Memorial VictoriaThis “Hello World” initial blog post is a small look back as a starting placeholder for this collection of new thoughts and information. This one story touches on a number of early stage, venture development and cleantech business themes.

Cleantech, what is cleantech?

Fourteen years ago, years before anyone had heard of cleantech, I was launching a business for the clean generation of electrical power at a small company with the overly-ambitious mantra “Power to Change the World”.

This was cleantech pre-history, and was back when we used to talk about something called alternate energy instead. This story also took place just after the first web browser was launched. The Internet was barely at cave drawing stage. I used to joke with my kids that I was older than the dinosaurs. In an Internet context, perhaps there is some truth in that. It is hard to believe just how much many things have changed.

Four years after this story took place, the first Feed-in-Tariff was introduced to subsidize renewable generation and accelerate its adoption. We hadn’t imagined any such scenario in our wildest fantasies. The PV industry of the time, for example, was barely 1/100th of its current size and forecasts for 2010 PV sales turned out to be 1/10th of the actual outcome. The second most important PV market was “Leisure, boating and caravaning” – a long way from today’s multi-megawatt ground mount installations covering hectares of land.

My focus at Ballard was on fuel cell power plants for electricity generation. Struggling to distinguish this opportunity ourselves, after much internal debate we settled on the almost nonsensical term ‘stationary power’. How does the concept of stationary power makes sense when in even in the most basic electrical circuit, current must flow? The elegance of Ohm’s law teaches that potential is directly proportional to current, and current is inversely proportional to resistance. A concept of stationary power only makes sense if potential is zero or resistance is infinite. Zero potential, futile resistance. A value proposition fit only for the Borg.

In 1996, Power-Gen, “the world’s largest power generation show, conference and exhibition”, decided to cater to the growing fuel cell curiosity. Speakers were invited from the fuel cell industry to present for the very first time. I was honored to be among those selected.

That Power-Gen presentation turned out to be an industry changing event. It was also a tremendous personal lesson in what happens when the obvious isn’t and reinforced the critical need to balance technology development with market insight.

As a backdrop, development funding in the fuel cell industry was heavily reliant on government programs. With our ‘Change the World’ naiveté, we were newcomers to this party, and had to earn respect among our fuel cell peers as well as in the real energy world. The fuel cell industry had long been criticized as ‘the power of the future and always would be’. Some fuel cell industry experts had conceded that our particular technology might be useful for the automotive market. Yet, there was a strong disconnect in accepting that something that could satisfy the demanding automotive power density, cost and performance requirements to displace the internal combustion engine could ever be practical for any other application. We hung heavily on the just printed HBR article Disruptive Technologies: Catching the Wave from Clayton Christensen, fresh out of grad school himself, while barely understanding its implications. Who knew that ‘disruptive technology’ would become a business plan staple?

I was charged internally with trying to uncover a starting market opportunity and then to deliver a believable external message about that opportunity.

We did not have the funding to pursue massive power plants that could compete directly with central station coal, nuclear or gas turbine technologies. Moreover, without a direct enabling subsidy program like a Feed-In-Tariff, we were focused on how utility deregulation might offer any sort of opportunity. Prior to deregulation there actually was an existing non-utility generation market. That market was dominated by small capacity generation systems. We had to look small to get big.

The paper PEM Fuel Cell Development for a Deregulated Marketplace observed:

“Power plants with output capacities less than one megawatt dominate the U.S. non-utility market.”

The paper went on to state:

“The data indicates that the largest market is for power plants in the 100 to 500 kW range.”

Notably, there was market pain that meshed well with fuel cell power plant benefits:

“In this 100 to 500 kW market, fuel cells have the greatest efficiency benefit over the existing competition. Currently available fuel cell power plants also have substantially better part-load efficiencies and produce significantly less noise and air emissions than the existing competition. Fuel cell power plants in this capacity range are well suited to provide customer value and meet user requirements.”

We seemed to have a clear value proposition – we could offer something the market cared about to a market that actually appeared to exist. But, this thinking was heresy to the multi-megawatt proposals from the well-funded development activities of other fuel cell technologies.

The next presenter paused before launching into their prepared remarks. In an attempt to engage the audience, he asked “How many people here are interested in fuel cell power plants under 1 MW?” Virtually the entire audience raised their hands. Oddly, he took the next step and asked, “How many are interested in fuel cell power plants over 1 MW?” Perhaps three people took the bait. Notably that company subsequently switched strategy and now has a commercial product in the 100 – 500 kW range.

What is the moral of the story?

It really isn’t that complicated to observe that if people need what you are building, they probably rely on some sort of alternate solution already. Perhaps nobody had ever bought a fuel cell before. But, if it really was useful and solved an existing problem, then what had people been using?

Why do people still write business plans promoting a lack of competition rather than embracing the existence of a competitive reference? Any sort of competition can be your best friend; existing competition validates your market and provides an opportunity to determine what is important. Sometimes it does pay to look at the obvious. And, don’t forget to start with what is easy first. In our case, electrical generation was easier than automotive propulsion. Changing the world is ambitious, so why not start with the easier tasks and build from there?

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