Low Carbon and Environmental Goods and Services Sector Strategy DRAFT FOR CONSULATION January 2010
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Table of Contents
1 Purpose of the Strategy......................................................................................................7 2 Setting the Scene ...............................................................................................................8 2.1 Sector Definition.........................................................................................................8 2.2 Policy Context...........................................................................................................11 2.2.1 Ensuring future economic prosperity.................................................................11 2.2.2 Meeting climate and environmental targets.......................................................12 2.2.3 Supporting Innovation.......................................................................................14 2.2.4 Skills Development............................................................................................15 3 Market Analysis...............................................................................................................17 This section provides an overview of the global, national and regional markets for Low Carbon and Environmental Goods and Services based on the definition presented in Section 2.1 and supporting market data. Where market value figures are provided these data are based on aggregated turnover accrued to businesses in the region under consideration. .................................................................................................................17 3.1 International Outlook ...............................................................................................17 3.2 UK Market ...............................................................................................................19 3.3 Low Carbon and Environmental Goods & Services in the Northwest ....................20 3.4 Low Carbon and Environmental Goods & Services in the Northwest’s sub regions .........................................................................................................................................21 4 Sector Drivers, Trends and Opportunities........................................................................22 4.1 Key Regulatory and Financial Market Drivers.........................................................22 4.2 Other Regional Market Drivers.................................................................................25 4.2.1 Availability of Regional Resources...................................................................25 4.2.2 Sub Regional Activity........................................................................................26 4.2.3 Existing Sector Support.....................................................................................27 4.3 Regional Sector Trends.............................................................................................30 4.3.1 Sector Profile.....................................................................................................30 4.3.2 Exports...............................................................................................................30 4.3.3 Inward Investment..............................................................................................31 4.3.4 Emerging Technology Markets..........................................................................31 4.4 Regional SWOT Analysis.........................................................................................33 5 Identification of Priority Segments for the Northwest.....................................................34 4. Sustainable Growth Markets – The core portfolio where there is a well established base in the region, with solid historical performance but relatively low indigenous growth projections. The Agency has a key role to play in supporting their continued growth. Future opportunities for growth most likely to come from future emerging markets and international opportunities and exports, for example:........................................................37 Water and wastewater treatment........................................................................................37 Waste management, recovery and recycling......................................................................37 6 Vision and Strategic Framework......................................................................................38 7 Priority Action Plan ........................................................................................................39 8 Monitoring and Implementation......................................................................................44 8.1 Key Performance Indicators......................................................................................44 8.2 Key delivery bodies and accountabilities..................................................................45 8.3 Governance and control mechanisms.......................................................................45
Appendix 1
Regional Market Sub Sector Breakdown 2007/8
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Appendix 2
Summary Segment Profiles
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation EXECUTIVE SUMMARY The ‘low carbon’ economy is universally regarded as a key component of future economic prosperity and recent Government policy documents such the Low Carbon Transition Plan and New Industry: New Jobs have laid out the framework for future development. In order to address climate change Government (and the EU) has put in place a number of powerful regulatory and fiscal drivers, all of which will provide a major stimulus to businesses who supply low carbon goods and services. The term ‘low carbon’ has only recently been adopted into common usage and recent work undertaken by the Dept for Business Innovation has identified a whole range of businesses that fall within the definition of ‘Low Carbon and Environmental Goods and Services’ (LCEGS) to describe the technologies, goods and services that provide a range of solutions for environmental problems. This definition includes a number of emerging low carbon activities such as low carbon transport, carbon capture and storage and nuclear energy; more established businesses involved with renewable energy; and mature ‘traditional’ environmental goods and services such as waste management and recycling, water treatment and land remediation. Low Carbon and Environmental Goods and Services are estimated to be worth some £106.5 billion to the UK’s economy; this is a sector with a large economic and employment impact. Future growth is likely to exceed many other areas of the economy and the UK LCEGS sector is forecast to increase in value by up to £45 billion by 20151. Some global markets are also predicted to experience even stronger growth creating major international opportunities for UK companies. In the Northwest there are currently 5000 LCEGS businesses, employing 87,000 staff with a market value for around £10 billion. This represents 10% of the UK sector and places the NW as a region second behind London/South East. Between 2006 and 2008, the sector in the NW grew by 4.9% compared to the UK average of 3.6%. There are several supply and demand factors that contribute to this regional strength: •
Strong natural resources especially around wind and tidal
•
Strong legacy industrial legacy in areas such as nuclear; waste/biomass processing
•
Large population and skill base
•
Large industrial manufacturing sector
However, businesses in the region face many challenges to growth not least to fully understand the new markets presented by the low carbon and environmental economy. There are many regions in the UK and the world competing to exploit the new market opportunities and quick, decisive action is required to ensure Northwest businesses develop a position at the forefront of their markets. This strategy provides a framework for the support and grow Northwest businesses within the Low Carbon and Environmental Goods and Services (LCEGS) sector. The aims are to build on the existing, well established regional capability and resources, and look to exploit growing and emerging market opportunities for future economic growth. This will require strong leadership and identifying priority areas where public sector intervention can add real value. Innovation has also been identified as a key 1
Low Carbon and Environmental Goods and Services: and industry analysis, Innovas Solutions Ltd, March 2009, Commissioned by BERR 3
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation theme; only innovative companies will thrive in these fast changing highly competitive markets. The starting point for this strategy is an overarching Vision: In 2020 Low Carbon and Environmental Goods and Services sector is the largest, industrial sector in the region and the leading LCEGS sector in the UK. The sector is diverse to support all the requirements of a low carbon economy with segments which are internationally leading such as nuclear energy and smart grids. There are three main aims that support this Vision: •
To realise a rate of sector growth of above the national average over the next three years by developing the existing portfolio of capabilities and exploiting emerging market opportunities;
•
To raise the level of innovation activity and increase the rate of successful technology transfer from the regional research base; and
•
To secure targeted private sector investment in support of regional business growth.
These aims will be achieved by the implementation of six key strategic objectives: 1.
Strategic Leadership: Provide focused and strong direction for the development of the regional sector, specifically emerging markets;
2.
Market Development: Identify and develop early markets opportunities and provide supply chain development support to facilitate access to markets;
3.
Innovation Support: Realise stronger communication between industry and the regional research base and improve the rate of technology transfer and successful enterprise;
4.
Investment: Optimise opportunities for inward investment and successfully leverage third party finance for regional projects and infrastructure;
5.
Exports: Provide specific and focused support for the development of export and internationalisation opportunities amongst the more mature segments of the portfolio; and
6.
Skills: Attract in high quality candidates to study in the region and encourage retention of graduates and skilled labour within the industrial base to develop the available talent pool.
Given the diversity of the sector, a key challenge has been to develop regional priorities for support based upon a number of key criteria: •
Available natural resources;
•
Industrial capacity;
•
Research capacity;
•
Capability to innovate;
•
Northwest competitive position;
•
Future growth potential; and
•
Barriers/market failures.
Based upon this analysis a strategic framework has been developed that is based upon a hierarchy of support based upon the level of priority with smart grids, solid state lighting and tidal energy emerging as the top three priorities. Nuclear is also a priority but this is dealt with in a separate action plan (and low carbon vehicles are covered in the recent launched Advanced Manufacturing Action Plan. The framework is summarised as follows;
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Low Carbon and Environmental Goods and Services Sector Strategic Framework 2010 - 2013 INVEST: Key strategic priorities in emerging markets where region has strong knowledge base and potential USP. Focus for development of regional proposition as markets mature over next 12-24 months
•Smart Grids •Tidal •SSL
BUILD: Continue to provide support and specialist interventions for on-going development of market segments of regional significance. Ensure success of on-going initiatives.
• Offshore Wind • Biomass (incl. EfW) • Energy Management in Buildings
SUPPORT: Work with segments as appropriate to optimise growth opportunities. Look to identify and elevate future priorities for investment. KEY STRATEGIC THEMES: Underpinned by specific objectives; delivered via Action Plan
Core Portfolio (Including Water/Wastewater; Waste and Recycling; PV; Alternative Fuels; CCS; etc.
Strategic Leadership
Market Devel.
Innovation Support
Investment
Exports
Skills
The success of the strategy will depend on many factors, many external and outside of the region’s control however the high level vision is underpinned by a number of specific outcomes: What Does Success Look Like in 2013? Segment
Realistically Achievable
Aspirational Target
Tidal
Outline consent achieved for one tidal scheme in the region.
Demonstration facility up and running, attracting in device developers to the region.
Smart Grids
National demonstration project secured and operational.
A national centre of excellence secured in the region and a number of demonstration projects up and running.
Solid State Lighting
Public sector procurement programme in place to purchase regional SSL technology.
Regional companies exporting products to national/international markets. Significant inward investment or regional landmark project secured.
Offshore Wind
One of the region’s ports has been allocated as a construction base for the Round 3 site.
Key supply chain manufacturer attracted to the region.
Biomass (incl. EfW)
Region’s wood chip processing capability at capacity supplying regional biomass needs. Most biomass waste in the region is being utilised as resource.
Significant manufacturer of process technology attracted into the region.
Energy Management in Buildings
Recognition as leading region in the UK for the production and installation of energy management for buildings technologies.
Region recognised as an internationally leading region for the production and installation of energy management for buildings technologies.
Core Portfolio
Export levels for sector increased to above national average.
The region is leading the UK in export activities.
The LCEGS sector has grown at its current rate of 1.3% above the national average.
The LCEGS sector has grown at a faster rate of 2.3% above the national average.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation A range of actions have been developed that will deliver the vision and these outcomes. These actions will be delivered by a range of organisations working across the region, principally Envirolink Northwest, Business Link Northwest, The Joule Centre for Energy Research and the Energy Innovation Centre. The Northwest Energy Council will be responsible for overseeing the implementation of the action plan implementation and monitoring of progress.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation
1
Purpose of the Strategy
This strategy provides a framework for the development of the Low Carbon and Environmental Goods and Services (LCEGS) Sector in the Northwest region. Its overarching aim is to ensure that public sector support facilitates the economic growth of the sector, and that interventions are directed towards resolving issues emanating from market failure. The LCEGS sector in the region is well established and has grown consistently over the past five years providing a solid foundation for future economic growth. The purpose of this strategy is to identify where the most significant future opportunities for growth lie, and to define where and how the NWDA should best deploy its resources to maximise impact. This strategy has a significant role to play in supporting the draft Regional Strategy 2010 as it will support one of the four proposed strands “capitalisation of opportunities associated with the move to a low carbon economy”. It will also support other key areas of policy in the region, specifically the Sustainable Consumption and Production Action Plan and the Climate Change Action Plan. This strategy has sought to identify the following: •
Those segments of LCEGS sector that have a credible USP within the context of the UK and international market, and represent a significant growth opportunity;
•
Opportunities to build on the existing capabilities, assets, support programmes and investments in order to make a meaningful difference to the future performance of the sector and maximise return on investment for the Agency; and
•
Interventions where there are perceived market failures and the NWDA can make a material impact
•
A balanced portfolio of actions that allow for the provision of focused investment on a limited number of priority segments that have potential for future high growth, whilst continuing to deliver appropriate and high quality support services to the core LCEGS sector.
