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Pulling ahead:innovating for
low-carbon leadership
CBI onclimate change
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Foreword 04
Executive summary 05
Recommendations 06Focus on priority technology families to maximise UK strengths 08
Develop the conditions to allow business to invest 16
Embrace innovation to drive further business success 32
References 37
Case studies
Ford Britain: developing low-carbon engines 10
Ma (Innovation): conceptualising new hybrids 11Barclays: helping London lead in carbon finance 12
QinetiQ ZephIR wind profiler: applying research 13
RWE npower: investing in offshore wind opportunities 14
BP: benefits of long-term policy 17
Imperial Innovations: promoting incubation 20
Corus: unlocking EU funding 21
Rolls-Royce: investing in low-carbon aviation 22
Graham Construction: low-carbon public procurement 24Transport for London: procuring hybrid buses 24
Wrightbus: delivering low-carbon public transport 25
Pelamis and E.on: demonstrating marine power 28
AlertMe home smart energy system: skills driving new ideas 30
Sun Microsystems: greening data-centres 33
Ford Britain: reducing emissions through its people 34
Cisco Telepresence: harnessing innovative thinking 36
Contents
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Foreword by Richard Lambert, CBI
We often read about the need to build to alow-carbon economy and hear about the newideas that will shape the way we live, work and dobusiness in the future. And so we scan the horizonsto 2020, 2030 and 2050 and imagine what mightchange and how.
But the reality is that the future is taking shapearound us right now. British companies arealready investing in new technology, demonstratingthe art of the possible; developing, testing andcommercialising the technologies that are alreadysetting us firmly on the path to a low-carbon UK.
Companies are changing how we get around, withnew low-carbon buses and cars coming off thedrawing board and on to the roads, and changinghow we use energy, with more of our homes gettingelectricity from wind, and new smart technologyhelping us cut down our energy use. Firms are alsothinking further ahead and investing in newtechnology to manufacture low-carbon steel andenvironmentally-friendly aeroplane engines, createnew fuels from plants and energy from the sea.
And these are just some of the ideas profiled in this
report. Through the lens of low-carbon innovation,it demonstrates how businesses are alreadybeginning to change the shape of things to come indesign, construction, engineering, manufacturing,ICT, procurement, power generation, services,investment and transport.
But the importance of this report is not just toshowcase what is already happening. It is alsoto galvanise action to ensure we make the mostof this start. Government has an important roleto play in making sure business is able to buildon this beginning. Without action by governmentto help create the right conditions for investmentby supporting new low-carbon technology basedon our existing strengths, we risk missing theopportunities that will present themselves upand down the supply chain.
We are seeing the beginnings of a new economy
developing in front of us but we need to stepup the pace to ensure we make the most of ouremerging competitive advantage from our worldclass expertise. Determined action from governmentand business will create the right conditions for newopportunities at home and abroad, so the UK cantake its place alongside the worlds future leadinglow-carbon economies.
This is not a pipe dream the opportunity is hereand now so lets grasp it.
Richard LambertDirector-general, CBI
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Executive Summary
Innovation will drive the low-carbon journey.Indeed, meeting our long-term climate changeobligations and securing future energy supplieswill only be possible by rethinking our businessmodels and implementing the next-generationof low-carbon technologies.
This transformation presents enormous growthpotential: the market for low-carbon andenvironmental goods and services in the UKis already estimated at 106bn and is expectedto grow rapidly throughout the coming decade.1
Globally the market is estimated at 3tn whichmeans that all major economies are consideringhow they too can manage the transition to alow-carbon economy and build an economicadvantage at the same time.
It will not be possible for the UK to compete inall low-carbon technologies. This report arguesthat building a long-term economic advantagewill require smart leadership. This means thatthe UK needs to focus on developing leadershipin a number of key low-carbon technologiesbuilding on existing expertise. To turn this into an
advantage government needs to develop the rightconditions to help the private sector commercialisethese technologies and export that expertise andtechnology globally. Support for low-carboninnovation, intelligent public procurement, buildingthe appropriate infrastructure and skills basewill all be essential.
Smart leadership also means action from thebusiness community. The case studies in this reportdemonstrate that many businesses across allsectors are already starting to integrate low-carbonthinking into their business processes, productsand services. And as we move towards a low-carbonfuture, all companies will need to understand thecarbon challenge and embed it into their businessmodels to be successful. Careful support fromgovernment will make this transition smoother.
This report demonstrates that the low-carbonjourney in the UK has already begun. Using case
studies from pioneering businesses, it confirmsthat the UK has the ability to innovate and maximiseits strengths to play a leading role in the globallow-carbon economy. The danger is that withouta more sustained effort this advantage could bewasted. So, to ensure that the UK capitalises onprogress to date and remains a low-carbon leaderwe must:
Focus on priority technology families to maximiseUK strengths
Develop the conditions to allow business
to invest Embrace innovation to drive further business
success
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Recommendations
6 Be intelligent about public procurement: ensure public
procurement decisions are taken on a whole-life cycle
basis and government uses its procurement muscle to
drive demand for low-carbon products, and supports
large-scale technology demonstration.
7 Dont delay on infrastructure: create the right physical
infrastructure, including substantial grid upgrades, to ensure
the demonstration and the commercial deployment of
large-scale energy technologies.
8 Make planning simpler: implement the 2008 Planning Act as
quickly as possible. Task the Better Regulation Executive to
minimise regulatory barriers to innovation for low-carbon
technology families key to the UKs economic growth.
9 Invest in training: ensure the UK workforce has the
necessary skills to be globally competitive, attract investment
to the UK and extract maximum value from international
supply-chains and global markets.
10 Support entrepreneurs: help ensure start-up companies
have strong commercial management to bring about full
exploitation of technological knowledge.
Top 10 recommendations for government:
1 Focus on technology success: use a transparent and robust
assessment to establish technologies that can add value
to the UK economy, taking account of existing strengths.
2 Firm actions not words: establish the next level of policy detail
to set the framework for the private sector to commercialise
technologies and encourage investment.
3 Leverage private capital: make the best use of public funds
to maximise private finance, through business incubators
and public-private hybrid funds for early stage development
and loan guarantees to aid final commercialisation.
4 Make it easier to get support: consolidate and streamline
applications to public agencies for support and press for
greater transparency in EU research programmes.
5 Maintain incentives: maintain and improve the R&D tax
credit scheme to ensure companies have confidence that
this vital incentive will continue over the long term.
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Top three recommendations for business:
1 Make carbon part of core business: take steps to measure
carbon use and include carbon costs in the bottom line.
Clear measurement of carbon use and the reduction potential
of innovation can increase uptake and give businesses
a head start on competitors.
2 Rethink approach to innovation: embrace innovation by
focusing on how frontline staff can reduce emissions and
fundamentally re-think at a boardroom level the impact of the
low-carbon economy on existing and new business processes.
3 Enable creative thinking: develop a culture of managed risk
taking to aid innovation and create incentives that allow
employees to experiment and innovate.
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With almost every country embracing thelow-carbon economy, it will not be possible forthe UK to compete in every low-carbon solution.We have neither the financial nor human resources
to do so. To ensure we gain economic advantage,we should focus on technology and innovation insectors with the greatest potential to create wealthfor the UK.
This will mean developing our core capabilities by building on
manufacturing and industrial strengths, maximising research and
intellectual property expertise and leveraging natural resources.
This focused approach will also build private sector confidence as
business understands where government plans to help build UK
strengths. As we argued in our recent position paperJoining the
dots: how to make the UK the place to do low-carbon business 2, this
clarity of vision will enable focused support for key sectors, whileallowing the market to deliver growth in other sectors.
Focus on priority technology familiesto maximise UK strengths
Building on manufacturing and industrial strengthsThe UK should take into account existing industrial strengths and
the potential to adapt these to a low-carbon economy expertise
in areas such as aerospace, automotive, electronics, ICT, offshore
industries and construction and design (see Exhibit 1).
