The Week In Green Energy: Scaling Back The Government Dollar

Where green legislation goes to die?

Money remains tight these days and so cuts are in order, even when it comes to supporting the establishment of a dominant renewable energy sector.

The Obama administration and the Democratic-led Congress share a single, ambitious goal when it comes to renewable energy: Crudely speaking they want to beat China and win the global green race. Yet, the reality is that at above 10 percent every year and the country is about to release another ambitious green investment plan, the U.S. economy is struggling, hammered by a near-double digit unemployment rate. So lawmakers looking to save a few pennies said this week they were considering cutting the popular Department of Energy loan-guarantee program by $1.5 billion to fund a $26 billion state education and Medicaid funding package.

The reality is that the $1.5 billion cut won’t be enough to derail the U.S.’s  long-term renewable energy policy. However, it does make for a bad headline, especially when it comes in the wake of the Senate’s recent decision not to push through a cap-and-trade bill. After news of the cuts came out, G.E.R.’s inbox was a buzzed by emails from renewable energy advocacy groups urging Congress not to scale back this crucial funding. “The loss of these loan guarantee funds,” President Rhone Resch warned, “could send solar development into a tailspin that will be difficult to reverse.”  There is about $2.5 billion left in the DOE loan guarantee program. That amount is enough to support $25 billion in actual loan guarantees.

As we’ve said before, while the $1.5 billion cuts make for a bad headline, all is not lost. The cuts would most likely impact smartgrid and energy efficiency technologies. So far those two sectors have received the least amount of funding (about $750 million each) and have also generated the fewest applications. The cuts, while “headline negative” as one analyst said, could help boost funding for wind, and biofuel developer at the expense of the solar industry, which so far has received the bulk of the guarantees.

We started the week by posting on a unique agreement forged between the United Steelworkers union and Chinese wind turbine supplier A-Power Systems, which over the past year has been leading an effort to develop a 600 megawatts wind farm in West Texas. Since its rollout last fall, the project, which could be the first Chinese-funded wind farm operating in the U.S., has been rocked by deep political opposition led by Senators Chuck Schumer (D-N.Y.) and Sherrod Brown (D-Ohio). Both have argued that the project’s best paying jobs would stay in China and the U.S. would only get temporary, low-paying jobs.

The agreement with the United Steelworkers union could soothe these concerns. Indeed A-Power and its partners have agreed to buy about 50,000 tons of U.S.-made steel to support construction of this landmark renewable energy project. The deal — a de-facto Domestic Content Requirement — underscores the ongoing importance of the U.S. market for foreign investors and the sort of compromise they’re willing to make to get a piece of the action of what remains one of the world’s most lucrative energy markets.

VC and PE Watch

South Korean industrial conglomerate Samsung invested $15 million in nanomaterials developer Nanosys to develop high efficiency solar, LED, memory, semiconductor and display products.

Solazyme, a research and development-focused algae-based biofuel company in South San Francisco, Calif., raised $52 million as part of a Series D financing round led by Braemar Energy Ventures and Morgan Stanley.

Algae-based biofuel developer PetroAlgae filed for a $200 million initial public offering. Goldman Sachs, UBS and Citi are underwriting the offering.

Good Energies, the renewable energy and cleantech-focused investment fund, CEO and COO both resigned on the same day, .

Rambling

How do you convince investors that you’re a winning horse when your company has zero sales, zero revenues and the technology you’ve banked on to eventually generate those missing revenues and sales, remains largely unproven. That’s in essence what algae-based biofuel developer PetroAlgae will have to do in the months leading to its $200 million Initial Public Offering (IPO). The the IPO market for renewable energy companies has been tough, in part, because of investor concern over the ability of renewable energy and cleantech companies to ever turn a profit. Even PV developer Solyndra, which unlike PetroAlgae generate strong revenues, had to fold its IPO plan after investors slammed the company for its high operating costs. As is the high point in PetroAlgae’s IPO process won’t be the potential share-sale but will have been the press release announcing the IPO. After that things look pretty dour for the Florida company.

Photo: Flickr — Wallyg

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