Clean Technology: A Venture in High Probability

Clean technology has grasped a hold of the energy industry in the name of increased proficiency, profits, and production.

Several of the world’s biggest energy players speak candidly with The OGM in exclusive interviews about how clean-tech venture capitalizations are formulating a win-win for the technology innovators, their investors, and the energy industry as a whole … and downhole.

“Clean tech” is a new buzzword resonating in virtually every industry around the world, and has become the compound “cleantech” in some sectors. While its definition is not black and white, its effects are creating the full spectrum of color and impact on sustainability and on conventional business practices and profits.

Originating in the San Francisco Bay area, The Cleantech Group is riding a wave of innovation. The Group’s Executive VP Greg Neichin recounted that his firm’s roots date back to a decade ago, when its founder noted that investors in the alternative energy space wanted to begin differentiating their practices in alignment with environmentally focused technology.

“Clean tech,” he says, “is evolving.” The term originally referred to the focus on spaces that were environmentally positive and resource efficiency positive, but also had investment grade returns.

Prior to 2000, Neichin explains how a large focus on ecological sensibility and environmental improvement through technology began to spawn new innovations under the banner of environmental advocacy with a lesser focus on business. From these ideologies grew entire industries of solar and wind technologies, beginning about six years ago, and the evolution of what clean tech means today.

“The boundaries between clean tech and energy tech are becoming increasingly insignificant. For someone who runs a business called “The Cleantech Group,” we have a metaphorical horse in the race in terms of trying to ignite the entire energy industry to be more productive under the banner of clean tech,” relates Neichin.

Neichin’s path had started in Silicon Valley as an entrepreneur launching software companies, but was drawn to the clean tech sector by a desire to see global capital injected into innovative solutions that impacted the world’s prevalent resource problems.

“You have some players, like GE, ABB, and Siemens, who have broad portfolios across various industries including agriculture, energy, water … each industry has different players,” explains Neichin. “In oil and gas, big dollars are being spent by big players on a variety of areas from production monitoring to produced water treatment.”

Global energy companies such as ConocoPhillips and BP embrace clean tech for the simple reason of improving the performance of the corporation’s core assets. George Coyle, who manages corporate venture capital investing for ConocoPhillips in Houston, explains that the company has two ways to invest in energy technologies: directly through its Technology Ventures group and indirectly through Energy Technology Ventures, the company’s joint venture with GE and NRG Energy, which is focused on the development of next-generation energy technologies.

“The change I’ve seen over the past few years is recognition of the value of corporate venture capital. There is an increasing trend into the O&G space by venture capitalists who previously ignored this area,” says Coyle, further explaining, “As a large company, you cannot invent everything from the inside.”

In conjunction, Issam Dairanieh, head of the BP Corporate Ventures team in Illinois, speaks directly to the environmental benefits of global players like BP’s strategic investment arm within the realms of clean technology investments.

He says, “We look at both the business opportunity and the environment as we invest in ‘Cleantech.’ We define clean tech as a suite of technologies that can lead to reducing carbon footprints—emissions. It runs the whole gamut of supply and demand of the energy equation, as well as energy efficiency technologies.”

The Innovator’s Role

The white paper, by the London Environmental Investment Forum company, “The Leif Brief 2013” contains a lengthy list of startup innovators whose technologies are being groomed and launched under the guidance of the biggest players in industries that span the full range from agriculture through to zoology innovations. Ultimately, these chosen technologies move from conception to commercialization with the utmost efficiency and deployment when aligned with clean-tech investors.

Dairanieh explains the relationship between the innovators and the corporations: “Despite the fact that companies like ours have strong and deep technical expertise, we believe that accessing external talent is critical. We have business unit experts who can act as advisors to the startup company from day one, to provide the assistance they need to commercialize the technology at a faster pace.” Providing direction at the development stage influences the selections of materials, system models, and power requirements with a direct impact on corporate production and mutual bottom lines.

“When we invest early enough in the [innovative] company, we are able to provide a lot of technical input that will help guide the company into one area or another, and help navigate that space and help maintain focus,” says Dairanieh. Two years ago, BP invested in a company technology that converts CO2 into 23 different chemicals, making CO2 no longer a liability but a valuable feedstock. BP’s input helped in guiding the development of the company towards two chemicals with the best market potential.”

