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55 comments on Addressing Proposition 87 Criticisms

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Halfin on September 5, 2006 - 1:35pm Permalink | Subthread | Comments top
http://www.greencarcongress.com/2006/07/calcef_invests_.html
The California Clean Energy Fund (CalCEF), a $30-million public benefit investment fund created via the PG&E bankruptcy settlement to spur investment and innovation in California's clean energy economy, announced a summary of its Fund 1 Portfolio.

Among the investments in the portfolio are Tesla Motors, makers of an all-electric high-performance sports car, and Imperium Renewables, a biodiesel producer.

The CalCEF Fund l portfolio is co-managed by three investment managers who, together, bring more than $5 billion in market power: Nth Power, DFJ Element, and VantagePoint Venture Partners.

Here's what I commented there:

"So this CalCEF fund is managed, apparently on my behalf as a taxpayer and ratepayer, by these investment managers, one of whom is VantagePoint Venture Partners. And one of their major investments is in Tesla Motors. At http://teslamotors.com/company_board.html we read that Tesla board member Jim Marver is co-founder and managing partner of VantagePoint Venture Partners! So this VC firm is taking California ratepayer dollars and funneling them into a private company that it is investing in and helping to manage. They are increasing the value of their own holdings and enriching themselves at taxpayer/ratepayer expense.

"This is just the beginning. If California Proposition 87 passes this fall (http://www.yeson87.org/ ) there won't be just millions, but billions of dollars being managed in just this way. According to the Sacramento Bee (http://www.sacbee.com/content/politics/story/14281078p-15089305c.html ) the funding for Yes on 87 comes from VC firms and managers who are already invested in the same companies and technologies that will see a windfall if this proposition passes. You can bet those are the same people who will be on the board to disburse up to 4 billion dollars, and they'll send it directly to the companies they are involved in, just as we are seeing here with this PG&E fund."

As for the claims that the Prop 87 disbursement board can't give money to their own companies, there are a million ways to maintain arms-length relationships and get around these restrictions. I'm sure the CalCEF board in the article above operates under similar limitations, yet we see that a board member is associated with the same VC firm that is a major investor in Tesla Motors, and sure enough the board gives a lot of money to that company.

We'll see exactly the same thing with Prop 87. All those Yes on 87 investors (Khosla's just one of them) are doing this to make money, pure and simple. If Prop 87 did not pass, probably most of those investors would give up on their alt-energy investments. Their whole play is to put money in advance into companies that are going to receive a windfall when this proposition passes.

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mbkennel on September 5, 2006 - 5:57pm Permalink | Subthread | Parent | Comments top
As long as it's my choice, I prefer that the robber barons enrich themselves while they hire and pay industrial geeks inside California, instead of robber barons enriching themselves in Russia, Iraq and Angola.

Since wealthy people will find a way to game the system to their advantage, I want the better class of wealthy people, those who might carry the rest of us along with the ride, to win.

Their whole play is to put money in advance into companies that are going to receive a windfall when this proposition passes.

Sure, but along the way those companies will actually have to try to make products.

I doubt that those startup companies are going to just declare a big dividend and return taxpayer cash to investors.  If that happened then certainly it would be considered fraud on the State of California.  

The reality is that this is effectively government funding of basic to applied industrial research, along with taxing oil companies.   I don't have the moral objection to this that others do.

Lots of other people have advocated a combination of two things:

  • higher gasoline/petroleum/carbon taxes
  • greater investment in energy R&D

OK, now we have it.   The principal problem is that it's only California and not nationally but that's a new matter.
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aslevin on September 5, 2006 - 8:35pm Permalink | Subthread | Parent | Comments top
I doubt extremely that the failure of Prop 87 would kill VC investment in CleanTech. The VC sees what all of us here see -- that there is a major transformation coming with regard to how society uses energy. They see major business opportunities  to supply the next generation of energy technology.  They are going to be investing whether or not Prop 87 passes.

The question is whether conflicts of interest in the managemet board will fund dollars into investments that would otherwise be questionable. This is a governance topic that needs to be getting news coverage, whether or not Prop 87 passes.

I think probably a lot of people here would be in favor of some sort of government investment into alternative energy R&D, the question is how to handle the governance of it.

(Before a market-libertarian chimes in to say that the government shouldn't be subsidizing technology development, they also need to make sure we get rid of all subsidies for oil and roads).

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55 comments on Addressing Proposition 87 Criticisms

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