The Cost of Going Green

Pricing for the new Nissan electric vehicle the Leaf (nice green name) seems to suggest that Nissan and/or their battery provider NEC are taking a loss on every Leaf it sells in the U.S. This is obviously being done in order to encourage electric vehicle adoption.

The major issue with electric vehicle is two-fold. Firstly as they take electric power directly from the gird, a grid that is not prepared for mass-use of such vehicles, a major jump in usage would cause a major strain on the Irish grid. The Green party is very enthusiastic about electric vehicles but there is a major infrastructure capital cost that has to be taken into account.

And there isn’t just the power load issue, but also the fact that electric vehicles need to be re-charged. Intra-city activity in a city the size of Dublin might be possible with a certain amount of recharge stations being made available but trips to the suburbs or in the country suddenly become risky.

Similar to the electrification of Ireland, there needs to be a roll-out plan that can handle the issues with electric vehicles that use recharge batteries like the Nissan model. But in the current climate who is going to pay for it? If the manufacturers are already selling at a loss to get any form of market penetration of this new concept cars, what chance that they will put their hands in their pockets again? We need a long-term investment strategy if this is to become a serious option. And that is without the issue of where the extra electricity generation is going to come from….

Green IPOs Point the Way

There are a number of green technology companies due to have an Initial Public Offering (IPO) during 2010. One of the best known companies is the rather trendy Tesla Motors, makers of the mean, green machine that is the Tesla Roadster. With lead investor and serial entrepreneur Elon Musk behind it, this should be an interesting one to watch, with some advanced sales (expect it to be the car of choice for Hollywood stars the way the Prius was in years gone by) and a turnover of almost $100 million in 2009 according to the company. Backed in their bid by Goldman Sachs and JP Morgan amongst others.

But there are a number of other potential IPOs this year from less known companies that point the way towards the trends in the sector, such as Codexis which works in biofuels and carbon capture and was set-up in 2002.

Another filing for IPO was put forward by solar company Solyndra but has been put in some doubt due to a failure to raise new capital, generate sufficient operating cash flow, lower discretionary spending or remain in compliance with loan covenants which could materially affect its ability to meet its business goals. In an open letter to its customers and investors recently the company stated that:

“Historically, the Company has been able to raise necessary expansion capital as needed, and we believe that the additional capital that we plan to raise will provide us with sufficient liquidity to continue to pursue our current expansion strategy. We believe that our next capital raise will address the issue underlying the explanatory paragraph regarding “going concern” included in PwC’s audit opinion.”

This is a cautionary tale about the level of investment needed in some of these industries. On a more positive point, smart grid networking company Silver Spring Networks is planing an IPO for mid-year.