For an entrepreneur promising to make electricity and hot water from the rays of the sun, the morning of Nov. 8 did not bode well.
BURLINGAME, Calif. — For an entrepreneur promising to make electricity and hot water from the rays of the sun, the morning of Nov. 8 did not bode well.
It was rainy and overcast outside the Marriott San Francisco Airport, where the National Renewable Energy Laboratory was holding its annual forum to woo investors to back new solar, wind and hydrogen ventures.
But the clouds didn't discourage Anders Jepsen, who had driven from Orinda to make a pitch for financial backing for a tiny solar company called HelioDynamics. Jepsen, the company's chief executive, had paid $200 and beat out dozens of competitors to win a place among the 33 presenters at the event.
Jepsen, 67, has lived for 30 years in Orinda, where his wife is a real estate agent. Born in Montreal, he got an undergraduate degree at McGill University and a doctorate in resource development from UC Berkeley. He has done stints as executive director of something called the Web3D Consortium, as an investor relations representative for Web site and minerals development companies and as president of a Berkeley-based company that sold gas gauges to PG&E and to Mexican geothermal companies.
In recent years, Jepsen hitched his entrepreneurial wagon to renewable energy and has seen it return to favor with investors with its promises to ease our car-dependent and neon-lit society's polluting and planet-warming addiction to oil, natural gas and coal. Recent fuel price spikes have made those promises shine even brighter.
But with only limited government support for alternative fuels, it largely falls to entrepreneurs such as Jepsen to take on the risks of developing and selling new energy technologies. That's an opportunity that usually require outside financial backing to pursue.
There is money to be had. Venture capitalists ponied up $520 million for stakes in 69 energy startups in 2004, the first up year in venture energy investing since funding peaked at $1.26 billion in 2000 during the technology boom, according to Clean Edge Inc., a San Francisco-based energy research firm.
At the NREL forum, no one on a panel of about a dozen venture capitalists and other lenders flinched when Jepsen opened his 11-minute presentation by proclaiming, "Today, we are looking for $4 million."
That sounds like a lot of money to bet on a company with no current revenue and only a test unit installed on the roof of a Fairfield sausage factory.
But long-shot bets sometimes pay off big especially in a hot growth market. And that's what alternative energy has been in recent years. During this decade, solar photovoltaic electricity generation has grown at an annual rate of 60 percent, while wind power capacity grew at a rate of 28 percent, according to the Renewables 2005 Global Status Report, which was produced by an international network of government and private sector renewable advocates.
And cash registers are ringing. Annual spending for solar equipment and components reached $7 billion in 2004 and is expected to quintuple over the next decade, according to Clean Edge.
HelioDynamics dreams of capturing a share of that market. Jepsen said that with $4 million the company could begin taking orders for 1-kilowatt electricity and heat-producing solar units with an expected retail price of $10,000. HelioDynamics would post revenue of $3 million in 2006, would reach profitability by 2007 and $15 million in net income by 2010, he predicted.
All those projections assume that HelioDynamics will be able to offer technology that produces power at competitive prices.
That's a big challenge. On average, solar energy and other renewables cost about 2.5 cents a kilowatt hour more than conventional products, according to a recent NREL report. Green energy marketers face tough competition from established companies that cut costs by tapping still-huge global reservoirs of oil and natural gas and by using an already-in-place multi-billion dollar infrastructure to process and deliver fuel.
While 2.5 cents may not seem like much, many Americans count on cheap energy to keep within their reach a bounty of powerful sport utility vehicles and sprawling suburban monster houses. To those consumers, energy price hikes can seem a direct threat to the American Dream.
So even though nearly a half-million Americans now pay a little extra to buy green energy, the industry remains a dwarf among energy giants. Renewables fueled only 4 percent of world power production in 2004, while biofuels had only a 3 percent share of the transportation energy market, according to the recently published Renewables 2005 Global Status Report.
Jepsen said that HelioDynamics, which aims to sell its units to owners of small commercial and industrial buildings, will offer a compelling economic case with its patented solar energy device. HelioDynamics' technology uses mirrors to reduce the volume of costly solar panels in each unit and produces heat as well as electricity.
But turning such dreams into reality takes hard work. HelioDynamics has worked at it for five years, starting with two small-scale prototypes of solar units in Scotland and the Canary Islands that the company built and tested with support from the British government.
Technology glitches and higher-than-expected costs twice sent developers back to the drawing boards. "It's fiendishly simple until you try to do it," said Graham Ford, the lead developer.
A third unit tested in France in March 2001 finally met the project's efficiency and cost reduction goals. A fourth prototype, this one full-scale, was installed in 2002 in Fairfield. It cost $1 million and, according to HelioDynamics, it works.
While some of the money came from investors, HelioDynamics' principals dug into their own pockets as well. "I've pretty much put every penny I own into it," Ford said.
In the United States, support for solar, wind and other alternative energy sources has blown hot and cold over the years.
For example, NREL, a unit of the U.S. Department of Energy, was established in 1974 as the Solar Energy Research Institute after the first "energy crisis" of the modern era produced gasoline rationing and price spikes.
Then, in the early 1980s, it endured a 50 percent budget cut and layoffs of hundreds of employees after energy concerns eased and the Reagan administration sought to rein in government subsidies and investments. Today, the Golden, Col., laboratory has a $200 million annual budget and employs 1,200 people.
California, with its sun- and wind-drenched inland valleys and history of high-profile energy woes, also has begun to encourage development of alternative energy technologies. Politicians in both major parties have signed on to ambitious targets to increase the share of the state's power that comes from renewables.
California has also offered some support. The state Energy Commission's Public Interest Energy Research Program annually spends $62 million on new energy and conservation technology research.
In 2003, another $30 million collected from PG&E customers as part of its plan to emerge from bankruptcy was used to establish the California Clean Energy Fund, which handed over most of that money for investments managed by three venture capital firms.
And in March 2004, the huge California Public Employees Retirement System agreed to invest up to $200 million in environmental technology start-ups. However, CalPERS said that it would proceed "cautiously" due to the market's newness, high costs and limited investment opportunities. (It took 14 months for CalPERS to come up with its first clean-energy money, an investment of up to $15 million managed by a Santa Barbara-based venture capital firm.)
CalPERS also has promised to move some of its huge stock portfolio into shares of companies and mutual funds that meet environmental and social responsibility criteria. In March, it bought a $75 million stake in a social index fund managed by Barclay's Global Investors. Last month, CalPERS hired six managers -- including Orinda-based investment management firm AXA Rosenberg -- to oversee up to $500 million in environmentally screened investments.
But HelioDynamics seems to have a long way to go to catch the notice of its Orinda neighbor or other institutional investors. Jepsen, a self-styled "technology missionary," was brought on board to help secure funding and get things off the ground.
"I know how to run a small company," he said in an interview. However, he also has said that HelioDynamics, with its eye on becoming a big company, intended to soon begin looking for his replacement as chief executive as well as a new chief financial officer.
Getting venture money would be only one leg of a continuing race for business success. Nine out of 10 startups that clear that hurdle still go on to fail prior before making an initial public offering.
Others will cash out when a Goliath decides to open his checkbook. Among the deep-pocketed giants quietly walking the hallways at the NREL forum were employees of venture affiliates of San Ramon-based Chevron Corp. and the U.S. Army.
But at HelioDynamics, such thoughts are way ahead of the game. As this story went to press, Jepsen was still chief executive, and the company was still looking for its $4 million.
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Source: Knight Ridder/Tribune Business News
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