(By Nicholas Parker) - With the end of each year come the inevitable end-of-year lists.

So, as 2007 draws to a close, let me offer some of the Cleantech Group’s thoughts on what developments the sector might see in 2008, based on what we’re hearing and seeing first hand and from industry insiders around the globe.

While some of the predictions below could be considered worrisome, as with all emerging trends, we encourage readers to ask yourself whether you believe our assertions—and, if you do, consider how you can best capitalize on them.

The following list debuted to members of the Cleantech Network at the Cleantech Forum in Toronto in October.

1. Green as global political platform

Articulating clean—or “green,” to use language that seems to be resonating best with voters—policies will no longer be differentiation for political candidates in 2008. If 2007 was the year that environmental concerns emerged from the margins to become a central leg of a politician’s platform, then 2008 will be the year that articulating environmental positions and cleantech initiatives will be table stakes for any world leader. Indeed, expect international political cooperation on some major environmental topics to accelerate while the environment also becomes a major trade and security issue.

Green policies were a cornerstone of 2007’s 17th national congress of the Chinese Communist Party. They were fundamental in the election of German Chancellor Angela Merkel and French President Nicolas Sarkozy, and are central tenets of all candidates jockeying for position for the 2008 U.S. election. And, of course, the year has come to an end with a new Kyoto-friendly federal government in Australia.

In 2008, green credentials will be de rigour for aspiring politicians everywhere: from Chinese mayors to U.S. Senators. The next generation of green political leadership understands “smart” environmental policies create knowledge-based jobs, revitalize economies and solve major sustainability challenges.

2. Cleantech drives new business and financing models

This year saw enthusiastic adoption of new financing models to accelerate cleantech adoption. One of the most visible examples: the solar power purchase agreement (PPA), which offers organizations the ability to receive a solar system for free, as long as they agree to pay the owner of the system a fixed price for the electricity generated by the array over its lifetime. More and more companies are now rushing to offer PPAs in solar and other energy sectors.

In 2008, look for the lines between venture and project financing to blur even more than they started to this year, as in cellulosic ethanol investments. And watch for even more new, creative models in 2008 intended to jump-start the adoption of clean technology, from asset-backed finance to carbon debit cards.

Bringing cleantech to market is requiring a suite of financing that is only just starting to come together.

3. Price per bushel on par with price per barrel

The front-month contract for a bushel of corn (56 pounds) on the Chicago Board of Trade was $1.86 at the end of 2005. Recently, it hit an all time high of $9/bushel, due to an unprecedented combination of droughts, sky-rocketing demand and diversion of land for fuel crops, causing a cascade of repercussions.

Much has been written about the impact of corn prices on the largely corn-based ethanol market (two of our own articles: Corn ethanol unprofitable by 2008, says Iowa State and Ethanol sector slapped on bad VeraSun earnings). Similar relationships exist with the price of soybeans, the dominant biodiesel feedstock.

The prices of commodities like corn and soy in 2008 will continue to pose profitability challenges for current ethanol and biodiesel pure plays, much like the oil crisis of the 70s impacted virtually all manufacturing industries.

This will, of course, create opportunity for non-commodity based next generation biofuels like cellulosics and others. Just don’t expect them to become cost competitive in 2008.

Further, high prices per bushel will signal that resource scarcity and security are not just energy issues. Prices for many, if not most, commodities are at or are near record highs. Be it food, fish, metals or minerals, 2008 will bring a heightened understanding of the opportunities for resource-conserving technologies in the rural economy.

4. Increasingly fragile water supply at risk

We don’t fancy ourselves doomsday prophets. But we at the Cleantech Group can’t help but note the impact large, catastrophic events like Hurricane Katrina have had on public awareness of climate change.

Crises-level events show no signs of abating. If anything, “oscillations” from the norm are getting bigger. In particular, we fear that after years of warnings, there could very well be a crisis event that draws attention to the fragility of existing fresh water supplies.