The scope of this strategy does not include oil, gas and coal as these are considered to be mature industries with limited potential for the public sector to add value. Nuclear energy and low carbon vehicles are considered within the analysis presented, as they are part of the LCEGS sector but not in the associated Action Plan. Nuclear energy is subject to a separate Action Plan, and low carbon vehicles are included within the Advanced Manufacturing Action Plan.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation 2
Setting the Scene
Key Insights: •
The definition of the LCEGS sector has evolved as new market segments have emerged and developed. A new definition has recently been proposed that includes traditional environmental goods and services, renewable energy technologies and emerging low carbon technology and services.
•
The low carbon economy is seen, regionally, nationally and internationally, as a key component of future economic prosperity. National and international policy on climate change and innovation support provides the platform to support the realisation of regional aims and the creation of “green jobs”.
•
The Government’s recent Low Carbon Transition Plan provides the framework by which the UK will meets its target of a 34% reduction in emissions on 1990 levels by 2020. A robust and innovative LCEGS sector will be critical to the Northwest and the UK in realising this plan.
•
The need for a transition to a low carbon economy is reflected in a number of key regional strategies and action plans including the Climate Change Action Plan, The Sustainable Energy Strategy, and Sustainable Consumption and Production Action Plan. In addition, the recent draft of the Regional Strategy for 2010 identifies ‘capitalising on the opportunities of moving to a low carbon economy’ as one of four key strands.
•
It is recognized that innovation is fundamental to success and that levels of innovation in the UK as a whole need to be increased. Innovation in the region is lagging relative to the UK as a whole and the need for increased capacity and capability is being addressed via the development of a draft Innovation Policy.
•
The attraction and retention of a highly skilled talent pool is fundamental to the development of the sector, and is supported by policy frameworks at both a national and regional level.
2.1
Sector Definition
The OECD/Eurostat definition of the sector is as follows2: ‘The environmental goods and services industry consists of activities which produce goods and services to measure, prevent, limit, minimise or correct environmental damage to water, air and soil, as well as problems related to waste, noise and ecosystems’ This includes cleaner production technologies, products and services that reduce environmental risk and minimise pollution and resource use. Low carbon technologies are those that specifically produce fewer greenhouse gases than traditional solutions. It includes renewable power generation sources, such as wind power, solar power, geothermal power and nuclear power, as well as sources with lower-level emissions such as natural gas and also technologies such as carbon capture and storage. It is not limited to zero-emissions technologies, but to those that significantly reduce the amount of carbon emissions relative to traditional fossil fuels based solutions. Formal definition of the sector is difficult, and traditional Standard Industry Codes (SIC) do not adequately capture the breadth and diversity of activities within it. Since 2006, the definition of the ‘Environmental Goods and Services’ has been generally been adopted, based on a report published by the DTI3.
2 3
Emerging Markets in the Environmental Sector, prepared for the DTI by UKCEED, Nov 2006 UKCEED, Nov 2006 ibid
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation However, the market place has evolved rapidly since 2006 with an increasing emphasis on new and emerging ‘low carbon technologies’ that do not fit within the existing sector definition. Envirolink Northwest commissioned a piece of work in 2007 to map the sector using a new definition to include the new and emerging aspects of the sector. Following the Northwest’s lead the UK Government has published a revised definition4. This is based on a hierarchy of 5 levels of segmentation; with Level 5 representing the full supply chain that is deemed to support Level 1. This methodology was also adopted for a recent report prepared by the same consultant for Envirolink Northwest, forming the basis of a sizing and valuation of the Environmental Technologies and Services sector in the region5. The Level 1 and 2 segmentation is summarized in Table 1. Table 1 Proposed Segmentation of Low Carbon and Environmental Goods and Services Sector Traditional Environmental Goods and Services Air Pollution Environmental Consultancy Environmental Monitoring Marine Pollution Control Noise and Vibration Control Contaminated Land Waste Management Water and Waste Water Recovery & Recycling
Renewable Energy Technology Hydro Waves and Tidal Biomass Wind Geothermal Renewable Consulting Photovoltaic
Emerging Low Carbon Technology and Services Alternative Vehicle Fuel Alternative Fuel Additional Energy Sources Carbon capture & Storage Carbon Finance Energy Management Building Technologies
The methodology used to develop this definition has attracted some criticism, specifically around the scope of activities included in Levels 4 and 5. There have been suggestions that the segmentation is too broad in scope, resulting in an over estimate of the size and value of the sector as a whole, as well as individual segments6. Whilst it is recognised that this methodology is not perfect, at a high level it does provide a useful framework for the overall segmentation of the sector. In addition, it is the methodology that has been used consistently in the recent development of compatible data sets for both the UK and the Northwest region. It has therefore been adopted as the framework for the development of this regional strategy document, with the following comments: •
Traditional fossil fuel energy generation technology and services, electricity networks and transmission are not included (with the exception of gas networks);
•
Nuclear fuel is included within Alternative Fuels, and nuclear decommissioning is included within Waste Management;
•
The definition of Alternative Fuel Vehicles effectively covers low carbon vehicle propulsion; and
•
In some instances accurate sizing and definition of supply chains of specific interest to this regional strategy requires some manipulation of the data. For example, the aggregation of data relating to biomass technology and biomass fuel, which currently sits in different parts of the classification.
4 5 6
Low Carbon and Environmental Good and Services: an industry analysis, prepared for BERR by Innovas Solutions Ltd, March 2009 Envirolink NW – Update of Market Intelligence for the Environmental Technologies and Services Sectors, Innovas Solutions Ltd, May 2009 http://www.timesonline.co.uk/tol/news/politics/article6715515.ece
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation In summary, the data presented within this strategy that is based on these outputs should be considered within the context of the trends and relative comparisons it provides, rather than the absolute values presented.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation 2.2
Policy Context
This section outlines the policy and strategic frameworks that provide the context within which the LCEGS sector currently operates and a key driver for its economic development. Specific regulatory tools and mechanisms are discussed in Section 4.1. 2.2.1 Ensuring future economic prosperity The low carbon economy is seen, regionally, nationally and internationally, as a key element of future economic prosperity. Implementation of the European Union’s Lisbon Strategy for Growth and Jobs7 included the development of an Environmental Technologies Action Plan8, and the Commission’s current consultation on an update of the Lisbon strategy to create an ‘EU 2020’ strategy, whilst acknowledging the need for very focused action at a time of constrained public finances, notes that resource efficiency and increased productivity will be key drivers for recovery. It states: ‘the exit from the [current economic and financial] crisis should be the point of entry into a new sustainable social market economy, a smarter, greener economy, where our prosperity will come from innovation and from using resources better, and where the key input will be knowledge.’ The UK Government has developed a ‘Low Carbon Transition Plan’ to support the development of the green economy in the UK and address how greenhouse gas emissions will be cut by 34% by 20209. This sets the development of a ‘cleaner, greener’ economy at the heart of the government’s economic plans, providing a key driver for the future development of the low carbon economy in the UK with some key goals for 2020: • • • • •
More than 1.2 million people in green jobs; 7 million homes will have benefited from whole house makeovers, and more than 1.5 million households will be supported to produce their own clean energy; Around 40 percent of electricity will be from low-carbon sources, from renewables, nuclear and clean coal; The UK will be importing half the amount of gas compared to business as usual; and The average new car will emit 40 percent less carbon.
The Government plans to back businesses in a range of markets and sectors, from pharmaceuticals to low carbon and plastic electronics. New Industry, New Jobs10 outlines a programme of 40 initial commitments, including: • • • • • • 7 8
Rolling out high speed broadband to give access to virtually all of Britain’s homes and businesses Investing and laying the foundations in pre-commercial technologies like wave and tidal energy, and electric vehicles Adapting Britain’s energy grid to link homes and businesses to the new forms of power generation Continuing to protect and raise investment in science and research in the years ahead Spearheading innovation in areas where there are business opportunities for future growth Anticipating future growth in the economy in areas like low carbon or bioscience and ensuring British people have the skills to take part
http://ec.europa.eu/growthandjobs/index_en.htm http://ec.europa.eu/environment/etap/etap/about_en.html
9
http://www.decc.gov.uk/en/content/cms/publications/lc_trans_plan/lc_trans_plan.aspx 10 New Industry, New jobs, April 2009, http://www.berr.gov.uk/files/file51023.pdf
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation • •
Intervening, where necessary, to ensure start-ups and young businesses have access to the finance they need to grow Helping UK companies, especially small and medium sized businesses to break into new export markets.
It will see more support for exporters by enhancing the role of UK Trade and Investment and the Export Credits Guarantee Department. The initiative also aims for “smarter, more joined-up Government” to create a coherent strategy for modern infrastructure and networks in Britain. In the Northwest The Northwest Regional Economic Strategy current vision for the Region’s economy is of one where ‘productivity and enterprise levels are high, in a low carbon economy, driven by innovation, leadership excellence and high skills’11. The current draft of the regional strategy for ‘RS2010’12 identifies four key strands for future focus, one of which is capitalising on the opportunities of moving to a low carbon economy. A key element of realising this objective is the provision of support to the LCEGS sector. 2.2.2 Meeting climate and environmental targets The development of a low carbon economy in the Northwest is consistent with, and supported by, policies that aim to deliver on European, national and regional climate change and environmental goals.
