New study finds West Midlands energy incubator could drive green recovery

Published: 2 July 2020

Growing demand for a green recovery from Covid-19 has strengthened the findings from a 12-month study released today into how the West Midlands can capture the benefits of cleaner economic growth.

The report recommends building the UK’s first business incubator focused solely on energy and with a strong focus on digitalisation – to improve the success of innovative small and medium-sized companies in the West Midlands. This would include a physical incubator housed in a single building to maximise the benefits of clustering, mentoring and networking from technical and commercial experts.

According to the study, a unique combination of factors in the West Midlands make it an ideal place for an energy incubator, including commitment from regional government, innovation expertise and region-specific challenges.

Funded by Climate-KIC and delivered by Energy Systems Catapult and Sustainable Ventures – the report has input from of a range of key West Midlands and national bodies including West Midlands Combined Authority, Energy Capital, University of Birmingham, Sustainability West Midlands & Innovation Alliance, High Value Manufacturing Catapult, Midlands Energy Hub, Carbon Trust, Innovate UK, Make UK, Eigen Ventures and the Active Building Centre.

  • Why Energy? Over ¾ of UK carbon emissions come from the energy needed to run our homes, businesses and transport. We need innovative UK businesses to deliver solutions to make Net Zero possible.
  • Why Incubator? It is widely recognised that innovative young businesses are much more likely to succeed if nurtured in incubators. Yet fewer than 5% of Britain’s small businesses have had any contact with an incubator.
  • Why Energy Incubator? Other than those linked to grant funding programmes, only three incubators in the whole UK have a focus solely on energy and they are all virtual incubators run by businesses.

Mayor of the West Midlands, Andy Street, said: “This study highlights that the West Midlands is a region that can build on its unique heritage and distinctive strengths and seize the opportunity to reset, rebuild and reinvent our region, and come back even stronger.

“It also aligns to #WM2041, our target for the West Midlands to be carbon neutral by 2041. This is our ambitious goal that will support the delivery of the Government’s national target to be carbon neutral by 2050 while ensuring no one is left behind.”

Energy Systems Catapult business lead for Energy Launchpad, Paul Jordan, said; “We carried out a rigorous 12-month study, that recommends the creation of West Midlands clean energy incubator to help UK innovators solve the toughest problems on the path to Net Zero – with a key focus on digitalisation, data services and commercialisation.

“The emergence of Covid-19 and recent demand for a green recovery have only strengthened the case for the West Midlands to become a centre of clean energy innovation.

“The aim is to offer a physical incubator in the West Midlands – initially for up to 20 SMEs but with room to expand – offering end-to-end services to help innovators on every stage of the journey from invention to full commercialisation.

“The study identified a range of services that innovative energy start-ups require but that according to more than 80% of respondents to our surveys, cannot be found elsewhere.

“A recent UK Government research paper concluded that when an incubator is established in a given region, within five years the target sector for the incubator sees a 243% rise in economic activity compared to non-target sectors.

“Commitment from regional government, existing innovation expertise and region-specific challenges – make the West Midlands an ideal place for this initiative.”

  • Commitment? The West Midlands Combined Authority has already shown its commitment to the energy transition with the Local Industrial Strategy and the Energy Capital and Energy Innovation Zones initiatives.
  • Expertise? The West Midlands region hosts significant innovation expertise, such as Energy Research Accelerator, Manufacturing Technology Centre, WMG at Warwick University, Birmingham and Aston Universities and Energy Systems Catapult and major energy companies including National Grid, E.ON, Shell Energy, Worcester Bosch and Tonik Energy.
  • Regional challenges? The West Midlands’ is 9% below the national average for productivity – which equates to £10bn of lost economic activity – and has higher than average rates of fuel poverty and carbon emissions.
  • Regional challenges? Birmingham’s 19th century housing stock, energy intensive manufacturing industries and leadership in electric vehicles provides great commercial scale test beds to develop cost-effective, consumer-focused energy solutions.

Jordan continued: “Massive strides in energy innovation over the past decade promise to revolutionise the economy. But progress is still too slow and too narrow. Unless we put this right, the UK will fail to reach its Net Zero emissions target and miss out on a huge economic opportunity.

