Part 10: Putting it all together
We’ve shared key elements that make for great climate startup ideas: planetary benefits; 2030 timeframes; sneaking in the benefits; cost curves; benefit now, pay later; geographic differences and potential traps. We’ll wrap up Chapter 1 with four examples to show how these elements combine to create once in 100 year opportunities to re-imagine human systems that are more compatible with our planet -
- how micromobility replaces automobilility
- when customers want more than savings — solar and batteries for adaptation
- why we’ll be excited to massively increase electricity use to solve the hardest climate problems
- how will companies choose between offsets and innovation?
Personal micromobility is more important to GHG reduction than personal automobiles
Decarbonization of transportation is well underway. While much of the media is focused on who will make the best sedans, SUVs, or trucks, there are already nearly 300,000,000 electric 2 and 3 wheelers. The personal vehicle market is going to look radically different in the coming decades because many customers are not choosing between automotive form factors like sedan versus SUV or truck; they’re looking to solve decades-in-the making problems that aren’t directly climate problems, but fundamentally about the limits of automobility.
Customer discussions reveal personal vehicle considerations like parking, charging, traffic, health benefits, etc. Customers can experience a better transportation future in places like Amsterdam, Copenhagen, or Portland. It’s not just vehicle sales. People have voted for city leaders who promised more space for micromobility, while taking space away from automobiles. Officials now understand that if you build it, they will come following pandemic findings that temporary micromobility infrastructure led to significant increase in usage.
Micromobility infrastructure is coming, More space being added in most cities around the globe. So we can expect continued increase in demand. A growing number of two-car families now have the option for one car and a mix of bikes, boards, and scooters. Beyond infrastructure and policy, there are also tech cost curves at play here. At the center of the story is a 97% cost decline for batteries over the 3 decades.
Micromobility benefits from falling battery, electronics, and motor costs. And this has led to multiple new startup successes like Ninebot, Future Motion, Van Moof, and Rad Power Bikes. At one end of the market, basic performance costs less each year. At the top of the market, new performance is unlocked. And the charging infrastructure already exists at your office, local coffee shop or in your home (your existing power outlet will do). Considering these combined conditions, the forecast below is from longtime micromobility (and Apple) observer Horace Dediu predicting the winning electric vehicles as we fully electrify personal vehicles.
When we were just starting Third Sphere, we met Kyle Doerksen, founder of Future Motion, makers of Onewheel. More than a decade ago, he’d spent a lot of time talking with potential customers and looking at tech cost curves. That had led to an award-winning e-bike design, Faraday. And he could see the potential of new electric motors and batteries to significantly change bikes. It was easier to ride much further, with less effort and sweat. And that introduced the possibility of replacing more car trips.
But Kyle had also been working on a project for himself to take advantage of the capabilities of batteries, motors, and sensors made cheap by smartphones. Not only was it fun, but it had the potential to be relatively simple and cheap compared to other personal EVs like scooters or e-bikes. And 100 million miles later, it’s clear that Onewheel owners take every opportunity to replace car trips and are also doing some unexpected things like riding down mountain trails.
Key Takeaway: Startup founders have a big advantage in forecasting technology adoption. They can look past high level adoption assumptions, talk to customers, evaluate tech cost curves and be the first to understand customer responses to new product offerings.
Related Third Sphere investments: Oonee secure bike parking; Cycle ebike and Cargo bike subscriptions; Future Motion, makers of the Onewheel; Miles rewards for all trips; Kiwibot small, friendly robot delivery service, ClearRoad digital tools to manage road use.
Solar shows how narrow focus on cost and GHG mitigation can miss use cases that drive rapid adoption
As the name suggests, levelized cost of electricity (LCOE) is a commonly accepted practice for calculating the comparative costs of, say, nuclear and wind power generation versus fossil fuel power generation. LCOE proves ideal for utilities that are effectively connecting a new box that produces electricity. In recent years, utilities have been joined by other customers interested in electricity generation, including a variety of industrial, commercial, and consumer segments. They’re often concerned about something else, though — energy reliability.
Source: World Economic Forum, quality of electricity supply
If you live in the EU, you’ve had one of the most reliable electricity grids. This has made it much easier to just focus on the comparative cost of different electric generation alternatives. But if you live in places like Southern Africa, India, Brazil or China, you’ve had a different experience. And even within countries, experiences are different with people living in places like Texas and California having to come to terms with less reliable service as wildfires and extreme weather events test generation and transmission systems. So what happens when we look beyond LCOE?
Customers have other important considerations, as reflected in Dave’s Hierarchy of Needs, below — WiFi (or more generally internet access) and batteries. If the power goes out, there is a good chance your mobile phone will be just fine because much of the mobile telecommunication network has backup power like batteries or generators. You’ll be fine until you need to charge your battery. But what about the various devices that require power and internet like security cameras or retail point of sale systems? Hospitals have long relied on backup generators, so they’re not benchmarking commercial solar against the grid. They’re comparing solar with generators powered by diesel or natural gas. Even EV manufacturers are looking past LCOE to directly pitch the value of an electric truck as a backup battery that goes nicely with residential or commercial solar.
