The Future Of Energy

Earlier this week, I attended Greentech Innovations, a conference focused on completing the transition to a green economy.

Over the next few weeks, I’ll be writing a series of articles that chronicle the detailed information presented there on a wide variety of topics.

Today, I want to begin with a broad view of a cleantech road map that provides a glimpse of what the future of energy will look like.

A Cleantech Roadmap

This road map comes from a presentation given by Scott Clavenna, CEO of Greentech Media. He calls it a “Greentech Market Taxonomy.”

It’s broken down into five major market segments:

• Power Technology: generation, storage, transmission and management
• Transportation: vehicles, fuels, and infrastructure
• Built Environments: greener buildings, energy efficient technologies
• Environmental Technology: recycling, remediation, pollution control
• Water, wastewater, and related technologies

Each of those categories contain four main sub-markets: Materials, Products, Systems, and Software/Services.

As you can imagine, with the breadth of these markets and sub-markets, fierce competition is brewing among nascent start-ups and established companies to carve out a lucrative niche in the new market segments destined to emerge.

Below are some of the new business opportunities that exist in these market segments. Each one will spawn new companies that will ultimately deliver profits for savvy investors.

Power Technology

• advanced battery technologies (materials)
• high voltage transmission (systems)
• smart grid, advanced metering, demand management (software)

Transportation

• biofuels (materials)
• hybrid, plug-in hybrid, and electric vehicles (systems)
• electric charging infrastructure (software./services)

Build Environments

• green construction materials (materials)
• light emitting diodes (LEDs), organic LEDs (products)
• smart building management systems and architecture (software/services)

The opportunities abound. There are, however, some obstructions that need to be tended to before a new energy economy can fully take hold.  Let’s cover some of those quickly, before taking a look at the nascent cleantech sectors that are starting to receive early rounds of funding.

Cleantech Opportunities & Challenges

Indeed, all those exciting new opportunities will certainly keep Green Chip investors busy, what with all the fresh technologies and investment vehicles.

But before we can get to a fully established new energy economy, where cleantech investors are giddy from staring at green numbers all day, there are first some hurdles to overcome.

First and foremost, there are some mental roadblocks that need to be addressed.

For example, as the cleantech industry evolved, certain sectors garnered more attention than others. You can probably name them off the top of your head: solar, wind, geothermal, etc.

And that was fine. Then.

Now, a platform has been laid consisting of now-efficient and proven energy generating technologies, like geothermal power systems, wind turbines, and solar panels.

Of course, work still needs to be done in those areas, reducing costs, creating economies of scale, as well as numerous mergers and consolidation.

Going forward though, investors at all levels-venture capital, private equity, institutional, governmental and retail-need to focus on fledgling and emerging cleantech sectors. These are the companies and technologies that will allow us to use already developed clean energy sources to a greater degree, while updating the grid, and offering real-time energy and data management to homeowners and utilities.

Secondly, there a few glaring gaps that must be filled before clean energy can become ubiquitous.

There are three main categories of these “glaring gaps.”:

• Technology gaps
• Funding gaps and
• Policy gaps

Technology gaps include sufficient storage capacity for renewable energy, transmission and utility grid management, and the lack of an efficient infrastructure for charging the electric vehicles of tomorrow.

Funding gaps consist of a current lack of will to bring start-up companies to maturity and, eventually, to scale.

Policy gaps relate to a lack of legislative leadership at the federal level, leaving the market uneven and uncertain. A price on carbon and a national renewable portfolio standard (RPS) are desperately needed, and doing it piecemeal at the state level is simply ineffective.

Cleantech: Only the Beginning

The transition to a green energy economy is a multi-trillion dollar opportunity. As we have seen, there is still work to be done.

Seed and venture capitalists need to recognize promising technologies early, and fund them at those nascent levels.

Private equity and institutions need to start helping these companies emerge from the start-up phase so they bring commercially viable solutions to market.

And the government needs to be an actionable leader, providing clear guidance and policy on how to bridge the gap from the fossil fuel age to the energy framework of tomorrow.

We’re already moving in this direction. So savvy investors need to pay attention to these up-and-coming technologies, solutions, and companies.

Because the smart grid start-up company of today could be the green chip juggernaut of tomorrow.

But you’ll only know about it and be able to capitalize on it if you read about the industry early and often, and actually invest in it.

We all know about the success stories of today. Solar companies like First Solar (FSLR) and Q-Cells (ETRA). The Ormats (ORA) of the geothermal world.

Which sectors and companies will fuel the next round of cleantech innovations and profits?

This chart of recent venture capital activity holds more than a few clues:

Solar and biofuels still lead the pack in terms of funding, but smart grid, demand response, and energy storage are the rapidly emerging new kids on the block.

Lighting and vehicle technology aren’t far behind, in terms of 2008 funding numbers.

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