Forecast: The State of the Cleantech Market Looks Strong

The Cleantech Group parses the crisis in the financial markets as it relates to clean energy technology, and concludes:

[The economic crisis] is going to take out some of the peripheral players in cleantech. There will be a flight to quality. We're going to see a better market emerge for cleantech that is more sustainable, more enduring.

-- Nicholas Parker, Executive Chairman, The Cleantech Group

In other words: expect a short-term shake-out followed by long-time growth that will drive more jobs, wealth creation and opportunity than ever. Or as the AP recently wrote: expect the sector to get "scarred but stronger."

The message was communicated by Mr. Parker in an address to the group’s Cleantech Network, and was titled: Cleantech: A State of the Union (sub. req’d for full webinar).

The group's prediction comes on the heels of a record-breaking third quarter, in which venture capitalists poured $2.6 billion into cleantech. That investment boost injected confidence in the cleantech market -- which was then followed by worries over the sector's resiliency in the face of mounting financial turmoil and sinking gas prices.

Truth is, investment will decline in the fourth quarter. Earth2Tech gives us a preview of what that slowdown will look like, via BusinessWeek:

Analysts with the Cleantech Group are expecting that in the next quarter later-stage green companies that need to raise a lot of capital—e.g., to fund biofuel plants, solar thermal farms, or green car factories—could find trouble. Tesla Motors has already been unable to raise a planned $100 million financing round on the terms it wanted and turned to an internal round of $40 million, with Tesla CEO Musk carrying half the load. Large clean power projects like T. Boone Pickens' wind farm are also getting cut back.

But the overall market will survive and then some. Cleantech is "well-suited to wait out the economic uncertainty," says Mr Parker. He adds:

The bubble has not burst in terms of the cleantech market and interest in cleantech.

Further observations/predictions by Parker et al:

• The credit crunch is making financing harder to come by, but the increase in the cost of capital will raise the rate of return for investors entering the sector and encourage more venture debt.
• Sectors of cleantech are consistently lowering their costs, becoming
  more competitive with traditional technology, including solar energy.
• There will be a reduction in "perverse" fossil fuel subsidies.
• China has become a major driver of cleantech, and Israel is one of the emerging leaders.
• Now more than ever, there are calls for energy efficiency technologies.

The International Energy Agency, in a rather conservative new estimate, predicts that renewables will overtake natural gas to become the second-largest source of electricity by 2015. Meanwhile, Merrill Lynch, in a new report, says: The world’s on the cusp of a cleantech revolution.

History shows that technology revolutions occur about every 50 years. We believe cleantech is at the beginning of a high-growth period much like computing was in the early 1970s. The application of technology to resource problems should cause profound changes in the energy, utility, and automotive industries.

There is no doubt that cleantech remains one of the biggest economic opportunities in the US and beyond.

Indeed, the market is brimming with potential. And the latest investment forecasts, combined with the knowledge that a clean energy revolution has a real chance of taking root in Obama's America, are a tremendous relief, for now.

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