Two curves: My view on the BC cleantech sector at the beginning of 2010

I was asked recently what I had learned from my informal survey of the local BC cleantech sector. This was my response and I was encouraged to share it more widely. I’d love your own thoughts on the following.

Dear (Friend):

You asked about my view on the cleantech sector after I took some time to survey it. Let me answer by starting with the big picture and the thing that prompted me to look at cleantech in the first place. Then I will be better able to answer your question at the bottom.

First, the global view.

Globally, we are standing at the confluence of two exponentially increasing tides. The power of one may help us address the risks of the other, but only if we engage them both head-on. One is the curve of resource usage, the other is the curve of technological change.

Curve 1: Overshoot and collapse and “peak everything”

We have used up half of our forests and half our our fish stocks on the planet to-date and given our “peak everything” 3.5%/yr compounding resource usage curve, we will use the same amount of resources in the next 20 years as we used in the last 260 years. It is widely understood that we have already exceeded the capacity of this planet to support our continued growth as a species by between 20-30% and are already going to have to plan for a “controlled crash.”

Curve 2: Double exponential technological advances

Simultaneously, technology is developing at a double exponential rate such that we can not even comprehend what our world may look like by 2050 from a technology perspective. A brief reminder: 30 steps taken 1 foot a a time moves you forward 30 feet. 30 steps taken exponentially moves you forward 1.07 billion feet. It’s hard for our brains to grasp. The next 10 years will be like our last 100 in terms of new technology and that is accelerating.  If predictions by people such as Ray Kurzweil come true, we could have nano solar devices providing 100% of humanity’s power requirements by 2030,  the wealthy and maybe even middle class will be iiving long healthy lives free of disease and many of them will be integrated into computers and robots. If we choose our technologies wisely, even the poorest will have the benefit of low-cost desalination and solar power.

In terms of scenarios, it will already probably be either a huge cliff, a controlled step-down crash, or in a miracle of miracles, a bounce off the bottom and a move to a regenerative world. Hopefully we still have those options.

Actions we need to take:

We need to understand and act on the knowledge that comes from both of these curves.

Regarding the first curve, we need to stop the denial, anticipate the issues, structure responses that address both the rational and irrational causes of inaction, address our flawed, emotional, homeostatic tendencies, and work towards creating a regenerative world, rather than the destructive negative overuse cycle we are in.  We know a lot about why we do not act. We don’t need “more information”, we need to build plans that take into account our very human responses to things. Jared Diamond and Joseph Tainter‘s work is key here.

Regarding the second curve, we need to stop sticking our head in the sand about technology and embrace and channel technological development. Relinquishment of technologies won’t work. That would be like standing idly by saying “I will have no part in that river coming dangerously close to the village” when that river is doubling in volume and power every year. We can’t stop it, but we can channel it. We need to slay our sacred cows by revisiting nuclear power (which is emissions free) and genetically modified foods.  We need to use every advantage we have to both increase resource generation and regeneration and also to decrease resource usage per person. This will require structuring government incentives for radical expansion of green technologies.  The Sustainable Development Technology Canada program is a great start. We need more. We need to think like Vinod Khosla who says “if we do not address maintech (building materials, concrete, water, chemicals, coal, oil, efficiency) and solve them at low-cost, that can get to market unsubsidized in China and India and scale to the whole planet, then we won’t solve our problems”. Since we don’t know where the innovations will occur, we need to structure capital to create massive “optionality” and R&D across the board, focusing on those areas that are most ripe for change / disruption / innovation and that are causing the biggest problems. Sadly, I think we should also continue to support companies and organizations like Space X and the LifeBoat foundation, both of which are trying to get off the planet in case we really make a mess and can’t live here any more.

We need to work the top line by increasing resources

We need to Increase outputs and resources and regeneration through restoration of forests, soils, forests, fisheries. We need to boost agricultural outputs (again) by raising land and water productivity and studying ways of producing protein more efficiently that with the standard corn-fed cattle approach. This includes continued research into genetically modified foods.

We need to work the bottom line by decreasing our resource usage per person

We need to also lower our resource use/person by restructuring economically through things like cap and trade, removal of subsidies on things like oil (we spend $700B annually across the globe subsidizing the exact wrong behaviours), restructure the energy landscape by decommissioning coal, shifting to renewables, pushing for all of the efficiency we can get now and every year going forward. We need to get MUCH better at urban design since in 30 more years, 80% of the planet will live in 3% of the surface area in cities and that means urban transportation, bikes, water use, city farming, squatter gentrification. We need to implement “third world” solutions in our own backyard – micro finance, entrepreneurial education, population stabilization (which happens automatically as people move to the city).

National leaders…aren’t leading

Global progress on our bigger issues is stalled. Copenhagen was widely regarded as a failure. Nations are too slow to act. China and the US refused to take material action at Copenhagen and that means that no other nations will follow. The US is frustrating cap and trade. Canada is also lagging. Within our borders, our provinces and territories are too heterogeneous and their populace has too many diverging interests.

