I recently attended two of the nation’s leading clean tech industry conferences — the AlwaysOn GoingGreen Silicon Valley 2010 Conference in San Francisco (October 12-14) and the NREL Industry Growth Forum in Denver (October 19-21). Both conferences attracted a talented and diverse group of clean tech entrepreneurs, investors and industry professionals from around the globe. Goodwin Procter was proud to be a co-sponsor of both conferences.
Two emerging industry trends were apparent, and I’ll discuss them in separate posts. The first trend was that energy efficiency solutions appear to be the “hot” industry segment of the moment, attracting significant market interest, buzz and investment capital.
The term “energy efficiency solutions” broadly encompasses products, software and other methods for monitoring, managing and consuming energy more efficiently and cost-effectively. Often, but not always, this includes strategies for using less aggregate energy. But it can also involve using the same aggregate amount of energy at a better time, in a better form or in a better location.
Specific intriguing examples include: software for utilities and homeowners to better monitor, interpret and manage energy use; IT solutions for electrical grid load balancing and frequency regulation; “smart” appliances for the home that communicate with the grid; advanced LED lighting solutions; advanced water management and re-use solutions; and technologies for improving the efficiency of old-line energy-consuming stalwarts such as HVAC systems and hot water heaters.
Many of the “new” concepts and approaches for efficiently using energy have existed for some time, but entrepreneurs on the cutting edge of the industry are increasingly integrating advanced IT and software technology in novel and interesting ways. It is at this intersection of energy management, raw computing power and sophisticated software development where the latest excitement in the clean tech industry appears to exist.
Tech industry veterans know that the “hot” market segment can change rapidly, due to simple human nature and an unending search for the next new thing. But many industry thought leaders have suggested that strong market fundamentals are driving this shift and that the focus on energy efficiency solutions may be more than a passing fad. Some of the principal drivers cited were: (i) the development of energy efficiency solutions is often much less capital intensive than the development of energy generation or energy storage solutions; (ii) energy efficiency solutions often revolve around cutting edge IT and software technology, which typically has lower development costs and a faster time-to-market than other technologies due to historical investments in IT; (iii) new energy efficiency solutions may have less regulatory, environmental and safety hurdles to overcome and are often less sensitive to fluctuating commodity prices than energy generation or energy storage solutions; (iv) energy efficiency sales channels often reach directly to the retail consumer and provide average Americans the opportunity to save money quickly with low up-front cost; and (v) energy efficiency companies generally expose potential investors to less “technology risk” as compared, for example, to advancements in solar cell technology or advanced battery cell chemistries, where it can be difficult for investors to predict winners and losers.
More than a few commentators also noted that the traditional venture capital model of financing and nurturing start-up and emerging technology companies lends itself well to evaluating and developing software and IT opportunities, which as noted above, are often significant components of energy efficiency solutions. Against the backdrop of the Great Recession and the current financial climate – which is putting immense pressure on capital raising efforts by companies and discouraging excessive risk taking by investors – many industry thought leaders believe that these market drivers will continue to be reinforced over time and that a focus on energy efficiency solutions may be with us for a while.
This post on Clean Tech was authored by Brad Weber.