Key Business Insights:
The shift to a low-emission, low-carbon world is introducing high-value business opportunities
There's something awfully sexy about the idea of jet fuel derived from Blenheim sewerage. Or a city powered by a generator submerged in the Kaipara Harbour. Or extracting plastic from the prunnings of a Rotorua pine forest.
Clean technology is very sexy. But is it a reality? Well, yes—all the above are real projects by real New Zealand companies, reflecting a worldwide explosion in clean tech investment.
"Just as thousands were drawn to California and the Klondike in the late 1800s, the green energy gold rush is attracting legions of modern day prospectors in all parts of the globe," says Achim Steiner of the United Nations Environment Programme.
"New investment in clean energy surpassed US$148 billion in 2007"
All parts of the globe that is, except New Zealand, where investment in clean tech is comparatively pathetic compared to the sums sucked into property, farming or traditional infrastructure. Indeed, it's a measure of how insignificant that is that no one, neither government nor private enterprise, has bothered to count it.
Several initiatives signal a change.
Last year, Pure Power, a fast growing, Asia–Pacific clean energy company, made two strategic investments in New Zealand. It took a 19.9 percent stake for $3 million in Aquaflow Bionic Corporation, the Blenheim-based biofuel company. It also paid $6 million for 100 percent of BioJoule, the wood-waste project headed by Genesis R&D's Jim Watson (see 'Big Jim' in this issue for a detailed profile). Pure Power's plays are the first real investments in New Zealand by an overseas clean tech specialist. David Milroy, the founder of Pure Power, says there's every reason to expect New Zealand to produce world class clean tech companies—and attract foreign investment. For one thing, the demand for alternative energy technology is growing faster than it can be supplied. "The demand for energy is rising like a ramp … every potential idea needs to be explored." He also was impressed with the engineering and ingenuity downunder. Jim Watson and the BioJoule team now form a core part of his research arm.
Locally, no such specialist investment firms exist, but an encouraging move was by Cranleigh Merchant Bank, which launched the first dedicated clean tech fund, CE3, hoping to raise $250 million across New Zealand and Australia.
For example, nitrogen inhibitors have already been proven to lift productivity and reduce fertiliser needs. Only five percent of farmers currently use the technology because it's expensive. An ETS would allow farmers to enjoy three new sources of income: increased productivity, banking carbon credits and avoiding carbon costs that are inevitable under a Kyoto regime. The report estimates the upside on such inhibitors could increase dairy farm incomes by $714 million a year and provide 1,728 new direct jobs with an annual wage value of $98.5 million. This will also cut dairy farmers' emissions liability by $98 million a year.
"The NZBCSD report claims that $12.3 billion new investment and revenues and 9,600 jobs will result from the ETS"
A failure to implement the ETS could jeopardise the benefits. For example, "it could cost the primary industry up to 7,600 direct jobs: If the reputation and carbon-intensity competitiveness loss results in overseas consumer boycotts, a loss of five percent of primary industry sales would cost 7,600 direct jobs, and $433 million a year, and probably a similar number in indirect jobs. A one percent reputation and market share loss will cost 1,520 direct jobs and $250 million a year."
In summary, the council warns: "A failure to pass the bill—which could delay an ETS until 2012—will continue stalling billions of dollars of investment decisions till ETS detail is settled. This will deny the country new jobs and export income. Having a price on carbon has also been factored into billions of dollars worth of investment in wind, geothermal power, and other new forms of ocean, wood-waste-based and biofuel power generation."
The report is a landmark for one simple reason: until now, only the government has attempted to calculate the risks and return of a Kyoto-aligned economy. Now it seems the private sector is taking action. The council's chief executive, Peter Neilsen, says the report is timely especially as the costs of implementing an ETS gets harder as time goes on. "It's like slowing a car down from 100 kilometres per hour. Better if you can brake slowly, rather than leave it to the last second. We know we have to reduce our emissions. Better that we get started now," he says.
These are just three bellwethers of the change. To get a sense of where the investment in clean tech is heading, here's a snapshot from around the country. This list is by no means exhaustive. Nor is it supposed to be investment advice. But it gives you a flavour of what clean tech can offer savvy investors who want to not just save the world—but make a buck in the process.