2 Cleantech Ventures, a Billion $ Each

An Interesting Post by a Northerner, surprised that the South is stilll not living in 1865;

CTE Editor


The region's big cleantech deals include billion-dollar polysilicon plants and stealthy new university spinouts, says Shawn Lesser of Sustainable World Capital.

When people usually think about the U.S. South, images of NASCAR are more likely to come to mind than successful cleantech startups. But the fact that the South has become an economic powerhouse is not new, certainly not when one considers the success stories of local companies such as the Home Depot and The Coca Cola Co.

The South also is branching out and developing a vibrant cleantech industry. As evidence, one need simply to recognize that the largest cleantech deals in the world have recently taken place in the South. In the past six months, Hemlock Semiconductor announced plans for a $1.2 billion polysilicon plant in Clarksville, Tenn., and German chemical firm Wacker Chemie announced plans for a $1 billion polysilicon factory in Cleveland, Tenn.

According to Michael Whelchel, managing partner of Watershed Capital, an investment bank working with cleantech companies: “To appreciate the significance, over the past 12 months, there have been only three billion-dollar business announcements in all of North America. All three have been located in the South, and two of these three are in the cleantech sector.”

Let’s take a look at what I think are the 10 top reasons why the South has and will continue to rise in the cleantech industry:

As discussed, the Hemlock Semiconductor deal.

Similarly, the Wacker deal.

The leadership of Tennesee Governor Phil Bredesen and his Economic and Community Development Commissioner, Matt Kisber, who have been instrumental in positioning their state as a powerhouse in the cleantech industry. They were also key in the successful execution of the Hemlock and Wacker deals.

The establishment and growth of Suniva, the Atlanta, Ga.-based solar cell startup that has attracted major Wall Street investors and has already booked more than $1 billion in orders from Southeast Asian and European customers (see Suniva, Solon in $500M supply deal and Suniva signs $480 million deal with India's Titan Energy).

The presence and continued growth of Georgia Tech’s ADTC (Advanced Development Technology Center) in Atlanta, which—with an annual research budget of over $500 million—is recognized as one of the top five research universities in the country.

The growing pool of talent drawn to the cleantech industry, such as Mike McQuary, the Atlanta-based Internet visionary who founded Internet service provider Mindspring and has jumped into the cleantech field by launching his latest venture, the electric car company Wheego, which spun out of RTEV (see RTEV, Shuanghuan Auto plan 2-seater electric car for '09).
EnerTech Environmental of Atlanta, which developed SlurryCarb technology that produces renewable fuel from organic waste.

The SouthEast Energy Efficiency Alliance, led by Ben Taube, an energy efficiency expert.
Oak Ridge National Laboratory in Oak Ridge, Tenn., which is the largest energy laboratory in the country.

SJF Ventures, a Durham, N.C.-based cleantech fund.
While all of these are major points in favor of the South’s continued growth, the No. 3 reason above requires further comment. Whatever inherent advantages a region or state may have, it requires the firm commitment and backing of political leaders for any initiative to gain traction.
California has established a cleantech industry, thanks to Gov. Arnold Schwarzenegger. Similarly, we in the South have our own cleantech superhero in Tenn. Gov. Phil Bredesen. (Anyone that gets two billion-dollar cleantech deals to the South in this economy is a superhero!)
Not long ago, I had a conversation with the governor’s right-hand man, economic point man Matt Kisber, who told me the genesis for Tennessee’s—and by extension, the South’s—rise in the cleantech field, took place four years ago.

Attending a National Governors Association meeting, Gov. Bredesen heard New York Times columnist and energy expert Thomas Friedman expound on the fact that clean technology would in the future be a key driver of economic development and jobs, and that the states that understood this first would be the ones that would position themselves to be able to attract cleantech companies.

Bredesen took Friedman’s message to heart and designed a strategy to attract a broad range of clean technologies. Just as venture capital firms invest in a range of technologies not knowing which will be widely adopted, Tennessee was intentional in attracting a range of various alternative energy technologies.

Last year with little fanfare, Gov. Bredesen shepherded through the state legislature a bill that offset increased costs from any future tax on carbon emissions for cleantech companies that make significant investments in Tennessee. "They [cleantech companies] were worried that Congress or the state would enact a carbon tax that would have to be borne by the company," he said. "So what we did was create a green energy tax credit, which actually says the state will take that out of the equation."

This unusual commitment to cover the cost of any future carbon tax for green companies was a key factor in the decision by Hemlock and Wacker executives to make major investments in Tennessee.

Not to be outdone, Georgia also has been aggressive in going after clean energy businesses. Georgia Tech’s VentureLab, for example, incubated the development of the technology that led to the launching of Suniva, which has attracted major venture capital funding and has created a buzz in the venture capital world about Georgia. Among Suniva’s biggest backers are Goldman Sachs, Querus Investment and HIG Ventures (see More solar heads to market).

Their bet is well on its way to paying off. With a backlog of over $1 billion, Suniva has positioned itself to be a solar powerhouse for the foreseeable future.

Fresh off its success with Suniva, Georgia Tech is moving forward with plans to duplicate that effort. With an annual research budget of over $500 million, the school is one of the top five research universities in the country, which is noteworthy given the fact that it does not have a medical school. There are also a few cleantech gems that VentureLab is working on in the hopes that they will turn out to be the next Suniva.

Chief among these firms in the incubator stage is Plum Combustion, which uses a simple new design for combustion chambers used in power plants that could slash the amount of pollutants and the costs to consumers. Georgia Tech also is working on a Vehicle Monitoring system that would enable fleet managers to track real time emissions data, which will be necessary when carbon regulation arrives.

To summarize, the South is a great place for cleantech companies. There is a perception among some people that the South is slow to adapt to change, but few folks remember that it was a Southerner, Jimmy Carter, who took the early lead… going so far as to be the first U.S. president to put solar panels on the roof of the White House in 1979.

Shawn Lesser lives in the South and is the president and founder of Atlanta-based Sustainable World Capital, which works to connect cleantech and sustainable companies with institutional investors worldwide.

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EnerTech Environmental
Hemlock Semiconductor
Matt Kisber
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Mike McQuary
Phil Bredesen
Plum Combustion
Shawn Lesser
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Suniva
Sustainable World Capital
Wacker
Watershed Capital
Wheego

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