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Robert Weissbourd
The Midwest Green Economy: Past, Present and Future
The Chicago Region’s “Green” Economic
Opportunities
Delta Institute and the Graham School of Continuing Liberal and Professional Studies
January 26, 2012
Part I: Defining the Green Economy
What Exactly IS the Green Economy? First, Drivers …
Global Warming and Pollution
High Fossil Fuel Prices Demand for Environmentally Friendly
Products
What Exactly IS the Green Economy? First, Drivers …
Demand for low carbon technologies is driving growth of Clean Tech.
Demand for clean energy generation
Demand for products that reduce energy
consumptionDemand for products that reduce pollution
An Info-Tech Analogy
Like IT, Clean Tech will affect the way every company does business.
Producers Users
Segments of the Green EconomyDemand
ConditionSubcategor
y Segment
Increase Renewable
Energy Generation
Energy source Wind Solar Geothermal Biomass/Biofuels Hydro Waste Ocean/Wave
Energy storage & infrastructure Fuel Cells & Hydrogen Battery & Energy Storage Tech Smart Grid/Smart
Metering
Reduce Consumptio
n of Energy & Natural
Resources
End-use-basedE.E. Lighting E.E. HVAC
E.E. Building Products & Materials
E. E. Appliances Water Efficient Products
Audits & Retrofits Green Architecture, Design & Construction
Electric/Hybrid Vehicles
Process-based Sustainable Forestry & Related Products Recycling & Reuse Recycled-Content
Products
Systems-based Logistics Public Mass Transit Local Food Systems
Reduce GHGs & Other
Pollutants
Product-based Green Building Products & Construction Materials
Green Chemicals & Related Products Nuclear Energy
Air & Water Purification
Technologies
Systems-based Carbon Sequestration Conservation & Management
Service-based Air/Water/Sewage/Solid Waste Management
Pollution Control & Prevention
Remediation Tech. & Services
Organic Farms & Food Production
Support Services Research, Engineering & Consulting
Regulatory & Compliance
Education & Training
Green Finance
Advocacy & Policy
Broad Opportunities in the Green Supply Chain
Auto-supplier created gearbox housings product line for wind developer.
New 42,000 sq foot facility
Gearbox housings
Regional Green Strategy DevelopmentIdentify Growth Sectors
Apply established economic development strategies to green opportunities.
Analyze Regional Assets
Determine Development Needs
Develop Products and Services
sectors
The Next Economy = Green
Source: Bloomberg New Energy Finance
Expected Global Annual Clean Energy Investment
Billi
ons
of U
.S. D
olla
rs
600
500
400
300
200
100
0
200 5
201 0
201 5
202 0
202 5
203 0
“The rebuilt American economy must be more export-oriented and less consumption-oriented, more environmentally-oriented
and less fossil energy-oriented, more bio- and software engineering-oriented and less financial- engineering-oriented...”
Geothermal, marine, low carbon tech
Small hydro
Biofuels
Biomass + Waste-to-EnergySolar
Wind
Part II: Overview of Chicago’s Green
Opportunities
Identify Growth Sectors and Analyze Regional Assets: Chicago
Identify Growth Sectors and Analyze Regional Assets: Chicago
0
0
Chicago’s Opportunities in Renewable Energy
Biofuels/BiomassWind
Solar Thermal
Chicago is home to over a dozen wind headquarters and over 100 component suppliers.
Over 100 firms are participating in the IIT-led Smart Grid Regional Innovation
Cluster
Chicago has more LEED-certified buildings than any
other city.
Vehicle Electrification
Chicago’s Opportunities in Energy Efficiency
Green Buildings
Smart Grid
Energy Efficient Lighting
Building Energy Management
Chicago’s highest
specialization is in Energy Efficient
Lighting and the region has over
30 firms working in the
space.
Recy
cled
Cont
ent
Prod
ucts
Chicago’s Opportunities in Waste Remediation and Pollution Control
Green Chemicals
Water Purification and
Treatment
Orga
nic
Farm
ing
& Fo
od
Prod
uctio
n Chicago ranks #1 in the country for employment in “Air
and Water Purification Technologies.”
Chicago’s Waste to Profit Network is a national model of
“byproduct synergy,” in which
one company’s trash becomes
another’s treasure.
Part III: Examining Business Opportunity –
the Energy Efficient Lighting Sector
Illustrating a Cluster Approach to Green Economic Development
Market Analysis: Energy Efficient Lighting
Huge LED growth projected: from 7% market share in 2010 60% in 2020
30+ Chicago area companies, >1000 employees Source: McKinsey and
Company
Barriers to Market Growth
Cost to Performance Curve Product Quality Distribution barriers Confidence in Commercial Viability
LED CFL IncandescentLight bulb projected lifespan 50,000 hours 10,000 hours 1,200 hoursWatts per bulb (equiv. 60 watts) 10 14 60Cost per bulb $35.95 $3.95 $1.25KWh of electricity used over 50,000 hours 500 700 3000Cost of electricity (@ 0.10per KWh) $50 $70 $300Bulbs needed for 50k hours of use 1 5 42Equivalent 50k hours bulb expense $35.95 $19.75 $52.50Total cost for 50k hours $85.95 $89.75 $352.50
COST SAVINGS OVER 50,000 HOURS, IN A HOME WITH 25 BULBSTotal cost of bulbs and energy $2148.75 $2243.75 $8812.50Savings to household by switching from incandescents
$6663.75 $6568.75 0
Market Dynamics: Change is in the Air
“The LED and energy efficiency markets are a big
challenge for traditional lighting businesses. They are used to being “order
takers” with repeat business every 6 months based on how many light
bulbs they know are going to burn out. If they
embrace LED, there will be no bulb turnover, no
predictable repeat sales.”
Firm interviews and industry research reveal a transforming industry.
“LEDs will drive change in the distribution model. Traditional
distributors are avoiding the LED market because it is too technical.”
“A big challenge with this market is its archaic distribution system. You need
to make same sale several times, to the architect, to the engineer, to the
building owner. There needs to be a new model.”
“I think you will see lots of new products for niche applications. To be profitable
you will have to get into these markets. You will have to have something someone else doesn’t have.”
“I’ve never seen so many new companies pop up in
so short a time. Our customer base has almost
tripled in number.” “We think the most interesting
investment opportunities in EE Lighting are on the integration side…”
Understanding the Emerging Cluster Opportunity in broader cluster made up
of: Energy efficient lighting Architecture, design and engineering Commercial building management Energy efficient HVAC Energy software and controls Energy management integration
EE Lighting Sector “Integrated Lighting and Building Energy Systems” Cluster
Strategies for ILBES Cluster Make Chicago the easiest place in the world to do
real world applied R&D on building energy efficiency. Consortium of architects, engineers, designers,
developers, property owners, property managers, energy management companies, utilities and component suppliers
Proactive “IP mining” for leading edge technologies Applied R&D networks for rapid prototyping Technology demonstration sites – Merch. Mart? Proactive relationships with venture and equity firms Public sector as lead adopters
Summary
Enormous market opportunity is rapidly emerging as demand for energy and resource efficient products and services affects how every company does business
Chicago has major competitive advantages: firms in currently “green” or related industries (particularly within strong manufacturing base); human capital; infrastructure; knowledge and technology specializations; demand conditions; etc.
In context of emerging markets and competition elsewhere, we need to compete deliberately –- build institutional capacity, business led opportunity identification and development, investment.
Robert Weissbourd
The Midwest Green Economy: Past, Present and Future
The Chicago Region’s “Green” Economic
Opportunities
Delta Institute and the Graham School of Continuing Liberal and Professional Studies
January 26, 2012