One example of a manufacturing strength is Ford Britain, whose
UK research and development base has developed low-carbon
engines that will come into use in 2010 (see case study 1).
In addition, Fords activity has had a ripple effect as spin-off
companies such as Ma (Innovation) are able to feed into
the innovation process (see case study 2).
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Exhibit 1 Existing UK industrial andmanufacturing strengths
Automotive the UK already has large-scale centres ofexcellence including Fords research centre at Dunton and
engine plants in Dagenham and Bridgend, Jaguar-Land
Rovers technical and research centres in Gaydon and Whitley
in the Midlands and Nissans plant in Tyneside. In addition
the UKs expertise in high-value and low-volume vehicles
including a world leading motor racing industry gives a
strong base from which to develop the next generation of
low-carbon vehicles and attract global automotive
manufacturers to Britain.
Electronics and ICT the UK leads the world in key areas such
as electronics design, photonics, mobile networks and broadcast
technologies. As a result Britain attracts global players includingHewlett Packard, Phillips, IBM, Sun Microsystems and Alcatel
to conduct both research and manufacturing. Worth $45bn a
year, this high-value and high-tech industry will be crucial in
enabling energy efficiency and changes in working patterns in
the low-carbon economy such as the increased use of video-
conferencing and working remotely to reduce demand for
travel (see case study 17).
Offshore structure and operations through experience ofexploiting North Sea oil and gas the UK has become a global
leader in offshore and subsea engineering, employing an
estimated 100,000 workers and with supply-chain exports
worth over 4bn a year.1 This expertise will be crucial in the
development of off-shore wind and marine power generation
and can play an important part in the carbon capture and
storage (CCS) supply chain.
Construction and design the construction industry is worth
over 100bn, providing jobs for 2.8 million people in 2008.
Construction also generates 10bn of exports each year,
with design generating 3.8bn alone. Innovations in green
buildings will be vital in enabling energy efficiency measuresthroughout domestic, public and commercial buildings.
The UK needs to focus on developing a leadin low-carbon technologies with the greatest
potential to create wealth for the country
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10 Pulling ahead: innovating for low-carbon leadership
Case study 1Ford Britain: developing low-carbon engines
Ford has established world-leading expertise in the development
and manufacture of fuel efficient petrol and diesel engines through
the Dunton Technical Centre and plants in Bridgend and
Dagenham. Across the sector, by combining these solid research
strengths with high-level manufacturing processes, the UK is
now in a position to take advantage of the expected move towards
lower emitting engines.
The Dunton Technical Centre in Essex is one of the biggest R&D
centres of its kind in the UK, employing 3,000 engineers with
a specific focus on engine and transmission as well as
commercial vehicle development. The work at Dunton has
contributed directly to the pioneering engines being produced
in Bridgend and Dagenham.
Over the last five years Ford has invested 315m in the Bridgend
plant, including 70m announced in October 2008 to bring to
production the next generation of low CO2 1.6 litre, four-cylinder
petrol engines. The new engines are expected to go into production
in 2010 and will be among the first in a new generation of
EcoBoost engines. Compared with current larger petrol engines
of similar power, these engines will provide 15% lower CO2
emissions, and will play a key role in delivering on EU vehicleemissions targets over the next decade.
Ford has operated at the Dagenham site since 1931, but the
2003 opening of the Dagenham Diesel Centre helped the sites
position as a leading engine producer. Last year it produced over
one million engines for Ford and other manufacturers including
Jaguar and Volvo.
The latest Econetic range of vehicles, including the Econetic
Fiesta with emissions of only 98g/km, will use the Tiger range
of engines manufactured at the plant. Fords experience
demonstrates the results of combining industrial and research
strengths to develop high-value expertise capable of competing
in a global market. By developing a portfolio of affordable diesel
and petrol engine technologies Ford has been able to take
advantage of the changes in demand, delivering significant
carbon emissions reductions through mass market application.
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Case study 2Ma (Innovation):conceptualisingnew hybrids
3
While the Dunton Technical Centre continues to produce
world-leading research, it also helps to support a wider
innovation community of suppliers, contractors, researchers
and former staff. One such company is Ma (Innovation) 2T4
Ltd set up by Dr Tom Ma, a former technical specialist at Ford,
and his son Jonathan Ma.
Their concept, the Supercharger Air Hybrid, has potential to be
an alternative low-cost hybrid technology. In 2009 they were thenational winner of the Shell Springboard Awards, which rewards
the best small business ideas for combating climate change.4
Ma (Innovation) will use its cash prize to develop a simulation
of the technology and hopes to soon be in a position to take
its innovation to the worlds largest car manufacturers.
Maximising research andintellectual property expertiseBritain has world-leading research with businesses, public
and university laboratories producing groundbreaking work in
sectors ranging from aerospace to pharmaceuticals to energy
(see case study 4).
In addition many of our service sector industries have world-class
strengths that could allow them to play a leading role in the
low-carbon economy. For example business services firms are
advising on reducing carbon use, the ICT industry is enabling
smart metering, while London is a global centre of carbon
trading and clean-tech investment. Indeed, Barclays was the
first UK bank to set up a carbon trading desk and since then over
75% of all carbon trading desks have been located in the city
(see case study 3). As the service sector recovers from the
recession, the shift to a low-carbon economy offers an
opportunity for significant future growth.
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We need to maximise our core strengthsto gain a low-carbon advantage
12 Pulling ahead: innovating for low-carbon leadership
Case study 3Barclays: helping London lead in carbon financeLondon is the global centre of carbon trading, being the location
of over 75% of all carbon market trading desks and housing 80%
of all carbon market brokering firms. The strength of its financial
sector and venture capital activity has made London home to
over 75-AIM listed clean technology companies, while in 2008
in excess of 19bn was invested in global renewable projects
and companies by London-based banks.5
Based in the heart of the City, the European Climate Exchange
was launched in April 2005 and quickly became the most
liquid carbon marketplace in Europe with more than 90 global
businesses signing up to trade emissions products, serving
several thousand clients around the world. In 2008 annual
volumes increased 170% to 2.8 billion tonnes, a figure that
was already surpassed in the first four months of 2009.
The first UK bank to set up a dedicated carbon trading desk
in 2004, Barclays remains one of the most active players in the
emissions trading market, having traded over 1.4 billion tonnes
of credits to date.6 In addition to facilitating market access and
trading, Barclays provides debt and equity finance for emission
reduction projects around the world, helping carbon reduction
projects that would otherwise be unprofitable.
An important enabler for Barclays in embracing this new market
was having an organisational culture supportive of innovation.
In seeking new opportunities Barclays focused on building on
existing strengths. With Barclays Capital a leader in the provision
of financial and commodity risk management, extending into
emissions trading was a good fit with existing capabilities.
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13Pulling ahead: innovating for low-carbon leadership
Case study 4QinetiQ ZephIR windprofiler: applying researchAccurate measurement of wind speed is critical to the
commercial feasibility of a wind farm. Historically this has been
done through the use of costly temporary masts, often requiring
planning permission and health and safety checks.
QinetiQ, a leading provider of technology-based services and
solutions to defence industry and related markets, adapted their
expertise in laser sensing to develop a portable ground based
laser sensor to measure wind gust profiles for both security and
aerospace applications. Realising the potential for simplifying
this technology, QinetiQ set about developing the ZephIR
a wind profiling laser sensor specifically designed for the wind
industry. In 2007 QinetiQ exclusively licensed this technology
to Natural Power, the leading international renewable energy
consultancy based near Dalry, Scotland.
Natural Power have since successfully deployed over 80 systems
in more than 25 countries around the world, renting, selling and
providing managed services to a worldwide market ranging from
large utility providers to turbine manufacturers. The ZephIR laser
anemometer is able to accurately assess wind speeds and
direction up to 200 metres into the air in extreme temperatures,
remote terrain and in both offshore and onshore sites.
