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

FINAL REPORT

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

mailto:[email protected]

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

EPEC

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


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INDEX EXECUTIVE SUMMARY .................................................................................................................. 1 1 INTRODUCTION....................................................................................................................... 17 1.1 Purpose of the Draft Final Report........................................................................................... 17 1.2 Structure of the Interim Report ............................................................................................... 19 2 AN INTRODUCTION TO ETV................................................................................................... 20 2.1 Background ............................................................................................................................ 20 2.3 Complementarity and coherence of ETV ............................................................................... 21 2.4 EU Strategic Objectives ......................................................................................................... 26 2.6 Scope of ETV ......................................................................................................................... 29 2.8 Added value and benefits of ETV........................................................................................... 33 3 THE POTENTIAL NEED FOR ETV .......................................................................................... 36 3.1 Focus of the market analysis.................................................................................................. 36 3.2 Approach ................................................................................................................................ 38 3.3 Market Review findings .......................................................................................................... 38 3.3.1 Water treatment and monitoring.......................................................................................... 38 3.3.2 Soil and groundwater monitoring and remediation.............................................................. 39 3.3.3 Cleaner production and processes...................................................................................... 40 3.3.4 Materials, waste and resources........................................................................................... 40 3.3.5 Environmental technologies in agriculture .......................................................................... 41 3.3.6 Air pollution monitoring and abatement............................................................................... 41 3.3.7 Energy technologies............................................................................................................ 42 3.3.8 Summary ............................................................................................................................. 42 4 STAKEHOLDER CONSULTATION RESPONSES.................................................................. 45 4.1 Introduction............................................................................................................................. 45 4.2 Survey Methodology............................................................................................................... 45 4.3 Statistical analysis of data from the survey with organisations .............................................. 46 4.4 Results of the technology developer survey .......................................................................... 46 4.4.1 Survey responses................................................................................................................ 46 4.4.2 Environmental technology research, development and demonstration activity .................. 50 4.4.3 Barriers to market acceptance of environmental technologies ........................................... 57 4.4.4 Potential benefits of Environmental Technology Verification .............................................. 61 4.5 Testing and Certification Bodies............................................................................................. 63 Organisational details ...................................................................................................................... 63 4.5.1 Information on existing client base...................................................................................... 65 4.5.2 Product testing, validation and verification costs ................................................................ 67 5 THE BUSINESS CASE FOR ETV ............................................................................................ 71 5.1 Overview................................................................................................................................. 71 5.2 Identification of business cases.............................................................................................. 71 5.2.1 Approach to identification .................................................................................................... 71 5.2.2 Ranking of Technology Groups........................................................................................... 72 5.3 Detailed justification for business cases including individual technology subgroups............. 74


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Building on the technologies identified as Tier 1, 2 or 3 from the ranking exercise, the following presents the clear justification for progressing with each business case. Where it is judged that the technology does not warrant further investigation, the reasons for doing so are made clear......... 74 5.3.1 Proposed business case 1: Low carbon building technologies........................................... 74 5.3.2 Proposed business case 2: Products made of biomass ..................................................... 75 5.3.3 Recycling of industrial by-products into secondary materials and recycling of construction and demolition waste....................................................................................................................... 75 5.3.4 Proposed business case 3: Soil and groundwater monitoring ............................................ 76 5.3.5 Proposed business case 4: Water monitoring..................................................................... 77 5.3.6 Soil and groundwater remediation....................................................................................... 77 5.3.7 Proposed business case 5: Energy efficiency in industry and buildings............................. 78 5.3.8 Proposed business case 6: Wind, solar and marine........................................................... 78 5.3.9 Air pollution monitoring........................................................................................................ 79 5.3.10 Proposed business case 7: Water treatment .................................................................... 80 5.4 Approach to business case analysis ...................................................................................... 80 5.4.1 Overview.............................................................................................................................. 80 5.4.2 Establishing the rationale, expected benefits and value added for technology developers for undertaking ETV for each technology product........................................................................... 81 5.4.3 Assessing the costs and willingness to pay for ETV in each business case ...................... 84 5.5 Results of the business case analysis.................................................................................... 84 5.6 Anticipated costs of ETV and developers willingness to pay ................................................. 92 5.6.1 Costs of testing and verification .......................................................................................... 92 5.6.2 Costs to developers............................................................................................................. 92 5.6.3 Funding and cost-effectiveness of ETV .............................................................................. 94 5.6.4 EU value added of ETV....................................................................................................... 94 6 CONCLUSIONS........................................................................................................................ 98


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EXECUTIVE SUMMARY ES.1 This is the Final report of the study commissioned by the Environment Directorate

General to undertake a ‘Detailed assessment of the market potential, and demand for, an EU Environmental Technology Verification (ETV) scheme’.

The aim of the study is to feed into the ex-ante evaluation of the EU ETV scheme, with the intention to move the ETV scheme forward by detailing the market case and need for ETV across most environmental technologies and eco-innovation areas1. The overall objective is to assess the market potential of the EU ETV scheme, which includes:

1) a detailed assessment of likely demand from vendors and users of environmental technologies;

2) a cost-effectiveness analysis of the scheme for technology developers; and,

3) an identification of technology areas with the highest value added and benefits.

This report assesses the overall intervention logic and expected added value of an EU ETV scheme. It provides the results of a systematic desk-based analysis of the supply-side and demand-side structural characteristics of each environmental technology area. It also reports on the results of a stakeholder consultation with technology developers and test centres which was designed to elicit both quantitative and qualitative insights on the needs and costs of undertaking an ETV. These findings have in turn enabled those technology areas with the most potential need for ETV to be shortlisted.

The report concludes by providing the results of seven in-depth business cases where the demand for ETV was expected to be highest. The findings and observations from discussions with over 60 stakeholders, comprising technology developers, test centres, end-users and wider stakeholders, during this latter stage of the study have enabled a detailed set of conclusions and recommendations to be developed on the likely demand for ETV.

ES.2 An ETV scheme provides technology developers with the opportunity to have a third party validation of the performance of innovative environmental technologies.

The objective of an ETV scheme for the EU is to:

1. increase the credibility of such technologies on the market;

2. enable technology users and purchasers to compare technologies and identify eco-innovations suited to their needs; and

3. ensure wider recognition of verification results, both within the internal market and internationally.

This service for businesses would complement EU environmental legislation on products and processes, as well as voluntary instruments such as labelling or product declarations, in each case

1 This was split for the purpose of this study into seven technology areas, themselves accounting for 25 discrete technology groups or sectors


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increasing the incentives of developers to innovate, the confidence of users to purchase the technology and the potential of developers and distributors to export in the wider EU and further afield.

The ETV is also a partial solution to market failures which may exist in environmental technology markets. Increasing awareness amongst users and providing credible information on the performance of new technology can improve the probability of the new entrant being accepted and the technology being adopted by end users.

The development of the ETV scheme fits within a broad suite of interventions in support of eco-innovation and environmental technologies at EU level. These include measures aimed at supporting Research, Testing and Development (RTD) and commercialisation of technologies, in addition to measures aimed at supporting demand for and adoption of new technologies.

ES.3 The study required an approach that established a very broad understanding of the potential for ETV, followed by a focus on those technology groups with the greatest expected demand for ETV

The overall work programme was carried out between November 2010 and May 2011. Figure 1 outlines the three main phases which are described below:

Figure 1: Approach to the study

Phase 1a - Literature review

Analysis of Market & Structural Characteristics(size and growth potential of the domestic and export market for the technology, variety of competing/alternative technological options, rate of innovation, horizontal and vertical industry organisation, technology readiness,…)

Cost of ETV(cost of development ,certif ication, testing…)

Demand for ETV(importance of information ,

expected benef its ,…)

Assessment of the Market Potential of EU ETV(Potential uptake, willingness to pay, need for public financial support, …)

TA1t1 t2 ti

TA2t1 t2 ti

TA33 5

TA4t1 t2 ti

TA5

TA6t1 t2 ti

TA7t1 t2 ti

TA11

TA22

TA44

TA66

TA77

TA3t1 t2 ti

TA5t1 t2 ti

Consultation with Stakeholders

(technology developers, users & test bodies)

Literature Review(market, studies

industry literature, pre-programme, existing certif ication /

verif ication schemes & EC studies)

Identification of Business CasesScreening based on demand and supply characteristics


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This involved a detailed review of environmental technology market studies, industry literature as well as the latest data from Eurostat on environmental expenditure, trade data and patent analysis.

Phase 1b - Stakeholder consultation

A pan-EU stakeholder consultation, focused on technology developers and testing organisations, was undertaken. The aim was to determine the barriers to market adoption of environmental technologies, as well as to determine the expectant costs and benefits of using the ETV scheme.

Draft questionnaires were developed, pilot tested with both stakeholder groups and refined. These were then disseminated via trade associations, industry representative bodies, innovation networks and the ETV pilot project community at European level. In all, over 1,300 organisations were contacted through these dissemination channels. The survey deadline was also extended to help improve the response rate.

The consultation overall elicited responses from 38 developers and 10 test centres. Whilst this represents a low response rate (estimated at approximately 4%) - and hence did not generate a statistically significant response rate - there were considerable benefits from the survey as it:

• produced valuable and consistent results across various technology groups which were used to complement and qualify the analyses in Phases 2 and 3;

• showed that many organisations have little knowledge of ETV or the need for independent performance verification;

• highlighted the challenge of engaging on this subject with innovative SMEs who are, on the one hand, unlikely to be members of trade bodies but, on the other, may be the most likely type of organisation to want to use an ETV scheme.

Phase 2 - Analysis of supply- and demand-side characteristics for each technology area

A detailed and systematic analysis was undertaken of all the information collected from the literature review, supplemented by discrete stakeholder interviews with technology developers and end users. The overall objective was to estimate the potential need for ETV across each of the seven broad technology areas including their respective technology groups. The analysis resulted in the original list of 25 technology groups being consolidated into 18 technology groups.

To determine the degree to which each technology group needs and could potentially benefit from ETV, a number of demand-side and supply-side criterion were assessed. These are shown in Table 1 alongside an assessment of the implications of each criterion for an ETV scheme.

Table 1: Characteristics of technology sectors have an impact on the need for ETV

Demand-side (D) or Supply-side (S) criteria

Implication for ETV

Market size (D) Larger markets theoretically provide more opportunities to use an ETV efficiently

Market maturity (D) Nascent markets have more need for an ETV to overcome lack of standards

Market growth potential (D) Highest growth potential offers considerable opportunities for new innovations to emerge


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Demand-side (D) or Supply-side (S) criteria

Implication for ETV

and for an ETV to help provide traction

Innovation scepticism (D) More risk averse end users are likely to use an ETV to aid their purchasing decisions

Procurement patterns in end users (D)

The ability to make a discrete purchase implies a wider potential market – and hence more scope for an ETV to be directed at end users – than applications that require complex system integration often lengthy validation

Technology maturity (S) More mature and established technologies are unlikely to benefit from an ETV

Technology investment level (S)

Larger investments into technology groups are likely to facilitate success (especially where investment by venture capitalists are backed by market contacts)

Phase 3 – Selection and elaboration of business cases with high potential demand for ETV

A screening tool was developed in order to generate a short list of technology groups where there was likely to be the largest potential demand for ETV. Using the criteria in Table 1, each technology group was scored and ranked.

Business cases were then developed to understand better the challenges of commercialisation across specific promising technology ‘families’ and to examine in detail the role that ETV might play in helping to overcome these obstacles.

Each business case:

• quantified the costs and benefits of a potential ETV verification and determined the added value to at least three developers, typically in different member states; and,

• was expected to be broadly representative of the wider environmental technology area from which it was drawn, enabling tentative conclusions to be made about the overall market demand for ETV.

ES.4 Our analysis shows a differential need for ETV, both across and within technology areas, which is a reflection of very different supply-side and demand-side conditions that characterise each technology group

Market sizes across the seven technology areas

The analysis found a large variation in the current and future market values across each of the seven technology areas (Table 2).

Table 2: Estimated current and future value of environmental technology sectors based on capital investments in leading edge technologies

Technology area Current EU Market Value (2010)

Projected EU Market Value (2020)

Water treatment and monitoring €4.2bn1 €9.9bn

Soil/groundwater monitoring and remediation €2bn - €10.7bn €2.7bn - €15bn

Cleaner production and processes €365bn €710bn


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Materials, waste and resources Global: €440m2 Global: €1.4bn2

Environmental technologies in agriculture n/a n/a

Air pollution monitoring and abatement €16bn €17.3bn

Energy technologies €70bn €275bn

Notes: 1 - Total capital investments across the EU water treatment and monitoring sector are much larger due to considerable spend on plant that consists of low tech equipment and concrete; 2 - This is only for the technology group that covers automated separation

The cleaner production and processes area, which comprises energy efficiency in industry and household, dwarfs other environmental technology markets. Energy technologies represent the second largest market.

Technology developer views from the initial consultation

Analysis of 38 developer responses to the survey contributed important insights which helped to complement the overall analysis of technology areas, including barriers to market adoption, routes to market taken by developers and the perceived benefits from an ETV scheme (see Box).

The survey of developers indicated that:

most have relatively small annual budgets for product testing, validation and certification (falling into a €1 to €25,000 category) - a substantial proportion have no budget at all for certification or validation with end users (e.g. prototype testing);

50% believe their customers have poor knowledge of their product’s technical performance;

Key market adoption barriers include: validation procedures being very onerous for new technologies; customers are highly risk averse and prefer to buy market proven technologies; and many developers are unable to demonstrate the performance of their technology in real world operational conditions;

a sales track record, company reputation, credible test data and demonstration at customer sites are the main mechanisms for proving performance claims to end users;

the most significant benefits from an ETV scheme are that: it facilitates entry into EU27 markets; clients gain insights on the environmental impact of their technologies; it enables them to compete more effectively against market leading/rival products; and it increases the speed at which new products will enter the market.

Overview of the characteristics and likely need for ETV across each technology area

1. Water treatment and monitoring – is differentiated by two distinct technologies and markets:

• Integrated and tailored solutions, developed with or by water utilities (as well key industries) for site specific treatment needs (i.e. tertiary treatment technology for removal of metals, nutrients or other chemicals). The supply side is generally well established with strong vertical ties between developers and users; it also appears to be dominated by large and often global companies, with ownership of the intellectual property and experience in offering a complete systems package to users from initial technology development to implementation and maintenance.


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• Discrete and commercially sold technologies, such as test kits and in-line monitoring devices, designed for multiple applications. Existing standards and certification procedures often exist, but these technologies tend to be highly innovative and thus already exceed existing provisions, requiring credible performance verification to increase market acceptance, awareness and uptake amongst end users. Many developers were found to be SMEs, and can be regarded as a ‘competitive fringe’ to the more dominant producers in this sector.

Much of the demand for improved technologies in this area is driven by ever more stringent regulatory requirements placed on water utilities and industry. In conclusion, the testing and monitoring side of the market is expected to benefit the most from ETV, as it can add the necessary credibility to performance claims where the technology already exceeds established standards to increase market acceptance and uptake.

The desire to use an ETV to compete against rivals was seen to be important where there are large incumbent suppliers. However, by flagging the potentially successful technologies supplied by innovative SME developers, an EU ETV may expose them to the market which in turn could help facilitate their takeover by more established market players. This may have implications for the competitive fringe and for the commercial adoption of future innovations.

2. Soil and groundwater monitoring and remediation – is characterised by a high number of SMEs and a huge diversity of technologies, each designed to remediate/monitor a different suite of pollutants in a different environment. The difficulty for end users is differentiating between the performance claims made by various products. ETV is therefore expected to have a highly significant role in this market to verify credible technologies, thus encouraging uptake and market acceptance.

A limitation of these benefits however is that as each contaminated site is different, often requiring a suite of technologies to be deployed together, the ETV may not be sufficient to satisfy both end user concerns and, importantly, those of environmental regulators who ‘sign off’ the site prior to redevelopment.

More real world pilot projects and reference cases using the technology may therefore be needed before potential customers have enough confidence to purchase the technology. Programmes in the UK and the Netherlands (e.g. CL:AIRE and HIP) have been established specifically to catalogue and disseminate the results of such reference projects in order to extend the performance ‘envelope’ of remediation technologies and stimulate market confidence.

3. Cleaner production and processes - comprises three main sectors:

• Integrated processes: customised solutions developed for a specific purpose in a plant production process. End users typically use large scale system integrators with extensive process experience in their respective sectors to design and build new processes. Strong ties are often developed between client and technology provider, especially for multinationals with global operations, based on established track records of successful plants. This restricts opportunities for innovative companies. The combination of scale and diversity of cleaner production processes, coupled with the need for integration, suggests minimal potential for ETV in these markets.

• Energy efficiency of buildings and industry: dominated by large players, supplying solutions to EU and global markets. The analysis illustrates that while standards exist in


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these markets, it is difficult to gain accreditation for innovative technologies that go beyond these standards - or else for innovative products or combinations of technologies where there is no standard. This would provide an important market advantage for developers using an ETV. Similarly in new technology areas this potential also exists. A significant proportion of the market is therefore expected to benefit from ETV. However, in many product areas, much of the intellectual property and ability to bring it to market rests with a small number of major international firms.

• Low carbon technologies: the existence of an ETV is likely to bring about high added value for low carbon technology developers. For some technologies there are concerns by developers about the existence of multiple national verification schemes which are generally not recognised beyond national borders.

The longer term prospects for ETV are expected to be substantial as demand for energy efficiency and low carbon technologies increases in Europe and worldwide, driven by the EU 2020 strategy and G20 targets. Market potential is therefore assumed highly significant in export markets.

4. Materials, waste and resources - focuses on five leading industry segments:

• Recycling of materials into products: involving the reprocessing and reuse of materials, conducted by a variety of SMEs and large companies. A critical market issue relates to the quality of these materials. Without confidence and reassurance in quality, end users are unlikely to want to use the product. Quality protocols for certain materials have been established in the UK to overcome waste definition issues and concerns, but this is not EU wide. Confidence in the market could drive demand for new and innovative waste processing technologies and ETV could make a valuable contribution to this.

• Separation and sorting of solid wastes: is a large, capital intensive sector, with often bespoke technology development and integration to meet end user requirements. Technology developers are often large dominant companies with strong customer ties. In summary, no benefit from ETV could be ascertained from our analysis.

• Recycling and reprocessing of batteries: is a sector dominated by well established waste and technology development companies. The supply chain is also highly vertically integrated with the same companies collecting, sorting, recycling and recovering the valuable materials. Technologies are developed as integrated solutions specific to a battery type or need. Little or no benefit from ETV is therefore expected.

• Mercury treatment: is a highly specialised sector, in which most developers are well established and the technologies mature. ETV is not expected to be significant in this case.

• Bio-based products: refers to products manufactured from biological materials, such as cellulose. Many of these technologies were found to be novel and highly innovative with no standards as yet established. The sector was found to include a high proportion of SMEs. Analysis suggests that ETV might have a significant impact in promoting market acceptance and uptake, the credibility of performance generated might also help developers gain first mover market advantages over rivals in this growing sector.

The market benefits of these technologies and products relate primarily to resource and energy efficiency improvements, lowering costs for users and reducing the environmental


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impacts from production. Decoupling economic growth from resource consumption is consequently important. There appeared to be good prospects for ETV for biobased products and the recycling of materials into products, both of which are large and growing markets where performance claims are often hard to prove, especially for materials that have not been used in the market before.

5. Environmental technologies in agriculture - the technologies used in agriculture relate principally to irrigation and air/water pollution monitoring equipment. In the irrigation sector the market analysis revealed that the performance credibility of technology imports into the EU was a concern, and therefore ETV could have a role to play in promoting credible and EU manufactured technologies.

In the air/water pollution monitoring sector, the technology needs have been highlighted as generally site specific, although a large number of solutions and SMEs exist in the market. ETV is therefore expected to have an impact on the sector by verifying the credibility of technologies to make product choice easier for users. Without the presence of many standards, the role of ETV is deemed significant.

6. Air pollution monitoring and abatement - the market is a highly mature, low growth sector, with high sunk costs and well established supply chains, creating strong ties between technology users and developers. There is also believed to be a very small number of independent SMEs who are new market entrants. Whilst there are innovative technologies being brought to market, particularly to meet emerging regulatory needs to abate new pollutant types (e.g. nano particles and novel pollutants such as carbon black), much of the innovation and routes to market will be dominated by incumbent multinationals. A number of well established, highly visible and de facto mandatory certification schemes also operate in some of the largest markets (e.g. Germany’s UBA, UK’s MCERTS). The potential need for ETV and the assistance it would provide to new market entrants was therefore expected to be minimal.

At a market level, the customer base (dominated by heavy industries with historically high air emissions) is moving out of the EU to lower cost economies. Consequently, the longer term prospects for the sector were also expected to be poor in Europe, with some potential in non-EU markets.

7. Energy technologies - refers to a wide range of sectors where ETV could have a benefit including:

• Wind: is largely a tried and tested technology, increasingly dominated by large developers in Europe to generate economies of scale and therefore lower production costs. At face value, the potential for ETV may therefore not exist. However, in discrete product area, such as in the development of generators and blades for wind turbines, ETV may help generate market confidence and acceptance of the next generation of technology.

• Photovoltaics: is a highly innovative sector, with many new innovations on the market, in many cases supplied by SMEs. The market analysis suggests that as each generation enters the market, going beyond current standards, verification of performance is demanded by users. ETV is therefore expected to be significant in this market. However, much of the intellectual property in the latest generations of PV cells are owned by non-EU countries such as Japan, leading to questions about levels of uptake from EU innovators.

• Biomass: biomass technologies are not expected to benefit from ETV as these technologies require large and reliable reference plants to take account of operational


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conditions, before potential customers are likely to purchase such systems. ETV does not provide the type of information required and therefore is not expected to be beneficial.

Table 3 summarises the conditions under which an ETV is likely to be most appropriate. These conditions will clearly vary by sector and more than one condition may apply in any one sector.

Table 3: Conditions under which an ETV is likely to be most beneficial

Standards /certification

No product standards currently exist

Certification/standards are unharmonised across EU

Products

Products are discrete and innovation is fast paced

Products are more expensive than incumbents, but can offer superior environmental performance

Testing

Technology is typically laboratory tested

Testing environmental performance is complex

Markets

Markets are populated by relatively homogeneous technologies

Developers are SMEs, often with limited reputation, track record and facing strong incumbent competition

End users

Risk averse customers prefer to buy market proven techniques

The relationship between buyer and seller is underdeveloped especially in nascent markets

Selection of business cases

Figure 2 provides the results of the screening and ranking exercise. The highest scoring technologies and products are often from emerging sectors with few precedents in the market, have a lack of standards/certifications and end user confidence. The applications may well also exceed existing standards and offer both strong economic and environmental benefits. There is therefore a need for ETV to inform potential end users and promote these technologies.

Figure 2: Distribution of Technology Groups by supply & demand characteristics based on market analysis screening (numbers in axes refer to total scores for each technology)


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Water Filtration & Disinfection

Water Monitoring

Desalination

Soil & Groundwater Monitoring

Soil &Groundwater Remediation

Cleaner Production Processes Energy Efficiency in Industry & Buildings

Low Carbon Building Technologies

Recycling of Industrial By-products into Secondary Materials

Separation & Sorting of Solid Resources

Recycling of Batteries

Mercury Reduction

Biobased Products

Environmental Technologies in Agriculture

Air emissions MonitoringAir Pollution Abatement

Wind, Solar and MarineBiomass Power

0

1

2

3

4

5

6

7

8

9

10

0 5 10 15 20 25

Supply side characteristics

Demand side characteristics

Tier 1

Tier 2

Tier 3

Tier 4

Tier 5

Discrete products

System integration

Further analysis of the barriers and drivers within each promising technology subgroup led to the final choice of business cases, which included: insulation; biobased products; site characterisation technologies; in-line water monitoring; micro CHP; solar thermal hybrid technologies; and anaerobic digestion.

