REFF: Google’s Dan Reicher: How to Bridge the “Valley of Death”

Google's Dan Reicher: Proposes a way across the "Valley of Death"

Dan Reicher, Google’s director of climate change and energy initiatives, wants to bridge the “Valley of Death” – the financing gap that clean energy technologies encounter when venture capital funding is exhausted but before they can access more funding. Reicher hopes that the creation of a Clean Energy Deployment Administration, a government entity sometimes called a “Green Bank” that provides support for deployment of technologies, will help bridge that gap. Reicher is supporting a bill introduced by Senator Jeff Bingaman that would fund CEDA. Reicher, an assistant secretary of energy in the Clinton Administration, joined Google’s philanthropic and advocacy arm, Google.org, in 2007. G.E.R. caught up with him at the Renewable Energy Finance Forum – Wall Street.

Green Energy Reporter: Why is it so important that the government help companies cross the Valley of Death?

Dan Reicher: It’s getting in the way of success with respect to a very broad range of energy technologies that I think are the solution to our environmental, economic and security problems. For a broad array of technical, renewable, efficiency technologies, the Valley of Death looms large for all of them.

If we’re going to put these advanced technologies in place and broadly deploy we’ve got to figure out to build a bridge over this valley.

G.E.R.: How would CEDA help do that?

DR: It provides a diverse set of financial tools through a government-industry partnership to help lower the risks in the scaling of promising clean energy technology. We of course do have today the Department of Energy loan guarantee, but there are a range of tools that can be used to get these energy technologies from the demonstration phase to the commercial deployment phase.

It starts with loans and loan guarantees but it goes up to a whole host of other tools that can be used.  This new agency has the potential to be self sustaining it could actually take profit and interest in a new technology and royalties.

It has the potential, I emphasize potential, that it wouldn’t have to return year after year to secure federal appropriations. In these fiscally challenged times, that makes it a very attractive additional feature.

G.E.R.: Do you think that the public will be able to tell the difference between CEDA and a straight government energy subsidy?

D.R.: Two reasons why I think this could gain strong public support: First, It’s a very modest chunk, a very modest amount of federal dollars than can leverage vastly greater private sector investments. Second, this could in effect be a self-sustaining agency not requiring additional funding.

G.E.R.: How does a company like Google benefit from CEDA?

D.R.: Google’s very interested in how we advance energy technology. We stepped up to the challenges and opportunities around energy and we’re approaching them from the engineering perspective, the policy perspective and investment perspective, all three points of what we call the green energy triangle.

CEDA in a sense puts all of thee things together, it says these interesting technologies that get developed through a creative policy mechanism that is CEDA could dramatically increase the private sector investment of energy technology scale.

G.E.R.: How has Google adjusted its approach to cleantech investing since it began?

D.R.: We’ve made some technology investments venture style investments across a range of technologies. Secondly, we’ve begun to make energy project investments [notably in a North Dakota wind farm] .

G.E.R.: Many in the green community think that the BP spill has provided the spur to climate legislation. If this moment passes without any of these significant milestones being reached, what’s the way forward?

D.R.: We’ve got to keep at it. This is a problem and an opportunity that is so vast that we’ve got to just keep pushing.

If we don’t get energy and climate legislation this year, and we don’t put CEDA and some of the other things in place we think are important, such as R&D funding and legislation to get people right of access to their home energy information, we’ll go back next year.

G.E.R.: What is Google’s investment strategy?*

D.R.: We are doing project investment, but given the high risk of these scale-up projects the vast proportion of the project investing is really focused on proven technologies. It’s much harder for us and virtually other the private equity investors to make the investments in these higher risk scale-up projects. We’ll take a careful look at a few of them and see what we can do.  But without mechanisms like CEDA and the other kinds of mechanisms… its going to be hard for Google and everybody else in the private equity area, to say nothing of the debt players, to get behind these innovative commercial scale-up projects.

*Reicher addressed this question during an earlier panel discussion.

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