‘It’s All About Energy, Stupid!’

Presidential candidates used to get away with little more than plugging ethanol in Iowa and the requisite pledge to clean the air and water for the next generation. Not in 2008. With oil prices nearing $100 a barrel and public concern over global warming rising faster than Al Gore's trophy pile, this year's campaign clich? is "energy independence." Along with health-care plans and strategies for Iraq, the candidates are churning out detailed proposals to slow climate change and wean the country from imported oil. (How green are you? Take our quiz and calculate your carbon footprint.)

Follow your favorite NEWSWEEK columnists

Customize the Newsweek homepage to feature the latest word from your favorite columnists.

Last week in Iowa, Hillary Clinton announced a plan to increase U.S. biofuel production. Two days later, she popped up in New Hampshire with home-improvement expert Bob Vila to trade tips on energy efficiency. This weekend in Los Angeles, she and John Edwards will attend the first-ever presidential candidates' debate on climate change. Not to be outgreened, Republican Sen. John McCain is pushing his bill to cap and trade greenhouse-gas emissions. New York City mayor (and potential independent challenger) Michael Bloomberg is calling for a carbon tax. Rudy Giuliani is pushing solar, wind and even nuclear power as "a matter of national security."

The pols, it seems, have figured out what venture capitalists and entrepreneurs have known for years: green is Topic A. "It's really smart to pull up renewable energy as a headline issue," says Silicon Valley venture capitalist Ray Lane, who now invests exclusively in "cleantech" ventures, even though, he cautions, "I have not become a tree-hugger—or a Democrat." Rather, it's because the $6 trillion world-energy market, dominated for the past century by fossil-fuel interests, is being swarmed by thousands of entrepreneurs peddling game-changing technologies in solar, wind, geothermal and bio-energy, batteries, electric "smart grids" and plain-old efficiency. The technologies are moving from the lab to the marketplace just as political pressure mounts to force companies to curb their greenhouse-gas emissions. "It's a perfect storm," says Lane.

Lane's firm, Kleiner-Perkins, now devotes one third of each new investment fund—about $200 million to $300 million every few years—to cleantech start-ups. Stars of the early computing era, including Sun Microsystems founder Vinod Khosla and Microsoft cofounder Paul Allen, have reinvented themselves as clean-energy investors. Nationwide, according to the Venture Capital Association, investments in cleantech nearly tripled from $497 million in 2005 to $1.45 billion in 2006.

Profit is not the only motive. For many renewable energy entrepreneurs, finding alternatives to oil, gas and coal is the biggest technological opportunity the world has seen since the birth of personal computing. "We are now where Bill Gates was before he left Harvard" in the 1970s, says Martin Tobias, a former Microsoft executive and digital-media pioneer, who launched Seattle-based Imperium Renewables, a biodiesel manufacturer in 2005. Imperium, which has filed papers to go public, last summer opened the country's largest biodiesel refinery, on the Puget Sound. (The fact that Tobias is a Republican didn't stop the state's Democratic pols from showing up for the ribbon-cutting.)

Like the dotcom era, the cleantech boom is sure to produce its share of flops—and an investment bubble or two. The science is tough, and oil isn't going away any time soon. None of that scares the entrepreneurs profiled below. NEWSWEEK has selected four privately held companies whose breakthroughs to replace fossil fuels seem especially promising.