ES.5 The business cases reveal that developers generally have a medium to very high demand for ETV and there is evidence of an increased willingness to pay for such a service by SMEs

The costs of supplying an ETV service and the willingness of developers to pay an ETV fee are different for each technology

Each business case involved collecting from test centres the costs of testing, certification and verification activities together with estimates from developers of their expected administrative costs in applying for an ETV and associated willingness to pay for a verification. Key findings include:

• Costs for testing were highest amongst technologies of a discrete nature (typically €10,000-€25,000), and where operational testing might be regarded as more complex;

• Verification and certification costs were found to be highest in more integrated technologies (€10,000-€50,000), although testing costs were lower than in the other business cases;

• Average administrative costs in applying for ETV were €16,000 and they were highest for large companies;

• Average willingness to pay for ETV was around €10,000, with SMEs valuing ETV the most relative to turnover.

For firms already with a reputation and track record, willingness to pay is often the same as much smaller companies, indicating a lower demand for ETV.


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The potential value added from an ETV relates both to the technology developer obtaining the verification and has wider implications for the EU

The business cases confirmed many of the initial insights and expectations, gathered during the market analysis, of what an ETV might achieve, especially for developers. Key conclusions are that an ETV can:

• provide product visibility, legitimacy and differentiation in markets dominated by incumbents;

• could provide de-facto standards in the market where none exist, especially for innovative products;

• facilitate entry of a technology into the market, especially into the EU27;

• add credibility to SMEs developing novel technologies without a track record.

A brief assessment of the expected impacts from an ETV reveals that:

• Environment benefits are expected to be substantial in terms of improved water quality, reduced air emissions from more efficient industrial activity and improved sustainability as resource efficiency improves.

• Employment impacts driven by the increased uptake of environmental technologies and associated knock on impacts in the rest of the economy.

• Potential improvements in market competition where new innovative solutions and SMEs challenge large incumbent producers.

• Improved functioning of the internal market where ETV acts as a de facto standard for new technologies and provides initial testing protocols.

Cost-effectiveness of ETV

Differences between the willingness to pay for a verification by developers and the costs quoted for a verification by testing bodies indicates that a funding gap exists for certain developers, where they do not perceive the benefits of ETV to exceed its costs. Uncertainty regarding the expected future sales generated as a result of obtaining a verification was found to be the key reason for this result. This is primarily due to many developers having limited knowledge of the market they wished to enter (specifically SMEs) and consequently being conservative in their willingness to pay based on future sales. In other cases, such as micro-CHP, where ETV was perceived as part of a an integrated approach to placing a new product on the market as rapidly as possible, and to differentiate the product as much as possible from its rivals, the willingness to pay was higher.

Whilst ETV does not necessarily eliminate the need for product certification, it could facilitate proof of compliance with one or several (EU or national) standards, thus reducing associated costs. It could also reduce the need for marketing. These factors will enhance the cost effectiveness of using an ETV.

Potential scale of demand for ETV across the business cases

The conclusions from each business case allowed an estimate to be made of the total number of developers in that specific technology ‘family’ who would be likely to participate in a proposed ETV scheme. Table 3 provides these estimates alongside estimates of the respective market sizes of each technology ‘family’. Overall, approximately 100 applications for an ETV might be expected across the seven respective business cases.


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Table 3: There is varying demand for ETV across each business case and differing potential according to each technology ‘family’ for such a scheme to be self-financing

Insulation

Biobased

Products

Site

Characterisation

Tools

In-line Water

Monitoring

Micro CHP

Solar Hybrids

Anaerobic

Digestion

Size of EU Market €12bn €17bn €1bn €35-50m €2.5bnPotential

~€25m €1-2bn

Developers in the EU 100-200 1000 100 50-75 20-30 10 50-75

Demand for ETV Low Very low Very high Very high Medium Very high Very high

Developers likely to use ETV in next 1-2 yrs 10-20 4-20 20+ 15-30 3-5 5-10 20-25

Potential for self-financing of ETV

Maximum allowable timescale for developer <2 mths 12 mths <12 mths 6-12 mths <6 mths <6 mths 6-12 mths

Based on these results, there is a clear rationale to establish an ETV for water monitoring and site characterisation technologies, where there are likely to be the greatest chance of success. These are also technologies where the willingness to pay the ETV fee by any one firm might equal the costs of supplying the verification – and hence offering the potential for self-financing of the scheme.

An important caveat underpinning these estimates is that while many developers may chose to apply for an ETV, due to a limited understanding of the ETV process they may not be suitable for it. Experiences from other ETV programmes (e.g. DANETV) indicate that large numbers of initial applicants drop out of the process. A key reason is that their product is not market ready.

It is clearly important, before committing significant resources to technology areas, to conduct further detailed business cases across promising technology ‘families’ to better establish the overall demand for ETV.

ES.6 Several factors need addressing if an EU ETV scheme is to become a success

Our consultations show that interest by developers in ETV is by no means straightforward: it often requires the developer to review both its channels to market and prevailing market requirements before any sort of view can be taken on whether such a scheme will be of benefit and value. To overcome some of these issues, the following factors need to be addressed:

Communicating the operational requirements of the ETV programme is critical to ensuring a smooth and economically efficient operation

• The procedure to obtain the verification should be as simple and transparent as possible.


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• Verification bodies will need to communicate all the requisite tests together with names of testing bodies, relevant standards and regulations for each of the technologies they are covering.

• Developers need to be appraised of the point in their development cycle at which an ETV verification will be most suited. As experienced by the DAN ETV programme, two to three times the number of developers who have been verified have been turned down because they did not have market ready technologies and in many cases required further product development.

• A robust set of ‘questions and answers’ will need to be drawn up to answer developer issues (e.g. under what circumstances might it be necessary to undertake a second ETV for any given product ‘family’ within a developer’s portfolio?).

Marketing the ETV programme and developing a strong brand will be critical to achieving the widespread recognition and eventual uptake by developers and wider stakeholders

Technology developers, certification bodies and end users sometimes struggle to identify the need for an ETV scheme. Despite an appreciation of the general logic underpinning ETV (i.e. to improve market entry for market-ready innovative environmental technologies), the added value of an ETV is often unclear in comparison to existing routes to the market. Clear communication and marketing of the ETV process is therefore critical in order to show:

• the differences to companies between verification (an opportunity to go beyond best practice and to demonstrate innovative aspects of a product) and certification (compliance with a standard), as well as other existing labelling schemes in each respective technology area;

• what benefits SMEs can expected from applying; and,

• at what point in the development cycle the ETV will be pertinent to developers.

Other issues that require further consideration include:

• Strong marketing of the ETV “brand” and what it stands for is important in order to increase its visibility.

• A dedicated EU ETV website needs to be established, distinct from the European Commission’s website to improve its profile and credibility.

• Some stakeholders felt that part of the verification fee will need to be allocated to marketing the Scheme.

Complementarity between ETV and existing certifications is important to determine and could yield benefits which could improve the delivery efficiency of an ETV scheme

In sectors where there are existing testing and certification schemes, either at the member state or EU level, there is some uncertainty about whether an ETV could provide some sort of fast-track mechanism to achieving such certifications or perhaps complementing them. For some technology families, the links between these types of mechanism and ETV would have to be made clear and explicit, and would have to be institutionalised.

Furthermore, several stakeholders noted the specific efforts required to involve and benefit from the experiences of existing EU institutions that deliver testing and certifications. For example, a


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company may have specific performance claims that, unwittingly, overlap with an existing certification scheme. The verification body will therefore have to ensure that verifications are compatible with other certifications to avoid the need for duplication.

Institutional buy in from environmental regulators across the EU is important

Some subsectors, notably contaminated land and to a lesser extent in water, examined in this study illustrate the strong role played by regulators in determining the market acceptability of technologies. The extent to which an ETV provides sufficient data and assurance for regulators to be satisfied will have to be confirmed over time.

The number and location of verification bodies required to establish verification at the European level will vary by technology ‘family’

Broad conclusions on the number of verification bodies that might be necessary are that:

• having concentrated expertise within one verification body, rather than achieving broad geographical coverage across the EU is critical (for example, in micro CHP, where the current park might be restricted to 10-15 developers);

• where the market is sufficiently large, a minimum of three to five verification bodies was felt to be adequate (e.g. water treatment and monitoring technologies) – for example, catering to Northern/Eastern Europe, Central Europe and Southern Europe;

• there may be scope for increasing the number of verification bodies to two in some regions, but only where it can be sufficiently proved that there are enough verifications to be carried out (e.g. contaminated land where ETV demand appears concentrated in Northern Europe).

One caveat is that SMEs tend to find it easier to collaborate with national bodies and language issues might prove problematic in some cases.

Affordability of an ETV scheme will be important for developers

ETV will need to be cost-competitive in comparison with existing performance certification, testing and labelling mechanisms. Various suggestions were received as to how to make ETV more affordable to SMEs:

• The verification fee could be proportional to a company’s turnover. Where there is a funding shortfall, this would ensure that micro and small businesses are able to benefit despite not being able to afford a large financial outlay.

• The fee for ETV might be deferred until a company is selling its product. ETV costs could then be recovered, so that it was not front end loaded for the developer.

• Since end users often spend a large amount of product testing in-house, end users could contribute towards ETV funding alongside developers and the programme itself. Indeed, in the contaminated land sector, for the ETV to succeed it might need to be sponsored by the industry that the technologies are looking to serve.

Clearly the first two options may not be feasible for verification bodies, but this approach could be possibly followed by other funding schemes (for example, in some member states through provision of loans for innovation work under similar conditions).


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Funding support mechanisms for users of an ETV scheme are likely to be available at the EU and member state level

At EU level, ETV clearly dovetails with core EU policy objectives, particularly for technologies and products focused on pollution reduction and improved resource efficiency (energy/carbon). The extent to which EU funding programmes can offer support is one obvious way of overcoming apparent funding gaps for any particular technology group and sub-group. The mechanisms most widely mentioned by developers and stakeholders include:

• Framework Programme for R&D (e.g. for micro CHP, biobased products, etc.);

• EU Strategic Energy Technology Plan (SET-Plan);

• Competitiveness and Innovation Framework Programme (CIP);

• LIFE+ for new technology demonstrations.

Many of these programmes involve significant product testing and hence developers felt that, by dovetailing with the ultimate requirements of an ETV verification, both large cost and time savings could be achieved by avoiding potential duplication. The ability to factor in verification fees might be possible at the project application stage, as long as these were approved by the relevant Commission project officers and National Contact Points who oversee the application processes.

At member state level, several potential mechanisms support R&D and, in some cases, the testing and sampling that has helped to demonstrate performance. These included:

• National innovation agencies and programmes (e.g. the Finnish Innovation Agency TEKES, Swedish Innovation Agency VINOVA, and Technology Strategy Board in the UK, etc.);

• Industry / sector specific initiatives (e.g. national competitiveness cluster programmes in France which support a number of technologies; the German BMELV RTD Funding Programme for the use of biomass including biorefineries).

A key challenge is the point at which State Aid restrictions apply to these national funding mechanisms. Some developers reported that verification costs were outside the allowable expenditure of some R&D programmes (e.g. at VINOVA).

Evaluation of ETV verifications must be core to the strategy for developing the ETV programme

Evaluation can be used to increase the credibility of the whole ETV process and hence improve the potential uptake by SMEs. To this end, it will be critical to put in place key performance indicators (KPIs), covering economic and environmental performance, to determine the value created from each verification. Particular areas to evaluate would include the degree to which market access has been facilitated by the verification; the value of sales; employment impacts arising from increased sales; environmental impacts and carbon savings arising from increased deployment of the technologies and products.


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17 EPEC

1 INTRODUCTION 1.1 Purpose of the Draft Final Report

This is the Final report of a study to undertake a ‘Detailed assessment of the market potential, and demand for, an EU ETV scheme’. The study was commissioned by the Environment Directorate General (DG ENV) under the terms of the Framework Contract between the EPEC consortium and DG BUDGET (Lot 1, reference: ABAC 101931 – EU ETV Scheme). The work was undertaken by an experienced team of staff drawn from two members of the EPEC Consortium, GHK Consulting Ltd and Technopolis.

Environmental Technology Verification (ETV) is a voluntary scheme developed by the European Commission under the Environmental Technologies Action Plan2 (ETAP) to generate independent and credible information on new environmental technologies, by verifying that environmental performance claims put forward by technology developers and vendors are complete, fair and based on reliable test results. Building on the success of similar schemes established in the United States and Canada, the aim of this study is to feed into the ex-ante evaluation of the EU ETV scheme with the intention to move the ETV scheme forward by detailing the market case and need for ETV by technology area, in particular by providing:

1. sound estimates of the potential market for an ETV scheme including the likely uptake by technology developers of ETV;

2. 7 robust business cases for ETV in promising technological applications;

3. validated estimates of the costs of technological verification under ETV;

4. insights into the willingness of potential applicants to contribute financially towards ETV;

5. an assessment of the cost-effectiveness of ETV, and

6. an identification of the technology areas which are expected to generate the greatest added value.

The purpose of this report is to consolidate the results and conclusions of earlier phases of the study (1-5) into a clear and unambiguous format and assess the overall intervention logic and expected added value of an EU ETV scheme, as stipulated in the detailed work plan submitted in the inception report.

To summarise the five study Phases:

Phase 1: the Inception phase aimed to refine our methodological approach and included a review of the suite of technologies classified under each of the original 21 technology groups together with an initial screening of the seven technology areas which could potentially benefit from an ETV scheme.

Phase 2: the Data collection phase involved gathering the most up to date market intelligence from published sources on each technology area previously identified in Phase 1. In parallel with the literature review an extensive consultation exercise with relevant stakeholders was undertaken. Crucially, stakeholder consultation is a leading

2 EC (2004): Communication from the Commission to the council and the European Parliament, ‘Stimulating Technologies for Sustainable Development: An Environmental Technologies Action Plan for the European Union’, COM(2004)38 final, Brussels 28.01.2004, available at: http://ec.europa.eu/environment/etap/files/com_2004_etap_en.pdf

http://ec.europa.eu/environment/etap/files/com_2004_etap_en.pdf

http://ec.europa.eu/environment/etap/files/com_2004_etap_en.pdf


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source of primary market data which will be used to supplement statistical and literature review outputs3.

The objective of this consultation was to:

• better understand the commercialisation and market adoption challenges for each technology;

• gather insights into current markets and the geographical nature of sales; and

• determine the expectant costs and benefits of using the ETV scheme.

Phase 3: a detailed market analysis based on the outcomes of Phase 2 was conducted, the overall objective of which was the estimation of the potential demand for ETV within each of the seven main technology areas.

Phase 4: identifies the most promising technology groups to take forward for more detailed analysis which will lead to the elaboration of seven business cases. Each case will quantify the costs and benefits of potential ETV adoption by technology developers. The business cases shall be assumed to be representative of the wider environmental technology area from which they are drawn and thus will be used to identify the conditions under which the EU ETV should be expected to deliver the greatest added value to technology developers and procurers. This phase will also consider the support instruments available to SMEs to fund participation in the ETV scheme as well as the costs incurred by testing and verification bodies in the setting up and operation of the scheme in Europe. An assessment of the number and location of verification bodies required around European will also be undertaken.

Phase 5: Overall analysis, validation and reporting will complete this study and is presented in this report.

Our approach is illustrated in Figure 1-1 following the bottom-up approach which we are adhering to throughout the study. The advantage of this approach is that it captures the nuances of each technology area by first assessing a large number of sub-sectors of the environmental technologies market, before selecting the seven business cases for more detailed analysis and aggregating any figures to sector level.

3 For example, the Dutch environmental technology and services trade body VLM has published an October 2010 analysis of their sector (in Dutch). It contains interesting insights into the levels of innovation across their membership, together with linkages in innovation between member companies, and innovation related export strengths.


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Figure 1-1: Methodological approach to the ETV market assessment

1.2 Structure of the Interim Report

The remainder of this Interim Report is structured as follows:

Section 2 provides an introduction to ETV;

Section 3 presents the results of Phase 3 on the market analysis of the seven technology areas;

Section 4 summaries the results of the consultation exercise;

Section 5 identifies and provides a summary of the business case findings, and

Section 6 presents the conclusions of the study.

Analysis of Market & Structural Characteristics across 7 Technology Areas(size and growth potential of the domestic and export market for the technology, variety of competing/alternative technological options, rate of innovation, horizontal and vertical industry organisation, technology readiness,…)

Cost of ETV, by (selected) technology areas

(cost of development and marketing ofcertif ication, cost of testing…)

Need for ETV, by (selected) technology areas(importance of information

on technology performance, expected benef its for vendors…)

Assessment of the Market Potential of the EU ETV scheme(Potential uptake, willingness to pay, need for public financial support, …)

Refined business case, economic simulation using supply and demand information on ETV

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2 AN INTRODUCTION TO ETV 2.1 Background

Urgent environmental challenges such climate change, the unsustainable use of resources, and the loss of biodiversity requires government, industry and citizens to take collective action within Europe and in the rest of the world. Environmental technologies can contribute by increasing resource efficiency, finding cleaner alternatives to current technology or introducing measures to mitigate or prevent the harmful effects of human activity on the environment. The benefits of environmental and eco-innovations are further enhanced by the policy win-win dimension of these technologies. For example, development, production and uptake of technology in Europe can positively contribute to competitiveness, economic growth and employment.

In light of this substantial need for environmental technologies, Environmental Technology Verification (ETV) is intended to facilitate greater environmental technology innovation and uptake by end users by providing independently validated and credible performance data.

Acknowledging the need to support eco-innovation and environmental technologies more generally, the following section provides a detailed introduction to the ETV scheme, how it complements other EU and Member State measures, and contributes to the wider strategic objectives of the EU. A problem definition summarising the barriers to technology development and uptake is also provided in order to clarify the rationale for ETV.

2.2 Introduction to Environmental Technology Verification (ETV)

At its core, the ETV provides technology developers with the opportunity to have a third party validation of the performance of innovative eco-technologies. The objective of ETV is therefore to:

• increase the credibility of such technologies on the market;

• enable technology users and purchasers to compare technologies and identify eco-innovations suited to their needs; and

• ensure wider recognition of verification results, both within the internal market and internationally.

This service for businesses would complement EU environmental legislation on products and processes, as well as voluntary instruments such as labelling or product declarations, in each case increasing the incentives of developers to innovate, the confidence of users to purchase the technology and the potential of developers and distributors to export in the wider EU and further afield. In addition, ETV could also facilitate the greening of public and private procurement in many technology areas.

The ETV is a partial solution to market failures which may exist in environmental technology markets. For example, the dominance of established market leaders or technologies may act as a barrier to the uptake of new technology solutions, even in cases where the new technology offers superior performance advantages over the incumbent solution. By increasing awareness amongst users and providing credible information on the performance of new technology in such circumstances can improve the probability of the new entrant being accepted and that the technology is adopted by users. The information, awareness and potential “rubber stamping” offered by ETV


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can therefore have a significant role to play in alleviating such market failures. The range of problems faced by various actors in bringing eco-innovations to market and the potential of ETV is further discussed in the following section.

It is envisaged that the ETV verification process would involve the following steps:

1. a review of the performance claim(s) made by the applicant through an accredited Verification Body to ensure that it is comprehensive enough with regards environmental content, and useful for users to enable meaningful verification.

2. a review by the Verification Body of existing test data provided by the applicant on the performance of the technology. This would evaluate the quality of the data, its completeness with regards to the claim, and whether additional tests are required to support the claim.

3. where additional tests are required to provide sufficient data in terms of quality and completeness, the applicant would then select a laboratory to perform these tests, either by an accredited testing laboratory or one with equivalent standing.

4. when enough test data of sufficient quality is gathered, a report and Statement of Verification drafted by the Verification would then be registered. This would then be available for use in business-to-business relations to attract investment or encourage the purchase of the technology.

2.3 Complementarity and coherence of ETV

The development of the ETV scheme fits within a broad suite of interventions in support of eco-innovation and environmental technologies at EU level (see Table 2-1). These include measures aimed at supporting Research, Testing and Development (RTD) and commercialisation of technologies, in addition to measures aimed at supporting demand for and adoption of new technologies.

Table 2-1: EU Initiatives to support Eco-innovation/Environnemental Technologies

Measure Description Impact

Ecodesign Directive Establishes design requirements for energy-using products from a

lifecycle perspective, thus creating an internal market for more efficient

technologies

Promotes development and encourages take-up of eco-

technologies

Energy Labelling Directive Obliges household appliance (e.g. washing machines, light bulbs,

refrigerators etc) manufacturers to label their products and display

power consumption so as to facilitate comparisons of efficiency

with alternative makes/ models

Promotion of energy efficient products over competitors; gradual shift in consumer preferences in favour of

efficient appliances; eventual withdrawal/ decommissioning

of relatively inefficient alternatives

Ecolabel Regulation Labelling of the total environmental performance of products over its

Increasing awareness and encouraging the uptake of


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lifecycle more efficient solutions

Green Public Procurement Voluntary instrument focusing on reduced environmental impact of

public procurement of goods services and works (throughout life

cycles)

Promotes sustainable consumption and production; incentivises development of

‘green’ products and technologies in a range of sectors and contributes to

attainment of resource efficiency goals

IPPC Directive The prime objective is regulatory – industry sector reference

documents (BREFs) comprise Best Available Techniques (BAT)

guidance which allows permitting authorities to base emission ceilings

imposed on production plants on official technical references

Encourage more uniform sectoral compliance across the

EU and offers scope for innovative technologies to be referenced in BREFs which could in time help market

adoption by raising awareness of new technologies

Emissions Trading Scheme (GHG)

Imposes a cap on overall extent to which factories, power plants and

other installations covered may emit specified greenhouse gases

(GHGs); within this cap, a limited number of allowances allocated to companies, which may buy or sell the same to meet their emissions

obligations

Reduces emissions of GHGs over time as the number of

allowances granted to companies gradually declines, raising the price of emissions

in the process; ultimately sought to be integrated with comparable systems across the world to set up a global

‘carbon market’

Eco-Management and Audit Scheme (EMAS) Regulation

Voluntary management tool for companies and other organisations

(public and private) to measure, report and pursue continuous

improvement in their environmental performance

Facilitates self-monitoring and improvement of environmental

performance by public and private sector organisations and promotes credibility and transparency in reporting of such performance indices;

promotes resource and cost savings and environmental

compliance; encourages eco-innovation and best practice sharing among organisations

Lead Market Initiative (LMI) Promotion of innovative technology solutions through EU tools such as standardisation, public procurement and regulations in six key sectors

(eHealth, Protective textiles, Sustainable construction, Recycling, Bio-based products and Renewable

energies)

Reduction in time-to-market of innovative products or

services; potential for job creation (up to 3m by 2020) and economic growth (about €3m by 2020) and improved

access to products and services with significant social

benefit potential

Eco-innovation Platform (Eco-IP)

Forum for development, testing and promotion of tools and instruments aiming at innovation; a platform for

innovative professionals

Helps innovative firms to undertake innovation more

rapidly; promotes knowledge sharing; provides a supportive

policy environment for


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innovators and better practical information services vis-a-vis sectoral innovation patterns

Eco-innovation observatory Structured portal for information on eco-innovation in the EU and other

major economic regions

Facilitates integrated information collection and

analysis of trends and practices in eco-innovation

pertaining to a range of sectors; draws out implications

for companies and service providers

Competitiveness and Innovation Framework Programme (CIP)

Focuses on provision of support to all forms of innovation (including eco-innovation), especially for

SMEs

Improved access to finance and business support services,

in particular for SMEs; increased use of renewable

energy and increased energy efficiency

7th Framework Programme for Research and Technological Development (FP7)

Instrument that provides funding (by way of grants) to research

enterprises/ other actors across the EU to facilitate research, innovation

and technological progress

Promotes scientific research and innovation; in longer run, helps build a solid foundation for scientific and technological development of EU industry and, ultimately, increased

international competitiveness in line with EU policy goals

An important synergy between ETV and IPPC should be highlighted at this stage. By verifying the performance of new and innovative technologies which are not covered by existing BREF documents, the completion of an ETV can allow the test data to be fed directly to BREF working groups, in effect making it easier to identify potential future BAT technologies in the sector(s) concerned and fast tracking the recognition of the technology amongst user groups, of significant benefit to the developer. In addition, the many regulations mentioned in Table 2-1 do not specify the technology to be used in a given industry installation. Confusion can therefore exist for many users in choosing between alternative technologies. In such cases, ETV can help reduce the confusion for users.

