Is alternative energy investing dead before it started?
John Dessauer, editor of John Dessauer’s Investor’s World, is in the camp of those who are worried that alternative energy has become too popular among investors: “Alternative sources of energy, including ethanol, have already been fully exploited by Wall Street. Not much opportunity is left for us in that category.”
Knowing how soundbites work, I’m not going to take that quote at face value and will assume that there is context missing. Because if there is not opportunity left for us in that category (i.e. clean tech), there are going to be a lot of sad VCs, corporations and consumers in a few years. Fully exploited by Wall Street? There are hundreds of startups – many of which are still in stealth mode – who haven’t even come close to liquidation events. Leading VCs like Draper Fisher, Kliener Perkins, VantagePoint Venture Partners, Mohr Davidow Ventures are betting the farm on this industry.
I’d be willing to venture that the fun is just starting in alternative energy investing. Take solar for instance. There has been some industry consolidation, new players from the tech industry like Applied Materials are entering the game, and companies in China are becoming billion dollar players over night. If we haven’t come close to deciding who the industry leaders are going to be, how could there not be much opportunity left? That’s like saying the tech industry was dead in 1979 when Apple and Microsoft were a few years old.
Dessauer goes on to point out:
“Wall Street is ignoring what I see as an obvious and highly profitable profit opportunity” to exploit the move towards greater energy efficiency: Technology stocks.
Most of my time is spent working with some of the biggest technology companies so I definitely agree that there is tremendous opportunity for these companies to make a real and substantial impact, something that should be reflected in how investors view them. The article names a few: Cisco, Intel and Philips Electronics. The list goes on from here. IBM, Sun, the PC makers… they all are doing things to address the way energy is consumed, managed and distributed by businesses and consumers.
Getting back to “alternative energy investing is fully exploited.” If we take the short-term view that Wall Street has trained some of us to adopt, maybe Dessauer is right. Ethanol gets over hyped, investors flock to it, some stocks don’t perform, and then we call it exploited and move on to the next thing. Same could go for solar. Silicon supply finally catches up with demand. Some solar companies face a margin squeeze, and people only looking three to six months out ditch the market entirely and move on to something else. It could happen. But then you could look at the solar market differently, as Todd Woody’s “Big Solar’s Day in the Sun” did in the June issue of Business 2.0 that just hit the stands. He shows the deals happening today for “industrial-strength solar energy sold to public utilities in 20-year contracts measured in gigawatts.” This industry is starting to align for the long-term.
So investors could move on. Or, they can stick around and find the renewable energy winners in a market that is certaintly not going anywhere. Maybe we need to look again at how we define alternative energy. If a big technology company can come up with a much more efficient way to get solar or wind power to the power grid and into your home, could they be in the same circle as the company making the solar panels? If we take that view, renewable energy becomes a much bigger space and the investing opportunities are endless. I’d like to think that’s where we’re heading.