Market Potential, and Demand For, an Eu Etv Scheme

DETAILED ASSESSMENT OF THE MARKET POTENTIAL, AND DEMAND FOR, AN EU ETV SCHEME

MARKET REPORT ANNEXES To the European Commission DG Environment

Under Framework Contract No. DG BUDG No BUDG06/PO/01/LOT no. 1 ABAC 101931 – EU ETV Scheme

EPEC

June 2011

Contact name and address for this study:

Jonathan Lonsdale, Principal E-mail: [email protected] Tel: +4420 7611 1100; Fax: +4420 3368 6900 GHK Consulting, Clerkenwell House, 67 Clerkenwell Road

European Policy Evaluation Consortium (EPEC) Brussels contact address: 146 Rue Royale – B-1000 Brussels Tel: +32 2 275 0100 Fax: +32 2 275 0109 E-mail: [email protected] URL: www.epec.info

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

This report has been produced by the EPEC consortium with contributions from:

Jonathan Lonsdale Mark Peacock Nihar Shembavnekar Ali Erbilgic Tamara Kulyk

Philippe Larrue Patrick Eparvier Carlos Hinojosa

The opinions expressed in this study are those of the authors and do not necessarily reflect the views of the European Commission

Detailed assessment of the market potential, and demand for, an EU ETV scheme - Interim Report EPEC for DG ENVIRONMENT

INDEX

ANNEX A: WATER TREATMENT & MONITORING ...... 4 ANNEX B: SOIL AND GROUNDWATER REMEDIATION ...... 41 ANNEX C: CLEANER PRODUCTION & PROCESSES ...... 61 ANNEX D: MATERIALS WASTE AND RESOURCES ...... 103 ANNEX E: ENVIRONMENTAL TECHNOLOGIES IN AGRICULTURE...... 156 ANNEX F: AIR POLLUTION MONITORING & ABATEMENT...... 174 ANNEX G ENERGY TECHNOLOGIES...... 194 ANNEX H REFERENCES...... 272

EPEC Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

ANNEX A: WATER TREATMENT & MONITORING

Overview The products covered under this Technology Area include filtration, disinfection, purification and membrane technologies, coupled with test kits, probes and analysers for microbial and chemical contaminants; desalination is also covered in its own right.

In 2010, the total turnover of the EU water and wastewater treatment (W&WWT) industry was €95 billion. The EU was home to the top five utilities in the global market: Suez, Veolia, SAUR, Agbar and RWE. Together these industry giants, dominated by French and German utilities, accounted for 32% of the global market in 2010. As a result of many years of acquiring technology companies, the largest utilities such as French majors Veolia and Suez, have built up considerable technology capabilities across a diverse set of applications. This gives them unprecedented market strength and dominance (e.g. Suez acquiring Degrémont). Consequently the largest utilities are both the leading W&WWT technology suppliers and users of such technologies.

Many of the other major suppliers in the sector are also multi-sector global technology giant OEMs such as Siemens (Germany) and GE (USA). To broaden their product portfolios, besides investing considerable proportions of their turnover in global R&D, these firms have also expanded through acquisition of innovative technology companies, particularly in the membrane market. Notable exemplars include Siemens’ purchase of Memcor (Australia) and Inge Watertechnologies AG (Germany), and GE Power & Water’s purchase of Zenon Environmental (Canada).

Germany is the largest EU exporter of water technologies accounting for 33% of intra- EU and extra-EU exports. The next largest exporters are Italy and the Netherlands each with 10% of the EU export market.

Market drivers for W&WWT are dominated by the implementation of stricter regulations and the need to reduce energy costs in treatment processes. Innovation is therefore focused on applications that will produce higher quality water at lower costs. Energy efficient treatment processes such as low pump rate membrane technologies are particularly suited to meeting these objectives.

The W&WWT is a mature industry that has been subject to decades of continuous tightening of water quality regulations. The scope for innovation is therefore incremental, although there remain opportunities to refine essentially mature technologies. There is also a need to move away from offsite laboratory testing to low cost and compact test kits that provide real time data analysis on site and which can be used by staff with minimal training.

Given the risk aversion to new technologies in utilities, coupled with market dominance of a small number of industry majors who often win framework supply agreements with utilities, there appears strong potential for ETV to help technology developers. Small, specialist developers of compact monitors and test kits would benefit from verification as there appears a gap in the end user knowledge of the capabilities of novel devices. In terms of filtration, clarification and disinfection technologies there may be more limited benefit in ETV because the market is, to a large extent, self-regulating due to

large multinational firms controlling the routes to market. These firms like Siemens already have close relations with leading R&D assets and emerging companies. On the other hand, firms without strong industry traction would benefit in obtaining an ETV, since it would help ‘level the playing field’, particularly in providing comparability of technology efficacy which could be demonstrated to end users.

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Table A1.1 Market characteristics

Technology Group Current EU Current EU share of EU Annual EU Market Market Global Discrete purchase or General Market Size Global Global Growth Rate size in status Annual requirement for end assessment of risk Market Size market 2020 Growth Rate user to require further aversion to new € billion (current testing as part of technologies for € billion % growth) € billion % system (e.g. wind end users farm) %

Filtration & Disinfection €1.8 (2009) €4.39 (2009) 41% 10-12% €5.1 Established 10%-12% System integration Risk averse technologies

Water monitoring ~€1.0 (2009) €2.6 (2009) 38% 5% €1.6 Established 5% Mixed markets Risk averse (based on export data of €447m)

Desalination (membrane & €1.34 (2007) €3.97 (2007) 58% 9% €3.2 Maturing 9%-14% System integration Moderate thermal technologies)

Table A1.2 Innovation characteristics

Technology Strength of EU market Status of Status of Rate of Level of Existence of Key barriers to exploitation of market Group EU leaders in established alternative innovation investment into established / ready technologies in sector Technology supply of (dominant) technologies EU supply side accepted Supply Side technology technology (VC, R&D, etc.) norms and standards

Filtration & Alternatives Numerous Risk aversion in utilities Disinfection with uncertain test World leading Norit X-Flow Maturing Incremental High Limited channels to markets technologies higher standards (NL) performance and Technology supply increasingly consolidated Siemens regulations into a few major players (German)

Water Alternatives Lack of monitoring with uncertain common High Tintometer Maturing Incremental Medium Risk aversion in end users higher standards (Germany) performance Information gap between end users, regulators and technology providers

Desalination Veolia Alternatives Numerous Limited channels to markets (membrane & (France) with uncertain test World leading Maturing Incremental Low Technology supply increasingly consolidated thermal higher standards Acciona & into a few major players technologies) performance and Befesa Agua regulations (Spain)

Biwater (UK)

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Introduction to Technology Water Treatment and Monitoring The water treatment and monitoring sector, for the purpose of this study, has been characterised according to the following three Technology Groups:

• Treatment of water and wastewater for microbial and chemical contaminants (e.g. filtration, chemical disinfection, advanced oxidation);

• Monitoring of water quality for microbial and chemical contaminants (e.g. labs, test kits, probes and analysers);

• Desalination of seawater or groundwater (e.g. desalination treatment plants).

There is a high degree of crossover between these groups. Water treatment plants use water monitoring equipment, often ‘in line’ with the processes, and desalination plants are a subset of water treatment plants. Our market analysis is focused as follows: • Water and wastewater treatment (W&WWT) market - covers specific secondary and tertiary treatment processes such as disinfection, clarification and filtration. These are also necessary processes for desalination; • Water monitoring market - covers testing and analysis equipment for testing and monitoring in-site as well as at laboratories; • Desalination market - covers the supply of desalination plants, and prevailing industry trends around this market’s growth. Specific technologies are included in the general water treatment analysis.

Overview of the Market The global W&WWT market is dominated by utilities which account for 70% of market revenues. The largest component of the sector is the production of potable (drinking) water, accounting for 43% of treated water usage.

In 2010 the global turnover was €283 billion of which EU turnover accounted for around €94.5 billion1. While the EU represents a large market in its own right, it is the EU’s multinational water utilities that make the EU a leader in global markets. The EU has the five largest firms in the global industry - Veolia, RWE, Agbar, Suez and SAUR – that represented 32% of the global market in 2010. Since 2000, the nature and structure of the global water sector has changed considerably, in large part due to more focused company strategies by these major EU utilities as they focus on specific markets and regions2.

Given the long and established nature of the market, it is not surprising that the W&WWT industry is highly consolidated, with the largest technology producers also being the largest technology users (i.e. utilities). The maturity of the market also has implications for the rates of innovation and the propensity for the adoption of new and unproven technologies: water utilities by their nature are highly risk averse because of the potential impacts on human health and the environment from failed treatment processes. New innovations must be fail safe to meet industry expectations.

1 Innovas Solutions (2010): Low Carbon and Environmental Goods and Services: An industry analysis, Market Update. Department for Business Enterprise and Regulatory Reform. 2 Pinsent Masons (2010): Pinsent Masons water year book.

Innovations in the W&WWT and desalination sectors are most likely to appear in refinements to existing processes for disinfection, clarification and filtration. These processes are generally the final (tertiary) stage of the treatment process, where ‘polishing’ of water is used to achieve drinking water standards.

Innovations in the water monitoring sector also appear to have scope for ETV. For example, the water monitoring sector is likely to experience innovation in the production of miniaturised and compact monitors and analysers that can be applied on- site where they will reduce the need for extensive and costly laboratory testing that by satisfying the environmental regulators is a fundamental part of a utility’s licence to operate. Sensors and test kits are also now being developed to detect both new contaminants (e.g. oestrogens) as well as lower concentrations of contaminants (i.e. parts per billion, not just parts per million).

It is estimated that to close the gaps between water supply and demand on a global level through improved productivity, investment of €36 billion annually will be needed from 2010 to 20323.

Technology Group A: Water treatment technologies

Product use and Applications

The W&WWT industry uses a large number of treatments which are classified as primary, secondary and tertiary processes. In the secondary and tertiary phases, a general distinction can be made between: • Filtration techniques – these typically involves membrane filtration, divided into reverse osmosis, ultrafiltration, microfiltration and other membrane treatments; • Disinfection techniques – these involves ultraviolet (UV), ozonation, chlorination and other treatment processes.

Water and wastewater treatment technologies are highly integrated into water treatment plants with many different processes required to achieve required quality standards. Few technologies operate on an individual basis unless perhaps in remote, rural treatment plants. An important consideration is also the integration of technologies across distribution networks. This may lead to a sophisticated mixture of technologies being deployed to ensure optimal treatment of wastewaters according to the pollutant types (i.e. from different industries).

Treatment becomes more complex depending on the source of the water to be treated, such as wastewater or brackish water, and the intended end use, such as drinking water or industrial usage.

The water treatment industry is mature and many processes have remained essentially unchanged for decades. Innovation and changes occur based on incremental refinements to established process technologies, for example in membrane filtration and disinfection.

3 Cleantech group LLC (2010): The Corporate influence on water efficiency. Prepared for the Cleantech water focus event.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

However, there are potentially significant opportunities for energy efficiency and hence cost reductions, for example by modifying or replacing old nanofiltration or reverse osmosis processes with more advanced and modernised systems.

There has also been an increase in UV treatment, since it eliminates the need for chemicals in disinfection. UV has experienced a significant increase in applications and will continue to do so as chemical treatments become more cost intensive due to increasingly stringent regulations.

Market Characteristics

Water utilities across the EU are often large multinational firms operating across global markets who have developed a high level of vertical integration – researching new treatment technologies, collaborating with others in external R&D programmes, as well as building and operating treatment plants. Veolia and Suez are good examples of companies that develop and use technologies, build treatment plants and enter into long term contracts (e.g. 25 years) with local authorities for the treatment of water in specific regions or localities.

Outside utilities the W&WWT industry consists of a small number of large technology Original Equipment Manufacturing (OEM) firms (e.g. ITT, Siemens) that dominate the market by their size, experience, range of treatment processes and ability to corner the routes to market. This structure tends to prevent technology developers from communicating directly with end users – and raises the potential importance of an independent verification process to bring credibility to unknown firms keen to impress utilities or OEMs.

Clearly a number of successful SMEs do supply multinational firms with specialised technology. Products tend to be licensed solely to one firm - or else the end user or OEM might decide it makes more commercial sense to acquire the technology provider. This is exemplified by some market leading acquisitions that include:

• GE Water (US) acquiring Zenon Environmental (Canada) in 2006 for €479 million;

• Suez (France) acquiring AGBAR4(Spain) in 2009 for €3.1 billion;

• ITT (US) acquiring Nova Analytics (US) in 2010.

Not surprisingly, given the maturity of the sector, the industry value chain is highly consolidated and dominated by large suppliers. Certain EU markets like the UK have already undergone rapid rationalisation of the supply base which has jeopardised long term sustainability of companies supplying the sector. Part of the blame has been levelled at the 5 year Asset Management Planning (AMP) cycle of investments in the UK water sector which, ironically, prevents long term strategic planning in the supply chain5.

Global and EU Turnover

4 AGBAR is a Spanish water utility operating globally who itself contacts and owns technology suppliers. 5 Innowater, Market segmentation: Overview of market characteristics, key market drivers and dimensions of priority segments. Innowater, European Commission Enterprise and Industry. 2010.

The global turnover for the W&WWT market in 2010 was estimated to be worth €283 billion6 (Table A1.3). The significance of two key technology areas within the sector (i.e. filtration and disinfection) is also shown, as these are focal points for innovation; and are increasingly used in both water and wastewater treatments due to their reduction in energy use and high quality outputs. Whilst these specific figures may appear small relative to total turnover, this overall sector turnover comprises all spending including the build and operation of plants. Around two thirds of turnover is typically spent on operational costs (e.g. labour, energy, waste disposal, etc.). A significant proportion of capital expenditure is also allocated to monitoring and control systems, very basic capital technologies such as metal screens, and concrete tanks.

Table A1.3 Global turnover by sector 2007-2010 (billions of Euros)

Sector 2007 2008 2009 2010 Actual Forecast Forecast Forecast Water and €277 €279 €281 €283 wastewater treatment Membrane €3.07 (1.1%) €3.29 (1.2%) €3.65 (1.3%) €4.02 (1.4%) filtration (component of W&WWT) Disinfection UV treatment UV treatment UV treatment UV treatment (component €0.36 €0.41 €0.48 €0.54 of W&WWT) Ozone treatment Ozone treatment Ozone treatment Ozone treatment €0.21 €0.24 €0.26 €0.29 Adapted from: Innovas (2009), ITT annual market report (2008), Sustainable Asset Management (2007)

Figure A1.1: displays the global water technology market by sector. Water utilities account for 70% of market revenues7 and are by far the largest users of treatment technologies.

6 Innovas Solutions (2010): Low Carbon and Environmental Goods and Services: An industry analysis, Market Update. Department for Business Enterprise and Regulatory Reform. 7 Caffoor, Issy (2008): Towards chemical free water and wastewater treatment. Environmental Knowledge Transfer Network.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Figure A1. 1 : Global water technology market revenues in 2007 (billions of Euros)

Source: Knowledge Transfer Network. United Kingdom. December, 2008. The EU water technology sector held 38% of the global water treatment market, 33% of the global wastewater treatment market and 20% of the global market for membrane technologies in 20078. These are significant proportions of the market and display the EU’s leading presence in the global water treatment technology market. EU turnover in 2010 was forecast at €94.5 billion. Table A1.4 shows this and an indication of the size of the advanced filtration and disinfection markets.

Table A1.4: EU annual turnover by sector 2010 (billions of Euros)

Sector Forecast Turnover (EU)

Water and wastewater treatment €94.5 Membrane filtration (component of W&WWT) €1.32 (1.4%) Disinfection (component of W&WWT) €0.47 (0.5%) GHK analysis adapted from Innovas, 2009/2010 figures, and Water: a market of the future. Sustainable Asset Management, 2007 figures for UV and ozone technologies. INNOWATER, the innovation network coordinated by the European Water Partnership (EWP) recently determined the market value of water and wastewater goods and services in five EU Member States including important markets like the Netherlands, Spain and the UK9. This confirms that the overall EU turnover figure above is of the right order of magnitude.

Figure A1.2: Market for products and services for water and wastewater in 2008 (billions of Euros). Total €24.7 billion.

8 Roland Berger Strategy Consultants (2007): Innovative environmental growth markets from a company perspective. Report to the German Federal Environment Agency (Umweltbundesamt). 9 Innowater (2010): Market segmentation: Overview of market characteristics, key market drivers and dimensions of priority segments. European Commission, DG Enterprise and Industry.

Source: INNOWATER, 2010.

Imports and Exports

GHK trade analysis of Eurostat data illustrates the dominant export strength of the German water technology supply side. It remains the largest exporter of water treatment technologies within EU markets by a significant margin, with total exports in 2009 of around €325 million. By comparison, the next four largest intra-EU exporters (Belgium, Netherlands, France and Italy) are clustered around the €100 million level.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Figure A1.3. Intra-EU export value of top 10 EU Member States for water treatment 2006-2009 (Euros)

Source: GHK analysis of Eurostat data From 2006 to 2009, Germany was also the leading exporter to markets outside the EU with total exports in 2009 of around €425 million – a position and level of trade that it has maintained throughout the global downturn, indicating significant strength across global markets. Italy, the second most important exporter, generated sales of €200 million in 2009, while the Netherlands ranked third. Both Italy and the Netherlands have improved their exports since 2006, overtaking France and the UK in growth rates.

Figure A1.4. The extra-EU export value of top 10 EU Member States for water treatment 2006-2009 (billions of Euros)

Source: GHK analysis of Eurostat data Leading Producers of Technology

The consolidated nature of the W&WWT sector means that many of the leading technology producers are also the major users of technologies. Many of the major

players acquire subsidiaries to secure key proprietary technologies needed for treatment plants (e.g. Siemens buying Memcor and ITT buying Nova Analytics).

Table A1.5: Leading EU technology producers

Company name Country Sector Suez France Water treatment & monitoring Veolia France Water treatment & monitoring SAUR France Water treatment & monitoring RWE Germany Water treatment & monitoring Siemens Germany Water filtration Norit X-Flow Netherlands Membrane filtration Agbar Spain Water treatment & monitoring GHK analysis, adapted from Cleantech Group LLC (2010) and Pinsent Masons (2010) Although the five largest global companies in the W&WWT sector are from the EU (i.e. Veolia, RWE, Agbar, Suez and SAUR), the United States is home to many of the remaining global leaders including ITT and GE Water.

Israel, although not a large market, has become increasingly important as a hub for innovation and R&D10 for innovative water technologies, driven in part by severe water stress and high population densities, which is stimulating large investments in modernised water infrastructure and monitoring and control systems.

Singapore has also invested tens of millions in stimulating a water technology R&D cluster. Established in 2006 through public funding, Singapore’s water industry cluster has levered substantial private finance, attracting over 70 water technology companies including GE Water, Siemens Water and Black & Veatch.

Table A1.6 lists some of the major non-EU technology developers in this market.

Table A1.6: Leading non-EU technology producers

Company name Country Sector Emefcy Israel Water treatment Aquise Israel Water treatment Ashi Kasei Japan Membrane filtration Hyflux Singapore Membrane filtration GE Water USA Water treatment Oasys Water USA Water treatment WaterHealth International USA Water treatment Koch USA Membrane filtration Dow Chemical USA Membrane filtration ITT USA Disinfection GHK analysis, adapted from Cleantech Group LLC (2010) and Pinsent Masons (2010).

Global Market Leaders

A good illustration of the high degree of consolidation in the global water technology market in shown by suppliers of membrane filtration plants. Table A1.7 demonstrates

10 Cleantech Group LLC (2009): Israel to export $2.5 billion in water technologies by 2011.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

that just six companies accounted for 92% of the global market share in 2010. With two of these six being EU companies, Norit X-Flow and Siemens, ranked number 1 and 3 respectively - and with a combined market share of 43% - the EU can boast considerable strength in the global water filtration market11.

Table A1.7: Top producers of membrane filtration technologies 2010

Company Country % Global market share Norit X-Flow Netherlands 25.5% GE Water USA 19.7% Siemens Germany 17.5% Asahi Kasei Japan 14.2% Hyflux Singapore 14.1% Kubota Japan 1.2% Total market share 92% Source: Global Water Intelligence, 2010. Technology Users

Water utilities are the primary users of W&WWT processes which include clarification, disinfection and purification technologies for different types of water (i.e. wastewater or brackish water). The food and beverage industry invests a lot in disinfection and filtration processes and must comply with strict regulations. As membrane filtration and UV disinfection provide reductions in energy and chemical use these are attractive technologies for end users. Industrial processes also require large investments in purification and disinfection. The pulp and paper industry for example is a significant user of water treatment process involving membrane filtration.

Future users of membrane technologies are the oil and gas industries with hydraulic fracturing processes and the production of shale gas and coal bed methane and coal seam gas-produced water - all of which will require treatment to varying degrees, depending on local environmental regulations.

A large expected future user of disinfection technologies is the aquaculture sector. Water treatment in fish farms is required to increase water purity and eliminate disease. The dairy sector is also exploring the potential for innovative disinfection technologies in pasteurisation.

Figure A1.5 illustrates the range of end users in the global market. In 2010 there was a global capacity of approximately 27 million m3/day of treated water produced by membrane filtration and ultrafiltration plants. Drinking water accounts for the largest share (43%) and membrane and desalination treatments and membrane bioreactor plants together account for approximately one half of usage with similar distributions. Industrial usage accounts for the smallest share at 3%. It is evident that drinking water is the most common output for membrane filtration and ultrafiltration plants.

11 Global Water Intelligence (2010).

Figure A1.5: The purpose of membrane and ultra filtration plants in 2010 by amount of permeate flow (million m3/day).

Source: Global Water Intelligence, 2010.

Leading Demand Drivers

The two main demand drivers in the W&WWT industry are changing regulations and the need to reduce energy use and costs. There has been significant tightening of EU regulations with the introduction of the following EU Directives:

• The Water Framework Directive;

• Drinking Water Directive;

• Bathing Water Directive;

• Priority Hazardous Substances Directive; and

• Urban Wastewater Treatment Directive.

These Directives have created the need for more efficient and higher quality W&WWT processes. EU directives have initiated a shift away from the use of chemicals in water

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

treatment due to the adverse environmental impacts they produce. Coupled with increased public awareness, this has stimulated demand for treatment processes with membrane filtration and UV technologies as alternatives to chlorine and other chemicals12.

Alternatives to conventional chlorine disinfection are advanced ozone and UV disinfection systems. UV disinfection is regarded as superior to ozone and chlorine with respect to chemical management costs and safety risks. UV disinfection also produces no chemical by-products which makes it a more appealing option13.

The need for a reduction in energy costs associated with clarification and purification processes are due to increasing energy costs and EU commitments to the reduction of carbon emissions. Water treatment requires huge amounts of energy in heating and pumping processes and applications that reduce these, such as membrane filtration systems that operate at lower pumping levels, are highly desirable.

Innovation Type

Innovation in water treatment overall appears to be incremental as technologies are maturing. Some experts believe that the introduction of the membrane was the last great innovation that the water treatment industry will experience14. There is also a high degree of risk aversion to using new and unproven technologies which has had a detrimental effect on innovation15.

The potential for game changing technologies for W&WWT will be in low temperature anaerobic treatments and the use of anaerobic membrane bioreactors that will significantly decrease energy costs16.

Innovation in disinfection treatments is incremental with some potential for step change in UV technologies as energy reduction continues to decrease. Competition is likely to increase between ozone and UV technologies in the disinfection market as the two leading treatment processes that will replace chemicals. This may have positive effects on innovation rates for these technologies17.

R&D Investment

There are no direct figures for the amount that companies invest into R&D for W&WWT, however Siemens is a market leader (17.5% of global market share) in water treatment and membrane technology. Siemens commits 5% of its annual turnover to industrial R&D which includes its water treatment sector. Sustainable Asset Management forecast investment rates by EU suppliers in the EU for 2007 and beyond

12 Innowater (2010): Market segmentation: Overview of market characteristics, key market drivers and dimensions of priority segments. European Commission DG Enterprise and Industry. 13 Frost & Sullivan (2007): Euro Water, Wastewater Disinfection Systems Market. 14 Global Water Intelligence (2010). 15 Innowater (2010): Market segmentation: Overview of market characteristics, key market drivers and dimensions of priority segments. European Commission Enterprise and Industry. 16 Cafforr, Issy (2009): In 2050 water is the new oil and carbon is the currency – A personal vision of a low carbon water sector in 2050. Kroto Research Institute. 17 Frost & Sullivan (2007): Euro Water, Wastewater Disinfection Systems Market.

provide an indication of the scale of investment in new technology development and growth in the sector (see Table A1.8).

Table A1.8: Estimated annual private investment in the EU by suppliers 2007- 2010 (Billion Euros)

2007 2008 2009 2010 Private €9.1 €9.5 €10.5 €11.0 investment GHK analysis adapted from Sustainable Asset Management, 2007. Leading Drivers of Innovation

The leading drivers of innovation in the W&WWT industry are the requirements to meet tightening environmental standards, coupled with the need for more sustainable processes (e.g. cleaner processes using lower dosing levels of chemicals and reduced energy costs which in turn will reduce carbon emissions).

The changing natural environment (i.e. water stress and climate change) coupled with population growth, increased urbanisation and pressure to secure water supply have also greatly driven the demand for new treatment processes for potable, waste and recycled water18.

The pressures on water supply due to an increase in water stressed areas across the globe has led to the need for reductions in water consumption (per unit product/activity) in conjunction with the need for energy efficiency in water management processes and the treatment of higher strength effluents as water reuse increases19. The industry is attempting to ‘do more with less’.

INNOWATER is an innovation network coordinated by the European Water Partnership and supported by the European Commission INNOVA initiative. INNOWATER have recently reviewed the market characteristics of the water and wastewater sector in Cyprus, Denmark, The Netherlands, Spain and the United Kingdom. A selection of the key findings from their report are summarised in Box A1. They confirm the difficulties of selling new technologies into the sector, despite a large number of highly significant drivers driving demand for more innovative and cheaper alternatives.

Box A1: INNOWATER report sets out critical issues and innovation challenges for the European Water Sector

Market characteristics - water markets are mature and highly regulated. Utilities tend to be conservative, price sensitive and averse to investing in new technologies. Supply chains are dominated by a few large multinational contractors supported by a large number of SMEs. Of the five markets investigated, the Netherlands and Denmark are more active in R&D although they are not the largest markets.

18 Innowater (2010): Market segmentation: Overview of market characteristics, key market drivers and dimensions of priority segments. European Commission Enterprise and Industry. 19 Innowater (2010): Market segmentation: Overview of market characteristics, key market drivers and dimensions of priority segments. European Commission Enterprise and Industry.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Market Barriers – the market suffers from limited competition and a small number of large firms that dominate the routes to the market. A lack of communication between end users and technology producers hampers demand and this clearly does not help to reduce the perception of high risks associated with new/unproven technologies.

Innovation – there are strong commercial drivers to reverse increasing operational costs of water treatments. Innovation in technologies is incremental, although there are many new technologies that offer improvements.

Leading EU Innovators

An indication of the level of innovation within the EU water treatment technology sector is the degree to which it benefits from venture capital (VC) investment. Table A1.9 displays those companies with the most active VC deals. Several firms are owned by major companies including AquaZ (Danfoss) and Inge (Siemens).

Table A1.9: Leading EU innovators

Company name Country Sector Danfoss AquaZ Denmark Water treatment & membrane filtration RC-lux France Disinfection Nordaq France Disinfection Triton Water Germany Water treatment Inge (Siemens) Germany Membrane filtration Bluewater Bio UK Water treatment GHK analysis adapted from Cleantech Group LLC, 2010. Note: Companies are not ranked.

Outside the EU, the most innovative companies are from the USA and Israel. Part of the reason for this is that they have excellent access to venture capital at the early stage. This enables them to invest sufficiently in pre-commercial R&D and overcome the funding gap that prevents many firms from getting their innovations to market.

Table A1.10: Leading non-EU innovators

Company name Country Sector Real Tech Inc Canada Disinfection Guangxi Bossco Environmental China Water treatment Emefcy Israel Water treatment Diffusair Israel Water treatment BPT Israel Water treatment AquaPure technologies Israel Water treatment Rotec Israel Membrane filtration Atlantium Technology Israel Disinfection Emefcy Israel Water treatment

Algal Scientific USA Water treatment APTWater USA Water treatment Microvi Biotech USA Water treatment Oasys Water USA Membrane filtration Seven Seas Water USA Membrane filtration Pump Engineering Inc USA Membrane filtration AquaGenesis USA Membrane filtration WaterHealth International USA Disinfection Purefresh USA Disinfection GHK analysis adapted from: Cleantech Group LLC, 2010. Note: Companies are not ranked.

Venture Capital

In 2009, water treatment technologies raised around €37 million across sixteen VC deals. These comprised UV disinfection, reverse osmosis, advanced oxidation and membrane based purification20. Of the sixteen deals, only four were EU companies. With respect to wastewater treatment technologies, fifteen VC deals attracted the same level of investment (€37 million). Technologies included activated sludge, advanced oxidation, membrane based wastewater treatment and advanced aeration21. Of these fifteen investments, just three were EU companies.

Figure A1.6 shows VC investments made into the water sector between 2006 and 2009. From 2006 to 2008 investments in water treatment was significantly higher than for wastewater treatment. This is attributed to the opportunities available in cost and energy reductions in technologies and equipment22. In 2009 the levels of investment were distributed more evenly.

Figure A1.6: Global venture capital investments in water and wastewater treatment from 2005-2010 (Euros)

20 Cleantech group LLC (2010): The Corporate influence on water efficiency. Prepared for the Cleantech water focus event. 21 Cleantech group LLC (2010): The Corporate influence on water efficiency. Prepared for the Cleantech water focus event. 22 Cleantech group LLC (2010): The Corporate influence on water efficiency. Prepared for the Cleantech water focus event.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Source: GHK analysis adapted from Cleantech Group LLC. 2010. Business Models

Build-Own-Operate models and versions of this model are increasing in popularity in the W&WWT sector (see Table A1.11). This is due to the ability of commissioning authorities to award a single contractor with the provision of financing, planning, construction and operation of water treatment plants. The approach has been popular as large firms are offering whole scale solutions in terms of building and operating treatment plants, supplying the technologies needed for treatment and distributing treated water23. These business models are expected to expand and are now including on-site energy recovery and generation as energy costs of treatments increase24.

Table A1.11: Leading business models

Build-Manage-Operate (BMO) Build-Own-Operate (BOO) Build-Own-Operate-Transfer (BOOT) Build-Own-Transfer (BOT) Transfer-Own-Transfer (TOT) Design-Build-Finance-Operate (DBFO)

Note: Same for desalination plants

23 Sustainability Asset Management (2007): Water: A market of the future. 24 Innowater (2010): Market segmentation: Overview of market characteristics, key market drivers and dimensions of priority segments. European Commission Enterprise and Industry.

Barriers to Entry

The main barriers to bringing new technologies to market in the EU W&WWT sector are the dominance of large scale established firms who exercise considerable control and influence across the supply chain. The continuing consolidation of the market, coupled with the risk averse nature of the water utilities, exacerbates the development risks for new companies wishing to bring unproven, but potentially game changing, technologies to market.

Potential for ETV

Overall, there appears to be limited potential for ETV in the W&WWT treatment sector. The market is mature, has an established supply chain (that is often vertically integrated) and is dominated by large multinational players who either procure innovative technologies or license their use, often from the major OEMs. This decreases the need considerably for ETV since the major players are often reliant on in-house technologies, or else know where the next innovations are likely to emerge – and will seek to influence the commercialisation and roll out of those technologies. They will often do this via corporate venture capital investments, or else through joint testing arrangements. In some cases, this relationship will lead to the OEM having exclusive worldwide rights to the IP or product which will obviate the need for an ETV – the OEM will simply bring the product in-house.

INNOWATER states that “It is also considered likely that the market place will increasingly look to reduce its risk by procuring from accredited, certified or prequalified suppliers and technologies. National and EU wide schemes already exist for energy efficient products, and it is anticipated that this will extend to the water sector”25. This will make it harder for start up companies and young SMEs with a limited track record to compete in these markets, but is equally an opportunity for ETV to support these small organisations.

Technology Group B: Water monitoring

The water monitoring and testing industry covers a large range of end uses such as potable water, wastewater, swimming pools and the drinks industry. Water must be tested and monitored for chlorine levels, biochemical oxygen demand (BOD) and the presence of microorganisms. Utility and industrial water must be tested for volatile organic compounds (VOCs), polychlorinated biphenyls, herbicides and pesticides as well as nitrogen, phosphorus, and magnesium nutrients. This has resulted in the development of numerous technologies for the testing of different contaminants across diverse applications, since testing requirements differ according to the water source (i.e. groundwater, wastewater, surface water etc.).

Product use and Application

In general the market for water monitoring and testing technologies is maturing, although there is scope for new innovations around instant detection of contaminants

25 Innowater (2010): Market segmentation: Overview of market characteristics, key market drivers and dimensions of priority segments. European Commission Enterprise and Industry.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

and real time analysis. The ability to coordinate data sets from numerous sites, for example to build up a picture of water quality across a river basin catchment is also driving innovation in sensors, software and telemetry as well as analytical and decision support tools.

Water monitoring and testing technologies have both integrated and discreet applications: • Integrated - water monitoring technologies are used as part of a process in water and wastewater treatment plants. Titration and colorimetric testing, refractometers, UV measurements and bioluminescence and electrochemical sensors are used in conjunction with one another to perform various tests to detect various contaminants. Utilities may employ continuous monitoring in order to satisfy stringent regulatory controls. • Discreet: water monitoring technologies can be used onsite or in a singular application to test waters for contaminants using small samples or hand held monitors that do not need to be analysed in laboratories. The market for on- site testing of contaminants is not as developed and would benefit from compact hand held test kits that produce data in real time.

There is an identified need for improvements in: measurement and sampling devices, network communication technologies, environmental modelling and data management software and improved data interpretation software26.

Market Characteristics

The water monitoring industry consists of a small number of large firms that dominate the market. The sector is also largely dependent on testing laboratories who may also supply their own equipment. The market is highly integrated with a few firms offering whole services for monitoring and testing at in-house labs.

There is a need for miniaturisation of testing technologies to reduce the large costs associated with laboratory testing of samples: a trend also seen with data analysers.

Overall, the water testing market can be divided into three distinct categories:

• Low-end equipment;

• In-line equipment;

• High-end equipment.

The low-end on site equipment sector is dominated by the following large suppliers: LaMotte (USA), Palintest (UK), Tintometer (Germany) and ThermoOrion (USA). Test kits for low-end equipment include hundreds of variations of colorimetric devices, hand- held electronic analysers, and spectrophotometers. Applications include testing of swimming pools, spa pools, wastewater, boilers and other industrial uses27.

26 Tang, Alec (2008): Environmental monitoring and forensics. Environmental Knowledge Transfer Network. 27 Global Water Intelligence (2009): Expanding geographical markets and increased regulation are predicted to increase growth in the water testing market.

In-line monitoring consists of methods and probes that offer analysis of a number of properties in real-time. These include pH, dissolved oxygen and turbidity measures28. Water utilities and industrial processes are increasingly using in-line monitoring to maintain high standards of quality by changing their focus from the detection of issues in quality to preventing them29. Two of the major manufacturers of in-line equipment include Siemens (Germany) and Hach (USA).

High-end testing and monitoring equipment consists of organic analysis (gas Chromatography and Liquid Chromatography) and metal analysis (Inductively Coupled Plasma) which are applied with Mass Spectrometry technologies. The market leaders in the production of high-end equipment are all American firms and include: Agilent Life Science (Hewlett Packard), Dionex, Thermo Scientific and Waters.

The water monitoring and testing sector can be further broken down by laboratory type, commercial laboratories and in-house laboratories.

Figure A1.7: Distribution of tests applied in types laboratories

Source: Global Water Intelligence, 2009. In-house labs are embedded in facilities such as municipal water and wastewater plants, beverage plants and pharmaceutical plants and account for approximately 50% of all tests carried out on an annual basis30.

Commercial labs are generally single sites catering to regions within a small area. They account for around 25% of all tests carried out on an annual basis. A small number of major laboratory groups operate globally and account for the remaining 25% of annual tests carried out in laboratories.

Emerging markets for water monitoring and testing technologies are located in Eastern Europe due to compliance with EU Directives. Asia and China are also emerging markets due to increasing environmental awareness and regulation in those regions31.

Global and EU Turnover

28 Global Water Intelligence (2009): Optimism for growth in the water testing sector. 29 Global Water Intelligence (2009): Optimism for growth in the water testing sector. 30 Global Water Intelligence (2009): Optimism for growth in the water testing sector. 31 SWIFT-WFD (2007): SWIFT market brief. Sixth Framework Programme. European Commission.

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The global turnover for environmental sensing and monitoring technologies was estimated at €6.5 billion in 2008 and €7.4 billion in 2009 - a compound annual growth rate (CAGR) of 5.2%32.

One component of the environmental monitoring sector is water quality monitoring and testing. The global water testing market is estimated to be worth €2.6 billion in 200933, approximately 35% of the total environmental monitoring sector.

Estimates of global market sizes across the testing industry in 2009 include: • Low-end test equipment - worth €255 million with the USA accounting for around half the market34. • In-line monitors – worth €95 million35. • Commercial labs – worth €1.3 billion36.

Imports and Exports

The total value of extra EU exports of water monitoring technologies in 2009 was €447 million. Germany was the leading exporter (38% share) with around €170 million of equipment exports (see Figure A1.8). France and the UK exported similar levels at around €60 million. A third cluster of exports included Sweden, the Netherlands, Italy, Austria and Ireland at around the €10m to €30m level. Figure A1.8: The extra-EU export value of top 10 EU member states for water monitoring 2006-2009 (Euros)

Source: GHK analysis of Eurostat data In 2009, the EU had similar levels of intra-EU and extra-EU exports. Export levels are show declines since the height of the global downturn in 2007/8 (see Figure A1.9).

32 bcc Research (2008): Environmental sensing and monitoring technologies: Global markets. 33 Global water Intelligence (2009): Expanding geographical markets and increased regulation are predicted to increase growth in the water testing market. 34 Global Water Intelligence (2009): Optimism for growth in the water testing sector. 35 Global water Intelligence (2009): Expanding geographical markets and increased regulation are predicted to increase growth in the water testing market. 36 Global Water Intelligence (2009): Optimism for growth in the water testing sector.

Figure A1.9: EU intra and extra exports (Euros)

Source: GHK analysis of Eurostat data Leading Producers of Technology

The USA is the clear market leader in the supply of instrumentation for water monitoring and testing and is the dominant supplier of high-end equipment.

Table A1.12: Leading suppliers of water monitoring and testing technologies

Company Country High-end Equipment Suppliers Waters US Dionex US Thermo Scientific US Agilent Life Science US Low-end Equipment Suppliers Tintometer Germany Palintest UK ThermoOrion US LaMotte US Source: Global Water Intelligence, 2009. Approximately 25% of testing in the water sector is analysed by large multinational firms who supply laboratory services. This market is dominated by a small group of major players (see Table A1.13), two of which are from the EU. Coupled with a leading EU presence in the low-end equipment market demonstrates EU strengths overall in the global market for water monitoring and testing.

Table A1.13: Global Laboratory Suppliers

Company Country Inspicio UK

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ALS Australia Bodycote UK TestAmerica US SGS Switzerland Source: Global Water Intelligence, 2009. Technology Users

The primary users of water monitoring and testing technologies are utilities. As previously mentioned, utilities employ in-line processes to test and monitor treatment plant water. For example, wastewater treatment plants use in-line processes for onsite monitoring, field quantitative tools and screening tools. This requires a large variety of analysers, probes and detection technologies. Utilities also tend to have on site laboratories for testing needs.

Secondary users include environmental regulators and other national and local authorities. Industrial water treatment processes also employ in-line processes.

Leading Demand Drivers

The main driver of demand is regulation. Legislation directly imposes the need for additional analysis and sets new parameters for water quality37. The most relevant EU Directives include:

Water Framework Directive - due to the diversity and accuracy of required measurements;

Environmental Liability Directive - due to the need for prevention and remediation of environmental damage; and

The Registration, Evaluation, Authorisation and Restriction of Chemical Substances Directive (REACH).

Cost reduction is also a leading driver since developments can reduce costs associated with the collection, analysis and interpretation of environmental data while providing a more comprehensive dataset.

There is also an identified need for cost reduction in environmental measurements38 which is driving the demand for measurement technologies without the need for laboratory testing.

Innovation Type

Innovation in the water monitoring sector is incremental, largely due to the resistance of users to adopt new technologies and the overall maturing of the market. Scope for innovation exists in the need for the miniaturisation of equipment that is able to analyse data onsite and produce real time results. These types of technology have the potential

37 SWIFT-WFD (2007): SWIFT market brief. Sixth Framework Programme. European Commission. 38 Tang, Alec (2008): Environmental monitoring and forensics. Environmental Knowledge Transfer Network.

to generate huge cost savings by eliminating the amount of testing required in laboratories.

Leading Drivers of Innovation

The UK’s Environmental Knowledge Transfer Network, recognising the importance of the sector to the UK, produced two reports addressing water monitoring in the UK and Europe: Rapid Measurement Tools (2007) and Environmental Monitoring and Forensics (2008). The reports conclude that key drivers of innovation are:

Changing industry perceptions of gathering data simply for compliance, to one that generates commercial benefits;

The need for technologies to address current needs and more complex emerging issues, such as source determination, ecological health assessment and new pollutants; and

The global focus of increasingly moving towards early detection of pollution incidents and the identification/mitigation of historical pollution39.

The largest scope for innovation is seen as the growth of xenobiotics issues in the EU and North America. Xenobiotics include substances such as common pain relievers, human and veterinary antibiotics, birth control medications and personal grooming products. Advanced testing technologies have allowed the detection of xenobiotics at parts per trillion levels, their impact is unknown and the water monitoring industry must anticipate whether or not they will become controlled and regulated substances that must be tested and monitored40.

Leading Innovators

The EU has a strong capability in developing novel water monitoring equipment. The UK has a good reputation in early stage company development in this space (see Table A1.14).

Table A1.14: Selection of leading EU technology innovators

Company Country Technology Salamander Group UK Water quality monitoring via hydrants (licensed to Siemens) Modern Water UK Bioluminescence process for real time detection of toxins i20 Water UK Smart water/monitoring and control Shaw Technologies UK Physical water quality monitoring Sens-Innov France Smart water/sensors Sorbisense Denmark Smart water/sensors Source: GHK market analysis, Cleantech Group LLC, 2010. Note: companies not ranked

39 Tang, Alec (2007): Rapid measurements tools. Environmental Knowledge Transfer Network. 40 Global Water Intelligence (2009): Despite suffering pressure from the downturn, Gordon Cope finds optimism for growth in the water testing sector, sparked by increasing number of substances requiring regulation.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

However, the USA dominates the market globally and is home to some of the leading innovators in the industry. Israel is also an important centre for innovation and although it is not the largest market it is a leading innovator.

Table A1.15: Leading non-EU technology innovators

Company Country Technology Hara environmental and US Smart water/monitoring and control energy management Nova Analytics (ITT) US Measuring and analytical instrumentation for use in the field LaMotte US Testing and monitoring equipment Ecochemtech Israel Smart water/monitoring and control Hydrospin Israel Smart water/monitoring and control

Aquarius Spectrum Israel Smart water/monitoring and control

TaKaDu Israel Water infrastructure monitoring platform TA Count Israel Water quality monitoring/micro biology

Checklight Israel Water quality monitoring/bioluminescence Universtar China Monitoring systems for water quality Source: GHK market analysis, Cleantech Group LLC, 2010. Note: companies not ranked Venture capital

In 2009, water resource management technologies (which includes, but is not limited to, monitoring) raised €21m across sixteen VC deals including physical water quality monitoring, smart water technologies and water saving appliances41. Figure A1.10 shows total levels of VC investment for water resource management. This includes monitoring the efficient use and quality of water, sensors, meters, data analysis, water saving appliances and crop yield enhancing technologies.

Figure A1.10: VC investment in water resource management 2006-2009 (M Euros)

41 Cleantech Group LLC (2010): The state of water innovation. Annual review of water upstarts and the VCs that backed them.

Source: Cleantech Group LLC, 2010. Barriers to Entry

Key barriers to bringing new monitoring technologies to market in the EU include: • The reluctance of end users to adopt new and unproven technologies – primarily due to the high human health risks associated with failure. End users are more concerned with the quality of information and the reliability of the technology, than the rapidity and cost effectiveness new technologies can provide42. • Lack of certification for new technologies – this has led to the need for a system of accreditation within the industry. This would produce confidence in new technologies and allow end users to adopt methods that have potential cost and accuracy benefits. The need for certification is also linked to the need for standardized data collection methods. The lack of standardisation is a barrier as it has allowed a vast amount of monitors to enter the market without consideration for the difficulty of interoperability of results and how they compare to traditional laboratory testing results43. • A disconnect between industry and regulator information and knowledge - the knowledge that regulators possess and their attitudes towards new methods and technologies for water monitoring and testing is not aligned with industry. Regulators are generally unaware of the most appropriate analytical methods and are reluctant to use unproven technologies that they are unfamiliar with44.

EU Initiatives

Est-Testnet Programme (2005-2008)

Est-Testnet comprised two areas: cleaner production technologies and water technologies. Water technologies covered drinking and process water, water reuse and waste water treatment and included water monitoring. Applications were mainly industrial and municipal45. Verified water technologies under Testnet included: • Monitoring of drinking water / surface water: Bio monitoring; • Monitoring of waste water: Optical monitoring; • Water disinfection in food industry: Disinfection by oxidation process; • Water treatment: fussy filter.

The key findings of these projects were46: • Verification helps facilitate environmentally sound decisions by ensuring that environmental performance information is reported clearly and in a transparent manner; • Performance claims need to reflect market needs and realities;

42 SWIFT-WFD (2007): SWIFT market brief. Sixth Framework Programme. European Commission. 43 SWIFT-WFD (2007): SWIFT market brief. Sixth Framework Programme. European Commission. 44 Tang, Alec (2007): Rapid measurements tools. Environmental Knowledge Transfer Network. 45 TESTNET (2009): Brief introduction to the TESTNET programme. 46 TESTNET (2007): Towards a European environmentally sound technology verification system. The TESTNET Newsletter.

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• It will be important to be able to perform verification with high quality at a reasonable price, the system has to be flexible and allow the use of existing data; • Some parameters like the durability of equipment, engineered quality and possible side effects are difficult to measure but have to be included in some form if important to the application.

SWIFT-WFD (2003-2007)

The European Commission, under the Sixth Framework Programme, supported the Screening methods for Water data Information in support of the implementation of the Water Framework Directive (SWIFT-WFD) programme. SWIFT-WFD was specifically targeted with understanding how the water market relates to SMEs in the water quality monitoring industry. The programme held consultations with private and public laboratories, manufacturers and distributors and case studies were carried out in the Czech Republic, France, Germany, Latvia and the United Kingdom.

The technologies identified by SWIFT-WFD as needed to support the implementation of the Water Framework Directive were: bio-markers; passive samplers; sensors for continuous use; chemical/electro sensors; bioassays; biological early warning systems; and immunoassays.

The programme concluded that the market is experiencing setbacks in innovation in the areas of communication between technology producers and end users and the end user resistance to new/unproven technologies47. Key points included:

• Only after monitoring technologies have been repeatedly utilized in the field did they gain recognition in the market;

• There is a lack of interaction between manufacturers and distributors with research institutes and end users;

• There is end user aversion to adopting new and unproven technologies.

Potential for ETV

The water monitoring and testing industry would seemingly benefit from an ETV scheme that verified smaller compact monitors and test kits. There is an existing market gap in the uptake of these technologies which stems from a number of factors including risk aversion by end users and a lack of standardisation and certification. In laboratories unproven technologies are unlikely to be rapidly introduced until they are accredited and better understood by laboratory staff48. ETV is likely to help correct these gaps.

As indicated by SWIFT-WFD “the future of SMETs in the European market would appear to be something of a chicken and egg problem: market demand is unlikely to

47 SWIFT-WFD (2007): SWIFT market brief. Sixth Framework Programme. European Commission. 48 SWIFT-WFD (2007): SWIFT market brief. Sixth Framework Programme. European Commission.

increase until SMETs are accredited; yet, without sufficient mass production, distributing and using these tools by the wider community is likely to be limited”49.

49 SWIFT-WFD (2007): SWIFT market brief. Sixth Framework Programme. European Commission.

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Technology Group C: Desalination Desalination plants treat seawater for the purpose of producing potable water in water stressed areas and are in high demand in the Middle East, USA and Australia. These countries comprise the top three markets globally (see Table A1.16). Although the EU does not drive demand for desalination plants, EU companies are very active in the supply of desalination technologies and plants and many of the largest global players are European.

From 2007 to 2009 the global installed capacity of seawater desalination plants grew by approximately 30%50. In 2008 desalination growth rates were estimated at 9%- 14%51; by 2010 this rate has increased slightly to 10%-15%52. The industry is likely to continue growing strongly as increased urbanisation and water stress puts pressure on supplies of potable water.

The desalination industry has many overlaps with the mainstream W&WWT sector. For example, both use high levels of membrane filtration and disinfection technologies; both have the same business models for treatment plants. However, it is necessary to explore key aspects of the desalination market given its growth, size and increasing demand.

Product use and Applications

Desalination plants incorporate a variety of technologies to achieve an end point of processed (often potable) water and are highly integrated. They combine many treatments such as reverse osmosis, UV filtration, ozone treatments etc. to achieve specific levels of filtration, clarification, disinfection and purification. Water is then piped into the normal distribution system for municipal or industrial use. The very nature of desalination plants restricts the discrete use of technologies.

Technologies involved in desalination processes are maturing. Innovation and changes are occurring in the sector based on incremental refinements to established membrane technologies. The most important technology within desalination is Reverse Osmosis which dominates plants. There is some apparent potential for game changing innovations where reductions in energy usage are possible.

Market Characteristics

The desalination market is currently consolidating. Market leading companies such as Siemens (Germany), Suez (France), Veolia (France) and Acciona (Spain) are the builders of desalination plants, the users of desalination technologies and the developers of the technologies. As large firms provide a whole range of desalination services from the construction of the plant to the distribution of processed water, the market is becoming more vertically integrated.

Global and EU Turnover

50 ICIS Chemical Business (2010): Salt Free. 51 Jefferies Research (2010): Clean Technology Primer. 52 ICIS Chemical Business (2010): Salt Free.

Global turnover for desalination in 2009 was around €2 billion for membrane desalination and €1.97 billion for thermal desalination53. When market size estimates include plant design, construction, and production processes, estimates range from €7.3 billion54 to €3.8 billion55 in 2008, with forecasts for 2015 ranging from €22 billion to €69 billion56.

In 2008 reverse osmosis treatments (membrane technology) accounted for 59% of contracted desalination plants as illustrated by Figure A1.11

Figure A1.11: Contracted desalination plants by technology in 2008 (m3/day)

Source: GWI/International Desalination Association worldwide desalting plant inventory, 2008. Increased stress on water resources has made desalination treatment a popular solution in the US and Middle East57. This has stimulated large investments in membrane technologies which are now used extensively due to their significant cost reductions. Globally in 2010, membrane processes accounted for 61% of all desalination plants and thermal processes 34%58. With higher energy costs associated with thermal processes there is an expected decrease in the number of plants that will utilize thermal processes as membrane technology is becoming more energy efficient and producing higher quality results.

From 2007 to 2009 the global capacity for seawater desalination increased by 30% and currently the largest desalination plants are located in the Middle East which accounts for 50% of the global market demand for desalinated water59.

EU Market

In 2009, the EU market for desalination plants with membrane treatment systems was estimated at €0.68 billion60, the turnover for desalination plants with thermal treatment

53 GHK analysis adapted from Sustainable Assets Management Group. 2007. 54 Jefferies Research (2008): Clean technology primer. 55 GHK analysis adapted from Sustainable Assets Management Group. 2007. 56 GHK analysis adapted from Environmental Technologies Action Plan, 2008 and ITT annual market report. 2008. 57 Pinsent Masons (2010): Pinsent Masons water year book. 58 ICIS Chemical Business (2010): Salt Free. 59 ICIS Chemical Business (2010): Salt Free. 60 GHK analysis adapted from Sustainable Assets management Group, 2007.

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systems was estimated at €0.66 billion61. It is unclear whether other aspects such as testing and monitoring and construction of the plants are included in these figures, therefore it is not possible to aggregate the total expenditure. In 2007, the EU held 58% of the global market share for supply of desalination technologies62.

Spain has the largest market demand for desalination in the EU. As demonstrated in Table A1.16, in 2008, Spain ranked 4th in global demand for desalinated water. By 2010, however, Spain had dropped to 13th place due to increasing demand from Saudi Arabia, the USA, Australia, Israel, Kuwait and other Middle Eastern countries63. EU demand for desalinated water is now very limited. Globally the Middle East accounts for 50% of total demand64.