The technology behind the ZephIR was the result of more than
20 years of scientific effort at QinetiQ. It is a small but vital
example of how world-leading scientific research often in
apparently unrelated sectors can have important side benefits
for the low-carbon economy.
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Exhibit 2 Natural strengths of the British isles
Wind: Britain has some of the best wind speeds in the world
for on-shore and off-shore wind generation. The UK is the
world leader in off-shore wind and is likely to remain for some
time the largest marketplace. This presents a valuable chance
to become a centre of the off-shore wind industry and create
export opportunities.
Marine power: Our strong tidal streams mean the UK is well
placed to take advantage of the power of the sea. There is a
strong existing technological base and research infrastructure
with many of the leading companies being UK-owned or
based. This technology is in the initial stages but is likely
to play an important role in reaching post-2020 targets. CCS: the abundance of depleted oil and gas reserves in the
North Sea presents a ready site for subsurface geological
CO2 storage and an opportunity to become a leader in
this technology.
Case study 5RWE npower: investingin offshore windopportunitiesIn 2003 RWE npower renewables built the UKs first major
offshore wind farm North Hoyle off the coast of North Wales.
With an installed capacity of 60MW from 30 wind turbines, the
site is fully operational and produces enough electricity for
40,000 homes.
RWE npower expects to complete the nearby 90MW Rhyl Flats
wind farm by the end of 2009, and has also acquired a 50%
stake from Scottish and Southern Energy in the Greater Gabbard
wind farm, 25km off the coast of Suffolk. Greater Gabbard is the
worlds largest offshore wind farm in construction and its 140
turbines will have a capacity of 504MW when fully operational
in 2012. It is expected to begin generating electricity in 2010.
The company was recently granted consent for the Gwynt y Mr
offshore wind farm, with a potential installed capacity of up
to 750MW.
Significant innovation in this sector is likely to come fromexisting knowledge, for example in the development of turbine
foundation designs from the offshore oil industry or a move to
high voltage direct current (HVDC) for offshore sites further away
from land. Technological innovation, such as the design of new
solutions for foundations, operations and maintenance control
systems, and improved systems for access to turbines, could all
be developed by UK companies. These innovations will require
infrastructure support outlined in the next section (see page 26).
14 Pulling ahead: innovating for low-carbon leadership
Leveraging natural resourcesBritains island status endows it with a geography and climate
which gives an advantage in sectors such as wind and offshore
marine technologies (see Exhibit 2 and case study 5).
Historically the UK has not had a good record at picking winners.
Therefore in our November 2008 briefLow-carbon innovation:
developing technology for the future7 we recommended that
government focus research, development and deployment on
technology families, enabling investment in areas where there are
real opportunities for the UK to add value and develop expertise
without directing resources into specific technologies too early.
This approach will build business confidence, encouraging
investment into these technologies.
It is vital that government develops an evidence based framework
for selecting a limited number of families with the potential to
strengthen the UK economy, taking account of the existing strengthsoutlined in this section. This assessment needs to take place as
soon as possible, preferably in the next year, to provide investor
and market clarity.
The governments low-carbon industrial strategy, published in July
2009, is a welcome move in this direction. The government is right
to set out the low-carbon opportunity in a range of sectors, but
should ensure that policy decisions on targeted funding remain
evidence based.
The next section of this report highlights the key policy issues in
delivering low-carbon innovation, many of which the government
is beginning to address.8
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15Pulling ahead: innovating for low-carbon leadership
Recommendation for BIS and DECC:Focus on technology success:Britain should use a transparent and robust assessment
to establish technologies that, if scaled up, can strengthen
the UK economy. This should take account of the UKs
existing industrial, research and natural resource strengths.
1
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Setting ambitious long-term policy measures has been proven to
encourage companies to invest in a new generation of innovation.
Case study 6 shows how business will invest to commercialise
low-carbon solutions if there is a clear and long-term policy
framework. In this case an ambitious and long-term mandate for
biofuels in the US encouraged innovation and investment there,
which could potentially also stimulate a global export market.
The UK government needs to implement the same level of policy
detail to ensure companies such as BP are encouraged to locate
their low-carbon investment in the UK.
And although the UK has historically been a strong centre of
venture capital, access to finance during the current economic
downturn is increasingly difficult. For some start-ups this is because
the timescales and riskiness of their projects is beyond what the
market can currently provide. In these cases business incubators
and public-private hybrid funds need to be maintained and
expanded (see case study 7). We welcome the governments
150 million investment in a UK Innovation Fund as an important
addition to filling this equity financing gap in low-carbon and other
technology sectors. 11
For more established industries loan guarantees can overcome the
current issues over access to finance. The European Investment
Bank loans for the renewable and automotive industry are welcome.
They will help give these established industries funding to ensure
investment in low-carbon innovation is not held back and the UK is
able to commercialise these technologies in the years ahead.
Recommendations for BIS and DECC:Firm actions not words: the key to business innovation is
long-term and stable policy measures to ensure market
confidence. Establishing the next level of policy detail will
set the framework for the private sector to commercialise
technologies and encourage investment.
Leverage private capital: make the best use of public funds
to maximise private finance, through business incubators
and public-private hybrid funds for early stage development
and loan guarantees to aid final commercialisation.
2
3
16 Pulling ahead: innovating for low-carbon leadership
Although Britain has a number of existing strengths,these are not unchallenged and if the UK doesnot continue to innovate and embrace theseopportunities, we risk losing the ability to createan economic advantage.
In particular the creation of super low-carbon sectors will need
additional investment. OECD experts predict that to reduce global
emissions by 50% from current levels by 2050 will require total
investment of over $1tn a year, an average of 1% of global GDP each
year until 2050.9 Figures from HSBCs climate change index indicate
that investors are increasingly investing large sums of money in
low-carbon solutions. But without significant action by government
to stimulate the right investment conditions, the UK risks losing out
on its share of this low-carbon funding pot.
For successful investment in low-carbon innovation, a wide range
of factors have to come together in an optimal way. These include
encouraging and leveraging private finance, supporting the research,
development and deployment lifecycle, promoting intelligent public
procurement, creating infrastructure to support regional clusters
and developing the low-carbon skills base to support innovation.
In a world of highly internationalised R&D the UK must remain a
destination of choice for high-tech, low-carbon innovation. This will
require the development of a commercial environment where all
these factors act together to enable low-carbon innovation to flourish.
Encouraging and leveraging private financeIn order to ensure market confidence and attract private capital into
the UK, the government must ensure a degree of certainty by layingout long-term coherent policy measures across the economy. This
will require a clear long-term strategy with wide political support.
The CBIs low-carbon roadmaps published in April 2009 contain
detailed proposals for what policy will be required up to 2020 10
and should be read as a contribution to creating a coherent
economy-wide delivery plan.
Develop the conditions toallow business to invest
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Case study 6BP : benefits of long-term policyThe long-term market for cellulosic ethanol has been driven
in the US by the Energy Independence and Security Act 2007
which mandates 21 billion gallons of advanced biofuels
production by 2022, of which 16 billion gallons must come
from cellulosic ethanol.
Since 2006, BP has announced investments of more than $1.5bn
in biofuels research, development and operations. BP is actively
developing technology for advanced biofuels and other bioenergy
applications. With the right technology and production methods,
BP believes advanced biofuels including cellulosic ethanol
made from energy grasses and other for-purpose feedstocks that
minimise pressure on food supplies will deliver cleaner, more
sustainable biofuels with the potential to reduce greenhouse gas
emissions by up to 90%.
Through a joint venture with Verenium a leader in the technology
required to produce cellulosic ethanol BP hope to build one of
the first commercial-scale cellulosic ethanol plants in the US, with
production expected to begin in 2012. The joint-venture has plans
to add additional capacity, including developing a second site in
the Gulf Coast region.