The purpose of ETV in this context is not to substitute existing regulatory or voluntary systems such as type-approval or labels which signify or promote compliance with an applicable standard, regulation or legislative framework; but rather to increase awareness and promote those technologies which go beyond existing standards and regulations. For example, eco-design requirements establish minimum standards to improve the environmental performance of all products. In this example, ETV supports this process by verifying the performance of products which go beyond such standards, thus increasing the uptake of new and innovative technologies, generating awareness amongst potential users. Although ETV does not certify compliance with any European standard, it does verify the authenticity of performance claims made in a Member State. Based on the principle of mutual recognition, the ETV should therefore help promote the internal market in these technologies and potentially act as de facto


24 EPEC

European standard for new innovative technologies. For these reasons, ETV clearly has strong European and third country dimension as a facilitator of trade.

Nevertheless, a number of similar schemes have evolved in Member States and developed outside the EU to promote specific environmental technologies, each of which are summarised in Table 2-2 below.

Table 2-2: Summary of verification schemes (intra and extra-EU)

Scheme Technology(s) Details

Examples of Extra-EU Schemes

USA: Environmental Technology Verification (ETV) Programme4

All types of environmental technologies – air, water

and land linkages

Initiated in 1995

Operation of environmental centres for ETV across a wide range of technology groups

Sharing of costs between public and private actors for protocol and verification

completion; collaborative programme emphasising stakeholder expertise

Canada: ETV Programme5

All types of environmental technologies – 55

technologies verified to date

Initiated in 1997

Implemented by ETV Canada – an independent verification organisation which employs a three-pronged strategy focusing

on technology verification, performance benchmarking and international verification

of protocols and test methods

Danish Centre for Verification of Climate and Environmental Technologies (DANETV)6

Technologies across water treatment and water

monitoring, alternative energy production, air emissions, and energy

efficiency: 20-30 verifications to date

Co-operation between five technological service institutes: DHI, Danish

Technological Institute, FORCE Technology, DELTA and AgroTech

Established with financial support from Danish Ministry of Science, Technology &

Innovation

Average vendor payment €7,200 (maximum paid by vendors due to funding offered by the Nordic Council of Ministers and other

sources)

Several joint verifications being undertaken with US and Canadian ETV schemes with the aim of targeting markets such as China

Nordic countries (Denmark, Finland, Iceland, Norway,

Innovative technologies in the water technology

domain

Coordinated methods for ETV developed in context of ten pilot projects involving water

technologies at three test centres8

4 US Environmental Protection Agency (EPA): ‘ETV Fact Sheet’, available at http://www.epa.gov/nrmrl/std/etv/pubs/600f08012.pdf 5 ETV Canada website: http://www.etvcanada.ca/etvcanada.asp 6 www.etv-denmark.com

http://www.epa.gov/nrmrl/std/etv/pubs/600f08012.pdf

http://www.etvcanada.ca/etvcanada.asp

http://www.nordicinnovation.net/prosjekt.cfm?Id=1-4415-201


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Sweden): Nordic Water Technology Innovation Centres (NOWATECH) Project7

Supports growth of Nordic water technology enterprises in home as well as foreign

markets

Japan: Pilot Project of ETV9

2006: wastewater treatment and water

purification technologies supported by pilot scheme

Seeks to promote dissemination of innovative technologies and practices,

enhancements in environmental conservation and local and regional

economic development

South Korea: New Environmental Technology Verification (ETV) System10

Initiated in 1997 – scope covers a wide range of technologies, including wastewater treatment,

solid waste treatment, air pollution monitoring and ecosystem restoration

Facilitates ETV and aims at reducing time-to-market for innovative technologies, with a

focus on helping SMEs

Examples of Intra-EU Schemes

UK: MCERTS Monitoring Certification scheme11

Industrial pollution monitoring and reduction

(air, water, soil) and monitoring systems

Initiated in 1998; administered by the UK Environment Agency (EA) – provides a de

facto mandatory framework for UK businesses to comply with emissions

regulation and quality requirements of EA

France: Association pour la Certification des Instruments de Measure pour l’Environnement (ACIME)12

Industrial pollution monitoring and reduction

(air, water, soil, noise)

Launched in 2003; seeks to provide a framework for the certification of measurement instruments on a

voluntary basis in France (MCERTS and UBA type-approval) are de-facto

mandatory

Germany: Federal Environment Agency (UBA) approval system

Continuous Emission Monitors (CEMs) and

monitors used by chimney cleaners to monitor

Initiated in 1975 – monitors product performance as well as compliance of data

provision with regulatory norms – laboratories authorised to undertake

7 VTT (2009): ‘NOWATECH market report – Nordic water technology approach for ETV system’, available at http://www.etvnord.org/?f=Market_report.pdf 8 Nordisk InnovationsCentre website: http://www.nordicinnovation.net/prosjekt.cfm?Id=1-4415-201 9 ETV Japan website: http://www.env.go.jp/policy/etv/en/index.html 10 South Korea New ETV website: http://www.koetv.or.kr/engpage.do?mode=engguid 11 UK Environment Agency (EA) website: http://www.environment-agency.gov.uk/business/regulation/31829.aspx 12 Information on ACIME available at http://www.ineris.fr/en/prestations/certification-ineris/m%C3%A9trologie-de-l%E2%80%99environnement

http://www.etvnord.org/?f=Market_report.pdf

http://www.env.go.jp/policy/etv/en/index.html

http://www.koetv.or.kr/engpage.do?mode=engguid

http://www.environment-agency.gov.uk/business/regulation/31829.aspx

http://www.ineris.fr/en/prestations/certification-ineris/m%C3%A9trologie-de-l%E2%80%99environnement

http://www.ineris.fr/en/prestations/certification-ineris/m%C3%A9trologie-de-l%E2%80%99environnement


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domestic heating systems13

performance testing must be accredited by the National Accreditation Institute

Belgium: PRODEM unit for technology testing (under VITO, the Flemish institute for technological research)

Environmental technologies in the domains of water

effluents, odour nuisance, waste, energy and soil

pollution14

PRODEM focuses on supporting SMEs in selecting innovative technologies or

processes with potential to lower environmental impact, through feasibility

assessments based on demonstration tests and pilot programmes

2.4 EU Strategic Objectives

The policy win-wins potentially achievable through ETV are a leading benefit of the scheme and as such are further explored in this section, focussing on the Europe 2020 Strategy.

The Europe 2020 Strategy includes the following targets15 of particular relevance to ETV:

• 75% of the population aged 20-64 should be employed;

• 3% of the EU’s GDP should be invested in R&D; and

• The “20/20/20” climate/energy targets16 should be met.

The increasing development and uptake of environmental technologies facilitated by ETV should not only generate employment and investment in environmental technologies, but also produce energy and material savings in many cases, thus achieving reductions in energy and fuel consumption, in addition to associated cuts in greenhouse gas (GHG) emissions. The EU has introduced a series of implementation initiatives to catalyse progress towards the Europe 2020 targets. Three leading themes are:

• “Innovation Union” to improve framework conditions and access to finance for research and innovation so as to ensure that innovative ideas can be turned into products and services that create growth and jobs;

• “Resource efficient Europe” to help decouple economic growth from the use or resources, support the shift towards a low carbon economy, increase the use

13 EU JRC (2007): ‘Environmental Technologies Verification Systems’, JRC Scientific and Technical Reports, available at : http://ftp.jrc.es/EURdoc/eur22933en.pdf 14 See footnote 9 15 COM(2010)2020: Europe 2020 – A strategy for smart, sustainable and inclusive growth, Communication from the European Commission, Brussels, 3/3/2010 16 EC (2008): Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: 2020 by 2020 Europe’s Climate Change Opportunity – COM(2008) 30 final, Brussels 23/01/08, available at:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0030:FIN:EN:PDF.

http://ftp.jrc.es/EURdoc/eur22933en.pdf

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0030:FIN:EN:PDF


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of renewable energy sources, modernise our transport sector and promote energy efficiency, and

• “An industrial policy for the global era” to improve the business environment, notably for SMEs, and to support the development of a strong and sustainable industrial base able to compete globally.

In each case, a role for ETV in promoting SMEs, encouraging innovation and increasing resource efficiency is clearly apparent.

2.5 Problem Definition

Eco-innovation begins with an initial new idea or innovation of existing technology. The innovator is defined as the entity which owns the intellectual and technical property rights to this technology. The innovator could be an individual inventor, an academic research organisation or a private company in this context. The first barrier faced by the innovator in taking this idea or development forward is to attract funding to enable the further development of this eco-innovation, including testing and the eventual production of a prototype product.

With the assistance of financial support provided by an investor, sourced either internally (from the same entity as the innovator) or externally (from entrepreneurs or public/private investors), the ‘developer’ undertakes the task of bringing the innovation to market. Investors are essentially attracted to this opportunity by the potential returns to be made from their investment, based on factors such as the expected market size for the innovation and its longer term profitability. The risk that the investor does not make their expected return, due to disappointing sales or the failure of the technology to make it into the market is also factored into the decision-making process when assessing the attractiveness of the investment.

In many cases, innovators may not get sufficient funding to develop their environmental technologies for very good reasons. In other cases, the failure to acquire financing can be due to incorrect information on the expected market potential, performance and future economic conditions associated with the technology and market. This can result in investors incorrectly evaluating the risks involved. Consequently, a market failure occurs as some potentially beneficial environmental technologies do not make it to market due to incorrect expectations. This is the first identified problem, supported by the 2007 Observatory survey17 findings of the Commission, in which the problem of accessing finance was identified as the leading barrier to innovation for SMEs.

The testing and development of the eco-innovations that remain is then conducted by the technology developers in an often continual iterative process (typically involving so-called alpha and beta prototype testing with end user companies) until a final technology emerges, ready for market. In some case, developers find it difficult to establish trials with end users, thus preventing the further development or these technologies. During this stage, some innovations may be found to be technically or economically infeasible due to technical test results, changing market conditions, or a lack of further funds needed to continue development and testing. Developers may therefore cease the development of these technologies as a rational response to new

17 European Commission 2007 Observatory survey, available at: http://ec.europa.eu/enterprise/policies/sme/fact-figures-analysis/sme

http://ec.europa.eu/enterprise/policies/sme/fact-figures-analysis/sme

http://ec.europa.eu/enterprise/policies/sme/fact-figures-analysis/sme


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information. However uncertainty and a lack of funding can still be a significant barrier to bring environmental technologies to market.

In placing the environmental technology on the market, a number of requirements may be required by the market or specific users before the technology is accepted or can be sold. These “barriers” include:

• Validation: customers and users of the technology, particularly for integrated solutions, often require that the technology is tested for performance, reliability and durability within a system of other technologies to ensure compatibility, efficiency and cost-effectiveness. Pilot and demonstration projects are often common place in such circumstances before the customer commits to a purchase. Giving potential customers the confidence in the technology to undertake validation is therefore important.

• Verification: where there is no opportunity for the customer to test the performance of the technology before making a purchase decision, they may have to rely on test data and the claims provided by the developer to make purchasing decisions. In such cases, the customer may require verification that the test results are credible, that the technology is fit for purpose and that it “does what it says on the tin”. Verification may also be used to complement the Validation stage (above) by ensuring that measurements taken from a demonstrated technology are repeatable in other contexts. This could potentially avoid the need to repeat the demonstration for different customers. Both approaches are important for gaining market acceptance and awareness of new technology, but equally can assist market entry as distributors become more confident in the technology.

• Certification: often required by the market to ensure that the technology complies with any health, safety, environmental or other such standards and legislation necessary for the environmental technology to be accepted by users or is permitted to be placed on the EU or third country market. In the absence of certification or standards in a particular sector, credible information on new technology can become ever more important for market entry and acceptance.

While the above procedures may only need to be completed once per Member State or other leading market, the economic feasibility of the technology might require access to more than one market, in which case, multiple verification and certification procedures represent a significant barrier for developers and distributors. A lack of an internal market in Europe and recognition further afield for many new technologies is therefore another problem in addition to each of the “barriers” denoted above, preventing the bringing to market and uptake of environmental beneficial technologies. Figure 2-1, depicts the technology development process. An indication of the number of technologies reaching each stage is represented by the inverted triangle, showing that while many innovations begin the process, only a small proportion are expected to make it to market.


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Figure 2-1: Schematic of the technology development process

Source: EPEC

With reference to Figure 2.1, the objective of the ETV is to ensure that beneficial environmental technologies do make it to market and are adopted by users. Importantly in this process, the ETV should not pick winners and losers in the market, but instead ensure that winners are identified by developers and investors early on in the process and users recognise the benefits of the technology to promote rapid uptake compared to the counterfactual (i.e. the level of technology take-up which would occur in the absence of ETV).

2.6 Scope of ETV

Given the multiple objectives of the ETV elaborated above, any assessment of potential impacts must consider all aspects of the technology lifecycle from technology

Prototype

Investor Innovator

Development

Testing

Research

Verification Certification Validation

Final Product

Domestic Market

Customer

EU Market Non-EU Market

FINANCEIDEA


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development; to introduction and on to growth and maturity (see Figure 2-2). Viewed from this perspective, the objective of the ETV should be to not only introduce more eco-innovative technologies at each stage, but also to increase the rate of transition from development to growth and maturity. How the ETV can assist in this process at each stage will be further developed in the following sections.

Figure 2-2: Technology Lifecycle

Source: http://212.85.13.29/podcast/wp-content/uploads/plc.png

2.7 Rationale of ETV

The rationale underpinning how ETV can achieve the objectives outlined above is best illustrated in Table 2-3. This presents the problems identified above, a description of how ETV might be expected to alleviate each problem and the stakeholders primarily affected. Critically, the identification of stakeholders provides an indication of where in the technology lifecycle the benefits of ETV are expected to be accrued.

http://212.85.13.29/podcast/wp-content/uploads/plc.png


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Table 2-3: Contribution of ETV to solving the problems

Problem How problem is addressed by ETV Stakeholders Affected

Absence of innovation incentives

By increasing the number of environmental technologies introduced and adopted, ETV could indirectly incentivise more innovators to participate in the environmental field

Innovators

Risk assessed to be too high for investor

Provided ETV increases the number of environmental technologies entering the market, the overall success rate of technologies, ETV should increase awareness of these technologies and increase the attractiveness of investing

(by enabling investors to correctly assess the technical risk, thus eliminating failing technologies earlier and accelerating

the development or acceptance of those that perform as indicated)

Innovators

Technology Developers

Investors

Lack of sufficient funds

for testing & development

Increased awareness of environmental technologies and the attractiveness of investing (by enabling investors to

correctly assess the technical risk, thus eliminating failing technologies earlier and accelerating the development or acceptance of those that perform as indicated) is likely to

increase initial investments for the development of new eco-innovations.

Innovators


Investors

Absence of technology

standards and certification,

leading to multiple

certification (EU + non-EU)

In the absence of standards, ETV has the potential to become a de-facto recognised standard for certifying the

performance and credibility of new innovative eco-technologies within the EU and in third country markets

Where standards do exist, ETV could facilitate the functioning of the EU market and become a recognisable

marketing benefit in EU and non-EU markets


Distributors

Validation procedures

For ‘supply only’ technologies and those available at point of sale (i.e. not intended to be integrated), ETV could

replace the need for validation, or where not required it could increase credibility and confidence amongst end

users and distributors

For integrated technologies of a specialist nature (i.e. customer specific), ETV may not prove beneficial as testing

bodies might find it difficult to replicate user conditions


Users

Distributors

Technology Verification

Leading benefit of ETV as performance can be verified as credible encouraging the roll-out and uptake of the

technology. This is likely to be particularly useful where the technology and/or producer is unknown/untested in a given market and therefore has no (or a very limited) track record


Users

Distributors

Lack of awareness and

confidence amongst users

ETV should credibly verify the technology’s performance and fitness for use (including highlighting potential sustainability issues), enabling the user to be more

confident in purchasing the technology and distributors more confident in supplying the technology. Take-up rates


Users

Distributors


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should consequently be enhanced

To further develop the rationale for the introduction of ETV, several factors can be observed that are likely to determine the applicability of ETV to specific technology markets and/or affect the scale of the potential benefits. Each can be discussed in turn and provides a focus for the remainder of this study, particularly when targeting groups for consultation and can be grouped into technical and economic factors.

Technical factors

Technology factors relate primarily to the physical and innovation characteristics of the eco-innovation and its timing. Each can be summarised as follows:

• Physical characteristics – to enable test centres to verify the performance of an environmental technology, it must be portable with a degree of mobility and operate independently of other systems. For example, a wind turbine or water purification technology requiring integration in a water utility company’s system would be difficult to verify in a test centre.

• Tradability – given the potential benefits of ETV as a facilitator of market access within Europe and third countries, the technology should be tradable. Custom solutions developed for specific user needs are therefore unlikely to benefit substantially from ETV.

Economic factors

Market characteristics include those factors not related to the functioning of the technology or innovation itself, but rather how it is likely to be perceived by users and rival developers. Each criterion is described as follows:

• Market size - ETV is likely to be more beneficial to developers, the larger the market, as ETV can help developers differentiate their innovations from the opposition based on credible environmental performance. The feasibility of undertaking ETV in time and cost can also be more justifiable the larger the market.

• Export market - linked to market size, the potential to export is likely to increase the potential benefits and feasibility of ETV.

• Market dominance - in markets characterised by a dominant market leader, new innovative technologies can find it difficult to be recognised by users and in many cases have a limited track record as a consequence. ETV might be particularly beneficial in such circumstances by providing credible information and increasing awareness amongst potential users.

• Innovation timescale - where a large number of innovations occur in a market, as new generations of products are developed and enter the market on a regular basis, the time taken to complete the ETV process can slow market entry or prevent first mover advantages, thus ETV may not be appropriate for all environmental technologies. In other cases, where certification, verification and validation are highly time consuming, ETV may help speed up acceptance by users by providing the credible information and reassurance they need.

The conclusions of this background analysis highlight that in order to quantify the potential demand for ETV and establish the leading business cases for its adoption, the focus of the remainder of the study should be on those technologies with a


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potential export market (intra and/or extra-EU), where verification in a test centre or verification body is feasible and where more rapid market entry is likely to be beneficial. This should preliminary look at the issues surrounding ETV focuses the remaining elements of this report, providing the theoretical and practical rationale for ETV.

2.8 Added value and benefits of ETV

Earlier discussion highlighted that environmentally technologies have the potential to generate substantial economic and much wider social and environmental added value to the EU. At this stage an introduction to these potential benefits and how they contribute to added value is presented in Table 2-4. This will serve as input into the development of businesses cases assessing the costs and benefits of ETV for different technology developers and users.

Table 2-4: Potential Added Value of ETV

Added value/benefit Potential Impact

Economic

Operating costs and conduct of business

Introducing cleaner, more efficient and effective environmental technologies assisted through ETV likely to reduce operating costs of business and potentially change production processes in many industries. Additionally, facilitation of the internal market could reduce the production costs of environmental technologies through economies of scale as uptake increases.

Indirect impacts on business

Suppliers of components and services to the environmental technology sector likely to benefit from associated increases in demand for innovative solutions. New opportunities could also emerge for professional users of technology where a new market is established

Member State public authorities

Innovations in pollution monitoring technologies facilitated by ETV likely to reduce monitoring and inspection costs for regulators

European public authorities

Potential for ETV to help accelerate the adoption of innovations into EU legislation such as the Industrial Emissions Directive through credible performance verification

Competitiveness, trade and investment flows

ETV could generate first mover advantages for some technology developers, increasing extra-EU trade, with associated impacts on EU productivity and competitiveness.

For users, lower costs brought about by eco-innovation should aid increasing industry competitiveness

Competition in the internal market

Within the EU, ETV could help facilitate the functioning of an internal market for environmental technologies and reduce costs of production. New technologies entering a market could also change the competition dynamics with potential positive and negative consequences

Innovation & research ETV expected to promote further investment in innovations and


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research in the environmental technology field.

Consumers and households

Low prices for goods and services consumed possible due to resource savings from environmental technologies

Macroeconomic Increased resource efficiency and growth in environmental technology promoted by ETV likely to increase employment and lower prices (deflationary impact)

Energy and Natural Resources

Resource efficiency, reductions in waste and cleaner production brought about by ETV endorsed technologies should reduce energy and resource intensity of economy and demand for finite resources

Distributive/Equity No major impacts expected

Sustainability Sustainability likely to increase as cleaner environment and improved resource efficiency likely to emerge. Growth also likely to be become more sustainable as less tied to resource consumption

Social

Employment & labour markets

Employment in environmental technology sectors and user industries likely to increase

Public health & safety Cleaner environment should improve well-being and general health

Environmental

Air quality Improvements tied to improvements in environmental technology monitoring, regulating and abating emissions.

Water/soil quality Improvements tied to improvements in environmental technology monitoring, regulating and abating emission to water/soil and treating both mediums

Climate Resource and energy efficiency improvements from ETV technologies to reduce CO2 emissions

Biodiversity Cleaner environment and more sustainable economy likely to promote greater biodiversity by halting habitat degradation and use or natural resources

Waste Improvements in waste separation, efficiency of production processes, recovery of materials and recycling likely to reduce waste sent to landfill and improve sustainability

When assessing the impacts of proposed EU intervention, the over arching rationale is based on the concept of ‘value added’. The Commission’s latest financial regulations refer to EU value added as the net benefit of €1 spent by the EU (i.e. each €1 invested delivers a return of €1.20) or more qualitatively the additional well-being, environmental and health improvement achieved from EU action beyond what might have been lost or incurred as a cost. Although a commonly used term, it is rarely defined. In outlining the case for EU intervention in the environmental technology field, a working definition is therefore helpful and is developed below.