11 12
http://www.nwda.co.uk/PDF/RES06v2.pdf http://www.nwregionalstrategy.com/
12
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Climate Change In 2000, the European Union has an established Climate Change Programme, which has resulted in a number of policy initiatives that support the development of a low carbon economy, most notably the EU Emissions Trading Scheme13. Other key European policies includes the Renewable Energy Directive 14, which sets mandatory national targets for the overall share of energy demand that should be met from renewable sources, requiring countries to produce national renewable energy action plans. Under this Directive, the UK is expected to meet 15 per cent of its overall energy demand from renewables by 2020 from its current level of 2.25% (2008). The EU Biomass Action Plan, 2005 aims to increase the use of biomass in the EU member states from 69 million tones of oil equivalent (mtoe) in 2003 to 150 mtoe by 2010. It prioritises three areas for deployment: heat production, electricity production and transport. The Action Plan reinforces the need for biomass technology R&D, demonstration and technology transfer through the mechanisms of the EU Framework Programme and Intelligent Energy Europe. The recent strategic energy review at the European level15 resulted in, amongst other things, a proposed infrastructure package. This includes the development of a blueprint for a North Sea offshore grid that will interconnect national electricity grids and also allow for the plug-in of planned offshore wind projects. It also considers the issue of ensuring that grid development facilitates the achievement of renewable energy targets. Nationally, the UK Government has signaled its commitment to a low carbon Britain through the Climate Change Act16, which sets a legally binding framework for national carbon emissions reduction and requires emissions to be cut by 80 per cent by 2050. The Biomass Strategy17; Renewable Energy Strategy18 and the developing Heat and Energy Saving Strategy19, together with the previously mentioned Low Carbon Transition Plan, set out the government’s plans for delivering the reductions required over the next decade or so. The Government will need to present a National Action Plan to the European Commission by March 2010 to define how the 2020 target will be met; it is anticipated that wind and biomass will be key technologies for the UK in realising this target. Environmental Performance Improvements in a wide range of aspects of environmental performance have been required by international and national legislation that has been introduced and strengthened over many years. For example, the European Union has developed policy and legislation to improve wastewater treatment20, water management and quality21, air quality22, energy performance in buildings, and noise23. UK National policy also covers the whole range of environmental quality and includes for example national Air Quality Standards, the Water Act 2003 and the Noise Act 1996. This
13
Directive 2009/29/EC contains the most recent amendments to the scheme.
14
Directive 2009/28/EC, 23rd April 2009
15
EU energy security and solidarity action plan: second strategic energy review. Memorandum from the European Commission
16
http://www.defra.gov.uk/environment/climate/legislation/index.htm
17
http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/explained/bioenergy/policy_strat/policy_strat.aspx
18 19 20 21
http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/res/res.aspx http://hes.decc.gov.uk/ Directive 91/271/EEC concerning urban wastewater treatment Directive 2000/60/EC establishing a framework for Community action in the field of water policy
22
Legislative limits on concentrations of various pollutants, most recently updated and consolidated in Directive 2008/50/EC on ambient air quality and cleaner air for Europe 23 Directive 2002/49/EC relating to the assessment and management of environmental noise
13
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation policy framework will support the development of the sector generally in the Northwest. There are a series of EU Directives that aim to reduce waste production and ensure that waste is managed properly24. These include the Landfill Directive, the Packaging and Packaging Waste Directive, the Waste Electrical and Electronic Equipment Directive, and the 2006 Waste Directive that requires the drawing up of waste management plans. The current (6th) EU Environmental Action Programme25 also includes a thematic strategy on waste26 that aims to simplify regulation and encourage waste recycling. The 2007 Waste Strategy for England27 sets out the Government’s vision for sustainable waste management. It covers both waste minimisation and better use of waste that is generated, and includes objectives of: • •
Securing the investment in infrastructure needed to divert waste from landfill and for the management of hazardous waste; and Getting the most environmental benefit from that investment, through increased recycling of resources and recovery of energy from residual waste using a mix of technologies.
In the Northwest The need for a transition to a low carbon Northwest is reflected in a number of key regional strategies and action plans including the Climate Change Action Plan28, the Sustainable Energy Strategy29, the Low Carbon Housing and Fuel Poverty Activity Plan30, the Sustainable Consumption and Production Action Plan31, and the Regional Spatial Strategy32. The Northwest’s Regional Waste Strategy33 aims to ‘contribute to the sustainable development of the North West by encouraging waste management systems that will reduce waste generation, lessen the environmental impacts of waste production and improve resource efficiency, whilst at the same time stimulating investment and maximising associated economic opportunities’. 2.2.3 Supporting Innovation Government at all levels recognises the need to improve rates of innovation to compete for the new and growing markets within the low carbon economy. The European Union has a range of policies and programmes that aim to support increased innovation across the economy34. Within these, there are a number of programmes specifically targeting sectors included in this strategy. The proposed Strategic Energy Technology plan35 includes a series of relevant initiatives: the European Wind initiative, the European Electricity Grid initiative, the Sustainable Bio-energy Europe initiative, and the Energy Efficient Smart Cities initiative36. Also, two of the six identified priorities in the lead markets initiative are recycling and renewable energy. 24 25
See http://ec.europa.eu/environment/etap/etap/about_en.html for more information on these Directives and other waste policy. Decision no. 1600/2002/EC of the European Parliament and of the Council, OJEC L242 10/9/02
26
Communication from the Commission; Taking sustainable use of resources forward: A Thematic Strategy on the Prevention and Recycling of Waste, COM(2005)666 final 27 http://www.defra.gov.uk/environment/waste/strategy/index.htm 28 http://www.climatechangenorthwest.co.uk 29 http://www.climatechangenorthwest.co.uk/assets/_files/documents/jun_07/cli_1181140886_North_West_Sustainable_Energy_.pdf 30 http://www.nwdea.org.uk/ 31 http://www.nwda.co.uk/areas-of-work/sustainable-development/consumption-and-production.aspx 32 http://www.nwrpb.org.uk/whatwedo/issues/environment/?page_id=457 33 http://www.nwrpb.org.uk/?page_id=129 34 http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/intm/91989.pdf 35 Communication from the Commission: investing in the development of low carbon technologies (SET-Plan), COM(2009)519 final, 7 th October 2009 36 http://ec.europa.eu/enterprise/policies/innovation/policy/lead-market-initiative/index_en.htm
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation One of the three strands of the Commission’s Competitiveness and Innovation Framework Programme is ‘Intelligent Energy Europe’37, which provides financial support to projects throughout the EU that are designed to improve market conditions for energy efficiency and renewable energy. EU support for research is delivered through framework programmes and the current (7th) framework programme defines the objective for supported energy research as ‘to aid the creation and establishment of the technologies necessary to adapt the current energy system into a more sustainable, competitive and secure one.’ Focus areas for financial support include renewables and smart energy networks. In the UK, the government’s aims for increased innovation are expressed in ‘Innovation Nation’38. In this innovation is recognised as ‘essential to the UK’s future economic prosperity and quality of life’ and a number of areas for government action are identified including: the use of public sector procurement and regulation to demand innovation; ensuring the availability of finance, and increasing use of Knowledge Transfer Partnerships. In the Northwest The Northwest Draft Innovation Policy39 highlights the lagging performance of the region relative to innovation in the UK as a whole. It aims not only to support improved performance in innovation across the regional economy but also to develop a better understanding of the process of innovation outside traditional science-based areas of activity. The need for increased capacity and capability to innovate is also recognised in the region’s manufacturing sector strategy40 and improvements along the innovation chain are supported by the Regional Science Strategy41 and Enterprise Strategy42. 2.2.4 Skills Development ‘Skills for growth’43 is the national skills strategy for England. The strategy recognises the economy-wide benefits of increasing the skills of the workforce and bases national skills policy on twin objectives: wider and more flexible access to skills training; and an increased focus on the skills required for key current and future employment. In addition, a key outcome of the national Renewable Energy Strategy has been the establishment of the Office for Renewable Energy Deployment: ‘The office will develop UK manufacturing, skills and jobs across all deployable renewable electricity and heat technologies. In collaboration with key partners including the Department for Business, Innovation and Skills, Regional Development Agencies, Devolved Administrations and UK Trade and Investment, ORED will build up the capability of the supply chain and proactively support investment in manufacturing’. In the Northwest The key principles and issues paper for the developing Regional Strategy 2010 identified the attraction and retention of highly skilled and talented people as a key challenge.
37 38 39 40 41 42 43
http://ec.europa.eu/energy/intelligent/index_en.html http://www.dius.gov.uk/reports_and_publications%20HIDDEN/~/media/publications/S/ScienceInnovation_web http://www.nwda.co.uk/pdf/NWReg%20Inn%20Plcy%20-%20Version%202.pdf http://www.nwda.co.uk/pdf/manufacturing_summary_doc3_final.pdf http://www.nwda.co.uk/pdf/science%20strategy%2007.pdf http://www.nwda.co.uk/PDF/NW_EnterpriseStrategy_ExecSummary.pdf http://www.bis.gov.uk/wp-content/uploads/publications/Skills-Strategy-Summary.pdf
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation NWDA are working with Summit Skills44, Cogent45, and Energy and Utility Skills46 on development of the necessary skills for the LCEGS sector in the Northwest. This includes work through the Higher Level Skills Partnership to fund new courses that are designed to meet the needs of the region’s employers. The development of five new courses in the LCEGS sector has been funded; postgraduate modules/CPD in Safety Case Specialist Topics, CPD in Power System Protection Engineering, a Foundation Degree in Wastes Management, a Certificate of Nuclear Professionalism and CPD in Fuel and Energy Generation from Waste.
44 45 46
the Sector Skills Council (SSC) for Building Services Engineering the SSC for chemicals, pharmaceuticals, nuclear, oil and gas, petroleum and polymers The SSC for gas, power, waste management and water
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation 3
Market Analysis
Key Insights: •
The UK Low Carbon and Environmental Goods and Services sector was valued at £106 bn in 2007/8, representing 3.5 % of the global market and placing it 6 th internationally behind the USA with 20.6 %. Within the UK, this would place the sector between the healthcare and construction sectors in terms of relative market size.
•
Global trends indicate strong performance and growth in the Emerging Low Carbon and Renewable Energy sub sectors at the expense of traditional Environmental Goods and Services. This trend is reflected both at a national and Northwest regional level within the UK.
•
13 segments with an annual value of > £1bn dominate the UK sector. Alternative Fuels, Building Technologies, Alternative Vehicle Fuel and Wind lead the pack each with an annual market value > £10bn.
•
90% of the companies within the sector in the UK are SMEs reflecting its relative immaturity.
•
The Northwest currently represents 10% of the overall UK market by value (c. £10 bn), second behind London/South East.
•
The highest value segments in the region mirror those at a national level with the exception that Carbon Finance is not currently significant within the Northwest.
•
The Northwest sector grew by 4.9% between 2006/7 and 2007/8 relative to a UK average of 3.6%.
•
The overall UK sector is projected to grow at a rate of 4.7 % in 2008/9 rising to 6.1 % by 2014.
•
In 2007/8, 8.8% of the total regional market value was derived from exports; an 18 % increase on previous year but lower than the national average.
•
The Northwest performs well relative to other UK regions in regard to inward investment. In 2008/9 5.7% of the inward investment in the region was in the energy and environmental sector, compared to a national average of 2.2% and second only to Wales with 13.3%. This section provides an overview of the global, national and regional markets for Low Carbon and Environmental Goods and Services based on the definition presented in Section 2.1 and supporting market data.47 Where market value figures are provided these data are based on aggregated turnover accrued to businesses in the region under consideration.
