For readers who haven't picked up a copy yet, Ron Pernick and Clint Wilder's recent book The Clean Tech Revolution is a very good primer on the sector. Even regular readers of this website might find it a very useful read -- and especially might find it a great gift for that special someone (your boss, your father in law, etc.) who doesn't quite get this whole cleantech "thing" yet...

So we thought it would be good to subject Ron and Clint (who also are a principal and contributing editor at Clean Edge, respectively) to be the next victims, er, participants in the overwhemingly popular ongoing series, "Five Questions". And they were kind enough to share their thoughts...

Q. When did you make the decision to write this book? Was there a particular triggering point in the market when you realized your potential audience had gone mainstream?

A. Back in late 2002, when Clean Edge was helping define the clean-tech industry, we felt that the sector was ripe for a book aimed at a broad business audience. We worked on our first book outline and the idea percolated – then went on the back burner as Clean Edge’s business expanded and took all of our attention -- but it never really went away. In late 2004, we decided to get serious about the effort, hired an agent, wrote a formal book proposal, and finalized a contract with Harper Collins in the summer of 2005.

What was the trigger?

There have been so many ‘tipping points’ in the mainstreaming of clean tech – the growth of clean-tech investing by seasoned VC firms, the sale of Toyota’s millionth hybrid car, California’s landmark greenhouse gas legislation, just to name a few. We’ve seen the momentum just build and build. To be honest, as we saw the clean tech revolution become Page One news and the topic of national magazine cover stories in recent months, we were a little worried that our book release date in June might ‘miss the window.’ Clearly those worries were unfounded, as clean tech, and global mainstream awareness of all things green is only gaining momentum.

As we point out in the book, the move towards clean technology -- in energy, water, transportation, and materials -- will take decades to accomplish -- so it really takes a long-term perspective. Indeed, one of the most common things we hear from friends and colleagues is, “The timing of your book couldn’t be better.� We believe that's because we really are just at the inflection point for clean technology.

Q. While the book is suited for a lot of potential audiences, who’s the prototypical reader you wrote the book for?

There are a number of prototypical readers. Current and potential investors in clean tech, ranging from individuals looking at single stocks or mutual funds, all the way up to pension fund investment managers and venture capitalists. People considering a career in clean tech, whether freshly-minted B-school grads or mid-life career changers. Public-sector officials looking for the next engine of economic growth for their city, state, or nation.

We wrote the book with a lot of different ‘entry points’ – Breakthrough Opportunities, Clean-Tech Consumer Tips, and especially our Ten to Watch lists of leading companies in each technology sector – so that everyone from clean-tech veterans to newbies will find something of value.

Q. Is there a cleantech investment bubble? Why, or why not?

A. Any high-growth investment sector, especially those involving cutting-edge technology, will have a host of losers among the winners. That’s how the capitalist system works. And of course, there will be irrational exuberance in some clean-tech sectors at various times.

But we are often asked ‘the bubble question’, and our simple answer is no; the broader clean tech sector will not be a bubble like the dot-com industry. Why? Because clean tech companies, for the most part, are providing technologies that the world truly needs – those that deliver energy, transportation, potable water, materials. We love John Doerr’s quote that really encapsulates this opportunity – the fact that we’re talking about businesses that are involved in atoms, not just bits.

We’re talking about the largest industries on earth – electricity, automobiles, water – opportunities in the trillions of dollars. And the clean tech revolution will need to serve the needs of both the developed world (to replace aging, crumbling, dirty infrastructure) and in the developing world (where 1 billion people lack access to electricity and 2 billion are without access to clean, potable water).

In the dot-com run-up, many companies put something out in the market and then tried to create the demand for it. No one needs to create a demand for energy use or clean water – or more reliable and efficient use of both – we really are talking about the new industrials when we look at clean tech...

Q. How much is the market growth you project in clean energy tech predicated on new favorable policies coming into effect? How much is this industry threatened by random acts of politics or inconsistent policies?

A. We like to point out that there is no energy industry on the planet that is subsidy or policy independent. Just look at the oil, coal, and nuclear industries. None of them would be where they are without government support. So to answer your question – policy that supports clean-tech growth and development is tantamount to its success.

But as we point out in The Clean Tech Revolution, the shift is already well underway. From Frankfurt to Sacramento to Tokyo to Beijing – government entities of all sizes are now viewing clean tech as a main driver of job creation, economic competitiveness, energy independence, and in battling climate change and meeting carbon challenges. Dozens of cities, states, provinces, and federal governments are lining up behind the transition.

Even in the U.S., where national policy has been lackluster, to say the least, states have stepped in to fill the void. There are now two dozen states with RPS and cities around the nation are vying for the jobs being created in the manufacturing of solar panels, smart grid devices, advanced lithium ion batteries, and wind turbines. In fact, California Governor Schwarzenegger most likely won reelection in 2006 by running on a clean-energy platform that has positioned California as a global leader in clean energy.

We’re generally optimistic that this shift in policy will continue – because we see it as an imperative for governments that wish to remain relevant. Those regions that don’t embrace clean energy and clean tech, and provide supportive policies and a shift away from the polluting, volatile energy industries of old, will lose out to those regions that do.

Q. What technology has the highest potential-to-visibility ratio right now? (In other words, what’s your favorite unknown technology that investors should be more aware of…)

A. You ask an interesting question. There are so many untapped areas – some with relatively high visibility and others that a re currently being overlooked by the investment community and the broader market.

Without sounding coy, we’d like to recommend that people pick up a copy of our book. Within The Clean Tech Revolution we showcase “breakthrough opportunities� in each of the eight technology chapters. We highlight some of the areas that we think offer the best near- to mid-term opportunity for investors, entrepreneurs, and corporate executives. Everything from next-generation lithium ion batteries and renewable-energy powered desalination plants to closed-loop biorefineries and smart appliances. The answer to your last question is, quite literally, in the book.

News came out last week that GreenFuel Technologies is having to lay off half of their staff and have a changeover of management. According to Jonathan Shieber in VentureWire, the algae-to-biofuels startup has had issues in figuring out a couple of key aspects of the technology, such as harvesting the algae. Venture investors, one of whom (Robert Metcalfe) is taking over as interim CEO, sound optimistic about the long-term prospects, but in the meantime the company has pulled back their fundraising efforts and will likely take in some bridge financing from insiders.

Cleantech venture deals in the news:

• Next generation spark plug replacement developer ENERPULSE has taken in a Series B of at least $5.5mm from SAIL Venture Partners and Altira Group. The company's products promise performance and efficiency benefits for gas-driven vehicles, and they aren't the only company targeting this relatively unknown fuel efficiency idea...

• ChapDrive AS, a Norwegian developer of wind turbine technology, has taken in a $3.1mm round of financing. NorthZone Ventures, Hafslund Ventures, and Statoil New Energy are providing the financing. The company is field testing a prototype.
  

• Techtium, an Israel-based battery system developer for use in consumer products, has raised a $10mm Series B from Pitango Venture Capital and Poalim Ventures. The company's products allow a disposable battery to charge a rechargeable battery for these kinds of applications, so it's no surprise that Energizer had previously put $5mm into the company. In total, the company has raised $25mm to date.

Cleantech investors around the world: Israeli cleantech venture firms Aqua-Agro Fund (the cleantech venture arm of B. Gaon Holdings) and Wanaka Capital announced progress toward their fundraisings and fund launches... Here's an interesting article on VCs starting to address the "bottom of the pyramid" -- note the financing of Cosmos Ignite Innovations by Vinod Khosla and perhaps 3i and Omidyar, and the mention that Walden International and NEA are looking at investing in $100-PC developer Novatium... And here in the U.S., IBM Venture Capital is getting more into cleantech (or at least energy efficiency).

Other news and notes: Putting cleantech venture capital in perspective... Another green car company launches -- Gordon Murray Design (word of their venture backers came out back in April)... Neal's not the only one confused by everything going on in Washington... Sure seems like some kind of cap and trade is no longer an "if" question but instead "when and how"... Meanwhile, here's more big news on the policy front for the solar industry... Here's another sign that energy efficiency is the next big thing in cleantech... The next round of funding announcements by Sustainable Development Technology Canada... Cleantech-focused recruiters Hobbs & Towne have opened up a west coast office... Finally, in this nice summary of a recent panel discussion, it's worth noting the statistic that 40 hedge funds are already trading in emissions.

