Services, as any economist would tell you, are hugely important to the economies of developed countries. In the European Union, where this post is being written (I’m here for our wonderful Amsterdam event), services make up 71% of the economy. In the US, it is even higher (at 77%). In fact, it’s likely that you – the reader – are part of the service economy.
Against this service-centric economy, popular media has often portrayed cleantech as a starkly different type of industry – one that is manufacturing-centric and commodity-reliant. Think of utility scale wind turbines, or solar manufacturing, or even hybrids. And these examples illustrate the stereotype is not entirely off the mark. But we at Cleantech Group believe the next wave of cleantech will be much more heavily focused on services. Here are just a few examples of where and how this is happening, in cleantech-sectors stereotyped as “dumb” or hardware-centric:
- Lighting: Innovation in lighting types (e.g., LED, OLED, etc.) is extending the operational life of fixtures up to 100,000 hours. While this is excellent for consumers, it challenges the traditional, large lighting companies’ business models of selling fixtures, waiting a few years, and selling the consumer new fixtures when the old ones fail. With margins compressing in fixtures, and devices lasting longer, lighting companies are busily re-orienting themselves to a software and services oriented model, using lighting controls, and integrating other sources of energy demand (e.g., HVAC). This evolution is something we’ve covered extensively in our research
- Storage: In a variety of forums – our webinar with Khosla Ventures, our panel discussion in San Francisco, and in this blog – we have pointed out that while “storage 1.0″ focused on building a better battery, “storage 2.0″ will focus on the intelligence, power electronics, software and services necessary to operate the storage device in the most effective way.
- Solar: While the popular media has been abuzz with news of solar IPOs and loan guarantees, arguably the most remarkable change in the solar world is the rise of distributed solar companies like Sungevity and SunRun. These companies will freely admit that their key innovation is not in the “hardware” or panels themselves, but in innovative business models, financing and customer service approaches.
Certainly, innovations related to hardware, materials, manufacturing and devices are not going away – nor should they. But – despite the hype that stereotypes cleantech as capital and hardware intensive – this industry is quietly transforming itself to resemble the strengths of the broader economy in the developed world. And despite the many economic challenges in the United States and Europe, let’s not forget that these are some of the richest economies on the planet.
In short, services represent the future of cleantech. And that future looks increasingly bright.
Josh Gould is a Director at Cleantech Group.
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