Partly inspired by the chance to use "ping-pong" and "pop" in a title, and partly because I've already speculated cleantech investing as a whole could suffer if ethanol's fortunes fall too far too fast, I've been thinking about investment bubbles today. A few weeks ago, I wrote about the potential for explosive growth in the solar and wind sectors, and this interesting post by Rob Day over at Cleantech Investing helped me connect the dots between the surging interest in solar and the potential for at least a solar sector bubble.
Our crack summer business fellow, Cai Steger, sent along this article about solar in Spain, which gives a sense of the explosive growth in solar. As Cai noted in his email:
Spain adopted a feed-in tariff a couple years, and is now set to triple its target installation from 400MW to 1.2GW by 2010. However, a Spanish PV solar trade group is actually criticizing the decision saying the target rate is too low. The same group also wants to cut the feed-in tariffs to prevent the market from overheating.
How hot? 500% growth in a year! (according to the trade group). Wowzers…
The percent growth numbers are not as staggering in the wind sector, but their still large. I was talking to some wind industry friends today and they were mulling over the challenges facing an industry that in about 10 years would like to be adding as much capacity each year as is installed today (about 12,000MW).
The event, which ran Sept. 10-12, kicked off with a panel of Silicon Valley venture capitalists in a session entitled "The Green Energy of Tomorrow." The panel agreed that VC pros have expanded their notoriously short exit horizon to as much as seven years in recognition of the complications of getting these green technologies to large scale markets—and not looking for the overnight turn-arounds of the internet bubble era.
In the end, regarding solar, Rob concludes:
Are there a lot of reasons to be very optimistic about solar markets and the prospects for solar investments long-term these days? Absolutely. But could we be due for a bit of a break in the hyper-activity? Quite possibly, but maybe not quite yet. In the meantime, VCs with existing investments in well-positioned solar tech developers will be enjoying the ride…
I left him a comment asking for his thoughts on "whether the cleantech sector is large enough and cohesive enough to rise and fall based on the fortunes of any given segment." We'll see what he thinks.
Regardless, the importance of the energy bill to the cleantech sector cannot be underestimated. Between a CAFE increase, a renewable electric standard, a renewable fuel standard, and a tax incentive package, the bill has a good chance to chart a course of sustained orderly development for cleantech broadly. Many of the policies being considered would have a 10 to 15 year time frame. Talk about giving some stability to investors. That why investors need to weigh in on Capitol Hill.
There's not going to be a traditional conference between the House and Senate versions of an energy bill; they're going to use a process known as ping-pong where the leadership of both chambers bounce versions of the bill back and forth. Both in this process and when the final versions come up for votes, investors need to let their voices be heard.