Financial markets are failing to provide funds for early stage cleantech start-ups warns a new report written by Green Alliance director Matthew Spencer and low carbon expert Paul Arwas. It points out that less than 30 early stage cleantech deals were made in the whole of the UK during 2011 from a pool of over a thousand fledging cleantech businesses seeking venture capital support. The result is that start up business are either growing only slowly or failing altogether due to the lack of risk capital. This has a knock-on effect in that supply chains suffer from a lack of competitive stimulus provided by new entrants.
The situation now requires immediate and decisive action, the authors argue. If not, the UK risks losing a generation of new enterprises and will have to import more technology from abroad. This could drive up the cost of decarbonising the UK economy.
The report points out that innovation is the only way in which an economy can prosper in a crowded and resource restricted world and is also fundamentally the greatest ally in the fight against worsening climate change. Applied learning drives down costs and therefore makes the technology more attractive. A consistent approach to innovation, properly funded, could save the UK around £160 billion in energy supply costs up to 2050 while also adding up to £89 billion to UK gross domestic product (GDP) over the same period.
Over the years successive governments have chopped and changed the institutions involved in technical development, applying funding too thinly and lacking the patience and focus required to drive projects through to the deployment phase. A much better level of technology push can be achieved at current levels of public spending given the right focus. Decisions will have to be made at arm’s length from the political process and institutions will have to be nurtured so that they can focus relentlessly on the various obstacles to project commercialization.
The report identifies four steps by which this can be achieved. First, the three main political parties have to avoid creating any new technological institutions over the next ten years while committing themselves to a minimum level of funding for existing institutions, including the Technology Strategy Board, the Energy Technology Institute and the Carbon Trust. Secondly, small businesses should be given assistance to help them innovate. This could best be achieved through the creation of a £100 million early stage green venture capital fund. Third, open access data should be provided from all publicly funded projects. Finally, technology experimentation in deployment with developers encouraged to work with new equipment and suppliers at the testing stage.
“It is hard to get innovation policy right” said Paul Arwas, “it takes patience and learning. “Technology development is unglamorous work, which requires steady efforts to improve performance over many years. We’ve identified the steps needed to reduce the costs of our low carbon transition and increase the economic benefits of innovation.”
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