Netscape was an early Internet browser company that went public with startling success in 1995 and kicked off an IPO binge for companies
associated with the World Wide Web. With the historic IPO and subsequent Netscape stock performance as a result of their 90% marketshare, bankers where screaming for any fast growing Internet companies that could have the same IPO performance and returns. The resulting number of IPO’s was nothing short of spectacular.
Over the last 8 years, there has been much discussion about when the Netscape moment would arrive for the renewable energy industries. Many thought it would be triggered by putting a price on C02, some thought it would be a new disruptive technology company, and some thought it would be an enlargement of government subsidies.
It’s difficult to see how the renewable and solar energy industries will have a Netscape moment. As many Venture Capitalists and other investment organizations who did well by investing in IT are experiencing, renewable energy is a one by one, infrastructure-intensive industry requiring large up front capital with longer return on investment timelines. The classic software model – make it once and sell it millions of the times – is not applicable to renewable energy. While the ROI on renewable energy, particularly photovoltaics, is on par with IT industry returns, more patience is required.
The energy industry is also highly regulated by governments in most locales globally which creates distorted market signals and tends to holds back “irrational exuberance” in the market.
In reality, I don’t believe there is going to be a renewable energy moment with one company setting off an IPO binge. It has been, and will continue to be, a longer, smoother growth curve with a number of significant events along the way that demonstrate value and scale. I believe we are entering that time frame now, as evidenced by recent global events:
- The renewable energy market expanded during the global economic slowdown of the past 3 years. In the solar industry growth exceeded 40% YOY during this time.
- Total SA (FP), Europe’s third-biggest oil producer, agreed to buy as much as 60 percent of SunPower Corp. (SPWRA) for $1.38 billion.
- U.S. Department of Energy (DOE) has conditionally committed to provide US $1.37 billion in loan guarantees to support the financing of BrightSource’s Ivanpah 400MW Solar Electric Generating System, one of the largest solar thermal systems in the world.
- After 10 years of development, 140MW CapeWind received final permitting and global wind energy installed capacity is expected to reach 707GW by 2015, meeting 20% of global demand.
- A rapid decrease in the levelized cost of photovoltaic solar energy systems is enabling $3.00/W installed cost for larger systems with $2.50/W in sight for 2012.
- A rapid increase in global fossil fuel costs (coal, oil and gas), and the recent Japanese nuclear disaster, are allowing renewable energy to achieve grid parity sooner than industry forecasts predicted.
The solar energy Netscape moment has been happening slowly but relentlessly. The business model differences between IT and Renewable Energy combined with government regulation of energy markets suggest that the Netscape “moment” will be more like the early days of large commercial agriculture. Highly profitable companies where slowly but consistently building revenue under government regulation and the finance industry began to consistently invest in companies across the agriculture supply chain.