After receiving tens of millions in taxpayer dollars in 2009, Waltham battery maker A123 Systems Inc. ramped up quickly, ultimately increasing production much faster than the electric vehicle market grew. The result was bankruptcy and the purchase of A123’s assets by a Chinese company on Tuesday.
The next day, another alternative energy firm that won tens of millions in government support opened a pilot plant in Bedford. But this plant was completely financed by private investors, and the company, solar component maker 1366 Technologies, has agreed not to tap its $150 million in federal loans until it proves its technology can succeed.
This tale of two companies shows how the once high-flying alternative energy industry has come back to earth, no longer charging full-speed ahead, but rather advancing cautiously. Chastened by slower than expected returns and several notable bankruptcies, including A123 and California’s Solyndra LLC, investors and companies have adjusted strategies and expectations.
After flooding the sector with money a few years ago, investors have pulled back, targeting money toward less risky companies that have shown their technologies are closer to commercialization, said Brian Carey, a principal in the clean-tech practice at PricewaterhouseCoopers LLP. The Big Four accounting firm estimates that overall investment in the nation’s clean tech industry fell nearly 30 percent last year, to $3.3 billion. Investment in solar companies fell nearly 60 percent.
“We sense that clean tech has not delivered on its promise,” said Fatima Toor, an analyst with Lux Research Inc. in Boston. “But there is a drive, there is a demand for it. Solar is a growing market, wind is a growing market. [So clean tech] is going to grow, but it’s not going to grow as fast as everybody hoped.”
Government is also moving more cautiously. Several years ago, caught up in the promise of alternative energy, Massachusetts awarded Evergreen Solar more than $50 million in state support for a panel-making plant in Devens. Evergreen filed for bankruptcy in 2011.
In contrast, the state has been much more modest in its support of 1366 Technologies, giving the company just $300,000 in 2010.
The award has strong repayment provisions in place if the company fails to meet expectations, said Richard K. Sullivan Jr., Massachusetts’ secretary of energy and environmental affairs.
“It’s very different from Evergreen,” Sullivan said. “It’s the type of strategic investment that I think is appropriate for the state to make to grow the industry, [and] I think it’s smartly placed and smartly protected.”
Such shifts are leading companies to accept slower, more deliberate paths to growth. At 1366 Technologies, chief executive Frank van Mierlo said he and chief technical officer Emanuel “Ely” Sachs have purposely grown the company at a slow pace, cognizant that they’re working in a “very risky” field with lots of competitors.
That’s why they’ve begun with a modest $6 million pilot plant, rather than immediately using the federal loans to grow more aggressively.
Peter Rothstein, president of the New England Clean Energy Council, a trade group, said this kind of approach reflects an industry that is maturing, one that is positioning itself for long-term growth.
“Everyone hopes that this is not going from a boom to a bust, but from a boom to a maturation — a transition to a more steady, careful building process,” Rothstein said.
But for clean technology to grow and prosper in the United States, many supporters say, Americans need to become more tolerant of failure in what is still an emerging industry. Without that tolerance, the sector will find it difficult to take the risks needed innovate quickly enough to stay competitive.
“We’ll see winners and losers, it’s unavoidable,” said Gil Forer, the global clean tech leader at Ernst & Young, another Big Four accounting firm. “That’s the evolution of an industry. Some companies will succeed, others will not.”
Despite the perception by some that clean technology is a bad bet, Forer added, “On every failure you mention, I can bring at least one success story.”
The Department of Energy says that it awarded grants and loans to more than 1,300 companies using stimulus funds, and only 1 percent of those firms failed.
Despite his own cautious approach, van Mierlo of 1366 Technologies said he believes that more should be done on a national level — through policies, market incentives, and financing — to push the country’s clean energy industry forward rapidly. In many ways, van Mierlo said, it was the country’s inability to implement a national energy policy, even as China and other countries accelerated their own initiatives, that slowed clean tech’s early momentum.Continued...