Silicon Valley's next big thing: 'clean tech'
Engineers aim to transform solar, fuel-cell, and biofuel projects into viable industries.
San Jose, Calif.
Microchips? Been there. Software? Done that. Dotcoms? Soooo 20th century. Now, Silicon Valley is looking to become clean and green – and it could turn into the region's next big high-tech push.Skip to next paragraph
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Its new focus: so-called "clean technology" – technology that uses natural resources more efficiently or not at all, thereby reducing the environmental impact of products and cutting costs.
Most of Silicon Valley's current emphasis is on clean energy. Entrepreneurs here are aiming to transform solar, fuel-cell, and biofuel projects into viable industries with huge potential. Already, the market amounts to $55 billion – more than the entire Internet advertising market dominated by the high-tech region's current darling, Google. In 10 years, the clean-energy market by one estimate could quadruple. In the past year, for the first time, more silicon in the US has gone toward making solar panels than computer chips. More important, venture capitalists are pouring money into clean technology, thanks to a confluence of events.
"We have an energy crisis, there's a national security crisis, and there's a climate-change crisis. And as a famous economist once said, 'A crisis is a terrible thing to waste,' " says Vinod Khosla, a top venture capitalist.
Twenty-five years ago, he cofounded Sun Microsystems. Now, he is funding dozens of clean-tech companies, everything from Altra, a biofuels firm, to LivingHomes, a home-building company that uses eco-friendly materials and the efficiency of prefabricated construction.
"Clearly this is a very important area, and a much larger market than the Valley has traditionally dealt with," he says.
One factor driving clean energy's expansion are laws in nearly two dozen states that mandate that a portion of electricity come from renewable sources. California has gone further with the passage last year of a law that caps greenhouse gas emissions. Experts see similar federal regulation around the corner, creating an enormous demand for clean energy.
Another factor: rising hopes that clean energy can one day compete with fossil fuels. Already, the cost gap is narrowing. If entrepreneurs can close it, then they will be competing in an enormous market.
"The industries they are attacking are so immense. We import tens of billions of dollars of gasoline each year," says Ron Pernick, coauthor of the forthcoming book, "The Clean Tech Revolution." [Editor's note: The original version had the incorrect dollar amount of gasoline imports.]
That huge market potential is luring big players such as General Electric and Sharp into the sector. Citigroup announced this week a $50 billion investment in clean tech. British Petroleum is investing $400 million in biofuel research at the University of California at Berkeley.
Startups are cropping up as well. Mr. Pernick's market research firm, Clean Edge, now tracks 45 clean-energy companies listed on US stock exchanges. The index is up 12 percent since February. Just three years ago, Pernick says, it would have been impossible to find enough companies to track.