Clean tech next big thing in energy
FORGET dotcom. It’s wattcom that is the new big thing — or, in the language of Silicon Valley, ‘‘ cleantech.’’ The latest United Nations report on sustainable energy investment reveals that $US70.9 billion was invested in ‘‘ clean-tech’’ companies in 2006 — particularly those engaged in wind, solar and biofuels development — and it forecasts that the sector will attract $US85 billion this year.
The UN Environment Program study, undertaken by London-based analysts New Energy Finance, adds that a further $US30 billion entered the sector via mergers, acquisitions, leveraged buyouts and asset refinancing last year.
UNEP says that, although renewable energy accounts for only 2 per cent of global power supplies, it is now attracting 18 per cent of investment in electricity generation.
Achim Steiner, UNEP executive director, says: ‘‘ This is full-scale industrial develop- ment, not just a tweaking of the energy system. The challenge for governments now is to turn near-term advances into continued sector growth.’’
UNEP comments that the volume of investment flowing in to clean energy now dwarfs the dotcom boom, has lasted longer and is showing no sign of abating. New investment through venture capital and private equity reached $US7.1 billion last year, 163 per cent higher than in 2005.
Despite the global criticism of the American Government for failing to sign the Kyoto treaty, two-thirds of the venture capital and private equity funds — totalling $US4.9 billion — flowed to the US in 2006.
While the focus of investment is in America and Asia, Australian clean-tech interest is growing fast, too. A forum in Melbourne earlier this year drew 230 participants. The organisers, Clean Technology Australasia, say that the clear message from the forum is that there is a strong opportunity to create a globally competitive clean-tech industry here. ‘‘ Now is an important time to seek solutions that make money as well as generate environmental and societal gains.’’
Terry Tamminen, a special adviser to California Governor Arnold Schwarzenegger, told the Melbourne forum that the opportunity existed for ‘‘ a hub of clean-tech investment and innovation’’ to be established in Victoria to take advantage of markets in India, China and the Pacific Rim.
Meanwhile, analysts confess bafflement at the poor performance of Europe in clean-tech investment. New Energy Finance says investment in the sector from Europe fell two per cent last year against growth of 138 per cent in North America, including Mexico, and 45 per cent in Asia.
NEF says the figures make depressing reading for European governments, ‘‘ who have set great store in achieving global leadership in clean energy development’’.
However, the take-off of interest in new energy technology is not without danger. Matthew Nordan, president of New York- based Lux Research argues that the clean-tech energy segment is starting to look overheated, with 930 start-ups established around the world in less than two years. ‘‘ There is no way more than a fraction of them can possibly succeed,’’ he says.
Nordan acknowledges, however, that there is a huge amount of investor interest in the area and says there is up to $US200 billion worth of venture and private equity money available at present for investment.
Lux Research also notes that government and corporate investment around the world in energy research is soaring. Last year, says Nordan, total clean-tech R&D funding globally reached $US48 billion with governments, including those in Australia, contributing $US24 billion.
The store of scientific papers on clean tech is also growing extraordinarily fast — 50,000 articles were published in 2005 and 2006.
US-based consultancy Clean Edge Inc says ‘‘ six Cs’’ make up the key forces reshaping the global energy landscape: cost, capital, compe- tition, consumers, climate and China. They have moved clean energy from the fringe of energy supply to the mainstream, it adds, and in combination they are accelerating the growth of technologies, companies and markets ‘‘ faster than even many optimists might have imagined.’’
Clean Edge says its research points to a $US60 billion increase in investment in production of ethanol and biodiesel between now and 2016, an outlay of more than $US40 billion on wind farms in 10 years, a $US54 billion expenditure on solar photovoltaics and investment of $US14 billion in fuel cells and distributed hydrogen technology (mostly for research and test units) by 2016.
‘‘ This level of growth is more akin to the PC, wireless and web industries in their heyday than to the staid and usually slowmoving energy sector,’’ Clean Edge comments. ‘‘ Clean energy is attracting the interest and commitment of many of the same innovators and investors who created the infotech revolution.’’
Many venture capitalists, it adds, have found ways to apply their skill sets to clean tech without straying too far from their IT and bio-tech knowledge and experience.
However, the consultancy also has a warning for investors. It points to sharp cost increases in a number of energy areas. The average cost for installation of a megawatt of wind farm has risen 20 per cent in two years. More silicon is now going into making solar panels in the US than into computer chips and the resulting high price of processed silicon is driving up solar photovoltaic capital outlays. Profit margins for ethanol in the US have nearly collapsed in the past year because of a doubling in the corn price.
Clean Edge also argues that there is ‘‘ sunlight at the end of the tunnel,’’ predicting that silicon costs will stabilise, that wind turbine prices will ‘‘ calm’’ and biofuel producers will benefit from new refining techniques and the development of non-corn feedstocks.