Clean Tech's First Decade
Ten years ago, Ron Pernick and I started a company to help companies, public agencies, and investors better understand and tap into the emerging world of clean technology. This week, that company, Clean Edge, published its 10th annual assessment of the clean-tech marketplace, so it seems an appropriate time to step back and take a broader look.
At the time Clean Edge was born, the term “clean tech” was nascent. As Ron explains: “Clean tech was virtually unknown in the mass media, in business circles, and among politicians. At the time, there was one clean-tech institute in India and the United Nations used the term sporadically, but decided, in a move that only a bureaucrat could love, to use the term ‘environmentally sound technologies’ or ESTs, instead.”
In April 2001, Clean Edge published “Clean Tech: Profits and Potential” (download – PDF), one of the earliest efforts to define the space. We divvied the sector into four major buckets: energy, transportation, water, and materials. We made some predictions about market growth. We proffered some thoughts about what it would take for that growth to happen.
Eight months later, in January 2002, we published the first of what would be an annual assessment of the clean energy marketplace, the part of the clean-tech world that was growing most quickly. They include annual forecasts of the decade ahead, providing growth estimates for various energy technologies.
The most recent of these, Clean Energy Trends 2011, has just been released. You can download the free report here.
Looking back 10 years, some of those forecasts, however bullish, proved to be a tad sheepish. Example: We forecast in 2001 “the markets for clean energy technologies growing from less than $7 billion today to $82 billion by 2010.” The most recent Clean Edge report puts the 2010 market value of just three clean-energy technologies — biofuels, solar photovoltaics, and wind power — at $188 billion. Hey, what’s $106 billion among friends?
But the gist of what we wrote in 2001 was on the money: the political, social, and technological context for the forthcoming clean-tech boom, and the potential barriers and wildcards that could slow or accelerate the development of clean tech. The latter included government support, or lack thereof; the vagaries of economic swings; the potential for incumbent companies (and their lobbyists) to resist change — or suddenly jump in; the need for standards that would accelerate market uptake; the infrastructural changes needed to support some of these technologies; the acceptance of clean technologies by customers, both institutional buyers and individual consumers; and activists’ role in “keeping the heat on companies, governments, and others to develop and promote clean technologies.”
All of those remain critical components of a robust clean-energy future.
The clean-tech marketplace has matured, and it’s changed. A decade ago, clean technology was the domain of mostly start-up companies. A few oil companies — BP, Exxon, Shell — dabbled in solar, fuel cells, or wind power — but few other large corporations had even dipped a toe into the clean-tech waters. Today, it’s difficult to find a large company that doesn’t have a clean-tech play.
Want proof? Consider: What do the following companies have in common?
3M, Agilent, Audi, Autodesk, BASF, Best Buy, Bosch, Caterpillar, Dow Corning, Dupont, Eaton, Firestone, General Electric, IBM, Intel, ITT, Johnson Controls, Kyocera, LG, Mitsubishi, National Semiconductor, PPG, Praxair, Sanyo, Sharp, Texas Instruments, United Technologies, Waste Management, Xerox.
The answer: They’re all in the solar business — variously making materials, components, or systems to produce solar electricity; or offering services to design, manage, or sell solar energy systems to companies or consumers. (A few of these have offerings that aren’t yet in the marketplace, but soon will be.) They're not just installing panels on their roofs and selling the excess energy into the grid. They're actually in the solar business.
Not one of these companies is a traditional energy company or utility.
Solar’s just one example. Big companies are in all of the clean technologies we identified in 2001. (Of course, there also are more early-stage companies than ever before. For example, there are more than 200 VC-backed or pre-VC solar start-ups alone, according to one report.) Examples include Google's investments in Silver Spring Networks and V-Vehicle, Daimler's investment in Tesla Motors, GE's investment in A123, and Norsk Hydro's investment in Norsun. But these represent just the tip of the iceberg.
Big-company investments will accelerate. In the coming years, as more start-ups need expansion capital in order to scale, they will turn not to venture capitalists but to major corporations, with their healthy balance sheets and large cash reserves. Big companies will overtake VCs (and banks) as the leading funder of clean-tech startups.
The other major trend, of course, is the global nature of clean-tech markets. China has outpaced the U.S. and other countries as the low-cost providers of clean-tech hardware such as solar panels and wind turbines, and is becoming one of the largest markets for clean technologies, along with India, Brazil, and other growing economies. (Depending on who you ask, China is either underhyped or overhyped as a clean-tech player.) As such, the largely U.S.-centric marketplace we saw in 2001 has become truly global.
All of this is only just beginning: the scale-up of technologies, the entry of big companies, the explosion of startups, the expansion of global markets. There’s lots more to come.
And Clean Edge — which now convenes one of the industry’s leading annual clean-tech events, publishes clean-tech stock indices for Nasdaq, and produces authoritative research (some free and some not) — continues to show the way, as evidenced in this week’s 10th anniversary report. I’ve stepped back from day-to-day involvement in Clean Edge (though I remain a not-so-silent partner) and have enjoyed watching from the sidelines as the company grows in lockstep with the industry it helped define.