Sustainable BusinessGreen Technology

Material gainsHow the chemicalsindustry is reactingto calls for cleanermanufacturingPage 2

Inside »

Pollution battlereaches stalemateHigh costs arehampering carboncapture progressPage 3

Fluid situationFear of shortagesprovides spur torefine waterprocessesPage 3

New standardsfor livingSmart cities adopta multi-facetedplan for actionPage 4

The big pictureAnalytics gives aninsight into the wayour environmentis changingPage 4

Tuesday October 22 2013 www.ft.com/reports | @ftreports

FT SPECIAL REPORT

With venture capital firmsshying away from cleanenergy, some might betempted to take a pessi-mistic view of prospects

for innovations that address climatechange or resource scarcity. However,with the business case for eco-effi-ciency becoming increasingly compel-ling, companies in a range of indus-tries are accelerating investment ingreen technologies.

The field of pursuing environmentalefficiency in materials and energyprocesses and production has notavoided the hangover from the finan-cial crisis and the world economicdownturn.

Global investment in clean energyfor the first quarter of 2013 was$40.6bn, lower than in any quarter for

the past four years, says BloombergNew Energy Finance. “A decade ago,there was huge optimism and eveneuphoria,” says Gil Forer, globaldirector of Ernst & Young’s greentechnology practice. “But the finan-cial crisis hit us severely, and clean-tech got hit as well, so now there’s asense of realism in the market.”

Moreover, the pool of venturecapital funding available for cleantech has been shrinking in recentyears and is unlikely to be replen-ished. “Clean technology turned outto be hard for the venture capitalmodel because of the amount of timeand money it took to make companiessuccessful,” says Joel Makower, astrategist for corporate sustainabilitypractices and clean technology. “Theyjust didn’t have an appetite for that.”

However, increasing demand forenergy, legislative changes and fallingprices for some renewable energysources mean that while investmentin green technology innovations mayhave slowed in some quarters, else-where it is still growing. “The trainthat’s moving towards a moreresource-efficient and low-carboneconomy has left the station – and it’snot going back,” Mr Forer says.

Innovative sources of funding couldfill some of the gaps left by the ven-ture capital slowdown. These includegreen bonds – issued by institutionssuch as the World Bank and theKorean Import-Export Bank – and thebundling of renewable energy projectson stock exchanges in New York andLondon.

In addition, social impact bondscould be applied to environmentalproblems. These financing instru-ments enable governments to savemoney because they yield a returnonly when an objective, such asreducing homelessness, has been met.

“Innovative finance that pays for per-formance is common in infrastruc-ture,” says Jason Scott, from EkoAsset Management, a specialistinvestment firm in New York. “So it’snot such a big step to move from thatto green infrastructure.”

Pressure to reduce environmentalimpact and the risk of exposure toenergy costs and resource scarcity isdriving investment in clean tech fromthe corporate sector. “Behind thescenes, there’s an extraordinaryamount of activity, from utilities andautomotive companies to anyone inthe energy, water, materials andtransportation businesses,” MrMakower says. In their search forsources of green innovation, many

Continued on Page 2New route: transport sector shares a growing appetite for eco-efficiency Getty

‘The train moving towardsa more resource efficientand low carbon economyhas left the station’

Clean techinnovationmoves intomainstreamHunt for fresh developments in eco-efficiencyhas led to sharing of knowhow across arange of industries, reports SarahMurray

2 ★ FINANCIAL TIMES TUESDAY OCTOBER 22 2013

As natural resourcesbecome scarcer and moreexpensive, the case forinvesting in costly recyclingtechnologies is becomingmore compelling.

Using high-tech smeltersand refining processes,Umicore, the Belgium-basedmaterials group, canretrieve precious metalsfrom circuit boards har-vested from redundant com-puters, mobile phones andother products.

Part of the problem isdeveloping technology thatcan separate products intotheir constituent compo-nents.

“If you’re treating a lot ofsecondary materials, youhave an enormous varietyof material combinations,”Christian Hagelüken, fromUmicore, says.

The company hasinvested heavily in recoverytechnologies, includingspending €250m over thepast decade on its recyclingplant in Belgium thatextracts precious metalsand other materials fromthe mining waste andindustrial products that itreceives.

This sort of investmenthas enabled a radical busi-ness transformation. Umi-core has changed from atraditional mining opera-tion in the 1990s into a spe-ciality metals refining, recy-cling and recovery busi-ness.

Its roots in mininghelped. “All the expertisewe had in mining metal-lurgy was a solid basefor developing the newmaterial streams,” MrHagelüken says.

Carpet manufacturershave also been investing inrecycling technologies.

Since 2007, Interface, a USflooring company, has beenusing its ReEntry 2.0 tech-nology to separate nylonfibres from the vinyl back-ing used on carpets.

Desso, a carpet and sportssurfaces manufacturerbased in the Netherlands,has developed a technologyit calls Refinity to separatethe yarn and other fibresfrom the backing.

The yarn is reused inother Desso products, andthe bitumen recovered fromthe backing is sold to roadand roofing companies.

While these companiesembarked on the path ofrecovering raw materialsearlier than many others,the drive to develop ways tomake waste reusable isbecoming more attractiveas businesses consider afuture in which resourceswill be increasingly difficultto source.

To highlight the problem,the European Commissionhas identified a list of 14economically critical rawmaterials that it says aresubject to a higher risk ofsupply interruption thanothers – and further materi-als are likely to join the list.

With awareness ofresource scarcity rising rap-idly, investing in wastemanagement technologieshas come to be seen as partof a risk management strat-egy – particularly in thecase of rare earth metals,which are used in mobilephones and other IT equip-ment.

“Increasing demand com-

bined with relatively lim-ited availability and thehigh cost of mining themmeans there has been sig-nificant research and devel-opment in that area,” saysPhilippe Pernstich, a con-sultant at the Carbon Trust,a UK government-backedadvisory group.

Scarcity of materialspresents new risks, butit also provides opportuni-ties.

Dave Berrill is perform-ance director at UK-basedInternational Synergies,which helps clients fromdifferent sectors worktogether to turn waste intosaleable raw materials.

“Because prices haverisen, it’s economical tolook at waste streams thatonce weren’t worth recover-ing,” he says.

