This article was published in Environmental Management News on 20 January 2010
This should be the time when the cleantech stocks start to significantly outperform all other stocks. It should be the time that those that have been investing in the sector finally get to say ‘I told you so!’ So why are the cleantech stocks in Australia faring so badly?
There are certainly some issues that have had clear impacts on those companies that need a strong, or indeed any, carbon price. The Australian Emissions Trading Scheme, or whatever it may be called in the end, is delayed and highly uncertain and the outcome of Copenhagen was even more underwhelming than the predictions. If you are a company getting ready to make money from a mandatory carbon market in Australia, there is still a little while to wait.
But there appears to be plenty of good news: the Renewable Energy Target is driving wind farms, although it is maybe driving solar hot water systems harder at this stage; the photovoltaic industry continues to thrive and is looking at further reductions to their supply costs in 2010 according to an upcoming report from the Clean Energy Council; and supply chain pressures are starting to build on the larger industrial companies with the publishing of the first NGERS figures and with analysis from companies such as Reputex that have analysed the supply chain emissions for the ASX200 companies. Even environmental standards in water, air quality, engine performance and recycling all seem to be creeping up, which should be driving the adoption of cleantech products and services.
There is undoubtedly the feel that the cleantech industry is growing quickly and that many are starting to generate good revenues with healthy margins. The public measure of cleantech, the ACT Australian Cleantech Index, is however having an appalling run. So where is this disconnect?
The ACT Australian Cleantech Index tracks 76 listed companies that generate the majority of their revenue (or future revenue if they have none) from defined cleantech activities. At the end of December 2009, the combined market capitalisation of all the constituents was A$10.5 billion, falling from its peak of $16.3 billion in July 2007. In FY07, the Index increased by 43%, more than the Small Ordinaries, and, in FY08, it fell by 16%, less than the ASX200. In FY09 however it fell by 39%, more than both of these benchmarks. The story has got worse over the first half of FY10 with the recovery experienced by most of the market bypassing most of the larger cleantech stocks.
Over the first half of the 2010 fiscal year, the ACT Australian CleanTech Index recorded a loss of 4.9%, compared with the 24.3% gain by the S&P ASX200 and the 26.7% gain by the S&P ASX Small Ordinaries.
The best performer of 1HQ FY10 Eco Quest Ltd, whose share price gained 189%. Other good performers, all of which had gains in excess of 50%, were Solco, Enviromission, Advanced Energy Systems, WHL Energy, Mission NewEnergy, Dolomatrix, Stericorp, Pro-Pac Packaging, Traffic Technologies, Gale Pacific, CBD Energy, Revetec, Greenearth Energy, Carbon Conscious, Pacific Enviromin and BioProspect.
Those that performed poorly with losses of greater than 50% over the first half of the year were Hydrotech International, Skydome Holdings, Pacific Environment and Jackgreen.
A closer analysis of the index performance shows that, whilst many of the smaller stocks have recovered quicker than the general market, the larger cleantech stocks such as Sims Metal, Transpacific Industries and Infigen Energy have not recovered as quickly. This has been the primary cause of the Australian Cleantech Index being left behind.
The sub-indices provide some further clues to this performance. The stand-out sub-sectors for the six months to December 2009 were the catch-all ACT Efficiency/Buildings/Biomaterials/Energy Storage/Fuel Cells Index, driven by strong performance by a number of different small stocks, and the ACT Biofuel Index, driven by the recovery of Mission NewEnergy.
The worst performer was the ACT Solar Index, driven by the 45% decline in the Quantum Energy share price over the period. Another poor performer was the ACT Waste Index, which contains some of the largest stocks (Sims Metal Management and Transpacific Industries).
So what does this all mean? Why isn’t the Index chart looking like the predicted ‘hockey stick’?
I think the recent results tell two stories. Firstly, and probably more reliably, it shows that the listed cleantech sector is still relatively small and immature. That the few larger companies have underperformed, generally for very specific reasons, has significantly impacted the whole index. If there were more, larger companies, then these isolated underperformers would not have such an impact.
Secondly, and maybe hopefully, the recent underperformance of the sector indicates that there is currently good value to be found in some of the stocks. 2010 is likely to see the listing of a number new cleantech companies, including at least one from China, as well as the recovery of some of those that have been slow to come back, so maybe this will be the year of the ‘hockey stick’.
