Read more past the break and join the Green Light Distrikt Facebook group for updates on events, blog posts and more.

Step 1: Collect Accurate Data About Your Existing Customers

In a Wall Street Journal article a few weeks ago, Bob Davis discussed how inaccurate data is leading to bad policy making in China:

“China reported that GDP growth slowed substantially in 2011 to 9.2%, compared to 2010’s 10.4%. But maybe it slowed more – a lot more. ‘China’s economic statistics are usually inconsistent, occasionally wildly inconsistent, and do not seem to be improving in quality,’ said Derek Scissors of the Heritage Foundation. Bad data leads to bad policy. The faster the Chinese economy is seen to grow, the less incentive there is for Chinese leaders to try to shift their economic growth model to rely more on domestic consumption – a move that’s been urged by government officials around the world and a slew of economists. Things are so bad he calls for the U.S. Department of Commerce to compile its own estimates of Chinese Economic Indicators.”

How can you collect accurate data? There are an endless number of tools based on the needs and budget of your company. Here is a short list of tools I’d recommend based on my experience:

• Website: HubSpot, Google Analytics, VisiStat
• Email newsletter: Constant Contact, Vertical Response, Emma
• Social media: Radian6, Klout, HootSuite, Facebook Insights
• Online surveys: Survey Monkey, Constant Contact, CVent
• Location-based services: The Coupons App, FourSquare, Yelp, Facebook Places
• Customer management: CiviCRM, SalesForce

Step 2: Protect Your Customer’s Privacy

Once you have accurate data, you have to protect your customer’s privacy. Why? Just ask Facebook. The social media giant has been plagued by privacy issues, most recently in November 2011 when Facebook settled with the FTC regarding a “number of cases where Facebook had made claims that were ‘unfair and deceptive, and violated federal law.’ For instance, it passed on personally identifiable information to advertisers, even though it said it would not do so.” Facebook isn’t alone. Earlier this week, Google announced a campaign to address privacy concerns by simplifying it’s privacy policy into one main policy.

Today’s Economist illustrates how governments around the world are trying to protect citizen’s privacy:

“[There is a] global government crackdown on the commercial use of personal information. As data whizz across borders, creating workable rules for business out of varying national standards will be hard. Building a single European data-protection regime is hard enough. Harmonising it smoothly with America will be harder. Reaching deals with Indian bureaucrats and Chinese mandarins set to defend the interests and data of their countries’ rapidly growing online firms may be downright impossible. Welcome to the new world of data geopolitics.”

Every company needs to decide to what degree to protect their customer’s privacy, but here is “A Seven-Step Guide to Protecting Customer Privacy”:

1. Conduct a data privacy audit
2. Minimize data collection and retention
3. Secure the data you keep
4. Post a privacy policy
5. Communicate with customers
6. Give consumers a choice
7. Provide a forum for complaints

Step 3: See If Your Existing Customers Are Your Target Customers

Assuming that you already know who your target customers are, you can now use the data you collected to see if your existing customers are your target customers. I argued in “How to Grow Electric Vehicle Sales” that advertising to everyone, but no one in particular, is doomed to fail. Chevy Volt product marketing manager Cristi Landy admitted as much: “We’ve learned that [the Volt marketing] is confusing to people.” Crystal Arvigio of Presidio Graduate School illustrates how the marketing of the all-electric Nissan Leaf differed from that of hte Volt:

“I was immediately struck by the fact that the Leaf is clearly going after the early adopter/leading user market and plays much more strongly [than the Volt] on potential customers’ sentiments about the environment to evoke a very strong sympathetic and emotional response. The Leaf has some functional drawbacks as compared to the Volt, such as not having gasoline as a substitute in between charges if needed. Nissan’s messaging appears to embrace the distinction with pride by suggestion the car is on the absolute cutting edge of the new electric vehicle technology.”

Needless to say, Leaf sales beat out Volt sales by 25% in 2011, despite the fact that the Leaf didn’t address range anxiety and was negatively impacted by production losses due to the Japanese tsunami. If there is a disparity between your existing customers and your target customers, sales will likely fall short and you have to redesign your marketing strategy.

How can you identify your target customers? Through a brand study. Branding guru Mitch Anthony discusses his process:

“[The study] is a highly collaborative program of discovery that  surveys an organization’s history, its audience(s) and potential audience(s), its service(s), the features and benefits that these services provide and the competitive environment(s) in which the organization operates. Most important, the work provides many stakeholders with the opportunity to share and align vision, goals and “what-if” scenarios. Typically this direct survey work is supplemented by secondary research on the trends affecting the organization and on its industry or sector. The brand study articulates recommended positioning and messaging strategy in the context of the audiences served and the trends that might influence perception.”

Brand studies can be accomplished either by staff or outside consultants. The more important element is to have a deep understanding of brand management, a discipline to stick with the process, and resources to execute the strategy once you identify your target customers.

Closing Thought: Data Will Not Save The World

While I am a firm believe in the role of data in a successful marketing campaign, I also believe there are two critical pitfalls that clean tech entrepreneurs needs to be aware of.

First, people don’t always say what they want, because they often make decisions on impulse rather than intellect. Take the case of Walmart. After surveying customers and trying to out-innovate Target, the company spent hundreds of millions of dollars redesigning stores. What happened? “Sales went way down. Walmart has lost close to two billion dollars of sales, maybe more. Needless to say, the executives in charge of the project have been fired, and Walmart is spending yet more money to return to its original, time-tested strategy of offering a huge (albeit cluttered) inventory of low prices.”

Second, people don’t always know what they want. “Some people say, ‘Give the customers what they want.’ But that’s not my approach,” Steve Jobs once said. “Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘If I’d asked customers what they wanted, they would have told me, ‘A faster horse!” People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”

Related posts:

1. How to Grow Electric Vehicle Sales Electric vehicles are one of the sexiest new entrants to...
2. Stop Marketing the “Good for the Environment” Benefit Last week I had the pleasure to drive the Chevy...
3. Green Light Distrikt in 2012 – Can We Increase the Velocity to $1 for Cleantech Companies? Another year has passed and Green Light Distrikt is still...

Related posts brought to you by Yet Another Related Posts Plugin.

Here is the story and what I’ve learned about prototyping in the process. Hopefully, it will be useful to you as well.

Here’s a quick snippet of what I learned.

1. Closeness with customers is key, especially if you’re getting them to change their behaviors. If you’re building a new product and are not building relationships with beta customers, this is a problem. It is critical for time between iterations and testing. This is also critical for them providing you blunt feedback. Lastly, with many cleantech products you’re interrupting existing operations. If they don’t trust you, they won’t want to risk it.
2. Don’t assume you know the answer. I was the target customer but 15 minutes of feedback on our alpha prototype enabled us to reduce manufacturing costs by 400% for our beta. This is key because unlike software or internet products, cleantech products are EXPENSIVE and tend to require face to face relationships.
3. Work on your communications. The concept must be clear to the customer quickly or it will be difficult for them to provide useful feedback that can use to enhance the product.

Click below to read the full story. Also, apply for Cleantech Prototyping Academy if you want to learn best practices of how to build products faster (and cheaper) in order to impress investors or find beta customers. CPA is taught by Ethan Labowitz.

The Pitch

The PV Pal is a tool that allows residential solar installation crews to install solar faster and with less men. Installing solar on a pitched roof is difficult. The hardest part is getting the first row up and to make sure the modules are parallel. It’s a three person job and an art form. The PV Pal holds the modules, so you need less people, and it also allows you to set the line before panels are up. Thus, the bottom line will always look straight.

Inspiration: 

My own pain point. I’ve installed well over 300 kW of residential solar PV and it can be serious pain. At one point, I was running a 3 person installation crew that was completely green. Their uncomfortableless started slowing down production and it was a safety problem.

The ‘Ah-ha’ Moment

There were two ‘ah-ha’ moments. The first was when I brought the alpha prototype to the crew. Everyone instantly saw the value and started providing feedback on how the design could be improved. Physiologically, this means they understood and liked the idea. The second ‘ah-ha’ moment is when my boss bought our first version for use on a job he was running. Why? Market Validation.

Target Market

Our target market is extremely specific. Residential solar installers that are primarily using Unirac mounting and installing at least 1 residential system per week.

Value Proposition

Better quality and time savings. Because the PV Pal holds the array, it will always be straight. Also, the ability to hold the array means a smaller crew is needed, and they can move faster.