...It still applies.

With the recent rise in interest in alternative energy technologies and other breakthrough clean technologies has come the inevitable rise in questionable business ideas promising unbelievable benefits: "free" energy, "free" electricity, etc. Let's just call these the "Huh" companies -- they typically invite people to sign up to be an early customer for free (just, hey, you will need to write a big deposit check, but you know, you'll get that back, no worries...), so what's not to like?

Any venture capital financing deal is typically the result of a very thorough diligence process, where any business model or technology that can't withstand deep scrutiny will not pass muster. And VCs are by nature pretty jaded on all this kind of wild-eyed stuff. So the "Huh" companies typically don't get venture funding, and cleantech VCs don't pay much mind to them. But as the cleantech sector grows, VCs are going to need to be concerned about the "Huh" companies, simply because when they inevitably implode it can have negative impacts on the overall market acceptance of related, serious approaches -- many of which the VCs have actually backed.

A few illustrative examples:

1. CitizenRe is a solar financing play that promises to let you rent a solar array that they'll place on your home's roof. Here's the great part -- you only have to pay the same rate for electricity that you are currently paying your local utility, for the life of the rental (up to 25 years). They make this claim for most parts of the country. Here's the rub -- how can this possibly work for the several signed-up customers in North Dakota, for example? There, you have extremely low power rates and pretty low government incentives. Even with a breakthrough solar PV technology, it's going to be impossible for CitizenRe to make any profit offering solar power at around 6 cents per kilowatt hour for the life of a 25 year contract.

Furthermore, CitizenRe has previously claimed that they're going to be able to offer these tremendous economics on the basis of "vertical integration" -- they're going to make their own solar cells and panels. Because, you know, coming up with an extremely low-cost PV manufacturing approach that beats the rest of the industry should be pretty easy...

Here's the best part: The most visible member of the leadership team, Rob Styler, has written a book about his previous eye-opening experiences as a trainer for a company called Equinox International that used so-called "multi-level marketing" (a version of a pyramid scheme) in ways that were later deemed fraudulent, resulting in the company being shut down. After successfully promoting his book about these experiences, Rob is now the SVP for Direct Sales at CitizenRe, and is helping them develop their multi-level marketing approach, which is actively soliciting new part-time "Sales Associates", to add to the more than 1,200 who have already signed up... I guess one lesson he learned was that it's important to be at the TOP of the pyramid...

The company claims that they don't make anyone pay for any power that isn't produced. But as it explains on their website, you will owe a deposit when they come out and design (note: not implement) the solar system for your rooftop. CitizenRe sales associates appear to go around the internet slamming critics of the company, so expect the same here. But the above info is all based upon what's available from the company itself on their website.

Who knows, maybe this is a serious effort. Several solar industry insiders don't think so, and they have some pretty damning evidence.

But even if it's a serious effort, signing up customers in places like North Dakota and Montana with this business model suggests they're going to face some pretty stiff challenges in making this all work as promised. And the bad thing is, while they've pushed the solar financing model to an extreme level, there are other solar financing startups that are very serious about similar-sounding approaches (power purchase agreements, etc.) to getting solar out there into the market. Some of these efforts have received significant amounts of venture capital lately.

If a CitizenRe blows up, what impact will that have on downstream solar markets in general, and thus on the overall industry? Especially after such an intense PR effort...

[7/13 update: Here's a very good podcast from Inside Renewable Energy on CitizenRe and the difficulties in matching up their promises with reality]


2. How about an electric vehicle that can carry seven people, goes 350 miles on a single charge, charges up in 10 minutes, and can go from zero to sixty in under five seconds? Sign me up!

According to Forbes.com (cited on Wired's Autopia), California-based ZAP is offering all of this to customers willing to put down a $25k deposit. The catch: The car isn't being made yet. And, btw, the above specs appear to be beyond the capabilities of anything available anytime soon in terms of battery performance. And the company has already gone through one bankruptcy.

