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Innovation in Cleantech Thriving in Dynamic MarketsThriving in Dynamic Markets

Steve CiesinskiVice President, Strategic Business Development

Nordic Green II, April 27, 2010

© 2010 SRI International ‐ Company Confidential and Proprietary Information    

Overview

• Welcome!

• Our Perspective on the Energy Issue

• The Dramatic Growth of the Cleantech Industry

• Mega Trends and Dynamic Markets

• Innovating to Thrive

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SRI’s Impact on SocietyInnovation!

HDTV

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Information Technology

SRI is Heavily Invested in Cleantech ResearchMultidisciplinary technology and research provides real‐world solutions

Engineering and SystemsSRI’s Value

CreationProcess™

Health, Education, and Economic Policy

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Biotechnology

Advanced Materials, Microsystems, and Nanotechnology

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Our Perspective on the Energy Issue

A Cubic Mile of Oil ‐ CMOUnderstandable unit: mental image

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Statue of Liberty

Visualizing a Cubic Mile

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1 cubic mile = Manhattan under 150 feet of oil

Current Global Energy Consumption Is About 3 CMO How long can we afford to live off our inheritance? What are the social costs?

RenewablesHydroelectric

0.17

Biomass0.19

Wind + Photovoltaic + SolarGeothermal <0.01

Inherited

Oil1.06

Natural Gas0.61

0.17 Wind Photovoltaic Solar Thermal <0.03Nuclear

0.15

Oil1.06

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Inherited

*2006 Data

Coal0.81Coal0.81

Source: A Cubic Mile of Oil, Hewitt D. Crane, Edwin M. Kinderman, Ripudaman Malhotra 

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Replacing Today’s World Energy Requirements* Any single resource is not enough

• Hydro• Nuclear• Solar CSP• Windmills• Solar Roofs

9 9Source: http://www.spectrum.ieee.org/print/4820 *Current world energy consumption is about 2.6 cmo

8 00

9.00

10.00

9 CMORecent energy growth rate: 2.5%/yrAnnual GDP growth rate:

World: 5 5%

Projected Energy Demand by 2050Need additional energy on the order of several CMO/yr

2050

4.00

5.00

6.00

7.00

8.00

Dem

and

(CM

O) 6.5 CMO

4 CMO

World:   5.5%China:   11%India:     9%

10

0.00

1.00

2.00

3.00

1990 2000 2010 2020 2030 2040 2050 2060

Ener

gy D

Year

Changes in Global Energy Mix Have Occurred BeforeTransitions take scores of years, Cleantech companies can lead!

80

90

100

esou

rces

Wood/Biomass

40

50

60

70

80

ary

Ener

gy fr

om V

ario

us R

e

Coal

Oil~1880

~1940

~1960

11

0

10

20

30

1850 1870 1890 1910 1930 1950 1970 1990 2010

Perc

ent T

otal

Prim

a

Year

Oil

Gas

Hydro

Nuclear

Wood/Biomass

Coal~1880

The Dramatic Growth of the Cleantech IndustryAffecting the scope and speed of innovation

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VC Investment in Cleantech Takes OffFrom negligible to substantial in just 9 years

Clean‐Energy VC Investments in US‐Based Companies as % of Total

Year Total VentureInvestments

Energy TechnologyInvestments

Energy Technology Percentage ofInvestments

(US$ Billions)Investments(US$ Millions)

Percentage of Venture Total

2001 $40.6 $351 .09%

2002 $22.0 $271 1.2%

2003 $19.7 $424 2.2%

2004 $22.5 $650 2.9%

2005 $23.0 $797 3.5%

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2006 $26.5 $1,308 4.9%

2007 $29.4 $2,867 9.8%

2008 $28.3 $3,213 11.4%

2009 $17.7 $2,216 12.5%

Source:  Bloomberg New Energy Finance with supporting data from Clean Edge and Nth Power, 2010

Investments by IndustryQ4 2009 – All industries

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Source:  2009 MoneyTree Report

