I get a number of people calling me almost on a regular basis with stars in their eyes – they want to start a business in “green” because they heard they was a lot of money in it.
Most times, I try to deflate the expectations. Because the fact is, most of the well known opportunities (note the qualifier well-known, will come to that soon) in the sustainability sector are not any more profitable than those from many other attractive business sectors – IT, real estate, entertainment….
In fact, companies in some prominent sectors such as solar PV are bleeding red because of intense local competition and oversupply, not to mention the threat of cheap Chinese imports. Similarly, the wind power sector in India has been going through tough times last 2 years in a row. A number of power plants in the biomass power sector (and biofuels too) have either shut down or are operating far below capacity.
With such turbulence in the market, it will take a very optimistic person to say that the green sector is blue with opportunities.
But I will stake out a limb and say green is indeed blue.
The reason has to do with how we define the green sector.
To most people (and this unfortunately includes many entrepreneurs and wannabe entrepreneurs), the green sector starts an stops at renewable energy. To me, this is the real issue why entrepreneurs miss a number of important opportunities through which they can make a significant difference to the world as well as make significant money for themselves.
To give you a macro perspective, renewable energy is only about 12% of the total sustainability pie, in terms of current market size. Of the total of about $3 trillion market that the sustainability sector represents globally, renewable energy is less than $500 billion.
Hmmm…so what does the rest of cleantech / sustainability solutions comprise?
Here is a broad list of a host of sectors that belong to the sustainability sector but not exactly to energy.
- Green Buildings
- Eco-friendly Consumer Products
- Sustainable Mobility
- Sustainable Corporate Operations
- Pollution Control
- Education & Training
- Energy Efficiency
- Smart Grid
- Energy Storage
- Green IT & Green Computing
- Waste Management
- Sustainable Materials
For those who wish to know the sub-sectors under each of the above, I would request you to refer to this page.
What will be of interest to many of the aspiring green entrepreneurs is that a number of sectors from the above list are quite profitable. And the reason is not far to see. While renewable energy projects still have fairly long payback periods (8-9 years for solar and 6-7 years for wind) owing to the fact that they compete with relatively cheap fossil fuels, solutions offered in many of the sectors listed above provide exceptionally good paybacks and returns to the end user. Investments in many energy efficiency projects, for instance, have paybacks fewer than 3 years.
So is it any surprise that there are lots of under the radar companies making significant profits in diverse, and not-in-the-limelight cleantech sectors, while renewable energy companies are sweating it out for their measly pennies.
As they say, mistrust the obvious. Don’t follow the crowd. The sectors looking sexiest could be the least profitable.
And by the way, should you be interested in knowing more about under the radar, emerging, attractive opportunities in cleantech and sustainability, you might want to be a part of CleanBoot, a boot camp EAI is organizing on Jan 18 at Chennai for all those interested in being cleantech entrepreneurs. More about Clean Boot from here.
See also: an interesting emerging cleantech segment – Building Energy Analytics