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Paul Dickerson - Haynes & Boone

Innovation and the needs of energy entrepreneurs.

Paul Dickerson

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John Pacini interviews the head of law firm Haynes & Boone’s clean energy technology practice. Paul, the former COO of the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy, is expert in all current energy issues. In this interview, he discusses innovation and the needs of energy entrepreneurs, China’s energy growth and where we’re headed in the very near future.

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John: This is the BusinessMakers Show heard here and online at TheBusinessMakers.com. I'm John Pacini and in the studio with me today is Paul Dickerson, head of the Clean Energy Practice for Haynes and Boone and the former Chief of Staff of Renewable Energy at the U.S. Department of Energy. Paul welcome to the BusinessMakers Show.

Paul: John, I tell you it's a pleasure to be here. Thanks for having me.

John: Great to have you. So Paul, tell me about Haynes and Boone's clean energy technology practice. Why is a big firm like Haynes and Boone focusing on this?

Paul: You know John when I left the Department of Energy I needed to find a firm with a very strong traditional energy practice, folks who could bring a lot of that knowledge of traditional energy into this new, clean energy space. Haynes and Boone's the best firm with that traditional energy practice. So that's why Haynes and Boone and it's been a great year and a half whereby year and a half end representing companies from California to Boston and New York to deep in the heart of Texas.

John: So you're finding that a specialization in traditional energy primarily focused in fossil fuels that's really where the heart of representing renewable energy comes from?

Paul: Traditional energy's a key part. To truly represent well clean energy companies you need four practices. You need the intellectual property, the patent practice which many of the firms in New York don't have. You need project finance and tax which our friends out in California, great firms but that just hadn't been their focus. That isn't how they grew up. Of course traditional energy. The reason why traditional energy is that this new energy is just that, energy. Right? What we're finding is that a lot of our venture capital friends in Boston and Silicon Valley that all made their money in biotech, high tech and the Web they just really didn't quite have their mind around what it would take to build a fuels plant or a traditional energy plant. The reason why of course I wanted a clean tech practice here isn't because Haynes and Boone doesn't have a California office or a New York office but I wanted to be deep in the heart of energy country to help bring some of my venture capital friends down from the coasts to energy country to try and make things happen.

John: So the focus of the practice really is bringing together traditional energy and the unique talents that a lot of the entrepreneurs bring from Silicon Valley?

Paul: Well John, you've got it. A lot of these entrepreneurs - I mean these are the folks that were taking all of these Web companies public several years ago. Right now they're playing in this new space, this energy space. So those entrepreneurs just simply don't have the expertise to manage this large scale capital intensive energy space. The people that do know how to do that are the incumbents. Right? The Shell, the Exxon, the Valeros and the rest.

John: So who's driving this? Is this being driven by your traditional companies? Is it being driven by the entrepreneurs?

Paul: Well it's a mix. I think certainly you have the venture communities which in the U.S. are primarily Boston and Silicon Valley looking for the next new area. It's not just them. I mean that's why China and I'd love to talk to you about what's happening in China.

John: Absolutely.

Paul: That's why China's in there. They're looking for this new, exciting technology that they can own. So the venture capitalists are driving it but of course the government and policy leads to a lot of this.

John: So let's talk about China. Obviously, China is growing. I've heard their consumption is growing by 15, 20 percent year over year. Obviously, that's unprecedented in the history of the modern era.

Paul: You know a few people really understand what's happening in China. In the next 15 years which we know isn't that long in 15 years 350 million people are going to move from China's countryside into the cities of China. The size of the entire U.S. will move in the next 15 years from the countryside into the cities. Imagine what sort of demand that's going to create for fuel, for electricity. I was talking to a friend of mine. They pointed out in 25 years China will have 221 cities each with population minimums of 1 million. They're going to have eight mega cities each with population minimums of 10 million. That's like combining Houston and New York eight times over. So the demand's going to be incredible and to get ahead of that crush of people China's really put forth some aggressive policies. They certainly are putting forth the capital and we can talk about it more but what it takes for a nation to really own any energy space whether it's clean or otherwise is a right mix of three things, policy, capital and technology.

