Investing in the clean technology revolution

January 2016  |  FEATURE  |  FINANCE & INVESTMENT

Financier Worldwide Magazine

As one might expect in a sector dedicated to saving the natural environment and making the world a better place, investment in the clean technology (cleantech) arena has proved to be plentiful in recent years.

The extent of interest in the cleantech universe – which embraces agriculture, air, environment, materials, recycling, waste, manufacturing, industrial, transportation, waste and wastewater – is evidenced by figures compiled by Frost & Sullivan revealing that the market was worth $601bn in 2014 and by 2020 is predicted to expand to $1.3 trillion.

Many others are dancing to the same cleantech tune, including the philanthropic The Pew Charitable Trusts which, in its ‘Innovate, Manufacture, Compete: A Clean Energy Plan’ report, forecasts that the world’s clean energy sector could generate nearly $2 trillion by 2018.

These trillion-dollar forecasts are being generated by a world “fast approaching an age of resource scarcity”, notes Frost & Sullivan, a view fashioned by concerns over global energy usage which is expected to jump 53 percent by 2035 (driven largely by strong demand from the likes of India and China), expectations that two-thirds of the world will face water scarcity by 2025, and projections that demand for food is going to rise by 70 percent by 2050.

Big numbers necessitating big ideas is certainly the cleantech mantra, and despite requiring a greater degree of financing and regulation, the sector appears awash with investment opportunities.

Although there is no universally accepted definition of what constitutes ‘clean technology’, it is generally classified as referring to technologies that have a direct or indirect positive impact on the environment, typically by decreasing greenhouse gas emissions from day-to-day processes (whether industrial or agricultural or at the commercial and residential end), or by contributing to a circular waste economy allowing for efficient material, energy and water usage.

“While many classifications do indeed exist, the overriding theme is the net positive impact on the environment through the retrofit, upgrade or replacement of conventional operations or technologies with new ‘cleantech’ systems,” suggests Ross Bruton, senior industry analyst for energy & environment at Frost & Sullivan.

Cleantech: innovation, investment and impact

Cleantech innovation has had a major impact on economies and environments around the globe. A fine, long-term, example is the Grand Coulee Dam in the US state of Washington, the resulting hydroelectricity of which has set the stage for the state’s economic boom in the years since its inception in 1935. “Washington State hasn’t stopped investing in clean energy,” says J. Thomas Ranken, president and CEO of the CleanTech Alliance. “Eighty years later we used a Clean Energy Fund to create several smart grid and energy storage demonstration projects across the state. Everyone benefits from the energy reliability delivered by the projects, and several emerging companies now have successful reference projects to replicate worldwide. It’s one of the reasons why several cleantech analyst firms are calling Washington a top state for energy storage and smart grid technologies.”

New technologies are indeed driving efficiencies in industrial processes and cities. Along with distributed generation, storage and e-mobility, they are expected to represent the new generation of cleantech into the future. These include innovations such as prosumer markets, renewables-with-storage, smart grids, smart factories, smart waste and water, home and building energy management systems, electric vehicles, autonomous transport and integrated mobility.

A clean future?

The White House Clean Energy Investment Summit and the United Nations Climate Change Conference in mid and late 2015 respectively, made it very clear that the desire to scale up investment in cleantech and address climate change remains a global issue. And although such events are not generally considered to be magic pills that will effect major change, the White House Summit did go some way toward proffering solutions by announcing $4bn in commitments by major foundations, institutional investors and others to fund innovation.  

Furthermore, with large economies such as China and India under pressure to clean up their environments, compliance with the cleantech agenda seems relatively assured. However, a potential stumbling block may well be the gap between the global demand for energy efficiency and the financial and regulatory muscle to make it happen.

“Cleantech’s future is very bright,” believes Mr Ranken. “Adoption is picking up pace in the US, but the real pendulum swing will happen in China, India and Africa as more and more of their populations move to urban centres and demand energy equity. More than a billion people don’t have access to power and billions more only have access to intermittent power. It’s our responsibility to make energy access and equity happen as quickly as possible in a sustainable way. That’s a challenge, but also a cleantech opportunity at the same time. Distributed energy generation, micro grids, energy storage – each of these will help transform the global energy landscape in the very near future,” he adds.

© Financier Worldwide

BY

Fraser Tennant