I have been hearing a lot about the breakthrough technologies that we need to invent to have a marked impact on reducing Greenhouse Gasses (GHGs) to fight climate change. In a recent article Bill Gates cites new nuclear power, carbon capture and storage and cow free burgers to name a few.However, focusing on the technologies we need to invent ignores an important reality- we have invented our way out of the problem. The critical question to solve is how do we commercialize these technologies so that they can have the desired impact onGHGs.
To understand the complexity of commercializing cleantech this article will consider the question of what is unique about cleantech by exploring how most technologies are developed and their traditional path to market. The article will consider how the market or industry shape the commercialization path of the technology being developed.
This article will be broken into the following parts:
1. How do new technologies typically enter a market?
Lets say you are an inventor and you create a cool new light-bulb that changes color with the hour of the day. You show your mom said light-bulb and to make you stop talking about it she says she loves it. All the motivation you need- you head out to find out how to start selling it. Now you know that you are entering the electronics market so you’re going to need to follow the rules of the industry, so ask yourself:
Since lightbulbs have been around for a while, they have to meet the standards defined by the relevant authorities before retailers will sell the product and people will use them. These standards help to ensure that products, in this case lightbulbs, would easily integrate in existing lightbulb sockets, and can operate safely within the home. In Canada these regulations are often created by government authorities such as the Standards Council of Canada.
Once you meet the minimum industry standards and regulations then you have to set up a business that would help support the sale of the lightbulb. This would include finding a way to manufacture them at a reasonable price, marketing them and finding sales channels. Innovations in existing industries have to not only be unique, but also follow established market rules
2. What kind of industry rules do technologies have to adopt?
The simple answer here is that technology needs to follow all the established rules for every industry it will be adopted by. In our example above, the lightbulb you created is intended for use in homes. So as long as it adheres to all the rules for home lighting you can sell within that market.
For simplicity, most technologies can can be broken down into 3 categories.
The type of technology you have created impacts the regulations and standards you have to pass to be able to sell in that industry. As an example say you have come up with the worlds best eyeglasses. A technology close to the author's heart. The glasses don’t slip off the nose, they stay on at the gym and they most certainly do not cause “lens fog” when someone enters a lightly humid room in a Canadian winter. Now all you want to do is sell this specific technology. So as long as you meet the rules and requirements of this industry you can sell your product. This is an example of a technology that is created for one a specific use.
Now, let us say you have developed a new type of battery that can be used in a variety of different technologies ranging from your watch to a pacemaker. The battery you develop can be operated in different industries, but it will have to follow the rules of each industry. The regulations to put a battery in a watch would be easier to meet than those needed to power medical devices. This technology would be an example of an inter-operable technology that can be applied to various industries. When commercializing a technology like this, it would be wise to start from an industry that has lower regulatory requirements to enter. This would allow you to make some money while refining your technology to meet requirements for industries with stricter regulatory requirements.
After dabbling in light bulbs and small batteries you decide to create some jet fuel. Except you are going to create sustainable jet fuel similar to the one that was developed to fly the Green Hornet, an F/A-18 Super Hornet aircraft. So you set out to first grow the plant that would serve as the input for your biofuel. Then you need to create a facility that can effectively convert the plant into fuel. Then you have to make sure that the biofuel you have created can power the jet. By the time you are able to fly the plane, you have had to adhere to the regulations and standards for agriculture, industrial processing, and aviation. Inter-sectional technologies have the worst of all worlds- but no one can deny the cool factor of flying an F/A-18 Super Hornet on a 50:50 biofuel blend.
3. What is challenging about cleantech markets?
While some cleantech fits easily into existing market structures most is actually inter-sectional. Inter-sectional technologies in this sector often result from the application of technology, process or idea from one industry into another in a unique way. Take for instance the case for biofuel, the idea of growing plants is not novel, nor is the idea of using plants as fuel. However the application of those technologies to create biofuel that can power aircraft is. Additionally, the current market cannot properly value a biofuel that can power a jet vs just fuel that powers a jet. In this way, cleantech, tends to be disruptive. For the sake of this article the author will consider the academic definition of disruptive technology:
“ A disruptive technology is a technology that consists of developed technologies but often lacks specific attributes that are currently valued in the market.”
- Clayton Christensen, Innovator's Dilemma
Let us take for example another technology like microgrids. Traditional electricity markets value and consider “electricity generation technologies” and “support technologies” in separate and distinct markets. An example of this is solar generation- an electricity generation technology that is not equivalent to traditional thermal power plants. Electricity generation from thermal power plants that derive fuel from natural gas or other input fuel can be controlled. The amount of electricity that can be generated by these power plants can be increased or decreased depending on the electricity demand. Solar generation does not react in the same way, it is available when the sun is out, it is intermittent and cannot be adjusted according to demand. Enter microgrids.
Microgrids can be an electricity generation tool by providing electricity to the grid when needed, it can take electricity away from the grid when there is excess if there is an energy storage device or electrical vehicles on the grid. Unfortunately, there is no way to effectively value microgrids on the modern grid. Thus one is often left with the unanswered question of how to value microgrids. As electricity generation? as a tool to manage electricity quality or as a resource to start the grid when the grid goes down?
Microgrids are effectively a disruptive technology, that cannot be properly valued by current market rules. This highlights the challenges faced by other technologies being developed in recycling, waste removal or other industrial applications.
The challenge of maneuvering the regulatory barrier in cleantech can be significant. Commercializing these technologies requires a consideration of how current markets are organized and how to change ingrained market rules. While this challenge impacts other established regulated fields cleantech experiences this as a significant barrier to entry in many industries.
So how can we help accelerate the diffusion of cleantech? My next article will look at the role of government and how they can aid in the commercialization of cleantech.