It’s been a testing year for companies and advisers in the renewable energy space. The Copenhagen Summit promised much but delivered little, pre-existing financial pressures were exacerbated by an economic meltdown, and even the science behind climate change has been called into question.
Held at London’s Natural History Museum, the Rosenblatt Solicitors New Energy Awards sought to brighten the doom and gloom in the industry as more than 400 entrepreneurs, dealmakers and advisers gathered to celebrate the achievements of the winners.
In a sense, the renewable energy sector has grown up in the past year, as the emotions around the need to reduce carbon emissions have drifted into the background. Instead, results and pricing are what now propels the green agenda.
Martin Dix, CEO of Current Cost, which manufactures devices that monitor energy consumption, says, ‘People don’t get excited about saving energy, they get excited about saving money. It’s up to us to make our products interesting.’
Current Cost has sold more than one million units in the past six years. Dix’s idea for the energy monitors came after spending more than 20 years in ‘various entrepreneurial activities’, including converting car radio systems in Japanese cars to comply with UK regulatory standards. Four years ago, Dix approached Scottish and Southern Energy to invest in his energy monitors. SSE agreed to distribute Current Cost’s devices to customers for free and invested £250,000 in the business.
Dix continues to see the business grow. He notes how the overall market has changed since he started out in this sector: ‘It’s different now – venture capital firms recognise the opportunities and there is a mounting appetite for investing in green businesses.’
One such VC is Zouk Ventures, winner of Investor of the Year, which typically contributes €10 million (£8.9 million) alongside co-investors. At present, the firm has a fund of €300 million (£267 million) but is currently raising new money for a fresh batch of investments.
The introduction of feed-in tariffs in April this year, which will guarantee a set price for electricity generated using small-scale renewable sources, is an exciting prospect for Zouk partner Felix von Schubert: ‘It means that small [cleantech] companies have a [guaranteed] local market. At the moment, UK businesses have to sell to German or Italian companies. The reason that Germany is the leading country for renewable energy is that it was the first to introduce feed-in tariffs.’
As for what is being done to encourage new companies in this sector, von Schubert wants fewer pledges and more action: ‘I’d like to see the government earmarking money for an early-stage cleantech fund. There are few firms that invest in early opportunities, and that’s where the government can do the most to help.’
Battling the elements
Joel Staadecker, CEO of SeaEnergy Renewables, has an altogether warmer view of state backing. ‘I am constantly impressed by the response from government and its increasing level of support,’ he says.
SeaEnergy Renewables, a subsidiary of AIM-listed SeaEnergy Plc, picked up the award for Company of the Year. It has gone from strength to strength after its team developed and delivered the Beatrice offshore wind farm demonstrator (the world’s first deep-water wind farm), a 49-square-mile installation off the east coast of Scotland.
Staadecker says the company was awarded two development sites at the beginning of last year with its partners, Scottish and Southern Energy and RWE npower renewables, with a capacity of 1.8 GW. It also signed a heads-of-terms agreement to develop offshore wind projects in Taiwan.
He says, ‘Early wind farms developed around the UK were never deemed viable from a commercial point of view. The challenge has always been to produce offshore wind at a profit. The way to do that is through mass – it’s a bang-for-your-buck paradigm.’
Hansjörg Lerchenmüller, CEO of Germany-based Concentrix Solar, makes a similar point about the need for volume: ‘The only way to reduce cost [in renewable technologies] is through mass production, but in order to get high volume, you need low cost,’ he says.
Concentrix Solar, which specialises in high-efficiency solar cells, won Deal of the Year after it was acquired by Soitec, a French semiconductor manufacturer, for €55 million (£50 million).
The deal gives the company its coveted bulk, as well as complementary technology in solar cell efficiency. Lerchenmüller says, ‘We were looking for a normal capital increase and Soitec stepped in. It’s a financially strong company and could move much faster than other investors.’
Days after winning its award, Concentrix secured a contract to open a 1 MW solar plant at Chevron Mining’s facility in New Mexico, the largest of its kind in America. Lerchenmüller observes that the US has started to make the right noises about committing to green technology, especially since Obama took up residency in the White House. ‘The US has made a strong move towards renewable technology. It’s our first major contract and we’re confident there is more to come from the US market.’
Adaptability was key for many of the winners. UK-based Zenergy, which specialises in superconductors, faced a slump in demand from its corporate clients for its main product, which allowed manufacturers to make dramatic energy savings.
CFO Karen Chandler says: ‘It was the right product at the wrong time. Our product generated a lot of interest but companies were hit by a freeze on capital expenditure. Demand fell by 60 per cent in March 2008 and there was a lull until July 2009.’
Chandler points out that Zenergy’s only customer at the time, German manufacturer Weseralu, had saved 50 per cent on its energy bill owing to Zenergy’s technology, but companies were holding on to existing systems for as long as possible.
However, as the worst of the recession was navigated companies again began to show an interest in the ability of the superconductors to halve the cost of electricity consumption. The Italian industrial group Sapa, which operates 200 of the world’s 5,000 aluminium heaters, signed a major contract in July 2009.
‘Sapa is a large company and we’re small by comparison,’ says Chandler. ‘It was a long negotiation process and it was important that we didn’t compromise on pricing. In the end, it was a great deal for us.’
It is quantum physics
Manchester-based Nanoco won University Spin-out of the Year for its work in developing nano-particles known as quantum dots (QDs). CEO Michael Edelman explains, ‘When materials are small enough, they start doing weird and wonderful things. We have developed a material that burns brightly but requires little energy to excite it.’
According to Edelman, QDs are energy efficient and have a number of potential applications including display lighting and improving solar cell efficiency. Up until now, Nanoco’s technology has been used for the backlighting on television sets.
‘Flat-panel televisions are not energy efficient, and they are getting bigger and bigger,’ Edelman says. ‘Asian manufacturers are under pressure to reduce energy consumption and our technology can achieve that.’
The company listed on AIM in the middle of last year and, prior to that, raised just over £4 million from private equity firms. Like many other eco-entrepreneurs, Edelman suggests that the UK government is making it harder than it needs to be for companies in this sector: ‘They are saying the right things, but they’re not doing enough to support growth businesses. If we relied on the government, we wouldn’t be where we are now.’
Many of the winners are triumphing against the odds, but perhaps that’s to be expected in a sector as competitive and innovative as new energy. Von Schubert, for one, remains upbeat because the basic maths remain very much on the side of the green protagonists: ‘Climate change is only one of the drivers in the cleantech space. Prices for oil and gas are volatile and nuclear energy is too expensive. Renewable energy is the only real option.’