How should we buy and sell sustainable energy?
We are re-making energy markets, but what is actually a good market?
Dear folks,
It’s November, my month with only necessary screen time has been fairly restorative, and I’m feeling fresh and entrepreneurial. Thank you for your patience. 🙏 Speaking of entrepreneurialism though, that’s what I spoke about last time, and it’s what I’ll speak about today!
Let’s do a quick recap, to settle back into things after all this time. What’s at stake when we speak about making money in sustainable energy? How do you ‘make’ it in the first place? Where should it go once you did?
Making money
Getting money to flow your way is never easy of course (it helps if you already have a lot of it or have access to places where there’s a lot of it). However, for those working in sustainable energy there has been, and often still is, an additional challenge: the very markets where money is supposed to flow do not exist yet.
Markets are a complex set of relations between manufacturers and digital fabricators, customers, financial institutions, and policymakers to name but a few. They depend, to some degree, on shared expectations about how the world works, broadly speaking, and what is of value, a little more specifically speaking. New technologies require and engender new relations and ways of thinking, and as you all know, fossil fuels are at the very heart of how we built our contemporary world, so it’s not easy to break, bend and replace those sets of relations and expectations. So, you want to make money in sustainable energy? Good luck!
(As a quick side note, the difference between ‘normal’ entrepreneurs and sustainable energy entrepreneurs is technically a difference in degree, not in kind – established markets also change through new regulation, product or service iterations, and competitive shifts in the composition of companies that offer them. Still, degrees can add up to qualitative difference: the adjustments required by businesses, regulators, and consumers for new markets to ‘work’ is substantive.)
In practice, besides being lucky, making money in markets-in-the-making comes down to creative combinations of existing rules and their loopholes, novel technologies and their reliance on old ones, and of course to finding the niche where business, regulators and consumers can practice, mature and, in so doing, make the market they want to operate in. (Next up: lobby. push and fight for better rules.)
We’ve seen some examples of this in the series so far:
The home-grown solar water heater from Peru: perhaps a case of the successful creation of a new market, but the failure of to thrive in it – as newcomers wound up taking over
The search for customers of solar lamps in West Africa: achieving a minimum amount of scale through the support of institutions before the product can stand on its own
Creating a mass-market for household rooftop PV by mobilizing different fiscal tools and devising a new service model to drive it out of its environmentalist or off-grid niche.
So there’s a lot of creativity, pressing and persistence for the puzzle pieces to fall in place and, to mix ludic metaphors, for the very chips that you are creating also to fall your way.
So that is one thing. But what if entrepreneurs want to do more than peddle products (if you’ll allow me this irreverence towards the noble craft of commerce), because they are also members of a community that they care deeply about and want to serve? Or because they are emboldened by the more radical promises of sustainability, that a sustainable future requires not just swapping out fossil-dependent machines for solar-reliant ones, but also swap out some liberal ‘invisible hand’ capitalist practices?
Distributing money
That means talking not just innovation of products and services, but also fundamental business models – in the sense of what it means to be a business.
I’ve discussed two examples of this:
ACE, from Boston, which sought to improve the energy profile of social housing while creating local employment opportunities. That meant training programs instead of just relying for undoubtedly cheaper and fast contractors.
The German town of Reußenköge, where farmers created large-scale wind parks in cooperation with townsfolk, making sure it wouldn’t benefit landowners alone. That meant a lot of talking and organizing, and some benefit-sharing as well.
In these cases, the question about the possibility of making the market also pertains to new ways of ‘doing’ the market – for new kinds of relations between producers and consumers, for example, relations that perhaps blur the boundary between the two.
Million-dollar questions
These cases takes us more explicitly into the domain of ethical or social entrepreneurship, where doing business is a way of doing good. What does that mean in the case of sustainable energy? And what conditions does ‘good business’ require to thrive?
I think it’s interesting to dwell on these questions, because in the long run, sustainable energy will win the day. Markets are being made as we speak. But what kind of markets do we want?
What is a good energy product or service?
If you’re in the business of making, moving or managing sustainable energy, and you’re in the confusing and stressful hustle to make it work, when is good ‘good enough’?
What yardsticks can companies refer to? What guidelines to thread through the many conflicting demands of creating a viable business?
And the bigger question: for those trying out new ways of doing markets, can they ‘merely’ create a niche for themselves, or can they create systemic change? If so, what should they do?
I’m planning to wrap up this series with a couple of interviews with some smart people to help me answer these questions 🤓, so stay tuned for more, or if you haven’t tuned in yet, consider subscribing 👌.
Take care,
Marten