Competition

The main competition is first using other racking systems. Our product is currently only compatible with Unirac.

Here’s the longer story.

Part 1 Realization of idea

Two years ago, I started working with Nexamp in the field installing solar PV, solar thermal and geothermal systems. My goal was simple. I wanted to really understand how the systems were installed and designed. After 3 months, I was training and running my first crew installing 50 kW of solar PV on 5 buildings in downtown Boston. Needless to say, these guys were scared of being on the roof and standing on the edge. This is when I realized the problem, if I could create a tool that held the panels, we’d be able to go faster, the modules would always be straight, and it would be safer.

I ran the idea by other installers at Nexamp and their response was “that tool would be amazing. We’ve been trying to figure that problem out for a while”. The initial feedback gave me confidence but I didn’t have the skill set to make the product. It was at this time that I was first introduced to Adam Standley of Arista Solutions. We quickly became friends and started talking about this problem and the idea. Adam’s job is to design and prototype products. We first met on a Saturday, Adam set my initial design ideas on Sunday morning. From there, we designed version 1 of the product.

Part 2 Creating of Product.

Our goal was to create the product as quickly and cheaply as possible. Our team was perfect, while Adam was clearly the product guy, I was the customer guy. He knew and had the relationships to prototype, I was in the field everyday. It took us less then 2 months to create the product with the major bottleneck being the machine work to manufacture the product.

Part 3 Putting it into the field and version 2.

Finally, we had the product and in enough time for me to try it on the job.

We field tested the tool and quickly found we had not built it strong enough to hold the modules straight as we wanted. Here was the key in the building the product, although it did not work the first time, everyone on the crew instantly saw the value of the tool when I first showed it to them. As soon as I told them what it would do, they understand why it would be useful, saw how it would work, saw how it could save them time. I feel that this realization is what made them so willing to provide feedback and test the product out. If it was not clear the tool would be useful, they would not have provided any feedback.

Key Lesson Learned: When you are prototyping and finding beta customers, don’t waste your time on customers that don’t “get it”. Find customers that see the value in what you’re working on. Key in mind that this can also be a problem if you’re not sure what the value of the product is or how they would specifically use it.

Part 4 The expansion dilemma

Here is the current dilema. Our business is completely financed by our own cash. This means, we need to take an order and downpayment to produce any PV Pals. However, in order to get to sell the product cheaply we need to manufacture in large quantifities. We can have a substantial gross margin if we’re producing units in batches of a hundred or more, but this is direct. Most likely, we’ll need go through existing distribution channels to get our product to installers because its cheaper then hiring a sales force for such a cheap product.

Also, I’ve spoken with many distributors and in order for them to carry a product they like to installers asking for it. This makes sense, they’d like to decrease their own risk.

Here’s the 5 Things I learned

Here’s were the keys to successful prototyping

1. The concept was clear to the customer quickly. The item that helped us the most in terms of making an initial sale and also getting feedback from my colleagues is that the concept was very clear instantly. Why? They understood what the tool was supposed to do, even if it didn’t work perfectly the first time, saw the benefit of a perfect tool, and thus wanted to help me. Thus, they were able to provide us with very specific and useful feedback. If the concept was not clear to them they would not have been interested in providing feedback.
2. Piggyback on existing product. Our product can only work with Unirac mounting hardware. Why? Because that is the product that we used during installation. Piggybacking on an product that has already penetrated the market helps in two ways. First, it provides us with some credibility. “Our product works with Unirac” sounds good. Second, it makes our marketing easier and also allows us to quality companies more easily.
3. Clear target market makes marketing extremely easy. Here’s how specific our target is, small and medium size companies that focus on residential solar, that use Unirac and install more then 20 systems per year. This makes it very easy for us to find them because we know exactly who they are and where they are. If you do not know exactly who your target market is, you need to. This has a huge amount of overlap with
4. Have close connect with the customer. In my example, I was a customer. Trust and relationships is key in product development and getting customer feedback. If I had to create a new relationship with an installation crew, it would have taken at least five times as long to get the needed feedback. Time and momentum are key in creating new products. The process is very personal and requires building strong relationships. This is why engineers tend to not focus on it as much as they should.
5. Don’t assume you know the answer. Everyone says this, but it can’t be stressed enough. I WAS THE TARGET MARKET, but my colleges still gave me feedback that helped drop production versions of the beta version by 400% within 15 minutes of using the product. They just saw the product differently AND we had an existing relationship so they were okay being blunt with me.

Related posts:

1. Two Questions to Ask About Any New Product Feature In the past 3 weeks, I’ve had 10 conversations with...
2. The Plan to Make Boston The Leading City for Clean Energy Prototyping BICEP is the Boston Institute for Clean Energy Prototyping. It’s...
3. 3 Reasons Why Prototyping Services are Essential to Solar Startups I concluded that cleantech prototyping services were the best solution...

Related posts brought to you by Yet Another Related Posts Plugin.

The goal of Green Light Distrikt is constantly changing as my work, and the work of other industry insiders, continues to shift. Currently, I’ve published a study guide for the Solar NABCEP exam, invented a solar installation tool, I’m responsible for all marketing and sales at HeatSpring, and am consulting with both renewable energy installation companies and companies launching new products, technologies or services targeted  at the solar or geothermal industry. All of these experiences have provided me a valuable skill, into how to build a product quickly, get it in front of customers, and collect money, or not.

What started as a personal blog, turned into a blog about the cleantech industry in Boston, then about the industry in multiple cities, and now Green Light Distrikt is a blog that is for people who are building cleantech companies. The goal is to make the blog for other people like myself, those that are constantly exploring opportunities and working to build successful companies in the cleantech industry.

Here’s a review about who Green Light Distrikt is, what we’re writing about, the projects that we’re working on and how they relate together and then topics and themes we’ll be writing about in 2012.

Most of the topics fall under one simple concept that GLD is beginning to focus around: How can we increase the velocity of cleantech companies to $1 faster ? By this I mean, what can we do to get companies out of “idea stage” and into “making money stage” as quickly as possible.

My goal in outlining what we’re about is to make it clear for readers, so that you can know what to expect when you come to GLD. I want to attract people that are interested in cleantech entrepreneurship and make sure those who aren’t are not wasting their time.

What is Green Light Distrikt?

GLD is a blog and community about building profitable companies in the cleantech industry. Everything we do and write about will support the following question; “Will X blog post, meetup, event, etc be useful to a cleantech entrepreneur?” If the answer to this question is yes, we’ll cover it. If the answer is no, we won’t. This means that we’re only interested in news, policy, or other larges trends only in as much as they impact the day to day ability of a profitable cleantech company to be created.

We’re more interested in specific “how-tos” and expert advice from people that are working on and have solved real world problems then a synopsis of news. Topics like, how do you find customers, what’s the best way to prototype a product, how do you design or install solar and geothermal systems, can you invest in green real estate, are all extremely interesting to us.

How do we define cleantech?

Our definition of cleantech is any organization that is directly working on reducing the pollution our economy creates.

For this reason, we are interested in having industry insiders from many different regions, technologies, and business roles, because the opportunities we’re looking at are extremely vast and impact every part of our economy.

Who is Green Light Distrikt writing for?

We are writing for a very specific group of people. Our writing and community is targeted at people between the ages of 20 and 35 that are expanding, or actively working on starting a company in the cleantech field. A question I receive frequently is, are we “agist”? Yes, absolutely. Their are many events for investors and CEOs only. We believe it’s also important for their to place for people that are similar to us to gather.

What is Green Light Distrikt and how are all of our product related?

There’s a number of related projects GLD is working on. Here is a review of each and how they relate to GLD’s core mission.

