Financial Post
It’s the kind of development that would leave environmentalists curled up in the fetal position: solar technology, funded by clean-tech venture capitalists, being used to extract oil from aging wells. In the Middle East.
Instead of the perceived epic battle between renewables and fossil fuels, venture capitalists and entrepreneurs are discovering practical ways for traditional and alternative energy sectors to converge, collaborate and co-exist.
And its starkest example is Cali
fornia-based Glasspoint Solar Inc., backed by Vancouver-based clean
tech fund Chrysalix Energy Ven
ture Capital, which began working on old oil fields initially in California, and is now in Oman this month.
“We need to stop thinking about clean tech as a separate industry where a few tree-huggers are willing to pay a premium for a grid,” said Wal van Lierop, Chrysalix’s co-founder and chief executive. “This is all about clean tech breaking through in the core business of very large companies.”
Mr. van Lierop’s $145-million fund was ranked among the world’s most active clean-energy funds last year by Cleantech Group’s i3 Platform. But the fund is stretching the traditional boundaries of clean tech, which often ring-fenced itself from the oil and gas industry.
Not Chrysalix — it even has an office in Calgary and is funding Axine Water Technologies Inc., which hopes to solve Canadian oil and gas companies’ wastewater issues via energyefficient solutions.
Chrysalix’s occasional forays into fossil fuels could be because Mr. van Lierop was once the vice-president of a natural gas company in Canada or because the fund’s backers includes Royal Dutch Shell PLC and Saudi petrochemicals giant Sabic Corp.
But the fund is certainly not alone in blurring the lines between traditional and renewable energy sources.
Private-equity investors, who were previously insignificant players in the U.S. oil and gas sector, poured in about US$32-billion last year, from under US$10-billion for much of the past decade, according to management consultants PWC.
Kleiner Perkins Caufield & Byers, the world’s most active clean deal maker, has a stake in Chesapeake-backed Sundrop Fuels, which combines biomass with hydrogen from natural gas to create fuel, and in Luca Technologies Inc., which uses biotechnology to produce natural gas from hydrocarbon deposits.
Draper Fisher Jurvetson, another major clean-tech investor, is an investor in Massachusettsbased CoalTek Inc., which claims to provide cleaner coal. Chyrsalix’s sister fund in Asia also features a coal company in its portfolio.
Khosla Ventures’ “sustainable” portfolio includes stakes in Great
Point Energy, tasked with converting coal and other carbon-based feedstocks into pipeline-quality natural gas, and Ciris Energy, which uses biotechnology to turn coal into natural gas.
Braemer Energy Ventures, another active clean-tech VC, has investments
This is all about clean tech breaking through in the core business of very large companies
in an Alberta-based company that offers bitumen-upgrading technology, apart from investments in Ciris and CoalTek.
“The lines are blurring…. There are those who say this is a justifiable thing to do because these fossil fields are a legitimate bridge fuel,” said Stephen Munro, a policy and international analyst at Bloomberg New Energy Finance.
“That’s the ideological fig leaf on the part of those who used to confine their investment to zero or low-carbon and now include oil and gas.”
There is also the need to make money.
“I don’t think that any of the large funds worldwide that have put money in clean tech have made significant money,” Mr. van Lierop said.
The global clean-tech sector saw US$40.6-billion in investments in the first quarter of 2013, its weakest quarter since 2009, but Bloomberg’s Mr. Munro says the costs per unit of alternative energy have also fallen dramatically in recent years, which could skew the figures.
North American private-sector and venture capitalists’ changing perception is partially driven by the U.S. government’s “all of the above” energy policy, which happily juggles an oil and gas renaissance with focus on alternative energies.
Clean-tech growth and innovation is occurring — but in traditional, larger companies.
“The reality is, oil and gas are here to stay. And if we can make them cleaner, I will give the world a significantly larger opportunity than if I invest in smart meters in San Diego,” Mr. van Lierop said.
Chrysalix will be visiting investors over the summer to raise anywhere between $150-million and $250-million. All said and done, the fund expects to generate three times the investment over a 10-year period.
The smart VC money is on to something. Bloomberg New Energy Finance data show that even as overall investments fell, new venture capital and private-equity investments in clean energy picked up to reach US$1.3-billion in the first quarter of 2013, compared with US$1.1-billion over the past few quarters.
Indeed, the clean-tech industry is hardly doomed despite the high-profile collapses of flagship companies like Solyndra LLC and battery company A123 Systems Inc.
“A battery company going for an IPO — are you kidding me? If that battery was doing wonderful things, players like Siemens, ABB and Panasonic would have bought it a long time ago,” Mr. van Lierop said.
“We have seen in the past five years an arms race between large multinationals to pick up the best clean-tech companies. And the ones that did an IPO were probably not good enough to be acquired.”
Despite technological advances that have re-enenergized the oil and gas industry in North America, the sector is not exactly off the hook.
Mr. van Lierop recounts two separate, recent conversations with California Public Employees’ Retirement System and California State Teachers’ Retirement System — two of California’s and the world’s largest pension funds — concerned about backing ‘‘stranded assets’’ in traditional energy infrastructure such as pipelines, LNG plants and power plants.
“They said, ‘We are getting very concerned about financing marginal projects in the traditional energy area, because in the next 20 years, way before the financing period ends, either through regulation or through innovation we may have to take a loss.’ ”
The volatility is here to stay and so is the increasing convergence between clean tech and traditional energy.
“What we see is a phenomenal opportunity in clean tech — in the traditional industries, be it all oil and gas, mining and forestry— as long as we can do it in a capital-light way,” Mr. van Lierop said.