Silver linings in a dark economy

It’s that time of year again. Despite a healthy respect for the impossibility of timing markets, once again I will try to make my cleantech predictions for the coming year.

We are entering 2009 with a continued far-ranging credit crunch, and the largest capital markets collapse in decades; falling energy prices; huge anticipation for the Obama administration energy and climate moves; and a broad set of policy frameworks and subsidies now backstopping renewable energy and cleantech.

So what does this mean for sustainable industries, such as solar, biofuels and energy management?

1.The oil price slide will take a big bite out of biofuels and EV/PHEV-driven businesses. This sector has been over-hyped and needs years to mature. However, OPEC cheating will likely alleviate some of the upward pressure on prices from OPEC cuts, and global demand (as usual) will be overestimated in a sliding market, leading to more price erosion offset longer term by a weakened new supply from the 2008 price drop. The world will not come to an end, but the highest cost, marginal projects in alternative-fueled transport are not going to do well. This is bad news for cellulosic ethanol.

2.Solar will trundle on forward. At least one new thin film player will join the ranks of First Solar in the first tier. The predicted supply explosion from thin film will come in shorter and later than some anticipate. The crystalline “shortage” will ease, taking margin out of the module business, offset by weaker than expected subsidized demand from Europe and the credit crunch taking its toll.
 
3.The United States will get a climate change bill. And God help us if it’s a bad one. It will not be as sweeping and all encompassing as President Obama wanted, as he figures out that we don’t have the money to implement it. Senators John McCain and Joe Lieberman will be key to getting it done. It will form the framework for the U.S. interaction with European- and Asian-based cap-and-trade schemes.

4.We will see the first of the big $100 million to $250 million write-offs that are coming in the cleantech venture capital sector. Confidence will be shaken, but not stirred. The likely culprits: what’s left of fuel cells in venture portfolios (you know who you are), thin film solar, automotive and biofuels. The cleantech venture community—especially the major IT investors who moved into cleantech thinking it was easy—will get a rude awakening.