DBL’s Pfund Calls For Gen 2 Approach to Clean Energy Growth at Symposium Keynote

It’s time for a Gen 2 approach to clean energy innovation, investment, and policy, according to Nancy Pfund, Founder & Managing Director of San Francisco-based venture capital firm DBL Investors.

Importance of Policy.  Speaking to about 300 students and cleantech industry professionals at the 2012 BERC Energy Symposium, Pfund emphasized that policy continues to be important to investment and innovation in the cleantech industry, particularly in the renewable energy sector.

In a high-level survey of the U.S. energy policy landscape, Pfund observed that renewable energy incentives consistently face renewal challenges and limited duration.

Level the Energy Subsidy Playing Field.  Pfund highlighted the importance of leveling the energy subsidy playing field between renewables and fossil-based and nuclear technologies. She noted that there are striking disparities in the U.S. government’s policy approach to different energy generation technologies.

Addressing critics of clean energy subsidies, Pfund cited a study conducted by DBL Investors that compared US government subsidies for energy generation technologies in their first fifteen years of subsidy life. The study found that subsidies to the emerging oil & gas and nuclear technologies industries were 5X and 10X greater, respectively, than subsidies for renewables.

Specifically:

  • Nuclear spending averaged $3.3 billion over the first 15 years of subsidy life; and
  • Oil and Gas subsidies averaged $1.8 billion; but
  • Renewable energies averaged less than $0.4 billion.

The tax code and other federal programs continue to favor the incumbent energy industries—oil, gas, coal, and nuclear.

Green Jobs. Addressing critics of policies designed to promote green jobs, Pfund pointed out that not only are such jobs being created in large numbers, but quality cleantech jobs also tend to be growing more rapidly in smaller, redder states, according to a recent DBL study.

Investment Trends. Commenting on the recent 3Q dip in clean energy investment worldwide, Pfund noted that ups and downs are to be expected. She encouraged the audience to focus not on short term fluctuations but on the fact there are still billions of dollars of capital flowing into the sector.

Further, traditional companies are turning to cleantech innovations to create better products and increase competitiveness. For example, chemical companies are moving away from fossil fuels toward sustainable and renewable alternatives, and energy companies are developing or acquiring clean energy companies.

“Mr. and Mrs. Sustainability.” Pfund sees a major investment opportunity in the sustainable consumer products sector. While this sector is influenced by regulation, it is not as sensitive to policy as the energy sector is.

From an investment perspective, Pfund views companies with “superior products [that] provide tangible environmental benefits for consumers” as particularly attractive.

Pfund noted that while price parity is necessary for the long-term success of clean tech products, consumer demand for quality green products has created a premium for certain new entrants. Tesla, a DBL portfolio company, offers a prime example.

Further, even large corporations are willing to pay more initially for innovative materials that enable them to differentiate their product in a competitive marketplace. Examples from DBL’s portfolio include start-ups that make compostable packaging for laundry detergent and absorbent materials from renewables that will be incorporated into “green” diapers.

In such cases, price premiums paid by early adopters give innovators time to bring costs down and compete at scale with incumbents. Pfund emphasized that targeted government policy levers also help innovators to bridge the gap.

“Natural Gas Culture Wars.” Returning to the energy sector, Pfund commented on the controversy over the impact of cheap shale gas on the renewables sector. Pfund mentioned that experts are predicting that today’s historically low gas prices are likely to go up. Further, utility scale storage technologies, which Pfund believes will be available soon, offer an innovative solution that can provide stable access to cheaper clean energy to abate the need for natural gas peaker plants

Policy Score Card. In closing, Pfund observed that other major countries around the world are continuing to support their renewable energy industries: China has made massive investments in renewables in its twelfth 5-year plan; the European Union has just approved a $5 billion UK Green Bank; Denmark is moving to be 50% wind-powered by 2020 and 100% renewables-powered by 2050; Japan and Germany are phasing out nuclear plants and replacing them with renewables; and India’s 5-year plan goal is 30GW of new renewables by 2017.

 In the U.S., Pfund’s list of “policy wins” includes steady progress on quality cleantech jobs, California’s AB 32 cap and trade program, renewable portfolio standards, and the California Solar Initiative, among other state level policies. The list of policies that “need fixing” includes oil, gas, nuclear and coal subsidies; inconsistent policies; and complicated, laborious and lengthy permitting processes for renewable energy projects.