SolarCity finally went IPO just before Christmas. Does this mean light at the end of tunnel for cleantech? Last year was particularly challenging for the sector, to the point that green energy got caught into Presidential rethoric cross-fire. More critically, many VC investors have moved away from traditional cleantech companies that consume a lot of cash and require building plants to scale.
I talked to a Sand Hill VC firm before the holidays and they confirmed that "cleantech fell out of favor" although they did well with a couple of investments like Nest. Smart devices, as we predicted last January, faired well in 2012. Smart thermostats, smart cars, etc. You name it! Today we are looking at the likely trends to come in 2013. Here is our top-5...
- Solar 2.0 - Despite the bad press about solar companies, mainly module manufacturers, the sector is maturing well. Costs are going down and applications are multiplying. Actually the only two IPO's in 2012 were related to solar: downstream installation (Solar City) and mivro-inverters (Enphase Energy). Companies that will position themselves smartly will continue to do well. One of the trends of 2013 is the convergence of solar and energy storage, grid integration, community buildings, etc. The second wave of solar is coming, less dependent on subsidies and more aligned on actual energy needs.
- End of cleantech per say - The term "cleantech" came to the mainstream in 2006-2007 with the surge of VC deals in renewable energy, particularly in solar. It will likely die with the end of the first generation of solar. Does this mean the end of investments in energy, transportation, water, etc? No. It simply means that there is little financial mechanism in common among "cleantech" deals, unlike digital publication in IT or drug approval in Biotech, to build a predictible model for investors. As a matter of fact, most of the exits in cleantech have been M&A's, confirming the terminology was mainly a marketing "umbrella" of distinct verticals. The common transformation of the infrastructure and the exchange of ideas will continue at technology level.
- Recycling & waste shine - The nexus of energy and waste is gaining ground with a few deals. Recycling ad waste is not as sexy as other cleantech verticals. However, investors like companies dealing with a liability (toxic waste) and generating a product (recycled material or energy) at the same time. Both can be monetized, and this one-two punch will likely drive more companies forward like Harvest Power that traditionally do not get attention.
- Convergence of private vehicles and public transportation - this trend is subtle but is coming clearer now, to the point that a number of services, from private shuttles to taxi phone applications got attention from regulatory bodies. And Google and Cisco are investing in software platforms for automated vehicles. Earlier this week, a Cisco representative stated that automated driving on highways is only a few years away. Commuters will be able to do other things... Does that sound familiar? Trains. This trend will be particularly strong in the US where public transportation is less strong than in Europe and Asia.
- A smarter planet, a building at a time - In the last World Exposition in China, the "city" was the highlight of the party when it comes to the environment and modernizing infrastructure. Technologies from LED lighting to energy efficiency management are here now, but the decision is really taken at the building level. Some cities like San Francisco and Paris are trying to take initiatives to make things easier new technologies. The vocal Michael Bloomberg is leading the C40 Council, but the complexvity of regulations at different levels in a city continues to make things slow. It really comes down to facility owners to make the decision. Luckily, green building does not just mean environmental friendly. Green technologies can also save them money.