The fundamental drivers of cleantech are unchanged, despite the delay in some of the carbon related schemes. It therefore feels just a matter of time until the performance of the listed cleantech sector reflects this promise.
I look forward to writing about how ‘I told you so’ in this column in January 2011.
Friday, January 22, 2010
Sydney Cleantech Network drinks, 11 Februay
You are invited to attend the Sydney Cleantech Network on Thursday 11th February 2010, 5:30 until 7:00pm
at
the Offices of Macquarie Bank, Mezzanine, No.1 Martin Place, Sydney
Including:
- a presentation from Ben Keneally, Head of Marketing & Strategy at Better Place on The future of the electrification of transportation in Australia and its impact on energy storage and distribution.
- 2 minute pitches from growth companies looking for investors, partners or just wanting to announce company developments. Please register in advance if you want to pitch.
There is no charge for attendance but bookings are essential. Please RSVP by COB on Monday 8 February to scn@auscleantech.com.au
Who should attend?
The cleantech sector comprises industries with both environmental and economic benefits. Sub-sectors include renewable energy (wind, solar, wave, tidal, hydro and geothermal), water, waste and recycling, energy efficiency, green buildings, biomaterials, energy storage and fuel cells, environmental service providers and carbon traders. The Sydney Cleantech Network aims to provide education, forge links and facilitate collaboration between the cleantech sector, the finance industry, academia and government services.
Interested in Pitching?
There will be a limited number companies invited to pitch at each event. If you are interested in pitching, please email pitching@auscleantech.com.au for more information.
Adelaide Cleantech Network, Networking Drinks, 4th February
You are invited to attend the Adelaide Cleantech Network drinks on
Thursday 4 February 2010, 5:30 until 7:00pm
at
the offices of Innovate SA, Level 14, 19 Grenfell St, Adelaide
Including:
- a short presentation on Business Innovation Through Sustainability by Saindhav Tamhane, Innovate SA.
- 2 minute pitches from growth companies looking for investors, partners or just wanting to announce company developments. Please register in advance if you intend to pitch.
There is no charge for attendance but bookings are required. Please RSVP by COB on Tuesday 2 February to rsvp@auscleantech.com.au
Companies that are investor ready and actively seeking investment are invited to undertake a two minute pitch. Please email pitching@auscleantech.com.au for more information
Who should attend?
The cleantech sector comprises industries with both environmental and economic benefits. Sub-sectors include renewable energy (wind, solar, wave, tidal, hydro and geothermal), water, waste and recycling, energy efficiency, green buildings, biomaterials, energy storage and fuel cells, environmental service providers and carbon traders. The Adelaide Cleantech Network aims to provide education, forge links and facilitate collaboration between the cleantech sector, the finance industry, academia and government services.
Sunday, November 22, 2009
Water, water everywhere....
This article was first published in the international Cleantech Investor magazine. Email info@auscleantech if you would like a full version of the article.
Australia is blessed with many natural resources to assist the growth of its cleantech sector. Some of the wind resources are exceptional, the wave resources are world leading and the hot rocks are driving big investments into the geothermal sector. Most of all, Australia is synonymous with solar radiation and much of the country has a ridiculous amount of solar resource to play with. There are of course issues with respect to NIMBY complaints for sites near communities and the fact that the best resources are never closest to those population centres – luckily the desert has few back yards to worry about.
Australia has another natural competitive advantage in the cleantech space: one that is not so apparent. The climate is highly variable with respect to its rainfall and as such there can be long periods of drought followed by long ‘wets’. Much of South-Eastern Australia is still suffering from the effects of a drought that started in the first years of decade. This has led to severe water restrictions in many areas, with the banning of sprinklers and specified watering days. This variability is likely to be exacerbated by climate change, but its existence is not new. The natural competitive advantage of having little water has therefore made the Australian water industry innovate to survive.
......
Australia is blessed with many natural resources to assist the growth of its cleantech sector. Some of the wind resources are exceptional, the wave resources are world leading and the hot rocks are driving big investments into the geothermal sector. Most of all, Australia is synonymous with solar radiation and much of the country has a ridiculous amount of solar resource to play with. There are of course issues with respect to NIMBY complaints for sites near communities and the fact that the best resources are never closest to those population centres – luckily the desert has few back yards to worry about.