• Blog. The blog is free for the public and is a place for me and our industry insiders to share what we’re working on, what we have learned and the various opportunities or challenges that we face. The purpose of making the blog public is to allow like-minded professionals the opportunity to connect with and learn from one another.
• Hitchhikers Guide to Cleantech (HHG). The Hitchhikers Guide will be a downloadable free product GLD offers that will be updated every 6 months. The purpose of the guide will be to help answer 6 simple questions about cleantech cluster across the globe. The questions will allow interested professionals and entrepreneurs to quickly understand local markets, opportunities and the resources needed to start a company.
• Cluster Chapters. GLD currently has 3 active chapters, New York, Boston and London. The purpose a chapter is simple. Provide an understanding of what’s happening in a local market on the ground.
• Friends of Green Light Distrikt. The Friends of Green Light District is similar to HHG is in that we’re going to be collecting and providing a list of amazing people, groups and resources that can help potential entrepreneurs. A sample list includes, the Boston Institute for Clean Energy Prototyping, NYC ACRE, Greentown Labs, and Wattnow.
• Energy Bar. EnergyBar is the second reincarnation of what started out as “Cleantech Kingpins.” The purpose of regular local meetups is simple. Learn from experts and provide a place to create real relationships. We believe building friendships between the current and future leaders of our industry is critical to growth. Currently Energy Bar’s are held regularly in Boston and London.
• Member Meetups: We’ll host the first member meetup in NYC in February. The purpose of the meetup is simple, explore real business opportunities and not just talk about it. The meetup will be restricted to professionals looking to build a company that have either market access, people who have access to sell to a specific market, and product people, those that can actually build something. The meetup will be limited to 15 people and will be driven by short presentation from attendees on market opportunities they see, or products they would like to sell.
• Green Light Distrikt Membership. Green Light Distrikt membership is a feature that will be added to GLD in 2012. Our goal is not to create another social network but rather provide people a better way to keep in touch with people who love GLD. Benefit will include access to conferences, first access to meetups, being able to reach out to other GLD members.

What topics will we be investigating in 2012?

This list is sure to change, but here’s a list of topics I’m super excited to share and explore.

• Where are the opportunites for young professionals?
• How can we reverse engineer cleantech companies to create profitable businesses without a lot of capital or formal credentials?
• The problem with cleantech is the industry is not making enough money. Is this changing at all?
• Where are the small, profitable, niche opportunities that large multinational corporations are not looking at nor could they exploit?
• Forget the national government, what can cities and state governments do to support new companies?
• How can we apply ‘lean startup’ concepts from technology to cleantech. We need to learn how to building prototypes faster and cheaper, we need to find our customers quickly and start charging money.
• What can we do to increase decrease prototyping time and costs?
• How can we start focusing on customers first, then investors and advisors?
• What is the real difference between regional clusters? Both within the country and internationally. Is there a place where it’s easier to start a company?
• Energy and IT. Where are the opportunities in using software to solve energy problems?
• B2B Tech tools. There has been huge growth in the solar and geothermal industry and there are a lot of problems that small businesses are facing in these industry, can we create simple software products to solve them?
• Customer development: How can increase the velocity to $1 for cleantech company? We need to figure out how to find customers and sell to them quickly.
• Is it a challenge for new companies to find talent?
• How to evaluate B2B vs B2C opportunities?
• What are the challenges of creating a product based vs. service based business? How do you scale either? What are best practices?
• What to consider if building a new product or service for the solar PV, geothermal heat pump, or solar thermal market. These will be lessons learned and on-going advice from what I’ve learned at my work with HeatSpring.
• Resources and advice and entrepreneurs that are looking to building installation companies in the solar PV, geothermal heat pump and solar thermal industry. Again, this will be more insights from my work at HeatSpring.

Related posts:

1. Why should Mass cleantech companies take a vacation to Costa Rica? I sat in on a webinar recently where the U.S....
2. GLD Set to Explore European Cleantech Clusters For the next few months, I will be working remotely...
3. NYC GLD Meetup: How can we Create Profitable, Easy to Test, and Cash Flow Positive Businesses Focused on Cleantech? The renewable energy and cleantech industries need to be making...

Related posts brought to you by Yet Another Related Posts Plugin.

The renewable energy and cleantech industries need to be making more money. This might seem like a simple observation, but I don’t think it’s talked about as much as it should be within our industry. I certainly do not hear it enough.

In order to help facilitate this process, I’m creating a meetup in NYC for entrepreneurs looking to build companies and make money in the renewable energy industry. Read below for the backstory, meetup details, types of opportunities we’re look at and the types of individuals who will be at the meetup.

Here’s the Back Story

I’m not saying companies are not making money, some are. Who is currently making money? (note: this is not a complete nor scientific list)

• Tax equity investors in solar are getting paid. “I’ll give you $.60 and you give me $1 in tax credits” Seems like a good deal to me
• Service based business that are run well. Solar and geothermal EPC companies are making between 6% and 12% net profit before tax.
• Solar financing companies are making between 13 and 15% IRR. All are attempting to drive down the customer acquisition costs. SolarCity does this by being vertically integrating, BrightGrid does this by partnering with module manufacturers, Sungevity does it by providing quotes online and One Roof Energy does it by working with roofing contractors.
• Top tier Geothermal heat pump and solar pv manufacturers are making money. Most are public, so you can look up their income statements.
• Software and simple product B2B companies selling to the EPC world are making money. These companies are small, but they’re making money. Solar software and racking companies come to mind. OnGrid Solar, Clean Power Finance, Solar Pathfinder, Panel Claw, to name a few.

Where is the REAL opportunity to make money for young entrepreneurs?

You’ll notice a few things about the industries that I discuss above. Namely, they are hard to get into. They have some large barrier’s to entry. Licenses, capital, public market access, relationships with Chinese government officials, etc. These are all things that most young entrepreneurs may not have and are too hard to get.

I explored why cleantech leadership tends to be much old then in other fields in the article; “Why are there no 24 year old CEOs in Cleantech?”

The one type of business a young cleantech entrepreneur can find herself in is a service based business. For the sake of this post, I’m not interested in service based businesses because they tend to not be easily scaleable. It is very difficult to separate profit from hours worked or the number of employees you have. It’s not that they’re bad businesses, just not what I’m interested in exploring for the sake of this meetup. I’d like to find a business model where your revenue could double or triple, and you might have to increase hours worked by 10%, given your systems are configured correctly.

With this in mind, there must be opportunities for new businesses that are very easy to test, profitable, can become cash flow positive quickly, and can run with small teams. Can we reverse engineer a business opportunity in cleantech that a youngish person with no “real” credential can start by being smart and tenacious? I think so. This is the purpose of the meetup I’m hosting. I want to find individuals that are looking to start these types of businesses and explore places where we can find these opportunities.

Here’s a little bit more about the meetup

I’m moving to NYC from the greatest state in the union, Maine, in the middle of January. I plan on hosting the meetup in Feburary.

• Here’s what I don’t know; where the event will be and the date and time. Easy details to fix.
• Here’s what I do now. I do know what type of people I want to invite. See below for more details.
• The event will be small, less then 20 people. Why? We want people to be pitching real businesses and giving real feedback.
• The goal of the meetup is to talk about creating real products and businesses. We want concrete and real discussions, not a conversation on general industry trends, unless these trends are showing a clear opportunity.
• The goal will be to find professionals that have one of two characteristics, and maybe both. First, market access and knowledge (I’m an example of this, read below for more). We want people that have access to customers that are spending money. Second, people who can build products. For example, the ability to build a product, piece of software, etc. If you can find a customer that wants something, you need people who can build it.

A little about where I’m coming from and my perspective.

I work with HeatSpring and have a lot of direct contact all types of companies within the solar pv, solar thermal, and geothermal supply chain. Remember I said I am a market guy. This gives me access to not only get new products into the existing supply chain, but create new products that may or might not exist yet. I can easily test and sell a B2B product to small and medium size solar pv, solar thermal and geothermal companies. I have access to installers, distributors and manufactures and thus can sell a product to anyone on the supply chain.

Also, I’m advisor at the Boston Institute for Clean Energy Prototyping. I know the people that can get prototypes and products built.

I’ve experimented with information product and physicsl tools. The NABCEP Study guide is an information product for solar installers. The PV Pal is a tool I invented while installing residential solar that makes the installation process go faster. Both product have been successful and I’ve learned from each. Now, I’m looking for more opportunities and would like to connect with individuals who are doing the same.

