My travelslast month took me to Texas and Bavaria, two high growth regions of the world where the clean deal is certainly ‘on’, albeit in different shapes and forms.
A prospective US clean deal investor drove me along Texan freeways at a leisurely 55mph past petrochemical and foundry smokestacks to witness a shale gas-fuelled US industrial renaissance.
A German client drove me at a hair-raising 125mph along the Bavarian autobahn past gleaming arrays of solar and wind farms, which on sunny and windy days contribute cheap power to the enduring industrial heartland of the Ruhr valley, three hours north.
There are critics of Germany’s pro-renewables electricity strategy, but heavy industry there seems to be doing fine with renewables and few are clamouring for shale exploration. Meanwhile, Texan enthusiasm for renewables, which was never particularly strong, is waning thanks to the abundance of cheap gas.
So the clean deals being done in the two regions are different, but not quite as different as you might think.
North American investment appetite for technologies that enable more efficient and clean shale extraction, such as advanced drilling and waste water treatment, is high. Moreover, as heavy industries return to the US in pursuit of cheap energy, investor interest in effluent treatment technologies rises because they are needed to meet US regulatory requirements on gas and liquid discharge. More obviously, there is growing investment across the gas value chain. Modular gas-to-liquids (GTL) technologies look hot.
Houston-based ConocoPhillips’ corporate venture unit invested before Christmas in the Canadian wastewater technology company Saltworks. It joins fellow corporate venturers, Cenovus and Teck Resources on the shareholder registry. Saltworks has solutions to the water problems of the Texan Shales as well as the Canadian oil sands.
Energy Ventures, a leading oil and gas VC which is also based in Houston, paid $9.2m in November last year to take ProSep Inc, an oil-focused water technology company, off the Toronto Stock Exchange, and merged it with its portfolio company Produced Water Absorbents. The combined entity is now in Houston.
In Germany, it is the increasing role of renewables and the concomitant need for greater grid flexibility that has shaped the local investment landscape. Recent additions to the portfolio of High-Tech Grunderfonds, an early stage German investor backed by chemicals giants Evonik and Lanxess among others, include Ice Gateway, a smart grid lighting company.
But Germany is not as passionate about renewables as Texas is about shale gas. I feel that German investors are not banking yet on a renewables-dominated electricity landscape in the long term. Energy efficiency rather than renewables / smart grid will be the dominant investment theme in the next few years. It looks like the more solid option.
So what are we witnessing? Is environmental investing becoming less global and more local? Can Texans stick to shale and its associated industries while Germany focuses on efficiency and renewables (probably)? Or must one energy source – renewables or shale gas – ultimately win out on the global stage?
The smart German global coporate venturer (of whom there are quite a few) is keeping its options open and global. While Evonik invests in early stage smart grid and energy efficient innovation via High-Tech Grunderfonds, they’re not neglecting gas-related opportunities in North America.
Vancouver-based Pangaea Ventures (which has Evonik among its backers) led a $3m investment in Calysta Energy, a California-based GTL and gas-to-chemicals technology company just before Christmas, whose biocatalyst–based business model is founded on the increasing role of gas in the global energy mix.
However effective the solar and wind farms of Germany are, I don’t foresee many Germans driving electric cars at 125mph on the autobahn any time soon.