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Venture Capitalists, China and Green Technology

Venture Capitalists, China and Green Technology

Venture Capitalists, China and Green Technology
Tina Butler,
May 24, 2006

A Bay Area venture capitalist with a storied past, has set his sights on “green technology” and ultimately China, after some compelling remarks from state representatives at a recent conference. Early this spring, Chinese officials named solar and clean coal technologies as two of their three pre-eminent priorities for investment and development in the near future. For a country with burgeoning energy needs surpassing what power is presently available, this is both realistic and positive news for environmentalists and economists alike. Hoping to capitalize, John Doerr and his associates are now funneling cash into the emergent green technology sector, which he, and an increasing number of other investors believe to be the next big thing.

To say the market potential for green and sustainable technology in China is significant is an understatement. Currently, China is a global economic force to be reckoned with. But the country is on the brink of exhausting the traditional sources of its power so necessary for maintaining rampant industrial and ultimately economic growth. It is becoming ever more clear that the country’s capacity to provide enough energy for sustained growth is limited. The impending shortage of energy in China is finally forcing the country to re-evaluate its energy production methods, and at the same time, capturing the attention of foreign investors.

Modernization of industrial construction and practices is integral to increasing efficiency, and the employment of green technologies may be the solution to this swelling problem. As understanding and acceptance of the inevitable consequences of global warming and dwindling of resources spreads around the world, Doerr predicts clean and eco-efficient technology will ascend to the same economically vital level of information technology and biotech. Green technology is being viewed as the new frontier, and believed to be a highly lucrative one. After an initial investment of $50 million, Doerr’s company is pouring an additional $150 million into new technologies that aim to produce cleaner air, power, transportation and water.

Doerr’s background and past experience has earned him much respect from the venture capital community, and his interest is quickly influencing other investors. Globally, industry is seeing a rise in cost for all traditional forms of energy, and it is becoming increasingly imperative to find new alternatives. Solar and wind energy, biofuels and hydrogen cells are all establishing a stronger presence on the global market. According to one report, the market for clean energy sources is anticipated to quadruple by 2015. Technologies are improving and demand is increasing. Overall, investment in green technology is already up 35% from 2004.

There are signs of change in China as well. On January 1, 2006, the Renewable Energy Law of China went into effect. This law requires real estate developers to consider and make design accommodations for development and use of renewables such as solar energy. In February, China signed an agreement with the European Union to reduce carbon dioxide emissions from coal-burning power plants. The ultimate goal for this agreement is to have zero emissions by 2020. Such reductions in traditional power generation only heighten the necessity of new alternatives.

As China is learning, industry can no longer simply favor progress and profit over the health and functioning of the environment. There is a new sense of responsibility and talk of a move toward more sustainable practices. What is more, in the future, cost-effective may soon be synonymous with eco-efficient. Regardless of China’s fate, all of this new attention is promising to environmentalists and appealing to venture capitalists. The final outcome is unclear, but the potential is obvious.

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