detailed assessment of the market potential, and … · detailed assessment of the market...

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

BUSINESS CASE ANNEXES

To the European Commission

DG Environment

Under Framework Contract No.

DG BUDG No BUDG06/PO/01/LOT no. 1

ABAC 101931 – EU ETV Scheme

EPEC June 2011

Contact name and address for this study:

Jonathan Lonsdale, Principal

E-mail: [email protected] Tel: +4420 7611 1100; Fax: +4420 3368 6900

GHK Consulting, Clerkenwell House, 67 Clerkenwell Road

European Policy Evaluation Consortium (EPEC)

Brussels contact address: 146 Rue Royale – B-1000 Brussels Tel: +32 2 275 0100 Fax: +32 2 275 0109

E-mail: [email protected] URL: www.epec.info

mailto:[email protected]

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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CONTENTS

Annex 1 BUSINESS CASE: INSULATION......................................................... 1 Annex 2 BUSINESS CASE: BIOBASED PRODUCTS ..................................... 18 Annex 3 BUSINESS CASE: SITE INVESTIGATION TOOLS........................... 32 Annex 4 BUSINESS CASE: IN-LINE WATER MONITORING.......................... 54 Annex 5 BUSINESS CASE: MICRO COMBINED HEAT AND POWER........... 70 Annex 6 BUSINESS CASE: SOLAR HYBRID TECHNOLOGIES .................... 91 Annex 7 BUSINESS CASE: ANAEROBIC DIGESTION................................. 111

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ANNEX 1 BUSINESS CASE: INSULATION The following business case has been prepared on the basis of seven interviews. The interviews include four company representatives and three certification bodies. A total of eight companies and eight certification bodies and testing centres were contacted.

A1.1 Introduction This business case builds on market analysis findings of the Cleaner Production and Processes technology area and Low Carbon Building Materials technology group (see main report). This showed 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.

The insulation sector is a very large market (e.g. floor, wall and roof insulation as well as pipework) within which companies are required to obtain certification within different member states in order to access new markets. Despite the presence of a number of very large companies that dominate the current supply side, the insulation sector is also characterised by the presence of a large constellation of SMEs, often working at the local or national level, bringing to market both renewable-based and leading edge innovative insulation products (e.g. aerogels). These producers often have to prove to the market the extent to which some of their products offer both superior performance and stronger environmental credentials than traditional solutions.

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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A1.2 Current status of the market and technology

A1.2.1 Nature of the market opportunity

The insulation market is a mature market, with a large number of technologies available. However, innovative technologies represent a small share of the total turnover of the insulation market in the European Union (around 5%). Some member states dominate the innovative market: Nordic countries, Germany and Austria. With policy makers and civil society increasingly focusing on energy efficiency and the environmental impact of construction products, more innovative products are entering the market. Due to the highly competitive nature of the market, there is an innovation push for highly energy-efficient technologies. The new building business relies increasingly on green-oriented products, and the same process is starting in the retrofit sector – even though retrofit activities are far less targeted by regulation.

Potentially, the market for new high efficiency technologies in the insulation sector is unlimited. Even when taking into account the diversity of insulation needs across Europe (depending for instance on climate specificities), all individual homes, buildings and industries could be the target of these technologies. Growing environmental regulation is likely to provide producers with great opportunities to expand this market.

Overall, the market opportunity for EU producers of new insulation technologies is high. With energy efficiency being a European flagship action in the EU 2020 strategy, awareness among producers and end users should rise, and drive the market to further take into account the environmental-related performance of the products.

A1.3 Innovation drivers

A1.3.1 Main EU and Member states regulations influencing the development of the technology

At EU level, the Energy Efficiency in Buildings Directive 2002/91/EC (2002) is the central piece of regulation. This directive has far reaching implications for home-owners and the construction sector. It has helped turn attention towards the energy efficiency of construction products, especially insulating products. This has stimulated R&D expenditure in insulation technologies.

At the member state level regulation is indeed particularly relevant to the insulation sector. The diversity in climate and land conditions across countries has meant construction regulations vary significantly. Several member states have adopted very demanding regulation for insulation. For example, in France, the new building regulation code (RT 2012) demands high energetic performance for new buildings and takes into account the insulating capacity of the building. The UK has developed a special code for sustainable homes (2007), aimed at changing practices in the construction of new houses by introducing minimal standards for energy efficiency.

Owing to differences in national construction regulations and building standards, the construction material market is highly fragmented. Companies have a very difficult time entering new markets due to the cost of adapting their products to local regulations.

A1.3.2 Non-regulatory end user requirements on innovation and performance

With rising energy prices, reduction of energy needs is of great concern for final users. Fundamentally, insulating products aim to reduce the demand and use of energy. This

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explains the high level of acceptance from home and building owners regarding the use of high performing insulating materials. End users’ choice is also price-driven: the product and duration (life-long cycle price) have great influence on end users, explaining why innovative companies focus on R&D in order to develop products at competitive prices. The economic efficiency of new technology use is therefore as important as their environmental impact.

In addition to the demand for products with greater insulating properties, users also express concerns regarding safety for use. In particular, high performance against fire and water damages. In the end, the users demand guarantees across supporting aspects of the insulation products that go beyond its core function.

A1.4 Current and future performance of technologies

A1.4.1 Current technology provision

A small number of large companies, such as Rockwool (Denmark), Saint-Gobain (France), Knauf insulation (Germany) or Uralita (Spain) dominate the European insulation market. These companies generally offer traditional products, derived from glass or plastic and invest heavily in R&D activities, focusing on increasing the lambda value of their products and making the products thinner. At the same time, hundreds of innovative micro and SMEs are trying to access the insulation market, offering highly innovative products (e.g. aerogels, eco-based materials, etc.). These SMEs however more often target local or national markets, whereas large companies operate internationally.

A1.4.2 Indication of ‘State-of-the-art’ for current technologies

Because building-related energy consumption represents a large share of the total energy consumption, the opportunity to introduce more effective insulating products is obvious. Reducing energy consumption and the carbon footprint of buildings at the same time is possible, by relying on new materials but also by working on the interaction between very diverse products. It is indeed the effective combination of these different products that helps increase the energy efficiency of buildings. The idea is to reduce as much as possible the lambda (λ) value of the entire building1. The development of more energy efficient technologies has then to be coupled with development of technologies used to monitor and assess a building’s real performance.

Technology developers are also trying to reduce the thickness of insulating products while increasing their insulating properties. Providing the general public with thinner and more efficient insulating products is a good opportunity for new technology producers to introduce radically innovative products.

A1.4.3 Likely developments of technology performance standards

The development of performance standards in this particular sector will be determined by the regulation and building requirements adopted at the national and European level. Therefore, predicting the evolution of performance standards is not always easy.

1 The lambda value, or thermal conductivity, is the rate at which heat is transmitted through a material, measured in watts per square metre of surface area for a temperature gradient of one Kelvin per meter thickness, simplified in W/mK. The lower the value, the better the thermal efficiency of the material.

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However, today’s trends in the sector provide us with hints regarding likely development of technology performance standards. First, companies focus on increasing the insulating capacity of their products, in order to cope with national or European regulations. Second, production is becoming increasingly green-oriented, using renewable materials as raw materials and aggregates to their final product. Third, some producers are trying to reduce the thickness of their products (that is especially the case with aerogels, which is two times thinner than standard products, with better insulation properties). In addition, the long-term performance of new products is also tested, and is likely to increase in oncoming years.

A1.5 Technology developers being examined in this business case Company A - develops aerogel-based insulation products that may be used in all types of buildings. It characterises itself as an ‘R&D company’ working mainly on a business-to-business basis. It develops aerogel-based materials for producers of insulation materials, for final users. The company spends a large amount of its budget on R&D, in order to reduce the total cost of its products (aerogel-based products are generally more expensive than traditional products).

Company B - has developed pre-insulated wall panels from recycled material such as paper. The product is currently in a pre-commercial stage, within two months of being available on the market. Regarding environment-related performance, the product has a very low carbon footprint in comparison to traditional solutions, mainly as a result of the low-carbon content of the product (a paper industry by-product).

Company C - has developed insulating panels from hemp. Constructors have been using hemp as an insulation product for a very long time, but the raw material is now being used as an innovative material, given its ‘green’ credentials combined with high insulation properties. With three products on the market, and two in development, it operates across the EU including in Germany, France, Sweden and Czech Republic.

Company D - is a multinational producer of construction materials. It recently developed a highly innovative binding technology, used in traditional insulation products (mineral or glass wool). The new product is derived from renewable materials, making the binding more sustainable. It is a radical innovation, in comparison to oil-based chemicals generally used for binding insulation materials. The company also is nowadays working on instruments to better assess the overall insulation properties of buildings.

Table A1.1: Overview of technology developers in this business case Organisation information

Technology developer A

Technology developer B

Technology developer C

Technology developer D

Member State Sweden UK / Ireland Germany Germany

Size Micro Small Small Large

Age (years) 11 15 13 30+

Products in development NA 3 2 NA

Market ready products NA 4 1 NA

Products in market NA 4 3 100+

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Product description

Environmentally friendly and recyclable aerogels for insulation

purposes

Pre-insulated panel from recycled

materials

Insulating panels from hemp

Glucose-based insulation binder

technology

NEED FOR ETV

A1.6 Routes to market for companies

A1.6.1 Summary of the key barriers to market acceptance

Table A1.2 illustrates the main barriers encountered by companies wishing to place new insulation products on the market. Responses generally depend on the type of company and the product being considered. The main barrier, encountered by three companies, is that their product costs more than incumbent technologies... Two companies have difficulties demonstrating performance in real world operational conditions.

Table A1.2: Rationale for ETV - Barriers

Technology Developer

Barriers A B C D

Our new product price is higher than incumbent technologies X X X

Customers are uncertain as to how suitable our product is to their operations (i.e. fitness for use) X

We lack legitimacy for our environmental performance claims X

We are unable to demonstrate the performance of our technology in real world operational conditions X X

Our customers are highly risk averse and prefer to buy market proven technologies X

Validation procedures for this new technology are very onerous X

A1.6.2 Current standards, norms and labelling that are used for the technology (family)

Due to the high level of maturity of the insulation sector, there is a wide array of standards and certification schemes that apply to this type of material. Existing mechanisms are either implemented at the European level or at the national level.

European standards and norms

In order to sell their products in the European Economic Area (EEA), building products have to conform with legally required minimum safety characteristics, leading to the CE marking. This is one of the outcomes of the Energy Efficiency in Buildings Directive.

This Directive also paved the way for the development of European standard (EN). European standards are adopted by the CEN (European Committee for Standardization2) and apply to all Member States, and supercede all existing conflicting

2 CEN draws up voluntary technical specifications to help achieve the Single Market in Europe

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national standards. Members of the CEN have now developed the Keymark for thermal insulation products. This is a voluntary quality mark, aimed to show insulation products’ conformity to the array of European product standards. The Keymark is a voluntary third-party certification based on the following product standards:

• DIN EN 13162:2001-10 "Thermal insulation products for buildings - Factory made mineral wool (MW) products - Specification"

• DIN EN 13163:2001-10 "Thermal insulation products for buildings - Factory made products of expanded polystyrene (EPS) – Specification"

• DIN EN 13164:2001:10 "Thermal insulation products for buildings - Factory made products of extruded polystyrene foam (XPS) – Specification"

• DIN EN 13165:2001-10 "Thermal insulation products for buildings - Factory made rigid polyurethane foam (PUR) products – Specification"

• DIN EN 13166:2001-10 "Thermal insulation products for buildings - Factory made products of phenolic foam (PF) - Specification"

• DIN EN 13167:2001-10 "Thermal insulation products for buildings - Factory made cellular glass (CG) products - Specification"

• DIN EN 13168:2001-10 "Thermal insulation products for buildings - Factory made wood wool (WW) products - Specification"

• DIN EN 13169:2001-10 "Thermal insulation products for buildings - Factory made products of expanded perlite (EPB) – Specification"

• DIN EN 13170:2001-10 "Thermal insulation products for buildings - Factory made products of expanded cork (ICB) - Specification"

• DIN EN 13171:2001-10 "Thermal insulation products for buildings - Factory made wood fibre (WF) products - Specification"

Another way to gain European technical approval is to obtain its approval from a member of the UEAtc (The European Union of Agrément3). The UEAtc was created in the 1960’s in order to facilitate international trade of construction products from one European country to another. Members of the UEAtc are responsible for issuing national technical approvals, and through the UEAtc it is possible to obtain approval in another country based on work already carried out. The technical approval is a useful tool to assess the fitness of use of a product. Membership to the UEAtc is voluntary and the methodology for approvals is made through consensus among members.

National Agréments and technical assessments

Most national approval/certification bodies offer voluntary product certification that relate to testing and assessment to national standards or other normative documents.

The British Board of Agrément (BBA - UK), or CSTB (in France) offer Agrément certificates, based on rigorous examination of the product, the production process and its fitness for use and safety. This process helps move the product from a confidential market to the general market. However, this type of certification is regard by producers as onerous because it is a long and expensive process and better fit for mature products with a history on the market. As a result, there is demand for a similar, less

3 UEAtc is the European network of independent institutes, Centres or Organisations that are engaged in the issue of technical approvals for innovative construction products or systems

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burdensome, type of certification which which is more adapted for market-ready innovative products.

In response to this demand, a limited number of national certification bodies such as BBA and CSTB have developed specific mechanisms for innovative products, known as assessment reports4. These offer producers a first point of entry into the market and larger scale performance testing (they can be a precursor for an Agrément certificate for example). Assessment reports also help innovative producers reassure first consumers and insurance companies about the readiness of the products and the fitness for use.

It is worth highlighting however that the certification landscape in Europe in the field of construction materials remains strongly fragmented and confined to each Member State. This reflects differences g among national regulatory frameworks and building requirements; and the differences in testing and certification cultures in each Member State. For instance, Belgian or French certification bodies take into account the fitness for intended use of a product when assessing its performance (dynamic performance), whereas in Germany certification tends to concentrate performance of the product in itself (static performance).

Additional National labels Several member states have developed green labels, such as Natureplus in Germany, Ecolabel in Scandinavia or Environmental Profile certification (issued by the BBA). These labels aim to differentiate eco-friendly products from traditional products. However, most of these labels do not provide consumers with data on the insulating performance of the product. At the European level, the EU Ecolabel aims to provide consumers with sufficient information about the environmental performance of a product.

A1.6.3 Trialling and demonstration of technologies

Company A - has conducted extensive in-house trials, in addition to working with intermediaries (installers, architects, construction companies) who provide the company with specific on-site testing requests.

Company B - uses internal tests to carry out demonstration of its product. It has already spent €100,000 in R&D for its product, with an annual testing budget of about €20,000. The key challenge is to find a way to differentiate its product from traditional products to increase its access to the market. Their product has very good carbon footprint credentials, but there are no existing mechanisms that allow the display and marketing of this.

Company C - has carried out a number of tests, both internally and through third-party testing. Through this it has obtained several national or international labels, such as Natureplus or Stiftung Warentest. It is well able to carry out trialling and demonstration of technologies and as a result, these do not necessarily represent a burden for them.

Company D - has developed over the years considerable experience in quality procedures and internal testing within its own facilities

A1.7 Rationale and value added for technology developers from undertaking an ETV

4 ‘Pass Innovation’ in France

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A1.7.1 Overview of companies issues

Table A1.3 illustrates the mixed views insulation companies have regarding the benefits from the potential introduction of an ETV scheme. Aside from company A which did not identify any potential benefit from an ETV scheme, the other companies thought an ETV would increase the speed at which their product could reach the market. Additional benefits would be to facilitate entry into other EU markets and increase market acceptance by customers.

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Table A1.3: Benefits from having an ETV for technology developers Technology Developer

Benefits of ETV A B C D

Facilitates market entry for our product into other EU markets X X

Facilitates market entry for our product into non-EU markets X

Increases the speed at which our product reaches market X X X

Increases market acceptance of our product by customers X X

Clients gain insights on environmental impacts from our product X

No benefit from an ETV X

Company A - carries out itesting internally, working with final producers to develop specific products. An ETV scheme would have limited added value, because the product has no real problem entering the European market. Their production is largely driven by high consumer demand and their aerogel-based products are only slightly more expensive than usual products, allowing them to be competitive in the market.

