Several weeks ago a comment on a Wall Street Journal blog described the opportunity in the clean energy power management sector as a “technological niche of Grand-Canyon proportions”.

It is always healthy to be sceptical of hyperbole, particularly when it involves internal contractions of scale into the bargain. However, the impressive quarterly results recently announced by a number of listed clean-energy power management entities indicate that the author of the comment may be not be wide of the mark.

Established global clean energy leaders such as American Superconductor, Itron and Power-One all announced excellent results and made it clear that the clean energy power management sector is expanding swiftly on the back of rapid technological innovation. Driving this innovation are hugely significant spends on R&D.

American Superconductor, a US company that provides multi-megawatt-scale wind turbine designs and control systems into Asia, as a well as a host of emerging smart grid technologies has averaged an R&D spend of 8 per cent of revenue for 2010. Smart meter company Itron has spent 6.1 per cent of revenue on R&D and Power-One, a power management technology firm specialising in inverters for solar panels, has spent 5.7 per cent on R&D for the same period.

The recent results announcements make it clear that clean tech companies more generally are also spending big on R&D. As a percentage of revenue, Siemens, SMA Solar and SAFT have spent 5.1 per cent, 4.6 per cent and 6.6 per cent respectively on R&D in 2010 to date. To take the illustration one step further, for Siemens alone its R&D figure of 5.1 per cent equates to an actual spend of €3.1 billion.

R&D spends of these magnitudes seldom find parallels outside Silicon Valley and it would probably surprise few to learn that a number of the principals of these companies have formerly been based there.

Venture Capital backed Enphase is a case in point. Co-founded by Martin Fornage, a Silicon Valley telecoms engineer, Enphase is one of the companies at the forefront of what promises to be a step change in solar power management technology through its development of cutting edge micro inverters.

Yet there is concern that, far from being a bonanza, R&D spending focused on clean energy innovation is not in fact increasing at anything like the pace within American corporations that a number of influential voices feel it should be.

In a report entitled "A Business Plan for America’s Energy Future," published in June 2010, the American Energy Innovation Council (AEIC), which comprises a group of top American technology executives, called attention to the inadequate and declining levels of US energy technology research and development.

The AEIC voices include, among others, Microsoft chairman Bill Gates, retired undersecretary of the Army and former CEO of Lockheed Martin Norm Augustine, DuPont CEO Chad Holliday, and GE CEO Jeff Immelt. And they forcefully noted that, while energy is a $1 trillion part of the US$14 trillion US economy, the US spends only around $US5 billion – or half of 1 per cent – per annum on new energy research, design and development (RD&D). Or, in other words, not an awful lot more than Siemens. This compares with $US30 billion each year on of bio/medical R&D, or nearly 8 per cent of the United States’ national health budget. Indeed, the report notes that America spends more on potato chips than it does on energy RD&D.

With strong echoes of the debate currently taking place in Australia, Gates and his fellow business leaders argue that, as willing as it might be, the private sector cannot step up and solve this problem alone.

This is for a number of reasons – including the high price of inaction meriting a public commitment – because the massive scale of capital expenditures required in the absence of policy reform makes it too risky for private investors to go it alone. And then there's the obvious and simple reason that turnover in the electrical generation system is incredibly slow.

The report points out (perhaps self-evidently) that “power plants last 50 years or more and are relatively cheap to run once built, so there is little market for new models.” The report also identifies that the difficulty in changing things and making forward progress is that the US federal deficit makes it very hard to find funds to take the steps towards new energy technology.

But Australia, a country which largely escaped the ravages of the GFC, is not in a dissimilar situation, as evidenced by the recent calls from all sides of politics to balance the national budget.

However, Gates and his colleagues believe that options available to generate revenue and kick start the investment process certainly exist; and most obviously include the sale of permits. They consider that “the first $US16 billion of ...greenhouse gas revenues should be devoted to RD&D” and add that new technologies will make it far cheaper to reduce emissions which then become a virtuous cycle of further RD&D-led reductions.

The simple take-away point of the report, however, is that the basic initial investment is physically made and that further funds are committed steadily over the long term.

Gates, et al, do not doubt the ability of the private sector to lead the way, but in the US, as in Australia, federal government must be a willing and able partner in the process given the hugely challenging and complex nature of the task of accelerating energy innovation.

Meanwhile the fossil fuel industry obfuscates, because delay and profit remain inextricably linked.

Tim Buckley is a managing director and Alex Wilkins an investment analyst at Arkx Investment Management