Where is the Clean Tech Jackpot?

It seems every week, if not every day, a new company is heralded as the next revolution in clean technology. Like gold prospectors a hundred years ago, the race is on to find fortunes in the emerging clean energy sector, which everyone agrees must be the future. But what does that future look like? What’s a venture capitalist to do?

Dr. Danny Petrasek is trying to answer that question. Currently on the research and teaching faculty in Bioengineering and Applied and Computational Mathematics at Caltech and the clinical faculty at the UCLA School of Medicine, Petrasek is uniquely positioned at the intersection of biology, physics, and engineering to determine what the future might look like. And as a Venture Partner at Voltage Capital, he’s putting his money where his mouth is. “Betting on the solutions to our energy shortcomings is the goal of every green tech investor,” he says. “But in truth we have no idea where to solutions will come from. It’s a constant search that will see many failures before an explosive breakthrough.”

Petrasek’s search to hedge the bet is three fold. Given the unknowns, what are the most commercially viable products and services? Where are the hotbeds of research? And where have breakthroughs occurred but not been commercialized?

One of the largest sectors within clean tech and one of Petrasek’s specialties is solar energy. Photovoltaic technology is proven but ineffi cient and expensive, so strong contenders for investment are companies and technologies who are figuring out the storage problem (i.e. batteries) and making the supply side cheaper.

A key ingredient to solar cells are silicon wafers. Once the lone domain to computer companies for use in microchips, silicon is now a commodity in great demand for green tech. "Make the wafers cheaper," Petrasek says, “and the solar energy product becomes cheaper. We are never going to get the kind of explosion as we got in computer chips, but what we will see is the silicon wafers and solar cells getting cheaper and cheaper. Right now the price of silicon is rising, so one prospect of investment lies within synthetic silicon production."

More companies producing silicon means cheaper chips, which in turn means cheaper solar cells, but that doesn’t address the biggest obstacle, storage. Collecting the energy is one thing, but once solar energy is absorbed and processed into electricity, you need to store it somewhere. There is no control over when the sun shines and at present there is no perfect solution to storage - today's batteries simply cannot keep up with the power or lifestyle demands of society. "Once we solve the storage problem," Petrasek says, "then you will see an explosion in solar energy. Until that time, its still not a great resource."

The solar energy industry is poised for a breakthrough, but as with so many new technologies, it is at the mercy of the market. When the economy was strong and new construction booming, solar gained market share, but all that ceased with the real estate crash. Prices are still too high for widespread implementation even with government subsidies, but if Congress adopts a carbon cap or begins selling emissions credits—both of which appear likely to happen in one form or another in the coming years—than solar will again be on the precipice of success. "Solar and storage is still an open field," says Mouli Cohen, Founder of Voltage Capital, "but we don't know what the future holds. As investors, we have to look at everything going on and try to decide where go. At Voltage, we’re still answering that question, but we need to begin moving soon."