Smoggy Olympics Opens Door To Clean-Tech Bonanza

By now, everybody knows Beijing’s ‘Green’ Olympics are going to be one of the most smog-ridden Games ever.

But that irony – the harvest of two decades of breakneck economic growth – offers tremendous opportunities for clean technology suppliers, where American firms excel.

There are also substantial - and growing - opportunities for investors looking to tap into the dynamic, and far larger, domestic China clean tech sector.

Helping matters, both Beijing and Washington have made the sector a priority. China, for instance, recently designated  clean tech an ‘encouraged’ investment category.

“It is fair to say hundreds of millions [of dollars worth of US clean tech has been sold in China], billions to follow and we have a long ways to go on this,” says David Bohigian, Assistant Secretary for Market Access and Compliance at the US Department of Commerce.

“When you look at China’s challenge in energy efficiency, in air pollution, water, in bringing clean coal onto the market, the opportunities are huge and just beginning to be tapped by US firms.”

Commerce has arranged two clean tech trade missions to China and a third one is set for September.

Among the biggest deals to date is one involving Eaton In April, the Ohio-based manufacturer sold 207 hybrid buses to Guangdzou, a city of 12-million, formerly known as Canton, the provincial home of most Chinese-Americans.

That deal is both China’s largest purchase of hybrids and Eaton’s single largest sale worldwide, nudging the company closer to its $1 billion sales goal in China by 2010.

Most of that will come from the output of Eaton’s 27 facilities, where 11,000 are employed, domiciled within ‘Greater China’, which also includes Taiwan.

Solar Turbines, a San Diego-based subsidiary of Caterpillar , is also doing brisk business selling turbomachinery to China’s enrgy and power industries, especially Combined Heat and Power (CHP) applications, which reduces greenhouse gas emissions.

A commerce department study offers a useful guide on clean tech exports prospects to China.

China is a particularly attractive market because of its strenuous energy efficiency efforts even while its economy is becoming more industrialized.

China will invest $175 billion in environmental protection in the next five years, according to the Commerce Dept. 

China invested $12 billion in renewable energy in 2007. Reaching wind energy targets alone (30 gigawatts by 2020 from 1.2 GW in 2005) will require $21-28 billion in investment.

Horrific Environmental Cost Long-Term Driver

Only a few companies will get a direct boost from the Olympics.

One of these is Echelon Corporation which installed a smart lighting control system for the Olympic Village, home to 23,000 athletes and team officials.

“Anything from the Olympic Village if it works out well is a great showcase to bring to other places” in China, says Anders Alexsson, a SVP of marketing, who says only 10 percent of the local energy management demand is currently being satisfied.

But China’s need for clean tech has long-term drivers, namely addressing the extensive collateral damage to the environment that accompanies phenomenal growth. 

China experts estimate roughly half of the dozens of serious protests that occur in China monthly are related to pollution or contamination.

“These are not only economic and social problems they are actually political problems that the Chinese leadership at the national and local level understand need to be addressed and that’s the kind of demand we really like as investors in the long term,” explains Jeffrey Leonard, CEO of the Global Environment Fund (GEF) he founded in 1990, which now has close to $1 billion invested in clean tech, about a tenth of it in China.

The upshot, Leonard says, is that China's increasingly assertive middle class - now estimated at 350 million – is demanding clean air, water and safe food.

Because China is still at a rudimentary level – most coal plants, for  instance, still don’t filter smog-causing particulates, which has been mandatory in the US for decades – much of the clean tech market is local.

“The vast majority of the market is an explosion of small local emerging businesses that are addressing local environmental and energy challenges,” explains Leonard.

There is an estimated $500 million in foreign private equity funds in the clean tech sector in China but up to 10 times that from domestic resources, says Joan Midthun Larrea, GEF’s China hand.

For foreign investors, that offers opportunities and challenges.

“Certainly we are concerned about creeping protectionism…within China and economic policies that may favor domestic producers over international competition,” says Bohigian.

© 2009 CNBC.com