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An Assessment of Enterprise Opportunities in Environmental Goods and Services

A Report to Forfás and InterTrade Ireland

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August 2008

An Assessment of Enterprise Opportunities in Environmental Goods and Services

CONTENTS

EXECUTIVE SUMMARY ...... 2 1. CHAPTER 1: INTRODUCTION ...... 13 2. CHAPTER 2: THE GLOBAL EGS MARKET ...... 18 3. CHAPTER 3: AN OVERVIEW OF THE EGS SECTOR IN IRELAND ...... 36 4. CHAPTER 4: THE EGS INDUSTRY BY SUB-SECTOR ...... 50 5. CHAPTER 5: KEY DRIVERS ...... 172 6. CHAPTER 6: INTERNATIONAL BENCHMARKS...... 187 7. CHAPTER 7: CONCLUSIONS...... 210 LIST OF ABBREVIATIONS

An Assessment of Enterprise Opportunities in Environmental Goods and Services

EXECUTIVE SUMMARY

Introduction

“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 eco systems. This includes cleaner technologies, products and services that reduce environmental risk and minimise pollution and resource use.” 1

The Environmental Goods and Services (EGS) sector is therefore quite diverse. For the purposes of this study includes the following sub-sectors:

o Air Pollution Control o Cleaner Technologies and Processes o Environmental Consultancy o Environmental Monitoring, Instrumentation and Analysis o Energy Management/Efficiency o Marine Pollution Control o Noise and Vibration Control o Remediation and Reclamation of Land o Renewable Energy o Waste Management, Recovery and Recycling o Water Supply and Wastewater Treatment

In addition, a separate assessment has been carried out of the construction sector as many of its products, such as heat pumps, lighting, insulation and building materials, could be categorised as environmental products.

The sector has expanded significantly in recent years, largely driven by more robust compliance with EU environmental legislation. However, the focus is now beginning to change as rising energy prices, growing awareness of the consequences of climate change, and increased demand for greener and more environmentally sustainable goods and services are having, and are likely to have, an increasingly important influence on the sector going forward.

Against this background, Forfás and InterTrade Ireland commissioned this study to assess the business opportunities which are likely to arise in coming years and to ensure that enterprises on the island and the State development agencies are well placed to take advantage of these opportunities.

This study examines the current state of the EGS sector in Ireland/Northern Ireland, both in terms of its structure and dynamics, and assesses the strengths and weaknesses of the sector. In

1 The Global Environmental Goods and Services Industries, Graham Vickery & Maria Iarrera, OECD, 1996.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

addition, it seeks to identify and analyse a number of promising areas in the EGS sector where new domestic and export opportunities are likely to occur. The study also highlights priority areas that may attract FDI.

A key finding - based on an assessment of the considerable evidence gathering during the course of this study - is that a strategic policy framework should be put in place to ensure that Irish companies, or companies choosing to base their activities in Ireland, can take advantage of the growth in demand for EGS which is expected in coming years.

The Global EGS Market

It is estimated that the value of the EGS sector was in excess of $600 billion worldwide in 2005 and is likely to exceed $700 billion by 2010 and $800 billion by 2015.2 This is triple the size of the global aerospace industry.3

Firms in OECD countries are estimated to account for about 90% of the global EGS market. However, this situation is now beginning to change and many transition and developing countries, in particular China and India, are now seeing strong economic growth, in response to concerted environmental problems, including air and water quality, arising from their rapid industrialisation and urbanisation.

In the developed world, compliance with environmental rules continues to drive investment, in particular in the areas of energy efficiency and renewables. Overarching all this at a global level is the ‘decarbonisation’ of society where the twin threats of oil and gas depletion and responding to climate change act as the biggest single driver in the sub-sectors of energy efficiency and renewable energy. Indeed, a recent report from the UK Commission on Environmental Markets and Economic Performance highlighted the fact that the market for new low-carbon energy technologies is now estimated to have reached $100 billion per year.

Investment in the EGS sector worldwide has also increased dramatically in recent years. Venture capital investment in the area of clean technology is now overtaking investment in areas considered core destinations for this capital. For example, in 2006, clean technology became the third largest venture capital investment category in North America, trailing only IT and biotechnology.

At a global and regional level, the sub-sectors which are considered to have the strongest growth potential are clean technologies and renewable energy technology. Dwindling sources and availability of potable water throughout the world are also proving to be a factor aiding the development of the water/wastewater sub-sector.

As the global EGS market is dynamic, this provides an opportunity for IDA Ireland and Invest

2 ENDS Directory 2008, U.K. CEED Global Market Estimate. 3 UK Commission on Environmental Markets and Economic Performance (BERR/DEFRA Report, November 2007).

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Northern Ireland to target some of the international EGS players that are identified in the study.

The EGS Sector in Ireland/Northern Ireland

While few published statistics are available, industry estimates at sub-sector level would suggest that the value of the EGS sector is in the region of €4.3 to €5.2 billion, with Northern Ireland accounting for nearly €1billion.

Some parts of the sector - waste, water, renewables and environmental consultancy for example - have seen rapid growth in recent years largely driven by public capital investment and the compliance burden resulting from the national implementation of EU legislation. The growth in the sector overall has also coincided with increased public awareness of the threats to our physical environment and the potential risks to human health that can arise from this.

With the exception of a small number of major players, the EGS market is dominated by SMEs who have established a substantial business presence over the past ten years. This trend has been associated with the significant increase in public investment in environmental services and infrastructure. It is important to note, however, that key sectors such as renewables, environmental consultancy and waste and water are dominated by subsidiaries of UK and EU parent companies which may affect the export opportunities available to these Irish operations.

To a very large extent, with a few notable exceptions, the EGS sector is playing catch-up with the technologies in greatest demand (RES-E and waste management) that are deployed and exploited by European companies of scale. This has implications for the prospect of an EGS company breaking in to the market for PV (solar technology), for example, without the setting up of a joint venture with an existing manufacturer.

At the same time, however, many EGS markets are starting from a low base of activity so it should be possible to gain market share in niche areas.

While it is difficult to provide an accurate figure, it is estimated that the level of investment that may be needed by 2020 if Ireland is to meet its legal obligations on foot of EU Directives on the environment, RES-E and energy efficiency is in the region of €38 billion.

SWOT

The strengths, weaknesses, opportunities and threats of the EGS sector were determined taking account of stakeholder feedback and EGS related research and can be summarised as:

Strengths Opportunities

• Large public sector investment • Rapidly growing global market • Government commitment to use fiscal and • Potential emerging markets in Eastern and other incentives Central Europe

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

• Commitment to regulatory enforcement • Business opportunity generated though • Open economy facilitates imported know- public procurement how • North/south alignment on infrastructure • Access to natural energy sources investment which could support EGS • Vibrant domestic economy and rising • Adjacency to growing GB EGS market population • Regulatory compliance • Good project engineering capacity in Ireland • Transition to carbon neutral economy • Clear government policy in RES and energy • WRAP and Carbon Trust models could drive efficiency innovation • All Island energy market • Benchmarks could offer best practice • Strong exchequer position examples • State agency adaptability (strong experience • Growing environmental awareness in public in FDI) and business • EPA (absent in NI) • Potential synergies between sectors (e.g. ICT and sensors) Weaknesses Threats

Low starting base (playing ‘catch up’) Rising energy and raw material costs Lack of government policy to support EGS Security of supply of energy and raw sector materials Weak EGS R&D Climate change Poor commercialisation of R&D Cost of not meeting RES targets Poor knowledge base Non compliance costs Reliance on traditional goods and services Lack of government driver Risk averse public procurement which Infrastructural investment embeds old technology Weak buy in from enterprise sector Poor spatial planning with diffuse pollution regarding climate change sources Conflicts of interest between regulator and Lack of scale and fragmented market (lack regulated sectors of networks) Diffuse state support to EGS sector Lack of investor interest Lack of standards/verification in EGS sector Lack of identity for EGS sector Lack of FDI presence Difficulties due to two jurisdictions Low history of innovation in EGS sector Distance from point of service to markets.

Opportunities

The cost compliance burden resulting from the implementation of EU environmental Directives is high and will get higher. For example, the European Commission estimates that the cost of the EU’s climate change/renewable policy package could be €60 billion EU-wide. A compliance burden of this scale has already had a significant impact on investors’ decisions and on the timing of investments.

On the other side of the equation, the need to respect environmental rules and greater corporate awareness about sustainable development – both largely driven by consumer behaviour – is rapidly changing the way certain sectors are conducting their commerce, in particular as regards sustainability requirements being pushed onto suppliers.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

While all EGS sub-sectors have prospects, state resources are limited so therefore priorities have to be set. This does not mean that any sub-sector should be ignored by the state agencies. Rather a higher priority should be given to a limited number of niche areas within sub-sectors that have the greatest potential to make a breakthrough into what is a very competitive European market.

In this regard, the following criteria were used in assessing the EGS goods and services with the greatest potential:

a. Clear demonstration of growth prospects in European markets b. Companies in the sub-sectors have the scale to export into European markets c. Exploitation of natural resources or technical experience is achievable d. Clear regulatory drivers exist with high levels of enforcement e. Emerging technologies and product development are attracting VC investments

Key Drivers

The key drivers identified are as follows:

EU environmental policy frameworks (e.g. Integrated Product Policy including REACH, WEEE, RoHS, Energy use Products Directives and Regulations) and compliance with environmental legislation. Regulation has driven growth in most sectors in the market. Early adoption of legislation can create an advantage over other Member States. Strong enforcement and consistent application across different local authorities is a key requirement. Ireland/Northern Ireland could also go beyond the minimum requirements of EU Directives to gain first mover advantage (e.g. plastic bags, smoking ban, light bulb ban etc.)

Having a clear policy with long-term supports (targets, tariffs etc.) creates the stable framework for growth and development.

Research and development is fundamental in the identification and widespread application of new/improved technologies. R&D should not only focus on new, innovative technology development but innovative ways to ensure greater uptake.

Rising energy costs is encouraging companies to consider energy efficiency initiatives and is creating an explosion of opportunity in the RES sector.

The public sector can lead by example through implementation of green procurement and specifying environmental criteria in public tenders. This can hugely increase the market for EGS and the spin offs through the whole product chain can be exponential.

Companies need support through the development phase of long lead-in technologies to ensure success which leads to long-term growth. Economic and information based supports need to be greatly intensified and more focused on EGS. There needs to be a greater coordination of agency

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

support.

Assessment of Enterprise Opportunities

Following the SWOT analysis and a general consideration of opportunities and key drivers, an assessment, as follows, was made of the growth prospects and sectoral capabilities and capacity of the sub-sectors with the highest potential.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Assessment of Enterprise Opportunities by Sub-Sector

Sub-sector Current size of Irish Growth Current Export Main Driver Main Barrier Comment market4 Potential - Sectoral Potential €million Island capability/ capacity Construction N/A HIGH LOW HIGH Higher energy Very limited indigenous Distinction between new build and retrofitting. efficiency capacity to provide required Unless indigenous manufacture develops, standards technologies, processes and imports will dominate in the short term. Long construction products term export potential is high because improving building energy efficiency will be a common EU requirement. However this will require concerted efforts to develop domestic capacity. Air Pollution 4-55 LOW LOW LOW Air quality and No demand There may be scope for odour control in waste odour regulations. water treatment plants. Clean 350-700 HIGH MEDIUM/L MEDIUM/ Energy and Knowledge and skills deficits This is a cross sectoral category Technology OW HIGH material costs Consultancy 60 – 75 (island)6 MEDIUM HIGH LOW/MED Regulatory Fragmentation and ownership There is a lack of information and support IUM compliance structure regarding EGS opportunities; smaller companies do not have the capacity/inclination to pursue work abroad Monitoring N/A MEDIUM MEDIUM/ MEDIUM/ Water Framework Insufficient commercialisation Dominated by aquatic monitoring; strong HIGH HIGH Directive of research research base apparent Energy 20 HIGH MEDIUM MEDIUM Energy costs Asset rating emphasis (not Current demand is low due to poor awareness Management operating performance) but rising energy costs will change this. Irish companies are operating successfully in UK market Marine 3 - 5 (island)7 LOW LOW/MEDI LOW Regulatory Lack of scale

4 No data for NI apart from population pro-rata calculation from DTI report. 5 Industry estimate. 6 Industry estimate 7 Industry estimate

An Assessment of Enterprise Opportunities in Environmental Goods and Services

UM compliance Noise N/A LOW LOW LOW Noise Directive Lack of skills Remediation 46 – 58 (island)8 LOW LOW LOW Risk mitigation Lack of scale EU Soil Directive will shift focus to treat soil as an asset RES 600 - 7009 HIGH LOW HIGH EU RES targets Lack of first mover advantage Low capacity relative to competitors; Strong niche capacity in NI; Wave, tidal have greatest potential Waste 1,200 – 1,60010 HIGH MEDIUM LOW Regulatory Lack of clear government policy There is greater potential for higher value compliance recyclables; achieving economies of scale is a critical success factor; the level of infrastructural investment committed should support new environmental technologies Water >2,00011 HIGH MEDIUM HIGH Regulatory Under investment in new Very significant commitment in NDP should be compliance technologies used to leverage capacity to deploy new technologies Total 4,280-5,160 –

8 Industry estimate 9 Consultant’s estimate 10 Industry estimate 11 DEHLG Water Services Investment Programme 2007 – 2009 capital costs only

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

International Benchmarks: Lessons and Best Practice

The study examined the EGS sector in a number of diverse markets - Austria, US and UK. The analysis concentrated on a number of factors including market mechanisms, domestic regulations and key sub-sectors. Each of these markets possesses characteristics that, individually or collectively, provide Ireland and Northern Ireland with key pointers to the successful development of the EGS sector.

As regards market focus, the contrast between the US and Austria is particularly evident; the US has established a system of supports and enablers that has resulted in a rapid inflow of capital providing a huge impetus to the renewable energy sub-sector; whereas in Austria renewable energy forms part of an integrated Master Plan across a number of EGS sub-sectors. The UK has again adopted a more broad-based strategic approach, avoiding the ‘picking of winners’.

Common to all three markets, and a recurring comment in discussions with industry sources, is the need for a regulatory environment that provides clear, consistent and long-term signals.

The lead-time behind commercialisation of some of EGS technologies and the capital construction costs require a long-term approach to attract capital. These serve to act as a spur to domestic markets and, building on that knowledge position, countries like Austria have become very export focused (65% of EGS sector is now exported). In the US, the scale of the domestic market and availability of capital has allowed US EGS companies to focus internally; for example, on the S&P global eco index there are a number of US companies listed whose operations are exclusively domestic.

The UK’s Commission on Environmental Markets and Economic Performance recommended:

o Setting credible goals and targets that give business clear signals about the future direction of environmental policies. o Favouring market mechanisms to ensure that businesses have greater flexibility to achieve environmental objectives in the most cost effective ways. o Avoiding prescribing particular solutions to achieve the desired outcome, and allowing for the development of innovative, new solutions in policy formation and appraisal. o Establishing a ‘level playing field’ through the removal of regulatory and institutional barriers that generally favour incumbent technologies.

As this report has been accepted by the UK government, some of its key findings may have an all-island application.

For Ireland and Northern Ireland, the messages emerging are clear; allied to implementation of EU environmental and energy Directives, set an ambitious strategic policy framework that will stimulate the development of the EGS as enterprises will respond to the rigorous implementation of legislation in areas such as water quality, energy efficiency, renewable energy etc.

An Assessment of Enterprise Opportunities in Environmental Goods and Services

Key Findings and Conclusions

The report provides clear evidence that for some EGS sub-sectors (renewables, clean technologies, water and environmental consultancy for instance) the domestic and export markets are dynamic and growing.

The principal drivers that are influencing investment and economic activity have been analysed and the barriers that could inhibit the further development of the sector have been identified.

Many examples of best international, and indeed national, practice at company and government level have been highlighted.

Ireland and Northern Ireland must plan now for a transition to a low carbon, resource-efficient economy in response to the global challenge of climate change and sustainable development.

There will inevitably be winners and losers. However, it is also clear there are significant new business opportunities for EGS companies in the domestic, UK and some European and international markets as the enterprise sector at global level is seeking to improve its environmental performance.

The EGS sector needs an identity like ‘ICT’ and ‘Life Science’. With few exceptions, companies within the sector are not networked at sub-sector level either with each other or with key enablers such as third level institutions. This is a major barrier to the development of the sector.

Finally, the following points are emphasised:

o Enterprise policy in Ireland has traditionally focused on maximising export potential rather than on fostering the domestic market. The evidence in this report suggests that agency support (and the setting of a clear strategic policy framework for the EGS sector) is needed to facilitate the growth of both domestic sales and export opportunities.

o Regulatory compliance was found to be a major driver of growth within the EGS sector and the need for clear and consistent environmental policy and regulation was strongly articulated by industry representatives. However, there is no suggestion that any additional regulatory burden should be placed on a sector that is already facing competitive pressures. What is needed is not more regulation, but clearer and more consistent regulation. What the report suggests, therefore, is that a fresh look needs to be taken at the business opportunities arising from the consistent implementation of existing EU Directives and related measures.

o With notable exceptions, the EGS sector is playing catch-up. In this context, while many potential new business opportunities have been identified, companies themselves will determine if the cost competitive conditions are sufficiently favourable to invest in expanding their business. What the report seeks to do, therefore, is to identify the optimum

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

strategic framework conditions which, if present, would encourage companies to innovate and expand their operations. o While the EGS sector is most aware of its “green and clean” image, this raises the much wider issue of the greening of manufacturing industry and internationally traded services, for example through the introduction of industry guidelines. A further study about this branding initiative could be undertaken. o Many of the sub-sector business opportunities (pollution control and monitoring, clean technologies and processes, and RES-E and energy efficiency) will be based on the use of ICT, where Ireland/Northern Ireland have particular competitive advantages. o It is beyond the terms of reference of this study to identify, for example, the capabilities of individual firms in the EGS market place or to identify product specific goods and services that have the greatest potential. This is a strategic study, not a market research report. o In carrying out this research significant statistical and data gaps have been identified. This is largely due to the unavailability at the present time of sufficiently detailed official statistics and therefore, it is not possible to provide key economic and financial data for the majority of sub-sectors.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

1. CHAPTER 1: INTRODUCTION

1.1. Background

The Irish environmental goods and services (EGS) sector is an extremely diverse and wide ranging sector encompassing industries such as waste management, water treatment, energy management and renewable energy, land remediation, noise pollution control, clean technology and environmental monitoring.

Some parts of the sector - waste, water, renewables and environmental consultancy for example - have seen rapid growth in recent years largely driven by public capital investment and the compliance burden resulting from the national implementation of EU legislation. The growth in the sector overall has also coincided with increased public awareness of the threats to our physical environment and the potential risks to human health that can arise from this.

However, the focus is now beginning to change as rising energy prices; growing awareness of the consequences of climate change; and increased demand for greener and more environmentally sustainable goods and services are having, and are likely to have, an increasingly important influence on the sector going forward.

While it is recognised that compliance with EU legislation has added to the costs of businesses, it is also important that the business community recognises and responds to the business opportunities that this compliance burden can create.

Against this background, Forfás and InterTrade Ireland commissioned this study to assess the business opportunities which are likely to arise in coming years and to ensure that enterprises on the island and State development agencies are well placed to take advantage of these opportunities.

This study therefore aims to examine the current state of the EGS sector in Ireland/Northern Ireland, both in terms of its structure and dynamics, and to assess the strengths and weaknesses of the sector. In addition, the study also aims to identify and analyse a number of promising areas in the EGS sector where new domestic and export opportunities are likely to occur and to consider the range of support measures that could be adopted to ensure that Irish companies, or companies choosing to base their activities in Ireland, can take advantage of the growth in demand for EGS which is expected in coming years.

Specifically, and in accordance with the project’s Terms of Reference, the study seeks:

a) To estimate broadly the size of the EGS sector on the island of Ireland; b) To examine, for the all-Island market, the market drivers, and the strengths and weaknesses of each sub-sector;

An Assessment of Enterprise Opportunities in Environmental Goods and Services

c) To identify systematically the most promising areas in the EGS sector where new opportunities are likely to occur - including indigenous, exports, foreign domestic investment and all-island collaboration - as a result of forthcoming market stimuli; d) To identify key supports and framework conditions required and desirable to assist EGS companies including the potential to increase communication and collaboration within the sector and between firms and research institutes.

It was agreed in consultation with the Steering Committee that the study would focus on the following sub-sectors

Air Pollution Control Cleaner Technologies and Processes Environmental Consultancy Environmental Monitoring, Instrumentation and Analysis Energy Management/Efficiency Marine Pollution Control Noise and Vibration Control Remediation and Reclamation of Land Renewable Energy Waste Management, Recovery and Recycling Water Supply and Wastewater Treatment

In addition, it was decided that a separate assessment would also be carried out of the construction sector as many of its products, such as heat pumps, lighting, insulation and building materials, could be categorised as environmental products.

1.2. Approach and Methodology

1.2.1. Introduction

This section sets out the approach and the key steps that were involved in undertaking this project. This approach was agreed as part of an Inception Report concluded at the outset of the assignment with Forfás and InterTrade Ireland.

1.2.2. Data Gathering / Review of Previous Research and Reports

The first phase of the project involved data gathering and the development of a thorough understanding of the structure of the EGS sector in Ireland/Northern Ireland, as well as an understanding of the changing policy context at both national and EU level.

This included for example, a review of existing information held by Enterprise Ireland, IDA Ireland, industry associations, Invest Northern Ireland, the EPA, SEI etc. In addition, the

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

consultants also reviewed a wide range of European and international documentation and reports on the sector, including reports produced by the European Commission (DG Environment), UK Government Departments, as well as the research conducted by the OECD. Previous studies on the EGS sector in Ireland such as those commissioned by the EPA relating to research and the barriers to environmental technologies and how to overcome them were also considered.12

A key part of the review of the existing situation was a data mining exercise to extract market statistics, key trends and to begin to develop a profile of the structure and dynamics of each of the sub-sectors.

The objective of this initial phase of work was to build a picture of the nature and scale of each of the categories of goods and services covered by the EGS sector; the structure and dynamics of each of these sub-sectors; the key drivers of demand, including economic and policy drivers, and the key players currently involved in the sector.

This phase of the work was completed in May 2008.

1.2.3. International Developments and International Benchmarking

This phase of the project involved a review of global market developments to gain a thorough understanding of how the sector has grown, and is likely to grow in coming years; the structure and dynamics of the sector internationally; the key “players” on the world stage; as well as an assessment of how the sector has developed and, more importantly, is expected to develop in coming years. To this end a desk top review of the literature about global developments in the sector was completed.

From this global perspective, we identified a number of benchmarks to gain an insight into how the EGS industry has developed; the policy context or strategic approach that is driving the development of the EGS sector; the support structures and measures that are in place to facilitate the growth of industry; and evidence of clustering, networking or linkages with research institutes. The US and Austria were selected as benchmark countries and company case histories were also examined where these demonstrated key learning points. It was agreed that the USA and Austria would provide valuable insight as they highlight the differing approaches being taken to the development of the EGS sector. This is very much market driven and technology focused in the US, whilst in Austria, the Government has taken a more central role in providing clear and consistent policy messages, providing support structures and comprehensive planning. In addition, the situation in the UK was also considered in detail as regards the strategic approach which the UK Government is taking to the sector and its development. This was considered important given the all-island

12For example, Kelly, D., and Ryan, J. (CIRCA Group Europe Ltd) Environmental Technologies: Guidelines on How to Take a Pilot Project to Market (2005-ET-DS-25-M3) Final Report, Environmental Protection Agency, Wexford, 2007 and Coakley, Tadhg et al. (Clean Technology Centre) Investigation into why existing environmental technologies are underused (2005-ET-DS-19-M3) Final Report, Environmental Protection Agency, Wexford, 2007.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

dimension to the present study and in view of the importance of the UK as a major market for Irish companies. Finally, the Commission’s Lead Market Initiative for Europe was assessed as it covers some of the sub-sectors covered by the report.13

The Consultants also attended two international conferences highlighting the emerging opportunities and outlook for the EGS sector across Europe. 14

The aim of this phase of the project was to identify key learning points to inform an understanding of the sector and its potential development and to guide the assessment of how the high growth segments of the EGS sector should be positioning themselves from a strategic perspective to enable businesses compete on a global and competitive market.

1.2.4. Stakeholder Consultation

This was a key phase of the project and involved extensive consultation at the outset with key stakeholders – all the State agencies and Departments representatives on the Project Steering Group - to clarify what they expected to gain from the study and to “double check” our understanding of the dynamics of each of the sub-sectors and to identify the problems and issues being faced by those in the industry from the government perspective. In addition to a number of industry trade associations, the Consultants also interviewed over 30 companies across all sectors of the EGS industry on the basis of a questionnaire approved by the Forfás and InterTrade Ireland Steering Group.

The Consultants and the Steering Group that managed the project also met with a consultative group from industry to get their insights into sector developments.

Meetings were held with WRAP, the Carbon Trust, the National Industrial Symbiosis Programme, and the UK’s Department of Trade and Industry to get a fuller understanding of the market in Northern Ireland and to ascertain if there were any lessons applicable to the rest of Ireland and to gain an understanding of potential models for the development of the EGS sector in Ireland.

The Irish Venture Capital Association was also consulted in relation to the financing of start- up and developing companies in the EGS sector. A cross-section of environmental research units at Irish universities and Institutes of Technology were consulted to establish the range of EGS related research activities currently taking place in the sector.

Finally, the Consultants’ research findings (and conclusions) for each of the sub-sectors were peer reviewed by a senior executive active in the sector in question.

13 www.ec.europa.eu/enterprise/leadmarket/ 14 The European Business Summit held on 21/22 February in Brussels on ‘Greening The Economy’, and Envietech, an international conference and exhibition sponsored by ETAP on environmental technologies and renewable energy.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

1.2.5. SWOT Analysis

After the existing situation in Ireland/Northern Ireland was reviewed in some detail and having consulted with key industry stakeholders to assess potential areas of growth and the key drivers of demand and, having examined a number of comparator countries/markets, an analysis of the Strengths, Weaknesses, Opportunities and Threats that face the EGS sector was carried out.

1.2.6. Forfás and InterTrade Ireland Steering Group

The consultants met with the Forfás Steering Group on many occasions during the course of the assignment and presented preliminary draft material on a regular basis.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

2. CHAPTER 2: THE GLOBAL EGS MARKET

2.1. Introduction

This chapter provides an overview of the EGS sector and identifies key trends globally. It outlines the range of products and services that are encompassed by the sector and provides an insight into key trends and the sector dynamics.

2.2. Defining the Sector

The EGS sector encompasses a wide range of activities, and definitions of the sector can, and do, differ from study to study. For example, the US Department of Commerce for example, defines the EGS market, or more generally the 'environmental technology' market, as those environmental technologies that "advance sustainable development by reducing risk, enhancing cost-effectiveness, improving process efficiency, and creating products and processes that are environmentally beneficial or benign”.15

The European Commission has adopted the OECD/Eurostat definition which states that: “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 eco systems. This includes cleaner technologies, products and services that reduce environmental risk and minimise pollution and resource use.” 16

For the purposes of this review, as similar terms of reference were used, and in light of the all-island nature of the study, it was decided to start with the approach to market definition used in the UK study commissioned by the UK Department of Fisheries and Rural Affairs. 17

As highlighted in that report, environmental goods and services concern the management and protection of natural resources. In the past, environmental firms were largely established to help industry meet the requirements of environmental regulations or opportunities that arose from sector deregulation. However, with the drive towards cleaner, greener processes and products and increased focus on energy management and the development of alternative energy sources, the scope of the sector has widened considerably.

Therefore, “this is a cross-cutting and emerging sector which includes both companies that have been created specifically to serve this market and companies sitting in more

15 US Department of Commerce, www.bis.doc.gov 16 The Global Environmental Goods and Services Industries, Graham Vickery & Maria Iarrera, OECD, 1996. 17 Emerging Markets in the Environmental Industries Sector, Report for the UK Department for the Environment, Food and Rural Affairs (DEFRA), by UK CEED, November 2006.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

traditionally defined sectors (such as engineering) that are diversifying in response to this opportunity. There is no exact boundary around the sector. While some companies (e.g. environmental consultancy) will readily identify with an environmental industry sector, others may not see themselves as operating within this sector. The key point is that there is a sector with common issues arising from the nature of the market it is serving”.18

The DEFRA report identified twelve sub-sectors or categories which broadly correspond to the sub-sectors that are covered by the terms of reference of this study. A brief summary of each category is provided:

Air Pollution Control These are defined as products, systems and services for the prevention, reduction and removal of gaseous and particulate pollutants from air. Examples include external and internal emission and odour control, filters and catalytic converters and treatment systems. This sub-sector may also include Environmental Monitoring, Instrumentation and Analysis activities specific to this sector.

Cleaner Technologies and Processes These are defined as products, systems and services which, by design: use resources from more sustainable sources; transform resources to deliver same functions with less resources; transform resources with less waste; and transform resources with waste designed to be recycled effectively.

Environmental Consultancy These are defined as services to provide assessment and advice relating to environmental issues. Examples include environmental audits, environmental management systems and training, life cycle assessment, environmental impact assessment, advice on bio-diversity, environmental regulations and corporate environmental responsibility. This sub-sector covers consultants providing advice in two or more sub-sectors or specialists not covered elsewhere.

Environmental Monitoring, Instrumentation and Analysis These are defined as products, systems and services for measuring and monitoring environmental parameters. Examples include water, air and soil quality, meteorological conditions and flow rates, including on site and laboratory analysis. This sub-sector includes specialist activities not covered in other sub-sectors, such as air and noise pollution, radiological monitoring, land remediation.

Energy Management/Efficiency These are defined as products, systems and services for energy management and energy efficiency. Examples include energy consultancy/audits, building energy management systems, energy efficient products and efficiency advice. This sub-sector also includes Environmental Monitoring, Instrumentation and Analysis activities specific to this sector.

18 Ibid

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Marine Pollution Control These are defined as products, systems or services for controlling, clean up and minimising marine pollution. Examples include products such as oil absorbents and booms; and services such as marine pollution prevention training, monitoring and clean up services.

Noise and Vibration Control These are defined as products, systems and services for monitoring and reducing noise and vibration. Examples include noise meters, monitoring systems, acoustic buffers, enclosures and barriers and silencers. This sub-sector may also include Environmental Monitoring, Instrumentation and Analysis activities specific to this sector.

Remediation and Reclamation of Land These are defined as products, systems and services for the identification, assessment and remediation/reclamation of land and buildings, including prevention of contaminant dispersal. Examples include adsorbents and injection equipment, monitoring systems and proprietary treatment processes, and sampling/analysis and site investigation/ engineering.

Renewable Energy These are defined as products, systems and services for the generation and collection of energy from renewable sources such as biomass/bio fuels, solar, photovoltaic, wind, hydro, tidal and geothermal sources. Examples include the manufacture of equipment, design, construction, installation, management and operation of renewable energy facilities, including microgeneration.

Waste Management, Recovery and Recycling These are defined as products, systems and services for the minimisation, collection, treatment, segregation, recovery, recycling and disposal of waste that may include paper, organics, metals, glass, plastics, demolition and construction wastes, electrical and white goods. Examples include advice on waste minimisation, landfill, mechanical and biological treatment, regulatory advice and technologies such as specialised containment, shredders, compactors and waste management vehicles.

Water Supply and Wastewater Treatment These are defined as products, systems or services for the management of the fresh water environment, provision, treatment, distribution and storage of clean water and wastewater for industrial and domestic users. Examples include resource development, demand management, manufacture of wastewater treatment equipment, design, construction, installation and operation of water and wastewater treatment facilities.

Furthermore, a separate assessment was carried out of the construction sector as many of its products such as heat pumps, lighting, insulation and building materials could be

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

categorised as environmental products. In addition, the construction sector is also a source of business for consultancy and other companies providing environmental and energy- related services.

The issue of market definition raised significant challenges, in particular insofar as SMEs and micro companies are concerned. This was particularly true in relation to the estimation of the size and value of the EGS sector on the island of Ireland, because of the fact that companies with existing (or potential) activities in the EGS sector are often engaged in more than one industry-sector and/or have diverse activities across numerous sectors.

2.3. The Global EGS Market

2.3.1. Introduction

The traditional market for environmental goods and services comprises suppliers of pollution control, including waste management, water treatment and land remediation technologies, as well as energy management and renewable energy. In recent years, the global market has been mainly driven by compliance and regulatory concerns and the deregulation of existing utilities. However, it is becoming increasingly evident that the threat of climate change and the pressure to reduce carbon emissions is beginning to have a major impact on investment decisions in the sector.

Because the sector is so diverse it can be extremely difficult to define and quantify. A number of studies have estimated that the value of the sector was in excess of $600 billion worldwide in 2005 and is likely to exceed $700 billion by 2010 and $800 billion by 2015.19 To put this in context, and to underline the growing importance of the sector, this is triple the size of the global aerospace industry.20 21 It is also interesting to note that the recent report from the UK Commission on Environmental Markets and Economic Performance highlighted the fact that the market for new low-carbon energy technologies is now estimated to have reached $100 billion per year.

In terms of regional breakdown, firms in OECD member countries are estimated to account for about 90% of the global EGS market, as highlighted in the following Table. However, this situation is now beginning to change and many transition and developing countries, in particular China, are now seeing the most rapid growth, in response to concerted environmental problems arising from their rapid industrialisation and urbanisation.

19 ENDS Directory 2008, U.K. CEED Global Market Estimate. 20 UK Commission on Environmental Markets and Economic Performance (BERR/DEFRA Report, November 2007). 21 According to Environmental Business International Inc. (EBI), in 1990, the EGS industry was estimated to have generated revenues of around $360 billion worldwide. By 2001, revenues had surpassed $550 billion and in 2005 is reported to have reached $620 billion, with revenues split about equally between environmental goods and environmental services.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Table 2.1 Global EGS Market (2003 estimate): Country/Region Share of Total Market

USA 38.6% Western Europe 29.7% Japan 16.6% Rest of Asia 4.9% Canada 2.4% Central/Latin America 2.2%

Eastern Europe/CIS 2.0%

Australia/NZ 1.6%

Middle East 1.3% Africa 0.7%

Source: Environment Business International, Inc., San Diego, CA, 2003.

The difficulty of arriving at a global figure for the value of the EGS sector is compounded by the fact that most countries do not have adequate data on their EGS markets, and the task of estimating environmental market size is often complicated by differences in market definitions. Although the authors of the country studies consulted as part of this review consistently use a broad definition of EGS, the results are not always readily comparable.22

The most comprehensive study to date on the EGS sector within the EU was conducted by Ernst & Young for DG Environment.23 This study, which uses the Eurostat definitions of the sector, estimated the EU-15 market to be valued at €214 billion, which was broadly divided between €144.9 billion on pollution management and €81.8 billion on resource management. However, the E&Y study has been the subject of much criticism and significant question marks exist over the accuracy of the estimates contained in the report. More recently, the OECD has embarked upon a separate study about the sector. This study sets out to measure what is called ‘eco-innovation’ in the thirty OECD members. This will include the identification of mechanisms that influence ‘eco-innovation’ and the promotion of policies that enable better diffusion of environment related technologies. The following policy instruments will be examined as part of this study: 24

Framework conditions (innovation, investment) Public finance for R&D Environmental technology verification Performance targets Mobilisation of finance (move from grants to loans) Market-based instruments (tax incentives, non-tax instruments)

22 OECD Trade and Environment, Opening Markets for Environmental Goods and Services. Ronald Steenbilk, September 2005. 23 European Commission - DG Environment, Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. Ernst & Young. September 2006. 24 Xavier Leflevre, OECD, presentation at Today’s Environmental Research, Tomorrow’s Environmental Protection EPA Conference on Irish Environmental Research Dublin February 2008.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

“Green Procurement” Awareness raising (showcasing technologies, eco-labelling) Acting globally (Institutional problems, developing countries, IP rights)

Allied to this will be a closer examination of specific policy issues around:

Framework conditions (knowledge base, VCs, size of domestic markets) The value-added by a strategy (e.g. downstream infrastructure) The need for inter-state cooperation The techno push and market pull aspects of this sector Comparison of early technologies vs. late technologies Problem solving and the spillover effect Role of the SMEs in the development of ‘eco-innovation’

Once completed, the OECD study will reflect the rapidly changing nature of the sector, driven by the multiple responses to climate change, declining commodity availability and energy security.

The CEMEP Report of November 2007 claims that in the UK the EGS sector in 2005 was estimated to have a turnover of £25 billion and to employ 400,000 people within 17,000 companies.25 However, no data for Northern Ireland was provided. Strong growth is expected to drive the market value up to £34 billion by 2010, representing an increase of 42% over five years. The main finding of the report, insofar as it relates to this study, is that environmental services are an expanding market and the UK is emerging as a world leader in related financial and business services, particularly in carbon markets.

The value of the EGS market in Austria - a country of a somewhat similar size to Ireland/Northern Ireland - is estimated at €10 billion, with an 8% annual growth rate. The sector comprises some 650 companies who employ around 25,000 persons. Some 60% of turnover is exported. According to Austrian sources, Austria is first place in Europe for renewables and second (after Denmark) in relation to energy efficiency. Austria’s key target market is Eastern and Central Europe where the value of the EGS sector is estimated at €200

billion. 26

In summary, market estimations from these sources can be tabulated as follows (all figures converted to Euro at market rates):

25 Commission on Environmental Markets and Economic Performance, Report for the Departments for Environment, Food and Rural Affairs, Innovation, Universities and Skills, and Business, Enterprise and Regulatory Reform, November 2007. 26 Presentation by Josef Proell, Austrian Minister for the Environment at The 4th European Forum on Eco- Innovation, ‘Unlocking global market opportunities’ Vienna, January 31st and February 1st, 2008.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Table 2.2: Summary of Market Estimates

Source Market 1990 2001 2005 2010 2015

UK CEED International €540 bn. €825bn. €900bn. €1,050bn. €1,200bn. EBI Inc. International €930bn. Ernst & Young EU-15 €214bn. CEMEP U.K. €34bn. €46bn. Austria €4bn.

2.4. Investment in the EGS Sector

While reliable figures on the economic value of the EGS sector are difficult to arrive at, the sharp increase in investment in the sector helps to underline the growing importance of the sector at global level and the recognition of its future potential. This has been particularly noticeable in the figures for global venture capital investments.

The venture capital companies have assigned the moniker “Greentech” or “Clean Tech” to this sector which is indicative of what areas the investment money is following. The year 2006 has been deemed the coming of age of the “Greentech”, with global VC investments reaching $1,284.9 million.27 This level of activity can be broken down as follows:

U.S. $883.6m China $221.8m Europe $157m Israel $22.5m

This figure represented an almost doubling of the 2005 investments and 2007 is expected to see a further doubling as global venture capital investments in clean technology as investment is reported to have surged to $1,100m in the first six months of the year alone.28

While investment in the sector in Europe appears relatively modest, it would seem that the figures may be significantly understated, as research published by Library House indicate that overall investment in clean technology by venture capitalists could be closer to £270m, or 2.5 times the figure suggested in the Dow Jones VentureOne report. 29

Even taking into account the alternative figures on investment in Europe, the scale of investment is disappointing given the leadership role Europe has taken in clean tech sectors

27 Bringing the Greenback, Jennifer Kho, September 2007. 28 Ernst & Young/ Dow Jones VentureOne, Total investments are on track to reach record levels in 2007, September 2007. 29 Library House, Cleantech goes mainstream, April 2007.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

like wind power and energy efficiency.

New Energy Finance has also suggested a number of reasons why Europe has been falling behind, including the traditional weakness of Europe’s VC industry, compared with that of the US, ‘Balkanised’ national markets and bureaucratic processes for technology support. 30

New Energy Finance makes the following eight recommendations for policy-makers wishing to promote the business environment for venture capital spending in the renewable energy sector:

1. Improve general macro-economics for innovation and entrepreneurship; 2. Identify and breakdown regulatory barriers to markets for clean energy providers; 3. Reduce investment risk by improving stability and longevity of clean energy support mechanisms; 4. Use the public sector to create markets through preferential procurement of clean solutions; 5. Introduce pan-European standards for clean energy, fuels and technologies; 6. Promote the development of supporting services such as testing and certification, training, information provision and insurance; 7. Avoid the temptation to pick winners, whether through green funds or any other mechanism; and 8. Decouple technology support programmes from social and political goals.

Perhaps even more striking is the fact that venture capital in clean technology is now overtaking investment in areas considered core destinations for this capital. For example, in 2006, clean technology became the third largest venture capital investment category in North America, trailing only IT and biotechnology.

By way of further example, a recent round of funding by the venture capital company, Technology Partners Inc. raised $300m.31 The cash will be invested in cleantech and life science start-ups; they anticipate a convergence between the life sciences and clean tech/greentech. A prominent example of this convergence would include the bioengineering of new bio fuels, a move away from the existing production of bioethanol from corn.

While the overall European figures may be somewhat disappointing, the upward trend is clear. In the UK, for example, (which the CEMEP report claims leads in Europe in share and spread of venture capital for clean technology, and accounts for almost a third of the total €1.9 billion invested across Europe in recent years), investment in the sector is beginning to become more diverse. While energy continues to attract most investment, investments are increasingly being targeted at a wide range of environmental sectors including materials, transport, logistics, water and air quality. As a result, UK investments are now claimed to be

30 New Energy Finance, White Paper, April 2007. 31 Green Wombat, Technology Partners.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

far more diverse than in Germany, for example, where energy accounts for 92% of activity. 32 Moreover, the CEMEP report also draws attention to the fact that the London venture capital market invested £210m in clean technology companies in 2005, 19% of the £1.1 billion invested in total (which is also significantly higher that previous estimates of European investment would suggest). It was also noted, however, that while the UK is the leading venture capital market in Europe, it lags significantly behind the US in scale and pace of growth.

The relative lack of investment in the UK (and Northern Ireland) means that the so-called ‘valley of death’,33 whereby innovative firms fail because of a gap in funding on the path to commercialisation, is still a problem, particularly when large scale demonstration projects are required.

The global warming-driven political and regulatory changes spurring such investments are unlikely to subside soon. These, allied to a strong innovation pipeline and confidence in the global drivers supporting growth in the clean technology market (such as government policies, consumer awareness, energy prices and concern about carbon emissions) will continue to drive venture capital investment.

The climate change roadmap and energy pricing are uniquely intertwined; the collective global response to climate change will involve a ‘decarbonisation’ of economies where the

prospective pricing of a tonne of CO2 at perhaps $100 will place both energy efficiency and renewable energy generation at a competitive advantage over traditional energy sources. Some commentators suggest that the impact of carbon pricing may be overtaken by hugely escalated prices for oil and gas – the so-called ‘peak oil’ concept. These factors will drive further investments in renewable sources of energy in particular.

The conversion of venture capital into IPOs is probably the acid-test for any venture capitalist. So far, Europe has produced the sector’s largest venture-backed IPO during this period: the solar company Q-Cells, which was capitalised with a $428.7m transaction on the Deutsche Bourse in 2005. LDK Solar Hi-Tech, a Chinese company that raised $361.6m on the NYSE in 2007, saw the highest post-money valuation at IPO - $2.8 billion. EnerNOC, a demand response and energy management solutions provider, concluded the largest US clean technology IPO in the first half of 2007 with a $92.6m offering on the NASDAQ in May 2007.

2.5. ICT Opportunities

EICTA, the industry body representing the information and communications technology and consumer electronics industries in the European Union published a report “High Tech: Low

32 Report of the Commission on Environmental Markets and Economic Performance, November 2007. 33 Op cit.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Carbon” highlighting how the digital technology industry will enhance, enable and transform Europe to help achieve its climate change targets, if used to its full potential.34 35 The focus of the report is on energy efficiency and not on using ICT solutions in the wider EGS sector. The European Commission has also highlighted the contribution that ICT can make to energy efficiency.36

EICTA believes that there are two interdependent solutions to the problem of overall carbon emissions - product innovation by manufacturers and the intelligent use of digital technology by consumers, businesses and authorities. Viviane Reding, EU Commissioner for the Information Society, said that she is convinced that ICT has a key role to play in enabling energy efficiency improvements across the whole economy, thus lowering emissions and fighting climate change.

The report identifies how more than 25 different technologies can be applied by other sectors of the economy, to enhance existing processes, enable new ways of working and transform our everyday activities, to reduce their overall carbon emissions and energy consumption. EICTA member companies manufacturing digital technologies are identifying the best low-carbon technologies and accelerating their development and implementation so that Europe can achieve its emissions reduction targets. EICTA argues that improving the efficiency of ICT products is not enough. Ways have to be found to completely decouple economic growth from energy consumption. This can only happen if the best in class carbon reducing technology devices are more rapidly applied at a large scale by all other sectors of the economy.

The report commits Europe’s digital technology industry to monitor the emissions associated with their products, share best practices through their supply chain, assist to encourage behavioural change and further develop low-–carbon technologies.

Of special interest to this study are some of the 44 case histories from leading global ICT companies which are summarised. These include, for example, enhancing, enabling and transforming technologies and improvements to products and services.

It is clear that a high carbon price will encourage more R&D and product innovation. EICTA appear to suggest that market conditions and not industry guidelines will drive investment in carbon abatement technologies and energy efficiency measures.

While it is beyond this study’s terms of reference to identify specific technologies and solutions, the ICT sector in Ireland will almost certainly benefit as a supplier and enabler to

34 EICTA. High Tech: Low Carbon – The role of technology in tackling climate change, April 2008 .http://www.eicta.org/ ICT Ireland is a member of EICTA. Citing several studies, EICTA points out that the application of ICT solutions could reduce energy consumption in the EU from 10% to 25% by 2020. 35 Intellect. High Tech: Low Carbon. The role of technology in tackling climate change, 2008 http://www.intellectuk.org/content/view/3785/84/ 36 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Addressing the challenge of energy efficiency through Information and Communication Technologies, COM (2008) 241 final, 13 May 2008.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

some EGS products and services. This is an important area and should be the subject of a dedicated piece of research which takes account of work done at EU level. 37

2.6. Global Investment in EGS and FDI Opportunities

Environmental goods and services in the US have, over the past number of years, become defined into a more distinct and documented sector of the economy. This has attracted the attention of the major fund managers who have packaged together ‘green funds’; one of the biggest of these, the S&P Global Eco Index is comprised of 30 of the largest publicly traded companies in ecology-related industries that meet specific investability requirements.

The index is designed to provide liquid exposure to the leading publicly listed companies in these industries. The index includes stocks in six different clusters which represent ecology related industries. A review of this index provides an insight into the operations of the top 30 companies and what opportunities exist for prospective inward investment activity into Ireland/Northern Ireland. A similar review of medical device or pharma indices would show significant manufacturing, R&D and back office operations in Ireland. The sector and origin of the eco index companies can be represented thus:

S&P Eco Index by Location

U.S. Spain France Other Europe ROW

The sector would probably reflect the previous data on EGS size. All the listed companies outside the US would have significant global operations; a number of the 14 US companies would be exclusively domestic. The significant number of French and Spanish companies reflect the growth in utility conglomerates post-deregulation of services throughout Europe. A closer inspection of the sectoral areas using the S&P categorisation can be displayed as follows:

37 Assessing Opportunities for ICT to Contribute to Sustainable Development, DG Information Society, European Commission, ISBN 92 – 894 -9899 – 4. December 2005.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

S&P Eco Index by Sector Water Utilities & Infrastructure 7.22 Clean Energy Producers 11.08 27.68

Clean Energy Tech & Equip 10.67 Providers Environmental Services

Timber 16.31 27.04 Water Equip, Instruments & Materials

Examining these individually for enterprise and job creation opportunities demonstrates the difference between the EGS sector and the afore-mentioned sectors of pharma, medical devices where capital is mobile and the emphasis is on the production of discrete products. The sectors of waste management, clean energy producers and water utilities generally provide services to the point of need. This can include the design, construction, operation and maintenance of basic utilities required by a static geographic population. So while Aguas de Barcelona SA used to be the water utility for the greater Catalan Region of Spain, it is now, through expansion and acquisition, a global provider of water utilities. This scenario is repeated in the waste sector where major US companies have reached significant scale through expansion within the domestic market but again, almost exclusively as a provider of services. The operations of the listed timber ‘eco-industries’ are located where the raw material is available.

A review of the S&P Eco index and an analysis of venture capital funding in the US and Europe clearly demonstrates that the mobile investment capital is concentrated in the renewable energy and energy efficiency sectors. These twin sub-sectors offer the best opportunities for FDI opportunities on an all-Ireland basis.

Recent FDI emphasis has been more directed at the higher value add propositions of R&D and services. However, such is the nascent stage of development of these alternative energy sources that manufacturing operations encompassing Europe, Middle East and Africa (EMEA) HQ activities and certainly development if not full R&D should be actively sought. The rationale behind this approach is based on the following arguments:

A significant number of these emerging technologies are based in the U.S. with little or no international activity. It would be an opportunity to promote the island of Ireland as a base for their EMEA activities. The protection of the IP assets of the new energy technologies would be of paramount importance. A review of the existing and expanding facilities of these new energy companies show them located in existing higher cost economies (particularly east/west coast U.S.A. and

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Germany). While Ireland may not present any discernible cost savings, the full order books and prospects for these companies suggest that they are at an early stage in the cycle where cost sensitivities would not be as apparent as with more mature, consumer- led products. Ireland’s ability to ‘hit the ground running’ and scale up operations has been demonstrated consistently in previous ‘waves’ of investment such as medical devices, ICT and Biopharma.

It should also be borne in mind that while there is no history of solar manufacturing or development in Ireland, if one considers the constituent parts, extensive silicon fabrication and optics experience with the like of Analog Devices, Intel, Vistakon and Bausch and Lomb is already in place. A review of other possible FDI targets such as wind turbines and associated components could be matched with the engineering capability of the marine engineering and aerospace industries of the Belfast region.

There are other factors that would be vital in demonstrating the readiness and commitment to attract new FDI projects. Most significantly, the announcement of clean technology as the third pillar of the government’s investment in science and technology sends a clear signal to prospective investors of the commitment in the future. The industrial development agencies can point to developments such as the refurbishment of the wave tanks in UCC and QUB, the development of Galway Bay as a smart bay to facilitate development of wave energy and the iconic wind turbine based in DKIT.

Unless and until Ireland commits to invest public funding for environmental R&D on a scale comparable to competitor countries such as the UK, Austria and Denmark, and unless the scientific and engineering skills base is in place, there is little prospect of securing a world class R&D presence in this area. On the other hand, as has happened in the past in relation to life sciences and ICT, declaring the EGS sector as a new pillar for science and technology endeavour will send the right signals to both global sustainable companies, investors and academia internationally.

The approach in attracting FDI would differ between the maturing energy technologies (e.g. wind energy and solar thermal) and emerging energy technologies (e.g. solar PV and battery technology). Wind energy is considered a maturing sector from a technology perspective but the global demand continues to outstrip supply.

The main players in the wind turbine market are:

1. Vestas 56% 2. GE 14% 3. Enercon 9% 4. Siemens 7% 5. Gamesa 5% 6. NEG 3% 7. Nortank 3%

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8. Others 3%

Some of these companies have long-established presences in Ireland and currently manufacture in Ireland through different divisions (Siemens and GE). Contact could be made with these top tier companies to understand their investment strategy in the coming years and how they propose to handle the rapidly expanding market. Not all manufacturing sites are dedicated to the manufacture of complete turbines, the next tier of manufacturing is as important and probably of more interest to Ireland.

A wind turbine consists of a number of discrete components typically:

Turbine mast, blades and housings Transmission – e.g. hub, bearings, gearbox, coupling Generator – e.g. induction coil, transformer Control and safety system

These can be manufactured at a dedicated site by the top tier company or sub-contracted to Original Equipment Manufacturers (OEMs). Turbines are generally not assembled and tested prior to shipping so the proximity of the tiered supply base to the primary manufacturing is not that critical. It would be vital to understand the existing network of the top tier manufacturing sites and the supply base that feeds into them. A possible strategy would be to engage with companies throughout the supply chain with a view to them establishing operations in Ireland to cater for the increased global demand and at the same time seeking R&D and back office elements as part of this investment.

Branded Indian and Chinese wind turbine manufacturers have emerged in the past couple of years. There is every prospect that they will expand their domestic operations and seek to establish a presence in Europe to service the European market. The agencies should identify these companies and seek to attract them to establish their EMEA operations in Ireland. By 2007 in China, there were 4 existing Chinese manufacturers, 6 major foreign subsidiary/JV manufacturers, and 40 other Chinese firms aspiring to produce turbines and developing prototypes.38

For the emerging technologies the FDI strategy would differ; the industry is at a much different stage in its lifecycle with a plethora of start ups, highly funded and eager for expansion. The solar PV industry appears (gauging on the level of expansion and investment) to be the most likely prospect for FDI. Again the focus should be directed at attracting these companies to establish EMEA operations in Ireland with manufacturing and back office services (design, treasury, supply chain). Similar to the wind turbine industry, a root and branch review of the complete solar PV supply chain should be undertaken.

