The world is trying to find technological solutions to energy, water, and pollution crises. It is logical that the solutions will arrive from the world cleantech industry, and Israel, if it operates wisely, can become a leading country in the field.
Just like high-tech in its day, the Israeli cleantech industry can't spontaneously develop out of nothing; however, in contrast to high-tech, which benefited from the military-technology infrastructure, cleantech as an industry does not have a similar advantage.
However, it should be remembered that Israel has a human-technology infrastructure that allows the closing of the gap with leading countries in the field.
Israel has a leading international standing in everything having to do with advanced agriculture, desalination, and thermo-voltaic solar energy. Together with our cognitive abilities in software and IT, it will be possible to create a quality cleantech industry here. All that needs to be done is to advance an incentive policy which will allows this potential to break out, as many countries in the world are doing.
For example, the US pronounced the environmental incentive policy of President Obama, a policy which was aimed at developing the local industry and reducing US reliance on oil. The EU also has several ambitious programs whose goal is to provide incentives for the cleantech industries.
In Israel, investments in cleantech are primarily through the traditional investment mechanisms of high tech, such as the Office of the Chief Scientist, and venture capital funds. But in contrast to high tech, where after development stage the main investment is in marketing, in cleantech there is a challenge called "the valley of death" - the need for significant investment in order to set up a pioneer project that will prove the ability of the technology on a large scale. And there is the problem: traditional models are not set up to finance pioneer projects, but as long as the technology is not proven through a pioneer project, regulators will not recognize it as viable, and banks will not agree to finance projects that use the technology.
Israel's challenge is to build a bridge over the "valley of death". In order to do so, the government must choose policies to support the industry and make them a reality immediately. The policies can be based on US or European models, and from the models adopted by Israel in the past for other industries. For the program to succeed it is important to give priority and tax breaks to pioneer projects in government tenders, to create additional quotas for buying electricity from pioneer projects in renewable energy, and to give loan guarantees for pioneer projects.
Additionally, and maybe most importantly, publicize tenders for joint private-public funds to invest in Israeli cleantech. The basic structure of the funds will guarantee private investors a shekel-fore-shekel investment by the state. The funds will be able to invest in projects at various funding stages, and thereby minimize risk to investors.
Making all this happen has to be done while keeping Israel's international commitments to fair competition, and to prevent illegal discrimination against product and services from overseas (including regulations of the OECD and WTO). International experience acquired shows that this is definitely an attainable goal.
We hope that the Minister of National Infrastructures and the Minister of Finance will rise to the challenge.
Nimrod Rosenblum and Gilad Maoz are partners at the Epstein Rosenblum Maoz law firm.
Published by Globes [online], Israel business news - www.globes-online.com - on December 28, 2010
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