“Industrial symbiosis”, asit is known, can be appliedin a surprisingly diverserange of sectors.

Technology developed byUK-based RockTron Inter-national turns fly ash fromcoal-fired power stationsinto mineral products suchas polymers, coatings andadhesives.

Meanwhile, in Scotland,chemical engineers fromHeriot-Watt University aredeveloping a process thatwill convert waste from thewhisky industry into feed-stock for the fish-farmingindustry.

Policy measures areanother factor in the pushto invest in recycling tech-nologies.

Europe’s waste electricaland electronic equipmentdirective, for example,requires manufacturers andimporters goods to collectand recycle their goods.

Mr Pernstich says landfilltaxes have “increased theamount of recycling, waste-to-energy and anaerobicdigestion technologies that

are being used for organicwaste”.

Anaerobic digesters usean oxygen-deprived envi-ronment to break downorganic waste and capturethe biogases produced foruse as an alternativeenergy.

“We’re seeing more andmore waste-managementcompanies use those kindsof facilities,” says Mr Pern-stich.

Retailers, such as Sains-bury’s, Marks and Spencerand Tesco, are using anaer-obic digestion. This meansthey can divert food wastefrom landfill and createenergy to light their storesor provide fuel for theirdelivery fleets.

The viability of an in-house approach to turningwaste into new businesslines or industrial supplies– as opposed to relying onwaste management compa-nies – depends on the indus-try and the type of productsbeing recycled.

“The key challenge forcompanies is to work outwhat the revenue streamsare and whether they arejustifiable as a side busi-ness,” says Mr Pernstich.

In the light of regulatorychanges, price rises andgrowing resource scarcity,many believe it will becomeincreasingly easy to justifyinvestments in these tech-nologies.

Precious metalshines lighton recyclingWaste

Compelling case forinvesting in costlyprocesses, writesSarah Murray

Materials scarcitypresents new risks,but also providesopportunities

The main tool for managingpeaks and troughs for elec-tricity has always been tobuild enough power sta-tions to meet peak require-ments. Along with somedemand management, thiswould be supplemented bylimited amounts of largescale energy storage andpumping water up to hydro-power reservoirs or com-pressed air into salt cav-erns.

With the growth of inter-mittent renewables, such assolar, wind, wave and tide,energy storage is becomingessential to balance supplyand demand by storing sur-plus energy. This willensure a secure, reliableand sustainable supply.

Lead-acid batteries havebeen used to store power ona small scale for decades.

Brendan Bilton, chief com-merce officer at AcalEnergy, a developer of fuelcell systems, says they arenot up to the demands ofthe future grid. “Theyrequire too much mainte-nance, their lifespan is tooshort and there are environ-mental problems from thetoxicity of lead,” he says.

Pumped water and com-pressed air are limited bygeographical and geologicalconsiderations, so a varietyof other technologies arebeing developed. Some ofthese, such as redox flowand molten sulphur (seebox), are similar in size tosmall chemical plants. Theyrequire considerable invest-ment and are restricted byplanning rules, but increas-ing their capacity can bringlarge economies of scale.

Japan’s ministry of econ-omy, trade and industry isinvesting Y20bn ($203m) instorage from SumitomoElectric Industries. This isto be installed on Hokkaidoto store solar and windpower using vanadiumredox flow with a capacityof 60MW hours – sufficient

to keep 60,000 homes run-ning for an hour.

The other approach is touse a large number of smallbatteries, such as lithiumion cells. This is beingpiloted in Europe by UKPower Networks, which isworking on Europe’s largestenergy storage project atLeighton Buzzard, Bedford-shire. It is backed by £13.2mof government funding andhas a capacity of 10MWh.

The advantage of thisapproach, assembled from alarge number of batterieslittle bigger than those in alaptop computer, is theycan be quickly and easilyplaced anywhere on thegrid without planning prob-lems. However, increasingscale requires a proportion-ate increase in cost, unlikethe plant-type approaches.

“UK Power Networks hadpreviously done anotherlithium ion project and wasvery comfortable with thetechnology,” says AndrewJones, managing director atS&C Electric Europe, leadsupplier on the LeightonBuzzard project. “It is on aflood plain and there was

an environmental concernwith redox flow batteries.The size of the electrolytestorage tanks also made itvery difficult to get plan-ning permission and theyinhibited future expansion.”

Mr Bilton says size andweight have no bearing ongrid storage, but lithium onbatteries can store a lot of

energy in a small space anddo it very quickly. How-ever, lithium is not widelyavailable. Most reserves arein China and extracting it isa very dirty and environ-mentally damaging process.

Safety is a big concernwith all grid storageprojects: several sufferedserious fires. Some of thesespread very quickly andothers cannot easily beextinguished, sometimeshaving to be covered insand and left to burn out.Much work has gone intomaking them safe.

John Miles, Arup/RoyalAcademy of engineeringresearch professor in transi-tional energy strategies atthe University of Cam-bridge, points out that theautomotive industry deliv-ers low price, high reliabil-ity and safety and couldapply itself to solving theproblems of grid storage.

“If it gets its teeth intogrid storage, it will trans-form the landscape,” hesays. “Intelligence and com-munications systems canlink a large number ofsmall units to work

together from a centralaggregation point.

“You can get massivestorage, even though eachindividual part is quitesmall. It gives you a veryflexible approach that canbe rolled out at scales andat rates that suit demand.”

Grid storage has lots ofpossible solutions beinginvestigated with many areexpected over the next dec-ade. The future is likely toconsist of a wide range oftechnologies, both for gen-eration and storage, work-ing together to meet thespecific needs of each partof each grid.

“The world leaders areGermany and Japan, asthey have closed down theirnuclear power plants andneed energy storage,” saysMr Bilton. “They will workout what mix of technolo-gies gives the best solution,depending on the make-upof the grid.

“Their companies willknow how to tune them forvery different storagerequirements and will thenexport it to every othercountry in the world.”

Novel means aid energy storage potential

It sounds like the perfect solution.Bayer, a venerable German chemi-cals company, has developed aprocess for using carbon dioxide,the main culprit for climate

change, as a feedstock for makingplastics.

