Commercialising Cleantech
September 2012
Clean technologies have the power to transform the way we use energy, water and other resources. Australia has some great cleantech scientists and innovators, but bringing technology from the lab to the market place is enormously difficult.
Australia is a relatively small market and an uncertain outlook for clean energy regulation has forced some leading Australian innovators overseas. A well-known example is Dr David Mills who took the solar thermal technology he developed at the University of New South Wales to California. The technology has since been on-sold to a French company.
Many clean technology ventures die in the so-called “Valley of Death” where promising technologies are unable to attract the capital they need to proceed to the next stage of development. In fact, cleantech innovators face two Death Valleys. In the first “Technological Valley of Death”, venture capital is unavailable to take a technology from the lab to pilot stage. In the second, “Commercialisation Valley of Death” private equity or debt is unavailable to bring a pilot project up to commercial scale.
The implementation of creative policies to overcome these Valleys of Death will not only generate business and job opportunities; it will also provide the cleaner energy and energy efficiency technologies needed if we are to reduce the likelihood of dangerous climate change.
Recently global firm GE in collaboration with five venture capital partners pledged $10 million to find, fund and bring to market breakthrough Australian ideas for reducing our carbon footprint. GE will select five Innovation Award winners and invest in promising cleantech start-ups. Importantly, GE and its partners will assist the start-ups with business strategy and global connections.
It is a good sign that a company like GE is prepared to provide a helping hand through the Valley of Death to some cleantechs, but much more is needed. Government policy is required to overcome a clear market failure. The Government must play a role in reducing financial and other barriers to commercialisation.
Two recent Federal Government initiatives aim to do that. As part of its carbon price package, the Federal Government has established the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation. ARENA will provide financial assistance to projects across the various stages of renewable energy technology innovation. The Clean Energy Finance Corporation will invest $10 billion in the commercialisation of renewable energy and energy efficiency technologies.
Some people object to such government support as government “picking winners”. But this ignores the fact that our existing coal-based energy system has benefited from massive amounts of government support in the past for research, development and government-funded infrastructure. The playing field is not level because the existing players have been massively subsidised. If the government fails to act now it is in effect picking the existing energy suppliers as winners.
While financing is a major hurdle for cleantech companies, it is by no means the only one. Many smaller firms may have a well-developed and innovative product, but lack the market insights, business planning skills and customer contacts necessary if they are to succeed in the market. To make headway, these firms need alliances and partnerships. Collaboration is often the key for successful innovation.
This is the thinking behind the Industry Capability Teams that have been established under the Federal Government’s Buy Australian at Home and Abroad program. There are over 500 firms in the Cleantech and Water Industry Capability Teams that are able to share information and skills and build knowledge of local and international markets. Understanding customer needs is critical. Customers don’t like to change their existing systems, so the more a cleantech can make its product fit into existing systems, the more likely it is to be taken up.
One stream of cleantech that has been quietly successful is Australian water technologies that are being used around the world. A Victorian company, Rubicon Water, has developed a range of automated irrigation systems that save significant amounts of water. The technology is not only being used in many parts of Australia, but also in other water-scarce places like California.
Australia is a dry country and we have developed a lot of expertise in water efficiency. We have top researchers in both urban and rural water in our universities. Many other countries look to Australia as a leader in water policies like our irrigation water market and water conservation programs. Bob Herbert, who is Australia’s Water Supplier Advocate, is championing our local water industry overseas and believes that our reputation for water research and policy helps water cleantech companies get a foothold in international markets.
Collaboration between researchers, policy makers and the corporate sector will be the key to maximising the commercial benefit from our high quality cleantech capacity in Australia.
John Thwaites is Chair of the Monash Sustainability Institute and a consultant on sustainability and climate change at Maddocks.
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