Sweden Puts Its Bets on Green Tech

Sweden's King Carl XVI Gustaf and Queen Silvia in a file photo. The king is a big supporter of green technology.

Lake Trummen in southern Sweden used to be a polluted, weed-choked mess. Now, after a $14 million cleanup, bathers crowd its clear blue water in summer. Växjö, a city of 80,000 that sits on its shores, is vying to be the most environmentally pristine place in Sweden. The town's car fleet is being converted to biogas, a clean fuel based on methane, and a new biofuel factory has created 320 jobs. Växjö has cut its carbon dioxide emissions cut by a third over the past 15 years, and the town even channels leftover heat from the local crematorium into homes.

Swedish business and political leaders think places like Växjö are on to something. A few decades ago the country led the world in developing mobile technology through companies such as Ericsson (ERIC). Now, with telecom sales flattening, business and political leaders think green technology could spark a new export boom—crucial to Sweden, where exports account for more than half of gross domestic product. "There is huge demand around the world for this technology," says Anders Brännström, president of Volvo Technology Transfer, a subsidiary of truck and bus maker Volvo (VOLVa.ST) that has invested about $20 million in clean tech companies.

While Denmark has wind power giant Vestas (VWS.CO) and Germany has a host of big outfits such as Q-Cells (QCEG.DE) that make solar cells and panels, Sweden's clean tech sector is made up mostly of smaller companies. In Växjö, for instance, IV Produkt makes energy-efficient ventilation systems it exports to 15 countries, from Belgium to Ukraine. The company says the systems mean energy savings of 80%, paying for themselves in about two years.

Going Like a Steamroller

Some 30% of IV's $38.6 million in revenues came from exports last year, a number that is likely to hit 50% by 2012, says sales manager Björn Fredriksson. In a Bauhaus-like suburban research park outside Stockholm, a startup called TranSIC is designing computer chips for the power systems of hybrid vehicles. And deep in the pine forests of Boden near the Arctic Circle, Swebo Bioenergy makes systems to burn manure and wood chips for heat.

The company, with close to $8 million in annual sales, says it is deluged with orders from the U.S. and Europe. "This is going like a steamroller," says export manager Mattias Lindgren.

Sweden boasts some 3,500 clean tech companies that together book roughly $14 billion in revenues. Exports, which make up about a quarter of their overall sales, have grown 75% over the last four years. To further boost the industry, the government is earmarking $590 million for environmental projects over the next two years, including $180 million to commercialize green tech. None other than King Carl XVI Gustav has become the green industry's biggest promoter and fan: He heats his suburban Drottningholm Palace with wood pellets and drives himself to and from Stockholm in a dark blue Volvo C30 station wagon that runs on biofuel. Where possible, light bulbs in the royal residences are being replaced with the energy-saving variety. He also has a prototype car that runs on hydrogen.

The 62-year-old king, whose environmental activism goes back to his Boy Scout days, is also taking to the road to pitch Swedish green business. He recently broke ground on a plant that Swedish Biogas International is building in Flint, Mich. "Mother Earth is not feeling well," the king says, "and she's reacting." Green projects such as the biogas plant are one way to help repair the damage."

Royal Example

The king also sees Swedish exports and the environment as natural partners. "We're a small country, so we're dependent on exports. And we've always lived in a clean environment, close to nature." He admits change isn't easy but says, "We have to think in the long term, not short term as we have before, but still make this happen quickly. I try to change my own thinking. We have to make this happen and not just discuss it. I don't like discussions."

And in an interview with BusinessWeek, he gently chides one reporter for flying to Stockholm to talk instead of picking up the phone.

With relatively little venture capital available in Sweden, the clean technology sector is scrambling to raise sufficient funds. But the U.S. ambassador to Stockholm, Michael Wood, is helping out. He has launched a program to steer U.S. venture money and potential U.S. customers to Swedish green tech companies. Of 52 companies on Wood's list, about a third have gotten financing or orders in the past 18 months.

Among the participants is the Sustainable Technologies Fund, run by Swedish entrepreneur Anders Frisk and U.S. venture capitalist AndrÉ Heinz, whose family founded the H.J. Heinz (HNZ) food company. Their fund has invested $2 million in Swebo Bioenergy. The global financial crisis may slow Sweden's green technology industry, but Frisk insists the long-term future is bright. "There will be tremendous growth for 50 or 60 years," he says.

Adds Heinz: "If you're able to offer savings in an economic downturn, you have a viable product, and clean tech does that."

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