Even as economy lags, corporate 'green' push may advance

Companies used to shelve environmental initiatives when times got tough, but now, with oil so expensive, spending on green projects is expected to accelerate.

from the October 15, 2007 edition

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Great Plains, which operates Kansas City Power & Light, spent $164 million in 2006 on 100 megawatts of wind energy. It is now deciding whether to go ahead with another 100-megawatt wind-energy project – enough electricity for 33,000 homes – in 2008.

In fact, economic uncertainties make energy efficiency a less expensive way to go, says Mr. Chesser. "When you build a major baseline plant, that's a commitment. It takes five years to build, and it's a big risk if the economy goes south," he explains. "With energy efficiency, you don't have that.... It has a lot of flexibility."

Still, energy efficiency costs money. In south Florida, Florida Power & Light is now testing a system on 50,000 homes that allows consumers to see the difference in their bills as the thermostat on the air conditioning goes up or down. To expand the pilot project to 4.5 million customer accounts, the company will spend $500 million.

Some investors view the downturn as an opportunity. Those burned by the real-estate slump or worried about slowing earnings growth should take a serious look at the long-term prospects of green companies, says Ms. Hannon of the Climate Group.

"Clean-tech funds are showing massive returns," she says. "When you look at the growth of renewables, it is projected to represent 20 percent of our energy supply by 2020. This is a massive opportunity."

One of those viewing a slowing economy as an opportunity is Environmental Capital Partners, which announced last month that it had raised $100 million to invest in mid-size green companies.

"A downturn is not so bad as long as it's within reason," says Chris Staudt, a principal of the newly opened New York-based firm, which is looking to make equity investments of $10 million to $25 million. "It could make companies we want to invest in more reasonably priced. And as companies get less expensive, we will be able to put on less debt, which can be dangerous for a company in a downturn."

Even in a downturn, Mr. Staudt believes green businesses will thrive. "Environmental sustainability is a sea change. You can no longer do business without taking the environment into account."

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