Australia has another natural competitive advantage in the cleantech space: one that is not so apparent. The climate is highly variable with respect to its rainfall and as such there can be long periods of drought followed by long ‘wets’. Much of South-Eastern Australia is still suffering from the effects of a drought that started in the first years of decade. This has led to severe water restrictions in many areas, with the banning of sprinklers and specified watering days. This variability is likely to be exacerbated by climate change, but its existence is not new. The natural competitive advantage of having little water has therefore made the Australian water industry innovate to survive.
......
Sydney Cleantech Network Event - 19 November
Clayton Utz hosted the Sydney Cleantech Network event on 19 November with over 140 attendees.
The evening featured a presentation from Matthew Warren, CEO of the Clean Energy Council on ‘Whether tax breaks help cleantech companies across the valley of death?’.
This was followed by two minute pitches from the following growth companies:
- BluGlass - Giles Bourne - www.bluglass.com.au (LEDs and Solar)
- NEP Solar - Johan Dreyer - www.nep-solar.com (Solar)
- Elemental Energy Technologies - Michael Urch - www.eettidal.com (Tidal)
- BTOLA - Bevan Dooley - www.btola.com (Biomass)
- Fuel Concepts - Andre Botelho - www.fuelconcepts.com - as I mentioned on night Andre was unfortunately detained and will present at the February event. (Vehicles)
Other links mentioned during the evening were:
- Azo Cleantech - www.azocleantech.com - onlisting of cleantech products and services.
- CleverGreen Conference, Adelaide, 15-16 February - www.southaustralia.biz/Innovation-in-SA /Clever-Green-Conference-2010.aspx
- Cleantech Investor, international cleantech publication - www.cleantechinvestor.com
The next event will be held on 11 February and will be hosted by Macquarie Bank. If you wish to be added to the distribution list for this and future events please email scn@auscleantech.com.au.
Friday, November 6, 2009
Sydney Cleantech Network Event, 19th November - SPEAKER & PICHTING COMPANY DETAILS
You are invited to attend the Sydney Cleantech Network on Thursday 19 November 2009 from 5:30 until 7:00pm
at the offices of Clayton Utz, Level 34, No.1 O'Connell Street
Including:
- a presentation from Matthew Warren, CEO of the Clean Energy Council on ‘Whether tax breaks help cleantech companies across the valley of death?’.
- 2 minute pitches from the following growth companies:
BluGlass - BluGlass (ASX: BLG) is developing innovative semiconductor technology to reduce the cost of producing next generation high efficiency LED and solar cell devices.
BTOLA - A global opportunity to halve the cost of micro-generation, with BTOLA’s patent pending turbines that run on biomass, waste and more
Fuel Concepts - Fuel Concepts is an Australia based company that is the worldwide licensee and distributor for a patented technology (founded by Fuel Concepts of America) that substantially reduces fuel consumption and carbon emissions for any gas-electric vehicles.
Elemental Energy Technologies - The SeaUrchin is an elegantly simple and efficient, environmentally-friendly, second generation marine vortex turbine generator offering major cost, performance and deployment advantages over the first generation marine technologies occupying the market place today.
NEP Solar - NEP Solar is a supplier of concentrating solar thermal collectors; its first product the PolyTrough is a parabolic trough collector aimed at the industrial heat market (up to 250°C) focussing on lowest cost per kWh delivered over the life cycle .
There is no charge for attendance but bookings are essential and you will not be able to attend without having pre-registered.
Please RSVP by COB Tuesday 17 November to scn@auscleantech.com.au
at the offices of Clayton Utz, Level 34, No.1 O'Connell Street
Including:
- a presentation from Matthew Warren, CEO of the Clean Energy Council on ‘Whether tax breaks help cleantech companies across the valley of death?’.
- 2 minute pitches from the following growth companies:
BluGlass - BluGlass (ASX: BLG) is developing innovative semiconductor technology to reduce the cost of producing next generation high efficiency LED and solar cell devices.
