UK Election Results Still Unclear for Cleantech

The UK’s first election of the decade has come and gone. The debates are over; election parties have fizzled out; political analysts are poring over the results, trying to divine the state of UK politics and the British economy in the next few years. One thing seems clear: power will be shared by the Conservative party and the Liberal Democrats, although negotiations are not yet over and no agreement has been signed. One thing which remains unclear is what direction economic policy will take; and how this election will affect the UK’s cleantech market.

Some hope, perhaps, will come from power (if any) the Liberal Democrats will be able to wield in science and enterprise policy decision-making after the Conservatives settle into Parliament. Indeed, the pre-election ‘green manifesto’ unveiled by the party’s leader, Nick Clegg, included far-reaching proposals aimed at boosting renewables deployment, cutting emissions, and providing incentives for the green building and green construction services sector, which is becoming increasingly important in the European and US cleantech markets.

However, the election has now passed, and cleantech seems to have been forgotten in the murky waters of negotiation. This is a common trend: pre-election debates focused very little on the environment, or energy, areas in which cleantech firms and entrepreneurs will play a key role in the future. Both parties will need to outline clear, synergistic plans and subsidy and incentive regimes if the cleantech market is to be supported.

This means keeping the focus on large mega-projects, such as the 300 MW Humber Gateway wind power project, or the 1GW London Array offshore wind farm, which will double the UK’s current 1GW installed wind capacity.

However, while strong backing and commitments may remain for large projects already in the pipeline, it is hoped that the election will bring more security and clearer vision to cleantech at a smaller scale, and especially at the scale of small to mid-sized enterprises, and venture-backed firms trying to capitalize on new ideas, technologies, and processes. This seems to be reflected in the current VC funding space; while investment amounts have picked up in the UK in the first quarter of 2010, investors are finding it difficult to pinpoint UK opportunities. Britain only attracts 2.5% of cleantech venture funding at the moment; this already small share is being allocated with difficulty.

The backing of small to medium-sized cleantech firms through official means, and the provision of space and resources where cleantech venture can thrive, is key to the UK’s low carbon future. In previous posts, I have argued for the importance of cleantech clusters, and for the developing maturity of the sector as its service component heats up.

However, promoting enterprise and innovation should also be a priority; and this is a sector where the UK could – and should – learn from Silicon Valley. In particular, fostering an innovation-focused national cleantech market requires changed attitudes to risk and failure; access to management teams able to exploit scale and commercialize products; opportunities for timely exits; and teams which can sell cleantech products efficiently and quickly in this rapidly changing and dynamic market. Forward thinking is needed. Indeed, as the issue of the UK’s deficit looms large on the horizon, the US is debating new, relaxed visa rules which will allow cleantech (and other) entrepreneurs to relocate to the US to start up their own ventures, subject to a minimum $250,000 funding requirement. This is a clear signal that innovation and the commercial development of new products and services is welcome and encouraged; it is, perhaps, the kind of initiative that the UK should take too.

As Nick Clegg, leader of the Liberal Democrats, argued at a security industry event in London at the end of April:

‘I feel very strongly that Britain has a fundamental problem when it comes to sustainability-related enterprise. And it is a problem brought home to me once again when I co-led a study mission of 19 founders and CEOs of UK cleantech companies to California, particularly Silicon Valley, earlier in the year. Stripped to its essentials, our basic, recurrent problem is that we are not good at bringing new solutions — cleantech or otherwise — to scale.’

By Federico Caprotti, writing for Skipso from London

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UK Cleantech Heats Up in January 2010

Wind-powered farm tractors

No, this post is not about protest-happy farmers, nor is it about gas. Picture a wind turbine-powered tractor. Good. Now that I’ve got your attention, read on….

One of the trends to watch in cleantech is the tie-up between established engineering, power, utility, and media firms and smaller firms operating within the cleantech sector. This creates synergies and economies of scale, and gives cleantech firms access to management teams and capabilities enabled by these larger players.

However, positive synergies can also be reached when two firms with a cleantech focus merge, especially if these companies’ activities can complement their respective industrial or service focus. This is also the point made by a recent publication by Ernst & Young. The report Cleantech Matters. Going Big: The Rising Influence of Corporations on Cleantech Growth, argues that for ‘investors and entrepreneurs, the increasing interest and activity of multinational corporations in cleantech emphasize the growing market opportunities in this arena.’

Specialist Energy Group on the horizon?

A sign that this trend is heating up in the UK is the recent news that Nviro Cleantech, a UK-based low-carbon technologies commercialisation firm, is close to announcing a reverse takeover of Southbank UK. After the acquisition, the two companies would merge to form a new entity, the Specialist Energy Group. The deal would mean a tie-up between Nviro, a company with a wide experience base in the cleantech investment sphere, and Southbank UK, which describes itself as an ‘acquisitive niche engineering group’. Indeed, Southbank UK’s activities have included the acquisition of engineering firm Hayward Tyler, which is focused on pump and fluid-filled motor technologies for the oil and gas, power generation, chemical processing, and renewable energy industries.

Southbank UK is listed on the Channel Islands Stock Exchange, where it was floated in 2006. Nviro was floated in 2007 on London’s Alternative Investment Market (AIM); one of the positive aspects of a takeover, according to Tom Young at BusinessGreen, is that:

‘The move would give Southbank access to London’s Alternative Investment Market and better access to capital as it looks to reduce debt and broaden its shareholder base. It is also likely to improve its access to the fast-expanding renewable energy market.’

According to the acquisition announcement by Nviro, if a takeover goes ahead, Southbank UK’s shareholders will own approximately 52.68% of Specialist Energy Group, while Nviro’s shareholders will hold 26.34%. As a result, subscribers to the share offering will own 20.98%. Because Southbank UK’s size is larger than Nviro’s, the deal is classified as a reverse takeover.

Farming the wind: Ecotricity’s electric tractor

Another way of achieving horizontal as well as vertical synergies is through internal development and expansion into lateral markets without acquisitions. This seems to be the direction taken recently by, for example, electricity company Ecotricity. The firm is associated most closely with the delivery of electricity, although it hit the headlines in late 2009 with its announcement that it would supply biogas (‘green gas’) for the first time to UK households.

However, the firm announced plans this January to expand into low-carbon energy generation and transport: the first step will be the development of an electric tractor, tapping into the food production transport market. There are even rumours that the final design will be wind-powered, which would be an exciting development. Watch this space.

By Federico Caprotti, writing for Skipso from London

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