Yet data from the Organisation for Economic Co-operation and Development (OECD) suggests Australia is only 20th out of 23 leading nations when it comes to company engagement in innovation. This finding supports the recent radical decision by the University of New South Wales (UNSW) to give away for free most of its research discoveries. The university wants the 80% never utilised findings to be available to promote innovation and build more useful links with business and other users. The aim is to make better use of knowledge industries in developed economies, such as Australia, as they undergo de-industrialisation, while China and India emerge as powerhouses.
Australia wants a share of new technologies and the clean industries of the future. But it was patronising to suggest the nation could make do selling technology to China and India, according to recognised global thinker on the environment and innovation, Michael Shellenberger, founder of theBreakthrough Institute in California, which has been influential with US president Barack Obama's policies. He told the Adelaide Festival of Ideas in October 2011 that China is spending US$70 billion a year on the clean tech sector. "It owns solar panel production, [it is] dominating wind power and is moving to nuclear. Transfer of technology is from them to us – China is eating our lunch on this," he said.
The Breakthrough Institute has been sceptical about the federal government's carbon tax as a strategy that's "politically unsaleable", and instead advocates large public investments to "make clean energy cheap" through innovation, not subsidies. This includes big help for new technologies that have already demonstrated proof of concept, yet require upwards of hundreds of millions of dollars to demonstrate that their technologies and manufacturing processes can be valid at a full commercial scale. Controversially Shellenberger suggests Australia could make a nice energy business out of exploiting its uranium deposits in small nuclear energy plants to produce hydrogen, for shipping to Japan. Yet UNSW School of Chemical Engineering senior lecturer Dr Kondo-Francois Aguey-Zinsou is sceptical and only sees a full-scale deployment of hydrogen use as an energy carrier "later this century".
The Garnaut Climate Change Review update in 2011 preferred to frame the issue as a global approach to combat climate change. It noted Zhengrong Shi, chief executive officer of Suntech, the world's largest solar photovoltaic company, recently wrote an article titled 'Can Australia Save the World?'. Shi observed that the UK had shown the world the way to use coal for energy and that the US had shown the world how to harness atomic power. He asked whether Australia and China would show the world how to best use solar power.
The review said the answer to Shi's question is a resounding "yes". Shi is an Australian citizen and former researcher at the UNSW School of Photovoltaic and Renewable Energy Engineering. The school has had an extraordinary impact on the global photovoltaic industry. Four of the top six global manufacturers in solar photovoltaic technology are linked with the university. Beyond Suntech, there is the world's second-largest manufacturer, JA Solar, also founded by former researchers at the school. The technology of Trina Solar, the fourth largest, and Yingli Green Energy Holding, the sixth largest, has been piloted by other graduates of the school.
"In fact, the influence is so great that the school refers to these graduates and former researchers as its 'gigawatt club'– the group of former staff and students whose global firms now produce more than a gigawatt of solar products a year," says economist Ross Garnaut, who led the original climate change review in 2008 and subsequently updated it last year. "The story of the School of Photovoltaic and Renewable Energy Engineering has a moral: it shows how the economic benefits of 'spillover' in innovation can accrue to all nations — when one country creates a breakthrough in technology all others stand to benefit."
Garnaut argues substantial public support for innovation is required. New technologies are not generally confined within national boundaries. "Australian firms will eventually benefit from successful innovation in, say, new biofuels technology that is developed elsewhere. But other Australian firms are likely to benefit more quickly and perhaps more comprehensively from innovation that is undertaken successfully in Australia," Garnaut observes.
Mina Guli, an Australian lawyer who is now chief investment officer of Peony Capital, a Beijing-based company dedicated to reducing greenhouse gas emissions, sees risks in being too parochial in exploiting clean technology opportunities. A green race is on and everyone else in the world is participating while Australians are still sitting on the sideline "tying our shoelaces", she said at the Adelaide festival. "We have to mobilise the Australian population – and business. We are innovative, a land of great ideas, have invested a lot in education, but we do not have the market to commercialise technology."
China wants clean technology and has had to spend big to meet its environmental targets, including its 2005 – 2010 plan towards reducing energy intensity by more than 40% by 2020, Guli pointed out. However, Australian companies appear reluctant to move to China to provide services. "Clean technology will be the third-biggest industrial sector by 2030 and presents a huge opportunity," noted Guli. "But there is a fear of the unknown in Australia. We are increasingly looking internally at what we can do instead of looking offshore, despite opportunities in China."
China is not seeking opportunities in solar – they produce 50% of the world's cells – or wind, where it's the eighth largest manufacturer, instead it is looking for clear air, water, industrial efficiency and clean coal, according to Guli. "Business and government have to find where these opportunities lie, where Australia has strength in these sectors and develop them. This is an opportunity right now in China to develop collaborative relationships with Australian clean-tech companies."
Made in Australia?
