Michigan has some natural advantages that could help it become a significant player in the renewable energy sector, but challenges remain with the financing and public policy necessary to make it happen, according to a panel of entrepreneurs and industry experts at the University of Michigan Friday morning.

Speaking at the Cleantech Conference 2009, the panelists outlined some of the issues with securing venture capital financing for clean technology projects -- such as the length of time before they tend to become profitable -- and the unique things Michigan has to offer, like tremendous excess manufacturing capacity.

Khiem Do, representing the Silicon Valley company Skyline Solar, said the firm is working with three Michigan manufacturers to produce the metal components of its solar systems. A company in Troy is working with Skyline, he said.

"We needed to partner with a company that has expertise in creating large, metallic structures on a large scale," he said. "What better place than Michigan?"

He added that the company has hired three U-M graduates and one from Michigan State University.

But attracting venture capital to the state has been a challenge. Rodrigo Prudencio of VC firm Nth Power, said the dearth of funding is not a function of any shortcomings of Michigan itself, or the state's economy. Rather, he said, it's that the Midwest does not have a long-standing culture of venture capitalism. The East Coast and West Coast, on the other hand, have been doing it for 40 or 50 years.

"It takes time to spread the entrepreneurial and investment culture to other parts of the country," he said. "Clearly there's an opportunity for the resurgence of the manufacturing base."

Producing wind turbines in Michigan, for example, would be advantageous because transporting the large pieces of equipment to various locations would be relatively easy.

"That equipment is being manufactured in the Midwest because of the locational advantage," said panelist Michael Learner, president and executive director of the Environmental Law Policy Center.

Whether the industry can gain a permanent foothold in the state depends on money and government policy, the speakers said.

In terms of policy, Learner said the carbon-emission policy being debated in Congress will have a direct effect on cleantech businesses.

"Nobody knows what Congress is going to do," he said. "It effects the fundamental economics of clean technologies."

In the area of financing, the entrepreneurial culture is being pushed forward by the recession, said Ann Marie Sastry of auto battery maker Sakti3.

"A recession is an advantage. Real estate is cheap. Good people are looking for work and willing to take risks ... it's an opportunity to change the culture," she said.

But getting VC funds to accept returns over a longer term is a problem, Prudencio added.

"Who do you pitch that to?" he asked. "The funding challenge is trying to get the equivalent of late-stage capital into early-stage technology."

Both Do and Dawn White, co-founder and president of Accio Energy, which is developing a wind energy device that generates electricity without moving parts, said a key is to simply seek less money.

White said for her company's next round of financing, she hopes to ask for much less than the $400 million-plus that A123 Systems secured this year.

"I want my company to go to the market for 10 percent to 5 percent of that amount," she said.

Do said Skyline is in the process of looking for more venture capital funding as well.

"It's more challenging, but interest is still out there," he said. "Our opportunity is less capital intensive than others, and that helps with the pitch."

The conference was put on by the Ross School of Business, the Frederick A. and Barbara M. Erb Institute for Global Sustainable Enterprise, the Samuel Zell and Robert H. Lurie Institute for Entrepreneurial Studies, and the Michigan Memorial Phoenix Energy Institute.

Freelance reporter Dan Meisler can be reached at danmeisler@gmail.com.