John: Are you seeing a lot of innovation in China?

Paul: Well we are and China gets it. China sets these five year plans but what's amazing to me is not only do they set the policy, the plan, the laws but they always exceed them. We were looking at the solar PV. PV is a solar panel. China in 2007 owned 5 percent of the market. Two years later in 2009 they command a 50 percent market share. So in two short years they went from 5 percent to 50 percent. Friends of mine tell me that they'll have about 70 percent market share by the end of this year. So that the policies are driving a lot of what's happening. Capital, that nation is spending $12.5 million dollars every hour just on clean tech. It's extraordinary what they're doing. What they're missing is technology.

John: Well and they're obviously playing a lot more aggressively on the global stage, too. What's your perspective on the Chinese going to Africa and in South American countries and negotiating contracts for significant oil and gas reserves going forward? Obviously they have the need but they're playing a lot more aggressively on the global stage now.

Paul: Well they do. I think the Chinese government understands that if you're about to have the population of the U.S. coming to your cities in the next 15 years you need to find some way to power the lights and figure out how to work the sewage and all of it. I mean these are massive cities. So they are going around using their thick wallet and buying up natural resources wherever they can find them.

John: So the key question here from really a global perspective is can renewable energy keep up with the demand globally and can it take a larger share of the overall consumption? Right now the market share of traditional fossil fuel is somewhere in 85, 90 percent of the total consumption. With the demand curve over the next 20 years that's really not going to change even in best case scenarios of renewable energy growth. What are we looking at here?

Paul: Well it's extraordinary and I think it gets to the point. Many people have said especially my friends out in California have said, "Look, we need renewables and efficiency to just take over for fossil fuels," and that just absolutely ignores our nation's historical use of energy. It took oil 50 years to capture just 10 percent of our primary energy market worldwide. It took another 40 years for it to capture 25, a quarter percent of the market. Natural gas, about the same timeframe. Nuclear took about 27 years to capture 10 percent. When you realize that no renewable power source has yet to capture even 5 percent of the primary energy market you can see that, one, we've got a long way to go but, two, we absolutely need it all.

John: Well it's clearly a long slog and we will discuss that more when we come back. We are talking about Paul Dickerson, head of the Clean Energy Practice for Haynes and Boone, former Chief of Staff of renewable energy at the U.S. Department of Energy. You're listening to the BusinessMakers Show heard here and online at TheBusinessMakers.com. This is the BusinessMakers Show heard here and online at TheBusinessMakers.com. I'm John Pacini and continuing on with Paul Dickerson, head of the Clean Energy Practice for Haynes and Boone and the former Chief of Staff of Renewable Energy at the U.S. Department of Energy. Paul welcome back to the BusinessMakers Show.

Paul: Thanks John. Great to be here.

John: Fantastic. Well listen, we were discussing before the break the need for advances in renewable energy and that this is obviously - even 5 or 10 percent of the global consumption is still huge market share, huge opportunity even though it takes time to grow the overall market share of renewable. That's still incredible opportunities over the coming 10, 20 years. So this is obviously your area of expertise. Tell me about the innovation that you're seeing. Where's the activity and what's exciting?

Paul: What's exciting to me are some of these energy efficiency plays that pay for themselves. Right now in the finance market it's tough for a lot of my venture capital friends or private equity friends to justify investments that don't show some pay out but what we used to tell our friends at the Department of Energy is, "Look, you can't have an energy efficient car that costs more, is uglier and is poorer performing." It's got to be sexier and cheaper and faster.

John: That's right.

Paul: You see companies like - there's a friend of mine out in California has a company called Serious Materials. They make sheetrock that it takes 50 percent of the energy to create it. Builders can't tell a difference between traditional sheetrock and the other and it's cheaper. Why would we not use this sheetrock? CFLs, that was something that drove us crazy at DOE. Why people weren't using these compact fluorescent light bulbs with the Energy Star rating. They pay for themselves. You've got LEDs coming which are even more exciting, better color. What we pointed people to - a lot of my friends, especially a lot of my friends in Texas point to this whole debate about climate change where they say, "The world isn't warming or it is or it isn't," and what I've told my friends in Texas, "Stop going down that road. It doesn't matter if the world's warming or not. Do you want a nation that is more secure? If so then you're on this bus."

