My hometown was fortunate to be the recipient of a Massachusetts Green Communities award this year. So I showed up at the town Renewable Energy Committee meeting to see if I could help. Being the fourth person in the room, it turned out to be a bit more interactive than I'd expected.
On the table were proposals to do major energy retrofits of the town's schools; financing a solar system on one town building's roof; marketing campaigns to get residents to do energy retrofits for their homes; funding a geothermal heat pump for the library; putting up a wind turbine at the athletic fields; purchasing more efficient street lamps; etc.
In other words, a pretty wide range of choices that the town has to deal with, with limited resources. And it'll be fun to help them think through their options...
But what it also brought home was the major gulf between the pretty high level at which we cleantech investors and entrepreneurs often operate, and the very specific challenges that are faced locally.
So often, I get approached by cleantech entrepreneurs who have a better mousetrap... but they haven't ever actually caught a mouse.
It's not unusual for me to see a business plan for a new energy generation or energy efficiency product or service that assumes rational customers with plenty of opportunities to make the correct choice when faced with a wide range of options. It rarely works out that way in reality.
The devil is very much in the details -- and in the available options and information -- in energy markets. In my town, they're essentially forced to work with a certain pre-approved ESCO for almost all of the above. That significantly reduces their technology options, and their vendor options. They are given a choice of a short list of solar financing options, each of which means they don't have control over the form factor of the solar generation tech to be used. Concentrated PV systems? Forget it. The choices are dictated by the financing partner and ESCO.
Similarly, I could tell by a quick look at the energy efficiency proposals from the ESCO that they were probably incomplete. At least in regards to the increasingly rich set of technology options available to customers. LED lighting? Forget it, not an offered option. And forget about smart windows or BIPV or new HVAC tech.
Partly, this is just a failure of the ESCO model, which is one reason why the "MUSH" market (municipal, university, school, hospital) may be willing to use ESCOs, but private sector building owners hardly ever use them.
But mostly, this reflects real conditions "on the ground." Why should my hometown government take any risks on a new tech? Why should they fight with their local utility, or the state governing agency, or the pre-approved ESCO?
So here's my advice to energy tech entrepreneurs: Start with solving a very local problem.
If you have a great idea for a new energy tech, that's awesome. Go talk to your town or local customers about it. See why they might be interested in it. See why they might not be able to get the full value out of it. Get very serious very quickly about what it would take for it to actually be implemented PROFITABLY in your town, or with a local customer.
Does your product not qualify for rebates for some reason? Does it not fit into existing energy procurement processes the customer may have? Does it not physically fit in their building and/or grounds? Can they not actually capture the savings you're creating, because of the way the utility bills them? Does capturing savings require behavioral changes that are unlikely for the people you're talking to? Is it simply not interesting given the current energy prices where you live?
Get really in the details, very quickly. And the best way to do that is to try to work with a customer very close to you, very early on.
In these often complex energy tech markets, it's important to get the lay of the land early on, before starting to build an expensive tech or offering that then needs major adjustments before the real world can actually use it. And being able to demonstrate a real-world implementation can also help show a level of credibility to investors and follow-on customers that can be important as well.
"Think globally, act locally."
