Is this the way to finance green innovation?

• The investment in technologies might extend from start-up companies to financing demonstration pilot plants. If you are to spend $2 billion a year for 5 years then you would have to look at pilot plant financing otherwise you will be mired in many small opportunities, not to say that you should not pursue this small business activity. But there is a $1.6 billion Solar Flagship program from the Federal Government already in place.

• Inputs to clean technologies might actually be a place for innovation. Perhaps producing rare earth metals that are used in magnets or perhaps making defect free silicon for better semiconductor yields or better solar voltaic cells could be justified. But be wary of this. The collapse of Solyndra, a photocell manufacturer in California has left the US Federal Government $535 million worse off with a loan guarantee. Solyndra was unable to compete on pricing with Asian competitors. Manufacturing inputs to clean technologies has been tried in Victoria and Tasmania. Vestas, the Danish manufacturer of wind turbines, opened plants to make and assemble wind turbines in 2005 and closed them in 2007 with an estimated lost of $9 million. This was after a $10 million waver of import taxes by the Australian Government. Australia is not a low cost manufacturing country so there will be limited opportunities unless there is some natural advantage from minerals or people. This points towards financing multiple modest start-up businesses.

• The electricity supply industry is already utilizing both clean technologies and government subsidies. Financing small-scale plants is where a few $100 million is easily spent, particularly if it is other peoples’ money. But could proposals be mobilized within the 5 year timetable?

The reasoning for the creation of the Clean Energy Finance Corporation may well be found in a chapter in the Garnaut Climate Change Review of 2011 on “Low Emission Technologies and the Innovation Challenge,” where expenditure of $2-3 billion annually is recommended. Garnaut recommended increased basic research. This is not only the most expensive way of buying innovation but also, by its very nature, available to all and often not protectable as intellectual property.

The proposed corporation needs to be carefully looked at and then put down. Alas it unlikely that the panel of experts will suggest such a course of action. However a future Liberal Government has vowed to put it down.