BTOLA - A global opportunity to halve the cost of micro-generation, with BTOLA’s patent pending turbines that run on biomass, waste and more
Fuel Concepts - Fuel Concepts is an Australia based company that is the worldwide licensee and distributor for a patented technology (founded by Fuel Concepts of America) that substantially reduces fuel consumption and carbon emissions for any gas-electric vehicles.
Elemental Energy Technologies - The SeaUrchin is an elegantly simple and efficient, environmentally-friendly, second generation marine vortex turbine generator offering major cost, performance and deployment advantages over the first generation marine technologies occupying the market place today.
NEP Solar - NEP Solar is a supplier of concentrating solar thermal collectors; its first product the PolyTrough is a parabolic trough collector aimed at the industrial heat market (up to 250°C) focussing on lowest cost per kWh delivered over the life cycle .
There is no charge for attendance but bookings are essential and you will not be able to attend without having pre-registered.
Please RSVP by COB Tuesday 17 November to scn@auscleantech.com.au
Green Bubbles?
This article was originally published in Ethical Investor
For those of you who always see the glass half-empty, there is much to worry about in ‘green’ investments at the moment. If you look a bit deeper however, the fundamentals of cleantech investing are actually becoming even stronger.
So, first for the bad news! The CPRS is still uncertain and appears to be getting weaker by the day. The geothermal industry is progressing slowly but is still suffering the aftershocks of Geodynamics well blow-out. The solar thermal industry was perplexed by the outlined criteria for the Solar Flagships Program, which is currently being rebuilt by the Boston Consulting Group. Furthermore, many see the credibility of solar thermal to be damaged by the collapse of Solar Systems after spending a huge $150m in development capital. The Biofuels industry collapsed in 2006 and, as indicated by the 43% loss in ACT Biofuels Index in the 12 months to 31 August, continues to decline. The plug-in electric vehicles being developed the world over will face little challenge from The Green Car Fund’s support of Holden’s four-cylinder ‘innovation’ and the hybrid Camry.
Wind farms could be seen as the only hope in the energy sub-sectors, but, with the honourable exception of Infigen Energy, little of the consequent investor benefits are held in dedicated listed vehicles.
Institutional investors in Australia, despite the great work of publications such as this, are largely unaware and uneducated on the potential and the practical risk profiles of cleantech investments. This has meant that will not provide funds and mandates to the venture industry to enable the commercialisation and growth of many of the emerging sectors. Some of the venture capital fund managers would love to be provided with more ambitious mandates, but the institutional investors are not yet ready to take that step.
The good news is that all of the above has meant that there has certainly been little irrational exuberance in the Australian cleantech market with the corollary that there was no Australian bubble to burst. The only sub-sector that showed signs overheating here was in the last group of listing geothermal companies.
But there is more good news other than there being no bubble to burst. The growth of cleantech investments is underpinned by four key and strong macro-economic drivers. Firstly, there are many tangible assets being constructed to provide core services such as power, water, waste and recycling. Secondly, the demand for these core services and for a reduced impacts on the natural environment is growing due to both population growth and increasing wealth. Thirdly, as the world continues to use and deplete its natural resources there is increasing pressure on communities to adopt cleantech solutions to increase efficiency and decrease waste. Finally there is the recognition of climate change and consequent regulatory regimes.
There is also increasing activity on a local and global scale that will assist in the growth of Australian cleantech companies and secure returns for their investors. Azo Cleantech, run out of Sydney, is fast becoming one of the world’s leading reference tools for cleantech companies and provides an opportunity to take Australian products to the world. The Adelaide and Sydney Cleantech Network’s offer opportunities for companies to pitch and for all involved in the industry to network and collaborate. My company is working successfully with Australian listed cleantech companies and successfully connecting them with institutional investors in Germany to increase the diversity and strength of their share registries.
Regardless of political decisions, the future for cleantech, both here and abroad, is bright. It has multiple global drivers and government backing which makes it stand out from previous growth industries. As it grows, mainstream corporate Australia will buy in because of supply chain pressures from their customers and also from increased environmental performance reporting by groups such as Reputex.
The glass is definitely half full and the opportunities for good returns from investing in cleantech are plentiful.
For those of you who always see the glass half-empty, there is much to worry about in ‘green’ investments at the moment. If you look a bit deeper however, the fundamentals of cleantech investing are actually becoming even stronger.
