Global Warming, Inc.
November 20, 2007; Page A18
Al Gore no longer needs to make claims about creating the
Internet, because the former Vice President deserves much of the credit
for creating an entire new industry -- the global warming business.
And like the energy barons of an earlier age, Mr. Gore has
the chance to achieve enormous wealth after being named last week as a new
partner at the famously successful venture capital firm Kleiner Perkins.
No fewer than three of his new colleagues sit on the Forbes list of
wealthiest Americans. If Mr. Gore can develop market-based solutions to
environmental challenges, we will cheer the well-deserved riches flowing
his way. On the other hand, if he monetizes his Nobel Peace Prize by
securing permanent government subsidies for nonmarket science projects,
he'll have earned a different judgment.
There's no shortage of new capital pouring into alternative
energy projects these days. According to the National Venture Capital
Association, "clean tech" start-ups attracted more than $800 million in
venture capital last quarter, a new record. What's not clear is whether
these are fundamentally energy ventures or political ventures. The
Manhattan Institute's Peter Huber, a former engineering professor at MIT,
exaggerates only slightly when he says that "Basically, 'alternative'
means stuff that nobody actually uses." If that turns out to be true, then
alternative energy companies could struggle for market share without
government assistance.
Those doubts exist even for the companies backed by Kleiner
Perkins. After making more than a dozen "green tech" investments, Kleiner
is still waiting for its first exit. According to a Kleiner spokeswoman,
many companies in its portfolio are "in stealth mode." The firm will
"neither name nor comment on them." So it's impossible to determine
precisely how much the Kleiner-backed firms will benefit from either
current federal subsidies, or new provisions that are part of the House
and Senate versions of the stalled energy bill. But we do have some
hints.
Of the portfolio companies acknowledged publicly by
Kleiner, at least two, Altra and Mascoma, are involved in the production
of ethanol, which is already heavily subsidized and would get more
subsidies in the House bill and higher mandates in the Senate version. A
third firm in the portfolio, Amyris Biotechnologies, is developing a
biofuel that will provide "more energy than ethanol," according to its Web
site, and should be just as eligible for government
set-asides.
Two portfolio companies in the solar energy field, Miasole
and Ausra, should benefit if a House provision requiring investor-owned
utilities to generate 15% of their power from wind, solar or geothermal
sources becomes law. The same is true for Altarock Energy, a
Kleiner-backed geothermal company. Lux Research analyst Ying Wu reports
that "company valuations will take a pretty big hit" in Miasole's market
segment if Washington turns off the subsidy spigot.
To put it another way, Kleiner's "risk-taking" here isn't
all economic. When everything is going according to plan, do venture
capitalists normally turn to a politician/filmmaker to help them cash out
of engineering firms?
Nope, but then again alternative energy has never fit the
usual venture model. Jack Biddle, co-founder of Novak Biddle Venture
Partners, says there's a reason few start-up companies try to build
commercial jetliners. "Large, complex systems with slow deployment cycles
do not play to venture's strengths. The whole idea with venture-backed
companies is speed, speed, speed." Mr. Biddle says the size and complexity
of energy systems "make 787s look like tinker toys. You need lots of
capital, lots of time, lots of people."
Mr. Gore seems to grasp the scale of the challenge, and the
need for government help, telling Fortune magazine, "What we are going to
have to put in place is a combination of the Manhattan Project, the Apollo
Project and the Marshall Plan, and scale it globally." That's the kind of
"green" vision that will require a lot of greenbacks.
We'll be as happy as the Sierra Club if one or more of
these new technologies turns out to solve the secrets of cheap, efficient
energy. But we recall the same technological promises being made in the
1970s, the last time the feds poured subsidies into alternative fuels.
Which leads us to suspect that maybe Mr. Gore has been
hired by Kleiner Perkins for more than his technological knowhow,
investment acumen, or global vision. His new partners may have hired him
for the more prosaic task of getting 60 Senate votes to keep those
taxpayer greenbacks coming.
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