A solar PV installation can be broken into constituent parts:

38 Renewable Energy Global Status Report, www.ren21.net

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Process equipment Solar Casting/Wafering Solar test equipment Material suppliers Solar cell assembly Inverters Batteries Solar module assembly and installation

As well as the leading edge solar PV companies, each of these components in the tiered supply chain offers the potential to attract FDI. At present, current solar PV investment appears to be concentrated on the flow of investment between Germany and the US. The agencies should identify the strategic components or companies that could kick start the industry in Ireland. In the same way as the location of Gammaster and Isotron were critical to the expansion of the medical device industry, there may be a similar infrastructural capability required to enable the development of the solar PV industry.

The attributes of Ireland (IP protection, language, agility etc.) for the establishment of a first- time overseas location should be emphasised to these new energy technology companies. It is not envisaged that logistics costs should be a determining factor in deciding European locations, the high value – low cube aspects of solar PV products mean logistics costs are minimal.

Other possible emerging technologies that could be possibilities for European expansion would include load management/demand response solutions, new battery technologies and next generation biofuels technology. For next generation biofuels, an example of the rapid scaling up in this sector can be demonstrated by Mascoma Inc.

Mascoma Corporation was founded in late 2005 with initial funding from Khosla Ventures and Flagship Ventures in early 2006. A Series B round of funding was closed in November of 2006.

Mascoma has subsequently received several state and federal grants, including:

A $14.8 million grant from the State of New York for the establishment of a demonstration plant. A $4.9 million grant from the US Department of Energy for organism development. Part of the $125 million US Department of Energy Bioenergy Science Center Grant led by Oak Ridge National Lab. A $26 million grant from the US Department of Energy for the establishment of a demonstration plant.

The Table below presents a number of companies, including Mascoma Inc., who are attracting funding and media attention for their products or services. The table is intended

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to be indicative and has been compiled from review of cleantech investment sites and journals. It does serve to demonstrate the diversity and innovation in the sector. All companies are US based with the exception of Atlantium which is located Israeli.

Table 2.3 FDI Cleantech Prospects

Company Year Product/Service Sub-Sector Competitors Name Established A123 2001 Lithium ion batteries Clean Gridpoint, Cobasys Technology Tesla Motors 2003 Electric Vehicles Clean Think!, REVA, Zap, Technology Phoenix Motorcars Mascoma 2005 2nd. Generation Renewable Abenoga, Blue Fire, Biofuels Energy Range Fuels, Sun Opta Solaicx 2003 Silicon Wafer Renewable Suniva Technology Energy Serious 2002 Low energy dry walls Energy Efficiency Alternative Materials and windows construction technologies Bloom Energy 2007 Solid oxide Clean regenerative fuel cell Technology Fat Spaniel 2003 Smart metering, Energy efficiency Converge, EnerNOC, demand response ESCO, Silver Springs Southwest 1988 Micro-generation Renewable Joliet Windpower wind turbines energy Plextronics 2002 3rd. generation solar Renewable technology energy Atlantium 2003 Hydro-optic water Water treatment disinfection EnerNOC Energy demand Energy efficiency Consumer powerline, response, ‘dial down’ Powerit, Converge power response

Presentation of capability as much as educated workforce and tax regime will define the island’s success at attracting inward investment from this burgeoning sector. The commitment under existing Parsons and Beaufort projects, amongst others, will be important. Another possibility would be to ‘zone’ the island on the basis of capability and infrastructure for inward investment and sub-market on this basis; as a broad-brush example:

Belfast – Newry – Dundalk – Wexford = Wind Energy Zone Limerick – Shannon = Solar Energy Zone and ‘Green’ manufacturing Zone Belfast – Galway = Wave/Ocean Energy Zone Cork = Biofuel Zone

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Ireland has proven itself in the past in the FDI market by trend spotting and identifying the next inward FDI wave; targeting the right sub-sectors, examining the different elements of the supply chain, proving capability and infrastructure and possibly sub-branding through zoning or clustering will ensure a slice of the rapidly expanding ‘green collar’ job market.

In addition to these cleantech companies, IDA Ireland and Invest NI could target the following companies given their proven track record in the EGS sector.

Table 2.4: Largest 30 Companies Involved in S&P Eco Index Aguas de Barcelona SA, Spain, - Water and utilities Allied Waste Industries, USA, - Waste Management Archer-Daniels-Midland, USA – Biofuels and industrial China Grand Forestry Resources, China - Forestry Copel –PNB, Brazil – Energy Utility Covanta Holding Corp, USA – Waste to Energy EDF Energies Nouvelles SA, France – Energy Utility First Solar Inc, USA – PV Cell manufacturer Gamesa Corp Tecnologica SA, Spain – Wind turbines Geberit AG, China – Drainage fittings Iberdrola S.A., Spain - Electric gen./transmission & renewables Itron, Inc., USA – Utility metering Kurita Water Industries Ltd, Japan – Water/environmental services Nalco Holdings Inc, USA/International – Water treatment services Ormat Technologies Inc, USA – Geothermal power products Pentair Inc, USA/International. – Water treatment products Plum Creek Timber Co., USA – Forestry company Q-Cells AG, Germany – PV cell manufacturers Rayonier Inc., USA – Forestry/cellulose fibres Renewable Energy Corporation AS, Norway – silicon product for solar PV industry Republic Services, USA – Waste management Severn Trent, UK – integrated water utility Sino-Forest Corporation, Canada – Chinese/Canadian forestry Suez SA, France – Integrated waste, water and energy utility United Utilities Plc, USA – Utility Provider Veolia Environment Vestas Wind Systems A/S, Denmark Waste Connections, USA – Waste management Waste Management Inc., USA – Integrated waste management Weyerhaeuser Corp. USA – Forestry products

2.7. Global Market Trends

The findings that can be drawn from this assessment of global markets trends are as follows:

• While some of the market definitions differ between the data sources, a high proportion of correlation exists in the presented data. All reports reviewed demonstrated growth in

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

the EGS market and a significant growth expected in the coming decade. The EGS market as a whole is growing steadily and this trend is likely to continue. • Rapid urbanisation and industrialisation is proving to be the major driver in the fast developing economies of the east as they struggle to provide acceptable air and water quality. In the developed world, continuing compliance with environmental rules continues to drive investment in the sector. Overarching all this at a global level is the ‘decarbonisation’ of society where the twin threats of oil and gas depletion and responding to climate change act as the biggest single driver in the sub-sectors of energy efficiency and renewable energy. • Competition for resources and security of supply are becoming important issues for both raw materials and energy. • Venture capital activity in Europe is relatively weak by comparison to the US and China. The vast amount of environmental venture capital is directed at clean tech/green energy sources. At a conventional level, investment appears to more conservative and directed at major utility and infrastructure developers and operators. Enterprise and job opportunities from this sector must consider the fact that these companies operate where the populations are located and the products and services investment opportunities are restricted by this fact. The only obvious exceptions are those companies making equipment and components in the renewable energy sub-sector. • At a global and regional level, encompassing the full spectrum of sources references cited in this report, the recurring sub-sectors with the strongest growth potential are, without doubt, clean technologies and renewable energy technology. Dwindling sources and availability of potable water throughout the world are also proving to be a factor aiding the development of the water/wastewater sub-sector. • Many EU countries have attained ‘first mover advantage’ in niche areas and will seek to capitalize on this. For example, Germany (solar), Demark (wind), Austria (energy efficiency), the UK (marine pollution control). • Some countries such as Germany and Austria that have a strong tradition in engineering and eco-innovation have been targeting export markets for environmental goods with strong government support for several years. On the services side, the UK has been very successful in growing multi-disciplinary, publicly-quoted professional services with major European presence including RPS, Enviros, WYG and ERM.

2.8. Conclusions

IDA Ireland and Invest Northern Ireland could usefully co-operate to attract emerging EGS service suppliers and manufacturers to Ireland/Northern Ireland. Ireland’s capabilities (including embedded ICT expertise), a strategic commitment to promote the EGS sector on the island, and the setting up of specialist EGS networks would be key unique selling propositions to potential overseas investors.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

3. CHAPTER 3: AN OVERVIEW OF THE EGS SECTOR IN IRELAND

3.1. Introduction

This chapter provides an overview of the EGS sector in Ireland, both North and South, including its scope and economic significance. Detailed examination of individual sectors, key trends and sector dynamics as well as the examination of the range and nature of companies currently operating within each sub-sector is covered in Chapter 4.

At the outset, it has to be pointed out that the unavailability of comprehensive Government statistics means that it is impossible, to a high degree of certainty, to quantify the size of the EGS sector, its output, exports, employment or value 39.

3.2. The Irish EGS Sector

There are no published national statistics on the value of output of the EGS sector in Ireland. The most detailed published information was contained in the Ernst & Young report for the European Commission on the size of the European EGS sector. This put the value of the Irish EGS sector at €1,211 million in 2004. 40 This figure can be broken down, in descending value thus:

Table 3.1: Value of EGS Sector in Ireland; Estimates prepared by Ernst & Young for the Commission Waste Water Treatment €445m

Solid Waste Management & Recycling €215m

Water Supply €177m

Recycled Materials €115m

Nature Protection €101m

Air Pollution Control €76m

General Public Administration €54m

39 It should be noted that changes to industrial classifications and the introduction of NACE Rev.2 should make it easier in future to capture basic statistical information on the EGS sector. These changes are occurring at every level of the classification and will, for example, introduce new sectors for 'Water Supply, Sewage, Waste Management and Remediation'. 40 European Commission - DG Environment, Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. Ernst & Young. September 2006.

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Remediation & Clean Up €18m

TOTAL €1,211m

While these figures provide the most comprehensive set of published estimates on the sector in Ireland, they are deficient in a number of important respects for the following reasons.

Firstly, the report, which is based on 2004 data, excludes market sectors such as renewable energy and energy efficiency. These sectors have emerged as being of vital interest, especially in the context of market growth and employment opportunity. Secondly, the market valuation is for Ireland only and while Northern Ireland is captured within the UK total (estimated at €21,224m), no regional breakdown is provided so it is not possible to arrive at an accurate estimate for Northern Ireland. Thirdly, estimates of the size of the sector as estimated by industry experts point to a significant under-estimation of the scale of the Irish EGS sector. For example, the Irish Waste Management Association estimates that the industry in Ireland is now worth between €1.2 and €1.6 billion; more than twice the Ernst & Young forecast.

The Ernst & Young report does, however, allow parallels to be drawn between Ireland and similar countries. So, for example, it would appear that while the value for EGS goods accounts for approximately 0.8% of GDP in Ireland, the corresponding figures in Denmark and Austria are between 3 and 4% of GDP. Moreover, on a per capita basis too, the turnover of the EGS sector in Ireland is estimated to be €300 which again compares with a typical figure of between €1,200 and €1,600 for Denmark and Austria.

These figures demonstrate the gap between the EGS sector in Ireland and a number of leading European competitors. And indeed, if the EGS sector in Ireland accounted for a similar share of national output (e.g. 3% of national GDP), then the sector would be worth at least €5.5 billion (at 2007 prices).

In terms of international trade too, Ireland is currently a minor player. While significant data problems exist in relation to determining export trade in environmental goods (as indicated in several reports for the European Commission) recent research suggests that Ireland’s share of OECD trade is just 0.5% of the total. The leading exporters are Germany (16.4% of the total); US (16.1%); Japan (10.8%); Italy (6.9%); and the UK (6.1%). 41

However, following examination of, and consultation with, the sub-sectors, it would appear that previous estimates of the sector have significantly under-estimated its true scale. Indeed, based on industry estimates at sub-sector level, it would now appear that the real size of the Irish EGS sector is in the region of €4.3 to 5.2 billion. The basis of this estimate is set out in the following table.

41 Legler et al (2007), p 152.

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Table 3.2: Value of the EGS Sector in Ireland: Revised Estimates (€m) Air Pollution Control 4-5 Clean Technology 350-700 Environmental Consultancy 60 – 75 (island)42 Environmental Monitoring n/a Energy Management 2043 Marine Pollution Control 3 - 5 (island)44 Noise n/a Remediation of Land 46 – 58 (island)45 RES 600 - 70046 Waste Management 1,200 – 1,60047 Water/Waste Water >2,00048 TOTAL 4,280 – 5,160

In addition to the sectors referred to in Table 3.2, it is estimated that the potential value per annum of the emerging market for energy efficiency in the building and house construction sector could be in the region of €50 million per annum on the assumption that some 40,000 houses are retrofitted each year, at an average cost of €15,500 per unit.

Moreover, it is important to note that the estimate of the size of the Irish EGS market under- estimates the quantum of business as companies are increasingly:

Addressing the environmental impacts of products throughout their life cycle49 Beginning to embed low-carbon and cleaner technologies in process and product development Using recycled material on a more systematic basis50 Re-engineering processes to cut costs and improve environmental impacts51 Incorporating environmental factors (such as packaging) into initial design52 Actively seeking to reduce or offset their (or their suppliers’) carbon footprint. 53

3.3. The Characteristics of the EGS Sector in Ireland

It is estimated by the Consultants that the EGS sector in Ireland is valued at around €4.3 to

42 Industry estimate 43 Industry estimate 44 Industry estimate 45 Industry estimate 46 Consultant’s estimate 47 Industry estimate 48 DEHLG Water Services Investment Programme 2007 – 2009 capital costs only. 49 National Industrial Symbiosis Programme case studies, 2007. 50 CEMEP case study: Scott Brothers, Impetus Waste Management and Plasrec, 2007. 51 WBB, Carbon Trust case study, 2007. 52 Improving Lives, Delivering Value: Philips Sustainability Report 2006. 53 Carbon Footprints in the Supply Chain: the Next Steps for Business, Carbon Trust, 2006.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

5.2 billion and accounts for approximately 0.5% of OECD trade in goods and services. 54

The sector comprises companies of all size categories. With the exception of some major players (e.g. Greenstar) the Irish EGS market is dominated by SMEs who have established a substantial business presence over the past ten years. 55 This has largely been associated with the significant increase in public investment in environmental services and infrastructure. It is important to note, however, that key sectors such as renewables, environmental consultancy and waste and water are dominated by subsidiaries of UK and EU parent companies. This may have the effect of limiting the export opportunities of their Irish operations as the parent typically is responsible for new emerging export market business development.

To a very large extent, with a few notable exceptions, the sector is playing catch-up with the technologies in greatest demand (RES-E and waste management) that are deployed and exploited by European companies of scale. This has implications for the prospect of an Irish company breaking in to the market for PV (solar technology), for example, without the setting up of a joint venture with an existing manufacturer.

On the other hand, many EGS markets are starting from a low base of activity so it should be possible to gain market share in niche areas.

While it is difficult to be precise about the future, the following is an initial estimate of the level of investment that may be needed by 2020 if Ireland was to meet its legal obligations on foot of EU Directives on the environment, RES-E and energy efficiency.

Table 3.3: Total EGS Forecast Investment Levels to 2020 (Ireland) Retrofitting of buildings to comply with BER standards €25 billion56 Climate change/RES-E investment €0.87 billion57 Investment in waste treatment €2 billion 58 Investment in water and water treatment €8 billion 59 Other €2 billion 60

Total €37.87 billion

54 The Strategy for Science, Technology and Innovation estimated that the environmental S sector employs 6,000 in the public and private sectors and invests some €1billion annually. 55 Companies employing less than 250. 56 SEI estimate based on average cost per household of €25,000. Obviously not all houses will invest this amount. The forecast figure illustrates the potential for energy efficient building materials. There are some 2 million buildings/housing units in Ireland. 57 The Commission’s Impact Assessment of the EU’s climate change/renewables strategy put the economic cost to Ireland at around 0.47% of GDP, SEC (2008) 85/3, 23 January 2008, Table 11. 58 A&L Goodbody Consulting, Ireland’s Strategic Infrastructure Investment 2020, September 2005. 59 Includes €5.8 billion in Water Services Investment Programme 2007-2009 (September 2007) and investment needs (€2.6 billion) as set out in Greater Dublin Strategic Drainage Study. 60 Consultant’s estimate.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

3.4. The EGS Sector in Northern Ireland

The most recent assessment of the EGS Sector in the UK was the Department of Trade and Industry study ‘Emerging Markets in the Environmental Industries Sector November 2006’, published in November 2006, which included Northern Ireland. This study estimated annual turnover in the sector in the UK at around £25 billion in 2005 - roughly the same as the pharmaceuticals and aerospace sectors.

A recent study on the Northern Ireland environmental business sector by White Young Green on behalf of Belfast City Council estimated that the local sector was worth somewhere in the region of £201 million in 2003, a growth of some £58 million since 1999. Of this, waste management accounted for 46% of the sector, comprising recycling and waste disposal.

Whilst an Invest NI analysis of the sector in 2004 concluded that there are an estimated 218 environmental products and services businesses in Northern Ireland, the White Young Green report estimates that there are in fact somewhere in the region of 416 businesses in this sector in the Province, employing approximately 4,500 people in total. This variation is likely to be due to the varying definitions of the environmental industries. A further Invest NI survey about the size of the sector is underway.

Since the White Young Green research in 2003, an increasing number of environmental consultancies have entered the market place in Belfast, both indigenous and international. This has resulted in a change in the split of the sector with waste management and recycling no longer the dominant sectors in the Belfast City Council area. At a local level the smaller local consultancies now tend to offer specialist services, for example, SDS Energy, specialist energy consultants and Geoman, specialist geotechnical consultants.

Given the emphasis on and support for the environmental industries across local, national and international policy, the sector is set to continue its strong growth. Particular areas of potential are;

Energy management, projected to grow at approximately 10% per annum over the next 10 years; Renewable energy, the market is estimated to grow by at least 15% per annum to 2015, although this is considered by some industry experts to be conservative; Contaminated land remediation, growth rates for the sector are estimated at approximately 5% per annum; Cleaner Technologies and Processes, growth rates of 10% per annum are expected; and Environmental consultancy, the sector is estimated to grow at an average of 10% over the next 10 years.

The following Table sets out an estimate of potential ‘environment’ public investment in Northern Ireland for the period 2008-2018:

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Table 3.4: Public Investment in Northern Ireland, 2008-2018 Water and waste water £2.535m Waste management £436m Flood risk management £82 Environment £65 TOTAL £3.118m Source: Investment Strategy for Northern Ireland, Section 5.4

3.5. Investment in the Irish EGS Sector

While international investment in the EGS sector has increased dramatically (with particularly strong growth being seen in the US and in the UK), there is little evidence yet that the Irish VC community has woken up to the commercial opportunities within the Irish marketplace.

A review of the Irish Venture Capitalist Association’s (IVCA’s) Techpulse report for 2007 shows approximately 50 Irish VC deals concluded deals worth €225m across all sectors; none of the deals listed could be defined as being in the EGS sector.

Consultation with the Irish VC industry indicates that the EGS sector is viewed as one driven by legislation and as being primarily subsidy led. A key issue for the VCs is the level of capital expenditure required in products and technologies which are not yet proven. They view the renewable energy sector, mainly wind and biomass, as entering a mature phase and a number of other EGS technologies as being too early in their development to attract the interest of the VC community. The good R&D infrastructure existing in Ireland was commented upon but overall, the lack of a track record in the EGS sector is predicating against its future development.61 This attitude is consistent with findings contained in an OECD briefing, where it was stated that technology and market risks were issues that may create barriers to investors.62

At a more traditional level, the emergence of ‘Green Funds’ in the investment community has been a distinctive feature of activity over the last number years. Sustainable banking is a growing area with key investment banks such as Merrill Lynch and Citigroup investing in the area of environmental risk management. KBC Asset Management, for example, has been the leader in this area with a suite of alternative energy, water and climate change funds and Al Gore launched a similar environment fund on behalf of Merrion Capital. All funds have proven popular and have performed well. However, closer examination of these funds reveal that they are generally made up of composites from S&P indices for water, clean energy and other commodities. In the recent offering from Merrion Capital, none of the companies listed in the prospectus had a presence in Ireland, north or south. However, despite this, green investments and investing particularly in alternative energy and climate

61 Irish Venture Capital Association, Regina Breheny, February 2008. 62 OECD, Xavier Leflaive, EPS Research Conferenc, Dublin, February 2008.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

change strategies are at the top of the agenda in terms of being flagged as major growth themes over the next five years. 63 Similarly, it is clear that the major banks have also become more active in this area and are also beginning to see the value of the renewable energy sector, in particular.

Funding provided through Business Expansion Schemes (BES) activity has tended to concentrate on asset-backed investments such as wind farms. However, it is interesting to note that a new ‘Green Fund’ promoted by BVP Investment Limited in the 2007 round of BES funding did not attract sufficient funding and has now been re-positioned for 2008.

The recent announcement of the establishment of the ‘Emerald Fund’ by the New York Pension Funds (retirement fund of the city employees) is significant64. This fund has been established as a vehicle to invest $150 million in a range of projects, the majority of which will be located in Northern Ireland. While the exact details have become available at this point, categories of investment include public infrastructure, real estate, waste management and renewable energy.

In summary, the cleantech area is being viewed as one with huge promise by the international venture capital community and it is expected that investment will continue to flow as long as there are suitable projects and technologies. The challenge in Ireland will be to get the venture capital community to move away from the staples of bio-technology and software that pre-occupy most of the funding activity and ultimately, result in an Irish equivalent of Q-Cells launching on the ISEQ and beyond.

3.6. Mergers and Acquisitions

A review of merger and acquisition activity can also provide a practical barometer to growth in a business sector and for the EGS sector this is no different.

In total, there were approximately 160 mergers and acquisitions recorded in Ireland in 2007 across 12 major commercial sectors with property and IT and Telecoms being the most prominent. The EGS merger and acquisition activity would fall into three of these sectors:

o Support Services o Industrial o Professional and Technical

These three areas accounted for 47 deals or almost 30% of all completed deals in 2007; displayed as follows:

63 Business and Finance, 41 shades of green, Nicole Matthews, 18 January 2008. 64 See for example www.comptroller.nyc.gov/press/2008.

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M&A Sectoral Analysis

Support Services 15% 40% Industrial

45% Professional & Technical

A closer look at these 47 deals reveals that 13, or 30%, were exclusively in the EGS sector (i.e. 8% of the total number of deals).

EGS M&A Activity 2007 Environmental Consultancy Waste Management 1 2 2 Energy Management

Environmental 1 Monitoring 5 Renewable Energy 2

Wastewater treatment

While the values of the deals recorded is relatively modest when compared to the values involved in construction for example, it does shed light on the activity and evolving trends in the EGS sector.

The area of waste management shows the largest number of deals in 2007. This reflects the continuation of a process commenced over the past number of year where the larger, well- funded waste management companies have acquired smaller regional operators or specialist waste contractors. Once deregulation commenced with domestic and commercial waste and the requirement for additional separation of waste streams, a plethora of companies were established in this area. There has been a steady move towards consolidation as the ability of the small regional operators to compete with the infrastructure of the large waste management companies becomes less and less. The chart above reflects three acquisitions by Greenstar Ltd. (a subsidiary of National Toll Roads Ltd.) bringing to 14 the number of acquisitions made by Greenstar since 1999. The scale of the industry and other players involved is discussed in greater detail in Chapter 4.

In 2007, in the environmental consultancy sub-sector, the White Young Green Group

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

(www.wyg.ie) acquired two environmental/engineering consultancies with the acquisition of Malachi Cullen & Partners and PH McCarthy Engineers. This continues a trend where large, publicly-quoted, UK-based consultancies acquire indigenous, long-established Irish practices. The majority of multi-disciplinary practices on the island of Ireland are now owned by overseas interests.

While on the surface, this demonstrates a growth and buoyancy in the sector it also has some adverse effects. At a time when Ireland is trying to establish itself as a ‘knowledge economy’ and a player in the global EGS market, the domination of this sector by overseas companies precludes these practices from developing export service capability as these would generally be handled by the subsidiary located in that export market. This is at a time where there is a recognised shortage in the availability of skills in the areas of renewable energies, alternative fuels and energy efficient technologies throughout Europe and further afield. This situation is beginning to change however, with EI taking an active role in these companies. This is discussed in further detail in Chapter 4.

The final days of 2007 also saw the sell-off of the most iconic and successful company in the EGS sector in Ireland with the €1.08billion sale of Airtricity to Scottish and Southern Energy (UK’s second largest electricity generator). Airtricity was predominantly owned by Irish interests (NTR 51% holding); the company was headquartered in Dublin; and a large amount of its engineering, marketing and commercial capability resided here. The future of this activity in Ireland is unclear at this point.

The importance of the role of a company like Airtricity should not be understated, leaving its sister company Bioverda the only major indigenous Irish company of European-wide scale. When we look at the development of the ICT sector, the emergence of major plcs like Iona and Baltimore Technologies aided the overall development of the sector and led to a significant number of ICT spin-off start ups (57 in the case of Iona Technologies alone).

The sell-off also casts doubts on the future strategy of NTR (www.ntr.ie) as the company entered the EGS space with a unique combination of renewable energy with Airtricity and Bioverda and the waste management operations of Greenstar. The sell-off of these, allied to the cash disposal of other assets in the group, leaves the group effectively rebuilding their presence.

3.7. Industry Views

A stakeholder consultation meeting was held at the offices of IBEC on 28 January 2008. Initial discussions focused on selecting the sectors with greatest potential: renewable energy, waste, water and wastewater. Sectors such as consultancy and energy management service the others.

A diverse range of views was exchanged with the following key points emerging:

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

Energy Energy, in particular response to the climate change agenda, is strategically important and influencing investment decisions. There is a need for capital incentives in renewables, especially biomass but also sea, wave power etc. Planning delays are a major deterrent to growth – it takes too long to get facilities built. There is a need for clarity and security on pricing to support new technologies such as wave power. Not enough focus on heat as a product – there is a need for government policy to support this, from biomass etc. Waste Venture capitalists are unlikely to invest in waste in Ireland due to the lack of policy clarity and uncertainty on the scale of market and lack of data about waste streams. The critical factor in the waste sector is price. Also the public/private issues with regard to collection and management is a problem. Stakeholders must become partners to achieve optimal solutions. Waste market growing and could increase by €1 billion to €2 billion due to Landfill Directive obligations. UK market is massive. Construction The Building Regulations now provide a clear target. Project inception delays Delay in obtaining planning permission and the difficulty in securing grid connection are significant obstruction to project implementation – planning legislation needs to be amended. Regulatory enforcement Compliance with regulation is a main driver for some sub-sectors and will generate opportunities. Stricter enforcement of regulations was identified by some industry players as a potential driver.. The lack of consistency in relation to enforcement across different regions and different local authorities was also highlighted as an obstacle for businesses. Shared international Enterprise Ireland and InvestNI could be a conduit to sell Irish expertise marketing abroad – many projects are too large for SMEs but they can achieve niche markets or work with other companies to fulfil overall large scale projects. Research, education and There is a need to develop people, processes and products. Research training support should encompass short-term projects: 3 – 6 months and the structured connection of “concept – proving ground – commercialisation” should be developed. Not enough R&D on waste. Difficult to get good people. More training is needed. Need to support R&D commercialisation. Northern Ireland third level institutes are considered easier to deal with in terms of getting work done. Companies Wish List Support (funding) for renewable. Education and training to support the sector, more focused and applied R&D for the EGS sector Stronger legislation and better enforcement, consistent enforcement Information on supports, incentives, data, market information, legislation, niche areas, growth areas etc. Supports to commercialise R&D Removal of public/private dichotomy in waste collection and management Benchmark information from other countries

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3.8. Support Structures in Ireland

Policy instruments as well as regulatory measures have been put in place in support of all of the EGS sub-sectors covered in this study.

Substantial time, efforts and resources have been invested in Ireland, in several areas, to support the uptake of environmental technologies by government departments, state agencies and private organisations through grant aids, research etc.

Table 3.5 Agencies/Mechanisms Providing EGS Support in Ireland Environmental Protection Agency Science Foundation Ireland (SFI)

Enterprise Ireland Marine Institute

IDA Ireland Higher Education Authority

Shannon Development Department of Transport

Udarás na Gaeltachta Teagasc

Sustainable Energy Ireland Forfás

Health Research Board Geological Survey of Ireland

InterTrade Ireland Department of Environment, Heritage and Local Government (DEHLG)

The North South Market Development Department of Enterprise, Trade and Group Employment (DETE)

The Market Development Group (MDG) Department of Agriculture and Food (DAF)

Department of Communications, Marine and Natural Resources (DCMNR) (Renewable and Alternative Energy Division)

Many of the instruments and incentives implemented by these agencies are listed in the Irish National Roadmap for the implementation of The Environmental Technology Action Programme (ETAP).65 Two studies, funded under the 2005 ERTDI Environmental Technologies research programme, also identified other specific support and research programmes in Ireland. 66, 67

65 Department of Environment, Heritage and Local Government Ireland’s national roadmap for the implementation of the Environmental Technologies Action Plan (ETAP) DEHLG, 2006 – available at the ETAP website: http://ec.europa.eu/environment/etap/index_en.htm 66 Kelly, David and Ryan, Jim (CIRCA Group Europe Ltd) Environmental Technologies: Guidelines on How to Take a Pilot Project to Market (2005-ET-DS-25-M3) Final Report, Environmental Protection Agency, Wexford, 2007. 67 Coakley, Tadhg et al. (Clean Technology Centre) Investigation into why existing environmental technologies

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A possible re-alignment and re-prioritisation of state supports falls outside the study’s Terms of Reference.

3.9. Support Structures in Northern Ireland

A range of mechanisms and instruments are in place in Northern Ireland which directly or indirectly support the development of the EGS sector. These broadly reflect those that operate in the rest of the UK, with regional variations tending to be ‘versions’ of those operating in the other regions of the UK. In some respects, these supports mirror those provided by the Irish agencies.

Table 3.6 Agencies/Mechanisms Providing EGS Support in Northern Ireland Environment and Heritage Service Envirowise

Invest NI Knowledge Transfer Networks (KTNs)

Department of Enterprise, Trade and Market Transformation Programme Investment

Department of Agriculture and Rural Carbon Trust Development

Department Regional Development Climate Change Levy (Transport)

Department of Environment for Northern Enhanced Capital Allowance scheme for Ireland Planning and Environmental Policy energy and water Group

Waste and Resource Action Programme Research Councils (WRAP)

National Industrial Symbiosis Programme Northern Ireland Geological Survey (NISP)

Business Resource Efficiency and Waste InterTrade Ireland programme (BREW)

Waste Planning Groups (ARC21, SWAMP, The North South Market Development NWRWMG) Group

Many of the instruments and incentives implemented by these agencies are listed in the United Kingdom National Roadmap for Implementation of the Environmental Technologies Action Plan for the implementation of The Environmental Technology Action Programme (ETAP). 68

are underused (2005-ET-DS-19-M3) Final Report, Environmental Protection Agency, Wexford, 2007. 68 Department of Environment, Food and Rural Affairs (DEFRA). United Kingdom National Roadmap for Implementation of the Environmental Technologies Action Plan. December 2005 – available at the ETAP website: http://ec.europa.eu/environment/etap/index_en.htm

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A number of structures can be highlighted as having had a direct influence on the EGS sector at a UK level, most notably WRAP, the Carbon Trust and the National Industrial Symbiosis Programme (NISP). This has been achieved via number mechanisms:

State aid for green technologies such as material processing or energy efficiency; Support for applied R&D for near to market technologies; and Support for applied research to underpin policy development and decision making.

3.10. EU State Aid Guidelines on Environmental Protection

A report was prepared in 2005 for the industrial development agencies that identified a number of new State aid schemes which could be introduced to assist the EGS sector.69 The proposed measures were based on schemes currently in operation in other member states which were approved under the (then) EU State aid guidelines on environmental protection. In summary, the following types of schemes were identified:

Table 3.7 Possible EU State Aid Compatible Schemes

The WRAP Capital Grants Scheme (UK) The Carbon Trust Low Carbon Innovation Programme and Enhanced Capital Allowance Measure (UK) The kfW Bank’s ERP Environmental Protection and Energy Saving Programme (Germany) The kfW Bank’s Programme to promote Renewable Energies (Germany) The Fideme Investment Fund (France) SenterNovem’s Carbon Reduction Plan (the Netherlands) SenterNovem’s Energy Investment Tax relief Scheme (the Netherlands) The Green Financing Measure (the Netherlands) The Programme for Cleaner Technology (Denmark)

In the meantime, the Commission has published revised guidelines for environmental protection that will have to be taken into account in the preparation of any new schemes to support the EGS sector.70 The basic principles underpinning the revised guidelines remain the same. There are some subtle but important changes as follows:

The guidelines apply to aid for environmental studies, district heating, aid for waste management and aid involved in tradable permit schemes.

69 Assessment of the Potential to Develop Environmental State aid Supports for Enterprise, a report for Forfas, A&L Goodbody Consulting and the Clean Technology Centre , May 2005. 70European Commission, Community Guidelines on State aid for Environmental Protection, 23 January 2008. OJ C 82 dated 1 April 2008.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

The permissible levels of aid intensities have increased considerably. If aid is awarded on foot of a competitive tender (e.g. to build an all island waste or recycling plant) up to 100% public funding may be provided. In certain situations tax reductions may be considered as compatible aid. Where large amounts of aid are proposed a detailed assessment will be carried out. However, once a scheme is approved individual company assessments will not be undertaken. Under a (forthcoming) Block Exemption Regulation, environmental aid under a certain amount will not have to be notified.

3.11. Conclusions

The assessment of the EGS sector leads to the following preliminary conclusions:

The EGS sector in Ireland is valued at some €4.3 to 5.2 billion, with Northern Ireland accounting for approximately £624m. In common with European trends the overall sector is growing. The largest sub-sectors, and indeed those with the greatest potential, are renewables, energy efficiency, waste management, and water. Many EGS companies do not rely on the State development agencies for core funding. They use their own resources, or those of investors, to develop their business. The most active and most of the largest EGS companies are subsidiaries of non-Irish parents who either acquired capacity through mergers and acquisitions or grew their businesses organically. EGS companies are, however, generally not aware of export market opportunities. The majority of small companies show no interest in expanding outside their niche area of expertise in the domestic market. An all-island ‘One-Stop-Shop’ providing market intelligence at sub-sector level may be needed as the service offerings of the state agencies North and South are not coordinated. The VC community is risk adverse to investments in EGS companies, with few exceptions. To this end, the relevant state agencies need to enter into dialogue with the VC community to brief them about the importance now attached to the EGS sector in Ireland on foot of this report. The State agencies have to hand considerable detail about EGS supports which work successfully in other member states that are compatible with EU State aid rules.

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4. CHAPTER 4: THE EGS INDUSTRY BY SUB-SECTOR

4.1. Introduction

This section is structured in the following way.

Each sub-sector is defined. Following a short introduction that seeks to highlight the main characteristics of the sub-sector, an estimate of the size of the market is set out with special features such as trends noted where relevant. Then the current and future drivers are identified and assessed. Where the main consistent driver is regulatory compliance, the most relevant primary legislation is identified. The strengths and weaknesses of the sub- sector are then set out. Possible new business opportunities are identified before conclusions relevant to the sub-sector only are drawn.

At the outset, it needs to be pointed out that the EGS sector is not categorised as a group for the purposes of collecting official statistics using the NACE 4-digit classification. Therefore it is not possible to be accurate about: the precise number of companies involved on the island; the volume or value of exports and intra-island business; numbers employed; and as a consequence trends in relation to key metrics. The data collected is therefore based mainly on secondary sources, including feedback from some 30 companies in the EGS sector who were contacted during the course of the project, industry associations and consultant’s estimates.

4.2. Air Pollution Control

Products, systems and services for the prevention, reduction and removal of gaseous and particulate pollutants from air. Examples include external and internal emission and odour control, filters and catalytic converters and treatment systems. This sub-sector may also include Environmental Monitoring, Instrumentation and Analysis activities specific to this sector.

4.2.1. Introduction

Air pollutants are generated through space heating, transport, electricity generation, agriculture and industry. Sources are either stationary (manufacturing industry, power generation, refining, quarrying, incineration etc.) or mobile (road, air and rail transport). There are also natural sources of atmospheric pollutants (including forest fires and VOC emissions from plants). Pollutants may be particulates (dust from quarrying, fine particles from diesel fuel

combustion) or gases and vapours (SO2, NOx from fuel combustion, complex molecules arising from biological degradation in landfills, composting, etc.). Control of these pollutants is achieved through technologies such as thermal oxidation, oil absorption, biological oxidation, incineration, catalytic oxidation, flue-gas desulphurization (FGD), wet and dry scrubbing, filtration, cyclone separation and carbon capture for stationery (or point-source) emissions and

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fuel substitution, improved combustion efficiency, particulate filters and catalytic converters for transport sources.

4.2.2. The Sector in Ireland

The most important companies operating in this sector in Ireland include:

• Manotherm • Enviros Consulting Ltd. • MacArdle McSweeney Associates • Bord na Mona • P&IDC • MegTec • GPE • Euro Environmental Services • BMD Engineering • PM Group

The engineering and environmental consultancies specify the appropriate technology and this is then sourced mainly from European manufacturers. Bord na Mona is the only indigenous manufacturer of air treatment plants. Local fabricators have a track-record in fabricating and installing polypropylene, steel and aluminium ducting, stacks, housing, fans etc. The size of the domestic market in Ireland for products and systems (i.e. not monitoring) has been estimated by one company in the sector as in the region of €4-5m. Most of the infrastructure required under IPPC and Waste Licensing has been put in place in what is a mature market.

Power generation accounts for 62% of SO2 emissions. The EU National Emissions Directive has set a target of 42,000 tonnes in Ireland by 2010. Current emissions are in the region of 60,000 tonnes71; further SO2 emissions reductions through the use of natural gas and low- sulphur fuels are now limited which means that more advanced technology-based controls are necessary. Flue-Gas Desulphurisation (FGD) is planned for Moneypoint coal fired power station, to comply with the SO2 ceiling of 42 kt in 2010. Lurgi Lentjes AG was awarded this contract worth €150 million in 2004. This could be viewed as an example of a maturing sector where compliance would result in a tailing off of market value.

4.2.3. Regulatory Framework

The EU’s policy to reduce carbon dioxide and other greenhouse gases has a major impact on

carbon-dioxide emissions, in particular, but also NOx emissions and methane (the latter particularly from agriculture in an Irish context). The Waste Management Act licensing

71 EPA, Environment in focus 2006 – Environment indicators for Ireland.

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regulations require landfill gas collection and treatment.

Many EU Directives that been introduced in order to limit and control the concentrations of pollutants in the air, including:

• Directive 96/61/EC concerning Integrated Pollution Prevention and Control (IPPC), the main purpose of which is to reduce pollution by scheduled industry and power generation. A number of solid waste and fume incinerators (thermal oxidizers) are in operation in the pharma-chem sector to comply with limits imposed by the EPA in IPPC licences issued since 1994. • Air Quality Framework Directive 96/62/EC on ambient air quality assessment and management. • Other Directives specific to certain air pollutants: • Directive 99/13/CE relating to VOC emissions, • Directive 99/30/CE fixing limits for emissions of nitrogen and sulphur oxides (NOx, SOx), lead, particulate matter, • Directive 2000/69/CE fixing limits for emissions of carbon monoxide (within 2005) and benzene (within 2010). • Directive 2000/76/CE on waste incineration. • Directive 2001/80/CE on emissions from combustion plants (SOx, NOx, and dust). • Directive 2001/81/EC on national emission ceilings, which sets upper limits for each member State for the total emissions of SO2, NOx, VOCs and ammonia by 2010. • Directive 2003/87/CE establishing a greenhouse gas emission trading scheme (EU ETS) within the European Community. • Directive 2004/107/CE imposing emission limits for metals like arsenic, cadmium, nickel, and for poly-aromatic hydrocarbons (PAH) within 2012.

The consequences of most of the earlier Directives have now worked their way through the economy. The Thematic Strategy on Air Pollution is part of the European Commission's 6th Environmental Framework Programme and sets out the main objectives for improving air quality up to the year 2020, including the so-called CAFÉ (Clean Air For Europe) Directive. The proposed Directive on Industrial Emissions tightens minimum emission limits in certain industrial sectors across the EU - particularly for large combustion plants. It introduces minimum standards for environmental inspections of industrial installations and allows for more effective permit reviews.

4.2.4. Trends

Carbon dioxide capture and storage (CCS) is a topical subject receiving a lot of attention for its potential to reduce emissions. Sustainable Energy Ireland has commissioned a study into the potential for CCS in Ireland.72 In the report carbon dioxide storage was considered in an aquifer beneath Moneypoint, the Kinsale and Corrib gas fields, and in enhanced oil recovery (EOR) in the, as yet, undeveloped Spanish Point oil field. The cost of electricity should

72 Carbon Dioxide Capture and Storage in Ireland, Costs, Benefits and Future Potential, SEI, 2006.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

carbon storage be deployed now would increase by 30% in the short-term (based on 2006 estimates and compared with coal fired electricity generation) and assuming implementation of a carbon-tax.

4.2.5. Drivers

The main instrument for change is the regulation of the emissions from the motor industry (via fuel standards and emission standards achieved via engine improvements and tail-pipe treatment), other sectors of industry and setting ambient levels for atmospheric pollutants. Odour control requirements in urban wastewater treatment sludge dewatering plants is being funded under the NDP. Bord na Mona is one of the main players in this market.

4.2.6. Weaknesses

Little market growth is predicted as the IPPCL market is a mature one and there is a decline in growth in manufacturing in general in Ireland. There is an exception for particulate filters in the transport sector where solutions are coming from the vehicle manufacturing industry based in the EU countries of Germany, France, Italy, Sweden, Spain, UK, Czech Republic and Slovakia or imported from Japan and the US.

4.2.7. Case Studies

Bord na Móna Environmental Ltd.

Bord na Móna Environmental Ltd. offer a range of process technologies and services to meet odour and VOC removal requirements across a broad range of industries and in the municipal sector. With over 500 installations worldwide and flow rates of up to 500,000 m3/hr, Bord na Móna Environmental Ltd. (on foot of a strategic decision to diversify its business) has built up a wealth of experience and expertise over the years.

Of all the potential pollutants that give rise to public concern, odour ranks highly. This is primarily due to the annoyance and nuisance caused by persistent odours, as against concern about adverse health effects. Bord na Móna Environmental Ltd. has the capability necessary to treat air emissions and odours from a range of applications including: municipal and industrial wastewater treatment facilities, municipal solid waste handling and treatment facilities, food processing and agri-industrial facilities, leather tanning, and solvent emitting industry such as flexographic printing applications and petrochemical industry among other applications. They have developed in-house patented biological technologies which have proved highly successful, with remarkably predictable performance when applied to difficult situations.

However, what is important is that biological systems are engineered such that all critical parameters can be monitored and controlled. Biofiltration is, by definition, the aerobic degradation of pollutants in the presence of a carrier media. Biofiltration is successfully emerging as a reliable, low-cost option for a broad range of air treatment applications. It is now becoming apparent that biological treatment will play a far more significant role in achieving environmental control on a

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wide variety of air emissions, with biofilters offering advantages such as low operating and maintenance costs and the ability to treat highly variable inlet concentrations across a wide range of applications. Installation is facilitated by off-site or on-site modular construction.

4.2.8. Barriers

Any air pollution control technology must be demonstrated in the particular application and accepted as technically and economically effective in the long term before it will be adopted.

4.2.9. Opportunities

Odour control is a niche opportunity in this sector. The opportunities lie in overseas markets, in particular the UK, and the US and also the catch-up required in new EU member states to comply with EU Air Quality legislation. Engineering consultancy may be provided to overseas markets that are adapting to EU Directives, but it must be recognised this area is mature and well serviced globally.

4.3. Building and House Construction

While the building and house construction sector is not strictly captured by standard definitions of the EGS sector, it is an important market for EGS products and services and offers significant potential growth opportunities going forward.

In addition, it could be argued that some construction services, provided by engineers, architects and quantity surveyors for example, could also fall within the EGS sector categorisation.

4.3.1. The Construction Sector

In 2007, the value of output in the construction industry in Ireland was almost €37 billion and accounted for some 20% of GDP, or 23% of GNP. The sector has seen phenomenal growth in recent years, with residential construction output (which accounts for around a third of total construction activity) more than doubling from €9.5 billion in 2000 to €24 billion in 2006. The sector is also a major source of job creation with construction employment currently standing at 280,000 with an additional 100,000 people working indirectly in professions and sectors which serve the construction industry. While the residential housing sector is currently going through a period of significant restructuring, the outlook remains relatively optimistic, with other sectors, such as civil engineering (partly linked to NDP infrastructure projects) and the repair, maintenance and improvement (RMI) of private residences expected to show strong growth.

Assuming house construction and RMI was included in the definition of EGS, then its output value was €25.5 billion in 2007.

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The following Table sets out the key indicators for the sector.

Table 4.1: Construction Forecasts 2006-2008 (€billion) 73 2006 2007 2008 New housing 20 18 15.5 New Housing as % GNP 13.3% 11.2% 9.1% Building 5 6 6.5 Civil engineering 4.5 5.5 6.5 RMI 6.5 7.5 8.5 Total output 36 37 37 Construction output as % GNP 24% 22.9% 21.6% Source: Institute of European Affairs (forthcoming report on climate change), 2008

According to DSD Housing Statistics some 10,000 to 13,000 new housing units are expected to be constructed in Northern Ireland over the next five years.

4.3.2. Drivers

As indicated elsewhere in the report, the regulatory framework acts as a key driver of demand within the EGS sector. This is also the case in the building and house construction sector. The regulatory framework in which construction activity takes place is focused on the quality of buildings through the national Building Regulations, health and safety law, environmental impact legislation and public procurement law. From 2007, and on foot of the Energy Performance of Buildings Directive,74 the Building Regulations require any person who commissions the construction of a new building with a floor area exceeding 1,000 m2 to ensure, before work commences on its construction, that due consideration has been given to the technical, environmental and economic feasibility of installing renewable energy systems in the proposed building, and that the use of such systems has been taken into account, as far as practicable, in the design of that building.

The main actions underway in the residential construction sector centre on a forthcoming strengthening of the energy aspects of the Building Regulations, building on a previous revision in 2002 and on the SEI House of Tomorrow Programme. It is estimated that current and committed actions through the reform of the Building Regulations will result in projected savings of over 13,600 GWh PEE in 2020. The introduction of building energy rating for new (2007) and existing (2009) houses will provide an instrument that can be used to raise awareness of energy performance and stimulate incorporation of such performance into purchase decisions. The pace of building activity, as reflected in the housing stock addition of recent years, contributed to a positive shift in average efficiency. For the same standard of comfort and amenity, a new house today (2007) typically has a 70% lower

73 New housing refers to public and private residential development. Building refers to new private commercial and industrial development. RMI refers to the repair, maintenance and improvement of buildings (commercial, residential and industrial) and civil engineering. 74 Directive 2002/91/EC.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

energy demand for space and water heating than its counterpart built 20 years ago. However, since homes being built now will have a lifetime of at least several decades, it is important to ensure that efficiency performance standards are robust.75 Building regulations are important in setting the standard and driving performance improvements. A typical semi-detached house built today and satisfying the 2005 Regulations would have a Building Energy Rating (BER) of 155 kWh/m2. Year (a C1 house). With the 40% improvement required to meet the 2008 Regulations this would mean it should have a BER of just over 90 kWh/m2. year (a B1 house). In order to keep pace with Europe, it is envisaged that a further 30% savings in energy and carbon emissions will be required with possible changes in 2011, on top of the energy savings envisaged in the 2008 Regulations. The 2011 house would then need to have a BER of less than 65 kWh/m2.year to meet the Regulations. This would mean higher levels of insulation with U-Values for the opaque elements being not greater than 0.20 W/m2.K (though the method of construction should not change too dramatically). Windows would, for example, be limited to 1.50 W/m2.K, which would mean that double glazed windows with highly insulated glass would be the norm but triple glazing would not be required.

While Building Regulations are determined by the Department of the Environment, Heritage and Local Government (and amended at frequent intervals), construction product standards are actually set at European level, and their free circulation is guaranteed under EU Directives. 76

Another key driver is climate change. The built environment is a significant emitter of GHG, both during the construction process and when in use. With existing technology, significant savings can be made by introducing new products to the construction market and incentivising new construction processes in order to extend the lifecycle of buildings. Buildings are one of the five main users of energy in Ireland and account for some 34% of TPER. Hence there is considerable interest in introducing measures to improve the energy efficiency of buildings. However, it is claimed that market failure and behavioural barriers are preventing a dramatic improvement. Emissions from the residential sector are projected (in accordance with the ESRI-economy-wide model of energy demand) at some 6.8 Mt per annum on average over the Kyoto period (i.e. to 2012). This forecast builds in a prediction that household numbers will rise from 1.33 million in 2003 to 1.74 by 2012 and that the population will be 4.55 millions by 2012.77 While significant additions to the stock have been recorded in recent years, some 50% of the current housing stock still pre-dates 1970. Improved thermal performance of new and existing buildings and continued fuel switching from solid fuels to natural gas will be necessary to improve the sector’s overall emissions’ performance.

75 All houses built today which are less than 125 sq metres must have floor area compliance certificates issued by the D/EHLG. Products used in the construction of new homes must have certification that they have a life of at least sixty years. 76 Directive 89/106/EEC. 77 Ireland’s NAP 2008-2012, page 7.

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

An absence of rigorous statistical information prevents a meaningful figure being given for the current energy requirements of the construction industry. By way of illustration of the current position, the Action Plan under Article 14(2) of Directive 2006/32/EC notes that energy usage in the residential sector amounted to over 33,425 GWh (final energy consumption) in 2005. Energy usage grew by 27% in the residential sector over the period 1990-2005 with the number of households increasing by 52%. Energy intensity (average energy usage per household) decreased by 16% over the period reflecting an improvement in energy efficiency of the housing stock, much of it due to higher efficiency standards of new housing stock additions. Not all of the improvement in energy efficiency resulted in lower energy usage, however, as higher standards of heating and comfort levels followed from the deployment of central heating.

4.3.3. Barriers

The Irish quantity surveyors, Bruce Shaw, has recently carried out a major sustainability cost analysis which has identified an initial extra capital cost of around 6% between conventional office buildings and modern sustainable office buildings. The largest component of the extra cost is in the building façade.78 As well as environmental gains, there are significant savings in energy costs for occupiers of sustainable office buildings. The difference between a sustainable office with a BER ‘A’ rating and a conventional air-conditioned office could be as much as €20 per square metre per year. For a 25,000 square metre office, Bruce Shaw calculates a potential saving of €500,000 a year. They also estimate that the extra cost of the new Part L of the Building Regulations will add an extra €4,000 to €5,000 per dwelling (but will provide savings of €350 to €450 per annum). Government estimates are twice this figure. 79 Restrictive planning laws are in place in Northern Ireland in relation to micro- generation.

While the Building Regulations involve the certification of compliance with the technical requirements of the Regulations, the BER’s role is to determine the energy rating for the building. The new BER has yet to be implemented but is expected to be in place by July 2009. In addition to its impact on the use of more energy efficient materials etc., the BER also means that more robust inspection and monitoring of buildings during construction will be required, ensuring that all relevant legislation has been complied with and that construction products have been properly approved, i.e. shown to be 'fit for their intended use'. Unless public authorities are resourced and trained as an immediate priority the probability is that the new BER standards will not be implemented. In such an event, this may affect the credibility of the government’s sustainability building strategy, in particular the pace at which government intends to impose a ‘carbon neutral’ requirement on the building and house construction sector. The problem is that an appropriate accreditation process and labelling standard has not been specified for some products to be used in the construction process to meet both Building Regulations and Floor Area Compliance

78 www.bruceshaw.ie 79 Department of the Environment, Heritage and Local Government, Regulatory Impact Assessment on Building Regulations Part L, December 2007.

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Certification requirements. An awareness and education campaign must be undertaken preferably by a body such as the NSAI to promote the awareness of the requirement to secure accreditation. The time delays associated with securing approval under the accreditation process is far too long and will result in lost opportunities for suppliers of some innovative products.

It remains to be seen if the Government’s new Enhanced Capital Allowance Scheme aimed at promoting energy efficiency will have any impact – particularly on commercial/industrial premises.

Progress on energy efficiency depends on people in the building industry being aware of the importance of the issue, and then being able and willing to act on it. A Report by the World Business Council includes the findings of a significant survey (of 1,423 respondents) about professionals’ views on sustainable building issues.80 A considerable number underestimated buildings’ contribution to GHG levels; awareness of environmental building issues was relatively high, but only 13% actually got involved in the development of a sustainable building; a significant body of opinion supported the view that developers and financiers are the main barriers to more sustainable approaches in the building value chain. The main conclusion, which admittedly has not been tested by Irish research, was that lack of awareness is not the issue; the main barrier is a lack of in-depth understanding about the impacts of global warming and a lack of leadership from the construction sector.

Unless the planning laws are changed it will not be possible to deploy some energy saving equipment such as solar panels and micro-generation units that require installation on, or outside, a building. The Minister for the Environment, Heritage and Local Government has signalled that the planning laws will be changed to allow the installation of small renewable units. 81

If new energy efficiency materials are to be deployed then construction product standards reflecting higher quality products and a life cycle approach would need to be introduced as a priority.

The inspection of construction projects will need to be undertaken in a uniform way through the various stages of construction from foundations to roof. Guarantee schemes operated by bodies such as Homebond provide structural warranties to new home owners for up to ten years.

