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POSTED ON 13/11/06

Nanosolar set for expected clean-tech boom

Private and institutional investors rush to jump on environmental bandwagon


PALO ALTO, CALIF. -- With the backing of Google Inc.'s founders and $75-million (U.S.) in recent financing, Silicon Valley startup Nanosolar Inc. is on the cutting edge of a clean-tech boom.

Armed with the proceeds of a June financing, the privately held company is building a factory that will combine patented nanotechnology and traditional printing techniques to produce so-called thin-film solar panels for photovoltaic power.

Nanosolar is benefiting from a rush among venture capitalists, private equity firms and institutional investors to build "clean technology" portfolios that would take advantage of high energy prices, advances in material sciences and the increasing concern about global warming.

But the energy tech sector remains a risky investment for the companies that have gone public, with North American markets in particular underdeveloped, and renewable energy often dependent on subsidies.

The WilderHill clean energy index, a basket of 42 publicly traded companies, is down 27 per cent from its May peak, but still up 12 per cent from a year ago. The index, which includes Vancouver-based Ballard Power Systems Inc., has gained 48 per cent since it was inaugurated in August, 2004.

Enthusiasts believe that well-managed companies that offer innovative products and processes will be winners in the coming years.

Nanosolar's Palo Alto headquarters has the dishevelled look of a Silicon Valley fledgling, a look reminiscent of heady days of the dot-com boom. The low-slung building, equipped with second-hand furniture and populated by casually dressed employees, is situated in a commercial plaza off the famed Highway 101.

Veteran entrepreneur Martin Roscheisen -- who studied engineering with Google founders Sergei Brinn and Larry Page at Stanford University -- founded Nanosolar with their backing four years ago and now has big production plans.

With the demand for solar panels booming in markets such as Germany, Spain and now California, Mr. Roscheisen said his technology represents a major leap forward from traditional silicon-based panels.

"We can achieve a cost reduction that will ultimately enable us to deliver grid-parity solar power, so that solar electricity does not cost more than power from the electricity grid," he said.

He said his copper-based, thin-film panels will cost five to 10 times less than silicon panels, based on projected 2007 prices.

This summer, Mr. Roscheisen completed a $75-million private equity offering, with participation from some of the best-known venture capital companies in the Valley, including MDV-Mohr Davidson Ventures and Capricorn Management LLC, the investment arm of eBay Inc. founder Jeff Skoll.

Erik Straser, who manages MDV's clean-tech portfolio and sits on Nanosolar's board, said several economic factors are coming together to boost the sector.

Energy prices have been being driven higher by rapidly growing demand in China and India, while governments are subsidizing clean technology as part of an effort to reduce greenhouse gas emissions to combat climate change. At the same time, he said, engineers are commercializing a new generation of innovation resulting from advances in the information technology and materials sciences, including nanotechnology, or the manipulation of subatomic particles.

In an interview at his Sand Hill Road office, Mr. Straser said the global business community has only begun to grapple with the new world of climate-change economics, when carbon and other greenhouse gases carry a price either directly -- through carbon taxes -- or indirectly through emission caps.

"There's been two currencies on the planet and we may have a third: the first one is the price of money, the second one is the price of oil, and the third one, the 21st century currency, may be the price of carbon," he said.

After winning control of Congress last week, Democrats on Capitol Hill are talking about implementing a national strategy on climate change that would boost investment in renewable energy and energy efficiency.

Clean Edge Inc., which tracks the sector, says U.S. venture capitalists are expected to double their investment in clean technology this year, compared with 2005. In the first nine months of 2006, U.S. clean-tech companies attracted $1.7-billion in financing, versus $917-million for all of last year.

John Denniston, a principal with venture capital icon, Kleiner Perkins Caulfield & Byers LLC, said he believes the boom in clean-tech financing will continue for the foreseeable future.

"I would say it is a very significant initiative for us. We're placing a high priority on it and it will be a meaningful portion of our fund."

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