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The Energy Tech Chronicles: Will Bust Turn to Boom?

Overcoming many obstacles, energy technology continues to have potential.
Fortnightly Magazine - February 15 2002

also encouraging energy technology. At both the federal and state level, spending is occurring. The Department of Energy has programs, such as its $57 million Superconductivity Partnership, and California has adopted a program to promote the installation of solar, microturbine, and fuel cell equipment. The State's latest proposal calls for purchasing 50 MW of microturbines, 20 MW of fuel cells, and 20 MW of solar power in 2002. Interestingly, in 1999, then-governor George W. Bush enacted legislation requiring Texas utilities to have 400 MW of renewable energy capacity by 2003. Investment bank Robertson Stephens estimates there are currently 15 states with renewable energy programs and over $1 billion in funds to speed the adoption of renewable energy sources.

Environmental regulation and government spending are most likely to be of continued help to energy technology given public attitudes: a recent Newsweek poll found that 84 percent of those surveyed favored increasing funding for research and development on an alternative energy sources.

While coal, oil, and nuclear power are unlikely to be displaced by new energy technology sources as primary electricity sources in the next decade, increased concerns about terrorism properly highlighted opportunities in new energy technology. First, there are increased concerns over the vulnerability of the U.S. grid and centralized power plants, focusing users on the need for independent backup power. Second, there are concerns about the supply of oil, given that the U.S. imports 1.7 million barrels of oil a day from Saudi Arabia, and 13 percent of U.S. daily imports are from the Persian Gulf. The combination of these security concerns is quite powerful. As one conservative Fox News commentator admitted on air, "Oil-rich terrorists have turned me as green as the jolly green giant."

The Incumbents: Investing in Disruptive Technologies?

A final reason to be optimistic about the promise of energy technology is to examine the reaction of incumbents. Those companies that have the strongest reason to accept the status quo and resist technological change-utilities, energy companies, oil companies, and automobile manufacturers-have, in fact, spent hundreds of millions of dollars investing in the opportunities offered by new energy technologies.

Faced with the uncertainties surrounding deregulation and the challenge of distributed generation, those companies with the most to lose, and with the most electricity experience, have not stood idly by. Utilities have championed the promise of energy technology. Dozens of utilities have created venture capital arms and formed strategic partnerships with young energy technology companies. DQE Enterprises, a subsidiary of DQE (formerly Duquesne Electric), has invested in Enermetrix, H Power, SatCon Technology, TeamFuel, Beacon Power, and US Power Solutions. DTE Energy (the old Detroit Edison), has investments or partnership agreements with Plug Power, STM Power, iPower Technologies, Turbo-Genset, and Kohler Co., among others. CapiTech, Hydro-Quebec's venture capital arm, has made investments in Capstone, Metallic Power, H Power, and NxtPhase and Minnesota Power's venture capital arm has investments in Proton Energy and Metallic Power.

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