While all eyes have been on politicians’ peccadilloes this week, cleantech folks have been anxiously watching another Washington drama. The government loans and guarantees that have sustained solar, electric vehicle and biofuel companies through the “Valley of Death” are likely to be either dramatically culled or scrapped altogether. Cleantech startups have a substantial disadvantage over their software brethren in particular; they’re more expensive. Your mother may be fine with you writing code in the basement, but she’ll probably draw the line at building a biorefinery down there. Your startup costs for a software firm are $400 for a laptop, for a biorefinery, they can be up to $5mn. So, the “Valley of Death” – the funding gap between a drawing board concept to snagging the first customer – is substantial, and losing government support would be extremely damaging.
By some estimates, the government has shelled out many times more than private investors to deal with this issue. In opponents’ view, the money has lined the pockets of companies who would have done just fine regardless (especially after successful IPOs such as Solazyme), and has not created the promised jobs bonanza. Backers cite the job, national security and productivity benefits of the industry, but they seem to be making little headway in Washington right now.
A common rationale has been that the current Republican House majority has no truck with cleantech of any kind, but a fascinating call with law firm Wilson Sonsini yesterday threw up another explanation. The cleantech industry is just not speaking with the right people in Washington; its efforts have focused mostly on Democrats and on the message of combating climate change, neither of which are especially attractive to the current Republican Representatives. According to Wilson Sonsini, the leadership is open to arguments from the cleantech industry, but is just not hearing from them at all. Cynically, we could see this as the usual rainmaking, but I think there’s more here for a couple of reasons.
At a state level, there’s a good deal of enthusiasm for cleantech programs because Governors see the benefits that accrue to their states in the form of jobs and economic activity. One example of this is in Nevada, which has strong geothermal and solar potential. This enthusiasm isn’t yet translating at a federal level.
Anecdotally, I’ve met numerous people who confess – sotto voce – that they’re lifelong Republicans, but are also big fans of renewables. T. Boone Pickens may be a very public example of this, but he’s a long way from alone.
In these straitened times, Wilson Sonsini pointed out that Washington is focused on cost savings over all else. What doesn’t yet seem to be understood in Washington is that cleantech can be used as a method of reducing costs; multinationals’ enthusiasm for the sector is based on this, not on saving the planet. Here’s hoping that we figure out a way of getting the message to Washington before it’s too late.
Real Assets Junkie 
June 10th, 2011 → 6:15 pm
[…] US university. In the current budget round, these programs are, of course, under scrutiny and the greentech industry has not communicated effectively with the right folks in Washington, which hasn’t helped matters. The SBIR program is “safe” until September, but all bets are […]