Given the howls of protest emanating from the Australian Petroleum Production & Exploration Association conference in Perth last week — and from other industries over the weekend — over the introduction of a carbon price and its potential impacts, one could be forgiven for thinking that these were industries on their last legs and in the throws of a painful decline.
Given some of the forecasts of peak this and peak that, it could well be a glimpse of the future for some. But for now, perhaps they should be grateful for small mercies: at least they’re not in the cleantech sector.
Cleantech may well be the industry of the new millennium — the heads of the world’s two biggest economies seem to think so — but even in a year when investments in clean energy outstripped those in fossil fuels for the first time across the globe, the Australia sector remains a mere blip on the radar of local investors.
The annual Australian Cleantech Review notes that the listed component of the sector accounts for just 0.8% of the market capitalisation of the ASX — $11.9 billion as at December 31, 2010, out of a total market value of $1.4 trillion. Granted, the cleantech index does not include the likes of Origin and AGL, who have a foot in both camps, or the unlisted majors such as Pacific Hydro, but it does include waste management groups such as Sims and Transpacific. It used to be a lot bigger, but the combined impact of the GFC and uncertainty over carbon and energy policies has contributed to a sharp 55% fall in the value of the index in the last three years.
Yet the sector is already of some significance in the local economy. The review notes that there are some 750 companies in the cleantech sector in Australia (81 of them listed), although most of them are very small. Perhaps, it’s just the stage in its evolution. Still, they had combined revenue of over $22 billion — which puts the industry at around half the size of the national construction industry — and employed over 25,000 people in 2010.
And water — perhaps reflecting some of the realities of the Australian geography and its energy challenges and opportunities — is the biggest sub-sector of the local cleantech industry with some 150 companies, followed by efficiency with 127, solar with 91 and waste with 90 companies. The sector was involved in capital transactions totaling $1.4 billion during the 2010 calendar year in 214 separate deals. The average capital transaction was $6.6 million, just to give an indication of their size.
But what I found particularly fascinating was its take on some of the major cleantech trends of 2011. Some of the predictions may surprise, but all of them are thought provoking.
Carbon déjà vu: The carbon debate will have a feel of déjà vu with the same arguments pulled out to oppose a broad-based emissions trading scheme as were used so successfully to destroy the CPRS.
No nukes: There will be no rational nuclear debate in Australia. The recent nuclear disasters in Japan will further reinforce the difficulty of this debate and have pushed back any serious consideration of nuclear energy by at least five years.
Scrambling pollies: There will be an increasing realisation within the community that we are dropping far behind the rest of the world in terms of cleantech industry development and jobs creation. The politicians will then start to scramble to show that they are indeed making progress and grasping those opportunities.
International benefits: Companies and investors will form international partnerships to secure the greatest benefit from the world’s shift towards sustainability. Successful Australian businesses will need to be more globally connected to be able to benefit from the greater rate of global uptake of cleantech internationally.
Chinese wind: Chinese wind turbine suppliers will finally enter the Australian market and move quickly to dominate the local supply with high quality, cheap products. This year may even see provisional commitments for some local assembly by Chinese companies.
Large solar: While the solar flagships will fail to deliver on its promises, the state-based schemes will drive 30- 50 MW projects that may even break dirt in 2011. There will also be a growing roll out of small utility projects (1-3 MW) and also of commercial scale projects (50-200 kW) around the country. There will be no progress on the harmonisation of the state based feed-in tariffs.
Asian money: In the same way that investment has been coming from Asia into the mining sector, 2011 will see the first of the large scale Asian investments into the cleantech sector in Australia. This will open up the sector to growth and may be the catalyst for Australia to build some momentum in the sector.
Local money: There is also likely to be a growing interest and roll-out of community-financed projects, where communities take control of local development and, at the same time, secure the investment returns.
Insurance takes the lead: Globally, there is a strong move from the insurance industry to quantify the risks inherent in climate change and the associated regulatory measures. The Australian insurance market is likely to start asserting its influence over investment decisions during 2011 following its assessment of the floods and cyclone pay-outs in Queensland. Indeed, the insurance industry may end taking the lead in the climate debate and in driving industry and government to adopt and develop cleantech solutions.
Some of those predictions are clearly coming to pass. The review seems to be good at this. Its forecasts for 2010 were also mostly spot-on, including the growing case for clean-tech as a communications theme, innovation in the water industry, improvements in wind turbine design, an increased focus on recycling technologies, renewed interest in cleantech IPOs, and the emergence of new business models that focus on energy services and efficiencies.
Unfortunately, there has been no progress in amending regulatory frameworks, no traction on proposals for national feed-in tariffs, little rollout of commercial scale PV technologies, and an expected increase in investment from the Chinese, Korean and Malaysia private sector interest in Australian cleantech is yet to emerge.
*This article was originally published at Climate Spectator