Energy
Background
The world continuously faces social and economic challenges over the availability, cost and environmental impact of energy. Despite trillions of dollars spent on consumption, technology, infrastructure, security and other energy related policies the energy equation remains unsettled. Countries and companies that have the lowest cost and highest availability of energy grow GDP at a distinctly advantageous rate.
The most successful providers of energy are ruthlessly efficient at discovering, extracting, refining, and delivering energy. Yield continues to rise and processing costs continue to lower. With worldwide growing demand for energy and a fixed quantity of available traditional fuel sources, the cost of energy is surprisingly low.
The business of energy requires scale. It takes billion to build new power plants, discover new reserves, and build energy distribution. The business case for energy companies is modeled on 20, 40, and even 60 year paybacks. Since end consumer markets can quickly react to price signals, energy producers are highly motivated to correct market price whenever new technology offers a solution that will permanently takeaway the consumer demand the energy providers included in their payback formulation. Therefore the energy providers are the key point of influence in the market. Energy companies are in a sense the real customer of energy innovation. This forms a “Monopsony” like market in which a few buyers have key influence over the technology adoption and market standards.
Concerns over the social cost of energy have at times created periods of regulation and market controls in an attempt to capture the cost of externalities (Environmental harm, war, etc) into the cost of energy. Often implemented in government policy, these solutions create market perturbations that serious entrepreneurs avoid out of uncertainty over the regulation’s survival past the next election.
Billions in research is being spent to develop new forms of energy, solutions to reduce energy use, and process to reduce environmental harm. In reality, there are many practical technologies that deliver real energy efficiency right now, but have limited market penetration. The reality of innovation is that new technology is successful when customers are willing to buy the solution. Customers buy a solution because it delivers more value than alternatives.
Because the energy market is “Monopsony” like, the effective “Customers” are the companies and entities that deliver energy and produce energy consuming products. They become effectively the customer because they have dramatic influence over what technologies fit within the energy delivery system, the price of energy, and ultimately the value to the end consumer.
A benefit of a few big players with control of the market is that if a technology is truly beneficial to these players and their consumers, it is possible to rapidly deploy a solution into the market. Young entrepreneurial companies dream of scale, but that process often takes 10-20 years. Properly aligned, young companies matched with large markets can deliver existing technologies rapidly.
Questions
Energy appears as a regular problem. Some are worried about the environment. Some are worried about cost of energy. Others are worried about the risk of importing energy. But, it appears progress on these fronts remains uncertain. There are various discussions about implementing a range of taxes and fees on hydrocarbon based fuels in an effort to drive people to choose alternative sources like wind, solar, and efficiency. It may be that people choose to raise these fees, but its a weak way to create a market. At any time, politics might change, the subsidy will vanish and the market will go away.
The Key Questions is "What needs to be true" to reduce the cost of alternative sources of energy below the cost of existing energy.
Market Opportunities
- Competitive Algae based BioFuels
- Create solutions that are Clean, Cheap, Secure and Plentiful
- Making Renewable Energy Work
- Natural Gas as major transportation fuel
- Operating without subsidies
- Speeding Renewables market adoption in US
- Supplying power to remote telecom sites
- US Cleantech Stimulus Still Not Stimulating
- Using Energy Information to help consumers save energy