Table A1.16 Top desalination countries in 2010 and 2008

Rank 2010 2008 1 Saudi Arabia Saudi Arabia 2 US UAE 3 Australia USA 4 Israel Spain 5 Kuwait Kuwait 6 Libya Algeria 7 UAE China 8 China Qatar 9 India Japan 10 Chile Australia 11 Caribbean N/A 12 Morocco N/A 13 Spain N/A Source: GWI DesalData/IDA, 2010.

Since 2000 Spain has planned to commission 20 desalination plants in order to relieve water stressed areas throughout the country.

• In 2007, Spain commissioned the Torrevieja, Alicante plant led by Acciona Agua. The planned capacity of the plant is 240,000 m3/day of water, the cost of the plant is estimated at €0.25 billion.

• In 2009 Spain commissioned the Barcelona-Llobregat plant led by Agbar, Degrémont, Dragados and Drace Llobregat. The planned capacity of the plant is 200,000m3/day. The cost is estimated at €158.7 million.

61 GHK analysis adapted from Sustainable Assets management Group, 2007. 62 Roland Berger Strategy Consultants (2007): Innovative environmental growth markets from a company perspective. Umweltbundesamt (UBA). 63 Global Water Intelligence (2010): The desalination market returns. 64 ICIS Chemical Business (2010): Salt free.

• In 2010, Spain commissioned the Guardamar, Vega Baja, Alicante Plant with an excepted capacity of 100,000 m3/day -150,000 m3/day and an estimated cost of €0.05 to €0.8 billion.

The level of expenditure for these plants illustrates the total likely capital investment required to meet their planned investment programme – potentially in the order of €4 billion for 20 plants.

Leading Producers of Technology

Due to the overlap in technology production, supply and use, it is difficult to identify companies that produce innovative technologies for desalination treatment. Tables A1.17: and A1.18 list a sample of top innovators based on VC investment data from the Cleantech group in 2010.

Table A1.17: Leading EU desalination technology producers

Company name Country Veolia Water France Acciona Spain Befesa Agua Spain Biwater UK Suez France Fisia Itlimpianti Italy Source: GHK analysis adapted from GWI figures, 2010. Table A1.18: Leading non-EU desalination technology producers

Company name Country GE Water US Hyflux Singapore IDE Technologies Israel Source: GHK analysis adapted from GWI figures, 2010. Technology Users

Of the top ten desalination plant suppliers from 2000 to 2008, six are EU firms (Table A1.19). The EU has a very strong presence in the desalination market and is home to the leading players in desalination technologies.

Table A1.19: Top desalination plant suppliers from 2000 – 2008 (m3/day)

Company name Country Rank by installed capacity Veolia Environment France 5,420,072 m3/day Fisia Italimpianti Italy 3,025,344 m3/day Doosan Korea 2,852,305 m3/day GE Water US 2,471,987 m3/day Suez Environment France 1,528,710 m3/day

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Befesa Agua Spain 1,387,624 m3/day ACS Spain 1,312,347 m3/day Hyflux Singapore 1,121,508 m3/day Acciona Agua Spain 1,111,516 m3/day IDE Israel 1,001,730 m3/day Source: GWI DesalData/IDA, 2008. Due to the integrated nature of the desalination market, many of the top plant suppliers are also the top technology producers – see Tables A1.14: and A1.16.

Leading Demand Drivers

The leading drivers of demand in the desalination market are the need to: • increase operating efficiencies of plants and technologies; • lower costs related to energy usage; and

• lower the costs of technologies. Innovation Type

Innovation has been slow in desalination treatment since the introduction of membrane processes for filtration and purification. Innovation is incremental across the suite of technologies used in plants. There is some potential for game changing processes in individual technology applications such as UV and membrane treatments.

In 2010, Global Water Intelligence identified the most innovative processes being explored for use in desalination treatment;

• Closed circuit desalination; • Vacuum multi-effect membrane distillation; • Multi-stage flash fluidised bed evaporator; • Membrane capacitive deionisation; • Hyrophillic graft for RO membranes; • Ion concentration polarisation; • Vacume-based evaporative process; • Membrane distillation with solar pond; • Wind-aided intensified evaporation; • Zero discharge desalination; and • Nano-engineered composite membranes. Leading Drivers of Innovation

The leading drivers of innovation for desalination are the increasing pressures on fresh water resources65 from:

65 ICIS Chemical Business (2010): Salt free.

• Increased urbanization;

• Population increases;

• Intensive agriculture;

• Salt water penetration of freshwater aquifers; and

• Attempting to minimize the environmental impacts of previous chemical usage in water supply systems and farming.

Leading Innovators

Note: Developers of reverse osmosis and membrane technologies are not included in this section as they are processes that are used for water purification, filtration and disinfection and are not limited to desalination.

Table A1.20: Leading desalination technology innovators

Company name Country Danfoss AquaZ Denmark NanoH20 US Source: GHK analysis adapted from Cleantech Group LLC, 2010. Barriers to Entry

Key barriers surround the integrated nature of the supply chain. Large multinational firms are the top producers and users of technologies and are also the builders of desalination plants.

Single firms provide the financing, planning, construction and operation of treatment plants offering whole scale solutions making it unnecessary to involve other players66. This places restrictions on the ability of smaller specialised firms to communicate with end users as the routes to the market are dominated by the major players.

Potential for ETV

There is little apparent scope for an EU ETV in the desalination sector. Similar to W&WWT the industry is largely self regulating as the main players are the plant suppliers, producers and users of the technologies. There is also little scope for game changing innovation as it is mainly centred on refinements in existing technologies and on cost reductions.

The technologies that are necessary for desalination such as disinfection and clarification processes are established and maturing which decreases their need for

66 Sustainability Asset Management (2007): Water: A market of the future.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

verification. Overall therefore we believe that an EU ETV scheme would offer little benefit to the market.

ANNEX B: SOIL AND GROUNDWATER REMEDIATION

Overview The products covered under this Technology Area include application processes for in- situ and ex-situ treatments of contaminants such as: oxidation, air sparging, thermal treatment, venting and solidification. They also cover soil and groundwater monitoring equipment for contaminants such as test kits and data analysers.

The total turnover of the EU soil and groundwater remediation market is hard to determine precisely and is clearly subject to recessionary impacts (being so closely related to the construction industry). A range of between €2 billion to 10 billion including assessment and equipment costs has been estimated by two leading sources.

The global market leader in remediation processes and instrumentation production is the United States.

The EU remediation industry is characterised by a small number of large firms who provide clients with complete site remediation including assessment, treatment and monitoring. While there is no clear market leader within the EU, major players are Arcadis (Netherlands)67, Veolia (France), Suez (France), DEME (Belgium) and Bilfinger Berger (Germany). The UK has one of the EU’s largest markets, one of the most progressive sectors with a high level of innovation, coupled with strong support for R&D, many leading global industry players and large scale site demonstration of new technologies.

Many of the largest supply side companies are both the producers and users of remediation technologies. Many of the major players also licence products from small scale specialised firms or buy equipment such as monitors and test kits though wholesale distribution.

The key market drivers for soil and groundwater remediation are EU directives as they have increased the need for land remediation by forcing developers to consider the impacts of contamination on soil and groundwater, human health, as well as very large liability risks that would otherwise limit remedial actions.

The soil and groundwater remediation industry is now mature for large scale applications such as thermal treatment and oxidation. There is generally only incremental innovation occurring as there is a reluctance to use radically new/unproven technologies due to human health risks.

The potential for game changing technologies is in site characterisation technologies which can provide real time comprehensive data analysis without the need for continually sending samples to laboratories there by reducing costs and speeding up the process.

67 A respondent to this study’s technology developer questionnaire for both the Netherlands and UK.

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There is a significant lack of knowledge, confidence and verification in the performance claims of remediation technologies which have led to end user hesitation. This has caused the uptake of new technologies to be very slow and has inhibited innovation.

There appears to be a need for an ETV scheme for testing and analytical equipment with small on site test kits particularly benefiting from a verification programme.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Table B1.1 Market characteristics

>€2 billion (NICOLE) Soil and €34 billion 6-31% ~3-4% >€2.7 bn - Established 3% Mixed markets Highly risk averse Groundwater <€10.7 (2010) <€15 bn monitoring and billion (Innovas) (GHK) remediation (Innovas)

Innovation characteristics

€ million

Soil and High Arcadis (NL), Mature Alternatives Incremental Low MCERTS for Significant lack of knowledge, confidence Groundwater Veolia & with uncertain test kits (UK) and verification in the performance claims of monitoring Suez higher remediation technologies Demonstration and (France), performance projects in the remediation DEME EU include (Belgium), Holland In-situ Bilfinger

Berger Programme, (Germany) CL:AIRE (UK), ERUODEMO+

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Introduction to Soil and Groundwater Remediation The Soil and Groundwater Remediation market, for the purpose of this study, has been characterised according to three proposed Technology Groups:

• Soil and groundwater monitoring (e.g. test kits, probes, analysers);

• In-situ (i.e. on site) soil pollution remediation (e.g. thermal treatment, air venting, chemical oxidation); and,

• Management and de-pollution of sediments, sludge and excavated soils.

The focus of this market analysis is on the first two technology groups since these are two of the most important elements of the contaminated land market. Land remediation involves the application of techniques to test and analyse contaminants present in soil and groundwater along with chemical, biological and thermal processes for mitigating and eliminating them. Remediation processes can be applied both on-site (in-situ) and after the excavation of the contaminated soils (ex-situ). A number of established and often mature techniques are used to undertake remediation including:

• Chemical oxidation and reduction; • Electro-remediation; • Enhanced bioremediation; • Flushing; • Monitored natural attenuation; • Permeable reactive barriers; • Phytoremediation; • Sparging; • Stabilisation/solidification; • Thermal Treatment; • Venting; and • Vitrification. Land remediation is generally used for the cleanup of sites before land development occurs. The following types of site are some of the most typical sites on which remediation projects will occur: • Landfills; • Oil refineries; • Steel works; • Heavy manufacturing sites; • Collieries and coke works; • Gas production facilities; • Chemical factories; • Scrap yards; and • Petrol filling stations.

In terms of the geographical extent of contaminated land market in the EU, Table B1.2 provides an illustration of the number and scale of contaminated sites in Germany, the Netherlands and the UK. Typically, these countries have several hundred thousand sites, representing some 0.3 – 0.7 per cent of total land area.

Table B1.2: Extent of contaminated land in three leading EU Member State markets

Country Contaminated site Number of % of total land area area (ha) contaminated sites Germany68 128,000 362, 000 0.4% Netherlands69 27,500 420,000 0.7% United Kingdom70 63,750 325,000 0.3% Source: GHK analysis and Eurostat71.

The Management and depollution of sediments, sludge and excavated soils – the third group in this Technology Area - covers a number of applications with limited available market data. There are also overlaps between this group and the water treatment market (e.g. for sewage sludge treatment), and the waste and solid resources sector (due to the legal requirements of the Waste Framework Directive) and energy sector (e.g. for waste to energy). Some elements of this technology theme are covered in this market analysis. Box B1 provides a brief overview of these three applications in this third group.

Box B1: Management and depollution of sediments, sludge and excavated soils

Sediment depollution covers deposition of heavy metals in flooded rivers and surrounding fields (e.g. illustrated by historic contamination along the River Rhine in Germany and the Netherlands) with the resulting need to excavate and potentially treat sediments if they pose a hazard to the environment and human health. Due to tightening environmental regulations for industry, the extent of this pollution has reduced over time. According to one research paper72, the maximum pollution incidents occurred on the River Rhine in the 1930s and 1960s, when copper, lead and zinc concentrations were about 6-10 times as high as background values. During the period 1975-1985 levels of these metals reduced considerably. Depollution is now only required where new developments might stir up previously contained contamination (e.g. at ports, housing developments next to water, etc.).

Sludge management refers to the treatment of sludges generated in numerous industries (e.g. water and wastewater treatment facilities, mineral extraction, in-process treatments, as well as on farms). Water companies, farms and increasingly industry use anaerobic digestion system to digest the sludge, often producing gas for power generation. Novel technologies have been developed to enhance gas production (e.g. Cellruptor technology by UK firm, Eco Solids International73). Water companies are also employing more novel techniques to digest the sludge (e.g. enzymatic hydrolysis has been researched by United Utilities under a LIFE programme74). Ex-situ remediation is a preferred approach to remediating many sites, especially where contamination may not be as extensive or where a site is required quickly for redevelopment. Excavated soil from such sites is then classified as a waste; it will also often be taken to a dedicated site where generic (on-site) treatments will be used to reduce its contaminant load.

68 Glumac,B. Han, Q. Smeets, J. Schaefer, W. Rethinking Brownfield redevelopment features: applying Fuzzy Delphi. Eindhoven University of Technology. 69 European Program for Sustainable Urban Development (2010): Development Brownfield Integrated Governance – BRING Baseline Study – Development phase European Program for Sustainable Urban Development. 70 Homes and Communities Agency. United Kingdom. http://www.homesandcommunities.co.uk/brownfield_land. Accessed 24 February, 2011. 71 Eurostat. http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=env_la_luq1&lang=en. Accessed 24 February, 2011. 72Middelkoop, H (2000): Heavy-metal pollution of the river Rhine and Meuse floodplains in the Netherlands. Netherlands Journal of Geosciences. 73 Eco-Solids International Reducing carbon and improving net energy gains through advanced wastewater treatment. http://www.ecosolids.com/products/cellruptor/ 74 LIFE. Sustainable sludge management. European Commission.

47 Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Technology Group A: In-situ and ex-situ soil and groundwater remediation Product Use and Applications

The contaminated land remediation industry uses a mixture of discrete and highly integrated technologies. A large number of characterisation techniques and test kits are bought as standalone technologies (discrete purchases). Equally, amongst the vast number of treatment processes that exist within the sector (see Table B1.3 below), many are used in their own right, particularly for small remediation projects and/or where site characterisation has found a limited number of contaminants that may be able to be treated by just one technique.

Conversely, complex site remediation projects often require the integration of different in- situ (and potentially ex-situ) techniques. Since most sites have a unique array of contaminants, it is often necessary to undertake the integration of different remediation techniques on a site-by-site basis into different “treatment trains”. This clearly poses challenges for end users and environmental regulators trying to establish the verification of performance for individual technologies. This is because the efficacy of a novel technique may itself be reliant at the site level on the efficacy of other more established techniques. Isolating respective performance is therefore complex.

Table B1.3: There are numerous remediation techniques with continuous refinements and new innovations being developed

Air sparging Electromagnetic heating Monitored natural attenuation Bioaugmentation Electro-migration Multi-phase extraction Bioslurping Electro-remediation Natural attenuation Biosparging Enhanced bioremediation Permeable reactive barriers Biostimulation Enhanced natural attenuation Phytocontainment Bioventing Flushing Phytodegradation Chemical fixation Hot air injection Phytoextraction Chemical oxidation In situ chemical oxidation Phytoremediation Chemical reduction In situ soil leaching Soil flushing Dual phase extraction In situ soil washing Soil vapour extraction Dual vapour extraction In situ vitrification Soil venting Electric current methods Intrinsic remediation Solvent flushing Electrical resistance heating Microwave heating Sparging Electro-chemical techniques Phytostimulation Reactive zones See Permeable Electro-kinetic techniques Phytovolatilisation Stabilisation/solidification Phytostabilisation Radiofrequency heating Steam injection Thermal conductive heating Treatment walls Venting Thermally-enhanced soil vapour extraction Source: CL:AIRE (Contaminated Land: Applications in Real Environments), 201075. Market Characteristics

75 CL:AIRE (2010): Contaminated land remediation. Defra research project final report. 48

The companies involved in land remediation are small specialized firms that often focus on the development of specific technologies. They work with large construction and consultancy companies that have the experience, skills and equipment needed for comprehensive remediation projects.

Another dimension of the market is the commercial market for soil and groundwater testing in environmental laboratories. The UK market for laboratory testing has an approximate turnover of €107 million 76 in 2009.

Measurements and tests conducted in laboratories currently account for the majority of testing techniques for the contaminated land sector. However, it is estimated that approximately 75% of soil and groundwater testing could be conducted on-site with compact probes and test kits. This creates a huge potential increase in the market for rapid measurement technologies77.

In terms of preferred technological solutions used by the industry across the EU, the Environmental Knowledge Transfer Network in the UK, in a 2008 report on in-situ land remediation, summarised the trends in key EU Member States (see Table B1.4).

Table B1.4: EU market trends for in-situ land remediation technologies

Country Most common technology Market trends Austria Soil vapour extraction Insignificant market due to regulations and lack of confidence Czech Republic Soil vapour extraction, bioremediation, Growing market due to lower chemical oxidation costs and increased confidence levels of applications Belgium Soil vapour extraction, chemical oxidation Stable market, experiencing increased confidence among stakeholders in applications Germany Soil vapour extraction Small market due to regulatory restrictions Sweden Soil vapour extraction, bioventing Stable, experiencing increased confidence in applications among stakeholders United Kingdom Bioremediation, chemical oxidation, as Stable and possibly stagnated well as monitored natural attenuation78 market due to intensive regulations and awareness of contamination Adapted from Environmental Knowledge Transfer Networks, 2008.

The contaminated land market is highly consolidated with ten companies comprising 80% of the market demand in the EU79.

Land remediation markets in Germany, UK, France and Nordic countries are currently reaching maturity and are starting to approach stagnation80. EU markets experiencing the

76 Tang, Alec (2007): Rapid measurements tools. Environmental Knowledge Transfer Network. 77 Tang, Alec (2007): Rapid measurements tools. Environmental Knowledge Transfer Network. 78 “Expertise in risk assessment against suitable-for-use criteria ensures the UK is comfortable in using Monitored Natural Attenuation – a value-for money approach that requires in-depth knowledge of fate and transport mechanisms and a true and pragmatic assessment of risk.” UK Trade & Investment, Contaminated Land and Remediation: a world class industry, 2010. 79 Ernst & Yong (2006): Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. Ernst &Young. European Commission, DG Environment. 80 Ecorys (2009): Study on the Competitiveness of the EU eco-industry.

49 Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

most growth are Spain and Italy due to stricter domestic regulations and the enforcement of EU Directives; Spain also enshrined a National Plan for Recovery of Contaminated Sites into legislation in 2005, creating a significant market driver81.

The main export markets for the EU are Russia, Brazil and Africa with large potential in China due to the rapid urbanization and land use pressures in the country82.

Global and EU Annual Turnover

In 2008, the global turnover for the low carbon and environmental goods and services industry was around €3,640 billion, of which the global turnover for contaminated land was €32 billion or 0.88% of the industry83. Table B1.5: shows a growth rate of 3% per annum for the sector between 2008 and 2010.

Table B1.5: Global turnover for land contamination (includes in-situ and ex-situ)

2010 2009 2008 €34 billion €33 billion €32 billion Source: Innovas, 2009.

There is reasonable data on the market value of the EU land remediation market. The Network for Industrially Contaminated Land in Europe (NICOLE), estimates that over €2 billion is spent annually on contaminated site characterisation, risk management and remediation84 in the EU85. This compares to a much larger estimate of EU sector turnover, €10.7 billion86, compiled by Innovas for UK government. No break down exists for these different figures so it is not possible to account for their differences. However, these could be a result of inclusion/exclusion of land assessment costs, labour costs, hauling costs for ex-situ land remediation etc.

To help validate these EU wide figures, it is helpful to look at the industry size across some of the EU member states leading this sector: • The UK is one of the largest land remediation markets in the EU with a legacy of historically contaminated sites. UK turnover for contaminated land remediation (not including assessment) was €0.83 billion in 200787. A recent publication for UK government estimates the value of the UK contaminated land management and remediation sector as now worth over £1 billion (€1.2 billion)88. Growth rates for the UK from 2011 to 2015 (Table B1.6) illustrate a mature market at 3-4 per cent per annum. Table B1.6: Forecast UK growth rates 2011-2015

81 Ecorys (2009): Study on the Competitiveness of the EU eco-industry. 82 Ecorys (2009): Study on the Competitiveness of the EU eco-industry. 83 Innovas (2009): Low Carbon and Environmental Goods and Services: An industry analysis, UK Department for Business Enterprise and Regulatory Reform. 84 Remediation is assumed to cover both soil and groundwater. 85 COMMON FORUM and NICOLE (2009): Common Position Paper on Innovative technologies. NICOLE Secretariat. 86 GHK analysis, Innovas figures 2008/2007. 87 Sweeney, Rob. (2008): In-situ land remediation. Environmental Knowledge Transfer Network. 88 UK Trade & Investment (2010): Contaminated Land and Remediation: a world class industry. 50

2011 2012 2013 2014 2015 3.34% 3.56% 3.60% 3.64 3.69% Source: Innovas, 2009.

• In France, another sizeable market the turnover for land remediation was €0.8 billion in 2007, with a forecast of growth in the market to €1.3 billion in 2012 and €2.6 billion by 2020.89 Growth rates in the French market are optimistic at over 10% growth per annum. • In the Netherlands, a recent industry consultation by environmental technology trade association VLM found contaminated land and groundwater sector turnover to be worth €286m in 2008.90

In terms of market potential, in 2006 it was estimated that remediation of the 250 most contaminated sites in Spain would require €1.8 billion and in Poland, the remediation market was estimated at €4.9 billion91.

Overall, it seems that (notwithstanding prevailing market conditions which in the past two years due to the economic downturn have dampened demand for site remediation across the EU) NICOLE’s estimate appears to be of the right order of magnitude, given that many EU companies in this sector export their services outside of the EU market.

In 2006, a report for the European Commission indicated that much of Western Europe was reaching maturity in the land contamination market and that it would soon approach stagnation92. Both Ernst & Young (2006) and a more recent report by Ecorys (2009) speculated that the largest growth will be in Eastern Europe. However, according to stakeholder consultation the growth in Eastern Europe is dependent on many factors and cannot be assumed as certain93. Remediation in Eastern Europe depends on the budgets that national governments allocate to remediation. The need for land development drives the urgency for land cleanup. In Eastern Europe this is not as prevalent as it is in Western Europe and so without any urgency or budgets the market will not develop94. It is therefore questionable whether Eastern Europe will experience a significant amount of growth in the near future.

Leading EU Producers of Technology

Large construction and environmental consulting firms are generally contracted by local authorities or land developers to assess, test and remediate contaminated land sites. Changes in liability and landfill Directives relating to contaminated land are making land developers more cautious of contamination testing and remediation processes.

Technology users

Large construction and consulting companies such as Bilfinger Beger (Germany) and DEME (Belgium) are the primary users of remediation technologies and are often the developers of technologies as well. They either own subsidiaries, such as Suez owning Sita, or license technologies from small specialized firms.

89 BCG (2008): Développer les éco-industries en France. 90 VLM (2010): De Milieutechnologie Sector in Nederland, December. 91 Ecorys (2009): Study on the Competitiveness of the EU eco-industry. 92 Ernst & Young (2006): Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. Ernst & Young Environment and sustainability services. European Commission, DG Environment. 93 Consultation with Gerard Van Kijk, Eijkelkamp Agrisearch Equipment BV, PROMOTE ETV participant, January, 2011. 94 Consultation with Gerard Van Kijk, Eijkelkamp Agrisearch Equipment BV, PROMOTE ETV participant, January, 2011.

51 Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Table B1.7: Leading EU users of technology

Company name Country Bilfinger Beger Germany Sita (Suez) France DEME Belgium Veolia France Arcadis Netherlands

Global Market Leaders

The US is recognised as the global leader in the supply of contaminated land remediation technologies. This is largely a result of its massive R&D spending during the era of the Superfund remediation programme in the late 1980s and 1990s. The US is also one of the major land remediation markets and it is a market leader in sensors, instrumentation production and environmental forensics95.

Historically, EU firms have had little activity in the US due to differences in approach and regulation. North American firms however have developed a strong presence in the EU96 through firms like Dow Chemical and Envirogen Technologies. In part this can be attributed to an established ETV process in the US (and Canada) and the reluctance of technology users in the EU to use new and unproven technologies, (discussed in greater detail below). New firms continue to bring new technologies to market in North America (see Table B1.8).

Table B1.8: Leading non-EU innovators of technology

Company name Country Sector VeruTEK USA Contaminant destruction Aquamost USA Land and groundwater contamination Natural Environmental Systems USA Ground water BacTech Environmental Corporation Canada Land contamination GHK analysis adapted from: Cleantech Group LLC, 2010.

95 Tang, Alec (2008): Environmental monitoring and forensics. Environmental Knowledge Transfer Networks. 96 Ernst & Young (2006): Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. Ernst & Young Environment and sustainability services. European Commission, DG Environment. 52

Leading Demand Drivers

The leading drivers of demand for contaminated land remediation are EU Directives including the: • Water Framework Directive; • Landfill Directive; • Environmental Liability Directive; and • Soil Framework Directive.

These Directives have increased the need for land remediation by forcing developers to consider the impacts of contamination on soil and groundwater, human health, as well as very large liability risks that would otherwise limit remedial actions. Restrictions on what may be disposed of in landfill sites (together with large landfill fees and landfill taxes) have also driven innovations in on-site land remediation technologies.

Due to technological developments it is now possible to gain much more accurate test results which enable companies to better target and eliminate specific contaminants. The introduction of more sophisticated test kits has led to in-situ testing that is faster and easier to use without intensive staff training. This has opened up the market making technology available to a wider range of end users97.

There is an increasing global focus on early detection of pollution incidents and the identification and mitigation of historical pollution sites which has had a large impact on the number of sites being targeted for cleanup98.

Increasing public awareness is putting pressure on local authorities and property developers to clean up contaminated sites99. Increasing population, urbanisation and land development targets are also placing large pressures on the remediation of Brownfield sites for national and local authorities.

Consultation with the Holland In-Situ Proeftuin (HIP)100 has indicated that the EU and UK markets differ because UK regulations follow a risk based approach which requires land remediation to be based on future use of the contaminated site. This means that the greater the hazard to human health, the greater the required level of remediation. For example, a site developed for housing will require proportionately higher levels of remediation than that required for a shopping centre. In the EU, the same level of remediation is required for all sites irrespective of future use. This has huge implications for the amount of remediation and the intensity of clean up that is required for sites in the EU101 and demonstrates the differences in regulation across member states. It also poses challenges for the type and cost of remediation techniques that might be adopted by end users.

Initiatives across the EU which are helping to validate technology performance

The European Commission has funded preliminary research into the viability of an ETV scheme for contaminated land and groundwater remediation technologies and monitoring

97 Tang, Alec (2008): Environmental monitoring and forensics. Environmental Knowledge Transfer Networks. 98 Sweeney, Rob (2008): In-situ land remediation. Environmental Knowledge Transfer Network. 99 Sweeney, Rob (2008): In-situ land remediation. Environmental Knowledge Transfer Network. 100 Consultation of Suzanne van der Meulen, Holland In-Situ Programme, January, 2010. 101 Consultation of Suzanne van der Meulen, Holland In-Situ Programme, January, 2010.

53 Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

devices, as part of a wider investigation of ETV for environmental technologies. Three specific programmes: Tritech, EURODEMO+ and PROMOTE (see Figure B1.1) were set up to look at developing test protocols and examining the practical issues around verification. These three programmes are discussed in detail below.

Figure B1.1: Environmental Technology Action Plan – ETV initiatives

Tritech (2006-2009)

TRITECH ETV aimed to investigate the practicalities of establishing an EU wide scheme for validating the performance of environmental technologies. It was set up as a result of inherent barriers faced by SMEs in launching new technologies to market and that verification would give them independent confirmation enabling accelerated acceptance by end users102. The project aimed to harmonise the links between environmental technology developers and users. The programme tested 15 technologies across soil, water and energy including the following:

• EkoTec - Compost degradation of petrol hydrocarbons;

• MB Enviroteknik - Compost degradation of petrol hydrocarbons; and • Crown Bio - Smart Soil tester.

102 Beta Technology (2009): TRITECH environmental technology verification project results. 54

One of the key findings of the Tritech report was that there is an obvious need for the establishment of a verification system and the Tritech model has proven benefits for both end users and vendors by promoting the acceleration of the uptake for new technologies103.

Consultation with Beta Technology104, who coordinated Tritech, confirmed that that parameters were difficult to measure and it can cost up to £30,000 per technology to verify. The in-situ remediation technologies tested were also very site specific.

PROMOTE (2005-2008)

PROMOTE aimed to improve confidence in technological innovations for soil and groundwater remediation through verification. The four technologies investigated included: a monitoring well; a soil coring kit for volatiles in soil; samplers for bacteria and bacterial genes; and an autonomous, wireless on-site biological oxygen demand (BOD) system105. The key findings from these verifications were that:

• The main reason for the vendor participating in the ETV process was to increase the end user acceptance of their novel techniques;

• The costs for contracting testing labs to assist in the verification are high;

• Although procedures are standard, both testing and samples are site-specific and are therefore difficult to standardise.

• The vendor often has the most extensive expertise of the technology area.

EURODEMO+ (2005-2007)

The European Co-ordination Action for Demonstration of Efficient Soil and Groundwater Remediation (EURODEMO+) aimed to accelerate market confidence in soil and groundwater remediation technologies through the demonstration of projects in the EU. EURODEMO+ is the pan-European network of national and regional demonstration platforms for contaminated land applications106. The key findings of the EURODEMO+ 2007 report107 on technology promotion included a review of the barriers to innovation in the sector. These barriers include:

• Legal framework - the largest barrier as it is complex, overlaps and is contradictive in its regulations. As such it prevents a comprehensive approach to land contamination across the EU;

• Lack of reliable and validated data in the field;

• Limited knowledge and expertise of regulators;

• Lack of communication among decision makers and stakeholders;

103 Beta Technology (2009): TRITECH environmental technology verification project results. 104 Consultation with Caroline Wadsworth, Beta Technology, January 2011. 105 http://www.promote-etv.org/content.php?pageId=3468&lang=en 106 http://www.eurodemo.info/ 107 EURODEMO (2007): Final concept for a technology promotion programme. European platform for demonstration of efficient soil and groundwater remediation.

55 Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

• Lack of financial incentives; and

• Resistance of public authorities to using innovative technologies.

NICOLE and COMMON FORUM

The Network for Contaminated Land in Europe (NICOLE) is the principle forum that promotes co-operation between stakeholders in contaminated land management in Europe. The COMMON FORUM (CF) on contaminated land in the EU is a network of contaminated land policy makers and advisors from national actors across the EU. Together these leading European networks involve the main contaminated land industry players and environmental regulators that are critical to the future success of the sector.

In 2010, NICOLE and CF released their workshop report108 on contaminated land management: opportunities, challenges and financial consequences of evolving legislation in Europe.

Key findings were that an EU ETV programme will only support innovation if the site- specific nature of contaminated land remediation is accounted for; and that any programme must keep participation costs affordable for small, innovative firms.

Consultation for this study with a representative109 from NICOLE and CF has clarified current views on ETV. Key issues include that: • One of the failings of the initial ETV pilot projects was the lack of involvement of potential end-users in preliminary studies such as the Tritech project on soil. • Verification will only “do what it says on the tin’”. However, based on the experience in industries (NICOLE) and CF (regulators, policy-makers), the quality of any particular remediation technique’s application depends on site-specific situations as well as the remediation design (by expert consultants). • Verification could apply to specific areas of the remediation design and implementation, such as monitoring. Demonstration projects across the EU include CL:AIRE, HIP and EURODEMO+. • For technology suppliers, verification should apply across a range of applications. The modular construction of ETV is seen as a way of at least partially resolving the dilemma of complexity, by assuming that the number of soil properties affecting performance is limited (e.g. Tritech project results). On this basis verifying performance against these parameters can allow the translation of technology from one site to another. However, the experience of NICOLE and CF shows that this is less easy in practice than expected.

Contaminated Land: Applications in Real Environments (CL:AIRE)

The UK’s CL:AIRE organisation was created with the backing of UK government in 1999 with the intention of encouraging the demonstration and research of practical solutions for the cleanup of contaminated land, and to provide a sustainable alternative to disposing of waste in landfill sites. CL:AIRE recently produced a report110 for UK government which reviews different treatment techniques used for land remediation and their associated costs and sustainability ‘profile’. Table B1.9 summarises these findings relating to in-situ and ex- situ technologies.

108 COMMON FORUM and NICOLE (2009): Common Position Paper on Innovative technologies. NICOLE Secretariat. 109 Consultation with Dominique Darmendrail, BRGM (and representative of NICOLE and Common Forum). 110 CL:AIRE (2010): Contaminated Land: Applications in Real Environments. Contaminated land remediation, Defra Research Project Final Report. United Kingdom. 56

Table B1.9: In-situ and ex-situ remediation treatments

Technology Costs Time scales Chemical Oxidation Low installation costs, timescales are site Requires long timescales for specific monitoring and re-injections Electro remediation Low installation costs, electric generation Few documented trials can be costly depending on duration of treatment Enhanced Low installation costs, costs are Dependant on application bioremediation dependent on time success, slow technique, has long term monitoring costs Flushing Low to moderate costs, plant and Depends on source removal headworks required techniques Monitored natural Low cost Site dependant attenuation Permeable reactive Moderate to high costs, highly No long term data available membranes engineered process Sparging Moderate costs Generally quick, there is risk of contamination rebound Solidification/ Batching plans required, may require Generally quick (weeks to stabilisation long term monitoring months), little long term data available Thermal treatments Moderate to high costs, significant High potential for the necessity energy costs of soil removal Venting Low to moderate costs, Requires n/a vacuum pumps and vapour treatment Vitrification Low to moderate costs, very significant Site dependent energy costs, requires highly skilled personnel Source: CL:AIRE, 2010. The report states that thermal treatments, air sparging (venting), bioslurping (venting) and chemical oxidation are the processes experiencing a significant increase in use for in-situ land remediation in the UK. These are the technologies that will deserve focus in future as their application increases. However, it is noted that the UK is not representative of the market in the EU as different regulations require different levels of remediation111.

Chemical oxidation, solidification/stabilisation, thermal treatments, venting and vitrifcation are used for both in-situ and ex-situ remediation. However, when applied as ex-situ treatments they tend to have higher associated costs. Specific ex-situ treatments are shown in Table B1.10.

Table B1.10: Ex-situ remediation treatments

Technology Costs Time scales Biological treatment Moderate to high costs Long timescales, slow technique (biopiles, windrows, Excavation costs are high and and has long term treatment and land farming) dependant on volume of extraction monitoring costs Soil washing High costs Quick and significant throughput Uneconomic for small sites, significant of treated soil management costs Source: CL:AIRE, 2010.

111 Consultation with Suzanne van der Meulen, Holland in-situ Programme, January, 2011.

57 Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Innovation Type

Innovations within this Technology Area tend to be incremental as there is a reluctance to use radically new/unproven technologies – hence the market appetite for such innovations is reduced. There is potential for game changing technologies around site characterisation technologies. These can provide real time and more comprehensive data analysis without the need for continually sending samples to laboratories, thus reducing costs greatly and speeding up the site characterisation process.

Innovations in chemical oxidation are also emerging which accounts for its increased use in in-situ processes. Innovations are also occurring in thermal treatments, the most recent being microwave heating as well as the use of radio frequency to heat treat soils112.

Leading Drivers of Innovation

There are three main drivers of innovation: • The need to detect and treat new contaminants, both as new regulations come on stream together with increased knowledge of site contaminants and how to tackle them. • The achievement of cost reductions for existing techniques, especially if these are energy intensive. The need for cost reductions is driving innovation particularly in analytical instruments. • An objective of incumbent suppliers to increase market share in a competitive industry.

Ex-situ remediation is cost intensive with increasing energy and haulage costs as well as surging landfill costs. Thus there has been a greater push towards using in-situ processes that are less costly and less invasive113.

Business Models

The main form of getting innovative technologies to market is through licensing agreements with large companies. Technologies such as chemical oxidation applications are licensed to technology users who complete large remediation projects and use a number of different licensed processes. Large remediation contractors are generally contracted to provide full service remediation on projects and will either have in-house consultants to specify projects or outsource this part of the project.

The sale of sensors, test kits and chemicals is often through wholesale distribution channels. Some may be specifically licensed to companies for particular geographic regions.

Barriers to Entry

There is a significant lack of knowledge, confidence and verification114 in the performance claims of remediation technologies which has led to end user hesitation115. This has caused the uptake of new technologies to be very slow and has inhibited innovation.

112 Consultation with Nicola Harries, CL:AIRE, January 2011. 113 Tang, Alec (2008): Environmental monitoring and forensics. Environmental Knowledge Transfer Networks. Note: exchange rates used are as follows €1.1958, $0.730780474 114 Tang, Alec (2008): Environmental monitoring and forensics. Environmental Knowledge Transfer Networks. 115 Sweeney, Rob (2008): In-situ land remediation. Knowledge Transfer Network. 58

The slow acceptance of new technologies by national regulators has become the largest barrier to entry in the industry. Part of the problem is the uncertainty surrounding the acceptability of data produced by new technologies. Existing knowledge gaps between technology suppliers and regulators are therefore a key issue and have stalled development of new innovations. There is also sparse information available on the credibility and performance of new technologies – so the knowledge that both regulators and end users have of new technologies and the efficacy of their application is low116. Not surprisingly this had led to end users using proven technologies even though they may not be as accurate or efficient as emerging technologies available in the market.

Local authority personal, who are generally not experts in remediation technologies, also often have a lack of confidence in new processes and tend to use techniques that they have known to be used in the past so as to avoid failure any perceived detrimental impacts on human health from poor remediation117.

Significant end user resistance to the implementation of new environmental monitoring technologies for land contamination also exists due to the costs of purchasing and implementing technology, retro-fitting new technologies into existing processes and staff training118. These costs restrict the willingness of end users to adopt new processes. Consequently, technologies that do not require large process changes are used more readily.

Potential for ETV

Of the two main sub-groups within this Technology Area, there appears to be most need for ETV for testing and analytical equipment. Small on-site test kits would benefit from ETV verification as they would stimulate confidence in the market for the technologies and overcome end user resistance.

While there seems to be some potential ETV for remediation techniques, NICOLE and CF caution that “the quality of a remediation technique’s application depends on the site specific situation and design. [The] concern is that certification of techniques would result in false ‘certainties’ and unrealistic expectations119”.

An effective ETV system will therefore need to have EU environmental regulators on board from the outset, so as to engender market confidence and regulatory certainty in the results of any verification.

Specific issues identified by NICOLE and CF for an effective ETV system include the need to: • Validate the quality of products in the field; and • To verify these products in line with national reference documents, guidance, BATNEECs, regulations, etc.

Ultimately this means that, as far as NICOLE and CF are concerned, an effective ETV system will only be possible if there is: • demonstration on site;

116 Tang, Alec. Environmental monitoring and forensics. Knowledge Transfer Networks. United Kingdom. 117 EURODEMO (2007): European platform for demonstration of efficient soil and groundwater remediation. Sixth Framework Programme, European Commission. 118 Sweeney, Rob (2008): In-situ land remediation. Knowledge Transfer Network. 119 COMMON FORUM and NICOLE (2009): Common Position Paper on Innovative technologies. NICOLE Secretariat.

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• a mechanism for enabling expert judgements for balancing the overall risk of failure with the risk of success to be taken into account; • transparency of the implementation of remedial techniques on site, including with continuous controls in place for assessing the reliability, robustness and ease of a fall back scenario in case the application fails; • integration of innovative processes as quickly as possible to increase cost-efficiency; • regulatory endorsement; and • detailed information for all stakeholders on real successful case studies of implementation.

NICOLE and CF would also like to see tax incentives for site owners where innovative environmental technologies have been implemented.

ANNEX C: CLEANER PRODUCTION & PROCESSES

Overview The cleaner production and processes Technology Area covers a wide array of technologies aimed at reducing the levels of energy and resource consumption during processes, in industries, businesses and homes. Buildings account for 40% of the world’s total primary energy consumption and are responsible for 24% of the world’s CO2 emissions120. As a result, technologies which improve energy efficiency standards121 in buildings of all types122 offer the possibility of making some of the most important reductions in GHG emissions. However, from a resource intensity of production standpoint, consideration also needs to be given to technologies aimed at making industrial production processes less resource intensive and cleaner. These often involve more upstream technologies and processes leading to materials savings and reduction of pollution in production processes.

Due to the enormous size of this technology area and the number of technologies it covers, it is virtually impossible to calculate turnover. We estimate it represents at least €600bn in turnover, with low energy building technologies accounting for approximately half.

The global market leaders vary strongly amongst technology groups and technology sub- groups. European players are particularly strong in the low carbon building technologies group, as well as in the heat generation and lighting controls sub-groups of the energy efficiency in industry and buildings group. The EU is also one of the largest markets and producers of heat generation products in the world. The HVAC and lighting sub-groups on the other hand are strongly dominated by US and Asian producers.

The energy efficiency in industry and buildings market is characterised by high levels of consolidation, with only a few key players establishing the major trends within the markets. These players are also the major innovators in these fields. The low carbon building technologies on the other hand is rather fragmented, and innovation is visibly flourishing from a number of SME operating at a national and regional scale.

The vast majority of the technologies under this technology area are bought and put into use by four large groups of consumers: individuals at the residential level, institutional, commercial and industrial. Products are usually bought off the shelf, and are not custom made to the needs of final consumers. The exceptions to this are products belonging to the savings of materials and prevention of pollution technology group.

The major drivers for both demand and innovation in the area are national and EU regulations, including new buildings regulations, the search for energy expenditure reductions on behalf of consumers, fiscal incentives, and consumer demands including a strong environmental awareness component. Innovation has also been strongly driven by the influx of important sums of public funds and private venture capital.

120 IEA (2008): Energy efficiency requirements in building codes: Energy efficiency policies for new building. IEA publications. 121 The World Energy Council defines energy efficiency as all changes that result in a reduction of the energy used for a given energy service or level of activity. Gains in energy efficiency are usually measure by comparing the levels of energy needed to produce one unit of output. 122 Residential, commercial and industrial.

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Barriers to market diffusion on the other hand are mainly economic-related, with traditional technologies still being relatively cheaper. In addition to this, consumers often tend to make their purchases based on first installation costs, rather than whole life cycle costs. ‘Technophobia’ also comes up as one of the leading market barriers.

Innovation in the sector is generally incremental, with only minor innovations being introduced in existing product designs to improve environmental performance. Most sectors are highly mature, especially the industrial components sector.

The need for an ETV scheme varies considerably from one technology area to the other. Implementing an ETV scheme appears virtually impossible in the savings of materials and prevention of pollution technology group, due to the process-orientation of technological solutions, rather than individual products.

However, low carbon building technologies would strongly benefit from such a scheme, with producers often citing the lack of international recognition of existing verification schemes as one of the leading barriers to sales and growth.

Table C1.1 Market characteristics

Technology Group Current EU Current EU share of EU Annual EU Market Market Global Discrete purchase or General assessment Market Size Global Global Growth Rate size in 2020 status Annual requirement for end of risk aversion to Market Size market Growth Rate user to require further new technologies for € billion (current € billion testing as part of system end users € billion % growth) % (e.g. wind farm)

Saving of material €6.3bn (2008) €21bn 30% ~ 3 to 5% ~ €10bn Maturing NA Mixed markets Highly risk averse resources (resource efficiency) and prevention and reduction of pollution and waste in industrial processes

Energy efficiency in €157bn (2005) €450bn 35% ~ 10% €300 to Maturing NA Mixed markets Highly risk averse industry & buildings (2005) 350bn

Low carbon building ~ €200bn NA NA ~ 6 to 8% €350 to Maturing NA Mixed markets Highly risk averse technologies 400bn

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Table C1.2 Innovation characteristics

Technology Strength of EU market Status of Status of Rate of Level of Existence of Key barriers to exploitation of market ready Group EU leaders in established alternative innovation investment into established / technologies in sector Technology supply of (dominant) technologies EU supply side accepted Supply Side technology technology (VC, R&D, etc.) norms and standards

Saving of World leading Linde Mature Alternatives with Incremental Medium Wide range of Reluctance on behalf of buyers to use new material (Germany) proven higher established technologies, prices, the need for pre-existing resources performance norms and technical conditions (AMEC (UK) (resource standards (but limited efficiency) and presence in prevention and markets) reduction of pollution and waste in industrial processes

Incremental Very high Wide range of with some established Energy Siemens Mature Alternatives with High prices in comparison to incumbent system norms and efficiency in (Germany) proven higher technologies, reluctance on behalf of buyers to High changes standards industry & performance use new technologies, impossibility of applying Schneider buildings new technologies to retrofitting projects Electric (France)

Philips (Netherlands)

Low carbon World leading See table Maturing with Alternatives with Incremental Low - Medium Wide range of Most EU member states require certification of building some products unproven higher with some established performance of technologies (e.g. BBA or BRE technologies recently performance system norms, in the UK) without which many procurers (and introduced into changes standards and grant schemes) will even consider the

the market certification technology

Technology Type A: Cleaner production and processes Introduction to Cleaner Production and Processes Originally, the Inception report contemplated covering following four Technology Groups: • Savings of material resources (resource efficiency), including savings of chemicals or carbon; • Improved energy efficiency in industry; • Improved energy efficiency in buildings; • Prevention and reduction of pollution and waste from industrial processes.

These Technology Groups have been modified based on a more functional approach. Firstly, the first and last (Savings of material resources, and Prevention and reduction of pollution and waste from industrial processes) have been joined into a single Technology Group. Both of these groups are strongly linked to production processes within industries. In addition, new cleaner technologies being implemented are often designed to achieve both objectives at once. For example, a new technique introduced in a semiconductor manufacturing plant as an alternative to traditional silicon wafer cleaning techniques, allows the reduction of the use of harmful chemical solutions and water at the same time123.

Secondly, the second and third groups (Improved energy efficiency in industry, and Improved energy efficiency in buildings) have also been merged due to the fact that most of these technologies are put into use in both types of environments. Instead of making a distinction between energy efficiency in industry and energy efficiency in buildings, the distinction has been made with regard to energy efficiency and low carbon building materials.

As a result, the cleaner production and processes market, has been characterised according to the following three Technology Groups124: • Savings of material resources (resource efficiency), and prevention and reduction of pollution and waste in industrial processes; • Energy efficiency in industry and buildings; and • Low carbon building technologies.

The last two technology groups comprise several technology sub-groups.

Overall, this particular Technology Area is characterised by its far-reaching scope and diversity of technologies covered. Thus, establishing general trends often proves to be extremely challenging. In order to partially overcome this barrier, the information in the following sections is often presented in the form of tables allowing the comparison of trends and figures for different sub-groups.

123 European Commission. Environment- LIFE programme. http://ec.europa.eu/environment/life/. 2011. 124 Note on the regrouping of the Savings of material resources, and prevention and reduction of pollution and waste from industrial processes.

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Savings of material resources (resource efficiency), and prevention and reduction of pollution and waste in industrial processes

Analysis of this technology group requires a clear distinction to be made between technologies and processes. Increasing energy efficiency and reducing pollution and waste generated from processes may be achieved not only by developing and implementing new technologies, but also by changing the manner in which processes are carried out. For example, replacing a feedstock with a cleaner one is a manner of reducing pollution in a process without having to replace a technology component125.

In some cases however, technologies may contribute to changing industrial processes making them cleaner and less resource intensive. These technologies are generally known as clean technologies (cleantech). The EU defines cleantech as « new industrial processes or modifications of existing ones intended to reduce the impact of production activities on the environment, including reducing the use of energy and raw materials »126. These technologies have become prominent become prominent due not only to their potential to bring about high resource efficiency gains, but also their capacity to produce large material cost savings for industrial players.

However, clean technologies vary according to the stage of production they intervene in (i.e. upstream or integrated, or downstream or end-of pipe) as well as to their main purpose (i.e. reducing consumption of resources or preventing pollution or both). As a result, cleantechs usually fall under one of the two following categories: • Integrated technologies aimed at reducing the resource intensity and preventing the production of waste from production processes – examples include closing process water cycles using catalysts for more tailor made processes; using biological processes with tighter process efficiencies; replacing toxic solvents and other auxiliary chemicals used in production processes with safer alternatives. • End-of pipe solutions aimed at reducing the production and minimising the impact of waste and pollution generated by production processes. These mainly involve preventing the discharge of hazardous waste (e.g. using thermal and catalytic controls to reduce volatile organic compounds).

Due to the vast range of technologies that fall under this particular technology group, it is impossible to present a detail assessment of the market and innovation trends in the sector.

Market Characteristics

EU and Global Turnover

Clean technologies cover numerous technological fields and, as a result, are an extremely ill-defined market sector. Estimating the size of the market for different types of clean technologies is thus extremely challenging. There are two key reasons for this: • New investments in industrial processes often have inherent process efficiencies including reduced energy requirements, fewer emissions to air and water, as well as better process throughput efficiencies. This investment is part of the overall capital investment cost and therefore it is difficult to split out environmental investment from process investment; it becomes ‘integrated expenditure’. In a chemicals plant for example, most processes are connected in one way or another; in printing, the latest print equipment is designed to have lower VOC emissions.

125 European Commission - Environment. http://ec.europa.eu/environment/enveco/eco_industry/pdf/annex2.pdf. 126 European Commission. Environment- LIFE programme. http://ec.europa.eu/environment/life/. 2011. 66

• Most cleantechs are tailor-made to the needs of the end-user, and are not mass- produced.

One way of estimating the size of the overall sector is by measuring investments made by industries in order to reduce their levels of resource consumption and pollution. Environmental Protection Expenditure (EPE) data produced by Eurostat includes the investments aimed at the prevention, reduction and elimination of pollution or any other degradation of the environment resulting from the production process or from the consumption of goods and services.

Total EPE covering integrated expenditure by EU businesses in 2008 amounted to €6.3 billion. The following figure presents the business expenditure in total environmental protection activities in 2008 by sector. The largest investments were made in the power generation sector (i.e. electricity, gas, steam and air conditioning supply businesses).

Figure C1.1 Business expenditure in total environmental protection activities in 2008 by sector

3,000 2,413 2,500 2,329

2,000

1,500 1,201 Investment in equipment and plant for pollution control 1,000

500 Investment in equipment and 129 184 165 31 32 plant linked to cleaner technology 0 ('integrated technology') Manufacture Manufacture Water Electricity, of computer, of machinery collection, gas, steam electronic and and treatment and and air optical equipment supply conditioning products n.e.c. supply

Source: Eurostat An EU study on cleaner production in 2001127 found that the EU accounts for about one third of the global market for cleaner production. The market across new EU member states was estimated at around 10% of the size of the EU15. The study also found the chemical sector to be the largest investor in cleaner production, accounting for 30% of total investments in this area.

Detailed information on the type of capital EPE (integrated or end of pipe) being carried out by industries across Europe is limited. An on-going annual business survey on EPE by industry in the UK carried out by Defra consistently shows that the largest share of capital EPE is on integrated solutions, rather than end of pipe technologies (see Table C1.3).

Table C1.3: EPE in the UK by type (€ million and per cent) 2005 2006 2007 Operational Expenditure

- internal 1,175 (35%) 912 (22%) 1,251 (27%) - external 1,219 (36%) 2,025 (48%) 2,202 (48%) Capital Expenditure

127 TNO-STB (2001): Cleaner production: Opportunities for a sustainable economy. IPTS.

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- integrated 515 (15%) 859 (20%) 665 (14%) - end of pipe 392 (12%) 352 (8%) 358 (8%) Research and development 90 (3%) 80 (2%) 140 (3%) Total (100%) 3,391 4,228 4,615 Source: http://www.defra.gov.uk/evidence/statistics/environment/envsurvey/expn2007/index.htm

According to the same Defra survey, the leading spending industries were energy and water supply (41%), chemicals (14%) and food and drink (10%). The relative shares of total spending by environmental media were air (22%), waste water (19%), solid waste (41%) and other (18%). Even this detailed survey is often unable to isolate particular process expenditure to allow more detailed analysis of cleaner processes.

The Community Innovation Survey (2008) enables the identification of sectors which have a higher tendency to implement eco-innovations to reduce material or energy use. Figure C1.2 presents the share of enterprises by sector that has introduced material and/or energy reducing innovations between 2006 and 2008. The manufacturing sector has the highest share of companies implementing eco-innovations to reduce material use while the electricity, gas, steam and air conditioning supply sector has the highest share of companies eco-innovating to reduce the use of energy. On the other hand, the energy sector itself is among the industries with the largest effort to save materials. Interestingly, with the exception of financial and insurance activities, companies in all sectors tend to implement eco-innovations aimed at improving energy efficiency; the focus on material efficiency is less pronounced.

Figure C1.2: Share of firms in different sectors with innovations leading to reduced material / energy use per unit output

According the survey, the countries with the highest share of firms investing in eco- innovation are Germany, Ireland, Portugal and Finland.

