The role of government in supporting the emergence of clean energy venture capital investing in Switzerland
Type
applied research project
Start Date
01 July 2005
End Date
31 December 2005
URI
Status
completed
Keywords
Government policy
venture capital
entrepeneurship
technology and innovation management
cleantech
renewable energy
Description
While the energy industry is one of the key sectors to address sustainable development, and investment opportunities in new "cleaner" technologies are abundant, the share of venture capital that is invested in sustainable energy is still very low. Furthermore, Swiss venture capitalists with a focus on energy tend to invest most of their funds abroad. Hence, there appears to be a significant funding gap for Swiss early-stage technology ventures in the energy sector. One option to close this gap might be a dedicated government venture capital fund investing in this sector. A panel discussion at the University of St. Gallen's 7th Forum for Sustainability Management, with participation from the Swiss Federal Office of Energy (BFE), private Venture Capitalists and other experts, has reviewed foreign experiences and discussed possible options for Switzerland. In order to focus this discussion towards specific results, BFE has asked IWOe-HSG to prepare a pre-study to investigate the issue of government support for energy venture capital and provide preliminary conclusions for Switzerland. The pre-study has reviewed VC literature and empirical examples of government support for venture capital, with a particular emphasis on sustainable energy or cleantech investments. It has also reviewed existing forms of support for innovation and venture capital in Switzerland, to the extent that they may be relevant to the percieved lack of VC funding for early-stage sustainable energy firms.

Key research questions:

1) What is the theoretical rationale for government intervention in the market for sustainable energy venture capital?
2) Which relevant schemes for support of venture capital and innovation in the Swiss sustainable energy sector can be identified?
3) Which policy options are available for government agencies to support the emerging energy VC market?
4) Which models have governments used in other countries to stimulate VC investment and/or sustainable energy ventures respectively?
5) Based on the above, which issues would need further analysis if BFE were to pursue the topic of government support for energy VC further?
Leader contributor(s)
Bürer, Mary Jean
Funder(s)
Topic(s)
Government policy
venture capital
entrepeneurship
technology and innovation management
cleantech
renewable energy
Method(s)
Survey
Expert Interviews
Range
Institute/School
Range (De)
Institut/School
Principal
Swiss Federal Office of Energy [Bundesamt für Energie]
Division(s)
Eprints ID
40467

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Publication

The Role of Government in Supporting the Emergence of Clean Energy Venture Capital Investing in Switzerland

2005 , Bürer, Mary Jean

Project Report - Clean energy innovation suffers from a double-externality problem. As any innovation, new clean energy technologies create positive external effects in the innovation phase (R&D spillover), but in addition, they avoid negative external effects in the diffusion phase - in other words, they provide a high societal value, but not necessarily a higher private value to the customer . As a consequence, sustainable energy investors may not only be hesitant to invest because they are uncertain whether they can capture the full value of the new technology, but also because they are uncertain whether consumers will prefer the firm's products over a competing product that has lower value to society (e.g. higher CO2 emissions) but may create the same private value (e.g. generating electricity). This double-externality problem calls for government to take measures to avoid market failure in the form of a suboptimal level of investment in clean energy innovation. The low levels of venture capital investment in clean energy ventures in Switzerland tend to indicate a case of market failure.

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