Renewable Energy Businesses Face Tough Realities

In the posts I put here on Renewable Energy World, I try to fill the very minor gaps I perceive in the existing coverage -- and one of those few areas, it seems to me, is business tips. Where the site is incredibly strong in addressing the breaking news on the technology, politics and macro-economics of renewables, there may be a partial vacuum in terms of helping entrepreneurs and investors in their day-to-day quest to make sense of the issues that will directly affect the choices they make as businesspeople.

To that end, I just published an 11-page report called The Tough Realities of Renewable Energy Businesses -- Why Investors and Entrepreneurs are Struggling to Profit in Clean Energy – and I offer it freely to anyone wishing to learn from my experiences as a business consultant in this space.

In the report, I note that, even though I’m not invited to the board meetings of General Electric and Siemens (and I’m guessing you’re not either), we can nonetheless pay attention to the obvious investment strategies that these giants are in the process of executing.

The first step here is understanding that a major transformation is in the process of taking place regarding the way in which Wall Street places a value on companies’ stock. Traditionally, of course, this has been about earnings—pure and simple. Big earnings mean big valuations. Recently, however, it’s become obvious that the earnings reported by most corporations are derived from unsustainable business practices that are rapidly depleting natural resources, and these earnings need to be severely discounted if we are to understand an individual company’s true value on a long-term basis.

There are a handful of companies that clearly "get this," of which GE and IBM are the largest in the US. (Sanyo and Panasonic in Japan, and ABB and Siemens in Europe are leaders in their respective geographies.)

Now it's clear that GE wants to rule the world as the Earth "goes green" over the coming few decades. As far as I can discern, there is not a single major green product or service line that GE is overlooking. From its Louisville, KY smart appliance plant, in which each product is fitted with a computer that communicates wirelessly to and from a programmable controller in the customer’s house, to its participation in Smart Grid, to its gearbox-less wind turbines, it’s quite clear what GE is doing as a long-term corporate strategy.

So what should smart entrepreneurs infer from this, and what actions do they take accordingly? Probably many things. But let’s look at a couple of obvious points:

A) If I were evaluating a business plan that suggests competing directly in one of these spaces, I’d be looking askance at the claim that anyone is going to beat GE in a head-on-head competition. I’d be much more sanguine on a plan that proposes to offer products or services that are complementary to the strategies of this behemoth.

B) A company with the vision and strength of GE is extremely unlikely to make a serious mistake when it comes to a major market strategy. I personally believe that the world is headed towards a green tomorrow – and I’m generally right more often than I’m wrong -- but you’re still far better off trusting a $157 billion company when it comes to making this prediction.

The above is an excerpt of one of 10 tips that I provide in the complete "Tough Realities of Renewable Energy Businesses" report. I want to make available to you fine folks at REW. It’s absolutely free; please help yourselves. I look forward to your feedback.