Back in the early 1980s, I persuaded my parents to part with the princely sum of £399.00 for a BBC Micro Model B. My initial reaction was to feel a bit let down – all that white-heat-of-technology talk around home computers and the best thing this one could do was putting you in charge of a crudely realised kingdom with a river, fields and mountains (at least until Elite came out, but that’s another matter…). At today’s prices, that £399.00 could buy you four, yes, four, iPhone 4 handsets, each with about a million times more processing capability and a cornucopia of sci-fi type technology (video, maps, access to vast stores of information) that the 11 year old me would never have dreamed of.
So what has this got to do with green business? Well it demonstrates a number of basic economic principles – new technology starts off expensive until a mixture of economy of scale and innovation makes it accessible to all. But reading some accounts, you would think that renewables, to take an example, were exempt from this rule. “They’re too expensive” we keep hearing. Only because they are the exception, rather than the rule. Already, with demand increasing and manufacturing shifting to China and India, prices of solar panels and wind turbines are starting to drop.
By the way, I’m not saying that offshoring manufacturing is a good or bad thing per se, just that once again, in the economic world we live in, that’s what happens and we shouldn’t be surprised if it does.
Demand also derives technology improvements and recently we have seen breakthroughs in dye-based solar PV technology which could deliver lower costs, higher efficiency and lower carbon footprint. Likewise, electric vehicles are currently expensive, but that’s because the extraordinarily lean supply chains that supply conventional vehicle manufacturers have not been built for electric vehicles yet. One manufacturer told me that an extra 1000 vehicles a year would cut his bill of material costs by 40%. 45% of the cost of an electric vehicle is the battery, so, given the innovations in mobile phone battery technology, we will eventually see massive improvements there.
The flip side of this is true too. I once sat through a presentation on a new biodiesel plant for the North East of England. I asked whether it would take waste oils as well as rape seed oil, but the presenter said that to make the economics of the plant would only stack up if they produced pharma-grade glycerol as a by-product so they needed to be very tight on the quality of raw materials. His company later went bust, allegedly because putting that amount of high grade glycerol on the market depressed the price. More supply, same demand = lower prices. Welcome to the real world.
I also have little patience for those who complain that environmental legislation or corporate social responsibility will cost business or the economy money. Hold on, what’s a cost? It’s an income for someone else in the economy – it’s not lost. Environmental legislation protects the world we live in and creates new markets. What’s not to like?
Whether or not you like the economy we live in, we live in it and that’s a fact. If you run, or want to run, a green business, you’ll quickly find you’re not exempt.