After a successful pilot project,Bayer is planning a production facil-ity at its site in Dormagen. Drawingon waste CO2 from other chemicalprocesses, the plant will, by 2015, begobbling thousands of tonnes of CO2and producing polyol, a precursor topolyurethane, used in manufacture ofsuch products as mattresses, buildinginsulation and consumer goods.

Substituting a waste product forfeedstocks such as coal, petroleum,natural gas and even biomass makesgreat sense in terms of sustainability,thus assuring raw material suppliesin decades to come. Powering theprocess with sustainable electricitywill bolster its green credentials.Bayer, meanwhile, will improve itsprocesses, enhance its competitive-ness and respond to its customers’desire for “greener” products.

“This is one of many projects thathas the potential to be a game-changer, showing real progresstowards the use of CO2 as a competi-tive feedstock,” says Hubert Mandery,director-general of Cefic, the Euro-pean Chemical Industry Council.

Green chemistry, which encom-passes an ethos of avoiding hazardoussubstances, once conjured images ofwashing-up liquid reformulated to bemore environmentally friendly. Pro-gressively, over the past decade or so,the chemicals industry has come tosee sustainability as a strategic objec-tive that goes to the heart of what itdoes. For our planet, this is good

news. With sales of $3tn in 2010, thechemical industry is one of the largestin the world. It gobbles 10 per cent ofglobal energy and spits out 7 per centof greenhouse gas emissions. Betterproducts and processes can slow glo-bal warming. Because more than 95per cent of its output goes into othermanufactures, more sustainablechemistry enhances the sustainabilityof industries from food and farming totransport and consumer goods. AsBayer’s polyol is gradually adoptedmore widely, other products willbecome greener.

David Constable, director of theAmerican Chemicals Society’s GreenChemistry Institute in Washington,says two themes powering greenchemistry have been the reduction orelimination of toxins and of waste. “Athird has been the consumer. In theUS, there are a lot of young mothers,”he adds, “who read labels on productsand who are concerned about expo-sure to a variety of materials in thethings that they buy”.

Legislators have tended to follow asimilar agenda. The toxic substancescontrol act was last overhauled in1976 but many states have introducedregulations controlling particular sub-stances. California became the lateston October 1, with its safer consumerproducts regulations that oblige com-panies to file an assessment of alter-natives to chemical ingredients con-sidered undesirable. Europe’s all-em-bracing registration, evaluation,authorisation and restriction of chem-icals regulations, under progressiveimplementation since 2007, are aninternational benchmark forcingindustries such as pharmaceuticals toreplace many traditional solvents.

Increasingly, the future vision is

being framed within the industry,strongly influenced by 12 principlesdrawn up by Paul Anastas and JohnWarner, the founding fathers of greenchemistry, in 1998.

These principles, which range fromwaste reduction and promotingrenewable feedstocks to improvedcatalysis and synthesis, provide possi-bilities that offer vast cost savings. Astudy by Pike Research in 2011 identi-fied green chemistry as a marketopportunity that would grow from$2.8bn in 2011 to $98.5bn in 2020 anddeliver industry savings of $65.5bn.

One example is a process perfectedby Elevance Renewable Sciences,based in Illinois. It uses catalysis toconvert natural oils into ingredientsfor personal care products, detergents,lubricants and polymers at lower costand using less energy than rival com-pounds made from petrochemicals.Commercial production has begun inIndonesia.

Bio-based feedstocks have greatpotential, says Professor James Clark,head of the Green Chemistry Centreof Excellence at the University ofYork, in England. But, rather thanuse food grains, he says, the chemicalindustry has to invent ways ofmaking its products from straw, grassand wood. One industry’s waste can

become another’s raw material. Brit-ish industry throws away about100,000 tonnes of orange peel a year,he says. Yet citrus peel is a goodsource of limonene, which can be usedto clean electronic circuit boards, andpectin, used as a food thickener.

Inventing cleaner, cheaper products,created with new processes fromrenewable feedstocks is only a begin-ning. Achieving their widespreadadoption in a capital-intensive indus-try takes time.

It requires the overhaul of entirechains, from the supply of raw materi-als to modifying customer technologyand facilities. Collaboration will beessential, to develop technologies andto enable them to be adopted on acommercial scale.

In the US, the Green ChemistryInstitute has set up industrial round-tables to tackle key industry-wideproblems. In Europe, where fossilfeedstocks are largely imported, mul-tiple programmes are under waydesigned to turn long-term sustaina-bility into a strategic advantage.

The real holy grail, says Mr Man-dery, is artificial photosynthesis.“When we can use sunlight to turnCO2 into energy to heat our houses orpower our cars, we can reinvent theway we live.”

Science viewswaste in role asraw materialof the future

ChemicalsThe industry sees sustainabilityas a strategic objective, writesRoss Tieman

Material evidence:a Bayerresearcherexaminesa sample ofcarbon dioxide-basedpolyurethane

companies are looking out-side their own operations.Companies are funding ear-ly-stage entrepreneurs,licensing the technology ofmore mature enterprisesand, in some cases, acquir-ing companies.

In October, for example,SolarCity, the US installerof residential solar systems,agreed to pay about $158mfor Zep Solar, whose photo-voltaic module mountingsystems cut installationtimes in half. Even tradi-tional industrial companiesthat once relied on theirown R&D centres see the

Continued from Page 1 benefits of this approach.Saint-Gobain, the Frenchbuilding materials group, ispursuing clean tech innova-tions through partnershipsand acquisitions. Last year,it bought Sage Electrochro-mics, a US group whosewindow glass can switchbetween tinted and trans-parent, reducing heatingand cooling bills.

Cities are becomingtesting grounds for thesetechnologies as theirmayors vie to make theirsthe greenest, most efficientand most livable city. “Putthose three parties together– the world’s biggest cities,corporations and technol-

ogy entrepreneurs – andyou have a really interest-ing ecosystem that’sbecome a rich breedingground for developing cleantechnologies,” says MrMakower. “That’s some-thing new.”

Contributing to the impe-tus behind the investmentis a growing awareness ofresource scarcity and aninterest in turning onceuseless by-products intovaluable raw materials.

