This post looks at some of the financing and perception challenges that the renewable energy sectors need to meet in order to compete with the much better organized and currently profitable fossil energy sectors. The author would like to see a greater focus in the renewable sector on the specific needs of the companies in the industry and makes the argument that companies in the renewable sector need to do a better job in how they present their case if they want to compete with the red hot oil & gas sectors with investors.
by Michele Ashby, CEO of MiNE LLC, which is hosting the Modern Energy Investor Forum (MEIF) in September 2011 in Denver, Colorado. Connect with Michele on Linkedin.
I attended two energy investor conferences in the last couple of weeks. The first was a renewable energy forum in Toronto, and the following week I was in New York for an oil and gas conference. The two conferences could not have been more different – in the challenges discussed, in investor confidence, and even in the mood of the attendees. And these differences provide great insight into the current energy market.
Let’s start with the oil and gas conference. For starters, the conference was 10 times the size of the renewable energy meeting. Conference organizers said it was the highest turnout in the 17-year history of the event. Over three days, more than 100 companies presented, and nearly every presentation I attended was packed. Investors were falling over themselves to learn about new discoveries, production and domestic reserve levels.
Companies were beaming with optimism. Investors were bullish. And why not? Oil is above $100 per barrel. As the recession continues to melt away, demand will only continue to rise – and it might spike faster than we can imagine. When you add emerging economies like Brazil and South Africa to an already-oil-thirsty China and a resurgent world economy, demand isn’t coming down. And supply? The uncertainty in some of the globe’s most valuable oil-producing districts hasn’t subsided.
Overheated? Maybe. But most of the attendees at the renewable energy conference in Toronto would trade their challenges in a heartbeat for this problem.
In Toronto, the mood was completely different. There are many questions, and many issues. We talked about subsidies, and how long it might take for renewables to be able to crawl, walk and run by themselves. We talked about how industry can convince regulators to put together attractive packages and nurture local renewable energy companies.
The biggest challenge, of course, is that public concern for greenhouse gases has taken a big hit in the last few years, as Americans instead worried about losing their houses or their jobs. And we know that if politicians aren’t feeling the heat from their constituents on renewable energy, most won’t make it a priority.
It was striking to me how few companies presented at the conference, however. Primarily, the speakers were political, legal, accounting or financial experts discussing the nuances of making investments in renewables. But I wanted to hear more from companies in the industry. What do you need, in specifics, to succeed? We hear investors talking all the time about payback periods being too long: What specifically do you need to cut that period in half? To drive a greater return on an investor’s money?
The other point I noted was that most renewable companies lack sophistication when it comes to structuring their deals and presenting to investors. Mining-industry companies are doubling and tripling their marketing and travel budgets right now. Renewable companies are lucky if they have any budget at all for these luxuries.
To see some strategies on to how to finance green businesses in the U.S. in terms of capital options and sources, see our related post “Financing Your Green Business“.
Particularly when facing the massive competition from the scorching-hot oil and gas sector, renewable companies need to be at the top of their game. Talk to experts about putting together deals that are attractive to potential investors. Work on your presentation, get critiqued, and keep working on it until it’s perfect.
Renewable energy companies need to exploit every advantage they can think of when they’re competing with much hotter energy markets. Oil and gas look good right now, but we’ve seen this before. Renewable energy companies, you’ve got the solution in the longer term. But it’s going to be up to you to make that case.
In our related post, “Why Can’t Cleantech Companies Get Funded When There is Plenty of Capital for Them” we look at why it is so difficult then for renewable developers and cleantech companies to access capital and how they can overcome the obstacles.
