In certain corners of the green energy sector size does matter. Many green energy companies need to leverage scale to make a profit, and with steep capital requirements companies often need to seek out deep pockets to finance technological research and project development.
In the wind business the quest for scale involves building and deploying bigger wind turbine blades. This week the ever-present drive for scale led GE to acquire Wind Tower Systems. The deal allows GE to eventually sell wind developers a package of taller towers that support bigger blades. According to Wind Tower founder Tracy Livingston the bigger towers are 10-15% more energy efficient, and greater efficiency is the Holy Grail of green energy.
GE’s latest acquisition is yet another example in the wind sector of a large company buying a smaller developer. This trend impacts both technology providers and project developers. Over the past year we’ve seen Good Energies buy Santa Barbara, Calif.-based Champlin Wind, and United Technologies picked up Clipper Windpower.
The flurry of acquisitions is evidence that wind is becoming a large, capital intensive business. “Over the next decade the wind business will likely be controlled by a few, large integrated companies,” a renewable energy executive recently tells G.E.R. This is obviously welcome news to behemoths like GE, who are busy building a massive green energy potential. In effect GE is growing its market share by both buying the technology for bigger towers and simultaneously generating a larger overall footprint in the wind sector.
However, bigger isn’t always better in every aspect of the green energy business. Although pursuing economies of scale is a logical goal for any renewable energy company, it can also become a liability. Ask anyone involved with Tessera Solar, a unit of Irish renewable energy group NTR. This week Tessera chose to exit the California market when it sold its ambitious 709 megawatt Imperial Valley project in Southern California to AES Solar/Riverstone Holdings. It’s the second project Tessera has sold in as many months.
While both projects enjoyed state and federal support, they were hampered by legal and financial hurdles brought on by the two projects’ utility-scale size and billion dollar costs. The steep price tag meant that they could not be completed without government support, ensuring a long and expensive development process.
In additions, the solar thermal technology used by Tessera proved to be cumbersome, requiring sun-rich areas in sensitive desert regions guarded by Californian environmentalists. Activists and the local Quechan Indian tribe sued to block the Imperial project, and were ultimately granted a preliminary injunction by a San Diego judge. While GE is going big to take advantage of economies of scale, Tessera went big and is now being forced to go home.
VC and PE Watch
Last year Venture capital funds invested a record $192 million in Canadian-based cleantech and renewable energy companies.
The Westly Group, the Menlo Park, Calif. venture fund, is busy raising a third cleantech-focused venture fund and aims to reach a first close in the spring.
A company owned by Energy Investors Funds (EIF) acquired a Michigan developer and its 11 project strong pipeline.
Milpitas, Calif.-based Soladigm, a company that develops energy-efficient glasses for large buildings, added $10 million to its Series C round of venture funding.
Ramblings and Musings
Sen. Jeff Bingaman, a New Mexico Democrat, announced Friday that he will not run for re-election next year. As we’ve reported, the Chairman of the Senate Energy and Natural Resources committee has been a prolific author of green energy bills. Last July Bingaman and Senator Ron Wyden (D-Ore.) introduced the Storage 2010 legislation, which, if enacted, would have provided energy storage companies up to $1.5 billion in federal tax credits. He also introduced energy legislation that, among other things, would create a Clean Energy Deployment Administration (CEDA), a government-funded “green bank” that would finance green energy technologies. Sadly, the Republican resurgence in the House ensures that these bills have little chance of becoming law, at least for the next couple of years.
In a statement President Obama praised Senator Bingaman for being “a tireless advocate for preserving America’s natural resources and promoting a clean energy future.” Before leaving the Senate Bingaman will likely help push the president’s clean energy standard, proposed during the state-of-the union. The ultimate goal is to ensure that 80 percent of the U.S.’ electricity comes from clean energy sources by 2035.
Photo: jsturr, Flickr