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Mercury News: Alan Salzman - Global investors see the future in clean energy

By Alan Salzman
Mercury News
Global investors controlling tens of trillions of dollars will gather Thursday at United Nations headquarters to showcase investments in clean energy and energy efficiency solutions. There's a powerful narrative here: Even in the face of paralysis among governments, many in the private sector are moving ahead on energy and climate change innovation.

Global investors controlling tens of trillions of dollars will gather Thursday at United Nations headquarters to showcase investments in clean energy and energy efficiency solutions. There's a powerful narrative here: Even in the face of paralysis among governments, many in the private sector are moving ahead on energy and climate change innovation.

But skeptics seem to be around every corner these days, from Capitol Hill to Wall Street. They typically have three arguments against replacing fossil fuels:

  1. Clean-energy technology is too expensive -- we can't afford renewable energy solutions or even efficiency technologies that drive down energy consumption such as LED lighting, energy storage or smart grid systems.
  2. The only reason these new technologies exist is subsidies; otherwise, free markets wouldn't support them.
  3. While we've got to compete with China and the world, we just can't afford to deal with this now.


First, as far as costs and timing go, in the technology world we know intimately the concept of the learning curve. The first use of any new technology always is pretty clunky and expensive, whether it's those first plasma TVs that cost $11,000 or the early brick-sized cellphones at $6,000 each. Today's energy innovations landscape is replete with examples of this.

However, once you have that first iteration, you begin a learning curve that's constantly nibbling away at cost and improving performance. That's why flat screen TVs are now $600 and cellphones currently outnumber people. Once you've cracked the code, prices drop.

For example, there are now LED light bulbs that are, in every way, identical to incandescents, except they save $8 to $15 a year in electricity bills and last 20 years. Does anyone seriously doubt that prices of those bulbs will plummet over the next several years?

The same applies to power plants, electric vehicles, building efficiency and more. I'm betting on the modernization of antiquated industries because costs will come down as we master the learning curve.

Second, when it comes to subsidies, most critics have it backward: It's current policies and their silent subsidies that keep fossil fuels dominant. Those subsidies dwarf anything flowing toward the clean technology sector.

And third, it's true that the most aggressive player in clean technology today, from a policy viewpoint, is China's government. They know that the industries of the 21st century are going to be founded on innovations in energy and resources. China is racing for market share and control of these technologies. If we remain asleep while they get there, America's competitive and economic recovery will be exceedingly difficult. We can't wait.

Keeping our country moving forward requires more than clean technology investments. We need forward-looking businesses and comprehensive government policy that sends firm, clear, lasting price signals and removes silent fossil fuel subsidies. In addition, we need innovation and efficiency at the forefront of our energy priorities.

The technologies that underlie our current global energy practices are decades old, inefficient, expensive and harmful. That's why many of us think clean technology is the fundamental investment opportunity of the coming decades. Anyone who understands these opportunities, plus the many grave negatives of the world's addiction to fossil fuels, understands how intimately issues of competitiveness, environment and America's long-term economic and national security are co-mingled.

The investors gathering at the U.N. on Thursday, many of whom work together as the Investor Network on Climate Risk, understand this risk and its attendant opportunities. Losing this great global race will be a major, painful and very long-lasting defeat for our country. Winning it is the best path forward by far.

Alan Salzman is CEO of Silicon Valley-based VantagePoint Capital Partners, a global investor in energy innovation with more than $4 billion under management. He wrote this for this newspaper.

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