5 Forces for Renewable Energy

As previously posted I started Green Power back in 2003 sparked by reading Jeremy Leggett’s book“Carbon War”. I had been running mobile telecoms/internet conferences for 8 years (1995-2003) and during this time I had met 100s of inspirational executives working in this highly dynamic sector. Mobile telephony had had an unparalleled growth from 90m users in 1995 to 2 billion by 2004. There was a huge rapid, disruptive change to established telephony businesses, change that is still continuing today with the convergence of the internet and mobility.

In 2003 when I began studying the energy sector and specifically the electricity power generation sectors (to try and understand the feasibility for renewable energy conferences) I was struck by the similarities with the pre-mobile era of fixed telephony (a world of long waiting lists just to get a line!) In my humble opinion (IMHO) the changes in the mobile market would not have happened had it not been for what Im calling my very own 5 "P" Forces Model (thank you Mr Porter).

Public Policy

Without spectrum licences the mobile operators had no business, without the European Union targets for renewable energy markets and accompanying incentives there was no market. So legislation and visionary leadership was a pre-requisite to opening up the markets. We do now need to continue to really open up the energy markets to true competitive forces of a single market for energy services.

Profit

In 2004 the electrical power gen industry was only just becoming privatised. In addition the renewable energy sector was largely driven by the environmental agenda, NGO’s and a “good to be green” politically left/socialist agenda. It was certainly not widely seen as a business opportunity to provide an alternative cheaper, modern high tech energy industry. The targets created an initial market to make profits, as did the initial premium people were happy to pay for mobile telephony.

People

On my initial meetings in the energy world I was struck by the difference in the people from the mobile world. In my humble opinion (IMHO) the greatest agent of change is people and the greatest spur to getting people to make changes is self- interest, they want to be paid and make money. The targets created a business opportunity and renewables got decoupled from a pure leftist agenda, and began attracting the necessary risk taking entrepreneurial talent, the Eddie O’Connor’s and Selim Zilkha’s of the world.

Progress

The electricity industry has always had a distinct lack of innovation. A world of state owned assets, undynamic bureaucratic institutions, soviet style central planning environments, a lack of competition and over engineering for 5 nines reliability (service and equipment has to work 99.999% of the time). This all led to a risk averse culture with very little uptake of new approaches, business models or technology . In 2004 VC/PE (Venture Capital and Private Equity) investment into spinning ideas out of universities/raw science and into early stage cleantech companies was only $1.4bn (by comparison $100bn was invested in the IT tech bubble of 2000).

By 2008 this had grown annually up to $12.2bn, before dropping back to $4.4bn by 2013 (still 4 times the 2004 figure). This boom of funds into cleantech entrepreneurs has gone into taking a wide myriad of ideas from higher efficiency solar cell manufacturing to LED lighting. These investments will create more innovation over the next 5 years, than all the energy R&D investments over the past 30 years (see R&D intensity in the US energy sector is extremely low when compared to other sectors).

Platform

Change creates a platform for yet more change. From the printing press, to steamboats, trains, radio and the internet, each wave of technology change be it the mobility of people or ideas, increases the speed and impact of the next iteration of change.

The initial mobile licences created new companies. The largely accidental inclusion of peer to peer SMS messaging (originally only designed into the GSM standard to let you know you had a voicemail) gave rise to mobile services and the vision of the mobile internet. The big shift then happened with the disruptive entrant Apple and the "iPhone moment" that led to the exploding world of innovative mobile apps that we have today (the “iPhone moment” was the knocking down of the largely unsuccessful “Walled Garden” approach of mobile operators curating/telling you what services you could have). In decentralised energy we have not had our “iPhone moment” but we do have the initial platform.

#KeyTakeaway is change creates a platform for more change. In energy a change is a coming!

#GoRenewables

Nad

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