Optimism is what drives investors to bet their bucks on companies with a disruptive approach but clean energy, despite all the promised support from governments and institutions makes them see red, CNN reported.
Clean Energy On Roll Again But Will It Be Different This Time Around
According to Craig Lawrence, who led clean tech and clean energy investing at Accel Partners between 2008 and 2010, he always worried something was going to happen that would suck the wind out of the market.
Meanwhile, clean tech projects are experiencing a massive boom in funding. BloombergNEF reported that energy transition received a $501 billion infusion with the WilderHill New Energy Global Innovation Index that tracked 125 global companies shares in the climate sector, soared to an all-time high earlier in 2021.
But the bust of a decade ago still spooks investors. Before the Great Recession that hit after the global financial crisis, sustainable energy startups attracted billions of dollars from Silicon Valley investors who hoped to reap a bonanza from the sector’s rapid growth. But with mounting losses, they pulled out giving the sector a bad name. By 2012, the venture capital climate technology deals’ value had plummeted to a meagre $1.1 billion.
But the sector had come a long way since then with the renewable energy production costs dropping dramatically making them competitive with fossil fuel, while governments, investors as also top companies pumping billions of dollars into sustainable projects.
Lawrence, who quit venture capital and switched to executive roles during the crash, had returned with Energy Transition Ventures, a new $75 million fund.
But according to commentators investing in new complex technologies came with risks. The question was now was whether, investors would be prepared to back their climate convictions, even if things did not work out.
According to Lawrence, he believed the fundamentals existed to build world-changing businesses. He added that did not mean all the companies funded right now would do that.
According to commentators, this was not the first time sustainable investments had attracted massive amounts of money from those who hoped to collect phenomenal returns. Between 2006 and 2011, venture capital firms had invested $25 billion into clean energy technology, according to a 2016 report published by the MIT Energy Initiative.
But it was not long before things went awry. Venture capitalists that were used to netting returns around five years down the line had portfolios loaded with startups that were going nowhere as they failed to develop and scale up fresh and complex technology.
Lawrence said the venture capitalists had a hubris of sorts when it came to the energy industry like their treatment of the tech industry.
Venture capitalists ended up losing over half the money they had invested in the period. Then during a crucial phase for addressing the climate issues, funding dried up. The political controversy around the solar technology startup Solyndra, which failed after it had received $500 million in US loan guarantees, did not help either.
According to Carmichael Roberts, investment committee member at Breakthrough Energy Ventures, when one hit those major bumps in the road it got scary. He added, he thought they had a lot of folks who joined for their own sets of reasons, but when it got really complicated, they bolted, rather than figuring out how things could be fixed.
However, in recent years fears had started to subside, according to commentators. Thanks to technological innovation and massive Chinese investment the costs of renewable energy sources, had fallen to levels competitive with traditional fossil fuels.
According to Lawrence the current surge was all about economics.
Investors had also developed a broader perspective of sustainability, that included agriculture, food, and manufacturing processes in addition to wind and solar projects.