13 June 2008

I was fortunate enough to interview Bob Hertzberg this week for an upcoming BusinessGreen.com podcast.

Hertzberg is chairman of UK solar start up G24i and founder of clean tech venture capital firm Renewable Capital, as well as the living embodiment of American can do brio. As a former Speaker of the California State Assembly and candidate for Los Angeles Mayor he also has a great insight into the relationship between environmental legislation and investment.

One of Hertzberg's top tips when looking for a clean tech investment is to be extremely wary of sectors that are only operating as a result of subsidy and legislative leg ups. He argues, not unconvincingly, that the best and indeed only way to transition to a low carbon economy is to make damn sure that green products are better and more cost effective than their traditional counterparts.

That is why he is enamoured with solar power in general, which advocates claim could soon compete with coal on price, and G24i's technology in particular, which the company, fresh from receiving $20m in venture funding, is seeking to integrate into mobile devices, providing them with a constant stream of power and removing the need for them ever to be recharged.

As Hertzberg observes if you have a Blackberry or mobile phone that never needs recharging and as such is far more convenient than conventional models people will want the device not just because it is greener but because it is better.

It is a philosophy that is hard to argue with and is all the more appealing because it envisions a scenario where if you develop the right product the switch over to a low carbon alternative can be achieved within a couple of years as opposed to a couple of decades. For investors it raises the possibility of backing the next Google, for the rest of us it offers the enticing prospect that we can genuinely decarbonise our economy relatively quickly.

There are signs in some sectors that this is beginning to happen. The recent shift in demand in favour of fuel efficient vehicles is a factor not of environmental concerns or legislation, but the simple fact that in a world of high fuel prices smaller cars are simply better.

Equally, it would be easy to dismiss the decision by developers of the Freedom Tower to install 12 fuel cells as a green publicity stunt, but if you believe the company providing the technology, UTC Power, the latest fuel cells are now cost competitive with the grid even before you consider the benefits you accrue from lower carbon emissions and not having to dig up the road to lay the electricity cables in the first place.

And who wouldn't want the washing machine unveiled this week that requires next to no water, uses little energy, doesn't shrink your clothes and doesn't require them to be hung out to dry afterwards. It's green, but is also in many respects just plain better than traditional models.

None of this is to suggest that legislation is not required to accelerate the transition to lower carbon technologies and business models in sectors where embedded economies of scale, decades long replacement cycles and cultural conservatism make it far harder for green alternatives to break through. And in this light it is encouraging to see political leaders in Japan, Europe and the US, including even President Bush, this week emphasising their commitment to more stringent environmental rules and regulations.

However, it is perhaps even more encouraging that if green businesses get their products spot on there is every chance of them forcing traditional counterparts out of the market with the same speed with which iPod's put paid to portable CD players. Not because they are greener, just because they are better.