“The UK has traditionally been excellent at inventing things, but weaker at commercialising them. If we hope to create the Google of energy, we will have to rethink our approach to innovation radically.”

The proposed incubator – provisionally called D4E – which stands for Decarbonisation, Digitalisation, Decentralisation and Democratisation for Energy, will include:

  • Physical incubator – housed in a single building to maximise the benefits of clustering, mentoring and networking
  • Virtual incubator/accelerator – linking existing West Midlands innovation organisations, national networks, incubators/accelerators and assets
  • Services – providing energy innovators with services and expert advice unavailable elsewhere to help them commercialise
  • Digitalisation – drives decentralisation of energy and convergence of different parts of the energy system – gas, electricity, heat, transport and the built environment
  • Data Services – to help decarbonise the energy sector and provide evidence to support commercial demonstration of new products and services
  • Commercialisation – supporting large-scale demonstrations and scaling-up to commercial production or service delivery, with expertise not available elsewhere.

EIT Climate-KIC Innovation Lead, Aled Thomas said: “The West Midlands is positioning itself to capture the benefits of the clean energy transition in terms of jobs, business growth and re-skilling.  These are critical elements of a successful green recovery programme following the COVID crisis.

“EIT Climate-KIC is pleased to support this initiative to create a dedicated platform to support the commercialisation of innovative energy companies, building on the many strengths and opportunities in the region.  It will provide companies with tailored and coordinated support from leading agencies to develop and grow.”

Sustainable Ventures Managing Partner, Andrew Wordsworth, said: “We are seeing growing numbers of ventures with innovative commercial solutions to the challenges of climate change and resource scarcity.

“Our experience shows that establishing a physical incubator underpins the creation of a Cleantech Ecosystem that is critical to channel support to these innovators at the time they need it the most.”

D4E offerings – key services will include:

  • The innovation window – experts guiding companies to the right services for their stage of development, provided either in-house or through a broad network of existing virtual support services.
  • Data library – data is vital for innovation in energy sectors but can be expensive for early stage companies. D4E will maintain access to a library of databases for innovators to either access free or at little cost.
  • Markets, policy and regulation – a consultancy service for the notoriously complicated regulatory and legislative complexities; and vice-versa, providing officials with evidence of the regulatory changes needed to support the commercialisation of innovations in the energy sector.
  • Product development and validation – advising on proof of concept testing, design for manufacture, and supply chain planning for early stages developers (TRL 3-6). Access to regional and national virtual assets such as ESC’s Living Lab & Data Communications Company (DCC), ‘digital sandbox’.
  • Commercialisation – launch a product or service can be a major cost – and risk – so help to develop commercialisation strategies, secure engagement in large scale demonstrations and secure its first customers at lower cost.
  • Funding readiness – bespoke advice for preparing business and financial plans, for investors, plus networking events to introduce SMEs and investors.

Key Facts and Stats:

  • The International Energy Agency (IEA) estimates that worldwide $840 billion will need to be invested every year between now and 2030 to put us on course to stop irreversible climate change.
  • The GII World Innovation Index – the UK ranked 5th in 2019, down from 2nd in 2015. As the world’s 5th largest economy, Britain relies heavily on the research outputs of its universities, but we lag behind the other top 10 nations significantly on the quantity of patents secured.
  • The Enterprise Research Centre (ERC) found innovation in the West Midlands is below the level of the best performing areas of England – 4-8% below in Coventry and Warwickshire, and 8-12% below in Birmingham & Solihull. ERC also found the number of West Midlands companies engaged in ‘new-to-the-market’ innovation – in other words, real innovation – was just 1 in 10 with most concentrated in larger companies with funding from Innovate UK and the EPSRC.
  • In energy, other than those aligned to grant funding programmes, sector-specific support is available through only three corporate accelerators – EDF Blue Labs, Eon Agile and Engie Innovation – which are highly selective. While the Energy Entrepreneurs Fund is a Government grant funding programme through which energy innovators can receive incubation support through Carbon Limiting Technologies.
  • Co-working incubators in Birmingham include: Eagle Labs, run by Barclays; Geovation, run by Ordnance Survey and HM Land Registry; and STEAMhouse, run by City University, which is planning a £48 million expansion. None of the incubators we identified focus on energy.