Company B - sees the lack of differentiation between its environmentally-friendly product and traditional products as its main barrier to market entry. It is looking for a way (label, etc.) to show the added sustainability value of its product, in terms of its content and method of production. It has no problem testing the insulating properties of its product, so the added value of an ETV scheme would be limited. However, it would help to access the market faster, by increasing end user confidence in the product.

Company C - uses both internal and external product testing, but could use ETV as a complementary route to market, both inside and outside the EU. The increased speed for entering the market which an ETV scheme could facilitate would be an additional benefit given the large amount of money it has spent in developing and testing its product.

Company D - sees the real added value of ETV in reducing the number of testing and verification processes required to enter national markets. ETV could increase the speed at which its product reaches market. It should also help reduce end user (as well as insurance companies) reluctance to use innovative products (include also insurance companies).

A1.7.2 Conclusions - why developers of this technology would want to undertake an ETV

In the insulation market, where there is already a significant number of national and European performance certifications, testing and labels, an ETV scheme would have added value for developers. It would:

• allow them to gain credibility among end consumers;

• potentially reduce the number of testing and certification processes SMEs would have to undergo before entering different European markets;

• increase the speed at which products enter the market.

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A1.7.3 Stakeholder views on the need for ETV in this technology area

The development of ever more stringent regulations for improved insulation performance is stimulating the need for more innovative products to enter the market. Tightening regulations have also paved the way for more demanding testing and evaluation from certification and verification bodies. According to representatives from several verification bodies, the use for ETV would be great if it gives developers a way to differentiate products on the market.

However, verification bodies in the UK, France and Belgium have found it difficult to understand the added value of an ETV, compared to the services they are already carrying out, and how it could be built and structured. The common concern is that the methodologies and priorities among verification bodies across Europe, as well as among national regulators is too diverse. Differences in geography (i.e. climate) or evaluation history have led to very different views about what should or should not be assessed and accepted when testing a new product.

In conclusion, verification bodies want to emphasize the specificity of testing in the context of insulating products. Because buildings must have specific safety and fire-resistance standards, testing and verification are not always simple and come become highly politicised. An ETV scheme would help innovative producers as long as it relies on rigorous testing of fitness for intended use and life-long performance.

COSTS AND WILLINGNESS TO PAY FOR ETV

A1.8 Introduction This section reviews the implementing, operating and user costs of an ETV scheme. It provides an overview of the likely costs to developers including:

1. Cost of testing the technology to enable it to apply to the ETV;

2. Costs of testing the technology in the event that the verification Body requires further testing;

3. Official ETV fee – which the developer / vendor will need to pay to the verification programme;

4. Other internal costs to the firms.

The section continues by looking at the costs of supplying verification services to companies.

A1.9 The costs of potential verification for technology developers Company A - has invested approximately €70,000 in testing equipment. A large amount of work time is dedicated to R&D and testing, as the company works directly with final producers to develop new products with very specific use.

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Company B - has invested over €100,000 to date in research and development, and spends €20,000 every year on testing (with administrative cost being around €10,000). It considers that the verification fee range should not be more than €5,000.

Company C - has invested around €200,000 in R&D for its hemp-based product, with an annual testing budget around €15,000 (including €5,000 for operational costs). It considers the verification fee range has to be around €3,000, emphasising the heavy existing costs of product testing (€6,000) and certification (€4,000).

Company D - has spent approximately €200,000 per year in testing its product. Testing for new products can take up to 10 years for very innovative or step-changing products. The company is unable to assess specific costs of verification given the very large amount of time and money spent on various testing and verification procedures.

Table A1.4 summarises the potential cost of verification for some of the companies interviewed in this business case. Despite the limited information provided, it is possible to conclude that companies are:

• not willing to pay more than €5,000 for a verification;

• generally only willing to wait approximately 2 months for verification;

Table A1.4: Costs to developers of undertaking testing and willingness to pay for verification for ETV Technology Developer

A B C D

Annual testing budget NA €20k €15k €200k

Total R&D invested to date5 NA €100k €200k €1m

Willingness to pay ETV fee (a) NA <€5k €3k NA

Administration costs for verification (b) NA €10k €5k NA

Total costs for verification (a + b) NA €15k €8k NA

Maximum amount of time willing to wait for verification NA 2 months 2 months NA

A1.10 The costs of supplying verification services to technology developers

A1.10.1 Overview of costs

The following tables show that the cost of testing largely depends on the results companies want to achieve: simple testing can be relatively cheap; further evaluations (including assessment report of certification) can however cost up to €35,000 depending on the complexity of the tests.

Table A1.5: Costs of providing testing and verification services across the insulation sector

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Certification Assessment report Testing

Belgium €10k - -

France €15-20k €12k €3-4k

UK €17 to 35k €12k -

A1.10.2 Summary of what would be the cost for developers of this technology when undertaking an ETV

From the various interviews carried out with companies and verification bodies, it is possible to draw some conclusions regarding the potential cost of an ETV for developers in the insulation sector. Most of the estimates provided in the following sections are calculated by using existing testing and certification costs as proxies. The verification fee for an insulating product should range from €5,000 to €15,000, if no additional testing is required. Verification fees will vary depending on the:

• number of parameters that firms are seeking to verify - insulation properties, moisture, fire or noise resistance, relation with other building products;

• number of parameters ETV encompasses;

• complexity and novelty of the technology;

• tests the company has previously done and the need for additional testing;

• location of the certification and testing bodies.

Compared to the cost technology producers are willing to pay for technology verification, there could be a difference of up to €5,000 approximately between the real price of verification and the maximum price producers would be willing to pay.

Certification and testing bodies estimate the time for certification to be between 3 months and one year, depending on the numbers of parameters and the novelty of the products. They also stated the time needed for verification must be not too long, the life cycle of an insulating product being generally around 5 years.

ETV MARKET POTENTIAL

A1.11 Conclusions from the business case

A1.11.1 Business case conclusions

A European-wide verification scheme offers the possibility of gaining recognition of the performance levels of a product in multiple countries, reducing the time and cost of obtaining multiple certifications. An ETV scheme could also be set up to represent a time and cost-friendly alternative to existing certifications and agréments, which are often difficult to obtain for young companies. Insulation materials represent a dynamic, high growth sector that will continue to expand because of rising consumer demand from and more stringent building requirements and regulations. Innovation is thus bound to flourish, particularly throughout the constellation of SMEs making up the

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sector. The market is still currently largely confined to national borders, and companies often encounter difficulties entering new markets, due to the differences in stringent building regulations and certification cultures among member states.

An ETV however would be created within the context of a pre-existing set of national and European certification and testing schemes and risks being drowned in this ‘spaghetti bowl’ of schemes. In addition, Member States and additional stakeholders may not recognise ETV as credible and relevant owing to the particular demands of national construction sectors, for example safety issues, insurance certification and national building requirements.

Key challenges for technology

The main challenges are:

• how to assess the life-long performance of a new product. Evaluators and product developers need to do more research in order to provide consumers with valid indicators assessing the life-long performance of their products;

• Assessing the suitability of a new insulation product according to insulation performance as well as other criteria, for example safety, resistance to fire or moisture. This could only rely on a set of well developed and recognised tests, built on agreement between testing and certification organisations;

• Accommodating differences in construction material markets and building standards and managing a multiplicity of certifications in accordance to each national market.

Value added for firms undertaking the ETV

For this technology family, the creation of an ETV scheme would:

• facilitate access to the EU market, particularly for SMEs;

• increase the speed for accessing the market for innovative companies;

• allow greater possibilities for differentiation between average and high performing products.

In a broader sense, an ETV scheme would provide a Europe-wide verification which would sit above member state certifications. Assuming Member States accept ETV, there is an opportunity to obtain ‘fast track’ approval (saving costs to the developer).

Finally, ETV could represent a shorter, less expensive alternative to traditional accreditations/certifications such as the European Keymark verification. This would be benefit small companies in particular, which lack a sales record, as well as the necessary cash flow in order to obtain full accreditation or certification.

Potential number of firms who might be interested in scheme

The number of firms who might be interested in the ETV scheme is difficult to assess. A rough estimate of the number of firms who might be interested in an ETV is between 100 and 200 – the insulation sector is dominated by 10-20 major companies across the EU but there are a large number of SMEs and numerous innovative companies. Overall, the number of products and national regulations is also very high, so the issues companies face are rather unique. We estimate that given the fairly low demand for ETV that the number of developers likely to apply for an ETV over the next 1-2 years would be between 10 to 20.

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A1.11.2 Sector wide conclusions

This business case can be used to draw conclusions about the need for an ETV scheme across the wider low carbon building technology group. The insulation sector faces the same commercialisation challenges and framework conditions (existing standards, certifications, testing procedures) as other low carbon building sectors. It is important to note however, that there may be differences among products which may affect the rationale for an ETV scheme. These differences generally relate to the:

• maturity of the technology group/family;

• existence of methods of performance certification and testing, notably at the European level;

• existence of standards, and standardised testing methods;

• size and reputation of the main innovators;

• rate of innovation;

• differences among Member State regulatory frameworks, and the willingness to recognise a European verification scheme.

As a result, this case study’s conclusions should be applied cautiously to other technology families.

A1.12 Operational challenges for an ETV in this area

A1.12.1 Possible funding support mechanisms for ETV users

There are a limited number of member state and European funding mechanisms available for market introduction projects in the insulation field. However a detailed analysis of this issue, especially at the national level, would require looking into the hundreds of innovation support mechanisms in all Member States. For example, in France, companies may receive financial assistance for insulation projects within the framework of the national competitiveness cluster policy. There is a dedicated cluster to positive energy building technologies, Alsace Energivie. There are also a number of funding opportunities at the European level, mainly through the Competitiveness and Innovation Framework Programme (CIP). An example of a CIP-funded project is MDFCYCLE, aimed at establishing a functional pilot plant to convert waste medium density fibreboard into recycled wood fibre for insulation purposes.

A1.12.2 Number and location of verification bodies required to establish verification at the European level

Due to the size of the European insulation sector, and the broader construction materials sector, establishing an ETV scheme would probably require establishing at least three verification bodies, whose work could be carried out in partnership with member state certification and testing bodies.

A1.12.3 Potential barriers to market introduction and diffusion

The main challenges for the implementation of an ETV scheme dedicated to this technology group are:

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• The existence of a well developed and recognised set of testing and certification organisations, which operate at the European level;

• The fact that most companies must go through a long and expensive testing and certification process, limiting their capacity to undergo additional verification;

• The importance of the safety dimension in construction product testing and certification. Technology producers, public authorities and insurers are often hesitant to recognise the value of any certification or testing scheme, unless they can be fully certain of the precision and technical quality of these schemes;

• The considerable differences that exist among Member States in terms of building requirements and regulations, as well as certification and testing cultures. This may reduce the possibilities of an ETV being accepted and recognised across all Member States.

In addition to this, technology producers and certification bodies expressed difficulties identifying the exact role, objectives and added value of an ETV scheme. As a result, their willingness to participate, and by extension their willingness to pay, is strongly reduced.

A1.13 Making a success of ETV – how to maximise value going forward The success of an ETV will depend on a number of underpinning issues including:

• Marketing the ETV brand: As most other labels and certifications, the ETV brand will have to be strongly marketed in order to increase its visibility. Technical excellence will not suffice to ensure ETV’s success. Instead ETV operators must ensure that ETV is branded correctly, to technology developers and consumers.

• Making the need visible and understood: Based on the experience preparing this business case, it soon became clear that technology developers and certification bodies were unable to identify the need an ETV scheme would answer to. Despite their understanding of the general logic behind ETV (improve market entry for market-ready innovative environmental technologies), it was unclear to these stakeholders where the added value of an ETV lies in comparison to existing routes to the market. It will therefore be necessary to effectively communication on the rationale of an ETV, the potential benefits for users, and its position in the landscape to existing certification, testing and labelling schemes.

• Building on complementarities: Due to the existence of multiple testing and certification alternatives already on the market both at the national and European level, an ETV scheme should seek to develop complementarities with these mechanisms. For example, an ETV scheme could fast-track the certification under the Keymark, or other multiple national certifications schemes, those offered by the British Board of Agrément. The links between these types of mechanism and ETV would have to be made clear and explicit, and would have to be institutionalised.

• Making it cost-competitive and reasonably simple: ETV will have to be cost competitive in comparison to existing performance certification, testing and

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labelling mechanisms. In addition to this, the procedure to obtain the verification should be as simple and transparent as possible.

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ANNEX 2 BUSINESS CASE: BIOBASED PRODUCTS The following business case has been prepared on the basis of seven interviews. The interviews include four company representatives, one R&D centre, one trade association, one technology centre and one certification body. A total of 12 companies were contacted as well as two certification bodies.

A2.1 Introduction This business case builds on the market analysis of the ‘biobased products6 technology group (see main report) which found that the overall turnover for this market is huge and growing with particularly large potential markets including automotive, aerospace and construction sectors. Market opportunities exist for biocomposite materials to replace expensive and energy intensive metals or finite fossil fuel derived plastics (particularly with rising oil prices). This creates potentially large raw materials cost savings combined with 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.

A2.2 Current status of the market and technology Novel bioplastics have been sold for over 20 years. Manufactured from either biobased or petrochemical feedstocks, they were originally intended to help reduce waste and free up landfill capacity by rapidly biodegrading. Market interest for biobased plastics often came from producers of single use applications. The focus has now shifted towards the advantages of biodegradabilty in helping to counter climate change.

Bioplastics are compounds based on a polymer such as PLA or PHA and additives (e.g. processing aids, stabilisers, colorants, etc.). The polymers can be made from up to 100% renewable resources; colorants and additives can also be formulated from renewable resources.

Biodegradability7 is dependent on the chemical structure rather than the origin of the raw materials. As a result, there are synthetic polymers, which are certified biodegradable. This distinguishes them from conventional standard plastics, which are neither biodegradable nor compostable. A2.1 shows the level of biodegradability of the main products.

6 Biobased products are commercial or industrial products composed, in whole or in significant part, of biological products or renewable domestic agricultural materials (including plant, animal, and marine materials) or forestry material. 7 The terms biobased and biodegradability may be related, but they are not synonymous nor are they interchangeable. If a material is biobased it comes from plants or animals, but it does not necessarily follow that it is biodegradable. A material is biodegradable only if microbes in the environment can break it down and use it as a food source.

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Figure A2.1: Current and emerging biobased plastics and their biodegradability

Source: PROBIBP, Product overview and market projections of emerging biobased plastics, University of Utrecht, June 2009.

The EU currently accounts for about 30% of the global €58 billion biobased products market which is expected to more than treble by 20208. In 2010, biobased products9 accounted for 10% of sales within the global chemical industry, accounting for $125 billion (€90 billion) in value. This share could rise to as much as 20% depending on the development of technologies, feedstock prices and an appropriate policy framework.

Germany is the third-largest producer of plastics worldwide (7.5% market share) and has a 24% market share in the EU. Accordingly, plastics producers - as well as converters interested in biobased materials - find ideal framework conditions for their businesses in Germany which holds a leading position in the bioplastics industry worldwide.

Several biobased products are already sold in the European market. For example, the chemical industry currently uses 8-10% renewable raw materials to produce various plastics. These plastics are used for food packaging, bags, hygiene products, packaging for biological waste, plant pots, etc.

The current market is characterized by high growth and strong diversification. Not only is there a growing number of materials, applications and products, but the number of manufacturers, converters and end-users has also increased considerably from a base that a few years ago was dominated by US food major, Cargill. Significant financial investments have been made into production and marketing10.

In 2010 the global market for bioplastics achieved estimated sales of €2 billion. The market is expected to grow by 32.4% a year from 2011 to 2015, reaching an estimated value of €8.2 billion in 201511.

The worldwide capacity of biobased plastics is expected to increase from 0.36Mt to 2.3Mt in 2013 and to 3.5Mt in 2020. This is equivalent to average annual growth rates of 36% between 2007 and 2013 and 6% between 2013 and 2020.

8 Biochem, Putting SMEs at the core of bio innovation, 2007 9 Definition of bio-based products refers to industrial products made from biological feedstock and/or biotechnological products. 10 http://www.european-bioplastics.org/index.php?id=139. 11 EL Insights, Critical Insights into Energy and Environmental Technology - Bioplastics, Issue # 17, 2011.

