Former calpers cio launches energy fund.
Just two years into his job as chief investment officer of the country’s largest public pension fund, Russell Read stepped aside in June to pursue an even greater calling: raising and investing money for what he says is “rapidly becoming the most important capital need in the world economy — and the most important pure investment opportunity.”
He’s talking about clean energy. And for Read, no potential power source is too exotic.
Solar and wind power have been grabbing the headlines recently, but Read says technological innovations are quickly transforming coal and biofuels — including timber, bamboo and even algae — into green energy sources that are also friendly to investors.
The former CIO of $232 billion-in-assets California Public Employees’ Retirement System will launch C Change Investments in the coming months with his business partner, John Preston, former head of the Massachusetts Institute of Technology’s intellectual-property-licensing office, known for incubating such firms as American Superconductor Corp. and Akamai Technologies.
Read, 45, is tight-lipped about the size and launch date of the Cambridge, Massachusetts–based fund, which will dole out capital to companies developing clean energy technologies. He discussed his strategy for the fund and the challenges of green investing with Institutional Investor Senior Editor Steven Brull.
Institutional Investor: Tens of billions of dollars are being spent on alternative energy. How do you pick the winners?
Read: It’s a mistake to say we’re focusing on any one technology, and picking winners is a bad strategy. Not all technologies are going to be commercially successful. In the long run only a handful will be the ultimate winners. It’s difficult to forecast [what will be] the prevailing technology in, say, 20 years, but being able to help develop the best technologies along the way — even those with transitional value — will be important for investment success.
So what’s wrong with solar and wind power?
We have to aggressively use wind, solar, geothermal and anything else that makes fundamental sense. Wind power will probably continue to grow at about a 20 percent rate per year — you need one wind turbine every kilometer between Boston and San Francisco to equal a coal-fired power plant like the ones China is building every three days. And you’ll see something similar in solar: nice, steady improvements, but nothing earth-shattering.
We see huge opportunities in clean coal as an interim solution. There’s new technology that converts 80 to 85 percent of coal’s energy to natural gas and can store the carbon dioxide that comes out of the process. In five years these technologies will be competitive even with big oil.
What about corn-based ethanol?
It’s problematic. As a feedstock, corn is inefficient, has a dubious impact on soils and crowds out other agricultural products. The conversion technology is based on a century-old fermentation technique. And ethanol as a fuel cannot be sent through a pipeline; it requires special tanker railroad cars or trucks for transportation.
What other biological feedstocks are more promising?
Timber, bamboo and algae will be very attractive alternatives in the coming years. An acre of corn can yield only 20 gallons of ethanol a year, but algae can produce up to 10,000 gallons of fuel per acre per year. And you can take carbon dioxide out of the atmosphere more rapidly with algae than [with] any other biomass. The economics have been out of reach, but give it five years.