The clean tech value proposition

By Nancy Turner | September 22, 2010 | Last updated on September 22, 2010
3 min read

Going green is a concept for markets in the upswing of the economic cycle. Once we hit financial dire straits though, clean tech – like wind or solar power – goes the way of the dinosaur, or at least that’s a common perception.

An informal poll conducted by following the ‘Value Creation in Cleantech’ session at the first annual Carbon Economy Summit in Toronto suggests many companies are keeping the clean tech momentum alive.

The clean tech market “is not a cottage industry whose time may arrive sometime in the future,” says Cleantech Group’s Executive Chairman and the summit’s keynote speaker Nicholas Parker. “The future has arrived.”

This future represents a significant opportunity for Canadians. For starters, Parker says the world’s population is approaching 9 billion people – most of whom are expected to have almost double the lifespan of those living even 150 years ago. This population has also experienced – and will continue to experience – mass urbanization. Currently, there are 18 megacities but by 2050 this number is expected to balloon to over 400.

Marry this with ongoing volatile resource prices (especially metals, food and oil) and an increasingly rapid rate of change in the world, fueled by IT and communication, and you’re looking at a $40 trillion global clean infrastructure opportunity over the next two decades.

“Green and clean,” Parker asserts, “is a major engine of sustainable prosperity.”

But it’s not just the clean-tech-solutions companies which will benefit from the greening of society. Currently, Parker suggests, the typical consumer-facing company’s profit margin is about 10%, but “the impact of a 3.5% annual increase in the price of resource-dependent inputs could eliminate all profit within a decade.”

Clearly, there’s a case for reducing, reusing and recycling. And despite a rather risk-averse Bay Street and an underrepresented Canadian venture capital industry, there are signs that investors are recognizing this and investing in clean tech when the opportunities arise.

Case in point: the TSX and TSX Venture exchanges had a record year in 2009, with over $19 billion in total market capitalization represented in their recently instituted S&P/TSX Clean Technology Index – $1.5 billion of which was raised last year alone. And in the first seven months of 2010, a further $832 million, representing 62 financings, was recorded. This brings the total of clean technology and renewable power companies on the two exchanges to 125.

Not bad for an emerging sector, especially coming out of one of the worst financial crises in recorded history.

So where does Parker think the future opportunities lie? In “knowledge-based technology products and services that provide superior performance at lower costs, greatly reduce or eliminate negative ecological impact, and improve the productive and responsible use of natural resources.”

In Canada, the competitive advantage could include cold climate renewable energy; clean fossil fuels; and smart mobility; including high-speed trains and electric cars.

We haven’t even begun to realize the full potential yet though. To do so, we’ll have to come up with policies that better support energy-efficient industries through the development and deployment of new technology, and by cutting subsidies to the fossil fuel sectors.

This would make for a more level playing field, in terms of economic feasibility. Moreover, many argue, it’s just the right thing to do. As Parker asks…Why wouldn’t we want to do this? Why wouldn’t we want to make the world a better place?

Nancy Turner