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The key policy drivers for the biobased market and bioplastics in particular include the:

• Renewed EU Sustainable Development Strategy (2006)12;

• Environmental policies and legislation - with respect to packaging, waste, landfill, pollution control, etc.;

• Lead Market Initiative for biobased products13 - this aims to stimulate EU demand for promising new innovative technologies or business models, resulting in early adoption of new business solutions. It is intended to create a virtuous circle of growing demand that will in turn reduce costs through economies of scale, rapid product and production improvements and a new cycle of innovation. This will fuel further demand and spinouts into the global market14. The action plan covers issues relating to standardisation, labelling and certification to ensure the quality and consumer information on the new products.


The key non-regulatory drivers of innovation include:

• Price rises for fossil fuels;

• Reduced availability of fossil fuels in the future;

• Opportunities to substitute other solid resources with biobased products;

• Changes in consumer behaviour.

There is a presumption that in the long-term, due to fossil fuel scarcity and resulting price increases together with climate change pressures, there will be a shift from petroleum and gas based raw materials towards biobased products. However, knowing at what point this switch will occur is difficult to determine and creates market uncertainty.

Biobased materials can substitute metals and mineral-based materials in certain applications, thus helping to free up potentially valuable resources for other uses. In some cases, these can also offer new functionalities and higher product qualities, opening up new business opportunities.

Advanced biomass production and new bio-chemical conversion technologies can also lower resource use (e.g. energy, water and other inputs) in the production of existing and new industrial (biobased) products, thereby contributing to more sustainable industrial production and greener industries.

The recyclability, reduced greenhouse gas emissions, high biodegradability and full compostability is also appealing to the European consumer, whose behaviour is increasingly affected by green product qualities. Recent research also shows consumers’ willingness to pay a premium for more sustainable products.

12 European Commission, Renewed EU Sustainable Development Strategy, 2006 13 European Commission, Accelerating the Development of the Market for Bio-based Products in Europe – Report of the taskforce on bio-based products, 2007. 14 European Commission, Accelerating the Development of the Market for Bio-based Products in Europe – Report of the taskforce on bio-based products, 2007.

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A wide range of biobased products exist:

• Fibre based materials;

• Bio-plastics and other biopolymers;

• Surfactants;

• Bio-solvents;

• Bio-lubricants;

• Pharmaceutical products (including vaccines);

• Enzymes.

The most important markets in terms of turnover, overall maturity and development potential are bioplastics and biopharmaceuticals.


The total maximum technical substitution potential of biobased polymers replacing their petrochemical counterparts is very large, estimated at 270 Mt or 90% of total polymers (including fibres) that were consumed in 2007 worldwide. However, it will not be possible to exploit this technical substitution potential in the short to medium term for the following reasons:

• economic barriers - especially production costs and capital availability;

• technical challenges in scale-up;

• short-term availability of biobased feedstocks; and,

• the need for the plastics conversion sector to adapt to the new plastics.

Currently, some segments of the industry appear to have reached maturity such as advances in catalyst systems and new versions of polymers in existing polymer families. Polymer blends and alloys along with advances in polymer matrix composite technology are also creating new performance capabilities whilst nanotechnology promises to advance the performance capabilities of plastics.

Overall, the bioplastics market is still in its infancy and is likely to experience high growth. Even if the technology appears mature with incremental levels of innovation, there exist possibilities to improve the biobased content of products.


Current developments in bioplastics are oriented towards the development of new products as well as reductions in the cost of production. Consumers are increasingly searching for higher biobased content and perfect biodegradability. The major uncertainty for end users concerns the biobased content of a product.

A2.5 Technology developers being examined in this business case Company A - is a global supplier of components for vehicle interiors. It offers an integral service embracing the conception, design, development, manufacture and distribution of

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overhead systems, doors and seats. Its research centre works on new materials including biobased products.

Company B - produces biodegradable trays, food containers, cutleries, plates and cups. Since its products remain more expansive than products made from petrochemical plastics, it puts an emphasis on its products’ green ingredients (that is to say biobased and biodegradable feedstocks). Certifications are important for its clients so they are assured that the products they buy are certified as biodegradable.

Company C - produces safety eyeglasses for people at work and has to communicate the biodegradability of its products to its customers.

Company D - produces natural food ingredients, green chemicals and biobased monomers for PLA.

Company E15 - produces hemp-polymer composites.

Table A2.2: Overview of technology developers in this business case Organisation information Technology

developer A Technology developer B



Technology developer E

Member State Spain France France The Netherlands France

Size Large Small Small Small Small

Age (years) +20 6-10 +20 +20 10

Products in development N/A Confidential data 4 N/A 20-30

Market ready products N/A Confidential data N/A N/A 10

Products in market N/A 30 21 N/A 10

Product description

Biobased components

for the automobile

industry

Biobased trays, food containers, cutleries,

plates and cups

Biobased safety

eyeglasses

Natural food ingredients,

green chemicals

and biobased monomers

for PLA

Polymer-hemp

composites

15 Company response mainly based on a survey response, not a detailed discussion with the company.

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NEED FOR ETV



Table A2.3 illustrates the high costs of production for companies delivering biobased products, not only with respect to product validation but also around quality and health, safety and environmental standard compliance. Companies do not suffer from limited track records since they either rely on certifications or perform ad hoc test in cooperation with the clients.



Barriers A B C D E

Our company is of insufficient scale (e.g. turnover) to provide credible guarantees to customers X

Our new product price is higher than incumbent technologies X X

Our customers are highly risk averse and prefer to buy market proven technologies X

Validation procedures for this new technology are very onerous X X X X X

Our company must comply with stringent health, safety, and environmental standards as a condition of sale X X X X

We have yet to achieve the right quality standards / accreditations (e.g. ISO9001/14001) to satisfy customers X X X X


Standards and norms

There are several ISO standards concerning plastics. The ISO TC 61 is the standardisation of nomenclature, methods of test, and specifications applicable to materials and products in the field of plastics. The objective of TC 61 is the timely development and maintenance of quality, market relevant, material and semi-finished product test methods and standards for the global plastics industry.

In Europe, there are no norms only for biobased products. However, most biobased products are covered by the European Norm (EN) 13432, entitled "Requirements for packaging recoverable through composting and biodegradation”16. The terms "biodegradation", "biodegradable materials", "compostability" are very common but frequently misused and a source of misunderstanding.

The definition of “compostability” is very important because materials not compatible with composting (i.e. traditional plastics, glass, materials contaminated with heavy metals, etc.) decrease the final quality of compost and can make it unsuitable for agriculture and, therefore, commercially not acceptable.

EN 13432 resolves this problem by defining the characteristics a material must have to be 16 For more information, http://greenplastics.com/reference/index.php?title=EN_13432

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claimed as "compostable" and, therefore, recycled through composting of organic solid waste. It is a reference point for producers, public authorities, composting plant managers and, ultimately, consumers.

According to the European Bioplastics Association17, bioplastics are:

• Plastics based on renewable resources; and

• Biodegradable polymers, which meet all criteria of scientifically, recognised norms for biodegradability and compostability of plastics and plastic product.

Bioplastic products provide proof of their compostability by successfully meeting EN 13432 and EN 14995 and the European Packaging Directive (94/62 EC) also refers to compliance with EN 13432.

Once a company has achieved EN 13432 certification, it is able to have the US standard, ASTM D6400 concerning compostable products, because the US tests are easier to pass than those in Europe.

Amongst EU member states, Germany has introduced a norm concerning bioplastic drink bottles under the German Packaging Directive18. Bottles "produced from at least 75% renewable resources" are exempt from the compulsory deposit for single-use drink bottles until December 31, 2012, but manufacturers must still participate in the DSD recycling system. Through this regulation, the German government is encouraging the use of renewable resources in beverages packaging, thereby stimulating substantial innovation from the plastics industry and growth in the market.

Certification & labelling systems

Several organisations promote the use of biobased products, such as bioplastics, and deliver labelling for biobased products, based on the biobased content of a product:

• ASTM D686619 was developed in the United States as a standardised analytical method for determining the biobased content of solid, liquid, and gaseous samples using radiocarbon dating. Recognised by European certification bodies and is a widely used method in the bioplastics industry, it quantifies the biobased content relative to the material’s total organic content and does not consider the inorganic carbon and other non-carbon containing substances present;

• DIN CERTCO – this certification scheme applies to products which are wholly or partly produced from biobased raw materials20 and rates the proportion of biobased raw materials21;

• Ok Biobased Certification – introduced by Vinçotte in 2009, this certification has arisen to satisfy the increased environmental awareness amongst customers. The investigation method behind the certification is very simple and the exact value of biobased content can be precisely and scientifically measured and calculated. On a basis of the determined percentage of renewable raw materials (% Biobased), the product can be certified as a 1,2,3 or 4 star-biobased product (as indicated on the awarding OK Biobased logo) - the more stars, the higher the content from renewable sources. The certification lasts for three years.

A2.6.3 Trialling and demonstration of technologies 17 See http://www.european-bioplastics.org/index.php?id=129 18 Established in the 5th Amendment of the German Packaging Directive; regulation took effect in January 2009 19 http://www.astm.org/Standards/D6866.htm 20 A parallel DIN certification for “Products made of compostable materials” certification scheme is also available 21 It does not include an assessment or calculation of the eco-balance of the respective product, nor confirm compliance with international, national or regional law, nor does it contain a statement about the biodegradability and compostability of a product

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In the field of biobased product, and even more in bioplastics, there are joint developments between technology developers and buyers. Clients (that are suppliers or vendors to end users) need specific requirements and for that reason transmit specifications to the developer. Once the product is ready, the client and technology developer undertake joint testing to ensure they meet client specifications. Sometimes, product volumes are very limited so that verification does not seem to be pertinent.

Company A - is a producer of automotive components. It has its own facilities for testing raw materials and final products. Supply chain pressures from car manufacturers (who rely on different standards, like ISO or the norms developed by the ASTM or by the German Association of the Automotive Industry (VDA), dictate the test requirements for its products.

Company B - uses the OK Biobased certification which is considered as sufficient. It cannot afford a certification process for its whole set of products due to cost. Some tests are made internally, in accordance with clients’ requirements, as well in client laboratories.

Company C - has based its business model on the biobased nature of its final products and uses the OK Biobased certification which it considers is sufficient for its needs.

Company D – does not use certifications for its products since it produces raw material for industry and does not need to build its strategy on its products’ environmental characteristics; rather it focuses on their technical characteristics (e.g. shock resistance).

Company E – relies only on ISO 9001. Testing and industrial scale production are performed by a third party.

A2.7 Rationale & value added for technology developers from undertaking an ETV


Table A2.4 illustrates the main benefits from ETV for the developers interviewed. Only one of the five developers showed any interest in an ETV scheme.


Benefits of ETV A B C D E

Facilitates market entry for our product into other EU markets X

Increases market acceptance of our product by customers X


No benefit from an ETV X X X X

Key: Responses relate to a “Significant benefit” unless in bold which is regarded by the developer as a “Highly Significant benefit”

Company A - does not consider an ETV helpful in any way since it has to comply with its clients’ testing protocols which differ from one company to another. Its strength is related, on the one hand, to the low cost of its products and, on the other hand, to the integral approach it proposes to its client, from the design in cooperation with the client to the production including if needed R&D.

Company B - produces many products and could not afford to pay for an ETV for each product nor for the process of production, since the final products only are of interest for the client. For that reason, it is not interested in an ETV. Further, it already benefits from a “green” certification and does not see what ETV would add since the characteristics of its product that pass a certification process are known by the customers.

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Company C - does not see any interest in benefiting from a scheme that would certify the performance claim of its products since there are already several appropriate certification schemes.

Company D - does not believe an ETV would increase its market position since its products need to comply with specific requirements imposed by clients (e.g. for shock resistance). ETV would not certify such requirements and therefore would not eliminate the need for the company to follow the additional requirements imposed by its clients.

Company E - believes ETV would help it to increase its credibility on the market. Its director is very interested in ETV.


Markets for biobased products are currently too small and there is high price competition with traditional products. Producers sometimes suffer from higher costs and hence seek to communicate to consumers the environmental characteristics of their products to counterbalance this price disadvantage. This communication is based on well-known and well-diffused certifications that seem to be sufficient: existing measurement methods and certification processes limit the added value of the ETV for biobased products. Only dramatic changes in the customers’ and final users’ behaviour could push some companies towards a demand for an ETV. Consequently, none of the companies we consulted showed any interest in an applying for an ETV and as markets are now the demand for an ETV in this market area is highly questionable.


Stakeholders consider that the need for ETV is not yet proven. ETV would be useful for companies that sell products that differ from traditional ones not only as regards their biodegradability and/or their biobased content but also as regards their effect on health for those involved in their manufacture, supply and installation. For example, a company that sells biobased insulation might propose products that have the same characteristics as any other product but with less harming effect for the workers that have to transport and install them. Existing certifications would be of no interest since these only deal with the characteristics of the products in terms of biodegradability and/or content characteristics but not more. Only an ETV would provide this company with a scheme that would certify the absence of potential health impacts from its products. However, the markets of biobased products are not yet ready and such a situation has yet to happen.


A2.8 Introduction This section provides a review of the cost of implementing, operating and using an ETV scheme. It starts by providing a detailed overview of the likely costs to developers from undertaking an ETV verification which include:

1. Costs of testing of the technology to enable it to apply to the ETV;

2. Costs of testing the technology in the event that the Verification Body requires further testing;

3. Official ETV fee - which the developer / vendor will need to pay to the verification programme);


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A2.9 The costs of potential verification for technology developers Company A – regards testing costs as product dependent. It is currently developing a product for €3 million of which €300,000 is budgeted for testing (though this percentage can change depending on the product). Two thirds of the tests cost correspond to personnel costs.

Company B - refused to provide specific figures since it considers that such figures are very strategic.

Company C - considers that €5,000-€10,000 is required to pay for a product verification by Vinçotte. It was prepared to pay the same amount to benefit from an ETV.

Company D – no cost information was available.

Company E - would devote €15,000 for testing activities if they were performed internally. It is willing to pay €5,000 for an ETV.

Table A2.5 summarises these various costs to companies. Key conclusions are that:

• firms support internal costs for tests and verification which can correspond to an important share of the costs of development of the final product;

• the timescale for verification for these types of product is already long (more than 6 months for biodegradability testing and can be up to 12 months). It is likely then that companies in this sector would accept a timescale from 6-12 months for ETV.

Table A2.5: Costs to developers of undertaking testing and verification Technology Developer

A B C D E

Testing costs (or total R&D invested to date)22 Testing

costs up to 10% of total

cost of developme

nt

R&D budget

(corresponding to 8-10% of

turnover): €1,5m

N/A N/A

Testing costs: €10k

R&D to date: €2m

Willingness to pay ETV fee (a) Not relevant

€5,000-10,000 N/A N/A €5,000

Administration costs for verification (b) N/A N/A N/A N/A N/A

Total costs for verification (a + b) N/A N/A N/A N/A N/A Likely unit/product sale price (c) N/A N/A N/A N/A N/A

Maximum amount of time willing to wait for verification 12 months 12 months 12 months 12 months 2 months

22 Note that some firms may only be able to provide a total or annual development cost

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Existing certifications for bio-based products cost between €5,000 and €20,000 (see Table A2.6).

Table A2.6: Costs of providing testing and certification services across the Biobased materials sector

Biodegradability Resistance of materials

Belgium €5,000-10,000 (C) -

Germany €15,000-20,000 (C) -

Spain - €5,000-6,000 (T)

Key: T = testing; C = certification




The low level of interest for ETV amongst the five companies sampled (i.e. 40% interest) suggests a weak demand for this type of verification for biobased products.

Furthermore, based on only two responses, the willingness to pay an ETV fee is between €5,000 to €10,000, whereas existing certifications concerning the composition of bio-based products are between €5,000 and €20,000.

We conclude therefore that in some cases, verifications of this type of product are likely to be self-financing at the outset; in others there will be a funding shortfall, perhaps of around €10,000, between what developers are prepared to pay as a fee and the cost of providing the service to developers.

A critical point regarding the willingness to pay is that biobased products are often manufactured in small volumes. This means that a company cannot afford to pay several tens of thousands of Euros to verify a product that is only likely to generate tens of thousands of Euros of turnover.

