Q&A talks with Patrick O’Neill, investment associate with Connecticut Innovations (CI) who focuses on clean energy.
Q: How strong is the energy industry in Connecticut?
A: “Strong” is a tough term to define. Energy has gained a lot of interest and publicity as of late due to the increasing cost of electricity, and the public’s concern for finding new cleaner forms of energy. As for political strength, there are some very strong players in the industry, most notably the utilities, who have always had a lot of market strength through their position as a regulated monopoly. The utilities’ market strength provides a measurable hurdle for new technologies entering the energy market. For instance, any company looking to develop a new electric generator knows that the metric to beat is the comparable cost of electricity (i.e. the grid price of electricity)
Q: Is growth coming in alternative energy like fuel cells and other sources like hydrogen?
A: Growth will be tough to find in fuel cells and hydrogen fuel for different reasons. Fuel cells currently use natural gas as a fuel, so the economic payback from fuel cells is tied directly to the cost of natural gas. Coincidentally, the cost of grid-based electricity is also directly tied to the cost of natural gas, so the cost benefit from fuel cells will be based on how well they can beat the marginal cost of electricity by generating electricity more efficiently than grid power. As for hydrogen, the technical hurdles associated with finding a way to generate hydrogen economically has been the biggest hurdle to making hydrogen fuel a high growth prospect. Growth in alternate electric technologies will come from a technology which can produce electricity at a lower cost than what is currently available on the grid. Until that happens, alternate energy companies will not be able to compete and take market share away from the grid without government intervention.
Q: Is there investment money for energy companies in Connecticut? What are some of the major sources of funding for energy companies?
A: Yes, CI has many programs available to companies with new technology which generate electricity. One of the programs is the clean tech fund that can invest up to $1 million into new companies that have developed a “clean” technology, which include alternative energy technologies. CI also administers the CT Clean Energy fund which has programs which invest in new/alternative energy technologies. The state Department of Economic and Community Development and the Connecticut Development Authority also have programs for Connecticut companies working in the energy sector.
Q: What makes energy companies attractive to potential investors?
A: The demand for energy has always been there and it is growing. Additionally, the supplies of our traditional energy sources are finite, making supply constriction a concern. So if an inventor can find a way to make energy economically from a renewable source, they will have a guaranteed market for their product.
Q: Have recent changes in corporate average fuel economy standards by the Obama administration driven more interest in energy companies serving the auto industry?
A: We have not seen a noticeable change in the focus of energy related companies towards the automobile. Even before the CAFE limits where changed, inventors and entrepreneurs were looking for ways to increase fuel efficiency in all forms of transportation.
Q: Does investment in technology need public support to work? Can this be done solely based on private investment?
A: Public support has generally been at the early stage where most private investors are more reluctant to invest. So public funding provides a needed bridge between the start of a company and the point where private investors are willing to step in and take on the risk of a new technology company.
