Now that the stimulus is passed, there’s a pile of money waiting to be doled out to many alternative energy companies. It’s a good thing the government is stepping in to give out money as the credit markets are frozen and venture capital is scarce.
Yet many fear, with good reason, how the government will get the money in the coffers of the *right* green tech companies and keep it away from the *wrong* green tech companies. The government will play the role of venture capitalist, in essence, picking winners and losers. The government has a mixed track record picking winners and losers, as CNET points out:
“That’s all possible. But even with 50 years of (picking winners and losers), the system has produced the world’s most advanced submarines, rockets, and jet fighters,” said Branko Terzic, a former member of the Federal Energy Regulatory Commission who is now an energy regulation expert at Deloitte Services.
Terzic’s is at least the glass-half-full view. But leaving these decisions up to government bureaucracies such as the Pentagon’s also has resulted in projects that busted their budgets, as well as boondoggles like the development of the V-22 Osprey helicopter.
People are wildly distrustful of the government when it comes to allocating funds. There’s lobbyists and a lifetime’s worth of bureaucratic mistakes to support the idea that government is bad at spending money. While the government has failed many times, so has private investment. Many venture capitalists invest in companies that go bust. Many corporations burn money on research and development that goes nowhere. So, while it’s unnerving to see the government pick the right green tech companies, it’s no more unsettling than when private investors do the same. It probably feels different because it is our money.
There’s another reason people fear government giving out money, which we alluded to in the last paragraph: lobbying. Bigger companies can influence decisions with ease, while small companies don’t have the same pull, which is a concern for clean tech investing:
CNET: “We certainly have a game plan, but it’s quite unclear how that funding will end up in the hands of small businesses like ours,” said Bionavitas’ Weaver, whose company invented a way to improve the economics of algae farming. “There’s a well-known track for getting money from government into industry, but unfortunately, that track usually means it goes to the largest players.”
Weaver and other green-tech start-ups say they are wary of the recent history of Energy Department grants, fearing that if past is prologue, the bigger companies will be able to take advantage of years-long relationships with the government to make sure they are first in line to get stimulus monies.
“Frankly, that’s my concern,” said David Grieger, the CEO of VU1, a company that has invented an energy-efficient lightbulb that doesn’t use mercury. “They have made a lot of statements that, in order to get the money out the door quickly, they will have to get it into existing organisations. If that’s the case, that can’t be good news for the companies that don’t have a pre-existing relationship (with the government).”
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