by Michael Kanellos
First, the good news.
The bad news? Competition will remain as fierce as ever. Here are some predictions on how the face and shape of industry might change. I’m calling these tectonic shifts because they mark how the roles that different greentech companies occupy will change. Plus, if I called it “Predictions for 2011,” you might just barf.
1. Solar Will Become Like the PC Industry, Part II. Two years ago, we predicted that the solar industry would spread rapidly through better marketing and an increasingly horizontal industry structure that would allow specialists to improve products, reduce prices and make money at the same time.
Overall, it’s happened. Solar makers have begun to tailor different panels for different applications. Concepts for cutting installation costs from Solon, Zep Solar and SunPower (SPWRA) have arrived. DuPont (DD), Dow (DOW), 3M (NYSE:MMM) and others have also continued to refine coatings and membranes.
Now here’s the second part of the PC analogy. The people on top of the industry will begin to change. Remember how Packard-Bell and Compaq used to be the top PC makers in the world? Or how AST was once a dominant figure in the business market? All have now been chased to the tar pits.
In solar, Yingli Green Energy (NYSE:YGE) and Trina (NYSE:TSL) have gone from the fringes of respectability to being producers of bankable modules with recognized brand names. In 2010, Suntech (NYSE:STP) was suddenly not the only well-known Chinese solar producer.
2. Silicon Widens Its Lead. Back to the PC analogy for a moment. Crystalline silicon -- modular, cheap, and with a broad manufacturing base -- is the desktop of the day. Solar thermal plants -- large, complex, expensive -- have become the mainframes, and are already seeing their market opportunity being gobbled up by crystalline. And thin film: could it become the thin client of its day? Crystalline silicon has the support of materials suppliers, manufacturers, equipment suppliers, installers and even the banks. Every day, it squeaks out a little bit more of an advantage.
Don’t bet against silicon: it seems to be as true now as it was then.
3. Building Management Goes Cold for VCs. Buildings consume 39 percent of the energy in the U.S. and most of them aren’t particularly efficient, but you can get nearly instant payoff from new software.
It sounds perfect for VCs, which explains the flood of investment in the field. But look at what has happened. Earlier this year Siemens (SI) bought SureGrid, a small angel-funded firm, to manage buildings. Serious Materials got into building management by buying Valence Energy, a small angel-funded firm hailing from Santa Clara University.
The shopping spree is almost over.
Expect to see a run on lighting management companies like Redwood Systems or Digital Lumens: all of the acquisitions above involve companies that control HVAC systems. A few HVAC players might hit escape velocity. Scientific Conservation says it will move from controlling 15 million square feet now to 150 million square feet of commercial real estate a year from now. If it can pull that off, the customer list will make it quite attractive as an independent company or takeover target.
This will be a big industry -- make no mistake. It just may not be a great time to be a startup anymore.
4. The Rise of the Intermediates. In 2009, demand response, energy efficiency, carbon accounting and other products and services began to meld into one thing. Silver Spring Networks, mostly an equipment provider through 2009, unfurled services that will let it participate more in demand response. Tendril, a home networking concern, bought GroundedPower to provide customer behavioral services to utilities. EnerNoc married demand response to building control.
For lack of a better term, the intermediates will fill the gap between utilities and consumers and, ideally, will be able to make their fees more palatable by being able to garner revenue from both of them. Even lights, computing, and heat as service plans fit here.
Remember how back in 2006 and 2007 utility execs started talking about how utilities would have to transform themselves, offering new services, etc.? Well, this is it.
5. China Becomes a Customer of the U.S. Innovalight, which makes solar ink, has signed four deals with Chinese solar module makers that ideally will make the Chinese firms more competitive and bring Innovalight revenue.
Demand response is nonexistent in China: expect to see EnerNoc and others venture over there. Those startups with diesel engines and components for boosting gas mileage in cars like EcoMotors and Achates Power will also find willing customers there. U.S. car companies (and solar ones) remain weirdly reluctant to partner with startups. The Chinese realize it’s a great way to close the knowledge gap.
6. LED Prices Will Drop So Fast, It Will Be Tough to Keep Track of the Moore’s Law References. China is minting a large number of LED manufacturers. Both Samsung and LG are reportedly ordering manufacturing equipment to expand LED production. And startups like Bridgelux will try to make progress on producing LEDs built on silicon, rather than sapphire, substrates.
All this will lead to cheaper LED chips, which in turn will lead to cheaper bulbs. Expect to see $10 LED bulbs for the home by the end of the year.
7. Time Will Be the Enemy of Nuclear and Carbon Capture. Constellation (NYSE:CEG) had been planning to build a 1.9-gigawatt nuclear plant in Maryland that would have gone operational in 2017. Between now and then, more than 8 gigawatts of solar will get planted in the U.S. and those panels will provide crucial peak power.
Carbon capture is one of the best growth industries on paper: by 2030, the world will need 850 CCS plants and 3,400 by 2050, according to the Global Carbon Capture and Storage Institute.
Completed to date: nine.
The costs and logistics are just too overwhelming.
8. Renewable Portfolio Standards Replace Carbon Regulations. Large swaths of voters don’t like carbon regs. By contrast, voters associate RPS programs with improving their communities and adding construction jobs. Even coal-heavy states like Missouri have implemented an RPS. Personal wish list: "Buy American" standards get passed, too.
9. Smart Grid Protests Vanish. The world has a large, but luckily, finite, supply of cranky people with enough time on their hands to attend public hearings. Utilities have finally begun to understand that they need to sell this concept. Swing voters too will begin to understand how a more efficient grid will lower their bills, let them buy electric cars and force people who use peak power to pay their way.
10. These Industries Will Struggle: green building materials (dependent on carbon taxation); car charging (commoditization will make it tough for startups to withstand conglomerates); non-LED bulbs; high-efficiency concentrators for solar; consumer-based car sharing (when cars come back trashed, car owners will pull out -- otherwise sharing is hot).
11. Almost Nothing Happens Here: water, small wind, biofuels, green chemistry, geothermal, portable fuel cells, green consumer products. Same as last year. Same as 2006.
12. Recycling and Resource Recovery Will Take Off. We predicted big things for this in 2009 and 2010. It didn’t happen. But new regulations and rising resource prices will make trash more attractive. China’s threat to curb rare earth minerals has underscored the need. Some companies to watch: Ostara, Lehigh Technologies, MCR, Bioplastech, iGPS, Waste Management (NYSE:WM), Interface, Autodesk. (NASDAQ:ADSK)
13. Psychology Becomes a Growth Industry. With over $30 million in revenue, everyone loves Opower. Expect to see behavioral technology expand. One example: CityBin, which uses the same sort of peer pressure tactics to get people to recycle.
Disclosure: No positions