Renewable Energy Projects Require Focus
As a result of my expressing my willingness to review any and all clean energy business plans for free, I’ve received some doozies.
One I got the other day caused me to think: exactly what works in terms of gaining acceptance from the investor community? What doesn’t have a chance? I’ve laid out my response below.
First, however, here’s a summary of the business plan in question. It came from a woman who claims that her team will take a part of the U.S. desert, build and operate a megawatt of geo-thermal power systems, build a 250 mile pipeline for water that they can extract somehow, help out an Indian tribe with water while cleaning up a river and a lake, implement vast amounts of wind and solar PV, implement algae as a fuel source, build resort dwellings with an institute of healing and a 9-hole golf course.
I wrote back:
I have to admit that I’ve never seen anything like this, insofar as it brings together so many disparate elements. But that’s going to scare people, and challenge (destroy?) your credibility with them. It’s like saying that your teenage son is on his way to becoming a major league baseball pitcher, as well as a violin virtuoso who will speak eight languages and teach at Harvard Law.
There are only two overall concepts in renewable energy that are viable:
1) One technology (or technologies that complement one another, e.g., wind and storage), no technical risk, seasoned development team with lots of cash invested, land committed, all siting, engineering, EIRs (environmental impact reports), full permitting, no additional development capital required, signed contracts for reliable sources of feedstock (for biomass/biofuels), grid tie in place, EPC in place, PPA signed with credit-worthy off-taker. Viable plans in place to either sell or operate the project. Requesting project financing, which can be a large (9-figure) number.
OR
2) A credible new idea in one of the flavors of renewable energy (solar, wind, biomass, biofuels, hydro, geothermal), and a working model with test data that proves the concept’s viability and suggests a path to cost-competitiveness at scale. Requesting a modest number (6/7 figures) to advance the TR (technology readiness) in some meaningful and understandable way. In addition, I have investor interest in things in the larger domain of cleantech, but that lies outside of renewable energy per se, e.g., sustainable ag, water purification, advanced nuclear energy, and new concepts in eco-friendly transportation.
Nothing else has any chance of success.
we are moving in the right direction but sadly at a turtles crawl but I doing my part as i have solar hot water and by next year some solar PV which will grow to 6kw
At least you’re moving in the right direction.
It can be extremely frustrating at times to listen to the musings of dreamers, especially those with little understanding of logic or science. They seem to ramble around chasing sometimes what seems a spark of unfounded inspiration. Of course the dreamers complain about the lack of vision of those they must work through, the bankers, lawyers, and venture capitalists. There are also limits. The dreamers have to eat. The do’ers need to renew their inspiration or they can lose their concentration.
Perhaps you are telling us that success lies in the ability to translate. The dreamers must be able to translate their visions in order to communicate with those who know how to get things done. The “do’ers” of our world will find more opportunities if they stretch into the world of those willing to challenge what “doesn’t work.” Perhaps little by little there is something that each of these camps can learn from each other… within limits.
I would say that the dreamers are accommodated in the second of the “workable” categories. The only thing omitted here are frauds and crackpots, which is (IMO) as it should be. Anyone with a new idea that makes some level of sense needs to be encouraged. Having said that, unfortunately, investors have little appetite for this right now, and dreamers normally need to advance their ideas with “friends and family” money.
Craig: As an inventor I can tell you that yes; Renewable Energy Projects require Focus, but not only focus, but the ability to change hats and shoes. First, you are a dreamer, then you are a developer (of your invention), you must learn all sorts of jobs to build, or explain someone so he can build it, then you are a manager, so you calculate costs, then you are a scribe, you must describe your idea very well, so someone else can build it (and you can apply for a patent), then you are a salesman, selling your idea to your friends, family and other persons when you find money to build your idea. You must be able to switch from one personality into another all the time so you can get your idea from concept to product.
Many people don’t have this ability, and struggle in one area or another; inventors in general aren’t very good business administrators, their whole existence is focused in finishing the job.
This example you put is typical, somebody has an idea, but does not have the necessary academic preparation, so from the begining, they are lost in the maze.
The other thing is: not only renewable energy projects need to be focused, every project, if you want to make it real, must have focus.
Investors are people who worry about the money, how much they put in => how much they are going to get out. They have worked a lot to get the money they have and won’t put it just anywhere, (that is why the inventor must wear the salesperson’s shoes) so they also must be understood. Unfortunately, investors are also human, and have their own faults, or lack the necesarry academic preparedness in the “right” fields.
Our world is very complicated.
Graig, over the years I have also seen many bizarre schemes, not all proposed by obvious dreamers and crackpots. Many highly qualified people also become so enamored with the idealism of their projects, they disregard reality and listen only to a small band of enthusiastic supporters.
Even when the projects collapse or fail, they don’t lose faith, blaming others for the failure, never themselves.
During “booms “, (usually fueled by government funding), vast amounts of funding becomes available for projects that can only remain viable if taxpayer funding remains intact.
Most of these projects, start with an ideological basis, to solve a perceived problem, rather than any viable commercial purpose.
