We are experiencing a boom of cleantech. Environmental technology has turned from a marginal and even neglected issue to hype. This is a very positive phenomenon as such, but it is creating some confusion. One of the problems of cleantech is that everyone is allowed to define it from their own starting point. The fuzzy concept leads to certain pitfalls.
Maybe the most important trap is the so called rebound effect, sometimes also called the boomerang effect. Put simply, the rebound effect is the extent of energy or material savings produced by an efficiency investment that is taken back by consumers as higher consumption, either in the form of more hours of use or a higher quality of service.
With narrow enough system boundaries, certain solutions indeed look like they would be providing environmental improvements. I have participated to serious professional discussion where warehouse automation technology has been referred as cleantech ‘because of its ability to make things happen more efficiently’. Nothing wrong from the efficiency point of view: often solutions providing relative environmental improvements lead to higher efficiency of operations. But, as a result, unit costs go down, allowing the increase in production, and thereby the increase in absolute levels of environmental impact.
Finnish approaches for cleantech aim often for the higher end of the industrial business-to-business market, emphasising technological innovations. In this search of technological advancement and smart customers, we tend to forget that cleantech can actually be smart in other terms as well. After spending considerable amount of time in several developing countries, I have experienced that SMART technologies (Simple, Maintenance free, Affordable, Robust and Timely to market) often bear characters of supporting sustainable development.
We live on a planet where more than one billion consumers do not have sufficient access to basic resources, such as food, water and energy. The real big market potential in developing countries lies in system level innovation. How to enable the transition from the current poor infrastructure services to a better life? Of course, this transition requires quite different set of skills from the traditional business-to-business sales, often perceived in the contemporary definition of cleantech projects. Novel business concepts, shared value creation, policy and end-user interaction are among the emerging concepts.
I often hear the counter-argument that yes, in principle you are right, but those customers cannot pay. But to justify my argument: the leading global consulting company McKinsey argues in their recent analysis that developing countries account 70 to 85 percent of the global resource productivity opportunities. After an extensive analysis, they have prioritized the relevant initiatives by their potential. Their list is topped by the following items:
1. building energy efficiency
2. increasing yields on farms (both large-scale and smallholder)
3. reducing food waste
4. reducing municipal water leakage
5. urban densification
For me, the issues in this list provide an ultimate starting point for the definition of cleantech. My main question is: What kind of solutions can your company offer on these markets?
Cleantech could really make the difference. But there is a need to twist our mindset. The business of cleantech is not only business.
Feel free to comment and continue the discussion in LinkedIn!
D.Sc. (Tech.), Professor
Lappeenranta University of Technology,
Department of Energy and Environmental Technology