Given the enormous brouhaha that has surrounded clean technology for several years, the wait for a flurry of clean tech IPOs may seem interminable. It may just about be over, however, because 2011 looks as though it will be the first pivotal year for clean technology IPOs due to a plurality of positive factors that are poised to come into alignment at the same time.
For starters, select public cleantech companies have been on a tear. Tesla Motors, for example, is trading at nearly double its June IPO price of $17. Amyris Inc., which develops synthetic organisms used to make biofuels, among other products, is trading more than 40 percent above its October IPO price. The Nasdaq Clean Edge Index, which tracks the performance of public clean energy companies, rose an enviable 15 percent in the third quarter and continues to produce respectable gains.
Another positive is growing evidence that the economy is improving again, and conventional energy prices are rising along with it. In the third quarter, GDP posted an unexpected 2.5 percent gain, somewhat tame but nonetheless respectable. And thanks to the latest round of Federal Reserve quantitative easing and the extension of Bush-era tax cuts, a number of economists have begun predicting that the economy will grow as much as 4 percent in 2011, much more than previously expected.
In addition, it is inevitable that some form of cap and trade, either nationally or at least in some states, including California, will become a reality. This will significantly spark demand for alternative energy, renewable energy and for energy conservation. And as global competitiveness for scarce energy resources mounts, state public utility commissions are likely to start forcing utilities to improve energy conservation to make some of their money, rather than simply allowing them to collect revenue based on how much electricity they sell.
Moreover, a number of the most exciting cleantech startups -- companies such as BrightSource Energy, Silver Spring Networks and SolarCity -- have been quieter but are also known to be interested in going public if the IPO window opens further. These companies could easily go public next year because their businesses are solid. Some have annual revenue surpassing $25 million, which i sis unusually robust by startup standards.
Cleantech investing drew some negative attention recently because it declined in the third quarter in comparison to the second and third quarters of 2009. Perspective was lacking in these complaints, however. Much of the third quarter’s 30 percent quarterly decline reflected a substantial pullback in solar companies, masking on-going buoyancy in biofuels, transportation and smart grid companies. (Editor's note: In December alone, over $260 million worth of green VC deals have been announced.)
Notwithstanding the current mindset in venture capital, I expect a number of solar companies to go public next year. They include:
--BrightSource Energy. Its mission is to make solar energy cost-competitive with fossil fuels by developing, building and operating the world’s most cost-effective, large-scale solar energy projects. The company already provides clean, reliable and low-cost solar energy for utility and industrial companies worldwide. BrightSource now has more than 2.6 gigawatts of power under contract with the likes of Southern California Edison and Pacific Gas & Electric, and it’s developing more than 4 gigawatts of solar power projects in southwestern states -- enough to power 1.4 million homes.
--Photovoltaic arrays are typically connected together to form strings, which are then wired to an inverter. The use of strings reduces the amount of wire needed and better controls voltage, but it has a big drawback. If the output from one module decreases, say from wet leaves or cloud cover, output from an entire string is reduced and can diminish the performance of the whole system. In a conventional setup, owners often cannot determine whether a module is underperforming without conducting a time-consuming investigation. Enphase’s micro-inverter system solves the problem by simultaneously improving output and allowing a problem panel to be easily identified.
--MiaSolé. MiaSolé makes an unusually efficient and inexpensive solar cell. Its current cells turn 10.5 percent of the light that hits them into electricity and the company has produced cells with an efficiency of 15.7 percent. This is as good as the best silicon cells, which commonly cost as much as three times as much per watt of power. MiaSolé’s cells are much more efficient than those of First Solar, the world’s biggest maker of solar cells.
--Solyndra. Solyndra is highly promising because it makes cylindrical solar power generating tubes for commercial rooftops, such as warehouses. This design offers lower installation costs and higher electricity production per square foot. Solyndra pulled an IPO in 2010 but still wants to go public and will figure out a way to do so.
Another broad-brush positive is that all the hoopla over clean tech has finally calmed down. With it has come a more rational and sober view of the potential value of companies with more appropriate valuations and probably better business plans. One of them is Claremont Creek-financed EcoFactor, an energy conservation company that clearly does not require enormous capital to get to a successful exit. EcoFactor sets the gold standard for maximizing energy efficiency and savings in the home, saving customers more than 20 percent on their energy bills without compromising comfort in any way whatsoever. (Editor's note: we picked Claremont as one of the top ten investors in smart grid in part based on EcoFactor.)
The company has created a software-as-a-service that gathers thousands of pieces of data from a two-way communicating thermostat and analyzes this information to create a picture of a home’s “thermal characteristics.” The device is set up by homeowners and then learns their energy consumption habits and the energy characteristics of their home. Ultimately, it knows exactly when to turn on and off the heater or air conditioner so that residents enjoy maximum comfort without waste.
For all its potential, EcoFactor probably isn’t mature enough to make its public debut in 2011. It could come in 2012, however. Meanwhile, a number of other companies will be leading the clean tech IPO charge, and all the hopes, optimism and dollars injected into this sector will finally be proven worthwhile.
Nat Goldhaber is the resident expert on energy conservation and management systems at Claremont Creek Ventures. His focus in this area is built on 20 years of experience in IT as CEO of Cybergold, founder of Centram Systems West, founding CEO of Kaleida Labs, and a vice president of Sun Microsystems. Prior to his business career, Nat served as Special Assistant to Pennsylvania’s Lt. Governor William Scranton III and interim director of the state’s Energy Agency.