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Can clean tech stem China's environmental woes?
Martin LaMonica June 9, 2008 5:00 AM PDT
A steady stream of bad news over the past year has brought China's environmental woes into clearer focus.
To point out the country's run-away energy demand, speakers at clean-tech conferences often say that China is building one coal-fired power plant a week.
Air and water quality are health issues. And China's skyrocketing energy consumption raises greenhouse gas levels, a matter of concern for everyone.
Even in the supposedly clean industry of solar power, there has been trouble. A recent Washington Post investigation unearthed toxic chemical dumping at a Chinese solar cell manufacturing plant.
The picture has been brought into clearer focus because of the upcoming Beijing Olympics, where some national teams are concerned about athletes' ability to compete.
But there is a flip-side, says Paula Beroza, an investment banker and managing director at Sierra Asia Partners, a firm that specializes in investment in China.
The giant Chinese market is creating an opportunity for clean technologies. Investments are following: a report in China Daily, citing numbers from Cleantech China Research, said that investment in clean tech is rising rapidly, from $550 million last year to an expected $720 million this year.
Equally significant is government support in China for clean technologies, said Beroza who noted that China's renewable energy target of 15 percent by 2020 is one of the most aggressive in the world. The government has also set up investment funds to nurture technology developed in universities to be commercialized.
I spoke with Beroza about clean-tech investing in China. Here are excerpts from our talk.
Q: What's the overall situation when it comes to the environment?
Beroza: If you look at the big picture, it's daunting. China's huge growth has been accompanied by huge problems on environment side. And that's an issue that everybody in the world is concerned about, quite frankly. But when I put my business hat on, there is also a huge opportunity for companies involved in clean tech. That's the positive news out of it.
I just focus on one step at a time, in terms of trying to get projects in China that help either through introducing new technologies or energy-saving devices.
The last financing we did was in a wind turbine blade company in China. Everybody that manufacturers wind turbine parts is going gangbusters because they are building huge wind farms. All of these are a drop in the bucket, but they help.
So much of Chinese business has strong government involvement, as I understand it. What's the government stance on environment and clean tech?
Beroza: The message to businesses I would give is the government is getting more supportive, for obvious reasons, for clean-tech projects in China. Some companies with new technologies are starting to introduce products in China first rather than elsewhere because there is a huge market and you can get government support. It doesn't mean cash (from the government), but it might mean getting factory space at attractive prices or access to educational facilities that might provide you with manpower.
A lot of money is being spent on infrastructure. Where are clean-tech opportunities?
Beroza: If you have a technology that works in an area and you can get it adopted, then you can be part of the huge building boom. That's where I see a leapfrogging. We--the United States and other more-developed countries--have a huge installed base. If you have clean technology for buildings and you can get it approved and you can get to be on the side of the angels with the government, then that can have tremendous impact.
It's not that somebody in the government is going to wave a magic wand. But in China, especially in this sector, the government can really be an ally. If you understand how they work and not go confrontational and try to co-opt them, and get them on your side, they'll help you out a lot. With all of the publicity around environmental problems in China, officials at every level in municipal, provincial, and federal governments are going to be helpful to try to get some brownie points for themselves.
Solar companies like Suntech have shaken up the solar business by manufacturing cells cheaply. Do you expect the same to happen in other areas of clean tech?
Beroza: On the solar side, the big investments have really been companies that manufacture in China for global consumption. Although they are clean tech, they are manufacturing plays more than anything else. There's nothing wrong with that, but what I see as more interesting is the next phase of new technologies. Thin-film solar, water treatment--there's huge demand for that. Anything with respect to energy-saving technologies in buildings. There's a great opportunity because of development and partially because, historically, people didn't focus on buildings--insulation and that sort of thing--and there's now all sorts of interesting new building materials.
Clean coal is another one and anything with respect to renewable (energy). All of those are great, great sectors.