Lassi Noponen: Clean technology spreading from industry to households

In the 2000s, clean technology has become a significant global investment theme. Simultaneously, large corporations around the world have taken cleantech thinking to the core of their own aspirations for competitive advantage.

Nevertheless, the current cleantech boom has its roots to a large extent in the last millennium. It is customary to describe the development of environmental technology at the end of the millennium as occurring in two waves. The first wave is regarded as having started at the end of the 1960s, and the general rise of environmental awareness in society was linked with it. The psychological impetus for growth came from the academic world, but what was behind the growth on the corporate level was only the increasing stringency affecting environmental norms. Technology was ‘end-of-pipe’: industry saw environmental investments only as an irritating expense, and the object was to avoid it.

The rise of the second wave was influenced by many factors during the 1980s. The times were affected by the growth in global environmental concerns which obtained their impulse from the great environmental disasters of the 1980s: Bhobal, Exxon Valdez and Chernobyl. The political commitment of states to the promotion of environmental matters increased as a result of the UN environmental conferences. Via the growth in environmental awareness, the demand for environmentally friendly consumer products clearly increased with the outset of the 1990s.

These days, all social and business sectors are committed to the promotion of clean technology, and enterprises regard environmental performance as the source of competitive advantage – even if the significance of norms and subsidies as engines for growth still cannot be denied. The competitive edge linked with clean technology has traditionally been based on, for example, the improvements in efficiency achieved by new technology, operational savings and risk management, new or improved products, a responsible image and a more open dialogue with interest groups. Currently, the situation has nevertheless changed in the sense that, with the rise in prices for energy and materials, environmentally friendly technology is at this point more usually a genuinely cost-effective solution. This has what has occurred with respect to, for example, the large wind and solar energy parks which in the United States, for instance, have achieved parity in many areas with traditional production modes, without subsidies.

During the cleantech boom of the 2000s, the object of investor interest has fluctuated in an intriguing manner. One could say somewhat pointedly that in the beginning the emphasis was on renewable energy production technologies, especially wind power and solar energy. Energy production technologies are capital-intensive and, for example, with the wind power industry having been increased into a huge sector, the leading companies in the field are seeking a competitive edge from operational efficiency and economies of scale. The production of these companies has indeed concentrated on economical manufacturing-cost countries, and the margins of business operations have narrowed to the level of bulk products.

The strong emergence of energy efficiency technologies has commenced in the 2000s. These technologies are frequently less capital-intensive than energy production technologies, and their impact can be significant. In industry and real estate, it is possible to achieve considerable cost savings with relatively small energy efficiency investments. Examples include frequency converters, automation, heat pumps and LED lighting. The more comprehensive utilisation of these technologies is reducing the need for basic power, but the repayment periods are considerably shorter than in energy production. A recent trend is in the activation of financing operators in energy efficiency and in decentralised energy production. With the new business models, in which the customer is not personally required to make the initial investment required, it is possible to accelerate the deployment of their own sensible resource-effective solutions. An example of this is the American company, SolarCity.

During this decade, 'cleanweb' technologies have come into the picture, in which – by means of internet-, software- and sensory-based technologies – significant efficiency improvements are being achieved in both industry and consumer markets. Examples of these include the technologies linked with the measurement and optimisation of energy consumption. In recent years, the sharing economy has also risen as an object of interest amongst investors and entrepreneurs. Airbnb represents a case of a community service that has strongly shaped the field as a whole.

The history of business operations connected with clean technology is a few decades in duration, and during that period it has become a significant global business. During this millennium, huge growth in investment interest has first been experienced in investment, followed by the retreat of many capital investors. The trends supporting growth in clean technology are literally questions of life and death, and their import is growing continuously. Clean technology still contains enormous business potential for companies developing technology and business concepts.

As a result of Cleanweb, information technology applications have risen at the hub of clean technology, so that clean technology is approaching, in an interesting manner, the world of the internet and other more traditional high-tech solutions. Also, those who have succeeded in the sharing and circular economies – such as the above-mentioned Airbnb and Finnish Swap.com – represent, from the perspective of Cleantech Invest, the most interesting new clean technologies. When resources and goods are shared or used for a longer period, natural resources are considerably saved. When we are capable of doing more while using fewer natural resources, we can achieve economic growth without it directly meaning the greater use of natural resources.

Lassi Noponen
Chairman of the Board
Cleantech Invest Oyj