3.1
International Outlook
The global value of the LCGS market reached £3,046 billion in 2007/2008, with Asia accounting for 38%, Europe 27% and the Americas 30%. The largest individual markets were the United States (20.6% of the total) and China (13.5%). Other significant markets include Japan and India (each 6.3%), Germany (4.2%), United Kingdom (3.5%) and France (3.0%).
47
All the values presented in this section, unless otherwise stated, are sourced from: Low Carbon and Environmental Good and Services: an industry analysis, prepared for BERR by Innovas Solutions Ltd, March 2009. Please refer to Section 2.1 for comments on level of confidence associated with these data.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation As discussed in Section 2.1, this overall market can usefully divided into three sub sectors, traditional Environmental Goods and Services, Renewable Energy and Emerging Low Carbon activities. The relative value of each of these sub sectors globally is shown in Figure 1, with Emerging Low Carbon Technologies the largest with a 47 % contribution. Figure 1 Global market value for Sector, 2007/0848
Environmental Goods and Services 22%
Emerging Low C arbon 47%
Renewable Energy 31%
These three sub sectors can be broken down into a total of 23 segments, with the top 10 accounting for over 90% of the total market value. Figure 2 shows the contribution of each to the overall global total of £3,046bn. Figure 2 Global market value of largest 10 Low Carbon and Environmental Goods and Services segments49
48
Innovas, 2009, ibid
49
Envirolink Northwest – Update of Market Intelligence of the Environmental Technologies and Services Sectors, Innovas in partnerships with KMatrix, May 2009 (accompanying spreadsheet document)
18
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation The top four segments, Alternative Fuel, Alternative Vehicle Fuel and Building Technologies all sit within Emerging Low Carbon, and between them account for nearly 50% of the total market value. Within Renewable Energy, Wind, Geothermal and Photovoltaic are all significant segments. The majority of the traditional Environmental Goods and Services segments are relatively small, reflecting the overall low contribution of the sub sector to total market value, however it is still significant at £670bn per year and with a growth rate of 3%.
3.2 UK Market
50
The UK market for LCEGS reached £106.5bn in 2007/08 accounting for 3.5% of the global market. Within the UK, this would place the sector between the healthcare and construction sectors in terms of relative market value. Adopting the same breakdown as applied in Section 3.1, Environmental Goods and Services accounted for 21% (£22.3bn) of this total, with the Renewable Energy sector at 29% (£31.1bn) and the Emerging Low Carbon sector 50% (£53.3bn). These proportions are similar to the global figures, with the newer Renewable Energy and Emerging Low Carbon sectors between them accounting for nearly 80% of the total value. In the UK, there are an estimated 54,835 companies active in the sector, employing 881,000 individuals. Over 90% of these companies are SMEs. As Figure 3 demonstrates, there are 13 segments in the UK which individually are worth more than £1bn per annum. Of these, four segments (Alternative Fuels, Building Technologies, Alternative Vehicle Fuel and Wind) have an individual annual market value of over £10bn. Figure 3 Comparative Value of UK Low Carbon and Environmental Goods and Services Segments (£m) 2007/8
1000
50
All the figures in this section and the NW and NW sub region sections are taken from Envirolink Northwest - Update of Market Intelligence of the Environmental Technologies and Services Sectors, Innovas in partnerships with KMatrix, May 2009
19
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation The UK LCEGS sector is projected to grow by 4.7% in 2009/10, rising to 6.1% by 2014. Within these headline numbers, Environmental Goods and Services has relatively modest growth projections of around 3%, compared with Renewable Energy between 7% and 8%, the Emerging Low Carbon at between 5% and 6% for the same years. 3.3
Low Carbon and Environmental Goods & Services in the Northwest
Within the Northwest, the LCEGS Sector is currently worth £10.6bn, consisting of 5,157 companies and employing 86,815 individuals. This represents approximately 10% of the UK in terms of market value, company numbers and employment figures. These overall figures place the North West in second place in the UK, behind London/South East. Figure 4 presents the relative current market value of the Low Carbon and Environmental Goods and Services segments. Figure 4 Comparative Value of Northwest Low Carbon and Environmental Goods and Services Segments (£m) 2007/8
The relative contributions of the regional segments to the market values of each of the three key sub sectors are presented in Figures A to C in Appendix 1. Building on the sector profile presented in Figure 4, Table 2 provides a comparative summary of the relative performance of the top six regional segments on the basis of value, number of jobs and predicted future growth rate. These data indicate a decoupling between some of the largest segments today, and emerging segments predicted to have the highest future growth rates. Wind and geothermal are the only two segments that appear consistently across all three categories. Data indicates that the Northwest sector grew in value by 4.9% between 2006/7 and 2008/9, compared to a UK wide figure of 3.6%. Projected future growth rates for the region is not available, but given the Northwest’s comparative strength in the higher growth sub sectors, it is reasonable to expect the region to continue to outperform the national growth rate.
20
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Table 2 Top ranked segments in the Northwest (2007/8) Value
1 2 3 4 5 6
No of Jobs £m
Alternative fuels* Alternative fuel vehicle Building technologies Wind Recovering and recycling Geothermal
2,506.84
Alternative fuels*
19,331.00
Carbon finance
8.92%
1,427.92
Building technologies
12,453.00
Wind
7.48%
1,378.23
Wind
11,893.00
Photovoltaic
6.62%
1,263.93
Alternative fuel vehicle Recovering and recycling Water and waste water
9,544.00
Wave and tidal
5.84%
6,702.00
Geothermal
5.49%
5,170.00
Biomass
5.23%
726.11 684.71
Sub-sector
National Growth Rate
Sub-sector
no.
Sub-sector
CAGR (2008-15)
* Alternative fuels includes a contribution of £556 m and circa 4,000 jobs from nuclear fuel.
In 2007/08, 8.8%, (£939.96m) of total regional market value came from exports, representing a 20% increase from the 2006/07 figure of £777.8m. Part of this is attributable to a wider sector definition being used than previously, but even with an adjustment of £25m to account for this, there was an 18% increase on the 2006/07 figure. However, this is still low compared to the average UK figure. The top five export locations in 2007/08 in descending order were China, Spain, South Korea, Hong Kong and Malaysia. 3.4
Low Carbon and Environmental Goods & Services in the Northwest’s sub regions
The total market value of £10.6bn for the Northwest can be split between its respective sub regions as follows: •
Manchester – 38.2%
•
Cheshire – 26.8%
•
Lancashire – 22.1%
•
Merseyside – 9.4%
•
Cumbria – 3.5%
These proportions hold true at for each of the three key sub sectors (Environmental, Renewable, Emerging Low Carbon), and across the other measures which are used – company numbers and individuals employed. The specific capabilities of the individual sub regions are presented further in Section 4.2.2. This distribution is broadly in line with the relative contribution of the sub regions to regional GVA, with the exception that Cheshire appears to perform significantly better in regard to this sector relative to overall GVA51.
51
http://www.nwda.co.uk/PDF/RES06v2.pdf
21
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation 4
Sector Drivers, Trends and Opportunities
Key Insights: •
Cascading down from the national policy framework, there are a number of sector specific regulatory and financial mechanisms in place/in development. These are key drivers for stimulating demand for, and supporting deployment of, new technologies. Key amongst these is the Renewables Obligation, the Renewable Heat Incentive, Feed-In Tariffs, the Carbon Reduction Commitment (CRC), and the Building Regulations. Increasingly mechanisms are being developed to support deployment of emerging markets such as Smart Grids and Energy from Waste (EfW).
•
At a regional level, the availability of a strong knowledge base, industrial heritage, natural resources and a significant population provide important attributes to support the on-going development of both supply and demand for low carbon technologies. These characteristics are a result of the aggregation of the specific resources and capabilities available within each sub region.
•
Significant regional sector support exists from early stage research through to business growth and internationalisation. It is estimated that c. £18m will be spent between 2009 and 2012 on a portfolio of support programmes. These will be delivered via a network of credible and nationally recognised delivery partners including: Envirolink Northwest, Businesslink Northwest, the Joule Centre, the Energy Innovation Centre and the Northern Way.
•
Looking forward, the most significant regional growth in the sector is anticipated to come from Renewable Energy and the Low Carbon segments. This will require a development of regional skill sets to meet the needs of the developing markets and inward investors.
•
Growth in exports, specifically to exploit opportunities associated with developing overseas markets, will become increasingly important for the sustained growth of the relatively more mature Environmental Goods and Services sub sector.
Fundamentally, development and growth of the LCEGS sector is being driven by the increasing political and social imperatives associated with climate change, sustainable development and energy security. These are being reflected at a macro level within the policy frameworks defined in Section 2.2, although practical implementation and realisation of the high level objectives relies on a portfolio of drivers impacting the market at a regional and local level. This section provides an overview of the key drivers, issues and trends currently affecting the Northwest sector, and those that may impact on its future performance and growth. It also outlines the sectors key strengths and opportunities which must be exploited to ensure continued growth and optimisation of economic impact. 4.1
Key Regulatory and Financial Market Drivers
Across the UK, the market for the uptake and deployment of low carbon and environmental goods and services is being heavily driven by Government intervention and regulation. Key amongst these with relevance to the Northwest are: •
Price of fossil fuels and energy security. Ultimately a significant driver for the uptake and deployment of low carbon technology is their (lifetime) cost relative to incumbent solutions, specifically for applications currently using fossil fuels. Recent volatility in the price of oil has begun to alter the commercial landscape in the favour of alternative technologies, and stimulated early market demand in some niche segments, for example off grid heat biomass. Oil prices are anticipated to remain volatile and are unlikely to return to the low of the 1990s. Future trends will heavily influence the economic case for new technologies.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation
•
Large scale renewable electricity generation is currently supported by the Renewables Obligation52. This, together with the Renewables Obligation Scotland and the Northern Ireland Renewables Obligation, requires electricity suppliers in the UK to source a proportion of the electricity they supply from renewable sources. In effect, generators can obtain a premium price for renewable electricity. The 2008 Renewable Energy Strategy 200953 notes that the impact of the policy so far has been to increase eligible renewable electricity generation in the UK from 1.8 per cent of electricity in 2002 to 5.3 per cent in 2008 and also comments that the UK is now number one in the world for installed offshore wind capacity. The 2009 strategy confirms that the Renewables Obligation will remain the main support scheme for large-scale renewable electricity projects and extends the scheme, for new projects, beyond its current end date of 2027 until 2037.
