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The Biggest Economic Opportunity of This Century

Jack Uldrich
May 15, 2008

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,, 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, I, 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 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 gases 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.

Many companies, however, are not waiting until such mandates are imposed -- they're taking action now. The Wall Street Journal recently ran an article on the carbon market going mainstream. Among other things, it outlined how companies such as Arch Coal (NYSE: ACI  ) , Calpine (NYSE: CPN  ) , and Chevron could benefit from a new regulatory environment on carbon dioxide emissions.

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 growth potential is there. Earlier this week, the American Wind Energy Association estimated 5,600 megawatts of wind generation power would be installed in 2008 -- a record. Companies like BP Alternative Energy -- a unit of BP (NYSE: BP  ) -- which is installing a 400 megawatt wind farm in Indiana this year is positioning itself nicely to ride this wave. And in the solar field, although Applied Materials (Nasdaq: AMAT  ) semiconductor business has recently fallen on hard times, it is worth noting that, in its latest quarterly report, revenue from its solar panel operations doubled over the previous year.

Fuel cell technology, on the other hand, may take longer. To this point, Boeing (NYSE: BA  ) flew the first manned airplane powered by a hydrogen fuel cell this past March, but it is likely to be years before the technology is commercially viable.

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, BP announced plans to invest $500 million into biofuel and biodiesel research. 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.

Another interesting company to watch in this space is Mascoma, a privately owned cellulosic ethanol start-up. This past month, it has received sizeable investments from both General Motors (NYSE: