The transition to a low carbon, more resource-efficient world empowers cleantech with the potential to deliver long-term economic growth, sustainable job creation, energy security and cutting-edge competitiveness to the economy of Scotland over the next ten years and beyond.
The country is well positioned to exploit this unique opportunity, given its engineering, science, technology and research and development heritage, not to mention its reputation for financial services excellence and, most importantly, its enviable portfolio of natural resources.
The optimism surrounding the sector was reflected in a survey undertaken by Ernst & Young, in which two thirds of respondents – the majority of which were senior industry stakeholders and key decision makers – stated that their confidence in the ability of cleantech as a growth driver had either increased or significantly increased in recent years.
However, the study also highlighted some perceived barriers that must be overcome if the opportunity is to be realised, namely incoherent and opaque policies, lack of capital and a poor infrastructure planning regime.
It warned that failure to address the pertinent issues will not prevent the development of our natural resources, but their benefits will be enjoyed by parties beyond our borders. Consider, if you will, the scenario it presented: resources developed using turbines that were manufactured by a Chinese company in a German plant and installed by a Norwegian shipping firm.
It should not be seen as a lost opportunity, though. The noises the coalition government has made about being the “greenest government ever” have been encouraging, as has the Scottish Government’s unwavering belief in the future of renewable energy. Much work remains, however, and the pace must quicken in relation to the dismantling of these barriers.
Global developments should serve to sharpen our focus. Last year, the government of South Korea announced plans to double its investment in cleantech R&D to $2.9billion by 2013. The Koreans have pledged to spend a staggering $85billion on cleantech projects – including the creation of the world’s first national smartgrid – during that time, equating to 2% of GDP.
Despite the global recession, worldwide investment in cleantech hit the $200billion mark last year. The Chinese invested almost $35billion in the sector in 2009 alone, nearly double the $18.6billion invested by the US government.
This demonstrates how countries less financially restrained than ours have also identified cleantech as an industry of national strategic importance and invested in it accordingly. Additionally, it points to the scale of capital investment required to develop our infrastructure at a time of acute national deficit.
This was not lost on our survey respondents, only 3% of whom believed that the conditions for success in cleantech have been established.
It is unsurprising then, that 76% of those questioned believed that urgent and decisive action was needed to establish a clear policy direction, a stable long-term policy framework and efficient delivery mechanisms to enable the cleantech industry to grow.
As noted, three significant and interdependent obstacles stand in the way of growth – policy, capital and infrastructure. Without a stable, long-term policy framework conducive to investment, capital is unlikely to be invested at the scale required to enable growth. A framework shaped around clear national objectives for growth, jobs, energy security and carbon reduction that attracts confident and patient investment at scale is key to breaking this cycle.
Our study indicates that a clear competitive advantage in any of the main cleantech sub-sectors is yet to be established. For some sectors this will be due to their nascent state. For others it may be due to an aversion to “picking winners”. As a result, survey respondents felt that policy and investment have been diffused across too wide a range of areas, preventing any individual technologies from establishing a conclusive competitive advantage.
There are signs that this emphasis is changing with the Comprehensive Spending Review (CSR) providing more directive support in areas such as offshore wind and carbon capture and storage (CCS). Our survey indicates a number of sub-sectors well poised to offer the prospect of achieving a world leading position, specifically offshore wind, energy efficiency, biomass, waste management and emissions reduction, including CCS.
Wave & tidal energy were also frequently cited, which is understandable given the resources we have in this area. No country has yet developed a manufacturing presence in the wave & tidal sector given its early stage, making this sector potentially valuable for future job creation.
However, more decisive action needs to be taken this year if we are to carve out a market-leading niche in these highlighted sectors. Our survey reveals that the CSR, while seemingly positive for cleantech, materially deflated optimism and confidence in the UK’s ability to deliver the opportunity.
In analysing and drawing the findings together we propose four priority areas of recommendation to unlock the cleantech opportunity:
o Establish 2050 targets that balance economic growth, job creation, carbon reduction and energy security
o Implement a transformational policy framework and delivery mechanisms to unlock capital at scale, and accelerate critical infrastructure
o Increase support for a select range of technologies in which the UK can establish comparative advantage and enable the whole ecosystem around these
o Drive public awareness of the cleantech growth opportunity
A once-in-a-generation opportunity is within our grasp and with decisive action it is one we can fully realise. It is time to deliver.
Steve Lang is head of cleantech, UK&I, Ernst & Young. Ernst & Young’s report: Cleantech and the UK Growth Opportunity – Time to Deliver, is available for download at www.ey.com or by e-mailing jsimpson@uk.ey.com
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