Clean energy luring investors’ greenbacks – Venture capitalists raise stake in turbines, fuel cells

Dirk McDermott and Peter Edwards of Denver’s Altira Group have pledged more than $2 million to Southwest Windpower,an Arizona company developing a turbine for home use.

Betting that the age of big, grimy power plants is nearing its end, some venture capitalists see money to be made by thinking smaller and cleaner.

By Eric Hübler
Denver Post Business Writer

http://www.denverpost.com/Stories/0,1413,36~33~2022003,00.html

Investors are increasingly gambling on clean-energy technologies, such as hydrogen fuel cells, small-scale wind turbines and solar generation gear.

Depending on who’s doing the talking, green can be profitable, or profitable also can be green.

"You can rest assured venture capitalists would not be investing in any of these companies unless they thought they were a good investment financially," said Rona Fried, editor of the Progressive Investor newsletter in New York.

The proof is in the investing trend.

Investment in clean energy as a percentage of overall venture-capital funding increased to 2.4 percent in 2003 from 0.8 percent in 1999, according to Clean Edge, a San Francisco energy consulting company.

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Worldwide, venture capitalists poured $526 million into clean-energy companies in 2003, down from $584 million in 2002. Investments averaged about $6.26 million. About $100 million went to companies outside the United States, according to Nth Power Technologies, a San Francisco venture firm that invests only in energy companies.

The California Public Employees Retirement System – the nation’s largest pension fund – on Tuesday launched the CalPERS Environmental Technology Program, which will invest $200 million in clean technology over several years.

Denver’s Altira Group typically backs oil and gas technology companies. But recently it pledged more than $2 million to Southwest Windpower, a Flagstaff, Ariz., maker of wind turbines that is about 18 months from debuting a turbine small, quiet, pretty and cheap enough for widespread home use.

Southwest Windpower president David Calley started looking for venture capital for the new product – code-named Storm – in late 2001. "Some of them don’t take it seriously at all, and some of them came looking for us believing that the market existed," Calley said.

Altira invested because "just as the world is moving to other technologies, so are we," managing partner Dirk McDermott said.

Going green is good economics because it’s good thermodynamics, said Nth Power managing director Maurice E.P. Gunderson.

The link between efficiency and economy was established two centuries ago, but the logical conclusion – making energy where and when it’s needed – only now is becoming profitable, he said. The concept is called distributed generation.

"But the reason that people want those products and services usually has to do with business reasons, economic reasons," Gunderson said.

Nth Power has $250 million under management in 22 companies, including several developing hydrogen fuel cells. Nth Power’s investments typically return averages of 15 percent annually, about the same as venture capitalists in general, Gunderson said.

Calley said the market for home turbines is "incredibly small" – maybe $50 million – and big utilities aren’t running scared. "But they should be," he said.

Many states allow net metering, meaning that if consumers can produce electricity safely, they can push it into the grid instead of drawing it out, causing their meters to run backward and reducing their utility bills. Colorado has net metering in the territories of Xcel Energy, Holy Cross Energy and Gunnison County Electric. Statewide net metering would need legislative approval.

The Storm wind turbine should allow electricity to be produced more cheaply than if it’s bought, and will let the customer feed power back to the local utility, Calley said. It will cost about as much as a high-end refrigerator.

"You can do it for purely economic reasons instead of just environmental reasons. Previously the only justification was environmental," Calley said.

Doing good and doing well are not opposites, said Altira’s McDermott, who predicts home turbines could become as common as air conditioners.

"Our social conscience is that if America ever wants to be energy-independent, it’s going to depend on entrepreneurs like David (Calley) and having enough capital in play," he said.

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