The regulatory situation in Northern Ireland about energy performance of buildings is currently confused, with elements of the Code for Sustainable Homes being diluted.

80 World Business Council for Sustainable Development, Energy Efficiency in Buildings Project, 2007. The WBCSD is promoting the Positive Energy Building. 81 Statement to the Energy Summit, 6 March 2008.

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4.3.4. Case Studies

There are numerous examples of best practice around Europe that Irish policy makers and the construction sector could learn from. For example, ETAP (Environmental Technologies Action Plan) is continuing its work on sustainable construction 82 and ERABUILD, which is a strategic network for national R&D programmes from Austria, Denmark, Finland, France, Germany, the Netherlands, Sweden, the UK, Switzerland and Norway, is actively issues around the sustainable construction and operation of buildings. 83 In addition, PREB-AT is a French-led international benchmark project dedicated to energy-efficient buildings. 84

PASSIVHAUS: AN EXAMPLE OF SUSTAINABLE DESIGN

Passivhaus, (a passive building) which began in Germany in 1991, has developed an approach that can reduce the energy demands of a building to one-twentieth of the norm, but still provide comfortable conditions. There are more than 6,000 buildings that meet the Passivhaus standard in Germany, Austria, Switzerland, the UK and the US – offices as well as apartments and houses, and new and renovated buildings. There are five key elements for a Passivhaus:

The envelope: all components should be highly insulated; Airtightness; stop air leakages through unsealed joints; Ventilation; use of a mechanical system with heat recovery so that hot air leaving the building warms the cooler air coming in; Thermal ‘bridges’: eliminate heat loss from poorly insulated points in windows, doors and other parts of the envelope; and Windows; minimize heat loss in winter and heat gain in summer.

The passive building requires the use of new construction products such as high quality thermal insulation materials, advanced window technology, and high-efficiency electronically commutated (ECM) motors. None of these products are available in Ireland.

Each building must fulfil strict (voluntary) requirements about energy use, air leakage, total primary energy consumption and heat load that are much higher than most normal building codes. By achieving Passivhaus standards, qualified buildings are able to dispense with conventional heating systems. In Germany, as a consequence of the country’s first mover advantage, it is now possible to construct passive buildings for the same cost as those built to normal building standards.

In Ireland, a typical house built to the passive building standard instead of the 2002 Building Regulations would consume 85% less energy for space heating and cut space-heating related carbon emissions by 94%.

82 www.ec.europa.eu/environment/etap 83 www.senternovem.nl. 84 www.prebat.net

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KINGSPAN CENTURY

Ireland’s Kingspan Century has been awarded a €4m contract by the British Government in a project to create 200 zero-carbon homes in the world’s most sustainable community near Bristol. The site is the first to be identified under the UK Government’s Carbon Challenge. The UK intends to introduce a mandatory zero-carbon standard in 2016. This project is therefore designed to demonstrate to the building sector that the target is feasible and can be commercially viable. The contract win follows Kingspan Century’s success earlier in 2007 when the company created the world’s most advanced and sustainable home ‘Lighthouse.’ It costs just €50 a year to heat. The project will be a partnership with developer Barratt Developments of Bristol, who will be using Kingspan’s (trademark) TEK Building System. The high performance of the system is based on structural insulated panels which deliver very high levels of thermal insulation and airtightness, thereby ensuring that high energy and sustainability standards are achieved. The homes will also include solar panels for hot water; a district heating system with combined heat and power; mechanical ventilation with heat recovery; greywater recycling for WC flushing; and rainwater harvesting for washing machine and irrigation.

Ireland’s first eco-village is Cloughjordan in County Tipperary. 85 The Village will develop a renewable energy district heating system, demonstrating ecological building. Each home will be measured for energy use, and the whole process will be closely monitored to act as a model of best practice in sustainability. This is an exemplar for other communities wishing to use sustainable technology and processes. Many other examples of sustainable housing development and initiatives exist. 86

4.3.5. Key Players

There are several large global construction companies specializing in sustainable building and house construction and building materials companies who are not currently operating in Ireland. 87 In addition, in the US there are many house builders specializing in sustainable house construction that may be interested in investing in Ireland and/or creating JVs with local builders if a major retro-fitting programme gets underway. 88

There is a growing indigenous sector, with many companies specialising in sustainable construction (e.g. members of the Environmental and Sustainable Construction Association). 89

Members of the Irish Home Builders Association built the bulk of homes in Ireland. As new products, technologies and building methods will be required as stricter BER and carbon requirements are progressively introduced, it may be in the interest of those companies who do not have sustainability construction know-how to form joint ventures with suitably

85 www.thevillage.ie 86 http://www.wwf.org.uk/sustainablehomes/links.asp 87 http://www.builderstate.com/Builders.html 88 http://www.ecobusinesslinks.com/sustainable_building.htm#Sustainable%20Builders%20General 89 http://easca.ie/content/view/13/29/

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qualified overseas specialist builders.

4.3.6. Opportunities

A report by the World Business Council for Sustainable Development points the way forward for the building and construction sector. 90

The main driver is the fact that buildings are responsible for upwards of 40% of energy use in most countries and there is an immediate requirement to introduce energy efficiency measures and thereby reduce GHG emissions. The IPCC Fourth Assessment Report estimates that by 2020 carbon emissions from building energy use can be reduced by 29% at no net cost. This drive towards building energy efficiency will be minded of the finding of the International Energy Agency that current trends in energy demand for buildings will stimulate about half of energy supply investments up to 2030.91

1. View of the Construction Industry Federation 92 The CIF has noted that a tipping point has been reached in relation to the sector’s awareness of climate change, sustainable development and environmental issues impacting on the industry. The CIF has recommended to government that there should be a much higher priority attached to achieving energy efficiency through the renovation of Ireland’s existing stock of buildings and that the improved energy efficiency in new buildings should be supported through enhanced capital allowances and appropriate tax incentives. The CIF also called for a nationally coordinated policy of supporting innovation in the products and services that will be needed to improve the energy efficiency of households and buildings generally in Ireland. A potential bottleneck identified by CIF is the availability of skilled public servants who will have responsibility for the strict implementation of the Building Regulations and BER standards. The voluntary system of self-certification for compliance with Building Regulations works well at present. What is required is that adequate resources be deployed so that products and processes are standardised so that industry knows exactly the products that can be sued in the construction process. Importantly therefore, the construction sector is acutely aware of the challenges of climate change, but specifically that new business opportunities exist.

2. Northern Ireland A number of major studies in the UK have assessed the resource consumption (material and water), waste and carbon emissions associated with both new housing programmes and delivering improvements to existing housing stock and the opportunity exists to assess the sustainability of the housing and infrastructure projections for Ireland. 93 94

90 World Business Council for Sustainable Development, Energy Efficiency in Buildings Project, 2007. The WBCSD is promoting the Positive Energy Building. 91 IEA World Energy Outlook, 2006. 92 Construction Industry Federation Annual Report 2007. 93 Stock Take. Sustainable Development Commission. July 2006. 94 Better Buildings - Better Lives: Sustainable Buildings Task Group Report. Sustainable Buildings Task Group. 2004.

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3. Carbon Neutral Buildings All new buildings could achieve an A1 BER by 2012 if the potential for significant energy savings was pursued vigorously. However, even if the target date of 2012 could be met, the cost of achieving A1 over A3 is considered prohibitive by the CIF in current market conditions. The technologies, processes and know how to meet such a stretch target do not exist in Ireland (or indeed in the UK) on the scale required. It has therefore been suggested that until the construction sector has acquired these goods and services, a better focus should be securing better energy efficiencies from the current building stock.

The whole concept of energy efficient sustainable design is in its infancy in Ireland and mechanisms need to be put in place to encourage/require the design community to focus far more on energy efficiency when designing new buildings. Large-scale retrofitting of existing buildings should be supported so that the burden of reducing the energy demands of the built environment is shared between new and existing buildings. The government has committed to reviewing the Building Regulations in 2010 with a view to raising efficiency standard from 40% to 60% on current levels. 95 The Minister for the Environment, Heritage and Local Government has already signalled his intention to move to a zero emissions standard, perhaps before 2016. This will require new building products and new processes and a greater awareness among householders and commercial property owners and tenants. The energy saving potential of buildings in the EU is estimated at 28%. There is particular scope for savings in the public sector, where users of buildings do not always have the incentive to use their energy efficiently. The government announced in June 2008 that it is considering the imposition of higher energy efficiency standards for all new buildings, regardless of size, from 2013 and provide incentives for the development of passive houses, which rely on good insulation levels and passive heating and mechanical ventilation rather than traditional heating systems.

Ireland should also consider introducing measures to raise the efficiency of energy transformation, for instance by promoting Combined Heat and Power and district-heating schemes in urban areas. With this in mind, the application of intelligent energy efficiency and conservation systems and remote energy management in all building types should be developed in order to support more energy efficient and energy saving patterns of building use by occupants.

According to SEI, a combination of the following in the renovation of existing homes will have the following impact:

Table 4.2: Cost of Renovating Existing Homes Technology Private NPV Social NPV Total quantity Present value Exchequer (€) (€) (MWh) over lifetime cost of (€) scheme (€)

95 The CIF’s Irish Housebuilders’ Associations has problems with this proposal.

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Condensing 782 691 107 1892 370 boiler CFL 435 464 6 525 30

Loft insulation 1135 1289 90 1315 60 Cavity wall 930 1006 95 1380 150 insulation Source: SEI

What these figures demonstrate is that the progressive introduction of a Positive Energy Building approach will require significant additional investment. According to SEI, it will cost some €25,000 on average to retrofit a house to the highest energy standards, the cost to the projected housing stock could be some €50 billion. This is probable the largest potential opportunity for the EGS sector and one that should be given the highest priority. Measures such as improved thermal insulation properties, lighting control, heat recovery on air handling units, improved BMS, CHP, Biomass boilers will all add to the capital costs of construction. As the regulatory compliance burden gets tighter, companies best positioned to provide these energy saving construction products will reap the highest rewards. This compliance burden will not be unique to Ireland as all member states will have to begin the process of reducing GHG emissions from the built environment. Therefore Irish companies with scale will have export opportunities.

In Northern Ireland, the Energy Savings Trust has schemes to assist with small-scale renewables (heat pumps, turbines etc.).

4. Tax incentives There is clear market failure in this sector. Consequently there are grounds for the introduction of targeted and time-limited incentives to promote the wider use of energy efficient goods and services. For example, consideration should be given to reducing that rate of VAT on all suitably certified environmental goods that are used in buildings with the aim of improving energy efficiency standards. The installation of smart meters should be encouraged (once the current pilot project is completed) by subsidizing installation costs for households below a certain income threshold. Grant aid for SEI’s ‘House of Tomorrow’ Programme should be increased and guaranteed over a five year period. Through SEI’s Houses of Tomorrow Scheme, more than 6,000 houses have or are being constructed with a 40% improvement in energy efficiency. Finally, urgent consideration should be given to an incentive package to encourage households and businesses retrofit their homes and buildings.

5. Recycling of Construction Waste The National Construction and Demolition Waste Council has been tasked to reduce waste from the sector and to increase the content of recycled and recyclable material. 96 To date however, no major new initiatives have been brought forward as CD waste is largely re-used on site. The Council should therefore be asked to set specific targets and to indicate the

96 www.ncdwc.ie

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business opportunities that may arise given the significant volumes (some 16.8m tones per annum) of waste arising; by far the largest category of waste in volume terms in Ireland.

6. Biomass The heating of buildings provide opportunities for significant energy savings, and consideration should be given to the provision of support for the installation of biomass heating in both new buildings and existing buildings. This in turn would require multi-agency co-operation within the biomass heating supply chain and perhaps a new taxation regime to support the efficient development of biomass crops in Ireland, and the development of heating systems on an efficient and low-cost basis. This opportunity to will be examined in more detail in the chapter on renewable energy.

7. New building materials There is an opportunity for a developing Irish product market for the materials needed to meet higher BER standards, and the expansion of the domestic industry when retrofitting of the current housing stock becomes a legal requirement. A critical success factor to unlocking the potential of the introduction of new products and services by the construction sector is changing attitudes and behaviour.

The WBCSD has identified the following products that will be needed in buildings required to meet the highest energy and building efficiency standards: ‘Low-E’ glass, energy-efficient boilers, heat pumps, new insulation materials, lighting and appliances, and softwood cladding. None of these products are manufactured on any scale in Ireland. 97

Over time all member states will be required to construct new buildings to A1 standards and also to retrofit old buildings to the highest possible energy efficiency standard. Therefore there is a significant export opportunity if Ireland could achieve first mover advantage in the production and installation of a new generation of building materials.

8. Procurement One of the keys to achieving the aim of sustainable building is to embed this requirement through revised procurement rules. In the UK, the Sustainable Procurement Task Force produced an Action Plan to deliver on the goal set out in the Government’s 2005 Sustainable Development Strategy to make the UK a leader in the EU in sustainable procurement by 2009.98 The refitting of buildings was identified as a priority target. 99 Given that the public sector in Northern Ireland is a much larger percentage of the economy than that of the UK, the importance of public sector procurement in driving sustainability and the development of the EGS sector is of even more vital importance. The integration of a Sustainable Procurement National Action Plan for Northern Ireland, or indeed for the island of Ireland, into the delivery of the Investment Strategy for Northern Ireland probably has the potential to influence the development of the EGS sector more than any other single action.

97 Policy Directions to 2050, Energy and Climate, World Business Council for Sustainable Development. 98 Securing the Future - UK Government Sustainable Development Strategy, March 2005. 99 Procuring the Future, Sustainable Procurement National Action Plan: Recommendations from the Sustainable Procurement Task Force.

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The greening of the construction sector in Ireland could be brought about by requiring higher energy efficiency and building standards for all new public construction and building works in the terms of public tenders.

9. Product Development R&D Given the potential scale of Ireland’s retrofitting building programme, research and development into products best suited for Irish circumstances should be explored.

4.3.7. Conclusions

The main driver of new business opportunity for the building and construction sector and construction professionals is climate change. The WBCSD Report concluded, while acknowledging the timing of market entry carries risk, that there will be considerable opportunities for early entrants into the building energy efficiency business.

While a lead-in period will be necessary for the construction industry to develop new products and processes in order to meet new standards of building performance and energy efficiency, there is an undisputed trend towards higher standards of sustainability which should not be ignored.

There is no incentive for individual companies to take a risk until there is clear regulatory certainty concerning the government’s intentions about the introduction of tougher (and fully enforced) building standards and energy efficiency.

The development of the construction products sector to anticipate much higher building and energy standards should become a high priority for Ireland given the wide skills base of the house construction sector and the service sectors that support it. New products will need to be developed or deployed. New services, including BER verification, are emerging.

No state agency has a remit to develop EGS domestic opportunities for the construction industry. Therefore, the key issue is who will take the lead to drive an sector-wide initiative to quantify the opportunity arising from the enforcement of stricter BER and building standards in Ireland and across Europe.

4.4. Cleaner Technologies and Processes

Products, systems and services which, by design: use resources from more sustainable sources; transform resources to deliver same functions with less resources; transform resources with less waste; and transform resources with waste designed to be recycled effectively.

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4.4.1. Introduction

This category (since it is not a sub-sector and cannot be considered as a sub-sector) requires examination in a different way to the mainly media focused sectors (waste, air, water etc.) analysed in this study.

While the issue of definitions of sub-sectors in the overall environmental goods and services sector is problematic, within this category (or sub-sector), it is especially so. There is also the issue of overlap with all other sectors, most especially consultancy and energy.

There have traditionally been many definitions of and synonyms to cleaner technologies, such as cleaner production, clean technology, waste prevention, sustainable production, dematerialisation, eco-efficiency, eco-design etc., but in loose terms cleaner technologies and processes (CTP) can be defined as those that impact to prevent or reduce waste and pollution at source. In this, they contrast with most environmental goods and services that are end-of-pipe based, attempting to reduce the impact of the waste and emissions produced after they have already been created e.g. recycling. In an Irish context, the Clean Technology Centre has defined waste prevention for the EPA as: “elimination or reduction at source of material and energy consumption, waste arisings (solid, gaseous, heat and liquid) and harmful substances.” 100

Cleaner technologies and processes can have many forms and use various methodologies. However these generally involve one or more of four changes: improved practices, process/technology modifications, material substitution, and/or product modification. Improved practices are sometimes categorised as involving housekeeping, operations, maintenance or inventory procedures.101 The switch from products to services is another important 5th dimension – this is a systems approach (based on Material Intensity Per Service (MIPS)).

In most studies on environmental technologies the quality of the environmental goods and service, and the extent or nature of its impact on the environment (such as those from CTP) are not considered separately. 102 The OECD has taken the approach to include clean technologies in the more ‘general’ quantification approach and to be very wary of separate quantification. According to the OECD, eco-industries “include clean technologies where pollution and raw material use is being minimised... These technologies need to be considered as part of the industry, despite definition and measurement problems. Cleaner technologies are difficult to measure because improvements which are less polluting cannot

100 Coakley, Tadhg and Cunningham, Dermot Assessment and Development of a Waste Prevention Framework for Ireland EPA, 2003. 101 Duffy, Noel and Coakley, Tadhg Waste Prevention Guide for Industry and Business Limerick Clare Kerry Regional Waste Management Office, 2006. 102 OECD The Global Environmental Goods and Services Industry OECD 1995; Ernst and Young. Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. European Commission DG Environment, Brussels, 2006; Coakley, Tadhg et al. Investigation into why existing environmental technologies are underused in Ireland EPA, 2007.

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be separated from general improvements which are more efficient, use less resources and produce less waste or harmful byproducts.”103 The point here is that, if a company decides to run an efficiency programme and to improve energy efficiency due to a change in practices, it would come under the heading cleaner technologies and processes, as well as increased general industrial efficiency (which may need to be considered in another study), as well as energy management (covered elsewhere in this study).

For their recent quantification of eco-industries in the EU, Ernst & Young has taken the approach to look at two types of activities: pollution management and resource management. 104 “The main difference between the two types of activities is that pollution management typically relies on end of pipe-technology while resource management is associated with preventive approaches of integrating environmental issues. The “Cleaner Technologies and Products” are included in the pollution management aggregate, however. This seems strange, as by any definition, the CTP category should be associated with preventive approaches, i.e. resource management. Another issue regarding the quantification of this category is the fact that it is clear that cleaner technologies and processes are already included in the other sectoral reports in this study and to re-quantify them separately and additionally could give a false impression of the overall EGS sector.

However, since, in relation to environmental impacts, climate change and carbon footprints etc. cleaner technologies and processes have a vital role, it is nevertheless worthwhile that they should be considered and examined separately. Not for quantification purposes, but rather so they can be given priority over other end of pipe environmental goods and services, in accordance with Irish and EU environmental policies as well as global necessities.

4.4.2. The Cleaner Technologies and Processes Sector

In one UK study where CTP are considered separately, they are defined slightly differently than in this report as follows: 105 “The supply of equipment and expertise for cleaner, more resource efficient technologies, processes or products, which for example, decrease material inputs, reduce energy consumption, recover valuable by-products, reduce emissions or minimise waste disposal problems - usually involving minimising polluting emissions at source rather than adopting 'end-of-pipe' pollution control techniques (JEMU, 2002).” 106

That study did go on to quantify CTP, not using its own research but that from another study, carried out by URS into expenditure spent by industry on environmental protection in the UK. However, since they did not specifically exclude this type of technology from the other industries they considered, there may have been ‘double accounting’ or overlap in

103 OECD The Global Environmental Goods and Services Industry OECD 1995 page 4. 104 Ernst & Young, 2006. Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. European Commission DG Environment, Brussels. 105 Department of Trade and Industry (DTI) study Emerging Markets in the Environmental Industries Sector, November 2006. 106 JEMU, 2002, Global Environmental Markets and the UK Environmental Industry.

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that case. 107 However, no such study has been carried out in Ireland to make a comparative analysis or to quantify the spending on CTP in Ireland and insufficient data are available to make definitive estimates of the value of this sector in Ireland. An Irish study, similar to the URS one carried out in the UK, would be worthwhile to estimate the size of this ‘sector’ in Ireland.

In the URS study, the figures for CTP are for the extraction, manufacturing and energy and water supply industries only, i.e. they do not include construction or service industries or the public sector. They also include capital expenditure only, not operational costs. The CTP market specifically used in the DTI study (reference 6) is defined as follows:

“Capital expenditure on integrated processes relates to new or modified production facilities designed to integrate environmental protection into the production process. This might include adaptation of an existing installation/process whereby the integrated expenditure is then the total purchase cost of the adaptation. It also includes installing a new process in which the design takes environmental protection into account and in this case the expenditure counted is only the extra cost compared with installing a ‘dirtier’ alternative.”

The market for CTP in the UK was estimated at £177m for 2005, which extrapolates to a Northern Ireland market of £11.9m, growing to £285m by 2010 and on to £459m by 2015. Those estimates now appear to have been on the low side, given that a more recent study has indicated that by 2005 the actual figure for the UK was £515m – a massive growth of almost 200% in two years. 108 The breakdown of these technologies on a sectoral basis is interesting: 50% was spent on water, 28% on air, 11% on other, 3% on solid waste, noise and nature protection and 2% on soil/groundwater – notably this appears to exclude energy which would be another considerable fraction and which would greatly increase the overall figure. These may or may not be indicative for Ireland, and a separate examination on CTP in Ireland, while merited, is not within the remit of this report.

Given the distinctions and caveats above, since the UK DTI estimate for all environmental goods and services was £25 billion for 2005, this CTP element comprises about 2%. This is considered to be a major underestimate by experts in the field consulted during this present study. The reasons for this underestimate include the limited scope of the sectors, the limited definition and failure to accurately predict the market (especially relating to energy) given the measures in place relating to climate change etc.

Industry feedback suggests that Ireland should focus more and more on CTP and away from end-of-pipe technologies as this could be a niche market and have eventual export potential.

107 URS Environmental Protection Expenditure by Industry: 2003 UK Survey DEFRA 2005. 108 URS Environmental protection expenditure by industry 2005 survey DEFRA 2007.

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4.4.3. Regulatory Framework

The main regulatory driver supporting CPT in Ireland is Integrated Pollution Prevention Control (IPPC) which was set up in Ireland under the EPA (Licensing) Regulations 1994 and in Northern Ireland under The Pollution Prevention and Control Regulations (Northern Ireland) 2003. The categories of industry coming within the scope of IPPC licensing in Ireland are:

Minerals and Other Materials. Energy. Metals. Mineral Fibres and Glass. Chemicals. Intensive Agriculture (poultry and pigs). Food and Drink. Wood, Paper, Textiles and Leather. Fossil Fuels. Cement. Waste (recovery or disposal in a facility connected or associated with an IPPC activity). Surface Coatings. Other Activities (includes testing of engines, manufacture of printed circuit boards, production of lime in a kiln and manufacture of ceramic products).

Prior to the advent of the IPPC system for industry and waste management, each environmental medium was separately controlled by different legislation, which resulted in so-called single media licensing. This single media approach is still the case for all non IPPC licensed companies (i.e. the vast majority of industry in Ireland) which means that the regulatory framework, for the most case, is not supportive of companies using cleaner technologies and processes, but rather drives them towards end-of-pipe technologies.

The focus of single media licensing is on emission limit values (ELVs). The classic water pollution control license barely consisted of more than a table of emission limit values for parameters relevant to the operation and the related monitoring and reporting requirements. The focus of compliance was the attainment of these ELVs, without consideration being given to the cross media effects in terms of increased emissions to other media or the additional consumption of energy and resources in achieving these limits or the lack of innovation of the technology, or the quality of its results in relation to other technologies. As a consequence, the market to date has been dominated by EOP technologies to meet these ELVs, but there are now indications that this could be changing (albeit slowly).

Apart from IPPC licensing, other environmental legislation in the Ireland such as, for example, the Waste Management Act and the Packaging Regulations (packaging nature and use requirements), do have scope for an emphasis on prevention at source options, but for the most part these possibilities are not being implemented.

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A key driver will be the climate change agenda and the adoption of targets for reductions in GHG emissions from domestic and commercial buildings in Northern Ireland. The UK Climate Change Bill has just received parliamentary approval at Westminster. However, it is currently unclear if Northern Ireland will be included in its target of a 60% reduction in carbon emissions by 2050.

The growth of wastes and emissions, year-on-year in Ireland, shows clearly that there is generally not a strong emphasis of waste prevention and cleaner technologies in Irish legislation.

4.4.4. Trends

As in the UK, it is expected that there has been a growth in the use of CPT in Ireland and this is expected to continue, especially relating to energy. The implementation of IPPC certainly had an impact on the large scale industrial sector in Ireland and may have pushed it (at least initially) towards best available technologies and away from emission level values in licensing.

However, as some studies have shown the uptake of prevention-based approaches among local authorities, public bodies and SMEs in Ireland still leaves a lot of room for improvement. 109

Within the energy sector in particular it is expected that growth in renewable energy and improved energy management systems will continue but that is covered in those sub- sectors. Regarding solid waste and material flows within Ireland, the most recent EPA waste data show that arisings continue to grow, implying that waste prevention measures and supports require further boosting and resources. There is no doubt that greatly improved recycling and waste management has taken place over the past 10 years, but with regard to prevention and the use of cleaner technologies, the extent of change has not been as great.

However, these trends are now being influenced by the drivers listed below and new policies that are coming on stream. If we consider the current construction energy efficiency requirements, the Solvent Regulations implementation Accredited Inspection Contractor (AIC) scheme, more intensive packaging regulations, etc., an opportunity to greatly improve the uptake of CPT could be further enhanced.

4.4.5. Drivers

As mentioned above, IPPC licensing has been a driver for the relatively small number of companies affected. By 2007, the EPA had issued over 650 IPPC licenses. This legislation

109 Coakley, Tadhg and Cunningham, Dermot Assessment and Development of a Waste Prevention Framework for Ireland EPA, 2003; Review of regional waste management plans, prevention elements, by Clean Technology Centre; Review of implementation of prevention element of 1st Irish National Hazardous Waste Management plan by Clean Technology Centre.

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requires compliant companies to implement best available technologies (BAT).

As also mentioned above climate change and its impacts on policies and regulation will drive cleaner technologies and processes. At a European level, the latest proposals to amend to the Emissions Trading System (ETS) require Member States to reduce GHG emissions to at least 20% below 2005 levels by 2020 and for 20% of energy consumption across the EU to come from renewable sources by 2020. End of pipe technologies will not be sufficient to achieve such targets.

Since 2004, the EPA has been implementing a National Waste Prevention Programme (NWPP).110 This includes several elements, with the aim of reducing waste production in Ireland and boosting waste prevention and clean technologies. One of its main national programmes is the Local Authority Prevention Demonstration (LAPD) Programme.111 This has two phases at present, with €1.2 million financial assistance for phase 1 and €500,000 for phase 2. The aim of the programme is to develop capacity and set up networks to support clean technologies within local authorities and to create demonstration examples of the implementation of such technologies at the local level.

Another initiative of the NWPP is the Green Business Initiative (GBI). While still at an early stage, the GBI aims to support SMEs in the take up of clean technologies. One of its first programmes is the development of the www.greenbusiness.ie website which aims to create a detailed information resource regarding clean technologies in Ireland, along the lines of the UK ENVIROWISE system.

The EPA also launched the Cleaner Greener Production Programme (CGPP) in 2001 as a grant scheme to encourage Irish organisations to implement cleaner greener practices. 112 To date the EPA has committed €3.7m to 59 organisations that have received co-funding for demonstration projects under this programme over three phases. Phase 4 of the programme was launched in March 2008 with a view to providing a further €2 million to Irish companies who implement cleaner technologies.

Another grant aid scheme to support environmental technologies and eco-design has been set up by Enterprise Ireland, providing financial aid to companies that wish to assess their potential for the development of environmentally superior products (ESP). Enterprise Ireland is also offering assistance to companies who wish to improve their eco-efficiency by providing them with a World Business Council for Sustainable Development (WBCSD) assessment procedure.

There are two national training programmes relating to cleaner technologies and processes. The Foundation Course in Environmental Management, facilitated by IBEC, provides training on cleaner production which is given by the Clean Technology Centre. The LAPD training

110 www.epa.ie 111 www.ctc-cork.ie/lapd 112 www.cleanerproducition.ie

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programme, developed by the Clean Technology Centre and the EPA, is provided to local authority personnel and is aimed at capacity building within that sector in the field of clean technologies and processes.

As part of the local and regional Waste Management Plans, local authorities are obliged to implement waste prevention procedures at the local level. All these plans contain commitments to waste prevention, to some degree or other, as did the first generation of plans. Many of the current phases of plans have committed to create the local authority post of Green Business Officer who will have the role of engaging with industry and organisations in that region in order to prevent waste and increase uptake of cleaner technologies. Some local authorities have already taken this initiative and the Limerick Clare Kerry Regional Waste Management Office has been notably active in this regard for a number of years. 113

4.4.6. Weaknesses

Despite the initiatives and drivers outlined above, CTP is still a relatively new and untested means of environmental protection for most companies and organisations. While the lock-in to traditional technologies is preventing a wide scale uptake of environmental goods and services in general, this lock-in is especially damaging to any potential uptake in innovations such as cleaner technologies.

Despite the drivers listed above and recent improvements, there is still a widespread ignorance in business and organisations of the subject of clean technology. While the training programmes and initiatives described above are welcome, they are not sufficient to create a culture of cleaner production in Irish society. Uptake in this method of environmental protection requires knowledge and consideration of the complete product life cycle chain and this knowledge is not yet common in Ireland.

There is still insufficient pressure from legislative, economic and policy drivers in Ireland (at national and local levels) for companies to consider cleaner technologies on a widespread scale. Without intensification of these major drivers, this area of the EGS sector will not develop widely and a major opportunity will have been lost.

4.4.7. Case Studies

Northern Innovations114

Northern Innovations was founded in 2006 to provide process and product development, consultancy and engineering design, focused mainly on manufacturing and industrial clients such as 3M, Seagate, Shorts. More recently the company has been providing these services or Invest NI and the Carbon Trust.

113 www.managewaste.ie 114 http://www.northerninnovation.com/

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One of the key companies to engage in the sub-sector consultations, Northern Innovations is a Northern Ireland based technology and process innovation company which illustrates the interdisciplinary nature of the clean technologies and processes sector. The company provides an internationally experienced, entrepreneurial, resource to customers, to enable them to better exploit their ideas, products and processes, focussed on the following areas:

Outsourcing Product Design and Development Process Design and Development Research and Development Project Management Mentoring

Northern Innovations has been established to fill the gap caused by many organisations reducing their spending or out-sourcing their in-house capability for process design and development and R&D.

Northern Innovations limited is a market driven technology transfer company that enables individuals and businesses to rapidly acquire innovative technologies by leveraging all available internal and external skills, whilst also bringing a close liaison with established Universities, Government Agencies and Research Institutions

Schiedel Storey High Chimney System Schiedel, an Austrian company based in Co. Monaghan has as its core business the production of chimney systems. 115 The Schiedel Swift chimney system is a versatile product that was developed to suit the open fire and central heating requirements of the UK and Irish markets. Prefabricated chimney systems have been an important feature in the European construction industry for many years. Traditionally this has not been the case in Ireland and the UK where chimneys have been constructed on site with components supplied by different manufacturers.

With financial support from the CGPP programme, Schiedel aimed to develop a new ‘Storey High’ modular chimney system to replace the current Swift Chimney System components - basically supplying the chimney in assembled modular sections rather than in kit form.

For the new three piece ‘Storey High’ chimney system each of the three sections was designed, prototyped, cast, tested by external organisations (Schiedel’s German Laboratory and Queens University Belfast) as well as site tested, and introduced to production. Various transportation cradles were produced by a supplier and tested. The weight of the cradles was reduced by 15% over the course of being developed. A key measurement is that the new chimney system can be installed in 1.5 hours compared to 8 hours for the current Schiedel Swift Kit system.

The product was installed and tested in a variety of sites around the country. There were open days held for building contractors at both the factory and on building site demonstrations. The new

115 From 2 page summary of CGPP project at www.cleanerproduction.ie

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system is factory assembled which increases the quality and accuracy of construction and reduces the amount of materials needed per unit. The new system also results in a reduction in chimney installation times for builders.

The financial and environmental benefits per annum of implementing this cleaner technology are shown in the two tables below:

A LIFE ENVIRONMENT construction project demonstrates the use of building materials derived from renewable raw materials116 This integrated and sustainable demonstration building has especially low energy consumption, with an energy demand half that of a standard passive house.

The LIFE S-HOUSE project was carried out in the context of the Austrian "Building for Tomorrow" programme for the development of greener buildings. It addresses the issue of building waste by making use of as much renewable material as possible, mainly straw and wood. During the project, the properties of walls made of straw bales were tested and validated for fire, humidity and sound absorption. Walls consist of straw bales covered in clay with no intermediary film, plus a wooden facade. Screws used to build the walls are made from a bio-synthetic material and have been specially designed and optimised. Floors and ceilings also have straw elements in order to create a continuous straw shell for the entire building, which provides optimum heat insulation. Since the completion of the building, the building components and materials have been monitored in order to assess their properties over time.

Additional energy efficiency features of the building include its large glazed south-facing facade that captures heat, with a ventilation system that distributes it around the house, and a biomass storage stove. Stone paving on the ground floor acts as a heat retainer.

All these features make the S-HOUSE an integrated concept of sustainable building. It now serves as an exhibition centre promoting the use of renewable raw materials and sustainable building

116 From case studies in environmental technologies on ETAP website: http://ec.europa.eu/environment/etap/technologies_en.htm

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technologies.

S-HOUSE: facts and figure: 1. 'Factor 10' concept successfully implemented: the consumption of resources was minimised 10 fold compared to conventional solutions. 2. The building requires as little as 6kWh/m² per year for heating purposes - passive houses have to consume no more than 15 kWh/m² per year and standard buildings can consume up to 180 kWh/m² per year. 3. The project was rewarded with several prizes worldwide: Global 100 Eco Tech Award, Expo 2005 Japan; Energy Globe Vienna; Meilenstein, Dr. Erwin Pröll Zukinftspreis 2006; RIO Award, Innovationpreis 2006; Austrian national award for Architecture and Sustainability 2006; Best of the Best LIFE Environment Projects 2006.

Roche Ireland eliminates production step117 Roche Ireland Ltd., in Clarecastle, Co. Clare, manufacture active pharmaceutical ingredients. A better understanding of their process dynamics has resulted in the elimination of an intermediate isolation step. This has significantly reduced the amount of solvent and energy used and the amount of waste generated.

A non-process example of waste minimisation is that they have moved from a time-based to a condition-based maintenance strategy for all lubricants used on site. This involves regular analysis of lubricants to determine effectiveness, and then replacement is carried out as required.

For hydraulic oil used in centrifuges alone it has reduced consumption from 1000 gallons/year to 250 gallons every 3 years, i.e. a 92% reduction with a saving of €9,000/year.

4.4.8. Barriers

There are many barriers in Ireland to the creation and usage of cleaner technologies and processes. Some are developed in the weaknesses section above. Many others, relating to EGS in general but which also apply to CTP, were described in another Irish study on the uptake to environmental technologies in 2007.118

Several barriers specific to CTP were pointed out in one study of 2003 relating to waste prevention.119 While some of these have been overcome since then, many others remain, including:

117 Duffy, Noel and Coakley, Tadhg Waste Prevention Guide for Industry and Business Limerick Clare Kerry Regional Waste Management Office, 2006. 118 Coakley, Tadhg et al. Investigation into why existing environmental technologies are underused in Ireland EPA, 2007. 119 Coakley, Tadhg and Cunningham, Dermot Assessment and Development of a Waste Prevention Framework for Ireland EPA, 2003.

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Lack of priority and resources in society – especially at national and local government levels Throwaway society – no externalities in real full costs of technologies and products Low levels of awareness – especially in SMEs Lack of sufficient research Lack of sufficient information provision, education and training Lack of green public procurement Insufficient economic instruments to support reduction at source over end-of-pipe Insufficient legislative support for CPT – IPPC type licensing not sufficiently widespread Design for disposal – products not designed to last or to be repaired

Another barrier pointed out by one expert in Northern Ireland was the skills shortage in the areas of CPT related engineering, product and process design and optimisation required to support manufacturing and industrial clients.

4.4.9. Opportunities

Ireland, as a knowledge-based economy, has an opportunity to develop the skill and expertise related to CTP and go beyond end-of-pipe technologies. Some knowledge already exists and this can be further nurtured and developed. The successes of EPA and Enterprise Ireland programmes can be built upon if resources and time are invested in this area of EGS. Climate change policies and programmes can enhance take up of CTP over the coming years.

With widespread concern about climate change and Ireland’s difficult Kyoto-related targets on carbon emissions, now is an excellent time to develop awareness of CTP in industry and society. Further economic instruments can be initiated to support this area of EGS. Simple legislative pressures can be applied to boost SME and public body uptake of CTP and to aid Ireland in catching up with other EU Member States such as Denmark, Austria and Netherlands in this field.

CTP is also an area where there could be spin off benefits to already developed sectors in Ireland such as, for example, Information and communication technology (ICT). New products with potential for less demand on energy and materials will often need such ICT hardware and Ireland has a leading edge in this area. Software development could also be another spin off and again Ireland is well placed to provide software solutions to product and service developers. Nanotechnologies is another growth area in this sector, with further potential to support other sectors such as monitoring and Ireland has developed expertise in this field at University and Institute of Technology level as well in the private sector.

Some areas of growth potential, noted particularly in Northern Ireland are:

Supply chain analysis for materials and energy/carbon efficiency Research and Development Process optimisation

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Product design

Northern Innovations is a case to point. They have identified a market opportunity from companies who have closed down their R&D units but who now need R&D consultancy support.

Other areas of growth potential and opportunity include:

• RES - E consultancy • Other consultancy • Energy management consultancy • Resource efficiency • Water efficiency • Energy efficiency and renewable energy sources • Training, export potential in particular

4.4.10. Conclusions

Ireland has a poor record with regard to CTP, but from a standing start, successful programmes from the EPA, Enterprise Ireland, Invest NI and the Carbon Trust can now be built upon. This will take political and administrative commitment and foresight. It is not enough for Ireland to grow its EGS sector with end-of-pipe technologies that do not sufficiently aid our environmental protection or long term economic growth. Key drivers for the sector are energy and raw material costs, as well as climate change pressures. Opportunities for development of the sector are limited by a skills shortage, particularly in engineering. Some knowledge gaps could be addressed through the EPA Science, Technology, Research and Innovation Programme (STRIVE) and other Research Programmes. The extension of the SFI research programme to include energy matters will enhance the CTP knowledge and business potential and this is welcomed. SEI’s continued R&D supports for renewables and energy efficiency should be continued and expanded. Several worked demonstration examples and capacity building developments are now in place through the CGPP, LAPD and ESP programmes and the activities of the National Waste Prevention Programme of the EPA has led to significant improvements in CPT knowledge and uptake in Ireland in recent years. These need to be further developed, extended, and continued to develop capacity further and increase demonstration levels to a critical mass. The Enterprise Ireland Environment and Green Technology Department’s recent expansion of its financial environmental supports for SMEs should also focus on CTP rather than end of pipe solutions. Local authorities are especially well placed to intensify diffusion of CTP at a local level and adequate resources and training of their staff should be a priority.

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We need capacity building, training, demonstration and subvention to reduce risk with innovations and these drivers need to apply over several years.

If we want to ensure sustainability and economic stability in the future, it is necessary to focus on CTP and to emphasise preventive based solutions over end-of-pipe technologies.

This can be done by some of the following actions:

Widespread training and awareness raising programme in SMEs and public bodies relating to clean technologies. Economic supports and subventions to create incentives to push industry and society away from end-of-pipe solutions to environmental pressures, both from push and pull perspectives. Large scale demonstration programmes involving hundreds of millions of Euro to support current CGPP, EPS, LAPD, Green Business and other programmes. Development of the legislative structure to support a mini-IPPC licensing system for SMEs and other innovative regulations. Change in focus of waste and packaging related legislation from recycling to prevention. Compulsory large scale green procurement backed by legislative and information based supports.

4.5. Energy Management/Efficiency

Products, systems and services for energy management and energy efficiency. Examples include energy consultancy/audits, building energy management systems, energy efficient products and efficiency advice. This sub-sector may also include Environmental Monitoring, Instrumentation and Analysis activities specific to this sector.

Energy efficiency in the construction sector is dealt with in the section on building and construction. There is also considerable scope for overlap between this sector and the cleaner technologies sector, for example energy efficient products may be labelled as clean technology (as has been the case with the US venture capital activity) and there may also be some overlap with the renewable energy sub-sector. This section will therefore concentrate on building energy management systems and the service provision of energy consultancy/audits /advice.

4.5.1. Introduction

At Ireland’s first Energy Forum, held on the 6th March 2008 the Taoiseach, announced that €200 million was earmarked to be spent on energy-related Research and Development over the next five years. At the same Forum, the Minister for Communications, Energy and Natural Resources stated that “energy efficiency is the least expensive and most intelligent

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means of making substantial cuts in our fossil fuel bills and greenhouse gas emissions. Initiatives such as smart metering, building improvements and peak demand reduction will benefit the Irish economy to the tune of €3.6 billion. Notably, they will reduce our carbon emissions by over 6 million tonnes.”

4.5.2. The Energy Management and Auditing Sector

In the 2008 Finance Bill, the Irish Government outlined plans to offer tax incentives aimed at supporting investment in new energy saving equipment purchased by businesses. The incentives apply to the purchase of Building Energy Management Systems (BEMS). BEMS is the "brains" of a building, a high technology system installed in buildings that controls and monitors the building's mechanical and electrical equipment such as heating, ventilation, air conditioning and lighting systems.120 The new scheme allows businesses to write-off the cost of purchasing a BEMS against taxable profits in the year of purchase.

The significant players in the Irish building management systems (BMS) market are Cylon Controls, Trend Controls (part of Honeywell), Siemens, Johnson Controls, TAC (a Schneider Electric company) and Comeragh Controls. The market for BMS hardware and software has been estimated by one of the key companies operating in the sector as €20m and represents 10-20% of the overall investment in heating, ventilation, air conditioning etc.

The energy auditing sector is dominated by Sustainable Energy Ireland (SEI) and the energy provider, ESB Independent Energy. A number of niche consultancies are established, including Hyperion Ltd., Callaghan Engineering, and Irish Energy Management Ltd. A search of the Kompass Directory under the key words “energy audit” yielded ten results.121 It is clear many consultancies will extend into this area as financial opportunities present themselves. SEI had 45 applications in 2007.

The Building Energy Rating (BER) Scheme has created an opportunity for independent inspection and rating for the predicted 45,000 new-builds in 2008 (according to the IHBA) and for existing dwellings placed on the market (for rent or sale) from 1 January 2009. 122 123 There are 471 assessors currently registered with SEI to issue BER Certificates in accordance with the EC Energy Performance of Buildings Regulation 2006 (S.I. No. 666 of 2006). 124

In its 2008 study, “Demand side management in Ireland – evaluating the energy efficiency opportunities”, Sustainable Energy Ireland identified energy efficiency savings potential by sector and technology:

120 http://www.cylon.com/news.php?id=28 121 www.kompass.ie 122 http://www.independent.ie/national-news/shortfall-in-newhome-construction-may-push-prices-back-up- 1314098.html 123 http://www.sei.ie/index.asp?docID=-1&locID=1184#5 124 http://193.178.2.42/SearchAssessors.aspx

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Figure 4.1: Energy efficiency savings potential by sector and technology

Source: SEI “Demand side management in Ireland – evaluating the energy efficiency opportunities”, 2008

With further consideration of peak demand savings, again by sector and technology:

Figure 4.2: Peak demand savings potential, by sector and technology

Source: SEI “Demand side management in Ireland – evaluating the energy efficiency opportunities”, 2008

Lighting and heating (space and water) are striking in their significance, with appliances also relevant in the residential sector and motors in the industrial. The following key measures to achieve greater energy efficiency have been identified by SEI:

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Table 4.3: Residential key measures by building status and fuel Market Fuel Key Cost-Effective Measures Existing Electric Compact Fluorescent Lamp (CFLs), energy efficient floor lamps, Homes proper sizing of Central Air Conditioning, high efficiency appliances, towel warmer timers, low flow measures, tank wraps, ceiling insulation, ceiling and wall insulation, duct diagnostics and repair Existing Oil and Gas Condensing boiler, ceiling insulation, duct insulation, duct repair, Homes Heating Ventilation and Air Conditioning (HVAC) diagnostics & repair, programmable thermostats, water heater blankets, high- efficiency water heaters, low-flow showerheads New Electric CFLs, energy efficient floor lamps, proper HVAC sizing, high- Construction efficiency water heater, high efficiency clothes washer, high efficiency dishwasher, pipe wrap New and Oil and Gas High-efficiency appliances, water heater blankets, programmable Existing thermostats, low-flow measures, tank and pipe wraps, ceiling Homes insulation, high-efficiency and condensing boilers, HVAC and duct diagnostics and repair New Oil Condensing boilers, high efficiency water heaters construction Source: SEI “Demand side management in Ireland – evaluating the energy efficiency opportunities”, 2008

Table 4.4: Commercial key measures by building status and fuel Market Fuel Key Cost Effective Measures Retrofit Electric Premium T-8s, High Bay T-8s, CFLs, occupancy sensors, High Intensity Discharge (HID) lights, HVAC tune-up diagnostics, HVAC proper installation, high-efficiency AC, motors, Variable Speed Drives (VSD), exit signs, LED signs New Electric Premium T-8s, High Bay T-8s, CFLs, occupancy sensors, High Intensity Construction Discharge (HID) lights, HVAC tune up diagnostics, HVAC proper installation, high-efficiency AC motors, Variable Speed Drives (VSD), exit signs, LED signs Existing and Gas High-efficiency boilers, duct insulation, tune-up diagnostics, infrared New cooking appliances, pipe insulation, ceiling insulation, low-flow Construction fixtures, high-efficiency water heaters, zone time and temperature control. Retrofit Oil Double-glazed windows, high-efficiency boilers, high-efficiency water heaters, heat-recovery systems, stack heat exchanger, Energy Management System (EMS) installation New Oil High-efficiency boilers, heat recovery systems, high-efficiency water Construction heaters, high-efficiency pool heater, pool cover, instantaneous water heater, zone time and temperature control Source: SEI “Demand side management in Ireland – evaluating the energy efficiency opportunities”, 2008

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Table 4.5: Industrial key measures by building status and fuel Market Fuel Key Cost Effective Measures Retrofit Electric Premium T-8s, High Bay T-8s, CFLs, occupancy sensors, High Intensity Discharge (HID) lights, HVAC tune-up diagnostics, HVAC proper installation, high-efficiency AC motors, Variable Speed Drives (VSD), exit signs, LED signs, pumps, compressed air, Clean room measures, process measures Existing Gas High-efficiency boilers, duct insulation, tune-up diagnostics, infrared cooking appliances, pipe insulation, ceiling insulation, low-flow fixtures, high-efficiency water heaters, process measures, zone time and temperature control Retrofit Oil Double-glazed windows, high-efficiency boilers, high-efficiency water heaters, heat-recovery systems, stack heat exchanger, Energy Management System (EMS) installation, process measures Source: SEI “Demand side management in Ireland – evaluating the energy efficiency opportunities”, 2008

Each of these represents a potential market opportunity, as many of the specific goods are not currently manufactured in Ireland.

4.5.3. Regulatory Framework

The Kyoto Protocol set clear targets for Ireland in relation to its GHG emissions; targets we have not achieved. Ireland is now faced with major reductions post-Kyoto i.e.post-2012, which will be even greater if a subsequent international agreement on climate change can be reached. Directive 2006/32/EC on energy end-use efficiency and energy services (ESD) required Member States to submit an action plan in 2007 setting out how they will achieve energy efficiency savings of 9% by 2016 (excluding businesses within the EU Emissions Trading Scheme, aviation sector and marine bunker fuels). However, the European Commission Communication “An Energy Policy for Europe”, 2007 included the sectors involved in Emissions Trading Scheme in the principle of a 20% reduction target. More advanced energy efficiency plans are required in 2011 and 2014. Ireland published its draft action plan in 2007. In addition to satisfying the 2016 target of 9% savings, the plan set out the path to achieving a 20% (33% for the public sector) reduction in energy demand across the whole economy by 2020, including the electricity, transport and heating sectors. This is consistent with the 2007 Government Sustainable Energy White Paper ‘Delivering a Sustainable Energy Future for Ireland’ which sets a further indicative target of 30% to surpass the general EU ambition of 20% saving.

The following targets are specified in the National Energy Efficiency Action Plan:

Table 4.6: Reference Energy Consumption and Target Savings Values Target Energy Saving PEE ESD 9% Target 2016 (ktoe) (GWh) Reference Energy Consumption 12,531 145,741 ESD Target (9% of Reference Energy Consumption ) 1,128 13,117

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ESD Interim Target 2010 6,500

White Paper 20% Target Reference Energy Consumption 13,725 159,624 White Paper) 20% Target (20% of Reference Energy Consumption) 2,745 31,925

White Paper 30% Target Reference Energy Consumption 13,725 159,624 White Paper 30% Target (30% of Reference Energy Consumption) 4,118 47,887

These savings are attributed per sector as follows:

Table 4.7: Sectoral Savings Sector % saving Residential 53 Business and public 28 Transport 16 Electricity supply 3

These savings must be seen in the context of continuing growth in energy demand, though energy intensity has improved by 32% between 1990 and 2005 (as measured by energy usage per unit of GDP). However, this improvement is attributed not only to energy efficiency but also to structural changes in the economy, with a shift towards higher added- value, less energy intensive industry and commerce. The EU Green Paper on Energy Efficiency “Doing More With Less”, asserts that a 20% reduction in energy demand could be achieved with currently available technologies and, of most relevance to this study, this improvement can be achieved in a cost effective manner – implying there is a clear economic stimulus. An analysis conducted by Sustainable Energy Ireland suggests that potential gains are equivalent to about 24% of current demand in the industrial, commercial and public, and residential sectors. Using the ODEX indicators specified in the ESD Directive, SEI, in their (2007) report “Energy Efficiency in Ireland” determined that there was an 8.1% improvement in energy efficiency between 1995 and 2005. This was composed of a 15% improvement in technical efficiency, but confounded by a dis-improvement in behavioural efficiency.

Directive 2005/32/EC on the eco-design of Energy-using Products (EuP) is a Framework Directive. It is intended to promote the adoption of environmental life-cycle considerations by manufacturers in the design of products. It defines conditions and criteria for setting, through subsequent implementing measures, requirements regarding environmentally relevant product characteristics. It aims to avoid disparities between differing national regulations and introduces an Integrated Product Policy (IPP) accelerating the move towards improving the environmental performance of energy-using products. Much of the effort to

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date has focused on developing a suitable eco-design methodology and testing this with selected appliances. Current work by SEI is examining lighting systems, boilers and water heaters, external power supplies and simple set-top boxes.

4.5.4. Trends

SEI has been effective in establishing networks of environmental managers, particularly in the large energy consuming businesses. The Irish Standard IS393 “Energy Management Systems” (not to be confused with Building Energy Management Systems technologies) provides a management structure similar to quality or environmental management systems, but with a focus on energy. Adoption of this standard by the larger enterprises and the parallel Energy MAP (Management Action Plan) Initiative for smaller enterprises is both stimulating investment and building capacity among consultants, which may provide a springboard for marketing Irish services abroad.

4.5.5. Drivers

Up to 2008 the building boom and rising energy costs were identified by one of the respondents to the industrial survey as the two key drivers in market growth. With continuing rising energy costs (with oil at US$200/barrel a prospect) this is now the main driver for business, underpinned by national energy objectives.

4.5.6. Weaknesses

The Irish Building Regulations do not currently specify any standards or requirements in regard to the energy efficiency of building operation as distinct from construction. Among the comments received from industry were: “Irish market very far behind UK in terms of metering and targeting.”; “Need recognition within Regulations of energy management and monitoring as an important asset with building design.” A critical requirement for effective energy management is a clear picture of detailed performance. Absence of metering indicates there is a market for improved meters, but interpretation of the meter readings is likely to have greater employment benefit than the supply of the meters themselves, since meters are likely to be imported from low-cost manufacturing locations (unless of course local production is encouraged). Building construction standards will go a long way in achieving energy efficiency, but ensuring on-going performance requires maintenance and management.

Energy service companies (ESCO), also known as Energy Performance Contracting, is poorly developed in Ireland, in contrast to some other EU countries. An ESCO is a company that: “guarantees energy savings and/or the provision of the same level of energy service at a lower cost through the implementation of an energy efficiency (or renewable energy project) and is rewarded based directly on the energy savings achieved”. This is distinct from energy service providers. While both offer similar services, energy service providers provide a service for a fixed fee or as added value to the supply of equipment or energy. They may have some incentives to reduce consumption, but compared to an ESCO, they do

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not assume any risk in case of underperformance, i.e. they are paid a fee for their advice/service, ESCOs are paid (either in whole or at least in part) based on the results of their recommendations. While there are several prominent energy service provider (Dalkia, RWE, Energia, ESB Independent Energy, etc.) few offer ESCO services.

