Atlanta Business Chronicle – 9/15/06
Companies, investors see green in green tech
by Randy Southerland
Venture capitalists and private equity investors are seeing a different kind of green these days. For the first time since President Jimmy Carter installed solar panels on the White House roof, alternative fuel and other kinds of so-called clean technology are attracting money-makers who see the prospect of another boom.
"There's a convergence of forces that have pushed clean technology away from the fringe and into the mainstream," said Joel Makower, co-founder and principal of Clean Edge Inc. , a research and publishing firm focusing on building markets for clean energy technologies.
"Climate change, global security, energy dependence, the shaky electricity infrastructure and a long list of technological advancements have made new technologies able to be commercialized for the first time so they are cost-competitive and reliable and all the things that they need to be to become mainstream."
The VCs agree.
Clean-tech venture capital investing in the United States hit a record $843 million in the second quarter with year-to-date totals reaching $1.4 billion, nearly doubling the $704 million invested in the first half of 2005, according to research by Cleantech Venture Network. The energy segment led the way with $594 million, a 69 percent increase over the $352 million invested in the previous quarter. The sector accounted for $1.6 billion for all of 2005.
"It's not just the VCs," Makower said. "It is the whole food chain of investors including angel investors, but also investment banks, pension funds, state pension funds and local pension funds."
The number of green companies is even inspiring some public relations agencies to launch green practices. Locally, that includes Trevelino/Keller Communications Group .
"Green is moving into the mainstream," said principal Genna Keller. "It's made its way from those who are environmentally centric to people and companies who now get that GreenWorkstk may be the most forward-thinking mantra one can embrace."
The clean or green tech companies grabbing the attention and money tend to fall into two categories, according to Ben Hill, a senior business adviser with Georgia Tech's VentureLab commercialization incubator.
"You've got those companies that are in the renewable energy field and then you've got that other component of clean tech, which speaks to sensors and emission control and climate change," he said.
This flow of capital is helping fund a boom in these companies such as Georgia-based WiSPI , which is getting ready to produce methanol-based fuel cells that can be integrated onto silicon chips to power wireless sensors.
Unlike other fuel cells that produce lots of heat, the WiSPI product operates at air temperature and releases almost no pollutants.
"All the materials used in the fuel cell itself and then all the materials used for manufacturing the fuel cell are green," said the company's president, Dave Kelly.
WiSPI expects to get its first round of funding in the next month and, within nine months, ship the tiny cells to power automated gas and water meters and sensors on equipment at oil refineries and pharmaceutical manufacturing facilities.
The fuel cell technology is licensed from Georgia Tech and the company is part of its VentureLab program for startups. The company is one of at least 10 firms at Tech that are trying to capitalize on the clean tech boom.
Another is C2 Biofuels LLC , which is planning to build plants in South Georgia that will convert pine trees into fuel-ethanol. Unlike ethanol produced from corn, which produces only slightly more energy than it takes to make it, fuel made from pine chips produces five to six times the energy required to make it, according to President and CEO Roger Reisert, a former oil and gas industry executive.
"These are trees that were grown for the pulp and paper industry and that business is not doing well so there is a huge resource of pines that were planted for that business and there is just not a large enough market to use the trees," he said.
That could change quickly if the company gets its pilot plant up and running. South Georgia could soon be home to up to five plants that could potentially produce as much as 500 million gallons of ethanol.
The company will construct a demonstration plant early next year with a full-scale production facility constructed the following year.
As long as oil stays above $40 a barrel, the future looks bright for ethanol and other alternative sources of energy.
Observers say this latest boom isn't a repeat of the dot-com bubble, which saw many investors lose their shirts with Internet startups that never turned a profit. Much of that hope is pinned on rising oil prices that have finally made solar, wind and other forms of alternative fuel economically feasible. Many still remember the Arab oil embargo of the 1970s that was followed just as quickly by a plunge in oil prices that lasted for decades.
"Of course the four most dangerous words in the English language are 'it's different this time,' " said Stephen Fleming, chief commercialization officer for Georgia Tech and head of the institution's VentureLab. "The difference is that storages in the '70s were clearly politically motivated. Today, we're broaching a supply problem. The easy oil is gone."
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