How the Carbon and Energy Software Market Grew 400% Without a Cap-and Trade Bill
Cap-and-trade legislation -- back when Congress had an interest in limiting greenhouse gas emissions -- promised to cultivate a slew of carbon-related markets, including one for companies that had developed software tools to track environmental data. Of course, we know what happened next. Congress punted on the issue and the economy continued its tailspin, which you'd think would erase any need for carbon accounting software. Curiously, it didn't fade away. Instead, the market grew -- and a lot.
The market in 2010 grew 400 percent, according to researchers at Groom Energy Solutions. And the group has forecast another 300 percent spike in market growth this year. Researchers said last year more 200 large corporations -- Arch Coal (ACI), Bayer and RJ Reynolds (RAI) to name a few -- bought software that tracks environmental data like energy and water use, carbon emissions and waste reduction. More companies are reporting carbon disclosure as part of their regular quarterly results as well.
A few factors are at work here, including increased interest in tracking energy consumption in an effort to save money in a crap economy. Companies also were motivated to buy energy and carbon accounting because their biggest customers requested it; and to improve their brand image.
Walmart's effort to cut some 20 million metric tons of greenhouse gas emissions from its supply chain by the end of 2015 also has been a market driver. Walmart's (WAL) initiative announced last February has focused on products with the highest embedded carbon like milk, bread, meat and clothing. Consider the number of products sold in Walmart's store and you start to get an idea of the impact it has had on its supply chain.
Even though the carbon accounting market expanded four-fold last year, researchers haven't seen much venture capital or M&A activity. In fact, VC investments and acquisitions dropped significantly from 2009 to 2010, a sign that the market is maturing. Among the companies that remain in the market, 10 were highlighted by Groom as the strongest in terms of customer base, tech features, energy management capabilities, financial stability and market vision. The leaders include large established corporations like Johnson Controls as well as Kleiner Perkins-backed Hara. Others listed by Groom were: Advantage IQ; Enablon; EnerNOC; Enviance; IHS; PE International; SAP; and Summit Energy.
Photo from TVA
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