Corporate Giants Look To Clean Up In Cleantech Market
Special to CNBC.com
Corporations appear to have fewer questions than lawmakers about how climate change will alter how the world uses energy and natural resources.
Firms across the globe are actively pursuing technologies they expect will give them a leg up in an economy less dependent on fossil fuels.
Chevron IBM, Google and Dow Chemical are just a handful of the global giants investing in so-called clean technologies not necessarily to make the world a better place, but because it makes economic sense, says Shareez Haji, president of the Cleantech Group, a research and consulting firm.
The notion of “this is actually a good way to reduce our energy consumption, a way to reduce our water consumption,’ is aligned with, ‘we can have some financial returns.’” says Haji.
Corporations also don’t want to be left behind.
“If a cleantech company is developing a technology that is useful for a corporation’s business, they’ll want it in their portfolio versus their competitors," says Brian Goncher, director of the U.S. clean tech practice at Deloitte & Touche.
And Goncher, notes, companies are seeking ways to grow revenue, and they have the cash on their balance sheets to be significant players.
By one estimate the global market for services ranging from energy efficiency, to water management, renewable power, energy storage, and smart grid applications will double to $3.6 trillion by 2020.
Through the third quarter this year, corporations invested $7.4 billion in cleantech, up from 4.5 billion in 2009, according to the Cleantech Group.
Some corporations, namely utilities and power companies, are interested in cleantech because they have state or national renewable power requirements to meet, while others are interested because they can develop technologies that allow utilities to bring that power online.
“The general consensus is that by 2020 or 2030, 20-to-30 percent of energy will be renewable,” says Tony Tursich, senior portfolio manager at investment firm Portfolio21.“This has sparked interest in investment here to first off, bring this energy into use and produce this energy, and secondly, it's sparking interest in getting this energy into the (electric) grid.”
Getting renewable energy on the grid, as well as upgrading the electric grid to deliver all kinds of power more effectively and efficiently—creating a smart grid—is a priority of the U.S. Department of Energy. It is also the focus of an enormous amount of money and attention by corporations and clean tech startups.
Cisco sees the smart grid developing into a $20-billion business within the next five years, and is ensuring it’s at the center of activity by developing its own technologies as well as partnering with startups and acquiring companies. And Cisco is far from alone.
"Because this is such a significant market transition, it’s attracting a lot of venture investment and startup activity,” says David Hsieh, vice president of marketing for Cisco’s emerging technologies group. “Virtually every large technology company will have to have a smart grid strategy."
Cisco, for instance, bought Arch Rock, a private company developing Internet-protocol-based, wireless-network technology for smart grid applications, to complement its partnership with Itron , which provides smart-grid delivery and distribution services to the utilities market. Cisco and Itron plan to create an IP-based platform for the smart grid market, with help from Arch Rock's technology.
Honeywell recently bought Akuacom, which makes automated demand response technology that Honeywell can marry with its own technology to help utilities reduce the power load on their systems at times of stress.
The technology is based on an open-source approach Akuacom had developed with Lawrence Berkeley National Laboratory, and was selected by the government for use in the smart grid.
Before the acquisition, Honeywell had worked with Akuacom to develop an interface for Honeywell’s systems. “The business model, and the dashboard they had built, was ahead of anything we had,” said Paul Orzeske, president of Honeywell Building Solutions.
Startups often aren't looking for a merger partner, but an alliances with bigger firms. For instance, eMeter,which is developing enterprise softwarefor smart grid applications, looks to corporations like IBM and Siemens “to get my products broadly into the marketplace,” says Gary Bloom, the firm's CEO.
IBM and Siemens provide services at utilities that eMeter can complement with its software technology, says Bloom. "They provide us with the leverage and reach to get out across the world and cover these accounts."
More with Less
Cleantech is also being driven by corporations that recognize their businesses will be hurt as resources like water become scarce even if they aren’t directly affected, says Peter Williams, chief technology officer at IBM Big Green Innovations. The unit develops cleantech products and services, such as a Smarter Water Management system that essentially applies smart-grid technologies to managing water.
“Even a company operating in the Pacific Northwest, where it’s wet all the time is going to have to worry about water if their supply chain is in a water-parched area in China,” says Williams.
Companies like Waste Management recognize resources, such as landfill space, or oil, won’t be around forever. Waste Management, which is capturing methane gas from some of its landfills and turning it into fuel, has begun investing in companies that can convert garbage into biofuels, says Neil Suslak, managing partner at Braemar Energy Ventures, a venture capital firm.
Earlier this year Waste Management invested $51.5 million in Enerkem, a private waste-to-fuel company.
General Electric (parent of CNBC.com) is an active acquirer and investor in various clean technologies. In the third quarter, the industrial conglomerate was the most active of all corporations, investing in 66 percent of all deals, according to the Cleantech group.
One of GE’s strategies is to invest in emerging clean technologies through GE Energy Financial Services, a venture capital arm. Through these investments, GE gains knowledge of innovative technologies and in turn, can lend GE expertise and capital to young companies to help get them to the next stage, says Kevin Skillern managing director.
“We think we can make money,” says Skillern. “We believe investing in these companies allows us to better understand the emerging technologies that matter going forward.”
Dan Bakal, director of the electric power program at Ceres, a network of investors and environmental organizations that push corporations to address issues like climate change, thinks corporate interest in clean tech will be lasting.
“The companies that actually seem to be taking action, it seems to be real, and they don’t seem to be pulling back,” says Bakal.