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| http://www.b-t.energy/ventures/ |
Bill Gates is leading a more than US$1 billion
fund focused on fighting climate change by investing in clean energy
innovation.
The Microsoft co-founder and his all-star line-up
of fellow investors have announced the Breakthrough Energy Ventures fund, which will begin making investments next year. The
BEV fund, which has a 20-year duration, aims to invest in the commercialization
of new technologies that reduce greenhouse-gas emissions in areas including
electricity generation and storage, transportation, industrial processes,
agriculture, and energy-system efficiency.
“Anything that leads to cheap, clean, reliable
energy we’re open-minded to,” says Gates, who is serving as chairman of BEV and
anticipates being actively involved.
The directors of BEV include Alibaba founder Jack
Ma, Reliance Industries chairman Mukesh Ambani, venture capitalists John Doerr
and Vinod Khosla, former energy hedge fund manager John Arnold, and SAP
cofounder Hasso Plattner. The combined net worth of the directors is nearly US$170
billion, based on estimates of their individual wealth by Bloomberg and Forbes.
Gates had last year announced his
intention to personally invest an additional US$1 billion in clean
energy technology. He was also among the 28 wealthy individuals and families
signed on to the Breakthrough
Energy Coalition, a group broadly committed to investing in this area. The
new fund, which includes many of them, is a next, concrete step toward actually
deploying their capital.
Gates says that he’s been surprised that
technology innovation isn’t discussed more as a solution to climate change,
since clean-energy advances could limit any economic trade-offs from switching
off carbon-emitting fossil fuels. “All of that takes place just as a normal
market mechanism as you replace energy sources with other ways to do it,” he
says.
But a recent wave of clean energy technology
investing turned out miserably for many venture capital investors, with one study estimating that VC firms invested over $25 billion from 2006 to
2011 and lost more than half that money. Institutional investment in this area
has remained limited as a result, which Gates and his fellow investors describe
as a market failure that large-scale, long-term private investments can
address.
Gates acknowledges that investing in energy is
harder than investing in information technology: “People think you can just put
US$50 million in and wait two years and then you know what you got. In this
energy space, that’s not true at all.”
But he adds that it’s an uncrowded investing
field. “It’s such a big market that the value if you’re really providing a big
portion of the world’s energy, the value of that will be super, super big.” BEV
estimates the global energy market at $6 trillion, with energy demand
increasing by one-third by 2040.
The BEV effort suits Gates’s nerdy interest in
science research and experience investing in energy technology. He has
personally made extensive investments in various energy technology companies
over the years, including nuclear energy startup TerraPower, which he helped launch
and where he serves as chairman. His US$1 billion investment pledge from last
year spans investments he has made subsequently, this fund, and other
investments he might make down the line.
Energy storage technology is among the areas
where BEV will likely invest as part of a first wave, as more efficient and
cheaper storage permits greater reliance on intermittent clean energy sources
such as solar and wind power.
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| Bill Gates and Mark Zuckerberg join tech titans to launch the Breakthrough Energy Coalition |
One thesis driving the fund is that only
governments have the resources to invest in fundamental research, through
government labs and funding for university research, at a scale that is needed
for breakthrough advances. Government funding in areas such as battery
technology and materials used for solar power, for example, has seeded the growth
of those areas, with their commercialization subsequently funded by private
investors.
“You need investment to take things out of a
research lab at a university like Stanford, or MIT, Berkeley, and many other
places, or national labs, for example, they’re doing a lot of research,” says
Arun Majumdar, a Stanford University professor who was the acting US
undersecretary of Energy and is advising BEV.
Gates was involved in last year announcing an
initiative called Mission
Innovation, where 22 countries and the European Union aim to double
investment in clean energy research over five years. The US is among those
countries, but president-elect Donald Trump and his appointees have been vocal
climate-change deniers and could potentially be skeptical of US
investment in clean-energy technology.
“The dialogue with the new administration as it
comes in about how they see energy research will be important,” Gates says.
“The general idea that research is a good deal fortunately is not a partisan
thing.”
The richest group of investors ever assembled?
Gates and his co-directors first convened at the
Four Seasons hotel in Seattle in August for two days to hash out their approach
to the fund, with Ma and Plattner conferencing in. Among the topics the group
actively debated was whether there really was a good existing pipeline of
companies to fund, and what that meant for how quickly they could invest,
according to Arnold.
“Being a 20-year fund with patient capital that’s
not needing short-term gains allows us to have a longer-term outlook as well as
fund technologies that don’t fit into the traditional VC model as it exists
today,” says Arnold.
The list of 20 initial investors in the fund is
an even-more comprehensive catalog of the world’s richest and most powerful,
including Kingdom Holding’s prince Alwaleed bin Talal, Amazon’s Jeff Bezos,
Virgin’s Richard Branson, Bridgewater Associates’ Ray Dalio, African Rainbow
Minerals’ Patrice Motsepe, Iliad Group’s Xavier Niel, SoftBank’s Masayoshi Son,
and SOHO China’s Zhang Xin and Pan Shiyi.
The directors are currently recruiting a
management team for the fund, the core of which Gates hopes will be in place
within about three months.
The fund, which won’t charge investors management
fees beyond its operating costs, will likely start with a temporary office in
the heart of the US venture capital industry on Sand Hill Road in Menlo Park,
California. It’s expected that the size of the initial fund will increase, with
more investors coming on board, and it’s possible that Breakthrough Energy
Ventures eventually launches additional funds.
Gates says that the success of the effort for clean, reliable, affordable energy depends on deploying far more than the US$1 billion in capital committed to the BEV fund. He plans to work personally to get strategic partners such as energy companies involved in funding and supporting the promising technology breakthroughs.
Originally published on Quartz
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