Since 2004, the western world has been involved in a huge ‘boom’ surrounding renewable energy. Much of this boom was based on the false concept of ” imminent peak oil”. A whole generation, became excited by “green” technologies, which seemed to breath new life into political and philosophical ideologies that had become discredited by the fall of the Berlin Wall.
In the last 10 years, very few of the new green technologies have become economically viable, without massive taxpayer funded assistance. Even relatively successful projects, still need taxpayer assistance to stay in business.
Taxpayer assistance, or artificially favorable trading conditions created by government regulation, are always created for ideological reasons, or as a response to a perceived threat to the commonweal.
In every boom, three types of investors emerge; 1) Speculators, hoping to “catch the wave’ and quickly make giant profits. 2) Long term investors seeking to find new industries with long term substantial growth. 3) Idealists, investing in projects that suit particular political or philosophic concepts.
The green boom, has created a vast number of “broken dreams” and seen some spectacular failures, with very few examples of success. (even less if government support is removed).
However, “booms” do create increased economic activity, and even short term prosperity, as long as the government credit card is still credit worthy.
During periods of internationally low interest rates, Fund Managers, Investment bankers, Venture Capitalists, etc, are forced to seek higher risk enterprises in order to provide the sort of returns demanded by those who money they invest.
Governments need the sort of economic activity, which is electorally popular. Thus a semblance of viability is maintained, and most of the “green boom” industries can retain an illusion of viability.
The comments you receive to your articles, are always interesting. The authors are usually very sincere, well meaning folk, who genuinely believe in the righteousness of their ideology, and are frustrated by what they see as a ‘conspiracy’ by conservative forces and “vested interests”, to maintain the status quo.
Naturally, when they discover that the vast majority of the public have no interest in creating a “better world”, and most “renewable” energy projects lack commercially viable applications, they turn to governments to change the rules. Thus a plethora of projects become seemingly “economically viable” , due to government regulation or funding.
The justification is always based on some gigantic threat to society, real or imagined, usually wrapped in incomprehensible scientific language, that captures the public imagination long enough, for these new technologies to become fashionable.
For the investment professional, correctly identifying these trends can be very, very lucrative.
In 1841, Charles Mackay wrote his book ” Extraordinary Popular Delusions and the Madness of Crowds ” about the madness of the ” Tulip Bulb Boom Bubble” of 1636-7.
The result may have been economically disastrous for some, but for the shrewd investor who got out before the collapse, the profits could be enormous.
My view may seem cynical, and even hypocritical, as I have invested in many alternate energy projects, mostly for idealistic reasons. The main difference, is that I know such projects have very little possibility of being even marginally commercially, or economically viable.
( Investing is a tough gig, not for the faint-hearted or idealistic) .
Wow, a lot of comment for the support of status quo that is subsidized to the painful max. Perspective is like beauty, status quo is an anchor paid for by the same.
Greg Chick, Ramona’s Plumber, Diy plumbing advice.com. I am responsible for my thoughts and my shameless plug is not commercial, all free.
@ Marcopolo: Although there is a “strange” situation about the oil prices, most people aaround the world don’t realize that oil has been very generously subsidized for more than a century in many ways, and that has been so because of the fright of “what would happen if we don’t get more oil (to fuel progress), just like a drug addict. But peak oil is here it really means that we have reached the point that oil is getting scarcer and more ex
pensive to extract; but the oil business is now starting to feel the punch, so there’s an economic war, a political war and several other problems around the world that have clouded the reality.
I have been working on green energy not because of the subsidies (in Guatemala we don’t have them), but because of rational analysis of the situation, oil IS getting more expensive, oil DOES pollute the environment and electricity CAN be produced through other ways, cheaper ways. OK, liquid fuel is a problem, but that’s half the problem, so we must keep on working to solve the problem, but why do we have to drive behind a polluting truck every day, why do we have to pay for throat sicknesses so often? Why do we have to risk or health because somebody else “needs” more millions?
We have jungles in our country and many underdeveloped countries have them too, they are the lungs of the world; it’s like we would say: OK, WE ARE THE LUNGS OF THE WORLD, BUT WE WANT TO SMOKE. THE HELL WITH EVERYBODY ELSE! We are giving jobs to the tobacco planters, the hospitals, etc.?
There are other people on this world, we have our children on this world and we ALL want to leave them a livable world so THEY CAN PROSPER!
I JUST DON’T UNDERSTAND THESE PEOPLE.
very good
but I have Tyre Pyrolysis industry, it’s by product having 85% carbon is it possible to make good useful product kindly provide ideas requesting to all knowledgeable persons
A tire recycling proess I would recomend is one that grinds the tires into a sand and use it as a foundation for roads and other construction applications. I figure that burning tires would be worse than burning crude oil. I don’t really know for a fact, but I have seen both fires, and both are very bad for the environment. At least, the powdered version keeps the molecules together and may even give a better base for the road, a little bounce, elastisity?
I read about this in some magazine some months ago.