Saturday, February 04, 2006

Let's talk peak oil and politics...

We're going to break an unwritten rule around here and mention a couple of highly contentious topics, "peak oil" and politics. Why are these topics generally off-limits on this site? Because while these are important topics for cleantech investors to keep in mind, they're covered very well by a lot of more knowledgeable authors elsewhere, and this site has always sought a "big tent" approach to the topic of cleantech investing -- it's a compelling investment area regardless of your political persuasions.

That having been said, this week saw these issues thrust front and center for cleantech investors, thanks to the State of the Union address ("America is addicted to oil"), the Cleantech Investors Summit (a broader post on the event is coming soon) where "peak oil" was a highlighted topic, and other media coverage that came out this week involving prominent investors. So let's take a look at a few such stories of note this week:
  • The President's now-famous line that America is addicted to oil, and his pledge to "replace 75% of our oil imports from the Middle East by 2025," certainly seems to have gotten a lot of attention (thanks in part to that line having been purposefully leaked earlier in the day, priming the media to grab onto it). At the event this week in Palm Springs, a common refrain was investors joking (?) about making big bets on ethanol now. But let's keep everything in perspective. A 22% increase in Federal spending on energy technologies is helpful, but is not going to make a huge near-term difference for many cleantech markets. And goals to be achieved in 20 years don't often lead to 3-7 year investment window impacts, such as many VCs care about. But on the other hand, it's a very important statement to hear the President make publicly, it is a strong signal of government policy direction going forward. And it will encourage the trend of large companies starting to act, regardless of current government policy, to get ahead of climate change issues. All of the above is why cleantech investor and entrepreneur reaction seems to have been pretty mixed. Readers of this site are invited to provide their own thoughts and comments...
  • The "peak oil" hypothesis has also gotten a lot of attention lately in the cleantech investor community and elsewhere. For those not familiar with the idea, "peak oil" is the theory that global oil production has, or soon will, reach its maximum levels, due to its finite supply (note: this doesn't say oil won't be available, just that it will be higher cost due to limited availability). As the CTO of Chevron, Don Paul, puts it: "Our economy is based around the idea that capital is expensive and energy is cheap. What happens when that gets switched?" The important thing for cleantech investors to take away is that, with some continued pushback, the concept appears to have been broadly accepted now, and the key question is no longer "if" but "when". Are we at peak oil now? Or will it be 20 or 30 years from now? And is it right to focus on peak oil, or should we also be thinking about "peak natural gas" and "peak coal", and what timings should we be considering for those? Even though venture investors tend to think about things in 3-7 year time windows, these are important questions to think about. Those looking for more information should check out the Energy Blog and Peak Oil News, as well as a number of books on the topic, such as Matt Simmons' "Twilight in the Desert". Readers of this site are also invited to discuss this topic, leave your comments below...
Okay, enough on those topics.

Getting back to topics more central to this site, it was interesting to note this Q&A with SunPower's Tom Werner (note the mention that he expects SunPower's silicon-based technology to achieve price parity with fossil fuels within 5-10 years), and given all the attention being paid to energy topics these days, it was also great to see this discussion of clean water technology -- its sometimes easy to forget, given all the hullabaloo, that cleantech investors care about clean water, clean manufacturing, advanced materials, and other investment areas that will be advantaged by emerging natural resource trends, not just energy generation technology.

[2/4 update: Big news, re: Tom Werner's Q&A from above, about Shell Solar selling off its silicon-based solar PV business this week. Note that they're holding onto their thin-film business...]


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