Virtually every US state aspires to have a clean-technology cluster. Among the changes arising from the country's 2010 mid-term elections are the impacts on cleantech enterprises and investments.
Young cleantech companies have gone back to the venture capital community for expansion funding, yet the proceeds are being applied to expansion not just at home, but globally. The business model for these anecdotal 'green jobs' companies includes building production facilities abroad to make use of arbitrage in labour and other production costs or to be closer to customers. Cleantech entrants are accelerating towards the threshold of having more than 50% of their business abroad, a proportion that mature multinationals have achieved during the past few decades.
Although the cleantech sector continues to enjoy the largest share of venture funding and the funding for the first three quarters of 2010 ($5.73bn) already exceeds the entire total for 2009 ($5.69bn), the second and third quarters of 2010 each trailed the comparable periods in 2009. This less-than-robust trend line results in part from the muddle over government policy, as many early bets were based on prospective incentives and regulations that 2008’s Democrats were unable to implement, despite having granted in excess of $5bn to renewable energy enterprises. The 2010 elections may lead to fewer policy interventions as well as reductions in funding. However, some companies, especially those in energy conservation and energy storage, have business models more closely aligned to market forces and are judged promising regardless of the political climate.
Global 1000 corporations have made increasing commitments to cleantech ($7.4bn in the first three quarters of 2010, up from $4.5bn in 2009). Acquisitions by Global 1000 corporations (as opposed to initial public offerings) also appear to be the expected monetary exit for young cleantech companies. As these investments hit the tipping point, major companies (who are also major political donors) may advocate policy-driven demand through mandates as well as incentives. Virtually every major accounting and law firm has a cleantech practice ready to help their clients weigh-in in Washington, DC, as well as with mergers and acquisitions.
Nevertheless, the path forward is uncertain. A substantial number of US citizens (some say the majority) are climate-change doubters. Many members of the new House of Representatives’ Republican majority oppose policy-induced higher energy costs or taxpayer-funded green subsidies. Some regions, businesses and therefore employees/voters believe they would be impacted severely by too rigorous a cleantech agenda.
Economic developers who have targeted the cleantech sector as a major growth opportunity may need to reassess both their expectations and their strategies.
Daniel Malachuk works with business and government leaders on global direct investment strategies. He has advised many of the world's leading companies and served in the US public sector as director of White House operations. Email: firstname.lastname@example.org