Coyle concurs: “We want to help accelerate commercialization of technologies that can impact our core business. Our Technology Ventures group works with operations to understand challenges, to source innovations through venture capital investing, and then to drive ConocoPhillips’ adoption, so that we can become a big customer of our portfolio companies, which, in turn, improves our performance.”

Corporate Venture Capitalists And Financial Venture  Capitalists: The Relationship

The relationships between the corporate venture capitalists and the financial ones are integral and often complicated.

“As with partners in any business opportunity,” Dairanieh explains, “you will see there are huge areas of overlap and some tension regarding exit strategies. Financial VCs look for exits within short periods of time. While this may be possible in areas like IT, the energy technology industry requires seven to ten years for the ideal exit situation to take the company to the broader market.”

ConocoPhillips strives to be the investor of choice to all their stakeholders. “In terms of making those relationships work,” Coyle asserts, “You have to avoid some of the corporate VC pitfalls of the past. You have to add value to the portfolio company, participate actively on boards, be there for future funding rounds, be an ambassador for the company, and, of course, work with operations to adopt the technology.”

The success of the synergy is quite simple, according to Dairanieh: “The corporate VC knows the market well, and are the subject experts with a market channel and how to get there in the most efficient way. The financial VCs have established practices of creating companies; each brings complimentary skills that lead to success and solutions … to take the technology to where it can create the highest impact.”

The Hotbeds of Clean Technology

Clean technologies can also be seen in conventional energy sectors. One example from the BP Ventures portfolio is Brightsource, which uses solar thermal power generation technology to generate steam and power. The steam may be used in enhanced oil recovery (EOR) efforts. Brightsource is making huge headlines; in August, they signed with the China Power Investment Corporation as well as the China Renewable Energy Engineering Institute, making Brightsource the technology supplier to the first commercial-scale solar power project in accordance with U.S.-China collaborations. Efforts between the U.S. Department of Energy and the Chinese National Energy Administration have been ongoing for some time and culminated recently at the Renewable Energy Industries Forum in Shanghai.

Coyle is excited about the great new technologies that are making an impact inside the O&G industry like those coming from the Norwegian company, Zeibel, who has designed a new tool to enhance well integrity.

“Ziebel’s new carbon fiber rod allows us to optimize production in real time in horizontal and vertical wells, and the stiff rod contains fiber optics which are pushed, versus lowered, into lateral wellbores. We can actually listen to the entire length of the wellbore, as well as measure distributed temperature continuously while the well is flowing, greatly enhancing our ability to confirm well integrity,” says Coyle.

Fascinating breakthroughs are occurring in the areas of microbiology applied to enhanced recovery operations by Glori Energy and Ciris Energy, where, as Coyle explains, they are “improving the ultimate recovery of existing O&G fields by enhancing the growth of naturally occurring microbes that can act as a surfactant or convert coal to natural gas in-situ.”

BP Ventures focuses on resource optimization. Dairanieh states that this can be gas, oil, coal, water, and more; the key is to optimize the resource within realms of efficiency and consider the environment. ConocoPhillips is working really hard to secure ventures with North Water Capital out of Toronto and with Cenovus in Calgary.

“When it comes to the O&G operations, there are a lot of things that can be done around being more efficient, such as improving drilling efficiency, increasing recovery rates, reducing water usage, and recycling water when possible, etc,” says Coyle. “The key is making sure the investment aligns with business strategy and impacts the core business for it to be sustainable.”

Reflection and Projection

Dairanieh is pleased to see the progress that’s been made in the scaling of leading technologies over the past few years. Solar and wind energy have transitioned from being very costly to producing electricity on par with other conventional sources. He shared how companies like Austin-based Xtreme Power’s battery storage project at Notrees has enabled wind energy to help stabilize the frequency of electricity traveling throughout the main power grid during peak periods.

One area within the oil and gas industry with a high concentration of clean-tech funding is water treatment and desalination; particularly in locations where water is less abundant, minerals require extraction and recycling is integral to the optimization of a well’s production.

Clean tech is an organic global innovation revolution spawned from the need for solutions. While the technologies are often quite complicated, the approach remains quite simple: if there is a problem, there exists a solution, and, somewhere in between, many brilliant minds are bringing many magnificent products to market with the profits and promises to validate them.