Why General Electric is Pouring $10B into Its Ecomagination Brand

Last Updated Jun 24, 2011 11:16 AM EDT

General Electric (GE) will spend $10 billion over the next five years -- double its current R&D budget -- on its Ecomagination brand, a cherry-picked line of the company's best clean tech products. Cutesy name aside, the brand and the billions GE has spent to research and develop these clean tech products have paid off.
Products bearing the green brand have generated $70 billion in revenues since it was created five years ago. Last year, these clean tech products, which include wind turbines and solar modules, generated $18 billion in revenues, up 6 percent from the year before.

Compared with GE's $154 billion revenue last year, the ecomagination numbers -- which account for only 11 percent of the company's total sales -- seem insignificant. But the brand's five-year revenue growth of close to 200 percent tells a different story.

GE saw a financial opportunity -- and demand -- for energy efficient products that reduce emissions and save money for its industrial, commercial and retail customers. And in the past five years, the label has helped two of GE's business segments -- energy and technology -- boost revenues and profits considerably.

Take GE's energy sector, which includes its power generation, wind energy, water, nuclear energy and oil and gas businesses. GE's well-known energy efficient refrigerators and other appliances -- also part of the ecomagination brand -- aren't included in the GE's energy segment. Of GE's 90 ecomagination products, nearly 50 of those fall under the company's energy segment. While other GE divisions have faltered -- GE Capital, most notably -- the energy business has seen revenues rise 61 percent from $25.2 billion in 2005 to $40.6 billion in 2009. Profits jumped 113 percent from $3.3 billion in 2005 to $7.1 billion in 2009.

So, where does GE go from here? Now that its found a moneymaker, GE will accelerate the rollout of ecomagination products and focus on key growth markets such as China and Korea. The U.S also is an important market for GE. The company also urged the U.S. government, in its ecomagination brand report, to investment more in clean energy. It's not a surprising demand, considering earlier this month GE's chairman and CEO Jeff Immelt and Bill Gates were among members of the American Energy Innovation Council that called on the U.S. government to increase its R&D energy spending from $5 billion to $16 billion a year.

To put that amount in perspective, GE's annual R&D investment equals almost half of what the feds spend in a year. Which means two things: GE is putting a boatload of money into greentech innovation; and the U.S. is failing miserably. GE isn't stupid. If the federal government puts more money and resources into clean tech R&D, it will likely become a big buyer of developed clean tech products, like those from GE's ecomagination brand, as well.

In terms of its product development, we'll still see GE focus on its more traditional clean tech products like wind energy -- including new investments in offshore wind -- water treatment and power generation. The company also will delve deeper into more subtle approaches to energy efficiency and emissions reduction. As Greentech Media notes, GE is increasingly interested in developing software that helps make existing products smarter and more efficient. For instance, GE Aviation Systems developed an advanced flight management systems now being used by Southwest Airlines, which helps aircraft use less fuel while reducing emissions and noise.

Photo LED light from Flickr user kalleboo, CC 2.0
  • Kirsten Korosec

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