Here are the characteristics of opportunities we’ll be look at:

• Can it be tested with no upfront investment?
• Can we collect downpayment for the products without the actual product? Here’s the test. Can we create a sales page and collect downpayment without investing time and money in the product? The easier the product is to test, the better.
• Is it a physical product, piece of software, information product, or service that has been turned into a product?
• The end customer, or group of potential customers for a new product, is very clear. Another key is that the customer can make decisions quickly.
• Is it a B2B sale? B2B just tend to be easier. (note: this is just my opinion)
• The product has a clear benefit. By clear benefit, I mean that it’s easier to sell something when a business is avoiding a large risk, regulation, fines, licensing requirements, rather then trying to maximize an upside, unless that upside is huge. In other words “buy this so you don’t get fine, or so you pass this test” is an easier sell then “give us XX dollar and it will save you 10% forever”

• We need to raised XX amount of money. This takes too long.
• Our break-even point is more then 12 months away.
• The customer is some a fortune 1000 company. This may seem couninteratie but many times these companies take too long to sell to, unless you’re selling a cheap product to a sub department where they can make a purchase without approval from accounting, their boss, etc.
• The company will grow to hundreds of people.

Please note. I’m not saying that any businesses that are working on concepts with the above characteristics are bad. In many ways, they’re awesome and needed. They’re just not for this meetup. 

If you’re interested in joining the meetup

If you’re interested, Green Light Distrikt is creating a meetup in NYC to bring together a small group of people who are looking at creating the same type of businesses focused on the space that I describe above. If you’re interested, please let me know a little more about yourself and when the event date comes closer in January, I will reach out to you.

Related posts:

1. Two Questions to Ask About Any New Product Feature In the past 3 weeks, I’ve had 10 conversations with...
2. NYC Bets Big on Cleantech: An Interview with the Director of NYC ACRE Incubator New York City is so close to Boston yet I...
3. My Plan to Make A Building More Profitable and Use 75% Less Energy from Day 1 Inspiration is funny sometimes. You never know when you’re going...

Related posts brought to you by Yet Another Related Posts Plugin.

“The first few phases of adoption are going to be relatively simple. The EV industry is trying too hard to address issues of range anxiety and others that the early adopters will be relatively comfortable with. There will be people who are early adopters of other technologies who are comfortable with those initial hiccups.”

Anatol reminds us that it’s essential that these companies optimize their marketing resources and target the audience that will be most likely to purchase electric vehicles regardless of their existing limitations.

Let’s consider the history of hybrid electric vehicle sales as a proxy for the growing electric vehicle market. Read past the break for the full story and join the Green Light Distrikt Facebook group for updates on new events, blog posts and more.

The Toyota Prius is of course the iconic hybrid introduced in Japan in 1997 and globally in 2000. Prius sales grew from 65,000 vehicles in its first four years combined to an average of 150,000 a year for the past four years to reach 2 million vehicles sold in 2010. An article from CNN Money supports Anatol’s view.

“The Prius wasn’t a delight to drive. A Car and Driver writer reported, “The Prius alternatively lurches and bucks down the road, its engine noise swelling and subsiding for no apparent reason.” But the Prius caught on anyway and sales were much higher than the company dared hope. Buyers didn’t care about the jerky ride or premium price — they focused on the improved fuel economy, lower emissions (as much as 80% lower), and advanced technology. Pride of ownership was so high that only 2% of buyers opted to lease.”

Why are some buyers (my father bought the first edition Prius in the early 2000s) willing to look past obvious shortfalls and take a chance on a new technology? According to the technology adoption cycle model, there are what are called psychographic profiles that helps explain why some people bought the Prius in its early years and why many did not.

“The technology adoption cycle model describes the adoption or acceptance of a new product or innovation, according to the demographic and psychological characteristics of defined adopter groups. The process of adoption over time is typically illustrated as a classical normal distribution or ‘bell curve.’ The model indicates that the first group of people to use a new product is called ‘innovators,’ followed by ‘early adopters.’ Next come the early and late majority, and the last group to eventually adopt a product are called laggards.’”

People who bought the first and second models of the Prius fit into the innovator and early adopter psychographic groups, and are willing to prioritize ecological benefits at the expense of performance more than the early majority, late majority and laggards.

When I was working at the Sustainable Performance Institute, I had the fortune to work with brand guru Mitch Anthony to lead SPI through a rebranding process. What became immediately clear was that as the organization transitioned from essentially a LEED Certification consultancy to a focus on improving a firm’s design process, we would have to reposition the organization to identify the innovator and early adopter firms that “got it.” That is, firms such as Buro Happold, Suffolk Construction, Vanderweil Engineers and other firms that best matched the psychographic profile of our new position in the marketplace.

SodaStream, the home carbonated beverage system manufacturer, is an example of a firm that has effectively leveraged psychographic profiles to sell an entirely new product to a typically conservative consumer products market. The system, which was first invented in 1903 and introduced in Europe in the 1970’s, was only brought to the U.S. in 2008 and has doubled sales to nearly $300MM with the U.S. going from 3% to 31% of sales during that time frame.

How did they achieve such rapid growth? SodaStream realized that as a new product, they would need to get their product in front of people most likely to buy it: families, people looking for environmentally-friendly alternatives, and people who drink a lot of seltzer water. So they focused on higher-end and lifestyle  retailers such as Williams Sonoma, Sur La Table and Bed Bath and Beyond. Now that the company has achieved about 0.5% penetration in the U.S. market (Note: when the second generation Prius came out in late 2003 and U.S. sales increased exponentially, Prius sales made up 0.6% of U.S. auto sales), SodaStream has increased distribution to mass market retailers such as Sears, JC Penny, Target and Costco. Sales have continued to increase, but at a slower pace, and they have recently pulled product from BJs due to low sales. Why? Because Target and the other new retailers aren’t as good of a match with the SodaStream psychographic profile as higher-end retailers such as Williams Sonoma.

The libertarian Cato Institute hosted an event in Washington DC last week with Todd Myers, author of the new book “Eco-Fads: How the Rise of Trendy Environmentalism Is Hurting the Planet,” which dissects why policy and business leaders often promote ineffective environmental policies. One example was a report that concluded that “in virtually every [Washington State] school district where there are green schools the green schools use more energy per square foot than non-green schools.” I’m not convinced that this is causation (e.g. wealthier schools may both consumer more energy and be able to afford renewable options), but the point stands that reducing demand through efficiency measures are typically less capital intensive with the same or more positive impact than increasing renewable energy supply. He also cited a McKinsey study which I mentioned in a post earlier this summer illustrating that energy efficiency is orders of magnitude more effective per dollar in reducing greenhouse gas emissions.

Lets return to the question of how to optimize electric vehicle adoption. We’ve learned from Anatol Feygin of Loews Corporation, Mitch Anthony, SodaStream, the Cato Institute and McKinsey that:

1. With finite sales and marketing budgets, organizations need to use their resources most efficiently by marketing to customers that match their product or service’s psychographic profile.
2. Organizations identify consumers that match their psychographic profile through a positioning process that evaluates the benefits of their product/service, who is are most likely to be in the innovator and early adopter psychographic groups, and what marketing tactics will most effectively reach these audiences.
3. Eventually, once organizations reach high enough market penetration they will saturate those innovation and early adopter psychographic groups and will need to expand marketing strategies to the early majority, late majority and eventually the laggards groups.
4. At some point, sales growth will slow, and that will depend on the benefits of your product for the target audience and its comparison to competitive offerings.
5. Continued innovation will enable the company to reach new consumers while the initial product becomes the cash cow funding innovation.
6. Evaluation and reevaluation is a critical piece of this process, and needs to be done regularly to make sure your target the right people through the right marketing strategies highlighting the right benefits.

For electric vehicles, it makes absolute sense that the innovators and early adopters are individuals with environmental sensitivities and a willingness to overlook issues such as range anxiety and premium pricing, commercial fleet operators who will save money through reduced fuel and maintenance costs without worrying about inconvenient charging stations because of predictable fleet routes. To penetrate the market as efficiently as possible, companies that have products that meet these needs – electric fleet vehicles, charge management systems (similar to Building Information Modeling in the building industry), grid-scale storage, and iconic-looking consumer electric vehicles should realize that localized advertising and social media is a much more effective way to sell electric vehicles to innovators and early adopters than $3MM ads during the Super Bowl. After a disappointing first year where the Chevy Volt is expected to fail to meet its 10,000 vehicle sales target, these lessons will become even more prescient.

This doesn’t mean that companies shouldn’t be thinking mid- and long-term opportunities to bring EV penetration beyond 0.5% market penetration when soccer moms will buy EVs for their families and macho men will buy EVs for their impressive acceleration capabilities. As Clay Luthy of IBM states after a recent survey finding that 83% of automotive executives said their future product line will include EVs, ”It is apparent to me that ‘whether’ electric vehicles will become mainstream is no longer in question.” However, it’s clear that the companies that will win the Toyota-like first mover advantage will understand and employ the lessons about psychographic profiles and the technology adoption model most effectively.

