CleanTech: It’s All About Scale

Reframe the Economics: When analyzing the cost of building either a new natural gas power plant or a wind farm, a basic analysis looks at upfront construction costs and ongoing costs (fuel, maintenance, cost of capital, etc.) versus the future expected cash flows from selling electricity. A more nuanced analysis, however, includes a societal and environmental cost/benefit analysis.  Does the plant pollute near a major metropolitan area, creating potential health risks? How many jobs does each plant create? Are there risks to local water supplies or natural habitats? When conducting a more holistic analysis of the cost of carbon emissions, clean energy solutions often close the gap with their dirtier counterparts. For example, one study found that coal power plants cost the United States $500 billion in additional health, economic, and environmental impacts.8

Win Over The Innovators: Previously discussed ‘scale hacks’ largely focus on government policies, but non-government-based approaches exist as well, such as winning over the Innovators. Innovators are the earliest adopters of a new technology on the adoption curve. They often buy products that are still expensive, unproven, or niche, simply because they are technology enthusiasts. Elon Musk masterfully targeted Innovators with the introduction of the Tesla Roadster in 2008, which helped the company achieve initial scale and develop its electric vehicle technology before expanding into more mass-market car models. For newer technologies, clever marketing and unique features can help attract Innovators in the early days to help jumpstart sales. For electricity production, the challenge is particularly daunting because the end-product, electricity, is as commoditized as they come. Yet entrepreneurs are still finding clever ways to enthuse Innovators with solar roof tiles, bladeless wind turbines, and smart batteries that arbitrage dynamic energy prices.

Conclusion

Reaching aggressive carbon neutrality goals by the middle of this century will require the rapid adoption of several clean technologies, ranging from renewable energy production, to energy efficiency & storage, emissions reduction & removal, and electrification. While the newest of these technologies often appear expensive at first, they are likely to follow similar trajectories as wind, solar, and batteries, and experience declining costs over time as they scale. The challenge lies in how to accelerate this process. Governments, corporations, and citizens can all play a role by implementing a variety of tactics to help these technologies achieve greater scale as quickly as possible. Ultimately, achieving higher output is one of the most important factors in ensuring that these new technologies reach economic viability and become ubiquitous.

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