It's easy to overhype the potential of the emerging clean-energy economy. When I first dipped my toe into these waters in 2000, the sector was already being hailed as "the next Internet," a dubious distinction, to be sure, given the implosion of dot-com startups then under way. But the overall point wasn't lost: The commercial potential of harnessing energy from the wind, sun, tides, and earth and distributing it intelligently to homes, businesses, and vehicles was enormous, representing the next wave of innovation and wealth creation. Over the past decade, that cleantech-as-Internet mantra has waxed and waned, but it hasn't disappeared.
Nor has the Internet. The flatlining of Pets.com and thousands of its startup brethren notwithstanding, the ecosystem of companies and technologies that bring us our daily digits is alive and well, even during tough times. It has become the backbone of commerce and media, woven deeply into daily life. It is hard to imagine life without it. It has created countless millions of well-paying jobs and made many people wealthy.
The new clean-energy economy will do no less. Comparisons to the Internet may even be inadequate. What's taking place today is arguably bigger—a mash-up of energy technology, information technology, building technology, and vehicle technology—plus related products, services, and businesses that stand to transform our lives over the next generation, at least as much as the Internet has.
Energy: As Cheap as Information?
One way to understand what's taking place is to look at how computing technology evolved. Consider this brief history of the past 50 years of computing as a comparison: The first computer systems consisted of mainframe computers hard-wired to an array of "dumb" terminals—so called because their principal purpose was to enter or draw information from the mainframe. Eventually personal computers came along that were smarter and more self-sufficient, able to have two-way conversations with mainframes and other PCs. Now everything seems to talk to everything else, and can do so wirelessly. Computers talk with a billion other computers, as well as with TVs, phones, home entertainment systems, and soon, our cars, refrigerators, and wristwatches.
All of this resulted from hundreds of innovations provided by thousands of companies, triggering dramatic price drops and efficiency gains in digital storage, microprocessor speed, software standards, communications bandwidth, and myriad other things. Everything has become and continues to become smarter and smaller. Information has become so cheap, efficient, and ubiquitous that it's nearly free: We rarely worry about how much time we spend talking, texting, surfing, or downloading—at least in terms of cost.
Energy systems are developing along similar lines. The "mainframe" is the central power station at your local utility, most likely fueled by coal or natural gas. The "dumb" terminals? You're likely sitting in one: They are homes, businesses, and most other buildings that can only receive "information" (aka electricity) from the "mainframe."
Focus on Abundance, Not Scarcity
Increasingly, those homes and businesses will become smarter and more self-sufficient as we install solar and other renewable systems to generate power. And thanks to smart meters and other devices, they'll be able to have two-way conversations with the power plant. Increasingly, major power-using devices such as refrigerators, lighting, and heating and air-conditioning systems will "talk" to the electric grid, powering down when appropriate—perhaps imperceptibly—to take advantage of cheaper rates as prices fluctuate throughout the day and year, in accordance with supply and demand. Plug-in electric vehicles and hybrids will store electricity in their ever-more capacious batteries, selling extra power back to the grid when needed, or perhaps powering a home or business during an outage, or when utility rates are too high. As with computers, nearly everything will "talk" to everything else.
Much of this will take place wirelessly.
The question—and the great opportunities—lie in this: What are the hundreds of innovations and thousands of companies that are needed to make energy so cheap, efficient, and ubiquitous that it becomes nearly free? Oh, and decarbonizes it along the way. That's the big, hairy, audacious question pondered by investors and entrepreneurs in Silicon Valley and other bastions of technology development. Unfortunately, this is the polar opposite topic of most energy policy conversations, which focus on generating ever-greater quantities of power from existing sources, and on how the clean technologies will affect electricity rates. This other, more compelling vision is about energy abundance, not energy scarcity.
By 2018, a $325 Billion "Clean" Market
This is not just pie in the sky. Energy. Water. Transportation. Buildings. All are trillion-dollar markets. In its Energy Trends 2009 report, researcher Clean Edge (of which I am co-founder) projected that the collective markets for just three technologies—biofuels, solar, and wind power—will grow to $325 billion by 2018, from $116 billion in 2008. That doesn't take into account other energy-producing technologies, electric vehicles, smart appliances, storage devices, and the myriad switches, routers, and software that tie them all together.
This is why there are thousands of startups—not to mention hundreds of mature behemoths, from GE (GE) to Google (GOOG), Boeing (BA), and Best Buy (BBY)—looking to build some piece of the clean-energy ecosystem. Even in bankruptcy, General Motors maintained the consortium of utilities it convened to design a smart, standardized infrastructure for plug-in electric vehicles. All of these companies find themselves in the middle of a revolution that few of them fully see yet.
It will take far more than enlightened entrepreneurs, investors, and CEOs to bring this revolution to a boil. It will require breakthrough business models, cooperation among competitors, out-of-the-box marketing, early adopting customers, open-source innovation, and just the right touch from the regulatory crowd. Along the way, there inevitably will be false starts, overhyped companies, consolidation, and far more investor carnage than anyone would like.
Sound familiar? Indeed. It's sounding more like the Internet every day.
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