This collaboration builds on a strategic alliance between BP and
Verenium announced in August 2008 which included investment
of $90m focused on technology and operations capabilities toadvance development of low-cost, cellulosic ethanol production
facilities. Using technology, the BP-Verenium partnership will
improve how biofuels are sourced, and produced a key element
of the BP Biofuels strategy.
The construction costs of the plant, which will initially be a 36
million gallon-a-year facility, is expected to be between $250
and $300m. BP and Verenium have together agreed to commit
$45m in initial funding and assets to the joint venture.
The joint venture is expected to provide lower carbon fuel for US
consumers at a price that will in the future be able to compete
with conventional gasoline. Process efficiencies in the production
process mean that early estimates for the greenhouse gas reduction
potential of the biofuels to be produced by the venture will easily
meet the 50% reduction standards for advanced biofuels set out
in the US Renewable Fuels Standard. The partners expect to improve
the greenhouse gas benefits further over time.
This investment is an example of two companies using their
respective core strengths to develop a new low-carbon product
in collaboration. The key policy driver was the US Energy Act 2007
which set out a clear policy framework over a 15-year period,
giving the stable policy framework to commit substantial funding
and manpower to the project, even given the difficult financial
situation. In order to help stimulate similar investment in advanced
next generation biofuels, the UK and EU may need to adopt
equivalent measures.
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18 Pulling ahead: innovating for low-carbon leadership
Supporting the research, developmentand deployment lifecycleThe low-carbon technology lifecycle that is the process of moving
from research through to development, demonstration, initial
deployment and then full commercialisation presents particular
challenges in the context of low-carbon innovation. Firstly, the value
of any low-carbon solution depends on establishing a robust
incentive (or price for carbon) to reduce carbon emissions. As
explained in the previous section, this will need to be created
through long-term policy measures.
Secondly, the timeframes for commercialisation of low-carbon
technologies are often beyond normal expectations of commercial
returns. Indeed, it is useful to think of low-carbon innovation over
two time horizons: technologies which will deliver by 2020 such
as the Ford low emission engines (see case study 1), and those that
will deliver up to 2050 such as the Rolls-Royce open rotor engines
(see case study 9).
The deployment of technologies up to 2020 is focused around
those already at or beyond demonstration phase, such as
zero-carbon homes or off-shore wind. Technologies which come
on-line beyond 2020 are much further back in the lifecycle. For
example, wave power, which is not expected to become fully
commercial until after 2020, is currently at the development and
early demonstration phase.
There is a significant role for policy in helping ensure these
technologies are fully commercialised. The Sainsbury Review in
2007 highlighted that the main investment gaps were in securing
the initial capital and in the later development and demonstrationstage.12 Thus we argued in our November 2008 briefLow-carbon
innovation: developing technologies for the future 7 that where
low-carbon technologies are ten years from market and have yet
to reach full commercialisation, bringing them to market should
be a priority. Technologies that can be taken up in this time period
should be fast-tracked and receive focused funding. For technologies
that which come online beyond 2020, the UK must take a long-term
view and ensure support for early stage research into these
technologies is maintained now. Exhibit 3 shows the innovation
chain and how it may apply in one sector wave power. 13
Streamlining business support throughout the technology lifecycle
chain will be crucial to help business manage associated risks
and ensure low-carbon innovations are brought forward to benefit
the economy. Yet currently, business support for low-carbon
innovation is complex and confusing. For example, business needs
to repeatedly apply for funding at differing stages, adding to the
costs and delays of technology uptake. The establishment of the
Technology Strategy Board in 2007 has enabled progress here and
a more integrated approach to funding is gradually emerging.
As the situation improves, greater use of project-based funding
through multiple stages of innovation should be considered.
For example, in the US the Defence Advanced Research Projects
Agency (DARPA) fully funds ideas from the initial stages through
to the development of prototype systems and advanced demonstration.
It is prepared to act quickly to fast-track promising new technologies.
Thus, instead of work progressing on a block by block basis DARPA
works to take an idea through to completion, with clear break
points if the project is not successful. DARPA projects have been
key to developments in low-carbon technologies ranging from solar
cells and lighting to biofuels and aircraft.
In addition to project-based funding, there also needs to be more
cooperation between the public and private sectors in developing
low-carbon technologies. The Energy Technologies Institute,
a public-private partnership, is helping industry develop practical
solutions to energy problems, such as lowering costs in the construction
of offshore wind. The Carbon Trusts business incubator is also
helping early-stage companies grow, working with incubator
partners including Imperial Innovations (see case study 7). This
activity will need to be scaled up.
And we are well placed to do this. The UK currently is home to the
R&D centres of many major corporations in fact the UK has highly
internationalised R&D, with foreign firms more active in the UK than
comparable economies.14 While a historic strength, this also puts
the UK at risk if research is transferred overseas, for example to
developing countries where there are cheaper operating costs.
In the short term, the increased investment in energy efficiency and
low-carbon energy programmes in the USA also risk having a major
effect on our ability to attract and maintain R&D investment and
venture capital. It is therefore vital to maintain this R&D base, and
use it to ensure the UK can be globally competitive in sectors whereit has existing strengths.
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19Pulling ahead: innovating for low-carbon leadership
To secure this, maintaining and improving the R&D tax credit
scheme should be a priority. It is vital for companies deciding
whether to increase the level of R&D activity they conduct in the UK.
For example Cisco employs 90 R&D staff in the UK compared to 140
based in Galway, Ireland. In making long-term investment decisions
on where to base skilled R&D staff, companies such as Cisco need
to have confidence that the R&D tax credit will continue andimprove. As well as committing to the future of the tax credit,
the government should commit to extending its rate and range
to allow more companies to apply for the scheme.
An additional source of funding and support for research and
development is the EU research framework programmes, among
the largest in the world. The last Framework Programme 6 (FP-6)
ran from 2002 to 2006 with a budget of over 16bn. The current
Programme (FP-7) runs until 2013 with a budget of over 50bn.
The UK has a relatively good record at accessing Framework
Programme funding during FP-6 British partners received around
2.4bn, or 14% of the total.15 One such successful scheme is the
collaborative Ultra-Low CO2 Steel programme (see case study 8).But the funding often lacks transparency and the cost of developing
bids can be prohibitive for SMEs and other organisations.
To improve this there should be greater transparency in the process
by which EU framework programme calls are made. When a call for
proposals is made, organisations can have as little as three months
to produce a proposal, but as these proposals often take up to 24
months to prepare, companies can find themselves investing
considerable time, energy and six-figure sums in preparing for calls
which never materialise. Even if successful, the cost of thispreparation cannot be reclaimed. Large organisations are able to
absorb these costs, but they are a clear barrier to additional SME
participation, where the opportunity costs of working on a proposal
can be high.
The CBI believes that the Department for Business, Innovation and
Skills (BIS) should continue to work with the Technology Strategy
Board to identify and remove barriers to UK business involvement
in FP7 and other European R&D and innovation schemes.
In particular we believe the government should push for greater
transparency in funding decisions and ensuring existing schemes
are widely marketed, including to SMEs. Increasing SME
participation through schemes such as EUREKAs Eurostars
programme can help aid early stage innovation and should
be actively supported.
