As we stand on the verge of what I and many believe is one of the next big waves of technology innovations, the GreenTech industry, and given the varying levels of government commitment to this industry around the world, I wonder what (if any) the role of Government is in the growth of this industry.
In many ways GreenTech is more than just about technology because technology alone won’t solve many of the problems the GreenTech industry is planning to solve. Every technological or industrial revolution drove social change in addition to breaking technological barriers. For example, during the industrial revolution Europe moved from an agricultural economy to an industry-based economy and goods that were produced in homes by every member of the family were now produced in factories which altered the family structure. The Internet revolution has enabled us to connect with friends and family across the globe instantaneously. Progress in technology continually impacts the social fabric of society.
To a certain extent, that’s the magnitude of change that is currently needed. While we need technologies to provide us energy from alternative sources and to optimize our energy consumption, we also consumers to adopt more eco-friendly energy consumption habits. Technology just helps accelerate that. There are many analysts and investors who already believe the GreenTech industry will be much larger than the Internet in terms of both:
Introduced by Venture Beat’s Matt Marshall as “The best known investor in Web 1.0, involved in the founding of Amazon, Netscape, and Google,” John Doerr and his firm, Kleiner Perkins, have raised a billion dollars to be channeled into greentech. “Greentech could be the largest economic opportunity of the 21st century,” said Doerr.
“Our expectation is that this network [Smart Grid] will be 100 or 1,000 times larger than the Internet. If you think about it, some homes have Internet access, but some don’t. Everyone has electricity access–all of those homes could potentially be connected,” Marie Hattar, vice president of marketing in Cisco’s Network Systems Solutions group.
Some of the factors to lead this change are already in place. In many large cities, there is a higher level of eco-consciousness now than ever before which means the market is larger than ever.Technologies for alternative fuel sources such as Solar and Wind have been around for decades, and new, creative sources of alternative fuel are being prototyped. In the past few years, Venture Capital funding has been the highest in the GreenTech/CleanTech industry. Smart people with lots of money are investing a lot of capital and making big bets on this industry. And to a very varying degree, Governments around the world are also committing to meeting their energy efficiency and carbon reduction goals.
I moved back to Ontario to start my own GreenTech company and one of the factors that made this decision easier was the level of commitment the Government of Ontario has in making Ontario a worldwide leader in the Green Industry. And it’s inspiring to imagine the possibilities of what this could mean for Ontario, from greater economic prosperity to being a model for environmental sustainability for other provinces, states, and countries.
In May 2009, the passing of the Ontario Green Energy Act
set the direction that Ontario is heading with its Green initiatives. And right off the bat, I think Ontario is making the right call by building strong partnerships early on with emerging markets such as India, China, and Korea. Traditionally, Ontario’s economy has been manufacturing base and very closely dependent on the US market.
However, it’s clear that future global economic growth will be driven by emerging markets and if GreenTech is going to have a significant piece of the pie in that growth, then Ontario is in a great position to capitalize on that growth.
International Green Trade Agreements
In the past 18 months, the Ontario Environmental Trade Missions have made the following major trade agreements:
- $600 million dollars worth of new contracts for Ontarian GreenTech companies doing business in China. In this deal, green technologies developed in Ontario such as Geothermal systems will be used in Chinese projects.
- $650 million dollars worth of new contracts for Ontarian GreenTech companies doing business in India.
- An astounding $7 billion investment by Korean companies led by Samsung to create four manufacturing plants and use Ontario produced steels to increase Solar and Wind output in Ontario.
Overall, I think this means great financial potential for Ontario-based GreenTech companies because there are channels open for those companies to do business internationally.
Government Green Initiatives in Ontario
The Government of Ontario is driving several local initiatives in the generation, distribution, and consumption of energy. Let’s look at some of them.
Today, Clean energy sources make up a much greater percentage of energy generation than before. Ontario’s coal-fired electricity generation fell by 73% from 2003 to 2009, from 36.3 billion kWh in 2003 to 9.8 billion kWh, and now only makes 6.6%
of Ontario’s total electricity. Just 2 years ago, the number that was at 18%
A massive infrastructure upgrade is needed because the current power grid infrastructure is inefficient, can’t differentiate between clean and non-clean energy sources, and provides limited ability to manage end user energy consumption. In 2006, Ontario already began the Smart Grid Initiative
to install smart meters in every home and residence by 2010 and that deployment is on track to be complete by the end of the year.
Transportation is a major carbon sink and electric cars require an infrastructure for their regular operation because they need charging stations, just like regular cars need gas stations. Better place
is setting up a Canadian head office in Ontario and they will build an electric car demonstration
and education centre in Toronto to lay the groundwork to help get electric vehicles running on Ontario roads.
Ontario is investing in public schools to make them more energy efficient with a $550 million investment which will also create 5,500 green jobs. Schools that are upgraded get on the certified EcoSchool
Government’s role in GreenTech
This is great progress but also leads to an argument: Is it the most efficient utilization of resources to have government drive this growth or should we let the free market efficiencies instigate and drive this growth?
I think it’s necessary for the government to provide the infrastructure for any technological revolution and to foster an environment where entrepreneurs and inventors can thrive. In India, the tech industry’s growth is being hindered because of infrastructure issues
such as blackouts and traffic jams and China does not have the same problem because or the large scale government investments in China’s infrastructure. Let’s also take some lessons from history and analyze the Industrial revolution.
During the industrial revolution, everything from population growth, raw materials, consumers, inventors, entrepreneurs, investors, and merchants had a part to play, and so did the British government which was one of the reasons why the Industrial revolution originated in the UK.
Firstly, the UK had a large domestic market, and unlike other nations, there was no barrier to trade between different regions in the UK. Other countries were split up by local regions who imposed tolls and tariffs on goods traded amongst them. This allowed the goods created in factories to be easily traded which was a key driver in the industrial revolution.
Secondly, the patent system developed by the government rewarded inventors by giving them monopolies in return for revealing the workings of the invention, and thus increasing the pace of development and the number of technological innovations.
Thirdly, the English Parliament was under the control of merchant and capitalist classes which led to many legislation that favoured mercantile and capitalist interests. This was not the case in other countries which still had Monarchies. The British Government chartered trading firms such as British East India Company to facilitate trade.
Lastly, the British government had built a good naval system, which played a key role in facilitating trade with other European countries and around the world. This was an infrastructure also helped British companies acquire raw materials needed for manufacturing, which fueled the Industrial revolution.
Therefore, the British government invested in the infrastructure and created an environment where the Industrial Revolution could originate. Obviously, many other players apart from the government had to be present to make the Industrial revolution possible, but the government played an indispensable role.
GreenTech needs some government
Even the internet began as a military project. In “Seeing What’s Next”
, a book I read a few years ago, Clayton Christensen repeatedly argues how government regulations can make or break innovation.
However, beyond providing the infrastructure and the regulatory support, it’s probably most efficient for the government to let the free market forces handle the rest. Several governments tried rebates for solar and wind, but quickly learned that they are not sustainable programs and most of them have ended or are being scrapped. Also, in those cases, the other problem is that government begins to decide what technologies are eligible for such programs, and the government is not the most qualified to make those decisions. I think Ontario’s Emerging Technology Fund
is an example of a good way to catalyze GreenTech growth, where the government matches investments in GreenTech startups made by angel investors. By doing so, government is supporting GreenTech startups while letting investors decide which startups will get funded. And this puts GreenTech startups in Ontario at an advantage over their peers in other provinces and states, and hopefully will accelerate GreenTech growth in Ontario.
The GreenTech industry is new so we’re still learning as we go, but I think it’s clear that government will be one of the driving forces.