Figure C1.3: Share of firms with innovations leading to reduced material use per unit output separated into industry and service sectors

Another study on cleaner production128 based on a survey of 400 companies in five EU countries, determined the key market drivers for installing integrated or cleaner capital investments. These ranged from the implementation of environmental management systems and an ecological ethic in the company (the main driver), to cost savings (second most important driver), eco-taxes, supply chain pressures or simply the renewal of capital equipment. Investments were made across a variety of environmental domains including waste management, air pollution control, and energy.

Innovation

Plant design and construction, especially in the petrochemicals sector, is done by well established and generally multinational process engineering companies like Linde129 (Germany) (who also supply their own technologies), AMEC (UK), Bechtel (USA), etc.

128 Institut für Wirtschaft und Umwelt der Arbeiterkammer Wien (2000): Environment and Employment: sustainability strategies and their impact on employment. European Commission DG Employment and Social Affairs. 129 The Linde Group (2011). http://www.the-linde-group.com/en/about_the_linde_group/divisions/engineering/index.html.

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Potential for ETV

Due to the more process-oriented nature of this technology group, it is difficult to see how relevant an ETV scheme could be if it was targeting specific market ready technologies, unless the verification covered the entire cleaner production process.

An additional limitation to the use of an ETV in this group is the lack of clearly identified technologies for which verification protocols could be developed. Verification would have to take place on a case by case basis due to the bespoke nature of these process technologies.

Furthermore, the nature of the process industries, means that discrete purchases are rare – when tens or hundreds of millions of Euros are being invested in new processes, the entire design stage is contracted out to a company that has established supply chains and can choose from a basket of proven technologies (which work in conjunction as an integrated package and have multi-project track records). Two approaches could be developed within the ETV scheme. The first would involve verifying technological components that make up larger processes. For example, ETV could verify measuring technologies that are part of closed water recycling systems. However, there seem to be extreme limitations to this approach. The most important of these is that technology users need to be reassured on the performance of the system as a whole. The user needs to ensure that other related systems within the plant will not be negatively affected by the incorporation of a new process technology.

The second possible approach is to develop a verification scheme for an entire process, rather than single technologies. From the technology consumer standpoint, this type of verification would be of greater value. However, due to the fact that these processes are tailor made, this would imply developing a verification protocol for each verified technology, which is not realistic. In addition, verification would have to take place on a demonstration site where there was an operating version of the process. This would come at a considerable cost to the technology developer. As noted above, it is also likely that a reference plant will already have been built elsewhere to give the end user confidence in their investment decision.

All in all, the potential to implement an ETV scheme in this technology group appears very limited.

Technology Group B: Energy efficiency in industry and buildings

The energy efficiency in industry and buildings Technology Group covers environmental technologies used in the operation and functioning of the built environment as well as in industry. Although closely linked to the Low Carbon Building Technologies Group, most of the technologies discussed in this section are not directly involved in building construction, but rather during the processes that take place within or around them during their life cycles.

Due to the diversity of technologies covered by this particular Technology Group, these have been classified according to their field of application. Table C1.4 presents some of the technologies analysed in the following sections by field of application.

Table C1.4: Technology sub-groups for energy efficiency in industry and buildings

Field of application Specific technologies

Heat generation High Efficiency (HE) boilers, micro Combined Heat and Power

Heating, Ventilating and Air Heat pumps, heat and cold storage, cooling, heat Conditioning (HVAC) recovery, heating systems, ventilation, solar cooling systems

Lighting Light Emitting Diodes (LEDs), Fluorescent Lamps, Daylight systems, timed lighting, lighting controls

Industrial production components* Motors and drives, boiler controls, burner controls, thermostatic controls, heat exchangers

Source: Adapted from Noailly J, 2010, ‘Improving Energy Efficiency of Buildings: the impact of environmental policy on technological innovation’, Nota di Lavoro, Fondazone Eni Enrico Mattei.

* This report only covers electric drives

It is now widely recognised that the shift to a low-carbon energy system will require changes in the way energy is distributed, stored and consumed, in addition to new sources of renewable energy. This has brought about a renewed interest in technologies aimed at improving energy efficiency in industry and buildings130. As a result, the energy efficiency sector has recently gone considerable expansion and is expected to continue to do so in the oncoming decades.

Alternative technologies

A number of technologies currently on the market offer important energy efficiency gains for each of the aforementioned technology subgroups. Presenting a detailed list of these would be extremely complex. However, for the purpose of this study, a number of high potential technologies, both in terms of innovation and market growth, have been selected for each of the previously mentioned technology groups. The following paragraphs present these technologies, as well as some of the advantages they hold in comparison to traditional solutions on the market.

Heat generation

Most modern boilers contain high efficiency technologies (such as condensing technologies) making them better at saving energy than traditional boilers. Modern high efficiency condensing boilers convert over 88% of their fuel into heat compared to 78% for conventional boilers. Rather than high efficiency boilers, the technology which is likely to radically change heat generation in households and commercial buildings are micro Combined Heat and Power units (mCHP). These units allow the generation of heat and electrical power from a single domestic appliance. As a result, they represent true low carbon technology replacement for the gas boiler which is more cost-effective and less disruptive compared to other renewable and low carbon technologies. In addition they are the most effective technology on the market for primary energy savings compared to other heating technologies. Micro CHP has the potential to integrate new feedstocks such as biomass (as offered by Button Energy of Austria131) or technologies such as fuel cells. For example, the first product developed by Ceres Power in the UK132 is aiming to use natural gas more efficiently. It is also an area that UK utility giant Centrica has clearly recognised as an important business opportunity since it made a £20 million investment into the company in 2008 and is helping with a pilot demonstration programme.

130 World Economic Forum (2009): Green Investing: Towards a Clean Energy Infrastructure. 131 Button Energy - Energiesysteme GesmbH. http://www.buttonenergy.at/index_eng.htm. 132 Brittish Gas. http://www.cerespower.com/OurMarkets/NaturalGasCHP/ - and one of the technology developers who answered our survey.

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HVAC

Heat pumps are the main alternative to traditional HVAC. Their primary use in cold countries is for heating although cooling can be achieved by reversing the direction of heat flow. Heat pumps can provide up to four times the amount of energy they consume because they move heat rather than generate heat

Heat pumps are subdivided based on their thermal source and fall into two categories: air- source heat pumps and geothermal heat pumps. Air-source heat pumps operate on the basis of a reversed vapour-compression cycle, extracting heat from external air and releasing it indoors. Geothermal heat pumps take advantage of natural heat reservoirs – the ground and bodies of water. These heat pumps are called ground-source and water- source, respectively. The key success factors of heat pumps are mainly their reliability, their payback time and COP.

Lighting

The leading technologies in the lighting sector are Light Emitting Diodes or LEDs. LEDs are small electrical devices that produce light due to their semiconductor properties. They consist of a chip of semiconducting material creating a positive-negative junction where power flows from anode (+ve) to cathode (-ve) - but not in a reverse direction. New High Brightness (HB) LEDs can produce more than ten times the lumens of old 5mm devices.

There are several advantages of LEDs over traditional lighting solutions. These include: • Instant on, requiring no "warm-up" time in a way compact fluorescent lamps (CFL) do; • Low energy thanks to the use of Gallium Nitride, a highly energy efficiency semiconductor material; • Low heat emissions; • Directional light emissions enables light to be guided to where it is needed; • Size advantage – LEDs are typically very compact and low profile; and • Breakage resistance.

In terms of luminous efficacy (lm/W) the best white LEDs produce approximately 45 to 60 lm/W, compared to 50 lm/W for CFL and 12 to 15 lm/W for incandescent lamps.

Industrial production components

One of the technologies in the industrial production components sub-group having undergone important innovations in recent years are electric motors. Electric motors are used in the production of a wide range of products, such as industrial machinery.

Over the lifetime of an electric motor, energy costs amount to about 97% of the total costs of ownership. Therefore, increases in energy efficiency not only lead to gains in energy consumption, but also long term savings. Based on 8000 hours per year, increasing the efficiency level of an electric motor can give payback times on the extra investment of about 2 years.

One example of innovation in this sector is illustrated by Synchropulse, a UK SME who produce brushless hybrid electronically commutated motors133. These motors make use of an innovative approach to magnetic engineering inside the motors. They also include

133 Synchropluse (2011): http://www.synchropulse.com/technology/. 72

electronics and software that maximise operating efficiencies and deliver additional control features - such as variable speed, sensor control, software control etc. - in a cost-effective way. The result of this innovation is a motor that delivers high-energy savings and performance advantages and could substitute traditional induction motors and brushed motors into existing equipment.

Market Characteristics

Due to the broad nature of the Energy Efficiency sector, it is extremely difficult to calculate the annual turnover of this particular sector at the EU and global level. According to a study by Roland Berger, energy efficiency accounted for 45% (€450bn) of the global environmental technology market in 2005. The share of European companies was estimated to represent 35% of this market (€157bn). Based on the forecasts made by the same report, the European annual turnover in the energy efficiency sector can be expected to reach anywhere between €300bn and €350bn by 2020134.

Estimating the market size for different technologies under this group also proves to be difficult. The information available generally points to recent growth in the market for some key technologies and the likely persistence of this trend. However, considerable differences exist among different technology types.

The energy efficiency sector has witnessed the arrival of important capital flows, from both private and public sources. Firstly, measures to develop energy efficiency in industry and buildings have been a key component of post-crisis economic recovery and stimulus packages across the world. According to a recent HSBC study, building efficiency has been the most favoured theme within the EU’s Members State climate-relevant investments, accounting for 26% of an estimated total of USD54bn climate relevant investments135.

The energy efficiency sector is also estimated to produce valuable business opportunities for private investors. The World Economic Forum predicts that efforts to improve energy efficiency will result in $170 billion per annum of global business and consumer investment opportunities until 2020. Investments in the sector are expected to offer a 17% average internal rate of return. However, two thirds of these opportunities are in developing countries as the cost of abating a unit of energy is around 35% lower than in developed countries. However, European companies are still well positioned to capture opportunities as home efficiency standards are higher.

In terms of sector, most energy efficiency opportunities lie in the industrial sector (49%), followed by residential (23%), transport (15%) and commercial (13%)136. In Europe, it is estimated that potential investors could invest up to €30bn annually in energy productivity improvements across Europe. The areas which are expected to offer important business benefits include: • Residential sector: high efficiency heating and cooling systems, the replacement of incandescent light bulbs with CFL and the reduction of standby energy consumption;

134 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. 135 HSBC Global Research (2009): A Climate for Recovery: the colour of stimulus goes green. 136 World Economic Forum (2009): Green Investing: Towards a Clean Energy Infrastructure.

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• Industrial sector: improved recovery of heat generated in the production of mechanical or electrical power, improved cogeneration, and the optimization of motor driven systems such as pumps and compressors137.

Heat generation: High Efficiency boilers

Boilers account for around 60% of all domestic CO2 emissions according to the UK’s Energy Saving Trust. As a result, replacing old inefficient boilers is one of the most effective ways of energy consumption in buildings. One of the leading products on the market are High Efficiency (HE) condensing boilers. An HE condensing boiler works by retaining as much of the waste heat as possible which is normally lost into the atmosphere from the flue of a conventional boiler system. HE condensing boilers convert over 88% of their fuel into heat compared to 78% for conventional boilers. These efficiencies are achieved by using an extra large heat exchanger (or two heat exchangers on some models), which maximises the heat transferred from the burner, whilst recovering heat which would normally be lost with the flue gases138.

BSRIA's study of the global heating market published in 2007 estimated the global domestic boiler market to be worth around €7.9 (US$9.7) billion, covering 11.85 million units in 2006, and still growing. Europe was the biggest market with HE boiler sales experiencing important growth from 2000 to 2009, particularly in wall hung products. Standard efficiency (SE) boilers on the other hand, saw their numbers decrease during the same period. As shown by the Figure C1.4. The highest increases in sales were recorded in the UK, Italy and France.

Figure C1.4: European Boiler Market Trends (Condensing and wall hung)

137 McKinsey Global Institute (2008): Capturing the European Energy productivity opportunity. *Estimations also take into account technologies, products and services which are not considered by this study such as: fuel-efficient transportation, energy services, and financing for energy-efficient investments. 138 Energy Saving Advice (2011): www.energysavingadvice.co.uk/energy-saving-products/energy-saving-boilers.php. 74

Source: www.hydroheat.com.au/downloads/Baxi%20presentation.pdf Within the HE boiler sector in Europe, condensing and renewable energy boilers have seen the largest increases. Sales in HE condensing boilers rose from 3 million units in 2007 to 3.9 million in 2010; while renewable boilers (i.e. small-scale biomass boilers) rose from 1 million to 1.4 million units over the same period.

Figure C1.5: Western European market evolution of HE boilers by technology

Within the renewable sector, the sales of solar power units doubled from 2005 to 2010. According to BAXI, a leading European producer of boilers, the strongest growth in

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oncoming years will be in the micro CHP139, an area the company has invested in through its subsidiary BAXI-SenerTec UK140.

Figure C1.6: - Sales of Boiler Units 2005-2010

Source:www.hydroheat.com.au/downloads/Baxi%20presentation.pdf The EU is a leading producer and one of the largest markets for HE boilers. In the US, HE condensing boilers are still estimated to represent a very small fraction (about 5%) of the total current boiler market. Figures dating from 2000 estimated that the market for commercial scale condensing boilers was about 700+/-250 units or just $9.5m/year. Calculations at that time forecast that under an optimistic scenario, the market share could potentially rise to 28%, or approximately 22,600 units, in 2020. For the time being, the US market is still, to a large extent, a small niche with lots of room for improvement in sales of condensing boilers141.

The boiler market is highly regionalised with the major players generally being strong only in their home continent. China is an exception because leading European brands such as Bosch, Buderus and Viessmann now hold important market shares there.

Wall hung units are dominated by some nine major companies, although there are many more big brands used by these companies in individual countries. Other markets such as the floor standing gas atmospheric and oil/gas pressure jet have become progressively more localised142.

The largest boiler markets in Europe are Germany, France and the UK. At the European level, production is also strongly consolidated around a handful of firms including BDR Thermea, Worcester-Bosch and Vaillant. BDR Thermea is a world leading manufacturer and distributor employing more than 6,400 people across Europe with a turnover of almost €1.7 billion (2009). The group has a top market position in six key countries: UK, France, Germany, Spain, the Netherlands and Italy and strong positions in the rapidly growing markets of Eastern Europe, Turkey, Russia, North America and China. In total BDR Thermea operates in more than 70 countries worldwide. The strategy of the group involves marketing under multiple local brands, with strong national operations in the major European economies allowing for rapid reaction to changes in local demand. BDR Thermea owns and sells some of the leading brands in the European market for heating products.

139 BAXI Sener Tec UK. www.hydroheat.com.au/downloads/Baxi%20presentation.pdf. 140 BAXI Sener Tec UK (2011): http://www.baxi-senertec.co.uk/. 141Consortium for Energy Efficiency (2001): A market assessment for condensing boilers in commercial heating applications. 142 Bsria (2006): World domestic boiler market showing some growth. http://www.bsria.co.uk/news/1885/. 76

These include De Dietrich, Baxi, Remeha, Heatrae Sadia, Brötje, Potterton, Chappée, BaxiRoca and Baymak.

The Asia Pacific region has a number of very large domestic boiler manufacturers, with a significant share of the world market but generally only strong in their home country. The exception is Rinnai (Japan and China) and Kyungdong (Korea and China). North American boiler manufacturers are also confined to their own region, finding it difficult for existing products to conform with European regulations143.

Heating, Ventilating and Air Conditioning (HVAC)

HVAC generally refers to heating, cooling, combined heating and cooling and ventilation technologies for industrial, commercial, domestic and public spaces. These technologies generally span six functional areas that are addressed by two types of system: heating systems and air conditioning (AC) systems. The following paragraphs provide information on the latter.

The global air conditioning market was worth $62 billion in 2007 and grew 13% compared to 2006. Table C1.5 shows the geographic distribution of this market by region of the world.

Table C1.5: Geographic distribution of the global AC market

Region Estimated market size in 2007

Asia Pacific $28bn

- China $12bn

Americas $15bn

Europe $13bn Middle East, Africa and India $5bn Source: BSRIA, 2008, ‘World Market for Air Conditioning’. Specific sectors of the HVAC market have displayed particularly high levels of dynamism. According to a BSRIA study, the Variable Refrigerant Flow systems (VRF) sector has been the best performing segment, and was expected to grow by around 15% in value during 2006-2011. Minisplit units of over 5kW also showed growth of above 10% during the same period. Centrifugal chillers performed slightly better than other chiller types, reflecting the strong growth in large construction projects mostly in the Middle East, Brazil, Russia, China and India. Indoor packaged technologies on the other hand, were recorded to be the flattest market with an annual growth in value of below 2%. The BSRIA study also highlights the additional market trends by type of product proposed in Table C1.6.

Table C1.6: Additional market trends by type of product

HVAC product Market trend

Window/through the In the majority of countries, the market for window units continues to wall units decrease. The US is the largest world market for windows, but sales dropped in 2007 compared with the previous period. Moveables In 2007, half of the world sales in the moveables market were made in Europe. The market doubled from 2006 to 2007. More recently however, the market in France has decreased by 75% and the markets in Spain, UK and Germany also experienced a decline. This was

143 Bsria (2006): World domestic boiler market showing some growth. http://www.bsria.co.uk/news/1885/.

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partially caused by customers switching to permanent cooling solutions such as minisplits in anticipation of changes in global weather. Minisplits China is the world leader in the minisplits market. China is the biggest manufacturer in the world and also largest minisplit market. With 24 million units sold in 2007, China accounted for nearly half of the world minisplit sales. Unitary products The US market for unitary products decreased by $0.5mn in 2007 compared with 2006, producing an overall decline in the world market value for unitary products. Approximately 80% of all ducted split systems are sold to the residential sector. Overall in the world, total sales of rooftops and indoor packaged remained flat compared with 2006. Chillers China is also the biggest world chiller market reaching a $1.6bn by value in 2007. Growing rapidly at 19% per year, the market value of the Middle East and Africa region is expected to equal that of the Total Americas region by 2010. Reciprocating chillers continue to disappear from the majority of markets and are expected to remain a niche, mostly process cooling application. Centrifugal chillers boomed in the fastest emerging world construction markets: Brazil, Russia, India, China and the Middle East, all of which have a strong potential for further growth. Source: BSRIA, 2008, ‘World Market for Air Conditioning’. The global HVAC market is highly consolidated and relatively mature, with the top five global players accounting for over 60% of sales. In general terms, there are two types of companies which manufacture HVAC equipment: • Diversified Far Eastern electronics giants, leaders in ductless splits and VRF; and • Specialised North American AC manufacturers who are leaders in unitary and centralised plant products.

Figure C1.7 Net sales by leading AC manufacturers ($bn)

Lighting

There is a significant lack of data regarding the overall size and trends of the lighting market. However due to the importance of lighting solutions in the reduction of energy consumption, new energy-efficient technologies are expected to undergo important growth in oncoming years.

LEDs are one of the main technologies currently being used to replace traditional lighting devices. They thus represent a good proxy to measure the market dynamics of this particular sector. LED technology produces light through a chemical reaction (in contrast, incandescent lights work by burning a filament) which allows them to consume less energy than conventional methods for the same amount of output144.

According to a Strategies Unlimited report, the LED lighting market is expected to exceed $5bn by 2012. The report forecast the LED lighting market to grow by 28% from 2008 to 2012 corresponding to a CAGR of 28%. This growth is considered to be at the outset of a much larger period of expansion, as LEDs ultimately replacing conventional light sources, including high-efficiency fluorescent and HID fixtures. The performance gains which have improved the efficacy of LED lighting fixtures, along with the reduction of production costs due to recessionary pressures and mass manufacturing, have turned LEDs into one of the best commercially available high-performance illumination technologies. White LED technologies are expected to make some of the most important gains in market shares145.

An additional key technology within the lighting sector are lighting controls. According to a recent Global Industry Analysts report, the lighting controls market in North America and Europe was estimated at $2.5bn in 2009, and is projected to reach $3.8bnn by 2015; a growth rate of 52 per cent. Growing demand for lighting control solutions including ballasts, relays, controls, automatic systems, photosensors, and occupancy sensors across various end-use segments including new building and retrofit applications is expected to propel the market146.

Ballasts represent the largest product segment of the lighting controls market in both European and North American lighting controls markets. This market is expected to register the fastest growth over the coming years in the European lighting controls market, while Controls (including Relays and Breakers) represent the fastest growing segment in the North American market147.

144 Cleantechnica (2010): Graphite foam makes high efficiency led lights last longer. http://cleantechnica.com/2010/08/28/graphite-foam-makes-high-efficiency-led-lights-last-longer/. 145 LEDs Magazine (2009): Strategies Unlimited believes the LED lighting market will grow by 28% from 2008 to 2012, but many challenges remain. http://www.ledsmagazine.com/news/6/3/2. 146Global Industry Analysts (2009): Lighting Controls Market in North America & Europe to Reach US$3.8 Billion by 2015, According to New Report by Global Industry Analysts, Inc. http://newsguide.us/index.php?path=/technology/electronics/Lighting-Controls-Market-in-North-America-Europe-to-Reach-US- 3-8-Billion-by-2015-According-to-New-Report-by-Global-Industry-Analysts-Inc/.

147Global Industry Analysts (2009): Lighting Controls Market in North America & Europe to Reach US$3.8 Billion by 2015, According to New Report by Global Industry Analysts, Inc. http://newsguide.us/index.php?path=/technology/electronics/Lighting-Controls-Market-in-North-America-Europe-to-Reach-US- 3-8-Billion-by-2015-According-to-New-Report-by-Global-Industry-Analysts-Inc/.

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Figure C1.8: Estimates of the size of global lighting controls market by different regions of the world (2010)

Source: BSRIA Europe and North America are the largest lighting markets with a combined share of over 75 per cent. Of the Asian markets, Japan, Hong Kong, Singapore and China are the most advanced markets in terms of the energy saving lighting controls. Other growing economies, such as India, have yet to realise the commercial benefits of lighting controls in their buildings148.

In the lighting market, there is no particular combination of businesses that has so far determined success in lighting controls. In fact, while there are a few industry leaders in terms of revenue, including Lutron (USA), Encelium (USA) WattStopper/Legrand (USA/FR), the market for lighting controls is actually quite fragmented.

This is not surprising given the traditional distribution channels for lighting controls. Lighting controls have largely been sold in much the same way as lighting products and systems, and there are hundreds of companies that participate in that business around the world. Lighting specifications are established by architects and/or lighting engineers and/or lighting designers. If not explicit in the design, specific product decisions are usually made by general or electrical contractors or system integrators. The products are then most often sold through distributors. This type of distribution has made it difficult for lighting or lighting control vendors to establish dominant positions in multiple geographic regions.

Unlike lighting products, however, the market for lighting controls is far from saturated. It is theoretically possible for any company or companies to significantly expand their revenues without having to steal market share from other vendors. The USA in particular has seen numerous innovative lighting controls new entrants in the past few years including Adura Technologies and LUMEnergi, both based in California.

148 Bsria (2006): World domestic boiler market showing some growth.http://www.bsria.co.uk/news/1885/.

The rise of consolidated market leaders will probably depend less on the synergies among company’s businesses, than on individual companies’ capacities to integrate the distribution and installation aspects of the business149.

Figure C1.9: Lighting control vendors and their related business lines

Source : Pike research Industrial production components

Information on the market size of industrial production components able to contribute to increasing energy efficiency is limited. In general terms, the markets for industrial production components such as heat exchangers and electric drives are mature.

The heat exchanger market is expected to undergo important growth in oncoming years. The plate and frame heat exchangers market, the fastest growing segment, registered a compound annual growth rate (CAGR) of 4.8% over the 2000-2010 period with Asia-Pacific being the fastest growing market. However, Europe is the largest overall market and is estimated to account for 45.7% of total plate and frame heat exchangers sales in 2008. Sales of heat exchangers to the chemical industry, the largest end-use segment, reached $2.7 billion in 2012150. Deriving growth from rapidly rising oil prices, investments in the fuel processing industry are expected to increase in the near future. The market for heat exchangers used in HVAC and refrigeration industry is projected to grow to over $2.5 billion by 2012.

Over the next few years, shell and tube exchangers are forecast to retain their market dominance, while plate and frame exchangers, air coolers, and other heat exchangers are expected to witness rapid market expansion. The heat exchangers market is well known for intense competition which affects margins. Increasing metal prices and energy costs are also have a direct impact on profitability of heat exchanger manufacturers, and, pricing pressure is expected to continue in future.

149 Wapner, Mike. (2011): Who does what best in the lighting control industry. Pike Research. http://www.matternetwork.com/2011/2/who-does-what-best-lighting.cfm. 150 Global Industry Analysts (2008): Global Heat Exchangers Market to Cross $12.7 Billion by 2012, According to New Report by Global Industry Analysts, Inc. Http://www.prweb.com/releases/heat_exchangers/shell_tube_plate_frame/prweb1503254.htm.

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Increasing demand for energy-efficient systems coupled with the need for reliability in process applications offers significant potential for electric drives in the European industry. The electric drives market in the European chemical industry for example generated revenues of $147 million in 2008, with forecasts that this might reach $187.6 million in 2015151 - a growth rate of 27.6 per cent.

The overall growth forecasts for electric drives are more modest with annual growth estimated at between 3% to 6% per year. According to Datamonitor, the European AC drives market generated total revenues of $2.4 billion in 2009, representing a CAGR of 2.8% for the period spanning 2005-2009. In 2014, the European AC drives market is forecast to have a value of $2,489.5 million, an increase of 3.7% since 2009. Once global economic stability is restored, the use of AC drives is expected to increase at a faster rate across all industrial segments, including oil and gas, building automation, chemicals, food and beverage, and metals and mining. Despite the moderate growth forecasts, the electrical drives market remains very large.

The main players within the motor drives market are large incumbents, namely: ABB, Mitsubishi Electric, Rockwell Automation and Siemens. The presence of such players, coupled with the sheer number of firms present within the market considerably boosts the levels of competition. Whilst some possibilities of differentiation exist, products within the same category are for the most part differentiated only by branding, price and relative performance, which further intensifies competition152. It also makes the potential entrant of an innovative SME very challenging. There are very few start up or young SMEs in the EU offering new motor technologies: the fact is that the major players have most of the IP already in house or else fund specific R&D (sometimes outsourced to research organisations) to improve their product ranges.

The highest share of the value of the sector in Europe is concentrated in Germany (33.7%), followed by Italy (12.5%) and France (10.5%).

Most producers in the sector operate internationally and benefit from scale economies of their operations. New entrants face a high degree of rivalry, particularly on price. Producers invest heavily in R&D in order to lower production costs and differentiate their offerings in the face of commoditization. In addition, new entrants must face the difficulties and costs associated with compliance stringent regulations such as the Restriction of Hazardous Substances (RoHS) Directive and Waste Electrical and Electronic Equipment (WEEE) Directive153.

Import-Export

Five products have been analysed under the energy efficiency and industry and buildings technology area, including insulation products154, air conditioning machines, thermostatic valves, light-emitting diodes (LEDs), and electric motors and generators. Figure C.10 indicates intra-EU and extra-EU aggregate exports values of the leading EU member states155 for these products in 2009.

Figure C1.10: Intra-EU and extra-EU exports of top 5 Member States in energy efficiency area (Million euros)

151 Frost & Sullivan (2009): Demand for energy-efficiency offers high potential for electric drives in the European chemical industry. 152 Datamonitor, 2010, AC Drives in Europe, Industry profile, April 2010, London. 153 Datamonitor, 2010, AC Drives in Europe, Industry profile, April 2010, London. 154 Insulation category includes a) slag-wool, rock-wool and similar mineral wools, incl. intermixtures thereof, in bulk, sheets or rolls and b) pads and casings for insulating tubes and pipes, of glass fibres. 155 The ranking indicates the EU Member States with highest value of intra-EU export with their extra-EU export values. 82

3,000

2,500

2,000

1,500

1,000 Intra-EU 500 Extra-EU 0

Germany is the top intra-EU and extra-EU exporter of energy efficiency technologies (33%). With respect to particular technologies, in 2009 Germany remained the leading exporter for LEDs, electric motors, generators and thermostatic valves. For insulation products the Netherlands, then Germany, had the highest export shares. Spain and Italy lead EU exports in air conditioning products.

Leading EU Producers of Technology

Table C1.7 illustrates the diversity of this market and reflects to some degree the results of the trade analysis above with German companies dominating across most product areas.

Table C1.7: Leading producers of energy efficiency technologies in Europe

Technology sub- Leading producers in Europe Country group

Heat generation BAXI UK

Potterton (BDR Thermea) UK

Worcester (Bosch Group) UK/Germany

Buderus (Bosch Group) UK/Germany

Vaillant Germany

Viessman Germany

HVAC Airdale (Modine) UK

Atlantic Climatisation et Ventilation France

Lighting Philips Netherlands

OSRAM Germany

BLV Licht Germany

Narva Lichtquellen Germany

Aura Sweden

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Zumtobel Austria

Schneider Electric France

Industrial production ABB Ltd Switzerland components Siemens Germany

Global Market Leaders

Globally, the strength of US and Far Eastern firms is visible from the following Table.

Table C1.8: Global market leaders by technology sub group

Technology Global market Companies sub-group leaders

Heat generation Germany Viessmann

UK/Germany Buderus (Bosch Group)

HVAC Japan Daikin, Fujistu, Hitachi, Matsushita, Mitsubishi, Sanyo, Toshiba

Korea LG, Samsung

China Chunlan, Gree, Haier, Kelon, Midea

Thailand Teco

USA Fedders, Frigidaire, Whirlpool, Friedrich, Carrier, Fheem, Trane, York, Lennox

Lighting Japan Panasonic, Nichia (LEDs)

Taiwan Arima Optoelectronics, Epistar, Formosa Epitaxi, Huga Optotech

USA Lutron, GE, Cree (LEDs), Wattstopper/Legrand, Cooper, Eaton Corp, Hatch Transformers, Howard lighting, Lithonia, Robertson Worldwide, Universal lighting technologies

Germany OSRAM

France Schneider Electric

Netherlands Philips & Philips LumiLEDs

Industrial Switzerland ABB production components France Schneider Electric

Germany Siemens

Japan Mitsubishi

USA Rockwell Automation, GE

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Technology Users

Technology sub- Technology Examples Remarks group users

Heat generation Residential HE boilers for apartment Very strong growth buildings and individual potential for mCHP in the homes residential sector

mCHP for houses and apartment buildings

Commercial HE boilers for office Opportunities for buildings replacement with biomass boilers

Institutional HE boilers for A particularly attractive government buildings, sector since decision hospitals and schools makers rely more on the magnitude of the life cycle costs of boilers than on initial capital costs to make purchase decisions

HVAC Residential Individual homes and apartment buildings

Commercial Restaurants, offices, Integration with heat hotels, etc.

Institutional Hospitals, schools and government buildings

District Large scale HVAC projects generally commissioned by local governments

Mobile Means of transportation (cars, trains, ships, etc.)

Lighting Individual Personal objects such as mobile telephones, flashlights, etc.

Residential Indoor and landscape electric and solar lighting

Commercial Lighting in shops, The most widespread restaurants, etc. usage of lighting controls is found in the commercial sector.

Institutional Public spaces such as Lighting controls and road signals, lighting in systems continues to government buildings, expand in the industrial segment that comprise

railway stations, etc. workshops, warehouses, and factories

Street lighting and signage are one of the highest growing sectors for LEDs.

Mobile Car headlights and Automotive is one of the dashboards, etc. highest growth sectors for LEDs.

Industrial Industrial Drives: Chemical, oil & Common applications of production gas, food & beverage electric drives include components industries, etc. ventilations systems, pumps, fans, and blowers. Heat exchangers: These often drive Chemicals, and HVAC assembly and/or conveyor and refrigeration lines, materials handling industries equipment (including elevators, cranes and hoists), packaging machines, etc.

Leading Demand Drivers

Leading demand drivers are common to all technology sub-groups.

Leading demand Examples driver group

Regulation National regulations - Regulations e.g. Part L, Building Regulations in the UK - DIN V 1 Energy-efficiency in Building Regulation in Wallonia - 8599 in Germany

European directives: - Energy Performance of Buildings - Energy Using Products - Efficiency requirements for new hot-water boilers - Commission Regulation (EC) on ecodesign requirements for fluorescent lamps without integrated ballast, for high intensity discharge lamps, and for ballasts and luminaries able to operate such lamps - Commission regulations to remove non-efficient lighting products from the market

End user Attitudes & education demands Search for efficiency to reduce spending

Aesthetics

Occupants’ demand to obtain control capability

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Search for comfort and security

Incentives and Utility rebates and incentives rewards Fiscal incentives

Installation grants/allowances

Financial Rising energy prices

Savings from energy efficiency

Technological The rise of automation developments The emergence of data communication protocols and standards such as BACnet, ENOCEAN, Zigbee and Z-Wave

IP addressing

Innovation Type

Innovation in this sector overall can be described as incremental: there has been a lack of radical innovations introduced in recent years and most innovations only introduce minor changes to the system. The CEO of a Swedish solar cooling company156 described innovation in the HVAC sector as “something that happens very little most of the time, and then during brief periods it happens very fast”.

In spite of this general moderate rhythm of innovation, these sectors have witnessed the birth of a limited number of step changing innovations with a very high potential for growth (See

Alternative Technologies).

In the Heat generation sector for example, micro CHP units are predicted to considerably change generation and consumption patterns of heat and electrical power in buildings. The HVAC sector has seen the rise of heat pumps, which now represent the main alternative to traditional HVAC. A representative from a leading French HVAC company pointed out that heat pumps are one of the most promising products for growth and innovation in the HVAC sector in future years157.

Additional HVAC sectors in which innovation is taking place include waste and heat recovery, solar air conditioning, seawater air conditioning, DC inverters, HVAC/building management systems, alternative refrigerants. The players behind the introduction in innovation often include medium and large enterprises operating at the national and regional scale, rather than large transnational companies. Climatewell is a highly innovative Swedish company specialised in renewable heating and cooling systems, which operates mainly in Europe. The company has developed a highly chemical driven heat pump that enables the storage of energy with limited thermal losses, and without the need for electricity.

156 Consultation with Goran Bolin, CEO, Climatewell, 2011. 157 Consultation with Erik Bataille, Atlantic Climatisation, 2011. 88

Innovation in the lighting sector is also moderate and mostly limited to incremental gains in energy efficiency of existing products. LED technology is one of the most promising areas for innovation, especially as it becomes more adapted to general lighting applications. However, the IP within the sector is dominated by Cree (USA), Nichia Corporation (Japan) and Philips LumiLEDs (Netherlands) and there is limited scope for new entrants.

The lighting controls industry on the other hand has seen more innovation in terms of ‘info- structure’ rather than infrastructure. In other words, most of the innovation taking place within this particular sector is related to the platforms and software designed to control lighting, rather than the lighting control devices themselves. A rising number of innovative suppliers include Adura Technologies (USA) and LUMEnergi (USA).

The electric drives sector has seen the introduction of very limited innovation over recent years. Producers have concentrated most of their efforts in differentiating their products by adding value through distributors prepared to offer an after-sales service, plus improvements in the reliability and environmental credentials of their products.

R&D Investment

Governments have increased policy actions aimed at supporting innovation in the energy efficiency sector. This has translated into stronger investments in research expenditure. According to the International Energy Agency, public sector R&D expenditure in EU member states in this area nearly doubled from 2006 to 2009, from $480m to $927m158.

Leading Drivers of Innovation

The key drivers of innovation are related mainly to the leading demand drivers, discussed present previously. However, additional factors contribute to new innovations. The most important of these is the availability of capital from public and private sources (See Venture Capital) and the increase in government support in favour of innovation.

Leading EU Innovators

See Leading EU Producers of Technology

Venture Capital

Positive growth forecasts of the energy efficiency sector are reflected in the volume of VC investment injected into it over recent years. According to the Cleantech Group and Deloitte, energy efficiency ranked third in 2009 in terms of clean technology investment (after solar and transportation), accounting for 18% of the global total or a total of $1.1bn of VC invested in the sector. In the same year in Europe, energy efficiency doubled its share of investment, reaching 19% of the total ($304m across 38 deals), and moving ahead of solar for the first time159.

This trend is expected to increase in oncoming years. The results of a survey conducted by Norton Rose among a group of investors show energy efficiency is expected to be the cleantech sector attracting the most investment interest in the short term. Survey respondents identified this sector as being the most likely beneficiary of investment over the

158 International Energy Agency. http://www.iea.org/stats/rd.asp. Statistics include energy efficiency in transportation. 159 Clean technology venture investment totalled $5.6 billion in 2009 despite non-binding climate change accord in Copenhagen, finds the Cleantech Group and Deloitte.

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next 18 months (77%), ahead of energy generation (73.7%), waste recycling (32.4%), energy storage (29.1%) and water (24.4%)160.

Barriers to Entry

Barriers to entry are common to all technology sub-groups.

Table C1.9

Main barriers Examples to entry

Technical Need for pre-existing infrastructure to install new technologies as retrofits. barriers HE boilers for example require 2-pipe hydronic distribution systems in order to be installed in retrofits. New lighting technologies do not always sit well with traditional house or commercial wiring.

Competitive alternatives (e.g. combination space conditioning-water heating systems for HE boilers).

Economic Higher installed costs compared to traditional solutions. HE boilers cost up to 3 times more than conventional boilers due to cost of production materials.

Purchasing habits based on total installed cost rather than long term benefits.

High interest rates slow down spending on new buildings and retrofits.

Institutional Absence of an infrastructure to promote this technology and provide training, and regulatory marketing and design tools.

Lack of regulatory enforcement.

Differences in regulatory frameworks across countries.

Slow acceptance of new technologies by regulators.

Cultural Lack of environmental awareness and reluctance to adopt new technologies on behalf of end-users.

End-users tend to base purchase on aesthetics rather than environmental benefits (lighting).

Potential for ETV

Based on the information in this section, there are several arguments that point to a potential use and need for an ETV scheme for energy efficiency products. Firstly, there is the existence of an important number of highly innovative SMEs operating only at a national and regional scale. For these firms, the ETV scheme could provide a means of accessing untapped markets internationally and increasing possibilities for expansion. ETV could also contribute to compensating for the lack of legitimacy these firms have vis à vis large multinationals, which tends to create scepticism among potential buyers regarding product

160 Norton Rose (2010): Cleantech investments and private equity – an industry survey. *In this study, the term ‘energy efficiency’ encompasses technologies such as electric and hybrid cars and alternative fuels, smart metering and the broader smart grid space. 90

quality and performance. The CEO of Climatewell, a firm that fits this description, stated that an ETV would be of great value to them in their ambitions for foreign expansion161.

Secondly, ETV could provide a means to overcome ‘technophobia’ displayed by potential end-users. Hesitance on behalf of final consumers is still a chronic barrier for access of new technologies into markets.

Thirdly, the interest of the global investment community to target this sector and pour unprecedented levels of venture funding into the commercialisation of new technologies illustrates the appetite for backing new innovations and spotting new business models for deploying technologies. However, given the structure and dynamic of the sector overall – including the dominance of global giants across value chains – there is a risk that many market ready products will fail to achieve the market access and their forecast growth rates. An ETV might help these developers to improve the credibility and profile of their technology’s performance amongst their global peer group.

Finally, the high growth outlook for the sector driven by both push and pull factors, promises to deliver increased activity and innovation rates. This will likely enhance the added value of an ETV scheme.

In spite of this, two structural factors point to a limited use of an ETV scheme. First and most importantly, the fact that a large majority of leading market players in this sector are not European (particularly for the HVAC sector) means that only a handful of leading EU market players (and obviously some innovative SMEs) would benefit from an EU ETV scheme. Further, it is unclear whether innovative SMEs would be interested in making use of such a scheme, if they are trying to introduce game changing innovations (see Box C1).

Secondly, the rate of innovation in most of these sectors has generally been modest, with a few exceptions. Most of the radical innovations took place over the past 10 years.

Box C1: The relevance of technology validation in the HVAC sector – feedback from innovative SME, 4Energy

4Energy162 is a UK SME that has developed an innovative cooling system for mobile base stations and server rooms which seeks to replace traditional fans and air conditioning systems through ducting the heat out of the room, rather than cooling the air. The firm does intensive R&D with a R&D budget of ~30% of turnover and 8-9 technical staff worldwide. It has received VC backing from the UK Carbon Trust – a measure of its growth potential.

The firm is now generating sales from corporates globally including Vodafone and breweries in the UK, Australia and elsewhere. They use the German TUV test house for verification. The greater the level of innovation in a product, the higher the test costs will tend to be. According to their CEO, Patrick Tindale, there is a spectrum of costs associated with product verification: "If you're at the innovative end, you need to 'test the product to death' because no-one believes your claims".

This is a challenge in 4Energy’s market because a commodity item such as an air conditioning system requires little or no testing. Another problem is that test houses will provide very functional tests to validate, for example, the power of a fan or noise levels etc. – they also generally do not determine in-situ performance. Since 4Energy’s filter membrane is proprietary - and hence does not

161 Consultation with Goran Bolin, CEO, Climatewell. 162 4Energy (2011). www.4energy.co.uk.

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fit standard norms - very often the firm has to design their own specific tests to validate performance: "We have never had a customer who hasn't wanted robust test data - on-line test data and a year's trial are both common." Indeed, as a result of customer pressure, the company has had to develop on line monitoring and performance 'dashboards' to satisfy client needs. A lot of effort is also required to write up robust trial data and to discuss results with clients, with several full time staff involved in writing technical reports specifically for clients. The key requirement for customers is whether the technology works for them, at their particular site – not whether the product has a performance verification per se.

Overall, one of the key market barriers remains the reluctance of consumers to spend more money on more energy efficient products. Consumers are unable, or unwilling, to think about longer term cost savings from products, i.e. they discount the savings. Verification might provide a useful signal to consumers about the veracity of performance claims.

1.1.1 Technology Group C: Low carbon building technologies Alternative Technologies

Due to the overwhelming number of technologies available in the low carbon building technology sub group, it is impossible to provide a complete list of alternative technologies. The following table lists the main technologies currently being used or rapidly growing.

Table C1.10

Sub technologies Alternative technologies

Window technologies Smart glass Honeycomb system Double or Triple glazed units Advanced plastic thermally insulated frames Insulated alloy frames

Door technologies Insulated plastic and alloy door (e.g. polyurethane foam filled door) Glazing Pocket

Insulation and heat retention materials Natural ventilation Natural insulation products (e.g. straw, clay, etc.) Aerogels Phase change materials Thermal screen Heat retention surfaces

Note: Innovation in the field of insulation focuses a lot on new use of old materials, such as clay, lime, hemp for example.

Monitoring and control systems Smart metering Motorized valves and actuators Sensing devices Inter building electronic control systems Balanced inter building heating systems Energy monitoring systems

Product use and Applications

The following Table presents examples of applications for new technologies in each sub- group.

Table C1.11

Sub technologies Use Examples

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Window technologies Window technologies can control Electro chromatic window glass: the amount of light and / or heat changes light transmission passing through windows. It can properties in response to voltage. be used in all kinds of buildings Honeycomb blinds: offers superior insulation thanks to the particular shape of the unit

Door Technologies Door technologies help increase building insulation

Insulation and heat Insulation and heat retention Granular insulation materials: the retention materials materials go from wall to rough technology uses diverse eco- through pipe work insulation friendly materials, such as recycled systems. The combination of papers, wool or other fabrics, these products helps reducing which have both a very high level heat exchange between inside of insulation and high-renewability and outside buildings. properties.

Natural Environmental Because companies develop Smart metering: with new houses Systems specific low carbon building becoming energy neutral or even technologies, the need for energy producers, smart meters monitoring and control system is help monitor energy use for utilities increasing. Control system help and consumers. They have been measuring the actual energetic shown to reduce energy performance of buildings. Smart consumption by modest amounts materials, such as electro through behavioural change. chromatic window glass, can Building management systems: only work with an efficient provide advance controls for system of monitoring, which management overall energy helps the materials adapt to the usage. temperature and the humidity.

Market Characteristics

EU and Global Turnover

Construction as a whole is one of the largest markets worldwide. In Europe, it accounts for approximately 10% of GDP and around 7% of overall employment. However, the European homebuilding industry was hard hit by the economic crisis, and shrank by 24% in 2009 to reach a value of $613 billion. Growth rates are estimated to recover through 2011 and accelerating towards 2014. In 2014, the European homebuilding industry market is forecast to be worth $805 billion, an increase of 31.4% since 2009163. The global turnover for the whole construction sector according to FIEC was €1,004 billion for the EU-15 in 2004. EU- 25 turnover for all construction activities according to the SBS in 2003 was €1,200 billion. Based on both sources, it appears that the proportion of the ten new member states is about 16%, that is, the same proportion as the population. The specific eco-construction turnover is much smaller, especially if only the specific parts of the buildings with a high environmental performance are taken into account164.

163 Data Monitor (2010): Industry Profile; Homebuilding in Europe. 164 Ernst & Young (2006): European Commission DG Environment: Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. 94

The sector has undergone considerable structural changes in the last few years, shifting from new construction towards the renovation market. According to Eurostat, 60% of the residential output for the sector will come from renovation activity in 2013165. This implies that those low carbon building technologies set to experience the most significant growth will be those directed at the retrofit market such as insulation, windows, and control systems.

Due to the crosscutting nature of this technology group it is extremely difficult to calculate the sector’s exact size. Innovas calculated the global building technology sector to be worth around £390 billion166 in 2007.

Despite the lack of overall statistics for the group, trends for individual markets within it show that it is expected to undergo considerable growth. Table C1.12 presents figures on the size and growth estimates for the global insulation and window industries. These figures however include both eco and non-eco insulating and window products.

Table C1.12: Forecast growth in global insulation and windows markets 2010-2015

Sub technologies 2010 2015 (forecast)

Insulation $ 30 billion $ 40 billion

Windows $ 32 billion $ 43 billion

Source: http://www.bccresearch.com/ Additional markets that fall within this group are also showing signs of strong growth. In the case of smart metering, annual sales of 129 million meters in 2008 rose to 141 million in 2009 and will rise to 193 million in 2013, an increase of 37% in four years. The meter industry has launched into the most important technological development since the introduction of the Ferraris induction meter over a century ago167.

Despite its small size, straw insulation systems are also very fast growing168.

The sector is characterised by the existence of a small number of large groups, along with a vast network of SMEs. These SMEs are responsible for the majority of innovations taking place within this sector, and operate mostly at the national and regional scale169. This is confirmed by the results of the Eurobarometer survey. Out of all the respondents from the construction sector, the overwhelming majority (87%) were SMEs with between 10 and 49 employees. Around half of the companies had an annual turnover of less than 2 million Euros, with only 1.8% reporting figures over 59 million Euros170. Competition among producers remains relatively low, due to the low numbers of firms specialised in different markets. This however is expected to change in oncoming years due to the increased creation firms in the field171.

Leading EU Producers of Technology

165 Eco Innovation observatory report, unpublished. 166 Innovas (2009): Low Carbon and Environmental Goods and Services; An Industry Analysis. 167 Data Monitor (2010): Industry Profile; Homebuilding in Europe. 168 Unpublished draft report from Eco Innovation observatory. 169 Consultation with Hervé Poskin, Eco-construction cluster. 170 Eco-innovation observatory report, unpublished. 171 Consultation with Hervé Poskin, Eco-construction cluster.

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Europe holds a leading position in the global market of low carbon environmental technologies. Northern European countries such as Germany, Finland and Denmark, as well as Austria, are the leading EU producers172.

172 Consultation with Hervé Poskin (Eco construction cluster) and Jean Luc Sadorge (Energivie cluster). 96

Global Market Leader

The following table presents a number of global market leaders by type of technology and shows the strength of EU producers, especially in German, UK and Denmark. The main competitor country is the USA.

Table C1.13

Sub technologies Leading Innovators Country

Windows Atria France Velux Denmark

Smart Glass Velux Denmark St. Gobain France SAGE Electrochromics Inc USA Chromogenics Sweden

Thermal Screen 3M USA Phifer USA Thermal Screen USA

Honeycomb System Bali USA Graber USA Levolor USA M&B USA

Door Ceco Door USA Veka Inc USA

Insulation Saint Gobain France Rockwool Denmark Knauf Germany BASF Germany Jablite UK/Germany Kingspan UK Uralta Spain Paroc France Aspen Aerogels USA

Heat retention surfaces Armstrong DLW Konzern Germany

Pipework insulation Knauf Germany Polypipe UK

Natural ventilation Daikin Japan Mahle Germany

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Breathing Buildings UK Monodraught Ltd UK

Monitoring and control Schneider Electric France systems Daikin Japan Black and Decker USA Johnson Controls USA GE USA Priva Netherlands

Technology Users

Low carbon technologies can be incorporated into the entire built environment, including residential buildings, commercial and industrial buildings, institutional buildings and public spaces.

For all buildings, an important distinction should be made between new buildings and retrofits. New buildings only represent 1% of the buildings. However, the use of low carbon building technologies in retrofits remains limited when compared to new buildings. This is mainly due to the fact that in most parts of Europe, new buildings now have to respect high standards and energy-efficiency regulations173. Public administrations are also increasingly focused on improving the energy efficiency of their own buildings. For instance, the French government passed a law demanding that all buildings be energy efficient by 2017174. No such obligations exist for retrofitting activities for the time being175.

Leading Demand Drivers and Barriers

The following Table illustrates the main drivers and barriers across the sector. The most important of these are in bold.

Table C1.14

Criteria Drivers Barriers

Economic factors • Competition for innovative • Limited demand for eco- building components innovative buildings

• High price of classic building • Building materials are too materials expensive

• Refurbishing too expensive

Technological capital • Innovative technology • Lack of innovative technology development development

• High R&D activity in the • Technological lock-ins construction sector

• Influence of model house

173 For instance, “Thermal Regulation 2012” in France. 174 “Plan Bâtiment”, France. 175 Consultation with Jean-Luc Sadorge, Head of Alsace Energivie (Regional Programme for the promotion of energy efficiency).

projects (ex. ADEME House model project)

Natural capital • Scarcity of materials for • Unfavourable geographical energy and resource- location efficient technologies

• Favourable geographical location

Socio-cultural factors • High level of awareness of • Lack of knowledge/training building/home owners of hand workers • High level of acceptance • Lack of knowledge/training of building/home owners of building planners (ex. advertising campaigns)

Regulatory and policy • Ambitious building • Lack of subsidies and framework regulation and standards programmes for sustainable (ex. EU Energy construction performance of Building • Monitoring and certification Directive) underdeveloped • Green public procurement

• Tax incentives (ex. no- interest loans for consumers)

Source: Eco-innovation observatory report, unpublished. Note: Strong drivers or barriers are bolded. Source: Unpublished CEO Report. Innovation Type Most of the innovation in this sector is either incremental or step changing176. However, governments are trying to strengthen innovation by adopting high standard regulations: the idea is to force producers to accelerate the innovation process in order to cope with forthcoming regulations. But the market is still waiting for innovations that can reduce the price differential between standard products and low carbon building technologies177.

This trend is confirmed by the results of a Eurobarometer survey. According to these, while the majority of companies in the construction sector have made some kind of investment into innovation in the past 5 years, the share of those investments that are related to eco- innovation is relatively small. Only 5% of companies reported that more than 50% of their innovation investments were eco-innovative. This is lower than relative shares in other sectors; for instance, around 10% of companies in the water and agriculture sectors reported that more than 50% of their innovation investments were eco-innovative. All in all, it can be seen that the majority of innovation investments are, not yet, focused on eco- innovation.

Figure C1.11: Share of eco-innovation related investments in the construction sector over the last 5 years

176 Consultation with Jean-Luc Sadorge, Head of Alsace Energivie. (Regional Programme for the promotion of energy efficiency). 177 Consultation with Jean-Luc Sadorge, Head of Alsace Energivie (Regional Programme for the promotion of energy efficiency).

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Source: Eurobarometer 2011, Question: Over the last 5 years, what share of innovation investments in your company were related to eco‐innovation, i.e. implementing new or substantially improved solutions resulting in more efficient use in material, energy and water?

Eco-innovation in products and services seem to be the most popular in the construction sector, when compared to organisational innovation, and new products and methods. This

differs from most other sectors, in which the most popular type of eco‐innovation is process-

related.

Figure C1.12: Introduction of eco-innovation in the past two years

Source: Eurobarometer 2011 (EC 2011); Question: During the past 24 months have you introduced the following eco-innovation? * Agriculture, Water, Manufacturing, Food services and Construction

One of the areas that promise to deliver important innovation in oncoming years is building automation. These technologies allow optimizing cost efficiency, energy use and comfort by for instance regulating temperature, or automatically closing and opening shutters.

Leading Drivers of Innovation

See Leading Demand Drivers and Barriers.

Leading EU Innovators

The leading EU innovative countries are Northern European countries, such as Finland, Denmark, along with Germany and Austria.