•
The Energy Act 200854 introduced support for smaller renewable energy generation through the Renewable Heat Incentive and Feed-in tariffs: - The Renewable Heat Incentive is due to be introduced in April 2011 and will be available to a wide range of technologies and scales. The Government is currently consulting on the details of the scheme but is thought that it will operate in a similar manner to the Renewables Obligation Mechanism. - Feed-in tariffs will offer support to renewable energy installations of up to 5 MW generation capacity per site55. The Government is committed to introducing the tariff from April 2010, and at present is planning to include a fixed payment for each kWh generated, whether used on-site or exported into the local distribution grid, plus a guaranteed minimum additional payment for electricity that is exported to the grid. Technologies covered by the tariff from 2010 are: wind, solar PV, hydro, anaerobic digestion, biomass and biomass combined heat and power (CHP), and non-renewable micro-CHP.
•
The UK Government is committed to ensuring that all new buildings are ‘zero carbon’ by the year 2016 (for housing) or 2019 (for non-domestic buildings) 56. In practice this means that the Building Regulations57 requirements are tightening in stages up to these dates: for housing, the requirements for the overall carbon performance of a new build property will tighten by 25 per cent in 2010, by 44 per cent in 2013 and then to zero carbon in 2016. For homes, the changes to the Building Regulations will follow the various levels of the presently voluntary Code for Sustainable Homes58. The changes will support greater use of both energy efficiency and renewable energy technologies.
•
Although Building Regulations apply primarily to new buildings, there are also a number of regulatory drivers for improved carbon performance in existing buildings. The Carbon Reduction Commitment (CRC) is a new cap and trade scheme intended to reduce carbon emissions in sectors of the economy not currently covered by the European Emissions Trading Scheme (EU ETS) or the UK Government’s Climate Change Agreements (CCAs). It will be mandatory and will apply to all organisations outside the EU ETS or CCAs with annual electricity consumption greater than 6,000MWh (for example, supermarket chains, large local authorities and government departments). The introductory phase of the scheme is intended to begin in April 2010. Participants will receive a carbon emissions allowance that they must pay for. At the end of a year, their emissions reduction
52 53 54
http://www.ofgem.gov.uk/sustainability/environment/renewablobl/Pages/RenewablObl.aspx http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/res/res.aspx http://www.opsi.gov.uk/acts/acts2008/pdf/ukpga_20080032_en.pdf
55
Installations of up to 50kW will be eligible for the Feed-in tariff only; installations of between 50kW and 5MW will be able to choose between the Feed-in tariff and the Renewables Obligation 56 http://www.communities.gov.uk/archived/publications/planningandbuilding/buildinggreener 57 http://www.planningportal.gov.uk/england/professionals/buildingregs/technicalguidance/bcapproveddocumentslist/ (see Part L, for dwellings and for buildings other than dwellings) 58 http://www.communities.gov.uk/planningandbuilding/buildingregulations/legislation/codesustainable/
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation performance will be recorded and a league table created. All the revenues from the initial sale of allowances will be recycled to participants based on their initial emissions plus or minus a bonus / penalty depending on their position in this league table59. •
Smaller energy users are subject to a number of lesser incentives, including the information contained in Energy Performance Certificates60, financial incentives for energy efficiency investments from energy suppliers under the Carbon Emissions Reduction Target61 and the Community Energy Saving Programme62 and, in the case of local public sector bodies, the carbon-related performance indicators within the new performance framework63.
•
The main regulatory driver for increased action on waste management and recycling remains the landfill tax. The tax aims to reduce waste sent to landfill by making waste minimisation and recycling more attractive financially, and is increased annually. In the 2007 Budget the Chancellor announced that the rate of increase of the tax would be stepped up, with the tax for each tonne of active waste (waste that results in emissions) increasing by £8 each year until at least 2010-1164 and will be £48/t in April 2010. Alongside this, the development of options for recovering energy from waste may be encouraged through the Renewables Obligation, described above. For example, anaerobic digestion is one of the technologies in the most advantageous band within the Obligation, gaining two Renewables Obligation Certificates for every 1MW of electricity generated 65.
•
In addition to the landfill tax, the Environment Agency’s Landfill Allowance Trading Scheme (LATS)66 allocates each waste disposal authority in England a number of tradable landfill allowances, allowing it to landfill an amount of biodegradable and municipal waste (BMW) each year. Authorities can trade or save (for future years) unused allowances, or borrow credits against future years’ allowances. In its first year of operation in 2005/06 the total amount of BMW waste was 18.5% less than the credits allocated. As the allocated annual allowances are reduced, however, it is expected that the opportunities for revenue creation (by selling excess credits) and the possibility of fines and extra expense (if more permits are required) will be significant drivers for the continued reduction of BMW waste in the medium term.
•
The development of a smarter grid is seen as integral to the changes in energy supply and use that will be necessary to the transition to a low carbon economy. In ‘Smarter grids: the opportunity’67 the Government sets out what it sees as the main benefits of such grids, including: a more reliable and cost effective system, greater consumer control over energy use, and the ability to smooth peaks in demand which will result in a more efficient and less polluting system. There are a number of UK smart grid pilots underway and the government has recently launched a £6 million smart grid demonstration fund.
•
The Innovation Funding Incentive (IFI) was introduced in 2005 as part of the electricity distribution price control programme for 2005-10, managed by Ofgem. It is aimed at reversing the decline in R&D activity undertaken by the District Network Operators and requires them to collaborate with industry and academia in the development of new technologies. Eligible projects are those
59 60 61 62
http://www.carbontrust.co.uk/climatechange/policy/CRC.htm Introduced as part of the implementation of the European Energy Performance of Buildings Directive. http://www.decc.gov.uk/en/content/cms/what_we_do/consumers/saving_energy/cert/cert.aspx http://www.ofgem.gov.uk/Sustainability/Environment/EnergyEff/cesp/Pages/cesp.aspx
63
National Indicator 185 relates to a local authority’s own carbon emissions; National Indicator 186 relates to carbon emissions across the whole local area. 64 http://www.defra.gov.uk/environment/waste/strategy/strategy07/documents/waste07-strategy.pdf 65 http://www.berr.gov.uk/files/file49197.pdf 66 http://www.defra.gov.uk/Environment/waste/localauth/lats/index.htm 67 http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/network/smart_grid/smart_grid.aspx
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation focused on enhancing the technical development of distribution networks. £12.1 m was invested in 2007/8 and IFI will increase from next year with the addition of the Low Carbon Network Fund68. 4.2
Other Regional Market Drivers
In addition to the political and regulatory landscape, there are a number of specific regional attributes and market drivers that need to be considered within the context of developing the sector strategy. These are considered below. 4.2.1 Availability of Regional Resources The Northwest has a wealth of existing resources that are fundamental prerequisites for the development of a strong regional low carbon sector, and underpin the potential for future growth. Its heritage in oil & gas, engineering and manufacturing provides a legacy of skills and assets, which together with its natural resources, can be leveraged for the benefit of the low carbon sector. These include: •
•
Knowledge Base – the Northwest has strong regional expertise in key areas of academic and industrial research and development of relevance to this sector. Specifically: -
Electrical and Power Engineering; e.g. University of Manchester, National Grid High Voltage Research Centre; Lancaster University, Manchester Metropolitan University, Liverpool John Moores University, University of Liverpool;
-
Marine Engineering – e.g. University of Manchester; University of Liverpool (incl. Maritime Environment and Water Systems Research Group); Lancaster University (Renewable Energy Group); Proudman Oceanographic Laboratory; Centre for Ecology and Hydrology (NERC);
-
Low Carbon Buildings - Salford University, Sustainable Consumption Institute at University of Manchester, Concrete and Structural Research at Liverpool University, Construction Knowledge Hub (Salford, Lancaster & Liverpool Universities).
Natural resources – the region has some of the best resources for renewable power in the UK, specifically: -
Wind – The UK has 40% of Europe’s wind resource and the Northwest is regarded as one of the most promising regions for offshore wind power. Under Round 3 of the Crown Estates concessions, the Irish Sea Zone has been identified as having the potential to produce up to 5 GW; Shallow sloping shores makes installation and management of farms relatively easy; ports facilities at Barrow, Liverpool, Birkenhead and Workington already geared to serving offshore energy industry. Significant existing installed capacity and associated know-how (652 installed turbines and 2.36 GW);
-
Tidal - 650 miles of shallow coastline and a variety of tidal estuaries with the potential to generate 50 % of the regions energy needs. Shallow sloping shores makes installation and management of off shore devices relatively easy. Recent work by the Joule Centre has identified possible locations for tidal energy schemes in the river estuaries of the Mersey, Wyre Estuary, Duddon, Morecambe Bay and Solway Firth. These could collectively could provide 5-7 GW of capacity;
-
Biomass – The region has the largest supply of biomass in the UK, estimated at 2 m tones per annum (tpa). This includes waste woodchip but also large volumes of clean wood, industrial, commercial and municipal waste streams (see below).
68 http://www.ofgem.gov.uk/Networks/Techn/NetwrkSupp/Innovat/ifi/Pages/ifi.aspx
25
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation •
Size of population - the Northwest has a population of around 7 million, making it the third largest region in the UK outside South East and London. The absolute volume, plus the concentration within the large cities and conurbations of Manchester, Liverpool, and Lancashire presents strong attributes in terms of: -
Waste streams – generation of large and consistent flows of municipal and industrial waste streams that require treatment and management, and offer potential for exploitation for power generation and/or heat recovery (energy from waste – EfW).
-
Availability of workforce – a large proportion of which is skilled in many of the disciplines required to support the development of the sector. This is a consequence of the regions legacy of expertise in the manufacturing and engineering sectors. In addition, average wages are lower than some other regions such as the South East69.
-
Infrastructure – the Northwest has well developed innovation, communication and transportation assets to support economic development and facilitate cross regional coordination of activities within the sector.
-
Quality of Life – the Northwest is perceived as an attractive place to live, with 88% of residents claiming to be very or fairly satisfied with the region. There are a number of factors which contribute to this perception including the vibrant city life, including the strong cultural and sporting scene, the opportunities for outdoors activities in the Lake District particularly etc. Large organisations such as the BBC are increasingly choosing to situate themselves in the region.70
4.2.2 Sub Regional Activity Within the context of the pan regional resources described above, each of the sub regions has specific resources and areas of expertise that are of relevance to this strategy. These have been identified by each Sub Regional Partnership, and have then informed the development of their individual renewable and low carbon strategies. Key areas of expertise are summarized in Table 3. Table 3 Summary of Sub Regional Sectoral Expertise Sub Region Cumbria
Key Areas of Activity •
Off shore and submarine engineering capabilities important to offshore wind sector. Key ports of Barrow and Workington
•
Playing an active role in the feasibility studies for a number of tidal projects
•
Deployment of biomass, specifically focusing on community and off grid applications
• Lancashire
Liverpool City Region
•
70
Promotion of the use of wood fuels and supporting the biomass supply chain
•
Advanced engineering expertise of relevance to all sectors
•
Cluster of photonics companies developing solid state lighting
•
Strong activity in the development of a tidal scheme on the Mersey and development of demonstration facility
•
Significant interest in EfW plants, led by Ineos Chlor and ENER-G; plans for a bio-energy park in Knowsley
• 69
Cluster of photonics companies developing solid state lighting.
