The D4E: an energy innovation platform for the West Midlands study explored why existing UK support for energy innovation is good at advancing new technologies through university funding and at supporting big industrial innovators in sectors like solar and offshore wind. But, it is poor at the bit in the middle: helping smaller innovators to commercialise.

This 12-month market based report provides a study of the UK and specifically West Midlands Iinnovation landscape. Providing evidence and analysis of the gaps and needs for energy innovation, we started with a market landscape study, followed by in-depth interviews and workshops with SMEs and stakeholders. Analysis of all the results informed recommendations, which were then market-tested in a second survey.

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.

Key points

This 12-month market based study into the UK and West Midlands innovation landscape found:

• 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.
• 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. .
• 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.

Recommendations

The D4E report recommends building the UK’s first business incubator focused solely on energy (other than those aligned to grant funding programmes) 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 – initially for up to 20 SMEs but with room to expand.
• 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. With a key focus on digitalisation, data services and commercialisation, including offering end-to-end services to help innovators on every stage of the journey from invention to scale up.

The study found that 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:

• 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.

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

• 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.