New Zealand's cleantech companies are world-class in developing low-carbon, environmentally friendly solutions.
First and foremost, it's important to understand what the term 'cleantech' actually means. The working definition we tend to use is "a diverse range of products, services and processes that harness renewable materials and energy sources, dramatically reduce the use of natural resources, and cut or eliminate emissions and wastes." So the key point is that 'clean technology' is not an industry sector as such, it's a descriptor for a bundle of green goods and services that span across all industries.
Cleantech can be transformational in the sense that it can completely replace existing carbon or resource-intensive technologies, such as wind turbines replacing coal-fired generation, and it can also include the smaller components that fit into larger systems to deliver a lower overall environmental footprint, such as low-energy LED lighting in a building.
This definition helps when we consider the commercial opportunities and risks that cleantech represents; these are largely dictated by the strength of the industry sector to which the cleantech relates. In this way a 'cleantech bubble' is not possible, but there are certainly sector-specific examples where cleantech investment has become overheated, such as solar energy in Europe and first-generation biofuels in the US.
When we think about cleantech as an economic growth tool to deliver both efficiencies within an economy and revenue from trade export opportunities, (and yes it absolutely makes sense to do so), it is important to consider three key factors; firstly what commercial capabilities currently exist within the economy, secondly to characterise specific environmental vulnerabilities or challenges, and finally to be realistic about where and how it's possible to compete internationally.
Cleantech is a global race. Denmark, South Korea, USA and many other nations are already setting the pace by stimulating sector-specific cleantech. Dire electricity grid problems in the U.S. provided an opportunity for skilled Silicone Valley tech entrepreneurs to innovate smart grid solutions. Israel's highly limited water resource provided a great reason to accumulate efficient irrigation technologies. Denmark's response to oil shocks was to introduce renewable generation. These nations now earn billions in export revenue from exporting sector-specific cleantech capabilities.
So what's the big cleantech opportunity for NZ? The business group Pure Advantage recently released an independent review, Green Growth: Opportunities for New Zealand, where one of the key metrics the report highlighted was that 80% of NZ's comparative trade advantage in some way relates to agriculture. No surprises there, but the more challenging question is this - if the future of farming is characterised by owning and adopting water-efficient, energy efficient, low-carbon and low-resource-intensity technologies and practices, what is New Zealand developing, commercialising and retaining the IP ownership of now, that will ensure that we are the leading 'sustainable farmers of the future?'
Further analysis tells us that technologies which improve productivity while delivering benign or net positive environmental outputs are where we need to go, gumboots 'n' all. Examples include natural fertilisers, smart irrigation, wastewater management, methanogen reduction, seed systems, biological practices, food origin labeling... the list goes on. This is just one sector we have an advantage in, think also about our forestry, fisheries, design engineering and geothermal industries.
From an investment perspective New Zealand's emerging cleantech market is plagued with good intentions, but notable pockets of real talent and opportunity exist. To better understand the commercial demographic and showcase New Zealand's talent to interested international investors, I launched the New Zealand Cleantech & Environment Network (nzcen.com) in conjunction with New Zealand Trade & Enterprise.
What the back-end data tells us is that New Zealand cleantech companies are very good at delivering niche products. For innovative companies the investment opportunities are very real. For example, global juggernaut General Electric launched its multi-billion dollar cleantech investment fund, Ecomagination, in 2008. The resulting investments now deliver more than US$20 billion in revenue.
In February this year I sat on GE's Ecomagination investment review panel and was thrilled to see that of the 35 shortlisted entries, seven New Zealand companies were interviewed, two of which were awarded AUD$100,000 innovation grants (congratulations again to Outpost Central and Hydroxsys). Investment discussions with more New Zealand companies are underway in conjunction with GE's venture capital partners.
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Duncan Stewart is an environmental scientist and entrepreneurial investor with a passion for growth businesses and innovative technology. He holds a growing portfolio of cleantech companies under advisory brand The Greenhouse, is the CEO of green growth business group Pure Advantage, and a board member of the New Zealand electric vehicle association APEV.