Local cluster of fuel cells/automotive development
Perceptions of England’s North West, 2008-2009 SQW consulting, February 2009 Perceptions of England’s North West, 2008-2009 SQW consulting, February 2009
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Greater Manchester
•
Three of the UK’s major wood reprocessing firms based here with a processing capacity > 1 m tpa. Also large volumes of other waste streams forming the basis of strong biomass and EfW cluster
•
Strong demand/supply capabilities in Building Technologies
• Cheshire and Warrington
• •
Core of expertise in professional services in support of the LCEGS sector, e.g. legal, consulting and finance Significant activity in the development of large-scale EfW plants Focal point for the development of electrical engineering capability for grid connection, distribution & transmission
4.2.3 Existing Sector Support There is a significant baseline of support initiatives for the LCEGS sector in the region that provides financial and specialist consultancy support for innovation and enterprise in the Sector. The regional budget for those programmes focused solely on the regional LCEGS sector between 2009 and 2012 is £25m. In addition there are a number of regional programmes that are not sector specific. Key initiatives are summarized in Table 4 but exclude those of specific relevance to nuclear power or low carbon vehicles which are considered elsewhere. Table 4 Summary of Existing Regional Support Initiatives Initiative
Cluster Support Programme
Low Carbon Market Development Programme
Biomass Work Programme
Waste Virtual Centre of Excellence 2
Climate Change Challenge Fund
Scope
% share taken by LCEGS
Delivery of sector development support to environmental technology companies in the renewable energy, energy efficiency and water sectors. Sector development activities include trade promotion of regional companies to foreign markets, specialist business support, and promotion of the sector. The LCMDP will help overcome the barriers for the development of renewables such as planning, grid connections and finance and funding, and provide advice and support to businesses and large scale developments in the region. The aim of the project is to increase the market for renewable energy in the region and to help grow the renewable energy companies within the environmental technologies sector. Provides support to energy intensive industries, particularly those that are subject to the EU Emissions Trading Scheme or are in a Climate Change Levy Agreement and are already engaged with the Carbon Trust. Assistance is available for the steps in the pre planning permission stages, the aim being to reduce the risk of preparing biomass proposals. Support covers environmental assessments and modelling, equipment assessments, site surveys, gird connections specifications and assistance with capital grant applications. The Waste Project aims to both develop the market for recycled products in the region, through projects such as the Buy-recycled code, and support the development of businesses in the sector. Support is offered to the businesses in the sector to help find end markets, assistance with trade promotion and advice and guidance on innovation and the commercialisation of new technologies. The Challenge Fund was offered through a competition to businesses and the public sector for projects that showcase the use of low carbon or resource efficient technologies. Envirolink Northwest provided advice and guidance to applicants as well as information on other funding sources.
27
Delivery Agent
100%
Envirolink Northwest
100%
Envirolink Northwest
100%
Envirolink Northwest
100%
Envirolink Northwest
100%
NWDA facilitated by Envirolink Northwest
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Northwest Tidal Energy Group
The Northwest Tidal Energy Group is a collection of developers, academics, industry and environmental groups interested in the development of tidal energy in the Northwest. Facilitated and chaired by the NWDA, the overall aim is to position England’s Northwest as a global leader in the exploitation of tidal energy. In order to achieve this the Northwest Tidal Energy Group will: Act as a forum for exchange of best practice and ideas pertaining to the Northwest tidal energy sector; explore the potential for energy extraction, and its likely implications, from the Irish Sea and its surrounding coastline.
28
100%
Envirolink Northwest
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation
Energy Innovation Centre
Joule Centre for Energy Research
Innovation Voucher Scheme
Grant for Research and Development (GRAND) and Carbon Reduction Demonstration Award
Carbon Reduction Demonstration Award Grant for Business Investment (GBI)
Business Support and Information Service
Northern Wind Innovation Programme Carbon Abatement Technology Innovation Fund
The project builds on the reputation and skills of EA Technology (formerly the research laboratories for the Electricity Council) to identify, encourage and develop financially viable innovative technology for the electricity transmission and distribution industry using Innovation Funding Incentive monies from the partner utility companies. The project is delivered by EA Technology on behalf of the NWDA and the partner utility companies. The Joule Centre supports low carbon energy research and development projects in the region and promotes the capabilities of the region’s university energy research capabilities. The Joule centre encourages links between universities and industry in the region by funding projects that involve university and industry collaboration. Innovation Vouchers are designed to help Northwest businesses owners, entrepreneurs and social enterprises to purchase a knowledge provider's expertise to develop innovation and enhance business. Provides voucher of £3,000 and £7,000 to growing businesses and social enterprises and was set up to encourage and make it easier for more people to engage with the knowledge base; in particular universities and FE colleges. The GRAND scheme aims to help entrepreneurs and business owners look at the market for and introduce innovative products and processes including research trials and product testing. Designed specifically to support technically innovative projects that have a solid commercial potential. Grants are only available to small and medium sized businesses (those with less than 250 employees) and turnover of less than €40 million. Grants range from £5,000 to £500,000. An extension of the existing GRAND award to allow SMEs to apply for funding to capital grant support for the demonstration phase of product develop for a low carbon or resource efficient technology.
Formerly titled Selective Finance for Investment in England (SFIE), GBI is a form of financial assistance available to businesses located in Assisted Areas in England to support their expansion, modernisation, rationalisation and diversification. Business Link is the business support, advice and information service for businesses in the Northwest. It has expert advisors for companies in the energy sector and is targeting companies within the energy sector to ensure they have access to the wide range of business support products on offer in the region. £2.6 m research fund focused on AC/DC electrical conversion, foundation system optimisation; bearing quality improvement; installation technologies.
The Northern Way has jointly funding a call for collaborative research project in carbon abatement technology with the TSB and DECC.
29
100%
EA Technology
100%
Manchester University
n/a
NWDA
16%
NWDA
100%
NWDA
<10%
NWDA
n/a
Business Link
100%
NaREC and Envirolink Northwest
100%
TSB
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation 4.3
Regional Sector Trends
4.3.1 Sector Profile The major trend experienced over the last five years in the Northwest has been the strong emergence, mirrored globally, of the renewables and low carbon sub sectors to rival and eclipse the traditional environmental sector on every measure, including overall market value, number of employees, number of companies, and projected growth rate. With regard to the UK’s Renewable Energy Strategy specifically, a recent report71 concludes that the demand for renewables arising from the 2020 targets represent particular opportunities for the Northwest in two areas: •
Biomass - with regional strength coming from the higher than average number of waste wood processors and its large quantities of waste wood, much of it from Cumbria. The report estimates the total number of jobs within the UK which could be created by biomass demand to be around 1,600. This market will be further driven from 2010 with the introduction of the Renewable Heat Incentive.
•
Tidal - The Renewable Energy Strategy identifies six UK sites which may be suitable for renewable tidal energy exploitation. Given that three of these (Mersey, Morecambe Bay and Solway Firth) are in the Northwest, this is also seen as a strength area. Once again, however, the 2020 demand for tidal energy is only thought to be likely to create 750 jobs, a good proportion of which are likely to be in and around the Severn Estuary project.
Accompanying this shift is a change and broadening of the skill sets required by the region’s employees, putting increasing emphasis on the need for mechanical and electrical engineering capabilities. As the physical deployment of renewable technologies will often rely on natural resources not found in urban areas, the relocation of skilled resources may be required. However, it is likely that many of the knowledge based jobs associated with professional services such as design, consulting, finance and legal, will remain in the main urban areas with continued concentration in cities such as Manchester, Liverpool and Warrington. 4.3.2 Exports Another key change for the region has been the growth in export opportunities from developing world markets. Many of these countries, including India and China, now have to address the environmental impacts of industrialisation and often lack the necessary domestic skills and technologies. These developments have contributed strongly to the growth in export led sales that Northwest companies have achieved in recent years, especially in the relatively mature traditional Environmental Goods and Services sector where indigenous market growth has been relatively low. However, regional performance in terms of value of exports is still low compared to other parts of the UK. While Asian markets already contribute more to global demand than any other, their percentage is projected to increase to 2015 and beyond driven by demand from fast developing countries such as India and China. The speed of growth of these countries, and others in Eastern Europe and the former Soviet Union, is such that they are already looking beyond basic service demand, towards investment in cleaner technologies and more complex approaches to environmental management. An analysis of the top 30 countries to whom Northwest companies export show that most are expected to grow their demand for traditional Environmental Goods and Services by an average of 45% over the 10 years to 2014/15, with some, including Mexico, Taiwan and Saudi Arabia, expected to register growth in demand exceeding
71
Economic Opportunities for the NW arising from the Renewable Energy Strategy, Quantum, August 2009
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation 50%. The notable exception to this pattern is the UK itself, whose growth forecasts are lowest by some margin at 33.69%.72 Within the Renewable Energy and Emerging Low Carbon sub sectors (which are considered together for the purposes of growth projections), 10 year growth rates are much higher, exceeding 200% in some cases (Russia and Chile), and in every cases exceeding 100%. Once again the UK’s own growth forecasts are relatively low at 110%, although these figures predate the legally binding UK emissions targets to 2020 and associated Renewable Energy Strategy. 4.3.3 Inward Investment Recent trends suggest that the UK has recently fallen in the rankings for receipt of foreign direct investment within the sector. Over the period of 2003-7 the UK was fourth in receipts behind France, Spain and Germany. This is in part a reflection of the large contribution of investments into solar (34% of total investments), where the UK struggles to compete with Southern Europe in terms of natural resource 73. Also Countries such as Germany have supported the creation of a market through feed in tariffs and it is unclear if the UK feed in tariff will create a large enough market to stimulate a UK manufacturing base. In terms of the UK market for inward investment, the Northwest performs well relative to other regions. In 2008/9 5.7%74 of the inward investment in the region was in the energy and environmental sector, compared to a national average of 2.2% and second only to Wales with 13.3%. Inward investment into the regional sector has been steady and growing, with 49 projects secured over the period of 2004-2009. Whilst 23 of these projects were in nuclear; seven were secured in Recycling and Waste Management, four in Wind, and three in Oil and Gas. Inward investment is anticipated to remain important for the development and growth of the regional sector. It will play three key roles: support in the development of critical mass for a particular sector; and addressing key gaps in regional capability and know how; and provide important investment in new regional infrastructure. 4.3.4 Emerging Technology Markets Looking to the future, it is anticipated that new, emerging markets will come to the fore and offer opportunities for the region. Current pockets of expertise and capability are likely to offer the future foundations for new sector growth, for example: •
Carbon abatement/Carbon Capture and Storage
•
New energy efficiency technologies
•
Next generation PV
•
Fuel cells/hydrogen
•
Energy storage
•
Biochar, and
•
Whitebio.