ICT driven ESCOs were identified as a clear area of interest by SEI.

The European ESCO market was estimated in the year 2000 to be in the region of €150m per annum, while the market potential has been estimated to be between 5 to 10 billion €/year. The cost effective potential market size for ESCOs in Ireland is estimated to be €49 – €110 million per annum by 2020.125

4.5.7. Case Studies

Cylon Controls

Since 1985 Cylon has provided building control systems worldwide becoming one of the largest independent manufacturers of building controls in Europe. The company has 50 employees and key clients include Microsoft UK and Royal Preston Hospital. Cylon provides building energy management systems across all categories of buildings maximising comfort and efficiency. Cylon's building energy management solutions have been installed in Europe, North America, Asia, the Middle East and Africa in large and small commercial offices, retail centres, schools and colleges, industrial buildings, health and leisure centres, hospitals and hotels.

Because Cylon is focused on building control solutions, they understand the variety of trends and associated challenges their clients are facing. Cylon builds backward compatibility into the design of their products, to ensure confidence that the company’s investment in a building energy management system is secure. Cylon is committed to providing the right product for each building control solution and the right building control solution to meet specific building energy management challenges.

Their purpose built energy efficient headquarters in Dublin, Ireland exemplifies the company’s pride and confidence in its building energy management systems. Encompassing over 18,000 square feet, the state of the art facility is fully controlled by Cylon's building management system. The building energy management system is fully integrated with its automated fire and security systems. At this showcase facility Cylon's energy efficient building control product range is manufactured to the highest international standard.

Comeragh Controls Ltd.

Comeragh Controls Ltd is an innovative technology-based company whose core business is the

125 Sustainable Energy Ireland, Assessment of the potential for ESCOs in Ireland, Sustainable Energy Ireland, 2005.

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design and manufacture of technologically advanced intelligent control systems for both the domestic and commercial markets

With the price of fuels continuing to rise and range of environmentally friendly products available in the market place, suppliers and installer of domestic and commercial climate system have be faced with the integration and management of many different systems. Comeragh Controls has responded to this requirement, by designing a configurable energy management control systems. Comeragh Controls currently supply systems for private dwellings, hospitals, nursing homes, hotels, schools, sport facilities, offices, etc.

Comeragh Controls have deign an intelligent controls system, iCon, which enables the installer the ability to configure the system, thereby enabling the system to be tailored to suite the specific individual project requirements. Great emphasis has been place on the user interface ensuring the iCon system is simple to use for both the installer & end user. Through individual zone scheduling & temperature control, weather compensation, prioritization of multiple heat sources, significant running cost saving can be achieved..

Glen Dimplex Group Global Energy Centre

The new Glen Dimplex Energy Centre announced in July 2007, will cost €2.5 million and will employ 20 leading researchers and engineers, dedicated to the research and development of energy efficient products for the Group's Irish and global markets. The Energy Centre, will be constructed using renewable and sustainable building materials. In addition, the Energy Centre will house a showroom which will feature innovative products created by the Group's research and development personnel and which will make a significant improvement to energy efficiency in homes and businesses throughout the world.

Founded in 1973 by entrepreneur, Martin Naughton, Glen Dimplex, which has an annual turnover approaching €2bn and employs 10,000 people worldwide, is in year 3 of its corporate strategy for creating a new business through the development of energy efficient products using renewable technologies. The global Energy Centre is a central part of this strategic initiative.

Glen Dimplex is already the largest producer of heat pumps in Europe and produced 30,000 heat pumps in its state-of-the-art factories in Germany and France in 2006 and expects to grow this volume significantly. In Germany, where Glen Dimplex is the market leader in the production of heat pumps, the company increased its production workforce by 330 people in 2006 to cope with the demand for its Geothermal and Air/water Heat Pumps. In Ireland, over 1,000 Glen Dimplex heat pumps have been installed in Irish homes since 2005.

Glen Dimplex is market leader in heat pumps in Germany, Austria, France, Switzerland, Ireland and the UK. With the opening of its new Energy Centre, Glen Dimplex will continue to innovate in the renewable energy product sector with the development of total heating systems solutions with the production of heat pumps, Solar Heating, Wood Pellet Boilers and Heat Recovery Systems.

4.5.8. Barriers

Industry respondents suggest there is still a deficit in the wider business community regarding the capabilities of energy management. The introduction of the BER scheme has

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resulted in a major growth in the number of individuals qualified to undertake this work, but the focus is on rating the asset rather than its on-going activity performance. There are few companies with scale that could grow into providing goods or services in the export market.

4.5.9. Opportunities

Energy-related consultancy work will present major opportunities. The effective retrofitting of the existing energy architecture will take place over the next 15-20 years at both large- scale and domestic levels. The large scale retrofitting will involve a reorientation of the grid to the location of the renewable sources of electricity as well the deployment of wind turbines, ocean energy devices and other renewable equipment. The adoption of a Corporate Social Responsibility or Sustainability outlook by major businesses will provide a demand for energy consultancy. In parallel, trends to outsource energy management and energy services will develop energy providers that provide the utility of heating, cooling, lighting, etc, rather than being solely primary energy suppliers. Building energy rating will become central to how property is valued in the future. The number of BER assessors will dramatically increase as will the opportunities for energy consultants who can advise SMEs and domestic dwellings on the best options around renewable energy solutions and energy efficiency measures. The stimuli for this will arise from full roll out of the BER system and consumer response to escalating fuel costs via increased commodity prices and carbon taxation. Export potential may emerge for energy management services if sufficient scale can be built on the back of indigenous requirements. However, the current position is that foreign-owned companies are providing the major ESCO services in Ireland, viewing Ireland as an extension of their main EU mainland market. Improved goods have also been addressed in the construction sub-sector report, and include: monitoring and control instrumentation for energy management systems, higher efficiency lighting systems and fossil-fuelled appliances e.g. LED lighting, small CHP units, condensing boilers; or appliances using renewable energy sources, e.g. biomass boilers, solar panels (thermal and photovoltaic), heat pumps (geothermal, air); building fabric units that combine insulation and energy collectors, higher efficiency windows, and ventilation heat recovery systems, etc.

Major ICT opportunities exist in this sub-sector. For example, SServer Virtualisation is a method of running multiple independent virtual operating systems on a single physical computer. It is a way of maximising physical resources to maximise the investment in hardware. Server Virtualisation is seen as very important to reduce the heavy energy usage of ICT databases. (An example of a leading company is VMWare) Another energy saving opportunity, power management software, is designed to switch machines off or put them on standby when they are not being used.

4.6. Environmental Consultancy

Services to provide assessment and advice relating to environmental issues include environmental audits, environmental management systems and training, life cycle assessment, environmental impact assessment, advice on bio-diversity, environmental

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regulations and corporate environmental responsibility. Also covers consultants providing advice in two or more sub-sectors or specialists not covered elsewhere.

4.6.1. Introduction

The services typically provided by consultancy companies in this sub-sector include:

IPPC licensing Strategic environmental assessment (SEA) Environmental impact assessment (EIA) EMS – ISO14001 Carbon foot-printing Life Cycle Analysis Environmental policy statements Environmental monitoring programmes Wildlife conservation Ecological studies SPA/SAC work Biodiversity studies

Estimating the size of the sub-sector is difficult as many companies offer environmental consultancy services as an ‘add on’ to their primary competency or activity. Therefore they are not classified for statistical purposes as an environmental consultancy. For example, energy management consultancy services may be included in the renewable sector but also in the general consultancy services NACE sector.

The inter-relationships between environmental consultancies is complex, with large or lead consultancies frequently engaging the services of a specialist firm (or indeed individuals) to complete a specific piece of work as part of a larger assignment. For example, a large firm may have the contract to carry out an EIA for a road project but will retain the services of an ecologist to produce a report on the impact on bird or bat life.

Companies in this sub-sector fall into one of two categories; either a large, multi-disciplinary practice (probably multi-national with a headcount of >200), or small companies, generally no more than 12 employees and a founder who would hold a majority holding in the practice. The larger practices are generally UK plc companies who have acquired capacity in the Irish market (North and South) through the acquisition of existing domestic firms. The decision to establish operations in Ireland was based on the intense level of infrastructural investment across a number of sectors since the mid-1990s. The purchasing of traditional style practices was a new concept in Ireland and allowed founding partners to realise the built up value in the practice and continue working under the new ownership. When pitted against competing against well-resourced, publicly quoted operations, most Irish practices chose the former route.

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All of the major environmental consultancies are either all-island or part of internationally owned companies. Therefore, an all-island market exists de facto.

There are approximately 170 environmental consultancy companies listed in the Enterprise Ireland envirocentre listing.126 Using an extremely broad definition, the Kompass listings show 326 environmental consultancies. However, a further filtering of this listing gives a figure closer to the 170 for Ireland. The vast number of listed businesses on the island are sole traders, or consultancies with a small number of employees.

For the purposes of this study, consultancy services provided as part of the other sub-sectors are valued within the figures for that sub-sector. The estimate of the annual market value of this specific sub-sector as described above in Ireland is around €60-€75 million per annum.

The split between public versus private work in Ireland is estimated to be 30:70. Smaller consultancies remarked on the fact that tendering for public work was too onerous and client interactions were too bureaucratic, this tended to turn consultancies away from tendering for this type of work.

4.6.2. Strengths

Over the past number of years increasing levels of compliance with national and EU legislation, combined with the growing public capital programme and investment in private infrastructure, has enabled the sub-sector to respond and ensure that the necessary expertise is available within Ireland to provide the client support services. The response from the third-level sector has been attuned to the changing needs and has provided the necessary courses to meet the demand. This has enabled some consultancies to become highly specialised in areas such ecology and bird surveys. Companies did not complain of skills shortages, perhaps because they are using non-Irish experts for the delivery of some specialised services.

The arrival of the UK plcs into the market has had a positive effect in the provision of consultancy services on the island. It has freed up the conventional thinking where the northern office serviced NI contracts and the southern office serviced Irish contracts. There is a more fluid approach now that allows consultants to develop their skills in two jurisdictions and develop best practice techniques in the execution of their work.

4.6.3. Weaknesses

Companies in this sub-sector appear to fall into one of two categories; either a large, multi- disciplinary practice (probably multi-national with a headcount of >200) or small companies, generally no more than 12 employees and a founder who would hold a majority holding in the practice. There does not appear to be the strategic intent or indeed the ambition to develop into larger practices through growth or acquisition. The sub-sector remains

126 http://databases.envirocentre.ie/EnvirocentreConsultancyWeb/consultantsList.aspx

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extremely fragmented with little attempted branding or marketing of services. This is probably some what reflective of the consolidation of a significant number of mid-term practices under the livery of the larger multi-national practices over the past decade.

The small, domestic companies within the sub-sector appear to be content to compete on a low overhead model specialising in niche areas. In the context of the knowledge economy this is disappointing; as its does not position Ireland to compete for work at a European or international level. While the legislation is uniform at a European level, how it gets transposed at national level can be different and this can act as a barrier to expansion. Other respondents referred to issues on applicability of professional indemnity in different states and local regulations around tax clearance as a hindrance to tendering for work outside Ireland; this was even mentioned in the context of southern companies applying for work in Northern Ireland and vice versa.

A common theme emerging was around the enforcement of legislation. It is felt that while a substantive body of legislation is in place across most of the thematic areas, compliance to and enforcement of, this legislation continues to be problem and acts as a barrier to the sub- sector as the necessary consulting expertise is not retained in the completion of applications due to the perceived lack of penalties involved.

A number of respondents noted that analytical and report-writing skills of new hires was an ongoing difficulty in developing the sub-sector and something that would require attention within the environmental graduate colleges.

4.6.4. Opportunities

While a cool-off has been observed in some consultancy areas (EIA, SEA) related to the construction industry, there are a number of areas where considerable growth is being experienced including biodiversity (Countdown 2010), water resources and climate change. These three areas will form a major part of the sub-sector in the coming years.

A recurring theme emerging from conversations with respondents has been the importance of the water sector in the expected growth of the consultancy sub-sector. The scope of evaluation work and ongoing monitoring is such that it is expected to generate considerable work for this sub-sector in the run up to and subsequently after the full implementation of the Water Framework Directive.

As soon as the market perceives that the there is serious intent in relation to the implementation of practical measures to reduce GHG emissions, a surge of consultancy activity can be expected as companies will need to determine their carbon footprint, reduce their energy usage and offset GHG emissions. This is an entirely new business area with significant growth potential commensurate to the compliance burden facing both the public and private sectors as climate change mitigation and adaptation measures begin to bite.

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In the UK the environmental consultancy industry is characterised by a willingness to seek work overseas. The sector has built up expertise in pollution control in the Middle East especially in the oil and gas area. More recently, UK consultancies specialising in waste management and soil reclamation/remediation have targeted Eastern Europe for expansion as the former Soviet bloc countries struggle with the legacy of their heavy industrial past.127 This appetite for expansion is not limited to the major plcs but also among the smaller companies; the 2008 ENDS directory noted that 57% of consultancies were seeking work outside the UK128.

While Irish consultancies would probably lack the sectoral experience mentioned above there are other possibilities around IPC licensing, ISO14001, SEA and the REACH directive where the harmonised approach throughout Europe and our excellent domestic record in these areas would provide the possibility for expansion in the future. Enterprise Ireland could play an important role in developing a programme to assist consultancies serious about scaling up their businesses and assistance in obtaining work overseas.

In addition, as a market entry strategy they would need significant intelligence about the likely flow of public tenders in their niche area of expertise. Once a significant public tender is secured this provides an exporter with a foothold in the market. This is the business model used quite successfully by many non-Irish environmental consultancies now present in Ireland.

4.6.5. Conclusions

The consultancy sub-sector is a new and vibrant sub-sector where its varied expertise can deliver the requirements of the markets north and south. The growth areas in this sub- sector are expected to be Biodiversity, climate change, compliance management (REACH, ISO14001, ISO14064) and water resources. The sub-sector appears to lack ambition to scale up and explore new markets and, in an era where Ireland looks to position itself as a knowledge economy, expert services in the international environmental services market should be viewed as excellent opportunities to meet this goal.

In particular, we would emphasise the consultancy opportunities in the response to climate change and soaring energy costs. Demand for carbon foot-printing, energy rating and energy retrofitting services will grow at an extraordinary rate as enterprises respond to regulatory and market demands. The opportunities exist both domestically and internationally for these services.

The recent addition of Enviros and RPS to the EI environinireland directory is a welcome pragmatic response to developing export potential in this sector. These and other multi- national consultancies have dominated the sector on the island over the past number of years. They have established significant capability across a number of disciplines which is

127 UK CEED, emerging markets in the environmental sector, November 2006. 128 ENDS Directory 2008 www.ends.co.uk

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potentially transferable to other markets. EI should continue to work with these companies to identify priority areas of expertise and know how, with the agreement of the parent company, and with EI support target niche markets in Eastern and Central Europe.

4.7. Environmental Monitoring, Instrumentation and Analysis

Products, systems and services for measuring and monitoring environmental parameters. Examples include water, air and soil quality, meteorological conditions and flow rates, including on site and laboratory analysis. This sub-sector includes specialist activities not covered in other sub-sectors, such as air and noise pollution, radiological monitoring, land remediation and energy management.

4.7.1. Introduction

It is estimated that there are some 28 companies involved in the environmental monitoring and instrumentation sector in Ireland. All the large environmental consultancies in Northern Ireland provide environmental monitoring services as do several small specialist companies. 129

There is the potential for overlap between the sector and a number of other sectors, including energy management and contaminated land. For the purposes of this study, the sector comprises the following areas:

Environmental laboratory services (soil and groundwater testing, radiological testing, and marine spill testing); Ambient air monitoring; Energy/electricity metering; and Water metering and monitoring.

The total UK market for the environmental monitoring and instrumentation sector is estimated to be £189 in 2005, which extrapolates to a Northern Ireland market of £12.8m.130

4.7.2. Regulatory Framework - Ireland

Ireland has developed an environmental monitoring service to cater for the licensed activities scheduled under the following legislation:

The Water Pollution Act 1977 (and amendments) The Air Pollution Act 1987 Environmental Protection Agency Act 1992 (and subsequent IPPC Regulations) Waste Management Act 1996

129 www.KompassDirectory.ie (search phrases, environmental monitoring, environmental instrumentation). 130 Department of Trade and Industry (UK) study Emerging Markets in the Environmental Industries Sector, November 2006.

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Protection of the Environment Act 2003 The Building Energy Rating (BER).

Some €753m in public funding has been approved under the NDP, with investment in the ’legacy’ issues of old landfill sites the priority. However, there are no details provided as to project priorities and the timescale for delivery of the proposed measures.

4.7.3. Regulatory Framework – Northern Ireland

The key legislative drivers for the sector include:

Waste and Contaminated Land Order (NI) 1997: the Northern Ireland equivalent of the Environmental Protection Act in Great Britain, the Order includes the main legal provisions for the introduction of a contaminated land regime in Northern Ireland.

The Pollution Prevention and Control Regulations (Northern Ireland) 2003: Implementing the IPPC Directive, the main focus of the regulations is the application of Best Available Technology (BAT). However,

The Water Environment (Water Framework Directive) Regulations (Northern Ireland) 2003: These Regulations make provision for the purpose of implementing Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy. The Regulations require a new, strategic planning process to be established for the purposes of managing, protecting and improving the quality of water resources. The Department must carry out the analytical and preparatory work required by regulations and prepare proposals for environmental objectives and a programme of measures for the river basin district and the part of each international river basin district falling within Northern Ireland (regulation 11). Those objectives will translate the generic environmental objectives of the Directive into specific objectives which take account of the particular situation in each district.

Other relevant legislation: the Energy Performance of Buildings Directive has not yet been implemented in Northern Ireland. However, the introduction of the regulations is expected in late 2008.

The implementation of the Regulations on the Water Environment and the Energy Performance of Buildings Regulations will be a key driver for environmental monitoring systems for water quality and use and energy use.

In the future, a key driver will be the climate change agenda and the adoption of targets for reductions in GHG emissions from domestic and commercial buildings. The UK Climate Change Bill has just received parliamentary approval at Westminster. However, it is currently unclear if the Northern Ireland will be included in its target of a 60% reduction in carbon

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emissions by 2050. 4.7.4. Trends

A major trend in the housing and commercial building sector will be for the installation of smart metering and control systems for active energy management as the impacts of GHG emission targets adopted at national levels cascade down to a sectoral and sub-sectoral level.

In addition, the specialist market for carbon emission verifiers is growing on foot of Ireland’s and the UK’s National Allocation Plans.

4.7.5. Drivers

The key drivers for the sector will be water and energy efficiency, with the GHG emissions or carbon footprint of activities, processes and technologies increasingly becoming the primary driver. Indeed, even water supply is increasingly being considered in terms of GHG emissions and climate change.

4.7.6. Weaknesses

Ireland has not addressed opportunities in building operation optimisation which can be achieved through energy (HVAC and lighting) monitoring and control. This is a requirement for all public buildings in the UK and is outlined in more detail in the environmental management and efficiency sub-sector review.

4.7.7. Case Studies

Over the past 12 years University College Dublin has been involved in the development of a Building Energy Management System (BEMS) which has achieved energy cost savings of £350,000 per year at current prices and has reduced the College’s overall energy bill from the equivalent of almost 5% of total expenditure in 1983 to just 1.7% in 1995.131

All pre-1986 buildings on the campus were fitted with stand alone electrical and pneumatic controls. This meant that over 100,000 square metres of buildings were fitted with time- clocks, thermostats and temperature controllers of different types and ages. Day-to-day maintenance of these controls was a considerable headache and the only real information on performance was through complaints from occupants. Event based control is also used in combination with time scheduling and delay timers to provide occupancy control of lecture theatre lighting and ventilation. Outside lighting is controlled using a combination of time- scheduling and outside light level, and lights are switched on and off at certain times accordingly. All the main buildings at Belfield have been fitted with electrical check meters which provide inputs to the BEMS. This allows individual buildings to be monitored on a daily

131 Good Practice Case Study 2. BUILDING ENERGY MANAGEMENT SYSTEMS AT UCD BELFIELD. http://www.sei.ie/uploadedfiles/FundedProgrammes/cs2bemsatucd.pdf

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basis. Flow measuring valves have recently been installed on the heating supply pipe work from the central boiler house to individual buildings. The BEMS can combine the information coming from these valves with temperature differentials measured at the flow and return pipe work to produce an overall heat supply calculation for each building. It is intended to use this information to have the BEMS produce a weekly total energy consumption report for each building. The cost savings alone have more than justified UCD’s commitment to BEMS. However, there are other benefits including improved comfort conditions for staff and students, centralised control which is vitally important on a large site like Belfield, and the facility to access the system by modem for remote diagnosis and solving of problems, reducing callouts for maintenance staff.

The Queens University of Belfast QUESTOR Centre Centre of Excellence for Environmental Monitoring and Instrumentation

Established in 1989 at Queen's University Belfast, the QUESTOR Centre is Europe's only Industry/University Co-operative Research Centre (I/UCRC). The I/UCRC concept is a highly successful model developed by the National Science Foundation in the United States where more than 50 such Centres have been operating successfully for more than 20 years. QUESTOR has been formally linked to the NSF Programme since its formation in 1989.

Research & Development Strengths Remediation technologies (water, soil, air) Water / wastewater treatment processes (biological, chemical, physical, thermal, plasma) Environmental genomics Environmental monitoring and analysis Waste management and recycling Environmental modelling (emissions, odour, noise, dust, air quality) Pollution prevention ('Green chemistry') Environmental communication Renewable energy, including bioenergy (particularly energy from waste) Applied Technology Unit

QUESTOR ATU is a unique, not for profit organisation that exists to serve a wide range of companies. The unit delivers a professional monitoring service that includes on-site monitoring and environmental analysis. http://questor.qub.ac.uk

University of Ulster. Centre for Sustainable Technologies Centre of Excellence for Environmental Monitoring and Instrumentation

The Centre for Sustainable Technologies at the University of Ulster undertakes multidisciplinary research to create, develop, improve, demonstrate and evaluate emerging, existing and alternative sustainable renewable energy, building design, construction materials and environmental modification technologies.

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The Centre of Sustainable Technologies has three groups, one of which is Solar Energy and Energy in Buildings which specialises in passive, hybrid and active solar energy systems, energy efficiency of buildings and the eco-sustainability of the built environment.

4.7.8. Barriers

A lack of capacity and weak knowledge base within Ireland are the main barriers that could be identified.

4.7.9. Opportunities

The opportunity to fund R&D to build capacity and enhance the knowledge base on the island of Ireland. The following would appear to be areas with future growth potential: building energy management systems (smart metering); and water quality analysis

4.7.10. Conclusions

The key areas for the development of the environmental monitoring and instrumentation sector are likely to be the WFD and energy management and efficiency. Increasingly, GHG emissions, or carbon foot-printing of activities, processes and technologies will be the key driver.

The key messages are:

Building design standards (domestic and commercial) can be used to develop capacity. An existing knowledge base exists in Ireland (UCD and University of Ulster) in advanced energy monitoring systems for buildings. Knowledge gaps could be addressed through the EPA Science, Technology, Research and Innovation Programme (STRIVE).

4.8. Marine Pollution Control

Products, systems or services for controlling, clean up and minimising marine pollution. Examples include products such as oil absorbents and booms; and services such as marine pollution prevention training, monitoring and clean up services.

4.8.1. Introduction

This sub-sector encompasses products and services that control and clean-up incidents of marine pollution. Ireland has been fortunate in terms of having very few accidental oil spills and pollution incidents. There have been several small to medium scale accidental spills affecting our waters e.g. Sea Empress 1996, a major spill in Milford Haven that affected Irish coast a month later, Hickson’s fire in Cork Harbour 1996, and the sinking of the Kowloon

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Bridge 1986.132

The specification of and purchase of goods and services specific to the marine pollution control sub-sector is restricted to the network of ports on the island of Ireland, private fuel terminals and the operations of the coastguard authorities on both sides of the border. The coastguard manages the response to marine pollution incidents as a resulting of offshore exploration activities.

There are 25 ports operating on the island of Ireland, four in Northern Ireland and 21 in the Republic and six fuel terminals. 133 The ports network can effectively fall into four categories:

General Cargo Ports (e.g. Belfast Harbour, Dublin Port) Fishing Ports (e.g. Castletownbere, Killybegs) Ferry Ports (e.g. Port of Larne, Rosslare Europort) Fuel terminals (e.g. Whitegate oil refinery, ESB Tarbert)

The total inbound/outbound tonnage amounted to approximately 75m metric tonnes in 2006 (excluding fuel handling), with a total tonnage of 53m in Ireland with a further 22m tonnes handled through ports in Northern Ireland. 134 The distribution of this tonnage is concentrated on a few ports:

Dublin Port 27% Belfast Harbour 23% Shannon/Foynes 15% Cork Harbour 13% Port of Larne 7%

These top five ports account for 85% of maritime freight activity on the island of Ireland. A review of the environmental plans for these ports provides a reliable indicator of the scope of the sub-sector. All these ports maintain stocks of pollution control equipment on-site and the Irish Coastguard also maintains a stock of pollution control equipment at Waterford, Killybegs and Castletownbere. Other stockists of marine pollution control equipment are coastal oil storage and processing facilities (Whitegate, Bantry) and power generation facilities (ESB Tarbert, and ESB Moneypoint).

4.8.2. Drivers

This equipment is used only in the event of a spillage or pollution incident. In contrast to the UK (2004) where there were 664 incidents involving discharges, there were only 33 around Irish coasts, and most of these were of a minor nature. 135

132 Marine Institute, NDP submission 2007-2013. 133 IMDO – Irish Maritime Development Office, www.imdo.ie 134 CSO – Central Statistics Office, www.cso.ie/statistics/porttraffic 135 Key Indicators of the Aquatic Environment, EPA (2005).

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There also tends to be a collective approach to incidents where equipment is pooled and moved between incidents when required. This is most evident with the Shannon Estuary Anti-Pollution Team (SEAPT), where a consortium of 16 parties manages pollution control in the estuary. A number of locations around Ireland retain the services of a major UK marine pollution contractor Oil Spill Response Ltd. who can rapidly deploy specialised teams and equipment to major pollution incidents. This is done on a retainer basis where equipment and personnel is effectively rented for short periods in the event of an incident.

Future drivers could include the response to a European Maritime Safety Agency (EMSA) action plan entitled ‘Oil pollution preparedness and response’. EMSA was established against the background of perceived inadequate ability to handle large-scale marine pollution incidents such as the sinking of the Prestige in 2002. EMSA was given the responsibility for setting up a network of vessels, equipment and other resources to help member states to deal with pollution from ships.

From these reports, the type of products that fall into this sub-sector would include booms, skimmers and absorbent materials. These are items used in the case of a pollution incident, they form part of a contingency plan and are utilised in the event of a spillage or risk of pollution. Many of the items are capital equipment with life spans of 10 or 12 years. As a consequence, usage and turnover of equipment and consumables is currently very low. As an indicative example, the port of Shannon-Foynes holds approximately €600,000 of marine pollution control equipment at any one time. However, a large port may only expend in the region of €15-20,000 per annum maintaining and topping up its marine pollution kit.

On the services side, companies or ports provide de-bunkering services to vessels in ports as well as providing consultancy services to ports in their preparation of response plans. Overall, the value of the all-island market is estimated to be in the region of €3-5m per annum.

4.8.3. Strengths

There is little obvious strength on this island in this sub-sector, other than the fact that we appear prepared in the event of pollution incidents. The port companies have produced oil spill contingency plans under the Sea Pollution (Amendment) Act, 1999 and maritime county councils are required to submit their oil spill contingency plans to the coast guard for approval. There is no impending legislation, nationally or on a European basis that would drive further investment in this area. A number of ports (Larne, Cork) have adopted the voluntary environmental code set out in the ECOPORTS criteria; Cork Harbour, in particular, has an impressive environmental policy statement and reports extensively on environmental performance centred on controlling pollution risk and minimising potential impacts.

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4.8.4. Weaknesses

As a sub-sector, employment is very limited; pollution response is managed by multi- disciplinary teams made up from existing port workforces. There is no dedicated supplier of MPC products or services throughout Ireland. Global suppliers service the market either from the UK or through a network of agents engaged in the broader hazardous waste area. On the indigenous manufacturing side, the only significant company whose manufacturing activities were predominantly in the MPC area was Fast Engineering in Antrim. 136 Due to the relatively small scale of the offshore oil and gas exploration industry, and the intermittent nature of this highly risky business, there was no significant opportunity to supply services to this market segment. The UK is a major competitor in this area of marine pollution control so it is unrealistic to believe that an Irish start-up company has any prospect of getting a foothold in this business, other than by acquiring an existing UK based operator. Another factor mitigating against new business in this area is the declining number of incidents of marine pollution control in European waters as international treaties on marine pollution are better respected by maritime companies. In the absence of an indigenous sub-sector, the prospect of securing new business in export markets is negligible.

4.8.5. Conclusions

The marine pollution control sub-sector is one founded on contingency. It is a question of having the people and equipment in the right place at the right time. There is no ongoing use of equipment or dedicated personnel but a plan to mobilise in the event of an emergency.

There is little or no opportunity for the prospects of inward investment in this sector due to the fact that there is little global growth in the area and manufacturing tends to co-locate to active ship building /ship repair locations - Southampton in the UK would be an example.

The Beaufort marine research programme launched in 2007 covered five key areas of marine research with a view to developing the industry onshore and offshore. A review of the five thematic areas showed no research into marine pollution control.

Overall, marine pollution control forms a very small part of the environmental goods and services sector on the Island. Commercial opportunities of all forms across the island are limited with little prospects for expansion in what is a low growth environment.

4.9. Noise and Vibration Control

Products, systems and services for monitoring and reducing noise and vibration. Examples include noise meters, monitoring systems, acoustic buffers, enclosures and barriers and silencers. This sub-sector may also include Environmental Monitoring, Instrumentation and

136 www.fastank.com Fast Engineering specialise in the supply of mobile, collapsible tank for holding pollution spills.

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Analysis activities specific to this sector.

4.9.1. Introduction

Noise pollution (or environmental noise) is displeasing human or machine created sound that disrupts the activity or happiness of human or animal life.137 Common forms of noise pollution are from transportation (principally motor vehicles but also including aircraft and trains) and from industrial plant and equipment vibration.

4.9.2. The Sector

There are 31 companies listed in the Kompass directory and 41 in the Golden Pages providing noise and vibration related services and products.138 139 Among the most important indigenous companies are:

Noise and Vibration Consultants Industrial/Construction Acoustic Solutions Suppliers AWN Consulting Hydroflow ANV Technology MTD Solutions Noise Solutions Acoustic & Thermal Insulations Ltd (A.T.I.L.) Bord na Mona Environmental Holgate Fencing AVA Acoustics Tennants Euro Environmental Architectural Acoustic Solutions (A.A.S.L.) P&H Vibration Ltd Teschem Acoustic Designs Buffalo Structures WS Atkins

The development of Ireland’s transport network infrastructure under the NDP has provided opportunities for acoustics solutions providers and ancillary monitoring activities. Industrial applications include enclosures on blowers, fans, pumps and compressors and monitoring/consultancy required for environmental licensing (including IPPCL) and occupational exposure purposes.

In Northern Ireland, the following companies specialise in this sub-sector:

- Commercial Connections - Vontract Acoustics Testing Services - FR Mark Associates - Healthy Buildings Intl - Lest Acoustics LLP - Pawlings Insulation & Supplies - RPS Planning and Environment

137 http://en.wikipedia.org/wiki/Noise_pollution 138 www.kompass.ie 139 www.goldenpages.ie

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- Peter Lloyd Associates - Sound and Acoustics Managet - Sound Control

4.9.3. Regulatory Framework - Europe

The Directive on Environmental Noise aims to provide a common basis for tackling the noise problem across the EU. 140 The underlying principles of the Directive are as follows:

• Monitoring the environmental problem by requiring competent authorities in Member States to draw up "strategic noise maps" for major roads, railways, airports and agglomerations, using harmonised noise indicators. These maps will be used to assess the number of people annoyed and sleep-disturbed throughout Europe. • Informing and consulting the public about noise exposure, its effects, and the measures considered to address noise, in line with the principles of the Aarhus Convention. • Addressing local noise issues by requiring competent authorities to draw up action plans to reduce noise where necessary and maintain environmental noise quality where it is good. The directive does not set any limit value, nor does it prescribe the measures to be used in the action plans, which remain at the discretion of the competent authorities. • Developing a long-term EU strategy which includes objectives to reduce the number of people affected by noise in the longer term, and provides a framework for developing existing Community policy on noise reduction from source.

4.9.4. Regulatory Framework - Ireland

The Environmental Noise Regulations for Ireland were published in 2006. The Environmental Protection Agency (EPA) is the body charged with implementing the EU Directive in Ireland. The regulations state that action plans are to be drawn up for the areas that undergo strategic noise mapping. These plans will establish actions to be taken to reduce environmental noise in areas where it is considered to be excessive. They will also serve to protect areas where the sound quality is considered to be good such as public parks.

The Control of Noise at Work Regulations 2006 (S.I. No. 371 of 2006) include new Exposure Limit Values in respect of daily exposure levels and peak sound pressure, and introduce a weekly noise exposure level of not exceeding 87db(A). Noise measurement, risk assessment and minimisation or protection from excessive noise in the workplace is a statutory requirement.

The law in Ireland governing the area of noise control is contained in Section 108 of the Environmental Protection Agency Act 1992 and the Environmental Protection Agency Act (Noise) Regulations 1994 (SI No. 179 of 1994).141 While the law does not specify an exact level or standard of noise that is illegal, it is clear that if neighbourhood noise is affecting a

140 Directive 2002/49/EC of 25 June 2002. 141 http://www.enfo.ie/leaflets/fs12-6.htm

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person’s quality of life, they have a right to expect something to be done about it. Section 108 of the EPA Act provides for the procedure to be followed to secure the limitation or prevention of noise which is causing a nuisance. Section 107 of the EPA Act also sets out the powers of a local authority or the EPA to require measures to be taken to prevent or limit noise. Under Section 106 the Minister has power to make regulations concerned with the prevention or limitation of noise.

Section 77 of the Roads Act 1993 enables the Minister for the Environment, Heritage and Local Government, following consultation with the EPA, to introduce regulations requiring local authorities or the National Roads Authority (NRA) as the case may be, to carry out works to mitigate adverse effects caused by increased road traffic noise following the construction of new roads or the improvement of existing roads.

4.9.5. Regulatory Framework – Northern Ireland

The relevant legislation in Northern Ireland is the Environmental Noise Regulations (Northern Ireland) 2006, which apply to environmental noise to which humans are exposed in particular in built-up areas, in public parks or other quiet areas in an agglomeration, near schools, hospitals and other noise-sensitive buildings and areas.

The regulations implement the Directive on Environmental Noise in Northern Ireland and place an obligation on the Department of the Environment to draw up Strategic Noise Maps and Actions Plans. Action plans have to be developed during 2008 for the noise sources for which maps have been produced. The action plans will seek to manage noise issues and effects from these sources including noise reduction, if necessary, and the protection of relatively quiet urban areas where they are identified142.

Other standards and guidance of relevance include:

• ISO 9613-2 standard “Acoustics - Attenuation of sound during propagation outdoors” • BS 5228 “Noise and Vibration Control on Construction and Open Sites”. • Environmental Protection Agency (EPA) “Guidance note for noise in relation to scheduled activities”. • World Health Organisation (WHO) “Guidelines for Community Noise 1999”. • BS 7385 Part 2: “Evaluation and measurement of vibration in buildings - Guide to damage levels from ground-borne vibrations”. • BS 6472 “Guide to evaluation of human exposure to vibration in buildings”.

4.9.6. Trends

Noise regulations and their application through construction programmes (particularly road network development) is a key market. The licensing of IPPC, waste management activities (including landfills and waste transfer stations), by the Environmental Protection Agency,

142 http://www.noiseni.co.uk/index.htm

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requires input from noise and vibration companies during planning and operation.

4.9.7. Drivers

The key driver in both Ireland and Northern Ireland will be the implementation of the Directive on Environmental Noise and the need for ongoing measurement, assessment and modelling which this will drive.

The NRA has published Guidelines for the Treatment of Noise and Vibration in National Road Schemes in 2004. 143 This document provides guidance on the treatment of noise and vibration during the planning and design of national road schemes. The guidelines are not mandatory but are recommended to achieve appropriate consistency with respect to the treatment of noise and vibration during the Constraints, Route Corridor Selection, Environmental Impact Assessment and construction phases of road scheme planning and development undertaken in accordance with NRA’s National Roads Project Management Guidelines (NRPMG). The Guidelines also address noise from operation/use following construction and cover the noise content of Environmental Impact Assessment (EIA).

4.9.8. Weaknesses

A lack of available technical expertise in noise and vibration in candidates in the jobs market is considered to be a significant weakness.

4.9.9. Case Studies

ANV Technology ANV Technology, based in Co. Clare, undertakes impact assessments, monitoring and recommends controls for environmental noise, vibration and air quality. They also undertake site contamination and waste management assessments.

Assessments are undertaken in accordance with EPA guidelines. A range of propagation and dispersion models are used as appropriate.

ANV Technology have undertaken a wide range of projects such as roads, industries, quarries and mixed developments and also provide expert testimony at oral hearings.

ANV Technology provides expertise in noise control to industrial and larger scale can help provide the most cost-effective solution by: Analysis of existing noise problem to identify source and transmission path Identification and quantification of optimum noise control methods Specification and design of noise control solutions, for equipment supplier or contractor Support and supervision during implementation Commissioning test to verify improvement

143 www.nra.ie/Publications/DownloadableDocumentation/Environment

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4.9.10. Barriers

One company surveyed made the general remark that support mechanisms available to Irish businesses are not adequate as they are insignificant and also time consuming to access. However, this opinion was not volunteered by other companies.

Lack of skilled labour has been identified as the most significant obstacle to business growth.

4.9.11. Opportunities

The noise limits and implementation of the action plans set out in the Directive on Environmental Noise Action Plans are at the discretion of the Government and regulatory authorities in Ireland (EPA) and Northern Ireland (EHS). However, the Governments could drive development of the noise sector by taking a pro-active approach to the setting of standards and ongoing improvements in noise quality provided this does not affect company competitiveness.

Construction related opportunities exist in the areas of acoustic barriers on motorways and highways planned under the current NDP. The mining and quarrying sector is also creating opportunities for companies resulting from planning and environmental licensing requirements.

4.10. Remediation and Reclamation of Land

Products, systems and services for the identification, assessment and remediation/reclamation of land and buildings, including prevention of contaminant dispersal. Examples include adsorbents and injection equipment, monitoring systems and proprietary treatment processes, and sampling/analysis, the installation of liners or membranes that are used on contaminated sites after the soil has been removed, and site investigation/ engineering.

4.10.1. Introduction

The remediation/reclamation of land sub-sector is split between traditional ‘dig and dump’ companies and specialist land investigation and remediation companies, consultancies and analytical services. Consultancy in this sector tends to be provided by larger companies, probably due to the higher levels of liability and risk associated with contaminated land remediation.

Remediation technologies are many and varied. They comprise ex-situ methods involving excavation of impacted soils and subsequent treatment at the surface; and in-situ methods that seek to treat the contamination without removing the soils.

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The export of hazardous waste - including contaminated soil - from Ireland has been a significant feature of our existing waste management plans; currently 48% of Ireland’s hazardous waste is exported to seven European countries. In addition, 91% of contaminated soil is exported for treatment with the remaining 9% processed in Ireland.144 The Proposed National Hazardous Waste Management Plan 2008 to 2012 sets out to deliver on a number of objectives, in particular to reduce the generation of hazardous waste - including contaminated soil - and to strive for self-sufficiency in the management of hazardous waste and, by extension, to reduce hazardous waste exports. The plan also explores the north- south potential for all-island solutions. 145

4.10.2. Market Size

The recent increase in the generation of contaminated soil can be attributed to the development of brownfield sites (especially old gasworks) in dockland areas in Dublin, Belfast and other urban areas. Industry estimates suggest that 60% of soil is produced from the construction industry, with the remaining 40% comprising sectors such as transport, and petrol station decommissioning and domestic home heating spills. In total, 406,904 tonnes of contaminated soil were removed from sites in Ireland in 2006 up from 168,000 in 2001. The majority of this soil was exported to mainland Europe, Germany (341,000 tonnes) in particular, for processing. 146

Enva’s Portlaoise site is authorised to treat up to 60,000 tonnes of contaminated soil each year; some 9% of total volume. Any additional soil arising is treated on-site of generation or exported for treatment abroad. Treatment abroad can be as simple as screening to remove rubble or may involve other physical or biological processes. The post-treated fate of exported contaminated soil includes construction use, landfill cover, landfill road construction or simply landfill disposal.

Taking into account these different elements, the soil remediation sub-sector is currently valued at €30-€40 million annually in Ireland and with an approximate market value of €16 - €18 million in Northern Ireland. This values the all-island sub-sector at some €46 - €58 million per annum. This is substantially less than the pro-rata figure for the UK where the sub-sector is valued at approximately €1.33 billion. The reason can be attributed to the extensive land banks of post-industrial land in the UK and the fact that 70% of new housing is built on brownfield sites compared with an almost exclusive use of greenfield sites in Ireland. 147

NI companies active in this sub-sector include RPS, White Young and Green, Enviros, EnviroCentre, WR&RD Taggarts and Jacobs Babtie. Irish companies include Enva, FLI

144 EPA, National Waste Management Report, 2004. 145 EPA, Proposed National Hazardous Waste Management Plan, November 2007. 146 EPA. Second National Hazardous Waste Management Plan – SEA Scoping Report, RPS Consulting Engineers, November 2007. 147 UK CEED, A study of emerging markets in the environmental sector 2006. www.dti.gov.uk/sectors/environmental/index.html

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Environmental, and DCC Environmental.

4.10.3. Drivers

The export of contaminated soil to mainland Europe is not exclusively a factor of inadequate processing facilities in Ireland. Environmental companies in this sub-sector do provide for on-site processing and a processing facility exists in Ireland. However, in the absence of legislation preventing the export of hazardous waste and the higher costs involved in processing contaminated soil domestically, the vast majority of the soil requiring treatment is shipped to mainland Europe for treatment. The direct competition from European waste companies is a critical issue, preventing the development of the sector in Ireland. It is hoped that changes in German environmental legislation may result in a push towards more domestic processing of contaminated soil.

While the sub-sector is governed under existing waste management legislation, the adoption of the proposed Soil Framework Directive will introduce much stricter standards. 148 The SFD, which will cover some 3.5 million soil contaminated sites (with 500,000 needing remediation) across the EU, is part of the overall environmental thematic strategy and follows those for air and water. The Directive includes preventative measures, identification of the problem and operational measures. The SFD sets out to preserve, protect and restore EU soils from the problems of desertification, salination, loss of organic material etc. It also seeks to remediate more brownfield sites through soil cleaning rather than the ‘dig and dump’ approach.

Another small-scale driver for the sector in the future will be treatment of invasive plant species. Significant tracts of land are being colonised by invasive species such as Japanese Knotweed, Giant Hogweed etc. Heavy infestations of these require specialist land remediation skills.

4.10.4. Barrriers

In the UK there are restrictions in place preventing the movement of contaminated soil outside the UK ensuring that processing is carried out on-site or at approved locations throughout the country. In Ireland there is no restriction on the export of contaminated soil. However, given the recent easing of restrictions in UK policy about the movement of hazardous waste for disposal between Northern Ireland and Ireland, an all-Ireland market for contaminated soil is now possible.

4.10.5. Weaknesses

The volume of contaminated soil has probably peaked with the relatively small number of

148 In addition to the SFD (COM (2006) 232), the Commission has also published a Soil Strategy for Europe and an Impact Statement (SEC (2006) 1165), 22 September 2006.

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brownfield sites in Dublin and Belfast now developed. Some industry sources suggest that this sub-sector, with the exception of Northern Ireland, is in decline, not entirely attributable to the construction downturn but to the fact that there are few remaining sites awaiting remediation. It is expected that a drop off in the volume of contaminated soil being generated and treated either domestically or in Europe will be observed in the coming year. In the near to medium term, the remediation of older landfills and the proposed development of the ‘Atlantic Quarter’ in Cork will provide the most significant opportunities for this sub-sector. Ireland does not have a history of experience in this area. This has tended to be the domain of countries with a long history of industrialisation. Technological developments in this area have tended to come from the UK or other European countries.

4.10.6. Opportunities

The Commission has estimated that the annual costs of soil contamination across Europe could be as high as €17.3 billion per annum. However, as there are no companies of significant scale in the Irish market, there is little prospect of new Irish entrants competing against major established European players for this business.

Provided economies of scale and technical feasibility can be demonstrated, there may be an opportunity for a suitably placed contaminated soil processing facility on the island. Currently there is no appropriate legislative framework preventing the trans-national movement of contaminated soil, as a result any remediation work generating soil in excess of 4,000 – 5,000 M3 is generally exported. This initiative, coupled with the adoption of best practices for land remediation as part of an all-Island Sustainable Procurement Action Plan, could serve as key drivers in this sub-sector.

While Ireland’s lack of industrial history has probably held back development of the sub- sector, new environmental technologies present an opportunity for Ireland to jump ahead of the existing approaches and develop a capability in bioremediation. Bioremediation is the use of micro-organisms and/or plants (phytoremediation) to degrade, immobilise, transport or transform contaminants in the soils. In the UK the Waste and Resources Action Programme (WRAP) has promoted the use of waste-derived compost for land remediation. This could be linked to Ireland’s Market Development Programme for waste resources.

There is little or no prospect of inward investment associated with this sub-sector.

Local enterprise opportunities will be limited to broad-based waste management companies for whom soil remediation is part of their offering.

An example of how opportunities in a niche environmental area can be developed is best exemplified in the UK by the CLARRC Centre.

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4.10.7. Case Studies

A CENTRE OF EXCELLENCE FOR LAND ASSESSMENT AND REMEDIATION

The Contaminated Land Assessment and Remediation Research Centre (CLARRC) is a centre of excellence for multi-disciplinary research. It develops technology for sustainable, cost-effective assessment and remediation of contaminated environments and promotes its transfer to industry.

CLARRC draws on the resources of groups from the College of Science and Engineering at The University of Edinburgh, the Schools of Life Sciences and Built Environment at Napier University and from the Scottish Universities Environmental Research Centre (SUERC). CLARRC offices and core laboratories are based in the Institute for Infrastructure and Environment, School of Engineering and Electronics, University of Edinburgh.

The Centre works in partnership with industry, stakeholders and regulators we are active in:

Academic research (e.g. subsurface modelling, biosensors, bioremediation, water pollution, composting) Contract research (e.g. treatability studies, remediation trials, product development and testing) Laboratory analysis (e.g. environmental, microbiological, ecotoxicological, Waste Acceptance Criteria) Consulting & contracting services (e.g. waste management options, geophysical investigations, remediation of soil and water)

4.10.8. Conclusions

The activity within the sub-sector is heavily dependent upon the cyclical nature of construction activity on brown-field sites. With the relatively small amounts of this type of land in Ireland, it does not present much of a base load to develop the industry going forward. However, in line with the stated policy of reducing the export of hazardous waste and the impending Soil Framework Directive, this should encourage in-situ or ex-situ processing of all contaminated soil on the island of Ireland in suitably positioned facilities to encourage the all—island approach.

The eventual implementation of the SFD will places new demands on the sub-sector as it seeks to treat soil more as an asset than a waste but the ramifications of any change are hard to quantify at the point. The key area for development of the sector is likely to be consultancy services on the treatment and reuse of soils and remediation technology providers. These development areas could be supported by the adoption of best practice standards for remediated land and research support for the development of indigenous capacity and knowledge base in land remediation/reclamation and in the development of bioremediation technologies.

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4.11. Renewable Energy (RES-E)

Products, systems and services for the generation and collection of energy from renewable sources such as biomass/bio fuels, solar, photovoltaic, wind, hydro, tidal and geothermal sources. Examples include the manufacture of equipment, design, construction, installation, management and operation of renewable energy facilities, including microgeneration.

4.11.1. Introduction

With climate change now recognised as a significant and threatening global environmental problem, it is vital that we develop policies and measures that have a sound economic footing and effectively meet our international obligations to reduce greenhouse gas (GHG) emissions. Unless these measures are carried out at a regional and local level, the targets will not be met within the timeframe laid down.

European leaders signed up in March 2007 to a binding EU-wide target to source 20% of their energy needs from renewables such as biomass, hydro, wind and solar power by 2020. On 23 January 2008, the Commission put forward differentiated targets for each Member State, based on the per capita GDP of each country.149 Ireland and Northern Ireland’s’s climate change policy operates within the context of an overall EU climate change strategy. The objective of reducing GHG emissions is closely linked to the achievement of sustainable development in Ireland/Northern Ireland. The main renewable energy resources available on the island are: 150

tSun (solar thermal and solar PV) Wind Water (hydropower, wave and tidal energy) Geothermal energy Biomass (wood, waste, energy crops).

4.11.2. Market Developments - Europe

According to the International Energy Agency (2007), renewable accounted for 13.1% of the world’s total primary energy supply in 204, with biomass (79.4%) and hydro (16.7%) the principal sources. The ‘new’ renewable – solar, wind and tide – make up less than 0.1% of total primary energy supply. In its Alternative Policy Scenario, the IEA (2007) predicts that by 2030 renewables will remain at around 14% of global energy consumption, but its share of the electricity mix will increase from 18% to 25%. A $1 trillion investment programme is needed to meet these targets. China is expected to leapfrog all industrialised countries as the main producer of RES-E as it has a national target for renewable of 30% by 2050. The EU is the world leader in renewable energy with a €30 billion turnover and employing

149 http://www.euractiv.com/en/energy/eu-renewable-energy-policy/article-117536 150 http://www.sei.ie/index.asp?locID=5&docID=-1

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350,000.151 The market leaders are Brazil (biofuels); China (solar hot water); Germany (solar electricity); and Spain (wind power). Morgan Stanley (2008) estimate that global RES-E sales could reach €353 billion by 2020 and as high as €700 billion a year by 2030. In 2005, Germany was the world leader in wind power (with 18,430 MW of installed capacity), solar photovoltaics (1,400MWp of installed capacity), production of bio-diesel (1.9 million litres), and, with China, overall investment in renewables.

The EU’s Strategic Energy Technology Plan (SET-PLAN) was set up to accelerate development and deployment of cost-effective low carbon technologies and complementary policies and measures to help the EU achieve its proposed 20% reduction in GHG emissions by 2020; ‘technology push’. 152 As part of this initiative, the Commission published a report on the current status and prospects of key energy technologies. 153 In addition, a study has been completed of the R&D energy capacity at EU level which found that the volume of public investment has fallen, notwithstanding a broad recognition that R&D investment in the energy sector is crucial against the background of the EU’s climate change/renewable package. Germany, France and Italy account for nearly 75% of public R&D energy funding. A similar pattern is evident in relation to business R&D, with Germany, France, Sweden and Italy accounting for nearly 75% of the total spend. The study also found that cross-EU cooperation is very weak and assessed the way that energy R&D activity is organised at member state level with reference to US and Japanese benchmarks. In 2005, Ireland did not record any public funding for in the R&D category for the production, distribution and rational use of energy. Not one Irish company was listed among the 73 largest EU companies investing in the energy R&D sector. A key finding (figure20) was the relative importance attached to different themes in relation to overall energy-related funding. 154

The European Commission will publish later in 2008 a Communication on financing low carbon technologies that will examine the opportunity of creating a new European mechanism/fund for the industrial-scale demonstration and end market replication of low carbon technologies.

In Europe, in the energy sector, five types of support models exist: feed-in tariffs, quota obligations, fiscal incentives, tenders and green certificates. Feed-in Tariffs are a price-based policy which set the price to be paid for renewable energy per kWh generated (in the form of guarantee premium prices). This is often combined with a purchase obligation. Solar projects in Germany receive as much as €0.57 per kWh. 155 The PREMIA project undertook a detailed analysis of support measures for biofuels. 156

151 3E Intelligence, 2008. 152 http://ec.europa.eu/energy/res/setplan/communication_2007_en. 153 Commission Staff Working Document: Technology Map, SEC (2007) 22 November 2007. 154 Commission Staff Working Document: A European Strategic Energy Technology Plan, SEC (2007) 1511, 22 November 2007. 155 Ringel, M. (2006). Fostering the use of renewable energies in the EU; the race between feed-in tariffs and green certificates. Renewable Energy 31, 1-17. 156 www.premia-eu.org

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The following factors have lead to the relative success of the German RES-E sector: 157

Feed-in tariffs Use of standards to set high technical performance levels Creation of social acceptance of renewable The use of industrial policy to promote indigenous enterprise Use of public procurement to drive demand for innovative goods

The Commission-funded Measuring Eco-innovation (MEI) Research Project defines and develops indicators on eco-innovation to provide a rationale for future policy research. 158 Specifically, the MEI offers a conceptual clarification of eco-innovation based on an understanding of innovation dynamics.