John: Absolutely.

Paul: "Do you want to create more jobs here in Texas or in the U.S.?" Well of course you do, right? For a nation with unprecedented unemployment with a massive national debt why we would continue to spend $700 million a day on imported fuel is baffling to me when we can do something about it and produce more here at home.

John: We can't - as you said we can't solve that overnight but we can certainly begin to eat into that over time with innovation. What role do you see that small businesses and start ups are playing in the clean tech, clean energy progression, revolution if you will?

Paul: Well they're driving it. What I love about your BusinessMakers Show is that you highlight a lot of these entrepreneurs who are making a difference. It's these small business owners who are getting out there with the great ideas, connecting the dots and commercializing. What we've told our friends in government is you can't continue to disable these entrepreneurs. Right now America's almost the opposite of China. We've got the technology but we don't have the policy nor do we have the capital. With this on again/off again policy which I'm happy to get deeper into that America has here we really disable our entrepreneurs and we see more and more of these entrepreneurs leaving America and going over to China to commercialize. We invent it here but commercialize it overseas.

John: Right, which we obviously have to lower that barrier to entry for our potential entrepreneurs and part of that is the government. Part of that is them playing well and the other part of it is the traditional big businesses that are already in place in those markets and being able to work with them. So that's part of what you do as well is facilitate those relationships and help the entrepreneurs and the idea people connect with the people that are in the traditional energy brackets and are able to facilitate some of these things and bring them to market. Is that correct?

Paul: Absolutely. Haynes and Boone has what's called a Business Practice and that's where we sit down with entrepreneurs and help them connect the dots in a way that charts a path towards commercialization.

John: And that lowers that barrier of participation really and helps get them on board with that.

Paul: Well it does.

John: Looking at kind of how this fits in with the global picture earlier you were kind of complimenting the Chinese because they had such a strong energy policy but I detected in your description that it's kind of bad or maybe even terrible for our country not to have an energy policy. Did I hear that correctly?

Paul: Well right now America doesn't have its five year plan. The way it looks like ahead of November and reelection campaigns Congress is so self-interested in reelection that they're unwilling to do -

John: I think our listeners will be shocked to hear that.

Paul: Right. But they're so unwilling to do what's in the best interest of the nation. It's really frustrating that they will not. So I will tell you for a fact we will not have an energy policy this year. I think that next year we'll likely come out with some energy policy. There are certain things that we saw, for example, in the Stimulus Act that did make sense. Things like the advanced manufacturing tax credit. It was set up to slow this tide of manufacturing jobs over to Asia and it worked. The problem was it was oversubscribed 18:1 so for every one project that was funded there were 18 more that weren't funded that it ran out of money. The other is this 30 percent treasury grant which I'm happy to explain but it expires in December. So that really to me exemplified America's policy. We do this short term, once a year on again/off again policy and we don't give investors and entrepreneurs what they need which is long term durable policies so they can make serious business decisions and make sure that they last over a long period of time.

John: So real world, real application are you seeing opportunities, are you seeing instances where you can step in with your relationships and your expertise and put those business deals together for an entrepreneur who wants to enter the space where you can maybe even knock down the barriers of participation from a federal perspective as well as get in the door and get the - gain the cooperation of the large traditional business? Is that - are those deals happening?

Paul: They are. Please don't take my frustration over Congress' unwillingness to give us prudent policy as some indication that this area, this clean tech area isn't on fire because it is and it will continue to be and we're doing a great job at Haynes and Boone, I think, trying to help entrepreneurs chart the proper path forward, find funding and either commercialize here or overseas wherever it's best.