Barriers to Entry

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Technologies in this field face multiple barriers to accessing markets: • Lack of recognition of technology verifications by neighbouring countries: according to the head of a Belgian eco-construction cluster178, the lack of recognition of national verifications in other countries strongly limits technology developers’ capacity to export towards neighbouring countries. • Lack of demand: Because energy is usually a relatively small part of the total cost for building occupants, energy-efficiency remains a low priority179. This has to do with the lack of regulation concerning existing buildings. Given this problem, eco-building technologies have a limited market target, which keeps the prices for these technologies very high (except for standard technologies, such as double gazed windows or insulated doors)180. • Fragmentation of the market: the building sector involves a large number of actors, in particular SME, all over Europe. The general market is highly national. The large number of companies involved lead to a poor level of cooperation between companies, and the size of most of the companies prevent them from reaching the economy of scale needed to innovate. • Lack of knowledge on behalf of users, consumers and installers: New technologies are generally unknown to potential users, as well as to building planners and installers that recommend their use to final consumers. This represents a huge barrier to market diffusion181. • Lack of knowledge on long-term performance: People buying highly efficient products usually pay more for these technologies. As a result, they want to have a guarantee of the efficiency of the products. Because some technologies – for instance thermal screens or heat retention surfaces – or even monitoring systems are still not 100% reliable, producers need to be able to guarantee the accuracy of performance claims. This is currently not the case182. • Long payback periods183.

Potential for ETV

Overall, the existence of an ETV is likely to bring about high added value for low carbon technology developers. This is mainly supported by concerns that developers express as to the limitations brought about by the existence of multiple national verification schemes which are generally useless beyond national borders.

For instance, new insulation products can get verification in Belgium, but the company still has to have its products tested in other countries: the cost is then very high for SME184. In the UK, product testing through the British Board of Agrémont (BBA)185 – the UK’s leading approver of construction products and systems - can often cost £30,000 (€36,000) per product. This strongly limits the capacity of developers to increase their presence in neighbouring regions.

An ETV scheme would also contribute to solving two major additional issues which limited entry and diffusion of environmental technologies into the market. The first would be to

178 Consultation with Hervé Poskin, Eco-construction cluster. 179 World Business Council for Sustainable Development. Energy Efficiency Building Report; Transforming the market. 180 Consultation with Jean-Luc Sadorge, Head of Alsace Energivie. 181 Unpublished draft report from Eco Innovation Observatory. 182 Consultation with Jean-Luc Sadorge, Head of Alsace Energivie. 183 Ernst & Young (2006): European Commission DG Environment: Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. 184 Consultation with Hervé Poskin, Eco-construction cluster. 185 British Board of Agrement. (2009). www.bbacerts.co.uk/.

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produce reliable information on the performance and efficiency gains brought about by specific technologies. This information would allow more informed decision-making by consumers, based on precise data. Secondly, it would reduce the fear of adopting new and unknown technologies, often displayed by potential buyers.

One major limitation however is linked to the fact that most technology developers in this sector (ETV target group) are SMEs. These actors might not be able to afford the full cost of an ETV scheme without considerable assistance. The cost component would be a key determinant to the scheme’s success186.

186 Consultation with Hervé Poskin, Eco-construction cluster. 102

ANNEX D: MATERIALS WASTE AND RESOURCES

Overview The total European waste management and recycling market was over €95bn in 2009187. According to Eurostat data, from 2001 to 2006, the EU recycling industry alone has more than doubled, growing from €19bn to €42.4bn. The largest market is in France, followed by the UK, Germany and Italy. New member states generate less than 10% of the total recycling industry turnover. However, it is in these member states where there are the greatest opportunities for growth. In the EU-15 countries, the percentage of some waste that is recycled is already very high. Improvements become harder to achieve at such levels.

The market is mature in the EU-15. Countries are producing more waste every year in several sectors, but it is well developed and opportunities are limited. The market for waste management and recycling shows annual growth of just 3% or so. Significant growth opportunities are mainly in new member states where recycling rates are well below the EU-15 average.

The waste management industry has evolved rapidly and is now a high-profile, innovating industry led by a few multinationals such as Veolia, SITA, Remondis, FCC that dominate the market. In 2009188, Veolia Environment was the European and global leader with €9.2bn of turnover in the waste management sector (compared to an overall company turnover of €32bn and 100,000 employees). Sita was second with €5.5bn of turnover in the waste management sector (and an overall company turnover of €12bn). Other European leaders, such as Remondis or FCC, are much smaller in the waste management market (half the turnover of SITA on 2007)189.

The European industry appears especially strong in the supply of waste management and recycling technologies with a global market share for European companies of around 50%. More recent data backs this statement: according to a 2010 Frost and Sullivan report, Europe maintains a strong position in the global recycling market190.

The waste management structure is consolidated, and is expected to become even more so191. The market share of the three largest waste companies exceeds 40% in Spain, France, Netherlands and Belgium, and is approaching this level in Germany. At the European level, the top ten waste management companies accounted for 15% of the market in 2006.

The leaders in these markets are large international companies (accounting for more than 80% of market). Small local/national companies account for 20%. Very few companies are of intermediate size. In general, the largest companies concentrate their operations across urban areas where they benefit from economies of scale, especially for investments in

187 European Commission (2010): Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the Thematic Strategy on the Prevention and Recycling of Waste. 188 Financial Times (2008): Waste management: A problem that comes in heaps. 189 European Federation of Public Service Unions (2007): Waste management companies in Europe. 190 Frost & Sullivan (2010): Strategic Opportunities in the European Waste Recycling Market. 191 European Federation of Public Service Unions (2007): Waste management companies in Europe. See also for the UK : DEFRA, Waste Strategy Annual Progress Report 2007/08

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recovery and treatment; the smaller players tend to focus on more rural markets, typically in localised operations.

In the recycling industry specifically, the industry structure is characterised by a few large companies and numerous very small companies. Many SMEs are still present: in 2006 there were 15,500 companies in the sector.

Large companies are especially present in the sector for secondary sorting and recycling, whereas small companies are found in the sectors of collection, primary sorting, treatment, as well as final waste disposal (e.g. landfilling).

The industrial structure varies according to the different waste material areas. In some of them, such as lead-acid batteries, the structure of the sector is vertically integrated: the waste management chain, from collection to recycling, is totally or partly owned by the material producers. Conversely, plastic waste management and recycling is independent of the material provider and producers.

In the recycling industry the European leaders are for example, European Metal Recycling Limited (UK), SITA SA (FR), Interseroh AG (part of the German ALBA Group), TSR Recycling Gmbh & CO. KG (DE).

World industry leaders in waste collection, recovery and treatment are Waste Management Inc. (US), Allied Waste (US), Republic Services (US), SITA (FR), Veolia (FR), and Remondis (Germany).

The main driver for the waste management and recycling sector are the numerous EU regulations such as the EU Landfill Directive, the Packaging Directive, the Battery directive, End of Life Vehicles Directive (ELV), the Waste Electric and Electronic Equipment Directive (WEEE). Other important drivers are the need to tackle growing waste volumes (a result of waste generation still not being decoupled from GDP growth), declining landfill capacity (in part due to tighter Landfill Directive restrictions) and public acceptance of new treatment plants, together with a need to process increasingly complex waste streams.

Some drivers are specific to sectors such as the cost of metals or rare earth materials in recycling which is providing a strong economic case for investment in recovery and recycling plants and technologies.

In general, large waste companies follow Build Own Operate business models, with cost recovery from charges levied on consumers. Many firms win contracts to supply municipal authorities with long term (e.g. 25 year) collection and/or disposal contracts.

Waste management is dominated by some very large companies in Europe with strong market power throughout all the value chain. They now expand through organic and external growth toward markets with strong potential in Eastern Europe.

Fixed capital investment associated with waste treatment facilities is also an important barrier to entry, especially the sorting and recycling segments which have become increasingly automated. Other sectors are still very labour intensive.

The industry has already significantly evolved from a landfill industry into a high-technology, capital intensive business that is increasingly putting greater emphasis on a service component. Although a great deal of improvement in the amount of materials being recycled is expected in the upstream stage of the waste management chain (i.e. greater material collection rates, but also a rise in public awareness, improvement of education, etc.), some technological innovation is expected in the sorting and recycling of materials.

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However, in most technology groups covered in this study, innovation is incremental. Established technologies tend to satisfy the current needs and regulations (as it is true in sorting, battery recycling technologies, amalgam separators).

As mentioned in Ernst & Young’s 2006 report to DG Environment, and supported by our investigations, innovation does not directly drive competition in the recycling industry: “Only the large companies invest in R&D, especially with the aim of finding better recycling processes that enable them to get ‘purer’ recycled materials that can be sold at higher prices”. The technological challenges are in the recycling of new materials, especially plastics, but also recycling of new battery chemistries at acceptable costs.

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Table D1.1 Market characteristics

Technology Area Current EU Current EU share of EU Annual EU Market size Market Global Discrete purchase or General assessment Market Size Global Global Growth Rate in 2020 status Annual requirement for end of risk aversion to Market Size market Growth Rate user to require further new technologies for € billion (current € billion testing as part of end users € billion % growth) % system (e.g. wind farm)

Recycling of NA NA NA NA NA NA Mixed markets Slightly risk averse construction waste

Separation or sorting techniques ~ €0.26 bn ~ €0.44 bn 60% ~ 20% ~€1,000 bn NA Mixed markets Highly risk averse for solid waste and materials recovery

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Recycling of Average of $2 bn by 2022 Mature with No No risk aversion but batteries and 32% a year global market, new weak incentive to new accumulators between 2009 (batteries for challenges technologies and 2016 HEVs) arising

Amalgam - - - - Mature - No Low separators

Products made of ~ ~ €90bn ~ ~ ~ biomass Mixed markets Slightly risk averse

Table D1.2 Innovation characteristics

Technology Area Strength of EU EU market leaders Status of Status of Rate of innovation Level of Existence of Key barriers to Technology in supply of established alternative investment established / exploitation of Supply Side technology (dominant) technologies into EU supply accepted norms market ready technology side (VC, R&D, and standards technologies in etc.) sector

Recycling of High Pellenc ST (FR) Mature Mature Incremental Low Quality protocol High prices, the construction waste for producing need for pre- RTT Systemtechnik aggregates from existing technical GmbH (DE) inert waste (UK conditions Binder & Co AG (DE) Environment Cost of individual Agency & WRAP) equipment

Separation or World leading Pellenc (FR) Mature Mature Incremental High Quality protocols Cost of individual sorting techniques for producing equipment RTT (DE) for solid waste and packaging from materials recovery S+S (DE) waste plastics

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(Titech : NO) (UK Environment Agency & WRAP)

Recycling of High UMICORE (BE) Mature for Development of Follows the pace of Med None Price of materials batteries and recycling of recycling methods introduction of new GP&P (UK) Level of regulation accumulators established and equipment for battery requirements (for advanced battery advanced batteries technologies, batteries recycling) technologies incremental

Amalgam World leading METASYS Established Already on market Incremental Very low The amalgam Purchase cost separators Medizintechnik GmbH separator ISO Maintenance cost (DE) standard ISO 11143:2008 Medentex (DE)

Dürr Dental (DE)

Products made of High BASF (DE) Maturing Mature Mix of incremental High - High prices, the biomass and radical need for pre- Arkema (FR) existing technical Genmab (DK) conditions

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Presentation of Markets

The materials, waste and resources sector, for the purpose of this study, has been characterised according to the following five proposed Technology Groups: • Recycling of industrial by-products and waste into secondary materials, recycling of construction waste into building materials (e.g. reworking of bricks); • Separation or sorting techniques for solid waste (e.g. reworking of plastics, mixed waste and metals), materials recovery; • Recycling of batteries, accumulators and chemicals (e.g. metal reworking technologies); • Reduction of mercury contamination from solid waste (e.g. separation, waste mercury removal and safe storage technologies); • Products made of biomass (health products, fibre products, bioplastics, biofuels, enzymes).

The following stages of the value chain can be distinguished: • Collection • Sorting • Recycling • Elimination/disposal of ultimate waste (incineration / landfilling)

The main sources of waste are: industrial, municipal (commercial and domestic/household), construction and demolition, and to a minor extent, agricultural. To give an order of magnitude, in the UK in 2004-2007, demolition and construction account for 32% of annual waste arising, mining and quarrying 30%, industrial 13%, commercial 11%, household 9%192.

In the EU27, about 55.2% of all wastes derived from industry and 36.2% of the construction sector in 2008 (Eurostat data). Table D1.3 Waste generated by activity, 2008 (% of total)

Agriculture Industry Construction Services EU-27 1.9 55.2 36.2 6.7

Source : Eurostat

Recent trends with regards to waste generation by activity and its past evolution shows that waste generation has decreased or stabilised in most sectors193.

192 DEFRA data 193 European Commission, Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the Thematic Strategy on the Prevention and Recycling of Waste, European Commission, 2010

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Table D1.4 Evolution of waste generation in the EU-27

Evolution Total waste generation Decreased by 10% (2006-2008) Municipal solid waste Stabilised since 2000, decoupled significantly from GDP** Hazardous waste Increase by 0,5% (annual increase) Increase of 15% between 1997 and 2006* Manufacturing waste Decreased by 5.4% (2004-2006) Mining and quarrying Decreased by 14% (2004-2006) Services Increase by 6,2% (2004-2006) Construction waste Increase between 1995-2006* Packaging waste Increase between 1995-2006*

Source: European Commission, 2010; except * European Environment Agency, Thematic assessment Material Resource and Waste, 2010; ** European Environment Agency, European environment outlook, EEA Report No 4/2005.

In terms of forecasts certain waste stream are expected to increase, especially WEEE and packaging waste: WEEE is expected to increase by 11% between 2008 and 2014 (EU-27, Norway and Switzerland); Packaging waste is expected to continue to grow (50% by 2020 compared to 2000).

Overall waste recycling in the EU has increased mainly as a result of regulations and, depending on waste streams, the raw material price rises. The share of waste being sent to landfill has dramatically declined in recent years (see Table D1.5). Table D1.5 Rate of EU-27 overall recycling (1995-2008) 1995 2005 2008 Overall waste 25% 33% 38% recycling Landfill 65% 49% 40% disposal

Source : European Commission, 2010

Although the setting of regulatory targets is the main driver for increasing recycling, some areas are still far from achieving targets (see Table D1.6). This is especially the case for WEEE wastes and, to a lower extent, construction and demolition waste. In other areas, such as batteries, which are important sources of wastes, targets are set in terms of recycling efficiency from 50 to 75% efficiency according to battery chemistries. This target has been met for lead acid batteries, but it is still a major challenge for advanced batteries (such as lithium ion) for electronic equipments and hybrid vehicles.

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Table D1.6 Recycling targets and current estimated recycling and reuse rate by type of wastes Recycling targets Estimated recycling & reuse rate Packaging waste 55% in 2008 59% in 2007 End-of-life vehicles 85% (inc. reuse) in 2015 82% in 2007 WEEE 50-80% in 2006 23% in 2006 Construction and demolition 70% (inc. reuse) in 2020 53% in 2006 waste including soil

Source: European Environment Agency, Thematic assessment Material Resource and Waste, 2010

According to different macroeconomic scenarios194, total waste generation in the EU-27 will increase by 60 to 84% between 2003 and 2035.

Specifically by waste streams, the increase in recycling of municipal wastes is expected to continue throughout the decade (see figure below)

Figure D1.1 Trends and outlook for management of municipal waste in the EU-27 (excluding Cyprus) plus Norway and Switzerland, baseline scenario

Source: European Environment Agency, Thematic assessment Material Resource and Waste, 2010

194 European Environment Agency (2010): Thematic assessment Material Resource and Waste.

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Technology Group A: Recycling of industrial by-products and waste into secondary materials, recycling of construction waste into building materials Construction and demolition (C&D) waste has been identified by the European Commission as a priority stream because of the large amounts that are generated and the high potential for re-use and recycling embodied in these materials. Indeed, proper management would lead to an effective and efficient use of natural resources and reduced environmental 195 impacts. For this reason, the Waste Framework Directive (WFD) requires Member States to take any necessary measures to achieve a minimum target of 70% (by weight) of C&D waste by 2020 for preparation for re-use, recycling and other material recovery, including backfilling operations using non hazardous C&D waste to substitute other materials.

The recommended approach to define C&D waste is to take into account both its nature (materials used in buildings) and the activities that generate it (i.e. C&D activities), regardless of who performs these activities.

Market Characteristics

EU and Global Turnover

There is currently no reliable data on recovery and recycling rates of C&D waste in the EU. Two recent sources (UBA 2009 and ETC/RWM 2009) provide recycling and recovery rates of C&D waste in some Member States. Both sources are based on national reporting, through either Eurostat or individual questionnaires sent to member states. There are important differences between these two sources, both on quantities of C&D waste arising and reported recycling rates. These differences are again due to several inconsistencies in the perimeter and definition of C&D waste196.

Table D1.7 Comparison of reported recycling rates for C&D waste from two recent sources (UBA 2008 & ETC/RWM 2009) % re-used or recycled - % re-used or recycled -

UBA 2009 ETC/RWM 2009 Average for x countries with 86% 66% available data Total amount of C&D waste on which the estimation is 252,7 820,2 based

Source: Bio Intelligence Service - SERVICE CONTRACT ON MANAGEMENT OF CONSTRUCTION AND DEMOLITION WASTE – Final Report Task 2, February 2011

As presented above, it is very difficult to assess the present situation in Europe, due to lack of homogeneous data and reporting between member states. In this context, without a precise quantitative assessment of the current situation, it is not easy to predict trends in the future.

Two approaches were taken to forecast the quantities of C&D waste197. The results obtained with these two forecasts are presented in the table below.

195 Directive 2006/12/EC revised by Directive 2008/98/EC 196 Bio Intelligence Service (2011): SERVICE CONTRACT ON MANAGEMENT OF CONSTRUCTION AND DEMOLITION WASTE – Final Report Task 2. 197 Bio Intelligence Service (2011): SERVICE CONTRACT ON MANAGEMENT OF CONSTRUCTION AND DEMOLITION WASTE – Final Report Task 2. 112

Table D1.8 Forecast of C&D waste

198 199 Year Forecast #1 (million tonnes) Forecast #2 (million tonnes) 2005 461 461

2006 477 466

2007 487 470 2008 469 454

2009 427 514 2010 413 531

2011 413 535 2012 423 539

2013 434 491 2014 445 496

2015 456 501

2016 467 506 2017 479 511

2018 491 516 2019 503 521

2020 516 526

Source: Bio Intelligence Service - SERVICE CONTRACT ON MANAGEMENT OF CONSTRUCTION AND DEMOLITION WASTE – Final Report Task 2, February 2011 Both estimates reflect the effect of the economic crisis, with decreases in the amounts generated between 2007 and 2008. Whereas forecast #1 shows a continuous decrease until 2011 (due to the economic crisis) and then a progressive increase, forecast #2 suggests that amounts of C&D waste generated start increasing again in 2009 (mainly due to more important renovation activities linked to stricter environmental criteria for buildings).

In the long term, these effects cancel out and both forecasts show similar patterns, with a total generation of C&D waste in 2020 of around 520 million tonnes.

198 Based on the production index of the construction sector (EUROSTAT data series from 2005 to 2009, industry estimates from 2009 to 2013, and gross BAU estimates for the period 2014-2020) 199 Based on assumptions on the new constructions, renovation and demolition rates from 2005 to 2020.

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Table D1.9: Recycling markets Material How is it recycled? Recycling markets Concrete The material is crushed, the Road base reinforcement bar is removed, and General fill the material is screened for size. Drainage media Pavement aggregate Asphalt Pavement The pavement is crushed and Aggregate for new asphalt hot-mixes recycled back into asphalt, either in- Sub-base for paved road place or at a hot-mix asphalt plant. Asphalt Shingles After removal of nails, asphalt Asphalt binder and fine aggregate for shingles are ground and recycled into hot-mix asphalt hot-mix asphalt. Wood Clean, untreated wood can be Feedstock for engineered particle remilled, chipped, or ground. board Boiler fuel Recovered lumber re-milled into flooring Mulch and compost Animal bedding Drywall Drywall is typically ground or broken Gypsum wallboard up, and the paper is removed. Cement manufacture Agriculture (land application) Metal It is melted down and reformed. Metal products Cardboard It is ground and used in new pulp Paper products stock.

Source: Today’s recycling solutions, Volume 1, Number 1. Leading EU Producers of Technology

In Europe, leading producers of such a technology are the same that in sorting technique technologies. Indeed, these technologies are at source of waste construction recycling.

Table D1.10 Leading EU producers of technology

Company name Country

Pellenc Selective Technologies France

RTT Systemtechnik GmbH Germany

Binder & Co AG Austria

Separation and Sorting technology GmbH Germany

114

Global Market Leaders Global market leaders in recycling C&D waste are dominated by American companies, especially the Astec Aggregate group (see Table below).

Company name Country

Astec Aggregate & Mining Group USA

Breaker Technology, Inc. USA

Johnson Crushers USA

Telsmith, Inc. USA

Continental Silverline Products Inc USA

Source: Umweltpolitische Innovations und Wachstumsmärkte aus Sicht der Unternehmen, 2007, Roland Berger 200 Strategy Consultants

Technology Users

The main technology buyers and users are C&D companies and recyclers (groups like Vinci, Bouygues, Lafarge, etc.). However, mining and quarry companies and road builders are also involved in the market201.

Innovation Type

Innovation is mainly incremental and it is mainly the plant operators that seek refinements to the technologies from the developers202.

Leading Drivers of Innovation

The two main drivers of innovation are the plant operators and regulations. European Commission had revised the Waste Framework Directive (WFD). The aim of the revised WFD is to promote waste prevention, increase recycling, and ensure better use of resources, while protecting human health and the environment. It re-enacts much of the existing WFD, and leaves the legal definition of waste unchanged, but it also contains a number of new features, including achieving a 70% recycling rate for C&D waste by 2020203.

Barriers to Entry

Without any dramatic economic event, it seems that the amounts and composition of C&D waste will follow the trends that have been observed to this day. There are two main barriers:

200 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. 201 Consultation with Laurent Chateau, director of sustainable consumption and waste, Ademe. 202 Consultation with Laurent Chateau, director of sustainable consumption and waste, Ademe. 203 See Directive 2008/98/EC on waste (Waste Framework Directive) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:114:0009:0021:EN:PDF

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Economic - the largest share of C&D waste is usually composed of concrete, masonry, asphalt and other mineral waste such as stones, sand, or gravel. The main barrier to recycling this mineral fraction is that virgin material that could be substituted by the recycled fraction (such as natural aggregates) are often easily and locally available, and can be produced at low costs. As a result, the economic attractiveness of secondary raw materials from mineral C&D waste can be low compared to virgin raw materials; recycling of the mineral fraction of C&D waste has been mostly successful in high density area, where virgin raw materials extracted from quarries are less available30.

Technical - ineffective sorting and contamination of wastes. The key to successful recycling of the mineral fraction of C&D is to collect the waste that is free of contaminants.

To overcome this problem, efforts should be made to sort out the different materials composing waste at source. In the UK, the Environment Agency, working with the Waste & Resources Action Programme (WRAP) have jointly developed Quality Protocols to help improve the reuse of a number of solid waste materials which were being impacted by a lack of clarity over whether a waste is a raw material or a waste. The UK’s Quarry Products Association (QPA) working with the Highways Agency and WRAP developed a formalised quality control procedure for the production of aggregates from inert waste204.

Potential for ETV

The main rationale that might call for the application of an ETV scheme in recycling construction waste technologies is, on the one hand the growing market and on the other hand the perspective that this growth will continue in the future, especially due to the regulation. However, an ETV scheme could not be effective due to the fact that the machinery is large with a low number of sales205. Moreover these types of equipment are tailor-made so that an ETV certification may not have a strong impact.

Technology Group B: Separation or sorting techniques for solid waste and materials recovery Sorting is a crucial step in the recycling process and includes the identification and separation of various materials. The recovery of waste allows a drastic reduction of landfill, which is an important aim for the European Commission. The focus of this analysis is on automatic systems, particularly on Eddy Current Separators, Magnetic Separation Equipment and Sensor sorting systems, which are far more efficient than traditional methods like manual sorting.

Manual processes still play an important role in the recycling of municipal waste but are faced with inefficiency problems. Whilst consumers often separate different substances at source, waste management facilities are often required to do further sorting. Mechanical methods such as air classification, eddy current separation and magnetic separation are used for classification by size, shape and weight as well as for removal of metals.

In the induction method, an electromagnetic field is built up in the metallic part of the waste stream. Using this method, non-ferrous (i.e. non-magnetic) metals such as copper or stainless steel can be sorted. Automatic sorting technologies can also separate different materials with the aid of sensors. The specific material types and properties (colour, shape, etc.) can be recognized and sorted.

204 WRAP. The Quality Protocols. (http://www.wrap.org.uk/recycling_industry/quality_protocols/index.html). 205 Consultation with Laurent Chateau, director of sustainable consumption and waste, Ademe. 116

Automatic sensor sorting technologies are an extension and an optimization of existing mechanical methods. They can replace manual steps in the recovery process. But today, the manual sorting is still necessary to ensure quality assurance.

Certain technologies based on sensors can recognize the different substances in waste. These optical sensors are based on infrared, lasers, ultraviolet or X-ray image recognition. The sensor sorting system detects respective materials, which are then sorted by an air pulse from the stream. Sensor sorting technologies are often combined with conventional mechanical sorting methods.

The separation and sorting market has been characterised according to the several technologies: • Sensor sorting systems; • Eddy current separation; • Magnetic separation; • Pneumatic separation; • Hoppers; • Sifters/screeners; • Conveyors; • Briquette making; and • Mixers.

The Eddy Current Separator (ECS) is an advanced non-ferrous separator capable of separating domestic and industrial waste into two individual containers. It separates non- ferrous metals such as aluminium and copper from non-metallic materials such as wood and plastics. Non-ferrous separators are very common in the fast growing market of can sorting, where they can provide an accurate separation of aluminium cans from steel cans and plastic bottles. Dependent on the application there are two types of ECS rotor available: a high strength rotor for delicate or specialised separations; and a standard rotor for less complex separations such as cans.

Magnetic Separation Equipment is suitable for separating general tramp iron and contamination such as nuts, bolts, nails, steel cans, wire etc. It is also suitable for removing general tramp iron, weakly magnetic material, fine iron/wire and ferrous metal with inclusions such as wood, rubber, non-ferrous metal etc.

Sensor sorting systems are automatic separation technologies consisting of an identification step and a removal step (e.g. the use of optical technologies to sort different types of plastic bottle)

Alternative Technologies

The main alternative technology to sorting is landfilling.

Product Use and Applications

Automatic sorting systems are used for several types of waste including municipal waste, commercial and industrial waste; C&D waste; as well as for recyclers and refiners. Of these, municipal waste is by far the most heterogeneous. It is made up of household waste as well as green waste and non-industrial commercial waste. Municipal waste is composed

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principally of packaging (plastics, metals, glass, etc.), paper, cardboard and other organic materials. Machines are used to obtain optimal recovery from the compost composed of organic material as well as from pre-treatment facilities processing household waste (untreated and residual). Producing residue derived fuels (RDF) from municipal waste also requires automatic sorting.

For quite some time industrial waste has been one of the primary sources of recyclable material (metals, then paper and cardboard, wood and plastics) since they are made up largely of very recyclable materials. In some countries over 50% of industrial waste is recycled. Initially, comparatively large quantities of clearly identified clean waste stocks were targeted for recycling. It subsequently became possible to recover energy from this waste. However, the paper cannot be incinerated because its energy value is too high. The solution consists in producing an alternative fuel. Residue derived fuels is a fast growing area and used to a greater or lesser extent depending upon the country. It is only more recently that automatic sorting has been applied to industrial waste since the economic and technological conditions were previously not favourable. Current limits on landfill in Europe are stimulating sorting and the use of RDFs.

C&D waste is principally composed of inert materials, but also contains such materials as wood, plastics, paper, cardboard, and ferrous and non-ferrous metals.

In order to recycle secondary raw materials it is necessary to separate recovered materials that have been sorted either at source. The aim is to eliminate residual contaminants to obtain an equivalent degree of purity to a raw material. For glass, these technologies have been used for over 15 years now, but it is a more recent development with plastics. Quality requirements for end-users are increasingly stringent irrespective of the type of material.

Market Characteristics

EU and Global Turnover

In 2005, the worldwide market for automated technologies of separation was €190 million206. Based on estimations of companies specialized in sorting technologies, the growth of the global market for automatic sorting technologies for the next 10 to 15 years will be an average of 14% per annum. So, this market could reach €1.4 billion in 2020207, growing from €440 million in 2010.

Outside Europe, Japan and North America are two relevant markets but South Korea and Australia also are important markets for sorting technologies.

The largest market for automated waste separation technology is Europe - 65% of global production is sold in Europe (see Figure D1.2). Germany accounts for two thirds of European sales (i.e. €80 million of €120 million turnover)208. Technology suppliers benefit from very strong and growing demand in Europe209.

Figure D1.2 Global and EU turnover of automatic sorting technologies (2005 – 2020, in million euro):

206 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. 207 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. 208 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. 209 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. 118

Source: Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. With over 65% of global demand and 80% of supply of the global market, Europe is the largest market for automated material separation technologies, and the market leader in technology supply. Germany represents 40% of the global market volume. Europe has a competitive advantage in sorting technologies due to its 20 years of experience. However, this competitive advantage could be challenged by emerging economies, particularly Asian countries.

The first large-scale demonstration has been the automatic sorting of waste from municipal waste. These technologies are now mature and recognized by customers. Automated sorting technologies are already used in the glass field, particularly throughout Germany. Increasingly, they are also used for sorting plastics. In Germany, for example, 80 to 90% of sorting factories for waste packaging are equipped with automatic sorting devices. In the rest of Western Europe, they are 60 to 80%, although a massive investment programme is currently underway210.

Table D1.12 Automatic sorting market potential between 2007 and 2020 Region Potential Asia Very high China Very high North America Very high EU Medium Japan Medium South America High Australia Medium Russia High Africa Low

Source: Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. In terms of market potential, Asia, China and North and South America are the main future market for automatic sorting technologies producers. For instance, the leading producer

210 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany.

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Titech has installed a number of new sorting plants in Argentina in 2010211. China is the leading market for non-ferrous metals recycling – and recycling rates in China are set to increase dramatically, with an annual growth of 9.1% per year until 2013212. In Europe, the market is not saturated but the prospects are lower than in these three markets

Leading EU Producers of Technology

In the global market for automatic sorting methods, there appear to be ten key players. In addition there are some young and smaller companies trying to establish themselves in the market. The individual product area determines the market structure. For example, there are just three leaders for glass, metal and plastic, which serve more than two-thirds of their market: Separation and Sorting technology GmbH, Binder & Co AG and MSS Inc.

Another phenomenon is relevant in this market: the consolidation of the waste management market due to rising investment costs and the importance of achieving scale in throughput and utilisation. This is not yet the case in Germany. Of the approximately 1,000 German SMEs involved in packaging waste management, the ten largest represent about 80% of the market turnover whilst in other European countries such as France, Britain and Spain, the market consolidation is more advanced, and there are only two or three dominant waste disposal companies.

Table D1.13 Leading EU producers of technology

Company name Country Specialization Pellenc Selective Technologies France Plastics RTT Systemtechnik GmbH Germany Plastics Binder & Co AG Austria Glass

Separation and Sorting technology GmbH Germany Glass

All the major players in this market are SMEs, but they are all internationally active. Moreover, there is an increasing competition in the industry – a result of price pressures. Companies agree with the expectation that competition and price pressures will be exacerbated in the future; they also think the market will consolidate in the medium term.

Market leaders in the plastics field are Pellenc ST (France) and RTT Systemtechnik (Germany), each with about 15% of the market. Pellenc ST has more than 110 employees, a turnover of €21 million and has installed 450 units worldwide.

The glass sector is dominated by the Austrian Binder & Co and the German S + S. Separation and Sorting Technology GmbH has 230 employees and is present in 60 countries. Its turnover exceeded €22 million in 2009213. Binder & Co had a turnover of €55 million in 2010214 and employees 233 persons (2011).

Global Market Leaders

The global market leaders are the European market leaders (see previous section). But there are two others leaders outside Europe: Titech and MSS Inc.

211 Sensor Based Sorting System Destined for Buenos Aires, Argentina - www.waste-management-world.com 212 bcc Research (2008): Recycling Markets in China. 213 Separation and Sorting Technology GmbH (2010). http://www.sesotec.com. 214 Vara Research (2009): Binder & Co analysis. 120

Table D1.14

Company name Country Specialization

Titech Norway Plastics

MSS Inc USA Glass

Norwegian Titech is the market leader in the plastics field. The company is mainly based in Germany and covers half the market215. Titech technology is used in 35 markets worldwide and more than 2000 units have been sold to date. More than 650 of these units are installed in Germany alone216.

Technology Users

In the waste management sector, a high level of vertical integration characterises the largest players. They are present from collection (to secure flow of waste) to treatment/disposal (including sorting) and are active on all types of waste, most of the time via dedicated subsidiaries. This is a way that demand for an integrated offer from industrials can be met. Firms like Veolia, Sita or Remondis are the main users of sorting technologies217.

Leading Demand Drivers

The primary market driver for environmental technologies in Europe is the EU environmental policies. In June 2008 the European Parliament voted to reshape the waste framework directive and the new rules are that each country will have to set and adhere to its own targets on waste. In terms of recycling, the new legislation states that 50% of all household waste and 70% of all construction waste must be re-used or recycled by the year 2020, so the need to make sure sorting processes are as effective and economical as possible is of paramount importance218.

Today, the most important driver of innovation for companies specialized in sorting technologies is the demand of both the market and customers for innovative solutions. The demand for automatic sorting technology has to be viable from a business perspective. Another important success factor, according to companies, is the access to research results. The development of technologies for automatic separation requires a high level of research effort. This is why companies research independently. Access to research results is even more important because only a few research institutions are active in the field of automatic separation.

Companies also stressed the importance of policy instruments as a driver of demand. They are aware that their industry has arisen primarily as a result of regulation, particularly with the general developments concerning the organization of waste management companies. But political regulation of market growth may also have limitations and some concerns have been raised that regulations have hindered innovation. For instance, some actors in the industry have claimed that policies such as waste incineration or deposit system in Germany (e.g. Duales System Deutschland, DSD) or Scandinavia have had direct negative

215 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. 216 TITECH: Innovation in Global Recycling (2011): www.titech.com. 217 The Boston Consulting Group (2005): Waste management market in Europe, structure and evolution perspectives. 218 Claudine Capel. Waste sorting – A look at the separation and sorting techniques in today’s European market. www.waste- management-world.com.

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effects on the demand for sorting technologies. However in general, companies estimate that the effect of waste regulations is strong and positive219.

Finally, according to companies, increasing demand for secondary raw materials is also a key driver for the market development of sorting technologies. In view of rising global commodity prices, it is also economically more interesting to recycle waste. Recycled paper, glass and metal are valuable; the recycling of plastic waste has also become viable in economic terms due to rising oil prices.

Innovation Type

The current innovation type within this sector is incremental. Technological development work currently focuses on optical methods, with R&D on more accurate methods for separation and improving the interaction between the sensor and pulse separation. In general, companies expect that the various technologies in the recycling process are increasingly combined and integrated. The sensors of the future are likely to be able to detect out not only individual substances, but all substances of the waste stream.

A challenge for the development of automatic sorting technologies is to further improve sorting efficiency, i.e. the flow speed and thus the capacity of sorting facilities.

Leading Drivers of Innovation

The need for cost reductions is driving innovation in the field of sorting systems. The mechanical sorting system can reduce the number of manual step in the recycling processes. Moreover, the automatic sorting technology is more efficient and cost is lower than manual sorting. Under the condition of sufficient capacity and throughput of large amounts of equipment enables the automation of a reduction in sorting costs.

Leading EU Innovators

In automatic waste sorting technologies, European firms are the leading global innovators. Innovation in sorting technologies is cost effective because of the scientific research that is necessary upstream, therefore principal enterprises grant a relatively high share of their turnover to R&D.

Table D1.15 Leading EU Innovators

Company name Share of turnover Technology dedicated to R&D220 Titech 15% Sensor-based sorting systems Pellenc 15% Optic sorting Separation and Sorting technology GmbH 10% Magnetic separators

According to the share of the turnover dedicated to R&D, Pellenc ST and Separation and Sorting technology GmbH are the biggest innovators in this field.

Barriers to Entry

219 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. 220 See producers website: www.titech.com, www.pellencst.com, www.sesotec.com. 122

The main barriers are: • Waste regulations; • High R&D costs;and • Difficulties of accessing finance; Cost of individual equipment.

The economics of the treatment and disposal of solid waste are increasingly driven by regulatory demands relating to the environment (the need for capital expenditure on treatment facilities that meet environmental standards, the need for planning permission etc.). This creates significant barriers to entry and encourages economies of scale whereas collection is a market with low barriers to entry and correspondingly low margins and returns221.

Since innovation is an important internal success factor, high R&D costs can also deter new entrants. The second important factor for success is the recruitment and retention of qualified personnel. Companies222 emphasize the importance of know-how in marketing and distribution of innovations in this context. The lack of knowledge and qualified labour is therefore seen as a barrier to entry on this market. For instance, 20% of the 110 employees at French Pellenc Selective Technologies are dedicated to R&D223.

Company access to finance is also seen as a significant barrier. Given the large development effort for procedures for automatic separation, financing needs are high. For a young company, it is a major challenge to find finance.

Finally, the cost of equipment is also a barrier. The cost for individual equipment depends on the size and technology and is generally between €60,000-400,000. A complete sorting system costs between €3 and 15 million (depending on the size and technologic complexity). Of these, 30% goes to sensor sorting systems, 25% of mechanical process equipment and the rest on steel, conveyors and buildings224.

Potential for ETV

The main rationale that might call for the application of an ETV scheme in automatic sorting technologies is the growing market and the perspective that this growth will continue in the future, driven by regulations, environmental concerns and the shift to automatic sorting for economic reasons.

However ETV scheme may not have a strong role to play in this technology group for the following reasons: • According to an interview at Pellenc Technology (optic technology), one of the market leaders, the demonstration of technology is often done directly with the client. Each waste stream (type of materials, quantity of waste) and operational conditions (dust, etc.) is specific to each operation. It therefore requires some adaptation of the technology (for instance with regards to screeners) before being fine-tuned with the client. Certification of the technology’s performance is done with the client during the prototyping phase – and most of the time this is directly on site since there is an important phase where the “technology has to learn and adapt to the

221 The Boston Consulting Group (2005): Waste management market in Europe, structure and evolution perspectives. 222 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. 223 Pellenc Selective Technologies (2011). www.pellencst.com. 224 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany.

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specificity of the waste stream. This is what really determines the performance of the technology for each use”. • These are large equipments characterised by a rather low number of sales and discrete sales, with a corresponding increase in the upfront effort required to convince the client of the technology’s merits.

1.1.2 Technology Group C : Recycling of batteries and accumulators Product Use and Applications Batteries contain a number of metals and chemicals that can create serious environmental damages if not properly treated. They generate risks of soil contamination and water pollution leakages occur. Recycling of batteries reduces the number of batteries being disposed in landfill sites and reduces this risk.

Market Characteristics The battery waste management market is expected to increase rapidly in the coming years as a result of the growing demand for batteries, especially in portable electronics and alternative vehicles, and in relation to the increasing EC regulation that impose collection targets and recycling efficiencies. However, as explained by European Battery Recycling Organization (EBRA) it is extremely difficult to obtain market data on battery recycling. Company data is kept strictly confidential in a context of fierce competition between recyclers. According to consultation with EBRA225, recyclers have made important investments in past years as a result of the Battery Directive. Many member states have been slow to translate and implement the Directive into national law. The sector is therefore characterized by over capacity and strong competition. Data can only be approached indirectly.

According to Freedonia forecasts in 2010, the world primary and secondary battery demand is forecasted to climb 4.8% per year to $109 billion in 2014226. This growth is partly due to China’s demand as it is the leading battery market.

India’s demand for batteries will also be very important. However, the battery markets in the US, Japan and EU-15 are projected to increase at rates below the global average through 2014. An increase of approximately $4.7 billion overall in battery sales is expected in western economies.

In terms of technologies, new chemistries are increasingly challenging lead-acid batteries, especially in renewable applications. Lead acid batteries should however conserve an important share in some growing applications such as telecom stationary applications (to support new phone networks). In addition, despite downturns, lead-acid batteries will still benefit from continued growth in the number of vehicles in use (and especially in emergent markets). Moreover, the recycling capacity and technology for lead-acid batteries are already in place.

Technology: according to the BCI (Battery Council International227), 97% of all battery lead is recycled, compared to 55% of aluminium soft drink and beer cans, 45% of newspapers

225 Consultation with Alain Vassart, General Secretary of EBRA (European Battery Recycling Organization). 226 Freedonia Group (2010): World batteries, Market research. 227 Battery Council International (2009): Recycling rate study. http://www.batterycouncil.org/LeadAcidBatteries/BatteryRecycling/tabid/71/Default.aspx 124

and 26% of glass bottles228. Currently a typical new lead-acid battery contains 60 to 80 percent recycled lead and plastic.

Capacity: in the U.S., over 99 percent of automotive starter batteries were recycled in 2006 according to the U.S. EPA. The secondary (recycled) lead now accounts for an increasing share of the overall lead production (and batteries represent 85% of lead use in 2009, compared to 27% in 1960).

Figure D1.3 Global primary and secondary lead production (1970-2009)

Source: D. Wilson, Lead in the 21st century: the era of the lead-acid battery, Internal Lead Organisation, 2010

According to Freedonia forecasts, non-lead-acid secondary battery demand will grow more rapidly than sales of primary and lead-acid secondary batteries through 2014229. The rapid growth of portable electronics will increase the demand for lithium ion and lithium polymer batteries and, to a lesser extent, nickel-metal hydride batteries. Primary battery demand will increase with the growth of electrical and electronic product markets. In both the primary and secondary battery markets, this growth in market volume will come along the shift from traditional chemistries to new advanced technologies. This will have strong impact on the recycling business since these chemistries require different recycling technologies.

2014 forecasts also predict high growth in batteries for industrial applications. Demand for batteries used in industrial and other applications will follow the ongoing growth in gross fixed investment. Automotive battery demand is expected to climb less rapidly, held back by the relative maturity of this market in most developed nations and expected declines in lead and lead-acid battery prices.

The market that combines the highest forecasted growth and recycling technological challenge is the one of electric and hybrid vehicles. The expected rapid growth in hybrid vehicle production will boost demand for these batteries because of both the volume of cars that might be circulating and also because of the amount of materials in each battery. The most popular hybrid vehicle, the Toyota Prius (Ni-MH battery) has already reached global cumulative sales of 1 million vehicles in 2008 and 2 million vehicles in September 2010 (the

228 One can also read in several sites and articles the claim that lead-acid batteries are the world's most recycled product. 229 Freedonia Group (2010): World batteries, Market research

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U.S. being the largest market with 814,173 units registered by December 2009)230. According to Honda, all materials in the Prius batteries are currently being recycled “from the precious metals to the plastic, plates, steel case and the wiring”231. The three companies authorised by Toyota to recycle the batteries are SNAP, Accurec and Umicore232.

Figure D1.4 Prius sales by region 1997-september 2010

Source: Green Car Congress The expected growth and technological challenge will increase in the future as lithium batteries should gradually replace Ni-MH batteries. According to Freedonia, the market for Hybrid and electric vehicles (HEVs) is expected to grow 22.9% during the period 2006- 2015. It would then reach 2.5 million units by 2015. The lithium battery market will follow this pace. According to JP Morgan forecasts, the market for Lithium ion batteries should grow from $10.8m to $1.5bn in 2020.

Table D1.16 Future of EV and Lithium-ion battery markets (2009-2013)

2009 2011 2013 2015 2017 2020

Li-ion batteries 1.8 15.1 34.3 59.8 104.0 159.1 (in$10 million) EVs (in 10,000 74.4 169.3 295.6 496 833.6 1293.6 cars Source: JP Morgan The figure below present scenarios for lithium market penetration according to six different market studies proposed by Chemetall, a leading producer of lithium compounds. The right

230 Green Car Congress, Worldwide Prius Cumulative Sales Top 2M Mark; Toyota Reportedly Plans Two New Prius Variants for the US By End of 2012, October 2010. 231 Hybrid Cars (2006): Hybrid battery toxicity. http://www.hybridcars.com/battery-toxicity.html 232 Toyota Prius' Battery Recycling Plan, Autoevolution. http://www.autoevolution.com/news/toyota-prius-battery-recycling-plan- 8360.html. 126

figure shows that the amount of lithium to be recycled coming from HEV batteries, could be an order of magnitude higher than the one coming from portable electronic batteries. The left figure shows the incidence on recycling volume potential and timing. According to these forecasts, the volume of recycled lithium would in 2030 account for about a fourth of the demand for lithium in HEVs.

Figure D1.5 Lithium market penetration scenarios and recycling potential (in lithium carbonate equivalent)

Source: Steffen Haber, Lithium Recycling Activities from EV Batteries233 The problem is that there is currently little infrastructure for lithium battery recycling, mainly because the batteries in electronic portable devices are small and the price of lithium is low. As claimed by the author of a report by Canaccord Adams “It’s a market that’s in its infancy”234.

The current state-of-the-art of lithium batteries for portable equipment is far from satisfactory235 due to;

• Post-consumer collection rate is poor;

• No dismantling, separation of individual components and treatment;

• In most cases, the technology is pyrometallurgical recycling (as opposed to Hydrometallurgical recycling), which results in lithium residues in slag or flue ash; and

• Focus on transition metals (Co, Ni), lithium materials are not poorly recycled.

Although there is currently little economic incentive to invest in the development of the required infrastructure, this might change in the future if the price of materials in lithium batteries increases as a result of increased demand. There are indeed growing concerns regarding the potential shortage of lithium carbonate and the increase of the dependence on countries that control most of the lithium reserves (e.g. China, Russia, Bolivia).

233 Haber, Steffen (2010): Lithium Recycling Activities from EV Batteries. Chemetall presentation, Sustainable development of lithium resources in Latin America, Santiago de Chile. 234 Cleantech Group LLC (2009): New business opportunities opening with lithium battery recycling. http://cleantech.com/news/5068/recycling-tied-lithium-battery. 235 Haber, Steffen (2010): Lithium Recycling Activities from EV Batteries. Chemetall presentation, Sustainable development of lithium resources in Latin America, Santiago de Chile.

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Frost & Sullivan236 state that the EU battery waste management market will have increased by an average of 32% a year between 2009 and 2016. From $10.3 million in 2009, it would then reach $74.0 million by 2016. Frost & Sullivan also state 237 that the EV Lithium-ion battery recycling market could be worth more than $2 billion by 2022, when about 500,000 end-of-life batteries would enter the waste stream.

Leading EU Producers of Technology

The recycling value chain gathers a wide variety of actors at different stages of the chain:

• Battery manufacturing;

• Collectors;

• Related logistic services;

• Sorting; and

• Recycling.

The leading companies at each stage can differ according to country (especially in battery collection and to a lesser extent recycling), battery type (especially in recycling where companies tend to be specialised to one or two battery chemistries), and battery application (collectors might be specialised in industrial or consumer batteries for instance, battery manufacturers also).

Table D1.17 Selection of European Leaders by stage in recycling cycle

Stage in recycling cycle Selection of European Leaders

Duracell Saft (FR) Battery manufacturing Varta (DE) Johnson Controls Battery Europe Recyclex Collectors G&P Waste battery recycling BERZELIUS Logistik Service G&P Waste battery recycling Sorting SNAM BERZELIUS Logistik Service Lead acid NiCd Others (inc. lithium) ECO-BAT (owns SNAM (FR) G&P, UK) UMICORE Recycling ACCUREC (DE) EXIDE (US) VALDI SAFT-NIFE (SE) Berzelius Battery VEOLIA (Baltrec) recycling (DE) SNAM

236 Frost & Sullivan (2010): European Batteries Waste Management Market. 237 Frost & Sullivan (2010): Global Electric Vehicles Lithium-ion Battery Second Life and Recycling Market Analysis. 128

As shown Table D1.18, battery recycling companies have a strong presence in Germany, France and Belgium. Only Umicore have a facility dedicated to the recycling of lithium-ion.

Table D1.18 EU leading battery recycling plants

Treatment Facility Location Battery Types Treated Accurec Germany ZnC/ alkaline Nicd Batrec Switzerland mixed batteries Campine Belgium Pb Celodis/ Acoor France ZnC/ alkaline Citron France ZnC/ alkaline Button cells Li primary Duclos France ZnC/ alkaline Button cells Eurodieze France ZnC/ alkaline Li primary Fernwarme Wien Austria ZnC/ alkaline Indaver Belgium button cells Lifmetal France Pb MBM Belgium button cells Metalblanc France Pb Pilagest Spain ZnC/ alkaline Recupyl France mixed batteries Recypilas Spain ZnC/ alkaline Redux Germany ZnC/ alkaline NiMH Revatech Belgium ZnC/ alkaline SAFT Sweden NiCd NiMH SNAM F rance NiCd NiMH STCM France Pb Umicore Belgium Li ion NiMH Valdi France ZnC/ alkaline

Source: Valpak consulting, Battery Recycling Market Research Study, March 2010

Technology Users

The primary technology users are the battery recyclers themselves, in most cases related to the material suppliers as the industry of recycling is vertically integrated.

Leading Demand Drivers

The main demand drivers for battery recycling are: • The regulatory context, especially the Battery Directive (Directive 2006/66/EC);

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• The evolution of the price of material (lithium, manganese, nickel, cobalt); • The growth of the portable equipment battery market; • The take-off and growth of the HEV equipment battery market (itself depending on a wide range of factors such as the level of performance as well as reliability and safety of new battery technologies, the set up of dedicated infrastructure); and • The will of automakers and battery manufacturers to diversify their battery material sources.

Innovation Type

There are currently two main technologies for the recycling of small lithium batteries:

Pyrometallurgical processes (furnace-based) which has a lower cost but results in lithium being left in residues (ash or slag) and hydrometallurgical recycling which has a higher efficiency on Lithium

Currently, there are two potential “routes”;

The recycling of batteries with furnace-based technologies: The equipment utilised in this “route” is not specific to the battery chemistry and only small adaptations are made. The same infrastructure is used for other components and products containing materials to be recycled. Generally batteries account for a small percentage of the materials processed through these furnaces. The battery business is therefore not driving the technological trajectory. This is currently the case for alkaline manganese and zinc carbon batteries which together account for 80% of the portable batteries sold, but also lead acid batteries.

The recycling of batteries in dedicated processing equipment: Today the current economic conditions do not provide incentives for any actors to afford such costs.

There are important differences between these technologies in terms of economics, energy efficiency, recycling efficiency and maturity of the technology. The dedicated processes are still at lab or pilot plant scale.

The technology is yet to be developed to efficiently treat the expected volume of HEV batteries. According to Frost and Sullivan238, only a few valuable metals that have the potential to be used in batteries are currently under research and development. Compounds of lower-value like iron and phosphorous will pose a greater challenge to creating a profitable recycling program without additional incentives or the addition of more valuable lithium.

The two main performance targets are the costs of the equipment and processes. For instance, AEA (UK) states that it has developed a process that allows the recovery of more of the cell content than two dominant alternatives (the Toxco and Sony respective processes).

R&D Investment

R&D investment focuses on the recycling processes for new battery chemistries such as large capacity lithium batteries. Currently there are approximately 10 alternative lithium battery chemistries. Each of them requires a specific process to recover the material inside

238 Frost & Sullivan (2010): Global Electric Vehicles Lithium-ion Battery Second Life and Recycling Market Analysis. 130

the batteries. Most R&D projects are dedicated to specific battery chemistries (see FP7 project in Box D1 below).

