China’s cleantech boom: Opportunity knocks for Australia
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Atop an XEMC wind turbine at dawn at the Shijing Wind Farm, near PuTian, Fujian Province, China. Photo: John O'Brien
China is establishing itself as the centre of the global clean technology industry and this presents a huge opportunity for Australia in this Asian ‘Low Emissions’ Century. These opportunities focus on the two-way transfer of technology and investment and have the potential to underpin Australia’s future prosperity.
‘Cleantech’ encompasses companies involved in renewable energy (wind, solar, geothermal etc), water technologies, waste management and recycling, green buildings, energy efficiency, biomaterials, energy storage, vehicle technologies, environmental services, biofuels and carbon. The common element is that their products and services have both economic and environmental benefits.
There is plenty of activity in the Australian cleantech industry. There is however even more activity in our near neighbours. A 2012 HSBC report reviewed the low-carbon investment policies of ten countries and found that China was by far the most attractive location, followed by India and South Korea. Cleantech in China
The growth of the Chinese cleantech sector has outstripped its wider economy over the last five years. This has been driven overall by depleting natural resources, the need for energy security and the sheer cost of importing energy resources, all accelerated by the growth of population and wealth.
Three additional specific drivers of China’s cleantech revolution have recently emerged.
First is environmental remediation. Over the last 20 years, China’s massive economic growth has also caused massive environmental damage with rivers dying and frequent smog and toxic contamination causing health, economic and social problems. The cleaning up of this mess is increasingly a priority.
Second, huge economic opportunities in building these global industries of the future have become apparent.
Third, being a change-leader delivers increased influence over global climate policy discussions.
China has a number of very ambitious 2015 targets in its current Five Year Plan: carbon intensity per unit of GDP to be reduced by 17 percent; water intensity per unit of GDP to be reduced by 30 percent; and the non-fossil fuels proportion of primary energy mix to be 11.4 percent, up from 8.3 percent at the end of 2010. The plan also backed seven strategic emerging Industries including energy saving and environment protection, new energy, new materials; and clean-energy vehicles.
The cleantech industry in Australia is also growing. With 45,000 employees, the sector is already the same size as the automotive manufacturing industry in Australia.
The performance of the listed Chinese cleantech companies is tracked by the China CleanTech Index. This tracks over 150 companies that are based in China although many are listed on international stock exchanges, with one even listed in Australia (Novarise, ASX:NOE). The performance of the market overall has not been good over the last two years and this has been driven primarily by the collapse of solar and wind stocks in the midst of the financial crisis. However, other sub-sectors have performed well, with the waste and environmental sub-sectors leading the way (see chart).
Increasingly, Chinese investors interested in cleantech are also looking to invest in projects and companies around the world. Australian CleanTech is currently working with Chinese and Korean investor groups looking at investments into solar, wind and recycling opportunities in Australia, India, the UK and Malaysia. There appears to be a growing interest both from the Chinese investors to look globally and from project proponents happy to work with Chinese investment partners. Cleantech in Australia
The cleantech industry in Australia is also growing. With 45,000 employees, the sector is already the same size as the automotive manufacturing industry in Australia and its $26 billion revenue makes it equal in value to a quarter of the entire Australian Manufacturing sector.
The sector has received some strong, if inconsistent, Government support through the Renewable Energy Target, the Carbon Price and the most recently the Cleantech Investment Program grants for manufacturing companies. The uncertain policy environment has however kept many investors away from the sector.
Nevertheless, there are excellent Australian companies developing world-leading technologies. Listed companies such as BluGlass (ASX:BLG), with its efficient LED manufacturing technology; Dyesol (ASXYE), with its building-integrated solar films; and Carnegie (ASX:CWE) with its wave-energy technology all have the potential to become global standards.
Many private companies are also making global inroads. The winner of the 2012 Australian Cleantech Competition, enLighten Australia, takes Chinese LEDs and combines them with Australian software to reduce bills by up to 93 percent. Other finalists this year included Biofiba with its biodegradable shipping pallets, VR TEK (tyre recycling technology) and TropiGlas which is developing a clear photovoltaic glass. The opportunities for each of these in the Chinese market are massive. Opportunities for collaboration
The companies with most appeal to Chinese partners will be those that address China’s current challenges. Technologies connected with reducing the emissions intensity (emissions per capita) of industry or with water, waste, recycling, waste-to-energy, renewable energy or electric vehicles will be of particular interest.
Finance can be secured from China through venture capital, supplier finance, private equity or even through angel investors moving to Australia. This can sometimes also be backed with export finance supported by Sinosure. This type of investment can make the difference between a technology being shelved and it entering global markets. These relationships can also be enhanced through collaborating with Chinese companies on research, market entry and global strategies.
The potential benefits to society of the spread of cleantech go beyond reducing environmental damage. Cleantech products and services will create more efficient businesses, less waste, greater recycling of materials, higher standards of living, more fulfilling jobs and more liveable towns and cities. Through adopting technologies that reduce energy, water and resource usage, societies will increase their productivity, their global competitiveness and drive local economic development and employment.
Australia as a quarry with some nice beaches is not a strategy that will deliver long term prosperity. Building an Australian-Chinese cleantech network will both meet the needs of the two home markets and build the foundations of this future prosperity. John O’Brien is managing director of Australian CleanTech, a research and broking firm that advises cleantech companies, investors and governments and works across Australia, China, Korea and Malaysia. It publishes the Australian CleanTech Index, the China CleanTech Index and manages the Australian Cleantech Competition. Visit auscleantech.com.au.
YE), with its building-integrated solar films; and Carnegie (ASX:CWE) with its wave-energy technology all have the potential to become global standards.
