Virgin.com: The next industry ripe for change

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The next industry ripe for change

“Disruption” is a word that gets overused. But let’s not lose sight of the fact that shaking up entrenched, complacent industries can do a world of good. Mobile banking in Africa has bypassed traditional banks and given millions access to financial services. Low-cost, distributed renewables are accelerating the death of coal-fired power-plants. Cloud computing is helping thousands of small and medium-sized business compete with incumbents without having to invest in giant servers. Elon Musk’s gamble with Tesla has made every major car maker plan for an electrified future.
Image by Owen Buggy

I’ve spent a large part of my career working to unsettle more mainstream industries from airlines and soft drinks to trains and hotels, mobile phones and media. Another industry that has caught my eye recently is particularly ripe for disruption.

It represents a 100 billion dollar market today, and is set to grow to nearly four times that size by 2050. It is based on a technology that has not fundamentally changed since its invention (or rather, accidental discovery) over 100 years ago. A handful of companies dominate the channels to market, and generally spend far more on advertising than they do on R&D. It produces something critical to people’s health and productivity (especially in the developing world) that are also going to consume as much electricity as the entire US, Germany, and Japan do today - combined. And, most critically critically, those widgets are going to account for 0.5 degrees Celsius of global warming by the end of the century - assuming business-as-usual.
City smog
Image from Getty Images

If you haven’t already guessed, I’m talking about air-conditioning.

As our planet warms, we need it more than ever to keep our people cool. Worldwide, by 2030, extreme heat could lead to a $2 trillion loss in labor productivity. India’s economy alone stands to lose $450 billion (not to mention the 200 million Indians exposed to dangerous heat conditions each year). The good news is that RACs have barely scratched the surface of their technology potential. Despite a 100-year runway, the most advanced products have only achieved 14 percent of their maximum theoretical efficiency. If we can trigger a major technology change, it could be the single biggest technology-based step we can take to arrest climate change.

The bad news is that incumbent manufacturers, left to their own devices, won’t do what we need. They are in the business of selling as many air conditioners as they can, as cheaply as they can. To the extent that they think about efficiency at all, it is because regulators force them too (and they don’t force them very much, either). The control exercised by a small number of players means that entrepreneurs and innovators find it difficult to find their way to buyers (or investors who will back them). High R&D costs present a major barrier to entry.
Wall of air conditioners
Image from Getty Images

The good news is that none of this is insurmountable. If we can disrupt the airline industry, where a single Boeing 737 can cost north of 70 million dollars, then I’m pretty sure we can do it with air conditioning.

We need to convince governments to aggressively raise energy efficiency standards and phase out the most damaging refrigerants (which the Kigali Cooling Efficiency Program is admirably working on). Korea and Japan’s regulators forced a doubling of AC efficiency over the last several years - and manufacturers still found a way to make prices fall. We also need to raise the technology ceiling. Commercial LED lighting has achieved nearly 70 percent of maximum theoretical efficiency. Solar panels have reached 40 percent. I’m no AC expert, but 14 percent seems pathetic.

Which is why I’m immensely proud to support the Global Cooling Prize. This innovation prize competition, organised by Rocky Mountain Institute and its partners, aims to shine a spotlight on potential breakthrough cooling solutions. It has launched, with the support of the Indian Government, offering three million dollars in total prize money. The prize is a great way entrepreneurs and innovators to get the visibility and support they need. It is also might just, finally, spur the industry into action. And it might attract the attention of other hyper-competitive technological geniuses. Get your applications in at www.globalcoolingprize.org. There is no planet B, as Jose Maria Figueres would say.
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By Richard Branson
2 January 2019
@richardbranson
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