Exhibit 3: The innovation chain
Research
Consumers
Government policy interventions
1 2 3 4 5 6 7 8 9 10
Basic research Concept
formulated
Applied
research and
development
Validation in
laboratory
Validation
in working
environment
Prototype
demonstration
in working
environment
Full-scale
demonstration
in working
environment
Pre-
commercial
deployment
Semi-
commercial
deployment
Commercial
-isation
Technology push Market pull
Business and finance community investments
Case study: Facilities to assist wave power
Researchcouncils
Researchcouncils
Carbon TrustMarine energy
accelerator
Carbon TrustMarine energy
accelerator
QinetiQ tanktest, Gosport,
Hampshire
Scalabletesting at the
NaREC, North
East
Live testingat European
Marine Energy
Centre,
Orkney
E.on testingof Pelamis at
EMEC
Wavehubin South West
Wave farmsnationwide
General technology readiness levels
Source: CBI analysis, adapted from Carbon Trust and EMEC
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20 Pulling ahead: innovating for low-carbon leadership
Case study 7Imperial Innovation:promoting incubationImperial Innovations was founded in 1986 to protect and
maximise commercial opportunities arising from work at
Imperial College, combining the activities of technology transfer,
company incubation and investment. Despite working with
some of the top scientists in the world, it found that this alone
is insufficient to commercialise innovative technology. Unlike in
other countries notably the USA the UKs venture capital and
entrepreneur community is relatively small. In the absence of a
developed network, organisations such as Imperial Innovations
fill the gap in supporting early stage company incubation.
Imperial Innovations focuses on obtaining the right management
for its early stage companies, and believes this is probably the
single most important factor in its success. It found a major
correlation between the success of its new spin-out companies
and having strong, experienced managers with keen commercial
awareness driving them. Through being aware of how the
optimal management profile will change as a companys
business grows and matures, it has been able to support
companies including Ceres Power a fuel-cell technology
company now listed on AIM.
To succeed Imperial Innovations found that managers need
experience and skills in three main areas:
The entrepreneurial process of bringing a concept
to commercialisation.
Industry knowledge is essential to connect to the market,
and developing demand for a clear end product.
The interaction between business and technology requires
technologists aware not just of the next scientific steps,
but how to build a commercial product.
The aim in commercialising low-carbon technological research
is usually to develop a mass-market product for manufacturing.
Much of the value-chain lies in early stages which can becaptured for example through licensing based technologies
even if factories are located overseas. The work of organisations
such as Imperial Innovation helps provide the entrepreneurial
support to early stage start-ups, as well as the finance to help
make the leap to product deployment.
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21Pulling ahead: innovating for low-carbon leadership
Streamlining business support through
the technology lifecycle will be crucial tohelp business manage the risks and bring
forward low-carbon innovation
Case study 8Corus: unlocking EU fundingPart of the Tata group, Corus is an industry leader in steel
manufacturing. Its aim is to reduce carbon use from 1.7t CO2
per tonne of steel by 2012, and 1.5t CO2 per tonne by 2020.
Through the EU Framework Programme (FP) it has taken a leading
role in the 59m EU project on Ultra Low-Carbon Steel (ULCOS),
unlocking funding and making valuable links with researchers
across Europe to develop the breakthrough technologies
necessary to enable Corus to meet its highly ambitious targets.
The need to make European steel production globally cost
competitive under the EU Emissions Trading Scheme has made
such ambitious targets and the ULCOS research programme
a commercially viable long-term project.
Active support and leadership at a CEO and board level among
the core partners including Corus was a key driver in setting
up the first phase of the ULCOS programme, which formally began
in September 2004 and will run until 2010. This encompassed the
research and pilot stage and involved 47 partner organisations.
The second phase ULCOS II is scheduled to run from 2010 to
2015 and will demonstrate the potential and feasibility of some
of the technologies investigated under ULCOS I under large-scale
industrial production conditions.
Agreement of the priority areas across European industry and
gaining political support were crucial in the success of ULCOS.
Before the ULCOS project there was a perception among some in
the industry that steel struggled to get its fair share of EU research
funding. When industry leaders embarked on low-carbon steel
project the scale of the work meant additional funding streams
would be needed. The European Steel Technology Platform
(ESTEP) was created in 2004, bringing together the whole
European steel industry, research centres, member states and the
European Commission. After an extensive roadmapping exercise
and agreeing that ULCOS should be a priority, the programme was
agreed with a budget of 59m over a six-year period, 44% being
contributed through the European Commission.
In addition to the clear benefits in becoming global leaders in
low-carbon steel innovation, there have also been significant
fringe benefits for participants. The proactive and progressive
research agenda has helped to attract and retain leading research
and development professionals and graduates into the industry.
As a result of the roadmapping exercise, additional research
agendas have been identified which are suitable for future
collaborative research.
The experience has been highly positive. The key to turning
this innovation into a competitive advantage will come in the
demonstration stage of ULCOS II. While the costs of piloting each
technology are high over 100m each ultimately UCLOS II
should result in transformational technologies which can be in
production plants over the next 15 to 20 years, resulting in
substantial cost and carbon savings.
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Case study 9Rolls-Royce: investing in low-carbon aviation
16
Rolls-Royce is developing next generation engines with the
potential to reduce carbon emissions by over 25% compared
to equivalent conventional turbofan engines available today.
Rolls-Royce invests around 800m a year in research and
development, a significant proportion of it aimed at improving
the environmental performance of products and operations.
The R&D programme operates at three stages strategic (or
basic) research, applied research and technology validation.
Progressing technology through each stage can take many years.
Rolls-Royce is a key partner in ACARE (the Advisory Council
for Aerospace Research in Europe), which is committed todeveloping technology that can help to reduce CO2 emissions by
50% per passenger kilometre by 2020 relative to a 2000 baseline.
This goal requires improvements to be made in engines and
aircraft as well as air traffic management and operations.
The Environmentally Friendly Engine programme will be a key
contributor to meeting this target by reducing engine emissions
by 10-15%. The 95m programme is led by Rolls-Royce and
includes industrial and university partners throughout the UK.
Over half the investment will come directly from industry with
the remainder funded by government agencies.17
Reducing CO2 beyond 2020 will require game-changing
technologies that are currently emerging or as yet unproven.
One is the open rotor engine, which could save 10,000 tonnes
of CO2 a year per aircraft on a 100 to 200-seater airplane. 18 While
previously researched in the 1980s the technology was never
developed to commercialisation, in part due to lower oil prices
and the significantly higher noise level.
Re-engineering the design and progress in aerodynamic
and acoustic modelling mean the new engine could provide
significant CO2 reductions while also improving noise levels
compared with todays planes. The design uses two sets of
propeller-type rotors which can be positioned at the front or
rear of the engine. These rotate in opposite directions, reducing
energy wasted from twisted air. By increasing the number of
blades, changing their shape and making them thinner,
Rolls-Royce believes the rotors will make less noise by
rotating at lower speeds, while maintaining high efficiency.
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23Pulling ahead: innovating for low-carbon leadership
Recommendation for BIS:Make it easier to get support: applications for research and
development support to multiple public agencies should beconsolidated so companies can make just a single application.
Greater use of project or milestone-based funding through
several stages of innovation can help develop innovative
technology at a faster pace.
Recommendation for HM Treasury:Maintain incentives: maintain and improve the R&D tax
credit scheme to ensure companies have confidence that
this vital incentive will continue over the long term.
Promoting intelligent public procurementGovernment and public agencies can play an important role
in encouraging innovation through their purchasing decisions.
In particular by procuring demonstration technology such as
low-carbon hybrid buses in London (see case study 11 and 12), they
can help pull technologies through the demonstration phase where
some often falter due to high risks and costs. This can be a powerful
tool when combined with integrated funding for early-stage research
and development.
To maximise public procurement in pulling through low-carbon
innovation, government agencies should ensure their procurement
processes are open and evidence-based. Avoiding monopoly
provision and maintaining dialogue with a wide range of suppliers including competitors outside the tendering process helps to
spur innovation, ensuring contracts still offer best overall value and
take into account new technologies. Public procurers must also be
actively engaged in new commercial partnerships with the business
community and keep open channels of communication to ensure
potential suppliers are aware of future requirements. Building these
relationships can lead to a better low-carbon outcome and helps
both parties understand and work through barriers.
