National oil companies and supermajors will have to be actively involved in creating new technologies for wind and solar power generation if unconventional energy is to become a major power source, the general partner of RockPort Capital Partners said Oct. 2.
Speaking at a conference at Rice University's Baker Institute, Alexander Ellis III said his firm has been actively involved in funding clean energy projects, only to learn "it's very, very hard to make money" in the sector. One company that led him to that conclusion was an investment in Solyndra Inc., a solar panel builder that spectacularly went bankrupt in 2011 after receiving $535 million in loans from the U.S. Department of Energy.
"I will go to my grave thinking Solyndra was a good idea," Ellis said. "What the Chinese did … was kill it. About $2 billion … was wiped out by the Chinese. It was their industry policy, that they would be the big player in building solar panels."
Ellis said he and other venture capitalists will continue to invest in companies looking to improve solar power generation, but real progress will come when major oil and gas producers start to make serious investments in expanding their energy portfolios. Major producers, he said, have the capital and the research and development capabilities to improve solar power gathering.
"The majors have a huge role … to play," he said. "They can afford [to spend] $2 billion a year [on renewables] … and they have a spectacular breadth of operations."
Some majors have already got into the renewables space, with limited success. Ellis said that, like his experience with Solyndra, producers will have to be careful when it comes to choosing which projects to invest in.
"In the past, we've seen big companies jump into this space and there probably hasn't been the diligence needed to get in to some of these projects," he said.
Ellis spoke highly about the prospects of wind energy as well and believed majors will also play a key role in expanding its percentage of the U.S. energy supply.
"When you look at the importance of offshore wind in Europe and how it will be in the U.S., it's a natural for the majors," he said.
Unlike solar energy, Ellis said there is essentially no need for venture capital in the wind segment as there is little opportunity for new ideas to take hold. Wind power, he said, is more cut and dry — if you have money, you can get in.
"You just need capital," he said. "You've got to pay for 167 tons of steel (for each large turbine). You can't innovate around that."
One issue that continues to face wind as well as solar power are the problems of energy storage for times when the sun is down or the wind is not blowing. Again, Ellis pointed to oil and gas supermajors as being the likely source of the technology allowing for larger batteries to be developed for wind and solar generation.
"It will take the [Royal Dutch Shell PLC]s of the world to get us to the next level [of battery development]," he said.
