The chilling economic headlines seem inescapable. The subprime mortgage crash. Record high oil prices. Queasily unprecedented moves by the Fed to shore up Wall Street. The belief, among two out of three Americans, is that the economy has entered a recession, according to a recent poll by the New York Times.
But amid that gloom appears to be a green glimmer. The alternative energy market—including solar, wind, biofuel, and fuel cells—saw a 40 percent growth in revenues in 2007. In the same year, US venture capitalists poured $2.7 billion into clean energy, and during his 2008 State of Union address, President Bush committed $2 billion over the next three years to a clean energy and technology fund. And the latest murmurings about creating a US carbon market under climate change legislation say that it could result in a $1 trillion American market by 2020.
The contrast between the faltering economy as a whole and the momentum of green industries has naturally led to speculation. Will the green economy buoy the US amid the current down turn? Could the cleantech industry crash? Or is it the next big investment after the Internet and real estate booms?
A few weeks ago, cleantech venture capital investor and blogger Rob Day aptly summed up the wildly diverse conjecture. He wrote about the effects of the recession on the young industry, noting that “opinions are even more widely cast at this point, showing that no one really knows anything. In the past few days, we’ve seen arguments all over the map.”
These arguments are coming from the legions of economists, investors, and cleantech pundits who are keeping a close eye on the market and the effects of new policies encouraging renewables and efficiency.
One of the most discussed positions of late has come from Silicon Valley angel investor and author Eric Janszen. He argued in a February cover story for Harper’s Magazine that to save itself from economic free fall and prop up the fictitious value created by the housing market in the early 00s, the US will turn to the next big idea. That, according to Janszen, will be alternative energy and infrastructure and it could produce an “estimate of $20 trillion in speculative wealth.”
Whether or not you agree with Janszen’s critical ideas about economic bubbles (also known as asset price inflations—think the Internet and real estate booms), his rationale implies that the green economy will not only survive the current down turn but benefit from it with a catapult-like boost. But during an interview with Plenty, Janszen seemed to retreat some from his stance in the story. “My hypothesis about alternative energy market is that it may never develop into an actual asset price inflation. It could develop in a whole range of ways,” he says. “[It could be] a big asset inflation in the future or it could merely be an oasis in an otherwise moribund economy. Either way it’s going to be a growth area over the next five years or so.”
On the other end of the spectrum sits financial bank investor and founder of the popular Cleantech blog, Neal Dikeman, who doesn’t see the growth in clean energy providing much remedy for the country’s larger economic problem. “Wind or solar or ethanol are growing at substantial double digit growth rates as an industry,” Dikeman says. “But if that’s actually getting us out of an economic doldrums, well, no, ‘cause it’s all higher cost than conventional sources.”
Dikeman’s point is that while the alternative energy industry is certainly growing, it’s not a product we’re exporting. “You’ve just created a lot of jobs and you just created a lot of economic output, but somebody’s got to finance that,” says Dikeman. “I don’t see, unless you’re exporting to someone else, how that’s necessarily getting you out of an economic downturn. But a lot of people would disagree with me.”
But perhaps speculating whether green investments can bolster the entire US economy is an exercise, while interesting, that won’t result in any clear answers. “There’s an old saying if you lay all economists in the world end to end they still wouldn’t reach a conclusion,” say Joel Makower, executive editor of GreenBiz. “And that’s sort of the case here.”
Rather, Makower is focused on how the green economy will fare through the current down turn, and for the most part is confident. “Cleantech in particular and big corporations in general are making long-term bets in renewables and efficiencies. These are not going to be effected by two or four or even six quarters.” He stresses in his research that, “The green economy is now tracking the mainstream economy, which makes the green economy more mainstream. It’s not fringe anymore, this is big business.”
Story by Victoria Schlesinger. This article originally appeared in Plenty in April 2008.