Surviving the Tipping Point of Disruptive Clean Technologies
2019-04-24 | 7 min read
The world has become more socially conscious about the state of our environmental health, and companies and organizations are quick to embrace and endorse messages that tout clean technology (cleantech) to ride the current hot bandwagons.
Much effort is poured into branding and awareness campaigns to harness consumer support and conversions, especially for disruptive innovations that promise low to zero emissions. These range from B-to-C electricity supply to hybrid and electric vehicles. This push for consumer mindshare is not new though. The beautifully crafted 2007 Cannes award-winning Mr W was one of the earliest ads advocating clean energy.
Not all ambitious marketing campaigns end in success though. In Singapore, listed company Hyflux was once the hot stock for many local investors. It promised to deliver 'sustainable solutions for a better tomorrow' during its initial public offering in 2001.
In April 2019, the company was making different headlines as it faced S$1.1B in losses. The wound that bled the company dry was its Tuaspring Integrated Water and Power Plant. Some disgruntled investors blamed it on the company’s lack of foresight, betting that electricity prices would stay above the high of S$200 per MWh in 2012. Unfortunately for them, the liberalization of the market has led to softening of electricity prices.
Singapore moved away from coal and oil in 2006 to natural gas for its energy needs. The nation has also been investing in solar photovoltaic systems to embrace clean energy. These changes have collectively pushed down electricity prices to an average of just over S$100 per MWh in early 2019. The shifting energy tides tilted the expensive Tuaspring from being a promising pioneer into an albatross.
Other Trailblazers that Got Burnt
Rapidly evolving dynamics in the clean energy business don’t just impact bottom lines of clean energy companies like Hyflux. Another investment-heavy disruptive innovation under the spotlight is the electric car.
Perhaps the adage “learn from the mistakes of others” is very apt for car makers raring to jump on the full EV bandwagon. Early EV trail-blazers were the ones that suffered most – Th!nk City, a Norwegian company, was one of the first to produce 100% EVs in 2010. Low range of under 99 miles and low horsepower, coupled with a hefty price tag led to the company tanking by the end of 2012.
Other brands like Chevrolet, Cadillac, Coda and ZAP Xebra were also early pioneers with all-EV models, which never took off. Their EV models only sold in the hundreds and were considered over-priced for the torque and range offered.
An MIT Energy Initiative working paper1 by Gaddy et al titled The Wrong Model for Clean Energy Innovation listed four key reasons why cleantechs were more likely to fail:
- Cleantech development needs time (normally longer than the 3-5 years which are expected by venture capital funds)
- Cleantech is expensive to scale as you need large factories even before your product is finalized
- Cleantech focuses on commodity markets with high competition and low margins, which reduces the ability to invest in research & development
- Cleantech lags incumbent companies that are willing to take the risk and acquire start-ups
Gaddy et al also reported that difficulties in scaling laboratory science to factory production help explain why cleantech companies underperformed compared with software companies. Higher risk profiles of cleantech companies also made them less attractive to favourable acquisitions compared with medical and software start-ups.
Leveraging Technology for Economies of Scale
Learning from the failure of their pioneers, purveyors of disruptive technologies are leveraging innovative design and test solutions to reduce their cost of product development and test.
Take battery cell development and test for example. These days, new design and test methods employ battery emulators – DC/AC converters that can behave like real battery cells. These emulators reduce test setup time, create a safer test environment, and provide more repeatable results versus using real batteries during test.
In the solar energy arena, public policies and growing economies of scale are key factors that help to harness widespread adoption and commercialization of solar photovoltaic (PV) energy. Underpinning these are continued innovations to improve the performance of PV inverters and energy management solutions that have greater capacity to store and distribute the generated energy safely and with minimal loss.
Apart from Tesla with its EV-only strategy, most of the world’s top car makers have learned to keep an even keel, leveraging existing core skills in car making, coupled with investments in new technology for electric powertrains and battery technology – as they steer their portfolio’s course towards the market’s tipping point when EVs will outnumber internal combustion engine vehicles.