Investing beyond wind and solar PV? 10 sectors to watch

Ian Thomas

Part 3. In the final part of this article, Ian Thomas concludes his look into what opportunities lie out there for investors wanting alternatives to wind and solar PV...

This article excerpt is taken from the July/August issue of Renewable Energy Focus magazine. To register to receive a digital copy click here.

In part 1: Geothermal, Marine, Sustainable Biofuels

In part 2: Resource efficiency, Water, Big Data, Heating and cooling

8. Sustainable materials and manufacturing

The construction industry can also benefit from the switch away from traditional, energy-intensive materials to more sustainable replacements.

Hunton Fiber is a supplier of insulation products manufactured from wood fibre that displace traditional materials such as stone and mineral fibre, particularly for construction of Passive Housing.

Although there are clear sustainability benefits to using a renewable feedstock, the market is typically not yet prepared to pay for it; hence, the products compete on the basis of their superior insulation properties at comparable cost. From an investment perspective, it is critical that these genuine commercial drivers exist rather than relying upon expectations of a ‘green premium’ which does not (yet) exist outside of products aimed at a small group of consumers who buy on personal conviction rather than price.

Techniques that improve the effectiveness of manufacturing processes are not unique to cleantech but, in most cases, they contribute to savings in energy and/or materials consumption. Where these technologies can be deployed in the renewables supply chain, there is a particularly strong case for investment by clean energy-focused investors.

One example of this is TeraView, which uses terahertz wavelength light for inspection and fault detection in (among many applications) the manufacture of solar cells. By identifying flaws in blocks of silicon, as well as in the coatings of the crucibles used to produce crystalline solar wafers, this process acts as a quality control mechanism and reduces waste along the production line. The technology also enjoys the benefit of being applicable to a range of other industries, with the potential for diverse revenue streams.

Apart from the well-known opportunity to address fertiliser usage, the agricultural sector is a large consumer of other energy-intensive and environmentally-unfriendly chemicals in the form of herbicides and pesticides, creating the opportunity for switching to alternative materials. LCIF has invested in Weeding Technologies, which supplies weed control systems based upon organic, non-toxic foams and steam as an alternative to chemical herbicides. The value proposition to farmers is lower and/or less volatile pricing, as well as the ability to deploy the product close to sensitive areas such as waterways, roads and populated areas.

The automotive sector's drive for fuel efficiency was energised by the EU's introduction of strict targets and financial penalties for CO2 emission reductions (with other parts of the world now following). Turquoise Capital has been a long-standing investor in Controlled Power Technologies, which has developed a low-cost, ‘mild-hybrid’ system for passenger cars that achieves the performance of a full hybrid at approximately one-quarter of the cost.

9. From waste to value

Recycling is one of the most well established parts of the cleantech industry and, in many aspects, works very effectively by deploying relatively basic technological processes.

However, there are numerous opportunities to address waste fractions that have traditionally been difficult to handle or where there is potential for conversion into higher value-added products (including energy). Though in many cases not yet fully commercial, some of these technologies have reached the tipping point and are now emerging at commercial scale.

In energy-from-waste, advanced thermal treatments such as pyrolysis and gasification have earned a bad reputation in the eyes of some investors due to the gap between theoretical effectiveness and real-life operational performance (typically due to an inability to deal with residues such as tar and to consistently control emissions).

Here too, later entrants (both technology developers and investors) have had the opportunity to learn from the mistakes of early movers and there are now a range of processes that are being built out at small commercial scale. Examples include ITI Energy and Environmental Power International which have, respectively, differentiated gasification and pyrolysis technologies for efficient electricity and heat generation.

An excellent example of a very hard-to-recycle waste material is fly ash, produced in enormous quantities over decades from coal-fired power stations across the globe. Despite many attempts to develop processes to beneficiate this material such that it can be reused, only a very small fraction has ever been recovered for commercial use (predominantly as a low-value filler in cement).

Turquoise is working with RockTron, which has a novel process for cleaning and separating fly ash into a series of recoverable products, all of which can be sold commercially (in some cases with very high value-added applications). The technology has been developed over many years and is an excellent example of genuine innovation directed at addressing a major environmental issue resulting in a very large commercial opportunity.

(Editor's note - a new generation of EfW technologies have been developed that can convert waste into energy with minimal environmental impact - while maximising resource and energy recovery. So called Advanced Conversion Technologies (ACTs), which use residual, non-recyclable waste to produce a synthesis gas (syngas) to generate electricity and other energy outputs, have the potential to combat rising waste levels while helping meet the world’s need for a clean, safe energy supply. See our webinar here for more information).

10. The future of cleantech and renewables

The sectors and companies described above represent only a fraction of the potential to be discovered within cleantech and renewables once investors look beyond the obvious and familiar opportunities in wind and solar. We believe that risk/reward considerations are now starting to favour increased investment in these areas as the underlying technologies and business models achieve greater maturity and investors acknowledge the risks of over-exposure to assets that rely on direct public subsidy to generate an acceptable return.

Over the long term it is opportunities, such as resource efficiency, which are fundamentally economic and can be realised through an acceptable amount of technological innovation that will attract significant and enduring investment.

Turquoise International is a merchant bank specialising in Energy and the Environment. Established in 2002, it is active in corporate finance advisory, including fundraising and M&A, as well as venture capital investments through the Low Carbon Innovation Fund (LCIF) and Turquoise Capital.

About: Ian Thomas is a managing director of Turquoise International.

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