So, first for the bad news! The CPRS is still uncertain and appears to be getting weaker by the day. The geothermal industry is progressing slowly but is still suffering the aftershocks of Geodynamics well blow-out. The solar thermal industry was perplexed by the outlined criteria for the Solar Flagships Program, which is currently being rebuilt by the Boston Consulting Group. Furthermore, many see the credibility of solar thermal to be damaged by the collapse of Solar Systems after spending a huge $150m in development capital. The Biofuels industry collapsed in 2006 and, as indicated by the 43% loss in ACT Biofuels Index in the 12 months to 31 August, continues to decline. The plug-in electric vehicles being developed the world over will face little challenge from The Green Car Fund’s support of Holden’s four-cylinder ‘innovation’ and the hybrid Camry.
Wind farms could be seen as the only hope in the energy sub-sectors, but, with the honourable exception of Infigen Energy, little of the consequent investor benefits are held in dedicated listed vehicles.
Institutional investors in Australia, despite the great work of publications such as this, are largely unaware and uneducated on the potential and the practical risk profiles of cleantech investments. This has meant that will not provide funds and mandates to the venture industry to enable the commercialisation and growth of many of the emerging sectors. Some of the venture capital fund managers would love to be provided with more ambitious mandates, but the institutional investors are not yet ready to take that step.
The good news is that all of the above has meant that there has certainly been little irrational exuberance in the Australian cleantech market with the corollary that there was no Australian bubble to burst. The only sub-sector that showed signs overheating here was in the last group of listing geothermal companies.
But there is more good news other than there being no bubble to burst. The growth of cleantech investments is underpinned by four key and strong macro-economic drivers. Firstly, there are many tangible assets being constructed to provide core services such as power, water, waste and recycling. Secondly, the demand for these core services and for a reduced impacts on the natural environment is growing due to both population growth and increasing wealth. Thirdly, as the world continues to use and deplete its natural resources there is increasing pressure on communities to adopt cleantech solutions to increase efficiency and decrease waste. Finally there is the recognition of climate change and consequent regulatory regimes.
There is also increasing activity on a local and global scale that will assist in the growth of Australian cleantech companies and secure returns for their investors. Azo Cleantech, run out of Sydney, is fast becoming one of the world’s leading reference tools for cleantech companies and provides an opportunity to take Australian products to the world. The Adelaide and Sydney Cleantech Network’s offer opportunities for companies to pitch and for all involved in the industry to network and collaborate. My company is working successfully with Australian listed cleantech companies and successfully connecting them with institutional investors in Germany to increase the diversity and strength of their share registries.
Regardless of political decisions, the future for cleantech, both here and abroad, is bright. It has multiple global drivers and government backing which makes it stand out from previous growth industries. As it grows, mainstream corporate Australia will buy in because of supply chain pressures from their customers and also from increased environmental performance reporting by groups such as Reputex.
The glass is definitely half full and the opportunities for good returns from investing in cleantech are plentiful.
Australian politics, wind and batteries….
This article was originally published in the international Cleantech Investor.
The media coverage of the latest round of climate related legislation in Australia has been hysterical to say the least. Emissions intensive industries will emigrate to carbon-friendly countries, coal fired power stations have already stopped long term maintenance causing power cuts in the height of summer, exports will be slashed, jobs will be lost and the country will generally go into a steep and unavoidable economic decline.
The voice of the cleantech industry is not as loud, but is not dissimilar – potential green jobs will be lost, the country will be left behind etc etc. I’m sure there is nothing unique about the Australian debate.
The legislation that has been passed establishes a Renewable Energy Target (RET) of 20% of stationary power to be generated from renewable sources by 2020. This will increase the annual generation from its current 9,500GWh to 45,000GWh. The legislation is enforced through energy retailers having to submit sufficient Renewable Energy Credits (RECs) as compared to their total energy sold. As the RECs can be banked in advance, it is believed that most of the target will be taken up onshore wind farms constructed over the next five years or so. This could lead to over 10,000MW of installed wind capacity being constructed at a cost of over A$20 billion. Forecast forward REC prices vary, but may end up at around A$40 with a REC being roughly equivalent to 1 tonne-CO2e.
