Save for the era of Thomas Edison, it has never been a better time to be an energy entrepreneur, especially in the United States. A new generation of forward-thinking entrepreneurs are making leaps and bounds as global regions update their energy infrastructure with new, “smart,” and “clean” elements. The “smart grid,” which is essentially an “energy Internet,” and “cleantech” are hitting their strides as both consumers and electricity providers begin to see tangible benefits.
Many entrepreneurs will agree that energy in general and clean technology in particular present unique sets of challenges to technology commercialization – capital investments required are usually large, scale adoptions take a relatively long time, and policies and regulatory uncertainties create their own sets of challenges.
In today’s lean economic climate, what alternative strategies should entrepreneurs look for to bring their technology to successful commercialization?
As a workshop discussion leader at the recent MIT Energy Conference, I led an engaging discussion among researchers, entrepreneurs, investors and corporations to discuss and evaluate strategies for navigating the current landscape. We sought ways to confront a historically tight funding environment and an economy that demands we “do more with less.” Some of the discussions explored how alternative strategies such as partnerships with large strategic players, “lean” product development, or risk-sharing at the proof-of-concept phase can help early-stage ventures succeed in lieu of the traditional fundraising and operational models.
Here are some of the highlights of those discussions that I hope will provide a generation of budding inventors and entrepreneurs with practical lessons and strategies to call upon as they move forward with ventures of their own.
For those who are in very early stages of their ventures, explore alternative sources of funding such as government grants (both from the state and federal governments in the US; and from foreign governments), before pursuing traditional venture capital. Use simulations and small pilots to test proof-of-concepts and create a technology platform that is modular and can be flexible with changing demands and environments. Given the nature of the energy industry – risk-averse, slow-moving, and regulatory-driven – incremental improvements may sometimes be favored compared to disruptive technologies.
Next, find a large customer and/or partner with a strong need for your technology who is willing to work with you through pilots and tests. The large customer’s or partner’s strong balance sheet, reputation, manufacturing capability, and distribution channels can create tremendous synergies that your technology alone will not be able to realize. Have a good IP strategy and understand that everyone is committed to be in it for the long haul as payoff may not happen until later down the road. Sometimes, this large customer or partner may be the military or the government. Other times, they can be the incumbents such as utilities and large industrial conglomerates.
Many people draw similarities between the energy industry and the healthcare industry, as both provide essential service to society and require large capital investments and strong policy leadership. In my opinion, there is a small, but important difference – energy is a commodity, while healthcare is not. Given that energy is a commodity, the industry needs an even stronger policy leadership from the government. For the clean energy industry to succeed, it needs the strategic focus and resolve of the government to support a comprehensive clean energy policy – from R&D, to manufacturing, to deployments, to workforce training. We also need full alignments between the state and federal governments to reduce the regulatory complexities and uncertainties. Our energy policies seem to be short-term focused, oftentimes dependent on election cycles. To keep America competitive in the global economy, we need longer-term energy policies. China, for example, has committed to invest ~$20 billion annually from now until 2020 in a comprehensive clean energy plan. In contrast, the United States does not have a comprehensive clean energy policy and is outspent by China by a ratio of approximately 4 to 1.
I personally believe that the spirit of innovation is well and alive in the American energy sector and we have the opportunity to not only develop a strong domestic clean energy economy, but also to export that American ingenuity abroad and lead the world.