Cleantech Group predicts shakeout, long-term growth

The ongoing economic crisis is pushing up the price of capital, but the long-term fallout is essential to trim to fat from the cleantech sector.

That was the message from today's webinar Cleantech: A state of the union, presented by the Cleantech Group for its Cleantech Network members.

"This is going to take out some of the peripheral players in cleantech. There will be a flight to quality," said Nicholas Parker, executive chairman of the Cleantech Group. "We're going to see a better market emerge for cleantech that is more sustainable, more enduring."

Parker said some sectors of cleantech are consistently lowering their cost, becoming more competitive with traditional technology, including solar, desalination and pesticides. Meanwhile, subsidies on the price of water and fossil fuels are going out of favor, he said.

"There will be a reduction in perverse subsidies and, in the longer term view, on the price of carbon," Parker said. "This present and opportunity calling on cleantech for more financial innovation."

The credit crunch is making financing harder to come by, Parker said. But that increase in the cost of capital will raise the rate of return for investors entering the sector and encourage more venture debt, he said.

"The bad news is pricing on your investment opportunity will be fairly harsh, however for those of you putting money to work this is a great time to have some dry powder," he said. "The bubble has not burst in tersm of the cleantech market and interest in cleantech."

Driving some of that continued growth in cleantech, corporations such as Wal-Mart (NYSE: WMT), Ikea and General Electric (NYSE: GE), which are continuing to spend on sustainability (see Wal-Mart: cleantech solutions wanted, Shopping for cleantech at Ikea and Google, GE team up on cleantech).

Additionally, Parker said China has become a major driver of cleantech (see China pushes for energy efficiency) and Israel is one of the emerging leaders (see Israel's Oree raises cash for flexible LEDs).

"Now more than ever, we see a call for efficiency," Parker said. "Cleantech can save people money and help them to do more with less."

Cleantech is well-suited to wait out the economic uncertainty, Parker said, noting the Nobel prize winners, serial entrepreneurs and scientists in the field.

"There is a great deal of pain that's hugely challenging for people in the short term," he said. "Looking to the next 12 to 24 months there is a huge opportunity moving forward."

Members of the Cleantech Group’s Cleantech Network can watch the recorded webinar, Cleantech: A state of the union, here.

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