Related posts:

1. Two Questions to Ask About Any New Product Feature In the past 3 weeks, I’ve had 10 conversations with...

Related posts brought to you by Yet Another Related Posts Plugin.

The ground breaking innovators in the “Skunkworks” were shielded as if working in start-up firm, isolating them from bureaucratic interference. Considering their main customer was the government, this was a huge and extremely effective achievement.

Tim Hartford in his excellent new book “Adapt” suggests that the ‘glass-housing’ of these radical projects won’t guarantee results every time. Furthermore the majority of output innovations will actually be wholly unusable in the world. However the odd one that does prove viable will more than make up for the combined failures and can provide unimaginable and incalculable benefits.

The “Skunkworks” first team leader was Kelly Johnson, and all projects were conducted in alignment with Kelly’s 14 rules and practices. These principles were specifically developed for delivering rapid, radical and successful innovation in public private partnerships.

Whilst attending the UK Technology Strategy Board’s Innovate ’11 conference, I found one seminar of particular interest. It was based upon the findings of an intriguing new project which set out to re-invent the “Skunkworks” rules for delivering future cleantech innovation. The project utilized Johnson’s rules as a starting point to run a series of workshops with the remit of establishing ‘14’ universal truths in the delivery of successful schemes between government and private sector from cleantech projects.

The founder of WPL, Theo Bird led a panel with representation from Finmeccanica, Mott McDonald, Gordon Murray Design and Grimshaw Architects. The panel disseminated the project’s aims to investigate the current challenges, barriers and problems of developing low carbon technologies. Whilst concurrently developing a set of project principles which public and private partnerships should aim to aspire to improve development and support innovation. The session offered great insight into government/ industry collaboration and the necessary collaboration and sharing which are crucial to meeting the world’s energy challenge.

The 14 principles were as follows:

1. The business case must be compelling, sustainable and revisited frequently.
2. Legislation changes – use government environmental policies but don’t bank on them.
3. Sustainability must permeate.
4. Define your stakeholders and align their interests.
5. Contracts are living things not things you live with.
6. Innocence and experience must sing in harmony. (Focusing knowledge and younger enthusiasm – allow space for young to innovate but support with experience).
7. The best communication is personal, allowing real trust to be built.
8. Theory is transformed when grounded by practice.
9. New technology and markets rejuvenate abandoned ideas.
10. Don’t make tomorrow an effigy of yesterday – constantly challenge and rethink old ideas.
11. The most reliable component is the one that’s not there. Continually pursue simplicity.
12. Human nature doesn’t like what it does not know, convey across qualitative ideas.
13. Good public relations.
14. Perfection is a trade of imperfections. Change from to designing for certainty and perfection to concentrate on what matters.

Over sixty seven years have passed since the founding of the “skunkworks” and now a new set of principles for a greener economy have been suggested. It has been rumoured that there was a 15^th unwritten rule at Lockheed, never to work with a certain famous large US airline manufacturer! During the seminar a challenge was thrown to the floor to suggest a 15^th principle. So to reiterate this challenge, do you agree with the 14 points, can you suggest a 15^th?

Can these principles be applied to your business small or large? Does your organisation allow for seemingly crazy projects that do not agree with top management’s plans? I fervently believe that the low risk policy for investment in ‘greening’ projects is just not meeting the grade for the drastic changes that are needed if we are going to get to a sustainable destination. This path is going to mean many failures but maybe these ‘new’ principles can improve the chances for the seriously radical and potentially disruptive success stories that we are yet to widely see in the cleantech space.

Related posts:

1. GLD Set to Explore European Cleantech Clusters For the next few months, I will be working remotely...

Related posts brought to you by Yet Another Related Posts Plugin.

“A half century ago, neither political party disproportionately consisted of those who favored a my-way-or-the-high-way approach. Unbending ideologues did not make it into leadership positions. Today, it may be the only way to get elected – for one of the parties. That party has framed the debt limit as a matter of principle and used it to fire up the base. For a group inclined to see the world in terms of absolutes, compromise can accordingly only be seen as betrayal.”

What’s causing this polarization? It’s certainly not that Americans feel that this polarization is good for the country. Eight in ten Americans disapprove of Congress, more than half disapprove of the President, and three-quarters believe that the country is headed in the wrong direction. So what gives? Read past the break for the full story and join the Green Light Distrikt Facebook group for updates on new events, blog posts and more.

Peter Orszag, Citigroup executive and former director of the Office of Management and Budget in the Obama administration, says that Americans are moving to areas with people in share income brackets, which is correlated to political affiliation:

“Residential segregation by income has been increasing markedly, and since income is strongly related to voting patterns, this phenomenon may help explain the rise in residential segregation by political party. As we surround ourselves with people like us, we reinforce our own views, and the result is a more polarized population. The polarized population, in turn, feeds a more polarized political system, which makes governing difficult. Paradoxically, because polarization creates safe bases for each side, it may make the modest number of centrist swing voters ever more crucial to winning presidential elections. And yet, actually governing from the center is increasingly challenging, given the hyper- polarization reflected in Congress.”

Of course, this political polarization directly impacts people’s lens on issues such as energy and the environment. The Economist recently published a poll illustrating belief in climate change. Unsurprisingly, the poll demonstrates the strong relationship between political affiliation and one’s view on climate change.

“Tea Partiers, unsurprisingly, tend not to believe in the phenomenon (the 53% who don’t believe in global warming just outnumber the 52% who don’t believe humans evolved from other animals) and are the most strongly opposed to all sorts of government action on the issue (yet quite keen, like majorities in all sorts of polling, on research into new energy sources). They also distinguish themselves in their assessment of their knowledgeability, with 30% considering themselves very well informed on the issue and a majority happy that it needs no more information on the subject.”

What’s interesting here is not that Tea Partiers are significantly less likely to believe in climate change than Republicans by nearly 20 percentage points, but that Tea Partiers claim not to need any information in order to form informed opinions about one of the biggest problems of our time. To be sure, this trend is not unique to the Tea Party; it can be seen in the naiveté of many people on the left for instance, that participate in Occupy protests.

Which brings me to last Friday, when I had the fortune to attend the Columbia University Energy Symposium. The symposium’s theme, “Rhetoric versus Reality,” conjured up a fantasy-world battle between idealists and realistics. On the ground, though, the symposium addressed a number of critical energy problems important to people across the political spectrium, and did so in an open way that acknowledged the delusion of the polarized “drill baby drill” and “clean tech will save us” worldviews that I also found at the Harvard Business School Energy Symposium last month.

The closing remarks, delivered by President and COO of Southwestern Electric Power Company, took the theme to heart. Essentially, she argued that coal was an essential part of the electric power grid as long as rate-based utilities were required to use the most affordable energy source. And she’s absolutely right. Unfortunately, she came off as abrasive and condescending, and in stark contrast to the rest of the day’s presentations, the audience attacked her firm for using “dirty energy” and “killing local jobs.” It was clear, at least to me, that the heated situated could have been preemptively diffused with a change in tone and, to some degree, in message. Following the conference, I sent the speaker an email hoping to shed light on the situation to help make future dialogue more productive.

“Dear Venita,

As the gentleman in the front row at yesterday’s speech at Columbia University, I feel compelled to share some thoughts from your presentation. A little background: I have no connection to Columbia and work in energy research for an investment management firm.

I agreed with essentially everything you said yesterday, and can appreciate that you came in expecting to be criticized by what you anticipated as a liberal audience. I’m interpreting this based on your somewhat agitational responses to questions and your implicit comments about the audience not being realists. As someone who’s attended more than his fair share of these conferences, I can attest to the fact that people come from a wide variety of perspectives. Certainly, some are liberal, anti-coal and will challenge AEP and other coal-heavy utilities no matter what.

However, I think there’s a much larger middle ground of people who are looking for an energy solution that is affordable and realistic, and I think it’s this middle that is underestimated in number. Throughout the day yesterday, there were some insightful, open discussions about coal, gas, oil etc that demonstrated the nuanced understanding of the audience about the world’s energy challenges and that coal will certainly be a significant part of the picture.