In addition, there is increasing interest in the development and deployment of technologies for the mitigation and adaptation to the effects of global warming, particularly in the developing world countries which are typically most at risk. Interestingly, these technologies are most likely to be developed from existing capabilities and know-how that exists within the traditional Environmental Goods and Services sector where the region has a solid platform, e.g. water engineering and land management techniques. This may provide future growth in this sub sector 72
Envirolink Northwest - Update of Market Intelligence of the Environmental Technologies and Services Sectors, Innovas in partnerships with KMatrix, May 2009 73 Oxford Intelligence, Renewable Energies, 2008 74 Source: UKTI
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation (most likely via international markets), and open up new opportunities for the development of next generation products and services.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation 4.4
Regional SWOT Analysis
An overview of the regional strengths, weaknesses, opportunities and threats for the Low Carbon and Environmental Goods and Services (LCEGS) sector is summarised in Table 5. Discussion of the specific strengths and opportunities associated with key segments is presented in Section 5.0. Table 5 Summary SWOT Analysis Strengths
Weaknesses
•
Legacy and culture of positioning as a key UK energy hub with manufacturing capability
•
Limited flexibility in the public sector to take advantage of emerging market opportunities.
•
Strong infrastructure and transport network focused around Liverpool-Manchester corridor but supported by effective regional network
•
Lack of a clear proposition in some key segments on which to develop compelling investment propositions
•
Large population (c.7 m) providing strong indigenous demand for products and services
•
No high profile, regional ‘flag ship’ project(s) on which to focus promotional activities
•
Large talent pool of high quality graduates and skilled labour (specifically engineering)
•
Poor external perception/branding of some parts of the region, in particular industrial areas
•
Significant resource base for renewable energy generation, e.g. wind, tidal & waste
•
Limited knowledge-based infrastructure, particularly in rural areas
•
Core centers of academic expertise relating specifically to engineering knowledge and skills and the Lancaster University Environment Centre
•
Out-migration of skilled graduates and workers; retention of post graduates within the region a key challenge. Anecdotal evidence of companies struggling to recruit
•
Presence of keystone industrial players, e.g. Peel Energy, National Grid, Siemens, Pilkington, Electricity Northwest , Baxi and ScottishPower
•
Low levels of exports relative to national average
•
Limited innovation and exploitation of IP. (Large foreign owned companies undertake R&D outside the region, and a large proportion of SMEs do not undertake or exploit R&D; poor communication between the industrial and academic communities.)
•
Lack of indigenous early adopters for new technologies.
•
Good spread of capabilities across a broad range of segments of the LCEGS
•
Well established professional services with sector expertise
•
Good quality of life and low cost of living relative to other parts of the UK
•
Established and credible regional delivery agent in Envirolink Northwest
•
Effective regional stakeholder groups including North West Energy Council, Northern Way, and North West Energy Tidal Group.
Opportunities
Threats
•
Growing and emerging markets for low carbon technologies supported by national and international policy
•
Strong competition from other Regions across most parts of the sector, especially the East Coast and Scotland
•
The Climate Change Act and its legally binding emissions reduction targets to increase business certainty and confidence and improve prospects for FDI
•
International competition from other countries seeking inward investment for sector development, e.g. France, Spain and Germany.
•
Exploitation of offshore resources for wind and tidal,
•
Competition for ongoing regional investment from foreign owned companies which decision making often taken outside the region
•
Potential to work with other RDAs to leverage complimentary regional assets and skills.
•
•
Exploitation of IFI funding and associated sources of finance from the power generation industry for the benefit of regional companies
Sector is still driven by policy and regulation rather than sustainable market pull. There is a risk that a change in National Government could alter the economic landscape.
•
•
Growing overseas markets offer opportunity to develop significant export markets, e.g. in traditional EGS segments
It may be difficult for the region to catch up with UK averages on skills and innovation when improvements are seen as a national priority.
•
Ensure gain share of significant amounts of Government funding likely to be made available to support development of key markets, e.g. recently for Smart Grids.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation 5
Identification of Priority Segments for the Northwest
Analysis and screening of the Northwest Low Carbon and Environmental Goods and Services sector has been undertaken to develop a ‘long list’ of the potentially most attractive segments for future support and investment. The critcal factors that have been considered in this process are: •
• •
Significant regional segment on the basis of current value, number of jobs and projected market growth (see Section 3.3). Those selected were consistently ranked within the top performing segments for each metric (See Table 1 in Section 3.3); Realistically represents opportunities for the region to build a strong proposition and create value specifically in the fastest growing sub sectors of Renewable Energy and Emerging Low Carbon Technologies; and Not captured in 1. but which are known to have a credible capability in the region and thought to have significant growth potential in high value niche markets.
Nuclear power and low carbon vehicles have previously been selected as priorities for the region and are covered by other Action Plans. Table 6 provides a summary of those segments selected and the supporting justification. Discussions were held with key stakeholders and sub regional partners to ensure that the selected cohort represented a fair reflection of the core capabilities and opportunities from across the region. Further analysis of the selected segments was then undertaken to provide a more detailed profile of their current level of maturity, the scope of regional representation across the supply and value chains, their competitive position within the UK, key barriers to development, growth potential and their relative strengths and weaknesses. These profiles provided insights into the relative attractiveness of the regional propositions and highlighted specific future opportunities for economic development. A key element of this analysis was the identification of those markets where the NWDA could intervene to make a material difference, and where potential exists for the creation of high value, knowledge based jobs. The outputs from this analysis are presented in Appendix 2 and summarised in Table 7. Nuclear Power and Low Carbon Vehicles have been included in this analysis for comparative purposes. Table 8 provides a summary of the barrier analysis with further details are provided in Appendix 2. The analysis confirms the fact that there are several types of barrier that are common across a number of segments, specifically market and supply chain development. In addition, the relatively less mature segments face more barriers, specifically those related to market intelligence and development.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Table 6 Selection of Regional Segments for Profiling1 Segment
Scope of Definition
Regional Segment 2007/8 (£ value)
Growth of UK market 2010/11 (%)
Initial Justification
Wind
Offshore Wind Farm Systems and Large Wind Turbines
1.2 bn2
7
Good regional natural resource; legacy of assets and skills in offshore engineering; national policy drivers; large market opportunity
Tidal
Tidal devices, generators and balance of plant; assessment and measurement; support services (tidal stream and tidal range)
7.2 m3
63
Excellent regional natural resource; strong academic capabilities; presence of keystone industrial player; national policy drivers; large market opportunity
Biomass (incl. EfW)
Biomass equipment supply plus biomass fuel supply; installation, supply & operation of EfW systems & anaerobic digestion; specialist consultants in waste management systems
342m
5
Excellent regional natural resource; good indigenous demand (process heat); large market opportunity;
Energy Management in Buildings
Insulation & heat retention materials; monitoring & control systems, energy management, & consultancy services;
1.1 bn
44
Good combination of local skills across the supply chain; strong regional and national policy drivers; large growth market
Smart Grids
Smart metering & grid management; distribution networks; transmission networks; smart appliances.
n/a
n/a
Strong legacy of skills and assets; presence of keystone industrial players; good representation across value chain; currently immature market but potential for explosive growth over the next 10 years driven by Government policy and programmes.
Solid State Lighting (SSL)
Lamps, luminaries, control systems
n/a
505
NW sector is significant, and active in UK and international markets; large market opportunity; strong market growth forecast; opportunity for first mover advantage.
1. Unless stated otherwise, data sourced from Innovas, 2009 2. Includes on shore wind as not possible to split the data 3. Includes wave as not possible to split the data 4. Ave. of Building Technologies plus Energy Management 5. Optimat, 2009 (growth to 2012)
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Table 7 Overview of Segment Profiles Segment
Industrial Capacity
Research Capacity
Innovation Support
Competitive Position within UK
Available Market
Regional Offshore Wind
Strong competition from East Coast & Scotland
Tidal
Competition from NE, SW Scotland, & Severn
Biomass (incl EfW)
Key Insights
Exports
(UK/overseas)
Limited regional knowledge base. USP limited to offshore capabilities
Immature market but strong knowledge base & natural resource
Strong, best feedstock supply chain in UK
USP focused on feedstock supply. Where are the high value jobs?
Energy Mgt in Buildings
No single region with clear advantage
Good regional capability/ markets, but exports?
Smart Grids
Lack of data due to immature market
Strong knowledge and industrial base. First mover?
Solid State Lighting
Reasonable but competition international
Cluster of specialist capability; potential large prize; strong end user demand.
Nuclear Power
50% of UK supply chain in the region
Strong critical mass, plus large share of new build
Low Carbon Vehicles
Strong competition from NE and Midlands
(UK)
Relatively low critical mass compared to other regions
Key: Weak regional capability
Strong and credible regional capability across the supply chain
Regional capability in a few niche areas
UK leading market position
Table 8 Overview of Key Barriers to Development Key Barrier
Offshore Wind
Tidal
Biomass
Energy Management in Buildings
Policy Framework
Market Intelligence
Smart Grids
SSL
Market Development: -
E
ducate/Inform -
D
emonstrate - Early adopter markets Supply Chain Development
Innovation support:
- Tech transfer - Tech development
Need for Regional Infrastructure
Skills availability
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Planning
The outcome of the analysis indicated a classification of the prioritized segments as follows: 1. Global Markets – where there is a mature and world class proposition and large associated future growth potential, i.e. nuclear. (subject to separate Strategy and Action Plan). 2. Emerging Markets - Those where there was perceived to be credible regional proposition based around a strong knowledge/industrial base; an immature market with potentially large future international opportunities; and where current market failures represent an opportunity for the Agency to invest in order to make a material impact: •
Tidal
•
Smart Grids
•
Solid State Lighting
•
(Low Carbon Vehicles - addressed by the Manufacturing Strategy and Action Plan)
3. Developing Markets - Those where there already exists a developing and well supported segment in the region, but where opportunities for the future development of value added jobs and large international markets are unclear. However, the Agency still has a role to play in continuing to build these markets using existing interventions and developing specific additional projects as appropriate: •
Offshore Wind
•
Biomass
•
Energy Management in Buildings. 4. Sustainable Growth Markets – The core portfolio where there is a well established base in the region, with solid historical performance but relatively low indigenous growth projections. The Agency has a key role to play in supporting their continued growth. Future opportunities for growth most likely to come from future emerging markets and international opportunities and exports, for example:
•
Water and wastewater treatment
•
Waste management, recovery and recycling
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation
6
Vision and Strategic Framework
The ten year Vision for the Sector is as follows: Vision: In 2020 the Low Carbon and Environmental Goods and Services sector is the largest, industrial sector in the region and the leading LCEGS sector in the UK. The sector is diverse to support all the requirements of a low carbon economy with segments which are internationally leading such as nuclear energy and smart grids. This strategy has a three year life span starting in 2010 and contains a specific Action Plan which will be reviewed annually. Whilst it is important that the Agency and its partners focus on long term goals to ensure the realisation of the strategic vision, flexibility is required to respond to short and medium term challenges and opportunities that may present themselves to the sector. Realising this Vision will require activity and resources to be focused on the following three aims: 1. To realise a rate of sector growth of above the national average over the next three years by developing the existing portfolio of capabilities and exploiting emerging market opportunities 2. To raise the level of innovation activity and increase the rate of successful technology transfer from the regional research base 3. To secure targeted private sector investment in support of regional business growth. These aims will be achieved via six strategic objectives: •
Strategic Leadership: Provide focused and strong direction for the development of the regional sector, specifically emerging markets
•
Market Development: Identify and develop early markets opportunities and provide supply chain development support to facilitate access to markets
•
Innovation Support: Realise stronger communication between industry and the regional research base and improve the rate of technology transfer and successful enterprise
•
Investment: Optimise opportunities for inward investment and successfully leverage third party finance for regional projects and infrastructure
•
Exports: Provide specific and focused support for the development of export and internationalisation opportunities amongst the more mature segments of the portfolio
•
Skills: Attract in high quality candidates to study in the region and encourage retention of graduates and skilled labour within the industrial base to develop the available talent pool.
