This column is inspired by the reader who remarked that my last column was little more than sophomoric drivel. This posting attempts to be more useful…
To continue our cleantech exploration, Ben Dubin, managing partner of Asset Management Company, recently shared his views with me. Ben is a prototypical early adopter of green and clean technology. He personally installed a three megawatt solar photovoltaic power system at his house and will be adding a grid-tied a wind turbine this summer. By installing these systems himself, he’s probably cut the cost of these technologies in half. He and his wife use low wattage florescent light bulbs and know exactly how much electricity every appliance and light in their house uses. He drives a truck which runs on clean-burning, compressed natural gas (CNG) and his wife drives a Prius.
According to Ben, the Holy Grail of clean technology is the need to be both green and renewable energy, like solar energy and wind turbines, where the creation and usage of energy doesn’t pollute. “It may take us decades to get there; we’re still at the early adapter stage. Most people have become conscious and aware. They know that their gas and utility bills are going up. And they’re playing around with what works and what doesn’t.”
Early adopters like Ben will play an important role in getting us there. Ben’s experience with his natural gas truck is a good example of how early adopters will help get the bugs out. His natural gas truck requires putting up with the inconvenience of 5-8 minute fill ups at a limited number (4 in the Bay Area) of specialty fueling stations. The truck has a limited driving range of 200 miles despite having three 400 pound tanks. Ben is willing to put up with this inconvenience because the fuel is cheaper than gasoline, is domestically produced and burns cleaner than gasoline. And he really uses the truck too, he has put over 75,000 miles on the truck since 2000.
The fuel tanks, however, require special engineering, because the gas is highly pressurized. The tanks expand considerably when filled, despite the thick steel and Kevlar casing, and require special brackets to accommodate this swelling. These tanks wear out and must be replaced after 15 years, increasing the cost of this clean technology. Improvements in tank design will follow. Much energy is wasted just moving 1200 pounds of tanks. Perhaps future tanks will be lighter and more durable. These advances in tank design may benefit future hydrogen powered vehicles where it is hoped that hydrogen will be stored in tanks pressurized to 10,000 psi.
Adoption can be caused by a combination of economic, government or psychological factors. Currently, the economic rewards are not great enough to drive adoption. In the early stages of clean technology, “expectation is greater than the reality of the rewards.” There is a transition to reality. In Ben’s opinion, from an economic standpoint, the easy early, money is in conservation, which at first will save more energy than new technology. The payback for conservation is high while the payback for alternatives like solar is currently low. The current economic drivers in clean energy are mostly rebates, tax breaks and creative financing, not economic cost-advantages. Ben suggests that venture capital investing is helping speed adoption but warns that 95% of early investments in this sector won’t be winners. Ben predicts that many of the early investments won’t make investors a lot of money, but will spawn solutions that will save energy, dollars and lives.
The economics will change and there will be an end to the oil based economy. Oil supplies do not regenerate, and India and China are driving more demand and consumption. The question is when. The price at the pump will cause our habits to change, but there has not been enough of an economic crisis yet to change behavior and create meaningful economic drivers.
Ben cited the “Icon” factor is being an important driver of adoption. Toyota’s first version of the Prius was a dud, a bland hybrid version of a cheap economy model. The car took off when it was completely redesigned with its own unique, iconic style. The car has become a highly visible symbol of a clean and green mind-set. “The Prius is successful because it is iconic, while its predecessor model and its main competitor, the Honda Civic, are not. The Prius has been accepted as a great thing because it looks different.” Ben’s advice for early players in the clean tech sector is to incorporate the icon factor in product design. Iconic products, like the Prius and iPod, get us thinking and help drive adoption.
Don’t underestimate the importance of the icon factor in driving adoption. Ben cited the example of the CEO of one of his startups, who recently switched from an E-Class Mercedes to a Prius and from a Land Rover to a hybrid Toyota Highlander. The same CEO also installed solar panels at his home.
The all-electric Tesla automobile has generated much buzz and excitement. Ben believes that its success will depend largely on the icon factor. Having an iconic product shows that one is a thoughtleader. Part of the strategy for Tesla is to get icons in an iconic car. The car’s release is targeted for the Bay Area, not only to ease service but also to get tech icons in the car. Tesla is apparently considering creating a solar farm near its new plant in New Mexico and connecting it to the grid. For an additional $10,000, your Tesla may come with a lifetime of clean, solar generated power. Here is a hint of the Holy Grail, the virtual cycle of green, clean and renewable energy.
In the larger ecosystem, we can all do iconic things. We can buy hybrid Highlanders, Escapes, Prius’ and Civics. We can purchase carbon credits to cover our CO2 footprints, and bike to work. The government isn’t moving fast enough. Until the government changes its energy policy, much change will happen at the grassroots level. It’s up to us, the early adopters, to help spawn people’s imagination and drive adoption. “Remember,” says Ben, “This is a marathon, not a sprint”.
Full Disclosure: Asset Management Company is an occasional client of my law firm, Montgomery & Hansen, LLP. Signal Hill is not a client of the firm. Also, a really good source of serious information about clean technology is Signal Hill Capital Group LLC’s weekly publication, Green Signals. Contact Michael Carboy (firstname.lastname@example.org) if you would like to receive a sample copy and receive this weekly publication by e-mail.