Cleaning up

I recently chaired our firm’s Business Intelligence Series workshop for more than 90 senior businesspeople on the topic of clean technology, or cleantech, and its progress in New Zealand and globally. As a result, I am left with some insights on how New Zealand is poised to take advantage of what might be called the ‘cleantech revolution’.

Cleantech has quickly become a global megatrend: in 2008, for the first time, investment in renewable energy projects surpassed that in conventional energy.

One commentator on the topic said recently that New Zealand is looking a gift horse in the mouth by viewing the world’s inexorable move towards a low-carbon economy as a cost rather than an economic opportunity. True words, and progressive political and business leaders are seizing that opportunity.

For instance, in a recent meeting of US governors at the White House, President Obama said, “I am convinced that whoever builds a clean energy environment, whoever is at the forefront of that, is going to own the 21^st century global economy.”

Although many businesses have been focused on surviving the recession, activity in green technologies has continued apace, with rapid global growth.

Roland Berger Strategy Consultants estimate that the global market for environmental products and services will double by 2020 — from US$1.4 trillion in 2008 to US$2.7 trillion. One report by Cleantech Group suggests that by 2020, cleantech could account for as much as 15% of GDP of some countries, while a second report, by Deloitte and Cleantech Group, shows venture investment in clean energy companies globally in the second quarter of this year is up 43% from the same quarter last year.

Cleantech is also the largest area of activity within the economic stimulus packages of the US, China and Korea. In total, for the G20 countries a staggering US$396 billion in stimulus funding is going towards green investments.

One of the speakers at our Business Intelligence workshop, James Muir, clean energy finance manager at Sinclair Knight Merz, noted that Asia is a boom region for cleantech, with investment in the Asia Cleantech Fund in the multi-billions. In Vietnam alone, more than US$1 billion has been dedicated to cleantech transport, while at least US$2 billion is being funnelled into cleantech power in the Philippines.

And in New Zealand, there are a number of cleantech firms already achieving international success such as DesignLine, SKM, Wellington Drive and Flotech. Ecodiesel has developed technology to make diesel fuel out of tallow, and is building a plant in Auckland to do that in commercial quantities.

In July it was reported that Auckland-based cleantech company LanzaTech, which uses proprietary bacteria to convert industrial waste gases into fuel ethanol, has secured US$18 million from investors led by Chinese venture capital firm Qiming Ventures.

Workshop speaker Chris Mulcare of Investment NZ identified New Zealand’s particular task in the cleantech movement — to serve the mass market, especially in China and India, for low-cost, pragmatic solutions (for instance, leadership of a biological approach to farming that reduces emissions and chemical outputs).

Such developments might logically be Kiwi-driven, Mulcare says, because lateral thinking is part of our DNA and constitutes much of our competitive advantage. And he is emphatic about our need to commercialise our smart ideas rather than continuing to rely on cheap commodity exports.

Building on this point, the third speaker, Phillip Mills of Les Mills International, cited the now widely held view of the global direction, that fundamental capitalism is no longer the model, while cleantech, according to the Harvard Business Review, is the biggest world development since the industrial revolution.

Big moves by nations are possible, he points out; Denmark has built a wind industry nearly the size of Fonterra and now sources nearly 50% of its energy from wind. New Zealand could aim for similar goals — and in fact, we already produce 75% of our energy from wind, hydro and geothermal sources.

The key is to not be distracted by the inability of countries to find agreement internationally, such as at Copenhagen late last year, because at an individual country level, huge resources are being invested and the opportunities are being pursued with gusto.

Mark Lowndes is a partner at Lowndes Associates