Conversely, for some products, the cost of verifying technical characteristics can be an important part of the total cost of production. If an ETV was to verify the outcomes of such tests then the cost of undertaking an ETV would no longer be considered as additional investment and might be more acceptable to companies.

A2.11.2 Key challenges for technology

Biobased products must respond to the same problems that standard plastics face (i.e. shock resistance, temperature resistance or insulation). The first key challenge for this technology is to decrease the price of final products to become competitive in face of standards plastics. For that, researchers can find solutions to diminish the costs of production such as a new and cheaper production process. However, any drop in fossil fuel prices will exacerbate this problem.

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Another problem relates to the field of application of the ETV scheme. When producers make a tailor-made product for a specific client, volumes are low in most cases so that the verification could not be pertinent in a situation of price competition. Further, even if ETV applied to the product, the seller as well as the customer would conduct several tests in order to verify that the product’s characteristics are in line with the specific requirements of the customer. That means that ETV would not reduce the costs for testing and verification but would increase the total cost of testing and verification.

A2.11.3 Value added for firms from undertaking the ETV

The main problem in this area is competition with conventional plastics. For the moment, conventional plastics remain cheaper than bioplastics. Producers of bioplastics communicate on the environmental characteristics of their products and count on the willingness of customers to buy more expansive but “greener” products. There are several certifications that help them in this communication. Companies consider that the certification of the biobased content is the only information that matters; and so far, the certifications provided by DIN CERTCO, Vinçotte, ASMT, etc. provide these companies with a scheme and an international credibility that is deemed sufficient.

An application for ETV would increase the sale price without necessarily increasing an applicant’s market share. Besides, an ETV would have to be done for each specific product, representing a huge number of verifications and a dramatic increase in price of the final product, which would not be accepted by the customers.

However, once the market for biobased products is mature and prices have fallen, ETV could help companies to reinforce their communication on the technical characteristics of their products as well as the environmental advantages of their products compared to conventional products.

A2.11.4 Potential number of firms who might be interested in scheme

Around 1,000 firms in Europe deliver biobased products23. Some of them are large companies, like BASF for instance (which sells commercial products Ecoflex and Ecovio). The industry also comprises numerous SMEs focused on niche markets.

Large companies would not necessarily be the most interested in ETV since they are already occupy prominent market positions. In contrast, smaller players might have an interest in ETV to secure their position in the market or to enter the market and afterwards to increase their market share. It is reasonable to assume that 1-2% of the existing companies will be interested in applying for ETV whereas new players will also show an interest.

In all, given the very low interest in ETV (at least currently), we estimate that over a five year period, between 10 to 50 companies could be interested in applying for an ETV, or roughly 4 to 20 over the next two years.


Biobased products are emerging but their presence in the markets remains limited and they are in general manufactured in small volumes24. Currently, the most important barriers are the cost of production of biobased products and the difficulties in entering the market. For producers, the key challenge is not related to the production process since it is not too difficult to produce biobased products, but to reduce production costs. The only way to counterbalance higher prices is to communicate the negative impacts of conventional plastics on the environment and the virtues of biobased products. As discussed, several certifications exist that provide companies with this communication tool. However, a pan-

23 Estimate provided by a technology developer 24 Advisory Group for Bio-based Products, Taking bio-based from promise to market, 2009

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European verification scheme of performance claims is likely to offer these advantages as well, with potentially more credibility for the EU27 and beyond.

Furthermore, existing certifications are costly. The challenge for ETV is to provide the same outcomes of these certifications without increasing dramatically the cost for testing and verification to firms.


A2.12.1 Possible funding mechanisms for ETV users

National and European mechanisms are available for funding projects dealing with biobased products. At national level, the French Competitiveness Cluster called Industries & Agro-Resources supports biorefinery projects. In Germany, the BMELV RTD Funding Programme devotes around €50 million per year for research, development and demonstration projects for the use of biomass including biorefineries.

At the European level, from 2007 to 2010, the FP7 has funded 11 projects related to biorefineries25. In 2011, other projects have been funded under a call dealing with “Novel biotechnology approaches for transforming industrial and/or municipal biowaste into bioproducts”. Such projects can include budgets for testing and verification of technical properties. For instance, the European project EcoPlast26, which deals with the development of novel biocomposites having biopolymers as base matrix that are reinforced with natural fibres, has some tests scheduled around the characteristics of the raw biobased materials and on the final product as well.


Technical centres and verification bodies of biobased products are numerous in Europe. The former carry out analyses on technical characteristics of the products (e.g. resistance) whereas the latter perform analyses on environmental characteristics of products (e.g. degradation, disintegration, chemical analysis and ecotoxicity).

However, given the low demand for ETV and the likely levels of applicants, we assume that only one verification body will be needed to verify all EU biobased products. This has the advantage of the one VB building its knowledge base and contacts considerably across the EU and achieving economies through undertaking all verifications.


Company views

For two or three years, biobased products benefit from certifications that help them to communicate on their positive effects on environment (or at least on the absence of harming environmental effects). These measurement methods and certification processes limit the added value of the ETV for the biobased products. Markets for biobased products are too small nowadays, which limits the interest of companies in ETV. The cost for ETV is too high in comparison with what companies pay for passing certification that testify the biobased content of their products (maximum of €20,000).

Stakeholder views

25 http://www.bioref-integ.eu/fileadmin/bioref-integ/user/documents/13._Peters_-_Biorefinery_Policy_Issues_and_Products_-130910.pdf 26 https://www.ecoplastproject.com

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ETV would be useful for companies that sell products that differ from the traditional ones not only as regards their biodegradability and/or their biobased content but also as regards their effect on health for the persons who manipulate them. At the time being, markets remain too small and it is unlikely that companies would apply for ETV. Biobased products are emerging and time is needed before ETV would raise the interest of companies.

A2.13 Making a success of ETV – how to maximise value going forward In the Action Plan for biobased products adopted in 200727, the European Commission emphasised the need to develop standardisation, labelling and certification. Reporting to the European Commission in 200928, the ad hoc Advisory Group for Biobased Products recommended to “develop clear and unambiguous European and international standards. The standards will help to verify claims about biobased products in the future (e.g. bio-degradability, biobased carbon content, recyclability, and sustainability)”.

In the past year or so, such certifications have been proposed to the market and seem to have filled a need, provided that the companies consider that these certifications meet their customer needs.

The success of ETV therefore depends on three different factors:

• Firstly, the take-off of ETV for biobased products needs further policy impetus from the European Commission and Member States to increase the development of biobased products. Measures are needed to increase R&D to enhance the supply of products and to reduce production costs. Measures are also needed to increase demand for biobased products, from the public sector, industry and consumers;

• Secondly, specific efforts will be required to involve and learn from the experiences of existing institutions that deliver certifications. Mechanisms should ensure that the testing protocols are compatible with each other to avoid double testing. For instance, a product that would apply to ETV might apply at the same time to one or several of these certifications. This implies that the ETV protocol would encompass the test procedures of these individual certifications;

• Thirdly, communication on ETV should be as precise as possible in particular regarding the advantages for the companies that would benefit from it as well as on the costs. Interviews show that the interest of ETV is not straightforward. Specific efforts will have to be made towards the potential beneficiaries of the scheme as well as towards the clients and potential clients of the products that have been verified by ETV.

27 European commission (2007), Action Plan for bio-based products, SEC (2007) 1729 28 Advisory Group for Bio-based Products (2009), Taking bio-based from promise to market

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ANNEX 3 BUSINESS CASE: SITE INVESTIGATION TOOLS The following business case has been prepared on the basis of thirteen interviews. The interviews include eight company representatives (including two end users), three testing bodies and two academic organisations.

A3.1 Introduction This business case builds on the findings of the main market analysis which showed that, while soil and groundwater remediation technologies is a mature market, there are a large number of innovative technology companies seeking to bring new testing and site characterisation and diagnostic techniques to commercialisation. These have the potential to significantly decrease the need for laboratory testing29 and hence speed up the process of site characterisation whilst also improving knowledge about site contaminants. Overall, such technologies could provide a step change in current practices which in turn could reduce costs considerably.

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.

A3.1.1 Current status of the market and technology

Contaminated land is a prevalent problem in the EU and while many countries such as the UK, Sweden, the Netherlands, Denmark and France are stable, others such as Spain, Greece and those in Eastern Europe have large market opportunities. Austria and Germany in particular have large market potential. The Czech Republic has a growing market for land remediation with increased confidence in the available applications. Sweden and the Netherlands have stable markets which would benefit from the increased use of site characterisation applications to reduce laboratory costs. The UK is one of the largest land remediation markets in the EU with a legacy of contaminated sites. Turnover for contaminated land remediation (not including assessment) was €0.83 billion in 200730. In France, another sizeable market, the turnover for land remediation was €0.8 billion in 2007, with growth forecast to reach €1.3 billion in 2012. In the Netherlands, a recent industry consultation by environmental technology trade association VLM found contaminated land and groundwater sector turnover to be worth €286m in 2008.

Contaminated sites can contain a vast number of contaminants (e.g. organic chemicals, heavy metals, etc.) that require identification and analysis. Laboratory testing is traditionally used to test samples of soil and groundwater collected by drilling test wells and taking core samples. This is an expensive, invasive and time consuming process. Samples are then tested to identify if contaminants are present and to determine what they are. More site investigation is then needed to assess where the contaminants are in order to ‘map’ out the site. The opportunities that the latest site investigation technologies offer are faster identification and characterisation methods.

29 Laboratory testing is a critical component of the soil and groundwater remediation market and a prerequisite for any major remediation project 30 Sweeney, Rob. (2008): In-situ land remediation. Environmental Knowledge Transfer Network.

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Site characterisation technologies in the EU are relatively new compared with remediation techniques, some of which are over 25 years old. There are now opportunities to introduce advanced technologies into the market which can reduce the time spent on extracting samples from sites and sending them to laboratories and hence greatly reduce stage one site characterisation costs. This in turn allows risk assessments performed in laboratories to be more focused and efficient. According to technology developers the site characterisation market has started to take off in the past ten years. However, strict regulations and a lack of end user confidence in adopting new technologies has stalled innovation31.

The commercial market in soil and groundwater testing in environmental laboratories currently accounts for the majority of testing techniques for the contaminated land sector. However, it is estimated that approximately 75% of soil and groundwater testing could be conducted on-site with compact probes and test kits32. This creates a huge potential increase in the market for rapid measurement technologies33. However, the current market for such real time analytical tools is immature for the following reasons:

• Significant lack of regulator knowledge and awareness;

• End user resistance to new/unproven technologies;

• Lack of harmonised standards across different regions;

• Restricted access to testing sites.

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



The most significant EU Directives for contaminated land are:

• The Water Framework Directive;

• Landfill Directive;

• Environmental Liability Directive;

• Soil Framework Directive (in the decision-making process).

These Directives have increased the need for land remediation by forcing developers to consider the impacts of contaminated soil and groundwater on human health, as well as exposing developers to very large liability risks that would otherwise limit remedial actions. Restrictions on what can be disposed of in landfill sites (together with the imposition of large landfill fees and taxes) have also driven innovations in on site land remediation technologies. The use of site characterisation equipment is not comprehensively regulated. Local authorities, member state environment agencies and consulting firms dictate which technologies they deem acceptable based on prior knowledge. Contaminated land is

31 Consultation with Derek Pedley, Environmental Sustainability Knowledge Transfer Network. 32 Tang, Alec (2007): Rapid measurements tools. Environmental Knowledge Transfer Network. 33 Tang, Alec (2007): Rapid measurements tools. Environmental Knowledge Transfer Network.

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regulated by present levels of contamination, not how remediation is achieved. Thus the use and acceptability of technologies, overall, is determined on a individual, highly subjective basis. The acceptance of site characterisation technologies is highly dependent on end user knowledge of the technology and regulator knowledge.

In the area of land remediation, local authority personal who are generally not experts often have a lack of confidence in new processes. They tend to use techniques that they have known to be used in the past so as to avoid failure and perceived detrimental impacts on human health from poor remediation34. This has largely affected the uptake of new site investigation technologies and has contributed to the resistance of innovation.


The primary driver of investment in site investigation tools is to reduce costs. The main objective of the company responsible for designing a site remediation project is to ensure that it has the most comprehensive analysis and mapping of the nature and extent of a site’s contamination at least possible cost. The potential to reduce the costs to consultants of using laboratory testing for multiple samples of groundwater and/or soil, whilst also enhancing the knowledge of where precisely contamination might exist on site, creates a strong incentive for technology developers to bring innovative site investigation tools to market. Furthermore, the ability of new techniques to provide real time analysis of contaminants creates a further selling point which could help to refine a remediation project and save money.



There are now a large number of real time site characterisation and diagnostic technologies on the market. Examples include35:

• Biosensors to detect dioxins, producing results within ten minutes;

• DNA dye detectors;

• X-ray fluorescent meters;

• Membrane probe detectors with spectrometers to detect contaminant ‘hot spots’ for contaminants for site ‘heat mapping’.

The application of some new technologies is more accepted in some Member States than others (e.g. XRD is widely used in Germany compared to the UK).


Leading edge technologies currently being developed include:

• Soil scanners and soil diagnostic tools used to detect the presence of polycyclic aromatic hydrocarbons (PAHs) in soil36;

34 EURODEMO (2007): European platform for demonstration of efficient soil and groundwater remediation. Sixth Framework Programme, European Commission. 35 There are variations of these technologies and many of the innovations in site characterisation are focused on improving these technologies and applying them in new ways. 36 Historically PAHs are detected with chemical testing in laboratories which is time consuming, costly and exposure of samples can skew contaminant concentration levels

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• Cone Penetrometer Technology (CPT) used for rapid site characterisation of organic matter;

• Hand held X-ray Diffraction (XRD) used to detect heavy metals;

• Hand held X-ray Spectrometer (XRS) used to measure pH and carbon levels in soil;

• Geophysical tracer equipment to detect fuels and dyes;

• Geo-probes used for on-site soil sampling which limits drilling and the need for wells;

• Multi-parameter and multi-species sensors;

• Combined phases (gases and aerosols) detection in one sensor;

• Embedded optical fibre sensors;

• Wireless sensors, Radio Frequency Identification (RFID) for the remote collection of data as well as telemetry;

• Biosensors for biotoxicity, bioaerosols and bioluminus bacteria;

• Miniaturisation of systems (e.g. laser-ablation mass spectrometry) for ‘Lab on a chip’ sensors.

While these products are diverse in their underpinning technologies and the contaminants they aim to diagnose, new developments and innovation in the field of site investigation are all focused on reducing costs by decreasing the amount of necessary laboratory testing.

Technology developers interviewed for this business case indicated that they do not face extensive competition in their particular product areas. This is an indication of the relatively new development of this sector. It also highlights the market need for a large number of real time analysers for different contaminants. One technology developer noted that:

“the need for innovation surrounds analysis in the field as opposed to in the lab. However, to date lab testing has always been safer due to the high levels of standardization in labs. Labs are heavily regulated and therefore testing standards are trusted and well known.”

Regarding future market development and efficiency in the sector one developer stated that “Site characterisation is key to the remediation market. What is needed are tools that are quick to use, coupled with pragmatic approaches that allow contractors to map sites in order to properly mitigate health risks.”


Given the current relatively immature status of site characterisation technology and the advanced technical knowledge held by product developers and end users, it is unlikely that performance standards will be adopted for some time.

A3.4 Technology developers being examined in this business case Company A - has developed a scanner for soil which is a chemical and biological sensor for the rapid detection of PAHs. It is currently developing biosensors for the rapid detection of dioxins in soil. Its main sales are in North America and to a lesser extent the EU with the Middle East offering growth opportunities.

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Company B - has over ten years experience of developing site characterisation and remediation techniques. It specialises in the development of biosensors to determine whether or not bioremediation of soil is a plausible option for any given site. It has two products on sale and two in development. It sells into the EU, Eastern Europe and China.

Company C - is Dutch owned, over fifty years old and specialises in the development of site characterisation technologies (e.g. a soil core sampler to detect volatile organics and a sampling probe that can be installed rapidly and under all geological conditions and tests soil on multiple parameters). It is also a member of the standardisation board for technical requirements of soil and groundwater sampling technologies in the Netherlands. Selling products globally, it has ten to twenty technologies under development at any one time.

