My travels recently took me to Texas and Bavaria, two high-growth regions of the world where the clean deal is certainly in fashion, albeit in different shapes and forms.
A prospective US clean-deal investor drove me along Texan freeways at a leisurely 55mph past petrochemical and foundry smokestacks to witness the rapid shale-gas-fuelled US industrial renaissance.
A German client drove me at a hair raising 125mph along a Bavarian autobahn past gleaming arrays of solar and wind farms, which on sunny and windy days contribute cheap power to the enduring industrial heartland of the Ruhr valley, three hours north.
There are critics of Germany’s pro-renewables electricity strategy, but heavy industry there seems to be doing fine with renewables and few are clamouring for shale exploration. Meanwhile, Texan enthusiasm for renewables, which was never particularly strong, is waning thanks to the abundance of cheap gas.
So the clean deals being done in the two regions are different, but not quite as different as you might think.
North American investment appetite for technologies that enable more efficient and clean shale extraction, such as advanced drilling and wastewater treatment, is high. Moreover, as heavy industries return to the US in pursuit of cheap energy, investor interest in effluent treatment technologies rises because they are needed to meet US regulatory requirements on gas and liquid discharge. More obviously, there is growing investment across the gas value chain. Modular gas-to-liquids (GTL) technologies look hot.
Houston-based ConocoPhillips’s corporate venturing unit invested before Christmas in the Canadian wastewater technology company Saltworks. It joins fellow corporate venturers Cenovus and Teck Resources on the shareholder registry. Saltworks has solutions to the water problems of the Texan shales as well as the Canadian oil sands.
Energy Ventures, a leading oil and gas venture capital firm also based in Houston, paid $9.2m in November last year to take ProSep, an oil-focused water technology company, off the Toronto Stock Exchange, and merged it with its portfolio company Produced Water Absorbents. The combined entity is now in Houston.
In Germany, the increasing role of renewables and the concomitant need for greater grid flexibility has shaped the local investment landscape. Recent additions to the portfolio of High-Tech Gründerfonds, an early-stage German investor backed by chemicals companies Evonikand Lanxess among others, include Ice Gateway, a smart-grid lighting company.
But Germany is not as passionate about renewables as Texas is about shale gas. I feel that German investors are not banking yet on a renewables-dominated electricity landscape in the long term. Energy efficiency rather than renewables or smart grid will be the dominant investment theme in the next few years. It looks like the more solid option.
So what are we witnessing? Is environmental investing becoming less global and more local? Can Texans stick to shale and its associated industries while Germany focuses on efficiency and renewables? Or must one energy source – renewables or shale gas – ultimately win out on the global stage?
The smart German global corporate venturer – of which there are quite a few – is keeping its options open and global. While Evonik invests in early-stage smart-grid and energy-efficient innovation via High-Tech Gründerfonds, it is not neglecting gas-related opportunities in North America.
Vancouver-based Pangaea Ventures – which has Evonik among its backers – just before Christmas led a $3m investment in Calysta Energy, a California-based GTL and gas-to-chemicals technology company with a biocatalyst-based business model founded on the increasing role of gas in the global energy mix.
However effective the solar and wind farms of Germany are, I do not foresee many Germans driving electric cars at 125mph on the autobahn any time soon.