Sweat the nexus

There’s typically far too much optimism around at this time of the year. Here’s a contrarian dose of reality with some predictions and pontifications for the year ahead.

 

IPO markets

European exchanges will remain mostly closed to clean-tech IPOs and that the more buoyant US markets will mostly welcome only US companies. “I don’t see too any exciting companies and IPO candidates in Europe,” said one London-based clean-tech broker who preferred to remain anonymous.

 

VC funding

There will be no revival in early stage funding of clean deals from financial VCs. They mostly remain skint. The few that have raised new capital are steering away from early stage clean tech companies, who should instead focus on angels, family offices and crowd-funding as a stepping stone to corporate venturers. “The recent downturn in venture capital investing in cleantech doesn’t mean the sky is falling,” says Dallas Kachan of the Vancouver-based consultancy Kachan & Co. “The dip becomes less threatening when viewed in the historical context of how venture capital always spikes early in emerging categories, later to be augmented with other sources of capital, such as often-unreported corporate and family office investment, as industries develop.”

 

Coal is not dead (yet). In fact, its endurance is driving the growth of water-tech

Coal contains too much hydrocarbon richness in easily accessible areas with low political risk for it to be neglected. And in many parts of the world, it’s not policy or investor sentiment that is curbing its extraction. It’s the lack of water. China is the obvious case in point. But new water technologies are coming to market that will enable water treatment and recycling on a much greater scale. Coal extraction will thereby become more feasible.

“Although much of the dialogue surrounding the water-energy nexus seems to focus on the fact that you need energy to make water and water to make energy”, says Christopher Gasson, publisher of Global Water Intelligence, “most of the business opportunities seem to lie in the premise that as we move towards the twilight of the fossil fuel age, that industry’s wastewater challenges are getting greater and greater. If we can get the technologies right, carbon’s difficulty will be water’s opportunity.”

 

Extending the nexus

We need to take the water-energy nexus one step further by adding waste. That’s because if we assume that the economy is going to continue to grow slowly at best or barely at worst, the clean-tech industry simply has to focus on triathlete solutions, i.e. they must lower costs and increase profitability in water, energy and waste. Innovation in energy alone is not enough, it has to enable water or waste benefits and vice versa. A small company getting this right is memsys. A medium-sized one is Cambi. A large one is GE.

memsys is a Singaporean-German distillation technology company set to solve the wastewater problems of several industries. It’s JV with GE has reported excellent results on Texas ‘frac’ water last year. (Disclosure: memsys is a client).

Cambi is a privately owned Norwegian company that is quietly in the vanguard of both Scandinavian corporate venturing and 21st century alchemy – transforming bio-waste into power and clean water. For example, the Cambi sludge hydrolysis technology being used to upgrade Washington’s DC’s Blue Plains waste water facility is reported to cost $200 million less than the alternative technology, has reduced the volume of residual sludge by 50%, operate on a tiny footprint, and generate 15 MW of electricity. Now that’s why I call extending the nexus!

GE Water’s suite of membrane and thermal technologies looks ideally suited to the waste water opportunities arising from the coal, oil and gas industries. Energy Technology Ventures, GE’s corporate venturing JV with ConocoPhillips and NRG, has one of the world’s most compelling ‘nexus’ portfolios.

Happy New Year.

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