Becoming commercially viable without state support is the focus for the next generation of renewable energy entrepreneurs. GrowthBusiness talks to the winners of the Rosenblatt New Energy Awards about survival in an age of austerity.
After a trying few years, the new energy industry had hoped for a better ride in 2010. While storm clouds lifted for many businesses, resulting in rising profits, new commercial deals and growing market shares, governments remained more focused on urgent economic woes than pressing environmental problems.
More recently dark shadows began to form on the horizon with the coalition government, elected last May, sending what could be described as mixed messages on green policy.
Chancellor George Osborne announced a number of green initiatives in the Budget, namely the creation of a ‘green investment bank’ that will have access to up to £3 billion of funds to support low-carbon investment and a carbon price floor for the power sector.
However, critics argue the government is harming the future of solar investment by threatening to overhaul the feed-in tariff scheme, which has already led two fund managers to suspend their solar VCTs.
Despite the challenges, entrepreneurs in the space remain confident and the fourth Rosenblatt New Energy Awards, held at London’s Natural History Museum, helped to reinforce their belief that the future is bright.
At only 40, Lifetime Achievement Award recipient Arthur Potts Dawson cheekily comments that ‘maybe it should be called my half-lifetime achievement award’.
A champion of sustainable catering, Potts Dawson insists that it is possible to maintain the highest culinary standards without harming the environment.
His two eco-friendly London restaurants, Water House and Acorn House, are committed to efficient waste management and follow a policy of ‘refuse, reduce, reuse and, where no alternatives exist, recycle’.
In addition, he is the driving force behind the People’s Supermarket, which aims to connect an urban community directly with local farmers.
Potts Dawson says it was the birth of his first child eight years ago that led him to make the connection between food and planning for life.
‘The first restaurant I opened was very much focused on energy and how I could save energy and waste, and prevent the planet from being consumed so fast that my son won’t have time to enjoy it,’ he says.
The path to success hasn’t been easy for the self-described ‘optimistic realist’. Potts Dawson laments a lack of government support for his projects, saying that he believes politicians are offering ‘knee-jerk’ programmes rather than developing true green policy.
He explains, ‘I have been banging on government and local council doors for a decade now, and they say, “Well done but sorry, we can’t help”.
‘I personally haven’t felt any support for a really green push. I would like to have my businesses supported by the government because they are test cases.’
He adds, ‘The government are happy to say, “Get on with it, pay your taxes and be a good boy”. To be honest with you, if this government are going to make changes, they need to become “planetarian”, they need to take the planet into consideration, rather than David Cameron’s image.’
AIM-quoted Bglobal hasn’t enjoyed any financial assistance from the government either. However, chief executive Tim Jackson-Smith says supportive legislation has played a large part in the company’s success.
Named Company of the Year, Bglobal provides smart meters as a viable, low cost way for energy suppliers and businesses across the UK to record, monitor and analyse energy usage.
The company, which moved into the black and made its first acquisition last year, has installed more than 130,000 smart meters to date.
‘The government support is not financial. They are making it law that meters need to be swapped [for smart meters] – that is a big driver in any market,’ he comments.
‘People recognise the power of smart metering and the value of energy management. Obviously the government is important to what we do, as it is for the whole industry, but it is not critical.’
Pilgrim Beart, founder of Deal of the Year winner AlertMe, makes the same comment. The company, which provides tools to help manage, save and automate energy in the home, raised £15 million last year, gaining backing from existing investors Good Energies, Index Ventures and SET Venture Partners.
It also added a new strategic investor and commercial partner in British Gas in a £20 million deal that will see AlertMe’s products and services deployed to the utility’s customers.
Beart observes that the coalition government took its time to pin its colours to the mast as far as new energy was concerned. Until recently, he says, ministers had been ‘incredibly silent’ compared with the past Labour leaders, and he was ‘worried about whether they had dropped the ball’.
However, he has been encouraged by recent announcements that suggest a stronger focus on helping consumers make green choices through the “Big Society” programme, saying this approach works well if the tools to achieve success are available.
