China leads the way with clean-tech

Launching the $10 billion Clean Energy Finance Corporation in Sydney, the Prime Minister said the funding agency - which is scheduled to begin operating next year - ''is going to be a part of making sure that we realise a clean energy future … that we use our abundant sunshine, our tidal power, our wind power and our other sources of clean energy.'' The government's goal, as stated on its Clean Energy Future website, is to ''ensure that 20 per cent of Australia's electricity comes from renewable sources by 2020.''

But, according to figures released that same week by the Australian Bureau of Agricultural and Resource Economics and Sciences, meeting that target will require an annual growth rate of just under 2 per cent a year. An ABARES energy report, launched at its annual conference in Canberra, revealed renewables are struggling to claim a place in the nation's energy mix. Despite trebling their growth rate in recent years, solar energy and wind power still account for only 2 per cent of Australia's electricity production. And, overall, Australia's renewable energy production has increased at an average rate of just 1 per cent a year since 2005.

''Most of Australia's electricity is produced using coal, which accounted for 75 per cent of total electricity generation in 2009-10,'' the ABARES report said.

''This is because coal is a relatively low cost energy source in Australia. It also reflects the abundance of coal reserves along the eastern seaboard, where the majority of electricity is generated and consumed.''

It's a different story in China. Last month, the Chinese government launched a renewable energy think-tank, the China National Renewable Energy Centre. It will draft industry standards and seek to boost global investment in green energy projects. The centre has already signed research and development co-operation deals with the United States, Denmark and Spain, and is also close to signing agreements with the International Renewable Energy Agency in the United Arab Emirates. More on the greening of the Middle East later.

China is now the world's single largest market for clean technology products and services. As a new report by California renewable energy consultancy Dallas Kachan points out, international business co-operation with China is nothing new, and has been growing rapidly for 30 years. But its status as a global clean-tech power is a new phenomenon, and countries like Australia risk being left behind in the race to identify and participate in rapidly emerging renewable energy markets across the world.

Green-tech is the new global gold rush, and it doesn't pay to be tinkering with policy tune-ups while the train is moving out of the station.

China is already attracting an influx of ''clean-tech entrepreneurs, investors and solution providers'', says the Kachan report.

''Much of this pull is to tap China's well-known cost and supply chain advantages that have been driving much of the country's industrial growth and foreign-direct investment into China for many years. However, clean-tech firms are also flocking to China to access opportunities not available in their home countries.''

According to report, these opportunities include lucrative new markets in reducing air pollution, green building design and retrofits, water efficiency, waste reduction and recycling, greener urban infrastructure and renewable energy uptake.

But overseas investors are also attracted by the Chinese government's financial support for innovation and manufacturing. Or, as the Kachan report says, ''incentives that help navigate the 'valley of death' and speed up getting technologies and products commercialised.''

In China last year, clean-tech was the second biggest recipient of venture capital investment.

The Global Innovation Index, which analyses the economic strengths and innovation potential of 125 countries, ranked China among the world's top five renewable energy ''innovation drivers''.

The index gave Australia an overall innovation score of 49.9 out of 100, giving it low scores (again, out of 100) for the number of science graduates (43), engineering graduates (22), share of renewables in energy use (three) and scientific outputs (33). The areas where Australia scored highly were political stability (76), tertiary enrolment (78), quality research institutions (76) and business regulations (97).

The Kachan report incudes comments from Australian lawyer Peter Corne, who has been based in Shanghai since 1996, and is regarded as a leading expert on cleantech innovation and intellectual property law.

''China is no longer the low-cost widget manufacturer that the West has come to view the country as. There is a concerted effort in China to move up the value chain and stand tall in the development and innovation of clean-tech solutions,'' Corne says. ''Westerners have a tendency to view China through the rear view mirror. This needs to change. The country is moving quickly - policy direction is very clear, there are more and more qualified managers and technicians, and the government leadership is applying money in very focused areas. Clean-tech will benefit from this top-down direction, and I'm very optimistic that China will make great progress in all clean and green areas.''

China has a five-year plan to develop and market clean technologies, but if Western countries and business innovators don't move quickly to develop partnerships or support China's green innovations, ''the window of opportunity to collaborate may close on them,'' Corne says.

''The West needs to bring something interesting to the table. As China is developing, it is catching up, and if you don't have anything special to offer,why should China collaborate with you?''

China is also expected to introduce a cap on coal use from 2015 as part of its five-year clean energy plan. Australian Greens deputy leader Christine Milne raised this issue last week, calling for the Gillard government to direct the Bureau of Resources and Energy Economics ''to review its modelling based on the current geopolitics of coal''.

''China projects utility scale solar power to outcompete coal by the end of this decade, and India expects to see that point in as little as four year. Just when Australia is getting ready to sell even more vast quantities of coal to the world, the world wants less of it,'' Senator Milne said.

''Even in the absence of global action on the climate crisis, the huge leaps in renewable energy around the world are leaving coal behind, and Australia risks digging ourselves into an ever bigger hole unless we change direction fast.''

The Kachan report highlights another trend in China's clean-tech policy that should sound alarm bells for Australia's struggling manufacturing sector. Chinese firms are ''increasingly looking west and carefully picking and choosing distressed clean-tech assets, investing in commodity supply and taking stakes in higher margin clean energy projects.'' The aim of this strategy is to gain access to markets for Chinese products in Western markets.

''Perhaps the most important numbers coming out of China are the government's increasing emphasis and clear targets for cleaner and more efficient industries,'' the report says. The Chinese government has allocated more than $US1 trillion over the next three years to achieve these clean, green objectives.

The Gillard government hopes its new clean energy funding agency will be open for business in mid-2013. Meanwhile, large-scale investment in renewable energy is ramping up in the United Arab Emirates, with the capital, Abu Dhabi, setting ambitious goals for green buildings, sand-resistant solar panels and cars powered by polymer electrolyte batteries in a bid to become the world's first zero emissions city.

The recently established International Renewable Energy Agency - which includes 148 member nations and the Europe Union - will have its headquarters in the United Arab Emirates. Why? Because the Emirates has made some very serious commitments to clean energy, including the world's biggest solar power plant and green public transport.

Australians might well ask, if a nation so rich in fossil fuels is already embracing a clean energy future, then what's holding us back?

■ Rosslyn Beeby is science and environment reporter.