Box D1: examples of FP7 project dedicated to battery recycling R&D

SOMABAT Development of novel SOlid MAterials for high power Li polymer BATteries (SOMABAT). Recyclability of components (started in January 2001). SOMABAT aims to develop more environmental friendly, safer and better performing high power Li polymer battery by the development of novel breakthrough recyclable solid materials to be used as anode, cathode and solid polymer electrolyte, new alternatives to recycle the different components of the battery and cycle life analysis. Targets are a Li polymer battery in which a 50 % weight of the battery will be recyclable and a reduction of the final cost of the battery up to 150 €/KWh. Main industrial Participants: UMICORE, RECUPYL, ACCUREC, LITHIUM BALANCE A/S, CLEANCARB SARL HYDROWEEE The project deals with the recovery of base and precious metals from WEEE including lamps and spent batteries by hydrometallurgical processes. The idea is to develop a mobile plant using hydrometallurgical processes to extract different metals in a high purity (above 95%). By making this plant mobile (in a container) several SMEs could benefit from the same plant at different times and therefore limit the necessary quantities of waste as well as investments. Main participants: 8 partners from 5 countries (N/A). Coordinated by the AUSTRIAN SOCIETY FOR SYSTEMS ENGINEERING AND AUTOMATION HELIOS The first goal of HELIOS project is to evaluate lithium ion electrochemical couples. The items evaluated by the project are: performance, safety, life, recyclability and global cost. Another issue addressed by the project is the definition of a European standard for safety and life (cycle/storage) tests, adapted to High Energy applications such ad EV, PHEV and Heavy Duty Hybrid Truck. The project partners include six OEMs, one battery manufacturer, test Institutes/Universities and one recycler. Main participants: CEA, OPEL GMBH, EDF, FORD, FIAT, PSA, VOLVO, UMICORE, SAFT JOHNSON CONTROLS HYBRID AND RECYCLING GMBH, various research labs

Leading Drivers of Innovation

Success factors for EV battery recycling are: • The legal framework; • Configuration and control of the entire system; • Setting of recycling standards; • Certification of recycling processes and companies; and • Battery design and quality guidelines.

Among these drivers, the regulatory context is very important (especially when the price of materials is low). In such a context, the precise modalities of the regulation have a tremendous effect on innovation incentives. For instance, there is currently a debate regarding the calculation of battery recycling efficiency, what can be included in the calculation rule. If the definition is kept “open” the current low cost - low efficiency

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technologies (furnace-based) will have an advantage. Only a stringent definition of recycling efficiency would support the development and introduction of new technologies.

The consultations in this technology group both confirm that the regulation is the driving element, but it is currently not pushing in the direction of new technologies and innovation in battery recycling239. Interviewees240 mentioned that the current target set by the Battery Directive is reachable with available technologies. This is especially true for lead-acid batteries and Nickel Cadmium batteries. Other types of batteries, for which a recycling efficiency of 50% should be reached, the situation is mixed according to battery chemistry. This is challenging for Lithium-polymer batteries; whereas it is easy to comply with this level in Nickel Metal Hydride batteries. It also depends on the precise calculation mode for the recycling efficiency: it is currently not clear whether the 50% level should be achieved by battery type or as an average for all battery types. In the latter case, the regulation would be less challenging allowing trade-offs and balances between battery types.

Leading EU Innovators

Leading innovators are large integrated companies, in the case of HEV batteries, as revealed by the list of participants to Framework programmes241 dedicated to advanced battery recycling, innovators are the material suppliers and battery recyclers such as UMICORE (Belgium, FP7 project), Rare Earth Material (FP project) and Chemetall (DE, project financed by the German government on lithium ion battery recycling)242.

Outside Europe, Toxco (US, project financed by the under the American Recovery and Reinvestment Act to research hydrothermal recycling of lithium-ion batteries) and Sony are also conducting research on specific processes to recycle lithium batteries.

Business Models

The business model of advanced battery recycling is dependent on the Battery Directive and the price of materials. It differs according to battery types, which are affected differently by the regulation and which contain different materials. Beside these two structural variables, it also depends on company origins and other markets. For instance, if the recycling company is owned by a vertically-integrated group that produces materials, the business model should be understood on the level of the whole value chain (see UMICORE and its “loop business model”, from raw materials to raw materials). If the recycling company is specialised in recycling the business model will be different.

For several battery types, battery recycling is not, in itself, profitable. Many battery recycling programmes for small electronics like cell phones and computers already exist, but they are funded by manufacturers and government grants and generally operate at a loss. Unlike most recycling processes, most of the income of Li-ion battery recycling comes from the sales of the product rather than from charges to waste disposers or subsidies, hence they are very sensitive to price volatility.

In most countries, the current metal prices cover the operational costs of recycling for the following battery types: Nickel Cadmium, Nickel Metal Hydride and Liion. The revenues

239 Consultation with Michael Green, Director of the G&P Batteries (UK). 240 Consultation with Alain Vassart, General Secretary of EBRA (European Battery Recycling Organization). 241 http://www.cordis.lu 242 Also to be mentioned, AEA Technology (UK) launched in 2003 a £2 million research and development facility in Sutherland, north Scotland, for all types of lithium-ion and lithium -ion polymer batteries.

132

from sales of zinc and manganese however do not cover the operational costs of recycling (optimising market reports, DG ENV).

Barriers to Entry

Barriers to entry lie in the high cost of capital equipment. This is especially the case for Li- ion batteries, which because of their complexity and the necessity to recuperate the compounds, requires dedicated battery recycling equipment, as opposed to mainstream furnace-based technology. For instance, the full demo plant (capacity of 7,000 tons of batteries, equivalent to 150,000 cars) developed by UMICORE in Belgium has required an investment of €25m.

Potential for ETV

The main rationales that suggest the need for an EU ETV scheme in battery recycling technologies are: • The growing market and the perspective that this growth will continue in the future with the market take-off of HEV technologies. • The specificity of recycling (non-furnace-based) technologies for each specific battery chemistry (even within the same battery type, for instance lithium-ion, which currently has about 10 different competing chemistries). The ETV scheme would help clarify the respective performance of these different technologies for different batteries.

However ETV scheme may not have a strong impact in this technology group. According to stakeholder consultation243, the lack of innovation in battery recycling is due to the business model of this industry. Currently it does not provide incentives to innovate and propose alternatives to furnace-based-technologies. In the absence of profit expectations, due to the low price of battery materials as compared to the cost of recycling, the battery manufacturer that bears the cost of recycling are not ready to support higher costs for a greater amount of recuperated material. In these conditions, recycling companies “sit and wait” even if they have a technology that would achieve greater performance.

One of the main barriers to innovation is the uncertainty regarding the calculation of the recycling efficiency under the Waste Directive. Two approaches compete, one flexible and another one more stringent. If the open definition is applied, there is little incentive to innovate since the level of efficiency can be reached with current low cost technologies.

There is little innovation in the area, current technologies fulfil the minimal regulatory targets and are less expensive than more advanced, more efficient, technologies. EBRA has issued guiding principles to measure the battery recycling rate which allows the dissipation of uncertainty.

Technology Group D: Reduction of mercury contamination from solid waste (e.g. separation, waste mercury removal and safe storage technologies)

Mercury is a persistent, bioaccumulative toxin that can cause damage to the human brain and nervous system, especially for children. Significant mercury contamination of the environment has already occurred over the years from various sources of mercury.

243 Mr. Michael Green, Director of the G&P Batteries (UK)

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The main sources of mercury pollution are: • Chlorine chemical plants, which use mercury to convert salt to chlorine gas and caustic soda, account for about 15% of mercury pollution, with 190 tonnes consumed in 2005. This substance is then used in soaps, detergents, plastics, as well as in the paper-making process. Chlorine is mainly produced by main technologies (mercury, diaphragm and membrane). In 2006, the mercury process is the most common one and accounted for 43% of European capacity. However, it is now expected to be soon overtaken by the more energy-efficient membrane process. New modern chloralkali plants are mercury-free technology. There is a gradual process of shift of the established plants to clean technologies in the US and in Europe (“decommissioning of plants”). Older plants have a record of “losing” mercury along the production process. Chloralkali manufacturers have made a voluntary commitment that all mercury plants will be converted to alternative technology by 2020244. It should be noticed that the mercury from decommissioned plants is most often sold on the market for other applications, more dispersed and therefore more difficult to monitor and control. • Dental amalgams represent the second largest use of mercury in Europe after chloralkali plants, with 90 tonnes consumed in 2005. As far as stocks are concerned, a study from COWI shows that dental amalgams account for more than 80% of the total mercury accumulated in products in the EU (about 1000 tonnes in 2007, to be compared with 900-1900 tonnes recoverable in contaminated site). Extracted amalgam materials from dental offices usually end up in a municipal wastewater system. It will soon become the largest use of mercury as chloralkali plants are phased out. It also, and more importantly, represents the largest source of mercury exposure for most people in developed countries as inhalation of mercury vapour from dental amalgam245. One solution, as currently implemented especially in Nordic states, is the use of mercury-free filings. However, mercury emissions will continue after a transition to mercury-free dental fillings since dentists will still have to repair, treat and remove existing amalgam fillings. Also, emissions will still be generated from particles already deposited in tubing systems. Amalgam separator devices are a complementary solution. The use of these devices in dental offices is allowed to filter out amalgam in waste water. • Coal-fired power plants release mercury in the air as coal naturally contains mercury. Most of the mercury pollution could be eliminated with the installation of pollution- control devices such as those used in other incinerators and boilers. • Automobile mercury-based light switches pollute the air when the cars are scrapped and recycled. The mercury they contain vaporizes into the air when the switch melts. Since the beginning of the 2000s, cars do not contain mercury-based light switches, however, older cars still contain mercury. The solution to this problem is not necessarily technological. The switch can be removed from an older car in approximately one minute. • Goldmining in developing countries. • Fluorescent bulbs contain mercury. This lighting technology has experienced fast growth due to its energy efficiency and durability, which is much higher than incandescent bulbs. Fluorescent lightning sales in Western Europe grew 34% between 2000 and 2004, from 173 million to 232 million units; in Eastern Europe they rose 143 %, from 23 million to 56 million units246. Growth is expected to accelerate in future years as the Commission considers a ban of the incandescent

244 Euro Chlor (2007): Steps towards sustainable development, Progress report. The European Chlor-Alkali Industry. 245 European Commission Communication (2005): Community Strategy Concerning Mercury {SEC(2005) 101}. 246 WorldWatch Institute (2011): Strong Growth in Compact Fluorescent Bulbs Reduces Electricity Demand. 134

bulbs247. However, there is a technological challenge in recycling these products. Several EU countries, as a response to the WEEE Directive, have developed special fluorescent bulbs recycling programmes (for instance, the UK and Germany). In Germany, approximately 70 to 80% of all spent mercury-containing lamps were recycled as long ago as 1994. The technological challenge faced is to develop mercury-free bulbs that have the same energy efficiency as fluorescent bulbs. Some alternatives are already being developed including light-emitting diode (LED) technology and high efficiency incandescent lamps. Some additional R&D and cost reduction is needed to make these new lighting technologies applicable useable on a more widespread basis248.

Figure D1.6 Mercury consumption (tonnes per year) 2000 (EU-15) and 2005 (EU-25)

Sources: European Commission, Mercury flows in Europe and the world: the impact of decommissioned chloralkali plants, 2004; COWI, 2008

The following analysis focuses on technological solutions to reduce the problem of dental amalgams taking into account that this area is soon to become the largest use of mercury and already has the largest potential impact on human health. It is also a dispersed source of pollution due to the number of dental offices in existence. Other sources of mercury

247 Frost & Sullivan (2007): Low Energy Light Bulbs: The Big Green Switch. 248 Newmoa (2009): Review of Compact Fluorescent Lamp Recycling Initiatives in the U.S. & Internationally.

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pollution have already been considered through regulation or voluntary commitments from industry.

Product Use and Applications

Amalgam separators are devices designed to remove amalgam particles from dental office wastewater using sedimentation, filtration and chemical removal by ion exchange or by a combinations of these technologies. These technologies are used for dental equipment in dental practices, with material filtered out in the separator and then sent to specific companies for recycling.

Market Characteristics

These devices are priced between €250 and €1000 in Europe, depending on models.

Member State Markets

There is currently no available European-wide market data on amalgam separators. This paucity of market data was confirmed through interviews249. However, some information can be provided at a national level, based on a survey carried out regularly by the Council of European Dentists250:

There is an increasing compliance of countries with the translation of the Hazardous Waste Directive in the dental sector. Almost all of the 30 countries surveyed (17 in 2006, 19 in 2008, 29 in 2010) have transposed EU Hazardous Waste Directive into national law and most countries who did so actually enforce this law.

Amalgam separators are required by law in the majority of countries (13/22 in 2008, 18/28 in 2010). In most cases (18/21) this requirement applies not only to new dental premises but also to equipped dental offices, already in existence. In most countries where separators are not legally required (primarily new member states where no more than 30- 40% of dental offices have separators installed), these devices were recommended by professional associations, government, environmental agencies or manufacturers.

In 14 countries, over 99% of practices have separators installed, with a further 5 countries reporting 80- 99% of practices with installed amalgam separators. These results show a strong growth in amalgam separators when it is considered that only 10 countries reported that more than 95% of practices had separators installed in 2008.

In most countries, dentists are liable if mercury wastes are not disposed of correctly. In 15 countries, all amalgam separator manufacturers/distributors offer recycling, whilst some do in a further 4 countries. This is an increase from 12 countries in 2008, and 9 in 2006.

Figure D1.7 Number of EU countries with laws requiring amalgam separators

249 Consultation with Daniel McAlonan, Senior Health & Safety Adviser British Dental Association; Susie Sanderson, British Dental Association Executive Board Chair & General Dental Practitioner; Armin BANTLE executive director, DÜRR DENTAL FRANCE. 250 Untitled document provided by Sarah Roda, Council of European Dentists. 136

Source: Council of European Dentists

Figure D1.8 Number of EU countries by class of percentage of dental offices having amalgam separators installed

Source: Council of European Dentists

Another study shows a somewhat less optimistic landscape. According to the data provided, only 32% of mercury was recycled in the EU in 2007. This would imply that there is a strong potential for improvement in the dealing of mercury in amalgams, and therefore a strong potential for growth in the market of separators.

Table D1.19 Mercury in waste from intentional uses of mercury in EU27+2 society Products category Quantities Quantities Contribution Recycling ending up in recycled to total efficiency waste Tonnes Tonnes amount within Hg/year Hg/year recycled % category and totally % Chlor-alkali 119 35 34 29 production Light sources 14 1.6 2 11 Batteries 30 4 4 13

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Dental amalgams 95 30 29 32 Measuring 21 4.5 4 21 equipment Switches, relays, 14 7 7 50 etc. Chemicals 41 6.5 6 16 Miscellaneous 70 13 13 19 uses Total (rounded) 404 102 100 25

Source: COWI, Options for reducing mercury use in products and applications, and the fate of mercury already circulating in society, 2008

One of the pioneering countries is Sweden. Since 1985, amalgam separators have been installed in all dental clinics (following a joint agreement between the Swedish Environmental Protection Agency, the Swedish Dental Association, the Federation of Swedish County Councils, and the Swedish Dental Trade Association). More generally, advanced countries in this regard include Austria, Denmark, Finland, France, Germany, the Netherlands, Norway, and Switzerland.

Technology Markets

Dental clinics that do not have a separator installed use a basic filtration in their vacuum system. However, this basic filtration only prevents some of the larger pieces of amalgam from entering the sewer system.

There are a number of different separator technologies251: • Sedimentation units reduce the speed of wastewater flow, which allows amalgam particles to settle out of the wastewater; • Filtration units. Depending on the type of filter used, these separators remove not some finer and colloidal amalgam particles in addition to coarser amalgam particles; • Centrifuge units. These products use centrifugal force to draw out amalgam particles from the wastewater; • Combination units, these separators use any combination of two or more technologies to remove minute amalgam particles and dissolved mercury particles;

There are also different types of systems placed in the suction vacuum system: • Wet system: the transportation of air and fluid from the dental chair to a central tank, where the air is separated from fluid. The fluid then enters an amalgam separator before it is passed on. • Dry system: air and liquid is separated within the dental unit, and the amalgam separator is generally integrated within the unit.

• Amalgam separators based on sedimentation, sometimes combined with a filter, dominate the market. This system is 10 times less expensive to manufacture than the centrifugal type252.

251 Hylander et al (2006): Mercury recovery in situ of four Different dental amalgam separators, Science of the Total Environment. 138

Import-Export

No information on import and export of amalgam separators is available.

Leading EU Producers of Technology

A few companies produce amalgam separators in Europe.

Table D1.20 leading European separator manufacturers and products

Company Products Company information Equipdent (UK) Alvaley amalgam No information on website separator METASYS The Multisystem Typ 1, is Integrated strategy: DENTAL ECO SERVICE is Medizintechnik GmbH the most installed. More METASYS subsidiary, dedicated to collection (DE) than 20.000 devices and recycling service for all types of amalgam world-wide. Installed for containing dental waste in Europe and many years. overseas since the early 1990s. Medentex (DE) Initial Medical Services has acquired Medentex as its own dental waste disposal site at the beginning of 2008. Located in Bielefeld, Germany, Medentex Initial Medical Service Amalsed Separator Initial’s innovative sedimentation separator. developed in our Dental Technical Centre in Bielefeld, Germany Dürr Dental (DE) CA 1 Amalgam-Separator Provider of services and equipments, imaging, self-cleaning amalgam compressed air device, separators, dental centrifuge care…) for dental medicine Cattani S.p.A Established in 1967, Cattani S.p.A. is now a leader in the dental field, exporting its range of products to all continents. The group has specialised in air technology (aspiration and compressed air distribution systems). Source: company websites The rather small number of products available is backed by a recent product survey in the US: only 18 systems (5 from the same company, AB Dental Trends) were benchmarked and rated by US dentists.

Other actors present in the value chain include: • Management (collection, storage, second separation, cleaning) of mercury waste : specialised in the dental sector (alliatech-dental, FR) or dealing with large quantities of various hazardous wastes (BMT Services, NL); and • Recycling and valorisation of mercury waste such as Claushuis Metaalmaatschappij.

Global Market Leaders

AB Dental Trends (US) seems to be the world leader.

Technology Users

Technology users are dentists.

252 Hylander et al (2006): Mercury recovery in situ of four Different dental amalgam separators, Science of the Total Environment.

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Leading Demand Drivers

According to the Waste Framework Directive, dental amalgams are considered as Hazardous Waste (Directive 2008/98/EC of 19 November 2008) and should therefore be collected separately and consigned to an eligible waste management facility. However, this directive does not require that amalgam separators be used in dental practices

The Community Strategy Concerning Mercury was adopted in January 2005. It has resulted in restrictions on the sale of measuring devices containing mercury, a ban on exports of mercury from the EU that will come into force in 2011 and new rules on safe mercury storage. It contains 20 measures to reduce mercury emissions, addressing the problem from both the supply and demand sides. The actions 4 and 6 are dedicated to amalgam separators

Action 4: The Commission will review in 2005 Member States' implementation of Community requirements on the treatment of dental amalgam waste, and will take appropriate steps thereafter to ensure correct application.

Action 6: In the short term the Commission will ask the Medical Devices Expert Group to consider the use of mercury in dental amalgam, and will seek an opinion from the Scientific Committee on Health.

The implementation of the strategy has been reviewed by Bio-Intelligence in 2010253. The 20 actions have been classified. 13 actions were assessed as having performed “Good progress”, whereas 3 actions only had moderate progress and 2 actions little progress. The two concerning dental amalgams fall under the moderate progress group. With regards to action 4, the review of member states practices shows that although some countries comply to the regulation and go even further (e.g. through making separators compulsory), some countries – especially in new member states, are still a long way from compliance. With regards to Action 6, two expert groups254 provided opinions on mercury pollution stemming from dental amalgams. Their conclusions are summarised as either the risk for health and environment being not high enough or that data was not reliable enough to justify strong actions such as a ban of mercury-based filling. Based on these opinions the Commission has not revised the regulations.

It is extremely important to note that a specific standard (ISO 11143:2008) already states requirements and test methods for amalgam separators. It specifies the efficiency255 of the amalgam separators in terms of the level of retention of amalgam based on a laboratory test and the test procedure for determining this efficiency.

Alternative Technologies

The two main technologies are sedimentation and centrifugal separators. Centrifugal are more expensive.

Table D1.21 the different separator technologies

Technology Principle Advantages Disadvantages

253 Bio Intelligence Service (2010): Review of the Community strategy concerning mercury, final report. DG ENV. 254 Scientific Committee on Emerging and Newly Identified Health Risks (SCENIHR) and Scientific Committee on Health and Environmental Risks (SCHER) 255 This performance is determined by measuring the mass percentage of the amalgam retained by the separator. A separator with 99% efficiency means that 99% of the dental amalgam is retained by the separator and 1% is passed through the separator and flows in the wastewater. 140

Sedimentation Sedimentation of - no electronic - only for small flow rates particles on the ground (round about 0 to 4 l under the effect of the /min) Earth's gravitational field. - separation rate is not constant

- level control and warning system difficult: usually only with weighing or fixed exchange interval

- by the low flow risk of a backlog to the suction machine

Centrifuge Separation by strong - separation rate - amlagam cassettes can rotating centrifuge. The constant (on all flow be used more than once water is separated from rates) the amalgam. - longs service life of the container - electronic monitoring system

- replacement of the box when full (not after a fixed time)

Hydrozyclone Separation in a long - simple construction - The separation rate is narrow cone by only true for a given tangential essential throughput (if the flow commitment of the liquid rate is lower or higher (similar to a hurricane). the separation rate cannot be met

Innovation Type

Innovation seems rather slow and incremental, which is confirmed by an interviewee256. Some of the current models on sale have been on the market for a number of years. Models evolved more rapidly until 5 years ago but the products have been stable since then. Some new models include sensors and centrifugal technologies for higher efficiency and better monitoring of device operations. This also guarantees smooth operation even during heaviest strain, with minimal cleaning effort.

It is however not completely clear whether the technology has already reached the desired level of performance, measured as the efficiency of the amalgam separator. Different studies demonstrate different results to that regard

For instance, a 2006 comparative study257 shows that 3 tested amalgam separators (sedimentation type) available on the market had real performance far below the claimed

256 Consultation with Susie Sanderson, British Dental Association Executive Board Chair & General Dental Practitioner. 257 Hylander et al (2006): Mercury recovery in situ of four different dental amalgam separators, Science of the Total Environment.

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efficiency of 99% (according to Danish and ISO protocols). Basically, they reduced mercury emissions by 79 - 91%, leaving an average Hg content in outgoing waste water of 1.5 mg/L1. One new technology tested as a prototype separator demonstrated a 99.9% efficiency.

Another study carried out in 12 dental clinics equipped with the (sedimentation-based) amalgam separators demonstrates similar results. It also shows that mercury emissions from dental clinics can be reduced by an improved design of the discharge system, a sensible use of high pressure water cleaning, and regular maintenance, including replacement of amalgam separators and filters at certain intervals.

The gap between claimed and real performance primarily stems from the difference between test under a laboratory protocol and the real conditions of system operation. As claimed by Hylander et al.258 “this may result in erroneous assumptions regarding the possibility to reduce Hg emissions from dental clinics, and about environmental effects from continued use of dental amalgam”.

Other tests run in 2008 show results more consistent with the claimed performance, although still not as high: proven efficiencies from the clinical samples were between 93% to 99%. Still, according to one interviewee259, separators are more reliable than they had been previously. Most products claim a 99% efficiency and achieve that level.

R&D Investment There is currently only limited development being carried out. Development being undertaken is directed towards reducing the maintenance burden and cost rather that toward the performance of the separator260.

Leading Drivers of Innovation

Regulation is the main driver of demand. However it is not clear how this regulation affects the innovation efforts. The buyers choice seems to be related to practical considerations (cost, maintenance type, longevity, size of the system, level of activities in terms of number of amalgam restorations placed or removed per day, or number of dental practices/chairs located in the same building, etc.). The performance in terms of efficiency, once the ISO minimal requirement is achieved (allowing the buyer to comply to the regulatory requirements), is not among the main purchase criteria. For instance, the minutes of a US dentist workshop on amalgam separators261 shows that efficiency is not a concern to them, it is taken for granted. Discussion focuses on matters such as maintenance, therefore innovation is limited and is directed toward practicalities, easiness of use, economic considerations.

Leading EU Innovators

Leading EU Innovators are the producers of the technology.

Venture capital

No venture capital is investment in this sector.

258 Hylander et al (2006): Mercury recovery in situ of four different dental amalgam separators, Science of the Total Environment. 259 Consultation with Susie Sanderson, British Dental Association Executive Board Chair & General Dental Practitioner. 260 Consultation with Armin BANTLE executive director, DÜRR DENTAL FRANCE. 261 American Dental Association (2007): ADA professional product review. 142

Barriers to Entry

Barriers to entry are primarily; the reputation with regards to dentists and dentist national associations, and the established market networks.

Potential for ETV

Two principal rationales may call for the application of an ETV scheme in amalgam separation technologies: • The market is bound to grow as the member states enforce tighter regulations, some of them even making the use of these technologies compulsory in dental practices; and, • There still seems to be uncertainty regarding the real performance of separation systems. The performance claimed by manufacturers might not resist more complete and advanced tests.

An ETV scheme may not have a strong impact in this technology group for the following reasons: • The choice for buyers seems related to practical considerations rather than performance. Uncertainty on performance is therefore not of foremost importance in their market diffusion, although it is of course crucial to the environment; • Our interviewee262 emphasised that amalgam separators are now more and more part of the “package” when buying dental office equipment even when it is not mandatory or requested by the dentist. These are, according to this reputed person in the sector, a mainstream well-accepted technology, which face no particular buyer reluctance or uncertainty; • There is already a standard (ISO) actually based on system performance. It is not like most other standards only set of rules to be used as good principles, practices or guidelines. Hence an ETV scheme might not have a great added value to this already in place and widely used standard; • The potential for market growth in Europe is mainly in new member states. It is not obvious that the ETV scheme is the best solution to support these countries in their attempt to catch-up with EU-15 level of adoption of amalgam separators.

262 Consultation with Susie Sanderson, British Dental Association Executive Board Chair & General Dental Practitioner.

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Technology Group E: Products made of biomass Bio-based products are of high societal and economic interest due to the potential impacts on sustainability and the protection of the environment, human health, rural development and industrial competitiveness.

Product Use and Applications

Bio-based products are commercial or industrial products that are composed, in whole or in significant part, of biological products or renewable domestic agricultural materials (including plant, animal, and marine materials) or forestry material.

According to the European Commission, bio-based products263 refer to non-food products derived from biomass (plants, algae, crops, trees, marine organisms and biological waste from households, animals and food production). Bio-based products may range from high- value added fine chemicals such as pharmaceuticals, cosmetics, food additives, etc., to high volume materials such as general biopolymers or chemical feedstock. The concept excludes traditional bio- based products, such as pulp and paper, and wood products and biomass as an energy source.

Box D3 Bio-based products: a high societal and economic interest

• Sustainability and protection of the environment Bio-based products are based on renewable and expandable resources, thereby decreasing dependency on increasingly expensive and finite fossil and mineral resources, and having the potential to save energy and reduce GHG emissions. In the long term, they offer the potential for more sustainable industrial production.

• Improved population health Bio-based products in general have low toxicity. Novel bio-based products, such as pharmaceuticals, food and feed additives, plant-based vaccines etc. offer the potential for increased functionality and quality at lower production costs.

• Increased industrial competitiveness through innovative eco-efficient bio-based products Bio-based products can make a substantial contribution towards a more sustainable and competitive industry, capable of generating growth. They can also generate employment opportunities particularly in rural areas.

Market Characteristics (incl. EU and global annual turnover) There is a wide range of bio-based products, which could eventually acquire a substantial market acceptance: • Fibre based materials (i.e. for construction sector or car industry); • Bio-plastics and other biopolymers; • Surfactants; • Bio-solvents; • Bio-lubricants; • Pharmaceutical products (including vaccines); • Enzymes; and

263 "Bio" refers to "Renewable biological resources" and not "biotechnology". 144

• Cosmetics.

The total markets for bio-based products globally and within the EU are difficult to estimate. Generally there is a strong tendency to focus on markets where bio-based products can substitute products based on other raw materials oil while the possibilities to estimate markets for new bio-based products are limited.

In 2005 bio-based products accounted for 7% of global sales and $77 billion (€55 billion) in value within the chemical sector. In 2010 bio-based products264 accounted for 10% of sales within the global chemical industry, accounting for $125 billion (€90 billion) in value. However the share could rise to as much as 20% depending on the development of technologies, feedstock prices and policy framework.

Figure D1.9 Global turnover for bio-based products265 (2005 – 2020, in billion euros)

Source: Accelerating the Development of the Market for Bio-based Products in Europe – Report of the taskforce on bio-based products; Composed in preparation of the Communication “A Lead Market Initiative for Europe”, European Commission, 2007.

There are already several bio-based products on the market in Europe; for instance, the chemical industry currently uses 8-10% renewable raw materials to produce various chemical substances. The EU currently accounts for about 30% of the global €58 billion bio- based products market which is expected to more than treble by 2020266.

The focus of this market analysis is on ‘Bio-based Materials’. In general, a plethora of cellulose based materials, which have applications across a large number of sectors including: • Health care; • Speciality chemicals (bioplastics); • Construction; and

264 The definition of bio-based products refers to industrial products made from biological feedstock and/or biotechnological products. 265 European Commission (2007): Accelerating the Development of the Market for Bio-based Products in Europe – Report of the taskforce on bio-based products; Composed in preparation of the Communication: A Lead Market Initiative for Europe. 266 In Putting SMEs at the core of bio innovation, Biochem, 2007. Data from McKinsey, 2007.

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• Automotive car parts.

Market characteristics by segment

Europe has a few small companies specialised in bio-based products and several major companies, especially chemical companies developing bio-based applications267.

The market of bio-based products can be separated into four parts: Construction materials; Composite materials for the automotive industry; Biochemical products; and Pharmaceutical products.

There are other segments in bio-based products market but these segments have a high potential and represent a large volume in terms of turnover268.

Construction materials and composite materials for the automotive industry

Products for construction:

For environmental and efficiency reasons, the building industry also needs to develop methods and materials which consume less raw material and less energy. Nowadays, buildings must also be energy-declared. In this market, there are products made from natural fibres (flax, hemp, jute, wood) that have found application in production of building materials such as cement-based composites (hemp concretes) that can be used for walls, roofs.

The need for new wood-fibre materials has led to materials such as “glulam”, plywood, particle boards and fibre boards. One of the most successful materials is Oriented Strand Board (OSB), a wood composite. The market for the material has grown to more than €11 billion, since it was introduced in the 1980s269.

Composite materials for the automotive industry:

These products are made from a mix of natural fibres and polymers (biopolymers or petrochemical) in replacement of fibre glass for the automotive industry. To improve their mechanical properties, fibres of different origins are added to thermoplastic or duroplastic in the production process.

Currently, this market of construction and composites materials represents 50,000 tonnes of fibres in the automobile industry and 3,500 tonnes in the construction industry (2007).

Expected growth in the motor industry is around 100,000 tonnes (2010 - 2015). The market for construction and composites materials will reach a share of 5 to 30% of bio-based products in 2020270.

267 European Commission (2009): Taking bio-based from promise to market. 268 Alcimed (2007): The Current Market for Industrial Bioproducts and Biofuels & Foreseeable Trends. 269 According to Newbeam Sweden AB, see http://www.newbeam.se/en/innovation.php 270 European Commission (2007): Accelerating the Development of the Market for Bio-based Products in Europe – Report of the taskforce on bio-based products; Composed in preparation of the Communication: A Lead Market Initiative for Europe. 146

Cost of natural fibres is 3-4 times higher than that of mineral wools but natural fibres have good mechanical properties (impact resistance, acoustic qualities, strong, lightweight concretes.).

Benefits in cars are related to lightweight advantages over conventional glass fibre compounds and partly to cost advantages over PUR foam based products.

Better waste management: materials containing vegetable fibres are easier to recycle or burn than the materials containing fiberglass fibres.

Biochemical products

Biochemical products replace fossil-fuel based chemicals, such as bioplastics and biopolymers, lubricants, solvents, surfactants. Bioplastics/biopolymers are the main segment of biochemical market. The other segments represent very low market shares for bio-based products271.

Bioplastics

Bioplastics are derived from maize, wheat, and potatoes. Polylactic Acid (PLA) is a plastic material derived by fermentation (producing lactic acid) from starches or glucose. These plastics are used for food packaging, bags, hygiene products, packaging for biological waste, plant pots, etc. The current market is characterized by high growth and strong diversification. Not only is there a growing number of materials, applications and products, but the number of manufacturers, converters and end-users has also increased considerably from a base that a few years ago was dominated by US food major, Cargill. Significant financial investments have been made into production and marketing272.

Figure D1.10 Global turnover for Bioplastics (2010 – 2015, in billion euro)

Source : EL Insights - Critical Insights into Energy and Environmental Technology, Issue 17 - February 01, 2011. Bioplastics.

In 2010 the global market for bioplastics achieved estimated sales of €2 billion. This value is expected to grow by 32.4% a year from 2011 to 2015, reaching an estimated value of €8.2 billion in 2015273.

Bioplastics applications comprised approximately 75,000-100,000 tonnes of the total 48 million tonnes European plastics market. Annual growth is considerably higher than 20%274.

271 European Commission (2009): Taking bio-based from promise to market. 272 http://www.european-bioplastics.org/index.php?id=139.

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Bioplastics represent 0.1% (50,000 t) of total EU plastic production but the sector has seen increases of 30% of its production in recent years. World production capacity in 2008 was 0.5 MToe. Production rose to 1 Mtoe in 2009 and it could reach 3-5 Mtoe by 2020, a growth rate of X per cent. In 2010, the market share of bioplastics was 1-2% and it is set to reach 1-4% of total plastics by 2020.

Surfactants

Surfactants are compounds that lower the surface tension of a liquid are used in soaps, detergents, pharmaceuticals, food additives and for the production of emulsions and foams. They are produced largely from oils. Next generation biosurfactants can be produced from algae or bacteria. The world market represented 10 Mtoe in 2002 (2.5Mtoe for EU) of which 30% (700 000 tonnes of vegetable matters, mainly oils).

Biosolvents

Solvents are mainly part of paintings, inks, varnishes, adhesives etc. The majority of solvents are currently petrochemical solvents. Currently biosolvents have a market share of 1.5% of total (60.000 tonnes out of 4 Mtoe) solvents. This market could grow to 12%-40% encouraged by environmental regulation.

Biolubricants

Biodegradable lubricants are made from vegetable oils (and their chemical derivatives) that are non toxic for soil or water. Biolubricants cost 1.5 to 5 times more expensive than competing products (due to higher development/delivery costs) but prices are decreasing.

Currently biolubricants represent 2 % of the total (100.000 tonnes out of 5 Mtoe) lubricant in 2007 and are primarily found in the hydraulic sector (and in the automotive sector), they achieved a 30% market share in 2010. Total market potential could be up to 90%, which gives a potential European market of up to 9 million tonnes of biolubricants per year275.

Biopharmaceutical products

With regard to health care, biological resources exist which are used as feedstock for fermentative production of antibiotics, amino acids, organic acids, vitamins, enzymes, etc. Healthcare biotechnological knowledge will provide personalised, innovative, safe, and effective healthcare biotech products and are expected to be used in the discovery and development process for all new pharmaceuticals by 2015276.

The biopharmaceutical products market has a high value, but it is also a low volume, niche market. The world market for plant derived pharmaceuticals is €34billion, and has been growing at an impressive compound annual growth rate of 19% over the previous five years. It can concern up to 25% of prescription medicines sales, 60% of anticancer drugs and 50% of cardiovascular drugs. This segment is set to continue outperforming the total pharmaceutical market and could easily reach €75 billion by the end of the decade277.

Figure D1.11 Global turnover for biopharmaceutical products (2005 – 2020, in billion euro)

273 Bioplastics (2011): EL Insights. Critical Insights into Energy and Environmental Technology, Issue 17. 274 European Bioplastics (2008): Bioplastics Frequently Asked Questions (FAQs). 275 IENICA (2004): Biolubricants, Market data sheet. 276 OECD (2009): The Bioeconomy to 2030: designing a policy agenda. 277 Biopharmaceuticals. Current Market Dynamics and Future Outlook, Research and Markets. 148

Source: Biopharmaceuticals - Current Market Dynamics and Future Outlook, Research and Markets.

Leading EU Producers of Technology

Leading EU producers of technology are large EU leading innovators like BASF, Arkema or Novo Nordisk. See previous section.

Economies of scale, high investment costs and the need for integrated production, are some of the reasons why bulk markets are mainly covered by large companies. SME’s mainly focus on niche markets and innovative applications, for example coatings and bioplastics.

Global Market Leaders

The American producers dominate the global market of bio-based products. There are several large companies in biopharmaceuticals and in biochemicals (specialised in bioplastics/biopolymers). Many American SMEs, like NatureWorks are present on the global market.

Table D1.22 Global market leaders278

278 Gil Y. Roth. 2010 Top 10 Biopharmaceutical Companies. http://www.contractpharma.com/articles/2010/07/2010-top-10- biopharmaceutical-companies-report.

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Company name Country Market

Amgen USA Biopharmaceutical

Roche/Genentech Swiss Biopharmaceutical Merck Serono USA Biopharmaceutical Baxter BioScience USA Biopharmaceutical Biogen Idec USA Biopharmaceutical The Dow Chemical Company USA Biochemical / Bioplastics

Mitsui Chemicals America USA Biochemical / Bioplastics

NatureWorks LLC (formerly Cargill, Inc.) (SME) USA Biopmastics Maxygen Inc. (SME) USA Biopharmaceutical Tanox Inc (SME) USA Biopharmaceutical

Technology Users

Technology users depend on the segment of bio-based products: Pharmaceutical products are mainly intended to patients who follow therapy based on biological resources; Concerning biochemical, users depend on the product. For instance, bioplastics can be used in automotive industry or in construction. They can be used by groups, which have to put their production in plastic packaging (groups like Coca Cola, Nestlé279). It can also be clients of large chemical groups like BASF or Arkema; and In construction, technology users are building contractors, modular house manufacturers and do-it-yourself stores.

Leading Demand Drivers

The main leading demand drivers are: Policy development; Limited availability and increased cost of fossil resources; and Consumer behaviour.

The EU climate change and energy policy objectives set important framework conditions for the development of markets for bio-based products, alongside those for renewable energies; Reduction of GHG emissions of 20% by 2020 and 30% within a wide international agreement; Increasing of the share of renewable energy sources to 20%; Increasing the levels of bio-fuels in transport fuels to 10% by 2020; and Improving energy efficiency with 20% by 2020.

279 Members of European Bioplastic, http://www.european-bioplastics.org/media/files/docs/en-pub/European-Bioplastics- Members.pdf 150

The EU Sustainable Development Strategy and environmental policies and legislation (with respect to packaging, waste, landfill, pollution control, etc.) are likely to have a considerable impact on the development of markets for specific bio-based products.

In addition, the European Commission has defined bio-based products as a lead market area280. The lead market approach aims to facilitate the demand-side potential of promising new innovative technologies or business models resulting in the early adoption of new business solutions in Europe. It is intended to create a virtuous circle of growing demand, reducing costs by economies of scale, rapid product and production improvements and a new cycle of innovation that will fuel further demand and spinouts into the global market281.

In the long-term one can expect, in relevant areas, a shift from petroleum and gas based raw materials to bio-based. The major reasons are the limited availability of fossil resources and the continuously increasing costs for fossil-based raw material as well as the climate change impact of increased consumption of fossil resources, and political and security factors. At what point in time this switch from one raw material base to another will occur is generally difficult to determine and would differ between products areas.

Bio-based materials can in certain applications also substitute metals and mineral-based materials, thus helping to free up potentially valuable resources for other uses.

It should be noted that bio-based products would not only compete with and potentially substitute petroleum-based products but could also offer new functionalities and higher product qualities.

Advanced biomass production and new bio-chemical conversion technologies have shown lower resource use (energy, water and other inputs) in the production of existing and new industrial (bio-based) products, thereby contributing to the development of a more sustainable industrial production and greener industries. Most bio-based products can also be recovered and recycled. In addition, bio-based products have the potential of saving on limited fossil resources, reduce greenhouse gas emissions, and offer a high biodegradability and full compostability. European consumer behaviour is increasingly affected by these "green" product qualities and recent research shows consumers’ willingness to pay a premium for more sustainable products.

Innovation Type

Innovation type in bio-based products is a mix of incremental and radical innovation

Leading Drivers of Innovation

The three main drivers of innovation are: Change in consumer behaviour; Public authorities; The sharp rise of fossil resources.

On bio-based products market, the two main drivers of innovation are the market demand and political instruments. A third driver can be exposed: the price of certain fossil- resources.

280 European Commission (2007): Accelerating the Development of the Market for Bio-based Products in Europe – Report of the taskforce on bio-based products; Composed in preparation of the Communication: A Lead Market Initiative for Europe. 281 European Commission (2007): Accelerating the Development of the Market for Bio-based Products in Europe – Report of the taskforce on bio-based products; Composed in preparation of the Communication: A Lead Market Initiative for Europe.

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Many consumers are now choosing more environmentally friendly consumption patterns and are keen to see continuous improvements. This philosophy puts demands on innovators of bio-based products to introduce new innovations to the market to meet their expectations.

The second driver of innovation is the public authorities, especially the European Commission. Its action plan for this lead market integrates all necessary actions in a synchronised way to favour the innovation of bio-based products. The actions range from improving the implementation of the present targets for bio-based products over standardisation, labelling and certification to ensure the quality and consumer information on the new products.

Oil prices can also be a driver of innovation in bio-based products, especially when the price of the petrol increases sharply.

Leading EU Innovators

Europe is currently well placed in innovative bio-based products, building on its established strengths. Europe has a solid chemical, biotechnology/biopharmaceutical industry infrastructure and knowledge base. Europe is also the world leader in key industrial biotechnologies such as enzyme technologies, and both small- and large-scale fermentation.

Table D1.23 EU large innovator groups

Company name Country Market Comment Novo Nordisk has 30500 Novo Nordisk Denmark Biopharmaceutical employees, which 20% work in R&D282. BASF has 105000 employees, which 10000 work in R&D. BASF Germany Biochemical / bioplastics Research in plastics represent €200 billion per year283.

Arkema has 13,800 employees. 10% of its employees work in R&D Arkema France Biochemical / bioplastics and 3% of its turnover is spent in innovation284.

There are also some SMEs that are good innovators in the EU.

282 Novo Nordisk (2010): Full year 2010 results. 283 BASF (2009): Annual report, 2009. http://www.basf.com/group/corporate /facts- reports/reports/2009/BASF_Report_2009.pdf. 284 BASF (2009): Annual report, 2009. http://www.basf.com/group/corporate /facts- reports/reports/2009/BASF_Report_2009.pdf. 152

Table D1.24 EU SMEs innovators

Company name Country Market Comment Symphony This company has 30 Environmental UK Bioplastics employees. Technologies plc The company has 173 Novamont Italy Bioplastics employees, which 23% work in R&D. Agennix AG has 60 employees Agennix AG Germany Biopharmaceutical and spent 30% of its turnover in R&D285. Genmab AS has 380 employees, Genmab AS Denmark Biopharmaceutical which 91% work in R&D286.

However, US and Japanese competitors are constantly improving their products and the market structure might therefore change in the near future. Europe is very strong in the development and production of bio-based speciality products such as food ingredients, several pharmaceuticals, and fine chemicals.

Business Models Bio-based product is a market that is a fast moving consumer goods sector. Bio-based products are aiming to substituting oil-based products.

Barriers to Entry

There are several barriers to entry the market of bio-based products the lack of qualified personal; the difficulty to create partnerships between businesses and research centres; and the difficulty in accessing financial resources.

The first barrier is the lack of qualified personal. The production of bio-based products demands knowledge in science and materials; European enterprises are also confronted by growing markets (such as the Asian market), which are now exploiting the qualified personnel. Improvements in skills are required at every level. In particular, Masters level training is needed in Europe to deliver appropriate interdisciplinary skills, to transcend traditional disciplinary boundaries and enable shared strategies and collaborative thinking at each stage of the bio-based product287.

The lack of cooperation with research institutes is also seen as a barrier. Indeed, the innovation in bio-based products is a very expensive process so that businesses need to create partnerships with some research institutes. However, these institutes are rare and cannot cooperate with all actors. A significant communication and strategy gap exists between existing and new upstream and downstream supply chains.

285 Agennix AG (2010): Annual report. 286 Genmab (2009): Annual report. 287 IB-IGT (2009): Maximising UK Opportunities from Industrial Biotechnology in a Low Carbon Economy. IB 2025.

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Bio-based innovation involves high-cost, high-risk long-term investment. As a result many companies remain non-profit for quite some time (in fact, today, around 87% of biotech SMEs worldwide are in the pre-profit phase as a natural consequence of their business model288). This means that they are often perceived as being too high-risk for external investment or that they simply cannot fulfil the criteria to sign financing contracts offered through various funds. The access to financial resources by the companies also can be seen as a significant barrier.

Potential for ETV

The current absence of standards for bio-based products causes difficulties for European companies who have developed bio-based products, e.g. bio-plastic. Although the market for plastic is huge, the bio-based novelties cannot easily access this market, in part because of the cost disadvantage of new technologies, as well as the lack of standards. This lack of standards creates uncertainty for companies willing to use bio-based components, for distributors and for retailers. In turn, the consumers cannot distinguish between conventional plastic and bioplastic, because of the lack informative product labels (that are based on standards). In addition, bio-based products may have specific characteristics, e.g. biodegradability, recyclability, low toxicity, etc. However, there exist certifications in bioplastics at the EU level. For instance, the Certification of compostable Bioplastic Products says that plastic products must provide proof of their compostability by successfully meeting the harmonised European standard, EN 13432 or EN 14995289. It is recommended to commercial users or retailers of compostable bioplastic products, that they ask distributors about their product certification and demand the certification number. Even if it is not intended to compose the product, certification guarantees high product safety.

In construction, there are strict certificates. There is the British Board of Agreement in UK for instance. The BBA provides invaluable information on the performance of new construction products and materials290. However, producers of bio-based products claim that their materials are as efficient as traditional construction materials. For instance, producers of structural building profile from cellulose with a resin added consider that their material is as hard as steel apparently but they say nothing about validated claims.

288 EuropaBio (2010): EuropaBio’s input to the EC consultation on the future “EU 2020 Strategy”: Towards a bio-economy in 2020. 289 European Bioplastics. Certification of compostable Bioplastic Products. http://www.european- bioplastics.org/index.php?id=156. 290 British Board of Agrement. http://www.bbacerts.co.uk/about_us.aspx. 154

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ANNEX E: ENVIRONMENTAL TECHNOLOGIES IN AGRICULTURE

Overview This Technology Area covers applications to reduce the direct and indirect impacts of agricultural activities on the environment and public health. In order to reduce potentially harmful effects of agricultural activities solutions are either technological or societal/behavioural or a mix of the two. This analysis is focused on technological solutions.

Technology can help reduce negative impact by either improving the quality or reducing the quantity of inputs (e.g. ranging from pesticides, fertilizers to water) used for the production of agricultural products. Two relevant technology groups in this category include: • Efficient Use of Water; and • Reduction of pesticide use and contamination (e.g. through more efficient spreading equipment, precision application, etc.) as well as the prevention of pollution from nitrates and phosphates into water courses and groundwater.

Technology can also help to reduce the negative external effects that occur during the production process. Two relevant technology groups in this category include: • Reduction of air contamination and odour; and • Recycling of nutrients and organic carbon from manure (e.g. separation, digestion), re-use of sewage sludge and re-use of waste water after treatment.

The overall market for these technology groups has proven difficult to identify. Markets are very fragmented and producers of technology most often focus on their domestic market. Indeed, the markets, main actors and technologies are not clearly known by the actors themselves. To give one example, a French company that sells systems for the treatment of manure and slurry has launched a market study to identify the market and its forecast development since it lacks a clear view.

With the exception of the pesticide/fertilizer spreading equipment sector, there are two kinds of player in the market. Firstly, those companies that specialise in the agricultural market; secondly, companies that sell products both for the industrial market and the agricultural market. It has not been possible to assess the share of each type in this analysis.

Farmers face a deepening financial crisis and cannot afford investments for technologies that increase their costs without any tangible benefit to their income. The market for environmental technologies for agriculture is mostly driven by legislation and the regulation. The IPPC Directive covers the external impacts that agriculture has on the environment. Public pressure (e.g. from neighbours) is also an important driver for implementing systems for treating air/odour/waste, without which facilities are usually closed down by environmental regulators. According to stakeholders, legislation is likely to reinforce the greening of livestock/dairy/poultry production.

There are numerous technologies to reduce the impacts of agricultural activities which are often tailored (i.e. bespoke solutions) to specific needs of the end user. These needs depend on the type of animals and the environmental context, which clearly depends on local and regional characteristics. For example, pigs and cows do not produce the same

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type of waste and therefore treatment systems vary; and some regions do not have sufficient agricultural areas (or the right crop types) to enable the reuse of waste products (e.g. slide) from treatment processes such as anaerobic digesters.

With these points in mind, stakeholders show an interest in an ETV scheme claiming that even if the market is very fragmented, there is a need for comparing technologies. It is however very difficult to state whether or not the companies would actually use the scheme if it were implemented. Furthermore, since waste and air treatment technologies are very different from each other, testing protocols will have to encompass a very large number of parameters.

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Table E1.1 Market characteristics

Environmental - - - - - Maturing - Discrete purchase Highly risk averse technologies for (spreading machines for agriculture pesticide/fertilizers)

System integration (on the reduction of external effect of agricultural activities)

Note: See above summary for indication of why data cannot be aggregated: Markets are very fragmented and producers of technology most often focus on their domestic market Table E1.2 Innovation characteristics

Technology Group Strength of EU EU market Status of Status of Rate of Level of Existence of Key barriers to exploitation of Technology Supply leaders in established alternative innovation investment established / market ready technologies in Side supply of (dominant) technologies into EU accepted sector technology technology supply side norms and (VC, R&D, standards etc.)

Environmental High - Maturing - Incremental Low No standard No “natural” demand from technologies for (many agriculture. Demand is agriculture studies generated by changes in available regulation (EU, national or which tested local) different technologie s against each other)

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Technology Group A: Reduction of air contamination and odour Livestock farms have a number of potential impacts on the environment and public health. The ambient air of animal houses may contain more than 130 different gaseous compounds291. These have impacts at the local, regional or global level. The identification and the reduction of these pollutants is a major challenge for European countries.

Regulations controlling odour have dramatically changed in the last decade, with the replacement of the 1996 IPPC Directive (Integrated Pollution Prevention and Control) by the 2008 IPPC Directive. According to the EC, the new Directive is “a formal amendment that assembles the original instrument and its subsequent amendments in one single legislative act without altering its substantive provisions”. According to our interviewee, the Directive is barely focused on livestock rising and he believes that this activity will most likely be covered as well in the future by the EC.

Alternative Technologies

Two main types of technologies reduce air contamination/odours: “traditional” technologies that treat the air on a continuous basis and “innovative” technologies that measure the air contamination/odour and initiate the treatment process when thresholds are reached. This second type of technology can save considerable amounts of energy and chemicals.

Product use and Applications

Techniques for measuring and treating odours and air contamination are the same for industry as for agriculture (see Air Pollution Control market analysis in this study). Products for treating air contamination and odours from agricultural are either specialised products or adaptations of products originally designed for mainstream industry. They are plenty of products on the markets and plenty of studies that tested either a single technology or several technologies in-situ.

Market Characteristics

EU and Global Turnover

The reduction of air contamination and odour is a particular issue for livestock/dairy farms that generate either toxic gases or odours or both. Hence the market generally corresponds to the current market for livestock farms – as well as future constructions. It is difficult to assess what the latter represents since it will depend on the change in the business models of livestock farmers (the tendency being to concentrate livestock and therefore increase the size of livestock farms as well as integrating these farms vertically with the feeding and/or the abattoir sectors, as well as the dairy sectors).

Air filtration systems are increasingly fitted to livestock housing units, particularly in Northern European countries, such as Germany, Denmark, Netherlands292 and the

291 Conclusion of a conference organised in 2000 by the Research Consortium Sustainable Production Animal. http://www.agriculture.de/acms1/conf6/ws4sum.htm. 292 VERA (2010): Test protocol for air cleaning technologies. http://www.veracert.eu/dadk/Saadan_soeger_du/Testprotokoller/Documents/VERA%20Air%20Cleaning%20Test%20Prot ocol%20-%20version%201%20-%202010-09-17.pdf.

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United Kingdom293. The map below – taken from IPPC guidance – illustrates the prevalence of intensive animal rearing across the EU, including in France, Spain, Italy, Ireland and Greece. The conclusion is that there is a potentially large EU market for such filtration systems.

Data on the number of existing or new build livestock housing units in Europe have not been found. EUROSTAT does not provide such data but data on number of animals instead which are not useful for this study.

Figure E1.1 Animal density in the European Union, expressed as number of livestock units (500 kg animal mass) per hectare of utilised agricultural area

Source: EC (2003), Reference Document on Best Available Techniques for Intensive Rearing of Poultry and Pigs294, IPTS, IPPC

293 Levitt, Tom (2010): UK farmers face dilemma over 'super-dairy' plans. Ecologist. http://www.theecologist.org/News/news_analysis/604208/uk_farmers_face_dilemma_over_superdairy_plans.html.

294 IPPC (2003): Reference Document on Best Available Techniques for Intensive Rearing of Poultry and Pigs. ftp://ftp.jrc.es/pub/eippcb/doc/irpp_bref_0703.pdf.

