Amory Lovins, George W. Bush, and the Valley of Death

“The commitment to a long-term coal economy many times the scale of today’s makes the doubling of atmospheric carbon dioxide concentration early in the next century virtually unavoidable, with the prospect then or soon thereafter of substantial and perhaps irreversible changes in global climate.”

That was Amory Lovins... in 1977.

From a long and interesting Atlantic article on climate change and energy, which concludes with rhetorical elegance that

The key to our energy future lies in exploiting two often opposing forces without having them trample or undermine each other: Silicon Valley’s free-market culture of innovation and Washington’s power to set the terms by which everyone operates.

OK, true, but not particularly specific or helpful. The article does show an appreciation for the difficulty of applying the VC model to renewable energy beyond demonstration scale:

The nature of venture-capital investing, which involves placing many bets in the hope that a few pay off, helped create today’s array of clean technologies. But venture capitalists have been unable to replicate the explosion of growth in the Internet sector, because they aren’t big enough to compete in the $5 trillion U.S. energy market. Google required only $25 million in venture capital to become the company it is today. A large wind or solar facility can cost upwards of $500 million just to get started. “When you’re talking power infrastructure, you’re talking thousands of tons of steel and glass and giant turbines,” says Peter Le Lièvre, the co-founder of Ausra. “All the investors in Silicon Valley combined cannot put $500 million into a project.”

This poses a problem. Venture capitalists can bring an idea from the lab to pilot scale. But sooner or later the limitations of their balance sheets kick in. Many start-ups have made it this far only to die searching for additional financing. Venture capitalists have a term for this. They call it the “Valley of Death.”

This is very true, most noticeably in biofuels where second-generation technology is having monumental difficulties securing funding to build at commercial scale.

Finally, an offbeat fact that made me smile:

Though it will have to compete for space in his obituary, George W. Bush, encouraged by Texas businessmen, signed what is regarded as a model renewable-energy standard while governor of Texas, in 1999; Texas easily beat it and now produces more wind power than Denmark.

Who knew?