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As emphasised in a 2008 report18, the fact that a policy has certain benefits does not imply that it creates value added. A policy adds value if “the benefits outweigh the costs, not only of implementing the policy, but also the costs created in other areas”. At a broad level, value added is generally reflected in increased efficiency in outcomes, or in reduced opportunity costs19 of funding (which imply reduced wastage of resources). Further, in instances of EU policy making, value added also needs to be justified in terms of the superiority (in terms of value added) of the Community-level intervention over national interventions (subsidiarity principle). As expressed in a 2004 Commission Communication, “Where a euro spent through the EU Budget will bring more return than a euro spent at national level, this is the best way to offer value for money to the taxpayer.”20

In the context of ETV, EU value added can be evaluated on the basis of the following criteria21:

• Effectiveness: through the more rapid introduction of technologies and uptake by users than would otherwise occur, improve the achievement of policy objectives;

• Efficiency: achievement of environmental policy objectives at lower cost, could also include improved resource efficiency for users adopting the technology, and

• Synergies: complementing other policy objectives, such as those relating to the environment and competitiveness.

The business cases have built upon these criteria to assess the justification and potential costs and benefits of ETV.

18 Centre for European Policy Studies (2008): “The EU value added of agricultural expenditure – from market to multifunctionality – gathering criticism and success stories of the CAP”, report prepared for the European Parliament 19 The costs incurred by society owing to the resources invested not being available for investment in other areas 20 COM(2004) 487 final: Communication from the Commission to the Council and the European Parliament – Financial Perspectives 2007-2013 21 COM(2004) 487 final: Communication from the Commission to the Council and the European Parliament – Financial Perspectives 2007-2013


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3 THE POTENTIAL NEED FOR ETV

The purpose of this chapter is to provide an analysis of those technology areas that could potentially benefit from the implementation of ETV, highlighting those factors that indicate its potential, the specific technologies affected and a quantification of its market value.

3.1 Focus of the market analysis

The ETV pre-programme clearly states that environmental technologies are understood to include all technologies (products, processes and service) whose use is less environmentally harmful than the relevant alternatives, emphasising the broad nature of this definition. In addition to this technologies that fall under the broad ‘resource efficiency’ label are also included.

The initial proposal identified 21 environmental technology groups tied to 7 leading technology areas as the scope of this study. Using this list as a starting point, the consultants reviewed these technologies in light of a number of sources of information including the US ETV scheme which has allowed a more detailed overview of the likely technologies that would be encountered under each of the technology groups. This has enabled the original technology list to be refined into 25 technology groups/applications which are shown in Table 3-1. This list has been used to underpin our market analysis as well as informing the scope of the consultation.

Table 3-1: Technology areas and examples of technology groups/applications for consideration in the EU ETV scheme

Technology areas

Examples of technology groups/ applications with illustrative technologies

Water treatment and monitoring

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

2. Treatment of drinking water and wastewater for microbial and chemical contaminants (e.g. filtration, separation techniques, biological treatment, chemical disinfection, advanced oxidation electrochemical methods, small-scale treatment systems for sparsely populated areas) *

3. Desalination of seawater or groundwater (e.g. novel technologies using aquaporins, clathrate hydrates) *

4. Soil and groundwater monitoring (e.g. test kits, probes, analysers) Soil and groundwater monitoring and remediation

5. Soil pollution remediation in situ and on site (e.g. thermal treatment, air venting, chemical oxidation)

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

Cleaner production and processes

7. Savings of material resources (resource efficiency), including savings of chemicals or carbon (e.g. substitution and low-carbon technologies)

8. Improved energy efficiency in industry (e.g. heat exchangers, heat


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Technology areas

Examples of technology groups/ applications with illustrative technologies

pumps, thermostat controls) *

9. Improved energy efficiency in buildings (e.g. wall insulation, low energy loss windows, air condition controls) *

10. Prevention and reduction of pollution and waste from industrial processes (e.g. new methods in surface coating)

Materials, waste and resources

11. Recycling of industrial by-products and waste into secondary materials, recycling of construction waste into building materials (e.g. reworking of bricks)

12. Separation or sorting techniques for solid waste (e.g. reworking of plastics, mixed waste and metals), materials recovery

13. Recycling of batteries, accumulators and chemicals (e.g. metal reworking technologies)

14. Reduction of mercury contamination from solid waste (e.g. separation, waste mercury removal and safe storage technologies)

15. Products made of biomass (health products, fiber products, bioplastics, biofuels, enzymes)

Environmental technologies in agriculture

16. Reduction of air contamination and odour (e.g. housing techniques, air treatment), efficient use of water

17. 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

18. Reduction of pesticide use and contamination (e.g. spreading equipment, precision application) , prevention of pollution from nitrates and phosphates

Air pollution monitoring and abatement

19. Air emissions monitoring (e.g. sensors, analysers and monitors, including continuous emission monitors)

20. Abatement of pollution from stationary sources (e.g. filtration, scrubbers, stabilisation of by-products, leakage prevention)

Energy technologies

21. Production of heat and power from established renewable sources of energy (hydro, geothermal, wind, biomass, solar PV/thermal, landfill gas) *

22. Production of heat and power from emerging renewables (marine power – wave/tidal, concentrating solar PV, ocean thermal energy, etc.) *

23. Reuse of energy from waste (e.g. combustion technologies covering mass burn incineration, plasma incineration, pyrolysis and gasification) *

24. Conversion of biomaterials to energy using novel bioenergy conversion technologies (e.g. 2nd generation (cellulosic ethanol) and 3rd generation (algal) biofuels)*

25. Energy efficiency technologies (e.g. micro-turbines, hydrogen and fuel cells, heat pumps, combined heat and power production, logistics)

Note: * denotes a category that has been split, merged or redefined by the consultants during Inception phase


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As agreed with the Commission, carbon capture and storage (CCS) and biofuels technology were omitted from the scope of the study. However, software was considered as a potential technology for inclusion within ETV, but only if this was apparent though consultation responses. On a general level, the use of software in environmental and energy technologies has clearly greatly increased over the last decade or so, starting with telemetry to remotely monitor water treatment works and air emissions at industrial plants. The use of the internet and cheap sensor technology is also now making it possible to explore much more sophisticated areas of monitoring and control systems in a large number of environmental technology markets (especially in the energy sector).

3.2 Approach

Our approach to the market analysis was to first produce a detailed fiche on the technology areas and groups identified. This was then used to structure our analysis of each area, considering in detail the economic and innovation characteristics of each market, before developing a commercial case for ETV in each product segment. Finally, this was quantified based on the market data collected.

Running parallel to this exercise, a consultation survey was conducted with technology developers and test bodies, to gather the views of stakeholders on the potential of ETV in each technology area. This survey was conducted independently of the market analysis in order to develop two separate evidences bases from which the findings of the study can be compared and validated.

Our preliminary results are presented in the remainder of this chapter, with each detailed technology area profile presented as Annexes in Volume 2 of this report.

3.3 Market Review findings

3.3.1 Water treatment and monitoring

This technology area was differentiated by two distinct technologies and markets:

• Integrated and tailored solutions, developed with or by water utilities (as well key industries) for site specific treatment needs (i.e. tertiary treatment technology for removal of metals, nutrients or other chemicals). The supply side is generally well established with strong vertical ties between developers and users; it also appears to be dominated by large and often global companies, with ownership of the intellectual property and experience in offering a complete systems package to users from initial technology development to implementation and maintenance.

• Discrete and commercially sold technologies, such as test kits and in-line monitoring devices, designed for multiple applications. Existing standards and certification procedures often exist, but these technologies tend to be highly innovative and thus already exceed existing provisions, requiring credible performance verification to increase market acceptance, awareness and uptake amongst end users. Many developers were found to be SMEs, and can be regarded as a ‘competitive fringe’ to the more dominant producers in this sector.

In conclusion, this second and significant proportion of the market is expected to benefit the most from ETV, as it can add the necessary credibility to performance claims where the technology already exceeds established standards to increase market acceptance and uptake.


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By flagging the potentially successful technologies supplied by innovative SME developers, an EU ETV may expose them to the market which in turn could help facilitate their takeover by more established market players. This may have implications for the competitive fringe and for the commercial adoption of future innovations.

In terms of the market impact of ETV in this sector, much of the demand for test kits and monitoring technology was found to be driven by ever more stringent regulatory requirements placed on water utilities and industry more generally. For example, the Water Framework Directive (WFD) increases water quality and compliance standards periodically in the EU, requiring new innovations to monitor water quality and treat water. For these reasons the market impact is expected to be highly significant and growing in the future as these technologies could be exported within the EU and to third countries adopting similar standards. For example, the Obama administration in the US has recently released its National Clean Water Framework22.

The economic benefits to the users and developers are two-fold in this context:

• the ability to determine the treatment efficacy of existing plants thereby potentially avoiding the need for new capital investment by utility companies, and

• the export potential in to global markets where regulatory standards are likely to rapidly catch up with the EU for developers.

The consequent environmental benefits include improvements to water quality, the resource efficiency of water treatment plants, and reductions in CO2 emissions. Better monitoring of water treatment facilities, freshwater, hazard risks and hazardous pollution incidents should also generate environmental benefits through improved management systems and rapidity of response.

3.3.2 Soil and groundwater monitoring and remediation

In contrast to other technology areas, this technology area was characterised by a high number of SMEs and a huge diversity of technologies, each designed to remediate/monitor a different suite of pollutants in a different environment. The difficulty for end users is differentiating between the performance claims made by various products. ETV is therefore expected to have a highly significant role in this market to verify credible technologies, thus encouraging uptake and market acceptance.

A limitation of these benefits however is that as each contaminated site is different, often requiring a suite of technologies to be deployed together, the ETV may not be sufficient to satisfy both end user concerns and, importantly, those of environmental regulators who ‘sign off’ the site prior to redevelopment. More real world pilot projects and reference cases using the technology may therefore be needed before potential customers have enough confidence to purchase the technology. Programmes in the UK and the Netherlands (e.g. CL:AIRE and HIP) have been established specifically to catalogue and disseminate the results of such reference projects in order to extend the performance ‘envelope’ of remediation technologies and stimulate market confidence.

The market benefits of these technologies essentially relate to the ability to characterise sites and treat pollutant loads more rapidly and effectively, thus saving on

22 http://www.pajarowatershed.org/news.php?display=1&oid=1000000489

http://www.pajarowatershed.org/news.php?display=1&oid=1000000489

http://www.pajarowatershed.org/news.php?display=1&oid=1000000489


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remediation costs and ultimately improving the environmental quality of land and groundwater at the site and its surrounding area.

3.3.3 Cleaner production and processes

This technology area included three main sectors:

• Integrated processes: customised solutions developed for a specific purpose in a plant production process. End users typically use large scale system integrators with extensive process experience in their respective sectors to design and build new processes. Strong ties are often developed between client and technology provider, especially for multinationals with global operations, based on established track records of successful plants. This restricts opportunities for innovative companies. The combination of scale and diversity of cleaner production processes, coupled with the need for integration, suggests minimal potential for ETV in these markets.

• Energy efficiency of buildings and industry: dominated by large players, supplying solutions to EU and global markets. The analysis illustrates that while standards exist in these markets, it is difficult to gain accreditation for innovative technologies that go beyond these standards - or else for innovative products or combinations of technologies where there is no standard. This would provide an important market advantage for developers using an ETV. Similarly in new technology areas this potential also exists. A significant proportion of the market is therefore expected to benefit from ETV. However, in many product areas, much of the intellectual property and ability to bring it to market rests with a small number of major international firms.

• Low carbon technologies: the existence of an ETV is likely to bring about high added value for low carbon technology developers. There are concerns by developers about the existence of multiple national verification schemes which are generally useless beyond national borders.

In terms of the market impact of ETV in these sectors, the longer term prospects are expected to be substantial as demand for energy efficiency and low carbon technologies increases in Europe and worldwide, driven by the EU 2020 strategy and G20 targets. Market potential is therefore assumed highly significant in export markets. The leading environmental benefits clearly relate to these targets in terms of reduced consumption of fossil fuels and associated GHG emissions.

3.3.4 Materials, waste and resources

This technology area focuses on five leading industry segments:

• Recycling of materials into products: involving the reprocessing and reuse of materials, conducted by a variety of SMEs and large companies. A critical market issue identified in the market analysis relates to the quality of these materials. This is important, as without confidence and reassurance in quality, end users are unlikely to want to use the product. Quality protocols for certain materials have been established in the UK to overcome waste definition issues and concerns, but this is not EU wide. Confidence in the market will drive demand for new processing technologies and ETV could make a valuable contribution to this.


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• Separation and sorting of solid wastes: is a large, capital intensive sector, with often bespoke technology development and integration to meet end user requirements. Technology developers are often large dominant companies with strong customer ties. In summary, no benefit from ETV could be ascertained from our analysis.

• Recycling and reprocessing of batteries: is a sector dominated by well established waste and technology development companies. The supply chain is also highly vertically integrated with the same companies collecting, sorting, recycling and recovering the valuable materials. Technologies are developed as integrated solutions specific to a battery type or need. Little or no benefit from ETV is therefore expected.

• Mercury treatment: is a highly specialised sector, in which most developers are well established and the technologies mature. ETV is not expected to be significant in this case.

• Bio-based products: refers to products manufactured from biological materials, such as cellulose. Many of these technologies were found to be novel and highly innovative with no standards as yet established (e.g. a structural beam for buildings made from waste cellulose pulp). The sector was found to include a high proportion of SMEs. Analysis suggests that ETV might have a significant impact in promoting market acceptance and uptake, the credibility of performance generated might also help developers gain first mover market advantages over rivals in this growing sector.

The market benefits of these technologies relate primarily to resource and energy efficiency improvements, lowering costs for users and reducing the environmental impacts from production. Decoupling economic growth from resource consumption is consequently important.

3.3.5 Environmental technologies in agriculture

The technologies used in agriculture relate principally to irrigation and air/water pollution monitoring equipment. In the irrigation sector the market analysis revealed that the performance credibility of technology imports into the EU was a concern, and therefore ETV could have a role to play in promoting credible and EU manufactured technologies.

In the air/water pollution monitoring sector, the technology needs have been highlighted as generally site specific, although a large number of solutions and SMEs exist in the market. ETV is therefore expected to have an impact on the sector by verifying the credibility of technologies to make product choice easier for users. Without the presence of many standards, the role of ETV is deemed significant.

The environmental benefits identified include improvements to water resource management through irrigation technologies, reductions in localised air and pollutions from large scale farms, plus reduced pesticide use.

3.3.6 Air pollution monitoring and abatement

This market is a highly mature, low growth sector, with high sunk costs and well established supply chains, creating strong ties between technology users and developers. There is also believed to be a very small number of independent SMEs


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who are new market entrants. Whilst there are innovative technologies being brought to market, particularly to meet emerging regulatory needs to abate new pollutant types (e.g. nano particles and novel pollutants such as carbon black), much of the innovation and routes to market will be dominated by incumbent multinationals. A number of well established certification schemes also operate in some of the large markets (e.g. MCERTS, UBA, US EPA). The potential need for ETV and the assistance it would provide to new market entrants was therefore expected to be minimal.

At a market level, the customer base (dominated by heavy industries with historically high air emissions) is moving out of the EU to lower cost economies. Consequently, the longer term prospects for the sector were expected to be poor in Europe, with some potential in non-EU markets.

Benefits to the environment evidently relate to air pollution, carbon emissions reductions.

3.3.7 Energy technologies

Energy technologies refer to a wide range of sectors where ETV could have a benefit:

• Wind: is largely a tried and tested technology, increasingly dominated by large developers in Europe to generate economies of scale and therefore lower production costs. At face value, the potential for ETV may therefore not exist. However, in discrete product area, such as in the development of generators and blades for wind turbines, ETV may help generate market confidence and acceptance of the next generation of technology.

• Photovoltaics: is a highly innovative sector, with many new innovations on the market, in many cases supplied by SMEs. The market analysis suggests that as each generation enters the market, going beyond current standards, verification of performance is demanded by users. ETV is therefore expected to be significant in this market. However, much of the intellectual property in the latest generations of PV cells are owned by non-EU countries such as Japan, leading to questions about levels of uptake from EU innovators.

• Biomass: according to the market analysis, biomass technologies will not benefit from ETV as these technologies require reliable reference plants to take account of operational conditions, before potential customers are likely to purchase such systems. ETV does not provide the type of information required and therefore is not expected to be beneficial.

Driven by regulatory requirements, the prospects of this sector are expected to be highly positive and are associated with substantial savings in GHG emissions and a reduced reliance on fossil fuels.

3.3.8 Summary

Based on the analysis undertaken above, Figure 3-1 presents a graphical depiction of the benefits of ETV to each technology area, the market impact taking into account projected growth opportunities in Europe and further afield, plus the scale of environmental benefits plausibly expected from their introduction. Deeper shading of green reflects higher significance.


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Figure 3-1 Summary of preliminary findings

Technology Area Significance of ETV Benefit

Market Impact Environmental Benefits


Soil and groundwater monitoring and remediation





Energy technologies

In order to assess the market value and future potential of each technology area, estimates were generated in the market analysis based on the available evidence. The results of which are presented in Table 3-2.


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Table 3-2 Estimated current and future value of environmental technology sectors based on capital investments

Technology area Current EU Market Value (2010)

Projected EU Market Value (2020)

Water treatment and monitoring €4.2bn1 €9.9bn

Soil/groundwater monitoring and remediation

€2bn - €10.7bn €2.7bn - €15bn

Cleaner production and processes €365bn €710bn

Materials, waste and resources Global: €440m2 Global: €1.4bn2


n/a n/a


€16bn €17.3bn

Energy technologies €70bn €275bn

Notes: 1 - Total capital investments across the EU water treatment and monitoring sector are much larger due to considerable spend on plant that consists of low tech equipment and concrete; 2 - This is only for the technology group that covers automated separation


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4 STAKEHOLDER CONSULTATION RESPONSES 4.1 Introduction

The study required the EPEC consortium to contact developers, testing bodies and users of environmental technologies, in order to gather information on the market characteristics of environmental technology sectors and their potential demand for ETV. The information gathered was intended to supplement the conclusions of the market analysis in order to reach robust and reliable conclusions as to the proportion of the environmental technologies market which would benefit from ETV and the factors its success for technology developers and acceptance by users. In addition, the information gathered was to be used to identify and populate the business cases later in the study. As part of this exercise, information was investigated on the potential benefits of the EU ETV and the costs that technology developers are willing to pay for a verification.

Research tools were required to differentiate between the different technology sectors and categories of organisations that might wish to participate in the EU ETV, specifically between SMEs and large companies. This approach allowed EPEC to first identify trends, whereby organisational characteristics are linked with potential costs and benefits, and to then unpack the factors driving these trends. As such, the research tools were specifically tailored to collect both quantitative data and qualitative information in order to build a robust body of evidence.

EPEC employed a two-tiered approach to information gathering, by using an online questionnaire to gather initial quantitative and qualitative data from each group of stakeholders, supplemented with some initial telephone discussions in the roll-out of the questionnaire to various stakeholders.

Section 4.2 below describes the methodologies that were employed in designing and distributing the questionnaire, as well as the approach taken towards data analysis.

4.2 Survey Methodology

A structured questionnaire was used to obtain quantitative and qualitative data regarding the research, development and demonstration activity of technology developers, the perceived barriers to market acceptance of environmental technologies and the potential benefits of ETV. A shorter questionnaire was targeted at testing and certification bodies in order to establish baseline testing and certification costs across technology groups as well as determine the nature of users of such services.

Questionnaires were designed in a‘multiple choice’ format, with a range of possible answers provided for each question in order to facilitate the speed and ease with which consultees could complete the questionnaire.

Questionnaires were designed for completion online and made available in an Adode Acrobat PDF and SurveyMonkey format. Given the time necessary to complete the questionnaires and a possible reluctance of stakeholders to insert their responses on-


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line, there was also an option to download the questionnaires and to send it by e-mail to EPEC.

Questionnaires were available in English, and were translated into Polish at the request of an environmental technology network. The SurveyMonkey questionnaire for technology developers was available in English, French and Spanish.

A draft questionnaire was first developed and pilot tested with environmental technology developers and investors to ensure the questions were clearly stated, relevant, and that the questionnaire could be completed in a reasonable amount of time (estimated at less than 30 minutes). Following testing, the questionnaire was revised to reflect input from the pilot phase.

The invitation asking technology developers and testing bodies to participate was accompanied by a letter from the Commission stating the purpose of the consultation and confirming that it was an official EU project. Again this was done to increase the response rate.

A “top-down” approach to distributing the questionnaire was adopted. Beginning with trade associations, industry representative bodies, innovation networks, university networks and the ETV pilot project community at European level before progressing to contact technology developers at Member State level. Individual companies were contacted as part of this ongoing consultation exercise to maximise the response rate. In all, over 1,300 organisations were sent the questionnaire, geographically dispersed in Belgium (>50), Finland (>100), Poland (400), Netherlands (100), Portugal (140), Spain (>500), UK (>100), and other Member States.

Following an initial roll out of the survey, invitations were successfully sent to all organisations by 1st February 2011. The invitation asked for questionnaires to be completed by 1st March 2011.

The number and nature of responses was monitored as the study progressed; reminders were sent by email and chased up with telephone calls during February in order to elicit as many responses as possible.

Recognising a slow and limited response to the questionnaire was developing, EPEC used the language capabilities of its staff to contact and chase individual companies, associations and networks across Europe to improve the response rate. The survey deadline was also extended to the end of March 2011.

4.3 Statistical analysis of data from the survey with organisations

Quantitative data from questionnaire responses was generated automatically by the software programme as responses were received. The data from responses were downloaded into a series of spreadsheets which provided analysis of the responses to each question by company size, turnover and sector. A summary spreadsheet was prepared which provided the percentage response to each question.

4.4 Results of the technology developer survey

4.4.1 Survey responses

By the end of the consultation exercise, 38 of the invited organisations had completed the online questionnaire. Whilst this represented a low response rate (estimated at around 4%) and hence did not generate a statistically significant response rate, it still


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produced valuable and consistent results across various technology groups which were used to complement and qualify the market analysis.

Following discussions with the various stakeholder groups, we believe this is an important result in itself, as many organisations appeared to have little knowledge of ETV or need for independent performance verification given the nature of the market they operate in and their relationship with customers.

It also highlights the challenges of engaging with innovative SMEs who are unlikely to be members of trade bodies and who may well fall outside the normal information dissemination channels that would be employed to raise awareness of support schemes for innovators such as ETV.

Organisational details

Figure 4-1 shows the breakdown of responses by organisation size, 42% of responses were from micro enterprises (turnover equal to or below €2 million, below 10 employees), 18% from small enterprises (turnover between €2 million and €10 million, 10-50 employees) and 24% from medium enterprises (turnover between €10 million and €50 million, 50-250 employees). Overall, 84% of reponses are from SMEs in our sample.

Figure 4-1 Percentage of responses by organisation size

Table 4-1 shows the breakdown of responses by Member State. Responses covered 11 of the 27 EU Member States, with most responses coming from the United Kingdom (24%), Germany (16%), Poland (13%) and Sweden (13%) . Unfortuntely, no responses were recieved from Austria, Belgium, Cyprus, Denmark, Estonia, France, Greece, Hungary, Latvia, Lithuania, Luxembourg, Malta, Portugal, Romania, Slovakia and Slovenia.

42%

18%

24%

16%

Micro

Small

Medium

Large


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Table 4-1: Percentage breakdown of responses by Member State

Member State % Responses

Bulgaria 3%

Czech Republic 3%

Finland 8%

Germany 16%

Ireland 5%

Italy 5%

Netherlands 5%

Poland 13%

Spain 5%

Sweden 13%

United Kingdom 24%

In this first part of the questionnaire, organisations were asked whether they were part of a larger organisation, as many SMEs can often operate as subsidiaries of larger companies. In nearly 90% of cases this was deemed not to be the case. Similarly the vast majority of respondents indicated that their head office was located in Europe, with 24% indicating that they operated additional non-EU sites. This suggests that most developers who responded are EU focussed and true SMEs.