Source: Dave on Reddit
As customers opt for more battery and solar, these technologies will move further down the cost curve, which in turn means that more people will be able to afford larger solar and battery systems. They might even consider the grid as a backup option, which then creates a new problem. If customers begin to leave the grid (the other cord cutting, if you will) this erodes the amount of funding available to ensure the grid is reliable, which in turn devalues the generation capacity attached to the grid.
Key Takeaway: Single dimensions of planetary impact, such as GHG reduction and cost can be useful guides toward understanding climate impact. But customer priorities vary by geography or specific applications and this ultimately shapes adoption and cost curves.
Related Third Sphere investments: Swell Energy builds virtual power plants from residential and commercial battery storage; Shyft Power helps customers to manage and control distributed energy systems in Nigeria; Urbio helps customers like utilities, cities and real estate owners to understand the select the best energy investments , Energy Applied quickly connects battery capacity to the grid; Gisual diagnoses outages for telecoms and service providers; Urbint uses AI to identify risks to infrastructure; Plentify turns water heaters in thermal storage.
Should we care about increased energy use, if indoor vertical farming unlocks land use pathways while increasing resilience?
Land use for agriculture is one of the largest planetary problems with the least progress. There are now various manufacturing schemes for alternative proteins but impact is tightly related to our ability to convince people to change their diets. What about other types of farming that can use significantly less land?
Indoor vertical farms like Bowery Farming (a Third Sphere investment) address most of the negative consequences of traditional agriculture but can be discounted by otherwise thoughtful commentators in the climate space. Why? First let’s look at the potential positive planetary impact and then we’ll get to the main complaints.
First, customers seem to be reacting positively to produce that is grown indoors. Indoor-grown crops can frequently be delivered more quickly and freshly and so are tastier. In short, for about the same price, in many cases customers are getting a better product.
So what are the planetary benefits?
Indoor vertical farms dramatically reduce land use needs, so indoor vertical farms can cut deforestation. Also, because they can be closer to consumption, they also reduce transportation emissions. And the use of nutrients is controlled in a closed system, so nitrogen run-off is not an issue.
Here’s a summary of the main indoor vertical farming benefits.
Source: ETH Zurich
And there is something else — in a world of increased heat and flooding, what can we expect from crop yields and food prices? Much of the news is focused on COVID-19 supply-chain disruptions along with those brought about by the Russian invasion of Ukraine, but digging a bit further reveals a trend of lower crop yields associated with more volatile weather.
The downside? We’re going to use substantially more energy. Ultimately, the exact amount will scale with the success of the approach, which in turn is linked to the price of traditional agricultural processes in the midst of more volatile weather as well as the range of successfully grown crops, which is today limited to greens and now some berries and vegetables.
Key Takeaway: Efficiency and load shifting have a critical role to enable us to do more with less, however some of the hardest climate problems will very likely require substantial increase in electricity use. Fortunately, low cost, zero emissions electricity is now a certainty.
How will companies choose between offsets and innovation?
As companies and consumers commit to reducing GHGs, one interesting alternative has emerged — pay someone else to do the work. The appeal is very clear. First, companies can show immediate progress toward climate goals. And they don’t need to take on uncertainties associated with investment in new technologies.
How might this play out? We have a good example from the automotive world. In 2020, FCA (Fiat Chrysler Automotive) agreed to pay $2 billion to Tesla to reduce FCA fleet emissions. Fleet emissions standards are designed to incentivize automotive firms to produce lower emissions vehicles and so FCA didn’t have much choice. But FCA didn’t just purchase emissions reduction; it was busily working on new offerings, most notably the Fiat 500e. As of August 2022, Fiat has leading EV sales in the EU with the 500e, beating out all other EV models, including Tesla.
It seems that offsets are unlikely to have the desired marketing benefits for many firms, if it becomes clear that zero emissions alternatives are available. This means that startups have another interesting way to create competitive pressure — beyond the usual challenges for incumbents, like stranded assets and channel conflict, there is now a communications problem, too. If incumbents buy offsets with the reasoning that their business is “hard to decarbonize”, startups have the opportunity to position these firms as “greenwashers” who haven’t invested in making their products or operations zero emissions and in many cases, better, faster and cheaper.
The voluntary offset market is inevitable, but it is going to be risky for companies who haven’t exhausted all other options as outlined by organizations like The Science Based Targets initiative. As automotive firms have found, it’s tricky to share the nuanced investor perspective that seeks to continue to operate existing assets profitably, while competitors prove that more aggressive investment leads to better, faster, and cheaper options for customers and clear planetary benefits.
Key Takeaway: Startups can create extreme pressure for incumbents simply by demonstrating that better, faster and cheaper solutions are possible while also being better for the planet.
Third Sphere investments like Wright Electric and Furno Materials aim to deliver better, faster and cheaper products versus “hard to decarbonize” incumbent options while also achieving planetary benefits such as zero emissions aircraft and cement production.