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Could fracking, the controversial natural gas drilling process, come to New England? Geologists say the black shale beneath the Connecticut River Valley may hold enough of the clean-burning fossil fuel to someday make it economic to drill.
While fracking hasn't come to the region yet, the widespread drilling technology — and the glut of low-cost natural gas -- is already affecting Massachusetts’ clean energy companies.
Clean Energy Investments Down
It was big deal when Evergreen Solar declared bankruptcy a year and a half ago. The Westborough-based solar panel maker went out of business after getting millions in state money. But that highly-publicized failure is not the reason clean energy investment in the U.S. fell by one-third last year.
"I think this is a particularly dangerous point in time for American alternative energy entrepreneurs and for the future of the alternative energy industry here," said Rob Day, a venture capitalist at the Boston firm Black Coral Capital. Day says the money to fund new clean energy ideas has been drying up due to fracking.
"Everybody sees the fracking boom here in the United States and, as I believe as well, the likelihood of a long period of relatively low natural gas prices, leading to low electricity prices, and yeah, it is absolutely driving investors out of the water," Day said.
That’s making it harder for clean energy companies to get off the ground.
Finding Private Investors
And getting something off the ground is exactly what Keystone Tower Systems is working on. The startup, based in an old industrial building in South Boston, is working on a new manufacturing process that makes it cheaper to build taller wind turbines. How tall?
"So today we build 80 meter towers in the U.S.," explained Chief Technology Officer Eric Smith. "We’re going to 120 to 140 [meters]."
Taller wind farms reach stronger winds that produce more energy. Technologies like this have been making wind power cheaper. Smith says the cost of wind has actually been falling in the U.S. at the same rate as natural gas prices.
"So last year, 2012, was the first year in which we installed more megawatts of wind turbines than we installed megawatts of natural gas plants," Smith said.
But fracking is getting all the attention. And Smith says it’s gotten hard to find private investors for wind. For now, Keystone Tower is funding its progress with federal grants. But Smith’s afraid policy makers will get tunnel vision for natural gas.
"Yeah, I’m not really worried about being able to continue to sell wind turbines in the U.S.," Smith said. "I have much bigger fears about getting consistent federal support for wind energy than I am about cost pressure from natural gas."
By no means is fracking killing Massachusetts' clean energy sector.
"It is completely invisible to our business," said Tom Pincince, CEO of Digital Lumens, a company just around the corner from Keystone Tower Systems in the Seaport District. It’s an energy efficiency firm that helps big box stores and warehouses save up to 95 percent of their lighting costs.
"We’re growing as much as we can," Pincince said. "And no matter how big the fracking boom comes, energy will never be free. And we’re essentially making lights free."
One of the investors in Digital Lumens is Boston venture capitalist Rob Day. He says fracking does affect firms that don’t offer such a big benefit to their customers.
"Lowering the cost of electricity does raise the bar and makes it not impossible, but certainly makes it more difficult for companies that are looking to sell into this marketplace," Day said.
Day says many clean energy startups are turning their attention overseas, where electricity costs are high and demand is growing. But Day wants local startups to have a strong domestic market, too.
"Because the real risk is that a lot of those companies end up selling overseas. They end up building their customer bases overseas. They may even move overseas or sell themselves to an acquirer overseas," Day said. "And there’s a real risk here that we lose our leadership position which we’ve built through our innovative capabilities. But we lose our leadership position because we’re not the best market."
Fracking As An Opportunity
One company that’s trying to keep a leadership position in solar power is 1366 Technologies.
On a tour of the company's pilot factory in Bedford, CEO Frank van Mierlo explains his company's competitive edge.
"Our wafer comes out of the machine and is very uniform," van Mierlo said. "That’s one of the big selling arguments that we have, is that we eliminate a lot of the variability in manufacturing."
But there’s one room van Mierlo won’t show anybody.
"And right here is the furnace room, where we currently have three furnaces in operation." The door’s window has been papered over. "To make sure nobody can look in," van Mierlo explained.
Inside is the company’s key breakthrough — a technology out of MIT. It’s a machine that makes silicon wafers for one-third less than the competition. That’s key because wafers are the basis for solar cells and the most expensive part of solar panels.
"It’s a real-live example happening right here in Massachusetts of how technology is drastically reducing the cost," van Mierlo said. "You know, we’ve made fantastic progress and thanks to technology we’ll be able to continue that."
Van Mierlo sees the fracking boom as an opportunity. He says it lets states such as Massachusetts continue to tell utilities to source more of their power from renewable sources. While those cost more now, lower natural gas prices will bring down the electric bill overall.
"So I actually believe we truly have a sunny future, pun intended," van Mierlo said. "And that gas is a very helpful transition fuel."
Van Mierlo says the fracking boom will give the U.S. cheaper energy for the next 20 or 30 years. And he hopes the country uses that to invest in next-generation power.
This program aired on April 3, 2013.
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