Nuclear crisis doesn’t panic cleantech investors

Sun Mar 20, 2011 12:03am EDT

An escalating crisis at nuclear power plants in Japan following a massive earthquake and tsunami has not changed the investing thesis about clean technology, according to a number of leading venture capitalists and researchers.

Fears of a meltdown at the Fukushima nuclear power plant in Japan sparked a new wave of criticism of nuclear energy — and a rally in clean-energy stocks on Monday. But that interest quickly waned as stocks in the sector dropped back from that day’s highs as the stock market experienced a broad sell-off.

And that brief surge of interest never touched the private investment community, because venture capitalists typically focus on longer-term plays, said Steve Minnihan, a partner at Lux Research, a firm which specializes in cleantech.

“I haven’t heard anything from my clients or from the companies that we speak to in terms of interest in solar and wind power,” Minnihan said.

Any sustained increase in interest probably won’t be felt for the next six to nine months, said Micah Myers, a managing partner with venture-capital firm Claremont Creek Capital. That’s because the energy sector’s investment cycle is typically longer than other venture investments, he said. Alternative energy sources have suffered from a lack of capital to finance projects, but that may ease as a result of the crisis in Japan.

“It’s a huge tragedy, but it’s only gonna give a tailwind to alternative energy technologies,” Myers said. “There will be more of a willingness to put capital to work in solar and wind.”

U.S. Energy Secretary Steven Chu said the fuel rods in one of the nuclear reactors in the Fukushima nuclear power plant in Japan had experienced a partial meltdown in a statement today. As of this afternoon, the Tokyo Electric Power Corporation (TEPCO) was attempting to restore power to the nuclear plants in order to cool the nuclear reactors and prevent a full-scale meltdown. The U.S. government has also urged any U.S. citizens within 50 miles of the reactor to evacuate the area.

While major natural disasters like the earthquake in Haiti and Hurricane Katrina caused a huge outpouring of public support and aid funding, they didn’t move the needle much on technology, said David Mann, chief of staff at Khosla Ventures — a venture-capital investment firm well known for its backing of cleantech companies.

The events in Japan led to a tremendous amount of misinformation spreading among the public at large — but not the investment and scientific community, Minnihan said.

“I do think there will be a public backlash against [nuclear power],” Minnihan said. “I don’t think there will be a backlash around the scientific … community — the nuclear plant was designed with the appropriate safety mechanisms, just no one had foreseen this scale of a disaster.”

And it’s not like there are many private investment opportunities in nuclear today, Mann said. Khosla Ventures is an investor in TerraPower, a company that specializes in nuclear reactors called Travelling Wave Reactors that are powered by depleted uranium. But Khosla, known for bold and risky bets across a wide range of cleantech opportunities, may be a fringe case. Nuclear power typically takes a long time to reach the commercial market after the company is founded, Mann said — longer than a typical venture capitalist’s investment time horizon.

The only clean-technology plays that would be affected by the nuclear disaster in Japan would be Japan’s own clean-technology investment community. TEPCO, which owns the nuclear reactors, is also a big proponent of smart-grid technology that uses software and real-time data to distribute power across the country’s power grid. Smart-grid technology is seen as one of the major innovations in clean technology that will drive the costs of distributing power down and make it more efficient. That would inevitably take a hit as TEPCO covers costs of damage from the crisis.

Damage from the 9.0-magnitude quake that struck off the northeast coast of Japan and spawned a massive tsunami far exceeded what nuclear plants are built to withstand. The quake cut off power to the plants, and the tsunami that followed the earthquake destroyed diesel-powered generators that were providing backup power to the plant. That meant clean water was no longer pumping into the reactor to keep the fuel rods cool, causing them to overheat.

The Department of Energy’s Loan Programs Office, which loans money to clean technology companies that produce clean energy, will continue funding nuclear power programs as part of its efforts to promote clean energy production, the office’s executive director Jonathan Silver said at the Cleantech Forum in San Francisco today. So the impact of the Japanese nuclear fiasco on U.S. policy might even be negligible — especially after President Barack Obama and U.S. Energy Secretary Steven Chu lobbied hard to bring nuclear power to the forefront as a potential alternative to fossil fuels like coal and natural gas.

While the immediate pop in interest might have already faded, there’s still an opportunity for clean technology startups to capitalize on the good will that will come from Japan’s nuclear crisis. The backlash against nuclear power will open up a hole that startups like Harvest Power, an alternative energy provider that converts waste into natural gas, can fill, said Ajit Nazre, a managing partner with Kleiner Perkins Caufield & Byers.

Tags: Ajit Nazre, biofuels, clean technology, cleantech, David Mann, Micah Myers, Nuclear, nuclear power, solar power, Steve Minnihan

Companies: Harvest Power, TEPCO, Tokyo Electric Power Corporation