China is the “it” place these days when it comes to everything green. The country is more and more looking like a leader of the global renewable energy sector and less like the emerging contender.
The Chinese market has several obvious advantages for investors: the market is huge and protected and production costs — which U.S. unions claims are kept down by illegal state subsidies — are a fraction of Western countries. But enertech investors are also motivated by the easy access to cash and the willingness of banks and companies to spend and lend. China truly is becoming “The Green Dragon.”
This week, veteran enertech fund VantagePoint Venture Partners closed on a $100 million China-focused cleantech and renewable energy fund. The fund is both sector specific (renewable energy and financial services) and focused on investing in companies based in the city of Tianjin and its surrounding area.
The VantagePoint fund underscores the serious interest that institutional investors have taken in China. You can expect VantagePoint, which holds ambitious car battery company Better Place and solar company BrightSource Energy in its portfolio, to find, finance and support ambitious Chinese green energy startups. That’s a milestone that confirms China is serious about crafting it’s own cutting edge technology, rather than, as it’s largely doing now, depending on foreign-developed innovations.
Duke Energy also announced plans this week to partner with Chinese companies to jointly develop cleantech and renewable energy projects outside China. Duke CEO James Rogers pointed out with characteristic bluntness that the growing regulatory uncertainty in the U.S. and lack tight lending standards makes China and its cash-rich companies attractive partners these days. “Our focus is really on partnering and going out together as a Chinese-American consortium to develop opportunities outside of China,” he told Bloomberg.
Up North, storm clouds gathered around the Ontario’s popular Green Energy Act, the legislation that has helped attract billions of dollars supporting renewable energy projects. The Green Energy Act is unfair, say competitors, including Japan, which this week took preliminary steps to filling a formal complaint with the Geneva-based World Trade Organization (WTO).
At issue, according to Japan’s government, is the Green Energy Act’s Domestic Content Requirement (DCR), which unfairly favors local firms. The DCR is THE essential provision of this trend-setting legislation. It acts as Ontario’s return on investment against the subsidies it is providing to encourage foreign companies to set up shop in the province. So, don’t expect Ontario or Canada’s federal government to give in on this key provision. Already Ottowa has maintained that the Green Energy Act meets all WTO requirements. However, of all the provisions in the Green Energy Act, the DCR, from an investor standpoint, is the least popular and so any loosening of its strictures would probably be welcomed.
VC and PE Watch
SG Biofuels, a bioenergy company that develops and produces Jatropha seeds, has raised $9.4 million as part of an inaugural Series A financing led by Flint Hills Resources and Life Technologies Corporation.
VantagePoint Venture Partners closed on a $100 million China-focused clean tech and renewable energy fund.
Sakti3, the Ann Arbor, Mich.,-based developer of high performance lithium batteries for the automobile sector, received a $4.2 million investment from General Motors Ventures and Itochu Technology Ventures.
Solar power got a boost this week with news that Germany’s Solar Millennium won approval from California regulators to develop a facility that at its peak could generate up to 1,000 megawatts of electricity. That’s impressive! Still, the developer has to clear some hurdles. In these uncertain times it remains to be seen if banks (at least in the U.S.) even have the appetite to finance such massive projects. This isn’t 2006 anymore, when credit was cheap and plentiful.