Kobad Bhavnagri, a clean energy and carbon markets' analyst with Bloomberg New Energy Finance, predicts new clean industries will drive growth this century. Australia has been grappling with how to capture value here, during the 20 to 30 years since tariffs were cut and the exchange rate floated. "Australia is not going to achieve this through manufacturing because of our small market size and high cost of labour," Bhavnagri says. "The mining boom is another nail in the coffin of manufacturing, driving up the exchange rate 20-30%. Yet you expect to pay high prices for expertise and cutting-edge research for advanced technology. The race has started, we are in it, there is more competition now but we have 10 years' experience.
"Between 2012 and 2020 we forecast A$43 billion will be invested in clean energy in Australia. Solar will capture A$20 billion of this on solar thermal, large-scale PVs (photovoltaics) and well over half on domestic PVs, such as on rooftops. Yet even importing solar panels, 30% to 40% of the costs are local, so there are jobs in installation, sales, marketing and metering."
The head of the UNSW School of Photovoltaic and Renewable Energy Engineering, Richard Corkish, believes there should be a "PV Silicon Valley" in Sydney, but governments have to want it. He sees research and development (R&D), thinking of new ideas and ways of doing things, as the sharp end of the technology process. "We have been doing it for decades. For most of that time, there was not a market or return for the business. Now there is, now it is in a good place. We are probably not going to be one of those tech manufacturing countries. People make a lot of noise about the manufacturing industry, but it's not such a big employer. Sydney can't be the biggest solar cell factory – that does not happen in any other industry, such as cars. Yet R&D can be big. We have had strong nibbles from major manufacturers outside Australia for an R&D centre here near us. In R&D we are important and we should be."
Mark Diesendorf, deputy director of the UNSW Institute of Environmental Studies, warns against completely writing off Australia's green manufacturing industry. "Australia has the opportunity to manufacture most components of its wind turbines and concentrated solar thermal power stations, but is missing out because it hasn't got adequate policies to build the market for these renewable energy technologies or to foster development of appropriate manufacturing industries in appropriate locations," he says. "The 'Quarry Australia' mentality is killing enterprise in green manufacturing."
The Breakthrough Institute agrees, arguing for the large US government support for renewable energies that was previously given to establish new technologies such as electric power and nuclear. It has proposed the formation of the Clean Energy Deployment Administration in the US, an independent financial entity to help energy entrepreneurs overcome the "commercialisation Valley of Death". Technologies can require hundreds of millions of dollars to demonstrate that their manufacturing processes can be valid at a commercial scale. Such large amounts of money are hard to source from venture capitalists.
Back in 1984, development finance was a major issue that hobbled the vanadium redox battery developed by Maria Skyllas-Kazacos and her UNSW chemical engineering team. It was a discovery before its time, but is now a promising solution to the issue of storing electricity from intermittent sources such as wind and solar.
"The problem with new technology is it can take 10 to 15 years to develop, by which time the patents are close to running out," says Skyllas-Kazacos. "It is hard in Australia where there are few venture capital companies that invest in the long term. They want to be in and out in three years."
"Second, it's catch 22 – there is no market because there is no product. For many years renewable energy companies did not worry about storage because they were feeding power directly into the grid. Only recently are utilities getting volumes of renewable energy that are disrupting their grid, so now there is a realisation you have to have storage. It has taken a while for the market to mature to warrant the investment in storage. We were able to get seed funding and develop pre-production batteries but not to manufacture them. We looked at manufacturing low volumes in China or India but selling rights was tricky and an extremely slow process, beset with problems."
The original vanadium battery patents were bought by an Australian company in 1998, which sold them to a Canadian company. They were subsequently acquired by Prudent Energy in a firesale during the global financial crisis. Prudent started out as a Chinese company but is now based in US and has secured a huge amount of investment from venture capital companies and the US government stimulus package. Now NewSouth Innovations (NSi), the company that manages the UNSW intellectual property, has announced it will licence recent improvements to the vanadium battery technology and negotiations are underway with some companies.
Although the vanadium battery is not part of the intellectual property that will be made available for free, the University's new liberal approach of Easy Access IP aims to improve the flow of knowledge into real world applications. Kevin Cullen, the new chief executive of NewSouth Innovations, says universities treat all IP as if it is hugely commercially valuable, when in fact it is not. Some is, and that will be handled in the traditional way. The rest would create more value by being given away free to companies or organisations or entrepreneurs or students who have demonstrated how they will use it to create social or economic benefits.
"It's our firm belief that greater university and industry engagement will lead to more innovation and therefore economic development and jobs," Cullen says. "We see the university as part of the economic ecosystem – we cannot do everything ourselves. Dynamic regions tend to have well-engaged universities, but the university is not necessarily the sole creator of the regional dynamism. Our job is to help get world-class research out into use and we are trying to tune the system to help make that happen." NSi handed over the first rights – for a system to forecast wind power 48 hours ahead – to ROAM Consulting, which employs UNSW alumnus Nick Cutler who devised the technology and is developing it for the renewable energy market.