Are Israel’s cleantech glory days over? The hype might be over, says leading business analyst group.
While Israel is often portrayed as a global leader in cleantech with an almost endless possibility for growth, a new report from the international consulting firm Ernst & Young published by the Israeli business daily Globes shows that potential is one thing and reality something else.
According to the study, which was conducted on behalf of the Ministry of Environmental Protection, the industry is suffering from a lack of funding for the complicated experience necessary because of the unique character of the field. Since the private sector simply can’t provide enough funds, the government needs to step in.
Diversity is key
There is also a sharp dominance in the industry of companies that are focused on clean energy and water – with 482 companies active in the fields of energy, water and environment – but only 89 that are working on air, and garbage and materials handling.
The leading area is perhaps not surprisingly renewable energy as Israel is home to companies such as SDE Energy, SolarEdge, and Gilatz to name just a few of the over 225 companies that are currently up and running. More start ups and deals waiting to be closed are also pending.
Solar energy is the sector that Ernst & Young believes has the most growth potential, according to Globes, with lower electricity prices working as incentives.
Other future growth areas include energy efficiency, energy storage and bio fuels.
The second largest field after solar is water with 166 existing companies in Israel (such as IBM). However, according to the economists at Ernst & Young, many of the companies are targeting conservative infrastructure firms with a slow technology cycle. The water sector is also attracting relatively little venture capital as the segment is heavily dependent on engineering.
One of the most important observations of the report is the decrease of investment in the local Israeli cleantech industry; the report points out that many of the solar and water companies that made it were back by government support from the office of the Chief Scientist or the Israeli Export Industry.
While Israel came out of the financial crisis relatively unharmed, private investment in cleanteach has been steadily shrinking from record levels of $300 million in 2008 to an expected less than $100 million in 2009.
But everything is not doom and gloom as another study by Ernst & Young conducted among 308 corporate leaders suggests that cleantech is not only a good investment, it’s also a way to cut costs.
More articles about Israeli Cleantech: