystar last year on Nasdaq, and Solar Integrated Technologies, a US based company on the AIM exchange. SunPower, another solar company whom Cypress Semiconductor has sunk tremendous amounts of money into, has filed for a $115 mm IPO in the US. Total revenues are just south of $30 mm, putting even this rather large IPO by cleantech standards well south of the top 10 solar players, who are mostly private.

My own firm advised one in green thin film processes for RFID antennas and EMI shielding, Block Shield, that floated on AIM last year and has done well.

The real question is how strong are these companies, are the valuations reasonable, and how will they perform? By and large most of the recent cleantech IPOs are very young businesses, not ready for the public markets by historical standards.

Renewable Portfolio Standards: Good or Bad?

In his columns featured in New Power Executive, Professor Robert Michaels of Cal State Fullerton is usually good for ruffling a few feathers. Recently, he took on the issue of renewable portfolio standards, with his typical contrarian stance that they are an abomination.

In defense of his position, Prof. Michaels leaned heavily on the work of David Montgomery of CRA International. Montgomery presented a paper in May at the Harvard Electricity Policy Group — a very interesting repository of leading-edge thinking on the electricity sector — entitled

“Renewable Portfolio Standards: A Solution in Search of Problem?”.

The Montgomery/Michaels position is that RPS requirements do not effectively address the core issue they aim to tackle (air emissions), and instead only produce significant economic distortions and hence inefficencies in the operation of power markets.

As an economist by background and a free-markets capitalist by philosophy, I am generally sympathetic to their arguments against RPS. In an optimal world, I too would prefer not to have RPS requirements. However, the Montgomery paper notes only in passing the real issue: that there is no policy in the U.S. to deal with the externality of CO2 emissions. If there were a binding U.S. policy on CO2 emissions — cap and trade, carbon tax, whatever — then I totally agree with the Montgomery/Michaels thesis that RPS programs are undesirably distortive. But, unless/until there is U.S. CO2 policy (which we badly need), then I believe RPS to be a fairly good second-best solution.

What do you think? Are there better ways to reduce CO2 emissions from the power sector than RPS requirements?

Plug-In Hybrids: New Contender for Clean Car Mantle

I’m gratified Neil Dikeman invited me to contribute to the CleanTech Blog. I may sometimes duplicate what I say at Power, Plugs and People at

I thought I’d start with a backgrounder that will bring readers up to speed about plug-in hybrids, the existing-technology solution that has been the subject of much attention in recent months. This is a version of a column published in the Green Car Journal, the quarterly publication that’s read both by consumers and auto industry insiders.

This year, batteries and electric motors are back in the news, spurred by the popularity of gas-electric hybrids and the recognition that fuel-cell cars are electric vehicles. The plug-in hybrid (PHEV), long consigned to a footnote as an interesting but unrealistic idea, may soon enter the mainstream as an automotive option.

Here’s how our organization, The California Cars Initiative (a non-profit group of engineers, environmentalists, entrepreneurs that combines technology development and advocacy), explains how PHEVs work for drivers. “It’s like having a second small fuel tank you always use first. You fill it at home with electricity, at an equivalent cost of under $1/gallon. Your energy is cleaner, cheaper and not imported.”

Now support for PHEVs comes from unexpected places. Neoconservatives seeking rapid reductions in oil dependency. Engineers immersed in online communities. Futurists concerned about a vulnerable centralized power grid. Ethanol advocates discovering feedstock alternatives to corn. Clean-Tech investors are supportive but haven’t yet determined how to participate.

They’ve joined forces with long-time supporters like renewable energy advocates, utilities with cheap off-peak power, fleet owners eager for green cars and component suppliers seeking new markets.

One by one, objections have fallen away:

* The complexity of two systems. Today’s hybrids use advanced technology to remove components and engineer some of our highest quality and customer-value cars.

* The national power grid is too dirty. Argonne National Laboratory and other studies show electric vehicles beat out gasoline vehicles on well-to-wheel greenhouse gases.

* No one is interested. Journalists have jumped on CalCars’ and EDrive’s high-MPG conversion stories. They understand how flex-fuel PHEVs would use almost no gasoline. Admittedly, some reporters haven’t factored in electricity and biofuel costs. But when the bipartisan National Commission on Energy Policy dug into the emissions numbers and looked for achievable strategies, they gave plug-in hybrids the highest grades. Then Orrin Hatch, Barack Obama and other Senators, along with George Shultz, James Woolsey and other former Cabinet Members, hailed the 2-4 cents/ mile cost for local travel as a breakthrough this country needs.

* Car companies won’t build them. DaimlerChrysler is now completing the firstOEM PHEV prototypes. Recent statements from Toyota and Ford indicate they are weighing the concept as well. We hope at least one company will jump on the opportunity to differentiate itself, leapfrogging over current hybrids.

