The Bloom and the Rose

Original Commentary:  Tom Ranken, November 7, 2011.

The pendulum is swinging in a very different direction.  The bloom is off the rose, the hype is over.  Solyndra and Beacon Power have declared bankruptcy.  Federal programs to created green jobs improving residential energy efficiency have been soundly criticized in recent months.  David Brooks wrote eloquently about this a few weeks ago.

Actually, it shouldn’t be shocking that short-term, quick-fix policies haven’t met expectations.  The purpose of these programs has been, at least in part, to create new jobs and address our nation’s economic woes: The question of whether the clean economy is a “for-real” driver of long-term economic growth isn’t really addressed by the fate of two early stage companies or a single government program.  (More effective government policy, Brooks argues, looks into the future and sets the table.)

But hype in business is never a good thing over the long-term.  Plainly, energy is an important, huge, and successful business around the world.  There are a lot of new technologies emerging.  Some will succeed and some will fail.

For investors, the more interesting question has to do with how much potential there might be in these cleantech opportunities.  Are we really at the precipice in cleantech of a “generational” change?

Grant Thornton thinks that these opportunities are real. Grant Thornton is a global professional services network of independent accounting and consulting member firms which provide assurance, tax and specialist advisory services. The firm encompasses a network of 27,000 employees and 2,207 partners in more than 110 countries in one of the world’s largest audit, tax, and advisory services.  Their brand new report, Cleantech on the Rise: Generational Opportunities for 21st-Century Business, offers a new look from perhaps a more balanced perspective.

They are optimists about cleantech.  “We see generational opportunities—comparable to those we saw just a few years ago in the high-tech and life sciences sectors—comparable to the development of telecommunications, air transportation, railways, even electricity.”  They continue:  “If you are leading a cleantech business today, you may well be in the right place at the right time.”

They offer warnings, though.  Cleantech is a young industry that is not yet well defined.  They advise corporate leaders to “develop and commercialize solutions with keen awareness of government policy but without undue reliance on public source of funding or other forms of governmental support.”  To be successful, companies must be adroitly managed, technologically proficient, and attuned to a broad array of market considerations.

Grant Thornton views status quo energy supply and consumption as unsustainable.  They say that environmental pressures are mounting.  The global economy, plus events such as those that have occurred in the Gulf of Mexico and at Fukushima, are breeding uncertain markets—“the hallmark of all emerging business sectors, but as history tells us, uncertainty breeds innovation—and innovation breeds opportunity.”

Ultimately, capitalizing on a generational opportunity require the balanced, keenly focused eye of a seasoned executive.  Environmental technology has been around for decades, but cleantech as a 21st century enterprise is untested.  The greatest experience many cleantech leaders can bring to the table is having been there, done that—that is, having managed, or operated in environments with global pressures, global challenges, global perspectives, global opportunities and perhaps more than a few global failures along the way.

This shouldn’t be a surprise to anyone.  The opportunities in cleantech over the course of the next several decades may well be extraordinary.  Success, however, will require the same business prerequisites of any other promising sector: Lots of hard work, enormous expertise, investors with patience and money, long periods of time, really smart people…..,and a whole lot of luck.

Over the long-run, the hype won’t matter.