Venture Capitalists Back Away from Clean Energy

The headline is a little more downbeat than the story, no?

As I read it, they say that private VC investment is moving from research to development. This is consistent with the nature of VC funds - they usually have to pay back investor money within 7-10 years. The research cycle in physical sciences is frequently long enough that adding development pushes the idea beyond 10 years. As such, VCs are more interested in bringing already researched ideas (or incremental ideas) to market.

There are 2.5 antidotes to this:

1) The government can fund more basic research, similar to biology.

2) The government can put a revenue neutral tax on unclear energy. (Carbon taxing) They can use to revenue to fund #1, or give it back in the form of lower taxes. Even the latter will create financial incentives to fund alternatives.

2.5) Fund longer term (10-15 year time horizon?) VC style investments with public funds, either through pensions or other dedicated funds. This would be similar to Singapore.

I am fairly confident that #1 will help, as it benefits other areas in science. There is potential for waste, but lots of residual benefits. I am very confident that #2 will work, as it lines up everyone's incentives to solve the problems. I am only slightly confident that #2.5 will work, as it is not a business model that has worked in many other places.

This is surprising to me. Photovoltaic installations are doubling about every two years. Photovoltaic costs are dropping precipitously, to the point that they're becoming competitive with fossil fuels without subsidies, and of course fossil fuels are becoming more expensive. (Liquids, anyway.) The total amount of solar energy available on Earth is something like 100 000 times the current world marketed energy consumption, which includes all of our current fossil fuel consumption plus nuclear, existing renewables, etc.

So it's a really big deal who supplies the equipment for solar energy harvesting over the next couple of decades.

Maybe the US-based VCs profiled here have just given up and figured that China already has the market sewn up?

I've noticed that the YC funded startups this year are particularly derivative. I guess the safe(r) money in this glum economy is in iterative also rans.

It's depressing though. There is no vision, courage or leadership from investor groups like YC. There's no "art" in these startups.