Saturday 20 November 2010
To market, to market
Organisations like the Australian Institute for Commercialisation (AIC) and Newcastle Innovation are in the business of assisting entrepreneurs turn ideas into marketable products, and both of these organisations have departments dedicated to the commercial development of clean energy products.
EcoGeneration, Australia’s clean energy industry magazine, takes a look at how a clean energy idea can be converted into a commercially viable clean energy reality.
Here, Alex Blauensteiner, Director of Collaboration Services at the Australian Institute for Commercialisation and Dr Brent Jenkins, CEO of Newcastle Innovation, offer insight into what makes one clean energy idea more attractive than another, and highlight some of the issues unique to the development and commercialisation of clean energy products. Both agree that policy and federal investment are vital to building and sustaining a healthy and diverse clean energy product market.
What makes a clean energy product viable for development?
Alex Blauensteiner (AB): Viability is ultimately dictated by what it will cost to develop the technology, produce energy (or save it) and how much that saves the end consumer. If the costs don’t stack up it makes it difficult to attract project finance, partners and customers. Capital will flow to the least risky or most attractive projects and others will struggle. This is no different to other product and service markets.
Other considerations include time to market, the degree of market risk, and the quality and experience of the management team. These are often dictated by the length of the supply chain and the number of other partners involved in taking the project through to completion. Obviously, the greater the number of links in the value chain, the higher the risk of project failure.
Dr Brent Jenkins (BJ): An existing market for the product and an identifiable and quantifiable market demand for improvements in the product will make it more viable than one that does not have these advantages. A product that is cheaper and has clear advantages over the existing products will be more attractive than one with fewer advantages. Having strengths in both areas will allow us to more readily find the early stage funding required for proof of concept for the product. Proximity to market makes it more attractive for commercial partners to get on board at an early stage to continue development and take the product to market.
This is a relatively simplistic snapshot of our assessment process which is quite involved, but it gives the key elements of our filtering process and the means by which we prioritise allocation of our commercialisation resources.
What are some of the barriers to clean energy product development?
AB: Clean energy developers really have to deal with public awareness and perceptions effectively at a firm, but more importantly, industry level. Many sectors are not as well known or understood by the public and the flow on is that they receive less attention from government. Unfortunately, this means public policy and subsidies may favour more developed sectors that people understand, while less organised or developed sectors can struggle to cut through to decision makers with their messages.
What are some essential elements a clean energy product must have in order to be developed by your organisation?
BJ: The primary consideration is whether the product has intellectual property that can be protected. The IP should be defendable and allow freedom to operate.
Secondly, there has to be an identifiable market for the product. The market opportunity has to be of sufficient size to warrant the expense of IP protection and provide an opportunity to obtain a reasonable return on the investment (both human and financial).
Finally, an analysis of the market and the competitive space should show a clear path to market, (i.e. potential commercialisation partners, licensees.) If these basic criteria can be met, we will consider moving forward with a project or the development of a technology.
What are some of the features unique to developing clean energy products?
AB: Developing clean energy products is more often than not a costly endeavour, especially if the aim is to replace base load power. To replace base load power means the technology has to firstly be proven at the large-scale and large-scale pilots are expensive and take a long time. Clean energy projects therefore often require associated technology, such as storage technologies, since the demand for energy will often not occur at the same time as the energy is generated. Also, integration with the existing electricity grid or other networks requires interfaces that can be difficult to specify and control. Even in the case of off-grid projects, such as in remote areas, integration with pre-existing generators such as diesel generators poses specific problems.
BJ: The clean energy sector is a relatively new market. The current technologies range from the relatively mature to those that are essentially on the drawing board. As a consequence, there is a wide variety of players in the market, ranging from start-ups to large utilities. Many of the technologies are only employed at small scale and most do not have long operational histories.
In contrast to other sectors there is a lack of good data to assess the market for a product, and there is a need for good benchmarking data for technologies to assess competitive advantage, and there is also a requirement for better information from industry on their technology and research needs. The upshot is that it can be more difficult to assess the value of an early stage product in the clean energy space and make a determination as to whether it is a viable commercialisation prospect when compared to many other sectors.
Is there a sense that the clean energy industry is a burgeoning one, or has it consolidated itself on the market place?
AB: The AIC is providing support to numerous clean energy technology firms (over 60 in the last 12 months). The industry is very much alive and some clean energy sectors are far more mature than others in Australia. For example solar photovoltaic is a very mature sector when compared to say geothermal energy production in Australia.
There are many factors that influence how quickly various sectors have developed. A price on carbon is seen by some clean energy sectors to be an important driver of their future development. They believe it will make their sectors more competitive regarding the price of energy they can produce and thus more investment will flow to aid their growth.
One might expect the solar industry to be flourishing in Australia because of its abundant solar resources, however most of the technologies are being developed, manufactured, and installed overseas. This occurs in those countries that have a favourable pricing on clean energy generation. Wind technologies are likewise already well developed. It is in the area of deep geothermal energy that Australian companies might still be able to develop globally novel expertise.
Describe some of the clean energy development activities your organisation is engaged in.
BJ: The University of Newcastle has made a strategic commitment to clean energy research and development. As a result it has assembled a strong cadre of internationally recognised researchers. In addition it has a good mix of pure and applied research underway in the clean energy space. We expect a see steady stream of IP to be generated from the research activities and increased numbers of commercialisation opportunities. The limitation to further development to many of these projects will be access to proof of concept and early stage funding to provide the data required to attract commercialisation partners.
The full article by Rachel Purchase can be viewed on the Eco Generation website
Would you like to comment on this article? Please contact us.