4.11.3. Market Developments – Ireland/Northern Ireland

There is on-going North-South co-operation in the sector under the auspices of a Joint Steering Group (JSG) established in July 2003. The JSG comprises of senior officials from the Department of Communications, Marine and Natural Resources and Northern Ireland Department of Enterprise, Trade and Investment and the offices of the two Regulatory Authorities (Commission for Energy Regulation (CER) in the South and Northern Ireland Authority for Utility Regulation (NIAER) in the North).

In 2005, the Minister for Enterprise, Trade and Investment, Northern Ireland and the Minister for Communications, Marine and Natural Resources, started a period of consultation on how the future energy needs for the island can be achieved in a sustainable manner. The two Ministers agreed that this process should be initiated with the publication of a joint high level consultation paper that seeks to map out a possible ‘2020 Vision’ for policy cooperation on the development of sustainable energy supplies for the island of Ireland. Their agreement is set within the framework of the All Island Energy Market Development Framework and the need to bring long term and mutual economic and social benefits to consumers, North and South. The Sustainable Energy Working Group (SEWG) of the Joint Steering Group (JSG) for the All Island Energy Market is mandated to develop policy in relation to electricity supply to 2020 and beyond and will also be dealing with heat supply, energy efficiency and combined heat and power (CHP). 159

In January 2008, a report on an All-Island Grid was published.160 The study examines:

a range of generation portfolios for Ireland,

157 Op cit Insead report. 158 www.merit.unu.edu/MEI/ 159 http://www.dcmnr.gov.ie/NR/rdonlyres/6F292506-1DAF-4A57-9586- 3A42CEE6C63A/0/RenewableElectricity2020final.pdf. 160 http://www.dcmnr.gov.ie/Energy/North-South+Co- operation+in+the+Energy+Sector/All+Island+Grid+Study.htm

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the ability of our power system to handle various amounts of electricity from renewable sources, the investment levels required, and the climate change and security of supply benefits that would accrue.

Grid capacity, access conditions and the availability of refit tariffs influence investors’ decisions. Clearly the correct policies are in place as the CER had applications for 7,000 MW of additional capacity prior to the recent Gate 3 announcement. 161 Formatted: Font: Calibri, 10 pt, Not Bold

In March 2007, EU leaders endorsed proposals from the Commission to cut CO2 emissions by at least 20% by 2020 (30% if global targets can be agreed on) and to set a binding 20% target for the use of renewable energy sources. 162 On foot of this political commitment, the Commission presented comprehensive proposals to deliver the EU’s climate change and renewable targets. 163 Decision taken at government level on foot of the implementation of this package will drive investment decisions in the areas of RES-E and energy efficiency. Ireland’s individual target for 2020 is 16% of energy from renewables. Hydro and wind power make up most of Ireland’s RES-E production. The RES-E share increased from 6.8% in 2005 to 8.6% in 2006. Important changes have occurred at a policy level. Ireland has selected the Renewable Energy Feed In Tariff (REFIT) as its main instrument. From 2006, this new scheme is expected to provide some investor certainty, due to a 15-year feed-in tariff guarantee. No real voluntary market for renewable electricity exists. There is also an absence of a genuine market for biofuels. However, support schemes have been in place since 2005 so this is expected to change.164

It was against the background of the EU’s climate change/renewable package that in March 2008 the ESB announced a €22 billion investment programme, Strategic Framework to 2020, and also set a target to make its energy generation business carbon “net-zero” by 2035. 165 It aims to achieve this through direct investment of €4 billion in renewable energy projects, €6.5 billion spent facilitating renewables including smart metering and smart networks and €11 billion to be invested by ESB in its networks. It will also facilitate the development of up to 6,000 MW of wind on the island.

In 2006, the total value of investments in sustainable energy worldwide was $100 billion.166 The overall turnover of the European renewable energy industries (including wind energy) is €10 billion,167 according to EREC (the European Renewable Energy Council), but it is not broken down by sector.

161 Statement from CER on a proposed Direction and Comments/Response Paper on the treatment of Formatted: Font: Calibri, 10 pt, Not renewable projects in Gate 3 of the group processing approach to network connection, 11 July 2008. Italic 162 http://ec.europa.eu/commission_barroso/president/focus/energy-package-2008/index_en.htm Formatted: Font: Calibri, 10 pt, Not 163 The Commission’s proposals of 23 January 2008 are assessed in a comprehensive manner in a report on Bold, Not Italic Climate Change (forthcoming) published by the Institute of European Affairs. Formatted: Font: Calibri, 10 pt, Not 164 http://ec.europa.eu/energy/climate_actions/doc/factsheets/2008_res_sheet_ireland_en.pdf. Bold, Not Italic 165 http://www.esb.ie/main/news_events/press_release337.jsp 166 http://www.taoiseach.gov.ie/index.asp?locID=582&docID=3800 167 Study on Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU Final report, Ernst & Young, August 2006.

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Several schemes now operate in Ireland, including a grant scheme (managed by SEI) for the installation of biomass fuelled and anaerobic digestion CHP units; a feed-in tariff (€120 per MWh) for the production of electricity from biomass CHP and anaerobic digestion.

4.11.4. The Market in Ireland

The Golden Pages lists companies under a number of sub-categories: Renewable- Energy Resources (122), Solar Energy - Heating (56), Solar Energy (53) and Heat Pumps (9). 168

Key players in the sector in Ireland include:

Electricity Generation/Distribution Wind Energy Equipment Microgeneration Suppliers Manufacturers ESB Vestas Coolpower Products Ltd. Airtricity GE F4 energy Energia Enercon CES Viridian Siemens Eirgrid Gamesa Heat Boilers Bord Gais NEG Futura Energy Solutions Ocean Energy Nortank Stoker Wavebob Windward Energy Kedco Ocean Energy Surface Power Gerkros Heating Technology Hydam Heatlink Jedcoe Manufacturing

Heat Pumps Solar Biofuels igen Genertec Capway Bioenergy Allard Renewables Solarite Ireland Teagasc Eco-nrg Bioverda Consultants Elementary Energy Enviritech Engineering Total Energy Management Hyperion

The (2008) Energy Year Book also lists companies who are involved in the energy sector overall on the island. 169 Insofar as the RES-E sector is concerned, 139 companies are listed.

Renewable energy consultants: 15 Renewable energy building consultants 11 Wind project engineering consultants 13 Power generation and CHP 25 Wind turbine manufacturers/project turnkey 5 Small scale wind equipment suppliers 8 Biomass 16

168 www.goldenpages.ie 169 Energy Ireland Yearbook 2008. It would be very useful if a similar Yearbook was prepared for the EGS sector.

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Hydro 1 Solar 24 Heat pump suppliers 21

4.11.5. Wind Energy - Europe

Modern wind power technology is largely based on know-how gathered from EU RD&D and deployment activities related to onshore and offshore wind energy.

By the end of 2006, the capacity of wind energy systems installed globally was almost 75,000MW, with the EU accounting for about 67% of this capacity. After Germany, Spain has the second highest amount of installed wind power capacity (10,030 MW). The US and India are now investing heavily in wind power. Germany, Spain and Denmark account for some 75% of EU R&D activity in the wind power sector. Capital costs for wind generation plants are of the order of €1,200 per kW for onshore technology, and up to €2,200 per kW for offshore; exclusive of connection costs. Currently, the average turbine size in the EU is around 1.3 MW onshore and 2.1 MW offshore. It is expected that turbines as large as 10MW will be installed by 2030. Seven of the top ten wind turbine manufacturers are located in Europe. These include Vestas and Siemens (Denmark), Gamesa (Spain) and Enercon and Nordex (Germany). GE Wind is the largest manufacturer in the US. There has been a recent surge in investment in wind technology in both China (Goldwind) and India (Suzlon).170

The European Commission has forecast that installed wind capacity- including a 50% contribution from offshore – will grow from 50 GW (2007) to 120 GW in 2020 and 148 GW by 2030, representing some 11% to 18% of projected EU gross electricity consumption respectively. After 2030, the contribution of wind energy to EU electrical consumption is expected to stabilise, with market structure shifting from additional to replacement capacity.

The main barriers to large-scale wind deployment at EU level are:

Grid integration as current electricity transmission and distribution systems have been designed and developed to manage more traditional generation technologies; New materials, control strategies and concepts need to be developed in order to cope with and/or reduce mechanical loads on wind turbine components and to increase stability; Lack of EU research facilities for testing wind technology; Energy storage mechanism to compensate for the fluctuating, unpredictable nature of wind generation; Disparate levels of financial support; Social acceptance of wind energy; and

170 BTM Consult (2007).

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Shortage of qualified work force.

4.11.6. Wind Energy - Ireland

The role of wind energy will be absolutely central in Ireland’s progress towards reaching its GHG reductions 2020 targets and overall in the step change to ‘decarbonise’ the economy. Within the overall EU package there is a specific target to obtain 16% of final energy demand from renewable sources. Throughout Europe, and particularly in Ireland, wind energy will provide the bulk of this capacity.

In Ireland, 800 MW of installed capacity was connected to the national grid between 1992 and 2007. This was delivered via onshore and offshore wind farms with a total of 708 turbines. Wind energy represents 13% of Ireland’s total generating capacity and delivered 6.8% of total electricity generated in 2007. The potential of wind energy as a generating asset was best exemplified in January 2008, where 26% of the electricity needs on a certain day were met by the network of wind farms. Airtricity was an early mover in the renewable energy generation business with construction of off-shore and land-based generation infrastructure.

A review of the existing and planned installation of wind energy capacity demonstrates this scaling up process currently underway:

Connected 803.4 MW Contracted 474.5 MW Gate 2 1,267.8 MW ‘In the queue’ 4,257.2 MW Total 6,802.9 MW

This generating capacity, if fully commissioned, would represent 112% of the total generating capacity available from all sources today and approximately 70% of projected capacity in 2020. This would probably represent 5,000–6,000 individual turbines offshore and onshore.

Importantly, after the hiatus in the early part of the decade, the commercial landscape for this industry appears a lot more certain for suppliers, operators and owners alike.

4.11.7. Biomass

Ireland’s Bioenergy Action Plan (2007) outlines the framework for Ireland to develop its bioenergy resources to generate electricity, for use as transport fuels, for use in heating and cooling buildings and for conversion to biochemicals as industrial raw materials. 171

The National Council for Forest Research and Development (COFORD) convened and

171http://www.dcmnr.gov.ie/Energy/Sustainable+and+Renewable+Energy+Division/Report+for+website.htm

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facilitated a strategic group formed from the saw milling and forestry sectors which appointed Electrowatt-Ekono, an international consultancy specialising in biomass and energy, to carry out a strategic study in the area of wood use for energy in Ireland.172 The report “Maximising the Potential of Wood Use for Energy Generation in Ireland” includes an outline of the potential sectors where wood fuel could be used to substitute existing fuels in solid fuel power plants and heat only plants in the domestic, commercial, public and industrial sectors. Ireland’s annual Total Primary Energy Requirement (TPER) was estimated at 603 PJ in 2003, and this was forecast to rise to 737 PJ by 2015.173 In contrast, the total annual energy potential of all pulpwood, sawmill residues and harvestable forest residues produced in Ireland in 2003 was estimated to be 17.3 PJ (2.3 million green tonnes), which would rise to 26 PJ (3.5 million green tonnes) by 2015, given favourable market incentives.

Wood Energy Ltd recently commissioned its 1,200kW Binder wood boiler at the Charlestown Shopping Centre in Finglas, Dublin. It is the largest wood-fuelled district-heating system in the UK and Ireland. The energy centre provides space and water heating for 284 residential apartments and a variety of retail outlets.

The following crops have been identified by Teagasc as suitable for agricultural growth as biomass in the Irish climate are: 174

Willow Miscanthus Hemp Reed Canary Grass

One hectare of willow is equivalent to 3.6 tonne or 4,000 L of oil while for miscanthus 1 hectare is equivalent to 4.07 tonne or 4,660 L of oil.12 The 2007 budget provided grants for establishing willow and miscanthus.

Phase 2 biofuels (using enzymes to breakdown the cellulosic content of feedstock) is an area where existing research should be further supported. Gasification of wood pellets can result in an increase of up to 30% in calorific output and should be promoted as a more efficient heat energy technology (over conventional biomass boilers).

4.11.8. Biofuels - Europe

Biodiesel can be made from waste vegetable oil (via trans-esterification) of from plant oil (e.g. rape seed oil). Bioethanol is produced from fermentation of sugars found in crops (e.g.

172 http://www.woodenergy.ie/iopen24/defaultarticle.php?cArticlePath=4 173 “Maximising the Potential of Wood Use for Energy Generation in Ireland”, COFORD, 2003. 174 http://www.teagasc.ie/publications/2007/20070306/index.htm

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sugarcane) or from waste streams (e.g. whey from cheese production). Bio-ethanol and bio- diesel are the most common biofuels used in transport worldwide. Agriculture biomass in the EU is the dominating feedstock with rapeseed being the main raw material for bio-diesel production while cereals and sugar beets are the main sources for bio-ethanol. Forestry biomass is mainly dedicated to power and heat markets. Bio-ethanol production is currently based on a fermentation process of starch and/or sugar. It is considered that bi-ethanol and bio-diesel can be blended up to 10% and 25% respectively without significant changes on vehicle engines or operating infrastructure.

The use of second generation lingo-cellulosic materials as feedstock for bio-fuels production is the priority of the EU’s Biofuels Technology Platform. Market entry for advanced biofuels production processes is foreseen around 2015-2020. The European Commission has forecast that biofuels will have a 14% market share of transport fuels in 2020 rising to 20% in 2030.

Biofuels reached a share of about 1% of all transport fuels sold in 2005. Only Sweden and Germany met the 2005 target set by the Biofuels Directive and these two countries have advanced second generation demonstration plants. The US is the largest investor in biofuels R&D, with Sweden and Germany the highest spenders within the EU.

Almost 4% of the EU gross energy demand is covered by biomass resources; some two thirds of all RES-E used comes from biomass. Biomass-converting systems are high R&D priorities in several member states, especially Finland, Austria and the Netherlands. The Nordic countries have a long tradition in exploiting these resources. Sweden and Finland generate electricity from biomass. Consequently, the scientific and technological capabilities for biomass are advanced in Europe.

While there is an expressed requirement that 10% of transport fuel must come from biofuels, this is being reinterpreted as a 10% requirements from renewables, softening the drive to biofuels. This distancing is in part driven by concerns that Europe will not be able to supply the biofuels;175 that present production is unsustainable;176and, allegations that food prices have been severely increased by fuel crops.177

There is one biomass CHP plant in Ireland at present, producing 3MW of electricity. Ireland has one of the best climates for biomass in the EU, with miscanthus and willow on short rotation the best prospects. It is expected that recent incentives to promote anaerobic digestion CHP will be fuelled by biogas from animal manures and from food industry residues.

At EU level the main barriers to the deployment of biofuels are:

175 Reuters, “EU report see biofuel giving 3.4% of 2020 needs” – commentary on leaked draft EEA report, 4 July 2008. 176 Environment Committee, European parliament, List of key compromise amendments tcm29-174034 on Directive Proposal COM2008-0019, 7 July 2008. 177 The Guardian, “Secret report: biofuel caused food crisis”, 4 July 2008.

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Cost competitiveness of biofuels with regard to conventional fuels; Under-funding of R&D investment in feedstock and biomass supply logistics; Too few demonstration projects at industrial scale; Sustainability of biomass production.

DALKIA (www.dalkia.com)

Dalkia operates over 100 biomass plants throughout the world; over 1.275 billion MWh of managed primary green energy. The company secures biomass supplies (forests, used wood, secondary products from the timber industry, dedicated crops) and creates a supply chain if there is not one in existence. In addition to carrying out the design and construction of the production plant, Dalkia will find a contractor to project manage all operations. Dalkia believes that converting wood into energy is a cost-effective and environmentally responsible solution for heating networks, healthcare facilities, universities, industrial sites and residential complexes.

0₂DIESEL (www.o2diesel.com)

O2 diesel is a verified, proven and understood oxygenated diesel technology – an ethanol-blended flexible fuel that provides premium diesel performance with all diesel products. The product is currently available only in the US and Brazil and will be demonstrated soon in European and other world markets. O2 Diels ahs entered into a five-year agreement with Abengoa Bioenergy, the largest bioethanol producer in Europe.

4.11.9. Biofuels - Ireland

The Department of Communications, Marine and Natural Resources has been operating the biofuels MOT Relief Scheme II since 2006. There were 11 applications received in the Bioethanol category, 36 in the EN590 category, 18 in the Pure Plant Oil category and 37 in the Captive Fleets Category. A panel comprising officials from DCMNR, Sustainable Energy Ireland and Enterprise Ireland assessed the applications and made recommendations to the Minister for Communications, Marine and Natural Resources. On 23 November 2006 Minister Dempsey announced that sixteen biofuels projects were to be granted excise relief under the Scheme.178

When at full capacity in 2008, the Scheme will result in 2% market penetration of biofuels in

the transport fuel market. It will result in emissions savings of over 1.2m tonnes of CO2 over the five years of the programme.

Bioethanol from Whey Waste

178 http://www.dcmnr.gov.ie/Energy/Sustainable+and+Renewable+Energy+Division/Biofuels+Scheme+II/

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Maxol introduced E5 in its 150 stations in Ireland, with ethanol made from whey. 179For the first time throughout Ireland, drivers of standard petrol powered vehicles will be able to use a biofuel without risk to the car manufacturer's warranty. The fuel was introduced at all 150 Maxol service stations nationwide in September 2007.

The Maxol Group replaced its regular unleaded petrol with its new E5 fuel - a blend of 95% petrol and 5% locally produced bio-ethanol which will retail at the same price as standard unleaded petrol. Maxol's E5 fuel has been successfully piloted at over 24 service stations throughout the North East of Ireland since September 2006.

The bio-ethanol fuel in E5 is 100% organic and is currently made from whey, a milk derivative and a by-product of the Carbery Milk Products Cheese plant in Ballineen, Co. Cork.

The rollout of the E5 green fuel is another first for Maxol in the Irish fuels market, following on from the launch of their E85 fuel (85% bio-ethanol) in September 2005. It is part of Maxol's commitment to renewable fuels and to helping the Irish Government meet bio fuel consumption targets set out in EU Directives. These targets require bio fuels to account for 5.75% by 2010 and 20% by 2020.

There remain serious reservations about the environmental sustainability of the first generation of biofuels.

4.11.10. Anaerobic Digestion (AD)

Biogas from anaerobic digestion can be used in electricity generation. Sources available for digestion are agricultural slurries, sewage sludge, food and catering wastes, the biodegradable fraction of municipal solid waste (MSW), industrial sludges and landfill gas. 180 Some 132 million wet tonnes of agricultural slurries, wastewaters, effluent and sludge are generated in Ireland annually, while the primary food processing and catering sectors also generate substantial waste flows. 181 At present the majority of these wastes are either spread on land, rendered, or disposed to landfill, but with additional processing these waste flows can be more beneficially exploited.

Anaerobic digestion technology is in competition with composting for feedstocks. It has had a chequered operational history in Ireland in terms of reliability and there may be a prejudice against the technology here as a consequence. However under controlled conditions it is now a proven technology and has its place in the Irish market. On-farm AD plants are considered viable in the Irish context but centralised plant feasibility is dependent on gate-fee prices for sludges, slurries and other feedstocks (and to a lesser extent on the electricity price payable). 15 The EPA consultation document on AD concluded by saying that “AD has the potential to deliver multiple environmental benefits, including reduced water pollution potential, lower greenhouse gas emissions, and reduced odours from agricultural slurries. In places that have high concentrations of animal waste threatening water quality,

179 http://biopact.com/2007/08/maxol-to-introduce-e5-in-its-150.html 180 Renewable Energy Development 2006, An overview of policy and strategy evolution, DCMNR. 181 http://www.epa.ie/downloads/consultation/epa_discussion_paper_anaerobic_digestion.pdf.

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centralised AD can play a significant role in managing the problem. AD is also unique among policy instruments as it can deliver positive outcomes for multiple policy objectives with respect to global warming, renewable energy and water pollution.

The major stumbling block for AD is that its financial return is insufficient to repay the investment outlay, but usual financial analyses ignore the environmental benefits. Government support for centralised AD can be justified on the basis of its environmental benefits, which without government support would not be realised. 4.11.11. Solar Energy

There are three basic approaches in use to gain the maximum benefit of solar energy in buildings: 182

Passive Solar Active Solar Heating Solar Photovoltaic (PV) Systems

Solar for heating (space and water) is a simple technology and is proving popular in the SEI grant schemes for domestic and commercial installation. Photovoltaic systems are generally small scale and should continue to be promoted for domestic, local authority (incl. street lighting, signage) and commercial/industrial applications. Currently there is no argument for or against large scale electricity generation from solar.

4.11.12. Solar Energy - Europe

Photovoltaics: Very high growth - some 30% over the past five years – has been recorded. Higher levels of production have led to significant price reductions, with an expectation that the cost of electricity from PV systems will be comparable to the retail price of electricity in 2015.

Si-crystalline-based cells are a mature technology for a wide range of applications, whereas technologies as thin-film silicon cells, dye-sensitive cells, and polymer solar cells are not yet as competitively priced. High concentration devices that are better suited for large grid- connected multi-MW systems, and compact concentrating PV systems for integration in buildings.

Installed capacity of PV systems in the EU 92006) was 3.4 GWp; some 0.5% of the total EU electrical capacity. The European Commission is predicting that by 2020 some 12 GWp will be installed, rising to 22 GWp in 2030. Germany (with the support of attractive long term financial support in the form of feed-in tariffs), the Netherlands and Switzerland have invested most in this technology. Germany has 1150 MWp installed; the EU total is 1250 MWp. Conergy of Germany is the second largest solar energy producer in the world.

182 http://www.sei.ie/index.asp?locID=264&docID=-1

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In the EU, production is carried out by many SME enterprises, whereas in Japan, the world leader at present, production is concentrated in a few large corporations. It is forecast that new and emerging technologies will come to the market, including high concentration devices that are better suited for large-scale grid-connected multi-MW systems and compact concentrating PV systems for integration into buildings.

The main barriers to the rapid deployment of PV technologies at EU level are:

High production cost of electricity; Lack of skilled professional; Usage of precious raw materials e.g. silver; Long waiting times to secure grid connections; Under-funded research; Requirement to have a generous feed-in tariff in the long-term Poor awareness of potential within building and construction sector

Solar: The concentrated solar thermal power sector (CSP) is now reviving due to a favourable supporting framework in Spain and increasingly in the US. A CSP plant consists of a solar concentration system made of a receiver and collector to produce heat and a power block. The most mature large scale technology is the parabolic trough/heat transfer medium system. Led by Spain, Europe has a market leadership in CSP technologies worldwide.

Solar-thermal systems installed in Europe are predominantly based on glazed flat plate and evacuated tube collectors, with the vast majority of capacity (90%) comprises single family house units used for the supply of domestic hot water. In addition, there are a few large scale systems installed in Denmark, Sweden, Germany and Austria which deliver heat to district heating networks. Total installed capacity was 13GWth, which produced approximately 0.7Mtoe of useful heat. The potential of solar heating and cooling technology is large however, with upwards of 135 GW in installed capacity forecast by 2030.

Solar Valley near Leipzig was built by German company UV and contains the largest series of solar modules in the world. It is reckoned that Germany is twenty years ahead of its global competitors. The critical success factor was the availability of feed-in tariffs.

Solar Panels at Bewley’s Hotel, Dublin Airport183

The installation of a solar water heating system in the Bewley’s Dublin Airport Hotel took place during construction of the building in 2005/2006. The system comprises 308 m2 of solar collectors and two 5,000 litre storage cylinders. The estimated cost of the solar system was €210,000, approximately 25% of this was obtained from SEI for the purchase and installation of the solar panels.

183 http://www.irish-energy.ie/index.asp?locID=1034&docID=-1

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Based on hot water consumption in other hotels in the group, an estimate was made for the daily demand for hot water (15o – 65oC) in the hotel. Based on the Irish climate and the maximum contribution from solar energy, it was estimated that operating at optimal conditions, the solar system could provide approximately 40% of the hotels hot water requirements.

The solar panel system at Bewley’s contains innovative design features including the drain-back system. There are a number of advantages to this system including:

• no additives are needed • inherent safety in the event of overheating or power failures • minimum maintenance levels are required • the performance compares well with other installations • system durability is increased • the lifetime of the solar system is extended to more than 30 years

Estimated Payback Analysis Total Project Cost €210,000 SEI Grant €52,500 Annual Fuel Cost Savings €15,000 Payback Period 10 years

4.11.13. Ocean Energy - Europe

There are several forms of ocean energy, for instance, marine current, wave and tidal energy. One of the largest units is the 240 MW tidal plant of La Rance in France. A large number of devices and designs are currently being studied and/or developed; up to 50 types of wave energy converters identified in a recent study. Large scale wave power demonstration facilities are currently being erected or planned, for example, the Pelamis Wave Energy Converter. A 750 kW size unit is already in operation in Scotland. Nine wave energy systems based on different technologies developed by European investors are being tested under real sea conditions. Ireland, with the UK, Denmark, Sweden and Portugal have invested very modest sums to the exploitation of ocean systems for power generation, with support typically limited to just €2m. The forecast installed capacity in 2020 is 0.9GW and 1.7 GW in 2030; or just 1.1% of projected EU-27 electricity consumption.

The main barriers to the rapid roll-out of ocean/wave technologies at EU level are:

Infancy state of development and its specific operating marine environment; Need for grid connections bearing in mind that offshore units will be quite some distance from onshore connection; Licensing at authorisation costs; Maintenance and plant costs; Need for engineering capacity; and Full development costs beyond range of SMEs.

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4.11.14. Ocean Energy – Ireland/Northern Ireland

AEA Technologies estimates that the worldwide market for offshore wave energy devices could be between €50 billion and €200 billion. 184 The 2005 Bacon/ESBI study calculated that 1,900 jobs would be created by 2020 if Ireland invested in ocean energy technology.185 It has been estimated that the total wave energy resource could yield 48 Twh if all of the Irish coastline alone were developed.186 The Irish Marine Institute has identified the medium term practical resource as around 800 MW installed capacity. 11

Ireland is located at the centre of one of the most favourable climates for ocean wave energy in the world. With a significant percentage of Europe’s coastline (but only 1% of its population) this is a major renewable energy resource waiting to be tapped. Ireland has third level research expertise in the areas of turbine design at University of Limerick, wave tank model testing at the Hydraulics and Maritime Research Centre of University College Cork and wave energy modelling at Queen’s University. In terms of prototype development, there are currently three wave energy developers in Ireland namely Ocean Energy, Hydam and Wavebob.187

In January 2008, a major programme of activity, grants and supports to develop ocean energy in Ireland was announced by the Minister for Communications , Marine and Natural Resources. Over €26 million in targeted funding will go to the sector over the next three years. The Minister also announced a significant boost for the future of the sector with the first-ever guaranteed price for wave energy. The initiative announced by the Minister will include:188

€1 million towards a world class, state-of-the-art National Ocean Energy facility in UCC. The Facility will now have an advanced wave basin for the development and testing of early ocean energy devices. €2 million to support to develop a grid-connected wave energy test site at Annagh/ French Point near Belmullet, Co. Mayo. €2 million in grants in 2008 under the Ocean Energy Prototype Fund. This will help developers to make their devices commercial. The introduction, of a new feed-in-tariff under the REFIT scheme for wave energy of €220 per MegaWatt Hour. €500,000 in 2008 to establish an Ocean Energy Development Unit as part of Sustainable Energy Ireland (SEI).

SEI’s Ocean Energy Development Unit will have a central role in overseeing this Programme.

184 Survey of energy Resources - TIDAL ENERGY, World Energy Council, James Craig, AEA Technology (2003). 185 http://www.greenparty.ie/news/latest_news/ryan_announces_26m_for_wave_power_research 186 http://www.oceanenergy.ie/market.html 187 http://www.marine.ie/NR/rdonlyres/86491414-3E7E-48E5-A0E1- 287CA9191C61/0/OceanEnergyStrategy.pdf 188 http://www.ucc.ie/en/mandc/news/fullstory,48055,en.html

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World First: Tidal Energy used for Commercial Electricity Generation in Strangford Lough

SeaGen is the name given to the 1.2MW tidal energy convertor that was installed in Strangford Lough, Northern Ireland at the end of March 2008189. Strangford Lough was chosen as the site for the world's first commercial tidal generator because has a very fast tidal current, and at the same time is fairly sheltered from bad weather which could hinder the installation procedure. It is also a convenient place for an independent team of scientists to monitor the interaction of the system with the environment.

The SeaGen components were manufactured in various locations in the UK and Europe. The significant subsystems were tested at locations close to Marine Current Turbines office in Bristol prior to being delivered to Harland and Wolff, Belfast, for final system assembly and preparation for installation.

SeaGen will be owned and run by Sea Generation Ltd,190 which is the project company and is a wholly owned subsidiary of Marine Current Turbines Ltd. ESB, Ireland’s national electricity company, is investing £3million in Marine Current Turbines. In addition, ESB’s retail subsidiary, ESB Independent Energy has signed a five year Power Purchase Agreement to buy all of the electricity output from the SeaGen tidal facility which will be sold as part of its green energy offering to its customers. ESB will be one of the first utilities in the world to provide tidal energy to its customers.

4.11.15. Geothermal Energy

The initial capital costs of installing a Geothermal Heat Pump system is usually higher than other conventional central heating systems. However, under the Greener Homes Scheme,191 there are now grants available which will reduce initial costs significantly. A large proportion of the outlay will be for the purchase and installation of the ground collector. The system is among the most energy efficient and cost effective heating and cooling systems available. Typically, four units of heat are generated for every unit of electricity used by the heat pump to deliver it, and the payback is typically about 8- 10 years. The life expectancy of the system is around 20 years. There are some geothermal spring sources (e.g. Blackwater valley between Mallow and Fermoy) that could be further utilised on a local basis for space heating. Current energy prices do not make retrospective district heating using geothermal springs a cost effective option but it should be considered for new housing schemes in those areas.

4.11.16. Combined Heat and Power (CHP)

The vast majority of Combined Heat and Power (CHP) users in Ireland qualify as auto- producers i.e. they produce electricity for use on one single premises only. Only a small number hold a licence to supply electricity. Therefore, for the majority of CHP users,

189 http://www.marineturbines.com/18/projects/19/seagen/ 190 http://www.seageneration.co.uk/default.asp 191 http://www.sei.ie/index.asp?locID=1220&docID=-1

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although the CHP unit is connected to and synchronised with the electricity system, payment is made for any additional electricity units imported, but no payment is given for any surplus units exported. CHP utilising absorption chillers has been installed by CES Energy at A&L Goodbody Solicitors in the IFSC in Dublin (see case study below).

Trigeneration Installation in Office Block192

A&L Goodbody is one of Ireland's largest law firms with headquarters in an 11,000m2, five-storey, purpose-built office block in the International Financial Services Centre (IFSC), Dublin. A&L Goodbody has a policy of supporting environmentally sustainable technologies and it was in line with this policy that they decided to install the 1MW tri-generation Combined Heat and Power (CHP) plant. The tri-generation CHP plant provides nearly all the heating, air conditioning, water cooling and electricity requirements for the building.

Prior to the installation of the system, the building's heating and electricity requirements were provided by two sources, on-site natural gas-powered boilers and the national electricity grid. A&L Goodbody's decision to embark on this tri-generation CHP project in 2004 was motivated by a number of factors. A back-up electricity generating system was necessary. Choosing to install a CHP system would mean that the capital investment in a new back up electricity generation system

would be avoided and there would be direct energy and CO2 emissions savings.

A&L Goodbody decided to employ an Energy Supply Company (ESCO), CES energy, to take over all responsibilities related to the design, funding, build, operation and maintenance of the tri- generation CHP project. The capital cost of the installation was borne by CES energy which owns the unit and takes responsibility for all monitoring, maintenance and repair work on a 24-hour/365-day basis.

Under normal operating conditions, the tri-generation system achieves an operating efficiency of over 85% and provides the majority of the heating, cooling and electricity requirements of the building. The CHP plant operates for 15 hours a day 7 days a week and has an annual fuel consumption of approximately 9000 MWh of natural gas. The heating demand of the building ranges between 180-400 kW with the largest demand in the winter months. The cooling demand is highest in summer, around 600 kW, however, there is still 140 kW of cooling demand during the winter months. The tri-generation solution is designed as thermal load follow. This means that when the plant is operating, all the thermal requirements of the building are being provided by the CHP plant and electricity generated over and above the law firm's requirements is exported to the national grid. This amounts to approximately 1,250 MWh of surplus electricity being exported each year. At peak demand in winter (i.e. between 5pm - 7pm) half the electricity generated by the unit is exported; all export revenues accrue to CES energy. As well as exporting electricity CES energy are looking into the possibility of exporting heat to other buildings nearby. Average electricity generation capacity is about 600kW.

The CHP unit is completely synchronised with the national grid. If, for some reason, it cuts out, the building automatically switches over to the national grid. The firm's ten 100kW natural-gas powered boilers remain as back up and only operate when heating is required outside the standard operating time of the CHP.

192 http://www.cesenergy.ie/case_studies.html

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Economic/Environmental Benefits Economic Previous Fuel Costs (Grid Electricity and Natural Gas): €600,000 /yr CHP Operating/Fuel Costs: €550,000 /yr Savings: €50,000 /yr

Environment Fuel Displaced (approximate): 12 GWh/yr

CO2 Savings: 2600 tonnes/yr

4.11.17. Regulatory Framework

The EU Directive, Electricity Production from Renewable Energy Sources (2001/77/EC), commonly referred to as the RES-E Directive, commits Ireland to the production of 13.2% of electricity demand from renewable energy sources by 2010.

The CHP Directive (2004/8 EC) provides for a range of measures to assist in the promotion of combined heat and power (CHP).

The Sustainable Energy Act 2002 provides for the establishment of Sustainable Energy Ireland on a statutory basis. The main functions of the Authority are to promote and assist environmentally and economically sustainable production, supply and use of energy in all sectors of the economy; to promote energy efficiency and renewable energy; and to minimise the environmental impact relating to the production, supply and use of energy. The Authority has a major role in implementing the National Climate Change Strategy.

The EU energy efficiency action plan: 20% reduction in energy demand by 2020, sets out 10 priority actions. These include minimum binding efficiency requirements by 2008 for new electricity, heating and cooling capacity of less than 20MW. Consideration of efficiency requirements for larger production units is also listed. Guidelines on best operating practices to raise average generation efficiency for all plants and agree upon guidelines on best regulatory practices to reduce transmission and distribution losses. A proposal for a new regulatory framework to promote the connection of decentralised generation in 2007.

The 2007 White Paper on delivering a sustainable energy future for Ireland sets out goals for security of supply, sustainability and competitiveness. It sets out about 200 different actions which include the following targets in relation to sustainability of supply:

15% of electricity consumption from renewable sources by 2010, and 33% by 2020. Energy Efficiency Action Plan to meet the EU action plan target of 20% energy savings by 2020, with an indicative target of 30% by 2020 to go beyond the EU target. 400 MW from CHP by 2010, and 800 MW by 2020, with particular emphasis on biomass fuelled CHP.

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500 MW installed ocean energy capacity by 2020. 5% market penetration of renewables in the heat market by 2010, and 12% by 2020. a biofuels obligation scheme on fuel supply companies by 2009. 5.75% biofuels market penetration by 2010, and 10% by 2020.

The 2007 Bioenergy Action Plan for Ireland is incorporated into the White paper.

4.11.18. Trends

Energy prices have been rising steadily. Oil is currently well over US$100 a barrel. Renewable energy is increasing its contribution to primary energy consumption in Ireland (e.g. increase from 1.8% in 2003 to 2.2% in 2004). Wind, which accounts for most of this growth, has now overtaken hydro in terms of renewable energy contribution. Biomass (mostly domestic wood burning) remains the largest contributor. In absolute terms, the primary energy contribution of renewable sources was 325 ktoe in 2004 representing a growth rate of 18% relative to 2003 and a 94% increase (4.8% per annum on average) on 1990 levels. The estimated quantity of carbon dioxide avoided by renewable energy in 2004 was 1.5 million tonnes.193

Harland and Wolff in Belfast have diversified into emerging technologies, particularly in renewable energy development, such as offshore wind turbine, wave and tidal power construction. 194 There is a significant focus in the large multinationals (particularly the large ‘oil’ companies) and indeed indigenous companies, such as ESB, on diversification into renewable energies to sustain and grow their business.

Flexible, coordinated and adequate electricity networks are needed to address mounting network congestion, increasing deployment of renewable-fed and more efficient electricity generation units and diffusion of dispersed generation installations. Alternative smart grid technologies are being deployed or are under development; HVDC, FACTS, GIL, HTS wires. The proposed introduction of smart meters into Ireland’s two million buildings is part of this development.

Although there are synergies with other forms of renewable energy supply, they each have their own distinctive technological and market attributes, and thus their own challenges and perspectives for growth. The PV industry is not in competition with other RES-based electricity generation industries. Biofuels development interacts strongly with the CASP and forestry policies.

The IPO value in the energy technology boomed in 2006 with an increase of 156% measured at global level. Globally, RES-E companies are on course to raise $13.7 billion this year. Solar energy and biofuels are the primary driving areas. 195 In Denmark, VC investments in RES-E

193 Renewable Energy Development 2006, DCMNR/SIE, 2006. 194 http://www.harland-wolff.com/ 195 Lux Research, 2007 and New Energy Finance.

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have developed from being almost invisible to some 7% of investment activity. 196

Another forecast suggests that EU Cleantech VC activity rose from 8% of all VC investments in 2003 to 19% in 2006. 197 However, US investment ($45 billion in 2006) is five times that level.198

Cleantech VC firms are investing in the following industry segments:199

Emissions control and monitoring RES-E Energy storage (fuel cells, advanced batteries, ultracapicitors) Energy efficiency products (lighting, sensors, automation) Recycling and waste processing Water purification and treatment, metering

The growing maturity of RES-E products in particular explains the confidence of VC investors. In Europe, solar is attracting 59% of VC activity; wind 9%; and biofuels 17%.

4.11.19. Drivers

The requirement for new and renewable energy technologies is being driven by the world’s needs to reduce greenhouse gas emissions in conjunction with the increasing global energy demands. While policy is less important a driver in energy than in other sectors (notably waste) nonetheless there is a range of issues that are key to the development of renewables in Ireland:

Ireland’s commitments to the Kyoto Protocol. Global warming resulting in climate change is having a fundamental impact on business and is having a positive impact on growth in the EGS sector. Depletion of fossil fuels has reached the point where some observers claim we have already reached “peak oil”. Security of Supply of fuel imports (oil, gas and coal) is driving governments and corporations towards self-sufficiency in energy generation. Significant price rises in gas and oil in last 5 years as a consequence of increasing demand. Social Influences including customer and shareholder expectations is influencing Corporate Social Responsibility (CSR) which also impacts on investment decisions.

The Taoiseach announced at the 2008 Irish Energy Forum that the Government will invest over €200 million in energy-related Research and Development, saying “Today’s

196 Vaekstfonden, 2007. 197 Report by Insead for the Federation of Belgian Employers; www.feb.be 198 European Cleantech Investment Report, Cleantech Network, 2006. 199 Insead Report Greening the Environment, February 2008.

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announcement is significant and shows our determination to honour our commitments in this important area under the Programme for Government. Through Research and Development Ireland can take a lead in developing environmental solutions and products. This investment will achieve a win/win situation of improved competitiveness and environmental performance. The €200 million will be made available over the next 5 years.” Minister for Communications, Energy and Natural Resources said, “Today is a demonstration of the cross-Government commitment to the new energy era. I am pleased today to launch a report on energy efficiency, which shows that the benefits of energy efficiency to the Irish economy far outweigh the costs. Energy efficiency is the least expensive and most intelligent means of making substantial cuts in our fossil fuel bills and greenhouse gas emissions. Initiatives such as smart metering, building improvements and peak demand reduction will benefit the Irish economy to the tune of €3.6 billion. Notably, they will reduce our carbon emissions by over 6 million tonnes.”

Opportunities and challenges for NI businesses are presented by the carbon emissions targets identified in the NI Sustainable Development Strategy (2006),200 the NI Sustainable Development Implementation Plan “A Positive Step” (2006)201 and the UK Climate Change Bill.202 DETI NI has recently commissioned research into the impacts and opportunities for businesses in Northern Ireland arsing from compliance with these targets.

The Department of Communications, Marine and Natural Resources is considering a report prepared by the Irish Energy Research Council which deals with the approach that should be taken towards basic and applied research to underpin new energy conversion, distribution and technologies. Specifically, the Council has identified the following areas of focus: ocean 203 energy, energy in buildings, and sustainable bio-energy. Formatted: Font: Calibri, 11 pt, Not Bold

4.11.20. Weaknesses

Over reliance on fossil fuels for heating, energy generation and transport and inertia from previous governments on carbon-taxes, has made it more difficult for Ireland to prepare for the changes required to comply with Ireland’s international greenhouse gas reduction commitments. The majority of CHP producers do not have licences to supply electricity. Stream-lining licensing could create the incentive for them to supply the national grid.

Coolpower Products Ltd

Drawing upon expertise extant in the area of electrical and electronic engineering, a number of startup companies have focused on opportunities within the energy management arena. One such company, Coolpower Products Ltd. has recently launched a patented energy and micro-generator

200 http://www.ofmdfmni.gov.uk/sustain-develop.pdf Field Code Changed 201 http://www.ofmdfmni.gov.uk/implementation2_plan_16_11__06.pdf 202 http://www.sustainable-development.gov.uk/what/latestnews.htm#130307 Formatted: Font: Calibri, 10 pt, Not Italic 203 Irish Energy Research Council, An Energy Research Strategy for Ireland, March 2008, page 26. Formatted: Font: Not Bold, Not Italic

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manager that maximises the value of energy generated by grid-connected micro-generators and minimises the amount and cost of energy imported from the grid.

The product, known as EMMA, prevents this loss by monitoring and comparing, in real-time, energy generation with energy consumption and directing all surplus energy to local energy storage devices such as hot water cylinders, storage heaters, heat pumps, fridges and even electric vehicles. EMMA also uses inputs from smart meters to track time-based electricity tariff variations and inputs from the likes of alarm systems and current sensors to determine when rooms or whole buildings are in use. These enable EMMA to control circuits intelligently and to thereby minimise electricity consumption and optimise grid-electricity demand profile.

This promising product is a good example of an innovative enterprise responding to the rapidly changing situation with respect to energy efficiency and the longer-term prospect of micro- generation forming a much larger part of energy provision in the future. The scale-up and route to market for this type of product will be critical to its future success.

4.11.21. Barriers

Not having a tradition in heavy engineering in Ireland makes it unlikely to become a centre for wave/wind turbine manufacture. Small population/market and low population density (outside of the Dublin conurbation) is not attractive for large-scale CHP/district heating. Maturity of the technology in some renewable subsectors (e.g. wind, anaerobic digestion, bioethanol fermentation etc.) leaves Ireland with some catching-up to do to develop a manufacturing base. No history of vehicle manufacturing means innovation is more likely to happen elsewhere. Small electricity generators have had difficulty in selling to the national grid and the situation of larger facilities in remote areas has also presented problems with the capacity/availability of high voltage transmission lines in which to supply.

4.11.22. Opportunities – Wind Energy

The largest growth in renewable energy contribution in Ireland in recent years has come in the form of electricity generated from wind power. The output from wind generation increased by 44% in 2004 alone and by a further 46% in 2005. The total installed capacity of wind farms in Ireland in December 2005 was 495 MWe. Wind energy has been touted as one of the big sources of ‘Green Collar’ jobs in a number of countries over the last few years. The wind sector currently employs around 64,000 people in Germany, around 21,000 in Denmark and 35,000 in Spain according to national statistics204. As a rule of thumb, employment can be gauged by 12 individuals employed per MW installed. Employment projections for the EU-25 for the year 2020 indicate: 153,400 direct and indirect employees for manufacturing, 27,400 for installation and 16,100 for maintenance.

Viewed like this, with a ratio of 3.55:1 jobs between manufacturing and post-manufacturing activities, we can see the enterprise opportunity currently being missed in the absence of

204 “Wind energy – why businesses should say yes”. Christian Kjaer, EWEA, Climate Action, December 2007.

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any direct wind energy manufacturing facilities on the island of Ireland.

A closer examination of the installed base of turbines in Ireland provides us with picture of the major players:

Vestas 56.2% GE 14.4% Enercon 8.8% Siemens 6.9% Gamesa 5.2% NEG 3.3% Nortank 3.0%

None of these companies currently have manufacturing facilities in Ireland with the exception of GE and Siemens who operate in completely different sectors. The global value of turbine sales globally in 2007 was €18 billion; there cannot be too many other hi-tech sectors of this scale where Ireland has such negligible presence. It also comes at a time when the order books for wind turbine manufacturers are filled with lead times in the region of 4 years for some manufacturers. What is also certain is the fact that demand is not going to diminish anytime soon. There are expectations of some consolidation among the manufacturers soon which could result in a positive disruption to the supply chain network, providing enterprise opportunities.

The challenge for Ireland inc. is to examine the wind turbine supply chain and carve out areas where sustainable ‘Green Collar’ jobs can be provided. Taking a view of the total goods and services involved in wind energy, there are a number of discrete components and steps involved, broadly represented thus:

Planning – EIA – R&D – Turbine – Turbine rotor – Gearbox – induction generator – Transformer – installation – commissioning – maintenance

As a first shot, Ireland inc. should use their existing networks to approach the manufacturers above and, given the long lead-times being experienced, offer a fast-tracked manufacturing plant proximal to sea-routes where capacity bottlenecks could be relieved extremely rapidly.

At the same time, the individual components making up the tier 2 and tier 3 supply chain should be reviewed for suitability to establish manufacturing operations in Ireland. Enterprise Ireland should also review these components and provide introductions for indigenous firms to bid for supply contracts among the tier 1 suppliers, a very successful policy adopted to service the computer industry in the 1980s and 1990s.

Taking the knowledge economy perspective, the existing capabilities in the sector should be reviewed to examine the prospects of offering a turnkey design, commission, installation and operation service to wind farm owners throughout Europe. This type of work is not new to Ireland, ESB International have been providing this type of turnkey design for power

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generating companies since the 1970s. Domestically, with an impending turbine population of 5,000, we envision prospects for companies to outsource the installation and maintenance of wind farms to dedicated service providers where the installed capacity will provide a sufficient critical mass for this degree of specialisation.

Another major factor emerging is the fact that this amount of generating capacity will be installed in areas with a poor grid network. SEI205 has estimated that 6,565 km of new transmission lines for wind energy alone will be required. This is effectively double the existing capacity of 6,800 km; we are looking at a scenario not faced since the electrification of the state in the 1930’s. The transmission network and successfully attracting manufacturing or services work with the turbines themselves offer huge sustainable employment potential in the coming decades.

4.11.23. Opportunities – Ocean Energy

In October 2006, the Carbon Trust in the UK launched a new Technology Acceleration project in marine energy called the Marine Energy Accelerator. This aims to accelerate progress in cost reduction of marine energy (wave and tidal stream energy) technologies, to bring forward the time when marine energy becomes cost-competitive so that significant carbon emissions reductions are achieved. The project follows on from the Marine Energy Challenge and the Carbon Trust report published in January 2006 which highlighted that marine energy could supply up to 20% of the UK’s electricity needs. 206 The costs of marine energy are currently higher than conventional and other alternative energy sources, reflecting the early stage of technologies. However, the report found there is potential for costs to reduce considerably in future and for the technologies to become competitive with other generation forms.

4.11.24. Opportunities – Other Technologies

The priority technology pathways that were considered to be the most promising in the 2006 DCMNR/SEI report “Renewable Energy Development 2006” in the period to 2010 were as follows: 207

• Co-firing in electricity generation – at peat-fired stations in particular. Biomass fuel is competitive with peat fuel. Co-firing would serve to build the market by providing strong, flexible demand for biomass fuels. • Industrial wood residue CHP – many suitable sites exist and could employ well-proven CHP technologies to produce both heat and electricity from on-site or imported fuels. • Anaerobic digestion – offers important waste management solutions in certain situations and could bring benefits in the short term • Landfill gas – many suitable landfill sites exist, and if the resource is not exploited it will

205 Rick Watson, Agmet, Glasnevin 29 February 2008. 206 Future Marine Energy, Carbon Trust, 2006. 207 www.sei.ie/getFile.asp?FC_ID=1752&docID=28

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be lost. This is a path to biomass fuelled electricity that is easy to capture in a short timeframe. Several landfill gas energy systems are already in place • Wood heat in buildings – a major opportunity for market growth though the delivery of high quality energy solutions in a range of buildings, from houses up to large public and commercial buildings • Energy crops – attention is needed now to ensure development of this sector, which will be the centre of bioenergy and biomaterials into the future.

The ESB’s proposed €1 billion investment in the installation of smart meters provides a unique opportunity for Ireland to establish a centre of excellence in grid management, including the management of non-dispatchable energy sources. The progression to smart metering in grid management is essentially about software application to make the hardware work. Given the scale of the ESB’s commitment there is considerable scope to leverage this investment to the benefit of many sub-contractors. As a priority therefore, the ESB should be asked how can enterprises with the necessary know how and skills currently in Ireland get involved in their smart metering project.

An alternative way of implementing a energy-saving investment is to outsource it as a total service package from a third party (the Energy Service Company - ESCO model). This concept has been pioneered successfully in Finland and should be considered in Ireland as it could enable distributed generators realise the potential of their resource.

Bioenergy chain management is another possible opportunity. Ireland will be a technology taker in terms of bioenergy technology, second generation in particular. But supply chain remains an issue in the collection and processing of the resource. This will certainly be the case with wood residues and forestry becoming a significant potential asset.

4.11.25. Conclusions

Policies aimed at technological innovation include technology push instruments such as R&D policies and market/demand-pull instruments. A successful introduction of a new technology into a mature market crucially depends on both elements and their correct timing in the process. Market-pull instruments can include command-and-control targets for energy efficiency or renewable combined with financial support schemes.

Potential opportunities in ocean energy (wave and tidal) should continue to be supported as our coastline presents us with a natural advantage and we still have early mover potential in this sub-sector. While there is a backlog of up to four years for turbines from some suppliers there is no strong argument in favour of manufacture here due to our relatively small heavy engineering tradition (except for Harland & Wolff in Belfast where off-shore wind and tidal energy structures are assembled). There is some tradition of domestic boiler manufacture (gas and oil-fired) in Ireland and the opportunity to manufacture biomass boilers here could be an area of employment creation. The total energy usage of a development should be a consideration in the planning process. The technology (hardware and software) to optimise

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multiple renewable energy systems (solar, CHP, wind, heat pumps etc.) on a micro (household) scale is an area of growth potential.

4.12. Waste Management

Products, systems and services for the minimisation, collection, treatment, segregation, recovery, recycling and disposal of waste that may include paper, organics, metals, glass, plastics, demolition and construction wastes, electrical and white goods.

4.12.1. Introduction

The approach to waste management on the island is based on the internationally adopted hierarchy of options that has been embraced by the EU since 1989 as the cornerstone of its waste management policy. The most preferred option is prevention and minimization, followed by re-use and recycling, energy recovery and, least favoured of all, disposal.

Waste management policy is set at EU level and a significant body of legislation has been developed since the adoption of the first Waste Framework Directive in 1977. 208

Ireland and Northern Ireland have adopted the proximity principle, which says that waste should be treated as close as possible to the source of generation. 209 Within Ireland, inter- regional movement of waste has been allowed to avoid the implementation of the Regional Waste Management Plans excessively restricting the establishment of economies of scale for infrastructure and markets. However, large quantities of waste continue to be exported primarily because of infrastructure deficits in relation to facilities and indigenous market size.

4.12.2. The Waste Management Sector

It is estimated that there are some 250 companies involved in the waste management sector in Ireland and approximately 75 in Northern Ireland. 210 211 In addition, local authorities are active players in this sector. The recycling sector (NACE 37) comprised 41 companies (2006), employing 530 with a turnover of €139m,212 demonstrating their SME nature with an

208 A full list of EU waste legislation can be found on http://ec.europa.eu/environment/waste/legislation/index.htm 209 The proximity principle is set out in EU Framework Directive 91/156/EEC. Member states must establish an integrated and adequate network of disposal installations so that waste can be disposed of in one of the nearest appropriate installations, by means of the most appropriate methods and technologies to ensure a high level of protection for the environment. 210 Proxied from UK data - Department of Trade and Industry. Emerging Markets In the Environmental Industries Sector, November 2006. 211 The KOMPASS Business Directory lists 100 companies involved in waste collection (excluding local authorities) and 104 engaged in recycling. In addition, 25 companies are listed as being providers of waste equipment and machinery. 212 2006 Census of Industrial Production, CSO, December 2007.

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average employment of 13 persons and turnover of €3.4 million. Some 561 IPPC and waste licenses have been issued by the Environmental Protection Agency (EPA).

On the basis of feedback from the sector, it is estimated that the value of the waste management market in Ireland is in the range €1.2bn to €1.6bn, and the corresponding figure for Northern Ireland is estimated at £250 to £300m.