A more formal way of engaging with the market is through use
of Forward Commitment Procurement (FCP) a model developed
by a joint government-industry advisory group to help create
demand for new products and services. FCP makes the market
aware of needs not in vague, general terms but in the context
of a credible procurement process with a clear offer to buy solutions
that meet needs once they are available at the right price. Innovation
is never without risk but this model can help stimulate innovation
through credible demand, better managing the risk for the consumer,
innovator and supply chain. An example of FCP in use is HM Prison
Service, which used it to procure cost-effective zero-waste mattresses
to end the practice of sending 40,000 used mattresses to landfill each
year.19 It could also be more widely applied to low-carbon technologies.
To be effective in promoting the shift to a low-carbon economy,
procurement must be properly coordinated across government
possibly through the Centre of Expertise in Sustainable Procurement
(CESP) under the Office of Government Commerce and decisions
taken on a whole lifecycle basis. Valuing goods and services on their
whole-life economic and carbon cost will help prevent lock-in to
high-carbon technologies and ensure future taxpayers will not have to
foot the bill for short-term decisions taken today (see case study 10).
The barrier to whole-life costing is often a cultural rather than
policy-based one, with procurers or office-holders unwilling to spend
more upfront in order to demonstrate low cost. But government policy
is that value for money must be assessed over the whole lifetime of
a project, including estimates of the costs and benefits to society as
a whole not simply those directly relevant to the purchaser. These
rules are already embedded in the Treasury Green Book, and should
be used more rigorously.20 Procurers must develop the right contracting
procedures for specifications and evaluation criteria, to ensure a
results-based approach which can capture innovations.
Finally, improving procurement skills could help procurers to
consider the full range of impacts, costs and benefits of specification
and purchasing decisions and allow the quality, cost and carbon
pay-off to be better managed, avoiding simple lowest-cost decisions.
This is an example of where the move to a low-carbon economy will
require the greening of the existing workforce (see also page 29).
4
5
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Case study 11Transport for London:procuring hybrid busesWith an annual procurement spend of 1.6bn, Transport for
London (TfL) is one of the UKs largest public agencies. The
previous and current London mayors both committed to a 60%
reduction in CO2 emissions by 2025, compared to 1990 levels.
TfL supports the delivery of this target through its Climate
Change Mitigation programme which promotes sustainable
travel, more efficient vehicle operations and using improved
vehicles, fuel and infrastructure.
As Londons 8,300 buses account for 5% of the emissions
attributed to service transport in the capital, an important
aspect of TfLs programme is its procurement of an innovative
new generation bus fleet.
Following a three-year trial of hydrogen powered fuel cell buses,up to eight new hydrogen buses will join the bus fleet in 2010.
In addition, Northern Ireland-based Wrightbus Group delivered
the worlds first double-decker hybrid bus in 2007, alongside
12 single-deck versions.
By early 2009 delivery of new single and double-deck hybrid
buses from four manufacturers including an updated double-
decker from Wrightbus saw the number of hybrid buses
increase to 56. TfL has committed to a further 300 buses by
March 2011, and from April 2012 all new buses entering service
will be hybrid including the New Bus for London.21 This is
expected to save 20,000 tonnes of CO2 in 2012.
At a rate of 500 vehicles a year from 2012, TfLs programme is
expected to be the largest roll-out of hybrid buses in Europe.
This clear procurement policy has been an important driver for
manufacturers development of hybrid buses. While the initial
cost is higher than a conventional bus, lower fuel costs mean
the whole-lifecycle cost of the buses will comparable or lower
than traditional diesel buses.
Case study 10Graham Construction: low-carbon public procurementVictoria Primary School in Ballyhalbert (Co. Down) was the first
building in the UK to receive an Energy Performance Certificate
Grade A. The tender specified that the cost of all fixtures and
fittings should be calculated over a 20-year period and had
a clear sustainability agenda. Graham Construction won the
contract, providing written evidence on the lifespan of products
as part of its bid and increasing insulation levels and installing
a biomass boiler to reduce running costs and enable capital
costs to be recouped over the lifetime of the building (further
examples of CO2 procurement will be featured in the CBIs
forthcoming report on low-carbon public services).
24 Pulling ahead: innovating for low-carbon leadership
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Recommendation for the Officeof Government Commerce:
Be intelligent about public procurement: ensure public
procurement decisions are taken on whole-lifecycle economic
and carbon costs basis. The Office of Government Commerce
should improve skills and remove barriers to whole-lifecycle
costing among procurers. Avoiding monopoly provisionand ensuring procurement process requirements are
evidence-based will also help innovation flow through
the system. Public procurement can also send bold market
signals by supporting large-scale technology demonstration
projects and through the use of Forward Commitment
Procurement.
Case study 12Wrightbus: deliveringlow-carbon public transportBased in Ballymena, Co. Antrim, Wrightbus is the UKs leading
independent supplier of buses. Founded in 1946 and still
family-owned, the firm has grown to become a leader in product
innovation in the transport sector. There are currently over 8,000
Wrightbus-bodied buses in operation in the British Isles. These
include the manufacture of the Gemini HEV (Hybrid Electric
Vehicle) being supplied to Transport for London. The hybrid bus
delivers impressive emissions reductions including a 38%
reduction in CO2 emissions as well as reduced noise levels
and a smoother ride for passengers.
6
25Pulling ahead: innovating for low-carbon leadership
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26 Pulling ahead: innovating for low-carbon leadership
Creating infrastructure to support regional clustersCreating the infrastructure to enable the deployment of low-
carbon technologies is vital to supporting those technologies.
Such infrastructure includes:
Charging points for electric vehicles
Smart meters and investment in power networks
CO2 transport networks for carbon capture and storage
For example if electric vehicles are to be widely available in the
2020s the infrastructure of charging points will have implications
for the ability of the electricity grid in dealing with this extra demand.
Likewise to build smart homes and offices buildings that use IT to
better manage energy demand smart meters must be installed
across the country. Tests are underway on how devices like air
conditioners and fridges could receive automatic signals through
the grid to help balance electricity demand. Further investment inpower distribution and transmission networks will be needed to
deliver the demand management technologies required by variable
electricity generation.
Some progress has already been made developing the infrastructure
for testing new technologies. The European Marine Energy Centre
on Orkney and planned South West Wave Hub for wave and tidal
technologies, are examples of support for testing and demonstration
before technologies are commercialised (see case study 13 and
pages 18-19).
The current planning regime is one of the key barriers to putting
in place the necessary infrastructure and supporting new
low-carbon technologies. Although the 2008 Planning Act is
designed to establish a more streamlined planning process in
the UK for major infrastructure projects like offshore wind farms,
implementation of the act is slow, leaving businesses to question
whether the planning system under the act will really be any more
streamlined than the previous regime.
The Better Regulation Executive should be specifically tasked with
minimising barriers across planning and the broad range of other
regulations affecting low-carbon technologies. For some sectors
such as automotive and aerospace the trade-off between new
and existing regulations on noise, local emissions (such as nitrates
and sulphur) and CO2 emissions must be managed to enablelow-carbon innovations.
Investment in all types of electricity generation is also currently
delayed by uncertainty in the regulatory framework. For instance,
Ofgem is currently reviewing the case for reforming grid regulation
to allow faster connection of new plants.22 These reforms must be
completed to allow grid upgrades to keep pace with nuclear and
renewable deployment. Ofgem is also reviewing the rates and
investment plans that electricity distribution companies are allowed
to make. This review must create appropriate incentives for
low-carbon generation and development of smart networks.
The Electricity Networks Strategy Group estimates investment of
4.7bn by 2020 may be required, but at present it can take many
years for network reinforcements to enable new generation to
connect to the network. These mechanisms must be reformed
so that commercial providers have faith that infrastructure will be
completed or the viability of off-shore wind and other low-carbon
energy generation will be at risk. As the CBIs low-carbon power
roadmap23 makes clear, streamlined planning processes and grid
transmission network upgrades will be crucial for driving demand
and innovation in the renewables sector.
