Cleantech 2.0 — Holy Grail of Startups

In the quest of growth and industrial development, our generation has polluted and toxified the world in which we live. It is not that we do not understand these side effects of unparalleled growth. From time to time, we have taken various climate control measures, starting from Kyoto protocol, (1997) to Paris Agreement (2015). The UNFCCC and its associated bodies have done a lot to propel the adoption of renewable energy (RE) and other clean technologies.

Certainly, these efforts have been increasing the popular public sentiment pertaining to the RE sector and containing conventional methods of energy generation. Further, it triggered the emergence of several technologies, to reduce the carbon footprints and to mitigate GHGs, together known as clean technology.

Trends in Renewal Energy

A major surge was observed in the RE and Cleantech sector during the term of 2006 to 2016, opposing the mainstream use of commercial alternative form of energy sources, like fossil based fuel used for energy generation. Tracking down the trends in the RE sector, it experienced an 18% growth with new investments flowing in, from 2004 to 2015, and mostly from the developing countries. While there was a 19% increase in the total number of transactions related to the RE assets setting new benchmarks. This has led to huge addition of 147 GW of power capacity, as the new renewable energy globally. Successfully contributing to 19.2% of global electricity consumption derived from the renewable resources.

By 2030, it is projected that RE will contribute to almost 44% in power generation, 48% in heating and other direct usage and 10% to the transportation fuel sector. The sector wise break-up is given in the graphic below.

As depicted below, in another 20 years from now, the share of fossil fuels in power generation would come down from current 65% to nearly 36% which would be a great achievement. Out of the RE sources for power generation by then, Solar will become a predominant source contributing to almost 26%.

Definition

The term ‘Cleantech’ broadly refers to a varied range of products (collective or singular in nature), processes and services which effectively taps the renewable sources of energy and materials, reducing the wastes alongside the emissions and keeping a considerable check on the utilisation of natural resources, ultimately decreasing their consumption.

Key Categories of Cleantech

Cleantech 1.0

The early 2000 witnessed the inception of venture investment in a field now called as “Cleantech”. As we saw, it encompasses verticals such as energy generation and storage, energy efficiency, water treatment, materials, and agriculture. The venture community saw cleantech as the next big technology wave, following the demise of first dot-com era. Investors saw Cleantech investing as a way to achieve multiple bottom lines — not just simple financial returns, but satisfying social and moral objectives as well. It is estimated that $25B in venture investment was made over the period from 2006–2011, peaking at $5B in 2008. Unfortunately, over 50% of that money was lost and the current investments have dropped to an annual level of US$2B.

Reasons for failures of Cleantech 1.0 Startups

• Its development needs time (normally longer than the 3–5 years which are expected by venture capital funds)
• It is expensive to scale as one need large factories even before your product is finalized
• It focuses on commodity markets with high competition and low margins, which reduces the ability to invest in Research &Development
• It lags incumbent companies that are willing to take the risk and acquire startups

Cleantech 2.0

As the sunset on Cleantech 1.0, a new wave of startups in cleantech is rising. The new dawn of Cleantech 2.0 will focus on less capital intensity and more usage of information technology for such startups to succeed. This strategy at its core implies that it is possible to concentrate on cleantech areas that are not excessively capital intensive. In fact, “small cleantech” may ultimately get much bigger and provide better investor returns than any of the capital intensive cleantech. In other words, this may turn out to be “Cleantech 2.0”

Possible areas for the Startups in the era of Cleantech 2.0.

Renewable Energy: Innovation lies in generation of power through a variety of renewable energy resources including wind, solar energy and biomass, geothermal and tidal energy.

Energy Efficiency: Cleantech start-ups concentrate on improvements in energy efficiency by adopting more efficient technology or production processor by application of commonly accepted methods to reduce energy losses.