We have structural capital issues that are impeding our ability to bring investment into Canada that will continue to haunt all forms of technology development, including cleantech, and they need to be addressed. The Section 116 problem has never been resolved and makes it difficult for investors to invest in Canada without great hassles. We need to fix this as it continues to scare US venture capital away and is causing a hollowing out of Canadian companies as US investors must move our companies south in order to invest in them. It’s easier for a US company to buy out and move a Canadian company than to simply invest in it.

This revolution will happen provincially, regionally and municipally:

BC is already the 10th largest “cleantech market” in North America.  We have top-notch universities that pump out research, we have core resource and mining people, law, and organizations in place that can be repurposed for cleantech company creation, financing, and implementation of things like carbon projects. We already have an excellent industry association leadership in the BCTIA, the Premier’s Technology Council is already very supportive of cleantech, and we have programs such as the newly launched CleanWorks BC marketing campaign intended to attract foreign investment to BC. We also have a large number of excellent cleantech companies here and we have strong core competencies in hydro electric power, power transmission, storage and battery technology, wastewater management, and bioenergy.

The Lower Mainland as a region and all of the cities inside it will be key. You can make a difference at the regional level. Cities are massive producers of the problem and they’re also massively incentivized to solve the issues for themselves – they are almost self-contained zones.

In Vancouver, we have a mayor who sees the benefit of working on all three pillars of sustainability: “people, planet and profit” as it is often referred to. He is building ties with Governor Schwarzenegger from California and Richard Branson’s Carbon War Room Initiative , among many other things. In short, he is trying to put Vancouver on the global map as a “Green Capital” in the world.

So what do we need to do next?

We need capital fixes. There are many others who know much more about this but I know that we have capital gaps. The exits are long and difficult for investors (10 years) for many of these green technologies and so many companies suffer or fail as do their investors.

We need to continue to back primary research at the universities that feeds into our technology landscape.

We need to build more funds that create small companies that can fail faster – allowing us to create promote “optionality” or the creation of as many options as possible.

We need to build a more unified province wide Cleantech BC association that unifies traditional energy, renewables, materials, efficiency, and water all into one cohesive strategic plan.

We need to survey our assets in the universities and our companies, scan the market for current and latent need and then really support those clusters where we can excel and build networks of inter-related and successful companies.

As a province, we need to realize we are competing globally, not within Canada.

As a province, we need to redefine “cleantech” to include all of our “maintech” – the stuff that will move the needle. That will require vision expansion and coaching. This means expanding our idea of “cleantech” from renewables to greening of the entire supply chain and all materials and energy usage.

We need to continue to push these changes bottom up because waiting for national governments (Canada, US, or otherwise) will take too long and be too ineffective. The only exception to that is major cap and trade policy and other regulation which mostly needs to happen federally. But even without it, cities and regions can adopt their own and enforce them locally as they’re doing now. It’s less effective but it’s a step until the national dithering is resolved.

The province must address issues of forest, agricultural land, fisheries and water restructuring in order to once again focus on maximizing sustainable, regenerative yields. One area I’m significantly concerned about here is water rights. It appears that we are selling off our water rights to foreign interests and that needs to be reversed. Peak water is right behind peak oil as a critical issue.

My final summary?

We have a lack of national leadership on the major environmental challenges ahead of us as evidenced by Canada’s embarrassing performance at Copenhagen, but that is countered by highly motivated provincial, regional, and municipal leaders. And we have a province filled with excellent cleantech companies, entrepreneurs, and teams that are highly capital efficient.

So, while my survey of the sector has tempered me with its long, difficult, unpredictable company builds and exits, the people working on those companies have excited me with their passion, vitality and energy for finding and creating solutions to our big challenges. That passion and energy is one of the key reasons I have decided not to return to the US and to instead, stay here and work to build BC’s local technology sector. We have a lot of work ahead of us. Let’s get to it.

(2) Comments

  1. I don’t think you’ve really read or understood Joseph Tainter’s work at all if you believe that our complex (global) society can overcome the collapse curve. It’s inevitable, and increased tech and R&D will only stave it off temporarily (because there are declining marginal returns on investments in complexity). Unless we somehow find another planet to invade and exploit.

    “We need to…” “We need to…” All you’re suggesting is an increase in social complexity. This is unsustainable in the long run.

    • Troy

      Hi Dan, thanks for the comment. Admittedly by Tainter’s model, adding more complexity (systems, organizations, etc.) leads to the marginal return you mention. My point is that in no other time in history up until now, have we had this opportunity to exploit this level of technological innovation that is on such a rapidly accelerating curve. We are the first to be both blessed and challenged by the rate at which it’s accelerating. Whether that gets used to increase productivity and decrease resource usage per capita is really the key question. Or will we just amuse ourselves to death, increase overall complexity and then fall down the step-function staircase into decline? Not sure. But following Tainter’s model says that innovation leading to increased productivity is the only way out. And Diamond’s model posits that there are ways to get past some of our most intransigent problems like the tragedy of the commons issues and dealing with irrational and rational actors. Regardless, I think it’s important not to be nihilistic and throw our hands in the air but to work on the issue. So my question to you would be…okay, so what is your response?

      innovation that increases productivity is – in the long run – the only way out of the dismal science dilemma of declining marginal returns on added investments in complexity.

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