You have to watch this one until the end to get it...
Really great
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The price of oil and the future of renewable energy
It was only 6 months ago that Goldman Sachs predicted $200 oil before the end of the year. Today, most analysts predict the price of oil will fall under $50 a barrel before the end of the year...
What will this mean for the future of renewable energy?
In the short term, it seems the answer is, unfortunately, a real slow down.
The combination of easing energy costs and a global credit crunch (making financing of new projects close to impossible) will slow down the progress of most companies in the space (Wind has been taking the majority of the hit over the last week, but this is true for solar, geothermal, and the others). A good article on this in the WSJ here
But in the long term, this may well be just be a small hiccup in the drive to eliminate energy dependence on oil.
Last night the show 60 Minutes had a profile with T Boone Pickens, who is trying to drive a shift into renewable energy with the "Pickens Plan" (this is a man that made his fortunes in the oil industry). He's already taken a big hit from the falling markets, and looks to be in for a rough time with his huge bet on the wind sector. But in the long term I believe he'll come out a huge winner.
Worth viewing:
What the financial markets look like
Red....
Here's a great map showing the performance of various stocks by sectors, with a strong red for the major declines.
What is the big island of green on the right? Try to guess
(Answer: Nothing to do with green technology of course... rather gold)
Making Australia a (Project) Better Place
After Israel, Denmark, and talks with Portugal and San Francisco, it now seems that Shai Agassi's Better Place is looking to take the electric fuelling infrastructure to Australia "an island that is the sixth largest country on Earth"
The company announced today a deal to set up a $660 million network in Australia, through partnership with two key groups - AGL Energy and Macquarie
This is a significant move, that will help prove the company's ability to scale its business well beyond small markets, and create one of the largest companies to ever come out of Israel. Good to see one person that's not slowing down at all in the current markets
Knesiat Hasechel (Church of Reason) - First US Performance in SF
This weekend I went to a music concert of Knesiat Hasechel - one of Israel's top bands of the last decade, and one of my favourites.
Apparently it was their first performance in the US.
The show was great, so no need to elaborate too much on that.
This was the first time I attended such an (Israeli abroad) event since I left Israel:
- The crowd was almost all Israeli's (not a big surprise). It seemed that most of the Israeli tech industry relocated to the valley was there (with quite a few from the Green tech space this year). So a great opportunity to catch up with the startups, hear who's raising money, who's hiring, (and these days who's firing)
- Most were between 30-45, married (very few were single), living around the valley (not to many inside SF), probably 1-3 young kids at home with a babysitter, just here for a "few" years
- For the first time I realised what a sense of patriotism these events provide to all those who are based out here. Something like Bob Hope going to entertain the troops. Its nice to see, but very sad to be on the receiving end.
My new years resolution will be to see much more local artists perform in Israel (rather than away)
Thoughts following the Solar Power 2008 Conference
Last week I spent some time at the Solar Power International Conference in San Diego.
I thought to share some thoughts I walked away from the conference with:
- This conference had 15,000 to 20,000 attendees - almost double the amount of people from last year. So definitely a high level of interest in what is happening in the space.
This is biggest event for the industry in the US. But being there I realized its still very small relative to semiconductor /communications industry events (for example, there was only one hall for exhibitors). This speaks to the fact that the solar industry is still very small (specifically in the US), with most companies still “behind the scenes” or in private rooms. Will they come out bigger next year (given ITC boost) or disappear altogether (given current economy)? I think we'll see a bit of both.
- This is not a time to raise money. Seems to me that many of the companies walking the halls have not fully grasped this yet.
If you need to raise money now – its going to hurt a lot (both in terms of effort that will be required, as well as valuation you will eventually get that will be much lower than expected). Companies should think about how they make it through 2009 with no external equity raised.
Although this is general advice for any company these days, it seems solar companies might have the biggest "wake up call" in terms of the variance between expectations they had just a few months ago (valuations, round size) to reality today and in the coming several months.
- Any project dependent on solar tax equity, project financing, or debt will see tough days ahead. With higher rates, and less suppliers of funding, competition for sources will intensify and project costs will be higher driving lower value / returns for developers. Today GE also noted they will be dropping out of the tax equity financing for the time being: As mentioned by Timothy Howell, head of origination for renewable energy at GE: "Right now we can't price a deal... We can't go out and borrow. So we can't commit to a deal today."
- Notwithstanding, some new and exciting disruptive technologies are being developed behind the scenes, and already making some traction with potential to become significant in the market.
- Finally, it was my first time in San Diego, and the weather was great. The city has great beaches... but it seems mainly a good place if you're looking to retire (something like the Miami of the west coast). One concept worth considering for other cities (especially these days) is "Taco Tuesday" - in order to entice people to go out on Tuesday's (mainly students), all food and drinks in the city are half price all night...
The amount of new projects will also be scaled back, as business (and consumers) look to cut costs ("If your business isn't growing at all, are you going to sign a contract for energy from your rooftop?")
This will affect the whole industry, although some claim module makers may take the large share of the cut (being the largest cost component, with the highest margins)
A couple of examples I liked - Enphase presented their new solar inverter design, and drew a lot of excitement to their booth (showing the big need for such solutions from industry players). There are a number of stealth mode startups going after the same space (A couple of Israeli players with interesting approaches);
In thin film solar - Solyndra recently came out of stealth mode with a radically new design for thin film panels, and high market interest - over $1.2Bn of orders (A company my fund is invested in)
Great news for renewable energy - but still taking the hit
As all industries these days, renewable energy is taking a big hit - Even though this has been a great week for the world’s clean energy sector - as the US Congress extended the tax incentives for wind and solar, relieving much uncertainty behind the market development potential.
Nonetheless, the WilderHill New Energy Global Innovation Index (NEX) plummeted today (to 217.2), more than 50% down on its highs of last November. Many clean energy shares are at their lowest levels of any time in the last two and a half years. (Is this a good time to buy?... I'll wait a bit)
With this in mind, next week I'll be attending the Solar Power International event (This is the largest event for this industry - The number of attendees has been nearly doubling each year, and expected to reach over 12,000 this year.)
Just a few months ago this would have been a place of celebration... But given the state of things, it will be interesting to see how the industry is thinking...
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