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Innovation Economy

Green energy sets up shop in Washington

By Scott Kirsner
Globe Columnist / May 17, 2009
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Before President Obama took office, most Massachusetts companies developing technologies in the green energy field didn't have a lobbyist on retainer. Wringing money from the Department of Energy and other agencies in Washington was simply too bureaucratic, and it took too long.

But in the months since the inauguration, companies working on new kinds of batteries, carbon sequestration techniques, and energy efficiency materials for buildings have hired lobbying firms and dedicated teams of employees to figure out how to land a portion of $100 billion in loan guarantees, grants, and other funding that's expected to start flowing as a result of the Recovery Act.

"Emerging technology companies in the energy space are landing in Washington like locusts," says Mitch Tyson, chief executive of Advanced Electron Beams, a Wilmington start-up that is just now hiring Holland & Knight LLP to handle its lobbying.

Hemant Taneja, a venture capitalist at Cambridge-based General Catalyst Partners, says that all of the energy-related companies in his portfolio are hiring government relations specialists and lobbyists: "This is a $10,000-a-month expense that could yield significant capital for our businesses, which are really capital-intensive."

Stimulus funding is the hot topic in clean-tech circles right now. The New England Clean Energy Council organized a field trip to D.C. last month to speak with administration officials like Carol Browner, the president's special assistant for energy and climate change. And last week, the Department of Energy hired David Danielson from General Catalyst Partners to help dole out $400 million as part of a newly-funded program called the Advanced Research Projects Agency for Energy, or ARPA-E.

The better-known ARPA, of course, is the group within the Department of Defense that helped launched the Internet (whose predecessor was known as the ARPANET). And the hope is that the federal government's stimulus funding will help spark a similar kind of explosive growth for the green energy sector - even if it takes a decade or two to really pay off.

"The Department of Energy has traditionally been about supporting early-stage technologies in research labs and doing weapons cleanup," says Steve McBee, chief executive of McBee Strategic Consulting, a Washington lobbying firm working with several local companies. "Now, you're talking about being an incubation instrument for clean energy solutions and helping them get to scale."

McBee estimates that about $50 billion of the $800 billion stimulus package will go to renewable energy and energy efficiency - and that's on top of $50 billion in Department of Energy loan guarantees that preceded the stimulus package, but have only just begun to flow.

That funding could help solidify Massachusetts' position as a center of gravity for changing the way the world produces and uses energy. And local companies have all kinds of plans for how they'll use the money.

GreatPoint Energy is hoping for $100 million or so in government loan guarantees, which can help lenders get comfortable with risky projects, to fund a facility that could cost between $300 million and $500 million to build. The facility would convert coal into synthetic natural gas, and sequester the resulting carbon dioxide (rather than releasing it into the environment).

"Getting that kind of project financing in ordinary markets would be challenging," says Daniel Goldman, chief financial officer of the Cambridge company, "and these aren't ordinary markets."

Advanced Electron Beams makes a system that today is used to sterilize food packaging, but the company believes its electron beams would also be useful for controlling the pollution emitted by power plants. Tyson says the company will apply for a grant of several million dollars to develop the technology, as part of the new ARPA-E program.

Boston-based Ze-gen Inc. is hoping for a loan guarantee that could help it expand a New Bedford facility that's still in the planning stages. The facility, which would create about 60 full-time jobs, would transform trash such as scrap metal into synthetic natural gas. Chief executive Bill Davis says that the stimulus funding will provide a boost to his industry - but so might the cap-and-trade system currently being discussed in Congress, which would place a price on carbon emissions.

"That forces companies to look at the true costs of producing energy, and it'd be more of a long-term help to the markets than stimulus," Davis says.

Boston-Power Inc., a battery company based in Westborough, started chasing stimulus funding in February, with a team of about a dozen employees and outside consultants working on the project. Chief executive Christina Lampe-Onnerud says the company will find out in July whether it has received a Department of Energy grant that would enable it to build a new factory in Auburn.

Lampe-Onnerud says the company today makes all of its lithium-ion laptop batteries in Taiwan, where it employs about 300 people. The Massachusetts facility could employ more than 600 people, she says - and the company is also planning to expand from just making lithium-ion batteries into producing batteries for hybrid and all-electric vehicles as well.

For venture capitalists who have poured millions into clean-tech companies, the government funding is a godsend: At a time when their companies can't go public, and few of them have matured to the point where they're appealing acquisitions for an ExxonMobil or a BP, stimulus money will allow companies to survive longer, take more shots on goal, and ideally develop something that both benefits society and their investors.

Will some of the companies that get government money fail? Absolutely. (Just last week, Cambridge-based GreenFuel Technologies, which used specially bred algae to turn carbon dioxide into biodiesel, announced that it was shutting down after gobbling up $70 million in private funding.)

"I think you have to accept the fact that you'll see some of these companies flame-out, and capital will be lost," says Hemant Taneja, who acknowledges that venture capitalists have "gone overboard" in funding too many clean-tech start-ups over the past few years. "But you'll also see some brilliant, big companies that will get built, and will be good for climate change and economic development. I just don't see how else you can do it."

Scott Kirsner can be reached at kirsner@pobox.com.