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US May Wind Up Green With Envy

Green is not turning into American red, white and blue.

AP

Despite recent advances, the U.S. lags far behind other major countries when it comes to clean energy investment and experts say it may never compete on equal terms, let alone lead.

And that's after some $836 million in green technology deals in 2009—the most ever, according to Greentech Media, and another $8 billion in renewable energy loans budgeted under the Obama administration's stimulus package.

"We stand to fall farther and farther behind other countries like China and India unless there are fundamental shifts," says Susan MacCormac, chair of the venture capital and cleantech practices at international tech law firm Morrison & Foerster. "The U.S. should catch up, but odds are low that it will."

A recent report from Deutsche Bank ranks the U.S. and Canada as two of the worst countries for investing in renewable energy, with Germany, France and China listed as among the best. The report cites a lack of long term and transparent energy polices in the U.S. that would translate into any kind of certainty for investments.

"I think there's been no long-term vision that's been executed," says William Brent, SVP of cleantech practice at Weber Shandwick, an international marketing and communications firm. "The Bush administration pretty much left it (green technology) on the table and Obama's made some improvements, but there's no political leadership that you're seeing in other markets."

Washington needs to commit to both policy goals and funding levels, says Dr. Fred Murphy of Temple University.

"Other countries give bigger subsidies to renewable projects," says Murphy, who once worked at the Energy Information Administration of the US Energy Department. "US government funding for research and development is stop and go. The government should support R&D in universities, small businesses and research institutes."

The Obama administration says it wants to develop a strategic green policy and is trying to pass a clean energy bill, including a cap-and-trade system, through Congress.

As promising as that sounds, compare that effort to other nations. Singapore, for instance, announced a clean energy strategy in 2008 that's drawn $8 billion in investment this year from firms in Norway, Finland and Denmark. Singapore leaders say they are determined to be a global hub for developing, manufacturing and exporting clean energy products, much like its place in the IT industry.

What investors want in the US is the same kind of no holds barred commitment, analysts say. Among the wish list items are more tax incentives, seed funding and less red tape.

"We need to do what Germany has done," says Martin Tobias, founder of Northwest Energy Angels, a venture capital group in cleantech that has raised $250 million in investment capital. "They put in place long-term market mandates. You can't have just have things like short-term tax breaks and expect investors to put in money. I want long-term mandates for a certain percentage of the market."

The energy sector needs to do its part as well, says Bill Moomaw, professor of international environmental policy at Tufts University.

"Many US energy companies are not in favor of doing a lot of clean energy," says Moomaw. "The amount of misinformation from them is astounding. Some companies are doing the right thing. General Electric (parent company of CNBC) and United Technologies are ones I can think of, investing in wind turbines and other renewable sources. But they are rare right now."

Cisco Systems CEO John Chambers frequently talks about cleantech in the same game-changing terms of the Internet.

Moomaw says a cultural change may need to accompany one in public policy. "People in Massachusetts have blocked a wind project in Cape Cod for eight years. They are of the 'not in my back yard' thinking even though the turbines would be six miles off the coast. We don't seem interested in modern technology as a people."

Beyond the culture wars, the U.S. still has to confront the more difficult questions surrounding renewable energy sources.

"The UK and other countries took global warming seriously, the US did not," says Mike Rosenfeld, vice counsel for UK Trade and Investment at the British Consulate. "There's energy security and supply issues to think about. For other countries, it's less of a partisan issue than in the U.S. Europe has higher energy costs and sees the end of its oil supply. That's making it think ahead."

The Obama administration is trying to do that, even if on a modest scale. With much fanfare the White House recently announced a $3.4-billion government investment in building an electrical smart grid to better control energy costs. It hopes the money will attract some $4.7 billion in private investment.

"Green investing seems to be on the way up," says Michael Derry, president of Sutter Pacific Industries, a waste to energy company with nine employees that started in 2001. "We're raising money for our first production unit. We are talking to a lot more investors than we have in the past."

Billions of dollars for cleantech research and development are now available through the Energy Department and projects are getting funds. A joint venture between US and Chinese firms to build a 36,000 acre wind farm to produce electricity for 180,000 homes in Texas was recently announced.

Photo: LMT

Thus far, the Obama administration's vocal commitment has unchained the alternative energy sector here from another negative force—the rise and fall of conventional energy prices.

"Falling oil prices killed the green movement in the 1970's," says Jon Strimling, president of WoodPellets.com, a small firm that delivers wood pellets for home heating. "I think there's a consensus today that we don't want that to happen again. The challenge that many renewable enterprises face today is low energy costs."

Whether the U.S. eventually catches up to other countries or not, the level of green investing will ultimately be decided by the classic risk-reward equation.

"Energy investing has produced the best venture returns in eight of the last ten years," says Alan E. Salzman, CEO of VantagePoint Venture Partners. "Cleantech investing is about creating the industries that will power the 21st century. Social and environmental issues aside, the primary driver for investors is and will be, very attractive returns."

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