Technology developers were also asked to indicate the age of their organisation in order to provide an approximation of their experience in the industry sectors in which they are active. Figure 4-2 provides their percentage responses, indicating that over 55% of respondents are established organisations with over 10 years experience. However, a significant proportion (over 30%) have less than 5 years experience, with 8% having existed for only 1-2 years. It could be infered from these results that, although most developers have experience of the innovation cycle and knowledge of the market in which they are active, a significant percentage are likely to have limited knowlege and/or a track record,making it difficult to gain customer acceptance of new technologies. It is in these cases that we might expect ETV to have a positive role to play.


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Figure 4-2: Percentage breakdown of responses by age

Finally, in this first part of the questionnaire, respondents were asked to indicate in which technology areas and specific technology groups they are principally active. Respondents could provide multiple answers to this question. Table 4-2 provides a summary of responses in percentage terms by broad technology area/group, indicating that the organisations surveyed are mostly active in the water treatment and monitoring (20%), cleaner production and processes (20%), and energy technology (24%) sectors. A much lower proportion of organisations are active in the air pollution monitoring and abatement (3%), and agricultural technology (7%) sectors suggesting that market concentration might be much higher, resulting in the market dominated by a few key players.

Table 4-2 Percentage breakdown of responses by technology area

Technology Area Percentage

Water treatment & monitoring 20%

Soil & groundwater monitoring & remediation 10%

Cleaner production & processes 20%

Materials, waste & resources 16%

Environmental technologies in agriculture 7%

Air pollution monitoring & abatement 3%

Energy technologies 24%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1-2 years 3-5 years 6-10 years 11-20 years More than 20 years


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A more disaggregated presentation is provided in Figure 4-3, by environmental technology product group and company type (i.e. SME or larger organisation). Smaller organisations appear to be proportionally more active in energy technology and soil/groundwater monitoring and remediation sectors than in energy efficiency and water monitoring/treatment sectors.

Figure 4-3 Breakdown of respondents by technology product group

4.4.2 Environmental technology research, development and demonstration activity

The following set of questions in the survey were asked in order to collect more detailed insights in to the technology markets in which developers are active and the characteristics of their own innovation activities. Specifically, we were interested in how they undertook research and development related activities, the characteristics of which might help explain the types of organisation, technology, and innovation that might benefit the most/least from ETV. For these purposes, respondents were asked to identify which single technology area their subsequent responses to the questionnaire should relate and, where relevant, responses were therefore broken down using this delineation.

The first set of questions asked organisations to specify the number of environmental technology products currently:

• under development;

• market ready but not yet placed on the market; or

• already placed on the market.

0 2 4 6 8 10 12 14

Monitoring of water quality Treatment of drinking water

Treatment of wastewater Desalination of seawater or groundwater

Soil and groundwater monitoringIn-situ soil and groundwater pollution remediation

Ex-situ management and de-pollution of …Savings of material resources

Improved energy ef f iciency in industryImproved energy ef f iciency in buildings

Prevention and reduction of pollution and waste …Recycling of industrial by-products and waste

Separation or sorting techniques for wasteReduction of mercury contamination f rom solid …

Products made of biomassReduction of air contamination and odour, …

Recycling of nutrients and organic carbon f rom …Reduction of pesticide use and contamination

Air emissions monitoring Abatement of air pollution f rom stationary sources

Production of heat and power f rom renewable …Reuse of energy f rom waste

Conversion of biomass to fuelEnergy ef f iciency technologies

Large

SME


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The aggregate number of responses is provided in Table 4-3.

Table 4-3: Frequency of responses to the number of products currently under development, market ready and placed on the market.

Frequency of response...

Number of products

Under Development

Market Ready Placed on Market

0 5 7 1

1 9 10 7

2 6 6 8

3-5 6 8 12

More than 5 9 4 7

Analysis of these responses by technology area has highlighted that organisations typically develop higher numbers of products in the water, soil, groundwater and energy technology market sectors compared to other sectors. However, on a comparative basis, a lower than average number of products are market ready in the soil, groundwater, material efficiency and energy technology sectors. Only in the soil and groundwater sector was it found that many organisations had placed three or more products on the market. With the exception of soil and groundwater remediation technologies, this suggests a high potential failure rate for technologies hoping to reach the market. However, it is unclear what the reasons are for his, or whether ETV could help increase the number of innovations making it to market.

Of those technology products identified in Table 4.3 as not yet on the market, respondents were asked a follow up question to identify the number of market ready products that might be sold or licensed solely to a single end-user. Figure 4-4 below suggests that many products in water treatment and monitoring, cleaner production and processes, and energy technology sectors are developed for a specific end user. As such they may not enter the commercial market, potentially being either adopted across a firm’s multiple sites (e.g. chemical company) or else exclusively licensed and sold as part of a company’s product portfolio (e.g. a multinational water technology supplier). In such cases, the benefits from ETV may be limited compared to commercial markets where market acceptance and awareness is more critical to successful and widespread uptake.

Another interesting observation is that in the energy technology sector, the majority of technologies appear to be placed on the market and/or sold commercially, indicating that ETV may assist developers increase the awareness of their products and eventual differentiation against rival solutions.


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Figure 4-4 Number of market ready technologies not yet placed on the market which might be sold or licensed solely to a single end-user

Organisations were also asked to indicate what percentage of annual turnover is represented by annual R&D expenditure. This was an open question, the results of which are presented in Table 4-4. The results support the general perception that SMEs are more innovative than larger organisations, spending more as a percentage of turnovers (3-60%) compared to larger organisations (1-5%)23. However, in absolute terms, large organisations are likely to invest the most in R&D.

Table 4-4 Summary of responses indicating the proportion of annual turnover devoted to R&D expenditure

Percentage of turnover (%)

Organisation size

SME 3%-60%

Large 1%-5%

Collaboration with key potential customers in R&D and through validation (often referred to as alpha and beta prototyping) is an important mechanism for developers to optimise product development, by checking early in the process that new products meet customer needs. ETV may be easier to achieve in such cases since the end users’ needs can be more easily integrated into the verification parameters. This initial customer may also be interested in participating financially in the verification process.

Respondents were asked whether they fund all research themselves (internal funding), receive some funding from customers (customer funding) or generally enter into a joint

23 Another interpretation is that innovative SMEs were more specifically targeted by organisations forwarding the questionnaires or they were more interested in responding to the survey than less innovative, lower R&D spending firms.

012345678

0

1 to 5

5+


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agreement funded by both parties (both parties). Responses are provided in Figure 4-5 below by technology area, indicating that customer support is clearly important to all developers surveyed. However, customers are less likely to provide financial support in the materials, waste and resources, cleaner production and processes, and energy technology sectors. In these cases, a role for ETV might exist to attract funding from other investors or to increase confidence in the product to encourage potential customers to collaborate.

Figure 4-5 Respondents collaboration on product R&D with key customers by technology area

NB: Only one response was received in environmental technologies in agriculture

Developers were then asked to indicate their total annual budgets for product testing, customer validation and certification procedures need to bring the next generation of environmental technologies to market. Figure 4-6, Figure 4-7 and Figure 4-8 present the budgets allocated to each activity respectively. Responses show that most developers have relatively small annual budgets for product testing, validation and certification (in the range of €1 to €25,000), with a substantial proportion having no budget at all for validation with end users (e.g. prototype testing) (32%) and certification (22%). It should also be noted that larger organisations were found to spend much more than SMEs, with budgets over €1million in most cases.

0% 20% 40% 60% 80% 100%

Water treatment & monitoring

Soil & groundwater monitoring & remediation

Cleaner production & processes

Materials, waste & resources


Energy technologies

No Yes (both parties) Yes (customer funding) Yes (Internal funding)


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Figure 4-6 Respondents total annual budget for product testing

Figure 4-7 Respondents total annual budget for product validation

13%

48%13%

16%

0%0% 3%

7%€ 0

€1-€25,000

€25,001-€50,000

€50,001-€100,000

€100,000-€250,000

€250,001-€500,000

€500,001-€1million

>€1million

32%

29%

16%

3% 13%

0% 0%

7%€ 0

€1-€25,000

€25,001-€50,000

€50,001-€100,000

€100,000-€250,000

€250,001-€500,000

€500,001-€1million

>€1million


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Figure 4-8 Respondents total annual budget for product certification

The final set of questions on research, development and demonstration (RD&D) activities focuses on the level of improvement in environmental performance and potential cost reductions for users that developers are aiming or expected to achieve in their next generation of products. Respondents were also asked to rate the level of knowledge that they and their customers have with respect to their next generation of products. Figure 4-9 and Figure 4-10 present responses for environmental and cost performance of products, and Table 4-5 the knowledge of actors.

22%

39%

23%

10%

0% 0%

3%3%

€ 0

€1-€25,000

€25,001-€50,000

€50,001-€100,000

€100,000-€250,000

€250,001-€500,000

€500,001-€1million

>€1million


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Figure 4-9 Level of improvement in environmental performance aiming to be achieved in the next generation of products

Figure 4-10 Level of cost reduction due to environmental performance improvements expected from new products

Table 4-5 Level of knowledge vis-a-vis the next generation of products

Rating Parameter

Very Low- Low

(Rated 1 or 2)

Some knowledge

(Rated 3)

High - Very High

(Rated 4 or 5)

Technical performance of your product in real operating conditions

9% 27% 64%

Technical performance that is required for your product to reach market acceptance

9% 25% 66%

Real production costs of your product in the first years of market introduction

23% 26% 52%

Technical performance reached by your main competitors for the same product

26% 39% 35%

0%10%20%30%40%50%60%70%80%90%

100%

less than 10%

10 -25%

26-100%

more than 100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%






Energy technologies

>25% 10 -25% <10% Yes (potentially) No


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Rating Parameter

Very Low- Low

(Rated 1 or 2)

Some knowledge

(Rated 3)

High - Very High

(Rated 4 or 5)

Knowledge your potential customers have about the technical performance of your product in real operating conditions

50% 37% 13%

The results confirm that substantial benefits to users are expected from the next generation of products in all sectors, demonstrating the incremental nature of many innovations (improvements of 10-25% predicted in most cases). However, higher rates of improvement are highlighted in cleaner production and processes, materials and waste efficiency, and in the water treatment and monitoring sectors, indicating the potential for ‘leap-frogging’ or ‘game changing’ innovations. Translating environmental performance improvements in to cost benefits for users, estimates provided in Figure 4-10 generally identify benefits of around 10-25%, although these are typically lower in the soil/groundwater remediation sector and potentially higher in water, energy and cleaner production and processes technology related areas.

In terms of knowledge, most developers believed they had a high or very high knowledge of the operating and technical performance of the technologies they produce as well as production costs in the first year of market entry. However, knowledge of rival technologies was deemed much more limited; as was the knowledge of customers regarding the technical performance of their products (50% replied that knowledge was poor or very poor).

In summary, this suggests that ETV could have a significant role to play in improving customer knowledge and prospectively their acceptance of new innovative technologies. In more risk averse and mature markets, this could therefore represent an important need for ETV.

4.4.3 Barriers to market acceptance of environmental technologies

In this penultimate section of the developer survey, organisations were asked questions on the barriers they perceive to exist, which prevents the market acceptance of their technologies and/or adoption by customers. Respondents were asked to rank the importance of identified barriers from 1 to 5 (1 being the most important and 5 least important). Our findings are presented in Figure 4-11 and suggest that the most important barriers identified by developers were:

• The company is unable to demonstrate the performance of their technology in real world operational conditions;

• Customers are highly risk averse and prefer to but market proven technologies;

• Validation procedures for new technology are very onerous;

• The company must comply with stringent health, safety, and environmental standards as a condition of sale; and,

• Other barriers (See Box 4.1).


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In contrast, failure to achieve mutual recognition, the right quality standards/accreditation for the market, or a lack of legitimacy for environmental performance claims are not viewed as important barriers to developers by over 50% of respondents. In contrast,

Other significant barriers identified by developers relate to the costs of new technologies being higher than the incumbent technology, a limited or no track record of sales preventing market acceptance, and customer uncertainty over the fitness for use of the technology.

Box 4.1: Other barriers identified by respondents

“Lack of external economical support to interact with possible customers, this is performed in-house and is limited as a result”.

“No other comparable product exists on the market that can be compared against, standard design and specification is therefore not applicable to the product”.

“Current micro CHP test norm PAS67 is a barrier to our technology. The norm was written around Stirling engine based products”.

“Unstable regulatory environment and lack of support”.

“Legislation to drive uptake is ambiguous in many countries”.

Figure 4-11 Barriers affecting market acceptance/adoption by customers

Developers were then asked about the methods they currently use for proving performance claims to potential customers. Respondents were allowed to give multiple

0% 10% 20% 30% 40% 50% 60% 70% 80%

Limited or no track record of sales

Company is of insufficient scale to provide credible guarantees to customers

New product price is higher than incumbent technology

Customers are uncertain about our product’s environmental performance

Customers are uncertain as to how suitable our product is to their operations (i.e. fitness …

Lack legitimacy for our environmental performance claims

Unable to demonstrate the performance of our technology in real world operational …

Customers are highly risk averse and prefer to buy market proven technologies

Validation procedures for this new technology are very onerous

Company must comply with stringent health, safety, and environmental standards as a …

Yet to achieve the right quality standards / accreditations (e.g. ISO9001/14001) to satisfy …

Lack of mutual recognition and harmonised standards prevents market access

Other barriers

Least important

Some importance

Most important


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answers to this question. The responses in Figure 4-12 indicate that an historical track record, market reputation, demonstration of technology at a customer’s site and credible test data are the methods most frequently used to prove performance claims. Importantly, this suggests that credibility offered by ETV is equally as important as many other factors, but 17% of respondents believe that having credible information is helpful.

Figure 4-12 Respondents methods current used for proving performance claims to potential customers

Where technologies are verified, developers were then asked:

• whether verification of performance was always a requirement of market access (Figure 4-13) – highest in water, contaminated land and energy technologies;

• what existing certification schemes help respondent’s access international markets (Figure 4-14); and;

• whether a lack of verification/certification has restricted international market access (Figure 4-15).

In the water treatment and monitoring sector, the responses reinforce the view that some developers might benefit from ETV, producing discrete and commercially available solutions, where as those developers providing custom integrated solutions might not. A similar, but a less significant pattern is shown in the energy technologies sector, with the soil/groundwater remediation sector identified as clearly benefiting from verification. Earlier responses indicated that this sector currently places a larger number of innovative products on the market compared to other sectors, therefore verification is likely to be popular as a method of differentiating the product from rivals. The commercial case for an ETV type scheme might therefore be regarded as strong.

18%

17%

17%3%

15%

18%

3%5% 4%

Previous sales to customer

Company reputation in the market

Test data f rom credible testing organisation

Use of an existing ETV scheme

Joint development with potential future customers

Demonstration at customer site

ISO certif ication

Other certifcation scheme

Other


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Figure 4-13 Respondents indicating performance verification as a condition of market entry

Figure 4-14 Certification scheme used to access international markets

0

1

2

3

4

5

6

Never required

Rarely required

Yes

0 2 4 6 8 10






Energy technologies

Yes

Don't Know

No


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Figure 4-15 Respondents view on whether a lack of verification and/or certification restricts international market access for their products

4.4.4 Potential benefits of Environmental Technology Verification

The final section of the questionnaire focuses on assessing the potential benefits of ETV and respondents willingness to pay for such a scheme. From a list identifying potential benefits, respondents were first asked to rank the benefits as insignificant, significant and highly significant in relation to their business. A percentage breakdown of responses is provided in Figure 4-16.

Figure 4-16 Respondents views on the likely benefits of ETV

0% 20% 40% 60% 80% 100% 120%






Energy technologies

Yes (both EU and Non-EU)

Yes (other EU markets)

No

0% 20% 40% 60% 80% 100%

Facilitates market entry into home marketFacilitates market entry in other EU markets

Facilitates market entry into non-EU marketsIncreases the speed at product reaches market

Increases market acceptance by customersReduces risk when investing in RD&D

Compete with market leading/rival productsEnables company to secure f inance f rom third …

Clients gain insights on environmental impacts

Other

No benef it

Insignif icant Benef it

Signif icant Benef it

Highly Signif icant Benef it


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The most significant benefits identified by developers are that:

• Clients gain insights on the environmental impact of their technologies;

• It enables them to compete more effectively market leading/rival products; and,

• It increases the speed at which new products are likely to make it to market.

Other ETV benefits broadly identified as significant are that it:

• increases market acceptance by customers;

• facilitates market entry in home markets; and,

• facilitates market entry in other EU markets.

Having identified the above benefits, developers were then asked, irrespective of any public support which might be used to access the ETV scheme, the level of finance developers are willing to commit in order to realise the benefits of ETV. It was noted that under the ETV all product testing costs, if required by the verification body, will be charged separately to any ETV fee and borne by the product developer. Developers were requested to take this information into account when responding to this question. The results, presented in Figure 4-17, suggest that the majority (25/38) of respondents are willing spend less than €10,000 for ETV, with most respondents indicating a willingness to pay in the €0 to €5,000 category.

Figure 4-17 Level of financing developers are willingness to pay for ETV

Supplementary to this question, as timing is often important to the successful introduction of technologies, developers were asked about the maximum time period that they would be willing to accept for a verification (Figure 4-18). The overwhelming result was between 6 month and 1 year.

0

1

2

3

4

5

6





Environmental technologies in

agriculture

Energy technologies

less than €5,000

€5,000-€9,999

€10,000-€19,999

€20,000-€49,999

€50,000-€100,000

more than €100,000


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Figure 4-18 Maximum time period for product verification under ETV developers are willing to accept

4.5 Testing and Certification Bodies

Ten responses were received from technology testing and verification centres in the EU. Five of these came from Polish institutes, four were from test centres in Denmark and the UK (two each) and one was from an institute based in Sweden.

Organisational details

Most respondents stated that the institutes they represented offered product testing (8) and product verification (9) services to technology developers, as shown in Figure 4-19. Only two institutes undertook product certification for developers, and four offered product validation services to technology users. Three institutes offered ‘other’ services, which were described as follows:

▪ Testing and verification of pollution emissions

▪ Monitoring of the impact of technology, raw materials, waste, fuel and other products on the environment (environmental quality testing)

▪ Technical and/ or organisational solutions in cleaner production

▪ Technical and economic analysis of technology with a focus on eco-innovation

▪ Consultative and advisory services relating to technology testing

0 2 4 6 8 10


Soil & groundwater monitoring & …



Environmental technologies in …

Air pollution monitoring & abatement

Energy technologies

<6 months < 1 year < 2 years


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Figure 4-19 Services offered by respondent organisations

3

2

4

8

9

0 2 4 6 8 10

Other

Product certification for developers

Product validation for users

Product testing for developers

Product verification for developers

Number of respondents

Source: GHK survey of testing and verification institutes (10 respondents)

Most respondents specified that their organisation was headquartered in the EU (8). Three stated that their institute also had other offices in the EU, and only one respondent organisation had an office outside the EU.

The operational domains in which at least five test centre representatives stated that they were active included the following:

• Air emissions monitoring (8 respondents)

• Monitoring of water quality for microbial and chemical contaminants (7 respondents)

• Prevention and reduction of pollution and waste from industrial processes (6 respondents)

• Abatement of pollution from stationary sources (6 respondents)

• Production of heat and power from renewable sources of energy (6 respondents)

• Reuse of energy from waste (6 respondents)

• Conversion of biomass to fuel (5 respondents)

• Soil and groundwater monitoring (5 respondents)

• Savings of material resources (resource efficiency), including savings of chemicals or carbon (5 respondents)

• Improved energy efficiency in industry (5 respondents)

On the whole, test centres were most active in energy technologies and cleaner production and processes, with monitoring and treatment services for air and water pollution also featuring as well.


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4.5.1 Information on existing client base

Regarding company size, overall findings suggest that there is a fairly even spread among respondent institutes’ clients across small, medium and large companies24, as indicated in Table 4-6 ‘Micro’ enterprises (companies having fewer than 10 employees) were less well represented in the client base.

Table 4-6 Typical size of client base of respondent institutes (number of respondents by technology area)

Technology area Micro (<10 employees)

Small (10-49

employees)

Medium (50-249

employees)

Large (250+

employees)

Water treatment and monitoring 3 5 6 5


3 3 3 3

Cleaner production and processes 2 5 6 6

Materials, waste and resources 2 4 4 3


2 4 2 2

Air pollution monitoring and abatement 1 7 7 7

Energy technologies 2 5 4 5 Source: GHK survey of testing and verification institutes (10 respondents)

When assessing whether respondent organisations’ clients were well established, results varied by technology area. The majority of respondents suggested that their clients were ‘established market players’ (5 years or older) or ‘market leaders’ in water treatment and monitoring and air pollution monitoring and abatement sectors.

On the other hand, respondents were more likely to categorise their clients as start-ups (in the pre-commercial stage of growth), ‘young’ companies (with products having been on market for less than 2 years) or ‘growing’ enterprises (2-5 years old) under the following technology areas:

• Cleaner production and processes;

• Environmental technologies in agriculture;

• Energy technologies.

In the soil and groundwater monitoring and remediation field as well as the materials, waste and resources sector, there was a fairly even spread between institutes with less established clients and those with more established or ‘market leader’ clients.

Five respondents estimated that less than 25 per cent of their start-up and young client companies were owned by larger enterprises, as shown in Figure 4-20 (two suggested that this proportion was below 10 per cent). Of the remaining five, three expressed uncertainty in this context, and two offered no view.

24 Categorised as per number of employees, using the Commission’s SME definition (available at http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm)

http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm

http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm


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Figure 4-20 Estimate of percentage of pre-commercial and young client companies of respondent organisations that are owned by larger companies

2

3

3 <10%

10-25%

Do not know


Across all technology areas, most respondents noted that over 75 per cent of their clients were situated in their domestic market. In the air pollution monitoring and abatement and energy technology domains, four respondents (each) stated that up to 25 per cent of their clients were located in other EU markets. Very few respondent institutes catered to clients outside the EU. There were three responses to the effect that up to 25 per cent of clients were non EU based in the energy technologies area, with not more than two such responses in any other area.

There was a mixed response regarding the scale of products being tested. There was a slight bias towards in-situ testing among respondent institutes, with eight engaged in such testing in the air pollution monitoring and abatement domain, and seven in the water treatment and monitoring technology area (Table 4-7). Hand-held products appeared to be the least common in this context.

Table 4-7 Estimate of scale of products being tested by respondent institutes (number of respondents by technology area)

Technology area Hand held Rig mounted

Multiple compone

nts integrated

at test centre

In-situ testing

Water treatment and monitoring 2 3 3 7


2 1 2 3

Cleaner production and processes 0 3 3 3

Materials, waste and resources 1 3 3 1


0 3 2 4


3 5 5 8

Energy technologies 2 3 5 5 Source: GHK survey of testing and verification institutes (10 respondents)


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Most respondents stated that their organisation would consider offering environmental performance verification services if the ETV scheme was introduced across the EU, with at least five expressing willingness to offer such services under each technology area (Figure 4-21). Some respondents suggested that they had relevant experience and expertise in testing specific technologies, and that this could be extended to other areas.

