Venture capitalists are people, just like you and me. They put their pants on one leg at a time and they're prone to making investing mistakes just like the rest of us. That said, it's hard to deny that some VCs are clearly better than others. John Doerr is one of Silicon Valley's more successful and higher-profile VCs, with big wins including early investments in Symantec, Amazon.com, and more recently, Google.
This success, I believe, gives his words some weight. So when he says that global warming is real and "cleantech" is "the biggest economic opportunity of this century," my ears -- and yours -- should perk up.
The future for cleantech
It's not that the idea of cleantech as a big investment opportunity is new. The Motley Fool, myself, and others have been writing about it for some time. Instead, it was Doerr's explanation of how cleantech can help address global warming that I found so interesting. He laid out four steps for solving global warming that, when viewed in aggregate, can provide investors with a useful framework for thinking about how to invest in cleantech.
First, Doerr said the U.S. government should adopt a mandatory goal of reducing greenhouse gas 25% by 2010. This is an ambitious goal and, in an election year, I don't think it's likely. Nevertheless, I do believe some controls are coming, and investors can profit by understanding which companies are getting ahead of the curve and positioning themselves to benefit from government mandates. For instance, I have written before about Duke Energy's willingness to embrace mandates and explained how this progressive position -- when backed with strategic investments in cleaner coal-burning technologies and large-scale carbon sequestration and alternative fuel energy projects -- could position it ahead of its peers if and when government mandates on carbon emissions are imposed. Other large companies, including Alcoa (NYSE: AA ) and PG&E (NYSE: PCG ) , have joined in the calling for greater governmental involvement on the regulatory front.
Second, Doerr called for the adoption of renewable sources such as solar, wind power, and fuel cell technology. The first two are hardly bold calls, but investors should give serious consideration to investments such as Motley Fool Rule Breakers recommendation Suntech Power. Another company with growing solar resources worth considering is Ascent Solar (Nasdaq: ASTI ) , which just announced its plans to increase production capacity to 100MW by 2011. In the wind field, Zoltek offers a unique way to profit from the growth of the sector; while in the long-beleaguered fuel cell sector, Ballard (Nasdaq: BLDP ) announced plans yesterday to provide fuel cell modules to a line of New Flyer Industries shuttle buses.
Third, Doerr said the United States needs to reinvigorate its biofuels industry. To a degree, this is already happening. Archer Daniels Midland now has a 50-million-gallon facility in production and, last year, Imperial Renewables raised a substantial amount of venture capital to build a 100-million-gallon biodiesel facility. With the advent of tougher EPA regulations requiring cleaner-burning diesel -- which biodiesel meets -- the demand for biofuels could grow stronger in the near future. And both companies, by positioning themselves at the forefront of this biofuels "reinvigoration," could profit nicely from its expansion. This is also likely the reason that Chevron (NYSE: CVX ) is now working with Solazyme to produce biodiesel from algae.
Another opportunity worth keeping an eye on is the area of hybrid technology. Companies such as A123 Systems, EEStor, and Altair are all continuing to make great strides in improving battery technology. On the automotive side, Daimler (NYSE: DAI ) is aggressively moving to produce plug-in hybrids by the end of the decade.
Finally, Doerr said there needs to be more investment in technologies that can remove existing carbon dioxide from the atmosphere. One interesting start-up to keep an eye on in this area is Global Research Technologies, but I would encourage investors to keep an eye on big boys such as Siemens (NYSE: SI ) . Cleaning up vast amounts of carbon dioxide is a big problem, and it could well take a large company to deliver the resources necessary to make a dent.
Investors looking for a more diversified approach to investing in renewable energy might want to consider the PowerShares WilderHill Clean Energy (PBW) exchange-traded fund. Alternatively, investors with a more conservative approach might want to look at a company like General Electric. While GE isn't a pure cleantech play, it recently announced a plan to increase by 50% -- to $6 billion -- the amount it invests annually in clean technologies. As a result, in the years ahead, investors can expect it to generate an increasing percentage of its revenue from alternative energies.
The bottom line is that, like Doerr, our Motley Fool Rule Breakers team believes cleantech will be big. And while there will be many technologies and companies taking part in the solution, Fools should be strategic about how they want to approach the opportunity. After all, just because the opportunity is large doesn't mean everyone's profits will be, too.
If you'd like to take a look at our ongoing cleantech research at Rule Breakers and read up on the companies recommended to date, you can do so free for 30 days. Click here for more information. There is no obligation to subscribe.
This article was originally published on Nov. 17, 2006. It has been updated.
Fool contributor Jack Uldrich still puts his pants on one leg at a time, but they're nanomaterial pants that easily repel liquids and prevent staining. He owns shares of GE and Suntech Power. Symantec is an Inside Value recommendation. Duke Energy is an Income Investor choice. Amazon is a Stock Advisor selection. Suntech Power and PowerShares WilderHill Clean Energy are Rule Breakers selections. The Fool has a strict disclosure policy.