$10 trillion cleantech plan fails to generate excitement

A $10 trillion investment is being called for in everything from energy efficiency and biofuels to nuclear power between 2010 and 2030 to lower carbon dioxide emissions and avoid extreme climate change.

But it's something those in the sector are already very well aware of.

In fact, the International Energy Agency report released this week only brings to the forefront the urgency of the global energy crisis and proves the focus is on the right track, companies in the energy efficiency space and an investor told the Cleantech Group.

“Energy is at the heart of the problem—and so it must form the core of the solution,” said IEA Executive Director Nobuo Tanaka, in a news release. The Paris-based IEA advises on energy issues to 28 industrialized countries.

The IEA is recommending that much of the spending through 2020 be on increasing energy efficiency, renewable energy and biofuels. This is to followed by investment in nuclear power, carbon capture and sequestration in the next decade (see Nuclear power is particularly green energy: get used to it).

“We’re a big believer that energy efficiency is the fastest, cheapest and most important component to solving the global energy crisis,” said Michael Sachse, director of government affairs and general counsel with OPOWER, which specializes in energy efficiency and smart grid software.

The Arlington, Va.-based company is working with 18 U.S. utilities to help customers realize and lower their energy consumption.

“There’s been a lot of attention given to the potential for renewable energy,” he said, citing sectors such as solar and wind. “Don’t get me wrong, that’s a very important part of the energy solution, but it’s the thing people tend to think about first. Energy efficiency is often overlooked. It’s cheaper. It’s more readily available. It just needs to be deployed more systematically and on a larger scale.”

He said whether the investment dollars will follow to support the energy transformation called for in the report will depend on whether governments set up the right incentives, such as those for utilities.

Other companies working with utilities, including demand response company EnerNOC, are poised and ready to take off as the energy efficiency sector grows on a global level in the near future (see EnerNOC ‘scratching surface’ of demand response market).

Andrew Chung, principal at Menlo Park, Calif.-based Lightspeed Venture Partners, says the report doesn’t address anything cleantech investors aren’t already thinking about, rather “it’s additional confirmation that supports what folks have been actively thinking about for some time.” His venture capital firm also has offices in China, India and Israel.

“We hold energy efficiency investments to the same high standard as we do for other cleantech investments,” he said. “Is this going to generate a strong return for the firm?”

He said energy efficient technologies tend to be less capital intensive than supply generation areas such as solar or biofuels. Some of his interest lately has been on smart grid technologies and lighting efficiencies, including fabless semiconductor company Exclara, which provides digital power management for light-emitting diode (LED) lighting.

“Without a doubt, energy efficiency is going to play a critical role in mitigating the effects of climate change, and this report is another validation of that,” said Chung, adding that as an investor his job is to look at a variety of cleantech solutions, including energy efficiency technologies in energy management, lighting, and building materials.

For Dan Hyman, principal with Milpitas, Calif.-based Custom Mechanical Systems, his company provides custom air conditioning/HVAC units, including cooling systems primarily for data centers that help lower energy consumption. He was pleased but not surprised to see energy efficient investment as a focus in the report.

“One hybrid car doesn’t save anything. One AC unit doesn’t save anything. But the whole industry moving in that direction is a good thing for the United States and for the world,” he said.

The report also calls for putting the global energy system on a trajectory of stabilizing greenhouse gas emissions at 450 parts per mission of carbon dioxide equivalent, which is in line with an increase in global temperature of around 2 degrees Celsius.

To achieve the 450 ppm trajectory, the study points out the energy transformation needed, sector by sector, in key countries and regions including the United States, Japan, the European Union, Russia, China and India. The full World Energy Outlook 2009 report is expected to be released Nov. 10 in London.

But it's not the first time the IEA has called for a dramatic increase in cleantech investment. Last year, the IEA's BLUE plan called for annual investments between 2010 and 2050 to "decarbonize" the power sector (see International body calls for $45T investment in energy infrastructure).