Back to your speech and responses to audience questions. I felt like you did a disservice to your firm and coal by approaching the speech expecting to be criticized. However, I felt that your agitational remarks only instigated further challenges and prevented a more open, nuanced dialogue from taking place. I would encourage you in the future to lay out similar challenges to energy supply, cost, etc, but to do so in a way that acknowledges the problems that exist with coal emissions, a free market system, etc. Only then will the young people who you assume to be all rhetoric realize how much truth there is to what you are saying. This is of course my personal perspective and doesn’t represent the view of my firm or Columbia. I hope this is valuable.

Best regards,

Aaron Desatnik”

So far, crickets.

For anyone interested in solving the energy and climate problem, which for the sake of argument I’ll assume our readers are, understanding the roots of increased polarization and how to navigate it in the public sphere is the difference between supersuccess and superfailure.

Related posts:

1. Lessons From the Field: Jeff Sachs Tells Universities To Take Leadership on Climate Change Last week, I had the fortune to listen to hear...
2. Energy Bar is Open (Boston) + Value of a Negawatt (NYC) There are two great events happening tomorrow in Boston and...

Related posts brought to you by Yet Another Related Posts Plugin.

May – The start!

May was our inaugural Energy Bar in London; the first small step in building up traction in the UK. Conveniently, Chris Williams happened to be travelling through Europe completing research for the development of the Hitchhikers Guide to Cleantech. During his stop off in London he dropped by to give a talk on the founding of GLD and his latest projects. The event was a fitting start for GLD UK to host our first Energy Bar with the GLD founder in town.

July – Trends

In July GLD UK welcomed Tom Rowlands-Rees, Head of Energy Efficiency at Bloomberg New Energy Finance. Tom gave a fascinating talk on life at New Energy Finance, pre and post Bloomberg, as well as a bunch of thought-poking insights on cleantech trends. Using the latest BNEF analyst research, Tom shown the audience projections for solar cells and lighting – both are becoming cheaper by the week. I felt this really helped to demonstrate how clean technologies are veering ever closer to the ‘tipping point’, if not surpassing it.

August – Blooms

In August we welcomed the very creative, James Sutton founder of The Bloom Trigger Project to speak about his hugely innovative start-up that links local tribes and NGO’s in the Amazon to primary (elementary) education, local fundraising and brand sponsorship. James describes his project as:

“Bloomtrigger is developing a new visual model of online fundraising that enables people to protect rainforest in a simple, affordable and creative way.  Blomtrigger is creating a disruptive business model that takes advantage of new technologies to out innovate traditional CSR projects and rainforest charities. Find good networks and invest your time into forming strong relationships instead of spreading yourself too thinly.”

October – Philosophy

Christina Rebel of We-Impact shed light on the philosophical aspects of Sustainability. Christina spoke about the open future of our political economy and its relation to the environment. Taking insight from Sartre’s reflections on free will and determination, she urges a consideration of sustainability as a fluid and dynamic concept so that potential alternatives can be harnessed and to escape the confines of a narrowly defined approach.

Breaking away from the dogmas of ‘eco-efficiency’ or ‘eco-radical’ she proposed a practical consideration of how we can drive greater sustainability into business practices and one’s own consumer choices. Recognising the efforts of small- and medium-size enterprises and campaigns that drive sustainability in this fashion, she outlined the capacity for an individual to ‘vote with their pound’ for an aggregate ‘flexing’ of society’s muscles to empower and shape an alternative future through their consumption choices. Channelling consumer behaviour to this end clarifies that a sustainable lifestyle is not necessarily about renunciation or a radical overhaul of one’s lifestyle, but about the desirable merits that adopting a sustainable lifestyle generates so to ensure that ‘every pound spent is a pound gained’ for themselves, their community and the biosphere.

October – Crowdsourcing

We also hosted Hugh Knowles, Principal Sustainability Advisor at Forum for the Future. With members in the audience whom Hugh had taught, he began by discussing a new approach being taken at the Forum; specifically on innovation and the funding challenges for early stage start-ups. Hugh has been working on a new crowdsourcing site called peoplfund.it. Developed by TV chef and campaigner Hugh Fearnley-Whittingstall’s team, the site is based on a Kickstarter model of crowdsourced funding; only it focuses on technologies, energy initiatives and localism. Having only launched this autumn, the site has already had some successfully funded projects.

November – A different sort of Energy Bar

Finally last week, we hosted a special Energy Bar in the run up to the Guardian Cleantech Summit. James and I ran two focus groups on the topic ‘Who will be leading cleantech in 2050’. Watch out for more details on GLD’s partnership with the Guardian…

Further, GLD UK has been building its online presence through a new twitter account: @GLD_UK and through a UK centric GLD site. Check it out here and join up as a member in the UK to keep up to date with London Energy Bar events.

Related posts:

1. GLD Spreads Across the Pond to the UK A warm hello to all GDLers, my name is James...

Related posts brought to you by Yet Another Related Posts Plugin.

On an average home installation of 2.5 kW, this translates to around £1,000 untaxed, index linked income guaranteed for 25 years to the home owner. Installations of this type typically cost £10,000, so one would expect the average installations of this type to provide 15 years of income. An interesting proposition, no?

As in many other nations where FITs have been introduced, investment in and installations of solar pv have soared. By August 2010 there had been around 10,000 installations; a year later this figure had risen to almost 65,000. It now stands at over 90,000 with many more in planning. A huge increase with the vast majority of both installations and installed capacity being attributable to solar pv. A very successful policy, I hear you say.

There has unfortunately been a similar trend in the UK to that of other nations: a FIT that is ‘too generous’ and unsustainable, resulting in early cuts. In fact, they have been so successful that government is progressing with not one but two early tariff cuts, both in the first two years of the scheme. The first of which came earlier this summer, primarily cutting tariffs on large scale solar, with the most recent announced cut aimed at small scale solar.

The second came with Energy Minister, Chris Huhne stating “Since the FITs scheme started it has been successful in encouraging people up and down the country to get involved in local, clean green energy generation…However, the green economy does not exist in a vacuum and it is important, particularly in the current climate, that our approach to public subsidy is responsible and results in the widest possible deployment”.

Compare this to the Spanish collapse of solar investments during 2009, where the industry was crippled by drastic government subsidy cuts.

Nonetheless, FITs have been a successful policy; particularly in filling media inches and getting people outside of the ‘renewable world’ speaking about renewables and solar pv. FITs have generated great interest in renewables, which is a lasting positive to take from a policy that is currently treading an ominous path; for don’t they say any publicity is good publicity?

The FIT is a policy that requires clear and continued government support to guarantee future investment. The mixed signals generated by early tariff cuts clearly undermine confidence in renewable investment. There is danger that this could spread to other related, non-FIT markets; which could be catastrophic if they take hold.

What government needs to do over the coming months is manage these tariff cuts effectively and not mistakenly published details of an early consultation. I offer the following points of advice:

1. Tariff levels: Getting the right tariff levels in the first place would avoid much unnecessary uncertainty in already wary investors!
2. Intended outcome: Make sure the scheme is sufficiently controlled that it delivers the desired outcome and not one that means early changes are required. The UK FIT was originally designed to increase household uptake of renewables, but it instead led to some of the largest UK solar parks being created which have taken much of the available pot of money.
3. Making announcements: How to announce a cut to a (too) successful policy is crucial and leaked papers only fuel rumours!
4. Continued support: FITs have proved arguably too successful, especially for solar pv. In an industry that is being transformed by the scheme, government must continue support or risk undoing all its good work.

FITs are primarily a financial incentive and this alone is not sufficient to make lasting changes. It is but a mechanism, although a vital one; enabling lasting, wide spread change, moving the UK’s cleantech industry towards the ‘mainstream’ by building a lasting low carbon economy. By calling an early cut to the tariff, and only leaving industry six weeks to adjust can hardly be called sensitive. Neither is a date for changes to come into effect falling before the consultation period is over.

There has clearly been greater than expected investment in solar pv over the last 18 months, but this is sure not the most appropriate approach to manage ‘over-demand’; which indecently should not be a bad thing; should it?

Related posts:

1. Unpacking Fuel Poverty There are around 3,750,000 households in England alone that are...
2. Reflections on Then and Now: Growing up in the Growing Solar Industry from East to West Coast A sustainability advocate unexpectedly finds her career in the NorthEast's...

Related posts brought to you by Yet Another Related Posts Plugin.