The rising price ofprecious metals is creatingstrong incentives to findbetter ways of recyclingPCs and mobile phones.

“Lots of people are trying

to figure out how to tapwhat they see as a goldmine in all that waste,”says Mr Makower.

Similar motives liebehind innovations inenergy management.

While some cash-strappedEuropean governmentshave pulled back supportfor renewables and otherclean energy technologies,President Barack Obamahas announced measures tocut US emissions from coal-fired power plants, promoteenergy efficiency standardsand increase renewableenergy use on public land.

At city and state level,public authorities see clean

tech as part of establishinga secure energy supply,reducing carbon emissions,economic development andjob creation. “When youlook at concerns aroundenergy security and energyprices, all the drivers wehad five or seven years agoare still there and have gotstronger,” says E&Y’s MrForer. While much energyinfrastructure involveswind turbines or solarfarms, some sustainabilityproblems can be addressedby nature’s own infrastruc-ture – wetlands that soakup storm or flood water, forexample. Such solutionscan cost less, have greater

long-term resilience and areoften more acceptable tocommunities than sea wallsor concrete dykes.“They’reugly and people don’t wantthem,” Eko’s Mr Scott says.

Environmental technol-ogy is becoming moreclosely bound to informa-tion technology. Complexinformation collected usingsensors and satellites offer

insights that can help peo-ple react more effectively tochanges in climate. Many ofthese technologies harnesscitizen power. Social mediaand mobile apps give indi-viduals ways of mappingbiodiversity or local pollu-tion levels, for instance.

Apps and websites helpconsumers to share, rent orborrow, rather than owncars and bicycles. B&Q, theUK DIY chain, is promotingits Streetclub website,which helps users to find,say, a ladder to borrowrather than buy one. Butwhether the technologytakes the form of a smartmeter or a mobile app that

facilitates car sharing, it isbecoming increasingly diffi-cult to distinguish greentechnology.

“Are sensors clean tech?Not by the traditional defi-nition – but they’re an ena-bling technology,” says MrMakower.

With innovation driven asmuch by the need forenergy security, resourceefficiency, cost cutting andconvenience as by environ-mental concerns, technolo-gies seen as clean or greenare going mainstream.

What this may mean ulti-mately is that terms suchas “clean tech” will simplydisappear with time.

Clean tech innovation is making a move into the mainstream

Batteries

Fresh techniques willhelp ensure reliablepower supplies,writes Rod Newing

Sustainable Business Green Technology

Grid storageTechnology briefing●Power to gas Surpluselectricity splits water intohydrogen and oxygen, withthe hydrogen beinginjected into the naturalgas network

●Flow batteries Knownas redox flow or RF, theyare easily scaled up andlong-lived but may requirelarge amounts of plant

●Sodium-sulphur Thisrelies on molten sodium,which reacts with air,water and fire-fightingfoam and explodes quickly

BarackObama, USpresident, ispromotingrenewableenergy use

FINANCIAL TIMES TUESDAY OCTOBER 22 2013 ★ 3

Sustainable Business Green Technology

There is a drip-drip feel tothe development of tools forwater retention, collection,treatment and reuse, saysSimon Gottelier, head ofwater strategy at ApaxAsset Management privateequity group.

“It’s not a market wherethere are huge numbers ofnew and exciting technolo-gies. It’s more a matter ofadapting existing technolo-gies to new circumstances.”

For example desalinationby reverse osmosis has beenaround since the late 17thcentury – though it tookmore than 200 years toapply that work outside thelaboratory – while the lis-tening sticks used by waterworkers to find leaks dateback to Victorian times.

Yet Mr Gottelier isexcited about growth pros-pects for water-focusedcompanies, largely becauseof growing demand for thetechnologies they offer –however old-fashioned, orhow slowly they develop.

Population growth,urbanisation, the developedworld’s ageing infrastruc-ture, and climate change allpoint to increased waterscarcity over the comingdecades. Eiris, an environ-mental research group, fore-casts that demand couldexceed supply by 40 percent by 2030.

“We would probably see

the emerging markets asthe principal drivers ofopportunities in the sector,”says Mr Gottelier, thoughhe adds that the developedworld’s need to updatewater infrastructure comesin a close second.

The big disappointmentamong investors in thewater sector over the pastdecade has been industrial-ised countries’ failure toupgrade, in part becausecoping with the creditcrunch and recession tookprecedence.

The big hope is that, withthe worst of the economicmalaise behind them,authorities will seek toaddress a backlog in repairsand overhauls that means3-4 gallons of water are lostto leakage out of every 10that pass through ageingsystems. “Municipal taxreceipts are looking health-ier now, so projects thatwere delayed are back onthe slate and ready for exe-cution,” says Mr Gottelier.

Mark Hanrahan, a direc-tor at PwC, does not foreseea step-change in spendingby state governments orlocal authorities. But he hasseen growing interest in thesector from a wide range ofinvestors, with pensionfunds drawn to the stabilityof regulated assets, andorganisations in the devel-oping world seeking notjust financial returns, butaccess to technologies thatthey might adopt.

Corporations, particularlyin the food and beveragesector, are also drivinggrowth, says Bjørn Haug-land, chief sustainabilityofficer at DNV-DL group,which offers clients water

footprinting – assessmentsof a company’s water usage,and its impact on the envi-ronment.

Mr Haugland believes reg-ulations and internationalstandards – such as a stand-ard for water footprintingto be adopted by the Inter-national Organization forStandardization in mid-2014– will make these measure-ment tools and methodolo-gies more valuable.

And Mr Hanrahan thinksbig data could change thewater monitoring landscapefundamentally.

Sanjay Wijesekera, chiefof water, sanitation and

hygiene at Unicef, agreesthat technologies thatimprove transparency willbe central to combating thegrowing gap between sup-ply and demand.

For example, being ableto monitor water usage inreal time, he says, “givesinformation to service pro-viders and governments,but it also means organisedcitizens can get involved.You start to see the level ofdiscourse that can lead tochange.”

New and cheaper technol-ogies are improving poorcommunities, he adds.