Company D - has developed a handheld luminator that emits light to detect bacteria and provides a toxicity tests for soils. This technology is traditionally used for testing in water and groundwater but the company has adapted it for soils. The company was acquired by a large water utility in 2008. It is active in the EU and Japan.

Company E - is a multinational company that specialises in site characterisation and is also a developer of rapid measurement tools. It employs over 13,000 staff across its EU offices and has a turnover of €2.3 billion in 2010. It is developing hand held XRF screening tools that detect the presence of heavy metals, as well as rapid screening tools for CPT.

A summary of each developer is shown in Table A3.1. All firms have at least one product in the market and a pipeline of innovations. As stated in the market analysis, the UK and the Netherlands are two of the largest markets in the EU, and have numerous innovative technology developers, which helps explain the concentration of firms from these two member states.







Member State UK UK NL UK NL

Size Micro Small Medium Micro Large

Age (years) 6-10 11-20 20+ 6-10 20+

Products in development 2 2 5+ 1 3-5

Market ready products 2 3-5 0 1 2

Products in market 1 2 5+ 1 5+

Product description Soil scanner to detect PAHs in

soil

Biosensors for the chemical

analysis of soil

Soil sampler coring tube to

test for volatiles

Hand held luminator for detection of

bacteria in soil

Hand held XRD heavy

metal detector

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NEED FOR ETV



Table A3.2 below shows that the three most importance barriers in the site investigation market are:

• the highly risk averse nature of the remediation industry;

• a lack of suitable sites for testing products; and,

• uncertainty about the suitability of new technologies, given the diverse nature of contaminated sites.



Barriers A B C D E

We have limited or no track record of sales x x x

Our company is of insufficient scale (e.g. turnover) to provide credible guarantees to customers x x

Our new product price is higher than incumbent technologies x

Customers are uncertain about our product’s environmental performance x x x

Customers are uncertain as to how suitable our product is to their operations (i.e. fitness for use) x x x x x

We lack legitimacy for our environmental performance claims x x

We are unable to demonstrate the performance of our technology in real world operational conditions x

Our customers are highly risk averse and prefer to buy market proven technologies x x x x x

We have yet to achieve the right quality standards / accreditations (e.g. ISO9001/14001) to satisfy customers x

Lack of mutual recognition and harmonised standards prevents market access x x x

Other: Lack of suitable sites for testing x x x x


Standardisation provides a set of specific parameters against which technologies can be tested. Examples of ISO standards in this sector are shown in the Box below.

ISO requirements for the site characterisation sector

ISO 15799:2003 - Soil quality Guidance on the ecotoxicological characterization of soils and soil materials

ISO 15175:2004 - Soil quality Characterization of soil related to groundwater protection

http://www.iso.org/iso/iso_catalogue/catalogue_tc/catalogue_detail.htm?csnumber=29085


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ISO/TS 17892-11:2004 - Geotechnical investigation and testing Laboratory testing of soil -- Part 11: Determination of permeability by constant and falling head

ISO 10381-5:2005 - Soil quality -- Sampling Part 5: Guidance on the procedure for the investigation of urban and industrial sites with regard to soil contamination

ISO 10381-7:2005 - Soil quality -- Sampling Part 7: Guidance on sampling of soil gas

ISO 22475-1:2006 - Geotechnical investigation and testing -- Sampling methods and groundwater measurements Part 1: Technical principles for execution

ISO/TS 21268-3:2007 - Soil quality -- Leaching procedures for subsequent chemical and ecotoxicological testing of soil and soil materials Part 3: Up-flow percolation test

ISO/TS 21268-4:2007 - Soil quality -- Leaching procedures for subsequent chemical and ecotoxicological testing of soil and soil materials Part 4: Influence of pH on leaching with initial acid/base addition

ISO 17402:2008 - Soil quality Requirements and guidance for the selection and application of methods for the assessment of bioavailability of contaminants in soil and soil materials

ISO 18772:2008 - Soil quality Guidance on leaching procedures for subsequent chemical and ecotoxicological testing of soils and soil materials

Note: CEN, EN and ISO standards for Geo-technical investigation are interrelated and overlapping, only ISO titles are presented.

ASTM International37, through its 141 technical standards writing committees and extensive industry networks, has developed over 12,000 international voluntary consensus standards that are globally recognised. Some of those applied to groundwater monitoring are shown in Table A3.3

Table A3.3: ASTM standards that apply to water monitoring

Standard Name What the standard covers

ASTM D7045 - 04(2010)

Standard Guide for Optimization of Ground Water Monitoring Constituents for Detection Monitoring Programmes for RCRA Waste Disposal Facilities

Identification of effective groundwater monitoring constituents for a detection-monitoring programme.

ASTM D5092 - 04(2010)e1

Standard Practice for Design and Installation of Ground Water Monitoring Wells

Design and installation of groundwater monitoring wells will promote (1) efficient and effective site hydrogeological characterization; (2) durable and reliable well construction; and (3) acquisition of representative groundwater quality samples, groundwater levels, and hydraulic conductivity testing data from monitoring wells.

ASTM D5521 - 05

Standard Guide for Development of Ground-Water Monitoring Wells in Granular Aquifers

representative samples of ground water that can be analyzed to determine physical properties and water-quality parameters of the sample or potentiometric levels that are representative of the total hydraulic head of that portion of the aquifer screened by the well, or both

Current standards and regulations in the contaminated land sector have two drawbacks:

37 Formerly known as the American Society for Testing and Materials – see www.astm.org









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• They do not provide scope for validating more advanced technologies that go beyond the standard;

• They regulate the levels and types of containments present on the site, not the process of testing for or identifying them. Therefore, if a technology is able to scan a site and analyse the types of contaminants present, no standards exist to show the time saved by the avoidance of laboratory testing or the costs savings provided.

One company noted that the merit and strength of ISO standards largely depends on the working group that has written them. There are therefore large differences in how sophisticated and detailed standards may be.


Validation of technologies is always necessary in this sector before products enter the market. The following illustrates the approaches taken by those companies interviewed:

Company A - currently licenses its product to a US consultancy which has helped to establish the company’s presence in the US. Such relationships have greatly helped to push market acceptance of the technology internationally, with established sales in Canada, the USA and the Middle East.

Company B - currently receives letters of approval from UK universities and laboratories to validate its product’s performance claims. This is in the absence of formal testing mechanisms. It also validates performance through demonstration trials at end user sites which it funds itself. Whilst gaining access to end user sites is sometimes difficult to achieve, the company is able to test new products on client sites as part of the project.

Company C – internally tests its new products. Depending on the level of verification required, experts may be brought in to write independent reports or statements that the product meets key requirements. It also collaborates with end users for the development and testing of new products and stated that “the best way to get a product accepted in the market is to get enthusiastic users who want to start working with it and presenting it to regulatory advisors.” A key barrier is the numerous standards that must be met including health and safety and technical standards. Applying these standards to local requirements across multiple territories is particularly onerous.

Company D - was fortunate in both obtaining grant funding and participation in industry research projects which enabled their toxicity tester to be tested and validated. Without this support it would not have been able to afford extensive testing and the validation of performance claims. A key challenge is that regulations do not specify standards for technologies; they only seek to control levels of contaminants. Thus formal processes and mechanisms are needed to help reduce uncertainty in the market.

Company E - is both a technology developer and user of site characterisation tools. It conducts new product testing on site. It then conducts laboratory analysis to obtain in-depth descriptions of what the technology is capable of. When purchasing equipment from manufacturers the company always insists on a certificate of performance claims. After review, all new products are tested independently of their claims for quality assurance purposes before use in the field. Key issues include significant end user resistance to new products and insufficient understanding amongst end users and environmental regulators about the types of data and decision making that takes place.

A3.5.4 Summary of approaches for proving performance

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Table A3.4 shows that a number of approaches are used by companies to prove performance claims, including previous sales, demonstrations at customer sites38 and the use of credible testing organisations.

Table A3.4: Summary of methods used by companies to prove performance claims


Approaches to providing performance claims A B C D E

Previous sales to customer x x x x x

Company reputation in the market x x

Test data from a credible testing organisation x x x x

Use of an existing ETV scheme (e.g. DAN ETV, US ETV, Canada, etc) x x

Demonstration at customer site x x x

ISO certification x x

Other forms of certification scheme relevant to the technology area x x

A3.6 Rationale and value added for technology developers from undertaking an ETV


Table A3.5 illustrates that besides facilitating and accelerating market entry in domestic, EU and non-EU markets, the other main benefit is to enable environmental regulators to better understand and accept new site characterisation technologies.



Facilitates market entry for our product into our home market x x x x

Facilitates market entry for our product into other EU markets x x x x

Facilitates market entry for our product into non-EU markets x x x x

Increases the speed at which our product reaches market x x x x x

Increases market acceptance of our product by customers x x x

Reduces risk for our company when investing in RD&D x x

Allows our product to compete with market leading/rival products x

Enables our company to secure finance from third parties x

Clients gain insights on environmental impacts from our product x

Other: Regulator acceptance of new technologies x x x x x


38 But not as a joint development process with potential future customers

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Company A - has experienced around 50% loss in profits due to end user resistance to its new technologies. To try to resolve this problem, in 2008 the company took their soil scanner through the EU’s TRITECH ETV pilot project. This verification helped increase sales and reduced the effort needed to prove the performance claims of the technology across many different member states. The Managing Director noted that:

“There is significant value in an ETV scheme, as third party verification greatly helps to reduce the costs and efforts needed in trying to prove that technologies meet standards in numerous countries. The benefits of ETV are that certification is always a requirement for the market, and an ETV label will create faith in the technology for customers and it also confirms the claims of the technology and helps to promote market awareness of technologies that are available.”

Before TRITECH the company spent five years seeking market acceptance of the soil scanner. However, it estimates that 20% of its profits resulted from having the TRITECH verification: “The technology has now been recognised. Once we went through ETV it was easier to gain market recognition and acceptance.” The TRITECH experience showed that verification creates faith in the product for customers as well as confirming the claims of the technology.

The company has a new product in development and feels that it would benefit from ETV and are eager to have it verified. It currently uses UK universities for testing and has also developed close working relationships with a UK testing house that is part of the Environment Agency. In-site demonstrations are also a large part of how the company gains client trust. However, as there are no formal mechanisms for this process, they believe ETV would help to standardize the process.

Company B - received government funding39 to demonstrate its product. This helped accelerate market entry because the verification and test data was provided to end users; it also created a 15% increase in sales.

“For innovative products it is a matter of getting the client to pay for sampling, otherwise it is too costly for small developers because of the high costs of drilling, digging wells and testing. This largely relates to issues of accessing sites on which to test new products.”

An EU ETV scheme would help to speed up the market acceptance of technologies, particularly since there is currently no formal mechanism for technologies to be tested and verified.

Company C - feels that there is an obvious need for an EU ETV due to the resistance shown by environmental regulators to new products and the lack of harmonised regulations across the EU. ETV will accelerate the rate at which new developments are accepted into the market:

“The first step is getting that stamp on technologies from regulators to ensure that they will use it, ETV will provide this.”

Having put two technologies (a soil sampler for volatile organics and a sampling probe) through the PROMOTE ETV pilot programme in 2009, it believes the ETV was a valuable marketing tool and that clients responded well to the fact that the technologies were verified. It also feels that an ETV will help to harmonise standards in the industry by establishing protocols for technology areas, thus ensuring the detail required is ‘fit for purpose’

Company D - encountered end user resistance to their new product. They feel that an EU ETV will help to significantly reduce end user hesitation by providing a platform for new technologies to be formally tested and reviewed by authorities.

The company became involved in site characterisation because they believe that there is a significant need for technologies that are able to decrease the resources need for

39 This provided 30% of the costs for testing

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assessment (time and labour). Any formal way of providing verification for such technologies will prove valuable to both developers and end users:

“The benefits of ETV are that it is a way of proving technology. Verification is useful at all stages of development.”

Company E - has faced end user resistance to new products. This is the largest barrier that they face and specifically relates to the lack of regulator knowledge about the sector. Regulations are seen as outdated, creating gaps between which technologies are acceptable and which technologies provide the best results. The company sees ETV as being able to help decrease these gaps.

“ETV will add value by accomplishing much of what we do already for development and testing in house for new technologies. However, end users will still want to perform their own tests on new products for quality assurance, so the success of ETV will depend largely on who receives the cost savings and what tests are carried out to ensure the appropriate breadth of testing.”


Technology developers have clearly indicated that by verifying performance data ETV will accelerate the speed at which new technologies are accepted by end users and regulators. This should also reduce the levels of testing that end users need to carry out because they will have improved confidence in the new products. One developer noted:

“Currently there are no labels that are useful for site characterisation technologies. What we do is get letters of approval and references from the universities and other testing bodies. There is no formal mechanism in existence for technologies to be tested and verified. This is where ETV would offer value to developers. Often the largest barrier is the lack of access to testing sites, if ETV can improve this it may be worth it.”

An ETV label could also help to facilitate access to demonstration sites for developers which in turn could generate sales. An ETV could therefore be a proxy for a track record and could enhance a young company’s credibility:

“The largest problems developers face are limited sales and track records. ETV would help to correct for this. It will help to prove that their results are equivalent to lab testing. At the moment, the only way to achieve this is through demonstration.”


Help with overcoming a lack of knowledge and an aversion to new technologies

End user resistance to new technologies appears to be perpetuated by a lack of common standards amongst member state environmental regulators, coupled with a risk aversion to new technologies, to the point of stalling innovation.

A Dutch organisation involved with contaminated land demonstration programmes stated that “in the Netherlands the municipalities don’t have a lot of knowledge therefore they don’t trust new technologies. The technologies need to be proven but it is a question of developers and contractors not wanting to invest in certification.”

Apparently Dutch remediation contractors support an ETV as they feel it will prove very useful as a marketing tool. However, it is not evident that contractors will be willing to fund such a programme.

A UK stakeholder also noted end user resistance: “Contaminated land is a very conservative area due to the risks, the nature of local authorities and the environment agencies, therefore ETV will depend on convincing these bodies about the claims of the technology. Technical training is also a setback for people in the industry, people must be made aware of what is available.”

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Providing credibility in the absence of a track record

The same organisation stated that the fundamental issue surrounding end user resistance is that laboratory measurements are traditionally relied upon for site characterisation whereas on-site testing causes distrust and uncertainty. Users of site investigation technologies interviewed for this business case noted that the largest barrier to technology adoption is that technology developers often have limited or no sales track record. Thus there is significant uncertainty about the environmental performance of a new product and its suitability to existing operations.

From an end user perspective there would be value in an ETV as it will increase their confidence in new products and give them access to testing data, generating more confidence in the technology.

If ETV is able to help site developers build their databases, then ETV will have significant value for end users:

“The hardest part for developers is to get that first test and that first client, ETV will help to decrease end user uncertainty and help to overcome the lack of a track

record.”– End user

Reducing testing times and offering comparability

Whilst end users would still need to carry out their own testing and analysis, an ETV could cut down on the amount of testing they require. It would also provide testing data on which they are able to compare their findings with. This offers great value for decision making.

“There is end user uncertainty with new technologies and site characterisation technologies. For these reasons we carry out our own testing on new products and this is typical throughout the industry. ETV will help to reduce uncertainty and reduce the costs of testing for end users.” – End user

However, end users will need to ensure that an ETV is not limited to verifying laboratory test results. ETV must provide information in a broad sense:

“The boundaries of technologies are generally discovered during demonstrations. Therefore an ETV scheme will need to provide more than the results of lab analysis to

gain an understanding of new technologies.” – End user








A3.8 The costs of potential verification for technology developers

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“The fear is that the costs will be a large obstacle. If the costs are too high, smaller companies will be unable to participate.” – Technology developer

Company A – recalls that the costs of participating in TRITECH were approximately €15,000 to €20,000 for testing procedures, €5,000 for administration costs and €10,000 to €15,000 for the actual verification. The process took eight months to complete in total which was found to be very reasonable. The company felt that the costs for providing ETV cannot be too high given the large amounts that are already needed for testing to reach the point where a product is ready for verification. The company estimates that prior to ETV they invested €20,000 in testing – if costs are more than €10,000 for ETV, SMEs might be unable to afford it.

