So far I've been pretty unimpressed by the "bubble" in GreenTech. It's been the bubble that popped before it even expanded. You would think that will all of the hype, slathering media coverage, and government subsidies, we'd have a roaring party going on in greentech markets. Or maybe even a roaring IPO market? Instead all we have are some pretty feeble success stories and at most, a couple of modest IPOs in 2010. There have been a handful of "greentech" companies slated for IPO in 2010, the most commonly discussed are Solyndra and Silver Spring Networks. I have no idea how they will do, nor I have I (yet) investigated these particularly companies thoroughly, but my initial feedback from reliable sources is an indifferent shrug. A Google-like outcome is not likely. More concerning is some feedback I have been getting from the sources in the venture-backed greentech market, where valuations are under pressure, it's extremely difficult to raise funding, and the general feeling is that of disappointment. One can just glance headlines and see what's driving it: economics. Quite simply, fossil fuels are still vastly economically superior to cleantech. Another concern for Western firms that is the the Chinese market -- perhaps the fastest growing market in cleantech -- appears to be slanted heavily toward Chinese companies and taking on a protectionist bent. And clearly the anti-China rabble-rousing in the U.S. Congress is not going to do much to help that. In the Bloomberg article cited above, Andreas Haenel, the CEO of Germany-based Phoenix Solar AG said of the solar market that “Everyone in Germany has been bled dry and made mega- losses last year." Profit on his projects dropped 64 percent last year, he said. In the meantime, coal stocks are going crazy. Public markets lead the venture markets, despite what they say, so the result is depressed valuations and a lack of further investment in cleatech projects, until at least the public markets can show some interest. One venture capitalist I spoke to who was willing to go on the record says the cleantech market has gone into a bit of a slumber. "Clean tech seems to be dying out in the rest of the world," says Atish Babu, a partner with Nexus Venture Partners in India.  "It may be another example of buying high and selling low." So far, this is not a pretty picture. The greentech market was supposed to be the "next revolution" to drive the innovation economy, as the networking and Internet market did in the 1990s. It also means some pretty big investors are on the hook for some large deals who have no near-term visibility into exits. One proxy to watch? Vinod Khosla, the legendary venture capitalist who has made gigantic bets on cleantech. Khosla is known for making outsized, risky bets, with the thesis that if one or two of them pays off, the payoff will be gigantic and more than compensate for a handful of failures. I witnessed him doing this first-hand in the optical networking bubble of the late 1990s with huge exits in companies such as Cerent, which was sold to Cisco for $5 billion or so. There is some good reading on Khosla over on GreenTech Media. First, greentech analyst Eric Wesoff wrote an updated profile of Khosla here. Then, we got to read Khosla's own detailed response, here. Make no doubt about it, the Khosla portfolio is fascinating, including companies such as Calera, which harvest carbon from energy projects and instead of releasing it into the atmosphere use the byproduct to create things like cement.In Khosla's response, he has some interesting thoughts on why energy storage may be the key to much of greentech, and why it's possibly one of the largest opportunities:

I believe that both [photovoltaic solar] PV and wind can both scale to meet 5-10% of the world's energy needs; given the trillions of dollars likely to be invested in power capex over the next 30 years, this is a very substantial market, but in the scale of the power system, these are niches.  However, without a significant decline in the cost of storage (and we have investments working on this!), the intermittency and unreliability of wind and PV prevents them from meeting the needs of base-load power generation. We view this "problem" as one of the larger "opportunities" in renewable power. And a solution will make solar and wind more pragmatic.

Khosla's thoughts are, as always, interesting, and I highly advise reading both of these articles. After having gone through, them, however, I was left with a feeling of uneasiness -- that even the smartest people in greentech (like Khosla) aren't sure exactly how the green tech market will play out. I asked Babu, a VC peer of Khosla's, what he thought about his huge investment in greentech and whether it would pay off, and Babu said that Khosla's strategy in the past has been to make gigantic bets on one area of focus and have the belief that one ore two huge returns will be had. Given Khosla's track record, said Babu, there's no reason to think he might not do that again. My hunch? Khosla will hit a goldmine, but it's going to require more capital and it's a ways down the road. I think the hype, in the greentech market, came too early, before economically viable solutions hit the mainstream. That, and a moribound Western economy, has hampered its advance. As usual, investing is about timing. Greentech has been trapped in a pre-emptive bubble created half by the investing community, half by the media. Look for the real greentech bubble to show up some time in mid decade. I'd place my bets for 2014.