A newbies’ reflections on the world of CleanTech
CleanTech; what a wonderfully simple name for what is undoubtedly a complex sector. Rewind just a month ago, and I could have given you a vague/rambling description of what CleanTech was. Throw in the opportunity to participate in EnergyLab’s CleanTech20 program, a lot of Googling, and meeting actual CleanTech startup founders, and I can give you a slightly better definition of CleanTech: a set of technologies that reduce/optimise the use of natural resources through things like clean energy generation and storage, energy infrastructure, and sustainable products + services.
… Basically, technology used for the good of our planet.
I think it’s also important to point out that CleanTech companies should be innovative and profitable (or at least, have a clear path to profitability!). This is an important distinction, as it means that they are more likely to be driven by investment and market economics; and thus, have the potential for a more sustainable impact.
So how did a CleanTech ‘muggle’ like me find myself immersed in this world, you might ask? I like to think that my wider interest in climate change mitigation was one formed over many years, with a few lightbulb moments along the way (covered in more detail here, if you so happen to be interested). With one of those lightbulb moments taking place last year, I began 2020 with a fresh outlook on where I wanted to take my career; and with a mandate to ‘think big’.
Thus, when applications opened for the CleanTech20 program, a new initiative from EnergyLab to promote Australian CleanTech entrepreneurship, it was an opportunity I knew I had to take. As someone with an interest in both technology and climate change mitigation, I’m grateful to have been accepted; especially given the cohort of capable individuals in the group. Whilst I currently feel like I’m trying to play ‘catch up’ on some of the basics (like the structure of the power grid and government policies here in Australia), it has been fascinating to dive into this after my recent startup experiences overseas.
What have I learnt so far?
My first key takeaway is just how important CleanTech is to our planet’s future. The energy sector alone is responsible for more than 80% of Australia’s greenhouse gas emissions[i], and unless you’ve been living under a rock, you’ll know that it is these emissions that are contributing to our current climate crisis; the greatest threat facing our world. Whilst it’s not a ‘cure-all’ solution (is there such a thing?), technology and innovation have an important role to play in our approach to solving climate change.
And yet, there are very few companies tackling this space, particularly when compared with categories such as eCommerce (as can be seen in the 2019 graph below).
So why, if it’s so important, are there not more CleanTech companies in existence?
And here we arrive at my second key takeaway: CleanTech entrepreneurship is hard. Very hard. Start with the inherent difficulties of starting any business (ideation and validation, finding product/market fit, capital raising, etc) and then throw in some added economic, logistical, and political complexities — and you have a challenging recipe.
CleanTech startups are typically more capital intensive, risky ventures that take longer to see a return. They can require large factories to be constructed and research completed before the product is finalised (unlike a software startup). CleanTech entrepreneurs themselves need to balance their motivation to reduce environmental impact with building a commercial business model, which isn’t always easy.
Layered on to this is the large number of investors that were burned in the CleanTech hype that occurred in the late 2000’s, when a sudden investment boom in the space was followed by some high-profile failures. As such, many investors now shy away from the sector, making it harder for entrepreneurs to access the capital they require.
Not only this, but an established energy network with large incumbents (the case in Australia, anyway) makes it hard for startups to disrupt the system, particularly when government regulation and politicisation are involved. One statistic that stuck with me from the film 2040 was that global fossil fuels are subsidised at a rate of $US10 million a minute[ii], reflecting the hold that coal and oil still have on the market.
And yet, with all this, I hold out hope.
Hope that, with the shift toward more digital, data driven CleanTech businesses (think smart metering and intelligent network assets), entrepreneurs will be able to grow and scale their startups faster and with less risk; thereby attracting more investment and in turn encouraging others into the sector.
Hope that, as the price of renewables continues to drop (solar costs alone have dropped by a factor of 5 since 2010[iii]), we will figure out scalable ways to integrate them into the grid.
Hope that people like Elon Musk and Bill Gates will continue to invest in innovative technologies that drive momentum and inspiration.
I also continue to hold out the hope that, outside of the immediate horrors and upheaval from COVID-19, we learn a global lesson. A lesson about the need to band together to defeat a largely invisible enemy, one that will take the lives of unknown victims. A lesson about the need to take action to protect the lives of unknown strangers, and with the insight that it’s possible to act with urgency when we prioritise an issue.
Wouldn’t it be great if our politicians could rally around this issue, as they are (mostly) doing with COVID-19?
I feel like we talk a lot about meeting targets. But when push comes to shove, are we taking action at the rate we need to? Are the public and private sectors really addressing this effectively and collaboratively? I certainly don’t think so — but I do think that a rise in good CleanTech companies will help to unite some of these competing forces, helping us to rebuild the climate as we rebuild the economy post COVID-19.
Which brings me to my final takeaway: how do we attract more smart people into this space to create a ‘critical mass’ — one that will help to unify the political divide around climate change?
It’s more of a question, really… And I certainly don’t have the answer. One thing I’m enjoying about the CleanTech20 program is the focus on business model innovation, as opposed to technological innovation. Not only does this help to de-risk ventures (often it can be a matter of taking an existing technology and offering it in a new way), but it can open the market to people with different backgrounds.
Some of the opportunities we’ve explored include solar rooftop financing, smart home electricity retailing, and clean energy investment platforms, drawing inspiration from exciting Australian CleanTech startups such as GreenSync, Everty, Power Ledger, and others. You don’t have to create the next Tesla to make a sizeable impact.
Government grants and funding from organisations such as the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation’s $200 million Innovation Fund can also help to de-risk CleanTech ventures, helping them to get off the ground and attract further outside investment.
I’ve often wondered too whether part of the problem is the dialogue around climate change and CleanTech. Just as many people switch off when you mention the words ‘climate change’, I’m sure investors burned by early failed CleanTech investments are wary of this term, too. Maybe it’s time for a reframe; for climate change, focusing on messaging that is action-oriented, impactful to individuals and a problem to be solved now, and for CleanTech, a focus on their actual business models/technologies (think robotics company, software company, IoT company) to broaden the appeal to investors.
In Conclusion…
Maybe I’m suffering from confirmation bias that comes with following pages/people in the space on LinkedIn, or maybe I’m a naïve optimist. But I feel like there’s a groundswell happening. I believe that what we do now as a society could be a real watershed moment in our fight against climate change; and hopefully an inflection point in the right direction.
As I reflect on my time in the CleanTech20 program so far, it has highlighted more than ever the need for motivated people to come together to solve these problems. A ‘pre-idea’ accelerator is not something I’ve come across before, but I believe is invaluable in helping to identify gaps, opportunities, and the right people to be starting CleanTech companies.
This, combined with a wider look at our systems and behaviours, will hopefully help us turn the tide on climate change. No one company will solve this problem; but together (and with the right combination of urgency and action) we can hopefully reach an inflection point… Sooner, rather than later.
[i] Source: https://ageis.climatechange.gov.au/
[ii] Source: https://independentaustralia.net/politics/politics-display/fossil-fuels-subsidies-cost-world-53-trillion-a-year--10m-a-minute,7735
[iii] Source: https://rameznaam.com/2020/05/14/solars-future-is-insanely-cheap-2020/
Originally published at https://www.linkedin.com in May 2020.