Another piece of legislation that was defeated in the Upper House and will be re-introduced into the parliament in November is the Australian Emissions Trading Scheme, which the Government has called the Carbon Pollution Reduction Scheme (CPRS). This was voted down primarily by conservative politicians worried about impacts on both rural communities and emissions intensive industries. There was also a resurgence of climate scepticism and a view that there is no point making any decisions until after Copenhagen. The scheme, in its current form, is a heavily watered down version of the first draft. It proposes a fixed carbon tax for its first year of operation starting in July 2011 and then a tradeable carbon commodity thereafter. The targets are modest at only a 5% reduction on 2000 levels by 2020 and the carbon price is not expected to exceed A$25/tonne-CO2e during this time. There are aspirational targets that are bigger but the conditions are sufficiently onerous to preclude their consideration. There are carve outs for petrol and for most of the emissions intensive and export industries, so, even if passed, the CPRS will not appear to drive significant behaviour change. The draft allows for unlimited import of credits from CDM projects but no export of credits from Australian projects. This has met with disappointment from investors looking towards developing local projects and seeking to trade credits on other markets with tighter targets and the potential for higher carbon prices.
There has been significant debate here on the impacts of this legislation on the cleantech industry in general and which subsectors will be most impacted. Over the longer term, the technology winners will be those technologies that provide required solutions at the lowest costs. In the short term however, there will be a huge impacts on individuals, companies and investors.
A quick look at which of the sub-sectors of the Australian Cleantech Index have performed well in the last six months demonstrates the correlation between policy and investment returns. The ACT Solar Index has increase by 119% in the 6 months since 31 January, driven entirely by the increased demand for rooftop solar photovoltaic panels resulting from government rebates for small scale pV installations. For instance, investors with $1,000 invested in Quantum Energy on 31 January 2009 could have cashed in $3,750 if they had sold out six months later.
Over the same period, the ACT Wind Index increased by 33.1%, roughly in line with the overall index. The RET legislation had not yet been passed and investors were clearly not yet confident enough in its passage to inflate the share price of the likely beneficiaries. There is a strong expectation that these enhanced returns will now materialise.
Big solar also appears to be set to make significant progress through a A$1.5 billion Government funding program to be rolled out from 2010. Winners from this may include companies such as Wizard Power, Acquasol and Solar Systems.
A valid question is whether the investment in wind will exhaust the investment appetite for cleantech and leave nothing for the other sub-sectors. Will sub-sectors such as water, waste, vehicle technologies, energy efficiency and energy storage simply stagnate in Australia whilst their cleantech cousins in clean energy boom?
Looking at the fundamental drivers of cleantech, the answer is clearly ‘no’. The other sub-sectors may not accelerate as fast in the short term and maybe the investment returns will not be so strong. However, the demand for increased resource efficiency, reduced waste and improved environmental performance will ensure that technologies across the Australian cleantech spectrum will succeed even in the short term.
Given the focus of this edition is on electric vehicles (EVs), it is worth providing an overview of the current activity within this sub-sector in Australia. Better Place has recently announced its first Australian project in the nation’s capital, Canberra, with financial support from Macquarie Bank.
There has however been little progress on the domestic development of electric vehicles, with talk more of trials of imported vehicles from the likes of Mitsubishi and Renault. To demonstrate the status of the Australian car industry, the local GM subsidiary, GM Holden, made a big announcement in late 2008 that, with significant and vocal Government support, it would start to manufacture a four cylinder car within a few years as a significant energy efficiency on its standard six cylinder model!
Battery technologies are however progressing well and some of these may find homes in EVs manufactured elsewhere. technologies such as Cap-XX’s supercapacitors, Cougar Energy’s and V-Fuel’s vanadium based batteries and ZBB’s and RedFlow Energy’s zinc-bromide batteries are all progressing well. There are also some exciting battery technologies coming out of research institutions such as the CSIRO, although many of these struggle to secure sufficient seed funding.
In summary, the Australian legislative agenda is progressing, although more slowly than many had hoped when the current centre-left government was elected in late 2007. The biggest winner from policy settings to date have been household solar and it seems that wind may well be the big winner over the next few years. Australia is a long way behind on EV developments although its battery technologies have significant potential, if they are able to attract sufficient early stage funding.