Figure 4-21 Number of organisations that would consider environmental performance verification service provision following EU ETV launch

5

5

6

7

7

7

7

0 1 2 3 4 5 6 7 8






Air pollution monitoring & abatement

Energy technologies

Number of respondents


4.5.2 Product testing, validation and verification costs

Responses to questions relating to the average fees charged by organisations for initial product testing and product certification prior to verification yielded three key findings:

• Four respondents stated that the average initial testing fee charged was less than €10,000 in the water treatment and monitoring technology area;

• In the ‘materials, waste and resources’ and ‘air pollution monitoring and abatement’ areas, responses indicated that average initial testing charges were often between €10,000 and €25,000;

• Four responses in the energy technologies domain indicated that initial testing charges fell in the ‘€25,000 to €50,000’ range.

There were no clusters observed among responses as regards product certification fees (Table 4-9) particularly as only a handful of responses were received to this question. Given the nature of the certification process, costs of below €10,000 for some and €25,000 to €50,000 for others are indicative of the costs that ETV might incur depending on the product, complexity of performance claim and the Member State in which it is carried out.


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Table 4-8 Frequency of responses given to the average fee charged for initial product testing (number of respondents by technology area)

Technology area <€10,000 €10,000-€25,000

€25,001-€50,000

€50,001-€100,000

€100,000+

Water treatment and monitoring 4 0 2 1 0


2 2 1 0 0


1 2 2 0 0

Materials, waste and resources 0 4 0 0 0


0 2 2 0 0


2 4 2 0 0

Energy technologies 1 1 4 0 0 Source: GHK survey of testing and verification institutes (10 respondents)

Table 4-9 Frequency of responses given to the average fee charged for product certification (number of respondents by technology area)

Technology area <€10,000 €10,000-€25,000

€25,001-€50,000

€50,001-€100,000

€100,000+

Water treatment and monitoring 0 0 1 0 0


0 0 1 0 0


0 0 1 0 0

Materials, waste and resources 1 1 0 0 0


0 0 1 0 0


1 1 0 0 0

Energy technologies 1 0 0 0 0 Source: GHK survey of testing and verification institutes (3 respondents)

Most respondents stated that their organisations carried out between one to ten initial product tests each year. The exception was in the soil and groundwater field, where two institutes undertook over 50 such tests annually. In most cases, the average fee charged for such tests did not exceed €25,000, which is in line with the figures presented in Table 4.9.

As suggested by Table 4.9, very few respondents provided data on product certification testing (in terms of number of tests undertaken as well as fees charged).

Respondents were then asked to identify the major barriers that, in their view, impeded the use of their services in each technology areas. As indicated in Table 4-10 below, the points raised with greatest frequency across technology areas were:

• Cost issues;


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• Poor awareness of added value of services (one respondent also said that that there was little awareness about ETV and its potential benefits); and,

• Lack of public support for the types of services rendered.

Few respondents thought a limited service office was a major barrier.

Table 4-10 Key barriers to use of test centre services (number of respondents by technology area)

Technology area Cost

Poor awareness of added

value

Lack of public

support

Service office too

limited

Lack of standardised

testing procedures

Lack of legitimacy

of test results


6 6 6 1 2 1


3 3 3 0 2 1


4 4 4 0 2 1


4 3 3 0 1 1


4 3 4 0 2 1


5 5 6 2 1 1

Energy technologies

5 4 5 0 1 1


Most respondents noted that over 75 per cent of their costs were covered by means of client charges (

Figure 4-22); only two suggested that the proportion was less than 25 per cent.

Figure 4-22 Proportion of institute costs covered by client charges

2

8

Less than 25%

75%+


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Four centres respondents said that their institutes received public subsidy funding, four of the remaining six emphasised that such funding was required in the technological areas of their operation (Figure 4-23). Two respondents elaborated by suggesting that public support and funding for ETV was crucial for technology suppliers, in particular SMEs, until there was greater awareness regarding ETV.

Figure 4-23 Proportion of respondents receiving public subsidy for provision of testing services

4

2

4

Yes

No

No, but it is necessary in the technology areas we are operating in



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5 THE BUSINESS CASE FOR ETV 5.1 Overview

The previous sections provided an overview of the environmental technology markets potentially benefiting from ETV and the views of stakeholders to further develop the evidence base for ETV. This section advances our analysis by determining the business case for ETV at a much more disaggregated level, thus confirming or refuting the findings of the market analysis, and refining the rationale, costs and willingness to pay for ETV. This will help develop an understanding of the conditions under which ETV holds the greatest value to technology developers and users. Finally this section will conclude by evaluating the cost-effectiveness of ETV and the market potential of ETV across all business cases.

5.2 Identification of business cases

5.2.1 Approach to identification

From the original list of 25 technology groups, the market analysis began by consolidating this list into 18 technology groups in seven technology areas. A screening tool was developed in order select the business cases of most interest and relevance from the 18 technologies identified in the market analysis. This built on the preliminary analysis undertaken earlier in the study which identified the list of factors which could be used to inform the ranking of each technology (See Section 2.7) to determine the degree to which each could potentially benefit from ETV.

A few new indices were used to rank the technologies identified; one indicator was omitted for the purposes of technology ranking (the ‘rate of innovation’, which became redundant since most technology groups were characterised with ‘incremental’ innovation rates). The refined list of criteria includes, on the demand side:

• Market size: scale of EU expenditure (€) by sector and market share of particular technology group;

• Global growth potential: global market growth prospects;

• Procurement patterns: identification of the primary user group for the technology and whether the purchase of the technology is discrete or integrated within a broader system;

• Innovation scepticism amongst users: indication of a conservative or risk taking approach to new ideas and technology within the user sector;

• Market status: extent to which the market for the technology in question is in an early ‘growth’ phase (up to 10 years), maturing (10-20 years) or ‘established’ (more than 20 years old).

And, on the supply side:

• Technology status: whether the technology currently on the market is in maturity or has recently been introduced, to identify where opportunities for innovation might exist;

• Status of alternative technologies: whether their performance is currently proven or unproven, or already placed on the market;


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• Investment level: higher levels of investment into the EU supply side would indicate a greater interest by the investment community to bring new products to markets (they do not wish to see their investment fail) and hence the likelihood that more channels to market will be provided to the technology developer in question.

5.2.2 Ranking of Technology Groups

The 18 technology groups were then scored and ranked (see Table 5-1). Those technologies which appear to have clear market potential (scoring 24/34 or higher) based on this screening are:

• Low carbon building technologies

• Products made of biomass

• Recycling of industrial by-products into secondary materials and recycling of construction and demolition waste

• Soil and groundwater monitoring

A further four technology groups were identified as having probable market potential (scoring between 20 and 22/34):

• Water monitoring

• Soil and groundwater remediation

• Energy efficiency in industry and buildings

• Wind, solar and marine

Table 5-1 Ranking of Technology Groups

Technology Groups Total % RankLow carbon building technologies 28 82% Tier 1 (80%+)Products made of biomass 27 79% Tier 2 (70-79%)Recycling of industrial by-products into secondary materials & recycling of construction & demolition waste 24.5 72% Tier 2 (70-79%)Soil and groundwater monitoring 24 71% Tier 2 (70-79%)Water monitoring 22 65% Tier 3 (60-69%)Soil and groundwater remediation 21 62% Tier 3 (60-69%)Energy efficiency in industry & buildings 21 62% Tier 3 (60-69%)Wind, solar and marine 20 59% Tier 3 (60-69%)Air emissions monitoring (e.g. sensors, analysers and monitors, including continuous emission monitors) 18.5 54% Tier 4 (50-59%)Water Filtration & Disinfection technologies 18 53% Tier 4 (50-59%)Recycling of batteries and accumulators 18 53% Tier 4 (50-59%)Abatement of pollution from stationary sources (e.g. filtration, scrubbers, stabilisation of by-products, leakage prevention) 17.5 51% Tier 4 (50-59%)Desalination (membrane & thermal technologies) 17 50% Tier 4 (50-59%)Biomass power 17 50% Tier 4 (50-59%)Savings of material resources (resource efficiency) and prevention and reduction of pollution and waste in industrial processes 16 47% Tier 5 (49% or less)Separation or sorting techniques for solid waste and materials recovery 16 47% Tier 5 (49% or less)Environmental Technologies in Agriculture 16 47% Tier 5 (49% or less)Reduction of mercury contamination (amalgam separators) 15 44% Tier 5 (49% or less)

It is important to highlight that the scoring and ranking exercise only provides an indication of ETV potential and not a definitive list, since there are numerous factors which are impossible to define and account for. The overall scoring is also very close


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between Tier 3 and Tier 5 technologies indicating a degree of commonality in the underlying nature of the markets.

A common characteristic of most products and applications in Tiers 1 to 3 is that discrete purchases can often be made, increasing the ease with which market ready products can enter the market (see Figure 5-1). This is important as it means the ETV verification process can provide the requisite product performance to satisfy the end user (i.e. “it does what it says on the tin”)25.

Such discrete purchases are also fundamentally different to those products that are required to undergo a secondary stage of product validation at a customer site. In many cases this involves the product being integrated into the industrial process to ensure it is ‘fit for purpose’. A cluster of technology groups is shown on Figure 5-1 where ‘system integration’ is a strong feature of the sales process.

Some areas, such as contaminated land remediation and air emissions monitoring, comprise a mixture of discrete and integrated purchases.

A further conclusion from the ranking exercise is that the highest scoring technologies and products are in many cases from emerging sectors with few precedents in the market and a lack of standards/certifications and end user confidence. Thus a need for ETV to inform potential customers and promote those technologies going beyond existing standards starts to emerge.

Interesting, these result are supportive of both the evidence bases: the literature based market analysis and the stakeholder consultation exercise.

Figure 5-1 Distribution of Technology Groups by supply & demand characteristics based on market analysis screening (numbers in axes refer to total scores for each technology)

Water Filtration & Disinfection

Water Monitoring

Desalination

Soil and Groundwater Monitoring

Soil and Groundwater Remediation

Cleaner Production Processes Energy Efficiency in Industry & Buildings

Low Carbon Building Technologies

Recycling of Industrial By-products into Secondary Materials

Separation & Sorting of Solid Resources

Recycling of Batteries

Mercury Reduction

Biobased Products

Environmental Technologies in Agriculture

Air emissions MonitoringAir Pollution Abatement

Wind, Solar and MarineBiomass Power

0

1

2

3

4

5

6

7

8

9

10

0 5 10 15 20 25

Supply side characteristics

Demand side characteristics

Overview of Technology Group Ranking based on Market Analysis Screening

Tier 1

Tier 2

Tier 3

Tier 4

Tier 5

Discrete purchases

System integration

25 One exception to this trend is for contaminated land remediation where a lack of verification is not regarded as a main barrier to market adoption.


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5.3 Detailed justification for business cases including individual technology subgroups

Building on the technologies identified as Tier 1, 2 or 3 from the ranking exercise, the following presents the clear justification for progressing with each business case. Where it is judged that the technology does not warrant further investigation, the reasons for doing so are made clear.

5.3.1 Proposed business case 1: Low carbon building technologies

A large number of technology subgroups, collectively making up the ‘building fabric’, cover this Technology Group, including windows, insulation, walls, roofing, etc. This family of technologies would strongly benefit from an ETV, with producers often citing the lack of international recognition of existing certification schemes as one of the leading barriers to sales and growth. Market analysis findings of the Cleaner Production and Processes technology area and Low Carbon Building Materials technology group show that overall, the low carbon building materials technology group could strongly benefit from an ETV due to the lack of international recognition of existing certification schemes and the barriers to growth this may create.

We propose focusing the business case on insulation materials. This is because: it is a very large market (e.g. floor, wall and roof insulation as well as pipework); there is a need to gain certification within different Member States (for example, products sold into the UK market generally require either BBA or BRE Global certification); and, despite the presence of a number of very large companies that dominate the current supply side, there is also a number of innovative SMEs bringing to market both renewable-based and leading edge innovative insulation products (e.g. aerogels). The extent to which some of these products offer both superior performance and strong environmental credentials that go beyond existing standards and current market needs is a strong case for further investigation.

There are two dimensions to the environmental innovation of new insulation materials. In some cases, innovation is oriented towards the content of the insulation product (i.e. insulation panels made of biomass). In other cases, insulators are produced using traditional materials while achieving higher levels of performance, notably in terms of thermal transmission. Most often however, these two dimensions go hand in hand.

There are two points which are important to consider when analysing the potential of an ETV in this sector. First, because insulation materials are parts of buildings, the safety for use dimension is crucial in product testing and certification. Second, buildings are long-term creations and as such, establishing long-term performance of innovative insulators is also a key element.

The construction sector is highly conservative, because producers often have to deal with safety and insurances issues. Performance claims are not only insulation-related, they also concern the water, fire or sound resistance of the product.

There are two major and overlapping uncertainties over performance claims in the insulation sector: medium to long-term performance (dynamic performance), and performance under real-life operating conditions. This is highly relevant for the market because the performance of the insulation product is dependent on the surrounding environment and materials. In other words, performance of insulation materials may vary considerably based on the types of additional products used in the construction of the building. In addition, the ease with which these products can be manipulated by installers is also a key priority for consumers.


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5.3.2 Proposed business case 2: Products made of biomass

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. There is a wide range of bio-based products, which could eventually find a substantial market acceptance, including:

• Fibre based materials;

• Bio-plastics and other biopolymers;

• Surfactants;

• Bio-solvents;

• Bio-lubricants;

• Pharmaceutical products (including vaccines);

• Enzymes.

We propose focusing on biocomposite materials which have a large market potential across a number of sectors, including automotive, aerospace and construction. The market opportunities for replacing either expensive and energy intensive metals, or finite fossil fuel based plastics, with biocomposite materials offers the potential for large resource and cost savings in raw materials, and enhanced sustainability.

Several large players dominate the EU biobased product market, although a very large number of SMEs are trying to enter it. However, these firms face considerable challenges, including:

• they are often in pre-profit phase due to the need for long-term investments required to commercialise products;

• there is a lack of existing standards for biobased products;

• biobased products are a higher price than standard products; and hence,

• the necessity of highlighting the ‘additionality’ from specific characteristics of bio-based products, such as biodegradability, recyclability, low toxicity, etc.

Being able to prove biobased product performance against standard products through an ETV would help SMEs in accessing the EU market.

5.3.3 Recycling of industrial by-products into secondary materials and recycling of construction and demolition waste

The use of industrial by-products into secondary materials and new products represents a large market opportunity that is currently being held back because of a lack of end user awareness and confidence in using waste materials in products. There are two key issues. Not only are there legal issues to overcome (i.e. when does a waste product become a raw material26); there are also quality considerations relating to the purity of the by-product and whether the end user is confident that it is fit for purpose. In the UK, for example, the Environment Agency, working with the Waste & Resources Action Programme (WRAP) have jointly developed Quality Protocols to

26 This is an area that falls under the EU Waste Framework Directive


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help improve the reuse of solid waste materials impacted by a lack of clarity over whether a waste is a raw material or a waste.

Several projects under the EU Competitiveness and Innovation Programme (CIP) are investigating market adoption challenges of reusing waste materials into new products: many will require verification of performance for products that may fall outside current standards and certification channels. The rewards are substantial as these products could lead to a step change in resource efficiency, cost savings and new company formation.

However, there is a problem in developing a robust business case. This is primarily due to the vast number of potential industrial by-products, combined with numerous products that might utilise such materials. The challenge is being able to focus on an appropriate class of material/product and follow this with the detailed investigations that are necessary to understand the costs and benefits of ETV, and then to find appropriate companies that are progressing these areas.

There is also an important legal dimension, noted above, which once resolved will help to unlock the market potential in this sector. Indeed, this is likely to be a far more powerful mechanism than a verification system focused on an end product since without greater legal clarity (and acceptance from environmental regulators) products are unlikely to be developed in the first place. The potential for ETV within this technology group should be addressed once there is greater legal clarity at the EU level. Even then, it may be the case that when materials are transformed into products, there is a risk that they are far too diverse with different performance requirements to make ETV operational. This technology is therefore not taken forward for further analysis.

5.3.4 Proposed business case 3: Soil and groundwater monitoring

In contrast to other technology areas, this market was found to be characterised by a high proportion of SMEs and a huge diversity of technologies, each designed to monitor a different suite of pollutants in different environments. The difficulty for end users is differentiating between the various performance claims made by various products.

The potential for game changing technologies in the sector is in site characterisation technologies which can provide real time comprehensive data analysis without the need for continually sending samples to laboratories thereby reducing costs and speeding up the monitoring and control process. In the market more sophisticated assessment, diagnostic and monitoring technologies will give users the ability to characterise sites more rapidly and effectively, thus saving substantially on remediation costs as well as ultimately improving the environmental quality of land and groundwater at specific sites and the surrounding area.

The companies featured in this business case have products that cover different types of site characterisation including: probes, on site samplers, heavy metal detectors and X-ray fluorescents. New technologies require on site demonstration which is time consuming, costly and often difficult to conduct due to the lack of appropriate sites for testing. The industry is dominated by large environmental engineering consulting firms that test new technologies for quality assurance before use after considering their performance claims. This is necessary because of the diverse nature of contaminated sites. Testing and validation are a prerequisite for acceptance of a new product. This business case shows the benefits that ETV will bring to both technology developers and end users.


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ETV is expected to have a highly significant role in this market to verify credible technologies, thus encouraging uptake and market acceptance. However, one of the challenges to be explored in the business case is the extent to which other factors are critical to satisfying end user purchasing requirements (see section on Soil and groundwater remediation below).

5.3.5 Proposed business case 4: Water monitoring

For the purposes of this business case, we have focused on ‘in-line’27 water monitoring equipment being commercialised for applications in the water industry (e.g. extending point monitoring into water supply networks) and other sectors including food processing and the oil and gas sector (e.g. monitoring oil concentrations in produced water from wells).

This subsector of the water monitoring industry consists of methods and probes that can collect and analyse a number of parameters (e.g. pH, dissolved oxygen content, turbidity, bacteria, phenolics, etc.) in real-time28. Key reasons for selecting this subsector are that:

• three industry responses were received to our initial study survey – indicating a clear acknowledgement by the market of the potential value to be derived from an ETV;

• it is a growth market within the EU with water utilities, food and drink processors, and manufacturers increasingly use in-line water monitoring to enhance quality standards and to shift the focus away from detecting contaminants in the laboratory to a more dynamic system of monitoring which can save costs and, particularly for water companies, help maintain a company’s reputation by being better able to respond to abnormal water quality episodes rapidly, thus helping to avoid pollution incidents29;

• the opportunities for further development within the sector are vast with opportunities to extend the range of parameters monitored, to link products with wireless technology for dynamic monitoring across different sites, as well for miniaturisation of the products;

• The EU possesses a world class R&D capability for water monitoring technologies amongst its university sector – as illustrated by the close association with universities in two business cases and the presence of a leading university in a third. This presents an excellent opportunity to focus continued efforts in facilitating the market introduction of novel in-line sampling technologies;

• there will be large opportunities to export these technologies into emerging non-EU economies including China as well as established markets such as North America.

5.3.6 Soil and groundwater remediation

The lack of verification is not regarded as the main barrier to market adoption of remediation technologies; rather it is the need to provide reassurance to site

27 Also widely referred to as ‘on-line’ or else ‘in-distribution’ for water distribution networks 28 Such products typically utilise a reference database of environmental data against which the samples are compared 29 For example, by being able to increase the dosage of chemicals in the water treatment process in order to deal with a sudden increase in particular contaminant levels.


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developers and regulatory authorities around key parameters such as the robustness of the technology, its stability, maintenance needs and the scope of its operation. Consequently, the most effective avenue to provide this real world evidence of overall performance is regarded as site demonstration and case studies, rather than simply validating that the technology “does what it says on the tin”30. Both CL:AIRE in the UK and HIP in the Netherlands are site demonstration programmes designed to provide this confidence to end users and regulators. Remediation technologies are regarded as much more challenging to verify than test kits and monitoring equipment, due to site specific conditions and control of the implementation process31.

Despite the high ranking of this Technology Group, for the reasons set out above (and elaborated on in detail in the market analysis) we propose that it is not one of the business cases taken forward for more analysis.

5.3.7 Proposed business case 5: Energy efficiency in industry and buildings

Energy efficiency is another technology group comprising a vast number of technology subgroups. To provide focus for the business case, the micro-Combined Heat and Power (mCHP) market has been highlighted. This because it is: (a) an emerging technology, (b) has many different innovative SMEs competing to commercialise products alongside some boiler manufacturers, (c) has a number of different underpinning technology types including sterling engines and fuel cells, (d) can run off natural gas, biomass and hydrogen, (e) offers a potential global mass market, and (f) the EU already has a strong capability. There is also a clear cross-over between this technology group and the energy technology area where energy efficiency was originally featured.

A completed survey response from an innovative SME in the UK who thought ETV a good idea for their fuel cell based mCHP product also spurred the consultants to consider this technology.

The extent to which norms across Europe act as barriers to market entry for innovative mCHP systems would be an interesting aspect of this business case, as would the scale up challenges and routes to market being explored outside existing verification routes.

5.3.8 Proposed business case 6: Wind, solar and marine

Across renewable power generation, the largest new markets covered in our market analysis were wind and solar photovoltaics (PV)32. Of these two, wind is largely a tried and tested technology, increasingly dominated by large manufacturers who are increasingly adopting supply approaches of other sectors, including rationalising their supply base to reduce production costs. At face value, the potential for ETV may therefore not exist. However, in discrete product areas, such as the development of generators and blades for wind turbines, ETV may help generate market confidence and acceptance of the next generation of technology.

Solar PV is a highly innovative sector, with many new innovations on the market, in many cases supplied by SMEs. The market analysis suggests that as each generation enters the market, going beyond current standards, verification of performance is demanded by users. However, the dominance of Germany in the EU solar PV supply

30 Member of the NICoLE steering group 31 Member of the NICoLE steering group 32 Hydro is also a very large market but was discounted on the basis of being a very established sector


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side, coupled with an apparent market reliance and satisfaction from using established test houses (e.g. TUV and world renowned institutes such as the Fraunhofer Solar Institute) to verify performance, challenges this logic. Moreover, much of the intellectual property in the latest generations of PV cells are owned by non-EU countries such as Japan, leading to questions about levels of uptake from EU innovators in the future. A key point made by the UK Carbon Trust was that larger companies have a good reputation in the market and the money to invest in verification; they can also buy already proven intellectual property from smaller innovative technology developers. For smaller companies, some universities already provide the requisite testing and verification to enable the firm to get their product into the market33.

On balance, it is worth exploring the verification challenges of solar thermal hybrid technologies (part of the micro-generation and small-scale renewable technology family). Solar thermal hybrids have the potential to supply combinations of heat, power, storage and air conditioning for commercial, industrial and domestic buildings. They represent a highly innovative niche market that has global potential.

A number of firms are bringing such products to market in the EU, including in Sweden and the UK. Not only is there a challenge for these firms in fitting their technology into existing standards (since they can be so innovative), they can also lose out on deploying their technology through government support schemes because they cannot gain the required certification. For example, one SME’s product is both solar PV and thermal.

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 quality and performance.

Finally, by exploring the potential of ETV to fill this apparent market need for verification, the analysis will aim to demonstrate the benefits to developers of novel, hybrid technologies. This could have important implications for specifying the scope of an overall EU ETV scheme.

5.3.9 Air pollution monitoring

The market analysis revealed that the air pollution monitoring and abatement market to be a highly mature, low growth sector, with high sunk costs and well established supply chains, creating strong ties between technology users and developers. Our survey also showed that none of our 38 survey responses were focused on the air pollution control sector.

