06/10/2013 10:04 am ET Updated Aug 10, 2013

How Competition and Prize Capital Will Save the World

In the wake of government stimulus in response to the Great Recession, many of us working in cleantech and energy efficiency have wondered: what is the best way to incentivize a new energy order, independent of fossil fuels and traditional grid-based delivery? While government incentives and equity investments clearly have a role in helping the private sector build the future of energy, prizes--such as the Zayed Future Energy Prize--are critical to grow the new energy economy. By helping young companies focus on differentiation and the "big idea" beyond prototypes, prize capital delivers exponential ROI by encouraging innovation, spurring competition and validating new ways of doing business that accelerate transformation in energy delivery.

Prizes are a vital means to benefit our global society and more quickly address the most pressing issues of our time. As noted in the McKinsey report, "And the Winner Is," "A core power of prizes derives from their openness; their ability to attract diverse talent, generate unexpected approaches, and reveal unusual perspectives in the face of a problem or challenge." Prizes come in all shapes in sizes; ranging from the MacArthur Fellows Program to the TED Prize, the Ashden Awards and even the Bloomberg New Energy Pioneers, many prizes include tipping-point investments in new ideas and game changers, as well as acknowledgment for a "job well done."

However, to mobilize the level of financial and intellectual capital needed to address global challenges such as hunger, access to energy and climate change, simply honoring past achievements is no solution to transform our future. Rather, awards like the X PRIZE that give to incite "innovation by tapping into our competitive and entrepreneurial spirit" are essential motivators to see Moore's Law-type progress in the face of today's global challenges. The results speak for themselves: the 2004 Anasari X Prize for sub-orbital space flight led to the creation of the private space industry; the 2009 Northrup Grumman Lunar Lander X Prize yielded innovate technology for life on the moon; and, the 2010 Progressive X Prize created numerous cars with over 100 MPGe (Miles per Gallon or gasoline equivalent energy).

So how does prize capital work in the face of significant global resource challenges? Take the example of the 3.1 billion people trapped in poverty by unreliable access to energy. In the case of our company, d.light--a for-profit social enterprise that designs, manufactures and distributes solar light and power products throughout the developing world--prizes have not only provided expansion capital, but have provided a lever to increase our impact and seize new initiatives we never could have on our own. The prizes d.light has applied for have forced us to sharpen our position in the market and refine our innovation pipeline. In fact, d.light was founded on a prize: when Sam Goldman and Ned Tozun were named winners of the DFJ Venture Challenge, d.light officially launched efforts to democratize access to clean, reliable, affordable energy. Today, d.light has improved the lives of over 15 million, helping to create new freedoms for people in the developing world to enjoy a brighter future.

Of greater impact than providing capital to individual organizations, prizes help with category creation and market building by putting a spotlight on leaders and helping to accelerate their effect. When trying to build an industry for off-grid light and power in the developing world, products and services that challenge the status quo face an uphill battle. In addition to battling inverse incentives (where governments still subsidize kerosene and other fossil fuels, while taxing renewable products), innovative companies like d.light must also overcome innate consumer caution in adopting and embracing new technologies. Prizes and awards help to galvanize industries and offer proof that markets exist, leading to distribution deals, partners and customers. Importantly, prizes that highlight excellence, innovation and quality--such as the Spark Awards and, in the off-grid lighting industry, Lighting Africa--guard against poor performing knock-off products in nascent fields and prevent market spoilage.

While reports of the cleantech industry's health has varied, one thing has not: the need to find clean, renewable energy solutions to combat the effects of global climate change. While all incentives have a role, prizes are unique, galvanizing mechanisms that can accelerate the way we create, deliver and use energy with minimum environmental impact. To figure out how to provide light and power to the billions in need, the entire energy industry--ranging from massive steel-in-the-ground utilities to small off-grid power companies--needs to up our game. Prizes can help us do this; prizes inspire companies like our to dream, prizes also require innovation, discipline and focus. We invite the competition that prizes encourage among our colleagues, competitors and partners in our pursuit of a clean energy future; we will only reach our solutions faster.

Donn Tice is Chairman and CEO of d.light design, manufacturer and distributor of solar-powered portable light and power for the developing world. d.light was recently awarded the $1.5 million Zayed Future Energy Prize in the Small and Medium Enterprise category; the prize money will go towards a new education initiative that will seek to transform the way an entire generation lives with renewable energy.