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Green Energy Sector Weekly Update: A Green Giant Emerges

Duke Energy’s $13.7 billion acquisition of Progress Energy formed the country’s largest power company with a $37 billion market capitalization and a whopping 57 gigawatts of domestic generating capacity, largely from conventional resources (coal, nuclear and natural gas). But they’ll also be a big player in renewables.

The combination of these two North Carolina power companies – the new entity will be called Duke Energy – creates a major green power giant with 13.1 gigawatts in Co2-free generation. A bulk of that capacity is generated by nuclear and hydro power but there is still a respectable 1,710 megawatts of “conventional green resources” like solar and wind power.

Of the two companies, Duke Energy has the much bigger green portfolio with renewables, not counting hydro or nuclear, making up 4 percent of its total current capacity. Duke owns and operates 986 megawatts of commercial wind power generation in the U.S., having invested some $1.5 billion in the business over the last three years. Last year, the Charlotte-based power company  also got into the solar business, committing to invest up to $180 million over the next two years to mount solar photovoltaic power projects on U.S. commercial rooftops.

Progress, by contrast, only has 1 percent of its capacity in renewables or about 425 megawatts of capacity, none of which is generated by solar or wind power. A bulk of its green power comes from hydro facilities and some from biogas power plants. One of the company’s largest capital expenditures  currently is the construction of a  950-megawatt combined-cycle natural gas plant at Progress’s H. F. Lee Energy Complex, which is expected to come online in early 2012.

Another green asset of the merged Duke Energy isn’t a solar or wind farm but comes with outgoing Duke CEO Jim Rogers, one of the energy sector’s most outspoken green executives. Rogers has been a leader among energy executives in calling for a cap-and-trade regime. “Every decision I make today, I make it with the assumption that there has been carbon legislation in the U.S. and that there is a worldwide treaty,” he told Bloomberg Television, last year.

Progress Energy supports reduction of Co2 and green house gases but says carbon-dependent industries should not pay for carbon emission permits.  In its 2010 Corporate Responsibility Report, Progress Energy argues: “An auction would enable market players who have no obligation to meet customers’ power needs to reap large profits at the expense of those who do. Auctions, like taxes, focus on raising revenue rather than achieving significant emissions reductions. We support allocating allowances in a manner that most effectively reduces costs to retail customers.”

Rogers will hopefully continue to push for a bolder green agenda  in his new post-merger position as executive chairman advising current Progress CEO Bill Johnson. Johnson will take over as Duke CEO once the merger closes, likely at the end of the year.

We’re halfway there. According to market research firm Bloomberg New Energy Finance more than $243 billion was invested across the renewable energy spectrum in 2010, up from $186.5 billion in 2009 and $180.1 billion in 2008. The 2010 investments are actually half of the $500 billion that BNEF says needs to be invested annually to start curbing CO2 and green house gas emissions over the next decade.  Some 2010 success stories include China, which attracted more than $51.1 billion invested last year, up 30 percent from 2009 levels.

On a sector-by-sector basis, solar grew by almost 50 percent to $89.3 billion compared to the wind industry where new investments grew by a 31 percent to $96 billion. The wind sector’s slowing growth underscored the maturity of the wind industry compared to solar, which is still being spurred by ongoing technological innovations.

What about venture capital investments? Over the past five years, venture and private equity funds embraced the green sector. At the peak in 2008, VCs and PEs invested more than $12 billion in largely unproven solar or biofuel startups. Over the past couple of years, data released this week showed, investors have been growing impatient with the long investment cycle and the “valley of death,” where new technologies wither and die for lack of adequate funds to make it to market.

Early-stage investors have not decamped from the green sector – they invested more than $8 billion last year – but they’re certainly being more selective, looking for cleantech companies with quick exit strategies. Energy efficiency companies, which tend to be more ready for the market than solar or biofuel startups, offer those coveted quick exits and have benefited from this strategy shift. Last year U.S. VC and PE funds invested roughly $2.5 billion in energy efficiency companies, from $1.2 billion in 2009, according to Peachtree Capital Advisors.

VC and PE Watch

GE  teamed up with Reliance Venture Asset Management to invest in a Series A round of venture funding supporting an Indian biomass developer.

Viridity Energy, a Conshohocken, Pa. developer of distributed energy resource management systems, raised an undisclosed second round of funding led by Braemar Energy Ventures.

Rambling

Details are emerging on the battery-gate shaking French car maker Renault. As we posted last week the French car-maker suspended three top executives overseeing its crucial electric car project. The trio is accused of industrial espionage, reportedly leaking information to subcontractors that would have helped future bids. This week French daily  Le Figaro reported that two of the three executives might have received bribes from  China Power Grid, an electricity distributor, an allegation the Chinese company has denied.  Also this week, the name of the three executives emerged. They are: Matthieu Tenenbaum, a former deputy director of Renault’s electric vehicle program; Michel Balthazard, a member of the Renault management board and Renault executive, Bertrand Rochette. All have declared their innocence.

By. Green Energy Reporter




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