Pumps powered by solarenergy panels have helpedlocal governments in rural

areas to distribute cleanwater to individual house-holds, charge for the serv-ice, and pay back the initialcapital costs within lessthan four years; householdwater treatment productshave fallen in price, makingthem accessible for the firsttime to the world’s poorestcitizens; and desalinationsystems – which “tradition-ally we’ve not been evenable to consider” – are alsobecoming cheaper, thanksto new technology.

Improved membranes arechanging the way largedesalination operationswork, but energy costs area bigger variable. Thatmeans most of the work ondesalination is in parts ofthe world where water isscarce but fuel abundant,such as Saudi Arabia,Australia and parts of theUS.

Mr Gottelier at Impaxnotes that in the US, atleast, fracking could bringdown the costs of desalina-tion as well as ratchet updemand, given the largequantities of water thepractice requires.

Researchers at Harvardpoint to concerns that theprocesses used in shale gasextraction could lead to thecontamination of aquifers,and pollute water that can-not be returned to the sys-tem. This said, an Apaxreport published this year,points to opportunities forcompanies that offer watertesting, treatment and recy-cling, and waste materialsstorage.

It says: “We could beabout to witness a modern-day equivalent of sellingshovels in a gold rush.”

Fear of water shortages providesincentive to refine processesWater

Investment in a basicnatural resourcewill benefit us all,writes Rose Jacobs

New and cheapertechnologies areenabling grassrootsimprovements inpoor communities

In the past five years, governmentsaround the world have committedsome $25bn to developing a com-mercially viable way of capturingcarbon dioxide from power sta-

tions and factories burning coal, gasand oil. So far, they have little toshow for it.

As CO2 is the main man-madegreenhouse gas blamed for globalwarming, carbon capture and storageis regarded in many quarters as theworld’s most important green technol-ogy.

Yet not a single large-scale coal-fired plant equipped with carbon cap-ture technology is in commercial oper-ation. What is more, of the $25bnpromised, some $8bn has been cut orclawed back, according to analysts atthe Bloomberg New Energy Financeresearch company.

If the world continues burning fossilfuels at current rates, global tempera-tures could rise to potentially riskylevels in as little as 30 years, accord-ing to a report released last monthby the world’s leading authority on

global warming, the UN’s Intergovern-mental Panel on Climate Change.

But, if the CO2 is captured before itenters the atmosphere and piped intodeep storage, it could stave off therisk.

At least that is the theory. Progressin practice has been slow, especiallywhen it comes to installing carboncapture equipment at the coal-firedpower plants responsible for a largeshare of global carbon emissions.

Two coal plants with carbon cap-ture and storage are due to start oper-ation next year, one in the Canadianprovince of Saskatchewan and theother in Mississippi’s Kemper county.But progress looks uncertain afterthat.

The gloomy outlook was under-scored last week by a status report onthe industry from the Australia-basedGlobal CCS Institute. It showed thenumber of large-scale carbon captureprojects worldwide had fallen from 75to 65 since its 2012 report.

Brad Page, the institute’s chief exec-utive, says that momentum is simply

too slow if carbon capture is to playits full part in tackling climate changeat the lowest cost.

“Of concern is that no new projectswere identified in Europe, nor are anyunder construction,” says Mr Page

Of the 75 projects the institute iden-tified last year, five have been can-celled, one downscaled and seven puton hold, while only three new oneshave come forward, in Brazil, SaudiArabia and China, the world’s biggestcarbon emitter.

The obstacle is not technical, butfinancial. Companies have for yearsbeen using captured CO2 in so-calledenhanced oil recovery processes,where it is injected into oil reservoirsto help extract more of the fuel.

But fitting carbon capture equip-ment to a power station not only addsbig costs to the venture, it alsorequires more of the electricity theplant generates, thereby making aplant more costly and less efficientthan its rivals.

In June this year, however, the USpresident, Barack Obama, made a

speech that many saw as a big boostfor carbon capture. Mr Obama made itclear he was determined to end whathe called “the limitless dumping ofcarbon pollution” and would intro-duce new standards for both new andexisting power stations.

When the Environmental ProtectionAgency unveiled the standards lastmonth, it said new coal stationswould need to emit no more than1,100 pounds of CO2 per megawatt-hour – a limit that effectively pre-cludes their construction withoutcarbon-capturing technology.

That came on the heels of news thatthe that Obama administration waslooking at offering up to $8bn in loanguarantees for low carbon technologydevelopment, including capture, that

Bloomberg analysts think could pushat least one stalled project over theline in Texas.

In the carbon capture industry, itoften seems that every step forward ismatched by at least one back, and soit was with the EPA’s coal plantannouncement on September 20.

On the same day, on the other sideof the Atlantic, Norway ditched itsplans to build a full-scale carbon cap-ture plant at its Mongstad refinerythat ministers once described as thecountry’s version of a “moon land-ing”. High costs were cited as part ofthe reason for the decision.

That capped a gloomy year for theindustry in Europe, which is wellbehind North America when it comesto developing carbon capture.

The European Commission and theUK government – one of the EU’smost ardent carbon capture support-ers – have been running separateefforts to fund projects for years.

The commission’s efforts haveboiled down to just one project in thewhole of Europe – a Yorkshire coal

Move to control pollution stuck in the starting gateCarbon capture Progress has been slow, especially when it comes to installing equipment at coal-fired power plants, writesPilita Clark

The commission’s effortsboiled down to just oneproject in all of Europe

Slow going: a tube for CO2 is connected to a truck at a CO2-free power plant at Vattenfall in Germany as part of a pilot project for carbon capture and storage in which toxic emissions from coal are extracted and buried deep in the ground Reuters

plant that is also one of only twofinalists in the separate carboncapture competition being run by theUK.

The other is a gas plant in Scotlandand neither is likely to be operationalfor some time, assuming they goahead. Each is likely to be eligible fornew long-term guarantees of supportbeing offered under the UK’s energymarket reforms.

But the industry is concerned aboutthe lack of clarity over whether anymore projects will be funded after thefirst two, assuming they proceed.

Luke Warren, chief executive of theUK’s Carbon Capture and StorageAssociation, says: “We’re seeing somesignificant development in NorthAmerica, with the first coal-firedpower plants fitted with carbon cap-ture and storage being developed.”

“But here in the UK there is stillreal uncertainty about the govern-ment’s ambition for CCS.”