‘The consumer can and will participate in radical change for the benefit of the environment, but they have to be empowered to do that,’ he explains. ‘They have to have the opportunity to take the right choices.’
Leading from the front
Rather than focusing on consumer empowerment, John Lewis Partnership has committed to educating and supporting staff members to achieve its green objectives.
The manager of Waitrose supermarkets and John Lewis department stores was named Retailer of the Year for not only setting tough green targets but also achieving them.
It increased energy efficiency by 22 per cent at Waitrose and 23 per cent at John Lewis, based on 2004 levels.
Nigel Keen, property services director at John Lewis, adds that the partnership has introduced newer, greener refrigeration technology to achieve these results and hopes to continue a policy of sourcing 100 per cent of its energy from renewables – the only major retailer to do so.
‘We feel it is the right thing to do,’ Keen says. ‘But, it is becoming an increasingly challenging thing to do to ensure that the sources that you are procuring from are truly green. We are determined to stick with it as long as it remains practically possible to do so.’
Another retailer looking to shrink its carbon footprint is Sainsbury’s, which has enlisted the expertise of RLtec with a decade-long commercial deal that sees the company’s green smart grid technology installed in more than 200 stores. The project is expected to save 10,000 tonnes of carbon annually.
Balance of power
Dubbed New Energy Rising Star, RLtec last year won an investment of £6 million from a venture capital syndicate, which will enable it to roll out its technology across the UK, the US, and Europe, as well as the emerging Chinese and Indian markets.
Simply put, its software manages the power consumption of equipment and automatically responds to changes in the balance between supply and demand on the grid.
Appliances such as heating and ventilation systems switch off and on throughout the day and RLtec’s product changes the timing of these ‘switchings’ to match demand.
Sales and marketing manager Mark Davis says business growth is expected to increase in line with the renewable energy industry as a whole. ‘Right now the balancing market in the UK is worth about £216 million.
But by 2020, the market is forecast to be in excess of £1.1 billion, mainly because of the expected rise in wind power generation and other renewable energies that significantly increase imbalance in the system.’
On government support, Davis says the company falls into a policy ‘gap’.
‘When you have a technology like ours, where we save carbon at the point of generation, not the point of use, we are not recognised under many schemes because they are so specific,’ Davis observes. ‘Flexibility around legislation would help us.’
Wave of change
One Scottish company which has benefited greatly from public support is Aquamarine Power, a developer of wave energy technology.
Since Martin McAdam joined as chief executive in August 2008, the company has grown from five to 50 people with £36 million of public and private financing secured. The company aims to ‘provide a viable commercial alternative to offshore wind’.
Named Entrepreneur of the Year, McAdam says the backing of the Scottish government has been instrumental in the success of not only the business, which is planning for a commercial launch of its technology, but the marine power industry as a whole.
‘Government intervention has been very important,’ he comments. ‘There are two organisations, the Technology Strategy Board and the Carbon Trust, which have supported this industry. Without them, I would say this industry wouldn’t exist. Their government grants have allowed very substantial private investment in our company.’
Here comes the sun
Private investment in new energy has also produced results. The 70 megawatt Rovigo photovoltaic (PV) project, awarded Project of the Year, is the largest single-operating PV solar plant in Europe.
Originally jointly owned by Sun Edison and Banco Santander, the northern Italian plant was sold to First Reserve Capital in October 2010.
In the first full year of operation, the system will generate enough energy to power over 17,000 homes and avoid 41,000 tonnes of carbon dioxide emissions.
Ricardo Díaz, executive director and head of renewable investment for Europe at Santander Group, comments, ‘Our business model is to support local developers, form strong industrial partnerships and sell the projects to long-term institutional investors once they are operational.
‘We have a positive view on renewable energy and the low carbon economy and plan to continue investing in it.’
He concludes, ‘In order to do this, it is paramount to have stable, credible regulatory regimes where investor confidence is not threatened.’