These estimates contrast sharply with those contained in the Ernst & Young report on the size of the European EGS sector, which valued Ireland’s total EGS sector at €1.21 billion (2004), with just €215m being allocated to solid waste and recycling. 213 The total UK market for waste management was estimated to be £8.1 billion in 2005, which extrapolates to a Northern Ireland market of £211m. 214

The market in Ireland is fragmented with the top five companies accounting for just 25% of the total market. Quite a number of companies (Greenstar, One51 (TechRec), Panda Waste, Oxigen, Bord Na Mona (AES), Thorntons Recycling, Mr Binman, Indaver Ireland, Enva and Veolia) are of a sufficient scale to use their skills and know how to take advantage of the growth in this sector in the medium term and to expand their businesses in export markets. Levels of profitability vary widely in the sector. Greenstar, for example, probably the largest private player in the industry, made a profit of €27.4m on a turnover of €134.5m (2006). While the local authorities operate the majority of Ireland’s municipal landfills, the private sector is the predominant service provider for commercial, industrial and hazardous waste management, 67% of the municipal waste collection capacity and nearly 50% of the direct kerbside household waste collection 215.

It is widely expected that there will be further consolidation within the sector and this should be welcomed as it will help create waste companies capable of competing internationally in the provision of services. The key players in the sector believe it is critical to reach scale and many expect that two or three dominant companies will emerge. Certainly the area of waste management shows the largest number of mergers and acquisitions in 2007. This reflects the continuation of a process commenced over the past number of year where the larger, well-funded waste management companies have acquired smaller regional operators or specialist waste contractors. Once deregulation commenced with domestic and commercial waste and the requirement for additional separation of waste streams, a plethora of companies were established up in this area. There has been a steady move towards consolidation as the ability of the small regional operators to compete with the infrastructure of the large waste management companies becomes less and less. For example, Greenstar has undertaken 14 acquisitions since 1999. There is a concern among some companies in Northern Ireland that a similar consolidation could arise, with the remaining smaller operators being ‘squeezed out’ by dominant players, or that if central

213 European Commission - DG Environment, Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. Ernst & Young. September 2006. 214 Department of Trade and Industry (UK) study Emerging Markets in the Environmental Industries Sector, November 2006. 215 Private communication, Irish Waste Management Association, 2008.

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procurement is adopted there will be no scope for smaller business. A contrary view is that such as larger grouping would provide opportunities for a higher level of expertise with a longer planning time horizon.

While all operators feel frustrated at the absence of a clear regulatory framework, feedback from the sector is generally positive about growth prospects and new business opportunities. Greenstar has been especially proactive in seeking to stimulate debate and to inform waste policy decisions on a variety of issues confronting Ireland. 216

4.12.3. The Regulatory Framework - Ireland

Legislation: Ireland has transposed the waste management provisions of the relevant EU Directives by means of primary legislation.

Overall: Policy has been guided by key statements, e.g. “Delivering Change” (2002), “Taking Stock and Moving Forward” (2006), various waste related Plans, e.g. Regional Waste management Plans, Plans for specific streams, e.g. hazardous waste, biodegradable waste, etc. Producer Responsibility Initiatives have been introduced, e.g. packaging, waste electrical and electronic equipment, end of life vehicles and a major public awareness campaign i.e. Race Against Waste has been implemented. The primary aim of the National Waste Prevention Programme (2004-2008) was to reverse trends in waste production, decouple waste generation from economic growth and minimize the environmental impact of waste. In August 2006, the Minister for the Environment, Heritage and Local Government published a consultation paper on options for future regulation of the waste sector. Submissions were invited on whether there is a need for a regulator for the sector, if so on what model of regulator might be most appropriate and on what powers any such regulator should be given, the role of local authorities as regulators and/or direct service providers, waivers, universal service obligation, recycling and other obligations on private collectors, etc. The government’s response to the more than fifty, many very detailed, submissions is eagerly awaited by the industry.

Hazardous Waste: A proposed National Hazardous Waste Management Plan published by the EPA set out a framework for a revitalized approach to hazardous waste prevention, collection and management.

Biodegradable Waste: The publication of the National Strategy on Biodegradable Waste has set further recycling priorities.

Public Capital Expenditure: Some €753m in public funding has been approved under the NDP, with investment in the ’legacy’ issues of old landfill sites the priority. However, there

216 Waste Policy, Planning and Regulation in Ireland, Final Report for Greenstar by Eunomia Research and Consulting Ltd., in association with TOBIN Consulting Engineers, April 2007.

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are no details provided as to project priorities and the timescale for delivery of the proposed measures.

International Review: A Request for Tenders for a consultancy study to carry out an international review of waste management policy has been published (February 2008). The terms of reference suggest that the review will identify possible policy changes and, in addition, examine institutional and organizational arrangements which could assist in achieving Ireland’s policy goals. Of critical importance, given divergent views within the industry, the study will evaluate the scope for the extension of the use of proven technologies for the mechanical, biological, chemical or thermal processing of waste (or combinations thereof). 217 In addition, the OECD will conclude a case study on waste management in Ireland and this too will be completed before the end of 2008.

Future Policy Change: In the longer term for both jurisdictions, the proposed revision of the Waste Framework Directive and the introduction of a Sustainable Consumption and Production Policy may shift the emphasis to the prevention of waste and may generate new opportunities, either in providing consultancy services or in cleaner technologies that produce less waste. The proposed Directive would merge legislation on waste and hazardous waste and simplify it, reflecting technological progress and also bring its provisions up to date. It would introduce the life-cycle approach into waste policy to focus on key environmental impacts and on improving the way we use resources. A revised definition of recovery is set out which confirms that the basis for this definition is the substitution of resources. The definition of waste is unchanged in the proposal, but it does allow for future clarification of when certain wastes cease being wastes by specifying criteria for those waste streams that meet certain specified tests. The Directive would introduce minimum standards or a procedure to establish minimum standards for a number of waste management operations and would improve the recycling market by setting environmental standards that specify the conditions under which certain recycled wastes are no longer considered waste but high-quality secondary materials instead. There is also an aim that by 2010 a product eco-design policy would be formulated to address both the generation of waste and the presence of hazardous substances in waste, with a view to promoting technologies focusing on durable, re-usable and recyclable products. 4.12.4. The Regulatory Framework – Northern Ireland

Legislation: Northern Ireland has transposed the waste management provisions of the relevant EU Directives by means of primary legislation. The key legislation is the Waste and Contaminated Land (NI) Order. The most recent updating regulations amended the Order to bring agricultural wastes and mine and quarrying wastes into the controlled waste system. 218

217 Final Report for Greenstar by Eunomia Research and Consulting Ltd., in association with TOBIN Consulting Engineers, February 2008. The report argued that MBT is the only internationally proven technology solution that can play a major role in helping Ireland meet its EU waste targets. AEA Technology, in a report for the European Commission has evaluated technology options. 218 The Waste Management Regulations (Northern Ireland) 2006.

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Overall: Towards Resource Management, the Northern Ireland Waste Management Strategy 2006 – 2020, was published in 2006.219 The primary aim of the Waste Management Strategy is to manage waste and resources effectively. This means using material resources in a way that reduces the quantities of waste produced and, where waste is generated, to manage it in a way that minimises its impact on the environment and public health and contributes positively to economic and social development.

Hazardous Waste: The Northern Ireland Hazardous Waste Forum consists of key stakeholders and has been established to advise on a way forward for hazardous waste reduction, recovery and management. The Forum published its first Action Plan in June 2004,220 with objectives and actions focused in four areas, namely the regulatory system; communications and awareness raising; reduction, reuse and recycling; and, provision of facilities.

Biodegradable Municipal Waste: The Strategy sets out the Department’s policies with respect to the diversion of Biodegradable Municipal Waste from landfill to meet EU Landfill Directive targets. Key to this is the development of significant new waste management infrastructure with considerable cost implications. A Waste Infrastructure Task Force was established to make recommendations on the type of infrastructure required, likely costs, funding mechanisms and planning and delivery, and the report of the Task Force was published in December 2006. 221

Public Capital Expenditure: The Strategic Investment Board has identified a capital investment requirement of up to £285 million. Northern Ireland’s Investment Strategy 2008- 2018 predicts a total investment of £436m over this period, with £256m being spent in 2008-2011 and the balance of £180m in the remainder of the period.

Strategic Review: A Strategic Waste Board has been established and Waste Infrastructure has been designated a supported programme by the Strategic Investment Board for Northern Ireland.

Future Policy Change: The EU has adopted thematic strategies on the sustainable use of natural resources and on the prevention and recycling of waste. The strategy on prevention and recycling of waste includes the introduction of life cycle thinking into waste policy and this could potentially lead to profound changes to policies and practises as the greenhouse gas emissions or Carbon Footprint associated with waste and resource management systems and technologies becomes a key issue.

4.12.5. Trends

219 Towards Resource Management, The Northern Ireland Waste Management Strategy, 2006. 220 Hazardous Waste in Northern Ireland – An Action Plan for its Environmentally Sound Management, June 2004. 221 Report of the Waste Infrastructure Task Force, December 2006.

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The nature of waste management continues to change at a rapid pace. For example, there is an increased emphasis on promoting the idea of waste as a potential resource. While good progress is being made in relation to recycling, significant problems remain on the waste disposal front with the top priority to divert waste from landfill. Other important trends in waste generation and management, as follows, have been identified: 222

The quantity of waste being recycled continues to grow at a significant pace; with the quantity of municipal waste recycled up 18% year-on-year (2005/2006). Some 36% of municipal waste is now recycled; exceeding the national (2013) target of 35%. Continuing strong increases in recycling and recovery remain overshadowed by increased waste generation and landfill; volumes to landfill were up 8% year-on-year (2005/2006). There are doubts if it will be possible to achieve the national target of 50% diversion of household waste from landfill by 2013. While the quantity of packaging waste is also increasing, the 60% recycling target for packaging and packaging waste (2011) should be met. Household WEEE collection (at 7.4kg) is nearly twice the requirement set out in the WEEE Directive. Waste recycling infrastructure (as opposed to export) is improving, with a 40% year-on- year increase (2005/2006). It is unlikely that the 2010 target to reduce biodegradable municipal waste by 450,000 tonnes will be met due to the lack of the full implementation of the National Strategy for Biodegradable Waste. Many of Ireland’s 29 landfills that are licensed to accept municipal waste are new and have significant capacity. However, this capacity cannot cope with the growing volume of municipal waste. Two proposed incinerators have been licensed but construction has not begun. Mechanical treatment of residual waste is on the increase. The subsequent biological treatment stage is not yet in use. Ireland’s non-compliance with the EU’s Landfill Directive and the absence of a clear national strategy on landfill options is inhibiting investment decisions. Construction and demolition waste is at a record high level (17m tones) but reported recycling rates are down, particularly in relation to the non-soil and stone fraction. 223 Hazardous waste generation has decreased slightly. The potential allocation of waste to the proposed incinerator in Dublin will divert very large volumes from materials recovery or landfill, though this issue is still subject to argument.

The latest estimate waste arisings in Ireland (excluding agricultural waste) are as follows:

Table 4.8: Waste Arisings – Ireland, 2006 Waste Category Tonnes %

222 National Waste Report (2006), Environmental Protection Agency, 2007. 223 Ibid, National Waste Report (2006), Environmental Protection Agency, 2007.

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Construction and demolition waste 16,819,904 54.8 Mining and quarrying waste 4,782,614 15.6 Manufacturing waste 3,818,711 12.4 Municipal waste 3,384,606 11.0 End-of-life vehicles and scrap metal 744,136 2.4 Contaminated soil 406,904 1.3 Energy, gas and water supply waste 333,341 1.1 Hazardous waste 314,072 1.0 Urban wastewater sludges 59,827 0.2 Drinking water sludges (wet weight) 30,047 0.1 Drinking water sludges (dry solids) 9,987 0.0 Dredge spoils5 0 0.0 Total 30,704,149 100.0 Source: EPA, National Waste Report 2006, EPA 2007

The following is the corresponding data for Northern Ireland:

Table 4.9: Waste Arisings - Northern Ireland, 2006 Waste Category Tonnes %

Construction, demolition and excavation waste 2.5-3.75 MT 64 (3.125) Mining and quarrying waste N/A Commercial and Industrial Waste 635,000 13.1 Municipal waste 1,052,234 21.7 End-of-life vehicles 56,900 Hazardous waste 47,400 Agricultural waste (non-organic) 41,000 1 Packaging 4 – 500,000 Tyres 16,100 Total (C&D&E, C&I, MSW, AG) 4,853,234 Source: Towards Resource Management. Volume 2: Waste Stream Summaries

Municipal waste is collected with possible prior segregation or subject to post-collection segregation. In principle, there are three broad fates for collected municipal waste: landfill, incineration with or without heat recovery, or material recovery (recycling). The majority of municipal waste in Ireland is landfilled, with improving recovery rates and no incineration at present. Materials separated for recycling are largely exported for processing, with the demise of local steel, paper and glass processing capacity. There is a policy objective to develop markets for recycled material, but with notable exceptions (e.g. Wellman, Shabra, TechRec), this is absent.

In Northern Ireland, there is a perceived division between larger multi-national operators

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with a traditional approach to waste management and indigenous SMEs that are more focused on resource recovery with innovative approaches and technologies.

4.12.6. Drivers

Government waste policy and compliance with EU Directives have been the key drivers to date; specifically, the Landfill, WEEE and Packaging Directives. Initially, restrictions on landfill capacity, the requirement to upgrade landfills and obligations to recycle packaging prompted a major rise in the cost of waste disposal and the formation of private service providers. Investment in landfill capacity has reduced this driver somewhat, though cost remains a concern and is now the critical driver, after legislation. There is a view among some of the waste management providers that the full cost of waste has still not been identified by waste producers and that this inhibits the adoption of less traditional waste management practices and technologies. The scheduled escalation of the landfill tax in Northern Ireland will increase the costs of disposal relative to other management and reprocessing options.

The application of the Landfill Directive will require the diversion of biodegradable municipal waste from landfill. 224 Using the 1995 quantity of biodegradeable waste as a basis, the targets for Ireland for the quantity to be landfilled as a proportion of the 1995 figure are:

Table 4.10: Targets for landfilling Year Target July 2010 (with derogation) 75% July 2013 (with derogation) 50% July 2016 (without derogation?) 35%

These targets translate into the following estimates; 225

Table 4.11: Treatment Targets Year Managed organic Biological treatment Residual treatment Total treatment BMW target (tonnes) target (tonnes) (tonnes) 2004 746,532 49,578 2005 744,685 47,802 2006 819,919 64,725 2010 966,003 338,129 308,904 647,033 2013 964,060 414,546 438,190 852,736 2016 921,104 442,129 499,762 941,891

Achieving these targets will require significant investment.

A future driver will be the need to reduce the level of GHG emissions from landfills which is

224 Directive 1999/31/EC. 225 Hitting the Targets for Biodegradeable Municipal Waste, Ten Options for Change, EPA, January 2008.

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currently 3% of the national total. This will provide a further incentive to segregate collected waste, whether at source or subsequent to collection, prompting demands for additional outlets. While the existing practices in response to current requirements may be relatively “mature”, management of biodegradeable waste will represent a step change in demands and one that will not be easily accommodated by export. Local solutions will be required. In addition, compliance with Ireland’s stricter climate change/RES targets post-2012 may encourage a greater use of energy from waste solutions. In relation to Northern Ireland, the carbon agenda (UK Climate Change Bill) is also starting to impact on waste and resource management decision-making in the UK, and this influence will continue to increase. However, there is a lack of awareness of these forthcoming impacts in Northern Ireland.

Full compliance by Ireland with the EU’s Packaging and Packaging Waste Directive (94/62/EC) by 31 December 2011 will increase the pressure on packaging collection and recycling. In addition to better recycling, EPA have suggested that a targeted approach be undertaken to reduce the quantity placed on the market in an attempt to take an alternative approach to increasing the percentage achieved.

The desire to segregate waste and to apply the “pay by use/weight” approach has led to the development of improved waste handling and accounting systems. This expertise may be provided as a service to other markets, e.g. Eastern Europe.

Specific legislation, e.g. the WEEE Directive and subsequent national legislation has provided stimulus for particular waste streams.

Finally, increasing waste costs that impact on company competitiveness is a concern which has been articulated on many occasions by the National Competiveness Council.

4.12.7. Weaknesses

In the course of interviews with companies in the sector, the main concerns expressed were uncertainty in policy and the time required to bring projects to fruition. Thermal treatment with energy recovery is the expressed preferred option for dealing with residual waste after achieving ambitious targets in respect of waste prevention, recycling and recovery and is reflected in the regional waste management plans, for which the local authorities have statutory responsibility. These waste-to-energy plants will be provided as entirely private sector developments or by way of public private partnership. At present, there are a number of proposals, led by Indaver, for thermal treatment (waste to energy) plants, but none of these have entered even the construction phase. Mechanical Biological Treatment (MBT) has been introduced in a number of localities and has received some positive comment. A review of national waste policy with reference to international best practice has been announced, with the possibility that current policy will be changed.

Private operators have also expressed concern about the apparent ability of local authorities to control the waste market through their adjustment of the prices charged by their own

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landfills and the potential to direct the fate of the waste (“flow control”).

Waste is largely exported for recycling, due in large part to the absence of an indigenous reprocessing infrastructure. Economies of scale are most often suggested as the reason for this deficiency, since there is free movement of waste for recovery and the Irish market is small in European terms. In Northern Ireland, collection and disposal (to landfill) is dominated by the local authorities.

Inertia, familiarity with existing practice and lack of knowledge of innovative and emerging technologies among local authorities has been expressed as weaknesses in Northern Ireland. A risk-averse procurement process and a sense of needing to take rapid and certain steps to prepare for the Landfill Directive favours maintaining the status quo of technology. The existing waste management planning structure is under review and the potential to consolidate the existing three planning groups into a single entity has led to uncertainty in relation to future policy.

4.12.8. Case Studies

Forfás has published a baseline assessment of the waste management sector. 226 This benchmarking analysis confirmed that Ireland performs poorly relative to a selection of competitor countries in meeting the waste management needs of enterprise. The Forfás Report also addressed waste treatment options with reference to international benchmarks.

TECHREC IRELAND

Techrec Ireland Ltd is engaged in the recycling and materials recovery of waste electronic and electrical equipment (WEEE) in its state-of-the-art plant in Parkwest, Dublin. The driver for its establishment was the planned implementation of the WEEE Directive in Ireland. TechRec Ireland Ltd is a subsidiary of One51 Ltd. - the majority shareholder. Immark AG of Switzerland (which is now majority owned by One51 Ltd.) provided the technology know how for the operation. One51 is a diversified group with a focus on waste, sustainable energy and associated support services. Immark AG is the dominant service provider of WEEE recycling facilities in Switzerland and also operates a number of large WEEE processing facilities in other European countries. In addition to having an EPA Waste Licence and a Waste Permit from Dublin City Council, TechRec has ISO certification for its environmental, quality and occupational health and safety management systems. TechRec Ireland has invested in facilities to disassemble and recover components and materials from WEEE. Collected waste products are segregated for mechanical or manual processing. Those subject to mechanical processing are mechanically broken with the residue separated before further size reduction and separation. Materials e.g. plastics, glass and metals are then exported for specialised recovery or directly for reuse. Hazardous components are segregated before they could be mixed in the breaking stage. In addition to providing the service of disassembly, destruction and materials recovery, TechRec provide an advisory service to business that wishes to establish a self-compliance scheme. Furthermore, they have developed software to track the path of received products,

226 Forfas, Waste Management Benchmarking Study, June 2006. An earlier report (July 2003) made very similar points.

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facilitating the reporting of waste treatment and fate and confirming destruction where required. TechRec (NI) Ltd., is the sister company of TechRec Ireland Ltd., and is the first fully licensed refrigeration recycling plant on the island of Ireland. Together they provide an example of an all- island solution to the difficulty of economies of scale. The WEEE collection service in Ireland is dominated by two compliance schemes: WEEE Ireland and the European Recycling Platform. Together they have been successful is surpassing the required recycling collection target for WEEE. However, a high proportion of the remaining WEEE is exported to non-EU countries where there could be concerns about the quality of waste management. Since the refrigerator recycling is conducted in Northern Ireland, movement of such material requires conformity with the Trans Frontier Shipment regulations which impose an additional administrative burden and cost.

LESSONS: The business opportunity arising from the up-coming implementation of the WEEE legislation was the primary driver for the investment. The investment made was from internal company resources; there was limited involvement by Enterprise Ireland. The lead time from initial business plan to plant commissioning was 4 years. Technical expertise has been provided from continental Europe. The technical service (materials recovery) is complemented by management services (compliance advice and waste tracking). The company is subject to regulatory (EPA, Dublin City Council) and voluntary (ISO) oversight (“certification” / “verification”), as well as customer examination. An all-island solution has provided an economy of scale, but is inhibited by frontier-crossing requirements. If restrictions were imposed on the un-controlled export of WEEE outside the EU, TechRec and other similar plants could expand their export business.

BRYSON HOUSE

Bryson House has grown from a small charity providing environmental advice to the largest provider of kerbside collection systems in Northern Ireland (approximately 60% of the market). Bryson Recycling is a joint venture trading company equally owned by the Bryson Charitable Group, Northern Ireland’s largest community-based charity and ECT, the UK’s largest community recycling provider. Bryson is a social enterprise and has recently extended its operations into Ireland. The company started with the Cash for Cans programme which was established in 1993 and provided the opportunity to become involved in the Kerbside programme which was launched in April 2001 and coincided with the opening of the Bryson House Recycling Materials Recovery Facility in Castlereagh. While the vast majority of its income is from local authority recycling contracts, Bryson has recently moved into commercial collection and recycling, The company currently employs 200 people, with an annual turnover £8m, projecting to £9m in 2008/2009. The focus of the business is on resource recovery rather than landfill.

LESSONS This, originally small, operator was active in the market and identified a need for a new service – collection and processing of recyclables on a large scale for local authorities. It has partnered with a larger, UK-based, entity delivering a similar service and with a

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similar management mission (social economy). The landfill tax increases disposal costs and favours recovery. Legislation has imposed recycling targets on local authorities. A buoyant market for recycled materials is an important income stream and benefits the cost effectiveness of recycling.

Waste Management (www.wm.com)

This US company deals with the waste of its 22 million customers and produces more renewable energy each year than the entire North American solar industry. It strategic goals to 2020 include: increase waste-based energy production; increase in the volume of recyclable materials; investment in clean technologies; and preserving and restoring more wildlife habitat. It operates 33 landfills and hopes to increase this number to 100 by 2020. To increase the volume of recyclable materials, the company uses a profitable single stream recycling technology. New areas of business include ewaste, and construction and demolition recycling. In partnership with Sony, Waste Management has developed an eCycling Programme aimed at providing a drop off within 20 minutes of 90% of population centres. The company is investing in the next generation of landfill technologies that could produce electricity, create more space in landfills, and make diesel from landfill gases. Waste Management’s consulting subsidiary works with customer companies to reduce their waste streams. According to the CEO of Waste Management ‘…..where most see waste, we see opportunity.’

LESSONS: Scale is important in the waste business. Waste companies have the potential to offer environmental advisory services to their clients. Waste companies should be exploring the feasibility of investing in waste-to-energy plants. A waste company that is allowed to operate collection points increases its load.

One example of an environmental technology supported by the WRAP programme relates to the process of separating brominated flame retardants (BFRs) from waste electrical and electronic equipment (WEEE) polymers.227 The work indicates that the Creasolv process for extraction of brominated flame retardants from WEEE polymers has potential to be commercially viable in the UK context at a throughput of 10,000 tonne/year. The Creasolv process was originally developed by Fraunhofer IVV in Germany and has been modified further in the course of this project. The Creasolv process will remove most BFR types from styrenic WEEE polymers. Work done for this project has shown that styrenic polymers constitute over half of collectable WEEE polymers and that they contain the great majority of the BFRs found in WEEE thermoplastics. It is has not been tested with the newer BFR types such as brominated epoxy oligomers because these are not yet found in significant quantities in real WEEE. A second process called Centrevap has also been developed in the course of this project and tested at technical scale. Tests have shown that it cannot achieve

227 www.wrap.org.uk WRAP works to encourage and enable businesses and the consumers to be more efficient in their use of materials and recycle more things more often. It has a budget of £79m (2008).

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significant reductions in BFR content. However it does offer good potential as a robust, flexible and relatively cost-effective process for removal of insoluble impurities down to submicron size from a wide range of polymer types. Both processes should be able to compete with landfill disposal or incineration (£35/te gate fee) as treatment methods for segregated polymer streams, Creasolv for BFR removal, and Centrevap for removal of other insoluble impurities. They will compete with export of the BFR-containing polymer outside the EU (current sales value of around STG£100/te) if the finished high grade compounded recyclate can be sold at about 80% of virgin compound price. Environmental impact comparisons conducted during the project indicated that both of the recommended processes have a net environmental gain across all environmental impact categories and that the proposed treatment routes are a substantially better environmental option than landfill and incineration with energy recovery.

4.12.9. Barriers

A key concern expressed by companies in the waste management sector is the issue of unfair competition due to the dominant position held by local authorities: they are waste management service and facility providers, regulators and planners. The Irish Waste Management Association (IWMA) has stated that this situation has created inefficient and uneconomic waste management services and delays in the delivery of necessary waste management infrastructure. The IWMA also pointed out that the sector is controlled by 15 regulators: the EPA, An Board Pleanala, the Competition Authority, the new National TFS Office, the Health & Safety Authority and ten regional waste authorities, which impose a significant regulatory burden on business. The Dublin local authorities challenged these assumptions by commissioning a report which argues that from a competition policy perspective household waste collection constitutes a separate product market. 228 In addition, this report argues that the household waste collection market is a natural (local) monopoly. Both of these conclusions are consistent with the national (e.g. Competition Authority) and international (e.g. UK Office of Fair Trading and Organisation for Economic Cooperation and Development) literatures though the IWMA does not accept this.

With regard to the appropriate public policy response to the existence of a natural (local) monopoly, this report considers and rejects as unnecessarily inefficient the competition-in- the-market option. As such, this report argues that local authorities should be permitted (indeed encouraged) to enforce exclusive rights with respect to household waste collection in a pro-competitive manner. This conclusion is also consistent with the relevant national and international literatures. Finally, it is argued that the actual identity of this single provider (i.e. public or private) is of secondary importance compared to the institutional environment within which the actual provider subsequently operates. However, this issue remains a major concern of the private waste management sector in Ireland who feel the lack of clarity and resolution of the dual role of local authorities (regulator and operator) in waste management is a significant impediment to their strategic decision making.

228 Dr. Francis O’Toole, Household Waste Collection: An economics of Competition Policy Perspective. Trinity College Dublin.

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The local authorities have additional competitive advantages in that unlike private operators they do not charge VAT (at 13%), and are in receipt of funding from the Environment Fund and Public Capital and current expenditure.

The IWMA has also stated that ‘the waste sector is characterized by a raft of unconnected national regional waste plans dreamt up in isolation by various regulatory bodies and state agencies.’ 229

To date, despite calls from the IWMA there has been no serious attempt to explore and develop opportunities for an all-island waste management market.

The planning process, notwithstanding the enactment of the Strategic Infrastructure Act 2006, continues to delay the implementation of critical infrastructure projects.

The motor industry has argued that the way the End of Life Vehicle (ELV) Directive has been implemented - by requiring registration in each local authority area – is cost ineffective and will not encourage any significant investment in ELV technologies and processes. 230

4.12.10. Opportunities

Ireland has the highest level of municipal waste generation per capita in the benchmark countries assessed in the Forfás Report. While this could be viewed as a problem, in reality it is a business opportunity. To date, policy-makers have not looked at the crisis in waste management in Ireland as a business opportunity.

The vast majority of Ireland’s recyclable materials are exported for further treatment; some 1.6m tonnes were exported in 2006.231 The cost of transporting these materials abroad adds to the above-average cost of waste in Ireland. This suggests that feasibility studies should be completed on the setting up of all-island recycling, materials recovery and treatment facilities for all waste streams. One such study (on paper) has been completed but not yet implemented. In April 2007 the Government launched the Market Development Programme for Waste Resources 2007 – 2011. This aims to promote more recycling in Ireland of recovered waste resources, focusing on organics, paper and plastics in particular, e.g. Sharma Plastics. The €13m Programme is to be sourced from the Environment Fund (€11m) and the private sector (€2m). A tender for the implementation of the programme was issued by the D/EHLG in February 2008. Re-processing of selected streams on the island is a potential opportunity. Where recycled materials continue to be exported, analysis of segregated streams to confirm that the recyclate is of higher quality and therefore higher value may provide an opening for laboratory services.

229 Press Statement, Irish Waste Management Association, June 2006. 230 www.simi.ie 231 National Waste Report (2006), Environmental Protection Agency, Table 6, 2007.

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The implementation of improved segregation of biodegradeable waste will create a new resource stream, one that will require local processing. Equipment that will effectively achieve this segregation or will subsequently process the waste will be required. Decentralised solutions will include contained composting processes (“in-vessel composters”) that would be applicable to large individual waste producers e.g. food processers, or closely located groups of smaller producers, e.g. an industrial estate. Anaerobic digestion of the waste to produce combustible gas will have the dual economic benefit of avoiding methane emissions and producing energy from, in some instances, a source that may be classified as renewable. Alternative technologies that generate energy from waste via pyrolysis or produce a secondary energy carrier, e.g. gasification, are also emerging to a demonstrated level.

As the key driver in the waste management business is EU legislation, all member states and not just Ireland are facing the same challenges in seeking to comply with waste treatment, disposal and recycling targets. Many of the new member states are addressing a significant infrastructure requirement with the assistance of EU cohesion and structural fund co- financing. The spending plans of these countries in relation to waste management should be assessed by Enterprise Ireland with a view to identifying specific new business opportunities and this market intelligence should be made available to the entire waste sector on the island. 232 Waste management expertise has been locally developed and is exportable, though in competition with other Member States with more advanced waste management systems.

Green procurement is part of the published Market Development Programme for Waste Resources but has not been implemented. National guidance on green procurement should be introduced as this will promote the use of new technologies and services.

The following would appear to be areas with future growth potential:

MBT development and operation Engineered in-vessel composters Analysis of segregated fractions from MRF or MBT, and compost quality assurance (though overall a small market) Niche re-processing of recyclable materials Outputs from producer responsibility initiatives: for example waste tyres; there is some scope for vehicle dismantling before compaction and export; but battery processing is unlikely Small or large scale anaerobic digestion of biodegradeable materials (in conjunction with water sector study) Export of waste management expertise: planning, development of infrastructure, tracking software (pay-by-use, hazardous waste streams) Development of packaging design expertise that reduces the packaging quantity or facilitates reuse or material recycling.

232 http://ec.europa.eu/regional_policy/newsroom/pdf/scoreboard17012008.pdf

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The UK’s market for waste management was £8.1bn in 2005 and is forecast to grow to £15.9bn by 2015. WRAP put the figure higher at up to £30bn by 2020.

4.12.11. Conclusions

The key messages arising from this research are:

The problems inhibiting the growth of the waste management sector in Ireland are well documented. Lack of a clear government policy and robust implementation of waste regulations are barriers. In particular, the dual role of local authorities in the area of waste management needs to be settled. The waste industry has expanded rapidly with little recourse to State financial supports. The waste management sector is well-organised as a network in Ireland, but less so in Northern Ireland. Infrastructure requirements identified in the National Hazardous Waste Management Plan, the National Strategy on Biodegradable Waste, and Regional Waste Management Plans have not been implemented. An all-island waste management strategy has the potential to provide economies of scale in relation to some waste streams.

The waste sector has great potential in terms of exporting services to other member states who, like Ireland, are struggling to comply with ever stricter EU regulations and targets.

Industry sources forecast that the Irish waste management market could double in size within five years.

The waste management sector has been the subject of many studies and assessments. Despite the depth of analysis, key policy recommendations that could generate new business opportunities have yet to be adopted. There a large consensus among the companies operating in the sector - a view that has persisted for many years - that there is an urgent need for a national waste regulator with a remit to centralise decision-making in relation to waste management policy and waste infrastructure investments. The view of the sector is that, at the very least, a co-ordination of existing separate structures/institutions to encourage regulatory and market certainty and ensure implementation that meets national policy objectives would be welcome.

As scale is critical in the waste management business, the State Agencies should actively partner and support companies who acquire capacity by way of mergers and acquisitions.

WRAP advises waste companies in Northern Ireland and does so very successfully.233 There is a need for a similar organisation in Ireland.

233 Further information at WRAP is available at www.wrap.org.uk

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The sector does not appear to need direct financial assistance from State agencies in its operation of the waste management system, per se, but financial support for R&D, market development and commercialisation, along the lines of that provided by WRAP, is desirable. At the stakeholder consultation meeting, a strong demand for information and advice about compliance with waste legislation and enhanced awareness raising was articulated.

If key investment decisions were implemented - and the Strategic Infrastructure Act, 2006 will certainly assist in this regard – this will unlock private sector investment and expertise.

Once the problems of the island’s waste market are resolved, problems which occupy much of the attention of companies in this sector, then the significant know how of these companies can be deployed to search for export opportunities.

If some local authorities were not so dependent on the revenues they receive from waste charges it is probable that the entire waste collection business would be outsourced.

The findings of the international review on waste policy are likely to have a significant influence on government waste policy, on the choice of technology and on the optimum organisational structures required. Assuming that the findings of this review are acted on promptly, then Ireland should have a clear waste management strategy from 2009. A robust regulatory framework will unlock significant potential investment if the market believes the right strategic choices are made.

If an all-island approach to growing this sector is to be taken, it will be essential that waste management is seen more as a business opportunity than a sector that should be strictly regulated.

4.13. Water Supply and Waste Water Treatment

Products, systems or services for the management of the fresh water environment, provision, treatment, distribution and storage of clean water and wastewater for industrial and domestic users. Examples of environmental goods and services include resource development, demand management, manufacture of wastewater treatment equipment, design, construction, installation and operation of water and wastewater treatment facilities.

4.13.1. Introduction

While approaches to water service provision and regulation differ across the world, all customers want an efficiently run service that seeks to minimise price increases and provide good levels of customer service. 234 The scale of the sector and its ownership is also an issue.

234 International Comparison of Water and Sewerage Services, 2007 Report, Ofwat UK. This report provides

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For example, the water industry in England and Wales consists of 23 fully privatised companies, with ten providing both water and sewerage services and 13 providing water only. In contrast, the water industry in Northern Ireland is not privatised but is run managed by one agency, NI Water. Outside the UK, ownership and operation is normally organised in the form of a public utility, either as part of a municipal organisation or a publicly owned company. On average across the developed world, water companies supply between 142,000 and 420,000 properties. However, in England and Wales the figure is much higher with medium sized companies servicing up to 1.7m properties. In Ireland in contrast, local authorities are responsible for water and waste water treatment as the procurer with the private sector as supplier.

4.13.2. Ireland

Water supply and wastewater treatment are two vital components of Ireland’s national infrastructure, essential for human health and well-being. Water is required for many industrial and service activities and is a prerequisite to the efficient functioning of the economy while wastewater treatment is essential for environmental sustainability and to protect public health. 235 The water supply sector is predominantly divided into the potable water supply required by one-off housing throughout Ireland or RWSS (Regional Water Supply Schemes) approved at a central level via the D/EHLG and Northern Ireland Water (NIW). A similar situation pertains for the collection and treatment of wastewater locally (on-site treatment or in group schemes) or collectively (in municipal wastewater treatment plants). There are approximately 2,700 industrial wastewater treatment plants in Ireland (700 IPPC licensed activities by EPA and 2,000 licensed by Local Authorities under the Water Pollution Act). The local authorities may provide this service themselves or procure this from the private sector. €3.7 billion was invested in new and upgraded water services infrastructure under NDP 2000-2006. Some €4.7 billion, an increase of 27%, has been provided under NDP 2007-2013.236

There have been 500,000 new house completions in Ireland since 1999. Wastewater treatment capacity has been put in place since 2000 to treat a population equivalent of 3.1 million. This has resulted in a reduction in the pollutant load discharged into rivers, lakes and seas from our cities and towns by 45,000 tonnes per annum. During the same period, water treatment capacity has also been increased (by an amount sufficient to meet the needs of a population equivalent of 666,000 people) and now becomes the main focus for the current NDP. 237

4.13.3. Northern Ireland

comparisons of the financial performance of water and sewage companies. 235 Overview of the Main Infrastructure Issues for Enterprise, Forfas, 2007. 236 http://historical-debates.oireachtas.ie/D/0635/D.0635.200704050437.html 237 The Provision and Quality of Drinking Water in Ireland, 2007. The EPA’s first report on the provision and quality of drinking water in Ireland sets out the issues for the sector, including the need for greater enforcement activity.

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The water industry in Northern Ireland has been the subject of a major (recent) review.238

In Northern Ireland, the Investment Strategy for Northern Ireland has set out the investment in the water and waste water sector to the year 2017/18, and these are set out below: 239

Table 4.12: Waste and waste water infrastructure investment in Northern Ireland 2008 – 2011 2011/2012 – 2017/18 Total £m £m £m

Water & Waste Water 646.5 (£391.9 add) £717 (£780 add) £2.5 bn

4.13.4. The Water and Waste Water Treatment Sector

The sector falls into three categories:

- Mechanical/electrical/civil contractors - Consultants/engineers/architects - Local authorities/private industry

There are approximately 270 companies involved in the water and wastewater sector in Ireland. 240 241 In addition, local authorities are active players in this sector. The market in Ireland has previously been estimated (for 2004) as €622m (€445m for wastewater treatment and €177m for water supply). 242 The Water Services Investment Programme (WSIP) 2007-2009 is made up of 955 projects that have an overall capital value of €5.8 billion.243 Some 30 of the 158 agglomerations (greater than 500 population equivalent) requiring secondary treatment by the 31 December 2005 did not have the required level of treatment in place by the end of 2005.244 There are presently at least 64 supplies that have inadequate treatment (i.e. supplies which originate from surface water and have no treatment other than chlorination) and need to be upgraded or replaced. In total, the EPA has identified 339 supplies that require profiling to ensure that the supply is providing clean and wholesome drinking water.245

238 Independent Water review Panel, Strand One Report: Costs and Funding, October 2007. 239 Investment Strategy for Northern Ireland. Northern Ireland Executive, 2007. 240 The only published statistics relate to NACE 41 which covers the Collection, Purification and Distribution of water. Figures from the CSO Census of Industrial Production indicate that in 2006, the number of local units was 64, there were 2,449 persons engaged in the sector and the gross output of the sector was valued at €168 million. 241 KOMPASS lists 245 companies involved in water products and services provision (excluding local authorities). 26 companies are listed as being providers of effluent services. 242 DG ENVIR Environment Study on Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU Final report, August 2006. 243 http://www.environ.ie/en/Environment/Water/WaterServices/WaterServicesInvestmentProgramme 244 EPA, Urban Waste Water Discharges in Ireland, A report for the Years 2004 and 2005. 245 EPA Report, The Provision and Quality of Drinking Water in Ireland - A Report for the Years 2006-2007.

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The single house and cluster market for wastewater treatment plants is worth €80m per annum, with unsewered on-site wastewater treatment systems accounting for €52m of the total. Bord na Mona Environmental, EPS Bison, BNM, Envirocare, and Klargester are the main players having a 50% market share. The remaining 50% of the market is shared by some 30 companies. While there has been a slump in the housing market this market is constant. Increasing concerns about the performance of existing treatment systems indicate there will be a market for retrofitting of superior technology. There has been increased business in the commercial sector due to increased regulation of leisure centres, nursing homes, hotels and schools. The water treatment market (local authorities) includes clarification, filtration and disinfection equipment. The wastewater treatment market includes pre-treatment, primary, secondary, tertiary (advanced) and sludge treatment equipment. This equipment treatment market is estimated to be worth €170m (2000, with an annual growth rate of 6.8% over 2005. Double digit growth is forecast over the next five years, reaching a size of some €307m by 2013.246

The key activities of the water supply sector and of the wastewater treatment sector have previously been identified as follows: 6

Water supply Waste water treatment

Water catch systems and collection Waste water collection Water purification Sewage and refuse disposal (Water desalinization) Sanitation Water transport & distribution Construction Construction Services Services

Investment is focused on delivering traditional solutions, particularly in the wastewater sector. Current issues of microbiological contamination (Chryptosporidium and E. Coli) in some water supplies is focusing attention in the water sector to look at new technologies such as membrane filtration and UV treatment, where conventional solutions have not worked. There are currently only two membrane filtration plants on a large scale in Ireland, a temporary plant in Ennis where there are continuing water quality issues and an ultrafiltration plant in Lough Nagharaman, Co. Monaghan where the Donaghmoyne Group Water Scheme supplies the needs of 1,700 domestic, commercial, industrial and agricultural customers.

Observed recent trends include:

Decreasing price for water and waste water equipment Consolidation of water and wastewater equipment companies with multinationals acquiring Irish companies Few green field projects, with expansion and improvement of current facilities the main

246 Report by Frost and Sullivan, 2007.

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priority Tangible shift towards small and medium agglomerations as well as rural communities Increasing population and the service land initiative providing new opportunities. 247

Research & Development

EPA funded research in environmental technologies and cleaner production has supported work in novel wastewater treatment technologies at NUI Galway including:

High-Rate Anaerobic Digestion as a Core Technology for Sustainable Treatment of Municipal and Low-Strength Industrial Wastewaters

Nitrogen Removal from Slaughterhouse Wastewater by Means of Simultaneous Nitrification and Denitrification (SND) in Modified Sequencing Batch Biofilm Reactor Systems (SBBR)

4.13.5. Key Players

Construction is the most significant activity for both wastewater treatment and water supply. Key companies in the sector include:

Design, Build Operate, DBO Treatment Plant Chemicals and Technical Companies Manufacturing and Design & Solution Suppliers Celtic Anglian. Treatment Technologies Acorn Water Response Engineering Bord na Mona Environmental Enva Veolia Water EPS Pumping & Treatment Chemifloc EPS Systems Ltd. Nalco Treatment Systems Ltd. Treatment Systems Ltd. Betz Earth Tech Butler Manufacturing Services Ashland Ltd. Crossmill Biocycle Euthenics Westfalia Separator Lennox Laboratory Supplies Norit Alkem Chemicals Solids Technology Whitewater Carl Stuart Water Technology Gilroy Group Balmoral Tanks FM Environmental John Molloy Engineering Klargester Environmental Envirocare Bowen Water Technology Elga Process Water Williams Consultancies Control Mechanical

247 Op cit Frost and Sullivan.

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Mott McDonald Pettit Honeywell ABS Pumps Fehily Timoney Siemens Hall Pyke Engineering White Young Green GE Fay Environmental RPS ABB Puro Tech Nicholas O’Dwyer Waste Water Controls EPS TJ O’Connor Amagruss Sensors Gerry McCluskey Eng.

Globally the French companies Veolia and Suez and the German energy conglomerate RWE dominate. Other global players include Bechtel, BiWater plc and Saur. 248 4.13.6. Drivers

The EU Water Framework Directive (WFD) is a key driver as it requires the quality of all waters to be protected and improvements to be made, where necessary, to achieve at least ‘‘good status’’ by 2015. Major legislative revisions have been provided for in the Water Services Act 2007 which incorporates a comprehensive review, update and consolidation of all existing water services legislation, and facilitates the establishment of a comprehensive supervisory regime to ensure compliance with specified performance standards. In summary, the Act includes provision to:

Consolidate water services law into a single modern code, for ease of access and application, Introduce a licensing system to regulate the operations of group water services schemes, Amend the Environmental Protection Act 1992 to assign responsibility for supervision of sanitary authority water supplies to the Agency. Strengthen administrative arrangements for planning the delivery of water services at national and local level, and Place duties of care on users of water services in relation to water conservation, protection of collection and distribution networks, and prevention of risk to public health and the environment.

More stringent requirements in relation to discharges to waters under the EU Dangerous Substances Directives will also impact on all sectors whose actions influence water quality. Ireland’s compliance with the EU Urban Wastewater Treatment Directive improved from 25% to 90% during the NDP 2000-2006 implementation period. This was mainly as a consequence of providing secondary treatment for the larger town and cities (population equivalent> 15,000). Ireland is fortunate in that we are on a small island with our major conurbations on the coast. As a consequence there has not been a requirement to go beyond secondary treatment save for those plants discharging to sensitive areas and inland waterways.

Once implemented, the Directive on environmental quality standards for surface waters

248 http://www.citizen.org/cmep/water/general/majorwater/

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will require the preparation of river basin management plans, and the subsequent implementation of the agreed measures. The EPA is expected to introduce stringent measures to give effect to this Directive. The Directive on Priority Substances, a daughter Directive to the WFD, will increase the compliance burden; and by definition generate new business opportunities. Listed heavy metals and organic chemicals must be monitored and removed, where necessary, to comply with limit values.

The key pieces of legislation in Northern Ireland are the implementing regulations for the EU Urban Wastewater Directive and the EU Water Framework Directive. The Regulations require a new, strategic planning process to be established for the purposes of managing, protecting and improving the quality of water resources. The Department must carry out the analytical and preparatory work required by regulations and prepare proposals for environmental objectives and a programme of measures for the river basin district and the part of each international river basin district falling within Northern Ireland (Regulation 11). Those objectives will translate the generic environmental objectives of the Directive into specific objectives which take account of the particular situation in each district.

Drinking water regulations continue to influence water treatment options. There are currently no limits for the chryptosporidium parameter in Ireland while limits have applied in Northern Ireland for a number of years.

Infrastructure and technology procurement is another key driver. The current national investment programmes in Ireland and Northern Ireland present a unique opportunity to drive sustainable procurement and maximise the options for local technology suppliers (“technology forcing”) to provide these systems. In the absence of such a decision, traditional systems, lacking innovation, delivering conventional standards are likely to be installed with Irish companies acting as agents for overseas technologies. This is a window of opportunity to provide demonstration sites and develop a knowledge economy – a window that is narrow in time.

There is near universal metering across Europe, the USA and Australia. High meter penetration influences the approach that companies may take to certain activities. Water metering and unit charges have created an opportunity for greywater recovery for use in non-potable applications such as toilet flushing in schools. Harvesting, treatment and distribution/storage of greywater are the main markets. Such systems benefit consumers by avoiding charges for local authority supplied water and benefit local authorities by reducing supply demands, which in turn avoid collateral leakage losses, treatment chemicals and energy requirements for purification and distribution.

Climate change may lead to future water shortages. Dublin City is already suffering supply shortages and is looking at diverting water from the Shannon or desalination as possible options. Either option will require a major energy commitment either for pumping long distances or heat energy for distillation or pumping energy for membrane systems.

As already pointed out, the location of Ireland’s major conurbations on the coast has

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facilitated the discharge of treated effluent to sea, relying on the assimilative capacity of the receiving waters. However, concerns about emissions of micro-organisms and micropollutants may increase in inland locations. This concern is likely to be addressed in mainland European locations first, driving the development of technology leading to higher effluent standards. Ireland may continue to use traditional technology, awaiting a revised Directive, or attempt to pro-actively anticipate this trend.

4.13.7. Weaknesses

Problems with Design, Build and Operate Process: There is concern that specialist water companies are not maintaining or growing technical competence due to pricing pressures from the tendering process in DBO plants which is turning what was a service led business into a commodities one. Feedback from a number of companies is that they cannot compete with non-specialist suppliers for municipal contracts in the supply of treatment chemicals. This has been described as an “unfortunate dumbing down” of services and quality of technical investigation work provided, due to specialist services being offered by new entrants into the market at cut-price rates. The poor quality of work provided by these "new entrants" has often reflected the low prices. Unfortunately the low quality of work has often been accepted by the client, as the over-riding consideration is the price rather the quality of the longer-term service. Experienced staff are required to provide the advice and direction which the industry requires.

Engineering consultants have also identified the “commodification” of engineering services. DBO is being promoted by political drivers rather than the needs of the industry. Design has moved to the DBO contractors, stifling innovation in design and the implementation of new technologies. The DBO providers offer a completely different viewpoint, however, claiming that DBO has “raised the bar” in providing unique solutions for each site with innovative designs that operate as efficiently as possible with minimum power, chemicals and labour requirements.

Monitoring and enforcement: Failure by water suppliers to continuously monitor basic parameters such as chlorine (indicator of the effectiveness of disinfection and removal of E. coli) and turbidity (indicator of effectiveness of the treatment barrier to Cryptosporidium) puts populations served by those water supplies at risk. Water suppliers should avail of the contingency fund provided by the Department of Environment, Heritage and Local Government (Circular L7/07) for the installation of such equipment where funding has not already been provided for this purpose. Local authorities need the powers and resources to regulate the installation and on-going performance of water supply and wastewater treatment systems. In the absence of such enforcement, health risks will continue and there is little incentive to adopt better quality systems and management practices.

Non-Domestic Water Metering: Charges for water services differ between local authorities,

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depending on the cost of their water and wastewater infrastructure programmes, the cost of operating their treatment plants and the cost of administering the metering/billing elements of their programmes. Water services metering for non-domestic users was to be introduced by all local authorities by the end of 2006 but a number are still outstanding. Fingal County Council, (as the lead authority on behalf of the four Dublin Local Authorities), awarded the €40m contract with Gerry McCloskey Engineering Ltd, to supply and install an estimated 42,000 automatic reading water meters on non-domestic connections across the Dublin region. Installing meters on the non-domestic water connections is in accordance with the Government’s National Water Pricing Policy Framework to comply with the Water Services Act. Until the scheme is fully operational, leak detection is difficult and the economic instrument of paying by use is absent.

Research & Development: There has been relatively little investment in water-related applied research with the notable exception of limited EPA funding. One of the seven principal thematic areas under the Environmental Protection Agency (EPA) programme for Science, Technology, Research and Innovation for the Environment (STRIVE) is Water Quality and the Aquatic Environment.

4.13.8. Case Studies

EPS (Electrical & Pump Services)

EPS employs over 300 staff between branches in Mallow, Co Cork, Ballyhaunis in Co. Mayo, Mountrath in Co. Laois and Naas in Co. Kildare. The company also has subsidiary companies EPS Environmental in Cookstown in Co. Tyrone , JF Andrews in Enniskillen in Co. Fermanagh and AH Cullen in Naas Co. Kildare. At the time of founding in 1969 the main thrust of investment in the water and wastewater industry was the provision of group water schemes. EPS's growth from the mid to late 1970s was rapid. In the 1980s EPS moved into the provision of regional water and wastewater schemes which provided a new platform to launch the company into collaborations with major consultancy firms, and on the path to significant local authority contracts. Throughout the 1990s EPS grew with contracts for everything from industrial wastewater treatment facilities in dairy, chemical and food industry installations to the acquisition of Aquapure in the UK, which opened up markets in Cyprus, Bahrain, Libya, Saudi Arabia, Scotland and Wales.

The year 2000 brought EPS into the country's first consortium for a D.B.O. (design, build and operate) NDP project for Cork's Main Drainage. Four additional partners came on board, three international expert groups and Hegarty's of Cork. The consortium pre-qualified, tendered and won the contract for the largest greenfield-site wastewater treatment plant ever constructed in the British Isles. The project treats the wastewater generated by a population of some 380,000 people.

EPS now also has operations in Drogheda, Dundalk and Limerick. A new division of the company, EPS Bison, was established in 2002, tapping directly into the potential of Ireland's housing boom; particularly the rural housing boom and the specific requirements of these rural 'one-off' dwellings where septic tanks have been traditional.

The Programme for Government, has flagged the introduction of grant aid for the upgrading of all

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septic tanks aged 15 years and over. This marks an opportunity for EPS since it already supplies a product called the Aquamax, specifically designed for retrofitting existing and defective septic tanks. EU Directives have been the primary driver because a high proportion of Ireland's drinking water is currently considered to be under potential threat. EPS is the first and only Irish contractor appointed to the Scottish water investment delivery programme.

EPS and New Technologies: Twelve membrane bioreactor (MBR) plants installed across Ireland by November 2007. Two ultrafiltration water treatment plants installed. Four thermohilic aerobic digesters for sludge treatment producing class A biosolids. Numerous anaerobic digesters with complete CHP units attached. Sludge dryer producing pelletised by-product for re-use. Installation of STED pilot project in Co. Tipperary. Installation of vacuum sewer system, Co. Tipperary.

New Membrane Bio-reactor Halves the Size of Wastewater Treatment Plants

Standard wastewater treatment today has four stages (see below). Thanks to a new technology, one step in the treatment can be avoided. Usually, the biological reactor consists of bacterial biota either suspended in the liquid or fixed on a substrate. An alternative technology named membrane bioreactor combines biota suspended in the liquid and a filtration membrane, thus providing clarification, aeration and filtration.

Researchers from Granada University in Spain have tested a membrane bioreactor using ultrafiltration membranes. 249 This solution has been tested and validated in a wastewater treatment plant which processes wastewater from the dairy industry. Such wastewater is highly polluted and rich in organic matter.

Compared to standard plants, the size of the biological reactor could be reduced by 40% to 60%. The quantity of sludge resulting from the treatment was also reduced. Secondary decanting was completely eliminated. According to the authors, construction of the plant would be less expensive than that of conventional plants (but see below). Moreover, researchers foresee that the primary decanting stage may also be suppressed in the future.

