Clean is the new green

 

Despite no shortage of promising ideas and R&D, it’s fair to say that Australia missed the boat on the last two hot global technology sectors: the dot-com boom and the global biotech bonanza. Australia didn’t produce any really big dot-com companies (perhaps LookSmart, if you’re feeling generous). And the downturn in the global biotech sector a few years back caught many Australian biotech start-ups unprepared, short of funding, short of market-ready products and, for many, out of business. And they were the ones that actually tried to commercialise their own technologies.

 

As the dot-com and biotech journeys illustrate, opportunities in emerging technology sectors don’t last forever. Timing is as important as access to global markets and sufficient funding.

 

Now we find ourselves at the juncture of yet another new technology boom – this one sure to be more profound and sustained than any in recent memory. Will we learn from the mistakes of the past and ride the cleantech wave all the way to shore? Or will Australia’s promising cleantech sector be stymied by the usual suspects: small domestic market, lack of access to serious funding, intervention by the powerful lobbies representing the primary industries that have underpinned our national prosperity?

 

Mention the name Dr Zhengrong Shi to participants in the Australian cleantech sector and many will wince involuntarily at an opportunity lost. Shi earned his PhD in 1989 from the University of NSW’s School of Photovoltaic and Renewable Energy Engineering, which is acknowledged globally as being at the forefront of solar technology research. In 1995, Pacific Solar, a co-operative venture between the university and the Pacific Power company, was established to commercialise the thin-film technology he worked on at UNSW, which uses 100 times less silicon than conventional cells. Shi continued to develop the technology in Australia until 2000 when he was lured back to his native China with an offer of $US6 million to establish a conventional photovoltaic solar cell manufacturing plant. The resulting company was Suntech Power, which listed on the New York Stock Exchange in December 2005 as one of the leading solar cell manufacturing companies in the world, making Shi a billionaire. In 2004, Pacific Solar was acquired by German company CSG Solar, which now has worldwide rights to commercialise UNSW’s thin-film technology. And once again Australia was left in the lab.

 

As the Australian Institute of Commercialisation’s Rowan Gilmore points out (p18), if you think this couldn’t possibly happen in today’s Australia, think again.

 

 

 

Ivor Frischknecht is Investment Director at Starfish Ventures, which holds one of the more prominent cleantech portfolios of the Australian venture capital firms. In the past he has been critical of the Howard Government for not doing enough to foster cleantech companies in the face of the powerful coal lobby. With the change of government, Frischknecht says we are still in the wait-and-see period with regard to possible policy shifts.

 

“The thing we’re really lacking is market incentives,” says Frischknecht. “When you have a tiny new industry – solar or geothermal, for instance – how do you get the sufficient scale so that it is competitive with a large industry that has been around forever and has various subsidies built into it (not all of them obvious ones)?

 

“I think government can help in the area of really early-stage spin-outs. This is basically the first step – getting the first million or two million dollars into a company. That is a very tough funding environment anywhere, but especially in Australia. The established venture capital funds like ourselves find it very hard to fund companies at that kind of level because the risks are high, the resources required are high and yet the capital deployed is very low. So having some sort of government leverage in that sector would be fantastic. Going back a few years there were pre-seed funds, with two government dollars for every one private dollar. I think those worked fairly well, but they are used up now, so I would like to see a renewal of that program.”

 

While the California Pension Fund and the New York State Common Retirement Fund have dedicated hundreds of millions of dollars to cleantech investments, the question of investment capital in Australia may require more of a hybrid solution.

 

“I think we do have access to sufficient investment capital here in Australia. I don’t think that’s the problem,” says Frischknecht. “There are players like us who have capital available to invest in the sector, and we have good relationships with Silicon Valley investors, too…. Australia was perhaps a little later to the game in funding the cleantech sector than California. But, as of today, investors are pretty aware of the sector.”

 

 

The fruits of local innovation are on display in the north-western Queensland mining town of Cloncurry. It is on track to become the first town in the world powered entirely by solar power.

 

Sydney-based company Lloyd Energy Systems is part of a $31 million consortium (which includes the Queensland Government) that is installing 8,000 mirrors to reflect sunlight onto graphite blocks. Water will be pumped through them to generate steam, which will be converted into electricity that will be distributed by a unique heat-storage technology. By the end of 2009, the scheme will be supplying Cloncurry with 80 megawatt hours of electrical energy every day.

 

It’s exactly the kind of project that works particularly well for towns at the edge of the electricity grid that suffer regular blackouts and where the cost of conventional upgrades are usually considered prohibitively high. It’s also an example of what can be achieved by effective collaboration.

 

Jeremy Rich would like to see more such projects. As CEO of Energy Matters, an online retailer of sustainable energy products with an emphasis on solar, he has seen his business grow dramatically over the past three years. While 95 percent of the company’s revenue is generated by the sale of solar cells to residential customers, Energy Matters also does bigger commercial projects such as standalone solar energy systems for mining operations in WA or islands in the Whitsundays.

 

“Australia is one of the sunniest countries in the world and yet we have one of the lowest rates of solar photovoltaics installed of any developed country,” says Rich. “The market at the moment is about 10 to 15 megawatts a year. In Spain over the same period of time they install 1,000 megawatts. That disparity is directly related to government support and incentives. We are grateful for the government support we do have, but we’d like to see greater mechanisms established to enable the industry to develop to the point where it doesn’t need government support. There will be a point in time when renewables will stand up against coal power on finance alone. The cost of solar is coming down while the price of coal electricity is actually going up.”

 

It is a critical point to make about all green products and technologies. While environmental imperatives have gained significant traction since the release of the Stern Report and Al Gore’s movie, An Inconvenient Truth, mainstream uptake has to date been impeded by the premium cost and inefficiency of green alternatives relative to existing solutions. The minute solar, wind or ocean-power can match the efficiency and cost of coal-fired electricity, it’s case closed. Until that time, cajoling and pro-active initiatives will play a critical role.

 

 

Jeffrey Castellas, CEO of Clean Technology Australasia, argues that we don’t need to abandon our primary industries. He runs cleantech forums in Australia and India that are designed to build links between the two market sectors. “We need to be able to use our resources much more wisely and effectively. It’s not something that’s going to happen overnight. Clean coal technologies, like those being commercialised by Australian company Environmental Clean Technologies, will play a huge role in this transition. It’s unrealistic to think that the world will stop burning coal overnight, so let’s be the world leader on how to do it more effectively.”

 

Castellas is holding the 2nd India Cleantech Forum in New Delhi in July. He has formed commercial partnerships with new funds run by some of the biggest investors in the world, as well as the big Indian banks. “We use the India Cleantech Forum as well as our commercial partnerships to position Australian cleantech companies into big Indian projects and find them the right partners to get new financing to accelerate the deployment of their products,” he says. “Without those links, Australian companies have found it very difficult to get into the

Indian market.”

 

These kinds of initiatives promise to help Australian cleantech companies overcome the factors that have traditionally hurt technology start-ups. Starfish’s Ivor Frischknecht believes Australia’s opportunity to really cash in on solar has passed, but indicates that we still have opportunities in solar-thermal, clean coal, deep geo-thermal and ocean-related power.

 

With so many opportunities available and so much on the line, it’s important that we get cleantech right, for our national prosperity and the wellbeing of posterity. It’s about time we Aussies found our place in the sun.