* Batteries cost too much and won’t last. This remains a subject of debate. Even discounting promising materials science advances, batteries are competitive through incremental but substantial technology, production and cost improvements, rising gasoline prices. Soon we’ll have data from DaimlerChrysler Sprinter vans with NiMH and Li-Ion batteries. A forthcoming Electric Power Research Institute (EPRI) study will report no technology impediments and see affordable batteries when produced in volume.

* Overly long payback. This topic is fading as many auto buyers demonstrate their willingness to pay more up front for green cars. They recognize that energy security and global warming are not simply issues of “dollars and cents at the pump”. Meanwhile, EPRI studies project lower lifetime costs for PHEVs than for any other type of car. And growing concern over the danger of further delay in reducing oil consumption led to tax credits that scale by MPG, and prompts companies like Hyperion Solutions and Timberland to subsidize employees’ hybrid purchases.

PHEVs are an extendable platform that welcomes other solutions like engine efficiencies. They can be designed for any fuel type, starting with gasoline and evolving to biodiesel, cellulosic ethanol and even hydrogen. This way, PHEVs solve both the “chicken and the egg” infrastructure dilemma and the uncertainty of predicting future technologies. and our allies plan to partner with OEMs on demonstration programs. We know the auto industry can deliver. After Pearl Harbor, Detroit switched from cars and trucks to planes and tanks in a year. With PHEVs, we have the opportunity to find out how clean and efficient cars can be right now.

Are Oil Prices Finally Coming Down?

Oil prices are made up of components, supply and demand.

The market tends to forecast near term supply for oil reasonably well. There is a lot of data out there, and a lot of smart people crunching it.

The big bugaboo in predicting oil prices, however, is forecasting short term demand. The main variables in demand tend to be economic growth rates in the US, Europe, China, and SE Asia. If those economic growth rates exceed what oil analysts expect, oil prices tend to rise. If they don’t, oil prices suffer.

As you can see in the recent press, oil price recently fell about 10% on overinflated demand predictions.

Falling Oil Price News Article

The last time oil hit a low of $11/barrel was only 7 years ago in 1998/1999. It was right after oil had risen to a recent high of $35/barrel in the mid 1990s caused mainly by heavy demand growth from rapidly growing SE Asian economies, and the solid US economic growth during the Clinton Administration, at a time of tight supply. During this time many OPEC countries were producing above their quotas, and when the “Asian flu” hit and took a bite out of demand, oil prices cratered. On the supply side, several years of relatively high stable prices had seen increasing investment in new oil production, just like today. And those new supplies kicked in just as demand dropped. OPEC, which usually balances supply, did not act quickly due to internal fighting, and we saw oil prices drop by 2/3rds in a very short period.

Similar situation today. No one knows when demand will falter, but when it does, watch out.

This is a cyclical industry. Let none of us forget it.

Cleantech Investment Forum in Australia

I just wanted to put a plug in for the Cleantech Forum in Melbourne, Australia in late Novemeber. I am moderating one of the panels on investing.

The founder, Jeffrey Castellas, has been looking to make a splash in cleantech for some time. I am excited to see he is doing it in Australia, as my firm does a lot of work done there. Australia has a tremendous amount of technology in the cleantech area, partly because natural resources is a sector where Australian punches outside of its weight, and partly because of a very strong university and government investment in research.

Check it out. Cleantech Forum

Coming Convergence of Energy, Environmental and Capital Markets

I recently had the pleasure of sitting down with Peter Fusaro in New York to discuss the evolution of the energy and environmental marketplace. For those of you who know Peter, spending time with him is akin to drinking triple-shot espresso out of a fire hydrant — a mixed metaphor perhaps, but one that should indicate the overwhelming volume, rapidity and forcefulness of commentary and opinions that Peter expresses.

These days, Peter is spending most of his time embedding himself in the energy hedge fund community, which gives him a distinctively insightful perch from which to view the current situation and near-term future. From his perspective, he is passionate in his conviction that the environmental markets will transform the energy markets, and furthermore will more deeply intertwine both markets with the capital markets. He rattles off several statistics and anecdotes demonstrating that interest in energy and environmental markets by the hedge fund community is exploding, and that such activity will fundamentally make the future quite different from the past.

After letting my head spin down from our discussion, I read Peter’s latest article, which he publishes through his relationship with Utilipoint. It’s intriguing stuff, and presents a window into Peter’s thinking — and, by extension, into the way the world of hedge funds is viewing energy and environmental matters.

“Turbulent Markets Ahead: Why the Energy & Environmental Crisis Will Continue For Many Years”

Cleantech Venture Network Now Streaming Cleantech Blogs

The Cleantech Venture Network is now streaming several Cleantech blogs on their site,

The stream is heavy on the technology investment and venture capital content at the moment, but several good blogs are already streamed there.

Check it out. We at Cleantechblog are big fans, and support all the Cleantech Venture Network is doing to drive investment into the cleantech, energy technology, and environmental technology community.