Yellow and Blue, the Utrecht-based clean energy venture investor founded by the Dutch utility Nuon in 2008, has emerged as one of Europe’s leading investors in smart grid, renewable and energy efficient technology companies. Its MD, Albert Fischer, has clear views about how utilities should do corporate venturing, which he describes as “industrial crowd-funding”.
“The key question is how much freedom a utility really has to invest in a disruptive technology. If the venturing unit is kept in house then its survival is subject to the whims of a new CEO, who should notice that some venturing investments threaten the core business.”
Fischer covets and champions his autonomy to invest in companies that are disrupting the utilities business model. Woe betides anyone who describes Yellow&Blue as Nuon’s corporate venturing fund. “We are an independent financial investor sponsored by an industry player,” says Fischer.
One of its most recent investments is in ROMO Wind, a Swiss-Danish wind farm optimization company, which raised €4.8 million in May from an investor group led by Yellow&Blue that included ABB Technology Ventures and b-to-v Partners, a Swiss wealth manager. ROMO helps increase the productivity of existing wind farms through dynamic monitoring of wind speed and direction.
The relationship with Nuon (which is owned by Swedish utility Vattenfall) has benefits. Former Nuon staff have been employed by some of Yellow&Blue portfolio companies. This adds utility expertise (and presumably saves money on recruitment consultants). But the portfolio works with Nuon’s competitors and peers from around the world, thereby underlining Yellow&Blue’s independence.
Locamation, a Dutch substation automation technology company (smart grid) announced partner agreements with Beijing Shuangdian Electric in April and with Scottish and Southern Energy last October. Entelios, a German demand response (smart grid) company Yellow & Blue backed in 2011 is collaborating with German utility E.ON.
Such deals are helping kill the pub bore myth that clean energy innovation and venturing is moribund. These are companies that are disrupting the old ‘generate and sell’ utilities model. They are part of a new emerging power paradigm which includes intermittent renewables, independent ‘merchant’ power suppliers and an increasing variety of demand-side innovation.
The European utility industries’ struggles are compounded by low or no growth in power demand. Does this reduce their capacity for venturing? Or is it a case of venture or die?
“Utilities around the world are interested in us,” says Fischer, who currently manages $50m. “We are also attracting interest of sovereign wealth funds.”
Utilities pinning their growth hopes on venturing include E.ON. and the Irish utility ESB. E.ON.’s new in house corporate venture unit was established in June to make direct investments in disruptive technologies that it can ultimately integrate into services offerings. It has also become a limited partner in The Westly Group, an American venture capital firm, which will give it access to US utility-focused innovation.
Greencoat Capital, the investment company established by the Irish utility ESB, is investing in new business models and early stage technologies. It is also buying working wind farms off utilities (thereby adding much-needed cash to their balance sheets).
“Some smart grid applications are destroying utility business models,” says Fischer. “Therefore it is of utmost importance that utilities continue to bring companies to market. For Yellow&Blue, it is working.”