Mr Warren is positive about thefuture, although as he says, in thisbusiness, it helps to be optimistic.

Sarah MurrayFT contributing editor

Pilita ClarkEnvironment correspondent

Sylvia PfeiferSpecial correspondent

Rose JacobsFreelance journalist

Ross TiemanFreelance journalist

Rod NewingFreelance journalist

Ian MossCommissioning editor

Andy MearsPicture editor

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4 ★ FINANCIAL TIMES TUESDAY OCTOBER 22 2013

A new kind of turbine thatcan be powered by wind orwater, is silent at anyspeed, does not harm wild-life and is vibration-free isbeing developed by 4sphere.

After seven years of workby founder David Patrick,the company is nowinstalled in the Los AngelesCleantech Incubator (LACI),alongside 14 other start-ups.

Zack Fleishman, 4sphere’schief operating officer, saysLACI has made a great con-tribution to the progress ofthe business: “It has helpedus focus on a couple of mar-kets that have the easiestpath to entry.”

The incubator has alsoset up meetings withexperts in key industries,provided mentoring, andoffered access to patent law-yers and events.

“The frustrating part wasthe amount of time it wouldtake our company to suc-ceed,” says Mr Fleishman.

That is a characteristicshared by many. FredWalti, executive director ofLACI, says one of the keylessons since the incubatorwas set up in 2011 is that“clean tech isn’t media, theInternet or software. This is‘deep tech’, with serious sci-ence and difficult problems.It is difficult to demonstratemarket traction in a shortperiod of time.”

Because proving that newtechnologies work can takeyears and investors havelittle hope of making aquick return, funding canbe challenging.

LACI has no money of itsown to dole out. But JohnKing, president of anotherLACI venture, CombinedPower, has been impressedby the incubator’s contribu-tion to his fundraisingefforts in recent weeks.

“We have established dia-logues with investors thatare active in the space, thathave fuel in the tank andthat are prepared to writecheques,” he says.

Combined Power hasdone a great job developingits solar thermal equipmentfor companies with steamboiler systems for less than$3m, says Mr King.

“Now picture the simulta-neous, parallel effort neces-sary to do a world-class jobraising money” beyond theinitial investment, he says.“The organisation to dothat is in place at LACI andcan be ‘bolted on’ to ourown organisation.”

David Aitken, head ofincubation at Carbon Trust,an advisory group backedby the UK government,says start-ups have threemain needs: research anddevelopment grants to dem-onstrate technology andproduct performance; incu-bation advice to help com-plement their skills, addingknowledge; support to helpconnect with investors,customers and industrialpartners.

There is a debate aboutthe extent to which beinglocated near other compa-nies helps start-ups thrive.

But LACI can already

claim a couple of successes.One of the first to gradu-

ate from its 5,000 sq ft prop-erty in LA’s Cleantech Cor-ridor was 350Green, whichby December 2011 – when itwas acquired by The CarCharging Group – hadbecome the biggest installerof electric vehicle chargingstations in the US.

Another LACI alumnus,Gridtest Systems, developeddevices to check that charg-ing points work well.

Gillian Isabelle, executivedirector of the Associationof Cleantech Incubators ofNew England (Action), saysphysical incubators offeradvantages. They may haveopen-access R&D labs, pro-totyping shops, and lightmanufacturing facilities aswell as affordable work-space and business supportand services, she says.

Because green technologyis so diverse, coffeemachine conversations mayoffer few technical solu-tions. Yet being in an incu-bator, she says, allowsentrepreneurs to share“ideas about business mod-els, available resources,commercialisation strate-gies, sales and other impor-tant areas”.

And in clean tech, novelbusiness models may beneeded to overcome thechallenges of finding mar-kets in a field such aspower generation, wherelong-lived assets are rarelyreplaced, and companiesprefer low-risk solutions.

One objective of Action,with partners in Europe aswell as 13 sites in New Eng-land is to share lessonsabout how to help compa-nies with a long infancy.

Mr Walti says LACI haslearnt some valuable les-sons in this regard. Acceler-ators, in the form of pre-

packaged, condensed three-month programmes, simplydo not work in clean techbecause of the long develop-ment times needed, he says.

The sheer diversity ofclean tech companiesargues in favour of flexiblesupport regimes, says MrAitken. The virtual model,exemplified by CarbonTrust, “is cost-effective andcan enable you to coverquite a wide geography.”

Many early-stage cleantech companies have a verylean business model, andmight not want dedicatedspace in an incubator, hesays. Others are already inuniversity incubators, orhave industrial partners.

One strength of CarbonTrust, which has aided 300start-ups (out of 3,000 thatapplied) is that it can offerresearch and developmentgrants, then give advice andsupport. But Mr Aitkensays two further ingredi-ents are essential.

You must be willing towork with a company forfive years or more.

And, even with a virtualincubator, you must get toknow the business and itspeople really well. “Wespend a lot of time face-to-face,” he says.

Start-upsenjoy benefitof proximityIncubators

Sharing premiseswith similarcompanies providessupport, writesRoss Tieman

The diversity ofcompanies arguesin favour of flexiblesupport regimes

Keith Gillard, general part-ner at Pangaea Ventures,based in Vancouver, thinkshis company’s expertise hasenabled it to benefit fromthe funding crisis in theclean technology sector.

His investment companyspecialises in advancedmaterials, with most of itsinvestments in green tech-nology. “You can make aclean tech case aroundalmost any advanced mate-rials technology, throughthe material or energy effi-ciency,” he observes.

Mr Gillard thinks thefinancing crisis stemmedfrom large investors andgeneralist venture capitalfirms, which had been suc-cessful in fields such as

software and pharmaceuti-cals, not realising the differ-ent nature of clean tech.

“They did not understandthe great challenges of scal-ing or the true nature ofcommodities with pricinginflexibility and an inabilityto negotiate.

“They also confused mar-ket size, which is enormous,with market opportunity, sothey overestimated willing-ness to pay a premium forthe feel-good, or publicrelations, value of beinggreen.”

Since its founding in 2001,Pangaea has attracted cor-porate investment, startingwith Umicore, a materialstechnology group.

