By Tina Perinotto
19 October 2011 – Green building technologies will be a key driver in a near doubling of the sustainability investment market to $3.1 billion by 2014, according to a new report from UK based Verdantix.
The report forecasts that the Australian corporate sustainability market will grow from $1.7 billion in 2009 “if the Clean Energy Bill becomes law, with increased spending on upgraded carbon and energy management systems, expanded energy efficiency programs, investment in green building technologies and corporate cleantech projects.”
Verdantix director David Metcalfe said growth in sustainability would flow from economic growth.
“Australia is already experiencing a boom in commodities demand as the Asian economy gathers steam. Our forecast for a 13 per cent CAGR (compound annual growth rate) between 2009 and 2014 assumes economic growth in Australia of 3pc to 3.5pc over the period.
“Spending on sustainability is positively correlated with global and national economic growth because they drive up the price of fossil fuels and other natural resources. As a result, spending on initiatives such as energy efficiency, sustainability communications, lobbying and renewable energy production will be higher if economic growth is above current forecasts.”
Verdantix analyst and author of the report Susan Clarke said: “Many Australian business leaders perceive climate change and sustainability trends as a break on growth and a cost to business.
“But carbon regulations, rising energy prices and natural resource scarcity also create new market opportunities. A pure focus on blocking and tackling new energy and climate change regulations will protect margins in the short-term but misses out on big opportunities like bio-diesel refining.”
The estimates of sustainability growth in the report are based on the proposed carbon tax and clean energy package and on analysis of spending by 139 firms with Australian revenues of at least $900 million. It included cross -industry research into more than 1000 Australian corporate sustainability initiatives.
The company interviewed executives from companies such as the Carbon Trade Exchange, CarbonSystems and Energetics “to fully understand the implications of this package,” the report said.
Key areas of expansion cited by the report include:
- Electricity efficiency projects. Forecast electricity price rises, stemming from Australia’s predominately coal based generation (75 per cent) will be 10 per cent in 2012 under a carbon price, the report said, citing Treasury figures. Specialist management consultants Energetics predicts regional increases in electricity prices of 8 per cent to 31 per cent for large users. “This will drive investment in energy efficiency,” the report said. “The National Australia Bank, which estimates that IT consumes 90 per cent of its total energy spend, is already using server virtualisation technology to reduce power consumption and carbon emissions”.
- Upgrades of carbon management systems. Carbon pricing will increase requirements for financial grade carbon reporting, the report said, citing work by carbon and energy management software suppliers, such as CarbonSystems and Credit 360.(Verdantix has a Buyers’ Guide To Energy Management Software).
- Investment in energy efficient building technologies. The federal government has provided incentives through the Green Building Fund and Verdantix cites green leases as another incentive. [See a range of other incentives, from the emerging Environmental Upgrade Agreements to tax breaks for green buildings proposals in The Fifth Estate].
- Increased corporate cleantech spending from 2012 onwards. The report says that in the absence of a formalised carbon market, Australian businesses have focused sustainability spend on compliance and cost saving initiatives. “Innovative firms have already invested in on-site renewable technology in parts of their building stock, for example Johnson & Johnson installed a $1 million200 kilowatt solar PV system at its Australian headquarters.”
Buildings figure prominently in other details of forecast expenditure.
In 2011 building energy efficiency initiatives alone will account for 16 per cent of firms’ total sustainability spend, says the report.
For instance, it says, Among an expected retail sector investment of $232 million in sustainable business initiatives by 21 retail firms with revenues over $1 billion, expenditure by firms such as Coles, Metcash and Woolworths will focus primarily on their building stock.
“In 2011, spending on building energy efficiency initiatives will total $89 million, while incremental spend on sustainable new builds will reach $31 million,” the report says of these firms.
Sustainable business expenditure from firms such as Macquarie Group and NAB will total $159 million, “with building energy efficiency, to account for $46 million in 2011, and data centre efficiency $18 million.”
In the auto industry four automobiles and parts firms plan to spend $20 million in building energy efficiency in 2011.
In the technology area three key firms will invest $3.8 million in buildings.
Other highlights includes: smart grid development – to grow from $23 million in 2009 to $76 million in 2014; dlectric vehicles and infrastructure from $22 million to $61 million by 2014, and on-site renewable energy from $70 million in 2009 to $182 million in 2014.
CarbonSystems chief executive officer David Solsky said carbon pricing will also increase requirements for financial grade carbon and energy tracking and reporting to provide greater financial accountability for greenhouse emissions.
“Pricing carbon will hasten and reward capital investment in renewable and less carbon intensive forms of energy. This is well overdue – for too long stalling investment has put a brake on clean energy alternatives by large carbon emitters in sectors like mining, manufacturing, transport, commercial property, and power generation,” Mr Solsky said.
He said that if the Coalition repealed the legislation if it won office in 2013 it would “stall the significant level of investment funds being mobilised to exploit and profit from the certainty now supporting a range of markets such as emissions trading, renewable energy, energy efficiency, and carbon abatement.
“This would be regrettable. Australia’s inconsistent and incoherent approach to carbon pricing policy has been a brake on renewable energy and related investments for a decade, and has adversely affected the nation’s reputation as a stable investment destination.”