The media coverage of the latest round of climate related legislation in Australia has been hysterical to say the least. Emissions intensive industries will emigrate to carbon-friendly countries, coal fired power stations have already stopped long term maintenance causing power cuts in the height of summer, exports will be slashed, jobs will be lost and the country will generally go into a steep and unavoidable economic decline.
The voice of the cleantech industry is not as loud, but is not dissimilar – potential green jobs will be lost, the country will be left behind etc etc. I’m sure there is nothing unique about the Australian debate.
The legislation that has been passed establishes a Renewable Energy Target (RET) of 20% of stationary power to be generated from renewable sources by 2020. This will increase the annual generation from its current 9,500GWh to 45,000GWh. The legislation is enforced through energy retailers having to submit sufficient Renewable Energy Credits (RECs) as compared to their total energy sold. As the RECs can be banked in advance, it is believed that most of the target will be taken up onshore wind farms constructed over the next five years or so. This could lead to over 10,000MW of installed wind capacity being constructed at a cost of over A$20 billion. Forecast forward REC prices vary, but may end up at around A$40 with a REC being roughly equivalent to 1 tonne-CO2e.
Another piece of legislation that was defeated in the Upper House and will be re-introduced into the parliament in November is the Australian Emissions Trading Scheme, which the Government has called the Carbon Pollution Reduction Scheme (CPRS). This was voted down primarily by conservative politicians worried about impacts on both rural communities and emissions intensive industries. There was also a resurgence of climate scepticism and a view that there is no point making any decisions until after Copenhagen. The scheme, in its current form, is a heavily watered down version of the first draft. It proposes a fixed carbon tax for its first year of operation starting in July 2011 and then a tradeable carbon commodity thereafter. The targets are modest at only a 5% reduction on 2000 levels by 2020 and the carbon price is not expected to exceed A$25/tonne-CO2e during this time. There are aspirational targets that are bigger but the conditions are sufficiently onerous to preclude their consideration. There are carve outs for petrol and for most of the emissions intensive and export industries, so, even if passed, the CPRS will not appear to drive significant behaviour change. The draft allows for unlimited import of credits from CDM projects but no export of credits from Australian projects. This has met with disappointment from investors looking towards developing local projects and seeking to trade credits on other markets with tighter targets and the potential for higher carbon prices.
There has been significant debate here on the impacts of this legislation on the cleantech industry in general and which subsectors will be most impacted. Over the longer term, the technology winners will be those technologies that provide required solutions at the lowest costs. In the short term however, there will be a huge impacts on individuals, companies and investors.
A quick look at which of the sub-sectors of the Australian Cleantech Index have performed well in the last six months demonstrates the correlation between policy and investment returns. The ACT Solar Index has increase by 119% in the 6 months since 31 January, driven entirely by the increased demand for rooftop solar photovoltaic panels resulting from government rebates for small scale pV installations. For instance, investors with $1,000 invested in Quantum Energy on 31 January 2009 could have cashed in $3,750 if they had sold out six months later.
Over the same period, the ACT Wind Index increased by 33.1%, roughly in line with the overall index. The RET legislation had not yet been passed and investors were clearly not yet confident enough in its passage to inflate the share price of the likely beneficiaries. There is a strong expectation that these enhanced returns will now materialise.
Big solar also appears to be set to make significant progress through a A$1.5 billion Government funding program to be rolled out from 2010. Winners from this may include companies such as Wizard Power, Acquasol and Solar Systems.
A valid question is whether the investment in wind will exhaust the investment appetite for cleantech and leave nothing for the other sub-sectors. Will sub-sectors such as water, waste, vehicle technologies, energy efficiency and energy storage simply stagnate in Australia whilst their cleantech cousins in clean energy boom?
Looking at the fundamental drivers of cleantech, the answer is clearly ‘no’. The other sub-sectors may not accelerate as fast in the short term and maybe the investment returns will not be so strong. However, the demand for increased resource efficiency, reduced waste and improved environmental performance will ensure that technologies across the Australian cleantech spectrum will succeed even in the short term.
Given the focus of this edition is on electric vehicles (EVs), it is worth providing an overview of the current activity within this sub-sector in Australia. Better Place has recently announced its first Australian project in the nation’s capital, Canberra, with financial support from Macquarie Bank.
