The Carbon TrustExperiences of a UK low-carbon innovation centre

Dr Martin JohnstonInternational Innovation manager Carbon Trust, UK

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Agenda

The Carbon Trust: 2001-2009

Delivering low-carbon technology innovation

Climate Innovation Centres

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The Carbon Trust is an Innovation Centre focused on carbon-reduction

Set up by the UK government as an independent company, with private and public sector Board

Our mission: to accelerate the move to a low carbon economy

We work with organisations to reduce carbon emissions and develop commercially viable low-carbon technologies

To deliver our mission we bring together public and private funding and encourage cross-sector partnerships

Any profits we make are reinvested to help deliver our mission

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We provide companies with advice, funding and support new technologies

We cut carbon today

Providing our customers with expert advice, finance and accreditation

Stimulating demand for low carbon products and services

We cut future carbon

Developing new low carbon technologies

Identifying market barriers and practical ways to overcome them

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Results to date

Since our launch in 2001 the Carbon Trust has:

Enabled our customers to save 23 MtCO2 and £1.4 billion

Helped catalyse £1 billion of third party investment

Accelerated the commercialisation of new low-carbon technologies that will save over 20MtCO2 a year by 2050

Supported the development of over 250 new low-carbon technology products and companies in the UK

Leveraged £7 of private money for every £1 of public money

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We are being asked to share our experiences globally

Our UK experience has led to international interest: China, US, Australia, Qatar; recent delegations from Brazil, Sth Korea, Japan

£10 million Joint Venture agreement signed with China Energy Conservation Investment Corporation

Product ‘footprinting’ and labelling projects underway in USA, Europe and Asia

Assisting Australia to develop the ‘Australian Carbon Trust’

Exploring collaboration opportunities and creating a clean-tech fund

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Agenda

The Carbon Trust: 2001-2009

Delivering low-carbon technology innovation

Climate Innovation Centres

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Cleantech innovation is challenging

Risky projects, uncertain benefits

Low-carbon and clean technologies are not reliably valued by the market; Government policy and regulation are the principal drivers

Variety of technologies, but not always suitable to local conditions

Limited capacity to adapt and deploy technologies

Limited access to capital of the right size and mindset

Unfavourable regulatory and political climate, subsidy structure

Not an ‘overnight’ fix: technologies can take 10-30 years to mature and yield benefits

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Time / experience / capacity

Tech

nolo

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Tota

l re

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pu

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investm

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Focus of CDM and multi-national donor funding

Focus of national R&D

funding

A resource gap prevents low-carbon technology deployment at scale

Increasingly attractive to private investors

Cost of fossil fuel generation

Cost of fossil fuel generation with

carbon price

Cost of fossil fuel generation with

fossil fuel subsidies

CDM

Illustrative

Resource Gap

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Companies need support to overcome barriers along the innovation journey

Innovation: moving from concept to commercial product by overcoming a diverse range of technology, business, market and regulatory barriers

Technologyjourney

Regulationjourney

Companyjourney

Marketjourney

1 or 2 individuals

(sweat equity)

Form venture (or new unit)

(Friends & family)

Bring in first outsider

(Angel or seed)

Recruit specialists

(Venture Capital)

Grow operational staff

(IPO)

30-50 employees

(Revenue)

No interaction

(Technology push)

Markets identified

(Indifference)

Market Field trial

(Recognition)

Early adopt-ers & niches

(Benefit quantified)

Rational economic purchase

(Market pull)

Technology & market evolution

(Feedback)

General Regulation neutral or positive

General Regulation neutral

Specific Regulation positive

General Regulation positive

General Regulation neutral or negative

Proof of principle

Proof of Concept

Proof of viability

Proof of scalability

Proof of durability

Proof of value

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Technology commercialisation: Directed research accelerator

Advanced Bioenergy: Pyrolysis oil for transport

OpportunityDevelop pyrolysis oil to replace fossil fuels in existing transport infrastructure delivering greater than 80% carbon savings

ChallengeUpgraded high quality pyrolysis oil for use in conventional refineries

SolutionResearch accelerator to speed developmentUp to £20 million investmentFocus on waste biomass

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Technology commercialisation: Directed research accelerator

Advanced Bioenergy: Algae biofuels

OpportunityPotential for CO2 savings >80% relative to fossil fuels6-10 fold increase in biomass yield per hectare compared with conventional biomass feedstocks – without need for fresh water

ChallengeDevelop low-cost, high productivity production systems at scale to

commercialise the use of algae biofuel by 2020

SolutionPhase 1: 3-year £3-6 million R&D projectPhase 2: 5-year £10-20 million large-scale demonstration project

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Technology commercialisation: Directed research accelerator

Organic Solar Photovoltaics

OpportunityDeploy 1GW of organic solar PV by 2017, which could deliver CO² savings of over 1 million tonnes per year.

ChallengeHalve the cost of organic solar PV technology within the next ten years

Solution£5 million Advanced PV accelerator Partnering with Cambridge University and The Technology PartnershipCatalyst to move projects through “valley of death” from research through to attractive investment for strategic buyers

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Opening future markets: Technology accelerator

Offshore wind

OpportunityGenerate 25% of UK’s total energy needs by 2020 250,000 new jobs, £65bn economic value by 2050, £2.5 billion a year global industry

ChallengeMake cost of wind energy competitive

Solution £30 million, 5-year program to cut costs of offshore wind energy by at least 10% Uniting individual organisations across the sector

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Opening future markets: Technology accelerator

Marine Energy

OpportunitySupply up to 20% of UK’s electricity needs from marine energy

ChallengeReducing cost of wave and tidal stream devices by up to 20% by 2020

Solution£3.5 million programme to accelerate cost reduction focusing on new device concepts, component technologies and installation, operation & maintenance

£22 million Marine Renewables Proving Fund to provide finance for the demonstration of wave and tidal technologies.

