Yellow&Blue Investment Management, a Utrecht-based clean energy venture investor founded by the Dutch utility Nuon in 2008, has emerged as one of Europe’s leading investors in smart grid, renewable and energy-efficient technology companies.
Its managing director, Albert Fischer, has clear views about how utilities should do corporate venturing, which he describes as “industrial crowdfunding”.
Fischer said: “The key question is how much freedom a utility really has to invest in a disruptive technology. If the venturing unit is kept in-house then its survival is subject to the whims of a new chief executive, who should notice that some venturing investments threaten the core business.”
Fischer covets and champions his autonomy to invest in companies that are disrupting the utilities business model. Woe betide anyone who describes Yellow&Blue – which combined make green … geddit? – as Nuon’s corporate venturing fund. “We are an independent financial investor sponsored by an industry player,” said Fischer.
One of its most recent investments is in Romo Wind, a Swiss-Danish wind-farm optimisation company, which raised €4.8m ($6.4m) in May from an investor group led by Yellow&Blue that included ABB Technology Ventures and B-to-V Partners, a Swiss wealth manager. Romo helps increase the productivity of existing wind-farms through dynamic monitoring of wind speed and direction.
The relationship with Nuon – owned by Swedish utility Vattenfall – has benefits. Former Nuon staff have been employed by some of Yellow&Blue’s portfolio companies. This adds utility expertise – and presumably saves money on recruitment consultants. But the portfolio works with Nuon’s competitors and peers from around the world, thereby underlining Yellow&Blue’s independence.
Locamation, a Dutch substation automation technology company (smart grid) announced partner agreements with Beijing Shuangdian Electric in April and with Scottish and Southern Energy last October. Entelios, a German demand response (smart grid) company Yellow&Blue backed in 2011 is collaborating with German utility E.on.
Such deals are helping to kill the pub-bore myth that clean-energy innovation and venturing are moribund. These are companies that are disrupting the old generate and-sell utilities model. They are part of an emerging power paradigm that includes intermittent renewables, independent merchant power suppliers and an increasing variety of demand-side innovation.
The European utilities’ struggles are compounded by low or no growth in power demand. Does this reduce their capacity for venturing? Or is it a case of venture or die?
“Utilities around the world are interested in us,” said Fischer, who currently manages $50m. “We are also attracting the interest of sovereign wealth funds.”
Utilities pinning their growth hopes on venturing include E.on and Irish utility ESB. E.on.’s new in-house corporate venturing unit was established in June to make direct investments in disruptive technologies that it can ultimately integrate into service offerings. It has also become a limited partner in Westly Group, a US venture capital firm, that will give it access to US utility-focused innovation.
Greencoat Capital, an investment company established originally with a limited partner investment from ESB, is investing in new business models and early-stage technologies.
It is also buying working wind-farms from utilities, thereby adding much-needed cash to their balance sheets.
“Some smart grid applications are destroying utility business models,” said Fischer. “Therefore it is of utmost importance that utilities continue to bring companies to market. For Yellow&Blue, it is working.”