At a market level, the customer base (dominated by heavy industries with historically high air emissions) is moving out of the EU to lower cost economies. Consequently, the longer term prospects for the sector were expected to be relatively poor in Europe, with growing potential in non-EU markets.

Fundamentally, there are established and highly ‘market visible’ de facto mandatory certification schemes for air pollution monitoring technologies both within EU national markets (e.g. German UBA or UK’s MCERTS) and in key overseas markets (e.g. US EPA). This creates a challenge for introducing an EU ETV due to potential confusion and onerous costs of yet another scheme. The credibility challenge of introducing a new scheme into a very established market is also deemed to be substantial. Indeed, a key conclusion of initial verifications undertaken in the Danish ETV scheme

33 Representative from The Carbon Trust, UK


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(DANETV) is that where there are very developed certification systems in place already, verification will make little sense as a value proposition to technology developers34.

Hence, investigation of ETV in the EU air pollution monitoring market is not taken any further, not least because there appears to be a limited number of innovative SMEs on the fringes of a very established supply side.

5.3.10 Proposed business case 7: Water treatment

This business case looks in more detail at a number of anaerobic digestion (AD) and sludge treatment technologies being commercialised in the water, industrial and agricultural sectors35. It seeks to show the benefits that ETV will bring to both technology developers and end users.

Across the EU, AD remains an immature market using quite mature technology. Only a few Member States such as Germany, the Netherlands and Denmark have very established operations and clear investment horizons. The UK has enormous potential, particularly given that 85% of households currently use natural gas. The opportunity to supply biogas to households, as is currently done in Sweden, provides big opportunities, for both water and energy companies.

Water companies offer large prospects for AD and sludge treatment. Other industries offer promising market opportunities including oil and gas, pharmaceuticals, food and beverage manufacturers and industries which have high concentrations of effluent that requires on-site wastewater treatment, as well as companies generating large sludge volumes. Farms also offer good prospects for treating animal sludges and generating revenue from distributed power generation. Energy companies are also now starting to exploit the technology to help fulfil renewable energy generation obligations.

For industry, the requirement for any new wastewater and/or sludge treatment technology will often be dependent on local need – for example an environmental regulator may impose tight restrictions on an end user which will make them look at several technology options.

Sludge treatment in the EU is a relatively new industry, only emerging since 1998. However, sludge generation is a large problem across the EU with numerous sectors requiring sludge treatment and disposal. Overall, the market opportunity is large and globally very attractive, particularly when considering the opportunity to generate energy from the waste.

5.4 Approach to business case analysis

5.4.1 Overview

The aim of each business case is to determine the overall market potential for ETV amongst the developers of each specific technology. A minimum of five stakeholder telephone interviews have been performed per business case (at least three of the stakeholder interviews conducted were with developers) to attain the preferences for and arguments against an ETV in each case, the costs they expect to incur, and their willingness to pay for an ETV. The business case will therefore help to:

34 Presentation by DHI on DANETV to EU ETV pre-programme launch event, November 2010 35 This area was selected because of the initial interest from three technology developers in the original ETV survey. A further two new developers were identified to complement these three and provide a robust evidence base for the business case.


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• Provide an accurate estimate of the potential uptake of an EU ETV scheme for the technology in question;

• Identify the benefits to be expected by technology vendors and an indication of their willingness to contribute financially to the scheme, and

• Illustrate the cost-effectiveness of undertaking the verification.

5.4.2 Establishing the rationale, expected benefits and value added for technology developers for undertaking ETV for each technology product

A generic intervention logic for undertaking the EU ETV is shown in Figure 5-2. This shows several problem areas that the scheme seeks to address.

Figure 5-2: Intervention logic for EU ETV

Technologies have no

standards or are too novel for standards

Financial support

Support new technologies that can bring

about improved

performance and cost

savings to enter market

Support for verif ication

bodies

Rationale Problem areas Inputs Activities Outputs Outcomes Impacts

Improved economic

performance

Reduced pollution

New business creation

Increased security of

energy supply in EU

Enhanced GVA and jobs for EU f irms

Young f irms lack

credibility / track record

in selling technologies

Increased exports to

non-EU countries

Enhanced translation of

innovation within EuropePoor end

user recognition of

new innovations

Support for applicants

Higher prof ile and market

share for EU companies

Improved end user

conf idenceThird party verif ication

process

Awareness raising of EU

ETV

Products verif ied under

EU ETVImproved resource

ef f iciency

Mutual recognition of

EU ETV

Increased private sector investment in more ef f icient technologies

Raised prof ile of innovative

SMEs

Poor assessment

of risks, benef its and limitations by

vendors

Bench-marking of technology

performance

Support across EU27 policy makers

Industry participation

Support f rom regulators

To explore the rationale in each business case further, interviews with stakeholders was focussed around the ETV decision tree depicted in Figure 5-3, building on the findings of the market analysis.

This enables a structured and consistent approach to be followed in each business case, guiding researchers to ask the right questions to developers and users to ensure that the detailed supporting evidence and robust arguments for ETV are established. This was also a good opportunity to test stakeholder’s understanding of the ETV scheme and improvements which could be made to it.

It is important to appreciate that the decision tree is a guide, not a definitive decision support tool for an ETV – it provides an illustration of the multiple factors at play that technology developers should consider. This could help developers to ascertain whether the time is right for them to apply to an ETV scheme.


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Figure 5-3: ETV decision diagram for technology developers

Market ready Products

Is test data available?

Ready to sell?

Do standards exist to allow certification?

Do these sales

provide appropriate reference

sites to satisfy

other end user needs?

Can a joint testing

programme with OEM/end

user be pursued to aid sales?

POTENTIAL FOR ETV

N Y

Pre-commercial Products

NToo early for ETV

Too early for ETV

Domestic sales?

EU sales?

Non-EU sales?

N

N

Y

Y

Y

Y

N

CertificationY

Limited need for

ETV

Y

N

Is it hard in the sector to find end user trial sites to prove performance?

N

YN

No need for ETV

Can certification systems in these

markets be exploited to help

market access?

YETV ACCREDITED PRODUCTS

Are results sufficient to prove performance?

Y

N

Source: EPEC

Is verification a requirement of the market?NNo need

for ETV

Y

Will the market (mutually) recognise the EU ETV?NNo need

for ETV

Total number of products

Y

Y

Y

N

Y – but certification

not fine grained enough to demonstrate

superior product

performance

Y – an alternative verification

route is required

N – an alternative verification

route is required

Limited need for

ETV

All technology products being placed on the market enter at the top of the decision tree. Many products will be gradually filtered out as they pass through each box in the diagram. The following describes key elements of the process:

• ETV only applies to market ready products. Vendors with pre-commercial products are not yet ready to enter into the ETV and do not qualify. They will have to undertake further development and then reconsider the scheme’s merits.

• The success of ETV is predicated on mutual recognition of the ETV label. The target market must recognise the value of the EU ETV for any particular product if it does not; there is no value proposition to the applicant.

• Verification of performance must be a requirement of the market. In the majority of products this is the case; in some, like irrigation system, the EU market is price driven; ETV is therefore not required.

• Test data is a prerequisite for entering into the ETV scheme (although in most cases, it is likely, based on experiences elsewhere, that further testing may be needed). Test data in its own right may well be sufficient to prove a product’s performance to an end user (e.g. on a solar cell). A company may believe it is ready to sell but it will require test data.


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• Certification could be pursued in many markets. In some sectors this is a pre-requisite for market adoption. However, a product may have been developed with superior performance to its competitors or key features that are not part of a standard but which provide an added value proposition to the vendor. Both situations provide a strong case for ETV to be pursued.

• Sometimes a standard will not exist for an innovative technology. Hence, an alternative verification route must be pursued (assuming the technology developer is unable to write their own standard). Again, ETV could be pursued.

• Some companies are able to undertake joint development programmes with end users or Original Equipment Manufacturers (OEMs). These firms will provide a clear route to market, especially if the innovator is keen to pursue an exclusive licence agreement. Where this is not possible, ETV could be pursued.

• End user trial sites may be an excellent way of establishing reference sites and a track record. However, such sites – for example, at wastewater treatment plants, factories to test air pollution abatement systems, chemical companies to explore cleaner production systems, etc. – may be difficult to secure, especially if the company has to meet many of the costs of installation. Where this is not possible, ETV could be pursued.

Finally, existing sales, either into the domestic, EU or non-EU market, could provide sufficient reference sites for a firm to build a track record and credibility in the market. Where this is not possible, and the use of a certification system is not possible, once again, ETV could be pursued. Consideration is therefore given to Table 5-1 indicating which markets technology developers are selling into or wish to sell into.

Table 5-1: Technology Area market sizes for key countries with ETV scheme

Market size

Popu

latio

n

ETV

sche

me?

Part

of E

U

Adv

ance

ETV

?

Wat

er

Trea

tmen

t

Con

tam

inat

ed

Land

Was

te &

Sol

id

Res

ourc

es

Air

Pollu

tion

Con

trol

ET in

A

gric

ultu

re

Ener

gy

Tech

nolo

gies

Cle

aner

Pr

oduc

tion

EU27 500m In dev Y *** *** *** ** ** *** ***

USA 307m Y Na *** *** *** *** *** *** ***

Canada 34m Y Y * * ** ** ** * **

Japan 128m Y Y ** ** *** *** *** *** ***

China 1331m In dev N *** * ** *** ** *** **

S.Korea 49m Y Y * * * ** * ** **

Philippines 92m Y Y ** * ** ** ** ** *

Key: *** Large ** Medium * Small. Note (a) USA withdrew from Advance ETV project in 2010

Sources: Market sizes, EPEC; Population statistics, World Bank World Development Indicators


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5.4.3 Assessing the costs and willingness to pay for ETV in each business case

For each business case, a series of questions were put stakeholders regarding the costs involved in attaining an ETV and their willingness to pay for this scheme, given their current expectations about the technology’s performance and the appetite of the market for such a solution.

It is acknowledged that the costs to developers from undertaking ETV verification can vary significantly, depending of the technology (i.e. number of parameters to verify and its complexity), the market demands placed on it (i.e. validation and certification activities) and the position of the technology within the innovation and development process (i.e. affecting the amount of testing and customer interaction already undertaken). In addition, access to test facilities, the market for testing and verification bodies should be considered as affecting the costs involved. One set of figures is therefore unlikely to be completely comparable to another set of figures. The approach adopted has consequently strived to clearly present the different costs estimated by stakeholders and the assumptions underlining them. Where possible an incremental breakdown is provided to allow the reader to assess which costs might be applicable to a specific technology. The costs evaluated are:

• The costs of testing of the technology to enable it to apply for the ETV;

• The costs of testing the technology in the event that the Verification Body requires further testing;

• Official ETV fee which the developer/vendor will need to pay to the verification programme, and

• The other internal costs to the firms, primarily referring to the administrative costs involved in reporting test performance and applying for ETV.

Equally, the assessment of developers/vendors willingness to pay is conducted in the same way, and is affected by a similar number of factors such as expected sales, existing expenditure on R&D and testing, and on the characteristics of the market.

Finally, based on the costs, benefits and willingness to pay assessment, the ETV market potential is presented by technology market, with consideration given to the funding mechanisms available to support SMEs in the ETV process.

5.5 Results of the business case analysis

A one page summary of each business case is presented in what follows, based on the detailed business cases (which are provided in an accompanying Annex to this Final Report). A reminder of the business cases selected through screening is as follows:

• Business Case 1: Insulation;

• Business Case 2: Biobased products);

• Business Case 3: Site characterisation technologies;

• Business Case 4: In-line water monitoring;

• Business Case 5: Micro CHP;

• Business Case 6: Solar thermal hybrid technologies;

• Business Case 7: Anaerobic digestion;


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Business Case 1: Low Carbon Building Materials: Insulation

Technology: Insulation: recyclable aerogels, pre-insulated panels using recycled materials, and glucose-based insulation binder.

Market Characteristics: • Large number of SMEs working at the local or national level • Mature market • Construction sector (users) are highly conservative • Safety and insurances requirements important

Current Market: Innovative technologies represent 5% of the insulation market in the EU. The Nordic countries, Germany and Austria dominate the innovative part of the market. High current and future market opportunities for highly energy efficient solutions.

Rationale for ETV

Drivers: • EU and national legislation on building energy efficiency • Increasing energy prices • Extensive cost reduction in new technology

Barriers: • Lack of international recognition of existing certification • Initial product price is often higher than incumbent technology • Inability to demonstrate operational performance

Anticipated Role for ETV • Encouraging the uptake of new more efficient solutions • Generate credibility and acceptance of new solutions

Benefits of ETV • Fast track to product approval – cost saving to developer • Increase the speed at which products reach market • Facilitates market entry across EU markets for new products • Increases market acceptance of new product by customers

Added value • Less expensive alternative to traditional accreditations/certification routes to market

• Allow greater differentiation between average and high performing products

• Opportunities for new entry to increase competition in market • Lowers energy cost for end-user (businesses and households)

Costs and willingness to pay for ETV

Costs: Costs of verification: €10,000-€35,000 Costs of testing: <€5,000 Administrative costs: €5,000-€10,000

Willingness to pay: Company A: N/A Company B: €5,000 Company C: €3,000 Company D: N/A

Concluding remarks ETV would provide a Europe-wide verification which would sit above Member State certifications. However, willingness to pay (amongst mainly SMEs) is low.

Market Potential for ETV

Ability to gain recognition across multiple countries for performance levels, should make obtaining certification less time consuming and costly to developers. ETV could facilitate internal market and in a


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fast growing sector, the potential is significant for developers and end users.

Business Case 2: Materials Waste and Resources: Biobased Products

Technology: Biobased products: commercial or industrial products composed of biological products, renewable domestic agricultural materials or forestry material.

Market Characteristics: • High growth • Strong diversification in materials and applications • High number of manufacturers, products and user groups

Current Market: The global market is valued at €58 with the EU accounting for 30% of the market. Germany is the global leader in the bioplastics. Large potential in the automotive, aerospace and construction sectors.

Rationale for ETV

Drivers: • Change in consumer behaviour • Public authorities and regulation • The drop of fossil resources, especially petroleum

Barriers: • Validation procedures are onerous • Stringent health, safety, and environmental standards • Difficult to achieve the right quality standards

Anticipated Role for ETV

No role foreseen as existing measures limit added value and market too small a present to justify expense for many developers

Benefits of ETV Currently no directly perceived benefit due to a number of certification systems across the EU

Added value • Reinforce communication on the technical characteristics of products • Promote environmental advantages of products compared to

conventional products


Costs: Costs of verification: N/A Costs of testing: €5,000-€20,000

Willingness to pay: Company A: N/A Company B: €5,000-€10,000 Company C: N/A Company D: N/A Company E: €5,000

Concluding remarks Willingness to pay very low as significant benefits are not foreseen by developers


Minimal market exists for ETV as it is perceived as a costly exercise with little or no reward for developers.


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Business Case 3: Land and Groundwater Remediation: Site Investigation Tools

Technology: Site investigation tools: Soil scanners, biosensors, samplers, contaminant detectors.

Market Characteristics: • Risk averse end users • Market dominated by large and integrated environmental firms • Specialist niche for developers • Low rate of innovation due to slow market acceptance of new/unproven

technologies

Current Market: An estimated €2 billion is spent on site characterisation per annum in the EU. Testing in environmental laboratories accounts for the majority of testing techniques. Approximately 75% of testing could be conducted on-site.

Rationale for ETV

Drivers: • Costs savings • EU legislation (specifically environmental) • Improved performance and efficiency

Barriers: • Customers uncertainty of suitability of product • Customers are highly risk averse, prefer established technologies • Lack of suitable sites for testing new products


• Accelerating market acceptance of new technologies • Establishing norms and standards for innovation • Improve access to new products.

Benefits of ETV • Facilitates market entry • Increases the speed at which product reaches the market • Promotes regulator acceptance of new products

Added value • Receiving independently verified test data • Access to testing facilities and testing sites • Increased confidence in new products • Increased awareness of new technologies • Increased uptake and sales


Costs: Costs of verification: <€10,000 Costs of testing: <€10,000 Administrative costs: €5,000-€10,000

Willingness to pay: Company A: <€20,000 Company B: €0 Company C: <€5,000 Company D: €10,000 Company E: €10,000

Concluding remarks With the need to gain market acceptance and promote the product as quickly as possible, willingness to pay is higher given the barriers to market entry.


The largest barrier for new technologies is the resistance of national and local regulators to unfamiliar products. ETV will create confidence in new products. A substantial market exists if proven to be credible.


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Business Case 4: Water monitoring: In-line Water Monitors

Technology: In-line monitors: sensing system, chemical toxicity monitor, sampling system, chlorine and turbidity.

Market Characteristics: • Immature sector • Large number of SMEs • Step changes in environmental performance • End users are risk averse

Current Market: • In 2009 the EU water monitoring market was approximately €1 billion • The EU in-line market in 2009 was worth around €35 million

Rationale for ETV

Drivers: • EU and MS legislation • More complex issues emerging in water quality • Demand for more sophisticated monitoring devices

Barriers: • Customers are uncertain about a product’s environmental performance • Customers are highly risk averse and prefer market proven technologies • Validation procedures are onerous


• Pursuing continuous improvement in environmental performance • Encouraging the uptake of environmental technologies • Facilitating integrated information collection

Benefits of ETV • Facilitates market entry into EU and non-EU markets • Allows new products to compete with market leaders • Clients gain insights on environmental impacts

Added value • Allows products to compete with market leading rivals • Facilitates market entry into both EU and non-EU markets • Improved efficiency and early detection in water monitoring systems • Harmonisation of standards


Costs: Costs of verification: <€10,000 Costs of testing: €10,000-€25,000

Willingness to pay: Company A: <€10,000 Company B: <€10,000 Company C: <€10,000 Company D: €0

Concluding remarks The demand for ETV is likely to come from revenue generating companies already selling existing monitoring technologies and who see ETV as being a helpful market entry mechanism into this growing segment.


There is a high level of interest for ETV in this area and the strongest demand will come from Northern European countries. The desire to shift away from extensive and costly laboratory testing towards more continuous monitoring of water quality is the main driver for ETV. It will help end users to have more dynamic plant operation and improve their operational efficiency by using advanced and innovative products. The market for ETV expected to be substantial both in the EU and third countries.


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Business Case 5: Energy Efficiency Technology: micro-Combined Heat and Power (mCHP)

Technology: mCHP based on fuel cells, SAtirling engines, etc.

Market Characteristics: • Emerging technology in the EU • World class capability • Highly consolidated • Replacement boiler market is not yet a regulated market • SMEs operating only at a national and regional scale

Current Market: Globally, Europe is the biggest market for domestic boilers with France, Germany, Italy, the Netherlands and the UK dominating EU sales. EU market size is about €2.5 billion. mCHP is regarded as an important aspect of decentralised generation and a future ‘smart grid’ contributor.

Rationale for ETV

Drivers: • EU Energy and Renewables legislation (i.e. EU 2020) • Introduction of Feed-In Tariffs • Potential to reduce peak load demand at centralised power stations

Barriers: • New product price is higher than incumbent technology • Validation procedures for this new technology are very onerous


• Promote faster take up • Promote awareness and also differentiation from rivals • Contribution to other EU and national policy objectives

Benefits of ETV • Facilitates market entry across EU markets • Increases market acceptance

Added value • Help to overcome multiple verifications across Member States • Enable products to be fast tracked through the process of gaining an EU

Energy label


Costs: Costs of verification: €11,000 Costs of testing: €8,000-€12,000 Administrative costs: €20,000-€40,000

Willingness to pay: Company A: €10,000 Company B: €10,000-€20,000 Company C: €10,000

Concluding remarks Most incumbent boiler manufacturers have generally no interest in ETV, given that they can wait 5-10 years for the market to take off. No one wishes to be the first when the current market is selling well. Nevertheless, the scale of potential market means willingness to pay is relatively high, particularly for innovative SMEs seeking to establish a market presence.


ETV will enable SMEs to showcase their products’ green credentials such as carbon savings which current labels and standards do not enable them to do.


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Business Case 6: Energy Technology: Solar hybrid technologies

Technology: Solar hybrid technologies: PV-T are photovoltaic collectors that generally produce heat as a by product Hybrid PV-T heating, solar cooling, solar roof tiles.

Market Characteristics: • Highly innovative sector, with many new innovations supplied by SMEs • The combination of thermal and photovoltaics technologies presents

steep change in innovation • New generations of products often go beyond existing standards

Current Market: Investment in the solar power sector investment is one of the highest among all clean energy sectors. In 2010 the solar photovoltaic market had a turnover of €34 billion. The European share of this market is estimated at 60%36. Germany is the EU leader in production and innovation.

Rationale for ETV

Drivers: • EU legislation, specifically EU 2020 and renewables targets • Rising energy prices • Reducing carbon footprint

Barriers: • Customers are highly risk averse • Product price is higher than incumbent technology • Customers are uncertain about environmental performance


• Improve awareness amongst customers • Set de facto standards above those that already exist • Give confidence to buyers and investors

Benefits of ETV • Facilitates market entry across EU markets • Increases the speed products reach the market • Increases market acceptance • Increases market uptake

Added value • Mitigating the constraints created by the lack of dedicated standards • Offering producers the possibility of verifying performance capacities that

go beyond the scope of existing standards • Reduces risk for our company when investing in RD&D


Costs: Costs of verification: €15,000-€25,000 Costs of testing: €5,000-€15,000 Administrative costs: €5,000-€50,000

Willingness to pay: Company A: €5,000 Company B: N/A Company C: €5,000

Concluding remarks Existing mechanisms for testing are not adapted to the solar hybrid technology family. The lack of standards and norms against which these can be measured make it difficult for producers to use existing certification. Willingness to pay consequently high as are expected benefits of ETV.


An ETV scheme would offer technology producers a means of reassuring consumers of the static and

36 PV Status Report 2009, Joint Research Council, Renewable Energy Unit


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dynamic performance levels of their products. ETV verification could serve as a power marketing tool for technology producers. Market potential in the medium term is large in this context.

Business Case 7: Water Treatment: Anaerobic digestion (AD) and sludge treatment

Technology: AD and sludge treatment: Supercritical oxidation of wastewater and sludges, optimisation of anaerobic digestion using sensors & controls.

Market Characteristics: • Water companies are highly risk averse • Adopting new technologies is lengthy and costly • AD is an immature market using mature technology • Requirement for sludge treatment is dependent on local

need/regulations

Current Market: Denmark, Germany and the Netherlands have very established AD markets. The opportunity to supply biogas to households provides big opportunities, for both water and energy companies.

Rationale for ETV

Drivers: • EU legislation requiring more efficient and higher quality processes • Decreased use of chemicals • Decreased energy costs

Barriers: • Unable to demonstrate the performance of technology in real world operational conditions

• Customers are uncertain of the fitness for use • Customers are uncertain about product’s environmental performance • Product price is higher than incumbent technologies


• Encouraging the uptake of eco-technologies • Provide sufficient operational test data and performance credibility • Give users confidence in technology

Benefits of ETV • Facilitates market entry across EU markets • Allows competition with leading/rival products • Clients gain insights on environmental impacts

Added value • Validating test data from reference site • Minimising pollution and waste form industry and agriculture


Costs: Costs of verification: €20,000-€100,000 Costs of testing: €25,000-€50,000

Willingness to pay: Company A: <€5,000 Company B: <€5,000 Company C: <€5,000 Company D: €10,000-€15,000 Company E: <€5,000

Concluding remarks Water companies offer large prospects for AD and sludge treatment. Other industries offer promising market opportunities including oil and gas, pharmaceuticals, food and beverage manufacturers and industries which have high concentrations of effluent that requires on-site treatment.