249 EU ETAP Programme http://www.ec.europa.eu

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One of the main advantages of this new wastewater treatment process is that a larger flow of water is treated in a smaller purifier, which reduces the size of the plant. This is especially relevant when available space is scarce, for example in growing urban areas.

Brightwater Engineering, now part of FLI but formerly owned by Bord na Mona, have installed a membrane bioreactor wastewater treatment plant in Half Way, Co. Cork. This plant illustrates the advantage of having a small footprint, with the additional potential advantage of producing an effluent of higher discharge standard, but arguably at a higher capital and operating cost than traditional plants.

Vacuum sewers and Septic Tank Effluent Drainage Systems in Tipperary

Some €4m has been allocated to pilot test new types of wastewater collection and treatment systems in seven villages in Tipperary. “Vacuum sewers and Septic Tank Effluent Drainage Systems (commonly called STEDS) have proved to be a cost effective alternative to conventional gravity and pumped sewerage systems in other countries and I want them tried here”, according to Dick Roche, former Minister of Environment, Heritage and Local Government. The STEDS system retains existing domestic septic tanks on-site but collects the effluent and transfers it through a small diameter PVC pipe for treatment at a central location250. It is designed to solve some of the more common problems with septic tanks, including ponding and run-off of effluent with resulting odours and the risk to local watercourses and groundwaters.

250 http://www.environ.ie/en/Environment/Water/WaterServices/News/MainBody,16121,en.htm

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Supercritical Fluids International

Supercritical Fluids International, a start-up Irish company has recently received investment from key venture capitalists. The company has purchased the intellectual property rights and pilot plant for supercritical water oxidation technology from Swedish company, Chematur Engineering. The aim of the Irish company is to develop, demonstrate and commercialise this technology which destroys wastewater sludge with a potential energy surplus. It resolves concerns about residual pathogens and organic micropollutants, reducing the volume of sludge which may, in turn, undergo iron and phosphorus recovery. The carbon-dioxide formed may be considered renewable is that the carbon is of biogenic origin and since the oxidation occurs in water there is no need to use energy to concentrate or dry the sludge for processing. Overall, the process becomes a net energy producer under suitable conditions and may also be used as a technique to process industrial and commercial organic waste to energy.

Ecogen Energy and Environmental Technologies

Ecogen is an SME based in Northern Ireland, serving a client base throughout the island of Ireland.

Ecogen sells two main types of non-chemical water treatment:

Ionic Water Sterilisation Magnetic Water Conditioning The ionic water sterilisation system replaces the need to use chlorine or ozone based water treatment, reducing costs, environmental impacts (materials and energy use) and health safety risks associated with the handling and storage of chlorine or ozone. The company has installed water treatment systems in hospitals, hotels and the food and drink industry. The use of the technology is claimed to reduce the carbon footprint of water treatment relative to traditional technologies.

4.13.9. Barriers

The Irish market is small and leads to Irish companies acting as agents for technologies developed elsewhere. In water treatment the much larger markets in Germany, UK and the USA are ahead of the Irish market in terms of available technology.

Companies involved in supply of consumables to municipal water and wastewater treatment plants see the tendering approach to procurement as a bureaucratic one and prefer to concentrate on the commercial/industrial market where the decision-making process is quicker and less price sensitive.

Investing in traditional technology is a conservative approach that will not develop indigenous expertise or anticipate future quality standards. A very high proportion of

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planned investment will go into construction costs rather than into knowledge services.

Abstraction of groundwater or surface water without charge offsets the economic driver of water charges, but may be argued as valid since any treatment is directly undertaken by the abstractor.

High standards must be specified, monitored and enforced. Such an on-going requirement will favour more reliable systems with a valuable service element. Because of the dispersed occurrence of effluent treatment in Ireland, it falls to the Local Authorities to regulate many small installations. The Local Authorities lack the capabilities to do this, resulting in the health threats already experienced and not providing the incentive for users to invest in higher quality systems and services. Stricter regulation and enforcement, to include performance monitoring and maintenance review is needed.

Small scale goods and consultancy service providers are being squeezed out of the market by the tendering process for major contracts. Arguably this is delivering better value for money in the short term and these providers are unlikely to have significant growth potential, but their demise will reduce the overall national technological competency, increasing reliance on external providers and restricting the potential for the emergence of new business. Irish companies may be confined to agents for overseas technologies, lacking the expertise to enhance a knowledge based economy.

4.13.10. Opportunities

The challenges - therefore the business opportunities - facing Ireland in water and wastewater treatment include:

Completing outstanding infrastructure projects under the Urban Wastewater Directive; Inadequate water supply (Dublin Region) and impact of global warming; meeting water quality regulations; protecting human health (chryptosporidium and E. coli outbreaks in water supplies) infrastructure deficit in water supply and wastewater treatment; meeting increased demand from users; water leakage; differential water pricing in local authorities; Diffuse pollution from agricultural sources, municipal wastewater treatment plant discharges and septic tanks; and Implementing the Water Framework Directive’s water quality objectives.

The market opportunities created by the implementation of the Urban Wastewater Directive are nearing maturity with some niches remaining to be filled such as sludge treatment and disposal. Wastewater treatment plants effect a reduction in oxidation demand by biological processes. The ensuing micro-organisms must be periodically “wasted” (removed), in combination with inorganic materials and other non-degraded

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substances. The traditional approach to dealing with this “sludge” has been land filling or land spreading. Some 121,750 tonnes of dried sludge was produced nationally by wastewater treatment plants in the period 2004-2005. Some 76% of this went to agriculture and 17% went to landfill. Adoption of the Landfill Directive will prohibit the latter and there are concerns about the former. Sludge may contain pathogenic micro-organisms, toxic heavy metals and micropollutants such as endocrine disruptors. Anaerobic treatment or composting may address some of the microbiological issues but concerns may remain, requiring careful management and monitoring of landspreading. Incineration or the emerging technology of supercritical water oxidation will provide more certain destruction.

Intensive agriculture, a spreading of dwellings with an increasing population unmatched by development in services has threatened Ireland’s water quality. Water supplies have been contaminated and eutrophication is a concern is some areas. Privately operated (single dwelling, group schemes) as well as public systems have been found to be inadequate on occasions. Major public investment in the supply of water and wastewater treatment is underway, leading to very large new plant as well smaller, local systems. A number of trends may be identified:

New group schemes are combining smaller entities and replacing others. Higher operating standards are expected. There is a tendency to adopt the Design, Build and Operate (DBO) model for procurement. Design has shifted from engineering consultants acting alone for clients to DBO contractors that provide the full service. Domestic sales of water treatment units (UV, ion exchange, membrane filters) are claimed to be increasing, as well as bottled water sales, as a result of either poor quality or perception of poor water quality. This demonstrates increasing public concern. A range of new technologies for water treatment (e.g. Ionic Water Sterilisation) are available and these are increasingly being adopted for use in the commercial sector, particularly hotels.

The market for water supply and wastewater treatment systems covers a wide scale, from one-off housing to cities. There are opportunities to provide integrated packaged systems across this scale. Such systems can be constructed from supplied components and integrated in a design, build and operate service, remotely monitored and serviced as required. They can be engineered to provide high quality potable water or effluent as relevant, with a small footprint that will address likely future requirements.

The European Commission estimates 40% of water is wasted across the EU. Opportunities lie in leak detection and repair and water use reduction through metering and monitoring. Demand side management services will become more attractive as metering and associated charging is introduced. This will present opportunities for consultancy services, with follow- on sale of more efficient water using devices.

Many of the existing Group Water Schemes have been operated on a voluntary basis.

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Clearly, the provision of operating and maintenance services is a future demand.

Remote sensing and control of small water and wastewater treatment plants is consistent with the previous point. In-situ sensing, telemetry and automation of validated systems will grow.

Grant aid for the upgrading of all septic tanks aged 15 years and over was promised in the Programme for Government. Ireland's Domestic Effluent Treatment Association (DETA), an all-island association whose members include Biocycle, Bord na Mona, Balmoral Tanks, EPS, FM Environmental, John Molloy Engineering, Klargester Environmental and Envirocare should be well placed to provide wastewater treatment systems with the required levels of treatment and durability for single dwellings.

On-going contamination of water supplies by cryptosporidium and e-coli will present opportunities to provide retrofit final purification equipment.

Provision of individual household water purification treatment units is another growth market created by contaminated water supplies. In principle, wastewater can be purified to a quality that allows it to be reused. In the extreme, it can be recovered to potable quality and better. The availability of water in Ireland is such that this is an unlikely approach for human potable supply, but the industrial application of such “closed water cycles” is reasonable where there is a requirement for a substantial quantity of water at less that potable quality. Application of water unit charges and increases in these charges has induced some companies to examine such an integrated approach. The feasibility of this will be driven by an economic balance of the capital and running cost of water recovery versus the purchase and disposal cost of local authority supplied water.

The EPA water quality research programme is focused in two main areas of research: eutrophication from agriculture and forestry; and water quality. The former topic has four main aspects, sources and pathways of nutrient losses, seasonal variation of phosphorus losses from soil and field management and nitrate leaching from soils. In addition to these large-scale projects there are a number of medium scale projects on topics such as ecological assessment of lakes, endocrine disruption in fish and impacts on ground water with a particular concern regarding eutrophication from agricultural sources. 251 In addition, the ERTDI Programme 2000 – 2006 has funded a suite of projects specifically to address the research requirements for the Water Framework Directive in Ireland. The total funding awarded was of the order of €2 million. One of particular interest is being conducted by NUI Galway, “Treatment and Monitoring of Nutrients, Odour and Sludge at a Small-town Demonstration Wastewater Treatment System”. This will examine new technologies, control, monitoring and developing operational and design guidelines for small-scale wastewater treatment systems, including tertiary treatment. EI should encourage the commercialisation of this research.

251 http://www.epa.ie/EnvironmentalResearch/ProjectSearch/WaterQuality/

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A programme of new and innovative technologies funded by the Marine Institute and the EPA is to provide instant alerts on pollution incidents, falling water quality levels and poisonous plankton blooms in bays, rivers and lakes directly to computer screens in the country. New approaches to monitoring are being developed at a number of research institutes across the country. These include advanced remote sensor and monitoring technology that can be applied to the EU Water Framework Directive. The three projects being funded under the first phase of this strategic programme are: SmartCoast: aimed at developing novel sensors to continuously provide water quality data via wireless links to a web-enabled interface, thereby enhancing the ability of monitoring and regulatory bodies to achieve compliance with the WFD. The Cytometry project aims to develop a miniaturised multi-channel system capable of detecting and counting bacteria and viruses in water. At present, this technique is limited to laboratory use. The new system will use cell counting coupled with suitable immunological (antibody) markers and fluorescence markers. The Optical Sensing project aims to deliver a new highly efficient and innovative monitoring system based on optical oxygen sensing (and respirometry). The new biosensor method will provide primary screening of marine samples thus allowing identification of contaminated, suspicious and life-threatening samples.

Since these technologies can be applied not only in Ireland, but also across the world, this offers an opportunity for Irish researchers and businesses to play a significant role in what could be a highly lucrative market, estimated to be worth some €550 million in Western Europe alone.

Demand side management, through improved efficiency by using non-potable water for appropriate uses, e.g. rainwater or recycled wastewater, low water use devices domestically and industrial efficiency will require consultancy services.

Analytical services to confirm on-going quality is another growth area. In addition to off-site laboratories there is scope for development and application of local sensors with remote monitoring.

Energy efficiency in the operation of systems will require more efficient equipment e.g. pumps, blowers, diffusers; more efficient use of equipment e.g. variable speed drives, management systems, instrumentation and automation; and local energy generation e.g. biogas fuelled systems, solar or wind powered – even if only for instrumentation.

The following would appear to be specific areas with future growth potential:

Integrated, packaged, compact plants for water supply, wastewater treatment. Such plants should achieve high quality outputs, requiring the use of “non-conventional” (in Irish terms) technologies: membrane filtration, membrane bioreactors, sequencing batch reactors, UV

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disinfection, ozonation exceeding existing Irish standards, anticipating future concerns about micro-biological and micro-pollutant contamination. Technologies and processes which reduce the Greenhouse Gas Emissions (GHGs) or Carbon Footprint associated with water or waste water treatment. Instrumentation and automation of such plant to support remote monitoring, operation and management. Operate contracts for municipal treatment plants provides opportunity for private sector (some DBO companies now operating to ISO 9001/ISO 14001 and include the DoEHLG PMS system). In-situ sensing of relevant parameters and laboratory quality assurance services. Energy efficient equipment, e.g. diffusers and local energy generation e.g. solar powered systems for instrumentation. Waste to energy plants e.g. anaerobic digestion, supercritical water oxidation. All of the above are applicable across a wide range of application sizes, from single dwellings to conurbations.

Due to the nature of our island status tertiary treatment technology has had limited implementation in Ireland. However, there is opportunity in European and other markets where nutrient and microbial removal are more pressing.

As many member states continue to have poor water quality, EI should target those countries that clearly needed additional investment where Irish companies have the requisite technologies or expert services. 252 Water and waste water projects are generously co-financed by the EU Cohesion and European Regional Development Funds.

4.13.11. Conclusions

The market is very competitive at present. The majority of opportunities over the next three years relate to extension into biological secondary treatment and addition of sludge treatment. Opportunities in the water segment are limited in numbers with signs of an acceptance and demand for advanced solutions such as membranes. 253 New sources/supplies are required for Dublin, currently the subject of a joint RPS/Veolia study. Upgrades may be required to existing infrastructure including treatment and supply systems.

The National Development Plan and Investment Strategy for Northern Ireland provide an opportunity to “force” improved technologies, by the creation of a market for goods and services using green procurement.

Setting high standards for water quality and enforcing these standards will stretch providers to innovate. Existing and new infrastructure may be considered as pilot and demonstration sites for better technologies. Since the Local Authorities are often the operators of this infrastructure, they should be engaged to support this development. With the government

252 The European Commission reports on a regular basis about the implementation of the WFD, COM (20070 128 final, 22 March 2007. See also SEC (2007) 362 dated 22 March 2007. 253 Op cit Frost and Sullivan.

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as their primary funding source, there is a clear lever to guide them.

A small number of Irish companies already exist which can assemble integrated package plants in this sector. Research funding should encourage the development of more sophisticated plants, in particular the introduction of improved automation, sensing and logging and technologies which will surpass existing Irish quality standards.

In common with other EGS sub-sectors, the water and waste water treatment sector is not networked to take advantage of market intelligence, legislative change, and emerging technologies and current and planned R&D effort. Building the capability of the sector to take advantage of significant future investment in infrastructure on the island and in some export markets in Europe should be a priority.

The imminent large scale Irish investment in the water sector should be seen as a proving ground for Irish companies and a stepping stone to export markets.

If Ireland had a single water and waste water authority, it is likely that this would generate significant economies of scale, for example in terms of bundling projects to attract more global investors. Typically, they would form JVs with local partners. A single authority might also attach more priority than is the case at present to the introduction of a wider range of treatment equipment and technologies. Presently international investors are tendering for DBO projects in the €20-30m bracket in Ireland. Large-scale projects underway in NI are the Alpha and Omega projects.

4.14. An Assessment of Strengths, Weaknesses, Opportunities and Threats

Having reviewed the sub-sectors and taking account of stakeholder feedback and EGS related research, the Consultants then reviewed the strengths, weaknesses, opportunities and threats as they relate to the EGS sector. The key conclusions are summarised in the following table.

Table 4.13: SWOT Analysis of the EGS Sector Strengths Opportunities

• Large public sector investment • Rapidly growing global market • Government commitment to use fiscal • Potential emerging markets in Eastern and other incentives and Central Europe • Commitment to regulatory • Business opportunity generated though enforcement public procurement • Open economy facilitates imported • North/south alignment on know-how infrastructure investment which could • Access to natural energy sources support EGS • Vibrant domestic economy and rising • Adjacency to growing GB EGS market population • Regulatory compliance • Good project engineering capacity in • Transition to carbon neutral economy

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Ireland • WRAP and Carbon Trust models could • Clear government policy in RES and drive innovation energy efficiency • Benchmarks could offer best practice • All Island energy market examples • Strong exchequer position • Growing environmental awareness in • State agency adaptability (strong public and business experience in FDI) • Potential synergies between sectors • EPA (absent in NI) (e.g. ICT and sensors)

Weaknesses Threats

Low starting base (playing ‘catch up’) Rising energy and raw material costs Lack of government policy to support Security of supply of energy and raw EGS sector materials Weak EGS R&D Climate change Poor commercialisation of R&D Cost of not meeting RES targets Poor knowledge base Non compliance costs Reliance on traditional goods and Lack of government driver services Infrastructural investment Risk averse public procurement which Weak buy in from enterprise sector embeds old technology regarding climate change Poor spatial planning with diffuse Conflicts of interest between regulator pollution sources and regulated sectors Lack of scale and fragmented market (lack of networks) Diffuse state support to EGS sector Lack of investor interest Lack of standards/verification in EGS sector Lack of identity for EGS sector Lack of FDI presence Difficulties due to two jurisdictions Low history of innovation in EGS sector Distance from point of service to markets.

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4.15. Assessment of enterprise opportunities by sub- sector

Following this SWOT analysis, an assessment, as follows, was made of the growth prospects and sectoral capabilities and capacity of the sub-sectors with the highest potential.

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Table 4.14: Assessment of Enterprise Opportunities by Sub-Sector

Sub-sector Current size of Irish Growth Current Export Main Driver Main Barrier Comment market254 Potential - Sectoral Potential €million Island capability/ capacity Construction N/A HIGH LOW HIGH Higher energy Very limited indigenous Distinction between new build and retrofitting. efficiency capacity to provide required Unless indigenous manufacture develops, standards technologies, processes and imports will dominate in the short term. Long construction products term export potential is high because improving building energy efficiency will be a common EU requirement. However this will require concerted efforts to develop domestic capacity. Air Pollution 4-5255 LOW LOW LOW Air quality and No demand There may be scope for odour control in waste odour regulations. water treatment plants. Clean 350-700 HIGH MEDIUM/L MEDIUM/ Energy and Knowledge and skills deficits This is a cross sectoral category Technology OW HIGH material costs Consultancy 60 – 75 (island)256 MEDIUM HIGH LOW/MED Regulatory Fragmentation and ownership There is a lack of information and support IUM compliance structure regarding EGS opportunities; smaller companies do not have the capacity/inclination to pursue work abroad Monitoring N/A MEDIUM MEDIUM/ MEDIUM/ Water Framework Insufficient commercialisation Dominated by aquatic monitoring; strong HIGH HIGH Directive of research research base apparent Energy 20 HIGH MEDIUM MEDIUM Energy costs Asset rating emphasis (not Current demand is low due to poor awareness Management operating performance) but rising energy costs will change this. Irish companies are operating successfully in UK market Marine 3 - 5 (island)257 LOW LOW/MEDI LOW Regulatory Lack of scale UM compliance

254 no date for NI apart from population pro-rata calculation from DTI report. 255 Industry estimate. 256 Industry estimate 257 Industry estimate

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Noise N/A LOW LOW LOW Noise Directive Lack of skills Remediation 46 – 58 (island)258 LOW LOW LOW Risk mitigation Lack of scale EU Soil Directive will shift focus to treat soil as an asset RES 600 - 700259 HIGH LOW HIGH EU RES targets Lack of first mover advantage Low capacity relative to competitors; Strong niche capacity in NI; Wave, tidal have greatest potential Waste 1,200 – 1,600260 HIGH MEDIUM LOW Regulatory Lack of clear government policy There is greater potential for higher value compliance recyclables; achieving economies of scale is a critical success factor; the level of infrastructural investment committed should support new environmental technologies Water >2,000261 HIGH MEDIUM HIGH Regulatory Under investment in new Very significant commitment in NDP should be compliance technologies used to leverage capacity to deploy new technologies Total 4,280-5,160

258 Industry estimate 259 Consultant’s estimate 260 Industry estimate 261 DEHLG Water Services Investment Programme 2007 – 2009 capital costs only 171

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5. CHAPTER 5: KEY DRIVERS

5.1. Introduction

This chapter considers the main drivers of growth within the EGS sector. As highlighted elsewhere in the report, and as confirmed by stakeholder feedback, regulatory compliance, including the compliance burden arising from the implementation of national and EU legislation, is the key driver. However, with growing concerns about rising energy prices and the recognition of the urgent need to tackle climate change, new challenges and opportunities are beginning to emerge as new technology solutions respond to market stimuli.

A December 2007 survey conducted among a diverse sample of environmental consultants in the UK and Ireland (>1,000 respondents) gave the following answers to the question of growth markets.

Which are the most important growth markets for your business? (Consultants answers only)

Private sector work

Waste management

Public sector work

Climate change/CO2 emissions

Renewable energy

Contaminated land

EIA/SEA

Water/Wastewater treatment

CSR/environmental reporting

Hazardous waste

Air quality/pollution control

IPPC

Cleaner production

© 2007 Faversham House Group

The same survey also posed the following questions to EGS customers “what changes do you expect to need to purchase the following consulting services over the next 1-2 years.

An Assessment of Enterprise Opportunities in Environmental Goods and Services

(Customers answers only)

CSR

ISO 14001

Waste management/recycling

Environmental reporting and verification

Water

Wastewater

Contaminated land

EIA

Climate change

IPPC

Cleaner production

Due dilligence

© 2007 Faversham House Group

The results are broadly symmetrical between the two groups with strong showings in the area of waste management and, in particular, the many facets of climate change. For example, the expected growth in environmental reporting has been attributed to the fact that customers expect the reporting of carbon footprints to become the norm in the coming years.

On a similar scale, ENDS (Environmental Data Service), a well-established information forum for the environmental goods and services sector in the UK and Ireland, produce an annual directory containing, amongst other information, the results of a wide-scale survey of EGS professionals. The 2008 directory ranks the core issues of environmental managers; the top three issues reported were:

1. Waste management and recycling 2. Environmental management systems 3. Climate change and carbon management

There is an obvious parallel with the previous results of the Faversham House survey, the noticeable change over the previous years has been the emergence of climate change as a key driver in the sector.

Drivers appear to fall into one of two categories:

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Conventional: Compliance with EU environmental legislation, infrastructure investment aligned to population growth. DG Environment defined these as “Traditional markets driven by demand for essential commodities (water supply) or services (waste collection) which are increasingly mature.”

Non-Conventional: New technology, adaptation to climate change or declining commodities Investment and reporting activity is dominated by climate change and energy security with the knock-on effect in four of the sub-sectors in the study. By way of example, Morgan Stanley comment that: “We believe our E4 growth drivers (emergence, economics, energy security, and environment) will generate significant investment in clean energy solutions by governments, businesses, and consumers worldwide.”

Lehman Brothers make the distinction between technology push and market pull schemes as drivers to the EGS sectors in the future:

Technology push – Development of low emission technologies through publicly-funded R&D programmes (Japan-Solar, Denmark-Wind).

Market Pull – Technological change coming from business, in response to economic incentives. This view gives priority to regulatory measures as: Technology-based regulatory limitation; GHG emission caps; and changes. Profit seeking business will innovate.

The overall purpose of these drivers is, as set out in the EU Lisbon strategy: “to become the most resource efficient economy in the world.”262

5.2. Legislation Specific to the EGS Sector

In recent years, the growth in the EGS market has been driven significantly by compliance to EU Directives and Regulations which will soon cover all major environmental segments. These EU rules have either superseded existing national legislation or created the benchmark where none existed previously. These include the following;

IPPC (Integrated Pollution Prevention and Control – 96/61 EC) EU ETS SSD (Sewage Sludge Directive – 86/278/EEC) Air Quality Directive (96/62/EC) Waste licensing WFD (Water Framework Directive – 2000/60/EC) WEEE (Waste Electrical and Electronic Equipment – EC 96/2002) REACH (Registration Evaluation Authorisation & restriction of Chemical substances – EC

262 Andrea Tilche, DG-Environment, EPA Conference, Dublin, February 2008.

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1907/2006) Ecodesign for EuP products – (EU Directive 2005/32/EC)

While these Directives may already be transposed nationally, the final compliance date may be significantly in the future; for example in the case of the WFD member states have until December 2015 to achieve, what is termed ‘good water status’. Implemented Directives also require significant on-going monitoring, control and reporting all forming part of the overall market. In the context of the all-island nature of this report, the WFD is a good example of where a Directive is trans-boundary treating Ireland as a single eco-region divided up into a number of natural river basin districts and the works associated with the evaluation and management of the RBDs is through a variety of public/private and EU funding partnerships. Other significant pieces of environmental legislation that will serve to develop the EGS market further will be the proposed Directive on soil which will put soil on the same legislative standing as air and water and the noise Directive. The forthcoming EU Action Plans on Sustainable Industrial Policy and Sustainable Production and Consumption (Ecodesign for EuP products) will be considered as part of the legislative review. This will be viewed especially in the context of energy efficiency.

The key Directives which will drive business opportunities are as follows:

Table 5.1: Primary EU Directives that generate business opportunities

• Water Framework Directive (2000/60/EC) • Sewage Sludge Directive (86/278/EEC) • Council Directive 1999/31/EC on the landfill of waste • Waste Framework Directive 2006/12/EC • Directive 2004/35/EC on environmental liability with regard to the prevention and remedying of environmental damage • Waste Shipment Regulations (Regulation No. 259/93) • Incineration Directive (2000/76/EC) • Hazardous Waste Directive (91/689/EEC) • Directive on Air Quality Management and Assessment (Air Framework Directive) (96/62/EC) • Directive 2001/81/EC on national emission ceilings for certain atmospheric pollutants. • Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community (EU ETS) • “VOCs” directive (2004/42/EC) • Ozone Depleting Substances (ODS) Regulations (No. 2037/2000) • Directive 96/61/EC concerning integrated pollution prevention and control (IPPC) • REACH (Registration, Evaluation, Authorisation and Restrictions of Chemicals) Regulation 2006 • Ecodesign for Energy using Products Directive (2005/32/EC) • Directive on energy end-use efficiency and energy services 2006/32/EC • Regulation (EC) No 1980/2000 on a revised Community eco-label award scheme. • Waste Electrical and Electronic Equipment (WEEE) EC 96/2002 • Reduction of Hazardous Substances (RoHS) in EEE (202/95/EC) • End of Life Vehicles Directive (2000/53/EC) • Directive 2002/49/EC relating to the assessment and management of environmental noise • Proposed Soil Framework Directive

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• Stimulating Technologies for Sustainable Development: An Environmental Technologies Action Plan for the European Union COM (2004) 38

The precise impact which these Directives have on the EGS sector and on manufacturing industry in general were explained in Chapter 4.

It is clear from stakeholder feedback, that even experts in the EGS sector have difficulty in fully understanding the ramifications of these Directives.

5.3. Infrastructural Investment and Government Policy Targets

Investment in Ireland’s infrastructure has also played a key part in the growth of the EGS sector in recent years. The new National Development Plan, 2008-2013, claims that it will make a major contribution to the enhancement and sustainability of our environment including significant measures to assist the limiting of Ireland’s emission of greenhouse gases in line with international obligations.

5.3.1. Energy Investment

Over the period 2005-2010, energy demand is projected to increase by 1.6% a year and this level of increase is expected to be maintained to 2013. The Energy Programme of the NDP allocates some €8.5 billion in investment in energy over the period of the Plan; €1.2 billion under the Strategic Energy Infrastructure Sub- Programme; €276 million under the Sustainable Energy Sub-Programme; and €7 billion under the State Energy Companies Sub-Programme. In addition to renewable electricity, the renewable heat and transport sectors, and in particular the bioenergy sector are now emerging as areas in which there will be increased policy focus over the lifetime of the new Plan. A target of 15% contribution by renewable energy to electricity generation by 2010 has been set. Investment in renewable energy during the 2007-2013 period will focus primarily on the large-scale deployment of wind, the emerging potential and deployment of biomass and biofuels, preparatory action on ocean energy and deployment of other technologies such as solar and geothermal technologies. Energy efficiency measures aimed at establishing and maintaining an effective market structure, informing and empowering consumers to make strong energy efficiency choices. The overall objective of the proposed programme will be the achievement of an annual saving of at least 1% of energy use across the economy over the lifetime of the Plan (3% per annum reduction in greenhouse gas emissions; 20% (33% for the public sector) reduction in energy demand by 2020.) Increased energy efficiency will mitigate energy demand growth, reduce import dependence, contribute to carbon reductions and mitigate growth in the energy bill, for the economy and for the individual. Integration and innovation measures will focus on integrating sustainable energy

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practices and structures into public policies and the development of regional and national infrastructures. There will be two sets of activities: the integration of national sustainable energy policy measures at a regional and city level, and the smaller-scale piloting and evaluation of sustainable energy technology options, including those in the renewable energy, energy efficiency and urban transport areas. Electricity produced from renewable sources, in particular wind, will increase its contribution to Ireland’s power needs threefold between now and 2010. At present there are just over 1,000 MWs of renewable generation on the electricity system. Eirgrid engaged with ESB Networks in processing offers for a further tranche of some 1,340MW of wind generation capacity. It is anticipated that the vast majority of the new projects will be operational by 2010. Bord na Mona’s proposed capital expenditure of €270 million over the period of the NDP relates to the development of wind farms in Mayo and the Midlands and the development of a waste management facility, which may include a waste-to-energy function. The Energy White Paper claims that Ireland will achieve the EU target of 5.75% biofuels market penetration by 2010 which will be delivered through the existing mineral oil tax relief scheme, the planned biofuels obligation on fuel supply companies and the promotion of biofuels in public fleets. The biofuels obligation on fuel suppliers is expected to be developed and put to industry and public consultation with the next 12 months. A target of 10% biofuels penetration by 2020 has been set. In relation to Biomass, the Government is committed to increase area sown by energy crops from 3,000 to 70,000 hectares. While no details are available about the level of capital investment required, significant investment will be needed in processing capacity etc. White Paper has set an initial ambition of at least 500MW of installed ocean energy capacity by 2020. The Energy White Paper claims that at least 400 MW from CHP will be achieved by 2010 through continued support under the CHP Deployment Programme and R&D supports with particular emphasis on biomass fuelled CHP and will aim to achieve at least 800 MW by 2020. Within two years further target for CHP will be considered for 2020 in light of further feasibility studies by SEI into CHP applications and reviews by CER. Bio Heat: The Energy White Paper claims that Ireland will achieve a minimum target of 5% market penetration of renewables in the heat market by 2010, facilitated through the expanded Greener Homes and Bioheats grants programmes and have set a target of 12% market penetration by 2020.

5.3.2. Waste Management

Under the Waste Management Sub-Programme, some €753 million will be invested in dealing with the problem of legacy landfills and in supporting the recycling and recovery effort. This will include funding for recycling and recovery services to continue to roll out

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publicly available recycling centres to increase and enhance the availability of high- quality biological treatment facilities. In line with national policy on the integrated approach to waste management, thermal treatment with energy recovery is the preferred option for dealing with residual waste after achieving ambitious targets in respect of waste prevention, recycling and recovery. This is reflected in the regional waste management plans for which the local authorities have statutory responsibility. These waste-to-energy plants will be provided as entirely private sector developments or by way of public private partnership. In relation to legacy landfills, there remains a ‘‘legacy’’ issue in relation to waste management activities before the introduction of the Waste Management Act, 1996. Municipal waste infrastructure consisted almost entirely of landfills, which were generally not engineered and operated to standards that would now be considered acceptable. Further, such landfills were not subject to the type of restoration and aftercare plans now considered the norm, and remediation activities were often minimal. Some of these landfills have been brought within the purview of the licensing process but quite a number closed before the licensing regime mandated under the Waste Framework Directive took effect.

5.3.3. Water Programme

It is intended to build on the progress made under the NDP 2000-2006 by investing €4.75 billion under the Water Services Sub-Programme in upgrading and expanding water and wastewater treatment capacity to meet the needs of a growing population and expanding economy, improving drinking water quality to meet National and EU drinking water standards, treating wastewater to achieve the highest level of environmental protection and compliance with national and EU requirements.

5.4. Infrastructure Investment in Northern Ireland

Construction and infrastructure development for the period 2008-2017/18 are set out in the Investment Strategy for Northern Ireland 2008-2018.263 The Strategy sets out 6 Pillars and 23 sub-pillars and identifies the investment required for each. The Strategy describes the objectives of investing in infrastructure as:

a) Economic – investment in infrastructure to help grow a dynamic and innovative economy, and help to deliver modern high quality and efficient public services b) Societal – investment in infrastructure to help promote tolerance, inclusion, equality of opportunity and the desirability of good relations, promote regional balance in future development, and tackle areas of social disadvantage c) Environmental – investment in infrastructure to help protect and enhance our environment and natural resources.

263 Investment Strategy for Northern Ireland 2008-2018. Northern Ireland Executive. 2007.

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Table 5.2: Infrastructure Investment in Northern Ireland Pillar and Sub-Pillar 2008 - 2011 2011/2012 – Total 2017/18 Networks 861.1 2774 4035 Roads 611 2083 (400 add) 3095 Public Transport 195 530 725 Gateways 5.6 6 Telecoms 28.7 7 35 Energy 19.7 154 174 Skills 891.1 3265 4156 Schools 718 2792 3510 FE & HE 141.5 366 507 Libraries 31.6 107 139 Health 728.5 2575 (355 add) 3659 Primary Care 152.6 354 (355 add) 862 Public Safety & Technology 163.8 408 572 Hospitals Modernisation 412.1 1813 2225 Social 1623.9 1413 3037 Regeneration 426.7 203 630 Housing 924.9 892 1817 Welfare Reform 71.2 71 Culture, Arts, Sport 201.1 318 519 Environment 881.2 (450.5 add) 830 (957 add) 3118 Water & Waste Water 646.5 (391.9 add) 717 (780 add) 2535 Waste Management 197 (58.6 add) 3 (177 add) 436 Flood Risk Management 23.2 59 82 Environment 14.5 51 65 Productive 496.9 825 1322 Enterprise & Innovation 192.9 477 670 Tourism 72 19 91 Rural & Primary Industries 172.1 240 412 Public Sector Reform 59.9 89 149 Other & Misc 6.8 10 17 Total 5489.5 (add 450.5) 11692 (add 1712) 19344

The Strategy has placed sustainability at the centre of infrastructure development and delivery in Northern Ireland, stating: ‘We will build sustainability into each infrastructure project as comprehensively as possible’

While the Investment Strategy for Northern Ireland sets out the economic/financial basis for the development of Northern Ireland infrastructure needs for the next 10 years, no attempt has been made to account for the resource consumption and greenhouse gas emissions associated with this infrastructure.

This presents a huge opportunity to build a robust evidence base for sustainable infrastructure development on the island of Ireland by measuring the resource flows and GHG emissions associated with this infrastructure and using this evidence to develop policies and programmes which ensure that the infrastructure is delivered sustainably.

A number of studies in the UK have assessed the resource consumption (material and water), waste and carbon emissions associated with both new housing programmes and

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delivering improvements to existing housing stock264 265 and the opportunity exists to assess the sustainability of the housing and infrastructure projections for Ireland.

The key to achieving this aim will be sustainable procurement and at a UK level, the Sustainable Procurement Task Force has been established in to produce an Action Plan to deliver on the goal set out in the Governments 2005 Sustainable Development Strategy to make the UK a leader in the EU in sustainable procurement by 2009.266

The Task Force published its Action Plan in 2006,267 which identified 18 Public Sector Spend Priorities, in terms of influence, scope and risk, and are:

a) Construction (building and refit, highways and local roads, operations and maintenance) b) Health and Social Work (operating costs of hospitals, care homes, social care provision) c) Food d) Uniforms, clothing and other textiles e) Waste f) Pulp, paper and printing g) Energy h) Consumables – office machinery and computers i) Furniture j) Transport (business travel, motor vehicles)

Given that the public sector in Northern Ireland is a much larger percentage of the economy than at a national level, the importance of public sector procurement in driving sustainability and the development of the EGS Sector is of even more vital importance. The integration of a Sustainable Procurement National Action Plan for Northern Ireland or the island of Ireland into the delivery of the Investment Strategy for Northern Ireland probably has more potential to influence the development of the EGS Sector more than any other single action.

5.5. Climate Change and Energy Efficiency

While regulation has been the most important driver of growth within the EGS sector in the past, in coming years, growing concern about climate change and rising energy costs are expected to take centre stage. As highlighted in a recent UK Government report, the transition to a low-carbon, resource efficient economy will see the emergence of new technologies and innovations that will stimulate new business models, products and services, transform existing sectors of the economy and create entirely new industries.268

264 Stock Take. Sustainable Development Commission. July 2006. 265 Better Buildings - Better Lives: Sustainable Buildings Task Group Report. Sustainable Buildings Task Group. 2004. 266 Securing the Future - UK Government sustainable development strategy. March 2005. 267 Procuring the Future. Sustainable Procurement National Action Plan: Recommendations from the Sustainable Procurement Task Force. 268 UK Commission on Environmental Markets and Economic Performance (BERR/DEFRA Report, November 2007).

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The threat of global climate change and the urgent need to reduce emissions is fundamentally changing the nature of environmental markets.

A recent estimate puts the current market for new low-carbon energy technologies at around $100 billion per year. This already large emerging market could become huge if there is concerted international effort to address climate change. For example, the Stern report estimated that it would be worth at least $500 billion per year by 2050, while others suggest that the overall added value in the low carbon energy industry could be as high as $3 trillion per year worldwide by this time;269 and could employ more than 25 million people.

But according to the CEMEP report, this still underestimates the size of the opportunities. “Low-carbon and cleaner technologies are beginning to be embedded in process and product development as mainstream businesses make explicit commitments to deliver products and services with lower environmental impacts. Attention is being paid to improving resource productivity, which can reduce the carbon embedded in products as well as the unsustainable consumption of natural resources. This in turn is having impacts throughout the supply chains and increasing consumer and employee awareness” 270

5.6. Ethical Consumption, Investment and Corporate Social Responsibility

More and more, it is clear that firms are being judged not just in terms of their financial performance but also in terms of their social and environmental responsibilities as well – the so called “triple bottom line”.

Reporting of CSR activities has come a long way in recent years. In the past, approaches to CSR reporting have been extremely varied. Many companies were accused of producing glossy PR brochures – with little or no real substance. However, now there is far more focus on the CSR report as an expression of a company’s core values and on how these translate into all areas of the company’s business.

Another notable development has been the growth in independent verification or audit of CSR reports to ensure enhanced scrutiny, greater transparency and accountability to stakeholders. Indeed, a new CSR standard, ISO 26000 on Social Responsibility, has been being developed, covering core areas of environment as well as human rights and labour practices etc.

269 Calculation by Professor Dennis Anderson, Imperial College London, based on the estimate that, by 2050, 70 % of expenditure that would have been directed to fossil fuels in the absence of carbon abatement will be directed to low carbon technologies. Using the expected value of world product by 2050 and the proportion of world product currently represented by fossil fuels gives a figure of $3 trillion. Such estimates are, of course, approximate, but provide a good indication of the likely size of the market for low carbon technologies. 270 ibid

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For larger multinational organisations, initiatives such as Global Reporting Framework have also been important developments (and indeed a number of Irish companies also use this framework). In addition, the growth of ethical investment funds and indices which track the relative ethical or environmental performance of companies has also added to the pressure to not only report but to open the business up to external scrutiny (e.g. Dow Jones Sustainable Index, FTSE4Good etc.).

The UK CEMEP report, for example, highlighted figures from the UK Investment Management Association which showed that UK investors have dramatically increased the amount of money they are putting into ethical funds. Indeed, net sales of UK ethical funds in the first six months of 2007 of £237.5 million were already double the £136.6 billion of sales made in 2006. Pure ethical funds now make up 1.4% of total fund sales in the UK.

It would also appear that a growing number of investors agree that integrating economic, environmental and social success factors into business strategy can result in competitive advantage, particularly in the long term. In 1999, for example, the Dow Jones Sustainability Index (DJSI) began tracking the performance of the leading sustainability-driven companies worldwide; it has consistently outperformed the Dow Jones Global Index.271

It would seem, therefore, that business is ready to invest in the environment as never before. Driven by political developments, increased public consciousness and the emergence of consumer demand for environmentally responsible products and services, environmental concerns seem certain to have a far greater impact on business strategy and operations in coming years.

5.7. RD&D

Supply ‘push’ includes support for research, development and demonstration (RD&D). Targeted support will leverage private sector investment into the technologies required to meet future environmental objectives.

Market failures resulting in under-investment in RD&D are well proven. Long lead times and the high cost of technology development are significant factors in many EGS sub-sectors. The displacement of incumbent low-cost technologies is another factor. Despite R&D funding for eco-innovation, R&D alone will not bring new technologies to the market. Therefore this justifies targeted support to help leverage private sector investment into technologies required to meet future environmental and energy policy objectives.

The Strategy for Science, Technology and Innovation set out the future strategy for RD&D in the EGS sector. However, there is no detailed Master Plan along the lines of what exists in Austria. The level of ambition and vision for the development of eco-innovation is nowhere near that of comparator economies. Furthermore the resources allocated to environmental R&D through the NDP could be higher. Approximately €90 million is available in Ireland to

271 Report of the Commission on Environmental Markets and Economic Performance.

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support environmental R&D activity through the ERTDI/STRIVE EPA Programme between 2007 and 2013. The percentage of this that will be allocated to environmental technologies (EGS) is not known (it is one of the three key measures). Therefore while there are notable exemplars - the Tyindall Institute for example - EGS-related and applied research should be given a greater priority than is presently the case. 272While there are strong institutional links Formatted: Font: Calibri, 10 pt, Not Bold between public agencies involved in EGS-related R&D by comparison to other member states, in general the coordination of the support for EGS could be better coordinated and less diffuse.

5.8. Public ‘Green’ Procurement

State contracting authorities have a very large purchasing power accounting for up to 16% of GDP (€25.8 billion in the case of Ireland). 273 In particular, extensive levels of construction work are carried out by or on behalf of public agencies and local authorities, involving huge volumes of goods and services. Energy, water and other material consumption is also at a high level and the technologies involved in this sector use large volumes of oil. State agencies are currently not leading the way by providing sufficient exemplary behaviour in the promotion of EGS goods and services.. Under the National Energy Efficiency Action Plan, the public sector is expected to play a leadership role by achieving a 33% reduction in energy demand by 2020 (a target of 20% is set for the entire economy).274 The environmental record of government offices and agencies, schools, universities, health boards, local authorities etc. can be significantly improved. It is vital that these agencies are seen to be acting responsibly, rather than just preaching good practice to the general public and business. In order for people to trust the information and advice they are getting from contracting authorities, these organisations must be seen to be implementing best environmental practice.

The percentage of Irish green public procurement (GPP) was about 5% compared with an EU average of 19% and compared with 50% for Sweden. 275. In another more recent study, Ireland did not rate much better. 276 As part of their commitment to GPP, all Member States have agreed to develop National Action Plans for implementation. In Ireland it is planned to reach the levels of the so-called ‘Green 7 countries’ (Austria, Denmark, Finland, Germany, Netherlands, Sweden and UK) that “appear to have consistently more tenders with green criteria than the ‘Other-18’”. 277 Ten Members States have completed and published their plans, and work on the Irish NAP has begun but it is not complete.278

272 http://www.tyndall.ie/ Formatted: Font: Calibri, 10 pt, Not 273 http://ec.europa.eu/environment/gpp/index.htm Italic 274 National Energy Efficiency Action Plan for Ireland 2007 – 2020, Dept of Communications, Energy and natural Resources, 2007. 275 ICLEI European Secretariat, Eco-Procurement Programme Survey on the state of play of green public procurement in the EU - Final Report Freiburg, July 2003. 276 Virage et alia Green Public Procurement in Europe 2006 Conclusions and recommendations (Take 5 Report) EU, 2006. 277 ibid. 278 Details of national action plans from other countries can be seen at http://ec.europa.eu/environment/gpp/national_gpp_strategies_en.htm

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Public procurement - as has been demonstrated in Austria and in the UK - provides an opportunity for ‘market pull’ i.e. it can facilitate the commercial viability of an innovative good or service and help to attract investment as a consequence. For example, an Irish enterprise would have a better prospect of getting a foothold in the $150 billion market for energy-efficient lighting (2020 forecast) if Irish contracting authorities indicated that they would begin specifying new lighting standards from 2010 for instance thereby giving Irish companies and potential joint venture partners an opportunity to collaborate on delivering a new innovative product.

New EGS goods and services will also emerge provided the contracting authorities set high RES-E or EGS standards in their purchasing requirements. For example, a single standard could be set by local authorities for all building materials required to be used in the construction of new buildings to meet BER A1 standards. This would drive investment in such goods which will otherwise be imported. Requiring that works contracts should reflect best practice in respect of sustainability would send an important signal to contractors and encourage the delivery of new value added services.

There is also the issue of scale. Many global players do not take an interest in the Irish market because the size of public works contracts is generally too small. If Ireland wants to attract these investors - and their know-how and technology - serious consideration needs to be given to the bundling of projects at a scale that might make it attractive to overseas companies. For example, there is no reason why the construction of BDO water and waste water treatment facilities should not be bundled into one multi-annual contact at regional level. While in the short term this would be unpopular with Irish contractors, what will be achieved is that overseas bidders will use Irish partners thereby transferring their know-how and engineering skills and technologies. This is turn will have a multiplier effect within the EGS sector. However Irish contractors could also benefit. One good example of this is the Irish firm CES Energy (Marenn Engineering) who is active in retrofitting buildings with energy systems, and providing renewable energy solutions. The turnover of this company has gone from €15 million in Australia to €150 million in one year, the driver being that all Australian public buildings have to be energy efficient and reliant on renewables, hence require retrofitting. If Ireland committed to such a large retrofit programme, markets would also open up here – for Irish as well as overseas providers.

One of the main barriers to green public procurement in public bodies and local authorities is the lack of integration among different departments especially in large organisations. 279 This is also true of the private sector. A major benefit of green procurement is that it involves all departments in an organisation and affects all their purchasing policies. It is most important that environmental issues are thus integrated, at all levels in an organisation, both horizontally and vertically. The finance department is especially important since so many decisions and issues critical to the environment are taken by finance departments, both in

279 Coakley, Tadhg et al. Investigation into why existing environmental technologies are underused in Ireland. EPA, 2007

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the private and public sector.

Another barrier to GPP is the common misperception that it is in breach of procurement legislation to give preference to products or services ‘just’ because they are environmental in nature. Some procurement professionals believe that it is necessary to select tender bids primarily on economic grounds only. It is also difficult for those involved in public procurement to draw up tender specifications with an environmental element as they often do not have the knowledge to environmentally assess technologies or services. However, despite these difficulties, as stated above, GPP is being widely practiced in some Member States and its benefits are substantial. 280

One of the issues to be explored by the EGS sub-sector networks is the encouragement of joint bidding for EU-wide EGS-related contracts. In this regard EI and InterTrade Ireland could provide advance market intelligence (based on PIN notices) to alert bid consortiums to pending business opportunities.

5.9. Conclusions

The key messages are:

• EU environmental policy frameworks (e.g. Integrated Product Policy including REACH, WEEE, RoHS, Energy use Products Directives and Regulations) and compliance with environmental legislation is a key driver. Regulation has driven growth in most sectors in the Irish market. Early adoption of legislation can create an advantage over other EU Member States. Strong enforcement and consistent application across different local authorities is a key requirement. Ireland can also go beyond EU Directive requirements to gain first mover advantage (e.g. plastic bags, smoking ban, light bulb ban etc.) • Having a clear policy with long-term supports (targets, tariffs etc.) creates the stable framework for growth and development. Current uncertainties in waste policy, for example, must be eliminated. • Research and development is fundamental in the identification and widespread application of new/improved technologies. R&D should not only focus on new, innovative technology development but innovative ways to ensure greater uptake. • Rising energy costs is encouraging companies to consider energy efficiency and is creating an explosion of opportunity in the RES sector. • The public sector can lead by example through implementation of green procurement and specifying environmental criteria in public tenders. This can hugely increase the market for EGS, given the massive spending commitments in the National Development Plan and the spin offs through the whole product chain can be exponential. • Companies need support through the development phase of long lead-in technologies to ensure success which leads to long-term growth. Economic and information based supports need to be

280 Several countries and organisations offer detailed guidelines on green procurement and criteria – these can be seen at http://ec.europa.eu/environment/gpp/guideline_en.htm

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greatly intensified and more focused on EGS. There needs to be a greater coordination of agency support.

The main drivers identified are:

• Regulatory compliance • Rising energy and raw material costs • Security of supply of energy and raw materials • Climate change • RES targets • Infrastructural investment • R&D • Public ‘green’ procurement

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6. CHAPTER 6: INTERNATIONAL BENCHMARKS

6.1. Introduction

This chapter examines the EGS sector in the United States and Austria and reviews the proposed strategic framework conditions for the EGS sector in the UK.

The US was selected as the level of investment in its EGS sector is expanding rapidly due to a heightened awareness about the environment and more recently in response to Federal and State initiatives in the area of climate change. In addition, the US is a key prospect for IDA Ireland and Invest Northern Ireland.

Austria was selected because of the high strategic importance attached by its government to the development of the EGS sector, in particular with the publication of a ten-year Master Plan for the development of environmental technologies.

In addition, consideration has also been given to the approach adopted by the UK Government to setting strategic framework conditions aimed at the further development of the EGS sector. This is apposite not least as this strategic policy framework applies in Northern Ireland some elements may be worth considering on an all-island basis.

Finally, the European Commission’s Lead Market Initiative is examined briefly as it applies to three of the sub-sectors covered in this report.

Company benchmarks were included in the Chapter 4 on the sub-sectors where these illustrated specific cases of best practice.

6.2. The United States of America

The US EGS market, or more generally the ‘environmental technology’ market is defined by those environmental technologies that “advance sustainable development by reducing risk, enhancing cost-effectiveness, improving process efficiency, and creating products and processes that are environmentally beneficial or benign”. 281 The main areas identified are water supply and treatment, solid waste management, air pollution control, and environmental cleanup. The categorisation and definition of the U.S. environmental industry is broadly in line with this study. Notable differences would include no categorisation of energy efficiency or noise pollution in the US; while the marine pollution control sub-sector is rolled up in a couple of US categories.

While figures vary between sources, the US environmental industry is valued at $282 billion in 2006 and grew at 6.2%.282 This was the third year in succession of +5% growth by the

281 U.S. Department of Commerce definition. 282 Environmental Business Journal, Annual environmental industry overview, Vol XX, Number 11/12, 2007.

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estimated 30,000 private companies constituting the sector employing approximately 1.6m jobs. The breakdown by segment for 2005 is illustrated in the table below. The 2006 figures represent a +6% increase over these figures.

Table 6.1: US Environmental Industry by Segment – 2005 ($ billion)

Environmental Industry Segment Environmental Services 2005 Analytical Services 1.8 Wastewater Treatment Works 35.6 Solid Waste Management 47.8 Remediation/Industrial Services 10.8 Consulting & Engineering 22.4 Environmental Equipment Water Equipment and Chemicals 24.8

Instruments & Information Systems 4.7

Air Pollution Control Equipment 18.6 Waste Management Equipment 10.1 Process & Prevention Technology 1.5

Resource Management Water Utilities 35.1 Resource Recovery 20.8 Clean Energy Systems & Power 22.3 TOTALS: 264.6

Source: Environmental Business Journal (EBJ), Environmental Business International, Inc., San Diego, Revenues generated by private and public sector entities, Copyright EBI Inc.

The basic service provision of water, wastewater utilities and solid waste management to domestic and commercial users make up 50% of the total US Environmental market. The US Market differs to that of the EU; the US market consists of large numbers of small-medium enterprises operating regionally compared with the EU market which is dominated by large firms, typically divisions of well-capitalised conglomerates.283 The US domestic market for environmental technologies is of such scale that only a few firms are engaged in exporting internationally.

Environmental cleanup represents a significant element of the overall US EGS sector – a legacy of an industrial past that has left large tracts of land and water in a chronically polluted state. The cleanup sites are known as Superfund sites. It is also the name of the fund established by the comprehensive environmental response, compensation and liability act of 1980. This law was enacted in the wake of the discovery of toxic waste dumps

283 Avery, Brock et al. Journal of Agricultural and Applied Economics, April 2004.

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throughout the U.S. It allows the EPA to clean up such sites and to compel responsible parties to perform cleanups or reimburse the government for EPA-lead cleanups.284 Over the past 20 years, the US EPA have located and analysed tens of thousands of hazardous waste sites, there are currently 1,240 superfunds on the national priority list and 317 delisted. This sector is currently valued in excess of $20 bn. annually.

While not commonly categorised under the US definition of environmental goods and services, the biggest growth sector in the US is the response to climate change and energy security. The fact that the U.S. has not signed the Kyoto Protocol does not mean it is not facing up to the threat of climate change. The U.S. is entrusting technology to point them towards a low carbon emission future. This is most vividly demonstrated through their massive deployment of venture capital and federal funding into biofuels and solar energy in what has been dubbed the ‘greentech’ sector, the VC side is covered elsewhere in this report. It also fits in with a stated government policy to move away from dependency on oil imports from geo-politically unstable parts of the world. In the absence of increased oil production from domestic reserves, the US has focused on a slew of alternative energies.

