Many of us look down the road and try to see into the future of clean energy, but actually, most of the handwriting is already on the wall. When I read articles that refer to the gaping uncertainties that face the renewables industry, I wonder about the lack of insight that the author must have – or why he checked his courage at the door.
For half a dozen different reasons, we’re moving away from fossil fuels – and far faster than most people realize. Sure, there are good reasons that have nothing to do with oil’s supply and demand curves; most of us care about global climate change, war, terrorism, and skyrocketing childhood cancer rates, and the other externalities that accompany our addiction to oil, gas, and coal. But even if we didn’t care a lick about any of that, it’s abundantly clear that we’re simply running out of cheap fossil fuels.
Does anyone think that we’ll be blithely pumping millions of barrels of crude per day out of the ground in 50 years? Come on. Even the glib and disingenuous oil industry spokespeople see the end coming at a certain point (even if they do lie about when it will be).
So, if so many questions have been answered to the complete satisfaction of everyone paying attention, what’s still left on the table? In my mind, here’s the only real question of any importance:
Who’s going to get rich in the process?
And here are a few answers.
First, we have the international industrial giants that had the foresight to understand that the world is going green, and to build strategies around that notion. Here we have pure-play energy infrastructure companies like General Electric, ABB, Siemens, and American Superconductor. You don’t have to be a fly on the wall of the board meetings at GE to see that it is aggressively trying to own the world as we become increasingly interested in sustainability. I’m not betting against them.
Add to that the IT companies that understand how important information about the entire clean energy picture is, especially smart-grid technologies. Here, we have already seen companies like Google, Oracle, Cisco, IBM, and Microsoft capitalizing on this notion.
Next, let’s look at the smart meter manufacturers, like Itron, Echelon, and Landis & Gyr, as well as energy management companies: EnerNOC, Comverge, Honeywell, Johnson Controls, and Schneider Electric.
Of course, as the penetration of renewables grows, so will the importance of energy storage and the companies that have cutting-edge solutions in that space, like A123 Systems, Maxwell Technologies, Exide, and China BAK Battery.
Customer-centric electric utilities will also do particularly well. Companies like PG&E, Sempra Energy, Edison International, Xcel, Duke Energy, Consolidated Edison, and Italy’s Enel come to mind here.
In transportation, I’m happy to report that the auto companies have shown the wisdom to disassociate themselves, at least in part, from the oil companies and embrace electric vehicles. This was a matter of survival; after a few near death experiences, they really didn’t have much choice but to embrace this trend – even though it will most assuredly come at the expense of operating margins. The maintenance (parts and service) on EVs is a fraction of that of internal combustion engine-based vehicles, and they need replacement far less frequently. It’s no wonder that big auto resisted this trend until it absolutely could wait no longer. Having said this, what is lost in margin may be made up for in volume, as car sales in Asia in particular will be staggering over the coming few decades.
The last category here are the well-heeled startups with the pedigrees and personal connections to raise big bucks from government grants. Of course, adequate capitalization (from taxpayers or whatever source) is no guarantee of long-term success — but it doesn’t hurt, either. Here you have companies like Solyndra in photovoltaics and Tesla and Fisker in electric transportation. I must confess that the process of raising investment capital – from public or private sources — seems a bit random. I know a whole bunch of people following CODA (electric vehicles) that are scratching their heads at that company’s ability to extract 8-figure streams of cash from the investment banking community.
OK, so there are a few words on profits for the big boys. But where are the opportunities for entrepreneurs? Here are 10 tips:
–Find a market position that offers some level of competitive protection.
–Understand where the Fortune 25 are going as a bellwether for the market overall.
–Take the “A” Team onto the field.
–Understand the basics of marketing as they apply to your product.
–Grasp the totality of the market infrastructure that must be built.
–Learn not to expect the impossible from government.
–Understand Technology Readiness (TR) and its implications.
–Understand corruption – don’t whine about it.
–Understand that ideas (even dubious ones) that come from big names and big money wind up on the fast track, ahead of yours and mine.
–Present an attractive reward given the risk you’re asking investors to take.
Wishing everyone the best of luck for a successful 2011.