Changes in politics, policy have clean-tech CEOs on their toes

BOULDER — The Trump administration has meant significant changes for the clean-tech industry, whether that be tax reform, financing for projects or the overall importance of green business in the government’s eyes.

Several clean-tech CEOs spoke about the issues at BizWest’s CEO Roundtable on Tuesday afternoon, discussing the uncertainty the industry is going through right now.

One of the major recent changes the administration has made has been taxes and tariffs.

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“We had to reprice our projects pre- and post-tax reform because it affects our tax equity partners’ investment in a project. And we’re seeing some partners pull out of deals, because they have to assess what the new tax code means for them,” said Michael Rucker, CEO of Scout Clean Energy LLC.

Brent Hendricks, a tax partner at EKS&H said that there are several tax changes that could affect clean-tech companies, such as the drop in the corporate tax rate and diminishing value of production credits.  With the corporate tax rate lower, Hendricks said, there is less return on projects designed to give a tax credit, such as ones focused on renewable energy or the environment. There is now less incentive for companies to invest in these projects.

For major companies such as Siemens Power Generation, the hope is that it can take advantage the current time period when subsidies for clean energy are available.

“We hope by [the time there no longer are subsidies] the market will be mature enough that we won’t need a subsidy,” said Jacques Nader, director of Siemens’ Wind Turbine R&D Office in Boulder.

Tariffs are also changing how clean-tech operates. There are tariffs on solar panels, the majority of which are imported into the United States.

“The vast majority of solar panels are made out of the U.S.,” said Blake Jones, co-founder of Namaste Solar. “The damage started about nine months ago with uncertainty. People have put so many projects on hold because no one knew what the tariffs would be. We know how to move forward now at least. But solar projects will be more expensive. That will hurt. Fortunately, as the cost curve with solar comes down, we can eventually overcome that.”

The metal tariffs on steel and aluminum could affect the industry as well. Nader said that wind towers are predominantly made of steel, although that could come from countries exempt from the tariff.

“The impact may be minimal,” he said, “but it is in the wrong direction.”

Overall, the national and local political climate are affecting cleantech: As the national government turns its attention to matters other than clean energy and the environment, many state and local governments are reaffirming their commitment.

Oliver Davis, CEO of Simuwatt Inc., said his company, which does energy auditing for commercial buildings, is focusing on cities such as New York, which is leading in efficiency mandates.

“Local business, municipalities and government are still supporting efficiency programs,” he said. “Our office in Brooklyn is opening next week, the reason being is New York has momentum from the governor’s office to the city level.”

David Rechberger, CEO of BoostBoxH2, said that as the Environmental Protection Agency is weakened, states are more free to step in. “It’s giving more leeway to states who want to take a leadership role,” he said.

Rechberger added, however, that many of those states have resorted to older EPA policies that weren’t helpful to growing the industry.

Robert Fenwick-Smith, founder and managing director of clean-tech investment group Aravaipa Venture Fund, said one of his portfolio companies, an electric-vehicle company, is benefitting from lack of regulation on electric vehicles. Electric vehicles don’t produce emissions, which is one of the main targets of regulations.

Still, a lack of regulation hasn’t necessarily made it easy for clean-tech companies to grow. Rechberger said it’s still very difficult to grow as a startup unless you’ve managed to go through burdensome certification and qualification processes.

Another issue stemming from politics is uncertainty regarding health.

“The EPA has been disingenuous at best in terms of regulation affecting water,” said Gautam Khanna, CEO of Tusaar Corp., which filters metals out of water. “In Flint, Mich., people are talking about what is the extent of damage to children by having lead and pollutants in the water. What is the decision from the EPA going to be? We have to look at our customers and say, ‘Wait and see.’ That uncertainty is not good for anybody, and consumers want a solution.”

Carl Lawrence, CEO of EnergySense LLC, agreed.

“The lack of reliable information coming from the federal government these days is a real concern,” he said.

Other issues:

Utilities: Peter Lilienthal, CEO of Homer Energy, said utilities are continuing to struggle to be innovative, because of the extreme regulation they face. The hope is that there could soon be a business model for them to start using smart-grid systems.

“Getting change through their regulation process is slow,” Lilienthal said. “I’m not bashing the utilities to say they’re not innovative. They can’t be innovative because they have to go through regulators. It’s an enormous challenge to the utility industry.”

Capital: John Loporto, CEO of SunTech Drive LLC, is looking to provide solar-power solutions to the agriculture industry. The issue, however, is that many farmers don’t have the capital to make the investments that could save them money in the long run.

“These solutions pay for themselves in 12 to 18 months, but they may not have the cash to put it forward,” he said.

Shelly Curtiss, executive director of the Colorado Cleantech Industry Association, said that it’s not just potential customers who struggle with capital, but the startups themselves .

“Capital in Colorado is very hard to come by,” she said. “Robert [Fenwick-Smith] is the only Colorado clean-tech-focused VC in the state.”

A change in cleantech: Curtiss added that another change is clean-tech is becoming less hardware-intensive and becoming more focused on data.

“It’s more of a data play, with data collection and data aggregation and that tech, collecting and using it,” she said. “Those companies are getting invested in faster and are less capital intensive. It’s a change in the definition of cleantech, widening the umbrella.”

The CEO clean-tech roundtable was: Shelly Curtiss, executive director of the Colorado Cleantech Industry Association; Oliver Davis, CEO of Simuwatt; Blake Jones, founder of Namaste Solar and Clean Energy Federal Credit Union; Gautam Khanna, CEO of Tusaar Corp.; Carl Lawrence, CEO of EnergySense LLC; Peter Lilienthal, CEO of Homer Energy; John LoPorto, CEO of SunTech Drive LLC; Jacques Nader, director of the Wind Turbine R&D office for Siemens Power Generation; Robert Fenwick-Smith, founder and managing director of Aravaipa Venture Fund; David Rechberger, CEO of BoostBoxH2; Michael Rucker, CEO of Scout Clean Energy. Moderated by Chris Wood, publisher of BizWest. Sponsored by EKS&H, represented by Brent Hendricks, and Berg Hill Greenleaf Ruscitti, represented by Rudy Verner.