2011 is almost upon us, and beyond being reminded that I’m another year older with a few more grey hairs, I’m anticipating another strong year for cleantech ahead. But my specific opinions stemming from ten years in cleantech investing may be different from many, so I’d like to present you with my “Top 11 List” and outline how I believe the industry will evolve within the next 12 months.

  • Cleantech will become more visible. Cleantech applications will get wider acceptance in many industries. The “electrification of transportation” and its infrastructure, including (fast) charging and supporting energystorage will become more important. LED-based products will become more common on Home Depot and Walmart shelves. Energy efficiency will become the building industry standard, and cleantech will start to make more significant inroads in traditional oil, coal, and gas processes. The “mainstreaming of cleantech” will finally take off.

  • Cleantech will become more invisible. As cleantech starts penetrating into mainstream industries and taking place more within the walls of large companies, it will become more difficult to measure what is actually happening within the industry on the whole. 2011 will be the first year where “cleantech” as a generic market slogan will start to lose some of the power it had in past years.
  • Cleantech exits will arrive. Since Labor Day 2010, the IPO window has opened up again, but most exits will come from the increasingly frequent “shopping sprees” undertaken by large, mainstream industrial companies with war chests trying to make evolving startups accretive to their bottom line, and by the natural consolidation process any industry experiences when it starts to mature. There is an arms race building up to claim global cleantech leadership positions.
  • The Chinese will top the “shoppers.” The “bite of the dragon” will go after a wide variety of technologies, IP, and cleantech products to satisfy the Chinese internal demand and further grow exports and employment. Key drivers for this are the Chinese desire to strengthen their global cleantech leadership aspirations and to exchange rapidly devaluating dollars for assets.
  • Mature financing will swing back. Private equity and project financing, which had been sluggish since the 2008 recession, bounced back in the latter half of 2010. This will continue in 2011. More Mezzanine funds will also emerge to help bridge clean energy technologies into the mainstream.

  • Industry will demand a carbon tax. You could not have dreamed of this five years ago, but large industrial companies will start calling loudly for a carbon tax to get investment clarity -- at the detriment of all of those vague cap-and-trade plays that seem good in theory but fall apart in practice.
  • Natural gas will stay cheap. Natural gas will remain cheap and continue to jeopardize unsubsidized solar and wind projects.

  • The utility industry revolution will begin. This will be driven by the ongoing explosion of growing amounts of data, the “dog’s breakfast” of new distributed generation, the growth of smart grid solutions, and the arrival of new entries into the utility space.
  • Energy generation investments will revert. VC investments in energy generation will go back to the basics. It’s no longer about the next exciting technology. Instead, it is all about cost. After all, energy is a commodity industry so cost is king. Expect more early-stage participation in new forms of nuclear, biomimicry, and waste-to-energy. Traditional energy generation will also try to be more efficient and “clean.”
  • Water will matter. Water will become the fastest-growing cleantech sector as desalination, irrigation, and waste-water treatment will get more attention than ever before.
  • China will be full of parks. No, not theme parks. China’s rapidly growing cities will become cleantech development, procurement, and demonstration parks, driven by China’s new Five Year Plan. China will be the first to start marketing the “Cleantech City” as an integral solution -- quite visionary, given the hundreds of 100 million+ cities we will see pop up all over the world in the decades to come.

2011… I can’t believe it’s here and I can’t believe it means our 10-year anniversary at Chrysalix. Now I really feel old. The only thing that would make me feel better is to see significant progress in the “mainstreaming” of clean energy technologies in 2011 so that one day soon, we won’t even have to say “cleantech” any longer. It will just be the way we do things.

 

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Wal is a co-founder and President and CEO of Chrysalix. He is responsible for strategy and operations of the Chrysalix funds. He actively supports a number of portfolio companies and holds board positions with HydroPoint, Angstrom Power (Chairman), and H2Gen Innovations.