John: Well that's great. Well I do want to talk a bit more about entrepreneurship when we return. We're talking with Paul Dickerson, head of the Clean Energy Practice for Haynes and Boone and the former Chief of Staff of Renewable Energy at the U.S. Department of Energy. You're listening to the BusinessMakers Show, heard here and online at TheBusinessMakers.com. This is the BusinessMakers Show, heard here and online at TheBusinessMakers.com. I'm John Pacini continuing on with Paul Dickerson, head of the Clean Energy Practice for Haynes and Boone and former Chief of Staff of Renewable Energy at the U.S. Department of Energy. Before we went to break we were talking about entrepreneurship and how this, the clean energy drive and revolution to a certain degree is being driven by entrepreneurs and small businesses and your role in facilitating all that. So imagine there's an entrepreneur out there who has a passion for clean energy, clean tech, some great ideas brewing and they've been able to start putting the pieces together. What would you encourage them to explore and how to go about building the next renewable energy super business?

Paul: My father was a patent attorney and as Dad used to say, "Paul, getting the patent's the easy part. Commercializing it, actually building the business is the tough part." One thing that I would first advise them not to do is leave their entrepreneurial bent and become grant writers and go after federal monies. We saw too many entrepreneurs during the Stimulus Plan put down the entrepreneurial bent and try and go beg for money at DOE. That was a huge mistake and it put our nation behind about 12 months when it came to inventing.

John: It sounds like the environment isn't conducive to that currently anyway particularly _______ -

Paul: Well it's not. Yeah, in the Stimulus we - that's a whole other deal.

John: A separate conversation. Exactly.

Paul: But yeah, for me it's surround yourself with the right people. Finance is going to be important. We've got great financing here in Texas but you need to look for that financing wherever it is. Be sure and develop the right business plan to sell either domestically or overseas. It's finding the right advisory group, getting the right business plan and executing. As I was telling a friend it's never, never, never stop. Just always go.

John: Exactly. Having said that do you see a game changer out there?

Paul: John, I tell you on this, to talk Texan for a bit as I've told my friends there is no silver bullet to this clean energy race. It's more of a silver buckshot or as I told my nieces on the multiple choice test of our nation's energy needs, "Don't circle A, B, C or D. Circle E, all of the above."

John: All of the above.

Paul: We do need all of the above. For a lot of my friends on the East Coast who are complaining that they don't wind blowing off the Cape that's okay. Let's give them civil nuclear but as a nation we're silly not to put solar panels out in Arizona or wind out in Texas. What's great about this clean energy space and it can be difficult to explain because everyone's looking for, "Okay, if not oil what," our nation is stronger if we take a portfolio approach. None of us would put all of our retirement money into a single stock. Our nation should not put all of our energy demand into just oil.

John: Exactly. So Paul having said that what would you do if tomorrow the U.S. Congress made you the Energy Czar of America?

Paul: Finally.

John: Exactly.

Paul: Finally, yes.

John: The Genie has answered. From your perspective what would you do to change the game yourself?

Paul: For America to own the clean energy space or energy space we need prudent policy, we need technology and we need money. So first we need to set up long term durable policy, ten year declining tax incentives. Not this one to two year tax incentive mess that we've done for years but a long term declining tax policy. We also then need to incent the capital market. This - one of the challenges with the Stimulus Act was it was all about spending and very little of it was about tax incentives. When you're all about spending you get a dollar's worth for every dollar. When it's $1.00tax incentive you might catalyze $10.00 worth of investment. So we need to catalyze a market loan guarantee program. There's a long list. Then of course technology. We're a nation - and I'm one of them, right. I'm a CPA lawyer. I'm not an engineer chemist. We need to focus much more on education. You see this going on in India. You see it going on - well really throughout Asia. We need to refocus our nation on the sciences so that we can continue to do what we do best and that's innovate.

John: Well Paul thanks so much for joining us today.

Paul: John it's a treat to be here. I'd love to come back.

John: Okay. We've been talking with Paul Dickerson, head of the Clean Energy Practice for Haynes and Boone and the former Chief of Staff of Renewable Energy at the U.S. Department of Energy. You've been listening to the BusinessMakers Show, heard here and online at TheBusinessMakers.com.

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