Mitigating Climate Risks: The Business Challenge

Think about the challenges involved in combating climate change, and issues like international cooperation, public opinion, public policy and technological innovation may all come to mind. But there’s another key topic that may not come to mind quite as readily — and that’s a business challenge.

Ernest Moniz

In an interesting talk last week at the Better World conference put on by the MIT Enterprise Forum, MIT professor Ernest J. Moniz made the point that we will need not only technology innovation and policy innovation to achieve a low-carbon future — but  also business model innovation.

The business model challenge, according to Moniz? The cultural mismatch between entrepreneurial energy start-ups and the needs and scale of the established energy sector.

Energy, Moniz explained, is a big, highly capitalized, commodity business featuring very efficient supply chains, very established customer bases, extensive regulations and complex politics.  “That is the system in which we now need to innovate, scale and scale fast,” explained Moniz, who is director of the MIT Energy Initiative.

Historically, 50 years is the characteristic time scale for a major change in the energy mix, Moniz said. However, he added, “we don’t have 50 years” if we are serious about the climate risk mitigation challenge. Figuring out the secret to matching the entrepreneurial culture of energy innovators successfully with the culture of the established energy industry is, according to Moniz, a “missing piece” that is really important if we are going to succeed.