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Leading EU Producers of Technology

It is difficult to identify large companies that specialise in air filtration for agriculture. VERA identified ten European manufacturers that supply air-cleaning systems to livestock producers in Northern Europe.

Technology Users

The main users are the livestock/dairy farmers who operate the facilities. However, the integration of the agricultural value chain, and scaling up of facilities, is likely to lead to outsourcing in the future of environmental systems to more established companies, especially if there is potential for power generation on site from waste residues.

Leading Demand Drivers

Demand for filtration systems is driven both by regulations and particular mandates by local authorities that may force farms to install air treatment systems295. Demand can be split into systems for new buildings and retrofitted systems. Provided that the supplementary cost of installing systems in new buildings only represents a small percentage of the total cost, there is typically good demand. However, livestock farmers face a deepening financial crisis and many cannot afford investments that do not generate supplementary income. In such cases, a farm might still need to comply with a local council or regulatory decision that has arisen from a nuisance complaint (e.g. from neighbours adjoining the farm). Otherwise, the implementation of such systems will only be effective if the farmer is willing to do so. The increasing threat of heat waves – a potential manifestation of climate change - has been a driver for some intensive chicken farmers in the UK to install cooling systems to prevent death of animals. In such cases, a system that is linked to a modern air filtration system might be the most economic solution to invest in

Innovation Type

Innovation is mostly incremental in this technology group. There are currently two alternate technologies: biofilters and bacteriological treatments. Both systems are used at increased scale for example in large scale pig production296. Multi-pollutant air filtration systems were also introduced into the market to tackle poultry facilities.

295 Even back in 2001, a leaflet produced by the French Applied Research and Development Institute for (essentially) the poultry farming, noticed that the pressure put by the public on the farmers for the treatment of air contamination/odour was increasing and that this pressure will have to be addressed by the farmers in the future. http://www.itavi.asso.fr/elevage/environnement/Les%20mauvaises%20odeurs.pdf 296 VERA (2010): Test protocol for air cleaning technologies. http://www.veracert.eu/dadk/Saadan_soeger_du/Testprotokoller/Documents/VERA%20Air%20Cleaning%20Test%20Prot ocol%20-%20version%201%20-%202010-09- 17.pdf.dk/Saadan_soeger_du/Testprotokoller/Documents/VERA%20Air%20Cleaning%20Test%20Protocol%20- %20version%201%20-%202010-09-17.pdf.

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A second type of innovation relates to the measurement devices that are embedded within odour/air filtration systems. These integrated solutions are an important source of savings of energy on the one hand and of chemical or bacteriological elements on the other hand.

Leading Drivers of Innovation

Investment in innovation is driven by the potential to reduce both capital and operating costs of the systems. Innovation that reduces energy consumption of energy whilst improving the efficiencies of the process are a crucial element in making the systems more cost effective to farmers.

Business Models

According to our interviewee297, the best business model is either for small companies that are specialised in air contamination/odour treatment systems for agriculture to build market share, or else large companies that work with the industry and that are able to sell systems at a lower price than those delivered to mainstream industry.

Barriers to Entry

The main barrier to entry is the price of the systems sold on the market. According to our interviewee, companies willing to enter the market should be able to sell systems that are adapted to client needs and with a price less than €15,000.

Potential for ETV

According to VERA298 and our interviewee, there is a need for technology verification. The potential for ETV is unquestionable. Legislation and regulation are likely to change, forcing livestock farmers to invest in systems that treat air contamination and odours. There is a need for clarification on claimed performances of different technologies/systems.

Technology Group B: Efficient Use of Water Agriculture is the predominant user (75-80%) of available freshwater in many parts of the world299. The biggest challenge in irrigation management is to improve water management and use in existing systems. Common challenges in irrigation systems are inefficient operations and maintenance and inadequate service delivery that is supply- rather than demand-driven. Other issues include: low water productivity, poor cost recovery, degradation of soil and water through water logging and salinity, and lost opportunities for balancing surface water usage with groundwater use.

With respect to the reduction of these negative effects on the environment, actions are needed to modernise existing schemes. This would promote efficiency in the way

297 Mr Louis Vivola who is responsible for the Environment department at ALPHA MOS and a member of the committee in charge of odour at the French Agency for Normalisation (AFNOR). Interview was conducted in February 2011. 298 VERA (2010): Test protocol for air cleaning technologies. http://www.veracert.eu/dadk/Saadan_soeger_du/Testprotokoller/Documents/VERA%20Air%20Cleaning%20Test%20Prot ocol%20-%20version%201%20-%202010-09- 17.pdf.dk/Saadan_soeger_du/Testprotokoller/Documents/VERA%20Air%20Cleaning%20Test%20Protocol%20- %20version%201%20-%202010-09-17.pdf. 299 FAO (2003): Agriculture, food and water – a contribution to the World Water Development Report.

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farmers use water; it would also make small- and medium-scale irrigation more profitable and ensure more sustainable development of groundwater irrigation.

Desertification is now becoming a threat to Southern Europe with large parts already affected. The effects are set to become more severe and more widespread over the coming years. One of the most important factors causing this desertification is the lack of available water caused by both water scarcity and droughts. Recent research by the European Commission identified a large potential for water saving by implementing innovative technologies. As agriculture is by far the largest user of fresh water, more efficient use in this sector will have the largest potential effect on the total available water supply300. The alternative is to resort to large-scale desalination plants, as in Spain, at least for potable water supply (see Water market analysis).

It is estimated that to feed the global population of around 7 billion and meet energy needs (from biomass), an increase of about 18% in irrigated land might be required between 1997 and 2030. Irrigation projects therefore need to be conceived within an integrated water resource management framework, with participation of private investment where feasible.

Alternative Technologies

There are three types of irrigation modes: • Gravitational irrigation - this type of irrigation is the least technological and represents 80% of the irrigated surfaces globally. • Sprinkling irrigation with mobile and fixed systems - these systems are the most adaptable in Europe and do not require much energy. This traditional method of irrigation is limited in terms of technology. • Micro irrigation systems - drip irrigation systems which aim to save water and fertilizer by allowing water to drip slowly to the roots of the plants. Micro irrigation could not be adapted for ground with high salinity levels (the salt concentrate in the surface with drip irrigation can be toxic for the plant after being diluted by rainfall).

Within this broad framework, there are two types of innovations: those linked to hydraulic and fluid mechanics and those linked to control and command systems (sensors (often embedded in fields which relay readings back to a central processor to turn on the irrigation etc) and automatic integrated systems).

Product use and Applications

The two different irrigation systems, sprinkling irrigation and micro irrigation correspond to two distinct markets, even if these two systems represent two different solutions in competition with each other. The market leaders generally offer both systems but they tend only to be a leader in one specific type, not both.

Most of the leading global companies selling agricultural irrigation systems are not involved in other types of irrigation systems. Nevertheless, some companies propose

300 DESIRAS project – European Water partnership.

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a full range of irrigation technologies such as a US company, Rain Bird, that offers solutions for residential, municipal, sports fields and golf courses.

Market Characteristics

EU and Global Turnover

Market leaders promote micro-irrigation as the most water efficient mechanism. However, the cost of implementing such systems often carries a premium of over three times the cost of sprinkling irrigation systems. Moreover the durability of micro- irrigation systems is short, with an average lifetime of between 5 and 10 years, compared to traditional systems with a lifetime of 40 years.

Leading EU Producers of Technology

The European irrigation association (EIA) has around 50 members; representing a large proportion of the global irrigation technology supply side (the association has American and Indian members, such as Jain irrigation systems). Public research centres assist developers in experimentation and performance measurements.

Global Market Leaders

According to our interviewee301, the sale of irrigation systems is a global market with only a few major key players. The sub-group of sprinkling irrigation systems comprises the following firms: • Rain Bird (US/Europe); • Nelson (US); • Senniger Irrigation (US); • Komet (Italy/Austria) - an important innovator in Europe; • SIME (Italy); • Valducci Irrigazione (Italy); • Cometal (Spain); • John Deere Water Technologies Group (US) which sells irrigation solutions and systems; and • Farmex (FR).

The micro-irrigation systems is composed of the following key players:

301 Consultation with Bruno Molle, CEMAGREF.

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• Lindsay Europe (FR) – sells irrigation solutions and systems; • Lindsay Manufacturing Co (US) - sells irrigation systems; • Omni Enviro water systems - produces irrigation solutions and systems; • Jain Irrigations systems (India) - the second world leader in terms of market share with limited experience in micro irrigation systems; • Netafim (Israel) - is the world leader and is reluctant for R&D collaboration; • Eurodrip (Greece) – is a subcontractor for Jain; and • Mandragon (Spain).

Technology Users

End users are producers of crops and cereals. However, buyers of these technologies might be farmers or agricultural cooperatives. Potentially, the market corresponds to the irrigated areas which covers a large share of farms in Europe. The market also depends on the geographical location in Europe and on the type of agricultural production.

Leading Demand Drivers

The main driver is the European Water Framework Directive which limits the volume of water for irrigation. This constraint in terms of volume (Quota) is the main incentive to save water for irrigation activity. Another alternative would be the development of an ambitious water storage plan302.

Financial incentives can help farmers to adopt water-saving irrigation technologies. The increase in the cost of water cannot be an incentive for adoption of an efficient use of water system in Europe, due to political reluctance to increase the price of water which is low, especially in northern Europe.

Innovation Type

Innovation is incremental in this sector.

R&D Investment

A major barrier for innovation and public private partnership between research laboratories and private companies is the lack of public support for irrigation technologies in the most significant European R&D programmes, such as FP7.

Leading Drivers of Innovation

The main drivers of innovation are the optimisation of water use and water saving sprinkling irrigation systems and micro irrigation systems.

Despite the global nature of the market, normalisation processes only apply at national level. For instance, the European Irrigation Association (EIA), which brings together all

302 http://www.agpm.com/en/communique0001210e.php.

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the main European stakeholders involved in the irrigation industry303, is not represented at the European level for normalisation issues. The EIA anticipates new trends within the market and helps raise awareness of new irrigation techniques – for example, meetings are organised periodically to discuss technologies and innovations. There is an opportunity to create a normalisation or quality label for irrigation systems at the European level. Normalisation can be an important innovation driver.

Even in Europe, water resources are becoming increasingly expensive, leading to increased costs to farmers to gain water for irrigation. Whilst many farmers rely on water abstraction, the drastic reduction of water volumes used for production is a major challenge for agriculture in Europe.

The EIA, through national organisations in charge of standards and by direct contacts with the CEN and ISO working-committees, contributes to the establishment of comprehensive and quality orientated international norms and standards. The EIA can assist its members in the understanding of these norms. The French research and testing centre CEMAGREF is a partner of the EIA.

Leading EU Innovators

Two leading EU firms deal with micro-irrigation systems: Eurodrip (Greece) and Mandragon (Spain).

Business Models

Sprinkling irrigation and micro irrigation systems are competing solutions, offering good water saving potential and cost efficiency for clients (especially the systems durability and the cost of maintenance). The market is now maturing with increased communication by firms about the characteristics of their products.

Barriers to Entry

For a few years, low cost systems (coming partly from China) have entered the market, with these newcomers illustrating that the market is open.

Potential for ETV

System cost has become the most important parameter with the arrival of new entrants such as Chinese companies marketing low cost systems: competition in the sector is therefore simply becoming cost-based, rather than innovation related. However, we understand that most of these new Chinese products have promising (but unverified) performance claims (in terms of water consumption and durability), but often fail to deliver these outputs once they are installed in a fully operational environment. According to CEMAGREF304, an ETV scheme would give a chance for EU producers to turn this market competition into an innovation-based competition.

The verification and the creation of a quality label are strongly recommended. The gain in productivity, water savings and durability are uncertain and must be verified.

303 Including manufacturers, importers, distributors, dealers, contractors, landscape architects, consultants, individuals, water and energy agencies, universities. 304 Consultation with Bruno Molle, CEMAGREF, 2011.

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The importance of performance in terms of water consumption, energy consumption and area covered is crucial. Irrigation systems available on the market must be tested in order to verify if theoretical (and announced) performances match with reality.

Technology Group C: Recycling of nutrients and organic carbon from manure (e.g. separation, digestion), re-use of sewage sludge and re-use of waste water after treatment More than half of European countries suffer from water stress (see Figure E1.2) and the phenomenon affects 70% of the population305. For the countries with a water stress index of greater than 20%, significant investments are needed to provide efficient solutions for ensuring adequate supply.

Figure E1.2 - Water stress index of the European countries

Re-use of sewage sludge and re-use of wastewater is considered a solution that not only provides these countries with alternate water supplies, but also decreases the impact of human activities on the environment. A 2006 report by SUEZ Environment underlined that since 1997, global wastewater reuse has been developing rapidly306. At the time of publication, around 2% of all wastewater was being reused globally, representing volumes of around 7 billion m3 or 0.18% of global water demand. From that perspective, global market prospects are strong for new technologies. Sources for wastewater re-use include sewage water, industrial wastewater and agriculture wastewater. Reuse of wastewater could apply to agriculture, industry or urban needs.

Alternative Technologies

There are three processes to treat wastewater corresponding to three types of treatment307. First, primary treatment consists of a physical process that removes the impurities by screening, sedimentation, filtration, flotation, absorption or adsorption or both, and centrifugation. Secondly, a secondary treatment consists of a process that

305 Bixio et al. (2006): Wastewater reuse in Europe. Desalination. 306 SUEZ Environment (2006): Water: alternative resources. 307UNEP (2006): Water and Wastewater Reuse - An Environmentally Sound Approach for Sustainable Urban Water Management.

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removes impurities chemically through coagulation, absorption, oxidation-reduction, disinfection, and ion-exchange. Thirdly, another treatment consists of a process that removes the pollutants using biological mechanisms, such as aerobic treatment, or anaerobic treatment. Wastewater treatment produces sewage sludge which can be used for fertilisation. (Further discussion of membrane technologies can be found in the Water market analysis)

With respect to the separation of livestock waste (i.e. slurry and manure), a report from the Nova Scotia Agricultural College on technologies notes that “a host of mechanical and chemical separation methods have been developed for the treatment of municipal and industrial effluents however, relatively few have been applied to agricultural systems”308. The same report states “four physical separation processes that have generally been included in agricultural waste separation equipment are sedimentation, screening, centrifugation and filtration.”

A 2004 technical paper from a US producer of membrane technologies lists all the existing techniques for digesting manure. Like many other technical reports, it underlines that the techniques/technologies often lack technical information on their performance characteristics309. For that reason, it is very easy to find technical papers that propose to test a single technology or the characteristics of several technologies against each other. However, results show that there is no “best” technique/technology per se but that the selection of any one technology is dependent on the final “value” of the solid and liquid reuse parameter, and on the local environment of the end user. For example, intensive farms with thousands of cows generates much more manure than a farm with hundreds of pigs. However, since pig manure is much more concentrated in potassium, it requires different technologies for treating the waste compared to cow manure.

Market Characteristics

EU and Global Turnover

For wastewater reuse, the main players in Europe in 2006 were Spain and Cyprus and to a lesser extent Greece, France and Italy310. Wastewater reuse for agriculture is expected to increase in the future, particularly in developing countries. Currently the countries with the highest volumes of wastewater used for irrigation are generally developing economies. Of the top 20 economies utilising the highest levels of wastewater for irrigation, the only EU member states were Spain (5th) and Italy (8th)311. When wastewater data is broken down into treated water and untreated water and presented by area instead of volume (square kilometres), the picture is different because Italy (6th), France (17th) and Germany (20th) enter the top 20.

The Minnesota Department of Agriculture in the USA312 stresses that “the Netherlands have taken the lead in anaerobic digestion in Europe. They have constructed numerous digestion plants throughout the country in recent years. Other European countries (Britain, Germany) have also been developing digestion plants”. In France,

308 Nova Scotia Agricultural College: Understanding Mechanical Solid-Liquid Manure Separation. 309 G. Johnson et al. (2004): Membrane Filtration of Manure Wastewater. New Logic Research, Technical Report. 310 SUEZ Environment (2006): Water: alternative resources. 311 World Bank (2010): Improving Wastewater Use in Agriculture - An Emerging Priority. 312 Minnesota Department of Agriculture. http://www.mda.state.mn.us/renewable/waste/faqs.aspx.

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our interviewee considers that there are about 150-200 screw presses in France which help with sludge reuse.

Leading EU Producers of Technology

A large number of companies provide technologies for the treatment of wastewater or manure separation/digestion. However, those companies dealing with wastewater are often world leaders such as Siemens offering huge integrated solutions, while those dealing with manure tend to be SMEs operating in niche markets313. (see Water and Energy market analyses for further details of leading companies).

Technology Users

End users for water reuse will generally be farmers growing cereals which require large water volumes. However buyers might also be municipalities/companies, which sell the water after treatment to farmers. Livestock farmers are also a large market for treatment technologies with numerous available systems according to the size and type of livestock.

Leading Demand Drivers

The benefits of wastewater reuse and of treatment of livestock waste are high for society as a whole, but generally negative for farmers. European Farmers have seen revenues steadily decline which is now impacting on the demand for technological developments. Demand can only be pulled through by regulation or financial incentives. European standards on the reuse of wastewater are often based on WHO guidelines drafted in 1989 and updated in 2006. At the EC level, the reference document is the Council directive establishing a framework for community action in the field of water policy of October 2000. Some EU Member States have defined their own regulations on wastewater re-use.

Every report that deals with wastewater re-use emphasises that the diffusion of such technologies depends strongly on the development of regulations as well as the acceptance of this approach by the population and wider stakeholders. The same statement applies to the technologies for treatment of livestock production.

Finance is considered the single most important barrier to wider use of these technologies. Public action is needed to help in the increase in demand. Without incentives or mandatory obligations, these technologies are not affordable for the agricultural sector.

Innovation Type

Technology is mature in this area. Innovation mostly deals with the technological characteristics of the product (capacity to treat chemical substances), but operational costs are an increasingly important element. Indeed, some companies emphasise the (low) level of chemical products to be used or the levels of energy required for treating a certain quantity of manure as part of their performance ‘claims’. The study shows however that it is difficult to compare the cost of the different products/processes provided that the technical characteristics are different from one to the other.

313 Anquetin, P (2011): Representative of PICHON SA. Conference on Eco-innovation. SIMA. Paris.

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It has been used for decades in industry and innovation is definitely incremental (our interviewee even talked about “improvement” instead of innovation).

Leading Drivers of Innovation

Innovation drivers mostly come from the producers of technology. Demand for innovation does not come from the final users of the technologies but is originated from the producers of legislations and regulations. As far as technical requirements are enhanced, technological innovation is needed and pushes the producers of technology to deliver product/process that fits with these requirements.

Leading EU Innovators

Producers of wastewater reuse technologies are worldwide players (see below). For technologies for waste treatment from livestock, our interviewee314 told us that producers are either very specialised companies in the agricultural sector or companies working both with industry and the agricultural sector. Some companies deal with single technologies; others deal with several. It is difficult to find data on market shares and there are too many websites of relevant companies that supply such facilities.

Business Models

The wastewater treatment market (whatever the origin and whatever the source) is huge. However, as already noted, farmers are not keen to invest in facilities that increase their costs without increasing incomes. For that reason, the price of products/processes for treatment of livestock wastes needs to be as low as possible. Systems for the agricultural sector have to be “simple, robust and cheap” according to our interviewee.

The Minnesota Department of Agriculture estimates that a manure digester costs from €2,000 to millions of euro. The website refers to the US Environmental Protection Agency's AgSTAR Programme which estimated the cost for a manure digester at approximately USD 550 (~€400) per cow.

As for mechanical liquid-solid separation systems, these can range from €10,000 to €50,000315 (€7,000-35,000).

Barriers to Entry

Technological characteristics and system price are important elements for entering the market for wastewater treatment or treatment of livestock waste.

Potential for ETV

Given increasing European Commission and public pressure to reduce environmental impacts from agriculture, one can reasonably expect a gradual tightening of such regulations, particularly if water scarcity becomes more prevalent. In this respect, the redesign of the Common Agriculture Policy after 2013 will undoubtedly green

314 Benoit Pouvesle. ALPHA LAVAL, Industrial Waste Manager, Market Unit Environment. 315 Nova Scotia Agricultural College: Understanding Mechanical Solid-Liquid Manure Separation.

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European agriculture; the European Commission is also investigating how it can ‘future proof’ the CAP against the threats from climate change.

From that perspective, the relevance of ETV is unquestionable for the technologies dealing with reuse of wastewater as well as treatment of livestock waste. There is likely to be growing pressure to employ such technologies to have more sustainable agricultural systems. However, given the vast number of techniques on the market, end users are likely to welcome a system that enables the fast and robust comparison of performance data.

However, performance clearly depends on end user needs which themselves depend on the type of animals and the region in which the application is likely to be installed. Hence for an ETV system to be robust would require an impressive number of parameters.

Technology Group D: Reduction of pesticide use and contamination (e.g. spreading equipment, precision application), prevention of pollution from nitrates and phosphates Alternative Technologies

The “technical” solutions currently available consist either of reducing consumption of pesticides by optimising the spreading process or reducing the level of protection of crop plants. For the former, the market is constrained by progress in technological spreading equipment; the latter option deals with technical as well as behavioural/economic changes.

An European Network of Excellence (NoE) funded by the sixth Framework Programme from 2006 to 2010, called ENDURE, highlighted that reduced consumption of pesticides can be carried out either by an integrated production or integrated production systems approach. Both go far beyond the scope of the current study, which is focused on technological innovation.

As far as ETV is concerned, the focus should be on optimising spreading systems to spread pesticides more efficiently or any product used for fertilisation that contains nitrates or phosphates.

Product use and Applications

Products are only used by the farmers.

Market Characteristics

EU and Global Turnover

Pesticides and fertilizers have two negative external effects. First, the presence of residual particles in water, air or food can affect human health. Second, the diffusion of these particles into the environment affects fauna and flora. In spite of these known impacts, pesticides and fertilizers are intensively used across Europe. France is the largest consumer of pesticides in absolute value, while Portugal is the highest user by land area (i.e. consumption of pesticides per hectare), followed by the Netherlands,

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Belgium and France. A scientific paper published in 2010316 underlined that very few scientific papers have addressed the implementation of policy aimed at regulating the use of pesticides at the scale of a country or of a group of countries.

At the micro level, in the current economic context, chemical phytosanitary protection is much more affordable than any other conventional use. In an interview conducted in 2010, a researcher at the French National Institute for Agricultural Research (INRA) explained that one could not expect novel pesticide substitutes at the moment to be as efficient as existing pesticides.

Leading EU Producers of Technology

Innovation is at the core of business models for producers of these technologies and hence one reasonably assumes that all producers have to be innovative to survive.

Global Market Leaders

According to the participants in the Conference on Eco-innovation organised in Paris in the frame of the 2011 International Exhibition of Agricultural Equipment (20 February 2011, SIMA)317, the market is very fragmented. Producers and dealers are the agricultural equipment providers. Besides global giants like John Deere, New Holland, Adams Fertilizer Equipment, to name but a few, there are also numerous SMEs.

Technology Users

Users of technologies are the crop farmers. Provided that the higher the size of the farm, the greater the economies, users can in some cases be cooperatives of farmers aimed at sharing agricultural equipments.

Leading Demand Drivers

Demand is driven by the technical characteristics of the equipment as well as their price. Technological considerations

Innovation Type

Innovation is incremental in this group. Innovation mostly deals with the capacity of new equipment to optimise the spreading of pesticides/fertilizers and to reduce system price.

Leading Drivers of Innovation

Innovation is not driven at all by environmental target. Stated differently, technological development does not target environmental objectives. Producers or users of technologies often consider they undertake sustainable agriculture in an indirect manner. The drivers of technologies that deal with the reduction of waste and the optimisation of pesticide consumption are the reduction of cost.

316 Société Française d’Economie Rurale (2010): Economie de la production agricole et régulation de l’utilisation des pesticides - Une synthèse critique de la literature. Conference on the reduction of agricultural pesticides – challenges, modalities and impacts. 317 Programme and list of invited speakers available here: http://www.cemagref.fr/programme-sima-2011.

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Leading EU Innovators

Innovation is not only led by the companies themselves but is co-produced by public research institutes. There are plenty of research/innovation projects that deal with the reduction of consumption of pesticides/fertilizers based on the optimisation of the spreading process.

Business Models

The business model is that of the agricultural equipment producers. This study has not put too much emphasis on this given our conclusion on the lack of interest in an ETV scheme (see below).

Barriers to Entry

As in the previous section, barriers to entry are similar to those in the agricultural equipment producers market.

Potential for ETV

The potential for ETV is very limited since environmental issues are only indirect issues to what drives technological development for reducing the consumption of pesticides/fertilizers. Furthermore, if the conclusion is that an ETV scheme is needed for such technologies, one should bear in mind the conclusions from a US project318 that stated that “Protocol development is costly and time consuming” and that “This problem is extremely complex - technical issues of spray drift, wide diversity of application equipment and technologies, large number of industry entities and varying interests, international interests”. This suggests that providing a laboratory based verification would simply be irrelevant compared to the real life operational challenges for validating new technology performance, literally, in the field.

318 The project was finished in 2008 and led by the Pesticide Spray Drift Reduction Team of the Environmental Technology Council which is part of the US Environmental Protection Agency. Results of the project are available here: http://www.epa.gov/etop/pubs/reportPesticideSpray0608.pdf.

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ANNEX F: AIR POLLUTION MONITORING & ABATEMENT

Overview The products covered under this Technology Area include applications that deal with the monitoring and treatment of contaminated air streams. These two technology groups are analysed as discrete sub-sections. The installation of a diverse set of technologies (e.g. filters and scrubbers) to prevent and control emissions to air is a critical milestone for numerous EU and global industry sectors, without which they would be unable to operate. Likewise, the regular monitoring of key air emissions parameters is vital in ensuring the achievement of regulatory consents and maintenance of a company’s ‘licence to operate’. The main markets for these products are heavy industries which include oil refineries, chemical plants, metal smelting and processing, cement production, power plants and waste incinerators.

The total value of the EU air pollution control market is estimated at around €16 billion, of which treatment technologies comprise 60%. It is the oldest European environmental market and has seen growth slow considerably as regulatory compliance has been mostly achieved across sectors over the past 10 years. The key market driver is the IPPC Directive (now the Industrial Emissions Directive) which aims to create a level playing field across industry (existing and new entrants) by ensuring compliance with the ‘Best Available Techniques’ on the market. Improved cost efficiencies are also possible if firms decide to reinvest in modern systems. However, in general, the high ‘sunk costs’ of abatement systems creates inertia in reinvestment unless a company’s hand is forced by the environmental regulators. Overall, the potential for growth in the EU is limited, relative to overall global market opportunities.

The relocation of many European heavy industries to emerging economies such as China (many of which are implementing stringent emissions regulations in earnest) does provide considerable opportunities for EU firms to export their market leading technologies. However, this global market dynamic clearly makes it more challenging for innovative SMEs from the EU to established routes to the main end user industries.

Despite the maturity of the market, the EU air pollution control industry is not as consolidated as other parts of the environmental technologies sector. However, German companies maintain a dominant position both in the production and external EU trade of most technology products – a phenomenon attributed in large part to progressive TA Lüft legislation that stimulated massive investments in air pollution controls in Germany in the 1980’s: legislation that also helped shape EU Directives. Not surprisingly, the industry has mature technologies with only incremental innovation.

German firms such as Balcke Dürr, Fisia Babcock Environment, Mahle Filtersysteme, Siemens and Durag Group remain major European players in this market. There are market leaders from other Member States including Haldor Topsoe A/S (DK), ABB (SE/CH), Johnson Matthey (UK), and Impregilo Group (IT). Many of these firms supply both abatement technologies and monitoring techniques and rely on licensing to expand their operations worldwide.

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There are established certification schemes for monitoring technologies (e.g. German TÜV or UK’s MCERTS) and for abatement techniques. This creates a challenge for introducing an EU ETV due to potential confusion and onerous costs of yet another scheme. Despite that, there are obvious challenges for innovative companies with novel air pollution control systems who do not fit norms and standards. On-site testing (e.g. of prototypes at client sites) is an established method of proving performance, particularly where products may have to be integrated into abatement systems. However, there may be merit in developing an ETV for certain types of technologies.

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Table F1.1: Market characteristics for air pollution control technology area

Technology Current EU Current EU share of EU Annual EU Market Market Global Discrete purchase or General Group Market Size Global Global Growth Rate size in status Annual requirement for end assessment of risk Market Size market 2020 Growth user to require further aversion to new € billion (current Rate testing as part of technologies for € billion % growth) € billion system (e.g. wind end users % farm) %

Air emissions €4 bn €13.3 bn 30% 1.6 (1999- €3.2 bn Established >5% Discrete purchase Risk averse monitoring (estimated) (estimated) (estimated) 2004 (estimated) (estimated) (some in-line systems) average)

Abatement of Discrete purchase (of Highly risk averse pollution from secondary measures); €12 bn €40 bn 30% 1.6 (1999- €14.1bn Established >5% stationary sources some primary (estimated) (estimated) (estimated) 2004 (estimated) (estimated) (integrated) measures average)

Table F1.2: Innovation characteristics for air pollution control technology area

Technology Strength of EU market Status of Status of Rate of Level of Existence of Key barriers to exploitation of market ready Group EU leaders in established alternative innovation investment established / technologies in sector Technology supply of (dominant) technologies into EU accepted norms Supply Side technology technology supply side and standards (VC, R&D, etc.)

Alternatives Established with uncertain certification systems Air emissions World leading Germany, Mature Incremental Low - Lack of information and awareness of product higher across most major monitoring UK, Italy Medium performance by end users performance markets, e.g. TÜV (DE), MCerts (UK)

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Lack of information and awareness of product performance by end users, often leading to Abatement of World leading Germany, Mature Alternatives Incremental Low - Considerable norms lengthy and costly on-site testing pollution from France, with uncertain Medium and standards based stationary Denmark, higher on IPPC Directive Slow EU growth. Main markets in developing sources Italy performance compliance economies. Increased costs for new entrants.

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Brief presentation of Markets / Innovation / Sector characteristics The Air pollution control market, for the purpose of this study, is characterised according to the following Technology Groups:

• Air emissions monitoring (e.g. sensors, gas analysers and monitors, including continuous emission monitors); and

• Abatement of pollution from stationary sources (e.g. filters, scrubbers, electrostatic precipitators, catalysts, stabilisation of by-products, leakage prevention).

Product use and applications

Air emissions monitoring

Air monitoring tools provide raw measurements of air pollutant concentrations. The regular monitoring of key air emissions parameters is vital in ensuring the achievement of a company’s regulatory consents and maintenance of their ‘licence to operate’, without which the company would have to shut down. The two main reasons for monitoring, highlighted in the IPPC Directive are for:

• compliance assessment; and

• environmental reporting of industrial emissions.

Parameters to be monitored depend on the production process, the raw materials which are processed and the chemicals, if applicable, that are used in operation of the air treatment process. Clearly it is advantageous if the parameters to be monitored also serve the plant operation control needs. A risk-based approach is often used to match various levels of potential risk of environmental damage with an appropriate monitoring regime. To determine risk, the main elements to assess are the likelihood that the emission limit value (ELV) will be exceeded and the severity of the consequences (i.e. harm to the environment)319.

The potential users of emissions monitors and their data outputs are the environmental regulators, plant operators, emission inventory specialists, certification and accreditation bodies, charging and taxation authorities, and consultants.

Abatement of pollution from stationary sources

EC reference document on BAT for large combustion plants (July 2006) identifies a set of technologies and techniques to prevent and control major emissions to air. These are classified under two categories, characterised according to which stage of the industrial process they are installed. Primary measures are integrated into the industrial process in order to reduce emissions at source or during combustion. Secondary measures are class ‘end-of-pipe’ measures to specifically control emissions

319 IPPC, Reference Document on the General Principles on Monitoring, July 2003

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to air. The former will have an impact on overall plant efficiency, the latter will add to plant costs but will not change the fundamental operation of the core process320.

Table E1.3 summarises the major techniques and technologies to prevent and control a diverse set of contaminants in process emissions.

320 European Commission, Integrated Pollution Prevention and Control, Reference Document on BATs for Large Combustion Plants, July 2006.

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Table E1.3 Technologies for air pollution prevention and control

Particulate SO2 NOx Combined Dust & Heavy VOCs Halogen CO & emissions SO2/NOx particulates metals emissions unburned hydrocarbons

Adsorbents 3

Desulphurisation321 3

Control systems 3 3

Burner technology 3 (integrated technologies) Integrated measures: NOx322 3 Primary measures

Electrostatic precipitator 3 3

Filters 3 3 3

Centrifuges (cyclones) 3

Scrubbers 3 3

Control systems 3 3 3

Sorbent injection 3

Regenerable processes 3

SCR/ SNCR 3

Alkali injection 3 Secondary measures

(end-of-pipe technologies) Electron beam irradiation 3

Gas/solid catalytic process 3

Adsorption/regeneration 3 3

Catalyst combustion 3

321 Use of a low sulphur fuel or fuel with basic ash compounds for internal desulphurisation. 322 Low excess air; Air staging; Flue-gas recirculation; reduced air preheat; Fuel staging (re-burning).

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Market characteristics: EU and global annual turnover A recent study323 for the European Commission shows that total turnover of the EU air pollution industry in 2006 was around €16 billion. Based on the value of EU trade for air pollution control products (see section below) it is reasonable to assume that around €4 billion (or 25%) of the market is sales of emissions monitoring equipment.

Air pollution control represents around 11% of total EU pollution management production (estimated as €145 billion in 2006). Germany enjoys about 30% (€5 billion) and the UK about 11% (€1.7 billion) of the total EU turnover for the industry.

Another study324 on eco-industries in France showed that the French market for air and noise pollution management was about €2 billion, of which €1 billion was allocated to air pollution control. Taken together, these three member states represent 48% of the overall EU market.

Estimates for other prominent EU air pollution control markets include Belgium (€470m), Finland (€176m), Portugal (€175m) and Hungary (€78m)325.

Import-Exports

Air emissions monitoring

Figure E1.1 shows the total value of imports and exports for monitoring equipments326. Overall, the EU had a positive trade balance for selected air emissions monitoring products between 2006 and 2009.

Exports have generally followed a constant trend for the period 2006-2009. However, the value of imports and exports has declined between 2006 and 2009, most likely as a result of the global economic downturn. In this period, the value of imports increased by 1%, reaching a peak of €1.4 billion before falling back to €1.2 billion in 2009. Similarly, the total value of EU exports first increased by 2% from €2 billion in 2006 and then went down in 2008 by 6% to €1.9 billion in 2009.

Figure E1.1 Imports and exports for monitoring equipments (million euros)

323 Study on the Competitiveness of the EU eco-industry, ECORYS, October 2009 324 Développer les éco-industries en France, BCG, December 2008. 325 Eco-Industry, its size, employment, perspectives and barriers to growth in an enlarged EU, September 2006, Ernst & Young 326 Instruments or apparatus for measuring or checking variables of liquids or gases, N.E.S.; Gas or smoke analysis apparatus.

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2,500

2,000

1,500 Imports 1,000 Exports

500

0 2006 2007 2008 2009

The following Figure E1.2 shows that only extra-EU exports increased during the period 2006-2009.

Figure E1.2: Intra-EU and extra-EU trade for monitoring equipments (million euros)

1,200

1,000

800 Exports Intra-EU 600 Exports Extra-EU

400 Imports Intra-EU Imports Extra-EU 200

0 2006 2007 2008 2009

Abatement of pollution from stationary sources

EU imports for air filtration products increased from by 21% from €3 billion in 2006 to €3.5 billion in 2008 before declining to €2.26 billion in 2009. Similarly, during the period 2006-2008 the total value of EU exports increased by 13% reaching a peak of €3 billion before falling back to €2.5 billion in 2009.

Figure E1.3 Imports and exports for air filtration products (million euros)

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4,000

3,500

3,000

2,500

2,000 Import 1,500 Export

1,000

500

0 2006 2007 2008 2009

During the period 2006-2009 all intra-EU and extra-EU trade declined. The highest percentage decrease in these categories was between 2008 and 2009. In this period, extra-EU exports had the lowest declining trend: while other intra-EU imports, extra-EU imports and intra-EU exports had negative growth rates of 29%, 46% and 21% respectively, extra-EU exports experienced a negative growth rate of 10%.

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Figure E1.4 Intra-EU and extra-EU trade for air filtration products (million euros)

2,500

2,000

1,500 Exports Intra-EU Exports Extra-EU 1,000 Imports Intra-EU Imports Extra-EU 500

0 2006 2007 2008 2009

Leading EU producers of technology

A recent study for the European Commission327 showed the top 25 European companies in air pollution control, based on operating revenue of 2007. Among these top 25 companies, 24 were German enterprises and just one firm from the UK, Johnson Matthey. Clearly this is to be expected given that the German market is about one third of the total EU air pollution control industry. Germany dominates intra-EU and extra-EU exports for air pollution control products (about 50% of total value of EU exports for emissions monitoring products). Germany is also the leading exporter of air emission monitoring equipment (other notable exporters include the UK, Sweden and Denmark).

A review of the ‘top 25’ list alongside other industry players reveals the following ranking by turnover328 for 2009/2010 (see Table E1.4). This clearly shows the capabilities of other EU member states in this market including Denmark, Italy and the UK.

Table E1.4: Turnover of major market players in air pollution control Company Country Turnover (million euros) Umicore Ag & Co. Kg (DE) Germany 9,700 (2010) Johnson Matthey Plc (UK) UK 9,400 (2010) Mahle Filtersysteme GMBH Germany 3,900 (2009) FLSmidth Airtech Company Denmark 2,700 (2010) Impregilo Group Italy 2,700 (2009) Haldor Topsoe A/S Denmark 577 (2009)

327 Study on the Competitiveness of the EU eco-industry, ECORYS, October 2009. 328 It is recognised that for some companies this turnover covers all activities, not just air pollution control, but this ranking is merely indicative of the market and used as a proxy in light of limited market data.

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Source: EPEC analysis

A 2006 report for the European Commission329 also lists other leading EU firms in the flue gas treatment field, which besides German firms Lurgi and Deutsche-Babcock, also shows the strengths of France in the market with ALSTOM, LAB and Rhodia.

329 Eco-Industry, its size, employment, perspectives and barriers to growth in an enlarged EU, September 2006, Ernst & Young

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Table E1.5 Market leading players in the global air pollution control sector

Technology EU Non-EU

Ammonia Haldor Topsoe ABB Hamon Wahlco Inc. analyser A/S (DK) (SE/CH) Group (US) (US)

Gas analyser Siemens (DE) Haldor ABB (SE/CH) Topsoe A/S (DK)

Continuous ABB (SE/CH) Casella (UK) emission monitoring

VOC analysers ABB (SE/CH)

Emissions Monitoring Equipment Equipment Monitoring Emissions Acid gas Haldor Topsoe Siemens ABB (SE/CH) Wahlco Inc. analyser / control A/S (DK) (DE) (US)

Filters FLSmidth Airtech Balcke-Dürr Donaldson Fisia Mahle Hamon AAF Donaldson Hitachi Foster

Company (DK) GMBH (DE) Gesellschaft Babcock Filtersystem Group (US) International Company Zosen Wheeler 330 331 MBH (DE) Environment e GMBH (US) (US) Corporation (CH) (DE) (DE) (JP)

Systems Scrubbers Clyde ALSTOM Hamon Hitachi Bergemann EEC (FR) Group (US) Zosen

FiltrationTreatment & Corporation

330 The company is actually part of US multi-industry manufacturing giant SPX Corporaation which it joined in 2002. http://www.balcke- duerr.com/download/broschueren/brochure_en_161.pdf 331 In 2009, former US engineering giant, Foster Wheeler, reincorporated its engineering and contracting firm as a Swiss company based in Zug. The firm’s rationale was to be more centrally located within its area of worldwide operations in a country with a stable and well-developed tax regime and a sophisticated financial and commercial environment. However, it still has substantial operations running out of the USA. http://www.nj.com/business/index.ssf/2008/12/foster_wheeler_plans_to_become.html

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Technology EU Non-EU

(DE) (JP)

Electrostatic FLSmidth Airtech Fisia Siemens (DE) Balcke-Durr ALSTOM Hamon precipitators Company (DK) Babcock GMBH (DE) (FR) Group (US) Environment (DE)

VOC BASF Catalysts technologies Germany (DE)

Selective Haldor Topsoe Fisia ALSTOM (FR) Balcke-Durr Hitachi Foster catalytic A/S (DK) Babcock GMBH (DE) Zosen Wheeler reduction Environment Corporation (CH) (DE) (JP)

Catalysts Haldor Topsoe Umicore Ag BASF Johnson Hitachi Mitsui A/S (DK) & Co. Kg Catalysts Matthey Plc Zosen Mining (DE) Germany (DE) (UK) Corporation Company (JP) Limited (JP)

Source: EPEC, based on company website information (the table is not exhaustive and should be seen as an illustration of the market)

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Global market leaders

As Table E1.6 above shows, alongside EU Member States, the USA has strong presence across both abatement technologies and monitoring systems. Indeed, one of the leading German suppliers, Balcke-Durr GMBH, is actually part of US SPX Corporation. Technology users

The technology area includes companies that offer products, processes and services dedicated to the monitoring the level of emissions generated by processes and are present in the air. Heavy industries such as refineries, metal industry, industries of cement, iron, steel, chemical plants, power plants, waste incinerators are the major users of air pollution abatement technologies including air emission monitoring technologies. In the private sector, medium-size and large industrial companies in the petroleum, chemical, cement, food processing, textile and tanning industries are the main users of this type of technology.

In the public sector, environmental regulators, municipal authorities, and hospitals are major users of air emission monitoring technologies.

Leading Demand Drivers

The IPPC Directive is the major legislative driver for air pollution control, alongside national legislation that may have stricter emissions limits. The Directive sets minimum requirements for plant permits, particularly in terms of pollutants released, with the aim to prevent or reduce pollution of the atmosphere and to ensure a high level of environmental protection.

Financial drivers may also play a role in incentivising end users to improve the performance of their production processes in order to reduced costs and improve plant environmental efficiencies at the same time.

In theory both types of drivers are interrelated as the framework of the IPPC Directive and its BREF documents illustrate. The application of Best Available Techniques (BAT) is the central requirement of the IPPC Directive: the policy objective is to stimulate the diffusion of state-of-the-art environmental technologies across industry. This is achieved through the BREF process which defines techniques as being BAT and outlines BAT emission levels for use across the EU. The BREF documents emphasise the cost-effectiveness of best available technologies.

Leading drivers of innovation

As for demand, the regulatory framework is the leading driver of innovation for both air emissions monitoring and abatement technologies.

Business models

The industry is reliant on its track record and particularly the success of reference plants operating worldwide in different markets which it use to satisfy client concerns around performance.

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The business model is mostly based on three options: companies may expand their core businesses to other countries (e.g. Balcke Dürr); they can enter in licensing agreements with national wholesalers in other countries (e.g. Durag Group UK); or follow both strategies together (e.g. Durag Group and ABB Group).

Licensing agreements with EPC contractors can be lucrative as some of the risks are passed onto the contractor who will manage the installation and follow up maintenance. This approach has given the EU supply side global reach in a rapid time period. With foreign markets now becoming much more important, relative to the EU market, firms are increasingly establishing local presence, sometimes through local acquisition.

Barriers to entry Lack of information and awareness by end users as to the efficacy of abatement technologies is a major barrier to exploitation of market ready technologies. If the potential purchaser is unaware of a technology, then it will not be considered in their pre-procurement assessments. Similarly, a potential purchaser who is not confident about the technology’s capabilities, due to a lack of independently verified data on the technology’s performance, is also unlikely to invest in the technology. Clearly new companies – or those with a limited track record – will find it hard to both to raise their profile, open doors to new clients as well as provide confidence that their technology will achieve what the end user requires.

A lack of financial resources may also prevent the exploitation of market ready technologies, from both the purchaser and the seller’s perspective (particularly for SMEs). This is especially the case if a reference plant or demonstrator is first required with associated monitoring requirements to validate the performance.

Innovation type

Innovation in this sector is incremental as technologies are well-established and mature.

Business models

Licensing agreements with manufacturers and wholesale distributions are the main forms of purchasing innovative technologies for the businesses.

Barriers to entry Lack of information and awareness on the end-user side is a major barrier to exploitation of market ready technologies in sector. If the potential purchaser is unaware of a technology, then it will not be considered in their per-purchase assessments. Similarly, a potential purchaser who is not confident about the technology’s capabilities, due to lack of independently verified data on the technology’s performance, is also unlikely to invest in the technology.

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Lack of financial resources may build other barriers against the exploitation of market ready technologies in sector. Purchasing and implementing the new technologies may be costly for businesses and for SMEs in particular.

Investment cost may also be too high so that the gap between investment and payback becomes very large. This argument is particularly valid for primary measures as the capital cost tend to be higher than that of end-of-pipe methods (as well as the key fact that end of pipe technologies almost always add costs to a business).

Potential for ETV

Overall, this analysis indicates that the EU air pollution supply side is mature, globally operating and reliant on established technologies with on-going, incremental developments that are often introduced as market differentiators in a highly competitive environment.

Air emissions monitoring

The use of well-established and globally recognised verification and certification schemes for air emission monitoring technologies (a response to environmental regulators seeking confidence in the performance of technologies) narrows the scope for ETV scheme in the field: innovators will naturally aim to achieve certification to a particular market standard. Major market players in the sector already ensure that their products achieve certification for those countries with whom they have high volumes of trade. For example, Durag Group, a market leader in the supply of dust and mercury monitoring devices, has certification for some of its most advanced emission and ambient measuring devices for the German, USA, UK, Korea and CIS markets332.

That said, an ETV scheme could support the market entry of those companies with novel monitoring devices that might not fit a particular norm or standard: end users might be willing to side step established certification channels if the product offer was compelling enough (and backed by an ETV ‘badge’). However, the environmental regulators would have to be engaged from the outset to provide market confidence.

Abatement of pollution from stationary sources

The AIRTV project examined verification processes for a large number of air pollution abatement technologies (see Table E1.6) covering a broad range of pollutants, sizes and technological complexity (from indoor air quality to industrial plants) and applications (end of pipe technologies plus source focused treatments). Whilst this helps to show the types of innovation that have been put forward by the sector, it illustrates both the incremental nature of innovation in the sector (see section above) as well as the fact that many companies who put their ‘novel’ technologies through the project were actually major industry players such as ALSTOM, M+W Zander FE, and Von Rol (see Table E1.6 below). It is uncertain how many innovative SMEs exist in the EU in the air pollution sector, given its overall maturity.

Table E1.6 Test cases within the AIRTV programme

332 TÜV (Germany), MCERTS (UK), US EPA (US), GOST (CIS), Korean (Korea).

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Technology Provider Pollutants Responsible partner

MFI Technology, GENANO Technology GENANO Ltd. Small particles VITO

Wet scrubber KOERNER HNO3, HF, Technology, KVK LEIA Chemieanlagenbau combustion gases GmbH

Electrostatic precipitator, ELPAC ALSTOM LTD Dust and VOC IVL

ELOSORB Technology M+W Zander FE GmbH VOC DFIU-IFARE

RTO Technology, Megtec VOCsidizer MTS Environmental TOC, NOx, CO TNO GmbH

Combi-Scrubber Big dutchman Pig Technology, MagiXx Ammonia, particles, TNO Equipment GmbH odour

High Velocity Burners Flue gas, CO2, HV TD TCK Italy INiG reduction of fuel usage

Acid gases, heavy TURBOSORP Von Rol Inova GmbH metals, PCDD/F, dust, UBA-A Technology organic carbon APP Odour abatement system Applied Plasma Physics Odour VITO AS

Source: AIRTV, Testing Network for Verification of Air Emissions Abatement Technologies: results and recommendations, November 2009 (available at www.airtv.eu)

The potential role of ETV scheme seems to be greater for secondary measures (i.e. end of pipe systems) since primary measures require integration into the plant and hence would require in-situ testing as well as a rethink of the overall process. The risks surrounding this for an uncertain technology suggest it is not practical.

The extent to which the IPPC Directive incentivises businesses to invest in innovation to tackle air pollution is open to discussion. A recent EC document333 discussed potential structural limits in the design of the IPPC Directive to promote innovation in air pollution control industry. The logic behind the discussion is that the IPPC Directive has two interrelated shortcomings. Firstly, it does not provide businesses with strong incentives for innovation beyond BAT or for improving environmental performance. In other words, market technology innovation capacity remains limited within the current interpretation of BAT; and secondly the BREF process, which defines techniques as being BAT and outlines BAT emission levels for use across the EU, creates uncertainty for technology developers and industry players about the future (i.e. further qualification and commercialisation of the technologies). This uncertainty may prevent technology developers and market players from developing or deploying emerging techniques at a larger scale.

It might be possible for an ETV scheme to play a role in helping to respond to structural shortcomings of the IPPC Directive in promoting environmental technology innovation.

333 Impact Assessment: Directive of the European Parliament and of the Council on industrial emissions (integrated pollution prevention and control), 21.12.2007.

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By verifying performance, ETV could potentially give businesses a fast track route to environmental regulators to illustrate the potential state-of-the-art for any particular pollutant treatment system. A registry of such verifications could be quickly built up as a reference for both the EU and national environmental regulators as to what is near to market/market ready. From the technology developer’s perspective, the ETV provides an incentive to invest in R&D in the knowledge that their innovation might find its ways into a BREF document.

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ANNEX G ENERGY TECHNOLOGIES

Summary

The total global market for energy technologies covered by this analysis is estimated at over €100 billion. By comparison the annual turnover of the renewable energy industry in the EU was about €70 billion in 2009334 - indicating the importance of the EU in driving this market. Wind energy and solar photovoltaics (PV) dominate the global market, with a combined share of over 85%. The main global market for renewables has until recently been Europe, notably Germany for wind, solar and biomass. However, non-EU markets are rapidly growing and catching up with the EU in their installed capacities including China and the USA.

This change in global renewable markets is in turn altering the innovation and supply chain dynamics of the sector, with traditionally EU-focused companies such as Vestas and Siemens (for wind) and Q-Cells (solar) now establishing both R&D and manufacturing plants in these emerging markets. Whilst there undoubtedly remains a massive market potential for suppliers of energy technologies within the EU - for example, the North Sea will have the world’s largest installed capacity of offshore wind turbines; the UK has the largest available resource for marine power globally; considerable emerging EU opportunities exist for biomass to energy – the rise of domestic players particularly in China and India across solar and wind in particular provide challenges for European business in selling into the global market. This globalisation of the renewable market – for both production and installation – also makes it harder for European SMEs to bring their innovative products to market. This is because OEMs and end users who they supply may be located well outside the EU.

The energy technology area is dominated by large corporations and the share of SMEs is very small. In the wind energy industry, for example, just ten companies comprise 80% of global turnover; the top five companies - Vestas (DK), GE Wind (USA), Sinovel (China), Enercon (DE) and Goldwind (China) - have 50% of global wind energy market turnover. In the solar market, fifteen companies represent 65% of global turnover and the top five companies - First Solar (USA), Suntech Power (China), Sharp (Japan), Q- Cells (DE), Baoding Yingly (China) - have a market share of 23%.

Rapidly increasing prices for conventional fossil-fuel based power generation, coupled with a need to reduce environmental and climate impacts from their usage are two major drivers behind technological investment in renewable energy. The EU’s ‘20-20- 20’ legislative package has fed through to Member State obligations and targets. Industry is also seeing the benefits of investment in renewable energy resources as a hedge against higher fuel costs, as well as fulfilling CSR commitments.

Energy technologies covered in this analysis are generally maturing technologies. The exception is marine power where the market is still nascent/pre-commercial. However, private and public investment in wind, solar and biomass are very much higher than in marine: a result of market scepticism and the high cost of capital deployed for marine power.

334 European Renewable Energy Council (EREC), Statistics

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Across all applications, rates of innovation have accelerated since the 1990’s, notably for wind power and solar PV. In wind power, Enercon is the top patent holder (closely followed by Vestas) for generators, gearboxes, drive trains and blades. Vestas is also a leading innovator for software and control systems. Patent ownership in solar PV and biomass/waste to energy however is dominated by Japanese firms. For marine power, the UK, Canada, Australia, USA and Norway are the major investing countries (in no small part as a result of their available marine resources).

The high capital costs to adopt new energy technologies and long payback periods for large scale technologies such as offshore wind farms marine power do create incentives for innovative firms to develop new technologies to improve performance.

With this in mind, there is scope for an ETV scheme to benefit certain parts of the energy technologies supply side. This varies according to the market maturity and structure of the value chain.

The latest generations of solar PV technologies (e.g. thin films, concentrating solar cells) would be ideal candidates for ETV as the first generation PV cells (crystalline silicon) has the vast majority of the market.

