Venture capitalists are people 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 recently Google.
This success, I believe, gives his words some weight. So when he said, at a recent TED convention, global warming is real and that "cleantech" is "the biggest economic opportunity of this century," my ears -- and yours -- should perk up.
The future for cleantech
Doerr explained how cleantech can help ameliorate global warming. He laid out four steps for solving global warming which, 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 its proposal is likely. Nevertheless, some controls are coming. Investors can profit by learning which companies are ahead of the curve and positioning themselves to benefit from government mandates.
For instance, there's Duke Energy's willingness to embrace mandates. This progressive position -- when backed with strategic investments in clean technologies for burning coal, large-scale carbon sequestration, and alternative-fuel energy projects -- could position Duke ahead of its peers, if and when the government imposes mandates on carbon emissions.
Many companies are not waiting for the government to step in. On Wednesday, for instance, Xcel Energy (NYSE: XEL ) announced its intention to roll out "smart grid" technology to help the residents of Boulder, Colo., reduce their greenhouse gas emissions. Other companies, such as UPS (NYSE: UPS ) , IBM (NYSE: IBM ) , and Microsoft (Nasdaq: MSFT ) are now all developing "green" software to help reduce energy use.
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 will need to demonstrate some patience. Since the beginning of the year, a number of solar stocks, including Suntech Power (NYSE: STP ) , Evergreen Solar (Nasdaq: ESLR ) and SunPower, are off more than 50%. Nevertheless, solar's long-term potential remains bright.
Fuel cell technology, on the other hand, may take longer. Executives at both General Motors and Toyota expressed their opinion recently that advances in battery technology make electric cars a more viable option than fuel cell vehicles, for the time being.
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 late 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 -- standards 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 biofuel "reinvigoration," could profit nicely from its expansion.
Finally, Doerr said there needs to be more investment in technologies that can remove existing carbon dioxide from the atmosphere. One interesting startup to keep an eye on is Global Research Technologies, but I would encourage investors to also focus on large companies such as Siemens. Cleaning up vast amounts of carbon dioxide is a big problem, and it could well take a big 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. Investors with a conservative approach might want to look at a company like General Electric. It can't be considered a pure cleantech play, but in January, the company announced that it would be increasing its annual investments in clean technology by 50%, to $6 billion. Just yesterday, GE CEO Jeffrey Immelt reiterated his estimate that the company would grow its revenue by 10% in 2008, thanks in part to growth in its portfolio of clean technologies.
Like Doerr, our Motley Fool Rule Breakers team knows that cleantech will be big. And while there will be many technologies and companies taking part in the solution, Fools should approach the opportunity strategically. After all, just because the opportunity is large doesn't mean everyone's profits will be, too.
If you'd like to 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 repel liquids and prevent staining. He owns shares of GE and Suntech Power. Symantec and Microsoft are Inside Value recommendations, and Duke Energy is an Income Investor choice. Suntech Power and PowerShares WilderHill Clean Energy are Rule Breakers selections. Amazon is a Stock Advisor pick. The Fool has a strict disclosure policy.