The answer is clearly somewhere in between, and that’s what I appreciated most about the open-minded dialogue I found at the recent Harvard Business School’s Energy & Environment Symposium, where I attended presentations about cleantech, distributed generation, unconventional fuels and global energy policy. All of these areas and more, according to Matthew Nordan of Venrock, “are bursting with opportunity.” There are some big names below – from the CEO of A123 Systems to a high-level policymaker at the World Bank – read past the break for the transcript of the day’s presentations and join the Green Light Distrikt Facebook group for updates on new events, blog posts and more.

Opening Keynote with McKinsey

• Tommy Iglesby, Principal, North American Natural Gas Practice and Global Unconventional Oil & Gas Line, McKinsey & Company
• The solution to the energy crisis is both to increase resource productivity of supply and find new supply.
• The break-even point of unconventionals means crude is inevitably going to increase in price.
• Regardless of supply growth, economic growth and policy decisions, demand will outpace supply in the long-term.
• There is hope for disruptive technologies in mature industries as can be seen from shale gas, wehere we have found 40-50 years of gas in the last three years. It’s the same story with tight oil. Other markets around the world are following the lead of the U.S. and starting to explore the application of these technologies.
• This is not that different from industry transformation in biotech, telecom, software and semiconductors, except that we’re disrupting the base economy.

Cleantech 2.0

• How is the world of cleantech investing different now than it was 5 years ago? What have we learned from the successes and failures of the last five years? Where has cleantech investing succeeded? Are some industries that investors thought were ideal for VC five years ago been proven unsuccessful? Has the focus of Cleantech investing shifted to the demand-side and away from supply-side? Do we think these trends will continue?
• Steve Vassallo, General Partner, Foundation Capital
• Bilal Zuberi, Principal, General Catalyst Partners
• Jim Matheson, General Partner, Flagship Ventures
• Matthew Nordan, Vice President, Venrock
• Introductions:
• S: We didn’t invest in solar because it’s highly competitive and capital intensive. There are 15 states now where it’s economic to do solar, representing 20 million houses, a trillion dollar opportunity. The poor upstream solar business has benefited consumers because per kw price has come down dramatically. The lesson for those interested in a clean tech career: it’s not going to be easy in the next few years so you have to be committed to stick with it.
• B: Downstream solar will also have challenges because it’s an increasingly competitive space. I’m concerned about biofuels in the next few years because there’s a risk that companies may not successfully scale up before they show results. But I’m super excited about shale gas and also excited about LED lighting and the lighting sector globally.
• M: There will be less investment in energy storage in the coming years because now we have much more room in the energy space. I think there will be a rush into shale gas investments, some of which are not going to be profitable. I can’t think of a single area that is not bursting with opportunity.
• J: There will be ups and down over next ten years. Solar and biofuels are in a bubble. All commodities industries have bubbles and have opportunities afterwards.
• What is the impact of cheap gas on clean tech?
• J: Cheap gas is both a plus and a minus. You have to build a portfolio to hedge risk.
• B: It has changed the conversation from innovation to a commodities-based conversation.
• S: If you’re an entrepreneur selling into a commodities market you’re going to get yourself killed because you have no control over the markets.
• Are there opportunities in energy conservation?
• S: Because energy transmission is inefficient, energy saved on demand has an outsized impact on supply. You also doesn’t get hit as much when commodities prices come down. There are huge opportunities to look at demand side in electricity and utility industry.
• M: I disagree. Commodity markets do impact demand, which have seen with the challenges at Enernoc.
• Where will solar development be?
• B: Everywhere. Residential, commercial and industrial.
• What are the trends in venture capital?
• M: Solar isn’t that profitable so moving we’re investments into other industries.
• Moderator: There’s a significant learning curve, which can be seen in biotech, which is why people made bad bets early in clean tech. I think this will improve in clean tech over time.
• S:  There is a risk that clean tech investments become victim of short-term approaches of limited partners.
• How is the lack of cap-and-trade influencing the investment landscape?
• J: Most believe there will not be a law in the next 5-10 years. Many firms made bets that there would be one in effect in 2009. The biggest barrier to investment has been regulatory uncertainty regardless of your opinion of the regulations themself. The big U.S. economic concern is the ability to compete in the future given the lack of regulatory support.
• B: Global business is becoming the norm. There is a lot of innovation going on in China, similar talents to what you would expect to find at MIT.
• M: Don’t invest in anything where profitability depends on regulation. The level of trust that financiers have in policymakers is near zero, which is very different from trust in regulators in Asia.
• What is your perspective on grid-scale energy storage?
• M: Grid-scale energy storage is competing with natural gas peaking facilities and global hydro facilities. It’s hard to compete with these cheap technologies. This prevents a number of solutions. I think there is a lot of opportunity on the demand side.
• What is the potential of concentrated solar power (CSP) grid storage?
• B: We’re starting to see most plans in Spain have storage for solar built in, and the economics are much better today than they used to be. I’m starting to see this in India, too. This is only practical when you don’t have heat, because it’s inefficient to convert to electricity and then to heat.
• What trends are you seeing in entrepreneurs approaching you for support?
• S: It’s down to people who have conviction about clean tech. My belief is that there are 5-10 great clean tech companies starting every year, so VCs want to be in 1-2 of these companies. I’m optmistic but cautious on how choose to move forward on career paths.
• Is clean tech more geographically disperse than in IT?
• B: Yes, clean tech is global. People aren’t concerned with finding talent in areas that aren’t Boston or Silicon Valley, as the IT industry is. Another trend is that I no longer see MBA students sitting around coming up with ideas but sitting with experienced advisors to develop ideas before pitching to money. This is a good trend.
• M: Geographical dispersion is a real problem in the water industry. Ideally companies should be near where can both recruit the best minds and convert customers. If can’t have both, decide which is more pivotal and choose that.
• J: Success is mostly about context. We value intellect and creativity. What’s most encouraging is that entrepreneurs are partnering with big companies to have a bigger impact.
• Moderator: The lay of the land will get clearer because governments will support clean tech less as they cut budget deficits. I suggest looking up where we are on Gartner Hype Cycle. Since the world isn’t going to work without fundamental changes to resource use, this offers massive opportunity.

