No Cleantech Hype Cycle For Small Wind

There is not a day that goes by these days without cleantech and clean energy investing generating media buzz. This week, topping that buzz list is the New York Times write up on the "fervor" of cleantech startups taking hold in Silicon Valley. In fact, the NYT piece jumped to #1 on their "most popular" list of emailed articles.

Yet most of this investment feeding frenzy seems to be overly focused on all things "solar" (cells, concentrators, themal, etc.) and paying very little attention to wind. Besides some fledging startups with limited outside funding, and one set of institutional investors putting approximately $15M into venerable 30 year old Southwest Windpower, there is very little dynamism or venture investment interest in "small wind" or wind power in general.

Considering the fact that large scale wind is a blockbuster success, with a $26Bn market, growing at >30% CAGR, with hugely more real power delivered into the market than solar today (10x more) and leading vendors sold-out through 2008 it might seem baffling why small and distributed wind doesn't get more investor interest.

Having pitched Wind-Sail to over 20 investment groups including all the major tier 1 VCs and angel groups in Silicon Valley in cleantech, I have the following reasons for the lack of interest in small/distributed wind:

Investors see small wind power as very tough to use - and I can't disagree:

1. Determining your payback isn't straightforward and requires measuring your wind speeds over time.

2. Requires complex siting and permitting. (I have some preliminary thoughts on permitting here.)

3. May require towering

4. {Network effect} No large ecosystem of installers/system integrators

5. Confusion if and whether subsidies exist.

6. Aesthetics, aesthetics, aesthetics. Solar has "cracked the code" and is now deemed hot and cool on your rooftop. Wind turbines still often considered unsightly, ugly, or detractful a home owner's resale value.

From the additional metrics that a VC investor uses { the technology, differentiation, IRR, etc. } small wind is also challenged by:

1. Hard to evaluate technology differentiation. Perceived as "bunch of mechanical metal up in air" with high startup costs and little competitive protection

2. Personal Mental Mapping: It's more sunny than windy where most investors live - especially in Silicon Valley.

3. Personal Mental Mapping Part Two: This won't fit on MY rooftop.

4. No "10x" left; market perceived to be mature from technology/innovation standpoint, and gains from here are only incremental.

5. Total market perceived to be poor. Graveyard of dead and failed small wind companies, two surviving firms make <$30m combined. Seen as existing in "rural" and "farm" scale only. 6. Doesn't fit in a home environment as easily. Not just aesthtics here, but the reality of safety, space, installation of guy-wired towers. 7. Birdkill still shows up, erronesouly or not, as an environment thorn in the clean aspects of wind. Outside of the users and the investors, there are macro issues hurting the love for wind. Last but not least, if you parse the data available from CEC on solar purchasing, you'll see a lot of buying behavior NOT driven by economics.

Yet, people are spending a lot of money on solar for systems that give them a poor return on their money - subsidies or otherwise. That means that the buying behavior is something other than economic. Call it "social" or "green".

So can wind systems fit into social buying? Perhaps, but aesthetics clearly play a larger role when the buyer is motivated by the "social" aspects of their energy purchase.

Stay Tuned For My Next Post: Will distributed or small wind every be a feeding frenzy for VCs?