The U.S. Market for Clean Technologies

Report Highlights

• The U.S. market for clean technologies was worth $54.2 billion in 2007 and $57.8 billion in 2008. This should reach $88.6 billion in 2013, for a compound annual growth rate (CAGR) of 8.9%.
• Clean energy has the largest share of the market, generating $18.7 billion in 2007 and nearly $26.0 billion in 2008. This should increase to over $30.6 billion in 2013, for a CAGR of 3.4%.
• Clean buildings are the second largest segment, worth $24.4 billion in 2007. This segment decreased in 2008 but is expected to reach $28.2 billion in 2013.

INTRODUCTION

STUDY BACKGROUND

The terms “clean” technologies or “cleantech” refer to technologies that use energy, water, and raw materials and other inputs more efficiently and productively, or create less waste and toxicity than other applicable technologies. Clean technologies share these characteristics with so-called “greentech” or “envirotech” industries.

However, envirotech in particular represents a regulation-driven, “end of pipe” approach that governments have used to achieve energy efficiency and environmental goals. The regulatory approach by itself has important drawbacks, such as escalating costs, market distortions and restrictions on private freedom of choice, that raise doubts about its long-term sustainability.

In contrast, cleantech is based on the premise that new technologies can be harnessed to give producers and users financial and economic incentives to use resources and the environment responsibly, by delivering equal or superior performance at a net increase in income. The increased income can result from lower costs, greater output, or both.

“Green technology” is a looser term that is often used to refer to any technology that is perceived as environmentally friendly. Green values are widely promoted by the U.S. educational system, media, and government as positive in their own right. As such, they can be applied to technologies that this report would classify as envirotech, as well as clean technologies as defined above.

However, it is the financial upside that separates cleantech from greentech or envirotech. There is no doubt that government regulation and education will continue to play an important role in achieving energy and environmental goals. However, because cleantech is driven by market economics rather than regulation, the resulting improvements should go far beyond what is achievable by regulation alone.

Some unsubstantiated estimates place the market for clean technologies as high as $150 billion in 2007. As this report will demonstrate, this figure is unrealistically high, probably because it includes the entire cost of a product such as a car rather than the technologies (e.g., hybrid power train, lightweight materials) that are responsible for its “clean” characteristics.

Whatever the exact figure, the market opportunity for cleantech is undoubtedly huge. Drawn by such an opportunity, venture capitalists invested $2.6 billion in clean technologies in 2007. This represents an 86% increase over 2006 investments of $1.4 billion and nearly a five-fold increase over 2005 investments of $524 million.

GOALS AND OBJECTIVES

The overall goal of this report is to identify and prioritize the business opportunities for providers of clean technologies that will arise over the next 5 years as products utilizing these technologies increase their market penetration. In support of this goal, specific objectives of the report include: 

• Identifying the clean technologies with the greatest commercial potential over the next 5 years (2008 to 2013)
• Analyzing the technical, economic and other demand drivers for these products, and other prerequisites of success in these markets
• Projecting the potential U.S. markets for these technologies through 2013
• Analyzing macro-level political and economic forces that are helping to shape the market for clean technologies.

INTENDED AUDIENCE

The report is intended especially for providers of clean technologies and products based on these technologies. Although the report is structured around specific technologies, it is largely non-technical in nature. That is, it is concerned less with theory and jargon than with what works, how much of the latter the market is likely to purchase, and at what price.

As such, the report’s main audience is executive management, marketing and financial analysts. It is not written specifically for scientists and technologists, although its findings concern the market for their work, including the availability of government and corporate research funding for different technologies and applications.

Others who should find the report informative include government agencies, environmental and public policy interest groups with an interest in energy, the environment, and sustainable development in general.

SCOPE OF REPORT

The study covers technologies that provide producers and end-users with financial/ economic incentives to save energy or produce fewer environmentally harmful wastes or emissions, including: 

• Clean energy sources
• Clean energy storage, transmission and distribution technologies
• Fuel cells
• Clean transportation
• Clean computing
• Clean buildings
• Clean manufacturing
• Clean chemicals

The emphasis is on enabling technologies rather than complete products. For example, this study is not concerned with sales of fuel efficient cars per se, but rather with the market for drive trains, storage batteries, control electronics, and lightweight materials technologies that are responsible for cars’ fuel efficiency.

The study does not cover technologies that are required to meet government environmental regulations, without regard to cost, such as vehicle catalytic converters and industrial pollution control systems. Ultimately, the technologies covered in this report should have the potential to be commercially self-sustaining, although some form of government subsidy may be required early in the product’s commercial lifetime.

A great many technologies, old and new, go into improving products’ energy efficiency and environmental performance. This report focuses on emerging technologies, without trying to be too rigid about defining what constitutes an “emerging” technology (e.g., in terms of the year when it was introduced to the market).

The study focuses on the U.S. market for cleantech. All revenues are reported at the manufacturer level.

METHODOLOGY

The report is based on the results of targeted interviews with producers and users of clean technologies, complemented by a thorough literature review and BCC’s internal data bases. The methodologies and assumptions used to develop the market estimates and projections are described in detail in the chapters on cleantech markets. That way, readers can see how the market estimates were developed and, if they so desire, test the impact on the final numbers of changing assumptions such as price.

There are several other methodological points that should be discussed here. For example, the previous section stated that technologies which must be purchased to meet government regulations, such as catalytic converters, are not considered cleantech for the purposes of this study. But what about government CAFE standards that mandate average fleet-wide levels of fuel efficiency that manufacturers must achieve?

At first glance, the fact that the CAFE standards are driving much of the research into fuel-efficient vehicle technologies might seem to exclude such vehicles from consideration as cleantech. However, because vehicle buyers are not required to meet a particular fuel efficiency threshold, but can choose among vehicles with different fuel efficiencies according to their own personal purchase cost/fuel cost/performance tradeoffs, BCC has included them in this report.

The previous section also stated that technologies that do not have the long-term potential to compete in the market place without subsidization are not, in principle, cleantech. It is sometimes difficult to discern the existence of a subsidy, or to determine whether the subsidy is a short-term expedient needed to build sales and production to levels where they are economical. (Such short-term subsidies are permitted under this report’s definition of clean technology.)

Other subsidies, such as the Federal tax breaks for purchasers of hybrid cars and other energy-saving technologies, are undeniably a factor in the market, but it is difficult to quantify the extent to which they translate into incremental sales. When confronted with such methodological questions, BCC will adopt a pragmatic approach, documenting the issues and explaining its decision whether or not to consider a product as cleantech.

AUTHOR’S CREDENTIALS

Andrew McWilliams, the author of this report, is a partner in the Boston-based international technology and marketing consulting firm, 43rd Parallel, LLC. He is the author of numerous other BCC Research reports, including several reports on clean technologies and related technologies, such as Petroleum Fuel Optimization Technologies (EGY051A); Advanced Materials and Devices for Renewable Energy Systems (EGY053A); Building the Global Hydrogen Technology: Technologies and Opportunities (EGY055A); U.S. Indoor Air Quality Market and Trends(ENV003B); The U.S. Market for “Green” Building Materials (ENV007A); Catalysts for Environmental and Energy Applications(CHM020C); and Lightweight Materials in Transportation(AVM056A).