Are We Doing Enough To Foster New Irish Cleantech Businesses?

Published on Friday, May 28, 2010

CLEAN TECHNOLOGY: There are many Irish companies in the burgeoning green technology sector, but are we doing enough to foster them? asks JOHN REYNOLDS 

CLEAN TECHNOLOGY – or cleantech – isn’t just about wind farms, electric cars and solar panels.

In New Zealand, researchers have developed a spray for putting on cowpats that prevents the nitrogen they contain turning into the greenhouse gas nitrous oxide, which is 296 times more environmentally harmful than CO2. It qualifies as a cleantech and demonstrates that there is plenty of potential for innovation in all kinds of ways that might not have yet been imagined.

An emerging business sector with no standard definition, cleantech is a catch-all phrase encompassing a wide range of businesses and technologies that are at different stages of their evolution, all of which have different routes to market.

Specialist US research firm Clean Edge defines cleantech (or greentech) as: “An emerging sector that comprises a diverse range of products, services and processes that harnesses renewable materials and energy sources, dramatically reduces the use of natural resources, and cuts or eliminates pollution and toxic wastes. “These include such innovative and expanding technologies as solar photovoltaics, wind power, hybrid electric vehicles, fuel cells, biobased materials, and advanced water filtration.”

Many of these technologies also overlap with IT and software applications. Smart meters enabling household appliances to avail of cheap electricity rates will produce data that will need to be managed and analysed. Wind, marine and solar energy also requires specialist software to ensure it operates efficiently.

Cleantech’s sheer diversity and the size of the market means that it represents a huge opportunity for SMEs and start-ups. It is estimated that China’s cleantech sector alone will be worth €800 billion by 2013. It will take up to €1.2 trillion to green the UK economy between now and 2030 and another €1 trillion of investment in Europe’s power network. That is before you factor in other parts of the world and numerous other industries.

It remains to be seen how big a stake in this Ireland can lay claim to. Eddie O’Connor’s Airtricity may have created the largest number of millionaires in our corporate history when it was sold for €2.2 billion in 2008. But many doubt whether we can foster the sheer number of start-ups here that might result in a few more Airtricities.

We have a dozen or so very promising smaller cleantech firms and it is hoped that we’ll be very successful in wave and tidal energy. “But there are not enough coming through in this space and we don’t have enough entrepreneurship in Ireland,” says Bartley O’Connor, manager of PricewaterhouseCoopers’ sustainability practice. “It might take 1,000 start-ups to get a few big successes, perhaps only one.”

The Ecology Foundation’s founder Declan Murphy agrees. “Big energy and infrastructure are being tackled very well in Ireland when you look at what the ESB, Bord na Móna and Bord Gáis are doing. What we haven’t done is create the right environment for smaller projects and individuals to succeed.”

Government policy is that a number of cleantech clusters that are at various stages of their development will lead to a flurry of new products and services. Among them are the Shannon Energy Valley, Galway’s SmartBay project, the Irish Energy Research Centre at UCC, and competence centres in bioenergy, energy efficiency, manufacturing productivity and composite materials.

One of the few private-sector initiatives is in Mayo, where the Biospark – a futuristic green business park powered by renewable energy, and where the outputs of one business are the inputs of another – is being built.

But a closer look at the facts reveals we compare very poorly to a country such as Sweden, which is home to more than 4,000 cleantech companies. It was granted 1,245 patents last year, and 15 to 25 per cent of their patents are cleantech ones with commercial potential, according to Nutek, the Swedish development agency.

In stark contrast, last year Ireland was granted 145 patents – how many were cleantech isn’t specified. Just 114 cleantech firms exist here, six of which were high-potential startups, according to Enterprise Ireland figures, plus a further 60 with some activities in the sector.

One informal forum in which cleantech entrepreneurs have the opportunity to meet potential investors is the Cleantech Ireland network, which was formed last year.

Co-founded by serial entrepreneur Peter Daly, managing director of SmartBuilder Software – a developer of mobile software for the construction industry – there are a number of business angels and venture capitalists among its 50 core members and the 80 members who attend its meetings less regularly.

Someone who should be able to reveal to members the secrets of getting funding is committee member Tad Crowley, whose wind-farm operation software firm Servusnet recently raised €500,000 from Enterprise Ireland and a private investor.

“Our vision is that a young graduate might find an investor here who might be willing to put €25,000 to €50,000 behind a good idea. Or they might find team members. Often a young techie needs to find someone with a business brain to work with them who could be a co-founder, for example,” says Daly.

While the merits of networking, making informal pitches and learning from others’ experiences cannot be underestimated, a frequent criticism, particularly in the wake of the mixed success of the First Tuesday network that was spawned during the dotcom boom, is that they are just talking shops. Their informal nature means that it can be difficult to measure the investment results they generate.

A slightly more innovative organisation is CMyPitch, where entrepreneurs can pitch for investment both in person and in online videos. Despite having launched in Ireland last year, however, only three of the 38 reported “done deals” have involved Irish companies. The only cleantech firm that won an investment was UK-based.

At a more formal level, Enterprise Ireland’s annual investor forum in London saw 16 Irish cleantech firms and 15 software companies make formal pitches last year to more than 100 VCs from across the globe.

But there is only one Irish venture capital firm specialising in cleantech at the moment and that is the ESB’s Novus Modus. On a mathematical basis then, Enterprise Ireland’s annual event offers the best chance of finding an investor.

So despite Cleantech Ireland’s merits and its admirable efforts, quite simply we need more funding sources. “There’s an urgent need for imaginative thinking about how we fund innovative green business projects. We recently proposed an idea to Shell that would see them allocate €1 billion from the revenue streams from the Corrib Gas field over the next 15 years to such a fund,” says Ecology Foundation’s Declan Murphy.

“The Government would have to guarantee a return from this and then match it so you could have €2 billion in total. Shell would put something back into the country as well as the tax they’ll be paying and hopefully they’ll earn a reasonable return from it.”

Labour finance spokeswoman Joan Burton has also proposed to create a €2 billion strategic innovation bank, so evidently the thinking on this issue is moving in the right direction. But returning to the question of how we come up with more good cleantech ideas in the first place, for their part Murphy and his team at the Ecology Foundation are transforming the organisation into a project incubator.

It will train 100 new recruits with a wide range of skills who will then form small teams to work on 20 green business projects. With corporate backers providing some seed funding, the aim will be to generate cash flow as quickly as possible in the hope of taking the ventures to the next level.

Another sign of how Irish firms are mobilising in their own ways was when a group of Irish businesses, including Siemens Ireland, recently campaigned for the implementation of a green public-procurement policy. By giving them a greater share of €17 billion in annual State procurement spending, boosting green businesses here, the Government could support existing clean tech jobs and create new ones.

The need to instil a greater sense of urgency in these ways means we are likely to see more action like this, which will hopefully lead to more imaginative thinking about how we come up with new inventions, perhaps through cleantech innovation challenges and overseas innovation missions, for example.

Of course, only time will tell whether any of this involves an Irish cowpat-related innovation.

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