Whether it’s the receding glaciers of Middle Asia jeopardizing the water supply to hundreds of millions on the plains of China and the Mekong delta, or dike problems in Northern California’s fragile delta region affecting the availability of clean water to virtually the entire population of California. Or whether it’s the effect of drought on biofuel output or reduction of water availability for tar sands oil extraction in Alberta, problems could be coming. We could see any of these as early as 2008.

Will we be prepared to deal not just with the crises themselves, i.e. the symptoms, but with what they mean? Will new models for decentralized, technology driven water solution providers start to take off? How will Wall Street respond?

5. “CleanChip” clusters grow in Asia, EU and Middle East

There will be further consolidation of cleantech market leadership in 2008 at investment, corporate and geographical levels.

From venture investors to investment bankers, the top performers are increasingly apparent and they are building partnerships around the world to gain access to the best opportunities and help speed up value creation. Major industrial and consumer corporations are entering into partnerships with each other, as well as partnering with innovative startups, public labs and universities and NGOs to protect existing markets and find new cleantech ones. Finally, the cleantech industry is clustering around a select number of urban hubs in Asia, Europe, the Middle East and North America.

In 2008, it will be much clearer who is winning the race to finance, build and host cleantech’s next generation of market leaders.

6. Solar breakthroughs, commercialization of liquid fuels and better batteries

We believe 2008 will see $1/watt solar photovoltaics in the lab—and perhaps from a lab in an unexpected location—although time-to-market and related manufacturing scaling issues are another matter. Solar production costs will continue their steady march downwards.

Also look for traction in next gen biofuels, such as bioalcohols like butanol, isobutanol and others, or syngas-derived fuels like FT diesel, biomethanol, biohydrogen or bio-DME. Time is getting short for warding off the rising criticism for biofuels support. 2008 could see opposition to biofuels as vociferous and ill-informed as that over GMO food. Evidence of the imminent arrival of next gen is vital.

We anticipate continued battery breakthroughs in 2008, but would carefully watch the price/performance of lithium ion-based batteries; lithium carbonate prices were up 59% in 2006 and were still rising in 2007.

Whether it’s for micro-devices, distributed generation of alternative energy or larger scale deployments for smart grid applications, energy storage is the weak link in the emerging sustainable energy paradigm. As such, watch for some significant business announcements in 2008 that should speed commercialization of new storage devices.

Finally, given progress in battery technologies and increasing awareness of the difficulties of a hydrogen-based automotive economy (see Hydrogen economy bubbling along and Hydrogen cars non-starters) we believe 2008 will bring increasing awareness that all-electric vehicles will ultimately be viewed as more practical than fuel cell-based vehicles. Indeed, expect the conversation to heat up in 2008 over the very future of liquid fuels themselves.

7. China graduates from manufacturer to end-market

The Chinese economic powerhouse has propelled several of the better-known renewable energy innovations of the last two years; witness SunTech’s rapid rise as a leading solar manufacturer. This coming year will see increasing recognition of China’s potential as a business, consumer and infrastructure market for clean technologies.

With the Chinese government arguably showing more significant commitments to embracing cleantech as a way to lower carbon emissions than most other industrialized countries, China should become one of the most sizeable markets for the sector, with one estimate putting just the renewable energy opportunity for China at $265 billion.

Other key growth areas include just about anything to do with energy savings, waste management and recovery, building materials, industrial efficiency and water purification and conservation.

8. Energy efficiency and demand response generate smart grid savings

Even the staunchest advocates of intelligence in the power grid acknowledge it’s going to take significant investment and time to realize the vision. Deploying enough smart meters, for instance, will be no small task.

We believe we’re going to take a few more steps forward in 2008 towards the vision of a smart grid in a somewhat unlikely way: through efficiency and demand response technology companies.

Not waiting for smart meters, a whole energy efficiency industry has emerged to help enterprises and homeowners save on energy costs now. And the successful IPOs of demand response companies Comverge and EnerNOC illustrate that enough companies are recognizing savings from these two companies that there are profits to be made here, now. And investors have noticed. In 2008, watch for more of their kind.