During 2007, it became apparent that climate change – and I am including clean energy and water as part of the mix – was the topic everyone wanted to talk about. It continually topped surveys as the public’s leading concern. It was raised at workshops during conferences on totally unrelated topics. And, of course, during the recent election campaign it featured almost daily.How wry the saying ‘every cloud has a silver lining’, for in fact the market to help combat climate change is probably the largest market that existing and emerging companies of the current generation will ever see. Where many companies see risk, some – too few – see an opportunity and race to seize it.
Clean Edge research predicts the global market for renewable energy will exceed $100 billion by 2012, while others forecast a market ten times that size by 2016. The International Energy Agency estimates it would cost $20 trillion over the next 30 years to deliver clean energy around the world. Although this seems enormous, on the scale of saving the planet, this equals only 1 percent of world gross domestic product. The question on every policy maker’s mind is: ‘How can Australian companies become global players by seizing these opportunities?’
Those from the laissez-faire mould will argue that the markets are themselves efficient and the best course is to let companies that operate in this space either flourish or decay according to their own merits. Perhaps this argument has merit for mature industries where firms exist in some sort of dynamic equilibrium, but there is plenty of evidence that it breaks down completely for new industries. Those who advance it overlook the genesis of the Japanese car industry or the Korean electronics industry, both of which were built on the back of pure government ‘push’ and investment. The absence of any overwhelming local market ‘pull’, and even the presence of existing strong international competitors, did not stop either of those countries achieving great success in building competitive strength. These markets that would come to demand reliability, miniaturisation, and internet connectivity as fundamental product requirements. So much for laissez-faire!
Increasingly, governments around the world are supporting investments in clean energy. Europe and Japan are particularly active, with Denmark and Germany major developers of wind power. Australia had a strong position in solar panel research, some of which has unfortunately dissipated offshore. As late as last year, credible solar commercialisation projects were floundering because of the lack of funds from an industry partner necessary to continue the research.
What a short-sighted innovation system!
The Australian biotechnology industry provides a historic parallel to the emerging clean energy sector. After taking root in the 1980s and receiving much attention from both governments and investors, only now is a mid-tier drug company (CSL) that might play a pivotal, catalytic role starting to emerge. The sector is mature enough that the value chains are better understood, but the small, undercapitalised, single product companies (sound familiar?) in that sector continue to struggle while the world moves on. How different it might have been! The problem is exacerbated by the small size of the Australian market, as most successful start-up companies need to be born global, but locally proven first.
The big differences between biotechnology and clean energy are the market risk and the commercialisation pathway. Readers of Anthill will be very familiar with the difficulties that small companies face in seeking to grow. The list includes finding capital to fund research and development and growth, the skills needed to grow a business and enter new markets, and the lack of market knowledge. Perhaps with an arguably more immediate market opportunity than biotech, and a shorter commercialisation pathway, the ability to attract substantive capital to clean energy projects will be easier. Certainly the new government’s focus on building collaboration will help to bring the right skill sets together for commercialisation and market entry, and help to build scale more quickly than has been possible in the biotech sector. Demand-pull programs such as the AIC’s TechFast program, which attempt to increase the technological absorptive capacity of Australian firms, have had great early success in achieving cross-sectoral and cross-cultural transfer of ideas. Such programs assist companies to innovate by seeking IP and establishing collaborative capacity with the research sector. Open innovation, embracing collaboration as both a source of new technology and conduit to new markets, is becoming globally established, and will increasingly be the avenue through which Australian companies are able to participate in global value chains. particularly in clean energy.
Let’s hope Australia grasps the opportunities with both hands this time around!
Dr Rowan Gilmore is CEO of the Australian Institute for Commercialisation, which helps businesses, research organisations and governments increase the success rate of commercialising Australian innovation.
