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February 16, 2009

Recession triggers rethink on renewable energy

At $145 to an oil barrel, Renewable Energy was a favorite theme among investors. But what when oil languishes at $45? Knowledge@Wharton provides the take of various energy industry players who spoke at the recent Wharton Energy Conference
Energy experts are now taking a more rigorous look at purported energy and environmental savings from renewables, trying to include all the costs and pollution that go into production, transportation and use. It is no longer given, for example, that America's oil-dependence and pollution problems can be solved by making ethanol from corn, Carson pointed out. "We're all doing a collective, 'What were we thinking?' on that." In another example, he pointed to a project in The Netherlands to make electricity from renewable wood pellets. While it sounded environmentally responsible, the wood came from pine trees in the U.S. state of Georgia, and the pellets traveled by train, ship and truck, each burning fossil fuels. "That was five or six steps too complicated for me."

A period of rethinking also could help dispel some of the myths about renewables, clearing the way for smarter investment, Susman said. "There's somewhat of a perception that investing in technology is ... going to drive all the changes that we see toward renewables in coming years. In fact, consumers will be the driving force, as they demand renewables and legislation to support these energy sources." Unfortunately, he added, economic worries are now cutting into consumers' willingness to pay a premium to go green.

A second myth: Startup firms will lead the charge to renewable energy. Such firms will indeed play a key role, "but we also need people sitting at Morgan Stanley, at Chevron and at the Department of Energy," Susman suggested. Without these players, the industry will not get the regulatory and financial support it will need.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in