As HSBC research estimates that revenues from climate-related businesses could exceed US$2trn by 2020, John Kennedy looks at the green-tech companies in Ireland that could help make us the clean-tech Silicon Valley of Europe.
It was while driving through an endless flow of traffic on a hot Indian day in an electric car manufactured by Reva, one of the companies he has invested in, that venture-capitalist extraordinaire Tim Draper got stuck beside a petrol station. "It hit me there and then that I was looking at a dinosaur."
Draper, the savvy investor who is credited with not only ‘inventing’ viral marketing but also making astute investments in internet giants such as Skype and Hotmail, told a Trinity College Dublin audience in November that many of his investments today are in green-tech companies, including Tesla, which makes luxury electric vehicles.
"There is no doubt in my mind that clean tech is going to be bigger than ICT," he told his audience. If Draper is right, then Ireland, with its abundance of natural wind, sun and wave resources as well as an ingrained reluctance to opt for nuclear energy, could be in the right time and place to capitalise on the green opportunity and create start-up companies that could be our Nokia or Google.
The environmental challenges facing the earth are well documented. At a time of economic gloom, Irish entrepreneurs behind clever research-and-development projects and with novel approaches to the world’s big problem could win global acclaim.
Opportunities for entrepreneurs and investors abound. In recent months, the European Commission has called for substantial additional investment in research in low-carbon technologies (LCT) and estimates an additional investment of €50bn will be needed over the next 10 years. This investment, it says, is vital in order to address climate change, secure EU energy supplies and ensure economic growth.
This means almost tripling the amount EU countries spend on LCT research, from €3bn to €8bn every year for the next 10 years until 2020.
"Upgrading investment in research in clean technologies is urgent if Europe is to make the road to Copenhagen and beyond cheaper," the EU commissioner for science and research, Janez Potocnik, said.
"With today’s estimates, the Commission wants to make the SET Plan a springboard to leap into a low-carbon economy, which is only possible if public and private actors pool resources in a coherent way. Increasing smart investments in research today is an opportunity to develop new sources of growth, to green our economy and to ensure the EU’s competitiveness when we come out of the crisis."
The Commission, together with industry and the research community, has drawn up technology ‘roadmaps’ outlining the steps that need to be taken to reach their objectives for the technologies with the greatest potential at EU level: wind, solar, electricity grids, bio energy, carbon capture and storage, and sustainable nuclear fission.
Irish investment vehicles are rising to the challenge. BVP Investments, an early-stage investor in green-tech businesses, has just raised a new €3m investment fund, and forecasts a positive outlook for Ireland’s green-business sector.
BVP Investments, which has invested in Irish firms such as Biomass and WaveBob, launched a Business Expansion Scheme (BES) fund back in 2007 called the Simple.ie Green BES Fund. It has already invested €2.5m in five Irish businesses over the past two years and, with three more high-potential start-ups in the pipeline, it is set to invest an additional €3m over the next two years.
“From the outset, we wanted to differentiate ourselves from the existing BES funds and so we chose to focus exclusively on the green sector and early-stage ventures," said Elliott Griffin, managing director of the fund.
"Over the past two years, we have invested in a diverse range of green businesses and we are already seeing the many positive results which have flowed from our investments. Despite the backdrop of falling stock markets, additional international investors have also been secured and these investors are attaching higher valuations to the companies we have invested in because of their high-growth potential.
"There’s no doubt that with the right investment behind it, the green sector has the potential to lead Ireland’s economic recovery over the coming years," Griffin added.
Among the companies that BVP has already invested in is Wavebob, a company developing wave-energy conversion technology. It has progressed its technology significantly, with a partnership with the leading Swedish energy company Vattenfall AB.
Riding the green wave
Wavebob recently announced a top-tier partnership with US defence manufacturer Lockheed Martin. As well as this, the company recently received funding from the Irish Technology Leaders Group (ITLG) founder John Hartnett.
The company has also been successful in securing investment from Enterprise Ireland, Sustainable Energy Ireland (SEI) and is the recipient of one of the largest fundings under the European Framework 7 programme. The company has sufficient funding to deliver its first full-scale device within two years, well ahead of target.
Together, Vattenfall and Wavebob have formed an Irish wave-farm-development firm called Tonn Energy, which is among one of the first commercial wave-power-development companies to be established in Ireland.
Work will now begin on the planning, installation, operation and maintenance of pre-commercial devices at the national wave-energy test site at Belmullet in Co Mayo. Success there would enable Tonn Energy to consider future plans to achieve 250MW of generating capacity elsewhere around Ireland, which would represent half of the Government’s published targets for 2020.
"We are responding to the massive opportunity that Ireland has," says Harvey Appelbe, project director for Tonn Energy. "Because the country has such a vast natural energy resource, and as the technology becomes proven and government policy and supports take effect, Ireland really can be the ‘Texas of Europe’, exporting large quantities of green electricity."
Wavebob founder Andrew Parish says his feedback from the Irish Silicon Valley-based backers of ITLG on the west coast, shows the area that is of most interest right now is wave. Wavebob was one of the first device makers in the world to generate electricity from waves. "The challenge is scaling up from 1.5MW today to optimise and deliver to meet the Government’s challenge of 500MW by 2020. Ireland is one of the first countries to set down such a target and this is only the beginning," Parish says, adding that Wavebob has also stuck up a partnership with US oil giant Chevron.