Company B - offers remediation services and is also a developer of site investigation technology. It spends about €50,000 per annum on specific testing and validation of new technologies, although actual testing will be higher since they test all new products on their own sites and include this as part of overall project costs. The company is currently able to sufficiently test its own products through close association with a UK university, through which it receives the necessary declarations and letters of approval. The company does not currently have a willingness to pay for ETV. However, if ETV is able to establish a formal mechanism for testing and validation for new products and improve access to testing sites, the company has stated they would then be willing to pay for an ETV scheme.

Company C - was unable to recall the cost framework for participating in the PROMOTE ETV project, primarily because the project covered the costs of testing and verification for participating firms. However, it recognises that testing and validation costs can range from €5,000 to €100,000 per product and its annual budget for testing new products is more than €100,000.

“The costs will depend on the claims you are testing for, on how complicated you make them. The key is how many claims you are testing for. There are costs for testing, reports and writing of manuals.”

The company would pay €5,000 for ETV although they would be willing to pay more if the system operated in a way that ensured the claims tested for were not arbitrary and that the breadth of testing was appropriate. However, until it is known what the technical standards will be, the company feels ETV will be most useful as a marketing tool and will not replace the need for validation.

Company D - was a micro-business before being acquired and did not make a profit, having directed all its resources into the development and testing for the toxicity tester for soil and groundwater. It has an annual budget of €100,000 covering testing, validation and product certification. The company would pay €10,000 for ETV since it feels that small companies are unable to afford more, despite the potential pay backs:

“The largest barriers for technology developers are the costs of testing. Developers do not have large budgets for testing - it is all wrapped up in the costs for R&D. ETV cannot be overly expensive as many developers can only afford €5,000 to €10,000 after all of the testing that is needed before you get to that stage.”

Company E - has no specific budget for product testing, certification and validation as the costs are specific to the type of site the product will be used on and the specific role of the product. However, the firm’s very large turnover provides an indication of what it is able to commit to product testing and validation, the majority of which is conducted in-house. Product testing costs depend on the types of measurements required which differs greatly for each product. The company would pay €10,000 for an ETV as they spend large amounts on testing themselves and have laboratories that carry out testing and validation services.

Table A3.6 summarises these various costs to companies. Key conclusions are that:

• Firms have indicated a willingness to pay for ETV ranging from €5k-€20k;

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• Firms would accept a timescale for verification of approximately one year;

• Firms do not have a clear idea of what their testing budgets are given that they generally include development, testing and validation costs together.

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A B C D E

Annual testing budget n/k 15% of turnover n/k 20% of

turnover n/k

Total R&D invested to date40 n/k n/k n/k n/k n/k

Annualised R&D invested to date (i.e. based on the age of company) n/k <€50k <€250k <€100k >€100k

Willingness to pay ETV fee (a) <€20k €0 (currently) <€5k €10k <€10k

Administration costs for verification (b) ≥€5k n/k n/k n/k -

Total costs for verification (a + b) <€20k <€50k - - -

Likely unit/product sale price (c) €5k-€10k - - - €30k

Likely increase of sales expected from certification of performance claim (in value) (c)

20% - 15% - -

Maximum amount of time willing to wait for verification 1 year <1 year 1 year <1 year >2 years

Note Company D was acquired by a large utility when they were in the product testing phase and are unsure of what verification fees and administration costs would have been at that time. Company B and D have indicated that administration costs are not distinct from product development, testing and demonstration costs.



To illustrate the potential variation in costs of verification services across the site characterisation sector we spoke to a number of test centres including a couple who had been involved in ETV verifications under the TRITECH and PROMOTE pilot projects.

It is important to note that these costs provide indicative, not actual, costs for the verification and testing of the specific technologies involved in this business case. However, we are confident that these provide the right orders of magnitude for the business case.

These results partly reflect the challenges of gaining estimates that adequately cover a number of technology groups, rather than specific product families.

Table A3.7: Costs of providing testing and verification services for site characterisation

Organisation Length of time to test site characterisation

products

Testing costing Verification costs

Germany <1 year €15k-€20k Does not currently provide verification

40 Note that some firms have only been able to provide a total annual development cost which often includes test costs

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Sweden <1 year €18,000 €7,200

UK <1 year <€10k <€10k41

Costs are greatly increased when there is no EU protocol in existence and the testing body and developer must establish one. One organisation had to develop protocols for soil testers based on the US ETV protocol. This added €3,600 to the cost of verification.


We are able to draw the following tentative conclusions about the costs of supplying verification services for ETV for site investigation technologies. A typical verification fee is likely to be €10,000 depending on the measurements that are required for the technology. Fee costs will vary according to the:

• Number of parameters that firms are seeking to verify;

• Complexity of the technology - for example, whether the technology is a simple scanner that is testing for specific contaminants, or a product that is able to scan for multiple contaminates in various conditions;

• Location of developers, testing houses and verification bodies – communications between parties will increase administration costs and lengthen the verification procedure. Where test centres are not alongside the main verification body, the increased need for communications will increase costs.




The use of an ETV scheme will have the following benefits for site characterisation technology developers:

• It should help environmental regulators across the EU to be more accepting of new technologies. This in turn should reduce market uncertainty and accelerate the adoption of novel techniques;

• It will reduce the effort required to prove performance claims;

• It will enhance product sales;

• It should generate financial savings for end users as a result of less extensive quality assurance testing on new products.

Overall, both site characterisation technology developers and end users perceive significant value from an ETV scheme.

Based on the findings from this analysis we believe the funding shortfall will be limited since the costs of verification at around €10,000 (depending on the technology) are likely to match the willingness to pay. The scheme therefore has the potential to be self sustaining.

41 The organisation does not currently perform certification but is seeking to become involved in this area and estimates the costs for certification as <€10k based on operations they currently carry out.

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Developers are willing to wait up to 12 months for products to be verified under an ETV. However, among both developers and end users, the length of time required for verification is less important than the appropriate breadth of testing being carried out.


The key challenges for the technology are:

• Ensuring the appropriate breadth of testing is carried out to satisfy end users;

• Validating the appropriate suite of performance claims (i.e. not measuring irrelevant aspects of the product);

• Ensuring both laboratory and field testing have been carried out.

Value added for firms from undertaking the ETV

The value added for firms undertaking ETV on new and unproven products are:

• Receiving independently verified test data;

• Access to testing facilities and testing sites;

• Increased confidence in new products by end users;

• Increased awareness of new technologies by regulators;

• Accelerated market acceptance of technologies;

• Increased sales.


Many developers interviewed for this business case did not have a clear idea about the nature of the EU competition in their respective fields. This is partly due to the localised or national nature of the remediation markets they operate in; it also partly reflects a very nascent supply side with a lack of visibility in certain fields. Indeed, we conclude that certain parts of the site characterisation sector are so highly specialised that there is often limited competition in some technology areas.

Given this sector dynamic, there is likely to be more appetite from end users for an ETV than perhaps in other sectors where technologies are perhaps better known and understood and innovations are often based on incremental improvements in design.

One test centre indicated that there are approximately 100 high technology firms in the EU involved in developing site characterisation tools; and much of the testing the centre conducts is for the environmental consultants and remediation companies who would purchase these technologies. This is an indication of the quality assurance that end users carry out before adopting a new/unproven technology (as described above).

Overall, with a very high level of interest in an ETV, we estimate that demand for ETV in this area could be at least 10 applications per year.


As previously discussed, the site characterisation sector covers numerous technologies – some with quite broad applications; others designed to detect very specific sets of contaminants. This business case has investigated a suite of technologies that are broadly representative of the wider site characterisation sector. It has also found an appetite and perceived need for ETV. We believe that the results of the business case are therefore applicable to the sector overall.

Technologies for site characterisation will affect the contaminated land sector. If there is widespread use and acceptance of site investigation technologies, it will greatly reduce the resources needed for the initial stages of land remediation. It will make site assessments

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less time consuming by reducing time spent on identifying contaminants, collecting samples, and laboratory testing.

A3.11 Operational challenges for an ETV in this area A key operational challenge in ensuring an ETV can be awarded is to conduct both laboratory and site-based product testing to ensure that the boundaries of the technology are fully understood and documented.

Given that testing is costly and time consuming, and that end users carry out quality assurance testing on new products themselves, ETV must provide enough data and assurance for end users to decrease the amount of resources spent on testing. This is how ETV will bring value to end users. This will be difficult given the diverse nature of contaminated sites.

There may also be reluctance for end users to get involved with helping to fund ETV unless certain conditions are met by the Scheme:

“In order to gain a willingness to pay from the end user and other stakeholders, ETV will have to prove cost savings to end users by the speed of the testing and the decrease in laboratory testing.” – Stakeholder

One company interviewed for this business case feels that there is an obvious need for common standards in the EU and states that for the EU ETV to be as successful as the US ETV, it must work hard to brand itself to be recognised on an international scale. The reason the US ETV is so successful is that it is branded internationally, and once a product is verified, markets in the Middle East and in Africa simply accept the claims of the technology.

Legal requirements are a large factor in limiting innovation. Large knowledge gaps exist between the industry and the regulators and while ETV is a step towards opening up the market, progress cannot happen without legal requirements becoming updated.

Another developer who participated in the PROMOTE ETV programme, commented on their experience, “ETV would have had huge potential benefits if it was recognised by member state environmental agencies and regulators. Initially, when clients knew about the ETV it was a solidifying factor in getting them to go ahead with the technology and increased sales by 10%-20%.”


One company suggested that the fee for verification should be proportional to the turnover of the company. This will ensure that micro and small firms are able to benefit from an ETV scheme despite not being able to afford large amounts.

End users that currently collaborate with developers to test products indicated that a good funding scheme would be to have: one third provided by the developer, one third by end users; and one third by an ETV programme fund. This is seen as feasible given the costs currently spent on the testing of new products.

One national environmental regulator noted with respect to funding of ETV across several key environmental sectors that “a voluntary ETV scheme will only work if sponsored heavily by the industry it is attempting to regulate / support. The question for me is "why would a small business want to achieve ETV certification other than to maximise market appeal?”. In the absence of a regulatory requirement, the incentive would have to come from industry buyers who adopted the new standard as a badge of a new technology’s credibility.

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Therefore, for ETV to succeed it will need to be sponsored by the industry these technologies are looking to serve.”


At the member state level there are various options that could be explored. For example, Company B received discretionary grant funding to support technical and commercial feasibility studies. Without this support funding the drilling and sampling needed to test their technology would not have been possible. Notwithstanding potential State Aid restrictions, there might be scope for such mechanisms to factor in verification costs.

One test centre felt that an EU wide ETV will incur high bureaucratic costs which will make it unaffordable for developers. It would like to see a simple operation where laboratories are in control of the process with only a few persons responsible for oversight. This will allow the need for funding to remain low. It also feels that DG Environment would have to offer funding jointly with member states for the scheme to become fully operational.


The experiences of ETV pilot projects in the contaminated land area (i.e. TRITECH and PROMOTE) show that it is more important for site characterisation technologies to have access to facilities with concentrated knowledge and appropriate testing sites as opposed to ensuring that verification bodies (VB) are present in every member state. It is also unlikely to be feasible to have VBs in every member state given the availability of test sites and appropriate laboratories.

According to the TRITECH ETV programme42 there are eight organisations that have the requisite credibility and experience to be immediate candidates as verification bodies for an EU ETV scheme. These are located in Belgium, Denmark, Finland, France, Netherlands, Germany and Sweden.


Company views

Technology developers raised concerns about the breadth of testing that will be carried out for ETV:

“The biggest issues are that technologies are used individually on different sites with different contaminants, so the fear is that ETV will not be able to provide the right

information given the differences from site to site.” – Technology developer

Stakeholder views

A Dutch stakeholder is concerned that in the Netherlands there is not a strong motivation for contractors to become involved in ETV and as a result it may become a useless process. It stresses that contractor buy-in is fundamental and that they must be willing to invest in such a programme for it to be successful:

“In order to gain a willingness to pay from the end user and other stakeholders, ETV will have to prove cost savings to the end user by the speed of the testing and the decrease in

laboratory testing.” – Stakeholder

A UK stakeholder raised concerns about the type of testing that will be done for ETV. “Rapid measurement tools offer cheaper and faster options for site characterisation. Site demonstrations increase end user comfort with technology. However, end users will still

42 TRITECH ETV (2009): Final Report. Swedish Environmental Research Institute.

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want to test and prove product claims for themselves. The big question is always ‘under what conditions did you test it’.”

Opinions from end users of site characterisation technologies also illustrates the need ideally for ETV to go beyond laboratory testing as well as regulatory/municipal authority buy-in to the Scheme:

“As an end user what is important is the need to see how technologies work in labs and also how they work in field, thus ETV must show not only the laboratory test results, but also how

the technology works in the real world. Testing outputs depend on the conditions and the boundaries it is able to set out, so there must be some idea and data present on the

boundaries of the technology, i.e. when and where and what it works on.” – End user

“Local authorities must also be involved and willing to take some responsibility in terms of risks. If the local authorities are not involved and vested, then ETV will not provide any

benefit.” – End user

One test centre stated that there would be little value in establishing ETV at the moment. What needs to come first is a change in current regulations to make it necessary for firms to receive an ETV logo or certificates.

A3.12 Making a success of ETV – how to maximise value going forward There is current uncertainty as to whether or not environmental regulators across the EU will readily accept the market deployment of products with an EU ETV verification without prior knowledge of the technology as well as potentially more rigorous testing results from longer term site demonstration.

“The benefits to the end users and customers are in the long term cost savings new technologies can offer, once the savings are proven market acceptance will follow for the technologies. What is needed is the quantification of cost savings.” – Technology developer

To ensure that ETV is able to maximise value the main issues to consider are:

• The breadth of testing must involve both laboratory and on site testing for end users to be satisfied with the performance claims.

• ETV must provide enough data to decrease the quality assurance testing end users perform.

• ETV must be recognised by all member states, national regulators, national environmental agencies and local authorities in order to be valuable to end users.

“We think the ETV logo does not convey to the public/customers that this is a verification scheme and the product has therefore gained independent verification of

its technology. This can be improved quite quickly with minimal impact at present. The USA ETV use a logo which incorporates a tick mark signifying very quickly that

the product has undergone some sort of verification/ testing of its claims. We believe eventually the USA/ Canada ETV programme should dove-tail with the EU one. We also believe other countries would be very interested in cooperating with

the EU for recognition of their own planned ETV schemes (i.e. Brazil).” – Technology developer

• End users must be involved in the process in order to ensure buy in from the industry and to have them invest in funding.

• To be successful an EU ETV must have significant branding and a recognised logo so that it is recognised internationally and not only across the EU. This is where the greater value for developers will be realised.

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• ETV should aim to reduce the restrictions that developers face in finding appropriate testing sites.

“There is significant value in ETV as third party verification greatly helps to reduce the costs and efforts in trying to prove that technologies meet standards in numerous countries.” – Technology developer

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ANNEX 4 BUSINESS CASE: IN-LINE WATER MONITORING The following business case has been prepared on the basis of eight interviews, including four company representatives and four testing and certification bodies.

A4.1 Introduction This business case builds on the findings of the Water Technology Area market analysis which showed that novel water monitoring technologies43 are expected to benefit from ETV since:

• there is a competitive fringe of small, world class SMEs offering step changes in both environmental performance and price reductions against large incumbent technology providers. However, these firms lack the market credibility and sales track record to win valuable first contracts. Lower sales volumes will also have the effect of reducing the opportunity to improve product quality which ironically arises from having more units deployed;

• existing standards and certification procedures often exist in this sector, but new testing and diagnostic technologies are often highly innovative and may well exceed existing provisions;

• the EU represents a leading global market due to the number of regulations affecting water quality across both the water sector and mainstream industry. This will provide excellent market opportunities to deploy new technologies.

For the purposes of this business case, we have focused on ‘in-line’44 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-time45. 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 incidents46;

• 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;

43 For the purposes of the study these cover discrete technologies such as test kits and monitoring devices which includes ‘in-line’ monitoring devices 44 Also widely referred to as ‘on-line’ or else ‘in-distribution’ for water distribution networks 45 Such products typically utilise a reference database of environmental data against which the samples are compared 46 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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• 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.

A4.2 Current status of the market and technology In 2009 the global water monitoring sector47 was worth around €2.6 billion, of which the EU is around €1 billion (38% share).

