I had been wanting to read Jigar Shah‘s book Creating Climate Wealth for a while now. Jigar Shah is the founder of SunEdison, which pioneered a different business model for the adoption of solar and was instrumental in starting off the rooftop solar revolution in the United States. Jigar Shah later sold his company to MEMC for $200 million in 2009.
Here is a cool slideshow that explains the business model that SunEdison pioneered. Put simply, the model removed one of the biggest bottlenecks to solar PV adoption (high upfront costs) and replaced it with a PPA (power purchase agreement) which was a valuable asset to another type of stakeholder – the financial investing community.
You could say that Jigar was one of the first entrepreneurial successes in the cleantech field.
I had met Jigar Shah in New York last year and was struck by his easy accessibility and down-to-earthness (in fact, when I went to meet him, he was reportedly baby-sitting and had to break that activity off to meet me, presumably resulting in both Jigar and his baby being annoyed, though for different reasons). He had also later taken the time to connect me with the New York school district’s sustainability program director while on a subsequent trip I was researching on sustainability education for school children.
During our brief meeting, he had mentioned to me about the book, which had been released just a few days earlier. I had since then wanted to read the book, and finally laid my hands on it a week back.
My first thoughts after reading Jigar Shah’s book is that he should employ a professional storyteller to polish up the book before its next edition. In my opinion, it is a raw, unpolished diamond. (just out of curiosity, I googled up an image of an unpolished diamond and compared it to a polished one. Boy, what a difference the simple act of polishing can make!)
When I started reading, I was looking for insights and perspectives from someone who had pioneered an exciting business model in cleantech. After reading the first few pages, I was not impressed, as it appeared to be a cross between an autobiography and a business management book.
It reached a stage when I almost stopped reading it, but fortunately by then I had landed at Chapter 5 – “Respect the Rules of Mainstream Capital Investing”.
From there on, it was unputdownable (irresistible, if you are an English puritan). The style remained the same – simple and forthright – but the content had metamorphosed dramatically – here was real-life wisdom on getting cleantech projects off the ground and interesting insights on raising finance. Coming from a person who had been able to negotiate with the hard-noses of Goldman Sachs to get a rather pioneering business model financed, these were useful and hardcore guidance and insights.
I thought I’d take some time to put down the highlights and insights so that those interested can consider purchasing the book too.
Some key highlights
To many of us who are accustomed to reading lot many business bestsellers, what we most times do not get from these books is a first hand account of a person who had executed a pioneering idea. This is where CCW stands out. While some of the insights that Jigar has explained in detail – for instance, “small is beautiful” when it comes to the future of renewable energy – have been explained well by others too (some interesting insights on the related distributed energy generation from here, here and here), the following were the perspectives I found to be unique in his book:
- Technologies exist for climate change and sustainable energy, what is required are the right business models – this is the theme that Jigar continuously stresses throughout the book. I think it is a powerful perspective. When understood well, this perspective can create a tremendous difference in the way entrepreneurs approach the cleantech / sustainability business domain. I do not completely share his optimism about technology existing for most cleantech domains; some technologies or processes for important areas such as energy storage and bioplastics, not to forget biofuels, are not yet there (In fact, about two years back, I started a community/network for cleantech researchers to interact because there is a clear need for tech breakthroughs in some domains). Broadly, however, I subscribe to what Jigar says – for many critical domains within sustainability, technologies exist; what are required are the right approaches to make these technologies provide sustainable benefits.
- Cash starved businesses hold power hand – I completely agree with him here; as a small company working in virgin business domains, nothing will spur creativity and hard work more than the need to make your ends meet. Jigar details how precisely this situation led them ultimately to their success. I run a small clenatech consulting firm myself, and I can say with conviction that the best ideas and the smartest work we did were during the tough times when we had little or no money.
- It is critical to respect the sacred rules of mainstream capital investing – This was perhaps the most important insight I got from the book. Essentially, Jigar contends that you are better off getting funded by a hard-nosed mainstream investor rather than an individual or an angel who puts in money just because he likes you. As someone whose earlier company was venture funded (and that too in the dot com era), I cannot but fully agree with him. We got about a crore in funding (a quarter million $ at that time), and within a year, we had blown all that without a semblance of revenue model in place! Easy come, easy go applies perfectly here. On the other hand, if your venture has been screened and funded after significant due diligence and if the investor is after you to ensure that you get your basics right post investment, there is much higher chance you are adding lots more value to the ecosystem than otherwise. A bit of reflection tells me that while Jigar’s insight here is applicable to all ventures, it is even more applicable to high capex/infra based ventures, where mistakes and casual assumptions can be very costly.
