Will Silicon Valley’s VC money hurt the energy industry?

That’s what the NYT seems to be asking in an article, “For Internet Barons, Uncharted Investment Territory”:

There lies a conundrum for the Internet barons who have turned, of late and en masse, to investing in solar, wind, biofuel and other energy startups. Does their expertise with technology qualify them to take on the world of alternative fuel and power? When it comes to Energy 2.0, are some of the nation’s most successful investors in over their heads? … The key to success, they say, is the Silicon Valley investment vetting process. The venture capital model, they contend, pits great entrepreneurs against one another, invests in the best technologies and creates focused, streamlined companies and new industries.

But their certainty, which can spill into bravado, has stirred criticism even within their own ranks. ‘They’re completely wandering in with no clear idea’ of how the energy industry works, said Paul Kedrosky, a venture capitalist and the executive director of the von Liebig Center for Entrepreneurism and Technology Advancement at the University of California at San Diego.

He argued that the party line — that good investment strategists can apply their principles across industries — did not acknowledge the peculiarities and complexities of energy technology. “The downside? They’re going to blow up this sector before it has a chance to get established,” Mr. Kedrosky said.

It is not as unlikely a possibility as it may seem. Before the dot-com boom “business incubators” were sometimes used to help small business grow. This economic development approach was all but destroyed when the venture capital companies got a hold of it. Companies like idealab in Pasadena used it to pump up multi-millions in investor funding until the entire concept of “business incubation” meant something entirely different. In all likelyhood, the recent flood of VC money into alternative energy projects will be a good thing, but the danger does exist that they could ignore smaller, more innovative but less profitable technologies and companies in the never ending quest for the big bucks.