Distributed Generation

• A discussion on the potential future roles of distributed and centralized generation technologies in developed energy markets. Specifically, we will examine on the challenges and opportunities faced by various players across the energy value chain, and who may stand to benefit from the transition to a world where distributed energy plays a bigger role.
• Lawrence Gelbien, Vice President of Engineering, NSTAR Electric & Gas Corporation
• David Vieau, President and CEO, A123 Systems
• Paul Grana, Director of Marketing, Tigo Energy
• Asim Hussain, Director of Product Marketing, Bloom Energy
• Introductions:
• P: The costs of distributed generation are coming down faster than most people realize. Solyndra will not be the last company is go under. The solar value chain is a distributed value chain, meaning that there is innovation at each phase. No one is making a lot of money right now in solar. With a distributed value chain the profit center moves around as capacity moves. Geography plays a bigger role than in other industries. Government supports, and the constant changes in them, is bad for the industry. It’s becoming increasingly profitable to manufacture locally. Grid parity is very complex, but we’re getting close to it. But grid parity isn’t going to save the industry. The bottleneck is permitting.
• A: Bloom Energy was Kleiner Perkins’ first clean tech investment. We deploy the product behind the meter in commercial and utility systems. Barriers to new products are safety, affordability, ease, noise level and reliability and our product addresses these problems. The longest process for our product is permitting. Because you can lock in low natural gas for 10-15 years but can’t do it for more than 1-2 years for electricity, we took advantage of this to provide consistent energy costs for clients. The product provides both the primary and backup power. Our biggest challenge is inconsistent policies across states.
• L: Our biggest challenge is large-scale solar in areas that don’t have electrical wiring to the transmission system. Another challenge is surges and sags throughout the day with solar. The opportunities are in technological advances to improve storage and address surge issue and collaboration between projects.
• D: Our products can charge batteries quicker, last longer and store more energy. The main barrier now is price. The Department of Energy (DOE) says price parity point for electric vehicles (EVs) is $250/kwh; we will be at $350-400/kwh next year. There is technology that will get us to price parity in the next 8-10 years. EV penetration will be low over the next few years, with plug-in and gas hybrids with higher share. The vehicle market is critical to getting to scale and price points. What about for grid storage? A123 tested this successfully in a 16MW Chilean project recently. There are applications in pinch points, and the increases in this application of storage will make products more cost effective and open up new application opportunities. There will also be opportunities to partner to address grid storage problem.
• How will the U.S. smart grid effort evolve?
• L: NSTAR did get a grant to support several projects: real-time metering, grid self-healing and sensors to understand underground energy flows. I think the smart grid is as important as solar and wind and is going to play an increased role in the U.S. energy system.
• What are the regulatory barriers to a smart grid?
• D: Incentives. The smart grid offers the benefit that it can respond immediately whereas natural gas takes 15-20 minutes to respond. FERC came out with a decision that incentivized systems such as grid-scale energy storage that can respond to energy shortages immediately.
• P: Consistent state regulations. Utilities that have a high percentage of natural gas could also be places with strong solar support because of their ability to deliver peak load, if state regulations were consistent.
• A: Compensation for stabilizing the grid. Bloom’s technology can help stabilize the grid because it’s a base-load system. This helps utilities, but there’s no compensation for helping utilities. The challenge is how to monetize this similar to how demand response and solar operates.
• How take into account variability of rare earth material costs?
• D: Rare earths are not a component of storage. There are concerns from customers because of rare earths in motors. I don’t see this as a primary constraint on the smart grid.
• What shifts have there been in your business focus?
• A: We make decisions in order to drive adoption, not because of core capacity.
• What is the role of the smart grid to solve renewables’ intermittency problem?
• D: The smart grid will make renewables viable.  It’s profitable to use older lithium ion car batteries in storage capacity as a second use after in EVs, which brings down the cost.
• What is your ability to solve the lack of cooperation between grid operators?
• L: The real issue is who pays to improve infrastructure if it benefits more than one operator.
• What technologies will disrupt the industry?
• D: Lithium ion used with fuel cells with make storage cheaper. Sodium and lithium air are also moving forward. Their view is to bring on the solutions, and the industry will find ways to utilize them. I think we will see these technologies in a 5-15 year time frame. I do see some technology coming on sooner in terms of fast charge. If storage batteries could charge faster, there could be a smaller battery, which would also bring down costs. Also, fast wireless charging, which has already been developed, could advance broad adoption of electric vehicles.
• A: I see trends coming together to bring down costs and improve adoption. I’m not sure what this will look like, whether it will be micro or centralized. I believe it will happen in 10-15 years. I also see changes in the way electricity is consumed. Many AC-DC conversions are inefficient.
• P: The solar value chain will continue to squeeze costs to compete with new technologies on the generation side. I see broader adoption of sensors on solar modules.
• Should we look for careers in distributed generation?
• All: Yes!

Unconventional Conventionals

• Experts with a diverse investment horizon will share their thoughts and perspectives on the supply of conventional hydrocarbons. They will address questions regarding technology and its impact on the global supply and demand equilibrium. Additionally, we will hear how investors are planning for these future shifts.
• Dr. Matthias Bichsel, Member of the Executive Committee, Regional Director of Russia, Ukraine, Central Asia and India and Director of Projects and Technology, Royal Dutch Shell plc.
• Osmar Abib, Managing Director, Global Head of Oil and Gas, Credit Suisse
• David Hayes, Managing Director, Natural Gas Partners
• Dr. Nicola De Blasio, Vice President, ENI
• Introductions:
• M: Even is renewables grow in double digits, due to increased global demand for energy, fossil fuels will need to account for 70% of energy demand. Offsetting nuclear is going to add a huge gap in the energy mix. Gas is not a bridge fuel but a destination fuel. It’s affordable, which is critical since global growth is slowing and what people want is cheap, reliable energy.
• O: There have been major technological advances in oil and gas as well as huge profit opportunities in renewables because of rapid growth.
• N: Technology is the only lever that the oil and gas industry has to get access to resources. This is the motivation between technological leaps lately in the industry.
• D: Advances happen with both majors and independents. The development is on the margin, such as bringing down drilling times and allowing longer laterals to be drilled. What’s unique to Canada and U.S. is that natural resources are privatized which allows for experimentation.
• Is there enough conventional energy to support global growth?
• M: Yes. But a bigger problem is the lack of young petroleum engineers in the U.S., while there are a huge number of young engineers coming out of Asian countries.
• O: However, young engineers don’t have enough experience and need time to gain it. The problem with nationalized oil companies is that without profit opportunities companies won’t take risks.
• M: I disagree. You underestimate the willingness of people such as Asian engineers to take opportunities from U.S. engineers.
• What technologies may be considered conventional in the near term due to technological advances?
• D: Shale oil has been around for nearly a century. Technological advances have helped access tight oil and oil sands.  The focus has been on increasing recovery and reducing costs. Nothing’s new; it’s just much more profitable.
• M: What’s happening with fracking is that is uses too much water. There is significant opportunity for technological advances with fracking to reduce water consumption. We’re also transferring these technologies to Chinese oil company PetroChina. I see carbon capture and storage (CCS) as something the world has to do if we’re serious about greenhouse gas emissions. We need government clarity about the price and storage of carbon dioxide. I think there will need to be incentives to jump-start CCS.
• What is the perspective of unconventionals in the banking world?
• O: Investors are focused on new technologies because there are large returns and first mover potential. Companies are making portfolios of bets because they don’t know where the technological wins are going to be.
• What are the trends in the gas market?
• M: I do not believe we will see a global gas market in the next decade. The regional markets are the U.S., Far East and Europe.
• What is the cost of conversion to LNG vehicles?
• Guest: Infrastructure is the major barrier to LNG vehicles. There are fewer regulatory barriers than in the past so conversion costs are dropping. The most I’ve ever paid is $1.40/gallon.
• How hedged are you against changes in oil and gas subsidies?
• M: We can adjust investment quickly in natural resource plays to adjust to subsidy changes.
• What infrastructure is needed for new fuels?
• N: The advantage is that shale gas supply is close to demand.
• D: Unconventionals have mostly discovered in places where pipeline already existed.
• Any final thoughts?
• O: People should care more about the importance of energy to our everyday lives.
• M: It’s an exciting industry with a lot of growth potential.
• D: There are ways to bring an entrepreneurial spirit to energy industry and make a lot of money doing so.

Global Energy Policy

• A discussion on the current state and likely evolution of global energy policy covering: (1) The role of policy for the industry (2) how different regions and countries are drafting policy in light of their economic objectives, resource endowments, security needs and perceptions of climate change (3) What’s working, what’s not and how will this myriad of strategies change the current landscape; (4) What still needs to be done – required action on a national and supranational level.
• Manuel Pinho, Visiting Professor, School of International Public Affairs, Columbia University
• S. Vijay Iyer, Director of Sustainable Energy Dept, World Bank
• Guilluame Aubert, Managing Director & Partner, Boston Consulting Group
• Introductions:
• M: The management of energy and the environment is one of most important changes in this century. 14 of the largest 15 oil companies are nationalized. There is no ministry of energy in China. I’m not optimistic about CO2 tax or cap-and-trade anytime soon.
• G: The variables are a secure supply, environmental target, costs to rate payers, overall competitiveness, jobs and public funding. For most of the country and the world price is the most important thing. In order to meet 2050 goals, the cost would be a trillion dollars in today’s dollars. It would pay back up to 3 trillion but who’s willing to put this kind of cash up front? Natural gas doesn’t solve the issue of reducing to 80%, though it could put CCS to solve CO2 emissions though this is very expensive. Daniel Yergin, author of “The Prize” and more recently of “The Quest,” said that people should be more rational about energy. The problem is that it’s very difficult to pass on CCS costs to utility payers because it benefits others. The U.S. has to decide, is preventing climate change worth a trillion dollars?
• S: Developing countries care about getting power, not about carbon emissions. The challenge becomes how do you balance access and climate change. This is the issue for energy policy outside the U.S. and Europe. The UN Secretary General proposed 2030 goals that are in lieu of a climate deal since Kyoto expires next year. Low-carbon energy plans are driving innovation more than climate science.

Related posts:

1. What I Learned at EnerNOC’s EnergySMART Conference The other week I had the pleasure of attending EnerNOC’s...
2. A Tale of Shale: Drill Baby Drill or Too ‘Fracking’ Risky? In 2008, when National Grid and NStar started to offer 50% or...
3. Using Government Policy to Spur Clean Energy Innovation When people (and companies) talk about the benefits of clean...

Related posts brought to you by Yet Another Related Posts Plugin.