RENEWABLE ENERGY AND INVESTMENT

Welcome to Charge: the future of energy

RENEWABLE ENERGY AND INVESTMENT
by Daniel C. Sweeney, PhD

We recently received the summary of a study on global investment in renewable energy for 2005. The total reported was $40 billion dollars—scarcely chump change, but nothing like the amount of money that has gone into telecommunications or enterprise information technologies even in the bad days since the Tech Bubble burst.

If we expand energy technology companies to include those touting innovative uses of fossil fuel or nuclear energy, then the total goes up a bit, but in toto the new energy technology field has received a rather disappointing response from the investment community.

We happen to report on industries other than energy so we believe that we can claim a larger perspective. We believe that this perspective affords us some understanding of why investors evince relatively little interest in energy despite the fact that energy concerns are looming so large today.

An example from the information industry is illustrative.

Today we received a flurry of press releases from company we had never previously encountered who were offering various mobile video platforms and services. We have been receiving similar flurries daily since the beginning of this year. No doubt the flurries will intensify because the mobile video industry, even its current embryonic form, has the appearance of bubble in the making.

No one, from what we can determine, has any clear notion of how such a market will develop, but one press release assured us that television programming viewed over two inch screens on hand held battery powered devices will be a far bigger and more influential business than traditional television ever was.

Interestingly, these product and service introductions follow numerous failures in the past. A myriad of mobile video companies, most notably PacketVideo, rose, crashed and burned in the 1999-2000 time frame, while second wave companies such as Enpocket arrived in 2004 and failed to have much of an impact. Now a third wave has arrived and the venture capital firms are in a frenzy.

Parallel with this development are the attempts of Google, Yahoo, and Microsoft, companies with little or no prior involvement in multimedia, to establish themselves as entertainment “gatekeepers” on the Internet and to redistribute content originally developed for more traditional media.

Again the response of the largely servile technology press has been ecstatic. Such “pervasive branding”, as it’s called constitutes a watershed event, perhaps the most important event in our lifetime. Or perhaps in all of human history.

Decades ago social scientists with an interest in mass media calculated that even with the less efficient content distribution of traditional print and broadcast, most Americans were bombarded with literally thousands of messages on a daily basis. Now, thanks to mobile digital assistants, the bombardment can become more or less constant, like shells falling on the Western Front.

One might be forgiven for thinking that intensifying the consumer’s exposure to messages of various sorts is somewhat less critical than ensuring energy security. After all, electronic messages inevitably diminish when electricity becomes uncertain. The point is, however, that unproven services and products are precisely what attract the greatest amounts of investment. When products or services are established or commoditized, then they are by definition mature markets and thus hard to crack and having limited potential for future revenues.

New energy technologies are in the nature of replacement technologies and in most cases they are unlikely to experience rapid take rates. The sole exception has been fuel cells which at one time were expected to replace batteries in many applications and to internal combusion as a power source for automobiles. Accordingly, fuel cells attracted a good deal of investment in the late nineties.

Technologies concerned with heavy duty infrastructure or large scale transportation applications are simply not likely to be quickly adopted, however, and hence they are equally unlikely to arouse venture capitalists.

Our prediction is that the information industries will continue to be focus of tech investors for the indefinite future. Energy will get its share of investment, but it will be a relatively small share.