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

In-line monitoring consists of methods and probes that are integrated into the process. These offer the analysis of any number of properties in real-time. They also offer low cost systems that require little ongoing maintenance. Much of the early in-line monitoring market was linked to SCADA48 systems. Water utilities and industrial processes are increasingly using in-line monitoring to enhance environmental quality standards and improve process efficiencies and cost savings.

Globally, the in-line water monitoring sector is still relatively young, in comparison with the laboratory and test kits markets, and worth €95 million. Based on the EU share of the overall water monitoring sector, we estimate that the EU in-line market in 2009 was worth around €35 million. There is scope for this market to grow considerably to 2020 although there are innovation and commercialisation challenges to be overcome: “In-line sampling is the most difficult part of the process and a relatively new market.”49

The US is the global industry leader in water monitoring with strong in-line monitoring capabilities from companies such as Hach, YSI and Rosemount Analytical. The EU also has a significant market presence with companies such as Siemens (Germany) and Tintometer (Germany).

A4.3 Innovation drivers Main EU and Member states regulations influencing the development of the technology

Environmental regulation is the main driver of innovation in this sector. EU legislation currently influencing the development of in-line water monitoring technologies includes:

• Water Framework Directive – which increases the need for water quality monitoring at the site and river basin management level;

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

47 Comprises laboratories, test kits, probes and analysers 48 Supervisory Control and Data Acquisition 49 Consultation with Technology Developer

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• The Registration, Evaluation, Authorisation and Restriction of Chemical Substances Directive (REACH) – changes industry perceptions of gathering data simply for compliance to one that generates commercial benefits.

Other drivers of innovation surround the need for technologies to address current needs and more complex emerging issues such as source determination, ecological health assessment and new pollutants. Globally, the focus is increasingly moving towards the early detection of pollution incidents.

EU member states implementing these directives look to their national environmental regulators to issue permits to the water sector and other industries which will state the conditions under which they must operate their process and monitor resulting emission loads. The degree to which regulators will be satisfied with the accuracy of new innovations will have a large bearing on the willingness of end users to consider and adopt new technologies.


The desire by end users to shift away from extensive, time consuming and costly laboratory testing of water samples, towards more continuous monitoring of water quality is a key driver of innovation for more sophisticated monitoring devices. This in turn helps end users to have more dynamic plant operation and hence improve their operational efficiency.



Current in-line monitoring methods include:

• In-line disposable filters that are used in conjunction with sampling pumps and bailers which are used for on field filtration for dissolved metal analysis.

• Flow-through cell technology which enables high quality field and laboratory measurements where air contact with the sample has to be avoided decreasing the time and expense of extensive testing.

• Sampling valves that collect samples mid-stream and flow through membrane filtration units into sterile sampling bags or graduated cylinders to test levels of purification.

• Microporous membrane methods within enclosed chambers that provide microbiological sampling.


New innovations being pursued include:

• Faster detection rates;

• Increased frequency of testing;

• Larger number of parameters to be tested (e.g. not one but multiple types of bacteria);

• More accuracy in measurements (e.g. parts per billion rather than parts per million);

• Miniaturisation of equipment;

• Enhanced data management and interpretation software;

• More sophisticated wireless and network communication technologies.

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Given the current immature status of the sector it is likely that performance standards for in-line monitoring devices will take some time to be adopted. In the meantime, it is likely that progressive end users seeking potential step changes in environmental performance, energy savings, quality improvements to product manufacture, and reductions in environmental compliance costs, will create informal industry standards and benchmarks through their normal procurement practices.

A4.5 Technology developers being examined in this business case Company A – develops wireless monitoring and control systems for commercial, industrial, agrifood chain, and environmental sectors. It already supplies a number of products, including a double sensing system and validation database, into EU and non-EU countries.

Company B – is a leading provider of patented water technologies. It conducts ongoing R&D, primarily through successful collaborations with top academic institutions, and sells globally with operations in the EU, Middle East, South Africa and China.

Company C - is a university chemical technology department with a small track record in developing innovative water technologies. It has developed an in-line water sampler to monitor pre-water treatment contaminant loads for water quality purposes (e.g. bacteria, phenolics, chemical pre-cursors within the pharmaceutical industry, etc.).

Company D - is an applied research firm (‘spun out’ from a UK university) focused on the development of low cost power sensors and wireless networking applied to the water treatment and monitoring technology markets. One of its products continuously monitors for chlorine levels in water distribution networks and is globally licensed to Siemens who manufactures it in Germany; another monitors turbidity50 and is now widely sold into UK water service providers.

A summary of each of the developers is shown in Table A4.1. All companies have at least one product in the market and a pipeline of innovations in development. The presence of organisations from Finland and the UK is indicative of the relative comparative advantage that these two member states have, alongside others such as Germany, France and Sweden, in developing water monitoring equipment.

Table A4.1: Technology Developers

Organisation information





Member State Finland UK Finland UK

Size Micro Small Large Small

Age (years) 11-20 3-5 20+ 6-10

Products in development 2 3-5 3-5 N/A

Market ready products 1 0 3-5 N/A

Products in market 2 1 2 3

Product description In-line self

validating double sensing system

In-line broadband

chemical toxicity monitor

In-line water sampling system

In-line water monitors for chlorine and

turbidity

50 Turbidity is a measure of the degree to which water loses its transparency due to the presence of suspended particles

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NEED FOR ETV



Table A4.2 illustrates that the two main common barriers, which are closely related, are:

• Uncertainty over environmental performance of new products; and,

• The highly risk averse nature of customers who prefer to buy market proven technologies.

Validation procedures are respectively the most important and third most important factors for two developers, illustrating the challenges of verifying performance, especially when it may be difficult to demonstrate the technology in-situ (an issue for one of the same developers).



Barriers A B C D

We have limited or no track record of sales x

Our company is of insufficient scale (e.g. turnover) to provide credible guarantees to customers x

Our new product price is higher than incumbent technologies x

Customers are uncertain about our product’s environmental performance x x x

Customers are uncertain as to how suitable our product is to their operations (i.e. fitness for use) x

We lack legitimacy for our environmental performance claims x

We are unable to demonstrate the performance of our technology in real world operational conditions x x

Our customers are highly risk averse and prefer to buy market proven technologies x x x

Validation procedures for this new technology are very onerous x x

Lack of mutual recognition and harmonised standards prevents market access x

Other : Legislation to drive uptake is ambiguous in many countries x


Standardisation provides a set of specific parameters against which water quality monitoring technologies can be tested. While there are now numerous ISO standards available and in development in this sector (see examples in the Box below), we understand that there is no standardisation for ‘in-line’ monitors. One developer also did not feel that there was a need for extensive standards to be developed as the industry is largely self regulating.

ISO standards for water quality monitoring – various contaminants

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• ISO 7704:1985 - Evaluation of membrane filters used for microbiological analyses

• ISO 6461-2:1986 - Detection and enumeration of the spores of sulfite-reducing anaerobes (clostridia) Part 2: Method by membrane filtration

• ISO 11923:1997 - Determination of suspended solids by filtration through glass-fibre filters

• ISO 9308-1:2000 – Determination and enumeration of Escherichia coli and coliform bacteria - Part 1: Membrane filtration method

• ISO 7899-2:2000 - Detection and enumeration of intestinal enterococci - Part 2: Membrane filtration method

• ISO 11731-2:2004 - Detection and enumeration of Legionella -- Part 2: Direct membrane filtration method for waters with low bacterial counts

• ISO 9562:2004 - Determination of adsorbable organically bound halogens (AOX)

• ISO 16266:2006 - Detection and enumeration of Pseudomonas aeruginosa - Method by membrane filtration

ISO standards under development for water quality monitoring

• prEN ISO 5667-3; Water quality - Sampling - Part 3: Preservation and handling of water samples (ISO/DIS 5667-3:2010)

• prEN 16164; Water quality - Guidance standard for designing and selecting taxonomic keys

• FprEN ISO 10523; Water quality - Determination of pH (ISO 10523:2008)

• (91/271/EEC 2000/60/EC); Water quality - Performance requirements and conformity test procedures for water monitoring equipment - Part 1: Automated waste water samples

• prEN ISO 7827; Water quality - Evaluation of the "ready", "ultimate" aerobic biodegradability of organic compounds in an aqueous medium -- Method by analysis of dissolved organic carbon (DOC)

ASTM International51, through its 141 technical standards writing committees and extensive industry networks, has developed over 12,000 international voluntary consensus standards that are globally recognised. Some of those applied to water monitoring, and particularly in-line monitoring are shown in Table A4.3.

Table A4.3: ASTM standards that apply to water monitoring

Standard Name What the standard covers

ASTM D3864 - 06 Continual On-Line Monitoring Systems for Water Analysis

The selection, establishment, application, and validation and verification of monitoring systems for determining water characteristics by continual sampling, automatic analysis, and recording or otherwise signalling of output data.

ASTM D4190 - 08 Standard Test Method for Elements in Water by Direct-Current Argon Plasma Atomic Emission Spectroscopy

Determination of element concentrations in many natural waters. It has the capability for the simultaneous determination of up to 15 separate elements

ASTM D5997 - 96(2009)

Standard Test Method for On-Line Monitoring of Total Carbon, Inorganic Carbon in Water by Ultraviolet, Persulfate Oxidation, and Membrane Conductivity

Detecting and determining organic and inorganic carbon impurities in water from a variety of sources including industrial water, drinking water, and waste water

51 Formerly known as the American Society for Testing and Materials – see www.astm.org









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Detection

Other standards adopted in the absence of recognised international or national standards are those of the US and Canadian ETV programmes. For example, US EPA ETV standards have been used by the DAN ETV programme where no other standards have been applicable for the verification of passive samplers for water monitoring.

Because there are no common standards it is up to the discretion of environmental regulators to accept the data presented by monitors. However, there is a disconnect between the levels of knowledge in industry and environmental regulators. Regulators are generally unaware of the most appropriate analytical methods available; they are also often resistant to accept data and test results from technologies that are not traditionally used, despite the superior information and analysis that is on offer52. This in turn influences the technologies adopted by regulated end users. Establishing ETV protocols for new technologies in water monitoring will go some way towards helping to improve this situation.

Certification schemes like MCERTS53 provide a framework for businesses to fulfil their responsibilities under EU and UK law as well as to meet the quality requirements of environmental regulators. This in turn boost’s environmental regulator confidence in the quality of monitoring at any one site which will ultimately reduce compliance costs to the business. MCERTS covers a number of water monitoring areas including continuous sampling and chemical testing of water and self-monitoring of effluent flows54. It is the only scheme in the EU that provides this service for water monitoring devices.


Company A – faces a major challenge in proving real life performance, for example in testing for microbes in water, since this requires additional in-situ testing. Furthermore, besides achieving CE mark (EU Machinery Directive) compliance, it faces high costs of certification to prove its product is able to test for basic physical parameters:

“There is a real threat to Europe since many innovations will be sold or lost to China because it is so time and money consuming to fight in our home market in Europe. One big problem is costs for certificates. If an SME needs to spend €50,000 to €100,000 for certificates on a new product, it’s simply too much.”

Company B – works on the ground in target market countries as much as possible, establishing trials and where necessary offices to develop closer end user client relations.

Company C – has trialled its sampler at two major Finnish pulp and paper companies. However, it is keen to sell it into the Finnish water industry and European food and drink sector. It intends to license the product or form a spin out as a route to market.

Company D – relies on the uniqueness of its products and their ability to perform in ways existing products cannot. Validation of performance claims is achieved by performing trials with customers on customer sites. However, if products need to be verified this is the responsibility of the distributor.


Table A4.4 shows a number of approaches used by companies to prove performance claims, including previous sales and demonstrations and joint development at customer sites.

52 Caffoor, Issy. (2008): Environmental Knowledge Transfer Network. United Kingdom. 53 The Environment Agency of England and Wales’ Monitoring Certification Scheme 54 For more details see www.environment-agency.gov.uk/business/regulation/31829.aspx

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Table A4.4: Summary of methods used by companies to prove performance claims

Technology Developer55

Approaches to providing performance claims A B C

Previous sales to customer X X X

Company reputation in the market X X

Test data from a credible testing organisation X

Use of an existing ETV scheme (e.g. DAN ETV, US ETV, Canada, etc) X

Joint development with potential future customers X X X

Demonstration at customer site X X X

ISO certification X

Other forms of certification scheme relevant to the technology area X



Table A4.5 illustrates the main benefit from ETV is to allow products to compete with market leading rivals. Other clear perceived advantages from undertaking an ETV are the facilitation of products into both EU and non-EU markets (for example, China was a key target market for one developer) and the insight that an ETV will bring to clients regarding a product’s environmental impact.



Facilitates market entry for our product into our home market X X X

Facilitates market entry for our product into other EU markets X X X

Facilitates market entry for our product into non-EU markets X X X

Increases the speed at which our product reaches market X


Reduces risk for our company when investing in RD&D X X

Allows our product to compete with market leading/rival products X X X X

Enables our company to secure finance from third parties X X

Clients gain insights on environmental impacts from our product X X X

Other : Reduces costs of testing X


55 Company D was not asked this set of questions

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Company A - believes that customers have more market confidence in larger companies: “Small companies have to work in small niches because larger companies take the bigger markets, so there are relatively larger costs for more specialist products. For example, having to produce a 100 page manual.”

An ETV could provide evidence of superior performance over and above an existing standard as well as providing an independent validation label that the market would trust - “some sort of labelling is needed to establish a technology’s credibility so that it can gain a foothold in the market.”

An ETV could accelerate sales in EU markets - “Finnish companies are now having a hard time to gain EU market share before non-EU countries access the same market with similar products with lower costs. ETV provides an additional sales tool to the company but would not give de facto access.”

Company B – sees an ETV as being of use primarily outside the EU and hence it will be crucial for mutual recognition of the EU ETV by third countries to be in place for similar developers to apply.

Company C – sees an ETV as being helpful given the lack of standardisation for in-line monitors and to facilitate sales outside of Finland.

Company D - does not feel that there is a need for ETV in the water monitoring industry, primarily due its niche product offer:

“When you have an individual and unique product there is no competition in the market so there is no need for an ETV because it doesn’t have to be proven against anything. The customer is taken with the uniqueness of the product. The need for ETV might change if competitors come into the market or it could be driven by the big companies asking for ETV.”

It sees ETV as being of use as an instrument if it is able to verify all of the claims of the technology and not only specific aspects of it. However, this will not replace the need for customers to perform their own on site testing and trials for new technologies.

Due to the company’s success in licensing its product to Siemens, it may have a diminished need for a scheme that might otherwise accelerate the market acceptance of its products.


Developers recognise that an ETV will help to create a level playing field with rival technology providers as well as improve market access in both EU and non-EU countries.


“There is a need for ETV, but firms do the minimum possible because of the costs. If the driver for them to have ETV is regulated and mandatory, then they have the credence to do it. As of now there is no driver for firms to pay for verification, they need funding and support and incentives.” – National environmental regulator

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A4.9 The costs of potential verification for technology developers Table A4.6 summarises these various costs to companies. Key conclusions are that:

• firms are willing to pay an ETV fee of €5-10,000 for in-line monitoring equipment;

• this verification fee is generally 10-50% of the testing costs;

• the maximum required time for an ETV varies considerably56

One developer noted that willingness to pay will always depend on the nature of the product

Table A4.6: Costs to developers of undertaking testing and willingness to pay for verification for ETV

Technology Developers

A B C D

Annual testing budget <€50k

(€20k testing cost)

<€100k <€250

(>€10k testing cost)

N/A

Willingness to pay ETV fee (a) €5-10k <€10k €5-10k Not willing to pay

Administration costs for verification (b) €10-20k N/A N/A -

Total costs for verification (a + b) €15-30k - - -

Likely unit/product sale price (c) N/A N/A €5-30k -


N/A N/A N/A -

Maximum amount of time willing to wait for verification <6 months <1 year <2 years -

56 Company C was happy for the timescale to be ‘less than 2 years’ because further testing was required to see whether groups of new chemicals, drugs, bacteria, etc. will be acceptable. This indicates a lack of knowledge about the actual ETV process, i.e. that the product needs to be the ‘market ready’ device, not a prototype that might be further refined.