[7/9 edit: Inside Greentech is more charitable towards ZAP than I've suggested. They've done homework on ZAP and its suppliers, and believe it's entirely feasible for the company to build what it's claiming. Read Inside Greentech's Look out Tesla... ZAP building electric supercar, Altairnano power play, and PML FlightLink gets wheel for more info.]

Again, maybe this is a serious effort, who knows. ZAP is a publicly-traded company with a serious-looking management team and board. And they are offering more feasible-sounding products than the above wonder-car. Autopia asks if the company is "a flim-flam outfit," but cleantech VCs who have backed other electric vehicle startups have to be asking themselves, "what happens to our industry if ZAP's wonder-car promises blow up in their face?"


3. We've mentioned Steorn before. That's the Irish company that claims to have used a unique configuration of magnets in a motor to be able to achieve "free energy." They even put out a big ad in the Economist and invited scientists to examine their claims.

The company was going to be making a big public unveiling and demonstration of their technology this week. Unfortunately, heat from the display lighting apparently caused them to have to delay things a bit... Funny, wouldn't you think "free energy" experts would be able to predict something as basic as the fact that lights emit heat? Maybe use some of that free energy to power an air conditioner, or use LEDs? Or maybe there were other reasons for the delay...

Let's make one thing clear: The se cond law of thermodynamics holds true. You can't get "free energy", nor can you make a perpetual motion machine. If you have an enclosed system that appears to provide you with more than the energy you put into it, something's adding energy into the system, you haven't violated the laws of physics.

That having been said, there has been a lot of chatter lately about the use of magnets to provide very good efficiencies based upon certain configurations of electric motors. It's entirely true that a lot of smart engineers are figuring out new ways to use magnets to provide more effective motors. That by itself can be valuable. It's even potentially feasible (we suppose) that the energy being added into an enclosed system is embodied energy being released from the magnets themselves, so that magnets could be used to "fuel" a motor. If so, then the effect should fade over time, and the magnets would have to be replaced -- and where did the magnets come from in the first place, and how much energy was expended in making them? The scientists looking over the Steorn system and others will be drawing their own judgments.

What's clear is that all the hyperbole surrounding "free energy" and the like isn't helping the adoption of any such efficiency-improvement technologies. It's making potential customers even more skeptical, and holding back adoption for these and any other similar-sounding approaches. And thus, VCs are forced to consider the Steorns of the world when they see a new electric motor concept promising significant gains...


The above examples may be legitimate efforts by well-meaning people. Not having done any diligence on any of them, I make no claims either way, and I expect a few flames for having used these examples. But they serve as good illustrations of the kinds of reputation-endangering activities out there in the broader world of cleantech that VCs are having to pay attention to. Because serious or not, when such overly-aggressive claims are put out there it competes with more sober claims being made by VC-backed startups. And if and when these companies fall flat on their face, it could hurt overall market adoption of next generation technologies, making it that much more difficult for VC-backed startups to get traction in the marketplace.

• Mohr Davidow took the wrapper off of a couple of biofuels investments yesterday, with initial investments in Catalin (which is developing a "tea bag" catalyst for biodiesel production) and ZeaChem (which is developing waste-heat, biochem-driven approach to cellulosic ethanol). The Catalin Series A was $3mm, and the ZeaChem Series A (which VWire reports happened back in July of last year) was $4mm and included participation by Firelake Capital.

• Germany's Heliatek, which is developing organic solar cells (note: opens pdf) with a targeted cost of EUR1 per Wp, raised a round of financing greater than EUR 3.2mm. BASF and Bosch are each putting EUR 1.6mm into the round, and other investors included Wellington Partners and the High-Tech Grunderfonds (not to be confused with the Royal Tenenbaums). The company earlier raised EUR 600,000 in seed financing from High-Tech Grunderfonds and one of the company founders.

• Mobius Power, which is developing an undisclosed battery technology, has raised a $4.5mm round of financing, according to VentureWire. Lightspeed, Sigma Partners and Walden International all participated in the round, according to Peter Nieh of Lightspeed, who will be joining Wade Woodsen of Sigma and Andrew Kau of Walden on the company's board.
  

• France-based Solaire Direct, a solar PV developer and installer, raised a EUR 6.1mm round of financing from TechFund, Schneider Electric Ventures, and Demeter Partners.