The appropriate infrastructure support will benefit from the
development of hubs, or clusters. For example, the need to access
off-shore wind turbines further off the coast and in deeper waters,
creates additional technology demands, increasing costs.
Technological innovation in offshore wind is possible (such as the
design of new solutions for foundations, operations and maintenance
control systems, and improved systems turbine access) and could
be developed by UK companies. This will mean developing core
services in regional clusters to enable development of port and
harbour facilities, local construction-based facilities and vessel
support services. Clusters are likely to be equally important in the
automotive and CCS sectors.
In delivering the infrastructure, there could be a role for regional
development agencies to build effective partnerships with local
businesses to develop regional capacity, or regional low-carbon
clusters. We welcome the announcement of the first Low-Carbon
Economic Areas (LCEAs), but these must be backed by real support
and drive. Developing a robust supply chain for manufacturing
in LCEAs is one area that will require further work by government
and industry.
The development of an LCEA in the north east, where the regional
development agency ONE is working with the automotive manufacturer
Nissan to develop regional expertise in manufacturing the low-carbon
vehicles of the future, is one example. Other RDAs are also looking
at their low-carbon focus for example around nuclear energy,
marine technologies or clusters of carbon capture and storage
projects around heavy carbon emitting plants (see Exhibit 3).
Streamlined planning processes
and grid upgrades are important fordriving demand and innovation
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8
7
27Pulling ahead: innovating for low-carbon leadership
Exhibit 3: Illustrativeregionalcluster map indicating possiblelow-carbon economic areas
Marine energy
Carbon Capture and Storage
Low-carbon vehicles
Nuclear energyFinancial services
Recommendation for DECC:Dont delay on infrastructure: creating the right physical
infrastructure is an essential prerequisite to the roll-out oflarge-scale energy technologies. The regulatory frameworks
for offshore wind, electricity distribution and transmission,
and CO2 transport networks must be finalised to allow early
stage development and demonstration and the commercial
deployment of technologies.
Recommendation for DCLG and BIS:Make planning simpler: implement the 2008 Planning
Act as quickly as possible. Task the Better Regulation
Executive to minimise barriers to innovation for the
low-carbon technology families which will be key to the
UKs economic growth.
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28 Pulling ahead: innovating for low-carbon leadership
Case study 13Pelamis and E.on: demonstrating marine powerThe European Marine Energy Centre (EMEC) in Orkney is the
worlds leading full-scale test facility for wave and tidal power.
EMECs open water facilities are used to deploy technologies
which have already gone through the rigorous research,
development and demonstration stages (see page 19 for
the innovation pathway).
The EMEC test sites provide the infrastructure for eight wave and
tidal test berths. Each berth is fully connected to the electricity
grid allowing developers to install their device and connect to
underwater cable. Realtime technology and environmental
monitoring can be accessed through the Stromness offices
and data acquisition facilities.
Edinburgh-based Pelamis Wave Power made history at the EMEC
in 2004 when its Pelamis 750 device became the worlds first
commercial scale offshore wave energy machine to generate
electricity into the grid. In February 2009 E.on announced plans
to buy, install and test the next generation of the technology at
the EMEC, becoming the first utility company to test a marine
device at the site.24
The device will be built at Pelamis new facility at Leith Docks
in Edinburgh, and is expected to be fully operational in 2010.
Over the next two years E.on will test and improve the devices
working capabilities ahead of possible commercialisation
in larger arrays around the UK coastline.
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29Pulling ahead: innovating for low-carbon leadership
Developing the low-carbon skills base tosupport innovationEnsuring the UK workforce has the skills necessary to support
low-carbon innovation will be crucial if we are to build expertise
and export it globally. This includes building science, technology,
engineering and maths (STEM) skills throughout the curriculum,
ensuring technical training courses anticipate future skills
requirements and ensuring employees throughout the economy
become more green-aware.
Developing economic value in the UK from low-carbon innovation
will not be possible without a breadth and depth of STEM skills
through the workforce.
This means increasing the supply of STEM-skilled people
whether entering the workforce from compulsory education or
higher education. One way to improve the pool of STEM skills is
to increase the number of young people studying all three sciencesat GCSE, as this is the best preparation for further science study.
At graduate level, STEM degrees should meet the needs of
employers and equip graduates to become the next generation
of innovators. The CBIs recent education and skills survey25
indicated that two thirds of employers are experiencing difficulties
recruiting STEM-skilled staff, with a particular concern at graduate
and postgraduate level, while two thirds of science, hi-tech and
IT firms said degree content was not relevant to their needs. The
CBI higher education taskforce will develop recommendations
to address shortages of higher level STEM skills and bring about
the necessary change. The final report will be published in
September 2009.
This must be accompanied by a general greening of further and
higher education, and the existing workforce. For instance, the
government needs to work to increase skills in public procurement
procuring low-carbon goods and services require strong
commercial and technical skills in order to design specifications
and evaluate bids. A national training programme for low-carbon
public procurement, delivered through existing learning networks,
could alleviate the current problem of poor skills.
The UKs strong science and research base results in spin-out and
start-up companies, many specialising in low-carbon technologies.
Many of the next generation of entrepreneurs will come from these
companies (see case study 14). Transformational or so-called
disruptional innovation will have a key role to play, but many of
these companies are initially run by people who though highly
talented, do not have the commercial awareness or managerial
experience to bring these technologies to market. Without these
skills, start-ups have a higher than necessary attrition rate and
cannot reach their potential.
A community of venture capital and entrepreneurs can encourage
the best people into the start-up sector by lowering the risks of
failure. In the absence of a wide start-up community, a sectoral
focus in different regions could enable clusters of related
technologies to form such as IT and biotechnology in the
Cambridge area or automotive companies in the Midlands. This
can benefit start-ups and established companies alike, as well
as allowing talented people to contribute to a range of projects.
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30 Pulling ahead: innovating for low-carbon leadership
Case study 14AlertMe home smart energy system:skills driving new ideasAlertMe is an award-winning provider of home energy-saving
and monitoring systems. It has built a small but highly skilled
workforce, benefiting from recruiting top graduates from its
base in Cambridge and experienced staff working in high-tech
industries in the region. Despite the economic downturn
AlertMes strong management, technical expertise and innovative
products helped it secure 8m from four leading international
clean technology investors in June 2009. It is in a strong position
to develop links with major utilities as well as delivering savings
direct to consumers.
The company was founded in 2006 by Pilgrim Beart and Adrian
Critchlow, both entrepreneurs and trained engineers. AlertMes
Smart Energy service differs from other smart meters as it allows
users not just to monitor but also to control their electricity and
heating use in a consumer-friendly manner.
Householders currently have no way of knowing how much they
spend each year on powering home appliances indeed most
only receive a single figure each quarter estimating energy costs.
AlertMe aims to give consumers a fully itemised utility bill, and its
simple-to-use website shows consumers exactly how much they
spend on each appliance in real time and real currency. This
means consumers can see the real running costs of fridges,
printers, TVs and other appliances, and lets them take more
informed decisions over replacing inefficient appliances and
ensuring better energy management.
AlertMe uses low-energy wireless networks to monitor how much
energy home appliances are using and flexibly control them
remotely online or by mobile phone. ZigBee a low-cost and
open global wireless standard encourages future innovators to
integrate smart home applications or products into the platform.
Knowing when the house is empty, the system uses SmartPlugs
and a heating controller to automatically turn off appliances or
heating when not needed. It aims to save the average home
around 1tCO2 and 25% of their annual energy bills, paying for
itself in only a year.
AlertMe has already shipped over 15,000 units to domestic
customers since January 2008. This active consumer base
has enabled the company to trial products and develop its
consumer interface.