There is also potential for the verification of performance of wind turbine components such as blades, drives and generators, prior to integration into the actual turbine.

There is far less, if any, need for ETV in the area of biomass and waste to energy as pre-commercial demonstration plant are the norm – and combined heat and power systems are already widely deployed within the biomass area as well as their traditional market of burning natural gas.

The deployment of marine power technologies – and greater investor confidence - is also going to depend on successful ‘at sea’ testing of generating devices – not the verification of 1/25 scale prototypes in tank testing environments.

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Table G1.1: Market characteristics for energy technology area

Technology Current EU Current EU share EU Annual EU Market Global Discrete purchase General Group Market Global of Global Growth Market status Annual or requirement for assessment of Size Market market Rate size in Growth end user to require risk aversion to Size 2020 Rate further testing as new technologies € billion % % part of system (e.g. for end users € billion € billion % wind farm)

Wind, solar and €40 bn €85 bn 47% 19.6% €240 bn Maturing 25 (wind) Mostly further testing High risk takers marine (estimate (estimate) (wind and necessary within the (marine) (only for wind (only for wind wind) solar) and infrastructure. & solar) & solar) emerging Risk takers (solar) 3% (for (marine) marine) Moderate (wind) Biomass and waste €13 bn €32.5 bn 40% 10% €34 bn Maturing 10% Mostly further testing (estimate) (estimate) (estimate) (estimate) necessary within the (estimate) infrastructure. Moderate CHP - - - 5-10% Established 5% Mostly further testing (estimate) necessary within the infrastructure Risk averse

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Table G1.2: Innovation characteristics for energy technology area

Technology Strength of EU market Status of Status of Rate of Level of Existence Key barriers to exploitation of market Group EU leaders in established alternative innovation investment into of ready technologies in sector Technology supply of (dominant) technologies EU supply side established Supply technology technology (VC, R&D, etc.) / accepted Side norms and standards

Germany Wind (very high: Large payback periods make them less (Wind & estimated €180 attractive investments Solar) Wind Alternatives Incremental million) Highly (maturing) with uncertain for maturing variable Access to financial resources

Denmark higher technologies Solar (very high: (Wind) Solar estimated €325 Lack of awareness Wind, solar High (maturing) performance Game and marine million) Spain (Wind changing for & Solar) Marine marine Marine (low: (nascent) power estimated €18 million) UK (Marine) Germany Large payback periods make them less attractive investments Biomass and High France Maturing Alternatives Incremental Medium Highly waste with uncertain for well (estimated €73 variable Access to financial resources Sweden established million) higher Lack of awareness performance technologies; and large for new ones

Denmark Alternatives Large payback periods make them less with proven attractive investments CHP Medium Finland Mature Incremental Low Yes higher Access to financial resources Sweden performance Lack of awareness

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Introduction to Energy Technologies

The initial terms of reference for this study characterised the energy technologies market into three technology groups:

• Production of heat and power from renewable sources of energy (e.g. wind, solar, sea, geothermic and biomass);

• Reuse of energy from waste (e.g. 3rd generation biofuels and combustion technologies);

• Energy efficiency technologies (e.g. micro-turbines, hydrogen and fuel cells, heat pumps, combined heat and power production, logistics).

Having decided to separate out ‘established’ from ‘emerging’ renewable technologies (see Inception Report), we decided that this was not practical for the market analysis and reverted back to the study reference list.

However, we have moved biomass technologies into a separate category and integrated them with the reuse of energy from waste. The rationale for this is that biomass and organic wastes are often converted into power and heat using the same types of thermal treatment processes. Biomass to fuel also falls within this overall sector.

This section therefore follows the following revised technology group structure:

• Production of heat and power from renewable sources of energy (e.g. wind, solar, marine, geothermic);

• Conversion of biomass and organic waste into energy (e.g. biomass, 3rd generation biofuels and combustion technologies); and

• Energy efficiency technologies (e.g. micro-turbines, hydrogen and fuel cells, heat pumps, combined heat and power (CHP) production, logistics).

The Energy Efficiency technologies group has clear overlaps and duplications with applications in the Energy Efficiency in Buildings and Industry technology group (see Cleaner Production market analysis) – for example, around heat pumps and micro turbines. For this reason, only CHP has been explored. However, even this has overlaps with the Biomass to energy group where CHP is exploited.

Overall, there is a large commonality of issues and market data across these three technology groups (e.g. end users, demand drivers, market structure, etc.) and this is therefore presented as an overall section below.

Technology users

The main users of large scale renewable are large utilities, for example in EU wind energy production. The largest firms are Iberdrola (Spain), Endesa (Spain) and EDP

EPEC 198 Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

(Portugal) - see Figure G1.1335. Private equity firms such as Magnum Capital and FCC are also owners of major utilities in the EU.

335 Roland Berger Strategy Consultants, From Pioneer to Mainstream: Evolution of wind energy markets and implications for manufacturers and suppliers, February 2010

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Figure G1.1: Top 10 wind portfolio additions in 2008 (MW)

800 700 600 500 400 300 200 100 0

Source: Roland Berger, 2010

Medium sized to smaller scale and micro-energy technologies are used by a number of other customers from industry (to generate their own energy), to households.

Leading Demand Drivers

Various political and economic drivers underpin investments in this area:

Increasing populations and consumption patterns increases energy demand;

Energy prices increases are making renewables more economic to exploit;

Reduction in carbon dioxide and other harmful gases;

Political framework (e.g. EU targets to generate 20% of final energy use from renewables by 2020); and

Energy efficiency standards and regulations.

R&D investment

In 2009, corporate and public investment in renewables R&D in Europe was €6 billion ($8.1 billion) and €2.6 billion ($3.5 billion) respectively. These were about 54% and 36% of worldwide R&D investment in renewable energy336. Worldwide corporate and public R&D investment in wind power technology in 2009 was €410 million ($560 million) and €250 million ($340 million) respectively. It is therefore reasonable to assume that corporate R&D investment in Europe was about €250 million and the public investment in R&D was about €80 million in 2009.

336 Global Trends in Sustainable Energy Investment, UNEP, SEFI, New Energy Finance (2010).

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Similarly, worldwide corporate and public R&D investment in solar power technology in 2009 was €1.30 billion ($1.77 billion) and €870 million ($1.19 billion) respectively. Corporate R&D investment in Europe is assumed to be about €700 million with public investment in R&D about €313 million in 2009.

In marine energy technologies, the highest concentration of RD&D projects in 2006 were in Europe and North America, as shown in Figure G1.2. For example, in the UK 17 wave energy projects and 12 tidal current projects were documented in 2006. Other EU Member States with relatively high number of marine technology projects were Ireland, Denmark, France and Portugal337. Figure G1.2: Marine energy technology RD&D projects in March 2006

Source: AEA, 2006

Leading EU innovators Large corporations are the drivers of innovation in the sector. Figure G1.3 shows multinationals hold ~52% of energy patents globally; SMEs’ share is just 5%.

Figure G1.3: Share of patents by organisation type

337 Based on countries participating in the International Energy Agency’s Implementing Agreement on Ocean Energy Systems

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Source: Chatham House, 2009 Multinationals have the highest number of technology patents in solar PV, after cleaner coal technology; national corporations have the greatest share in wind (Figure G1.4).

Figure G1.4: Type of patent holder by technology

Source: Chatham House, 2009 In the wind energy industry, the total number of patents in 2009 was 12,264 and EU companies held just 15% (1,840). Similarly, the share of EU companies holding patents in the whole sector was (15%). Based on these figures – and given the structure of the market - it demonstrates the strength of the EU energy industry in translating patents into commercial products.

In the marine energy technology area, there is limited data availability at the organisational level however analysis at the country level suggests that UK is the

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

leading EU Member State in terms of market and investment volume, followed by Ireland, Denmark and France.

Technology Group: Renewables power Wind Energy

Product use and applications

The key application for wind turbines in the future is likely to be large wind farm arrays comprising tens to hundreds of turbines of between 3-5 MW in rated output. The key technologies required by the wind turbine industry are: Large forgings and castings; Turbine blades/wings; Bearings; Gearboxes and drive trains; Generators; Power take-off assemblies; Cables; Foundations; Energy storage; Software/control systems; and Offshore wind energy. These technologies are generally mature, with common standards adopted by the sector, however on-going innovations are occurring across most areas.

Market characteristics

Annual turnover of the renewable energy industry in the EU was about €70 billion in 2009338. The total annual turnover of the EU wind energy industry in 2009 was about €20 billion, which is approximately 40% of global turnover339. Germany (€8 billion340) and Denmark (€6.8 billion341) are the leading Member States.

The 2008-2009 annual growth rate for the global wind power industry was 25%342: the global turnover for wind energy sector was €40 billion in 2008 and reached €50 billion in 2009343. The most recent estimated growth rate for the wind industry is 17% per annum until 2012344.

Import-Export

Figure G1.5 shows the total value of imports and exports for European wind turbine generating sets. There has been an increase in the value of imports between 2006 and 2009. In this period the value of total imports increased from €1.4 billion in 2006 to €2.3 billion in 2009 (65% growth rate). Also, during the period 2004-2008 the total value of

338 European Renewable Energy Council (EREC), Statistics 339 World Wind Energy Association, World Wind Energy Report 2009 340 German Wind Energy Association, Wind Energy in Germany: http://www.wind-energie.de/en/wind-energy-in-germany/ 341 Danish Wind Industry Association, Danish Wind Industry Annual Statistics, 2010 342 World Wind Energy Association, World Wind Energy Report 2009 343 World Wind Energy Association, World Wind Energy Report 2009 344 Wind energy manufacturers’ challenges, Using turbulent times to become for future, Roland Berger, 2009

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exports increased by 38% reaching to a peak of €2.8 billion before falling back to €2.2 billion in 2009. Figure G1.5: Import and export values for wind turbine generating sets (million euros)

3,000

2,500

2,000

1,500 Imports Exports 1,000

500

0 2006 2007 2008 2009

Source: Eurostat

The value of intra-EU imports for wind turbine generating sets is considerable higher than that of extra-EU imports (Figure G1.6). There has been also a steady increase in the value of intra-EU imports between 2006 and 2009. In 2009, while the intra-EU import value of wind turbine sets was €2.2 billion, the extra-EU imports stayed at about €110 million. Figure G1.6: Intra-EU and extra-EU imports of wind turbine generating sets (M€)

2,500

2,000

1,500 Intra-EU 1,000 Extra-EU 500

0 2006 2007 2008 2009

Source: Eurostat

Similarly, the value of intra-EU exports for wind turbine sets is higher in 2008 and 2009 than that of extra-EU exports. The value of extra-EU exports has decreased from €1.5 billion in 2006 to €920 million in 2009 (Figure G.7). Figure G1.7: Intra-EU and extra-EU exports of wind turbine sets (million euros)

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

1,800 1,600 1,400

1,200 1,000 Intra-EU 800 Extra-EU 600

400 200 0 2006 2007 2008 2009

Source: Eurostat

Leading EU and non-EU producers of technology

Table G1.3 shows leading European and non-European patent assignees345. Major European companies with highest market share in terms of assigned patents numbers are: Enercon (DE) 5%, Vestas Wind Systems A/S (DK) 2.6%, LM Glasfiber A/S (DK) 1.4%, Siemens (DE) 1.1%, Repower Systems AG (DE) 0.9%.

The top five non-EU producers are: General Electric Co. (US) 4.3%, Mitsubishi (JP) 1.9%, Hitachi Ltd. (JP) 1.2%, United Tech. Corp. (US) 1%, and ABB AB (CH) 0.9%.

The analysis shows the world leading strengths of the EU wind power supply side and EU Member States including Germany and Denmark appear to be the major players both in European and global markets. Generators, offshore wind energy and wings and blade development are major areas where EU firms hold patents (Table G1.3).

Table G1.3: Wind – Top patent holders

Assignee Number of patents

Total 12,264

Enercon 612

General Electric Co. 525

Vestas Wind Systems A/S 316

Mitsubishi 239

LM Glasfiber A/S 171

345 Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies, Chatham House, 2009

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Hitachi Ltd 146

Siemens 140

United Technologies Corp. 122

ABB AB 116

RePower Systems AG 111

Gamesa Innovation & Technology Sl 89

Nordex Energy GmbH 86

NTN Corp 77

Aerodyn Engineering Gmbh 68

Hansen Transmissions International 60

Neg Micon A/S [Vestas: 2003] 59

Matsushita Electric Ind Co Ltd 56

Shinko Electric Co Ltd 55

Fuji Jukogyo KK 34

Ebara Corp 30

Toshiba 30

Source: Chatham House, 2009

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Table G1.4: Top 5 patent owners of wind sub-space

Assignee Number of patents

Generator

Total 5,834

Enercon 227

General Electric Co 213

Mitsubishi 125

Hitachi Ltd 90

Vestas Wind Systems A/S 80

Gearbox & Drive Train

Total 3,378

General Electric Co 116

Vestas Wind Systems A/S 95

Enercon 81

NTN Corp 76

Hansen Transmissions International 53

Offshore Wind Energy

Total 1,170

Enercon 43

Aerodyn Engineering Gmbh 36

General Electric Co 29

Norsk Hydro As 19

ABB AB 19

Energy Storage

Total 936

General Electric Co 41

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ABB AB 22

Vrb Power Systems Inc 19

Hitachi Ltd 18

Canon KK 8

Matsushita Electric Ind Co Ltd 8

Proton Energy Systems Inc 8

Blades/Wings

Total 5,547

Enercon 318

General Electric Co 283

Vestas Wind Systems A/S 208

LM Glasfiber A/S 159

Mitsubishi 83

Software/Control Systems

Total 950

General Electric Co 52

ABB AB 47

Vestas Wind Systems A/S 17

Siemens 16

RePower Systems AG 10

Source: Chatham House, 2009

Global market leaders

The top five countries in the global wind market for cumulative installed capacity in 2009 were the United States (24%), Germany (16%), China (16%), Spain (12%) and India (7%). Table G1.5 shows that of the top nine countries, six are EU Member States (38%) with the highest level of cumulative installed wind energy power capacity.

The same countries are also those with highest volume of patent filling activities for wind: USA (27.2%), Japan (14.8%), China (12.2%), and Germany 4.5%. In terms of

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

patent assignee origins, again USA, Germany, Denmark, Japan and the UK take the lead.

Global investment in wind power increased by about 44% from 2004 to 2009.

New energy capacity installed in 2009 is considerably higher in third countries such as China and the USA than EU Member States. Total renewables investment in China in 2009 was €25.7 billion of which 81% (€20.7 billion) was on wind power and this was 63% higher than 2008 levels. China now represents about one third of the total worldwide financial investment in wind power.

Table G1.5: Cumulative installed capacity by countries in 2009 (MW)

Country Installed Share in the total capacity (MW) capacity

US 39,159 24%

Germany 25,777 16%

China 25,104 16%

Spain 19,149 12%

India 10,929 7%

Italy 4,850 3%

France 4,492 3%

UK 4,051 3%

Denmark 3,465 2%

Others 24,926 15%

Total 161,902 100%

Source: EWEA, Statistics 2009

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Germany and Spain have lagged behind other countries in terms of new energy capacity installed in 2009 (see Figure G1.8).

Figure G1.8: Wind power capacity of top 10 countries in 2009

Source: REN21, Renewables 2010 Global Status Report

The Global Wind Energy Council (GWEC) has more than 1,500 members worldwide, representing 99% of the world's installed wind power capacity. The European Wind Energy Association (EWEA) has over 600 members from 60 countries, representing approximately 90% of global wind market. Therefore it is reasonable to assume that there are approximately 500 companies operating in the EU wind energy market.

Table G1.6 and Figure G1.9 below show the turnover share of top producers in the wind turbine market. During 2007-2009 the top two leading companies were Vestas and GE Wind. However, their respective shares of the global wind industry decreased considerably in 2009 with respect to 2007 and 2008. The sum of the market share of these two companies was 36% in 2007, 45% in 2008 and 25% in 2009. Similarly, Gamesa, ranked third company in 2007 and 2008 moved down to seventh place in 2009. This is further evidence of the growing market share of the Chinese turbine suppliers.

In 2009 the three largest EU wind companies, Vestas, Gamesa and Enercon had total revenues of €5 billion346, €3.2 billion347 and €2.5348 349 billion respectively. The sum of the top three companies’ turnovers represents 53.5% of total turnover of the EU wind

346 Vestas, 2010 Annual Report. 347 Gamesa, 2009 Annual Report 348 Wind Industry Germany website, Manufacturers database: http://www.wind-industry- germany.com/en/companies/manufacturers/enercon-gmbh/ 349 2008 figure for Enercon

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industry. Vestas’ revenue in 2010 increased by about 38% and reached €6.9 billion350. The emergence of new global players such as China and India, together with the financial crisis, are the major reason behind the fall in the turnover share of leading European companies in the wind power industry.

350 Vestas, 2010 Annual Report.

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Table: G1.6: Market share of top wind sector companies

Company Turnover share in Turnover share in Turnover share in 2009 2008 2007

Vestas 13% 27% 21%

GE Wind 12% 18% 15%

Sinovel 9%

Enercon 9% 13% 12%

Goldwind 7%

Dongfang 7%

Gamesa 7% 13% 14%

Suzlon 6% 6% 9%

Siemens 6% 6% 6%

Repower 3% 3%

Acciona 4%

Nordex 3% 3%

Ecotecnia

Mitsubishi 2%

Others 21% 7% 9%

Source: REN21, Renewables 2010 Global Status Report Figure G1.9: share of top wind sector companies in 2009

Vestas 13% GE Wind 21% Sinovel Enercon 12% Goldwind 3% Dongfang 6% 9% Gamesa 6% Suzlon Siemens 7% 9% Repower 7% 7% Others

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Source: REN21, Renewables 2010 Global Status Report

Innovation type

The main challenges in the wind turbine generator (WTG) market are improved reliability, more effective whole life-cycle costs, and better performance (i.e. converting available wind into the maximum energy output). To achieve this, a number of areas within a WTG are undergoing significant innovation, including351:

• Blades and rotor (e.g. new materials to improve strength, longevity and reduce weight);

• Drive train and generator (e.g. direct drive generators, superconductor generators, reduced bearings);

• Tower and foundations (e.g. new designs for offshore such as floating platforms); and

• Grid connection and integration (e.g. improved voltage control, high voltage DC systems).

The patenting rate of major energy technologies has been slow in the past 3 decades (Figure G1.10). Many of the innovations that were undertaken in the 1970s and 1980s are only now coming into the market and a high rate of patenting is observed from the end of 1990s and the beginning of the 2000s. Wind technology innovation, together with solar power sector, leads the innovation trend among all energy technologies (Figure G1.10). Figure G1.10: Patenting trends for 6 sectors (1976 – 2007)

351 Roland Berger Strategy Consultants, From Pioneer to Mainstream: Evolution of wind energy markets and implications for manufacturers and suppliers, February 2010

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Source: Chatham House, 2009

Patenting in the wind sector did not have any sharp change until 1996. During a 10- year period, until 2007 the number of patenting steeply increased by about 130% per annum, reaching 1,400 in 2007.

Within the wind sector the early focus of innovation until the end of 1990’s was in blades (harnessing mechanical energy from the air), the generator (efficient conversion of mechanical energy into electricity) and the gearbox (a frequent cause of breakdowns, even today).

In recent years, wind has become a mainstream conventional energy source (albeit still supported in many countries by generous tariff structures) placing a greater premium on effective integration with the grid, accurately modelling wind patterns and building in more difficult locations with high wind speeds352.

Innovation in the beginning of the 2000’s has extended towards software and control systems, short-term energy storage and offshore technologies, as shown in Figure G1.11.

Figure G1.11: Patenting rates in wind energy subsectors

Source: Chatham House, 2009

Furthermore, for wind power sector there is a close correlation between the rate of deployment and patenting growth, as indicated by Figure G1.12. Figure G1.12: Patenting level and deployment in wind sector

352 Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies, Chatham House, 2009

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Leading drivers of innovation

There are now large deals being made between wind turbine manufacturers and utilities. Examples include Repower’s agreement to supply 1.9GW of capacity to German RWE Innogy and Siemens agreeing to supply 1.8GW of capacity to Danish DONG Energy. Utilities have also established framework agreements with suppliers. This all indicates a maturing of supply chains.

Average wind farm sizes are also getting larger which requires a step change in supply change management – and is seen as a key factor in stimulating the industrialisation of the wind energy value chain, so that it mimics other energy generation sectors like gas fired power stations etc. This will have large implications for innovations that can deliver cost efficiencies whilst maintaining or exceeding current performance levels (especially in offshore conditions).

It also suggests that standardisation, modularisation, and faster time to market for new WTG designs will occur over the next 10 years. The scale of suppliers is also likely to become more important as OEMs seek to rationalise their supply base to introduce efficiencies (as has happened in the water market). This is all likely to impact on the ability of new technology entrants to gain exposure and could therefore make an ETV system potentially more useful to SMEs.

WTG manufacturers have been characterised into three main types353:

• Large industrial corporations (e.g. Alstom, Siemens, GE, Mitsubishi) – who have entered the market mainly through acquisition and were estimated to occupy 30% of the supply side in 2008;

• Pioneering original WTG manufacturers (e.g. Vestas, Gamesa, Enercon, Nordex, REpower) who have 53% share of the supply; and

353 Roland Berger Strategy Consultants, From Pioneer to Mainstream: Evolution of wind energy markets and implications for manufacturers and suppliers, February 2010

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• Regional players (e.g. Acciona, Sinovel, Fuhrlander) who have a 17% market share.

Venture capital

Wind power investments have been the dominant industry among all clean energy sector investments accounting for about €50 billion ($67 billion) or 59% of all financial investments in sustainable energy. About 1.5% (€750 million) of this was from venture capital (VC)354. Figure G1.13 indicates the financial new investment in wind technology from 2004 to 2009.

354 Global Trends in Sustainable Energy Investment, UNEP, SEFI, New Energy Finance (2010).

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Figure G1.13: Financial new investment in wind technology355 (million euros)

60,000

50,000

40,000

30,000

20,000

10,000

0 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

Total financial investment in 2008 was €45 billion ($59 billion) or 47% of all financial investment in sustainable energy. The 2008-2009 growth rate for wind technology investment was 14% and the share of wind technology investment in all renewable energy resources increased by about 12 percentage point, as indicated in the Figure G1.14. Figure G1.14: The share of financial new investment in wind energy

100% 90% 80% 35% 46% 41% 53% 53% 70% 59% 60% Other renewable energy 50% sectors 40% Wind energy 30% 65% 54% 59% 47% 47% 20% 41% 10% 0% 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

In 2009, total VC investment in Europe was about €1.22 billion ($1.67 billion) or 24% of worldwide VC investment in all clean energy sectors356. Global VC investment in wind

355 Exchange rate $1 = €0.73 has been used for calculation 356 Global Trends in Sustainable Energy Investment, UNEP, SEFI, New Energy Finance (2010).

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power in 2009 was €730 million ($1 billion). It is therefore reasonable to assume that about €180 million of wind power investment in Europe has been through VC’s357.

Similarly, worldwide venture capital investment in wind power industry in 2008 was €1.36 billion ($1.80 billion). The total venture capital investment in Europe in all clean energy sectors was about 23% of worldwide investment in all clean energy sectors. Therefore, it is reasonable to assume that about 23% of €1.36 billion investment (€310 million) in Europe was realised by venture capital. Figure G1.15 below indicates the estimated venture capital investment in wind energy in Europe.

Figure G1.15: Venture Capital investment in wind sector (million euros)

1,400

1,200

1,000

800 VC investment in wind technology, global 600 VC investment in wind technology, Europe 400

200

0 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010 Business Model

The approach of Siemens is a good example of how the EU wind industry is now expanding its supply chain into major markets, while strategically placing key R&D assets to capitalise on regional expertise. Vestas follows a similar pattern with its main R&D headquarters in Denmark, but key assets in Texas and Boston (USA), Chennai (India) and Singapore. The implications for innovators are that these companies are now exposed to global innovations, not just EU sourced.

357 24% of €730 million.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Figure G1.16: Global wind power supply chain assets of Siemens

Source: Roland Berger, 2010

Merger and acquisition activities are also other common business strategies in wind power industry. Merger and acquisition activities in global wind industry considerably increased from €3.7 billion ($5 billion) in 2004 to €31.4 billion ($43 billion) in 2008 and then with a 23% decline reached €24.1 billion ($33 billion) in 2009. The trend for acquisition activities for the period 2004-2009 is shown in Figure G1.17.

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Figure G1.17: The value of acquisition transactions in wind energy (million euros)358

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

The total value of acquisition transactions in Europe was €20.5 billion ($28 billion) in 2009. This represented 46% of the total value of all transactions worldwide. This figure has decreased since 2008 by 21%. The same negative trend has been observed for North America (negative 10% growth) while the total value of acquisition transactions in Asia and Oceania increased by 75% and reached €7.2 billion ($9.9 billion) in 2009. It is therefore reasonable to assume that the value of total acquisition activities undertaken in European wind sector is about €11 billion359. Potential for ETV

The market structure for wind energy technologies leaves little room for an effective functioning of an ETV mechanism. The wind power industry is a mature market allowing incremental changes in innovation. Large, well-established and well-known manufacturers dominate the global and European trade and supply chains for this technology area and the share of SMEs which are potential beneficiaries of an ETV mechanism is low.

358 Exchange rate $1 = €0.73 has been used for calculation 359 46% of €24.1 billion

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Solar Photovoltaics Product use and applications

Solar PV comprises products that include PV wafers, cells, modules and inverters. These are integrated into systems that are deployed at the household, commercial and utility scale (as solar farms).

Market characteristics: EU and global annual turnover

In 2010, the global PV market achieved a turnover of over €34 billion. Total yearly investments could reach €160 billion by 2040360. In 2006 the total turnover of the European solar industry was €20 billion361. We therefore estimate that European companies generate about 60% of global turnover.

Germany is the most important European solar market, responsible for around 9,800 MWp installed PV capacity in 2009, with an industry turnover of €9 billion (about 45% of total EU solar industry turnover)362. Germany is also the global PV technology leader with a 20% global share of the module market and 69% market share of the inverter market363 - for example, SMA is the global giant in inverter supply and is renowned for investing a very high proportion of its turnover into R&D.

Figure G1.18 shows sales in German PV industry. The sales of silicon, wafer, cells and modules considerably increased from €200 million 2000 to €9.5 billion in 2008. In 2009, the value of sales from these technologies was €8.6 billion, 9% down on 2008.

Figure G1.18: Sales in German PV industry (million euros)

10,000 9,000 8,000 7,000 6,000 German photovoltaic 5,000 suppliers (Silicon, wafer, cells, modules) 4,000 PV-suppliers (Machine 3,000 manufacturers) 2,000 1,000 0

Source: German Solar Industry Association

360 European Photovoltaic Industry Association (EPIA), Solar Generation 6, October 2010 361 PV Status Report 2009, Joint Research Council, Renewable Energy Unit 362 German Solar Industry Association, Factsheet, June 2010 363 Roland Berger Strategy Consultants, Directions for the Solar Economy, PV Roadmap 2020, November 2010

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A recent PV Roadmap 2020 study for the German PV industry envisaged German companies maintaining their position as technology leaders and strengthening their domestic production364. The study found a high global demand for PV products “Made in Germany”. Products include PV wafers, cells, modules and inverters. Germany currently exports 50% of its module production. To achieve its vision by 2020 it will need to export over 80%.

A number of challenging targets need to be met by the German PV industry to achieve this goal. These include cutting system costs by more than 50% and investing at least 5% of sales into R&D (from a level of 2.5% in 2009). The implication is that Germany will continue to tap the market for new solar PV innovations, no doubt reliant on its own testing houses such at TUV and institutes such as the Fraunhofer Solar Institute for verifying performance.

Import-Export

Figure G1.19 shows the total imports and exports for European PV devices. Imports and exports followed similar trends for the period 2005-2009: average annual growth rate for imports and exports for 5-year period was 58% and 55% respectively. Between 2005 and 2007 the imports and exports for PV devices increased steadily until they had a sharp increase for the period 2007-2008. The value of imports reached to a peak of €16.6 billion in 2008 before falling back to €15.8 billion in 2009. Similarly, the value of exports reached to a peak of €8.7 billion in 2008 before falling back to €8.1 billion in 2009. Figure G1.19: Import and export values for photosensitive semiconductor devices (million euros)

18,000 16,000 14,000 12,000 10,000 Imports 8,000 Exports 6,000 4,000 2,000 0 2005 2006 2007 2008 2009

Source: Eurostat

The value of extra-EU imports for PV devices is higher than that of intra-EU imports. There has been also a steady increase in the value of intra-EU imports between 2006

364 Roland Berger Strategy Consultants, Directions for the Solar Economy, PV Roadmap 2020, November 2010

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

and 2008 before started decreasing in 2009. In 2009, the value of extra-EU imports was €10.5 billion and the value of extra-EU imports was €5.2 billion.

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Figure G1.20: Intra-EU and extra-EU imports of photosensitive semiconductor devices (million euros)

12,000

10,000

8,000

6,000 Intra-EU

4,000 Extra-EU

2,000

0 2005 2006 2007 2008 2009

Source: Eurostat

As indicated in Figure G1.21, the value of intra-EU exports for PV devices is considerably higher during the period 2005-2009 than that of extra-EU exports. The average annual growth rate of intra-EU exports in this period was 57%. Figure G1.21: Intra-EU and extra-EU exports of photosensitive semiconductor devices (million euros)

8,000 7,000 6,000 5,000 4,000 Intra-EU 3,000 Extra-EU 2,000 1,000 0 2005 2006 2007 2008 2009

Source: Eurostat

Leading EU and non-EU producers of technology

Table G1.7 shows the leading European and non-European patent assignees365. The global solar PV technology market is dominated by non-EU companies. Major European companies with highest market share in terms of number of assigned patents are: Merck Patent Gmbh 198 (1.2%) and Siemens 129 (0.8%). Merck Patent Gmbh has strength in the production of organic PV / OLEDS PV solar sub-space.

365 Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies, Chatham House, 2009

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

As with wind power, given the strength of the EU supply side in solar PV, this suggests that EU firms are good at translating R&D into commercial products. However, the future of the sector may well move away from the EU if more innovative solar cells based on these patents prove to be viable and more efficient that today’s solar cells.

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Table G1.7: Solar PV – Top patent holders

Assignee Number of patents

Total 15,989

Sharp 608

Canon 561

Sanyo 483

Asahi Glass Co Ltd 478

Matsushita Electric 359

Fuji Electric Co Ltd 258

Hitachi 223

Merck Patent Gmbh 198

Kyocera Corporation 190

Kanegafuchi Kagaku Kogyo KK 184

Samsung Electronics Co Ltd 178

DuPont 172

General Electric Co 164

Shin Etsu Handotai Co Ltd 160

Sumitomo 159

Sony Corp 157

Honda Motor Co Ltd 155

Seiko Epson Corp 144

Atlantic Richfield Company 129

Siemens 129

Source: Chatham House, 2009

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Similarly, Table G1.8 indicates the top give patent owners across thin film and advanced solar photovoltaic technology categories

Table G1.8: Top 5 patent owners of solar PV sub-space

Assignee Number of patents

Amorphous Silicon

Total 993

Sanyo 57

Canon 49

Kanegafuchi Kagaku Kogyo Kk 36

Atlantic Richfield Company 33

Fuji Electric Co Ltd 33

Asahi Glass Co Ltd 29

Nanotech Related

Total 1,667

University California 42

Nanosolar Inc 41

Konarka Technologies Inc 40

General Electric Co 34

Samsung Electronics Co Ltd 30

CcTe-Based

Total 730

Matsushita Electric 27

Atlantic Richfield Company 19

Energy Conversion Devices Inc 15

Nanosolar Inc 14

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First Solar Inc 13

University California 13

Dye Sensitized

Total 987

Sharp 49

Ngk Spark Plug Co Ltd 43

DuPont 40

Fujikura Ltd 40

Samsung Electronics Co Ltd 37

CIS&CIGS

Total 1,810

General Electric Co 50

Shell Oil Company 42

Boeing 37

Energy Conversion Devices Inc 29

Nanosolar Inc 29

Organic PV / OLEDS

Total 4,991

Merck Patent Gmbh 182

General Electric Co 99

DuPont 96

Canon 78

Konarka Technologies Inc 67

Source: Chatham House, 2009

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Global market leaders

The EPIA Global Market Outlook report shows that the annual PV market has developed from less than 1 GW in 2003 to more than 7.2 GW in 2009 in spite of challenging financial and economic circumstances. After a 160% CAGR (Compound Annual Growth Rate) growth from 2007 to 2008, the PV market in 2009 continued to grow another 15% in 2009. While Germany reclaimed its leadership, many other markets have started to show significant development. South Korea and, in particular Spain, saw their installation rate dropping.

Figure G1.22: Global PV market 2000-2009

Source: EPIA, 2010

The total capacity of European PV markets in 2009 was 6.5 GW. Figure G1.23 shows the share of the major Member States in the total installed PV capacity in the EU. Figure G1.23: European PV markets in 2009 (GW)

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36 32 63 69 185 Germany 292 Italy 411 Czech Republic Belgium

711 France Spain 3,806 Greece Portugal Rest of the EU

Source: EPIA, 2010

Despite the financial crisis, the PV market has continued to grow by almost 15% in 2009 compared to 2008 and the total power installed in the World raised by 45% up to 22.9 GW. The growth of the German market played the major role in this development in 2009. The German solar sector almost doubled in one year from 1.8 GW in 2008 to around 3.8 GW installed in 2009, representing more than 52% of the World PV market. Besides Germany, other countries continued to develop in 2009, such as the Italian solar energy sector which followed Germany with installed 711 MW. Czech Republic and Belgium also made considerable progress in 2009, with 411 MW and 292 MW installed capacity, respectively.

France made a major development by adding capacity of 285 MW. However Spain suffered a major setback in 2008 due to the impact of the financial crisis and the heavy regulatory market cap on feed in tariffs366. As a result new installed capacity levels declined from 2,600 MW in 2008 to just 69MW in 2009.

China appears as a new player in 2009 with about 160 MW installed, and India with around 30 MW.

Leading technology providers

In 2009 only one EU enterprise (Germany) in the top 15 companies with highest market share in global solar energy sector as indicated in Figure G1.24. The market share of the top three companies in 2009 was 23% of global turnover.

In the EU, the top three solar manufacturing firms have a turnover of about €1.5 billion367: Q-cells (DE): €802m (5%); 2) Isofoton (ES): €470m (3%); 3) Deutsche Cell (DE): €130m (0.8%). Figure G1.24: Market share of top solar sector companies

366 European Photovoltaic Industry Association (EPIA), Global Market Outlook for Photovoltaics Until 2014, May 2010 367 Annual reports of the firms: Q-cells, Isofoton and Deutsche Cell

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First Solar (USA) Suntech Power (China) 10% Sharp (Japan) Q-Cells (Germany) 7% Baoding Yingli (China) 35% Ja Solar (China) 6% Kyocera (Japan) Trina (China) 5% Sunpower (USA) Gintech (Taiwan) 5% Motech (Taiwan)

5% Canadian Solar (Canada) 2% Ningbo Solar Electric (China) 4% 2% 3% 4% Sanyo (Japan) 3% 3% 4% 2% E-Ton Solar (Taiwan) Others

Source: REN21, 2010

Innovation type

The patenting rate of major energy technologies has been slow in the past 3 decades (Figure G1.25). Many of the innovations that were undertaken in the 1970s and 1980s are only now coming into the market and a high rate of patenting is observed from the end of 1990s and the beginning of the 2000s. Solar technology innovation together with wind power sector, leads the innovation trend among all energy technologies. Figure G1.25: Patenting trends for 6 sectors (1976 – 2007)

Source: Chatham House, 2009

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Patenting in the solar sector was constant until 1996 when it started to accelerate. From 1996 to 2007 the number of patenting increased by about 37% per annum, reaching 1,400 in 2007.

Until 1996 PV patents were low and focused on four sub-fields, each with its own crossovers with other manufacturing applications, as shown in Figure G1.26. Figure G1.26: Patenting rates in solar PV subsectors

Source: Chatham House, 2009

Amorphous silicon is a key ingredient in LCD displays. It can be used over larger areas than traditional crystalline silicon and can be printed onto plastic as well as glass to make large solar cells. CIS and CIGS are copper alloys used in thin-film PV. Thin-film PV requires less light-absorbing material (reducing manufacturing costs) and is also easier to integrate with other materials. Cadmium telluride based PV is suitable for high-temperature conditions and has been developed from the use of advanced alloys in solar panels on satellites and lasers. Organic PV is related to developments in light emitting diodes. These involve mounting plastic onto glass – a less efficient but cheaper approach that could in future be found on the surface of mobile phones, for example.

When PV patent rates took off in the late 1990s each of these four categories expanded. Organic PV and CIS/CIGS combined still make up over half of all patenting activity. At the same time, however, advances in materials science opened new avenues for PV technology development, with nanotech and dye-sensitized approaches (which can be painted on to surfaces) emerging strongly. Furthermore, for solar PV power sector there is a close correlation between the rate of deployment and patenting growth, as indicated by Figure G1.27368. Figure G1.27: Patenting level and deployment in solar PV sector

368 Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies, Chatham House, 2009

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Innovative technical solutions are required in the following areas:

• Improved performance of solar cells, either for 1st, 2nd or 3rd generation; • Improved coatings on PV modules to increase light penetration; • Better system monitoring to isolate faulty panels and avoid whole system shutdowns; • Improved inverter technology, to convert more solar energy into usable energy; • Long-term storage of electrical energy (e.g. vanadium oxide and sodium sulphate batteries); and • Integration with ‘smart grid’ and demand response technologies and systems.

Venture capital

Solar power sector investment has been one of the dominant industries among all clean energy sector investments. In 2009, solar power sector accounted for about €17.8 billion ($24.3 billion) or 21% of all financial investments in sustainable energy. About 1.5% (€267 million) of this investment was realised by venture capital369.

Figure G1.28 indicates the financial new investment in solar technology from 2004 to 2009. The average annual growth rate during this period was 658%, and the share of solar technology investment in all renewable energy resources increased by about 17 percentage point, as indicated in the Figure G1.29.

Figure G1.28: Financial new investment in solar technology (million euros)370

369 Global Trends in Sustainable Energy Investment, UNEP, SEFI, New Energy Finance (2010). 370 Exchange rate $1 = €0.73 has been used for calculation

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30,000

25,000

20,000

15,000

10,000

5,000

0 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

Figure G1.29: The share of financial new investment in solar energy

100% 90% 80% 70% 74% 60% 80% 79% 86% 92% Other renewable energy 96% 50% sectors 40% Solar energy 30% 20% 26% 10% 20% 21% 14% 8% 0% 4% 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

In 2009, total VC investment in Europe was about €1.22 billion ($1.67 billion) which accounted for 24% of worldwide VC investment in all clean energy sectors371. Global venture capital investment in solar power technology in 2009 was €1.3 billion ($1.82 billion). It is therefore reasonable to assume that about €325 million of solar power investment in Europe has been undertaken by VC372.

Similarly, worldwide VC investment in solar power industry in 2008 was €1.36 billion ($1.80 billion). The total VC investment in Europe in all clean energy sectors was about 23% of worldwide investment in all clean energy sectors. Therefore, it is reasonable to assume that about 23% of €1.36 billion investment in solar energy industry (€310

371 Global Trends in Sustainable Energy Investment, UNEP, SEFI, New Energy Finance (2010). 372 24% of €1.3 billion.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

million) in Europe was realised by VC. Figure G1.30 below indicates the estimated VC investment in solar energy in Europe.

Figure G1.30: Venture Capital investment in solar sector (million euros)

4,000

3,500

3,000

2,500 VC investment in solar technology, 2,000 global

1,500 VC investment in solar technology, Europe 1,000

500

0 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

Business model

Merger and acquisition activities in global solar industry considerably increased from €700 million ($1 billion) in 2004 to €10.2 billion ($14 billion) in 2009. The average annual growth rate for the period between 2005 and 2009 was about 217%. The trend for acquisition activities for the period 2004-2009 is shown in Figure G1.31.

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Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Figure G1.31: The value of acquisition transactions in solar energy (million euros)373

12,000

10,000

8,000

6,000

4,000

2,000

0 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

Potential to ETV The market structure for solar energy technologies is now mature and consolidation is occurring. Globalisation is likely to accelerate this process over the next 5-10 years. The opportunity for SMEs in the EU that are currently developing novel solar cells to use an ETV scheme is questionable because

A few test centres such as the Fraunhofer Solar Institute in Germany are industry renowned for providing verified performance tests that are recognised by the global market. The EU does not hold the majority of the novel patents in the solar sector and therefore there are unlikely to be the numbers of companies that will take advantage of such a scheme.

373 Exchange rate $1 = €0.73 has been used for calculation

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Marine Energy

Product use and applications

The most common marine energy devices are those designed to harness power from wave energy and tidal currents. The specific technologies employed in marine energy devices depend on design, the components used and the location of the device (near- shore/offshore). The sector borrows heavily from technologies in the wind and offshore industries, e.g. rotors, electrical systems, device installation, grid connection and materials. In general, the main technologies involved in wave and tidal devices are listed below:

Wave power devices • Large forgings and castings; • Buoys; • Pistons; • Pumps; • Bearings; • Gearboxes; • Generators; • Hydraulics; • Power take-off assemblies; • Control systems; and • Cables.

Tidal turbine devices • Large forgings and castings; • Turbine blades; • Bearings; • Gearboxes; • Generators; • Power take-off assemblies; • Control systems; • Cables; and • Foundations.

Market characteristics: EU and global annual turnover

A study on marine energy sector374 reported that by 2008 less than 10MW of marine energy capacity had been installed globally and that the marine energy industry has the potential to reach 1GW of installed capacity by 2014 with an annual market size of more than €360 million ($500 million) and over €1.46 billion ($2 billion) of investment in commercial production and installation is forecast for that same period.

374 Greentech Media, 2008

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The total value of worldwide electricity revenues from wave and tidal stream projects could ultimately be between €72 billion (£60 billion) and €227 billion (£190 billion) per annum375. Also, a recent figures376 estimate annual 3% growth rate for marine energy by the end of 2020.

The UK has 35% of Europe’s total wave resource and 50% of Europe’s total tidal resource. The long-term potential for offshore wave energy in the UK has been estimated at 50TWh/year with near-shore and shoreline producing a further 8TWh/year while tidal stream has the potential to produce 18 TWh/year. The Carbon Trust estimates that wave and tidal stream energy could supply up to 20% of the current British electricity demand (of which tidal range generation could contribute around 13%, especially from the Severn estuary). This resource translates into a potential supply of around 16,000 jobs in the UK, around a quarter of which would support British exports.

The UK is forecast to install 51 MW of new capacity by 2013377 and wave and tidal energy could represent a market of €107 million (£90 million) for related technologies and services. Existing market mechanisms and extensive funding means that the investor confidence in the UK is high compared to other countries. The potential for major domestic and export markets for capital equipment, construction, installation and operation is large.

The estimated market value of the global marine power industry is over €350 million. Based on the Innovas (2009) figures, the UK market is worth €87 million (£73 million) and this is about 25% of global wave and tidal market378.

Work for the Carbon Trust suggests that the marine energy sector could grow by over 5% annually up to 2015379, when it would be expected to enter an early mass deployment phase. BWEA (2008) estimates that some 1.3GW of generating plant could be installed by 2020 which would lead to significant industry expansion in the following decades.

Innovation type

A study for the Irish Government380 mapped the status of marine technologies in development from concept design to prototype demonstration. As shown in Figure G1.32 the UK has a dominant position in the global marine energy market. Ireland, Denmark and Portugal are also other EU Member States with relatively high number share of technologies in development in 2006.

375 Carbon Trust, Future Marine Energy, 2006 376 The Sixth Revolution: The Coming of Cleantech, November 2008, Merill Lynch 377 Douglas-Westwood, 2009 378 Innovas (2009) 379 Carbon Trust, Focus for Success: A new approach to commercialising low carbon technologies, 2009 380 Review and Analysis of Ocean Energy Systems Development and Supporting Policies, AEA, June 2006

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Figure G1.32: Development Status of Marine Energy Technologies in 2006

Source: AEA, 2006

According to the AEA report for the Irish Government, in 2006 there were about 81 individual concepts in development381. The great share of the ocean wave energy technologies is expected given that wave energy is estimated to be the largest energy resource available for exploitation382.

Figure G1.33: Total reported ocean wave, tidal current, OTEC and salinity gradient technologies in development in 2006

1 1 United Kingdom 2 Canada 2 Australia

3 16 USA Norway

3 Denmark Ireland 3 Israel 4 Sweden

Source: AEA, 2006

381 Review and Analysis of Ocean Energy Systems Development and Supporting Policies, AEA, June 2006 382 Review and Analysis of Ocean Energy Systems Development and Supporting Policies, AEA, June 2006

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The number of marine energy technologies in development increased by about 131% from 35 in 2003. Ocean wave energy technologies which had also the greatest share in 2003 increased by 77% during this period.

Given their functionality and technical features 53 ocean wage energy technologies are regrouped under 7 main types of technology. Figure G1.34 shows the breakdown by technology group and technology development under each technology group.

Figure G1.34: Ocean wave energy generation technologies currently in development by type (2006)

Attenuator

Collector 5 4 2 2 Overtopping 3

OWC

OWCS 12

21 Point absorder

3 Submerged pressure differential Other

Source: AEA, 2006

The most common technology is the point absorber type which includes those technologies which use linear generators (21 devices). The OWC is the second most researched concept (12 systems). The rest of the devices are relatively equally spread across the other groups identified.

The tidal devices analysed in the AEA report (2006), and are mostly of a rotary turbine nature (20 devices). The horizontal-axis turbine is the most common concept, representing 14 concepts being researched. Six devices are of vertical-axis rotor configuration. Two technologies use the Venturi ’choke’ concept to capture tidal current energy, whilst only one system uses oscillating hydrofoils. Figure G1.35: Tidal current energy generation technologies by technology type (2006)

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

1 2 Horizontal axis turbine Vertical axis turbine

6 Venturi 14 Oscillating hydrofoil

Source: AEA, 2006

As the sector rapidly grows, so the numbers of developers is also increasing. By 2008, the UK had over 30 technology developers compared to 15 developers in the rest of Europe and 20 in the rest of the world383.

In their 2008 survey of 35 leading marine energy developers companies, Greentech Media found that the UK led the world with 16 firms (46% share). Denmark, Ireland and Sweden are also other EU Member States with major marine energy developers.

Figure G1.36: Global Distribution of 35 Leading Marine Energy Developers (2008)

1 2

Ocean wave 25 Tidal current OTEC 53 Salinity Gradient

Source: Greentech Media, 2008

Venture capital

In the period 2001-2008 the cumulative VC investment in global marine energy market reached about €95 million ($130 million). VC investment trend was however volatile during this period.

Figure G1.37: VC investment in marine energy industry (million dollars)

383 NAMTEC, The mapping of materials supply chains in the UK's power generation sector, 2008

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Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Source: Greentech Media, 2008

In total, just over €365 million ($500m) including VC investments, government-backed funding, and equity and debt financing raised on the capital markets, has been invested in the 35 most active marine energy companies since 2001384. This figure excludes the government funding of wave parks and testing facilities, except where funding is part of overall R&D support to businesses. It also does not include support from government of university research.

Potential for ETV

The technologies are still in their nascent and/or pre-commercial stage and therefore not yet at a stage where they can be deployed at scale. The role of energy utilities in funding and deploying these devices is likely to mean a low demand for any ETV scheme. The scale of the devices also means they are unlikely to fit the basic criteria for testing.

384 Greentech Media, 2008

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Technology Group: Biomass and waste to energy Product use and applications

This technology group covers the conversion of biomass and other organic waste materials into energy (both heat and electricity). Current technologies to achieve this end use objective include:

• mass burn incineration with energy recovery;

• wood and biomass burning boilers to raise heat and/or steam and power;

• anaerobic digestion;

• pyrolysis; and

• gasification.

Figure G1.38 illustrates the substantial number of biomass resources which provide wide ranging and potentially competing feedstock for conversion into energy and other end uses (e.g. fuel, construction materials, pharmaceuticals, etc.).

Figure G1.38: Conversion of biomass and organic waste into energy

Source: UK Biomass Strategy, 2007

Market characteristics: EU and global annual turnover

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Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Biomass covers about two thirds of all renewables in the EU27 and is the fastest growing sector in absolute terms385. The total turnover of the EU biomass market is above €13 billion. From 1995 to 2004, the contribution of biomass to the energy supply grew by 27.5 million tonne oil equivalent (Mtoe) to reach 72 Mtoe, accounting for 78% of the total growth of renewables. Wood from forestry dominates biomass supply at over 85% of supply whilst waste accounts for 10%; the remaining share (~5%) comes from agricultural sources386. Bio-energy usage differs widely across EU Member States, ranging from 1.3% in the UK to 29.8% in Latvia, with the average being 4.1%. Typical applications include:

Biomass for district heating: on average around 1% of European heat demand is covered by district heat from biomass. However, countries like Austria, Sweden, Finland, Denmark and the Baltic states have pushed this to between 5% and 30%.

Wood pellets and chip: in 2005 in Europe about 6 million tonnes of wood pellets were used, roughly 50% for residential heating and 50% for thermal power plants. Just 7 countries used 95% of these pellets: Austria, Belgium, Denmark, Italy, Germany, Netherlands and Sweden. Outside these countries, pellet supply chains have started to develop and have led to suppression of demand for boilers. In the UK, for example, the government has overcome a shortage of biomass supply with grant funding for a Bioenergy Infrastructure Scheme. However, the delayed introduction of a Renewable Heat Incentive for consumers (due to come into effect in summer 2011) which has stalled purchases of new biomass boilers has suppressed for biomass387.

Figure G1.39 shows 14 EU Member States with market turnovers for solid biomass energy in 2008. Germany leads the EU market with a total turnover of €3.1 billion. According to the BMU (German Federal Environment Ministry), turnover from the operation of biomass to energy plants in Germany in 2009 was €4.3 billion for biomass electricity and €1.7 billion for biomass heat. France and Sweden were also significant markets for biomass to energy, each being worth around €2.5 billion, followed by Spain and Finland, each worth around €1.25 billion. These five member states dominate the current market.

Figure G1.39: Turnover from solid biomass in 2008 (million euros)

385 Bio-energy statistics in the EU, European Biomass Association (AEBIOM), Sept 2007 386 Bio-energy statistics in the EU, European Biomass Association (AEBIOM), Sept 2007 387 Current GHK study for UK Department of Energy and Climate Change

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3,500 3,000 2,500 2,000 1,500 1,000 500 0

388 Source: German Federal Environment Ministry, 2010

Anaerobic digestion - an established technology that has seen wide ranging R&D for a number of years by numerous companies. There are therefore a large number of different anaerobic treatment processes and new proprietary variants are constantly being developed. The market for AD can be subdivided into three key areas: • Sewage sludge - in Germany, France, Netherland and the UK, as well as many other EU countries, this has created the largest market; • On farm animal excreta as slurries - carried out for many years and increasingly common in Europe (e.g. Netherlands, Germany) • Liquid (and much less common solid) organic waste streams – used in certain industrial sectors.

Data on the installed capacity of biomass and waste-to-energy across Europe over the period 2001 to 2008 (see Figure G1.40) show that the incineration (mass burn) of biomass and waste dominate the market. Anaerobic digestion also makes an important contribution to the mix. Other more novel technologies such as pyrolysis and gasification have no significant market presence. However, New Energy Finance estimates389 that there are around 250MW of gasification projects at various stages of development in Europe, although only very few, small-scale plants have been fully commissioned including the 2.3MWe Energos municipal energy-from-waste plant in the Isle of Wight. Figure G1.40: Commissioned biomass and waste-to-energy capacity in Europe by technology, MW

388 http://www.bmu.de/files/english/pdf/application/pdf/broschuere_ee_zahlen_en_bf.pdf 389 New Energy Finance, Biomass and waste to energy investment: fundamentally strong, short term weaknesses, Research Note, March 2009

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Source: New Energy Finance, March 2009

Biomass will undoubtedly play a crucial role in achieving the EU’s 20% target for renewables by 2020 and in the future reduction of CO2 emissions in Europe. EU trade body, AEBIOM estimates that the EU bio-energy market could be increased to 220 Mtoe by 2020. The biggest potential for growth lies in biomass from agriculture with estimates of between 20 to 40 Mha of land across the EU27 being used for energy production without harming European food supplies.

Leading EU and non-EU producers of technology

Table G1.9 shows the leading European and non-European patent assignees390. Among 21 companies identified in the list there are no European companies, the list being dominated by Japanese enterprises. Combustion-based systems and gasification- based systems are the top two biomass-to-electricity sub-space where highest levels of innovation have been achieved. Hitachi and Mitsubishi Heavy Industries are the clear leaders of the global market in this technology area.