There is a high level of interest for ETV in the AD and sludge treatment subsector. There is a clear opportunity to introduce advanced technologies into the market. Extracting more energy from sludge digestion through improving the efficiency of the AD process is an important innovation area..


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5.6 Anticipated costs of ETV and developers willingness to pay

5.6.1 Costs of testing and verification

Assessing the costs of the business cases in more detail, Table 5-2 presents the range of costs produced by each business case, based on the discussions with testing bodies. Where knowledge or experience of verification is limited, certification costs have been quoted as a proxy by stakeholders.

Table 5-2: Estimated testing, verification and certification costs

Business Case Testing (€) Verification (€)

Certification (€)

Assessment report (€)

1: Insulation 3-4,000 - 10-35,000 12,000

2: Biobased products - 5-10,000 5-20,000* -

3: Site characterisation technologies

10-20,000 7-10,000 - -

4: In-line water monitoring

10-25,000 5-40,000

(av. 28,000)

10,000 -

5: Micro CHP 8-12,000 11,000 - -

6: Solar thermal hybrid technologies

6-15,000 - 15-23,000 -

7: Anaerobic digestion 25-50,000 10-40,000 25-50,000 -

*Costs relate to testing and certification process

Table 5-2 clearly demonstrates some of the differences in costs associated with undertaking testing and verification/certification. For example, discrete products such as in-line monitoring technology for the water sector and site characterisation technologies appear to face some of the highest testing and verification/certification costs. Despite this, these sectors were found to demonstrate the greatest market potential for ETV. The complexity of assessing anaerobic digestion technology performance, determined partially by the site specific characteristics of operation and the integrated nature of the solution, supports the relatively high costs presented.

Those technologies where differentiation from the competition was deemed important, particularly to justify the higher costs of an environmentally beneficial technology were found to incur some of the lowest testing and verification costs. This could help explain why these markets are populated by such a large range of technologies, as the barriers to entry which testing, certification and verification costs could represent are minimised in such circumstances.

5.6.2 Costs to developers

In addition to the costs estimated above based on testing body consultation, the costs incurred by developers should be considered. This includes the administrative cost of collating technical and administrative data relating to the technology, plus application costs required to submit information to the testing/certification body. The question of what price each developer is willing to pay for the external activities provided by the


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testing/certification body was posed to companies in each business case. A summary of both these costs to the developer are presented in Table 5-3. This illustrates the average cost received from responses by business case and size of company. The average cost across the entire sample was €16,000 and €7,000 for administrative costs and ETV fees respectively.

Table 5-3: Average administrative costs and ETV fees stated by technology developers

Administrative Cost (€) ETV Fee – Willingness to Pay (€)

Business Case

1: Insulation 7,500 2,750

2: Biobased products - 7,500

3: Site characterisation technologies

11,000 8,000

4: In-line water monitoring - 7,500

5: Micro CHP 32,500 12,000

6: Solar thermal hybrid technologies

22,000 2,500

7: Anaerobic digestion 7,500 4,500

Size of Company

Micro 9,500 7,500

Small 14,500 5,000

Medium 32,500* 7,500

Large 15,000 7,500

Sample Average €16,000 €7,000

*Believed to be an outlier as average driven by high cost reported by a single company response.

The evidence gathered shows that the willingness to pay for ETV is as high in SMEs as in large companies, despite differences in turnover and annual research and development budgets. This partially reflects the hypothesis that SMEs may have more to gain from ETV, entering a new market, often with a limited track record and with highly innovative products which go beyond existing standards. The benefits of ETV are therefore expected to be greater for SMEs, consistent with their willingness to pay revealed above and compared to that of larger companies, who may actually gain less from such a scheme.

The other principle conclusion to be drawn from Table 5-3, and the supporting evidence in the business cases, is that in those sectors where a large range of


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competing solutions exist or in which ETV could play a role in product differentiation, the willingness to pay is lowest. This could be due to the variety of routes to market available to developers, including certification, marketing, industry marking schemes, etc. For these reasons, the ETV must be deemed to be the most cost-effective route for developers and/or it should be employed as part of a selection of measures to achieve the developer’s objectives, in both cases a low individual willingness to pay should exist. In general, the sample suggests a fee of around €10,000 is reasonable for most developers.

5.6.3 Funding and cost-effectiveness of ETV

To many companies consulted in the business cases, cost-effectiveness was deemed to be achieved once the anticipated additional sales attributable to ETV have exceeded the costs incurred by developers. Due to the high degree of uncertainty surrounding future sales and the limited market knowledge of many companies (particularly SMEs), many companies appeared to take a conservative approach, therefore potentially underestimating their willingness to pay. Consequently, the cost-effectiveness of ETV could be greater than predicted by stakeholders.

Where the ability to pay is limited, as in the case of SMEs, but where the benefits are judged to be significant (i.e. the willingness to pay would be high if affordable based on future expected sales), a case for support exists.

In other cases, businesses were found to assess the cost-effectiveness of ETV as part of a package of measures to facilitate a more rapid route to market and eventual uptake of the product concerned. This could include giving consideration to more testing, numerous certification and industry environmental labelling schemes as complements or substitutes to ETV. Assessed as a package the willingness to pay may well be higher or lower, in turn affecting the cost effectiveness of the ETV.

Where no standards or testing protocols currently exist for the technology, or the multiplicity of national and industry certification schemes confuses users, ETV could become the de facto standard and provide the necessary harmonisation of performance requirements and testing protocols to improve the functioning of the internal market. Cost effectiveness should therefore be increased as a consequence.

Finally, cost-effectiveness should not only account for the private benefits of ETV which fall on the developer. The wider benefits on the EU economy and the environment should also be considered (see below)

5.6.4 EU value added of ETV

As demonstrated previously, the wider added value of ETV can be substantial as it contributes to improving the state of the EU’s environment, to employment, as well as to EU industrial competitiveness should the technologies be adopted in export markets. As individual companies do not necessarily directly experience these benefits they are unlikely to be accounted when making decisions like whether to purchase a technology or to undertake ETV. Nevertheless, these benefits should be considered by policy makers taking a much more holistic view. To aid this process a qualitative assessment of the potential wider impacts is presented in Table 5-4 by business case.


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Table 5-4: EU Added value of ETV by Product Market and Impact Category

Business Case/Sector

Leading direct benefits to users

Impacts on EU competitiveness, trade and investment flows

Impact on EU competition in the

internal market

Impact on future innovation and

research activities

Macroeconomic impacts on

employment and sustainability

Environmental impacts

Insulation Increased market acceptance by customers

Greater product credibility among end users

Potential for increase in competitiveness through cost reductions owing to fewer testing and certification requirements for SMEs

More rapid market entry

Facilitation of penetration of other EU markets

Scope for increased product differentiation leading to further innovation (assuming testing standards are rigorously enforced)

Promotion of innovative environment-friendly technologies in the insulation sector through more stringent specifications

Biobased products Potential for improved EU market access for SMEs

Improved consumers awareness regarding product quality and increased market credibility (in particular in period following market maturity)

Increases in efficiency driven by savings due to less burdensome validation procedures

Could help innovative producers differentiate their products from conventional alternatives by better demonstration of positive health impacts

Promotion of more sustainable industrial production

Potential for shift from petroleum and gas-based raw materials to biobased products in long run likely to create new ‘green’ employment openings

Reduction in resource usage through substitution of metal and mineral-based materials

Increased potential for recycling and composting

Reductions in greenhouse gas emissions

Site investigation tools

Improved understanding and acceptance of new site characterisation technologies on part of regulators

Reduction in consumer uncertainty regarding product risks

Better access to testing

Efficiency gains driven by reductions in levels (and costs) of testing should boost competitiveness

Facilitation of entry into non-EU markets; potential for increased investment and exports

Improved market access in home as well as other EU markets

Innovation likely to be promoted by enforcement of common standards across Member States (which along with risk aversion currently impedes innovators)

Aid to developers in terms of building a sound track record could promote sustainable development by driving new technology adoption and broadening the market

Potential for longer run environmental benefits: widespread acceptance of site investigation technologies would result in substantial resource savings in initial stages of land remediation


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internal market


research activities




sites and facilities and independently verified data for developers

In line water monitoring

Increased reassurance of risk averse customers regarding credibility of new products (as opposed to proven technologies)

Strong demand for verification scheme for in-line monitoring equipment; likely to prove self-financing at the outset

Potential for cost reductions through adoption of EU-wide certification and verification standards

Significant export promotion potential – world-class EU R&D space would bolster exports to emerging economies (e.g. China) and established markets (e.g. North America)

Facilitation of market entry into EU Member State markets

Facilitation of competition between small/ young firms and market leaders

Promotion of innovation as gap between knowledge levels of industry and regulators could be bridged

Relative maturity of sector suggests that strongest demand (and medium term added value benefits) would be visible in Northern European countries

Enhanced client insights vis-a-vis environmental impacts

Micro Combined Heat and Power (mCHP)

Increased product acceptance and customer credibility

Potential for increased competitiveness and extra-EU exports through increases in cost effectiveness (leading to improved competitiveness)

Promotion of entry into home and other EU markets

Increased competition between new entrants and established operators

Potential for streamlined verification system and ‘fast tracked’ energy labelling conducive to increased innovation levels

Increased transparency from client perspective as regards potential environmental impacts

Potential for SMEs to advertise ‘green’ credentials of products (e.g. in terms of carbon savings)

Solar hybrid Reduction in consumer uncertainty vis-a-vis new product performance (a ‘power marketing’ tool)

Reductions in cost and

Increased competitiveness driven by efficiencies realised through well recognised standards

Contribution to eligibility

Facilitation of EU market entry (helps resolve capacity constraints faced by SMEs in demonstration and

Promotion of increased differentiation among new high performers and existing products through performance

High anticipated future growth rates likely to drive increases in employment owing primarily to cost and

Improved product performance and quality control drive potential for rise in resource efficiency


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internal market


research activities




time-to-market due to time and resource savings

for public support schemes could lead to increased competitiveness and industry growth

communication)

Reduction in risks involved in R&D investment

capacity verification uncertainty reductions and promotion of innovative technologies

Anaerobic digestion Reduction in uncertainty vis-a-vis operational performance demonstration

Validation of reference site test data to a wide range of clients (especially beneficial for SMEs)

Increase in speed to market

Increases in competitiveness and potential for rise in exports through better access to non-EU markets

Improved market access through increased mutual recognition and accepted market standards

Promotion of competition between new entrants and market leaders

Promotion of innovation rate in sludge treatment sector by addressing issue of ‘lock in’ into combustion processes

Bright growth prospects outside mature markets (such as Germany, the Netherlands and Denmark) points to positive longer run ‘knock on’ effects on employment and sustainability

Increased transparency from client perspective as regards potential environmental impacts

Enhanced demonstration of environmental performance

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

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6 CONCLUSIONS The main conclusions of this study are presented in this section, based initially on the supply-side and demand-side analysis and stakeholder consultation, refined and developed by the business cases summarised above (and presented in the accompanying Annexes to this report).

6.1 Rationale for an ETV

Table 6-1 summarises the conditions under which an ETV is likely to be most appropriate. These conditions will clearly vary by sector and more than one condition may apply in any one sector.

Table 6-1: Conditions under which an ETV is likely to be most beneficial

Standards /certification No product standards currently exist

Certification/standards are unharmonised across EU

Products

Products are discrete and innovation is fast paced

Products are more expensive than incumbents, but can offer superior environmental performance

Testing

Technology is typically laboratory tested

Testing environmental performance is complex

Markets

Markets are populated by relatively homogeneous technologies

Developers are SMEs, often with limited reputation, track record and facing strong incumbent competition

End users

Risk averse customers prefer to buy market proven techniques

The relationship between buyer and seller is underdeveloped especially in nascent markets

6.2 The costs of supplying an ETV service and the willingness of developers to pay an ETV fee are different for each technology

Each business case involved collecting from test centres the costs of testing, certification and verification activities together with estimates from developers of their expected administrative costs in applying for an ETV and associated willingness to pay for a verification. Key findings include:

• Costs for testing were highest amongst technologies of a discrete nature (typically €10,000-€25,000), and where operational testing might be regarded as more complex;

• Verification and certification costs were found to be highest in more integrated technologies (€10,000-€50,000), although testing costs were lower than in the other business cases;

• Average administrative costs in applying for ETV were €16,000 and they were highest for large companies;


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• Average willingness to pay for ETV was around €10,000, with SMEs valuing ETV the most relative to turnover.

For firms already with a reputation and track record, willingness to pay is often the same as much smaller companies, indicating a lower demand for ETV.

6.3 The potential value added from an ETV relates both to the technology developer obtaining the verification and has wider implications for the EU

The business cases confirmed many of the initial insights and expectations, gathered during the market analysis, of what an ETV might achieve, especially for developers. Key conclusions are that an ETV can:

• provide product visibility, legitimacy and differentiation in markets dominated by incumbents;

• could provide de-facto standards in the market where none exist, especially for innovative products;

• facilitate entry of a technology into the market, especially into the EU27;

• add credibility to SMEs developing novel technologies without a track record.

A brief assessment of the expected impacts from an ETV reveals that:

• Environment benefits are expected to be substantial in terms of improved water quality, reduced air emissions from more efficient industrial activity and improved sustainability as resource efficiency improves.

• Employment impacts driven by the increased uptake of environmental technologies and associated knock on impacts in the rest of the economy.

• Potential improvements in market competition where new innovative solutions and SMEs challenge large incumbent producers.

• Improved functioning of the internal market where ETV acts as a de facto standard for new technologies and provides initial testing protocols.

6.4 Cost-effectiveness of ETV

Differences between the willingness to pay for a verification by developers and the costs quoted for a verification by testing bodies indicates that a funding gap exists for certain developers, where they do not perceive the benefits of ETV to exceed its costs. Uncertainty regarding the expected future sales generated as a result of obtaining a verification was found to be the key reason for this result. This is primarily due to many developers having limited knowledge of the market they wished to enter (specifically SMEs) and consequently being conservative in their willingness to pay based on future sales. In other cases, such as micro-CHP, where ETV was perceived as part of a an integrated approach to placing a new product on the market as rapidly as possible, and to differentiate the product as much as possible from its rivals, the willingness to pay was higher.

Whilst ETV does not necessarily eliminate the need for product certification, it could facilitate proof of compliance with one or several (EU or national) standards, thus reducing associated costs. It could also reduce the need for marketing. These factors will enhance the cost effectiveness of using an ETV.


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6.5 Potential scale of demand for ETV across the business cases

The conclusions from each business case allowed an estimate to be made of the total number of developers in that specific technology ‘family’ who would be likely to participate in a proposed ETV scheme. Table 6-2 provides these estimates alongside estimates of the respective market sizes of each technology ‘family’. Overall, approximately 100 applications for an ETV might be expected across the seven respective business cases.

Table 6-2: There is varying demand for ETV across each business case and differing potential according to each technology ‘family’ for such a scheme to be self-financing

Insulation

Biobased

Products

Site

Characterisation

Tools

In-line Water

Monitoring

Micro CHP

Solar Hybrids

Anaerobic

Digestion

Size of EU Market €12bn €17bn €1bn €35-50m €2.5bnPotential

~€25m €1-2bn

Developers in the EU 100-200 1000 100 50-75 20-30 10 50-75

Demand for ETV Low Very low Very high Very high Medium Very high Very high

Developers likely to use ETV in next 1-2 yrs 10-20 4-20 20+ 15-30 3-5 5-10 20-25

Potential for self-financing of ETV

Maximum allowable timescale for developer <2 mths 12 mths <12 mths 6-12 mths <6 mths <6 mths 6-12 mths

Based on these results, there is a clear rationale to establish an ETV for water monitoring and site characterisation technologies, where there are likely to be the greatest chance of success. These are also technologies where the willingness to pay the ETV fee by any one firm might equal the costs of supplying the verification – and hence offering the potential for self-financing of the scheme.

An important caveat underpinning these estimates is that while many developers may choose to apply for an ETV, due to a limited understanding of the ETV process they may not be suitable for it. Experiences from other ETV programmes (e.g. DANETV) indicate that large numbers of initial applicants drop out of the process. A key reason is that their product is not market ready.

It is clearly important, before committing significant resources to technology areas, to conduct further detailed business cases across promising technology ‘families’ to better establish the overall demand for ETV.

6.6 Achieving an effective and operationally efficient EU ETV scheme

Several factors need addressing if an EU ETV scheme is to become a success. Our consultations show that interest by developers in ETV is by no means straightforward: it often requires the developer to review both its channels to market and prevailing market


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requirements before any sort of view can be taken on whether such a scheme will be of benefit and value. To overcome some of these issues, the following factors need to be addressed:

6.6.1 Communicating the operational requirements of the ETV programme is critical to ensuring a smooth and economically efficient operation

The procedure to obtain the verification should be as simple and transparent as possible.

Verification bodies will need to communicate all the requisite tests together with names of testing bodies, relevant standards and regulations for each of the technologies they are covering.

Developers will need to be appraised of the point in their development cycle at which an ETV verification will be most suited. As experienced by the DAN ETV programme, two to three times the number of developers who have been verified have been turned down because they did not have market ready technologies and in many cases required further product development.

A robust set of ‘questions and answers’ will need to be drawn up to answer developer issues (e.g. under what circumstances might it be necessary to undertake a second ETV for any given product ‘family’ within a developer’s portfolio?).

6.6.2 Marketing the ETV programme and developing a strong brand will be critical to achieving the widespread recognition and eventual uptake by developers and wider stakeholders

Technology developers, certification bodies and end users sometimes struggle to identify the need for an ETV scheme. Despite an appreciation of the general logic underpinning ETV (i.e. to improve market entry for market-ready innovative environmental technologies), the added value of an ETV is often unclear in comparison to existing routes to the market. Clear communication and marketing of the ETV process is therefore critical in order to show:

• the differences to companies between verification (an opportunity to go beyond best practice and to demonstrate innovative aspects of a product) and certification (compliance with a standard), as well as other existing labelling schemes in each respective technology area;

• what benefits SMEs can expected from applying; and,

• at what point in the development cycle the ETV will be pertinent to developers.

Other issues that require further consideration include:

• Strong marketing of the ETV “brand” and what it stands for is important in order to increase its visibility.

• A dedicated EU ETV website needs to be established, distinct from the European Commission’s website to improve its profile and credibility.

• Some stakeholders felt that part of the verification fee will need to be allocated to marketing the Scheme.


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6.6.3 Complementarity between ETV and existing certifications is important to determine and could yield benefits which could improve the delivery efficiency of an ETV scheme

In sectors where there are existing testing and certification schemes, either at the member state or EU level, there is some uncertainty about whether an ETV could provide some sort of fast-track mechanism to achieving such certifications or perhaps complementing them. For some technology families, the links between these types of mechanism and ETV would have to be made clear and explicit, and would have to be institutionalised.

Furthermore, several stakeholders noted the specific efforts required to involve and benefit from the experiences of existing EU institutions that deliver testing and certifications. For example, a company may have specific performance claims that, unwittingly, overlap with an existing certification scheme. The verification body will therefore have to ensure that verifications are compatible with other certifications to avoid the need for duplication.

6.6.4 Institutional buy in from environmental regulators across the EU is important

Some subsectors, notably contaminated land and to a lesser extent in water, examined in this study illustrate the strong role played by regulators in determining the market acceptability of technologies. The extent to which an ETV provides sufficient data and assurance for regulators to be satisfied will have to be confirmed over time.

6.6.5 The number and location of verification bodies required to establish verification at the European level will vary by technology ‘family’

Broad conclusions on the number of verification bodies that might be necessary are that:

• having concentrated expertise within one verification body, rather than achieving broad geographical coverage across the EU is critical (for example, in micro CHP, where the current park might be restricted to 10-15 developers);

• where the market is sufficiently large, a minimum of three to five verification bodies was felt to be adequate (e.g. water treatment and monitoring technologies) – for example, catering to Northern/Eastern Europe, Central Europe and Southern Europe;

• there may be scope for increasing the number of verification bodies to two in some regions, but only where it can be sufficiently proved that there are enough verifications to be carried out (e.g. contaminated land where ETV demand appears concentrated in Northern Europe).

One caveat is that SMEs tend to find it easier to collaborate with national bodies and language issues might prove problematic in some cases.

6.6.6 Affordability of an ETV scheme will be important for developers

ETV will need to be cost-competitive in comparison with existing performance certification, testing and labelling mechanisms. Various suggestions were received as to how to make ETV more affordable to SMEs:

• The verification fee could be proportional to a company’s turnover. Where there is a funding shortfall, this would ensure that micro and small businesses are able to benefit despite not being able to afford a large financial outlay.


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• The fee for ETV might be deferred until a company is selling its product. ETV costs could then be recovered, so that it was not front end loaded for the developer.

• Since end users often spend a large amount of product testing in-house, end users could contribute towards ETV funding alongside developers and the programme itself. Indeed, in the contaminated land sector, for the ETV to succeed it might need to be sponsored by the industry that the technologies are looking to serve.

Clearly the first two options may not be feasible for verification bodies, but this approach could be possibly followed by other funding schemes (for example, in some member states through provision of loans for innovation work under similar conditions).

6.6.7 Funding support mechanisms for users of an ETV scheme are likely to be available at the EU and member state level

At EU level, ETV clearly dovetails with core EU policy objectives, particularly for technologies and products focused on pollution reduction and improved resource efficiency (energy/carbon). The extent to which EU funding programmes can offer support is one obvious way of overcoming apparent funding gaps for any particular technology group and sub-group. The mechanisms most widely mentioned by developers and stakeholders include:

• Framework Programme for R&D (e.g. for micro CHP, biobased products, etc.);

• EU Strategic Energy Technology Plan (SET-Plan);

• Competitiveness and Innovation Framework Programme (CIP);

• LIFE+ for new technology demonstrations.

Many of these programmes involve significant product testing and hence developers felt that, by dovetailing with the ultimate requirements of an ETV verification, both large cost and time savings could be achieved by avoiding potential duplication. The ability to factor in verification fees might be possible at the project application stage, as long as these were approved by the relevant Commission project officers and National Contact Points who oversee the application processes.

At member state level, several potential mechanisms support R&D and, in some cases, the testing and sampling that has helped to demonstrate performance. These included:

• National innovation agencies and programmes (e.g. the Finnish Innovation Agency TEKES, Swedish Innovation Agency VINOVA, and Technology Strategy Board in the UK, etc.);

• Industry / sector specific initiatives (e.g. national competitiveness cluster programmes in France which support a number of technologies; the German BMELV RTD Funding Programme for the use of biomass including biorefineries).

A key challenge is the point at which State Aid restrictions apply to these national funding mechanisms. Some developers reported that verification costs were outside the allowable expenditure of some R&D programmes (e.g. at VINOVA).


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6.6.8 Evaluation of ETV verifications must be core to the strategy for developing the ETV programme

Evaluation can be used to increase the credibility of the whole ETV process and hence improve the potential uptake by SMEs. To this end, it will be critical to put in place key performance indicators (KPIs), covering economic and environmental performance, to determine the value created from each verification. Particular areas to evaluate would include the degree to which market access has been facilitated by the verification; the value of sales; employment impacts arising from increased sales; environmental impacts and carbon savings arising from increased deployment of the technologies and products.

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