Renewables Capacity Nearly Tripled in Last DecadeWind and PV capacity is growing most rapidly

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Source:  2008 Renewable Energy Databook, July 2009, DOE

Renewable Energy Costs Vary WidelyBut electricity from certain renewables is now cost competitive

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Source:  2008 Renewable Energy Databook, July 2009, DOE

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Cleantech Patents Indicate Growth

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Corporate Commitment to Sustainability Chief Sustainability Officers are the newest hire

K P f I di t

The Definitive Corporate Sustainability Benchmark – Top 10 2010

Key Performance Indicators

• Energy productivity

• CO2 productivity

• Water productivity

• Waste productivity

• Leadership diversity

• CEO‐to‐average worker payCEO to average worker pay

• % tax paid

• Sustainability leadership

• Sustainability pay link

• Innovation capacity

• Transparency18

Is Cleantech a New Bubble?

Too broad to pop?

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Jean Paul Rodrigue, Transportation Geographer, Hofstra University, NY, USA, February, 2008

Recently, IPOs have dropped off the radar‐ ominousAnd M&A Exits Have Dipped from Previous Years

M&A transactionsIPO transactions

VC‐backed company exits 1992‐2008

IPO transactions

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Uncertainty still surrounds the US IPO market! Maybe Cleantech can lead a new wave!

Source: PWC Money Tree  Q4 2009 Report www.renaissancecapital.com

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Innovating to Thrive

Cleantech Companies/Projects

“Venture capital firms have invested almost $20 billion into hundreds of greentech startups since 2005. All of these firms are looking to launch a disruptive force into their target markets, scale rapidly and grow quickly.

Very few of these firms will actually make it.”

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‐ GreentechMedia, March 2010

Nordic Region Pioneering Cleantech InnovationSupporting cleantech through policies, investments, and purchases 

• Geothermal

• Public transportation/hydrogen buses

• District heating

• Energy efficient buildings

• Strict building code

• Wind turbines

• Biomass

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The Creation of the Wind Turbine IndustryA Nordic example of government supported innovation

Denmark 1978 2009:Denmark 1978 – 2009:• From 22 kW to 3.6 MW turbines• From 0 to 20% of total electricity supply• 28.000 jobs created• From 0 to 7.2% of total Danish exports

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Other Regions and Countries Are Investing HeavilyIt’s become serious business for many

• Korea: “Green New Deal” ‐ $46 billion / 5 years

• Japan: invests $63 billion / 5 years

• China: invests $440 billion / 10 years

• US: plans to invest $172 billion / 5 years

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Cleantech VC investments as % of 2009 total:US 21%, China 14%, India 6%

What to Do? Think Innovation!

Innovation is the creation and delivery of new customer value in the marketplace with a 

sustainable business model for those producing it.

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Remember: True Innovation is more than R&D:It’s Research + Development + Commercialization

Innovation Creates the Highest ValueEntrepreneurs should focus on being truly innovative

InnovationInnovation Highest company and societal value

LowLow‐‐cost cost incremental incremental ii No breakthrough or sustainable advantage

InventionInvention andand knowledge knowledge creation from R&Dcreation from R&D

Not customer or market focused

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LowLow‐‐cost cost imitationimitation Commodities at minimal value

improvementsimprovements No breakthrough or sustainable advantage

SRI’s Five Disciplines of Innovation

1 Important Customer & Market Needs

2 High Value Creation i2 High Value Creation

3 Innovation Champion

4 Innovation Teams

5 O i ti Ali t

Top 10 Business Book of the Year!

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MarketSuccess

5 Organization Alignment

Disciplines are multiplicative

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The New Balancing Act for Cleantech Companies

• Focus on True Value Creation (not incremental)

• Deeply understand your market, and how it’s changing

• Capture your niche

• Secure growth financing

• Constantly analyze your

approach or solution‐

avoid getting caught in

b bbl th t b t!

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a bubble that can burst!

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Headquarters

Thank You, Enjoy the Conference!

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