Low carbon venturing: This time it’s different. Is it?
This time it’s different – dangerous words. But I’m two weeks away from co-chairing GCV’s annual energy-focused venturing conference in Houston and the quality of the low/zero carbon technology start-ups on the agenda has got me excited.
I’ve not been excited about low carbon venturing for a while – about ten years to be exact. It was 2008 when the low carbon and clean-tech bubbles burst. I was there. We were going to change the world. Obscure oil-yielding laxative beans promised to undermine the oil and gas industry. That AIM-quoted clean-tech company whose CEO had a bad hair-cut and a part-time career as a film director had promised to end the internal combustion engine’s reign of supremacy.
The legacy of irrational exuberance was a decade when low carbon technology all but ceased to be a venture proposition. Only a few die-hard specialist low carbon and clean-tech VCs survived. Corporate VCs dipped their toes in and out of low carbon waters. Impact investors were active on the fringes. The great improvements in the efficiency of solar and wind power were brought about mostly through manufacturing at scale (thank you China), not thanks to venturing.
Renewables have made great strides, but still have a long way to go if they are to start displacing hydrocarbons and do so soon enough to reduce greenhouse gas emissions. New technologies are required and venture capital is required for their fast commercialisation.
So, why am I excited now? What’s changed? Looking at the Houston agenda and the companies that are presenting, I can see at least four reasons for rational excitement.
The CEOs of the low/zero carbon companies come from conventional energy industries as do their technologies.They’re working with large energy companies rather than against them.The business models are aggressive but realistic. No bad haircuts.
Here’s a quick snapshot of just three of the venture-backed businesses presenting:
Several carbon sequestration companies have failed. Vancouver-based Inventys could succeed because it is focused on costs. “Inventys’ technology can cause a step change in the economics of CO2 capture,” says Dr. Pratima Rangarajan, CEO of OGCI Climate Investments, which announced its investment in Inventys in July this year. OGCI, a venture ‘coalition’ of energy companies that is backing low and zero carbon technologies, joins Chevron on the Inventys shareholder registry.
Using recent advancements in physics and chemistry discovered at Rice University, Houston-based Syzygy is building a new type of chemical reactor. This reactor is powered by light instead of being powered by heat from burning fuel, which reduces GHG emissions. Their go-to-market reaction is low cost, low GHG hydrogen to help the fuel cell vehicle industry begin to compete with conventional vehicles.
3. Fervo Energy
San Francisco-based Fervo Energy intends to make geothermal power more accessible and lower cost by deploying technologies which were commercialised in the shale gas revolution. Fervo has raised money from Breakthrough Energy Ventures, an investment company set up by a coalition of the extremely wealthy, and is partnering with Schlumberger.
A fifth reason for excitement is simply that we’re all ten years’ older and, hopefully, therefore wiser. Technologies have advanced.
“We’ve watched this space for a long time and have played in some areas before,” says Barbara Burger, President of Chevron Technology Ventures, who will give the Venture Houston opening keynote. “That experience makes us better informed today. We’ve monitored the cost curves, the scaling opportunities and the impact of policies. So, it’s not about us joining a new cycle. We simply believe that now is the right time to build on our participation. And we’ve gotten smarter about what it takes to be successful in this area.” (Disclosure: Chevron is among the conference sponsors).
Chevron Technology Ventures recently announced a new ‘Future Energy Fund’. In Houston, Barbara will tell us more about its strategy. “It will be different than our earlier funds – it will be focused on technologies that enable emissions reduction in oil and gas operations as well as investments in technologies that may breakthrough or disrupt the energy vertical in the future,” she says.
So much for the excitement. Here’s one reason for scepticism: digital. The energy industry is still largely hydrocarbon and analogue. Huge efficiency gains are available from the great digital tweak set off by the collapse in oil prices. Though oil prices are back up, the oil and gas industry has taken another great stride forward in deploying technology – most of it digital – so that it can survive and prosper in a low oil price environment. Renewables must anticipate, and compete with, oil and gas at lower prices. (This issue is also on the Houston agenda and will be covered in a separate blog).
Ten years ago, a lot of venture investors lost a lot of money on magic beans and other dreams. But this time it’s different. Is it? Please join us at Venture Houston and make up your own mind.