Its 15 corporate limitedpartners now include BASF,Castrol, Mitsubishi andToyota, some with theirown funds.

Pangaea’s activities covertechnologies, markets andintellectual property, look-ing at how they fit witheach other and which aregood and which are bad.

This gives groups accessto early stage innovationyears earlier than theycould achieve themselves.

“We have a network thatgoes beyond theirs,” hesays. “Innovators, academ-ics and entrepreneurs aremore willing to talk to usthan to a big company.”

Mr Gillard says much ofthe strategic value for cor-porate limited partners isnot the deals at the end ofthe pipeline, but access toscreening work at theentrance to the deal ‘fun-nel’. The partners can thenapply their own filters,depending on what isimportant to them.

Corporate backing helpedPangaea win deals in a com-petitive market. Now themarket has been decimated,it has a clear run. “The val-uations on deals are amaz-ing,” adds Mr Gillard.

Nathan Goode, the part-ner who heads energy,cleantech and sustainabilityat Grant Thornton, anassurance, tax and advisory

firm, agrees with this analy-sis: “It is the recession;over-optimism about howquickly they can commer-cialise; and an overhangfrom past investments.

Tom Whitehouse, chair-man of the London Envi-ronmental InvestmentForum, says: “Cleantech

is almost always capital-intensive, so some arguethat it isn’t a sector for ven-ture capital.

“That might be true forfinancial venture capital,but it is not true of corpo-rate venture capital, whichhas a long-term outlookand, more importantly, the

ability to bring clean tech-nology to market.”

Corporates are looking forgrowth. Venture capital is agood source of innovationto power it and they holdcash that is earning lowinterest rates.

“A corporate can placebig orders with a portfolioinvestment,” says MrWhitehouse. “That gets itreferences and market vali-dation and if it goes wellthey can acquire it.”

According to GP Bull-hound Connect, an annualevent for chief executivesand founders of technologycompanies, the top quartileof companies in green techportfolios show consistentcompound annual growth of25-40 per cent in revenueover the past four years, sothey represent attractiveacquisition opportunities.

Andre Shortell, partner atGP Bullhound, the invest-ment bank behind theevent, says: “More time isneeded to reap higherreturns, as large corporate

buyers rarely look at anacquisitions below €100m,”he says. “The challenge forventure capital is to makethem feel the urgency toown a technology. ”

Despite the problems,there is no shortage ofmoney for entrepreneurswith a good idea, a strongmanagement team and arobust business plan.

Mike Reid, managingpartner at Frog Capital, aventure capital fund, saysthe fundamental driversremain unchanged: a press-ing need for food yieldimprovements, waste regu-lation and energy manage-ment technologies.

“The clean tech compa-nies to watch are not theones with the best idea,” hesays. “It is those with asolid business model toback up the idea.

“The next five years isthe time to be getting onboard, before the cycleturns up and valuationsrise. The phoenix from theclean tech ashes is bright.”

Corporate investors will reap long-term rewards

The centre of Christchurch inNew Zealand still bears thescars of the 2011 earthquakethat killed 185 people anddevastated many of its build-

ings, but the community hopes tomake use of the rebuilding of SouthIsland’s largest city to fit it with sen-sors and hardware that could influ-ence how it functions in the future.

The project, Sensing City, is led byresident Roger Dennis, former futuretechnology specialist at EGG internetbank, in conjunction with Arup, theengineering and consulting firm. Datawill collected on a range of variables,such as pedestrian and vehicle trafficflow, water and air pollution.

The first pilot project entails mem-bers of the public testing river waterquality. It is just a first step, but itshould help the city think more stra-tegically about data.

The concept of smart cities, usingtechnology to improve the infrastruc-ture, resources and quality of life oftheir citizens, has evolved from may-ors trying to burnish their green cre-dentials to using a city’s assets andinfrastructure imaginatively to makethem better places to live.

It is no longer just about putting incycle lanes or car hire schemes, butabout deploying smart technologythat enables you to measure anythingand analyse the data in real time.

Some 80 per cent of global GDP isgenerated in cities according to recentestimates, says Volker Buscher, ITand communications leader and smartcities expert at Arup, underlining justhow important they have become.

More accurate information onwhere and how resources are beingconsumed can help cities and theircitizens make more informed use ofthem and lower consumption.

It is also a great business opportu-nity. Arup estimates the global mar-ket for smart city solutions and theservices required to deploy them willbe $408bn by 2020. International tech-nology companies including Cisco,Intel and IBM are among those lead-ing the global charge in providingsome of the data infrastructure.

Mr Buscher cites Copenhagen as anexample of how a more “integratedfocus” can make a big difference. Theextensive use of cycling, for example,

has had a quantifiable effect, not onlyby reducing the number of cars on theroads but also cutting down on GDPspent on transport, as well as havinga beneficial impact on people’s health.

The city’s aim is to have 50 per centof people cycling to their place ofwork or education by 2015, comparedwith 35 per cent in 2010.

Copenhagen’s ambitions do not stopthere. It has established a clean techcluster to create partnerships, builddemonstration facilities and seekinternational reach. It wants it to bethe main entry point for any cleantech inquiry from foreign parties.

Those cities that have been mostsuccessful have done so with “leader-ship from the top,” says KatharineFrase, chief technology officer at IBMPublic Sector. “The key is to set thestrategy and priorities: What do wewant to solve first and how do we getthe necessary stakeholders aligned?”

Although all cities are different and

work in their own ways, they sharecommon challenges: how to reducetraffic, obtain enough affordable – andgreen – energy, and provide cleanwater. IBM has developed softwarethat can help local government execu-tives to get a more complete view ofhow well their operations are run-ning. It synthesises data from a vari-ety of government IT systems, such asthose that handle water systems andpublic transportation.

Da Nang, Vietnam’s fourth-largestcity with one of the highest popula-tion growth rates in the country, isusing such software to ensure accessto high quality water for its citizens –both to reduce leaks but also toimprove the quality of water and howit is treated. While water samplesused to be collected and analysedmanually, by installing sensorsthroughout the water treatment proc-ess, the city’s utility can measuresuch things as salinity, pH and chlo-rine levels in real time – and react ifneeded.