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Company journey:Companies supported

90 companies incubated since 2001– Raising £86 million in private investment – Leveraging £16 of private funding for every £1 on incubation

services

Portfolio of 12 early stage venture capital, equity investments – £250,000 to £3 million invested per company– £12.2 million invested to date– £109 million of private funding leveraged

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Example company support in China:Joint Venture with CECIC

Planned activities, Registered Capital £10m:– Technology development– Incubation– Investment

CECIC approached Carbon Trust as ‘experts’ in identifying and developing low carbon technology – wanted pipeline for China

Technology collaboration – we are each providing funding and have control at Board level in terms of how investments are made

CECIC are majority owners: vested interest in providing access to China and successful market entry and growth for companies

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Opening future markets: Providing insight and analysis

Shaping future policy frameworks

Identifying market opportunities and development

Recent studies include:

– Focus for success: A new approach to CommercialisingLow Carbon Technologies

– Offshore wind power:big challenge, big opportunity

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Agenda

The Carbon Trust: 2001-2009

Delivering low-carbon technology innovation

Climate Innovation Centres

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The Innovation Centre vision

A national, independent body working closely with Government, business and the (energy technology) research community to help create a sustainable energy economy, by bringing clean energy tothe factories, offices and homes of millions

Approach:– Independent entity, clear lines of responsibility, governance– Tailored to local needs, capabilities and priorities– Focused on delivery, not policy– Creating fruitful partnerships between entrepreneurs, research

centres and the business community– Drawing on eight years of Carbon Trust experience of helping

to accelerate the commercialisation of low-carbon technology– Concept to be moulded in discussions like this one, by local

stakeholders

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Key features and benefits

Provides a focal point for clean-tech activity and knowledge-sharing, and a bridge between entrepreneurs, commerce and science

Balances delivery of practical assistance today against future needs

Adequately resourced, designed to serve the country for the future

Delivering:

Technologies that work and bring energy supplies to millions

New ‘energy-efficiency’ and ‘clean energy’ technology sectors

Local skills and capacity, through the provision of training

Favourable national political and regulatory frameworks

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Critical success factors

Funding, goals and governance:– Agreed goals, terms of donor support and success criteria;– Appropriate local control of problem definition and project

prioritisation and local ownership of the solution – Sufficient funding certainty and time horizon to allow planning

and implementation of complex projects; minimum 5 years– Sufficient public funding to undertake pre-commercial activities– The right stakeholders engaged in centre design

Activities and approach:– Independent viewpoint, but collaborative with Government;– Leveraged with private sector funding;– Project prioritisation process (CO2 and economic potential);– Full spectrum of activity from R&D to deployment (tailored to

local needs)

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Developing countries clearly need a tailor-made solution

Enormous energy-related challenges face developing countries: expand energy sector; increase energy access; face the climate problem

Need for technology innovation that is shaped by local needs androoted in local context to meet these challenges but sparse support in global initiatives for innovation

A network of Innovation Centres based on public-private partnerships can help advance developing-country-relevant technology innovation and capacity-building

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Questions?

Dr Martin Johnston

Martin.Johnston@carbontrust.co.uk

www.carbontrust.co.uk

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Innovation centre concept founded on local knowledge

Challenge: How could resources be effectively used to catalyse low-carbon innovation and deployment in the developing world?

Key inputs:– Carbon Trusts’ knowledge and experience of accelerating low-

carbon innovation– Understanding of the landscape:

– Developing world emissions and future emissions growth– Existing multi-lateral funding and support mechanisms

– 30 in-depth interviews with experts in multi-lateral agencies, NGOs, research institutions and businesses in the developing anddeveloped world

– Case study analysis of 3 countries and 6 technologies

The Result: The concept of using funding to set up self-sustaining national innovation centres across the developing world as a means of catalysing low-carbon innovation and deployment

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Innovation centres accelerate innovation and remove barriers to low carbon development

Low Carbon

Economy

Harness Markets

- Carbon markets drive cost efficient emissions abatement

Accelerate Innovation

- Innovation delivers new or lower cost, low carbon technologies

Remove Barriers

- Address the barriers inhibiting low carbon development

Protect Carbon Sinks

- Land use changes can drive huge emissions or create carbon sinks

Key Levers

• Global targets and trading mechanisms (e.g. Kyoto, CDM)

• National targets and trading mechanisms (e.g. CRC)

• Carbon taxation

• Support for R&D

• Support for demonstration and pre-commercial deployment (including technology transfer)

• Enabling conditions (e.g. planning rules, IPR)

• Regulation and standards

• Awareness raising and information provision (for business + consumers)

• Finance

• Property ownership + rights

• Compensation mechanisms for alternative land uses

• Links to carbon markets

* Stern review identifies 3 key tasks – harness markets, accelerate innovation and remove barriers. However, chapter 25 acknowledges the importance of forests land use change and sinks represented here as a 4th element.

Addressed by international negotiations

Key challenge requiring national

level action -focus of

innovation centres

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Accreditation: recognising commitment to carbon reduction in products

Standard, comparable approach to carbon footprinting of products and services

Rewards commitment to real carbon emissions reduction

Carbon Reduction Label awarded to more than 2,000 products and services

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