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Crossing the Commercialization Valley of Death: financing clean energy technologies

28 September 2010
Crossing the Commercialization Valley of Death: financing clean energy technologies

On Tuesday September 21, 2010, the second day of Climate Week NYC, Bloomberg New Energy Finance and The Climate Group hosted a high-level discussion focused on financing clean energy technologies, such as concentrated solar power and electric vehicles.

The event 'Crossing the Commercialization Valley of Death' was introduced by Peter Grauer, Chairman of Bloomberg L.P. and Amy Davidsen, US Executive Director of The Climate Group, and featured a panel discussion with financial leaders and clean tech CEOs. The keynote address was delivered by Lord Nicholas Stern, author of the landmark Stern Review, a 700-page report that estimated the effects of climate change on the world economy.

While clean energy technologies have made substantial progress over the past decade, positioned to address such issues as climate change and energy independence, critical financing gaps remain before these technologies can be adopted in a truly widespread and meaningful way. And although venture capital firms and corporate research & development departments will support small-scale projects, the initial commercialization phases of these technologies are generally beyond VC and corporate budgets, creating an often-insurmountable “valley of death” before larger financial institutions are prepared to step in.

Summing up the 'Valley of Death' problem for clean tech CEOs in his opening remarks, Ethan Zindler, Global Head of Policy Analysis at Bloomberg New Energy Finance noted that banks will always be the first in line to finance your second project.

Brian Bolster, Managing Director of Cleantech Investment Banking at Goldman Sachs and Jonathan Maxwell, co-founder and CEO of Sustainable Development Capital, discussed their personal experiences helping clean tech companies cross this valley of death.

The panel discussion also focused on solutions, with moderator Ken Locklin, Director of Finance and Investment at the Clean Energy Group, asking: What needs to happen to unlock a greater level of private sector investment into clean technologies?

Kevin Czinger, President and CEO of CODA Automotive, a California-based company that designs, manufactures and sells electric vehicles and lithium-ion battery systems, suggested that clean tech industry must innovate locally but scale internationally, referring to globally available financing.

The key is developing a “comprehensive capital formation strategy”, said Jeffrey McDermott, Founder and Managing Partner of Greentech Capital Advisors, describing the need for clean tech companies to plan for how much capital they will need, and come up with a comprehensive strategy for securing it.

Gisele Everett, Director and Head of Private Equity Investments at Deutsche Bank Climate Change Advisors added that there is a need to move away from the idea of an IPO as the ‘end game’ by suggesting that an IPO should be viewed as part of a ‘broader capital formation strategy.’

Panelists also shared their recommendations on how public policy, from a price on carbon to innovative ideas like a ‘race to the top’ program for clean energy, could help bridge the current financing gap.

Lord Nicholas Stern, in his keynote address, stated that climate change is the biggest market failure ever, and that an argument against a price on carbon is an argument for market failure. Lord Stern also emphasized the important role the financial community can play in delivering this message to policymakers.

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