If the ambition is clear, putting itinto practice can be difficult. Amongthe biggest challenges is ensuring ini-tiatives are integrated across variouscity authorities and stakeholders.

Mike Hausser, director of asset man-agement for Cambridge, Ontario, saysa common issue is that of “jurisdic-tion”, or “silo effects”, where eachutility or city authority has its ownideas as to what needs to be done.

The city is using software from IBMto collect data about anything fromthe state of its roads to that of itswater pipes. Algorithms process theinformation and predict which assetsare likely to fail and when, while afinancial tool helps to plan fundingfor each project.

Companies, too, will need to collabo-rate across industries. Qualcomm, atechnology licensing group, is trial-ling its wireless electric car chargingsystem, with a fleet of up to 50 vehi-cles including Renault’s Fluence ZEEV. The system uses inductive tech-nology to transfer energy from compo-nents in the ground to the vehicle.

For its London trial, the companyhas also been working with Charge-master, a charging station specialist.

Potentially, systems such as thiscould make electric vehicle batteriessmaller, because they could becharged frequently in small bursts –rather than from a fixed point.

“Our intention is to work with man-ufacturers to build this into cars,”says Andrew Gilbert, executive vice-president for European InnovationDevelopment at Qualcomm Europe.

Cities will need to interact differ-ently with their residents. Whetherthe aim is to reduce water usage, ortraffic or energy consumption, “in allof these you need the citizens tocare”, says IBM’s Ms Frase.

Citizens use intelligence to live better

Quality work: children inChristchurch, New Zealand,use a water sensor as partof the Sensing City pilotproject Arup

By harnessing the energiesof millions of bird watchers,a project called eBird is pro-ducing one of the world’sfastest growing collectionsof biodiversity data, ena-bling the creation ofdetailed maps of migrationpatterns and year-roundmonitoring of species acrossNorth America.

Giving citizens the powerto report on environmental

changes – through websitesor mobile apps – is just oneway of using technology toproduce “green data”.Social media, smart meters,wirelessly enabled sensorsand satellite technology areall generating vast amountsof data that offer freshinsights into mankind’simpact on the naturalworld. Scientists, govern-ments, companies and oth-ers can use “big data” todevelop sustainability strat-egies and policies.

Alyssa Farrell, sustaina-bility product marketingmanager at SAP, the soft-ware group, says: “If theanalysis of big data is astransformative for sustaina-bility as it has been forother industries, we expectit to return incredible

results that help organisa-tions make better decisionsearlier in the cycle.”

One application concernsadapting to changes in cli-mate. Power and watercompanies can use predic-tive analytics, which minespast and present data toforecast trends, to copewith severe weather eventsmore effectively.

Scott Flavell, an energyexpert at PA consulting,points to Australian energyand water utilities, forexample, which have devel-oped modelling software tosimulate the impact ofcyclones, floods and heat-waves so they can reinforceinfrastructure accordingly.

“The data are there,” hesays. “It’s about developingthe software and modelling

to make the data useful andapply it to the system.”

When it comes to manag-ing resources, widespreadadoption of smart meters,which feed real-time energyand water use data back toelectricity grids and watersystems, will be critical.

Utilities not only gaindetailed information onenergy or water use, butcan create pricing tools andincentives for consumers tochange their behaviour.

Mark de Vere White, pres-ident of the electricity busi-ness at Itron, a smartmetering company, says:“The ability to understandwhat’s being generated andconsumed in real timeallows the consumer to be abigger participant in con-servation.” In some cases,

new data-driven technologyis enhancing the old. Inparts of the world, forexample, up to 70 per centof water is lost throughleaks caused by ageinginfrastructure.

Sensors and in-pipe moni-tors can detect weaknesses,allowing local repairs,rather than having toreplace networks or buildnew infrastructure.

In the Philippines, Miya,part of Israel-based ArisonInvestments, is workingwith a water utility toimprove the efficiency ofthe existing system. “We’resaving 800m cubic meters aday,” says Meir Wietchner,chairman. “That’s theequivalent of eight desalina-tion plants.”

Sensor-based technology

can improve environmentalcompliance. Ms Farrellpoints out that oil refineriesand gas processing plants,which have monthly limitson gas flaring levels, cansupply evidence of activity.

Mr Wietchner stresses theneed not just for informa-tion but also ways of ana-lysing it. “You need theright algorithms to makethe right decisions,” hesays. When high-perform-ance computing is appliedto big data, scientists cangain a clearer picture of theimpact that changes in cli-mate, industrialisation andother stresses are having onforests, oceans and land.

“The limitations in thepast were that many ofthese models required hugecomputing resources,” says

Gwyn Rees, director of envi-ronmental informatics atthe Centre for Ecologyand Hydrology, part of theUK’s Natural EnvironmentResearch Council (NERC).

This meant that largephysical areas and longtimeframes were needed tocreate predictive models.

“With high performancecomputing and virtualisa-tion processes, we can nowrun those models down to a1km square resolution on adaily or sub-daily timestep,” he says. “That givesa far better representationof what might happen onthe ground.”

Yet, with the volume anddetail of environmentaldata increasing rapidly, thequestion is how to makesense of the information.

“You have the data com-ing in and the IT infrastruc-ture to do things with thedata but there is a gapbetween that technologyand the ability of the envi-ronmental scientific com-munity to exploit the infor-mation,” says Mr Rees.

This, he says will requirecollaboration between sci-ence and industry. And forthis reason, the NERC hasjoined the UK’s TechnologyStrategy board in seekingproposals for projects thatapply environmental datato commercial challenges orthe creation of businessopportunities.

“We need to work outhow to use these differenttechnologies that are offer-ing us a fantastic resource,”says Mr Rees.

Fragments of information come together to give the big picture

Venture capital

Expertise is requiredto make the best of aspecialist sector,writes Rod Newing

Analytics

The right algorithmsare needed to exploitthe data to producethe right decisions,says Sarah Murray

Urban management

Building smart cities meansutilising and maintainingtheir strategic assets andinfrastructure to makethem better places to live,writes Sylvia Pfeifer

Sustainable Business Green Technology

Patchy returns ledmany venturecapital firms to losetheir appetite forclean technology

Cities that havebeen successful didit with ‘leadershipfrom the top’