There has however been little progress on the domestic development of electric vehicles, with talk more of trials of imported vehicles from the likes of Mitsubishi and Renault. To demonstrate the status of the Australian car industry, the local GM subsidiary, GM Holden, made a big announcement in late 2008 that, with significant and vocal Government support, it would start to manufacture a four cylinder car within a few years as a significant energy efficiency on its standard six cylinder model!
Battery technologies are however progressing well and some of these may find homes in EVs manufactured elsewhere. technologies such as Cap-XX’s supercapacitors, Cougar Energy’s and V-Fuel’s vanadium based batteries and ZBB’s and RedFlow Energy’s zinc-bromide batteries are all progressing well. There are also some exciting battery technologies coming out of research institutions such as the CSIRO, although many of these struggle to secure sufficient seed funding.
In summary, the Australian legislative agenda is progressing, although more slowly than many had hoped when the current centre-left government was elected in late 2007. The biggest winner from policy settings to date have been household solar and it seems that wind may well be the big winner over the next few years. Australia is a long way behind on EV developments although its battery technologies have significant potential, if they are able to attract sufficient early stage funding.
Tuesday, October 27, 2009
Sydney Cleantech Network Event on Thursday 19th November 2009
You are invited to attend the next Sydney Cleantech Network event on Thursday 19th November 2009,
5:30 until 7:00pm
at the offices of Clayton Utz at
Level 34, No.1 O'Connell Street, Sydney
Including:
- a presentation from a leading cleantech industry participant – details to be advised before the event.
- 2 minute pitches from growth companies looking for investors, partners or just wanting to announce company developments. Please register in advance if you want to pitch.
There is no charge for attendance but bookings are essential. Please RSVP by COB on Tuesday 17 November to scn@auscleantech.com.au
Who should attend?
The cleantech sector comprises industries with both environmental and economic benefits. Sub-sectors include renewable energy (wind, solar, wave, tidal, hydro and geothermal), water, waste and recycling, energy efficiency, green buildings, biomaterials, energy storage and fuel cells, environmental service providers and carbon traders. The Sydney Cleantech Network aims to provide education, forge links and facilitate collaboration between the cleantech sector, the finance industry, academia and government services.
Interested in Pitching?
There will be a limited number companies invited to pitch at each event. If you are interested in pitching, please email pitching@auscleantech.com.au for more information.
Future Events – diary note
- 11 February hosted by Macquarie
- 25 March hosted by New Energy Finance
- May 2010 hosted by the ASX
- July 2010 hosted by Griffith Hack
Saturday, October 10, 2009
150 People Attend the Sydney Cleantech Network Launch
The Sydney Cleantech Network launched with a packed room of 150 people in attendance. The event was hosted by KPMG at their offices on Sussex Street.
The attendees listened to Roger Price from Innovation Capital talk about their investee company Windlab Systems and how it has changed from a technology provider into an international wind farm developer. Importantly Roger also explained how VCs invest in people and businesses and that technology is just an enabling factor.
Five companies then did 'two minute pitches' explaining their products and services and detailing their upcoming funding requirements. The companies were:
- CMA Corporporation - A leading integrated Australian-based recycling group that provides products and services to customers across three continents.
- Acoustica - Commercialising the world’s best "Green" Noise Barrier - Quietwave® Captive Membrane Technology.
- T3Energy - Developer of both a solar space heating and super-insulated building technologies will reduce energy consumption in homes by up to 80% while offering a competitive and compelling alternative to conventional homes.
- Azure Energy - The Azure Energy ALI system produces seven forms of energy from Solar Energy, in all weather conditions
- Universal Power Storage - Universal Power Storage (UPS) has the only invention in the Massive Electrical Storage (MES) space that can potentially deliver the largest scale electrical storage system in the world: rectifying the largest market failure in the electricity market – base load storage.
Most importantly the attendees networked with people from cleantech companies, the finance sector, academia, professional services and the government.
The next event will be hosted by Clayton Utz on 19 November 2009 commencing at 5:30. Attendess must have registered to attend. Future functions will be hosted by Macquarie Bank, New Energy Finance, Griffith Hack and the ASX.
The Sydney Cleantech Network will hold events every couple of months. If you would like to be informed of future events or are interested in pitching please email scn@auscleantech.com.au.
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