In the final four months of 2008, as the global economic crisis took hold, many claimed that the cleantech industry would not be harmed by the recession. The logic was that governments would be channeling resources into infrastructures such as water and renewable energy in order to kick-start economies.
The cleantech sector was indeed not hurt by the crisis, but it changed direction. If before the crisis, cleantech meant mainly venture capital investments and public offerings on the capital market, in 2009 the name of the game was large government investments in major infrastructure projects.
Nor was this trend unique to the US, where President Obama allocated $6 billion for cleantech projects. In Europe, China, Japan, Australia and even Israel, governments initiated cleantech projects too. What is more, the UN Copenhagen Climate Change Conference earlier this month decided that undeveloped countries would receive generous support for projects that lower greenhouse gas emissions.
Even though 2009 was not a good year for venture capital investment in Israel, the country's cleantech sector can take satisfaction from the acquisition by Siemens AG (NYSE: SI; XETRA: SIE) of Solel Solar Systems Ltd.. The German giant paid $418 million for the Beit Shemesh-based solar-thermal energy systems manufacturer, after a long period of negotiations.
Siemens also acquired 40% of Arava Power Company Ltd. for $15 million. Arava Power is a leader in photovoltaic systems for producing electricity. Kibbutz Ketura owns 40% of the company, and a group of US Jewish investors led by company president Yosef Abramowitz own the rest. The acquisition was made at a company value of $37.5 million.
Siemens and Arava Power also signed a framework agreement to build solar power plants with a total capacity of 40 megawatts. The first project will be the construction of a 4.9-megawatt facility at Kibbutz Ketura, which already has an electricity production license from the Public Utilities Authority (Electricity).
According to Yotam Ironi, an analyst with Altshuler Shaham's Green Fund , in 2010 there will be further good news for Israeli cleantech companies. He is probably hinting at BrightSource Industries (Israel) Ltd. (formerly Luz2), which is involved in a major solar-thermal project in California.
Besides Solel and BrightSource, Israel Cleantech Ventures partner Jack Levy points out that other Israeli companies stood out over the past year in the cleantech industry, with six companies in the top 100 of Cleantech Group: electric car infrastructure venture Better Place LLC; wastewater treatment solutions company Aqwise Wise Water Technologies Ltd.; solar arrays company Tigo Energy Ltd.; photovoltaic harvesting company SolarEdge Technologies Ltd.; energy storage systems company Enstorage Inc.; and integrated quantum wind energy company IQ Wind.
Over the past year, solar energy came of age as an industry in Israel, with many integrators arising locally or coming from abroad to enter Israel's photovoltaic sector. New Knesset legislation fixed tariffs for small installations of up to 50 kilowatt, and from this week medium-sized installations of up to 5 megawatt.
That's not all. At the Copenhagen Conference, Israel's President Shimon Peres pledged to decrease Israel's greenhouse gas emissions by 20% by 2020. This requires setting up a substantial solar energy infrastructure, while abstaining from building additional coal-fuelled power stations. Over the next few months, a decision will probably be taken to set up large, 40-60 megawatt plants, and many players want to be a part of this market.
Government sponsored technology
Cleantech did not escape the attention of the Israeli government, which decided to promote the sector during 2009. This has overcome a major obstacle, because infrastructure companies are conservative and it is tough to persuade them to try out new technologies. And if the new technologies are not given trials it is hard for them to become commercial propositions, making government assistance vital.
Minister for Environmental Protection Gilad Erdan is promoting a measure that will enable Israeli cleantech technologies to be given trials at the US Environmental Protection Agency (EPA). The idea behind this is that setting up laboratories in Israel is too expensive, and it will be more worthwhile and faster to pay for technologies to be tested overseas. Several government ministries will divide up the NIS 5 million cost between them.
In addition, Erdan, together with Minister of Industry, Trade and Labor Binyamin Ben-Eliezer, is examining the possibility of allocating a budget for encouraging factories to allow start-ups to set-up beta-sites and pilot projects.
According to Levy and another Israel Cleantech Ventures analyst Gene Dolgin, these companies could also generate revenue by entering the US, European or Far East markets through collaboration with local companies.
Ben-Eliezer is also promoting the establishment of two special technological centers in southern Israel, the first for water technologies and the second for alternative energy. He is investing NIS 92 million in the two centers, which should commence operations in 2010 and form a bridge between research and industry, and promote the integration of these technologies into commercial initiatives.
High-tech people entering cleantech
However, government investment will not be enough. According to Aqua Agro Fund managing partner Hillel Milo, there is a lack of capital to fund business development for young cleantech companies. This lack, he said, will endanger the development of the cleantech sector in Israel, if additional direct investors like Siemens and venture capital funds do not enter this field.
With this in mind, Kinrot Ventures water technologies incubator CEO Assaf Barnea mentions the strategic entry of IBM into the global water sector, which he says will help build a bridge between traditional infrastructures and the water infrastructures of the future, which will be based much more on information.
While there is still not a constant flow of investment, high-tech professionals from other sectors are joining cleantech companies, and this is making the industry much more sophisticated. According to Terra Venture Partners general partner Dr. Harold Wiener, the fact that the world is coming towards the end of the era of government incentives for the promotion of many cleantech branches, such as biodiesel, wind energy, and solar energy, will bring about the development of breakthrough technologies that will provide more efficient and cheaper solutions, and will substantially change the main cleantech markets.
Published by Globes [online], Israel business news - www.globes-online.com - on December 31, 2009
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