- Service companies have an edge in the infrastructure space – I had probably intuitively known this already, but it was nice to have this point explained in a detailed way, along with anecdotes. I still remember my early days in Sify (India’s first Internet Service Provider). Even though I was a greenhorn then, I kind of realized that Sify, which was essentially a software solutions company, will not have a competitive advantage in the ISP business which was essentially a cable and wire telecom game. I suggested this to my CEO, but was shot down saying one should not bother thinking too far off. Fast forward 7 years from then, Sify was a doddering ISP, and the kings were the usual suspects – the big telecom players such as BSNL, Tata Telecom and Bharti. Something similar applies to energy infrastructure too. Companies getting into this space need to have a long term commitment and service orientation. Creativity is not as important as discipline and being very good in nuts and bolts…I am sure we will see this phenomenon soon in the solar PV sector in India, which today is inundated with firms of all hues and colors in search of (non-existent) quick bucks.
To me, just taking home the above four insights is enough and more value. There are times when I don’t see even one worthwhile, memorable takeaway after reading some so-called bestsellers, so four is a real merry.
A few other chapters of interest for me from the book:
- Solutions for achieving building efficiency – while I had been acquainted with the energy efficiency sector for quite sometime, this chapter provided me some useful, and shall we say, reinforcing, tips. I have said this in dozens of conferences I have spoken in the last 2 years, and will say it again: Energy Efficiency is the 800 (make that 8000 or whatever is the largest gorilla the world has ever produced) pound gorilla in the room none of us simply bother to notice, and frighteningly because it is bang right in front of us! I have come across energy efficiency projects where they have demonstrated savings of over 50% year and year, with paybacks of less than 3 years. In fact, come to think of it, energy efficiency is one domain where Jigar’s PPA model (customized appropriately) could do wonders, because capital cost is pretty much the only party-spoiler in what is otherwise a dream business case! Energy efficiency might however have turned the bend in the recent past in terms of getting the acknowledgement it deserves, Google’s acquisition of NEST might be one such indication.
- Why is industrial efficiency so hard? – this chapter was a definite eye-opener to me, and I could relate to it in a significant way, as we at EAI have been involved in some fairly significant industrial energy efficiency projects in the past two years, and more recently with our dedicated solution EAI SURE-FIRE. Jigar’s insights are sobering on why industrial energy projects don’t take in spite there being a clear business case. And, from what I have seen, his insights are right on the dot. Industrial energy and energy efficiency projects most times do not take off because these belong to the engineering domain, and the engineers at industrial/manufacturing setups cannot be easily convinced that outsiders know better. In fact, wherever I have see large scale industrial energy efficiency projects take off quickly, it has been mainly because the top management pretty much forced the engineering division to take help from external experts and get moving. Here it is a curious case of The-CFO-gets-it but The-CTO-doesn’t (in many cleantech projects, it is usually the other way round).
- Shipping puts the -ization in globalization – I knew little about energy efficiency possibilities in the shipping industry, but after reading this chapter, it appears to me I should read up a lot more, because the shipping industry appears to hold significant promise for CO2 abatement. I would request Jigar to include a bit on aviation side in the next edition. The shipping sector can possibly learn from the aviation sector which has made dramatic advances in fuel efficiency in the last few decades (some interesting dope on this from here, here, here and here). Given that Jigar had worked earlier with Richard Branson, he could provide real life insights from what Virgin Atlantic is doing in this context. Airlines contribute 5% to world’s greenhouse gases, and fuel costs make up the largest cost component (about 30% of total operating costs) for these folks, so adopting fuel efficiency is a no-brainer for this industry. The industry’s efforts in the use of renewable fuels (read biofuels) has not been anywhere near as successful, though! There are significant challenges to airlines shifting to more sustainable fuels such as biofuels, and I should know something at least here as my team also runs Oilgae, a global intelligence resource on third generation biofuels from algae. I remember my meeting last year with the executive who heads Boeing’s biofuels program, and he admitted that it would take until 2020 for airlines to have just 1% of their fuel as biofuel. Just imagine!
Hmmm…with so much written above in this post, feels like having written a book myself 🙂
Overall, Creating Climate Wealth was a useful read.
I am positive that Jigar will write a sequel to this, or bring the next edition with even better coverage of topics, and with a more forceful focus that his insights fully deserve.
I will leave you with these twitterish thoughts about the first edition of CCW
- Down to earth
- For those looking to make it big in cleantech projects, a must read
- Perspectives that are a blend of commercial and operational
- First (not-so-great) impressions can be deceptive. That said, the book can do with a more powerful storytelling.
You can purchase Creating Climate Wealth from Amazon .
If you had read CCW and would like to leave a comment for others, use the comment box below or send me a note and I will be glad to publish it here. Me = Narasimhan Santhanam, narsi [at] eai.in