A cleantech edge with Ron Pernick

Ron Pernick is in a good position to co-author a book on the industry.

As a founder of industry analyst firm Clean Edge, Pernick has co-authored more than a dozen reports on emerging clean technologies, and has worked with a range of clients including multinationals, startups, government agencies and investors.

His book The Clean Tech Revolution, just published by Harper Collins, is co-authored with Clint Wilder, also of Clean Edge. With chapters introducing various clean technology sectors, their players and dynamics, it's a good primer for those just learning about the industry.

Pernick shared some of his thoughts with the Cleantech Group on issues from the book, and what he learned while researching and writing it.

Read more about the book itself, and/or buy it, here.

In your book, you compare the clean-tech gold rush to that of the Internet. What's different this time? The investment dynamics? Time to market? Others?

Many of the same investors and entrepreneurs involved in the Internet (from folks like Steve Case to John Doerr) are now involved in clean tech.

There are many reasons for this shift of capital and talent—including the fact both the Internet and clean tech offer the promise of making money while changing the world. This may sound idealistic, but as we point out in the book, it takes innovators and entrepreneurs to help create new technological possibilities. That’s a challenge that innovators and venture capitalists relish.

And interestingly, many of the same technologies that enabled the high-tech sector are at the core of clean technologies. Solar is the best example of this; the solar industry now uses more silicon than the chip industry, and stalwart chip and consumer electronics industry leaders are now leading the solar charge—including Applied Materials, Cypress Semiconductors, and Sharp Electronics.

But there is a fundamental difference, we believe, between the Internet and clean tech. The Internet was about creating entirely new business models and tools and had, what many considered, low barriers to entry. The clean tech revolution, on the other hand, is about serving our most basic needs such as water, transportation, and electricity. These technologies are needed to support the multi-billion dollar infrastructures of modern societies.

Therefore, the build-out of clean technologies such as solar, wind, biofuels, and the smart grid will take decades, not just a few short years. In other words, to shift from, say, 5 percent renewables to 30 percent renewables, might take 10-20 years.

And herein lies one of the great differences between the Internet and clean tech, and one of the great clean-tech opportunities. This sector really does offer life-time job security for those that pursue working in this field.

The worldwide energy and water markets are as big or bigger than the market for IT. And yet clean tech is still only 5-10% of venture capital investing totals, behind IT and biotech. How do you reconcile the market opportunity vs. today’s relatively low investment levels vs. concerns about a looming energy tech bubble?

Well, as we touch upon above, these shifts take time. In a recent column I point out that success in clean technology requires “long term thinking.” In our own tracking with Nth Power, however, we show that energy tech alone accounted for 9.4 percent of total VC activity in the U.S. in 2006, up from less than 1 percent in 1999. That’s a pretty significant shift.

And globally, if you look at all investments (not just venture, but corporate, governmental, project finance, etc.) the clean-energy sector along is now valued at around $70 billion.

Regarding an energy tech bubble, certain sectors within clean tech will at times experience irrational exuberance by investors. There’s no doubt about that. And some very promising companies will of course fail. That’s part of the free-market system.

But overall, considering the diversity of technologies and the daunting challenges faced by governments and companies (such as climate change, volatile supplies of natural resources, the growth of the middle classes in places like China and India, etc.) we expect more of a long boom, with areas of readjustment, rather than some kind of singular, blow out.

What are the barriers to growing renewable energy to utility scale? Solar PV, waste to energy, geothermal, biomass … while the largest implementations are individually fairly small today, they all have large-scale ambitions. What’s standing in the way?

It’s helpful to look at some places that have already begun shifting to significant portions of clean energy. Denmark and Spain both get around 20 percent of their electricity from the wind today. Ethanol is widely available in Brazil and accounts for a significant portion of overall transportation fuels usage. California is on target to get between 20-30 percent of its electricity from new renewable within ten years. So it’s possible to get into the 10-20-30 percent or greater range in a relatively short time frame (again, when considering longer time horizons) when you have political and business will on your side.

And at the core, the ability to ramp up manufacturing and drive down costs really is the big driver behind much of the clean tech thesis. That’s what makes it so compelling.

The auto industry is still based on technology that Diesel and Ford would understand. And the same could be said of the electric grid for Tesla and Edison. But things are finally shifting. We are seeing the advent of high-tech driven energy and transportation technologies that are less reliant on volatile fossil fuels, and more focused on technology-driven efficiencies and silicon-, bio- and nano-based developments. And in these areas of development lie opportunities for mass manufacturing, scaleability, and therefore, lower costs.

Just look at wind and solar—they are both now an order of magnitude cheaper than 30 years ago. Wind is now often the most cost competitive, most easily deployable energy source. And solar, while still expensive, is within striking distance. One more halving in cost/price and solar will be competitive in most energy markets around the globe without subsidies.

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