Water & Waste: Potable water availability is an important human need and a public policy issue. Cleantech start-ups havecentred around how technologies using RE sources can be used for production of drinkable water. Solid waste management is another big concern globally and it is an area where cleantech can play a pivotal role in initiatives, such as waste-to-energy, using bio degradable waste for multiple purposes, and using recycling techniques.

Distributed energy: Most cleantech startups in this area are working to achieve following in a novel way.

• Integrating or setting up a grid interactive, and providing on-site renewable energy production capability to the locales.
• Merging the projects of renewable energy generation to the local transmission grids.
• As the Micro Grids in rural areas have diversified load & energy generation amounts, they are generally integrated with stand-alone systems, instead of the grid interactive.

Sustainable Agriculture: Traditionally, agriculture has been a large contributor to GHGs emissions due to the usage of animal, fossil fuels driven machinery and burning of agricultural waste. Cleantech in this area means, how usage of RE to power farm machinery and using agricultural waste to generate power can help in this mitigation.

Sustainable Transport: Most start-ups in this area are around electric vehicles (EV) which have bright future in term of its impact in reduction of usage of fossil fuels and thereby reducing the carbon footprint. Another area that start-ups are working on is the provision of EV charging stations using battery storage coupled with wind and solar energy.

Green IT and Clean web: Green IT start-ups work through collection of strategic and tactical initiatives that directly reduces the carbon footprint of an organisation’s computing operation. Other such start-ups concentrate on reduction of environmental impact of its manufacture, transport, usage and disposal of ICT tools.

Clean Web which is a grassroots movement committed to solving profound issues related to resource constraints of our world through the application of IT.

Characteristics of Startups team

• Strong Management team for RE startup is critical for successful commercialization
• Requires multidisciplinary competencies (from electronic engineering to life sciences)
• Should be savvy in environmental policy
• Managing required network, industry and government

A few case studies of Cleantech 2.0 Startups

Sistine Solar: The US based startup offers the technology, which an illuminated graphic layer atop a solar panel that can color-match roof shingles which aesthetically pleasing solar panels. For those who have balked at the idea of covering their Spanish tile roofs with shiny black grids, Sistine Solar enables them to conserve energy, keep up appearances and potentially save on electricity bills and add value to the selling prices of their homes. The Sistine received $1 million grant from the U.S. Department of Energy.

SkyCool System: Startup works to connect its discs shaped mirrors to air conditioning systems that circulate water, as well as use them to keep solar panels from overheating and stays 9 degrees colder than the surrounding air. They have raised fund in tune of $990,000.

Gram Power: An Indian based startup Gram Power, works on the Smart Grid technologies for electrification challenges in developing nations. In Rajasthan, Gram Power has established Solar Powered Smart Microgrid providing energy for lights, buttermilk machines, televisions and fans, and currently providing solutions to 30 remote villages. The startup was selected among the top 10 Cleantech Innovations by NASA in 2011 and received grant about $1.0Million by US DoE.

Husk Power System: This is another cleantech startup in rural India. The Bihar based Husk Power Systems’ provides power to rural area by making use of company developed proprietary technology. They use a biomass gasifier to generate electricity. Each of the company’s plant is currently serving over 400 rural households, thus saving 18,000 litres of diesel and 42,000 litres of kerosene every year. This further helps in improving the health conditions and reducing indoor air pollution. Husk Power raised Fund about US$ 5.0 Million.

Conclusion

When we look at the size of the climate change challenge, there is much more to be done. Governments and organisations around the world are increasingly pursuing the sustainability plan. It is expected to see greater recognition for the long-term, durable value of cleantech. Question remains how to inspire the next generation of business leaders to adopt even more ambitious sustainability goals and of course how do we give cleantech innovators and entrepreneurs the best chance of success.

About the author: Dr Parag Diwan is a noted energy professional and an established ‘Eduprenuer’ who has built some of the finest Institutions. Currently, he runs his own consulting firm which helps institutions, energy companies and entrepreneurs.

 

 

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