Clean Tech: Profits and Potential
The following are excerpts from Clean Tech: Profits and Potential. To read the full report, please download the PDF file by clicking on the link to the left.
Amid the litany of millennial doom-and-gloom stories -- energy price hikes and rolling blackouts, economic slowdown and dot-com meltdowns, and continued controversies over everything from genetics to global warming -- there's a genuine bright spot: Clean technologies are booming.
For all the hype about the New Economy -- the irrationally exuberant world of e-business products and services -- a real, sustainable new economy is emerging. It is based on proven markets for essential goods and services, such as clean energy, transportation, water, and materials that embody the emerging principles of industrial ecology, resource productivity, and natural capitalism.
We believe clean technologies are poised for dramatic growth in a manner that will offer significant and tangible economic, environmental, and social benefits. Based on our research, our extensive network, and our analysis of a wide range of research from other credible sources, we conclude that:
- The markets for clean technologies, while still nascent, will rise significantly. For example, we estimate the markets for clean energy technologies growing from less than US$7 billion today to US$82 billion by 2010. Some clean technologies, such as wind power, photovoltaics, and fuel cells, will continue to experience double-digit annual growth. However, the growth of clean technologies will be uneven, with some experiencing faster commercial ramp-up than others.
- The number of companies offering clean-tech goods and services will experience a similar growth curve, with hundreds of start-ups reminiscent of early markets for e-business, telecom, and wireless technologies. The significant differences that exist between clean-tech and e-biz companies likely will result in fewer boom-and-bust business cycles than were experienced among many high-tech companies.
- Investment money will pour into clean technology firms at an accelerating rate as investors, though chastened by the nosedive in technology stocks, view clean tech's attractive growth potential. During 2000, more than US$1.4 billion of equity investments were made in clean-tech companies by angels and venture capital firms. Adding the money invested in clean-tech firms through initial public offerings the total escalates to more than US$2 billion. Company research-and development investments in clean tech will skyrocket, too, with a few leadership companies in each sector leading the way.
- Clean technologies stand to provide significant relief to shortages in energy, water, and other natural resources, while providing a path for both developed and developing countries to address such pressing concerns as greenhouse gas emissions, deforestation, resource scarcity, and air and water pollution.
- Clean technologies will engender a variety of social benefits, from reduced illness and infant mortality to citizens' improved ability to hold meaningful jobs and raise families. As such, clean tech increasingly will become a cornerstone of the growing global movement toward a more just and sustainable society.
- The success of clean technologies will depend nearly as much on government investments and policies as on companies' entrepreneurial and marketing skills. Some countries -- in northern Europe, for example, as well as Japan -- recognize this and are aggressively promoting clean-tech agendas. Other countries may be forcing clean-tech companies to compete on an uneven playing field through subsidies and policies that favor coal mining, oil drilling, clearcutting, and other "dirty" technologies.
Today's clean-tech revolution is the result of a convergence of environmental, tech-nological, economic, and social factors. Among them:
- Energy uncertainty, exemplified by electricity shortages in California, has increased demand for "distributed generation," technologies such as microturbines, wind turbines, and solar photovoltaics, which enable electricity to be generated at or near where it is needed, rather than being shipped hundreds of miles over power lines.
- Technological advances, including continued innovations in microelectronics, biology, chemistry, and physics, have significantly improved the performance of many clean technologies.
- Pressing environmental issues, including global climate change, deforestation, air pollution, and inadequate supplies of clean water, have stepped up pressure to find more environmentally benign ways to meet the needs of a growing world. The concern over climate change in particular has led to new focus in alternative transportation and energy technologies.
- Changing political winds have led many business and government leaders to recognize that their future competitiveness is directly linked to their ability to be more resource-efficient and less reliant on older, polluting technologies.
- The sustainable development imperative, which aims to balance environmental, economic, and social interests as a means of addressing the needs of the world's citizens, has increased the demand for clean, affordable, and resource-efficient technologies in the newly open markets of China, India, Latin America, Africa, and Eastern Europe.
- Vast new business opportunities presented by the clean-tech revolution have prompted investors to pour billions into new technologies and the companies that can bring them to market. Forward-thinking entrepreneurs are coming forth with a rapidly expanding array of innovations, accelerating the development of many clean technologies.
THE ROAD FROM HERE
The future of clean technologies, however promising, won't come easily or cheaply. A myriad of challenges could derail one or more technologies, or at least slow their development and implementation. Among the wildcards:
- Government support will be critical for to advance clean technologies.To succeed, clean tech will need adequate and reliable research-and-development budgets as well as incentive systems to promote and support clean-tech purchases by businesses and consumers alike. Toward that end, governments must identify and, as much as possible, eliminate subsidies that give an unfair advantage to conven-tional fuels and technologies that compete with new, cleaner technologies.
- Robust economies will be a vital factor in spurring clean-tech investments. Recessions or stock-market plunges could retard or curtail private-sector invest-ments at a time when access to capital is critical to success.
- Industry resistance -- through lobbying or policies that stifle competition -- could deal a blow to some companies and technologies. For example, if energy utilities make it difficult for customers to generate their own power, and to sell excess power back into the grid, markets for alternative energy technologies could slow significantly.
- Standards will play an important role in ensuring the growth and market ac-ceptance of some clean technologies. For example, sales of alternative building products made from plant-based material could languish without changes in building codes that allow them to substitute for conventional products like wood or drywall.
- Infrastructure changes will be necessary for some technologies to take off. For example, the forthcoming generation of fuel-cell vehicles could require a system in which hydrogen-fueling stations become as prevalent as gas pumps.
- Customer acceptance of new technologies will be an obviously crucial factor in determining which technologies succeed. Their acceptance will no doubt require copious quantities of education to explain the products' benefits -- to the buyer as well as to the environment and society. Companies, government agencies, and others will need to play a major role in promoting the reliability, performance, and safety of clean technologies to an often-skeptical and reluctant marketplace.
- Activist pressures will likely play a key role in keeping the heat on companies, governments, and others to develop and promote clean technologies. Activists also will play a role in educating their constituencies about the new technologies, and in watch-dogging companies and politicians to ensure that their promises are kept and their marketing campaigns are truthful.
Beyond these are a host of unforeseen obstacles and opportunities, ranging from re-gional conflicts and other events that cause perturbations in energy supplies, to un-usual weather cycles that raise increased concern over climate change, to environmental catastrophes that accelerate public interest in clean technologies, to any of a number of unintended consequences that cause the fortunes of clean technologies to rise or fall.
The opportunities and uncertainties will make the coming decade a critical period for clean technology. Much like the Internet revolution, there will be winners and losers, and more than a little carnage among companies and entrepreneurs competing for a slice of the clean-tech pie. But there's a great deal of evidence to suggest that clean technology will engender a more sustainable and highly profitable era -- for business, the planet, and all of its denizens.