The cloudy Welsh coast may seem an odd choice for making solar panels, especially for a bigwig like Robert Hertzberg, a Californian who has hobnobbed with California Governor Arnold Schwarzenegger. But a commitment by European governments to helping out "clean energy" entrepreneurs is creating a more welcoming environment than the US, where erratic support, a lackluster market for taking companies public and more onerous financial rules have given pause to some start-ups and investors.
"California does have this great image," said Hertzberg, a former speaker of the California State Assembly and the co-founder of an investment firm, Renewable Capital. "But Europe still is much greener than anywhere in the United States, by several orders of magnitude," he said.
Besides, said Hertzberg, his thin and flexible solar panels even work in overcast conditions.
"Hey, don't you get it? It works in the rain!" he likes to tell the bemused Welsh.
Europe is experiencing a new wave of interest in ventures that develop energy from less polluting or renewable sources, like sun and wind, as well as from tides, agriculture and geothermal heat. It is not clear, though, if the interest will turn into a passing fad or a bubble, like the rush into Internet stocks during the late 1990s.
The US has not signed the Kyoto Protocol, an international accord aimed at stabilizing emissions of greenhouse gases in the atmosphere. Even so, US industry has set the investment pace, pouring US$3.5 billion of private equity and venture capital money into start-up clean-energy developers last year, according to New Energy Finance, a research firm based in London.
EU countries are signatories to the Kyoto Protocol, but the private equity and venture capital investment in Europe into clean energy has been smaller than in the US over the last two years. Together, Europe, the Middle East and Africa have raised only about one-third of the amount the US has into new clean energy ventures, according to New Energy Finance.
But Ken Bruder, the executive director of New Energy Finance, warned that those numbers were an unreliable guide to the overall development over the sector. He said that ready access to green-minded consumers and long-term government support would do more to create fertile territory for generating profits.
"Setting up power lines to reach wind and solar farms is a major task and not accomplished overnight," Bruder said.
"Europe may be doing a better job than America in setting up these new infrastructures," he said.
Another incentive in Europe for clean energy companies is lighter regulation over publicly listed companies. More than half of the world's 22 most valuable publicly traded wind and solar companies are based in Europe, according to the Jefferies Group, an investment bank based in New York.
Among the most prominent firms to have emerged in Europe is Vestas, a Danish company supplying turbines that generate 35 percent of the electricity worldwide that comes from wind power.
But Vestas lost 192 million euros (US$252 million) in 2005, on 3.6 billion euros in sales, partly because of weak results in the US. Rebates on wind power have lapsed several times in the US, creating what Soren Madsen, a Vestas sales executive, called "wild swings in demand."
Vestas has forecast improved profit margins for this year, and its shares rose about 130 percent last year -- a sign that the drive for clean energy and alternatives to oil is pushing up valuations. Apax Partners, a buyout firm based in London, multiplied its initial investment of 11.5 million euros by 27 times when it sold most of its stake in the German solar company, Q-Cells, between October 2005 and January last year. Such success is helping to motivate small incubator funds in Europe, like Hertzberg's, to compete with the cash-rich venture capital firms and giant utilities to find and finance renewable energy ventures and start-ups.
Years ago, raising large amounts of money for scalable renewable energy sources was more a concept than a practice, even as governments publicly sought to curb global warming, secure new supplies of energy and still meet rising demand.
But last year, clean-energy companies raised about US$4.4 billion on European stock markets, about four times the amount raised in stock markets in the US, according to New Energy Finance.
High government taxes have forced Europeans for a long while to pay more than Americans for their energy, and the search for cheaper energy sources has helped spur research and development in competing wind and solar technologies, particularly after an oil embargo by Arab countries prompted oil shortages starting in late 1973.
In response, research and development in European countries like Denmark ramped up substantially beginning in the mid-1970s. Investors also have welcomed moves by large utilities to expand into renewable energy.
Shares of EDF Energies Nouvelles, a renewable energy company half-owned by the French power giant Electricite de France, were more than 30 times oversubscribed during an offering last November. The stock rose 18 percent on the first day of trading.
The EU has imposed mandatory caps on pollution generated by carbon dioxide emitting industries, such as coal-fired electricity generators, helping to create openings for new kinds of energy companies. Many European governments also back the use of new technologies with generous subsidies. In Germany, for example, consumers who sell renewable energy, like solar, to the electricity grid, are offered highly attractive tariffs. That helps consumers pay back the cost of buying expensive new equipment like solar cells.
Countries like Britain, France and Norway also encourage renewable energies, with incentives to switch to low-carbon emitting alternatives.
"You can't really make a comparison with the United States," said Mark Kerr, the director of the oil, gas and power sectors at 3i, a buyout firm based in London.
"There is a huge amount of public and government support for renewable energy across Europe," he said.
Kerr said that 3i had invested about 100 million euros over the last 12 months in Gamesa, a Spanish company that services wind turbines, and Electrawinds, a Belgian company operating wind farms, along with other ventures, including a plant in Ostend that turns animal fats into electricity. All those projects, Kerr said, would continue to depend directly and indirectly on subsidies for profits in coming years.
As for Hertzberg, he did not come to Wales for the subsidies -- at least not directly.
But he credits the commitment of European governments to renewable energy for making the region a more promising place to whip up investor interest in his latest venture, called G24i.
"Kyoto here is the real thing," he said.
"The financial markets and those who control the big funds understand the importance of renewable energy," he added.
Hertzberg chose a site near Cardiff, the Welsh capital, partly because it is within easy reach of the growing community of bankers and financiers in London who cover markets for trading emissions credits and who closely track companies that are involved in clean technologies.
Eventually, Hertzberg wants to list G24i on a stock exchange like the London Stock Exchange's AIM, which has become a hub for renewable energy companies.
To jump-start sales, he plans to sell inexpensive devices in poor regions of Africa and India, bundled with his solar panels that could charge a cell phone or power a light bulb. Hertzberg declined to say how soon G24i would be profitable -- a reminder that many renewable energy businesses will have to prove that their business models work.
However, the fact is that only four out of 30 clean energy stocks listed on the AIM have a history of profitability, and the stocks are highly volatile, according to Simon Gottelier, an investment manager at Impax Asset Management, in London.
"There is a question over whether there is a bubble, or has been a bubble," said Jens Lapinski, an analyst at Library House, a research firm in Cambridge, England.
"All the venture capital houses in London still are asking themselves, `Is this the big new thing?'"
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