The following insights are a selection of key thoughts from the associates at Aum Energy based on recent experiences. The intent is to share a flavour of how we like to think about the notion of seeking and achieving 'efficient success' that is sustainable and profitable.
“One of the most valuable insights that is regularly reinforced is the notion that only "1 in 10" of development projects succeed. Whilst I believe that the ratio can be heavily improved by carefully selecting the projects that are taken from inception to development, my belief is that it is often the varying positions and strategies of project partners, investors and host agencies that cause many projects to grind to a halt. The sooner that one can gain alignment, or otherwise, the sooner one will be able to gauge the real chances of success. The more champions that exist inside a project that have real 'skin in the game', then the faster it will move and then, after a time, it will generate its own positive momentum”.
“Get your strategy right at the start. Don't skim through this step as otherwise, when decisions become more intractable, you will not have a guiding compass with which to work through complicated mutually-exclusive choices. Independence of thought is lost when strategies are designed late in the day. The outcome will be influenced by temporal conditions which can change quickly and become irrelevant”.
“Having a single point of accountability (SPA) for each aspect of a project is key. People may want to shy away from being allocated hard responsibilities, but in a project it is the only way in which to hold people to account and to make sure that all the moving parts are being managed in tandem. Give the SPA the authority that s/he needs and you'll foster enrolment and collaborative behaviour."
“When developing a strategy, it is vital to look outside and to objectively see how one stacks up with the outside world. All too often a lack of independent thought means that energy and time are wasted and reputations risked by a focus on areas where there is no real material competitive advantage and the ultimate chances of success are muted”. For instance, there are a number of long-duration flow batteries in development (often for over 10 years) who are viable at a minimum economic profile that has already been surpassed by li-ion technology.
“In an uncertain world, one can increase the chances of success by operating a portfolio approach. If one is selling technology for example, rely on several vendors and rely on several customers. If one vendor can't deliver, either at all or enough of the items that you seek, have your back-up plan. If you have one customer that has created the notion of a long-term upside, then find another that doesn't claim the same benefits, but needs you today and will pay you on a prompt basis. Hedge yourself against currency and credit risks and, in particular, create enough short-term business such that all costs are covered......before the long-term is secured."
“Consider the "Lean Start-up" model. With only 1% of all USA patents leading to successful commercialisation (ARPA-E), it is imperative for all technology developers to avoid the mistakes of many organisations in raising significant amounts of capital early on and then having to answer to both impatient investors as well as expectant clients and employees. Instead, outsource...do-it-yourself....collaborate and focus on getting the critical innovation landed first and foremost whilst deploying as little capital as possible. Then you can expand and seek publicity.
The increasing focus on solar within the Indian power industry is powerful and in sync with wider climate change goals. However, the shortage of local capital and the lack of bankability of the local utilities will severely constrain the growth of the industry. Add in some fiercely fought utilty-scale tenders and their optical impact on the wider price of solar and financial returns for international investors are diminishing to the point at which real project sanction and delivery will be hampered. Commissioning 5-6 GW/annum will be an increasingly frought task. India needs to create additional pools of capital that are comfortable with currency and counter-party risks on one side as well as start to bring the utility level of performance up to international standards. Only then can RE grow to to its full potential and can planned coal fired projects be shelved.
The pace of change is increasing and unless one adopts a full 360 degree view on legislation, competition, consumer attitudes and investor preferences, then one runs the risk of missing the target. Imagining a dartboard as the target, it is moving both horizontally and vertically and is now rotating on an axis as well. Product-market fit is harder to achieve and increasingly relies on pace, innovation and the ability to stop what is not working.