November 21st, 2010
Cleantech – Energy and Chemicals
There’s a lot happening in cleantech now – impacting energy and chemicals. First, on Thursday December 9th, Con Edison, the CM&E Group of the American Chemical Society and the American Institute of Chemical Engineers are sponsoring the 5th annual Energy and Resources Conference. I am privileged to hold a board seat on the ACS CM&E group and was happy to play a small role in helping plan the conference.
I was recently fortunate to be invited to a Goldman Sachs conference on cleantech. This day-long event featured around 50 companies and a number of Goldman investment bankers and stock analysts active in the renewables space. I will not blog the entire proceedings here as that is not fair to either the organizer nor the attendees of this invitation only event. As I like to say – “sometimes, you just gotta be there!”. However, I will list here a few learnings and memorable quotes, from this event and other meetings in the last couple of weeks, that capture the status of this extremely important and dynamic field – especially as it impacts the chemicals markets.
- The Walmart Effect: Do not underestimate the power of WalMart in the greening of their supply chain and its ripple effect to suppliers and other retailers. The surfactant industry well remembers the impact of WalMarts banning of nonylphenol ethoxylates from its products and similar initiatives.
- Large companies like Siemens are driving investment in this area. Siemens claims a €23 Billion environmental portfolio and their venture capital arm has invested €80 Million in Greentech businesses.
- Solar Power? In 6 hours, the world’s deserts receive more energy from the sun than mankind consumes in a year. The challenge, of course, is capture and storage.
- Venture Capital companies, are of the opinion that the constraint in the development of many greentech businesses is human capital not financial capital. That is, there’s plenty of money just not enough people to evaluate and execute on good ideas.
- If there is a lament of the renewables sector it is China – “they do everything better than we do and quicker and with more money and greater national purpose” . This reminds m e of the great British lament during the 60’s and 70’s era “brain drain” when all the clever and talented Brits came to the USA because everything just worked better here and there was so much money to be made. I do not include myself in either (clever or talented) category as I came here in the 80’s and it was love not money that convinced me to stay! Of course it was the tremendous capital allocation system that the Brits envied in America. Money got to where it was needed – plenty of it and fast. It is worth thinking a little more deeply exactly what we are envying in China with regard to their renewables sector. This is not a political blog but let’s say that maybe there is a way to adopt what we like of the Chinese system and leave behind the bits that we find not to fit with our own society.
- The world’s biggest solar farm will be built in Erdos, Inner Mongolia (yes that’s part of China), next year; 2.2 GW. The supplier of key equipment is US firm, First Solar. At same time, we learn 95% of solar panels made in China are exported (can this be right?)
- Biomass: One of my favorite subjects, given the potential impact on the supply chain for surfactants and oleochemicals. One of the GS conference panelists likened this to a game of musical chairs in which the emerging companies scramble to line up supply chain partnerships in order to ensure commercialization for their technologies. Some notable partnerships in this space already, include. Codexis/Shell/Cosan, Solazyme/Unilever, LS9/P&G, Wilmar/Elevance/Stepan. A recurring theme in this space is “Brasil” and, unlike the lament that is “China”, Brasil is more of a clarion call – “go South young man!”. It is becoming a bit of an in-joke that the “out of office” replies for large swathes of the renewables industry should just read “I’m in Brasil. Try back next month. Obrigado!”
- Agriculture is key for the biomass sector. Without the right stuff at the right place at the right time in the right quantities and the processed by the right technology, nothing significant is going to happen. This is where companies like Monsanto, Bunge, Cargill et al., have to step up to the plate. Where does the biomass come from – to execute this fuels or chemicals revolution? BP Biofuels, not surprisingly, views this sector as a resource play and they are betting on non-food cellulosics. For many companies Brasil is “the model” . Sugarcane is two thirds carbon, but apparently sweet sorghum is even better, according to Ceres and others.
- Reed Hundt and the Coalition for Green Capital have proposed a sort of Fannie/Freddie type entity, the Green Bank, for financing green initiatives. Interesting, politically and economically.
- Bottom line; this is an active, exciting and sometimes fractious sector. Follow the money, however and you will see some serious players as investors and recipients of investment. The old Yorkshire saying has it that “where there’s muck, there’s brass”. However the converse is not necessarily true, as this sector demonstrates. To learn more, why not join us on December 9th at the CM&E Energy and Resources Conference?