Lessons in Energy from an MIT Sloan School Grad

8/26/10

A little less than two years ago I made the decision to enroll at MIT Sloan for an MBA. Shortly after getting to the campus, I made the decision to look at careers in the energy sector. Despite being armed with a technical degree and spending some time in the energy sector prior to enrolling at Sloan, I was green—no pun intended. A sequence of lucky associations and learning experiences exposed me to different aspects of the energy sector.

After 16 months and an MBA degree, I can safely say that it was a great learning experience trying to understand the business side of innovation in the energy sector. While it is unfair to characterize a sector into generic “boxes” to better understand it, I have attempted to do so regardless. I’ve read multiple documents and have heard investors and entrepreneurs talk about the risks involved in new ventures. I am not going to repeat them here. Instead I want to write about three crucial factors that one needs to appreciate when starting or investing in a new venture in energy: policy, people, and scale.

Policy

Everyone in the energy sector knows this: regulation and policy drive the adoption of a majority of energy technologies/services in the world today. Feed-in tariffs in Germany and the rest of Western Europe were (and are) responsible for the rise of solar and wind energy. Product and investment tax credits drove wind and solar manufacturing and installation, biomass, as well as geothermal project development in the U.S. in the last three years. Numerous states in the U.S. have extended multiple tax credits for energy-efficient appliances, homes, and offices.

China, India, and Japan have also joined the party and have aggressively included regulations to favor the adoption of new energy technologies. A day does not go by these days without a politician/activist/industrialist calling for the adoption of a renewable energy standard (RES) in the U.S.—some of the European nations have already either approved an RES or are in the process of approving one.

So what does this mean for you and me? Well, if you are thinking of starting a new venture or want a job in investing, you should keep in mind that success to a large extent currently depends on policy and regulations helping you out. Or if you don’t want to depend on regulations, try to work or invest in a business that does not use them as a crutch—there are a few of these if you look hard.

People

Quite a few intelligent people have already written about how the energy “renaissance” of the 21st century is very different from that of the Internet/high-tech boom of the 1990s. I will spare you the side-by-side comparisons here, but it is safe to say they are indeed sufficiently different. One important distinction is the background of the founders. You did not need an advanced degree, or to spend hours in a research lab, to come up with the business idea for Facebook, PayPal, eBay, or Amazon.com (Google is an exception). A majority of innovation in energy that will be successfully commercialized will originate … Next Page »

Mahesh Konduru is currently a Principal at the Potomac Energy Fund. He is an alumnus of the MIT Sloan School of Management. Follow @

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  • SD-skeptic

    Unfortunately this article is written by someone who is the antithesis of an entrepreneur – he works for the government.

  • Bill Aulet

    Mahesh,
    Very nice article and summary. You were a great contributor to the Energy Innovation Ecosystem not only at MIT but in the greater Boston area from the first day you got here. You will be missed physically but we expect you digital presence to continue.
    Two things I would add:
    1. Another “P” that you are missing is “Price”. When dealing with energy, one always has to keep in mind it is a commodity.
    2. The other point that you hint at, is that “energy” is like “technology” — it is so broad and there are so many differenet varieties that one has to be careful with the term. Always make sure which part of energy you are talking about when discussing it.

    Stay in contact.

    Bill

  • Pulakesh Mukherjee

    Mahesh,
    Nice summary. A lot of the time scale and price are forgotten in the initial analysis. Also, as Bill pointed out, energy is commodity-thus distribution and supply chain becomes an important component of the overall business.

    Pulakesh

  • http://web.mit.edu/tlo Chris Noble

    It seems to me that Policy, People, Scale and Price are crucial aspects of new enterprise in every business sector. The days when the business community and government could go about their own interests, ignoring each other, are (thankfully) over. I disagree with Sd-skeptic’s comment that working for the government is forcibly “the antithesis” of entrepreneurship — there are some pencil-pushers in business and some energetic visionaries in the civil service. We need to give up our ideological hang-ups — we’re all in this together.