Roaring, respectful debates around the conference table engulf our team at Chrysalix on a regular basis. We believe these help the team come to better decisions. From time to time, this debate centers around potential investments and whether they meet the mandate of our clean energy fund. How can this be so hard? We want things that are “early stage,” are “technology,” are “energy-related” and in the end, are “good for the planet.”
For a long time, we have struggled with many biofuel investments. The Bush administration supported ethanol from corn, which we could never understand, as we couldn’t find how it was a benefit on a whole-product lifecycle.
The hardest mandate issues revolve around the “dirty” industries: coal, oil, concrete, mining, metal processing -- you get the idea. Purists tell us that we should avoid these completely. We have taken the opposite view. These are industries we should tackle wholeheartedly, because a one percent improvement in coal-fired power plants has about the same benefit to CO2 emissions as all the solar installed in the world to date. Unless we, as consumers, completely change our lifestyle, then the polluting industries will be around to stay, so let’s work out how to clean them up.
Despite this agreement amongst our partnership, we still have raging debates, for example, around our investment in NanoSteel. Steel, on the one hand, is the most recycled material on the planet. On the other, it is a tremendously energy-intensive, polluting, trillion-dollar industry. So how does a cleantech venture capital firm make such an investment?
First, we believe that steel is not going away. It will be a mainstay of the world economy for centuries to come. Second, if we can reduce the energy intensity of the industry, that is attractive and certainly moves closer to our mandate. Third, where steel forms the bulk of material used in most transportation (i.e., road, rail and sea; not air), it results in a major portion of the cost of oil used by these secondary industries.
NanoSteel holds the promise of producing steel that has twice the strength of today’s steels. Half the amount of material is required to produce parts for cars, lowering the energy intensity of the steel production process. While this is attractive, we should not fool ourselves into thinking that it will lead to a significant reduction in steel use and thus, in and of itself, it would be a stretch for NanoSteel to be considered to fall within the parameters of our investment mandate. But add the impact on transportation, where a vehicle weighs 2,500 lbs. and the person in it weighs 150 to 250 lbs. We understand that 90% of our fuel consumption in cars is in the zero-value activity of moving the vehicle, and only 10% is for the value of moving people. If we can reduce the weight of a vehicle by 20% to 40% through the adoption of NanoSteel material, we can increase the fuel efficiency of vehicles.
Now that is within our mandate and within cleantech in general. Wouldn’t you agree?
***Richard MacKellar is a Managing Director of Chrysalix Energy Venture Capital.