How this recession has affected green energy start-ups
During our last class session, Prof. Webber mentioned that one of the reasons AEP has a footprint into alternative energy is because their clean energy project was funded prior to the downturn. That made me ask the question – how are green energy start-ups faring in this economy? Do they still have the funds they need in order to grow, or are their projects on a standstill due to a lack of money coming in?
On doing some very basic research, I have come across an article that partly provides an answer to the aforementioned questions. This article, “Could The Credit Crunch Kill Green Energy?” by William Pentland for Forbes.com (http://www.forbes.com/2008/10/01/energy-credit-solar-biz-energy-cx_wp_1001energy08_credit.html), is summarized below.
What Pentland has found is that the green energy companies and start-ups received a little over two million dollars in funding during 2007. (Note: no source is cited, and the green energy industry is not broken down or defined in the article.) In particular, companies delving in solar energy technology received approximately $600 million in funding from venture capitalists and other investors. Many of these solar energy companies are currently working on projects that will enable their technologies to be commercialized through scale production.
The issue, however, is that these companies still need cash to continue operations. And the present market situation is of little help to that end. For example, Lehman Brothers acted as an underwriter for many solar energy companies in their quests to raise funding – but Lehman exists no more, and any company shares loaned to Lehman may not be recoverable. This has led to company devaluations. Additionally, several solar energy companies have had to shelve their IPO plans because they feel that the current market situation will not be conducive to funding. Thus, many companies could close operations due to current market conditions. To avoid this fate, some green energy companies are partnering with or consolidating operations with Fortune 100 companies such as Chevron. Others are holding out hope for renewable tax credits.
In any case, the one glaring question to students aiming to work in this industry in the very near future is – what value will you bring to such companies that will enable them to weather this recession?