Need for interconnect
Tom Raftery, a green technology consultant for Greenmonk who lives in Madrid and is a director in Ireland’s first green data centre CiX in Cork, says that if Ireland is to achieve the target of 40pc of all electricity being generated from renewables by 2020, there needs to be an interconnect.
"Wind could be providing 200pc of the demand but this is hugely problematic because there is no interconnect. In the meantime, we are importing non-renewable resources but we could be an exporter.
"Looking to the future we need an interconnect or a means of transacting some of this excess energy that could be created by wind, wave and sun and selling it on to France and Iceland, for example. There are also opportunities in terms of in-vehicle ICT such as the ability to generate power and sell it. Instead of vehicles costing you money, imagine if they could generate a profit instead?"
Managing the potential excess energy that could be created is a problem that could be solved by Cork-based Synergy Module. It has developed a device that sits in factories and takes on board electricity pricing information, making decisions based on the price of that electricity before switching power supply to diesel generators. Synergy Module’s future opportunity is applying the same principle in homes and cars.
Jerry Sweeney of Synergy Module explains that the power grids around the world are a bit like the Wild West – there’s no synchronicity and power is consumed and wasted.
"Ireland could be a world leader in demand-response technology and define the rules for the global smart grid or electranet. We can lead and others can follow.
“Ireland aims to be the first grid in the world to reach 40pc renewables and have exporting technology. There’s no other location on the planet with a small grid and high dependency on wind so, in this situation, we can be out in front. Real-time electricity pricing is going to be a global phenomenon," Sweeney says.
Raftery agrees. "The problem with renewables is that it will lead to major spikes in supply. For example, wind energy provides the greatest supply at night when supply is low. The smart grid of the future should never sleep."
Another Irish company OpenHydro has successfully deployed the first commercial scale in-stream tidal turbine in the Bay of Fundy, Canada, on behalf of its customer, Nova Scotia Power.
The development sees the emergence of a new renewable energy market. The 1MW-rated commercial-scale turbine reached the Fundy Ocean Research Centre for Energy deployment site, in the Minas Passage, on 11 November. The turbine is now operational, rotating with the tides, collecting data, and producing energy.
"This is a historic first for both OpenHydro and Nova Scotia," said James Ives, CEO of OpenHydro. "For the first time, thanks to Nova Scotia Power’s foresight and OpenHydro’s technology, a commercial size in-stream tidal turbine has been successfully deployed in what is undoubtedly one of the world’s strongest tidal-energy resources."
With Ireland accounting for 13pc of Europe’s coastline, it is no surprise Irish wave-energy companies are so numerous, explains Brian Motherway, head of strategy at SEI. Some 10 Irish companies involved in developing ocean-energy technologies are to benefit from a recently announced €4.3m investment by SEI.
Participating companies include Wavebob and Ocean Energy, which have been trialling their prototype wave-energy converters in Galway Bay, and OpenHydro’s turbine system. Other companies receiving assistance in conducting research and feasibility studies include Technology from Ideas, based in Waterford, and the Marine Renewables Industry Association. Individual company grants ranged from €20,000 to €2m.
The clean-tech opportunity versus the ICT industry cannot be underestimated, says Motherway. "First of all, what’s different about this revolution compared to ICT is this will permeate everything. For anyone who makes anything in the future, if it is not seen as reducing carbon then you won’t remain in business.
"Clean technology is cutting a swathe into all sectors and the fact is that clean technology is where Ireland’s natural advantages are. Not only are we producing companies specialising in areas like remote sensing, communications and ICT but Ireland, because of its size, also has an advantage.
"Firstly, our size. There’s a lot of frustration around planning and accessing the grid. Clean technology is about changing the way we manage this. The country that can adapt quickest at a regulatory and policy level will have the advantage.
“Ireland has 13pc of Europe’s coastline. In terms of wave- and wind-energy resources, that is the equivalent of having a natural-gas oilfield. Ocean energy is going to be happening off the coast of Ireland within the decade. The level of entrepreneurial activity in this area is staggering, the amount of people with ideas is staggering and established companies such as Kingspan and Glen Dimplex have reoriented themselves to capitalise on this opportunity. This is where the future is going to be as we reduce our dependence on fossil fuels and carbon."
The issue of linking money with ideas is one that needs to be resolved to position Ireland to become the natural home for clean tech in Europe, Motherway says.
"There seems to be a disconnect between supply and demand. There are start-up companies with ideas and business plans but because they are not conventional ideas, they aren’t being seen by investors. It’s not that the finance isn’t there – it actually is – there’s a nervousness about what they’re proposing and a need for greater networking.
"This space is new to many banks and venture capitalists. What they need to understand is that business revenue from clean tech will come from savings rather than spending cash. This is scary to many conventional funding models."I’ve heard people say it’s hard to get finance, but I’ve also spoken to financial people who have money but don’t know where to invest it," says Motherway. "The State now has a role to play in building up confidence in green-tech companies and getting the success stories out there."
By John Kennedy
This article is taken from the Irish Director Green Economy Report