Commentary: Israel’s untapped cleantech potential

We must hope that cleantech is at the beginning of a process where it is viewed as having economic potential and is given unique incentives.

September 17, 2011 22:48
3 minute read.
ISRAELI WASTEWATER treatment technology

wastewater 311. (photo credit: Sharon Udasin)

Interest in finding new technologies, in Israel and worldwide, depends on whether they will be a source of future profits and if they meet social goals, such as safeguarding the environment. From the investor’s point of view, the main question is: Can they create a stable, long-term business model?

The strength of Israel’s cleantech industry lies mainly in the development of water technologies. Israel’s achievement in the National Water Carrier project, alongside the success of its desalination plants, wastewater recycling, purification of rivers and lakes and, of course, irrigation technologies, give the Israeli market an advantage over competitors worldwide. However, there is still a long way to go, especially on renewable energy and the environment.

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In comparison with other sectors, such as software, Internet and telecommunications, investment bodies in Israel tend to invest less in cleantech. This is one reason there are not enough financial resources in this field. In addition, the failure of the sector to reach its potential results from a lack of government incentives, which stands out in comparison with other countries.

European example

Regulatory tools can substantially speed up technological progress, and cleantech relies heavily on regulatory legislation, the goal of which is to encourage the development and use of environment-friendly technologies. This type of legislation, alongside an incentives policy, will encourage fast and focused development in the sector. In light of the shortage of private investment, this combination is crucial to the development of cleantech.

EU grants are an excellent example of the advancement of cleantech through allocating dedicated funds according to specific calls for proposals. Substantial sums of money are budgeted through the European Seventh Framework Program for Research & Development (FP7), and the various countries have similarly allocated resources to advance these goals. The US government has been budgeting enormous sums for cleantech for several years.

In Israel, almost no government funding has been allocated specifically for green technology, except for the Katamon track, which is funded by a Chief Scientist’s Office R&D grant.

Cleantech companies are eligible to receive R&D incentives according to the R&D Law, just as all other technology companies are that meet the criteria; i.e., they must be innovative and have an accessible market.

Lately, the National Infrastructure Ministry’s Seed Fund has started a special track for cleantech companies. This is a first (almost) and extremely rare initiative where funds were specifically earmarked for cleantech.

Grants of up to NIS 625,000 have been offered to entrepreneurs and technology companies in the following fields: energy efficiency, smart networks, petroleum substitutes for transportation and industry, production of synthetic fuels, use of biomass from various sources, hydrogen technology, electrochemical energy storage and renewable energies, such as wind and water.

These initiatives are welcome, but they are not enough compared with grants offered overseas.

Beyond these specific incentives, the promotion of technology companies depends on their ability to perform experiments. Finding a location to perform the beta experiments (dry runs on site at the client’s locale) and putting together a program that will convince established companies to perform the experiments on their site, and to provide the necessary funding, are extremely important in promoting the technology company.

We must hope that this is the beginning of a process – in which the perception of and attitude toward cleantech is changing – to being seen as having economical potential and then be given targeted and unique incentives.

Nadav Gil is a CPA, director and cleantech leader at accounting and consulting firm Deloitte Brightman Almagor Zohar.

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