A large portion of demand for clean and renewable energy will be driven by China and Japan over the medium term and Australian SMEs are in a prime spot to take advantage of the boom, a new KPMG report says.
The KPMG Green Power 2012 report found that Asian investment in renewable energy increased by more than 50% during 2011, while companies located in Asia made acquisitions worth more than $US2.1 billion. Over 40% of respondents to the report believe investment is most likely to come from China.
Respondents to the KPMG survey also said they expect more mergers and acquisitions in the sub-$50 million space. KPMG Australia leader of renewables Matthew Herring says the findings open up opportunities for SMEs.
“There are very good opportunities for SMEs in this space, and I think that’s where we can become a leader in the region,” he told SmartCompany this morning.
“For instance, how can we better fit SMEs into the project supply chain?”
Herring says that due to Australia’s proximity to these large Asian nations where buyers are contemplating renewable technology, businesses should be looking at making Australia a more suitable place for investment in the sector.
While many of the deals mentioned in the report are quite large – such as deals eyed by Japanese groups Marubeni and Mitsubishi – Herring says SMEs have a great opportunity to set up shop somewhere in the supply chain.
“If you look at the barriers to entry in this industry, everyone knows the problems with wind power in that wind doesn’t blow all the time. So the question is, how do you match wind power to demand?”
“That’s where something like energy storage comes in. That sort of research can really be driven by SMEs, and that’s just one example of how businesses can work on the technological barriers that exist.”
The report suggests Japanese interest is focused on energy projects that provide longer-term benefits, while KPMG itself said Chinese investment seems centred on equipment manufacturing players.
The Federal Government has been pushing for more research in the clean energy space, including providing grants to SMEs through its carbon tax legislation.
But more businesses have suffered in the past few years as states have reduced tariffs for solar energy. This has led many to collapses, including Melbourne-based solar hot water manufacturer Edson, which was placed in administration last week.
Herring says while the report focuses on slightly larger deals than in the residential market, he notes this is an issue that SMEs need to solve.
“The question becomes, how can companies reduce the cost of solar and other technology by advancing the innovation done in this space?”
“There are questions that still need to be answered by small businesses in this field.”