390 Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies, Chatham House, 2009

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Table G1.9: Biomass-to-electricity - Top patent holders

Assignee Number of patents

Total 5,305

Hitachi 334

Mitsubishi Heavy Industries 265

Kawasaki Heavy Ind Ltd 116

Ishikawajima-Harima Heavy Industries 97

Nippon Steel Corp 94

Ebara Corp 87

Sumitomo 87

NKK Corp 69

Mitsui 62

Toshiba Corp 36

Fuji Electric Co Ltd 27

Nippon Kokan KK 27

General Electric Co 25

Kubota Ltd 24

Ube Industries Ltd 24

Chugai Ro Co 22

Takuma Co Ltd 22

Chinese Academy of Sciences (and 21 Affiliates)

Kobe Steel Ltd 20

Union Carbide Corporation 20

University of California 20

Source: Chatham House, 2009

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Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Similarly, Table G1.10 indicates the top five patent owners in biomass-to-electricity sub- spaces shows the predominance of Japanese corporations.

Table G1.10: Top 5 patent owners of biomass-to-electricity sub-space

Assignee Number of patents

Combustion-based systems

Total 1,715

Hitachi 109

Mitsubishi Heavy Industries 89

Ebara Corp 34

Kawasaki Heavy Ind Ltd 34

Ishikawajima-Harima Heavy 30 Industries

Gasification-based systems

Total 1,511

Mitsubishi Heavy Industries 68

Hitachi 45

Kawasaki Heavy Ind Ltd 38

Ebara Corp 37

Nkk Corp 35

Co-firing

Total 693

Hitachi 47

Mitsubishi Heavy Industries 27

General Electric Co 14

Sumitomo 14

Kawasaki Heavy Ind Ltd 11

Source: Chatham House, 2009

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Global market leaders

As of 2007, the US accounted for more than 34% of electricity from solid biomass generated in OECD countries, with a total of 42 Terawatt-hours (TWh). In the same year, Japan and Germany were the second and third largest producers among OECD countries with capacities of 16 TWh and 10 TWh respectively391. The US market lagged behind Europe until early 2009 when an additional 80 operating biomass projects in 20 US states supplied about 8.5 GW of power capacity392.

By early 2010, some 800 solid biomass power plants were operating in Europe -burning wood, black liquor, or other biomass to generate electricity - representing an estimated capacity of 7GW. Both the largest scale of plant and number of plants are in heavily wooded countries of Scandinavia, although Germany and Austria have also experienced significant growth in recent years. A major part of this growth in biomass capacity has resulted from the development of combined heat-and-power (CHP) plants393.

More than half of the electricity produced in the EU from solid biomass in 2008 was generated in Germany, Finland, and Sweden. Germany is the top biomass energy producer among EU Member States. Germany increased its generation of electricity from solid biomass 20-fold between 2002 and 2008, to 10 TWh, and had about 1,200 MW installed by the end of 2008. By early 2010, bioenergy accounted for 5.3% of Germany’s electricity consumption, making it the country’s second largest renewable generating source after wind power. Similarly, Finland is an important market for biomass energy: biomass accounts for about 20% of Finland’s electricity consumption394.

The global financial crisis badly hit the Finnish biomass energy sector. In 2009, the market experienced a decline of 11.7% in primary energy output, mainly due to the impact of the financial crisis on saw mill and paper pulp industries. This also affected electricity production with generation from these energy sources in 2009 16.6% lower than that of 2008. Finland is the top per capita solid biomass energy producer in the EU, as indicated by Figure G1.41 below.

391 REN21, Renewables 2010 Global Status Report 392 REN21, Renewables 2010 Global Status Report 393 REN21, Renewables 2010 Global Status Report 394 REN21, Renewables 2010 Global Status Report

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Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Figure G1.41: Primary energy production of solid biomass by toe/inhab in the EU in 2009

1.400 1.200 1.000

0.800 0.600 0.400 0.200

0.000 n a a a l k a a c y e a y d a a n e g s y s a 7 d e i i ri a r i i li r c i n n i ri i m c r l d m u lt 2 n tv n t g a n n b a n n a a k a a iu e u d ta n o r a la d a to s tu m a e u g a a l a g p g e o n I la d p U in e L s u r n u v p n r m m o v l S l r b la e g y M E w A o e th lo e u F o r P lo u e G r Ir n C F S E P i H e S B B m e i D L S R R G e th K h x e d c u N e e L it z n C U

Source: REN21, 2010

Finland is trying to develop new recovery technologies to increase its biomass potential, particularly through the Biorefine technology programme (2007-2012) for which €130 million of funding has been allocated. One of the objectives of the project is to make the use of wood chips easier for energy production as well as their use as raw material. Finland plans to increase the current usage level threefold to 12 million m3 in 2020395.

In Germany, according to the BMU, the economic activity of the solid biomass sector in 2009 is valued at €9.4 billion in 2009, a significant increase on the €7.3 billion valuation in 2008. The job figures quoted for the sector were 79,100 in 2009 as against 78,600 in 2008. Investment in biomass energy followed photovoltaics and wind energy investments in 2009. Investment in the construction of biomass electricity sector and biomass heat sector installations accounted for €1.9 million and €1.35 million in 2009 respectively396.

As indicated in Figure G1.42, in 2009 gross electricity production from solid biomass in the EU is about 62,186 TWh, 7.4% higher than that of 2008.

395 REN21, Renewables 2010 Global Status Report 396 German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Development of renewable energy sources in Germany 2009, December 2010

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Figure G1.42: Gross electricity production from solid biomass in the EU (TWh)

12.000 10.000 8.000

6.000 4.000 2008 2.000 2009 0.000 y n d d s a y y n k l c e a a a a a a n e n n m ri l m r i r a li c i i i d i i i a d a a d o t ta iu a a a g b n k n n n n n tv e l l n d s I g g p m tu u a a e a la a to a m in o la g u l n S n r r v v u e m s L r w F P r n A e u e o p F lo lo th Ir e S e i B H P e S i o E G th K D R S L R e d h N e c it e n z U C

Source: Eur Obser’ER, Solid Biomass Barometer, 2010

Growth of electricity output from solid biomass steadily increased from 2001 (20.8 TWh) to 2009 (62.2 TWh) - an average of 14.7% per annum397. Most of this production (62.5%) in 2009 was generated from co-generation plants.

An Ecoprog and Fraunhofer Umsicht survey reports that the number of solid biomass power plants has almost doubled over the past 5 years. The report also shows that there are about 800 biomass plants in Europe with combined capacity of some 7.1 GW. The installed capacity of these power plants is expected to rise to about 10 GW before the end of 2013. These figures do not include fossil fuel based co-combustion power plants, which are highly popular in the United Kingdom (e.g. Drax power station which provides 10% of UK electricity supply and which has aimed to burn 10% of its fuel as solid biomass) and Germany.

The introduction of an incentive system for biomass electricity production (feed-in tariffs and green certificate) and the introduction of subsidies to make investments easier are major reasons for this significant growth398.

The main producer countries in the EU biomass energy sector are the major Scandinavian forestry countries as well as Germany and Austria. Table G1.11 shows some important players in biomass boiler production in the EU. The sample in the table includes SMEs from leading Member States.

397 Solid Biomass Barometer, EurObser’ER, No,200; 2010 398 Solid Biomass Barometer, EurObser’ER, No,200; 2010

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Table G1.11: Examples of biomass boiler producers in the EU

Company Country Turnover in Turnover in Employmen Employmen 2009 (mln 2008 (mln t (2009) t (2008) euros) euros)

Ökofen Austria n.c. 39 n.c. 300 Heiztechnik GmbH HDG Bavaria Germany n.c. 32 200 200 GmbH ETA Heiztechnik Austria 63 65 120 120 GmbH KWB Austria 47 55 225 190

Compte R France 26 22.3 100 80

Weiss France France 15 15 65 65

MW Power Oy Finland 168 130 200+ 200

Source: Eur Obser’ER, Solid Biomass Barometer, 2010

Technology users

Biomass and waste to energy technologies are used by utilities, waste management companies, commercial and industrial users, public sector (e.g. schools, hospitals) and households.

Leading demand drivers

Various political and economic drivers underpin investments in this area:

Increasing populations and consumption patterns increases energy demand;

Energy prices increases are making renewables more economic to exploit;

Reduction in carbon dioxide and other harmful gases;

Political framework (e.g. EU targets to generate 20% of final energy use from renewables by 2020); and

Energy efficiency standards and regulations.

Innovation type

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The patenting rate of major energy technologies has been slow in the past 3 decades (Figure G1.43). Many of the innovations that were undertaken in the 1970s and 1980s are only now coming into the market and a high rate of patenting is observed from the end of 1990s and the beginning of the 2000s. In 2007 biomass energy sector was the 5th technology area with highest level of patents.

Figure G1.43: Patenting trends for 6 sectors (1976 – 2007)

Source: Chatham House, 2009

The various biomass-to-electricity technologies have emerged via different pathways. Combustion-based applications are relatively mature, with patenting rates steadily growing since the late 1970s.

In contrast, approaches based on gasifying biomass prior to combustion are only starting to become pre-commercial to commercial today, with accelerating patenting rates since 2000, as seen in Figure G1.44. There are overlaps between biomass and coal technologies, such as in combustion and gasification. However, biomass technologies involve a range of fuels and fuel quality, consistency and emissions control are major issues399. Cleaning or purification-related patents have been important since the beginning and its growth rate has followed a parallel trend to that of the overall patenting. Patents related to biomass co-firing with coal have become prominent only in the last 10 years, reflecting perceived commercial prospects.

399 Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies, Chatham House, 2009

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Figure G1.44: Patenting rates in biomass-to-electricity subsectors

Source: Chatham House, 2009

Innovation across the biomass and (organic) waste to energy sector

There is scope for innovation in CHP, moving in the medium term away from gas-fired CHP to biomass-fuelled CHP plants – whether they use solid biomass or biogas. In mainland Europe, a number of commercially operated, solid biomass-fuelled CHP plants have been operating for several years, driven in part by generous subsidies for this type of technology. Plants range in size from 1MW to 20MW (see Table G1.12 below).

Most sites take wood residues from adjacent timber yards or wood processing plants and many plants feed their excess heat into district heating networks (see illustration in Figure G1.45) or into an adjacent factory.

Figure G1.45: Circuit diagram showing hot water flows together with power generation and biomass feedstocks at Evonik Energie’s Neufahrn CHP plant in Germany

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In general, the market for solid biomass-fuelled CHP plants tends to be limited to those places where they can be co-located with the feedstock source, have a good user of the heat, as well as being located in countries where the incentive structures are designed to promote co-generation.

Table G1.12: Selection of small & medium sized solid biomass-fired CHP plants (together with a selection of UK biomass fired power plants for comparison on size/cost/CO2 reduction potential)

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Source: New Energy Finance; UK Department of Business; Company websites

The Balcas biomass-fuelled CHP plant in Northern Ireland (see Box) was the first of its kind in the UK. However, since 2005 only much smaller scale biomass CHP plants have been built, at schools, community buildings etc., driven in part by Bio-energy Capital Grants.

The Balcas Timber Ltd sawmill in Co. Fermanagh, Northern Ireland is an exemplar biomass CHP development (2.7MWe/10MWth) costing £9m (part funded with a £2m Government grant). The CHP plant, which started operation in 2005, makes the saw mill self-sufficient in electricity (saving around £0.5m/year) and also powers one of the largest biomass pellet production facilities in the British Isles. The pellets are produced using wood chips and sawdust residues from the main sawmill operation and the operation produces 50,000 tpa of pellets - sufficient to meet the energy needs of 10,000 households. Surplus electricity is fed into the grid. The boiler was supplied by Vyncke; the turbine/generator supplier was M&M Turbinen, Kaick.

Anaerobic digestion: Anaerobic digestion (AD) treatment processes are used to remove organic material from liquid streams, often generating methane which can then be used to generate power. The longest established AD processes include:

• Upflow anaerobic sludge blanket (UASB) – some of the most proven AD systems available today since they have been used for years to treat soluble Chemical Oxygen Demand (COD) in waste waters;

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• Anaerobic suspended growth;

• Upflow and down-flow anaerobic attached growth;

• Fluidized-bed attached growth;

• Covered anaerobic lagoons (for slurries and process outputs e.g. from sugar cane plants);

• Membrane separation anaerobic processes; and

• The Dry AD process for MSW has been more recently developed by companies such as Linde (Germany).

In the last decade AD technology has been proven on a commercial scale in Europe. In Germany alone, there are now over 3000 operational plants, ranging from small scale farm digesters processing slurry to large centralised facilities processing a range of organic wastes (see Table G1.13).

Table G1.13: Numbers of biogas plants in EU-countries producing electricity in 2005

Country Biogas plants Electricity produced installed

Austria 159 plants 29MWe

Belgium 6 12.3

Denmark 58 on-farm and 20 40 CAD

France 3 n/a

Germany >3000 550

UK <20 <2

Ireland 5 0.2

Italy 80 62

Netherlands 12 3.8

Switzerland 71 n/a

CAD: Centralised anaerobic digestion

Source: Michael Kőttner, November 2005

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Leading European AD technology suppliers include: Linde, Dranco, Hese, Valorga, Ros Roca. Table G1.14 shows a number of examples for main AD technology providers. According to the sample shown in the table, it is reasonable to expect that Germany companies have relatively greater share in the EU market.

Table G1.14:

Company Location System Waste application

ArrowBio Israel Aerobic and Anaerobic First, 70,000 tpa plant for MSW in Tel Aviv

Kompogas Germany Continuous AD Selected organics - biogas

Haase Germany Continuous AD MSW

Hese Germany Continuous AD Selected organics - biogas Umwelt

BIOGEN - UK Continuous AD Food (MSW) and farm waste Greenfinch – biogas

ORT Australia Batch AD High solids loads

Wehrle Germany Membrane bio reactor High organic waste

Pyrolysis: Notable countries developing such systems include Germany, Italy and the Netherlands. The USA, Canada and Australia also have strong R&D capabilities. Three types of pyrolysis are in development around the world: fast, intermediate and slow.

Fast (flash) pyrolysis involves the use of a dry biomass feedstock which is ground into fine particles and then quickly heated to moderate temperatures (350oC to 600oC) for a short period (i.e. less than two seconds). Several reactor configurations have been shown to achieve this condition (e.g. bubbling fluid beds, circulating and transported beds, cyclonic reactors, and ablative reactors) and to achieve yields of liquid product (bio-oil) as high as 75% based on the starting dry biomass weight. Numerous feedstocks have been tested by many firms worldwide with many now offering commercial processes (see section below). The UK Department of Environment (Defra) has also funded some projects to investigate this approach for treating biological municipal solid waste (see Box).

Scarborough Power was one Defra’s exemplar projects under its New Technologies Demonstrator Programme (NTDP) initiative. The project’s GEM fast pyrolysis plant is designed to process 18,000 tpa of SRF, from an adjacent processing plant at Yorwaste’s integrated waste management facility in Scarborough. Generated syngas will be burnt to generate both heat and power, with excess electricity fed into the National Grid. The facility will be eligible for two ROCs from April 2009. Some of the heat will be used to dry the fuel prior to being pyrolysed. Plant construction is now complete and it is currently going through the process of commissioning. The plant is expected to operate well within the environmental limits of the Waste Incineration Directive and carbon monoxide levels will be minimized by passage through a thermal oxidizer. Initially, the 10% char residue (i.e. 1,800 tpa) will be disposed of in a non-hazardous landfill. However, the project aims to find alternative sources (e.g. as a compost enhancer or filler in concrete/brick products).

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Intermediate pyrolysis – an approach developed by Prof. Dr. Hornung at Aston University (UK) in collaboration with Forschungszentrum Karlsruhe GmbH and SEA Marconi in the EU which has funded the Haloclean Reactor project (originally researching the treatment of waste electronic equipment to recover gases but SEA Marconi now appear to be moving towards biomass). The Haloclean process incorporates indirect heat transfer using circulating solids (metal spheres): the spheres transfer heat between a burner and a pyrolysis reactor. The process yields a dry char that is suitable for combustion or as a fertilizer, as well as vapours free from molecular tars. Because the char is separated from the gas stream, the gas can then be fed into a low ash gasifier. The process has been tested to date on wood, wheat straw and oil seed rape.

Slow pyrolysis - can be optimized to produce substantially more char (i.e. 30 to 50% or more), with a corresponding reduction in liquid and gas phases. It may take hours to complete. Several firms have developed pre-commercial processes including BEST Energies (USA/Australia) and EPRIDA (USA).

Table G1.15: Overview of some leading pyrolysis demonstrators in the EU and globally

Firm Pyrolysis Stage of Feedstock Nominal Capacity Main product process development focus type

Dynamotive Energy Fast Commercial Biomass 10 t/d (plans for 100 t/d) Oil (+ char for Systems Corporation agriculture)

(Canada)

Ensyn Corporation Fast Long-term Residual wood (or 100 t/d (Renfrew plant) Oil (~75% by (Canada) commercial agricultural products) weight) Plans to scale to 500 – 1000 t/d plant

BTG (Netherlands) Fast Pre- Wood and other 250 kg/hr (plans for 50 Oil commercial biomass residues t/d

Scarborough Power Fast Pre- SRF (from Yorwaste) 18,000 tpa Gas for CHP pyrolysis demonstrator commercial generation (GEM technology) (2.4MWe & 1.8MWt)

~10% char

National Renewable Fast Experimental Biomass 15-20 Kg/hr Gas Energy Labs (USA)

Prof. Dr. Hornung (Aston Intermediate Pre- Rapeseed 4,000 tpa Fuel for CHP University), (Haloclean commercial 500kWe Forschungszentrum reactor) Karlsruhe GmbH & SEA

Marconi (Italy)

BEST Pyrolysis Slow Pre- Various residues 300 kg/hr (1/10th scale) Char (25-70% (USA/Australia) commercial depending on feedstock)

EPRIDA (USA) Slow Pre- Various residues 10-25 Kg/hr Char (~50% ) commercial

Topell (Netherlands) Slow Commercial Wood Pellets for co- firing and biomass boilers

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Source: Company websites

Gasification: Whilst gasification of coal has been used for years to produce syngas, either for burning or as a feedstock for the Fischer-Tropsch process which converts it into a liquid fuel, it has been only in the last 10-15 years that it has been applied to solid- biomass feedstocks. The development process has by no means been easy. Repotec in Austria, who have developed the Gussing gasifier and are one of the leading developers of such technology, have previously noted400 that there are over 100 failed biomass gasification projects in Germany alone. Several UK firms now claim to have commercial gasification systems including Biomass Engineering (see Box) and ITI Energy.

O-Gen UK Ltd is a company set-up to treat organic matter through the use of gasification technology. The company obtained £10m funding from cleantech investor, Foresight Venture Partners, with Nord LB providing banking facilities, to enable the development and operation of a series of solid biomass fuelled plants, supplied, designed and installed by Biomass Engineering Ltd. The first of these plants was built in Stoke-on-Trent at a former industrial site and will generate power for export to the electricity grid.

Gasification is regarded as a good method of improving the efficiency of large-scale biomass power facilities (e.g. those using forest industry residues or the black liquor from boilers of the pulp and paper industry – see Box below) because the syngas will burn more efficiently and cleanly than the solid biomass from which it was made. Excellent feed-in tariffs for biomass CHP in Italy and Germany has also prompted interest from industrial end users in the use of gasification technology.

Swedish Chemrec (www.chemrec.se) has developed a proprietary, highly efficient gasification technology that enables organic black liquor to be converted into renewable motor fuels, biomaterials or electricity. Currently this by-product is burned in steam boilers with low energy efficiency for production of steam and electricity. Chemrec’s gasification technology is already proven with two plants in operation. The firm raised $20 million from venture investors in December 2008 to support the company in achieving full commercialisation of its technology, particularly with leading pulp and paper firms in the USA and Sweden. Chemrec believe there is no comparable technology in the market.

Gasification is also now being applied as an advanced thermal treatment method for both solid recovered fuel (SRF) (see Box below) and refuse derived fuel (RDF) – for example by Waste Gas Technology Ltd in the Isle of Wight using Energos technology. RDF and SRF are made from biomass residues of household waste following processing through recycling and composting systems.

In July 2005, UK renewable energy developer, Novera Energy announced plans to build, own and operate a 10MW biomass gasification plant in Dagenham – the East London Sustainable Energy Facility (ELSEF). Novera would license the gasification technology from Enerkem Technologies. ELSEF would convert SRF into a syngas to generate electricity. The project was one of Defra’s New Technologies Demonstrator Programme (NTDP) but Novera withdrew voluntarily in August 2007 owing to delays in the project, which were exacerbated by the planning process and likely changes to revenue potential through change to ROCs. In May 2008, Novera announced that Shanks Waste Management had signed a 15 year fuel supply contract for 90,000 tpa of SRF from its neighbouring Mechanical Biological Treatment (MBT) facility. Novera expected to reach financial close on the consented plant by late 2008/early 2009 and appointed M+W Zander as preferred bidder for the EPC contract. In March 2009, Matrix

400 Pers comm, GHK, 2009

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Capital wrote that Novera was looking to sell the plant.

The following table illustrates the range of leading firms and the status of biomass-fired gasification technology.

Table G1.16: Overview of some leading gasification demonstrators in the EU

Company Gasifier type Stage of development Feedstock Plant location

Repotec (Gussing, Dual fluidized Commercial Wood Austria Austria) bed steam Over 40,000 hours of (planning several CHP operation projects

ITI Energy (UK) Cross draft Commercial Virgin wood Wick, Scotland CHP Was expected to start operations in 2008

Babcock & Wilcox Latest MkIII Commercial Virgin wood Pilot Harboere plant Volund (BWV) design is (will also use (Sweden); plants in Latest Italian plant (Sweden) updraft produced tar Japan & being built in expected to start combined residues) Germany & Italy operations at end 2009 cycle CHP

Biomass Engineering Downdraft Commercial Wood Cumbria & Stoke on Ltd (UK) gasification Trent (run by O-Gen (established 1996 and CHP Ltd – see case study) now have more than 10 with sales pipeline for gasifiers installed with Italy and Germany over 30 in build/installation)

Keld Energy (UK) Gasification Prototype Poultry litter North West proof of CHP concept with Uni of Manchester

Schmitt-Enertec Fixed bed, Commercial Wood Test plants in Japan; (Germany) downdraft Germany and Italy CHP

Chemrec (Sweden) Pressurized Commercial Paper Various plants across oxygen-blown sludge EU development (black liquor) plant Novera Energy (UK) Enerkem Pre-commercial Solid Dagenham Technologies Recovered Fuel Waste Gas Technology Energos Commercial Refuse Isle of Wight Ltd gasification (gasification Derived Fuel (six plants operate in demonstrator (UK) followed by (70-80% Norway & Gemany) high biodegradab temperature Planning consent for le waste) oxidation) 9MW plant in Irvine, Scotland

Goteberg Energi AB Repotec Feasibility study now Forestry Gothenberg (Sweden) (Gussing) being undertaken residues

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Source: company websites

R&D investment

In 2009, corporate and public investment in R&D in Europe was €6 billion ($8.1 billion) and €2.6 billion ($3.5 billion) respectively. These were about 54% and 36% of worldwide R&D investment in clean energy401. Worldwide corporate and public R&D investment in biomass & waste energy in 2009 was €139 million ($190 million) and €139 million ($190 million) respectively. It is therefore reasonable to assume that corporate R&D investment in Europe was about €75 million and the public investment in R&D was about €50 million in 2009.

Leading EU innovators

SMEs’ share of patents worldwide is 5% and the share of multinational companies worldwide patents is about 52% and the share of national corporations' share worldwide is approximately 28%, as indicated in Figure G1.46 and Figure G1.47402. However, there is not any European company holding any of the 5,303 patents in this technology area. About 266 biomass-to-electricity technology patents are held by non-EU SMEs403.

Figure G1.46: Share of patents by organisation type

Source: Chatham House, 2009

401 Global Trends in Sustainable Energy Investment, UNEP, SEFI, New Energy Finance (2010). 402 Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies, Chatham House, 2009 403 Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies, Chatham House, 2009

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Figure G1.47: Type of patent holder by technology

Source: Chatham House, 2009

Venture capital

Biomass and the waste to energy sector investment has been the third biggest sector which received highest level of new financial investments. In 2009, biomass and waste to energy sector accounted for about €7.9 billion ($10.8 billion) or 9% of all financial investments in sustainable energy. About 1.5% (€119 million) of this investment was realised by VC404.

Figure G1.48. indicates the financial new investment in biomass and waste to energy technologies from 2004 to 2009. The average annual growth rate during this period was 58%, and the share of biomass and waste energy technology investment in all renewable energy resources decreased by about 5%, as indicated in the Figure G1.49.

404 Global Trends in Sustainable Energy Investment, UNEP, SEFI, New Energy Finance (2010).

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Figure G1.48: Financial new investment in biomass & waste energy technology (million euros)405

9,000 8,000

7,000

6,000 5,000

4,000 3,000

2,000 1,000

0 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

Figure G1.49: The share of financial new investment in biomass & waste energy

100% 90% 80% 70% 60% 86% 84% 88% 90% 93% 91% Other renewable energy 50% sectors 40% Biomass & Waste 30% 20% 10% 14% 16% 12% 10% 7% 9% 0% 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

In 2009, total clean energy VC investment in Europe was about €1.22 billion ($1.67 billion), representing 24% of worldwide VC investment in all clean energy sectors406.

405 Exchange rate $1 = €0.73 has been used for calculation 406 Global Trends in Sustainable Energy Investment, UNEP, SEFI, New Energy Finance (2010).

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Global VC investment in biomass and waste to energy technology in 2009 was €300 million ($410 million). It is therefore reasonable to assume that about €73 million of biomass & waste energy investment in Europe has been undertaken by VC407.

Similarly, worldwide VC investment in the biomass and waste to energy industry in 2008 was €438 million ($600 million). The total VC investment in Europe in all clean energy sectors was about 23% of worldwide investment in all clean energy sectors. Therefore, it is reasonable to assume that about 23% of €438 million investment in the biomass and waste to energy industry (€102 million) in Europe was realised by VC. Figure G1.50 below indicates the estimated VC investment in the biomass and waste to energy industry in Europe. Figure G1.50: Venture Capital investment in biomass & waste energy (million euros)

500 450 400 350 300 VC investment in biomass & waste 250 technology, global 200 VC investment in biomass & waste 150 technology, Europe 100 50 0 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

Business model

Technology developers in this area typically rely on a number of options to realise commercial benefits from sales of their biomass to energy system. This might include:

• Licensing the technology to a project develop;

• Creating a Special Purpose Vehicle (SPV) for each project; and

• Creating a spin-out company (if the intellectual property originates in a university etc.) to develop projects.

The value of merger and acquisition activities in global biomass and waste energy did not change from 2004 to 2009. The value of merger and acquisition activities in global

407 24% of €300 million.

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biomass & waste energy in 2009 was €1.5 billion. The trend for acquisition activities for the period 2004-2009 is shown in Figure G1.51.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Figure G1.51: The value of acquisition transactions in biomass & waste energy (billion euros)408

1,600

1,400

1,200

1,000

800

600

400

200

0 2004 2005 2006 2007 2008 2009

Source: New Energy Finance, 2010

The total value of acquisition transactions in Europe was €20.5 billion ($28 billion) in 2009. This represented 46% of the total value of all transactions worldwide. This figure has decreased since 2008 by 21%. It is important to mention that the same negative trend has been observed for North America (negative 10% growth) while the total value of acquisition transactions in Asia and Oceania increased by 75% and reached €7.2 billion ($9.9 billion) in 2009.

It is therefore reasonable to assume that the value of total acquisition activities undertaken in European biomass & waste energy sector is about €675 million409.

Potential for ETV The market structure for established biomass energy technologies is dominated by a vast number of technology developers, many of whom bear the scars of having failed pre-commercial demonstrators scattered across EU member states.

The need for large scale demonstration of technologies prior to achieving mass market adoption means it is unlikely that the sector would benefit from an ETV.

Furthermore, the most successful companies in this space (including those that dominate patent ownership) are really the only organisations with the scale and track record to successfully take forward new innovations.

408 Exchange rate $1 = €0.73 has been used for calculation 409 46% of €1.5 billion

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1.1.3 Technology Group: Combined heat and power (CHP) Product use and applications

Combined heat and power (CHP) is an efficient technique of capturing the heat created during the energy production process. Traditional electricity generation disposes of the heat created during production, but CHP plants capture it so that it can provide hot water and central heating to homes, offices and industrial sites. The heat is transferred from the power plant to the end user via an underground system of highly insulated pipes, known as a district heating network410.

Market characteristics

In 2004 global electricity production was about 7 EJ per annum. Most of the CHP installed capacity was realised in early 1990s in OECD countries, which accounts for about half of the CHP electricity production. Figure G1.52 shows global CHP installed capacity between 1992 and 2004. Figure G1.52: Global CHP capacity (1992-2004)

Source: IEA, 2007

As indicated in Figure G1.53 industrial CHP use in the EU and United States is concentrated in chemicals, pulp and paper, and refining industries where there is a high demand for steam and power. These three industries represent about 80% of the total electric capacities at existing CHP installations411.

410 Why waste heat?, ICE, 2009 411 Tackling Industrial Energy Efficiency and CO2 Emissions, IEA, 2007

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Figure G1.53: Distribution of industrial CHP capacity in the EU and in the US

Source: IEA, 2007

Total CHP installed capacity in EU25 was about 91.6 GW in 2004. Germany had the highest level of CHP installed capacity with 26.4 GW in the same year (29%)412. France, Poland and the UK followed Germany with CHP installed capacity of 6.5 GW (7.1%), 6.3 GW (6.9%) and 6.3 GW (6.9%) respectively.

The IEA also calculated that in 2006 1,169TWh of electricity was generated in the EU27 and as such about 1,600TWh of energy was wasted. This shows slightly higher efficiency levels than that of the US, but the potential for waste heat recovery in Europe is still very large.

A recent study413 shows that 40% of electricity in Europe could be generated from cogeneration. EU27 produced about 11% of its electricity production from CHP, as indicated in Figure G1.54. The figures demonstrate that there is a great potential for investment both for investors and technology developers in the area of heat capture from production. Among the EU Member States, Denmark and Finland are the most developed CHP markets. In Eastern European Member States of the EU there is significant potential for waste heat recovery and CHP implementation due to the low level of CHP utilisation, cold climate and large municipal apartment blocks414.

412 Tackling Industrial Energy Efficiency and CO2 Emissions, IEA, 2007 413 Waste Heat Recovery, New Energy Finance, March 2009 414 Waste Heat Recovery, New Energy Finance, March 2009

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Figure G1.54: Amount of CHP in total electricity generation

45% 41% 40% 35% 35% 31% 30% 25% 20% 15% 11% 8% 8% 10% 6% 7% 6% 7% 6% 4% 5% 0%

Source: New Energy Finance, 2009 Global market leaders

A study by New Energy Finance researched some of the leading major players in the waste heat recovery area. Most selected players were US firms; only a few including ALSTOM were from the EU (Table G1.17). Table G1.17: Selected companies and technologies

Company Country Ownership Technology

CAIN Industries US Private HRSG

Thermax India Public (BOM: 60041) HRSG, WHRB

Citech UK Private WHRB

Dresser-Rand US Public (NYSE: DRC) Steam (turbines)

Electra Therm US Private ORC, expander

Alstom Power France Public (EPA: ALO) Various

Xetex US Private Heat wheels

Desiccant Rotors India Private Heat wheels

Econotherm UK Private Recuperators, heat pipes

O-Flexx Germany Private Power bar

Source: New Energy Finance, 2009

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Innovation type

Heat recovery steam generators (HRSGs) are common technologies used in waste heat recovery. CAIN Industries (US) is a leading supplier of waste heat recovery technologies. HRSGs are sometimes part of the technology used within a waste heat recovery boiler (WHRB). Citech, an established heat recovery system provider specialises in WHRB for oil and gas industries within its ‘CiBAS’ range. Also, Thermax (India) is a leading WHRBs manufacturer415.

Recuperators (radiation recuperators and convective recuperators) are the most widely used technologies in heat recovery systems. ALSTOM Power, through its German subsidiary Alstom Power Energy Recovery GmbH, manufactures recuperators for a variety of industrial processes, including iron and steel production, forging, and glass and aluminium melting416.

Heat wheels are another type of recuperator which enables the transfer of low to medium temperature waste heat. Major heat wheels manufacturers include Xetex (US) and Desiccant Rotors International (India).

Denmark, Finland and the Netherlands already have high penetration rates for CHP. Most EU Member States however have great potential for CHP adaptation, as the IEA statistics suggest. However the literature417 shows that there are a number of barriers that can inhibit expansion of CHP:

• Power grid access/interconnection regulations and utility practices (buy-back tariffs, exit fees, backup fees);

• Environmental permitting regulations and lack of an agreed methodology to assess the environmental benefits of CHP; and

• Increases in natural gas prices relative to electricity prices extend payback periods and make them less attractive investments.

These barriers to CHP market may also limit the technology innovation growth rate as less market players will be willing to invest in this technology area.

415 Waste Heat Recovery, New Energy Finance, March 2009 416 Waste Heat Recovery, New Energy Finance, March 2009 417 Tackling Industrial Energy Efficiency and CO2 Emissions, IEA, 2007

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ANNEX H REFERENCES

Water

Cafforr, Issy (2009): In 2050 water is the new oil and carbon is the currency – A personal vision of a low carbon water sector in 2050. Kroto Research Institute.

Caffoor, Issy (2008): Towards chemical free water and wastewater treatment. Environmental Knowledge Transfer Network.

Cleantech Group LLC (2009): Israel to export $2.5 billion in water technologies by 2011.

Cleantech group LLC (2010): The Corporate influence on water efficiency. Prepared for the Cleantech water focus event.

Cleantech Group LLC (2010): The state of water innovation. Annual review of water upstarts and the VCs that backed them.

Frost & Sullivan (2007): Euro Water, Wastewater Disinfection Systems Market.

Global Water Intelligence (2009): Despite suffering pressure from the downturn, Gordon Cope finds optimism for growth in the water testing sector, sparked by increasing number of substances requiring regulation.

Global water Intelligence (2009): Expanding geographical markets and increased regulation are predicted to increase growth in the water testing market.

Global Water Intelligence (2009): Optimism for growth in the water testing sector.

Global Water Intelligence (2010): The desalination market returns.

ICIS Chemical Business (2010): Salt Free.

Innovas Solutions (2010): Low Carbon and Environmental Goods and Services: An industry analysis, Market Update. Department for Business Enterprise and Regulatory Reform.

Innowater (2010): Market segmentation: Overview of market characteristics, key market drivers and dimensions of priority segments. European Commission Enterprise and Industry.

Jefferies Research (2010): Clean Technology Primer.

Pinsent Masons (2010): Pinsent Masons water year book.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Roland Berger Strategy Consultants (2007): Innovative environmental growth markets from a company perspective. Report to the German Federal Environment Agency (Umweltbundesamt).

Sustainability Asset Management (2007): Water: A market of the future.

SWIFT-WFD (2007): SWIFT market brief. Sixth Framework Programme. European Commission.

Tang, Alec (2008): Environmental monitoring and forensics. Environmental Knowledge Transfer Network.

Tang, Alec (2007): Rapid measurements tools. Environmental Knowledge Transfer Network.

TESTNET (2009): Brief introduction to the TESTNET programme.

TESTNET (2007): Towards a European environmentally sound technology verification system. The TESTNET Newsletter.

Soil and Groundwater

Beta Technology (2009): TRITECH environmental technology verification project results.

BCG (2008): Développer les éco-industries en France.

CL:AIRE (2010): Contaminated land remediation. Defra research project final report.

COMMON FORUM and NICOLE (2009): Common Position Paper on Innovative technologies. NICOLE Secretariat.

Consultation with Caroline Wadsworth, Beta Technology, January 2011.

Consultation with Dominique Darmendrail, BRGM (and representative of NICOLE and Common Forum).

Consultation with Gerard Van Kijk, Eijkelkamp Agrisearch Equipment BV, PROMOTE ETV participant, January, 2011.

Consultation of Suzanne van der Meulen, Holland In-Situ Programme, January, 2010.

Ecorys (2009): Study on the Competitiveness of the EU eco-industry.

Eco-Solids International Reducing carbon and improving net energy gains through advanced wastewater treatment. http://www.ecosolids.com/products/cellruptor/

Ernst & Yong (2006): Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU. Ernst and Young. European Commission, DG Environment.

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EURODEMO (2007): European platform for demonstration of efficient soil and groundwater remediation. Sixth Framework Programme, European Commission.

EURODEMO (2007): Final concept for a technology promotion programme. European platform for demonstration of efficient soil and groundwater remediation.

European Program for Sustainable Urban Development (2010): Development Brownfield Integrated Governance – BRING Baseline Study – Development phase European Program for Sustainable Urban Development.

Glumac,B. Han, Q. Smeets, J. Schaefer, W. Rethinking Brownfield redevelopment features: applying Fuzzy Delphi. Eindhoven University of Technology.

LIFE. Sustainable sludge management. European Commission.

Innovas (2009): Low Carbon and Environmental Goods and Services: An industry analysis, UK Department for Business Enterprise and Regulatory Reform.

Middelkoop, H (2000): Heavy-metal pollution of the river Rhine and Meuse floodplains in the Netherlands. Netherlands Journal of Geosciences.

Sweeney, Rob. (2008): In-situ land remediation. Environmental Knowledge Transfer Network.

Tang, Alec (2008): Environmental monitoring and forensics. Environmental Knowledge Transfer Networks.

Tang, Alec (2007): Rapid measurements tools. Environmental Knowledge Transfer Network.

UK Trade & Investment (2010): Contaminated Land and Remediation: a world class industry.

VLM (2010): De Milieutechnologie Sector in Nederland, December.

Air

European Commission (2009): AIRTV - Testing network for verification of air emissions abatement technologies.

European Commission (2003): Integrated Pollution Prevention and Control (IPPC) Reference Document on the General Principles on Monitoring.

European Commission (2006): Integrated Pollution Prevention and Control (IPPC) Reference Document on BATs for Large Combustion Plants.

European Parliament (2007): Impact Assessment: Directive of the European Parliament and of the Council on industrial emissions (integrated pollution prevention and control).

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Eurostat (various)

Energy

AEA (2006): Review and Analysis of Ocean Energy Systems Development and Supporting Policies.

AEBIOM (2007): Bio-energy statistics in the EU.

Boston Consulting Group (2008): Développer les éco-industries en France.

Carbon Trust (2009): Focus for Success: A new approach to commercialising low carbon technologies.

Carbon Trust (2006): Future Marine Energy – Results of the Marine Energy Challenge: Cost competitiveness sand growth of wave and tidal stream energy.

Chatham House (2009): Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies.

Danish Wind Industry Association (2010): Danish Wind Industry Annual Statistics.

Douglas-Westwood, 2009 (from GHK (2009): Low Carbon Marine Energy)

Ecorys (2009): Study on the Competitiveness of the EU eco-industry.

EPIA (2010): Solar Generation 6.

EPIA (2010): Global Market Outlook for Photovoltaics until 2014.

EREC: Statistics: http://www.erec.org/statistics.html

Ernst&Young (2006): Eco-Industry, its size, employment, perspectives and barriers to growth in an enlarged EU.

Eur Obser’ER (2010): Solid Biomass Barometer; no. 200.

EWEA (2010): Wind in Power – 2009 European Statistics.

German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (2010): http://www.bmu.de/files/english/pdf/application/pdf/broschuere_ee_zahlen_en_bf.pdf

German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (2010): Development of renewable energy sources in Germany 2009.

German Solar Industry Association (2010): Statistics data on the German photovoltaic industry.

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German Wind Energy Association: http://www.wind-energie.de/en/wind-energy-in- germany/

Greentech Media, 2008 (from GHK (2009): Low Carbon Marine Energy)

ICE (2009): Why waste heat?

IEA (2007): Tackling Industrial Energy Efficiency and CO2 Emissions.

Innovas (2010): Low Carbon and Environmental Goods and Services: an industry analysis. Update for 2008/2009.

Joint Research Council Renewable Energy Unit (2009): PV Status Report 2009.

Merill Lynch (2008): The Sixth Revolution: The Coming of Cleantech.

Michael Kőttner, November 2005 (Jonathan quoted it)

New Energy Finance, UNEP, SEFI, (2010): Global Trends in Sustainable Energy Investment.

New Energy Finance (2009): Waste Heat Recovery.

New Energy Finance (2009): Biomass and waste to energy investment: fundamentally strong, short term weaknesses, Research Note.

Nomura (2010): Blue Sky Coming Through.

Nomura (2010): Asia Power, Utilities & Renewable Energy 2010 Outlook.

REN21 (2010): Renewables: 2010 Global Status Report

Roland Berger Strategy (2010): From Pioneer to Mainstream: Evolution of wind energy markets and implications for manufacturers and suppliers.

Roland Berger (2010): Directions for the Solar Economy, PV Roadmap 2020.

Roland Berger (2009): Wind energy manufacturers’ challenges - Using turbulent times to become for future.

Wind Industry Germany website, Manufacturers database: http://www.wind-industry- germany.com/en/companies/manufacturers/enercon-gmbh/

World Economic Forum (2009): Green Investing – Towards a Clean Energy Infrastructure.

World Wind Energy Association (2009): World Wind Energy Report.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Cleaner production and processes

4Energy (2011). www.4energy.co.uk.

BAXI Sener Tec UK (2011): http://www.baxi-senertec.co.uk/.

Button Energy - Energiesysteme GesmbH (2011): http://www.buttonenergy.at/index_eng.htm.

British Board of Agrement. (2009). www.bbacerts.co.uk/.

British Gas (2011): http://www.cerespower.com/OurMarkets/NaturalGasCHP/.

Bsria (2006): World domestic boiler market showing some growth. http://www.bsria.co.uk/news/1885/.

Cleantechnica (2010): Graphite foam makes high efficiency led lights last longer. http://cleantechnica.com/2010/08/28/graphite-foam-makes-high-efficiency-led-lights-last- longer/.

Consortium for Energy Efficiency (2001): A market assessment for condensing boilers in commercial heating applications.

Consultation with Erik Bataille, Atlantic Climatisation, 2011.

Consultation with Goran Bolin, CEO, Climatewell.

Consultation with Hervé Poskin (Eco construction cluster) and Jean Luc Sadorge (Energivie cluster).

Consultation with Jean-Luc Sadorge, Head of Alsace Energivie (Regional Programme for the promotion of energy efficiency).

Data Monitor (2010): AC Drives in Europe, Industry profile.

Data Monitor (2010): Industry Profile; Homebuilding in Europe.

Energy Saving Advice (2011). www.energysavingadvice.co.uk/energy-saving- products/energy-saving-boilers.php.

Ernst & Young (2006): European Commission DG Environment: Eco-industry, its size, employment, perspectives and barriers to growth in an enlarged EU.

European Commission - Environment. http://ec.europa.eu/environment/enveco/eco_industry/pdf/annex2.pdf.

European Commission. Environment- LIFE programme (2011). http://ec.europa.eu/environment/life/.

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Frost & Sullivan (2009): Demand for energy-efficiency offers high potential for electric drives in the European chemical industry.

Global Industry Analysts (2008): Global Heat Exchangers Market to Cross $12.7 Billion by 2012, According to New Report by Global Industry Analysts, Inc. Http://www.prweb.com/releases/heat_exchangers/shell_tube_plate_frame/prweb150325 4.htm.

Global Industry Analysts (2009): Lighting Controls Market in North America & Europe to Reach US$3.8 Billion by 2015, According to New Report by Global Industry Analysts, Inc. http://newsguide.us/index.php?path=/technology/electronics/Lighting-Controls- Market-in-North-America-Europe-to-Reach-US-3-8-Billion-by-2015-According-to-New- Report-by-Global-Industry-Analysts-Inc/.

HSBC Global Research (2009): A Climate for Recovery: The colour of stimulus goes green.

IEA (2008): Energy efficiency requirements in building codes: Energy efficiency policies for new building. IEA publications.

Innovas (2009): Low Carbon and Environmental Goods and Services; An Industry Analysis.

Institut für Wirtschaft und Umwelt der Arbeiterkammer Wien (2000): Environment and Employment: sustainability strategies and their impact on employment. European Commission DG Employment and Social Affairs.

International Energy Agency. http://www.iea.org/stats/rd.asp.

LEDs Magazine (2009): Strategies Unlimited believes the LED lighting market will grow by 28% from 2008 to 2012, but many challenges remain. http://www.ledsmagazine.com/news/6/3/2.

McKinsey Global Institute (2008): Capturing the European Energy productivity opportunity.

Norton Rose (2010): Cleantech investments and private equity – an industry survey.

Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany.

The Linde Group (2011). http://www.the-linde group.com/en/about_the_linde_group/divisions/engineering/index.html.

TNO-STB (2001): Cleaner production: Opportunities for a sustainable economy. IPTS.

Wapner, Mike. (2011): Who does what best in the lighting control industry. Pike Research. http://www.matternetwork.com/2011/2/who-does-what-best-lighting.cfm.

World Business Council for Sustainable Development. Energy Efficiency Building Report. Transforming the market.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

World Economic Forum (2009): Green Investing: Towards a Clean Energy Infrastructure.

Agriculture

Anquetin, P (2011): Representative of PICHON SA. Conference on Eco-innovation. SIMA. Paris.

Benoit Pouvesle. ALPHA LAVAL, Industrial Waste Manager, Market Unit Environment.

Bixio et al. (2006): Wastewater reuse in Europe. Desalination.

Consultation with Bruno Molle, CEMAGREF, 2011.

FAO (2003): Agriculture, food and water – a contribution to the World Water Development Report. 1 DESIRAS project – European Water partnership.

G. Johnson et al. (2004): Membrane Filtration of Manure Wastewater. New Logic Research, Technical Report.

IPPC (2003): Reference Document on Best Available Techniques for Intensive Rearing of Poultry and Pigs. ftp://ftp.jrc.es/pub/eippcb/doc/irpp_bref_0703.pdf.

Levitt, Tom (2010): UK farmers face dilemma over 'super-dairy' plans. Ecologist. http://www.theecologist.org/News/news_analysis/604208/uk_farmers_face_dilemma_ov er_superdairy_plans.html.

Minnesota Department of Agriculture. http://www.mda.state.mn.us/renewable/waste/faqs.aspx.

Nova Scotia Agricultural College: Understanding Mechanical Solid-Liquid Manure Separation.

Société Française d’Economie Rurale (2010): Economie de la production agricole et régulation de l’utilisation des pesticides - Une synthèse critique de la literature. Conference on the reduction of agricultural pesticides – challenges, modalities and impacts.

SUEZ Environment (2006): Water: alternative resources.

UNEP (2006): Water and Wastewater Reuse - An Environmentally Sound Approach for Sustainable Urban Water Management.

VERA (2010): Test protocol for air cleaning technologies. http://www.veracert.eu/dadk/Saadan_soeger_du/Testprotokoller/Documents/VERA%20Air%20Cleaning%20Test %20Protocol%20-%20version%201%20-%202010-09-17.pdf.

World Bank (2010): Improving Wastewater Use in Agriculture - An Emerging Priority.

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Materials Waste and Resources

Agennix AG (2010): Annual report.

Alcimed (2007): The Current Market for Industrial Bioproducts and Biofuels & Foreseeable Trends.

American Dental Association (2007): ADA professional product review.

ARKEMA (2009): Annual Report. http://www.arkema.com/pdf/FR/corporate/arkema_rapport_activite.pdf.

BASF (2009): Annual report, 2009. http://www.basf.com/group/corporate /facts- reports/reports/2009/BASF_Report_2009.pdf.

Battery Council International (2009): Recycling rate study. bcc Research (2008): Recycling Markets in China.

Bio Intelligence Service (2011): Service contract on management of construction and demolition waste. Final Report Task 2.

Bio Intelligence Service (2010): Review of the Community strategy concerning mercury, final report. DG ENV.

Biostrategy (2005): Biopharmaceuticals. Current Market Dynamics and Future Outlook, Research and Markets.

Boston Consulting Group (2005): Waste management market in Europe, structure and evolution perspectives.

British Board of Agrement. http://www.bbacerts.co.uk/about_us.aspx.

Claudine Capel. Waste sorting – A look at the separation and sorting techniques in today’s European market. www.waste-management-world.com.

Cleantech Group LLC (2009): New business opportunities opening with lithium battery recycling. http://cleantech.com/news/5068/recycling-tied-lithium-battery.

Consultation with Alain Vassart, General Secretary of EBRA (European Battery Recycling Organization).

Consultation with Armin Bantle executive director, DÜRR Dental France.

Consultation with Daniel McAlonan, Senior Health & Safety Adviser British Dental Association; Susie Sanderson, British Dental Association Executive Board Chair & General Dental Practitioner; Armin Bantle executive director, DÜRR Dental France.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Consultation with Laurent Chateau, director of sustainable consumption and waste, Ademe.

Consultation with Michael Green, Director of the G&P Batteries (UK).

Consultation with Susie Sanderson, British Dental Association Executive Board Chair & General Dental Practitioner.

Department for Business Enterprise and Regulatory reform (2009): Maximising UK Opportunities from Industrial Biotechnology in a Low Carbon Economy.

Euro Chlor (2007): Steps towards sustainable development, Progress report. The European Chlor-Alkali Industry.

EuropaBio (2010): EuropaBio’s input to the EC consultation on the future “EU 2020 Strategy”: Towards a bio-economy in 2020.

European Bioplastics. Certification of compostable Bioplastic Products. http://www.european-bioplastics.org/index.php?id=156.

European Bioplastics (2011): EL Insights. Critical Insights into Energy and Environmental Technology, Issue 17.

European Bioplastics (2008): Frequently Asked Questions (FAQs).

European Commission (2007): A lead market initiative for Europe. Commission to the Council, the European parliament, the European economic and social committee and the committee of the regions.

European Commission (2007): Accelerating the Development of the Market for Bio- based Products in Europe – Report of the taskforce on bio-based products; Composed in preparation of the Communication: A Lead Market Initiative for Europe.

European Commission (2010): Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the Thematic Strategy on the Prevention and Recycling of Waste.

European Commission (2009): Taking bio-based from promise to market.

European Commission Communication (2005): Community Strategy Concerning Mercury {SEC(2005) 101}.

European Environment Agency (2005): European environment outlook, EEA Report No 4/2005.

European Environment Agency (2010): Thematic assessment Material Resource and Waste.

European Federation of Public Service Unions (2007): Waste management companies in Europe.

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Financial Times (2008): Waste management: A problem that comes in heaps.

Freedonia Group (2010): World batteries, Market research.

Frost & Sullivan (2010): European Batteries Waste Management Market.

Frost & Sullivan (2010): Global Electric Vehicles Lithium-ion Battery Second Life and Recycling Market Analysis.

Frost & Sullivan (2007): Low Energy Light Bulbs: The Big Green Switch.

Frost & Sullivan (2010): Strategic Opportunities in the European Waste Recycling Market.

Genmab (2009): Annual report.

Gil Y. Roth. 2010 Top 10 Biopharmaceutical Companies. http://www.contractpharma.com/articles/2010/07/2010-top-10-biopharmaceutical- companies-report.

Haber, Steffen (2010): Lithium Recycling Activities from EV Batteries. Chemetall presentation, Sustainable development of lithium resources in Latin America, Santiago de Chile.

Hybrid Cars (2006): Hybrid battery toxicity. http://www.hybridcars.com/battery- toxicity.html

Hylander et al (2006): Mercury recovery in situ of four Different dental amalgam separators, Science of the Total Environment.

IB-IGT (2009): Maximising UK Opportunities from Industrial Biotechnology in a Low Carbon Economy. IB 2025.

IENICA (2004): Biolubricants, Market data sheet.

McKinsey (2007): In Putting SMEs at the core of bio innovation, Biochem.

Newmoa (2009): Review of Compact Fluorescent Lamp Recycling Initiatives in the U.S. & Internationally.

Novo Nordisk (2010): Full year 2010 results.

OECD (2009): The Bioeconomy to 2030: designing a policy agenda.

Pellenc Selective Technologies (2011). www.pellencst.com.

Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany.

Separation and Sorting Technology GmbH (2010). http://www.sesotec.com.

TITECH: Innovation in Global Recycling (2011): www.titech.com.

Detailed assessment of the market potential, and demand for, an EU ETV scheme EPEC for DG ENVIRONMENT

Toyota Prius' Battery Recycling Plan, Autoevolution. http://www.autoevolution.com/news/toyota-prius-battery-recycling-plan-8360.html.

Vara Research (2009): Binder & Co analysis.

WRAP. The Quality Protocols. (http://www.wrap.org.uk/recycling_industry/quality_protocols/index.html).

WorldWatch Institute (2011): Strong Growth in Compact Fluorescent Bulbs Reduces Electricity Demand.

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