Specific Actions have been identified against each of these strategic objectives and will be delivered either for the benefit of the sector as a whole, or for prioritised segments as appropriate within the context of the Strategic Framework presented in Figure 5.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Figure 5 Low Carbon and Environmental Goods and Services Sector Strategic Framework 2010 - 2013 INVEST: Key strategic priorities in emerging markets where region has strong knowledge base and potential USP. Focus for development of regional proposition as markets mature over next 12-24 months
•Smart Grids •Tidal •SSL
BUILD: Continue to provide support and specialist interventions for on-going development of market segments of regional significance. Ensure success of on-going initiatives.
• Offshore Wind • Biomass (incl. EfW) • Energy Management in Buildings
SUPPORT: Work with segments as appropriate to optimise growth opportunities. Look to identify and elevate future priorities for investment. KEY STRATEGIC THEMES: Underpinned by specific objectives; delivered via Action Plan
7
Core Portfolio (Including Water/Wastewater; Waste and Recycling; PV; Alternative Fuels; CCS; etc.
Strategic Leadership
Market Devel.
Innovation Support
Investment
Exports
Skills
Priority Action Plan
Table 9 presents the Priority Action Plan for the Low Carbon and Environmental Goods and Services (LCEGS) Sector for the next three years, together with suggested action leads. This Action Plan will be reviewed and updated on an annual basis.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation
Table 9 Priority Action for the LOW CARBON TECHNOLOGIES Strategy Strategic Objectives Strategic Leadership: Provide focused and strong direction for the development of the regional sector, specifically emerging markets
Market Development:
Identify and develop early markets opportunities and provide supply chain development support to facilitate access to markets
Existing Projects / bodies Northwest Energy Council NW Tidal Energy Group
Biomass Work Programme St Helens SSL project Manchester LCEA Sustainable buildings policy Business support
Suggested New Actions
1. Northwest Energy Council to take an oversight role for the delivery of the sector strategy and ensuring that energy infrastructure fit for purpose
Segment Focus
Lead Body
All
NWDA
2. Develop formal Working Groups similar to the NWTEG for Smart Grids and SSL.
Smart Grids; and SSL
NWDA
3. Develop ‘foresighting’ capability to undertake horizon scanning for new emerging markets
Tidal, Smart Grids, and SSL
Envirolink Northwest
4. Develop regional database to provide robust evidence base for future monitoring and development of the sector
All
1. Develop and articulate regional proposition for priority markets.
Smart Grids; Biomass
NWDA
2. Secure funded regional demonstration project for Smart Grids
Smart Grids
NWDA
SSL
NWDA / Envirolink Northwest
3. Develop public sector procurement support programme for SSL
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Opportunities to work with other teams in the NWDA Need to work with SCP and CCAP to spot where markets are being created regionally. Work with other sector teams to identify opportunities for diversification
Business Link and Envirolink Northwest Need to identify parts of the Digital and Creative and Automotive sectors with an interest in smart grids and energy management controls. BPS – opportunity to develop financial models
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation
Innovation Support:
Realise stronger communication between industry and the regional research base and improve the rate of technology transfer and successful enterprise
provided by Business Link and Envirolink Northwest
4. Provide continued support for proposed regional tidal schemes
Innovation MOU The Joule Centre for Energy Research Energy Innovation Centre GRAND
Tidal
NWDA
All
All
1. Review of current innovation capability and definition of targeted development to realise significant uplift in effectiveness in line with priorities of this strategy.
All
NWDA
2. Develop opportunities for closer interaction between the regional industrial and academic communities to encourage more effective market led innovation
All
5. Build on existing regional projects as appropriate, e.g. Biomass Strategy
Innovation Vouchers
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Potential opportunities to work with Advanced Manufacturing team and Science and Innovation team
NWDA
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation
Investment:
Optimise opportunities for inward investment and successfully leverage third party finance for regional projects and infrastructure Exports: Provide
specific and focused support for the development of export and internationalisation opportunities amongst the more mature segments of the portfolio
Investor development services
1. Market the region to inward investors, particularly in the priorities segments.
Biomass, Smart Grids & Nuclear
Inward investment service
2. Maximise opportunities for third party financing of regional projects and infrastructure
All
GBI
3. Strategic planning for use of waste resources in the region recycling Vs EfW
Biomass & EfW
Envirolink and UKTI trade promotion activity
1. Increased resourcing of sector support for internationalisation and export to appropriate developing overseas markets
Core Portfolio
UKTI and Envirolink Northwest
Emerging Technologies
UKTI and Envirolink Northwest
2. Identify early opportunities for export markets for emerging technologies
Skills: Attract in high
Cogent
quality candidates to study in the region and encourage retention of graduates and skilled labour within the industrial base to develop the regional talent pool.
Energy and Utility Skills
Investment Services NOE team UKTI
NWDA
SRPs Internationalisation team
1. Facilitate dialogue between universities and employers to help ensure that developing skills needs are picked up on and new provision/increased capacity follows.
All
2. Encourage enrolment of more domestic students by ‘selling’ engineering courses in schools and FE colleges on the basis that they are part of the new economy, that there will
All
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NWDA / NoE
NWDA
Internationalisation team
NWUA Business Link
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation be increasing opportunities for sustainable careers 3. Promote greater University/employer links at the undergraduate level to support employer input into the development of undergraduate courses, and potentially to increase the amount of time students spend on industrial placements within their undergraduate degrees.
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All
Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation 8
Monitoring and Implementation
8.1
Key Performance Indicators
Performance will be monitored relative to the three main aims of the strategy, as indicated below: . Aim
1.
KPI - Annual growth rate (%) relative to sector national average (currently 4.9 % in 2007/8 relative to UK ave. of 3.6 %)
Realise a rate of sector growth of above the national average over the next three years by developing the existing portfolio of capabilities and exploiting emerging market opportunities
- Total sector GVA - Size of the sector measured in numbers of businesses, jobs and turnover - Export levels (current level of 8.8 of regional market value %)
2. Raise the level of innovation activity and increase the rate of successful technology transfer from the regional research base
- Number of new start-ups/survival rates (new VAT registrations) - Average salary for the sector - Amount of money invested into research in the region for both private and public sector.
3. Secure targeted private sector investment in support of regional business growth.
- Additional funding leveraged into regional projects - No of inward investment projects/jobs created (overseas and UK)
To help illustrate the KPIs the following table provides examples of what success might look like if this strategy achieves all it sets out to by 2013. This strategy aims to influence and facilitate these process but the public sector is not able to achieve all the targets without working in partnership with the private sector and academia.
What Does Success Look Like in 2013? Segment
Realistically Achievable
Aspirational Target
Tidal
Outline consent achieved for one tidal scheme in the region.
Demonstration facility up and running, attracting in device developers to the region.
Smart Grids
National demonstration project secured and operational.
A national centre of excellence secured in the region and a number of demonstration projects up and running.
Solid State Lighting
Public sector procurement programme in place to purchase regional SSL technology.
Regional companies exporting products to national/international markets. Significant inward investment or regional landmark project secured.
Offshore Wind
One of the region’s ports has been allocated as a construction base for the Round 3 site.
Key supply chain manufacturer attracted to the region.
Biomass (incl. EfW)
Region’s wood chip processing capability at capacity supplying regional biomass needs. Most biomass waste in the region is being utilised as resource.
Significant manufacturer of process technology attracted into the region.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Energy Management in Buildings
Recognition as leading region in the UK for the production and installation of energy management for buildings technologies.
Region recognised as an internationally leading region for the production and installation of energy management for buildings technologies.
Core Portfolio
Export levels for sector increased to above national average.
The region is leading the UK in export activities.
The LCEGS sector has grown at its current rate of 1.3% above the national average.
The LCEGS sector has grown at a faster rate of 2.3% above the national average.
8.2
Key delivery bodies and accountabilities
The NWDA has a number of existing projects and delivery bodies as detailed in Table 4. This strategy has not identified a need for a new delivery body or mechanism more a focus of existing efforts onto emerging market opportunities. Envirolink Northwest, the Energy Innovation Centre, The Joule Centre for Energy Research, Business Link, along with the sub-regional partners and local authorities in the region are essential to the successful delivery of the strategy. The NWDA works in partnership with these organisations and will continue to do so to ensure existing resources are aligned to deliver the actions in this strategy. 8.3
Governance and control mechanisms
The Northwest Energy Council will oversee the delivery of the strategy. The quarterly meetings will receive updates on performance against the Key Performance Indicators.
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation APPENDIX I Regional Market Sub Sector Breakdown by Value 2007/8
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation Figure A Relative Value of Environmental Goods and Service Segments in the Northwest (£m) in 2007/08
Figure B Relative Value of Renewable Energy Segments in the Northwest (£m) in 2007/08
Figure C Relative Value of Emerging Low Carbon Segments in the Northwest (£m) in 2007/08
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Low Carbon and Environmental Goods and Services Sector Strategy Draft for Consultation APPENDIX 2 Summary Segment Profiles
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