Daily Archives: July 12, 2007

Cleantech in Australia

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Mitra Ardon from Natural Innovations blogs about the recent Cleantech forum in Australia and links to his article (PDF) in Ethical Investor.

He concludes:

It was noticeable that, apart from a couple of notable mid-stage funders such as Starfish Ventures and CV Sustainable Investments, investors at the conference were asking where the large, low-risk deals were. Yet all ten companies in the ìpitch-festî were looking for less than $10m and with higher risks and better up-sides.

In my opinion, our challenges in Australia, in a time of great opportunity for the cleantech industry are: investors that are focussed only on big, low-risk deals; a bureaucratic government funding system that is inaccessible to start-ups in the process of commercialising new technologies; and that government still thin
our energy future is basically in mining coal or uranium.

It should not be surprising to see more of Australiaís clean technology start-ups head overseas for funding This will of course lead to the very shortage of local later-stage deals that the fund managers complain about.

The positive perspective on this is that for those, here or abroad, willing to look at risky early stage deals,there are bargains in Australia.

Here comes Solar

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Marc Gunther on the investments in Solar:

Three years ago, the market value of all publicly traded solar energy companies added up to a puny $1 billion. Today, their value comes to about $67 billion…That data point comes to me from John Cavalier, an investment banker at Credit Suisse, who spoke at the American Council on Renewable Energy’s finance conference recently in New York. He’s a sharp guy, and a big believer in solar. “The opportunity for solar companies is absolutely tremendous,” he said. Among the key drivers: the rising price for conventional sources of energy and electricity, government incentives including an aggressive subsidy program in California (where else?), the desire for energy security and, of course, tightening emission controls related to global warming.

On the investment side, here are some of the names who have bought into solar companies: John T. Walton (of the Wal-Mart Waltons), John Doerr of Kleiner Perkins, Ted Turner, Google founders Sergey Brin and Larry Page, Goldman Sachs and T.J. Rodgers (CEO of Cypress Semiconductor). On the customer side, Wal-Mart, Lowes, Google, Home Depot, Starbucks, Johnson & Johnson, Toyota and Target are all buyers of solar energy.

Now, before we get carried away….the industry is not yet at what’s called “grid parity,” meaning that it’s still cheaper to buy electricity generated by burning coal or nuclear power than it is to generate it from rooftop solar panels. That’s why much of the domestic growth in solar is coming in California, Arizona, Hawaii, New Jersey and Maryland, all states with generous tax breaks. Even more is coming from Germany, which got the industry rolling a few years ago by requiring utilities to buy renewables. But as the market has grown, there’s little doubt that economies of scale will make solar more competitive over time. That’s the logic behind the subsidies.

Taking things too far

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Environmental Leader reports:

Royal Bank of Scotland’s chairman, Sir Tom McKillop, claimed this week that an attempt by environmental activists to hold it responsible for the carbon emissions of oil and gas projects which it finances was “deeply, deeply flawed,” The Herald reports.

McKillop said the report implied “banks should be responsible for the carbon footprints of everyone they lend to.” He added: “That would mean banks would be responsible pretty much for the carbon emissions of the world.”

“It is just completely flawed,” he claimed, saying that the argument could be extended to take in the impact of households’ carbon emissions if Royal provided a mortgage, or the environmental impact of cars if it had provided a car loan.

This is non-sensical.

Chris Goodall – Cost of Energy

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But it simply isn’t working, and there is one principal reason: fossil fuel energy is extraordinarily cheap, both in historical terms and when measured against average salaries. Consider the tumble dryer. A full load of clothes, swiftly extracted from the washing machine and pushed firmly into the dryer, can be painlessly dried in a couple of hours or less. To take that tangled mess of dripping underwear, shirts and tea towels and pin it on a washing line might take 15 minutes. Drying “by hand” would take several hours, possibly a day, and bringing the clothes indoors and folding them could easily take another 20 minutes. Moreover, rain could fall or the activities of birds could spoil your clean sheets.

However, the cost of the electricity to power the dryer will be around 25 pence (US$0.50), and the labour saved may be half an hour or more. As a result, the rational person who values his or her own time has little choice. Homo economicus slams the door of the dryer shut, feeling only a little guilty that another kilogram of CO2 has been added to the communal atmosphere.

Source: Chris Goodall on China Dialogue

Thomas Schelling on Climate Change

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Writing about the Tangled Web, Atanu Dey (his new series 1, 2, 3, 4, 5 and more to come) points to the work of Thomas Schelling.

Thomas Schelling is the 2005 Nobel Prize winning Economist for “having enhanced our understanding of conflict and cooperation through game-theory analysis.”

Atanu points to a quote in an article by Tim Harford: “. . . his work treats human frailties as something to be analysed and worked with, rather than denounced or denied.”

Atanu concludes, “That lies at the crux of a multitude of failures. People don’t fully appreciate the fact that what we have is frail human nature and if we refuse to confront reality, we are likely to make public policies that are wrong-headed and disastrous because they are built upon fairy-tale visions of human nature.”

Discussing and reading about the environmental issues I have come across many of the well meaning environmentalists failing to come to the same conclusion. A lot of people working in Environmental Management or other areas which require changing people’s behaviour look for perfection. I have made the same mistake many times but then when I think about myself and my frailties I decided that it may be too much to ask from others.

We need to work with human frailties to achieve change. That is the first lesson.

I got intrigued by the article because it contained a discussion on climate change. Schelling being original in his thinking had a different view of the entire issue. I wanted to understand his thinking and a Google search provided articles written by Schelling on this issue. He makes some compelling arguments on the need to address climate change and the way to go about doing it.

Using his latest article in the Economist’s Voice as a guide, the entire argument can be divided into four parts.

Continue reading →