Published on October 17th, 2016 | by Scott Cooney0
SOCAP Recap: Investment Success In Clean Energy
October 17th, 2016 by Scott Cooney
The Social Capital Markets Conference (SOCAP) is one of the premier gatherings on impact investment and social entrepreneurship. The conference has historically been primarily focused on getting money into hard to reach areas–getting basic human services (sanitation, clean water, etc.) to those who need it most. Cleantech discussions at SOCAP were generally focused on this area, getting solar lighting to those without electricity, for instance. This year’s conference in San Francisco felt a little different. There was a much larger presence of cleantech investors and sponsors, as well as several panel discussions focusing on impact investing focused on the field.
One of those panels, entitled “Investment Success in Clean Energy,” featured some major industry players, including Dawn Lippert of the Energy Excelerator, Charlie Finnie of EFW Partners, Deepa Lounsbury of California Sustainable Energy Entrepreneur Development (CalSEED), Geoff Eisenberg of Ecosystem Integrity Fund and Pete Shannon of Firelake Capital.
What does success look like in clean energy investing?
Dawn Lippert, Director of the Energy Excelerator, a mid to late stage cleantech incubator focusing on the Asia Pacific region, indicated some major signs that the cleantech revolution has firmly arrived. “20% of homes in Hawaii have some form of solar. Our biggest power plant in the middle of the day is this distributed solar,” she said. The challenge, she indicated, is not necessarily technology or adoption but integration and management. “The utility has virtually no insights into solar production.” The Energy Excelerator recently signed a contract with TEPCO (Tokyo Electric Power Company), which has been pilloried in the press a lot recently, but has access to millions of customers and the infrastructure needed to help bring about the integration of so many clean technologies.
“Policy will always lag technology,” Lippert said. As a result, Energy Excelerator is starting to focus on getting the technology voice into the policy side. One example is Stem, an Energy Excelerator portfolio company and a leader in distributed energy storage, is leading a coalition pushing to have a storage conversation with the Hawaii legislature (Distributed Energy Resources Council of Hawaii).
Geoff Eisenberg, of Ecosystem Integrity Fund, said that the industry is very much in flux. “The solar coaster is real,” he said. The trials and tribulations of the solar industry are well-documented, and the recent layoffs at SolarCity are an indication that the industry is in a low-growth mode in the U.S. Eisenberg said that these things are cyclical. He indicated that at the recent Solar Power International Conference, that there were a lot of long faces, and a lot of vultures circling around looking for undervalued assets to buy. “A liquid market for project finance for wind and solar would make a big difference,” he said.
Charlie Finnie, of EFW Partners suggested that education about consumer finance is still far from reaching the audiences that can affect change the most in this arena. CalCEF, to whom Finnie is an advisor, is launching a consumer website called Good Money, to see if people (especially millenials) know where their retirement savings are invested. The website will then offer an alternative to them if they find out that their portfolios are invested in Exxon and the like. That is not an easy task, according to Finnie, who offered many insights into how a consumer-facing website in 2016 needs to look, feel, and interact. Finnie and team’s research found that millennial consumers generally feel “If I’m going to be managing my savings, I want it to be browsing on a phone, and for the interaction to be similar to booking a weekend AirBNB.” This was a real eye-opener for Finnie, who believes most major financial institutions don’t understand how millennials want to manage their finances online.
Someone in the audience asked what would help from a consumer behavior and policy perspective, and Finnie replied that the good news is that “the trend is our friend,” due to dropping prices on LEDs, solar, etc. “At the end of the day the market wins.” What would really help, he suggested, is a national RPS, but he doesn’t see this as likely. As a final thought about policy, he smiled and said it would really help if Exxon and others would stop funding biased research that asserts climate change is not real and not man-made.
Ultimately, Finnie believes that large scale adoption is more probable if we can prove success along traditional metrics. “In order for capital to flow into this industry, it’s important to dispel the myth that you have to sacrifice financial returns in order to invest in this space,” he said.
Deepa Lounsbury, of the California Sustainable Energy Entrepreneur Development (CalSEED), offered the perspective of a governmental program aiming at incubating a cleantech industry. Lounsbury was formerly at GE Ventures. “When you’re selling systems to large big box stores, they don’t really care about 1-2% energy savings shifts, but they really care about productivity–and sales,” she said. So if you can hit them with that sort of strategy–how it’ll affect their customers experience, you’re onto something.
CalSEED is offering non-dilutive funds for startups doing cleantech business in California. “We’re looking for good ideas from anywhere including line workers at PG&E, high school students with an idea about student carpooling…” she said. CalSEED is also looking to provide assistance and resources to help companies in terms of expertise, connections, etc. To apply, entrepreneurs must have a footing in California.
Peter Shannon of Firelake Capital, (a firm that was one of the original investors in Sungevity) said that in one of the previous iterations of the cleantech boom/bust investment cycles (2005, when “it was hot,” he said), everyone was chasing better mousetraps. It led to great things — good battery improvements and solar panel improvements, but the market just may not have been ready for those things — infrastructure, legacy utility companies, slow-moving markets. “But now, with CleanTech 2.0 or 3.0 or whatever we’re in, these improvements, combined with some of the rapid gains in sensors and smartphones, ubiquitous data and wifi, smart entrepreneurs are coupling these things and making gains that seem like they have a lot of staying power,” he said.
Shannon indicated that a key element of the transition will be in smoothing the volatility of the solar coaster, and that means integration of storage. “Solar,” he said, “especially from the manufacturing side, is probably always going to have some element of boom and bust…there are some inherent feedback loops on the supply side that will confound profitability….There’s additional instability on the demand side. The economics are irreversibly heading in a good direction (as the cost of solar continues to drop), but until then, if you can add storage to solar, it can really change the dynamics on the demand side substantially.”