Despite their reluctance to sign up to international climate change agreements, the scale of the U.S. response with a number of EGS sub-sectors, in particular renewable energy and energy efficiency, has seen an extraordinary level of investment in a very short time.

Renewable energy has been growing at unprecedented rates accounting for 22% of new nameplate electricity capacity additions in the US in 2006, up from just 2% in 2004. In 2006, the U.S. surpassed Germany as the world leader in annual installed capacity of wind energy with the installation of an additional 2.4 GW.285 The US continues to lead the world in geothermal electricity generation with 2.9 GW of installed capacity, with a potential for conventional geothermal of 20 GW and for enhanced geothermal of 100 GW.286 This growth looks set to continue in 2007 where the scaling of renewables will yield 4 GW of new installed wind energy and 3 GW of concentrating solar power (CSP) projects.287 To put the 3 GW into perspective, it would be equivalent of building three Moneypoint generating stations (Ireland’s largest power plant) in a year.

Overall, these 3 sources of non-hydro renewables – Wind, Geothermal and Solar doubled their installed capacity in the US between 2000 and 2007.

With solar increasingly being viewed as a major contributor in the area of renewable energy the race is on to produce the next generation of solar cells. A major milestone was passed on December 28th 2007 with the first commercial production of mass-produced wafer-thin solar cells printed on to Aluminium film. This has been accomplished by a US company based in California called Nanosolar. The order books

284 www.epa.gov/superfund 285 Energy Information Agency. www.eia.doe.gov 286 U.S. Department of Energy-EERE, National Energy Renewable Laboratory. 287 USDOE/EERE 2007.

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are filled until mid-2009 and they are claiming to produce solar cells at a price competitive with the price of electricity generated from coal. According to the Earth Policy Institute in Washington, solar is now the fastest growing electricity source, doubling every 2 years.

An important aside relevant to Ireland is the fact that Nanosolar have already selected Germany as their European manufacturing base and expect to start production there soon. This most probably reflects Germany’s pre-eminence as the main European country for solar development and installation. What framework needs to be put in place to ensure that we can compete for these ‘Green Collar’ jobs?

In early January 2008, Germany’s SCHOTT AG has selected the municipality of Mesa del Sol near Albuquerque, New Mexico, for the location of its new plant for manufacturing glass and optical equipment for solar-energy systems. Forest City Enterprises, Inc. will build the new, 200,000-square- foot for SCHOTT Solar, Inc. on 80 acres. The developers said that the SCHOTT project will generate 350 jobs initially and as many as 1,500 jobs when all phases of the plant are complete. The plans call for an initial investment of $100 million in the project. Construction of the first phase will begin during the early part of 2008, and production is scheduled to begin in the spring of 2009.

These are the start of a wave of high quality ‘Green Collar’ jobs being created throughout the world. The economies in the jump-seat to benefit from this investment are those who have provided the framework (feed-in tariffs, Germany, R&D infrastructure, US). The challenge for Ireland is to build a technical capability in these areas to attract these high quality investment opportunities.

In the area of biofuels, the US accounted for 36% of worldwide ethanol production.288 The first of six US funded commercial-scale cellulosic ethanol bio-refineries broke ground in November 2007, kick-starting production of 60 million gallons of cellulosic ethanol on-target to cost-competitive scaling by 2012.289 This is expected to ensure that the US government meets its target ‘Twenty in Ten’ target (of reducing motoring fuel use by 20% in ten years). Some aspects of biofuels are losing their gloss as a form of alternative energy due to little net benefit in the energy balance equation and concerns over knock-on effects on global food prices. Cellulosic Ethanol does offer the best prospect as a biofuels for the future with the energy balance equation showing a 1:2.36 step up versus the best case of 1:1.3 with corn ethanol. Cellulosic ethanol also offers a 91% reduction in GHG emissions versus petrol compared with a 22% reduction in GHG emissions versus petrol provided by corn ethanol. 290

The US response to energy efficiency concentrates around the metric of energy intensity reduction (energy consumption per dollar of GDP) which has reduced by 13% since 2000. The U.S. government, the largest energy consumer in the US has committed to a 30% reduction in building energy intensity (energy per square foot) by 2015.291

The Department of Energy is leading development and validation of cost-competitive zero- energy building technologies that will enable buildings to be secure and sustainable sources of distributed energy. The DOE is supporting advanced building codes that would decrease

288 Renewable Fuels Association, April 2007. 289 U.S. DOE Feb./Nov. 2007. 290 Joel K. Bourne, National Geographic, October 2007. 291 U.S. government executive order 13423.

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new building energy consumption by 30% by 2010.292 On a domestic level, sales of compact fluorescent lighting (CFL) now account for 20% of retail sales; with a similar level of activity observed in other domestic energy efficiency measures. 293

The scaling up of renewable energy and energy efficiency can be attributed to 3 main reasons; prices signals from the rise in oil prices, strategic moves to address geo-political concerns and a sustained investment programme undertaken by the US Government. The US DOE EERE office funded $750 million for research, development and deployment of renewable energy and energy efficiency technologies in 2006 with $350m allocated towards energy efficiency, and $400m in renewable energy applications.294 The US DOE Solar America initiative doubled US investment in solar energy from $80m to approximately $160m per year helping catalyse an increase in global market capitalisation for pure-play solar photovoltaic companies from $40 billion to over $160 billion in the last 18 months.295

Bp beyond petroleum (www.bp.com/us)

In 1997, BP’s then CEO Lord Browne - in a speech at Stanford University – spoke about the need for the energy industry to accept the science of climate change and begin to do something about it. BP committed to reduce its GHG emissions to below 1990 levels by 2010; this target was achieved nine years ahead of schedule. The setting up of BP Solar, one of the world’s largest solar manufacturers, was a key strategic move, as was the establishment of BP’s Alternative Energy Group in 2005 with a commitment of €8 billion of investment over ten years in four sectors: solar; wins; gas-fired power; and hydrogen power and carbon sequestration and storage. BP has acquired several small wind power companies throughout the US and formed a strategic partnership with Clipper Wind (www.clipperwind.com/) one of the largest wind turbine manufacturers in America. BP’s first wind farm (a 300MW unit) was commissioned in December 2007. BP built a 1000MW gas-fired cogeneration plant in Korea within the same time frame. In addition to low-carbon power, BP invests heavily in the R&D of low carbon fuels and has partnered with DuPont to import biobutanol from an existing first generation manufacturing facility in China to blend with petrol for export to the UK market. Some €500m has been invested in an Energy Biosciences Institute co-located at UC Berkeley and the University of Illinois at Urbane-Champagne. According to BP ‘…..it is all in the name of good business as part of a sustainable business strategy that will reap both environmental and economic benefits.’

Waste Management (www.wm.com)

This US company deals with the waste of its 22 million customers and produces more renewable energy each year than the entire North American solar industry. It strategic goals to 2020 include: increase waste-based energy production; increase in the volume of recyclable materials; investment in clean technologies; and preserving and restoring more wildlife habitat. It operates 33 landfills and hopes to increase this number to 100 by 2020. To increase the volume of recyclable materials, the

292 U.S. DOE/EERE, 2007. 293 U.S. DOE/EERE, January 15th 2007. 294 IEA 20/20 Report. 295 Bloomberg Business, November 2007.

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company uses a profitable single stream recycling technology. New areas of business include ewaste, and construction and demolition recycling. In partnership with Sony, Waste Management has developed an eCycling Programme aimed at providing a drop off within 20 minutes of 90% of population centres. The company is investing in the next generation of landfill technologies that could produce electricity, create more space in landfills, and make diesel from landfill gases. Waste Management’s consulting subsidiary works with customer companies to reduce their waste streams. According to the CEO of Waste Management ‘…..where most see waste, we see opportunity.’

Another prominent area in the deployment of funding has been the decision by US DOE in its 2008 budget to invest $1.2 Billion over five years to accelerate hydrogen and fuel cell technology.

In summary, in this brief review of the US EGS sector, our focus has been directed at the sub- sectors attracting the most attention and investment. The sub-sectors of renewable energy and energy efficiency are dominating the US landscape in this regard with record and increasing levels of investment from government, VC and commercial sources. The spinoff from this investment is the emergence of the growth of ‘greencollar’ jobs.

6.2.1. Venture Capital Activity

As indicated earlier, US investment in the cleantech sector has increased dramatically in recent years. Looking in a bit more detail into which sectors the venture capital money is being invested; in the US investment in alternative energies with bio fuel production have attracted the highest level of funding. However, so far in 2007 venture capital investments in solar power have surpassed investments in bio fuel, reaching $1.2 billion and exceeding to the total investment in bio fuels in 2006. The growth in solar investment has gone from $200 million in 2005 to $400 million in 2006 and appearing on-course to triple that figure in 2007. Investment in solar looks set to continue in 2008, the battleground among the venture capital community will be picking the next generation thin-film materials that will replace crystalline technologies.

Very recent data presented by Greentech Media suggests that Greentech: VC investment in renewable and cleantech hit $3.4 billion in 2007. Venture capital (VC) investment in renewable energy development reached “an unprecedented level” of $3.4 billion in 2007, led by an investment of more than $1.05 billion in solar energy technology through more than 70 VC rounds, according to data recently released by Greentech Media, Inc. (Cambridge, MA). Battery technology was also well-supported by VC last year, at $33.9 million, followed by the energy efficiency/smart grid sector at $419.1 million, Greentech reported. “VC investment in renewable energy in 2007 was up 50% over the previous year with more than 220 funding rounds across the entire spectrum of renewable energy,” said Eric Wesoff, senior analyst at Greentech Media. He added, “investors are looking for 2008 to 2010 to be the years of renewable energy exits.” Notable recipients of VC investment in 2007 were HelioVolt’s $101 million for thin-film photovoltaics, Great Point’s $100 million for coal gasification, Amyris’ $70 million for synthetic biology and biofuels, and A123’s $70

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million for innovative battery technology.296

There is concern being expressed in some quarters that the hype surrounding bio fuels could lead to excessive concentration of venture capital in this area and excessive valuations whereas other cleantech sub-sectors like carbon sequestration, water purification and energy storage are seeing a much slower inflow of capital. 297

6.3. Austria

Austria has long been considered a leading country regarding environmental protection and initiatives. It has identified the environmental and economic benefits of environmental technologies and these benefits have been closely monitored as far back as 1993.298

The Ernst & Young study of EU eco-industries (2004 data) indicated that Austrian turnover in that sector was about €10.1 billion, or eight times that of Ireland (€1.2 billion). 299

Table 6.3: Relative Size of EGS Sector in Austria

Turnover of eco-industries per capita, again estimated by Ernst & Young, is shown in the following figure. From this it can be seen that Denmark and Austria are the European leaders with over €1600 per capita in Denmark and over €1200 per capita in Austria. Ireland’s

296 Climate Change Business Journal, January 18, 2008. 297 Library House, Cleantech goes mainstream, September 2007. 298 Koppl, Angela The Austrian Environmental Industry Summary of Results WIFO, Vienna, 2006. 299 Ernst and Young, Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU European Commission DG Environment, Brussels, 2006.

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turnover per capita is just less than €300.

Figure 6.1: Relative Turnover of EGS Sector in Austria

Figure xxx: Turnover of eco-industries per capita in EU - 25

With regard to turnover of eco-industries as a percentage of GDP there is an EU average of 2.3%. The highest is Denmark, with Austria the second highest in the EU-25 at about 4.3%, nearly double the EU average, as the following figure shows. With regard to the Irish position in Figure 6.2, it should be noted that GDP/GNP ratio in Ireland is abnormally high and percentage of GNP might be a better guide.

Figure 6.2: Relative Turnover of Eco-Industries as a Percentage of GDP

Some doubt has been case upon the figures in the Ernst & Young study and the scale of

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technologies included may not tally with other studies that have been carried out (see below). 300

However, it is still clear that, in Austria, the development of environmental technologies is a high strategic priority at Government level. For example the Austrian Federal Ministry for Economy and Labour has set up a website of such technologies. 301 This comprises a searchable database of about 500 companies under region, name and keyword (services).

Companies in Austria have also set up national and regional associations of environmental technology suppliers. For example, Austrian Environment is an Association of Austrian companies in all sectors of Environmental Technologies and Waste Management which was set up in 1999 in the framework of the “Austrian Export–Offensive”. 302 According to this association there are 1,500 suppliers of environmental technologies and services in Austria. Regional clusters have also been developed.

For example, Eco World Styria comprises a comprehensive network of more than 500 companies in the field of energy and environmental technology in the State of Styria alone. The network claims a turnover growth for its companies in 2006 (from ‘previous years’) of 14.9% to €1.69 billion. Companies in the area of biomass, solar energy, material flow management, water and wastewater recorded a growth in the number of employees of around 12.6 % to 10,700. According to a survey they carried out, member companies of the network have themselves recorded an overall turnover of €4.25 billion in 2006 (for all their activities), with €1.68 billion for clean energy and environmental technology alone (an increase of 14.9%), which corresponds with about 5 % of the Styrian gross regional product.

While areas such as water/wastewater and material flow management currently generate the highest turnover, the field of renewable energy has recorded the highest growth: 30% for solar and 18% for biomass. The drivers of growth are particularly small and medium-sized companies. From the total of 19,700 employees in the member companies, some 10,700 work in the field of renewable energy and environmental technology, with growth of 12.6%.

This network provides a 24-hour answering service to its companies and potential clients and its website shows the diversity of companies and solutions provided in that province, with another searchable database of service providers. 303 It provides a wide range of services to its constituent companies as figure 6.3 shows and has achieved a high level of branding for the EGS sector in this region, in all of Austria and abroad. It has published several publications and reports (in both German and English) outlining the nature and advances of EGS services available in the region including a regular magazine304 and a

300 Private discussions with industry expert from WIFO (at EnvieTech Conference in Vienna, January 2008) and Xavier Leflaive, OECD (at EPA STRIVE Conference, Dublin February, 2008). 301 www.umwelttechnik.co.at. 302 http://www.austrian-environment.at/eng/index.htm 303 www.eco.at 304 Eco World Magazine: Leadership in Energy and Environmental Technology (3 issues produced)

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product guide305 which categorises the companies and products under several categories for easy access (Biomass/Biogas/Diesel; Solar; Material flow; Water/Wastewater; Energy Efficiency and Other).

Figure 6.3 Services offered to companies by Eco World Styria

6.3.1. Economic Importance of Environmental Technologies in Austria

Several studies have been carried out to quantify environmental technologies in Austria. The most recent, in 2006 (with data up to 2003), by WIFO 273 gives some interesting data and conclusions. However, the data from this study should also be treated with caution with respect to any comparative analysis as the definitions of EGS are not the same in each country. It would appear from an analysis of the WIFO report, for example, that it does not include many of the activities that are included in this Irish study. It also does not tally with some of the information provided by the Austrian EGS networks given above.

According to the WIFO study in 2003, an estimated 331 companies produced environmental technologies in Austria. The estimate for total turnover was €3.78 billion for the Austrian environmental technology industry. These companies employed approximately 17,200 individuals in 2003. Exports by the Austrian environmental technology industry are estimated to amount to €2.45 billion. The growth trend from 1993 to 2004 is shown in the following chart.

WIFO noted a large scale shift from end-of-pipe technologies in 1993 and 1997 to more integrated and cleaner technologies in 2003. Clean energy technologies are the most significant mover, contributing to €1.9 billion to turnover and employing almost 7,500 people.

305 Eco World Product Guide 2008

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Figure 6.3: Austrian EGS Sector – Key Indicators

6.3.2. Structure of Austrian Environmental Technology Industry

The figure below shows the breakdown in type of environmental technologies being provided. From this, it can be seen that, between 1997 and 2003 there has been major reductions in air and waste related technologies and a major growth (from 21% of turnover to 48%) in energy. Water and monitoring and control technology markets have stayed relatively stable.

Figure 6.4: Breakdown of Environmental Technologies

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6.3.3. Demand Drivers

WIFO also examined the drivers for this growth in environmental technology demand. Interestingly there are significant changes in demand drivers from 2000 to 2005, but this could relate to the companies queried. Subsidies for investment were seen as the main driver, with EU, Austrian and other country legislation also being strong drivers.

6.3.4. Markets for Environmental Technologies

Figure 6.5: Environmental Technologies – Key Markets

In the mid 1990s, some 50% of environmental technologies were sold on the Austrian market and the rest were exported. By 1997, exports had gone up to over 60%. In the WIFO survey sample, companies were again able to increase their exports, to about 65%. In total, companies in the sample exported goods to the amount of €1.6 billion. There was little change in the various markets where these technologies were sold, with the EU-15 being the major segment in both cases (around 39% in 1997 and 40% in 2003) (half of this was to Germany), and the Austrian market being second.

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6.3.5. Austrian Masterplan for Environmental Technologies

In 2007 the Austrian Government produced a Masterplan for Environmental Technologies. 306 This ten year national strategy or plan aims to put Austria in the leading position regarding the share of environmental technologies per GDP worldwide. It also aims to double the number of people employed in environmental and energy technologies and to aid Austria achieve its climate protection and other national environmental goals.

The Masterplan contains four strategic fields of action:

1. Promotion of exports - targeted initiatives on central export markets and further development of the existing export infrastructure for Austrian enterprises. 2. Research and qualification - strengthening the technological competitive position and training the staff members of enterprises and research institutions 3. Financing - supplementing technological solutions and services with customer-specific financing offers 4. Making the domestic market more dynamic - safeguarding an innovative domestic market for products and services at a high technological level.

In order to achieve its goals and to fulfil the strategic fields of action, the Masterplan contains 30 specific core measures across a range of areas.

There are three early priorities for Austria which will be developed initially: 307

Promoting the Export Offensive for Environmental and Energy Technologies Representatives of politics and administration should increasingly promote Austrian environmental and energy technology abroad. The promotion of the Export Initiative Environmental Technology within the framework of go international takes place through the cooperation of the Federal Ministry of Agriculture, Forestry, Environment and Water management, and the Federal Ministry for Economic and Labour Affairs, and in close coordination with the Austrian Board of Foreign Trade (aussenwirtschaft österreich), the Austrian Federal Economic Chamber and its 106 foreign trade offices all over the world.

In this context the Office of the Environmental Technology International Network (netzwerk umwelttechnik international) located at the Austrian board of foreign trade, which was founded in January 2007, has to be integrated as well as the information and communication platform, in order to take targeted and coordinated market opening and market developing measures abroad and to further exploit the export potential for Austrian companies in this sector. The goal of the export initiative is an increase of the export quota in the field of environmental technology to 80% within ten years.

306 Bundesministerium für land- und forstwirtschaft, umwelt und wasserwirtschaft land niederösterreich MUT Masterplan Uumwelttechnologie Österreichische: umwelttechnologie auf dem weg in die zukunft. 2007 307 ibid. page 9.

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Starting the innovation-offensive for environmental and energy technology The establishment of the energy and climate protection fund should contribute to considerably accelerating the launching of innovative products and services on the market and to strengthening the competitiveness of Austrian suppliers.

The medium-term goal is to establish a good know-how basis for becoming an international technology leader in the central sectors of environmental technology by means of setting up or further developing mission-oriented research and diffusion programmes as well as by creating centres of excellence.

Further developing the efficiency offensive for buildings The increased consideration of klima:aktiv criteria for the sustainable construction of residential buildings and a passive house standard in the housing subsidisation of the Federal Provinces contributes considerably to a significant reduction of the energy demand for space heating in Austria.

The medium-term goal is to attain the klima:aktiv standard for 50% with new buildings. Apart from strengthening the energetic component of housing subsidisation the focus is on the implementation of ambitious efficiency standards for the energy demand of buildings in the building regulations. The measures of the Master Plan Environmental Technology on the renovation of old buildings aim at a rise of the renovation rate and an increase in the thermal quality of renovation.

6.3.6. Conclusions

While there are some disparities between the data from different sources, environmental technologies are a strong economic sector in Austria and they continue to grow. This is due to long term policies and programmes of support and legislation put in place over many years by the Austrian Government. Businesses and Austria have also seen the economic potential in this sector and have moved quickly to innovate to take advantage of the drivers in place. The companies have also developed strong networks and industry support groups, providing joint services, a strong brand as well as joint business opportunities. The growth in environmental technologies has been qualitative as well as quantitative with more clean technologies and clean energy options being developed. This has greatly aided Austria’s targets regarding the reduction of GHG emission targets as well as protecting the Austrian environment.

To achieve similar successes, Ireland also needs a long term national strategy on environmental technologies with suitable policies, regulation and support mechanisms. The companies in this sector in Ireland also need to network better, develop support groups, avail of joint services and create a stronger brand.

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6.4. The United Kingdom

6.4.1. Introduction

In November 2007, the report of the Commission on Environmental Markets and Economic Performance (CEMEP) was published. The CEMEP was established by the UK Government in light of the Stern Review on the Economics of Climate Change and drew together representatives the business community, academia, trade unions and NGOs, with the Secretariat being jointly provided by the Departments for Environment, Food and Rural Affairs (Defra), and Business, Enterprise and Regulatory Reform (BERR). Given the fact that the CEMEP examined many of the issues that have been examined by the present Forfás/InterTradeIreland study and in light of the fact that its recommendations may impact on Northern Ireland, then it seemed sensible to at least consider whether its findings and policy recommendations might also help to inform the policy options arising from the present study.

The CEMEP report acknowledges that the transition to a low carbon, resource efficient economy is needed to meet the global challenges of climate change and sustainable development. “There will be winners and losers, but there are considerable opportunities for those countries and businesses with the foresight to seize them”.

The UK Government has committed to making the UK a global leader in low-carbon and environmental markets. The goal is to make the UK one of the best locations in the world to develop and introduce low-carbon and resource-efficient products, processes and services and by doing so, attract the investment today that will help create tomorrow’s prosperity and jobs, as well as contributing to a cleaner environment.

UK Government has acknowledged that achieving this goal will require a policy framework that drives investment and enterprise in environmental markets and provides more effective support for the development and commercialization of environmental innovations. In fact, the conclusions in the CEMEP report are mainly targeted at Government because CEMEP believes that environmental market opportunities are heavily influenced and, in some cases, driven by the policy framework set by Government.

Both the UK CEMEP and the UK Corporate Leaders Group on Climate Change underlined the fact that in order to stimulate private sector investment a strong policy framework is needed that creates a long-term value for carbon emission reductions and consistently supports and incentivises the development of new technologies. 308 However, implementing these principles can be difficult in practice.

The following are the key CEMEP recommendations:

308 The Corporate Leaders Group on Climate Change comprises major UK and international companies, including ABN Amro, Centrica, Shell, Tesco and Vodaphone.

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• Setting credible goals and targets that give business clear signals about the future direction of environmental policies. • Favouring market mechanisms to ensure that businesses have greater flexibility to achieve environmental objectives in the most cost effective ways. • Avoiding prescribing particular solutions to achieve the desired outcome, and allowing for the development of innovative, new solutions in policy formation and appraisal. • Establishing a ‘level playing field’ through the removal of regulatory and institutional barriers that generally favour incumbent technologies.

6.4.2. Setting Credible Goals

Government needs to set very clear goals or targets which will help to provide businesses and investors with greater certainty about the direction of policy. To be effective they need to be credible, unambiguous and set over a long enough timescale to influence investment decisions.

Moreover, it is also important to ensure that environmental goals are fully supported across policy areas, so, for example, targets for renewable energy are not undermined by the planning system.

In this context too, it is important that Government should ensure that it sets out and adheres to well-defined timetables for the implementation of environmental legislation, as any delay can undermine investment and damage confidence in the direction of policy.

6.4.3. Market-Based Instruments

As a general principle too, it is clear that market-based instruments are preferable to direct regulation. Market based instruments enables businesses to adapt and respond to the policy objective in a more economically efficient manner.

6.4.4. Dynamic Regulation

While market based instruments are preferred, it is clear that in some instances, well- designed direct regulation can be an effective way to supplement market-based instruments, and in some cases can help to stimulate innovation and product development.

Experience from other Member States has shown that some Governments have used progressively updated or ‘dynamic’ performance standards to drive improvements in the resource efficiency of products. This is based on the idea that many existing regulations simply enforce minimum standards or specify best available technology, which tends to lock in existing technologies and provide no incentive to drive further improvements in performance.

By providing incentives or aid to firms to exceed existing performance standards, firms can

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be encouraged to strive to innovate to continuously improve their environmental performance. Moreover, such incentives (properly structured) are fully compatible with the EU State Aid rules.

6.4.5. Removing Institutional Barriers to New Technology

An interesting conclusion to emerge from the UK CEMEP report was the role that Government can unwittingly play in locking in existing technologies and inhibiting the uptake of new and innovative goods and services. An example of this is the business appraisal process used by Government Departments and State agencies, which tends to focus on currently available solutions, where costs and benefits are more readily identifiable. This tends to work against the adoption of new technology – particularly where the initial capital cost may be high, relative to the incumbent technology, and the benefits in terms of environmental performance may accrue over a long period of time.

The UK CEMEP argued for a different approach that allows for the potential of innovation and investment to deliver better, cheaper solutions to be better taken into account in standard business appraisal processes. They called on the UK Government to commission a study of how the long-term needs and opportunities from innovation can be incorporated into cost-benefit analysis guidance, with a view to assessing longer-term impacts on economic performance routinely in environmental policy appraisal.

Moreover, it is also interesting to note that the UK has developed a new Regulatory Impact Assessment process which explicitly incorporates an assessment of the impact on carbon emissions, as well as on other environmental issues and sustainable development. This is something that should also be considered in an Irish context.

6.4.6. Science and Innovation Strategies

In the UK, Government Departments and many agencies publish science and innovation strategies. But many of these focus only on research to provide information for policy formulation and do not address the Department’s or agency’s role in inducing and rewarding private sector innovation that furthers the Government’s objectives, including on the environment. CEMEP recommended that science and innovation strategies should better reflect the opportunity of environmental markets, and that the requirement to produce them should be extended to key regulatory agencies and procurement functions.

6.4.7. Testing and Certification

Product testing and certification has been identified by firms in the environmental sector as one of the most significant challenges businesses face in bringing a new product to market. This is particularly difficult where established standards do not exist, as can be the case for innovative products. Customers in this field often have little incentive to make the switch from tried and tested products and processes to more sustainable alternatives, and

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certification is particularly important to overcome this.

In the UK, the Carbon Trust has developed a programme of activity dedicated to helping businesses overcome technical and market barriers to the deployment of innovative technologies using tools such as field trials and performance monitoring and evaluation. At the EU level too, the European Commission has proposed the establishment of an EU Environmental Performance Verification scheme to help address some of the problems faced by environmental innovators.

6.4.8. The Role of Public Procurement

Public procurement potentially has a very important role to play in fostering and promoting the development and adoption of new environmental goods and services. By leading the way in this area, and by providing a “market pull”, public procurement could help to facilitate the commercial viability of an innovative good or service and help to attract investment.

In the UK, for example, a number of initiatives are taking place in this area. The Forward Commitment Procurement Process (FCP), pioneered by the business-led Environmental Innovations Advisory Group (EIAG), involves providing advance information of future needs, early engagement with potential suppliers and – most importantly – the incentive of a Forward Commitment: an agreement to purchase a product that currently does not exist, at a specified future date, providing it delivers agreed performance levels and cost. The EIAG is also working with BERR, Defra, the National Health Service, the Office of Government Commerce and the Greater London Authority to use Government procurement to create a market for a new generation of innovative and energy-efficient lighting, making it more affordable and widely available. Indeed, the UK Government, in its Sustainable Procurement Action Plan, has committed to replicating the FCP model more widely in the public sector.

CEMEP believes there are two essential elements to achieving this in practice: first, a more systematic process is needed to identify where better, more cost-effective solutions are needed to achieve environmental policy objectives and targets; and second, the public sector’s capability to carry out this type of supply chain management practice needs to be developed and enhanced.

6.4.9. The Use of Environmental Mandates

The CEMEP report also acknowledged the fact that regulation can be another powerful way of creating important early markets and stimulating innovation and investment. It pointed to the California Zero Emissions Mandate as a good example, as well as the UK Code for Sustainable Homes. If reflected in building regulations as planned, the CEMEP concluded that the Code would create an ambitious mandate for zero net carbon homes in England. Building such homes cost efficiently and at scale will require new technologies and techniques that have yet to be developed, creating new economic opportunities. Using

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market pull measures including public procurement in conjunction with such regulation can help ensure these opportunities are maximised.

6.4.10. Sectoral Deployment Support

The CEMEP report also drew attention to the important role that sectoral deployment support can play. For example, sectoral deployment support has been successful in stimulating the development of renewable energy, such as wind power and solar photovoltaics (PV), and are used widely in the EU and elsewhere to build scale and reduce costs of a technology that is not currently cost competitive.

It is clear that targeted sectoral initiatives will be necessary in many instances to stimulate the development and uptake of renewable energy technologies that would not otherwise be widely adopted. While there are inevitably costs associated with such support, they could prove the best option in the longer term.

The CEMEP, however, noted that the choice of the appropriate policy measures will depend on the stage of the innovation process being supported. Policies to support investment in high-risk, early-stage options will be most effective if, in addition to providing revenue, they are designed to reduce or remove revenue risks associated with price volatility. “Support should target those applications with significant potential for mass market rollout, and should take into account areas of natural advantage for the UK, such as offshore renewables.”

The report also draws attention to the findings of the UK Energy Research Centre which advocates the following ‘risk hierarchy’ linking policy to technology maturity in the low- carbon and renewable energy generation sector309.

Capital subsidies and/or PFI equity stakes are most likely to be appropriate for wholly new technologies emerging from R&D, or for unproven and large-scale investments with limited prospect of incremental learning through small-scale early commercial units: e.g. carbon capture and storage and possibly wave and tidal power. Fixed-price tariff schemes may be most appropriate for initial roll-out of emerging technologies that are demonstrated, but yet to be used on a large scale: e.g. offshore wind, also possibly energy efficiency schemes in old building stock. Market-based schemes, including taxation and ‘cap and trade’ are generally most suited to proven technologies, or to incentivise least-cost means for short-term carbon reduction: e.g. onshore wind.

6.4.11. Support for Research, Development and Demonstration

The CEMEP report also underlined the importance of support for R&D, particularly given the

309 Source: Investment in electricity generation: the role of costs, incentives and risks, UKERC (2007).

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fact that market failures resulting in under-investment in RD&D by the private sector are well established. Long lead times and high costs of technology development are significant factors in many environmental sectors, particularly energy. They are often compounded by the need to displace low-cost incumbent technologies. The CEMEP believe that targeted support will help to leverage private sector investment into the technologies required to meet future environmental objectives and will help facilitate generation of intellectual property and the development of new products and services, building options to meet future environmental needs and potentially creating competitive advantages

To leverage best overall value for money from the funds available, the CEMEP recommend that existing capabilities and new initiatives in RD&D across the public sector and industry should be better coordinated and that synergies should be sought between different strands of innovation support, including linking RD&D support to procurement opportunities.

However, it warns that Government should be careful not to ‘pick winners’ by focusing its attention and support on a single or small number of technologies to address environmental challenges. Therefore, the CEMEP recommends that a portfolio of candidate technologies should be supported. While it is acknowledged that few, if any, of these emerging technologies will at first be cost effective compared with the technologies they are designed to replace, it is, however, prudent to continue to invest in them to create an option for commercial deployment if the technology becomes economic in the future. The CEMEP believe that without what are sometimes relatively small amounts of investment in the interim, this option may no longer be open at the crucial time.

The CEMEP report also drew attention to the fact that a commonly articulated barrier to the commercialisation of environmental technologies by the private sector is the perception of ‘funding cliffs’ (i.e. the concern that Government grant support is available for early stage R&D, but funding is not forthcoming at the demonstration stage when technology and commercial risks are at their highest). To overcome this problem, the CEMEP recommend that Government support should aim to be as consistent as possible, through the life-cycle of a technology’s development, to allow that technology to make progress towards commercial deployment. By way of example, the CEMEP noted that long term public support for innovative technologies has been seen where important low-carbon technology breakthroughs have occurred previously, e.g. Danish support for onshore wind through the 1980s and 1990s and Japanese support for Solar PV from the 1970s.

In conclusion, the CEMEP recommended that an ‘Options Approach’ should be taken to RD&D support, whereby:

a diverse portfolio of emerging technologies is supported as consistently as possible beyond early-stage R&D and through the development lifecycle; but progress is reviewed at the end of each development stage, and support withdrawn for underperforming technologies.

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On 1 May 2008, the UK Government responded to the CEMEP report; Building a low carbon economy: unlocking innovation and skills. 310

6.5. Lead Market Initiative for Europe

The EU’s Competitiveness Council instructed the European Commission to bring forward an initiative on lead markets, based on a broad stakeholder consultation, for defining a valid approach for fostering the emergence of markets with high economic and societal value. The Commission’s response – the Lead Market Initiative (LMI) – selected renewable, waste recycling and sustainable construction among its priorities.311 Lead markets have a number of characteristics. For example, there is a high degree of customer intelligence, with users having a certain degree of anticipatory knowledge of the technology and recognising the premium to be paid for innovation.

These sub-sectors were chosen because they are demand driven (instead of technology pull). There is strong market potential in Europe and on a global level within a short time span. In addition, the market segment is broad, with a range of interconnected products and services capable of being offered simultaneously. The Commission also adopted the policy of not picking winners on the basis that technologies are sufficiently mature. Dictating technological choices might therefore pre-empt the development of competing and possibly economically better options.

The construction sector was selected as buildings account for 42% of final energy consumption and produce some 35% of all GHG emissions. The sector represents one third of EU GDP. Almost 50% of all materials extracted from the earth are transformed into construction materials and products. Sustainable construction encompasses energy efficient appliances, and developing solutions for residential and non-residential buildings as well as for infrastructural assets. A Task Force identified specific market opportunities for sustainable construction and innovation in market segments. For example, a priority is to change attitudes in the construction supply chain to a full life cycle approach. This includes knowledge in energy consumption, environmental impacts, indoor environment, safety, the adaptability of structures and premises, service life planning and facility management. Barriers inhibiting the sector include fragmented standards and a fragmented supply chain and a general absence of Green Public Procurement (in a market where the public sector accounts for 40% of total production). Among the measures recommended to develop the potential of the sector are: the development of guidance for the choice between EMAT (economically the most advantageous tender) and lowest price and for the use of life cycle costs in construction works; expanding the scope of the Energy Building Directive; and the adoption of performance-based approach in national building regulations.

The recycling sector was another priority as the EU has around 50% of the global waste and

310 http://www.defra.gov.uk/environment/business/commission/index.htm 311 Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee of the Regions, COM (2007) 860 final dated 20 December 2007.

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recycling industry. The EU recycling sector comprises some 60,000 companies with nearly 70% categorised as small firms. Despite significant market potential, many barriers to market development remain. There are, according to the Commission, indications that the international trade in recycled materials will continue to grow. Among the measures recommended is a review of the WEEE Directive (due in 2008) which would promote the long-term development of recycling materials. A new Thematic Strategy on the prevention and recycling of waste will also be brought forward (in 2010). Another barrier is the lack of certainty about the quality of certain recycled products. The Commission also recommends the procurement of recycled products, technologies and related services as part of Green Public Procurement. It is notable that countries such as China, Korea, Australia, Canada and the State of California are introducing WEEE, ELV and RoHS legislation similar to the EU. This provides an opportunity for European companies to sell their know how into these markets.

The final sector of the LMI that is relevant to this report is renewable. The EU RES sector has a €20 billion turnover and provides some 300,000 jobs. A ‘roadmap’ for the sector is being developed. The Commission believes that the development of renewable resources is being held back by three factors. First, demand is sub-optimal given that the external costs of energy use are not fully reflected in energy prices. Due to this low level of demand important learning curves effects which would lead to lower prices in several technologies are being exploited too slowly. Finally, the fragmentation of RES support systems is also an inhibitor.

The LMI, as does this report, points to the regulatory regime as a key driver. The Commission is a strong proponent of Green Public Procurement and a step change in improving standards, labelling and certification. The Commission believes that the new State aid guidelines on environmental protection should be used by Member States to exploit new business opportunities.

6.6. Conclusions

This chapter has examined the EGS sector in a number of diverse markets - Austria, US and UK The analysis concentrated on a number of factors included market mechanisms, domestic regulations and key sub-sectors. Each of these markets possesses characteristics that, individually or collectively, provide Ireland and Northern Ireland with key pointers to the successful development of the EGS sector.

Looking at market focus, the contrast between the US and Austria is particularly evident; the US has established a system of supports and enablers that has resulted in a rapid inflow of capital providing a huge impetus to the renewable energy sub-sector; whereas in Austria renewable energy forms part of an integrated Master Plan across a number of EGS sub- sectors. The UK has again adopted a more broad-based strategic approach, avoiding the ‘picking of winners’.

Common to all three markets, and a recurring comment in our discussions with industry

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sources, is the need for a regulatory environment that provides clear, consistent and long- term signals.

The lead-time behind commercialisation of some of EGS technologies and the capital construction costs require a long-term approach to attract capital. These serve to act as a spur to domestic markets and, building on that knowledge position, countries like Austria have become very export focused (65% of EGS sector is now exported). In the US, the scale of the domestic market and availability of capital has allowed US EGS companies to focus internally; for example, on the S&P global eco index there are a number of US companies listed whose operations are exclusively domestic.

For Ireland and Northern Ireland, the messages emerging are clear; allied to implementation of EU environmental and energy Directives, set an ambitious strategic policy framework that will stimulate the development of the EGS as enterprises respond to the rigorous implementation of legislation in areas such as water quality, energy efficiency, renewable energy etc.

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7. CHAPTER 7: CONCLUSIONS

7.1. Introduction

It is recalled that the primary focus of this report is to identify new business opportunities within the EGS sector.

The report provides clear evidence that for some EGS sub-sectors in Ireland/Northern Ireland (renewables, clean technologies, water and environmental consultancy for instance) the domestic and export markets are dynamic and growing.

Having assessed the strengths and weaknesses of the sub-sectors, there is also clear evidence that the prospects of some sub-sectors are better than others.

The principal drivers that are influencing investment and economic activity have been analysed and the barriers that could inhibit the further development of the sector have been identified. In addition, many examples of best international, and indeed national, practice at company and government level have been highlighted.

In this final chapter, the evidence to hand is assessed with a view to informing the development of a strategic policy framework for an all-island approach to support the development of priority EGS sub-sectors. Ireland and Northern Ireland must plan now for a transition to a low carbon, resource-efficient economy in response to the global challenge of climate change and sustainable development.

There will inevitably be winners and losers. However, it is also clear there are significant new business opportunities for EGS companies in the domestic, UK and some European and international markets as the enterprise sector is seeking to improve its environmental performance.

In coming to conclusions, the Consultants emphasise the following:

Enterprise policy in Ireland has traditionally focused on maximising export potential rather than on fostering the domestic market. The evidence in this report suggests that agency support (and the setting of a clear strategic policy framework for the EGS sector) is needed to facilitate the growth of both domestic sales and export opportunities. Regulatory compliance was found to be a major driver of growth within the EGS sector and the need for clear and consistent environmental policy and regulation was strongly articulated by industry representatives. However, there is no suggestion that any additional regulatory burden should be placed on a sector that is already facing competitive pressures. What is needed is not more regulation, but clearer and more consistent regulation. What the report suggests, therefore, is that a fresh look needs

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to be taken at the business opportunities arising from the consistent implementation of existing EU Directives and related measures. With notable exceptions, the EGS sector is playing catch-up. In this context, while many potential new business opportunities have been identified, companies themselves will determine if the cost competitive conditions are sufficiently favourable to invest in expanding their business. What the report seeks to do, therefore, is to set out the optimum framework conditions which, if present, would encourage companies to innovate and expand their operations. While the EGS sector is most aware of its “green and clean” image, this raises the much wider issue of the greening of manufacturing industry and internationally traded services, for example through the introduction of industry guidelines. A further study about this branding initiative could be undertaken. While not referenced in detail, many of the sub-sector business opportunities (pollution control and monitoring, clean technologies and processes, and RES-E and energy efficiency) will be based on the use of ICT, where Ireland has particular competitive advantages. It is beyond the Terms of Reference of this study to identify, for example, the capabilities of firms in the EGS market place; or to identify product specific goods that have the greatest potential. This is a strategic study, not a market research report. In carrying out this research significant statistical and data gaps have been identified. This is largely due to the unavailability at the present time of sufficiently detailed CSO statistics and therefore, it is not possible to provide key economic and financial data for the majority of sub-sectors.

7.2. Opportunities

The cost compliance burden resulting from the implementation of EU environmental Directives is high and will get higher. For example, the European Commission estimate the cost of the EU’s climate change/renewable policy package could be €60 billion EU-wide. A compliance burden of this scale has already had a significant impact on investors’ decisions.312

On the other side of the equation, the need to respect environmental rules and greater corporate awareness about sustainable development – both largely driven by consumer behaviour – is rapidly changing the way certain sectors are conducting their commerce, in particular as regards sustainability requirements being pushed onto suppliers.

While all EGS sub-sectors have prospects, state resources are limited so therefore priorities have to be set. This does not mean that any sub-sector should be ignored by the state agencies. Rather a higher priority should be given to a limited number of niche areas within sub-sectors that have the greatest potential to make a breakthrough into what is a very competitive European market.

312 As articulated by speakers at the Business Europe conference on ‘Greening The Environment’ held in Brussels on 21/22 February 2008.

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In this regard, the following criteria were used in assessing the EGS goods and services with the greatest potential:

1. Clear demonstration of growth prospects in European markets 2. Companies in the sub-sectors have the scale to export into European markets 3. Exploitation of natural resources or technical experience is achievable 4. Clear regulatory drivers exist with high levels of enforcement 5. Emerging technologies and product development are attracting VC investments

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Table 7.1 Environmental Goods and Services with the Greatest Potential

Sub-sector Growth Sectoral Export Product and Service Potential Comment Potential - capability/cap Potential Island acity Construction HIGH LOW HIGH Windows Export potential predicated on the construction industry gearing up to build Insulation and deliver BER energy efficient housing. If domestic production of key Heat pumps components sourced within Ireland, there may be export opportunities as Ventilation buildings across Europe will have to comply with the strictest energy efficiency Solar panels targets by 2020. Unless indigenous manufacture develops, imports will Cladding dominate in the short term. Therefore growing the domestic market will be the CHP springboard for securing market share in the UK initially and other EU markets Facades subsequently. Installation services

Clean Technology HIGH MEDIUM/LOW MEDIUM/ RES - E consultancy Other This is cross sectoral and will be mainly focused on the energy sub-sectors. HIGH consultancy Again the development of the indigenous sector to develop capacity and scale Energy management consultancy should be a priority and export potential will only follow if this happens. This is Resource efficiency a knowledge intensive category therefore R&D and training should be Water efficiency prioritised to develop the sector. Energy efficiency and renewable energy sources Training, export potential in particular

Consultancy MEDIUM HIGH LOW/MEDIUM Climate change Again this is a cross sectoral opportunity, with the highest potential in the area RES of climate change, renewables and energy efficiency. Ability to export will Carbon footprinting depend on the mandate given to Irish subsidiaries, the exploitation of market Supply Chain analysis intelligence and the scale and ambition of the indigenous EGS consultancy Sustainability reporting industry. RES project scoping and design

Monitoring MEDIUM MEDIUM/ MEDIUM/ Aquatic remote sensing The WFD and R&D will remain the key drivers. Critical success factors include HIGH HIGH commercialisation of R&D effort, deployment of emerging technologies and very strict enforcement. Widespread application of key technologies in the Irish market is a key first step to building export potential.

An Assessment of Enterprise Opportunities in Environmental Goods and Services

Energy HIGH MEDIUM MEDIUM Building Energy Management High energy costs will drive investment across Europe in improved monitoring Management Systems and management of energy use in buildings. Products with best prospects are Smart meters/grids intelligent building management systems. ESCO – energy service companies Auditing and demand side that supply and manage energy use to optimum efficiency a specific growth management area.

RES HIGH LOW HIGH Wave EU RES-E targets are the key driver. Low base with high growth potential. Tidal Ireland has comparative natural resource advantages that should be exploited. Ocean Critical that scale achieved in the short term. Major investors should form Solar linkages and strategic partnerships with sub-suppliers. This is the one EGS Wind sector that requires a quantum improvement in the level of funding to support Biomass RD&D. This is also a sector where FDI activity should be proactively sought at Biofuels all levels in the supply chain. Waste HIGH MEDIUM LOW MBT Waste should be seen as a resource. The majority of opportunities in this Analysis services of recyclates sector will be domestic. Priorities should be to exploit the recovery and Anaerobic digestion treatment of current waste streams with a view to capturing their value added. Recycling treatment facilities Key opportunities driven by climate agenda include biomass and biofuels from Gasification/LPG waste. Clear government policy a critical success factor for future investment. Water HIGH MEDIUM HIGH Membrane processes for The majority of opportunities in this sector will be domestic. Significant purification commitment in NDP and Investment Strategy for NI and green procurement Packaged Design Build Operate practices should be used to leverage capacity to deploy new technologies. WWTPs Household scale treatment plants

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

In summary, this analysis suggests that companies have the greatest prospects (and therefore export market potential), provided framework conditions described elsewhere are favourable, to expand in the following areas:

o Building materials and components to be used in the retro-fitting of the existing building stock to rising BER standards and in the construction of new energy efficient buildings. o Engineering services in the RES-E sector, in particular the construction of connections and the installation of RES-E units. o Environmental consultancy services, in particular in relation to climate change, energy management and RES-E project development. o Water and waste water, driven by the proposed public works programme. o Clean technologies, in particular energy efficiency services and products.

As the vast majority of EGS companies are satisfying demand on the island, it will take a major effort over several years to grow exports. On the other hand, the task of growing exports should be greatly facilitated as the UK - Ireland largest export market – expects the EGS sector to grow by nearly 100% to £46 billion by 2015. With an adjacent, large, growing and dynamic market, this suggests that the priority should be to secure an ambitious market share of the UK overall EGS market as a first step for potential Irish exporters.

Where business opportunities are identified in the domestic market initially, this will enable companies to develop and expand capabilities and expertise to test products and services which may provide the launch pad for exports.

A best estimate suggest that the value of the EGS sector in Ireland is in the region of €4.3 to €5.2 billion. It is therefore, comparable in size to the sector in many other of the more developed Member States. While statistical data deficiencies mitigate against a precise quantification of the sector’s KPIs, this research clearly demonstrates that the sector has enormous potential.

Environmental policy, in particular the climate change agenda, has been, and is expected to continue to be of critical importance in influencing the future direction of the overall EGS sector. For this reason, it is important that Governments, both North and South, provide and articulate a clear and consistent strategic policy framework as regards how best the EGS sector will be developed. This is an essential pre-condition in order to provide certainty and confidence in the long term prospects for the EGS sector to stimulate investment in the provision of new goods and services.

As highlighted in stakeholder consultation (and consistent with findings of studies in other jurisdictions), clear and consistent policy direction can help to reduce the risk associated with the development of new products and services. “Risk can be reduced and some market failures overcome by creating a robust, long-term framework that gives business the time and confidence to invest in finding new solutions to environmental goals”.313

313 Ibid.

An Assessment of Enterprise Opportunities in Environmental Goods and Services

It is evident that the regulatory framework has been the most important driver of growth for virtually all EGS sectors to date. While other factors are also now coming into play in some sectors (e.g. climate change and energy pricing), there is no doubt that regulation will continue to play an extremely important role going forward.

Governments need to raise the bar by designating the EGS sector as a priority industry on par with Life Sciences and the ICT sectors. The report’s evidence suggests that a strategic policy framework that drives investment; that facilitates enterprise in environmental markets and exploits new business opportunities needs to be prepared. Top level engagement between the EGS sector and the state agencies tasked to support enterprise is a pre-condition if the ambitions articulated in this report are to have a prospect of success.

Initially through the UK, Ireland’s main export market, companies in the EGS space - whether or not they are Irish owned - need to harness the market dynamics that are evident in priority EGS sub-sectors and to build a sector that will position the island as a major player in niche environmental goods and services.

Setting credible targets; seeking to exploit a comparative advantage; re-focusing state supports; and by articulating a strategic intent to become a player in the global EGS market will set the right framework conditions essential to secure FDI; to unlock investment; to raise the level of RD&D; and to convince Ireland’s entrepreneurs that the EGS sector is a growth area of the future.

A word of caution is needed by way of final comment. Many of Ireland’s EGS sub-sectors are playing catch-up and as a consequence the proposed strategic framework needs to be realistic. Despite having a potential comparative advantage in niche areas, Ireland does not have first mover advantage in respect of any EGS technology (apart perhaps from wave and tidal). Furthermore, there are no major indigenous players of scale in the private sector that, for the present at least, could challenge on the global market. Finally, as the EGS sector was not a government priority until recently, FDI activity, R&D investment and eco- innovation levels are well below what exists in competitor economies.

Despite these weaknesses, the EGS sector is on a strong growth path – worldwide sales of $700 billion are forecast for 2010 - so the challenge is the transform the sector into a key driver of new economic activity on the island.

To achieve this ambition, governments will need to convince suppliers and manufacturers of environmental goods and services that Ireland/Northern Ireland has adopted and is implementing a coherent, clear, coordinated and well-resourced strategic policy framework that will position the EGS sector as a new driving force for the economic development of the island economy.

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LIST OF ABBREVIATIONS

AD: Anaerobic Digestion AIC: Accredited Inspection Contractor BAT: Best Available Technologies BEMS: Building Energy Management System BER: Building Energy Rating BERR: UK Department for Business, Enterprise and Regulatory Reform BFR: Brominated Flame Retardants BREW: Business Resource Efficiency and Waste Programme CCS: Carbon Dioxide Capture and Storage CD: Construction and Demolition CEMEP: Commission on Environmental Markets and Economic Performance CER: Commission for Energy Regulation CFL: Compact Fluorescent Lamp CGPP: Cleaner, Greener Production Programme CHP: Combined Heat and Power CIF: Construction Industry Federation CO2: Carbon Dioxide COFORD: National Council for Forest Research and Development CSR: Corporate Social Responsibility CTP: Cleaner Technologies and Processes DAF: Department of Agriculture and Food DBO: Design, Build and Operate DCMNR: Department of Communications, Marine and Natural Resources DEFRA: UK Department for the Environment, Food and Rural Affairs. DEHLG: Department of Environment, Heritage and Local Government DETE: Department of Enterprise, Trade and Employment DJSI: Dow Jones Sustainability Index EGS: Environmental Goods and Services EIA: Environmental Impact Assessment EIAG: UK Environmental Innovations Advisory Group ELV: Emission Limit Values ELV: End of Life Vehicle EMEA: Europe, Middle East and Asia EMS: Environmental Management System EMSA: European Maritime Safety Agency ENDS: Environmental Data Service EOR: Enhanced Oil Recovery EPA: Environmental Protection Agency EREC: European Renewable Energy Council ESCO: Energy Service Company ESP: Environmentally Superior Products ETAP: Environmental Technology Action Programme

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

ETS: Emissions Trading Scheme FCP: UK Government Forward Commitment Procurement Process FDI: Foreign Direct Investment FGD: Flue Gas De-sulpharisation GBI: Green Business Initiative GDP: Gross Domestic Product GHG: Green House Gas GNP: Gross National Product GPP: Green Public Procurement HVAC: Heating, Ventilation and Air Conditioning ICT: Information, Communication and Technology IEA: International Energy Agency IHBA: Irish House Builders Association IP: Intellectual Property IPPC: Integrated Pollution Prevention and Control ISEQ: Irish Stock Exchange IVCA: Irish Venture Capital Association IWMA: Irish Waste Management Association KTNs: Knowledge Transfer Networks LAPD: Local Authority Prevention Demonstration LMI: Lead Market Initiative MAP: Management Action Plan M&A: Mergers and Acquisitions MDG: Market Development Group MPC: Marine Pollution Control MSW: Municipal Solid Waste MW: Mega Watts NACE: Statistical Classification of Economic Activities NAP: National Allocation Plan NDP: National Development Plan NIAER: Northern Ireland Authority for Energy Regulation NISP: National Industrial Symbiosis Programme NOx: Nitrogen Oxide NRA: National Roads Authority NSAI: National Standards Authority of Ireland NWPP: National Waste Prevention Programme OEM: Original Equipment Manufacturer PV: Photovoltaic REACH: Registration, Evaluation, Authorisation of Chemical Substances Directive RES: Renewal Energy Supply RMI: Repair, Maintenance and Improvement RoHS: Reduction of Hazardous Substances Directive S&P: Standard and Poor SEA: Strategic Environmental Assessment SEAPT: Shannon Estuary Anti Pollution Team

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An Assessment of Enterprise Opportunities in Environmental Goods and Services

SEI: Sustainable Energy Ireland SET-PLAN: EU Strategic Energy Technology Plan SEWG: Sustainable Energy Working Group SFD: Soil Framework Directive SFI: Science Foundation of Ireland SO2: Sulphur Dioxide SSD: Sewage Sludge Directive STRIVE: Science, Technology, Research and Innovation Programme TPER: Total Primary Energy Requirement VC: Venture Capital VOC: Volatile Organic Compounds WBCSD: World Business Council for Sustainable Development WEEE: Waste Electronic and Electrical Equipment WFD: Water Framework Directive WRAP: Waste and Resource Action Programme

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