There are some words in the business world that become swiftly debased: innovation and cleantech are, along with “crowd” anything, are among the worst of recent offenders. But that doesn’t mean that any of these terms fail to represent meaningful concepts for energy sector decision-makers, and if anything participants in energy business decision sets should be paying extra attention for when the terms assumes an operational, financial or communications reality. There are signs that we’re getting to that point in 2014.
With states finally assuming the lead that the federal government has largely dropped in funding clean energy projects, often through Green Bank initiatives like that currently taking center stage in New York state, private companies are circling in the hope that this time the lessons learned by earlier problems in funding programs will enable wider adoption and meaningful capital commitments.
At a recent panel I moderated on “Crowdfunding and Open Innovation for Cleantech and Sustainability” for AGRION at the offices of the Markle Foundation in Rockefeller Center, the talk moved swiftly away from the esoteric or theoretical ideas and into the realm of business and financing realities. Some meaningful trends emerged:
1) Headline risk drives fear-based decision making: If investors always want to highlight the deals they could have done that would have been winners, governments are always stuck first with the deals they did that could have been losers. The federal government learned hard lessons from the collapse of Solyndra, the lesson that a single poorly performing loan can taint an entire program in the public eye. With state governments lending their credit ratings and their political support to the cleantech sector, especially in distribution and solar energy technology deployments, leading lenders are understandably skittish and potential project developers are seeking ways to build coalitions that can support state funding commitments when things get tough.
2) Wall Street is still convinced some cleantech money is stupid: When it comes to cleantech, anything but the most adventurous financier is still unsure that they can add value. Big banks do the big and obvious projects, and rolling up smaller deals look a lot like hard work with minimal payoff. The business models that can attract crowdfunding or are built on crowdsourcing are still suspect in their eyes, are still the province at current prices of “dumb money” (though it is arguable that if 2008’s global financial crisis proved anything, it is that in the long term, all money gets dumb). Issues of scale and performance will always be concerns, but financial innovation isn’t currently matching the technology innovation that’s driving change in the energy sector today.
3) A little data can go a long way: Energy firms and the companies that do business with them are holding on tight to their data, even in its most scrubbed and anonymous form, inhibiting developers from doing the kind of analysis and building the kinds of technology projects that can smooth transactions, orient operational and strategic priorities or underpin needed financing. A little bit could go a long way, a roundtable participant and New York Energy Week data jam participant said, although unusually government entities have again outpaced corporates in opening their raw data sets to external developers now leveraging that for productized outcomes.
States and municipalities are proving that they can be responsive to pressure from markets and from constituents in establishing clear and responsive policy supported by real money. Businesses have in many cases begun to engage, but are still often hobbled by regulatory limitations, investor concern and lack of performance data that can inform decision cycles. Learning to embrace a degree of failure and communicating effectively even when projects do experience problems – communicating with the very “crowd” whose work and money cleantech is sourcing – are becoming key tools in the skillset of energy company leaders.
Full disclosure: Peter Gardett consults with companies in the cleantech and energy data sectors and related regulatory agencies. He is also a Founding Board Member of New York Energy Week. This was piece originally published on his website.
