Industry Market Trends

Opportunities for Industrial Businesses Abound in the "Real" Cleantech Industry

Dec 13, 2012

Enterprising industrial businesses can ride the cleantech wave. Credit: Ricka Mayangsari.

The cleantech industry too often gets a bad rap among manufacturers. Critics say the sector has a high concentration of start-ups. Many technologies lack infrastructure. There is a perception that much of cleantech is unproven and stuck in a developmental stage. Still others see the industry as capitalizing on environmental regulations.

This view of cleantech is not an honest one, though. Certainly the green energy sector has had some misses, particularly in the past two years. But there is much more to cleantech than renewable energy. Industrial businesses that step back and see the real value of cleantech will quickly realize that, while the industry faces challenges, there are innumerable opportunities to "ride the wave" and build their businesses. These opportunities go beyond selling into new markets, and include cost savings, efficiencies and improved bottom lines.

The Boom and the Bust

Many industrial businesses look at cleantech with a mix of excitement and trepidation. The rapid growth of wind turbine manufacturing, for example, has opened doors for suppliers of fasteners, bearings, rotors and more to sell into new markets. Yet manufacturers of pistons may feel threatened by the rise of electric vehicles.

Another reason for concern is that cleantech seems to be simultaneously booming and busting. In August 2011, after receiving a $535 million loan from the U.S. Energy Department, California-based solar panel manufacturer Solyndra went bankrupt, unable to compete with Chinese competitors. Lithium battery maker A123 filed for bankruptcy on Oct. 16, swallowing a $249 million federal grant and devastating its stock price. Both events seemed to have cooled off capital investors who were once hot on the green energy sector. General Electric CEO Jeff Immelt confessed last year to wishing he had spent less time advocating cleantech, even as the company's Ecomagination initiative banked an estimated $21 billion in revenue.

Many small manufacturers worry that the uncertainty of cleantech will create problems for them. That happened to Cardinal Fastener & Specialty Co., Bedford, Ohio. In 2009, the company was the poster child for how all manufacturers could benefit from the cleantech boom. But over-leveraged in expanded capacity for a demand that did not quite take off caused the company to file for bankruptcy in June 2011. The firm is still alive, although it shed some jobs and was purchased by German-based Würth Group earlier this year.

Expanding Horizons

All of this seems to support an incorrect view of cleantech. To see the real face of the industry, manufacturers need to look beyond energy and batteries. Vinod Khosla, the founder of Khosla Ventures, recently wrote in Forbes that his company's sustainability investment strategy includes mechanical (i.e., fuel) efficiency, electrical efficiency (e.g., LED lighting), biochemicals, bioplastics and much more. Khosla calls this a "more holistic view" of cleantech than what is commonly written about.

As David Gold, managing director of Access Venture Partners, blogged last month, "I have always looked at cleantech as way to drive increased efficiency, reduce waste and create less-expensive alternatives -- the things that drive bottom-line benefits in the free market."

One of the technologies that will help industrial businesses do that exactly is GE's "Industrial Internet." The concept involves connecting industrial equipment of nearly all types to intelligent sensors and analytical software in a continuous loop. Data is generated, processed and fed to human operators, who then communicate back to the machines. The main benefits are increased productivity, greater energy efficiency and reduced waste.

These are the areas where manufacturers have the most to gain and the least to lose. In particular, energy-intensive sectors such aluminum, steel, chemical, and glass -- for which energy consumption represents anywhere from 20 percent to 40 percent of production costs -- can see significant savings through efficiency measures.

Many global corporations are already realizing this. An Ernst & Young survey of billion-dollar companies found that 73 percent foresee energy costs rising over the next five years, and 70 percent have an energy strategy and implementation plan to help manage those costs.

Playing by the Rules

The Obama administration has been relentless in its efforts to regulate waste and emissions from all businesses, not just manufacturers. While the pendulum of regulation tends to swing as power shifts among political parties, the overarching trend is toward greater and greater limitation and reduction of emissions, waste and ever-growing lists of pollutants. For many manufacturers it's a headache. But for some it can be an opportunity to sell into a new market. Pollution controls, liquid waste reclamation, lighting and more are all forms of cleantech that thrive when these legislations pass through.

Does this mean that all industrial businesses will thrive as cleantech industry grows? Certainly not. In fact, some will be threatened. But that's the nature of evolution. Those manufacturers that are proactive and enterprising enough will be able to take advantage and enhance their chances for success.

And as a side effect, they might just help save the planet.