Energy Policy:

Third Way's Freed says venture capital investments for clean energy declining

What is the state of venture capital investments for clean energy in the United States? During today's OnPoint, Joshua Freed, vice president of Third Way's clean energy program, discusses a new report highlighting a steep decline in venture capital investments in the clean energy sector. Freed calls on Congress to pass legislation that will help reignite interest from the venture capital community.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Josh Freed, vice president of Third Way's Clean Energy Program. Josh, thanks for coming back on the show.

Joshua Freed: Thanks for having me.

Monica Trauzzi: Josh, Third Way has just released a new report highlighting a steep decline in the amount of money being spent on clean energy investments here in the U.S. Is the U.S. in a clean energy crisis?

Joshua Freed: That's what we're concerned is happening. There's a $2.3 trillion global market in clean energy and we've seen the rest of the world, for a variety of reasons, rushing ahead to create new technologies and manufacture them. In the U.S. we're seeing a decline in venture capital at the same time as Congress is contributing more uncertainty to the sector. We are at the risk of losing it if we don't change our ways.

Monica Trauzzi: So, where is the disconnect? When President Obama came into office clean energy, green jobs, they were two major factors that he was pushing. What's happened in the last three years that's caused this decline to happen?

Joshua Freed: Well, we saw first, the first two years, an increase and that's because the Recovery Act provided significant new money to a variety of clean energy technologies. There was the possibility that Congress was going to set the rules of the road so companies knew where to put investments in place. Congress really didn't do that. And so when you have more uncertainty created by the fact that funds are going to expire, companies don't know what rules to play by, they look elsewhere to put their money or they just sit on their money.

Monica Trauzzi: So, if the economy started to take an upswing, would you expect that these investments would start coming back?

Joshua Freed: I think we'd see some investments start coming back, but you still face the problem of both startups and established companies not knowing where to put their money, because they don't know what technologies are going to be useful in the next five or 10 years. You do know that in China, you do know that in Denmark and Germany, and so that's why you're seeing clean technology take off there, where it's facing more challenges in the U.S. still.

Monica Trauzzi: It's really striking, because just a couple of years ago all venture capitalists, I mean I even went to the meetings with venture capitalists, this was all they were talking about and even here in the U.S. And some of the numbers that you have in the report, the sector has lost 26 percent of its value, which is $22 billion, 26 percent decline in new companies in just three years.

Joshua Freed: Yeah.

Monica Trauzzi: These are very striking numbers.

Joshua Freed: It is striking and, look, the numbers from the third quarter of 2011 do show a little bit of an uptick. It's up to $1.1 billion, so we are hopeful that there are signs of life. However, at the end of the year, many of the U.S. investments in clean energy from the government are going to expire and there's still a lot of the deals that are being made are going to existing companies to keep them funded until there's an opportunity to recoup their investments, rather than to the next generation of startups that will invent new technologies. And those technologies are being created in other places rather than here in the U.S.

Monica Trauzzi: So, how does the Solyndra bankruptcy affect the outlook on clean energy?

Joshua Freed: I think Solyndra is more of a symptom of a problem in Washington right now, which is the clean energy sector is a private sector of our economy where you have entrepreneurs creating new ideas and technologies, very similar to biotechnology to the Internet. Unfortunately, some elected officials have decided to turn it into a political football and that obviously scares some investors and others away who just don't want the negative attention, understandably.

Monica Trauzzi: So, if all of the money is going overseas, will we not see this push towards innovation that everyone's talking about here in Washington?

Joshua Freed: We're still seeing some of the push to innovation and we have the best universities in the world, we have the best entrepreneurs and, under the right circumstances, capital here is accessible and affordable. But we do need Washington to, in some instances, get out of the way of the private sector, but then also just provide certainty in the rules of the road so that the business people that have led American success over the last century can get back to doing what they do so well.

Monica Trauzzi: So, be more specific on what that certainty needs to look like. Are we talking about a clean energy standard or more loan guarantees? What are you thinking?

Joshua Freed: A clean energy standard would certainly help, providing the funding over a set period of time so that companies know that the federal government will invest in emerging technologies until they're able to either stand up on their own or fail on their own, establishing the Defense Department and other agencies as demanding customers, so new technologies can scale up, can be tested and then can roll out to the private sector. Clear steps the government can and should take right now. Unfortunately, the government's not doing enough in part because of the way the House is operating.

Monica Trauzzi: All right, we're going to end it there. Thank you for coming on the show.

Joshua Freed: My pleasure, thank you for having me.

Monica Trauzzi: And thanks watching. We'll see you back here tomorrow.

[End of Audio]

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