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9
10
31Pulling ahead: innovating for low-carbon leadership
Whole house
electricity monitor
SmartPlug
Keyfob
Your computer
or mobile phone
Heating
controller
Home
appliance
Alertme
servers
Recommendations for BIS:Invest in training: ensure the UK workforce has the
necessary (STEM) skills to be globally competitive, attract
investment to the UK and extract maximum value frominternational supply-chains and global markets.
Support entrepreneurs: help ensure start-up companies
have strong commercial management to bring about full
exploitation of technological knowledge.
Ensuring the UK workforce has
the skills to support low-carbon
innovation will be necessary to build
expertise and export it globally
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In addition, the development of methodologies to understand the
life-cycle emissions of products and services, such as the PAS 2050
standard on measuring embodied greenhouse gas emissions
developed by BSI and the Carbon Trust, will enable business to
explore where it would be most effective to innovate to reduce
emissions. In general, standards can often provide a very simple,
off-the-shelf, quick way of delivering low-carbon innovation. For
example, the MoD is attempting to get the ISO 14001 sustainability
standard used by its suppliers to start delivering a more sustainable
supply chain.
Recommendation for BusinessMake carbon part of core business: take steps to measure
carbon usage and internalise carbon costs into the bottom
line. Clear measurement of both carbon usage and the
reduction potential of innovations can increase uptake
and give businesses a head start of competitors.
1
32 Pulling ahead: innovating for low-carbon leadership
The CBI believes businesses that value innovationand integrate carbon into their business plans arelikely to adapt quickest and gain most from the
low-carbon economy.In some sectors business is already delivering innovative
low-carbon solutions. In other sectors government needs to put
in place the policies weve outlined to stimulate the marketplace.
In all cases internalising carbon strategies into every business,
rethinking approaches at all levels and incentivising an innovation
culture in business is vital. As the impact of carbon on companies
bottom line is recognised, businesses across all sectors will
need to find innovative ways to reduce their emissions and
engage employees.
Internalise carbon strategies into every business
As carbon is increasingly seen as another commodity or currency,businesses across all sectors are recognising the impact carbon
will have on their bottom line, especially when reducing carbon
is equated to reducing energy use. The recent CBI briefLess is
more: building an energy efficient UK26 found that on average
UK business wastes 10-20% of the energy it buys. The economic
recession and the prospect of higher energy prices in the future is
driving action to improve energy efficiency, which in turn is driving
innovation. Through taking steps to measure and control their
carbon use, companies are likely to gain substantial first mover
advantage (see case study 15).
With the introduction of widespread and standardised carbon
reporting, through the Carbon Reduction Commitment (CRC)and likely introduction of mandatory carbon reporting for some
businesses, it will be possible to measure carbon usage in a more
focused and consistant manner. This will make the measurement
of the carbon reductions emerging from innovations easier and
more transparent. The CBI has set out a simple and common
method for businesses to report their carbon emissions in the May
2009 reportAll together now: a common business approach for
greenhouse gas emissions. 27
Embrace innovation to drivefurther business success
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Case study 15Sun Microsystems:greening data centreInnovation has always been at the heart of the information and
communication technology (ICT) sector, which currently produces
around 2% of global GHGs. The long-term trend for computer
hardware power to double every two years often popularly
known as Moores law has pushed the possibilities of technology
innovation at every level, from laptop computers to huge data
centres. The latter large hubs used to house servers and computer
systems essential to commercial ICT operations often run on a
very large scale and at high temperatures.
Sun Microsystems provides IT products and services on a business-to-business basis. In its Green Data Centre project Sun Microsystems
extracted heat as close to the servers as possible, drastically reducing
cost and energy use. Its recently-built data centre in Santa Clara,
California, reduces the number of servers by 44%, the space needed
by 88% and power use by 78%. As well as a cost saving of $9m a
year, emissions were reduced by 3,227 MtCO2.
Three key drivers have helped spur recent innovation in
greener data centres:
Firstly the rise of energy prices helped focus management on
the need for efficiency savings and to reduce energy costs.
Secondly organisations have increasingly moved to takeaccount of full-lifecycle costing. Previously energy bills and
capital projects were often managed through separate budgets,
leaving little incentive for data centre managers to invest in
costly capital projects. By ensuring energy budgets are
managed in a holistic manner, reducing costs and carbon
emissions in this area is given an appropriate priority.
Thirdly industry collaborated to develop and adopt a simple
matrix to determine the relative energy efficiency of a data
centre, making improvements easily understood and measured
by data centre managers and business consumers. The Green
Grid consortium created the PUE (power usage effectiveness)
ratio to illustrate the proportion of energy used by the essential
computer infrastructure compared to auxiliary services such
as coolers and air conditioning. This very simple model gives a
baseline and enables efficiencies to be easily accounted for.
While these drivers can be acted on at any time, organisations
are often triggered to act through the end of a lease, energy
contract or upgrade in equipment requirements. This was the
case for Sun Microsystems when its 3,000 square feet data
centre in the Netherlands reached the end of its lease. By taking
a top-down approach and engaging people in all parts of the
business, Sun Microsystems conducted a thorough redesign
which achieved an 80% reduction in storage and server space
when the new data centre was developed in Guillemont, Surrey.
A key lesson is that transparent measurement is an essentialprecursor to greater innovation. The PUE is a broad figure which
enables measurement of progress in a given environment. While
the requirements and context of individual centres will vary,
most legacy systems have a PUE of around 2.5:1, while a PUE
of under 1.7:1 is achievable in many circumstances. With the
right conditions and a purpose-built complex such as Sun
Microsystems data centre in Santa Clara figures as low as
1.28:1 have been achieved.
33Pulling ahead: innovating for low-carbon leadership
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Rethinking approaches at all levelsManagement leadership is vital in embedding sustainability into
employees everyday work and making it clear to all departments
that these environmental goals are just as important as other
metrics on productivity, quality and safety.28
For example Tescos board agreed in 2006 to alter its performance
management tool the first change for over a decade to incorporate
environmental sustainability. This clear signal from senior
management has helped focus minds and enable collaboration
among departments. The CBIs recent guide on employee engagement,
Getting involved: a guide to switching your employees on to
sustainability29, has further examples.
But only through engagement of frontline staff can workplace
emissions be reduced. For example staff on the shop floor are often
best placed to implement cuts in waste through reducing, reusing
and recycling. They can see the inefficiencies in existing systems andcreate new systems of recycling and processing (see case study 16).
The move to a low-carbon economy also presents substantial
new business opportunities in areas of British strength such as
engineering and construction, information and communication
technologies and financial and professional services. Innovative
businesses are developing new business models for a low-carbon
economy, often moving to an ongoing service model.
For example, pioneering carpet manufacturer InterfaceFLOR offers
a leasing system on its modular carpets. Instead of selling the
carpet as a product, it is leased it as a service, replacing tiles that
have been accidentally damaged, swapping tiles in high traffic
areas with less exposed tiles and maximising the lifecycle of the
product. This incentivises InterfaceFLOR to develop sustainable
ways of providing a long-lasting product, while giving the consumer
an affordable product and a stable service.
Similarly the development of electric cars is likely to be based
around leasing the batteries, in much the same way that mobile
phone contracts currently operate. In the governments recently
announced UK-wide trial of electric cars, many of the vehicles being
trailed are rented to households on a monthly basis. This spreads
the high upfront cost of the battery over its lifetime, helping make
the vehicle more competitive with conventional vehicles on initial
price and running costs.
Finally, in the IT sector moving to a service model rather than
owning the physical infrastructure has enabled management
of data centres to increasingly be passed to those with skills
and know-how to innovate and reduce energy, costs and
carbon emissions.
Recommendation for businessRethink approach to innovation: embrace innovation
by focusing on how frontline staff can reduce emissions,and fundamentally re-thinking at a boardroom level the
impact of the low-carbon economy on existing and new
business processes.
Incentivising an innovation cultureOn
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