Thoughts on 2008 - caution and optimism

Below is a collection of my own predictions for 2008 in cleantech and sustainable business, along with links to writing I've done in the past covering these topics. My post on the predictions from other bloggers, writers and experts is here.

1) Weak US and global economic conditions will have some negative impact on the “green movement” in the short term.

The weakening U.S. and global economies will dampen investor enthusiasm in all things green and cause national politicians to temporarily back off their environmental pledges. The frigid housing market will negatively impact PV solar installation in the US and the poor economic environment will cause some cleantech companies to fail or post poor results. These won’t be representative indicators, but the mainstream media, in a downcast mood, will jump on these outcomes anyway as signs the “green” boom is ending.

Due to this, many undecided Americans will take a step back to pause and reflect on the “green movement” (a term I dislike, but use to encompass “clean energy investment”, “corporate sustainability”, “climate change solutions”, etc). I think there are still many more skeptics than optimists regarding the potential future success of renewable energy and green business. These developments will give the skeptics ammunition to re-emerge and question if the hype is justified. While I think this backlash would have occurred naturally, the 2008 conditions described above will exacerbate it.

2) However existing concerns (energy prices, climate change etc.) will remain, lessening the impact of the developments described above, and allowing for the future long-term development of the “green movement”.

The pause in interest in all things green will be short-term. No more than a year. High energy prices, energy security concerns, increasing scientific certainty around anthropogenic climate change and new weather phenomena (climate change-induced or not) will mitigate some of the media (and the public’s) skepticism and ensure continued interest in all things green. Climate change will not be a large campaign issue (too much issue clutter), but it will be discussed, especially if McCain gets the Republican nomination.

Longer-term, the steps taken to boost the economy (lower interest rates, tax cuts/credits, housing industry bailout) will have a beneficial longer-term impact on the “green movement” spurring consumer and business interest and institutional investment. U.S. politicians and business leaders will recognize the value (and currently wasted opportunity) in developing the variety of industries under the “green/clean” banner. But that will be a 2009-2010 development.

3) One new trend will capture public imagination, while solar will experience a backlash.

This stems from a conversation I had a few months back. To borrow from my own writing, it certainly seems as though the last few years, one specific technology has captured the imagination of the media, the business community and the public. There’s a love affair for about a year, followed by the inevitable falling out of love period, as various individuals question the economic, environmental and political realities underlying each technology. 2004 was the year of the hybrid (Prius); 2005 - wind; 2006 - biofuels; 2007 - solar. I see no reason why this pattern won't repeat itself. As to what 2008 would be, I think I'll stick with energy efficiency (although I'd broaden it to include #5 and #7 below).

4) Coal power plant cancellations will grow, sparking interest in a variety of energy alternatives

As I blogged here, I believe the pace of coal plant cancellations or postponements will quicken. I last counted 22 cancellations in the past 12 months. There’s a reason why a lead Citigroup analyst (and others) downgraded coal stocks in July. There are a number of financial ramifications as a result of this, but more importantly, that lost capacity must be made up somewhere. Utilities and power generators (and city and state governments) will need to choose between natural gas, lobbying for nuclear, or looking at other alternative technologies.

5) Some smart people will begin applying the lessons of the most recent technological revolution to the consumption of energy.

As I also blogged here, the concept of empowering and engaging the consumer, so that they are actively involved in the generation and consumption of their own power will be a dynamic trend in the coming year. Demand response technology, smart and net metering, last-mile smart grid efforts, incentivizing energy efficiency – each can and will play a role. Although as my caveat above stated, we should only be witnessing the start of this long-term trend, and maybe even just the first outliers.

6) Reducing the energy intensity of transportation will be the primary focus, but the solution is still to be determined.

Whether one considers the new Energy Act, the build-out of high speed trains, the focus on ethanol and infrastructure from “field to fuel pump”, or electric vehicles and battery storage, the bottom line is this. We need to get people from point A to point B using less energy, and with less environmental damage. I didn’t post as much on this topic as I would've liked this year, but it is one that will continue to hold the attention of investors, policy makers, corporate executives and individual consumers. 2008 will see a variety of solutions proposed, and while I don’t see one gaining more favor than any others, I do believe those solutions that keep #5 in mind may do well.

7) “Design” and aesthetic appeal will be a growing consideration and differentiator among renewable energy and other clean technologies.

My significant other has long appreciated the idea and concepts underlying renewable energy, but disliked the outwardly unappealing and awkward appearance of solar panels, wind turbines, CFLs, etc. I think it’s a valid criticism. Key to the resurgence of a number of companies (Apple, Mini Cooper) and has been the focus and integrating of style and design with technology. Everything from green buildings to urban environments to distributed generation could benefit from a similar philosophy and I think they will in 2008.

8) Labor shortages will be as big a constraint to the energy industry (traditional and alternative) as polysilicon and turbines are to solar and wind respectively.

Clean Break (linked above) has a good reference on this (although he has a different take), and I’ve posted about jobs in the green industry here and here. The US was already suffering from a dearth of engineers and scientists in most fields, but the shortage appears especially acute in energy. The lack of qualified technicians and installers for distributed generation mirrors a similar shortage (for different positions) in traditional oil, gas and power. While some “green jobs” legislation was included in the Energy Act, ultimately, much more support is necessary to meet the growing need for labor in this space.

9) People will focus on “managing intermittency” through diversification and other energy portfolio strategies, as well as a variety of energy storage solutions.

I’ve covered the geographic diversification and intermittency issue here for solar and wind in detail. Outside of cost per watt, this is the biggest challenge and drawback for renewable energy. It’s not a bold prediction to state the people will be working on ways to store energy where intermittency is a factor, but I do think more project financers, investors, energy executives and policy makers will focus on the potential value in diversification across regions for wind and blending solar (Thermal, CSP and PV) with other renewable and traditional energies.

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So that’s it – my predictions for 2008. Before writing this post, I didn't expect that I would leave out predictions on carbon legislation and carbon markets, emission measurement technologies and global climate change policy. I could be wrong, but ultimately, given the economic challenges and US elections in 2008, I don’t think much will be happening in those areas.

I was somewhat surprised also by my pessimism, but as I worked through this post, I started to realize what had been bothering me about so many of the predictions and forecasts I had read. Many (especially the optimists) seemed to be looking to cram at least 5 years of development and success into 2008.

I personally believe the industries that are growing around cleantech, renewable energy and green business are strong enough to withstand a pause, and in fact could benefit from one. That’s not to say that I wouldn’t love to see growth that far exceeds the $117 billion invested this year and in fact I’m sure just that in 2008. But the rush to invest and overwhelming interest in all things clean and green is, yes, beginning to look a little frenzy-ish and bubble-ish. And I’d rather smooth that out of the system now, than go through a dot-com cycle lasting five years.