Population Growth is Good for Innovation
Victor
Bivell
Eco Investor
Novermber 2009
Many environmentalists
are against population growth, as shown by the debate about Australia
speeding towards 35 million people. But a higher population can also help
the environment.
Contrary to
the impression, there is no direct correlation between population numbers
and environmental damage. The direct correlation is between the quality
of political leadership and environmental damage.
Spain proved
this again last month. Spain's electricity system often runs above 40
per cent on renewables and, according to Greenpeace, on one particularly
windy day in late October it tipped up for the first time above 50 per
cent.
Spain has about
40 million people so that was about the equivalent of supporting Australia's
22 million people on renewable energy. Yet renewable energy supplies only
6.5 per cent of Australia's electricity needs, enough for about 1.4 million
people.
Spain's renewable
energy comes mostly from wind and some help from photovoltaics and solar
thermal. Australia has a lot more wind and a lot more sunshine than Spain.
We also have a lot more ocean, a lot more geothermal potential, and a
lot more biomass. But clearly we have only a fraction of its political
leadership.
I wish I could
argue that a bigger population would guarantee Australia better political
leadership, but Denmark would prove me wrong.
Denmark has
five and half million people, about a quarter of Australia's population.
It is even smaller than NSW which has 7 million people. Yet renewables
supply 17 per cent of Denmark's energy. Like Spain, much of it comes from
the wind.
If Australia
produced 17 per cent of its electricity from renewables that would be
the equivalent on a population basis of Western Australia and South Australia
combined.
So a bigger
population need not mean more environmental damage. It would certainly
give us a bigger talent pool from which to draw our political elites.
But if the quality of leadership is important to you, the medical advice
is don't hold your breath.
The real benefit
for Australia of a larger population is a larger domestic market and how
this can make it easier to commercialize innovation, including our abundance
of environmental innovations.
Our small market
has always been an issue for local innovators and their financial backers
and it's one of the reasons our venture capital sector is going nowhere
in particular. As well as developing world leading technology, our innovators
have the extra hurdle of having to commercialize it on the other side
of the planet. That takes more money, more time, and more sweat.
How much easier
it would be if we had a California or half a Germany in our backyard.
Our small domestic
market also means Australian investors are likely to miss out on two of
the biggest technologies coming down the environmental pipeline - the
electric car and the smart grid.
On the electricity
side we have listed electricity suppliers, including listed green energy
suppliers. But on the technology side the Australian Securities Exchange
doesn't offer exposure to electric car makers for the same reason it doesn't
offer exposure to any car makers.
The best local
investors can hope for is a listed local parts supplier, or a favourable
exchange rate as they look overseas.
Ditto with
the smart grid.
Through high
tech componentry such as smart meters and broadband communications, the
smart grid will let consumers do clever things like make their electricity
usage more efficient, recharge their electric cars at cheap rates, and
get paid for feeding electricity into the grid.
Utilities will
also become more efficient, improve electricity supply and better integrate
intermittent renewables such as wind and solar.
Like the electric
car, the smart grid should be terrific.
Overseas markets
are already on to it and in September the NASDAQ Clean Edge Smart Grid
Infrastructure Index was launched to help investors.
But will ASX
investors see much of the action?
A large chunk
of the benefits from Australia's smart grid will flow to international
electrical manufacturers, private Australian companies and government
owned utilities including perhaps the new National Broadband Network.
Some listed
companies will benefit, but these are more likely to be on the electricity
side rather than the technology side.
That's what
can happen when you're small. So more people please. But do it well.
This
article also appeared in The
Business Australian
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