Clean Technology and the SMEs
By Fritz-Earle S. Mc Lymont
February 6, 2013
Recognizing the importance of clean technologies to our daily lives and the environment that we must rely on for our survival, we at the National Minority Business Council, Inc. (NMBC) have taken a proactive position in promoting the values and opportunities in the Clean Technology industry.
As an organization representing the interests of Small Medium Enterprises (SME) we must continue to pay attention to developments in the emerging and important Cleantech sector. While there is no standard definition of “clean technology,” it has been described by Clean Edge, a clean technology research firm, as “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.” It notes that “Clean technologies are competitive with, if not superior to, their conventional counterparts.
The Africa Strictly Business Forum 2010 which NMBC sponsored along with the Network Journal and BNY Mellon brought together experts from the private sector, government and philanthropic institutions to look at the best policies, best practices and best opportunities in the Cleantech and Renewable Energy industries in the US and Africa for SMEs. Africa today represents one of the fastest growing regions globally and a potential destination for SME investment and trade including clean technology products and services. On the domestic front we continued our commitment with the launch of our Green Initiative in 2012 that will focus on education and advocacy. In March we will be hosting a conference on March 20th 2013 at Citi under the direction of Michael Robinson, member of the Board of Directors of NMBC and head of the NMBC’s Green Initiative; President of NY Staffing and author of recently published “One hundred pennies”.
The world must spend an additional $14 trillion on clean energy infrastructure, low-carbon transport and energy efficiency to meet the United Nations’ goal for capping the rise in average global temperatures, according to a World Economic Forum report released at the current session in Davos, Switzerland. “The extra spending amounts to about $700 billion per year through 2030, and would provide economic stimulus along with reducing the costs associated with global warming over the long haul”, said former Mexican President Felipe Calderon, chairman of the Davos-commissioned Green Growth Action Alliance, which compiled the study on behalf of the WEF.
Clean technology is emerging as a significant force in the global economy given its potential to create new jobs and revenue streams, advance alternative technologies that save money and improve productivity and quality of life across a wide range of industries. This improved productivity, with new or better ways of producing goods, has the potential to revitalize industries, boost profitability and simultaneously improve businesses’ environmental performance. The world’s emerging economies are demanding these superior technologies to sustain their rapid growth, producing a clean-tech market pegged at $4-trillion per year.
Research commissioned by the German government shows that the clean technology market is expected to more than double in size by the mid 2020s. This doubling of market size is expected to occur regardless of potential ongoing global financial turmoil. Specifically, the research found that the clean technology market has grown at an average of almost 12 per cent a year since 2007, and predicts it will continue to accelerate over the coming years. “The economic and financial crisis has not stopped the worldwide expansion of the green tech industry,” said the study’s author, Torsten Henzelmann, head of the Civil Economics, Energy & Infrastructure Competence Centre at Roland Berger Strategy Consultants. “On the contrary, the worldwide market volume has now overshot the €2tr mark, thus exceeding our forecasts from 2009.
President Obama has been a strong supporter of Cleantech, especially renewable energy and “green jobs,” and promised to make this a continued focus of his second term. He has promised to continue his “all of the above” approach to energy independence, which includes continuing to increase production from renewable sources like wind, solar and biofuels.
In November 2012, the U.S. government announced the establishment of the U.S.-Africa Clean Energy Development and Finance Center, an initiative by the U.S. Trade and Development Agency (USTDA), the Overseas Private Investment Corporation (OPIC) and the Export-Import Bank of the United States (Ex-Im Bank) to provide a coordinated approach to clean energy project development in sub-Saharan Africa. The Center will provide technical and financial support for clean energy project development by providing the U.S. private sector, as well as sub-Saharan African developers, with a centralized means to identify and access U.S. government support for their clean energy export and investment needs. This initiative comes at a time when SMEs and especially minority businesses are poised to make inroads into the fast growing African economies.
Federal programs strategically used have always served to facilitate the development of Minority and SMEs and we must continue to take advantage of them. Section (8) A of the Small Business Administration proved an effective tool for building minority businesses in manufacturing and services since the early 1970s. In today’s highly technological world we must apply ourselves in manners commensurate with the demands of an advanced technical and scientific community. A development strategy for Cleantech companies should consider tapping into federal resources that can contribute to their global competitiveness, especially in providing access to money, a major problem for SME’s in today’s economy. A starting point is the Department of Energy (DOE) Loan Programs Office (LPO) that administers three separate loan programs: (1) Section 1703 loan guarantees, (2) Section 1705 loan guarantees, and (3) Advanced Technology Vehicle Manufacturing (ATVM) loans. Here are descriptions of the three loan programs, as explained by DOE.
- Section 1703 of Title XVII of the Energy Policy Act of 2005 authorizes the U.S. Department of Energy to support innovative clean energy technologies that are typically unable to obtain conventional private financing due to high technology risks.
- Advanced Technology Vehicles Manufacturing (ATVM) loans support the development of advanced technology vehicles (ATV) and associated components in the United States. They also meet higher efficiency standards.
- The Section 1705 Loan Program authorizes loan guarantees for U.S.-based projects that commenced construction no later than September 30, 2011 and involve certain renewable energy systems, electric power transmission systems, and leading edge biofuels.
We should not be spooked by the Solyndra experience but learn from it. Stay clear of the “politrickal” debate. In our challenge to be a global leader in sustainable energy, we can learn from the mistakes of Solyndra and build viable SME’s where the nation’s creativity and innovation exists. In 2009, renewable energy company Solyndra received $535 million through the federally backed 1705 loan guarantee program of the Department of Energy (DOE). Two years later with the renewable energy industry in tariff and market battles over solar products, the firm filed for bankruptcy and had to lay off its 1,100 employees. Since 2009 howvever, DOE has guaranteed $34.7 billion, 46 percent of it through the 1705 loan program, 30 percent through the 1703 program, and 14 percent through the ATVM. Most of these firms are still competing in the fierce global renewable energy industry.
Other federal resources worth paying some attention to include the Small Business Innovation Research (SBIR) program, which is utilized across the DoD, DOE, U.S. Department of Agriculture (USDA), and other agencies, which recently updated its funding policy. Rather than companies applying for a Phase I award of up to $150,000 and then applying again upon successful completion for a Phase II award of up to $1,000,000, some SBIR programs have instituted a “fast-track” for companies to apply and be approved for both Phase I and Phase II funding, as long as milestones are met throughout the company’s research timeline. As initially fast-tracked companies find this funding path more beneficial than traditional SBIR programs, companies likely will be in a position to encourage the spread of the fast-track program throughout the rest of the DOE SBIR programs. One should view this program alongside the Small Business Technology Transfer (STTR) program which provides up to $850,000 in early-stage R&D funding directly to small companies working cooperatively with researchers at universities and other research institutions. Complementing these programs is the Cooperative Research and Development Agreement (CRADA) a legal agreement between a federal laboratory and one or more nonfederal parties such as private industry and academia. CRADAs offer both parties, you and Uncle Sam, the opportunity to leverage each other’s resources when conducting research and development (R&D) that is mutually beneficial.
The multilateral world for better or worse is paying attention to SMEs in this industry. The World Bank is supporting a study that is looking at “Opportunity and Role for SMEs in Clean Technology Industries” The study will examine the available evidence on the current and potential roles for small and medium enterprises (SMEs) — particularly startups and growth-oriented SMEs — in clean technology industries. In particular, it will examine the SME role in driving innovation, economic growth and job creation:
- Estimating the size of the market opportunity for clean technology industries in developing countries. This analysis will serve to highlight the importance of clean technology industries to developing countries including the potential transformative impact of clean technologies on societies in addition to the environmental and economic impacts.
- Investigating how SMEs operate within clean technology industries as compared with other technology industries (e.g. IT, biotech, consumer internet) drawing from evidence in developed and developing countries. Findings will compare the characteristics of SMEs across these industries (e.g. entrepreneurship rates, average firm size, failure rates, financing received, etc) and the impacts from SMEs in these industries (jobs, revenue growth, patenting rates, etc).
When all is said and done, money is still the big driver and will continue to be a critical factor whether you are the consumer in the Caribbean that must pay close to 40 cents per KW to have electricity or the investor looking for a reasonable return in investment. Clean energy investment slid 11 percent last year after governments in industrial nations slashed subsidies for technologies ranging from wind turbines to solar power and biomass. The $268.7 billion invested in the industry last year was down from a record $302.3 billion in 2011, the second highest reading ever and was five times the level in 2004, according to data compiled by Bloomberg New Energy Finance. Investment fell 32 percent in the U.S., 51 percent in Italy, 68 percent in Spain and 44 percent in India.
The leading sector in 2012 by amount invested was Biofuels & Biochemicals ($952 million), followed by Transportation ($927 million) and Energy Efficiency ($907 million). Energy Efficiency was the strongest sector measured by number of deals, with 140 funding rounds. The Solar sector, which saw large investment declines compared with previous years, still managed to come in second by this measure, with 79 deals. Solar projects reaped the most funding with $142.5 billion of the total, followed by wind at $78.3 billion.
Some wise one recently informed me that “collaboration is the new competition” and if ever this is relevant, it is with the opportunity to take advantage of the tremendous growth taking place in the global clean technology industry. Whether we partner with governments, large corporations, other SMEs or overseas partners, SMEs must now be prepared to garner and control the human, technological and natural resources at our disposal to satisfy the global demand for a cleaner, safer, more productive and more prosperous world in a reliable and sustainable manner.
Fritz-Earle Mc Lymont is Managing Director of NMBC Global (www.nmbc.org) and Managing Partner of NMBC Global a New York based international trade and development strategist firm with clients in the U.S. Africa and the Caribbean, and actively involved in the renewable energy sector. He can be contacted at Fmclymont1@nmbc.org.