Cutting Through The Hype Around "Green"
The problem was that I had more than one answer. The green market can be divided in a large number of ways, depending on what you are trying to get at. Below is a list of some of the more handy ways to think of it.
1. The Nick Parker Unified Field Theory: "Cleantech is new technology and related business models that offer competitive returns for investors and customers while providing solutions to global challenges," says the founder of the Cleantech Group. It brings economics into the picture. But it's a bit broad.
2. The Two Rs. Replace and Reduce: Does a company seek to replace fossil fuels, fertilizers or industrial chemicals with green technologies (solar turbines, synthetic chemicals generated by bacteria) or does it try to reduce the consumption of energy, water and raw materials. Some people add a third R-recycling-but recycling is essentially a subset of reduction.
While this cuts the market somewhat broadly, it has two advantages. One, it's the easiest to remember. Two, it gets to the heart of the main challenge they face. If a company seeks to replace fossil fuels, the big hurdle is cost: Can whatever they are making compete with oil and coal?
These are ultimately utilitarian companies. An electron from a wind turbine works as well as a coal plant does.
Replacement companies typically face a behavioral hurdle: will customers or businesses care enough to adopt it? Car sharing. LED lighting. New forms of public transportation. Forget economics: the real problems are skepticism and indifference. Prediction: replacement will grow a lot faster.
3. The Three Disciplines – Biology, Chemistry and Physics: One of the more engaging aspects of greentech is the emerging impact of biology and chemistry. I reported on the IT industry for years and you rarely had a discussion about microbes or the economic potential of manure. Now that's a daily occurrence.
Biology is going to be the big employer of the next decade, with companies trying to exploit genes to produce biofuels (LS9, Microgy) industrial chemicals (Genomatica, Cambrios), fertilizer (Marrone Organics), air cleaners (Bio-Reaction, very cool stuff) and other materials. Intermolecular and Wildcat Discovery Technologies, meanwhile, want to port genetic screening tools to battery making. If you're looking for a job, this is a way to help you determine where you might fit.
4. The Four Food Groups of Vinod: Legendary investor Vinod Khosla divides the market into four groups: replacements for fossil fuels, replacements for coal, energy efficiency and materials. Informally, he also divides the market into two categories: sound concepts (his investments) and simpletons (yours).
It's one of the better ways to think about the market and can encompass pretty much everything. But things can straddle, Alsace Lorraine-like, into two groups. A company that makes energy efficient desalination equipment belongs in energy efficiency, but also materials. Where do you put green cement – in efficiency or coal or materials? Still, it works and he lives like a price while I suffer in abject squalor, so who do you want to trust.
5. The Five Fingers of Greentech (Divide by Product and End Market) Transportation, Electricity, Building, Waste and Food/Water: You can also think of this as the Big Three (transportation, electricity and building) and the Two Dwarves. Buildings are the sleeping giant here: 39 percent of all power in the U.S. gets consumed by air conditioners, lights, heaters and other appliances in buildings and 13 percent more gets gobbled up by construction. Transportation only accounts for 26 percent. You weren't expecting that, were you?
6. The Five Fingers of Greentech With Bonus Vestigial Tail Nub – Green Electronics: Hardware, software and networking often gets lumped into building because it largely revolves around energy efficiency, involves air conditioners, and because most computers and large-screen TVs aren't located outside. They are inside.
Green electronics, though, deserve their own category because the companies and circuit designers competing in this market belong on their own planet.
Electronics actually only consume a little power. TVs and PCs account for 9 percent of power in homes. Computers account for 4 percent of energy consumption in commercial buildings, according to the Buildings Energy Book from the Department of Energy. Lighting accounts for 25 percent. You'd have to put six computers on every desk to equal lighting.
But this is an important category. Electronics makers are rabid, obsessive change-mongers. They see this as a selling point. They will react quickly.
7. The Seven Samurai: Add consumer to that last one. Consumer remains a market that needs to take off. Surveys show that consumers want greener household cleaning products, but they often aren't willing to pay for it. A few clever ideas – such as the green dry-cleaner hangers subsidized by ads from Vesta – have emerged as well. Still, it's a "to-be-determined" situation.