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To illustrate the potential variation in costs of verification services across the water sector we spoke to a number of test centres across Europe including several that have been involved in ETVs. Table A4.7 illustrates the estimated range of costs from five centres. These provide indicative, not actual, costs for the verification and testing of the specific technologies involved in this business case. However, given that the test centres between them have conducted product testing and certification on numerous monitoring devices, we are confident that these provide the right orders of magnitude for the business case focus.

Test centres that have been or are currently involved with ETV type verifications, note that it is difficult to specify precisely what costs will end up being without knowing exactly the performance claim parameters that are to be verified.

Table A4.7: Costs of providing testing and verification services for monitoring devices

Testing

Verification or Certification

Testing & Verification / Certification

Poland* <€10k (IPT)

Denmark* - €9.5-40k (V)

(average €28k57)

€22-94k (T&V)

Sweden* €25-€50k – in-line devices

<€25k - test kits

≤ €10k (V) €35-€50k – in-line devices

<€35k - test kits

UK* <€10k (IPT)58

<€5k (V)59 <€15k (T&V)

UK <€10k (IPT)

<€10k (C60) <€20k (T&C)

Key: * = original respondent to ETV survey conducted under EPEC study. T = testing; IPT = initial product testing; V = verification; C = certification

Furthermore, based on ETV experiences from current European practitioners in this sector there is often a need to undertake further testing as part of the verification. This is due to the difficulties of relying upon submitted test data from developers as well as the data often found to not correspond directly to the verification application.

Estimates of verification range from around €10,000 or less depending on the technology. There does not appear to be a great deal of variation between technologies. One test centre

57 Cost estimates of verification are based on over 20 verifications across a number of environmental sectors where verification totalled 43% of total costs. 58 The costs and time scale of testing is dependent on the parameters the product is being tested on and the suite of tests that must be performed. In general, it takes less than 6 months to test products and total testing costs are less than €10,000. It estimates that in the past 5 years 100 water monitoring devices have been tested. 59 This test centre does not currently perform certification but has estimated the costs of verification based on current practices. It believes it could take less than 3 months. 60 This is the price for MCERTS. There are two parts to the MCERTS certification. Testing includes theory of laboratory testing (<€5,000) and field trials (<€5,000), making total testing costs less than €10,000, depending on the amount of previous testing and data the company is able to present. Certification includes writing of final reports and publication of certification with total costs less than €10,000 depending on the scope of the technology and the parameters being tested.

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has documented a range of approximately €9.5k-40k for verification from actual verifications across a number of sectors, with an average of verification cost of €28k.


Given a fairly good alignment of fees across several Member States, we conclude that the costs of supplying an ETV verification across the water monitoring sector is likely to cost less than €10,000. This is not likely to significantly increase for in-line monitoring devices.

Initial product testing is likely to cost less than €10,000 for simple test kits and monitoring devices. Test costs could rise considerably to €25,000 for more sophisticated in-line monitoring devices.




The high level of interest for ETV amongst the four developers sampled (i.e. 75% interest) suggests strong demand for this type of verification for in-line monitoring equipment.

Developers are willing to pay an ETV fee of €5,000-10,000 for in-line monitoring equipment. The costs of supplying an ETV verification for this subsector is likely to cost in the order of €10,000 or less. We conclude therefore that verifications of this type of technology are likely to be self-financing at the outset.


Despite the fact that all developers who were asked used previous sales to help prove performance claims, in this sector there remains great uncertainty over the environmental performance of new products and the highly risk averse nature of customers (who prefer to buy market proven technologies) are obstacles for developers of in-line monitoring technology. Validation procedures are also regarded as onerous for this type of technology.


The main benefits for SMEs are to:

• allow products to compete with market leading rivals; and,

• facilitate market entry into both EU and non-EU markets.


Whilst there is a high level of interest for ETV in this niche technology area, we do not believe that there are a very large number of young companies across the EU27 who are currently struggling to commercialise in-line monitoring devices.

Demand for ETV – as illustrated by this business case – is more likely to come from revenue generating companies already selling existing monitoring technologies and who may see an ETV as being a helpful market entry mechanism.

This conclusion partly reflects the relative maturity of the water monitoring sector, which has many large companies and multinationals dominating large parts of the market including in-line monitoring, against a relatively small number of highly innovative SMEs.

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Based on the market strengths of a number of EU member states in the water monitoring sector, we believe that the strongest demand will come from Northern European countries. Having sampled four companies, from Finland and the UK, out of a potential pool of 50-75 developers, we estimate that there are likely to be in the region of 15-30 companies in this subsector who might be interested in taking part in the scheme over the next two years.


For water technology developers it is generally easier to package laboratory scale technologies (e.g. for €20,000 apiece) due to a faster sales cycle than performance based technologies (for several million Euro) which are much more difficult to obtain a sale from. Using an ETV for pan-EU sales could therefore potentially help unlock a lot more sales than for larger process technologies.

The overall EU sector in which in-line monitoring falls is worth around €1 billion – or around ten times the size of the in-line market - and comprises portable monitoring devices, probes, analysers and test kits. However, the ability to prove performance in other areas may be a lot easier, not least to the relative maturity of these other technology ‘families’. We therefore estimate that despite the larger market size, the demand for ETV in the water monitoring sector overall could be in the region of around twice that of in-line monitoring – hence some 30-60 potential applications over a two year period.



Although the evidence suggests that an ETV in this subsector may be self-financing, one national environmental regulator suggested that a plausible funding scheme may be for testing bodies to provide testing services at a very low cost for developers and to seek cost recovery as part of the profits the firm gains on the certified product.


Both Finnish developers suggested potential support from TEKES, the state innovation agency. However, it was noted that TEKES will not give money for instrumentation, only basic R&D.


Given the size of the EU water market and the potentially large number of developers interested in an EU ETV scheme, we conclude the following about the number of VB’s that would be required to run an effective ETV scheme for water monitoring technologies:

• The need to satisfy geographical and language issues suggests that at least 3 VBs are required, potentially catering to Northern/Eastern Europe, Central Europe and Southern Europe.

• There might be scope for increasing the number of VB’s to two in some regions, but only where it can be sufficiently proved that there are enough verifications to be carried out.

One caveat is that SMEs tend to find it easier to collaborate with national bodies. Language issues will be problematic in some cases.


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A4.12.5 Company views

An important issue arises when examining the application of Company C’s sampler, since it would require component modification for each end user market (e.g. water companies, pharmaceuticals and food (which requires very clean water due to human contact), metals, pulp and paper, etc.). This might require more than one ETV verification because different parameters would be tested.

Stakeholder views “The market demand for verification will follow behind a regulatory scheme.” – National environmental regulator

A4.13 Making a success of ETV – how to maximise value going forward

Experiences of verification from DAN ETV

Within DAN ETV, around 20-30 verifications have now been carried out. However, between 40 to 60 additional firms (or 2-3 times the level of verifications) have been turned down because it was not possible for them to go through the verification process. A quick scan of the product at the outset is sufficient to judge whether the product is suitable to be verified.

“We feel that very often SMEs do not have market ready technologies. Furthermore, it’s very difficult for SMEs to explain when precisely they have completed their product development. So it’s very good to have a preliminary ‘test’ phase with SMEs to sort out problems and to help the company to further develop its technology.”

Verification requires following a lot of quality procedures and manuals which entails costs.

If performed very quickly then the length of time from first contact to completion would be between four to six months. However, this timescale is highly dependent on the SME understanding the verification process and there being no disruption to the SME’s activities from the verification. Some verifications take a very long time, especially if joint verifications with USA or Canada which can then take over one year.

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ANNEX 5 BUSINESS CASE: MICRO COMBINED HEAT AND POWER The following business case has been prepared on the basis of ten interviews. The interviews include six company representatives (one of whom responded to the original ETV survey), one trade association, two testing centres and one end user. A total of seven companies and five centres were contacted.

A5.1 Introduction This business case builds on the findings of the market analysis of the Energy Efficiency technology group (see main report). This showed that there are a significant number of highly innovative SMEs operating only at a national and regional scale – many of whom are backed with EU venture capital. For these developers, an ETV scheme could help access untapped markets internationally and help compensate for their lack of reputation these vis à vis large multinationals, (this tends to create scepticism among potential buyers regarding product quality and performance).

We consider the micro-Combined Heat and Power (mCHP) market to be of interest since:

• It is an emerging technology in the EU, with limited commercial sales to date and hence a strong need to accelerate deployment by “early adopters” to achieve significant cost curve reductions through mass production. This would turn mCHP into a commodity product like solar PV;

• It is a technology area in which the EU has a world class capability;

• A number of SMEs compete to develop and commercialise innovative products with different underpinning technology types alongside a number of established EU manufacturers;

• The products being developed are able to run off natural gas, biomass, biogas and hydrogen, which in turn will enable distributed heat and power generation to be made possible in both on-grid and off-grid applications;

• It is an example of a technology that is seeking, in many cases, to replace the existing and large gas boiler market. This alone offers a potential global mass market but one in which incumbent companies are also developing mCHP systems to fend off competition from new entrants;

• An additional benefit of analysing the market potential for ETV in mCHP is the clear cross-over between this Technology Group and the Energy Generation Technology Area where energy efficiency was also featured as a discrete Technology Group.

A5.2 Current status of the market and technology Micro CHP systems have the ability to radically change heat generation in households and commercial buildings while also allowing the generation of electrical power from a single domestic appliance. Heat-led mCHP systems offer an alternative to centralised power generation since they generate when heat demand is at its greatest. This coincides with when electricity grid demand is also at its peak and generally met by fossil fuel based power stations. Micro CHP could therefore be a fundamental aspect of decentralised generation and a future ‘smart grid’ which would improve generation efficiencies, reduce distribution losses and reduce carbon emissions (in the range of 1-2 tonnes of CO2 per annum61). They also offer the opportunity to exploit a more diverse range of feedstocks which in turn can help with more off-grid applications (e.g. use of farm based biogas in rural communities). As

61 Source: COGEN Europe, December 2010

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a result, deployment of mCHP represents a true low carbon technology replacement for the gas boiler which is less disruptive compared to other renewable and low carbon technologies. It also offers economic savings opportunities to the end user where Feed in Tariffs (FITs) enable surplus electricity to be sold into the grid at a premium.

The EU mCHP market is described by one technology developer as “cannibalism” of the existing gas boiler market which is both very mature and dominated by incumbent companies seeking to protect their market share as new innovations enter the market. Switching to mCHP systems will also rely greatly on the existing installation and service infrastructure and skills base for heating which makes it easier to adopt than some other low carbon technologies.

BSRIA estimated the global domestic boiler market to be worth around €7.9 (US$9.7) billion in 2006, covering close to 12 million units, and still growing62. Globally, Europe is the biggest market for domestic boilers with France, Germany, Italy, the Netherlands and the UK dominating EU sales. We estimate that the total EU market size is therefore worth at €2.5 billion or more.

Figure A5.1 shows how the condensing (or high efficiency) boiler market expanded at the expense of traditional boilers, from 3 million units in 2007 to 3.9 million in 2010, while renewable boilers (e.g. small-scale biomass boilers) rose from 1 million to 1.4 million units over the same period. Micro CHP only achieved around 100,000 installed units in 2010 – mostly across the main gas using countries such as Germany, Italy, the Netherlands and the UK – bringing total installed capacity to around 230,000 units63. Despite this nascent market for mCHP, according to BAXI - a leading European producer of boilers - the strongest future growth in the boiler sector will be for the mCHP64, an area the company has invested heavily including through its subsidiary BAXI-SenerTec UK65.

Figure A5.1: Western European market evolution of high efficiency boilers by technology

Source: www.hydroheat.com.au/downloads/Baxi%20presentation.pdf

62 Boiler Market & Energy Efficiency, BSRIA, January 2008 [Available at http://www.bsria.co.uk/news/1984/] 63 DELTA Energy & Environment, mCHP in Europe: The Opportunities and Options, Presentation by Sytze Dijkstra, April 2009 64 BAXI Sener Tec UK. www.hydroheat.com.au/downloads/Baxi%20presentation.pdf. 65 BAXI Sener Tec UK (2011): http://www.baxi-senertec.co.uk/.

http://www.hydroheat.com.au/downloads/Baxi presentation.pdf

http://www.hydroheat.com.au/downloads/Baxi presentation.pdf

http://www.baxi-senertec.co.uk/

http://www.baxi-senertec.co.uk/

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Future estimates of the mCHP market predict annual installations of around 550,000 units by 2015 (creating a cumulative installed base of around 2 million units), rising to around 950,000 annual units by 2020 (total installed base of 5.6 million units)66.

At the European level, boiler production is strongly consolidated around a handful of firms. Based on consultations the following illustrates the current ranking of these major suppliers, most of which are understood to have mCHP products close to production:

1. Bosch;

2. Vaillant (e.g. selling Honda’s ECOWILL mCHP unit into the EU market combined with its proprietary control and connection technologies67);

3. BDR Thermea (BDR stands for BAXI, De Detrich and Remeha) - BAXI and Remeha are both developing mCHP units;

4. Viessmann (marketing a Stirling based mCHP system).

Japan was the first country to introduce mCHP systems and essentially remains the only country globally where the technology is fully commercial. Honda’s 1kW electric ECOWILL (based around internal combustion engine (ICE) technology) was introduced in 2003 and had sold more than 90,000 units by 200968. Yanmar also introduced a larger capacity mCHP unit based on ICE. However, Japan has also been extensively researching fuel cell mCHP technologies for some time, with a collaborative Polymer Electrolyte Fuel Cell (PEFC) research programme between manufacturers Panasonic, Toshiba, Sanyo’s ENEOS Cell Tech and Ebara Ballard, as well as Kyocera developing a Solid Oxide Fuel Cell (SOFC) mCHP. Since 2005 a residential fuel cell mCHP deployment programme has installed over 3,300 system and an associated government development programme has focused on auxillary equipment with the intention of achieving cost reductions for several manufacturers69.

However, European firms are also global leaders in both the mCHP engine technology and the overall product, with Germany, the Netherlands and the UK having market leading innovation and manufacturing centres70.

The market entry strategy for mCHP adopted by one major EU boiler manufacturer BAXI (part of BDR Thermea) illustrates a diversified strategy to maximise the channels to market using different types of mCHP system (see Box).

BAXI has developed three product variants as follows:

- Ecogen – suited to the boiler replacement market – uses the Microgen Engine Corporation (MEC) Stirling Engine;

- DACHS mini CHP based around internal combustion engine – suited to commercial applications or larger homes with high heat demand;

- Fuel Cell Heating – BAXI Innotech PEM fuel cell mCHP which is suited to high efficiency residential dwellings.

One stakeholder noted that “in general, mCHP is at very early stages of commercialisation and there are still significant obstacles that need to be overcome including size, weight, operability, and fit with existing systems, but the mass market potential is high and I’d be

66 DELTA Energy & Environment, mCHP in Europe: The Opportunities and Options, Presentation by Sytze Dijkstra to COGEN Europe, April 2009 67 Honda and Vaillant to launch cogeneration system in Europe, Energy Efficiency News, March 2009 [available at www.energyefficiencynews.com/co-generation/i/1928/] 68 Takahiro Kasuh, Development strategies toward promotion and expansion of residential fuel cells micro-CHP system in Japan, 2009 69 Takahiro Kasuh, Development strategies toward promotion and expansion of residential fuel cells micro-CHP system in Japan, 2009 70 COGEN Europe, Micro CHP: Empowering people today for a smarter future tomorrow, December 2010

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surprised if there was not a significant increase in uptake over the next 5 years, particularly as there is a lot of interest from gas and electricity distribution companies.”

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Numerous EU Directives exist in this subsector. These are principally aimed at ensuring that products will be safe to use for customers. Besides the need to fulfil CE mark requirements (under the Gas Appliances Directive for gas fired products or else the Machinery Directive 2006/42/EC where there are moving parts), other EC Directives which may need to be taken into account in commercialising new mCHP technologies include the:

• Pressure equipment Directive;

• Electromagnetic compatibility Directive;

• Low voltage Directive;

• Explosive atmospheres Directive;

• European Boiler Efficiency Directive (efficiency requirements for new hot-water boilers);

• Ecodesign Directive (Framework Directive 2009/125/EC) which lays out ecodesign requirements for energy-using products;

• Combined Heat and Power Directive.

A test centre stated that “the ethos of CE marking is to reduce testing in each member state”. For example, a developer of a gas fuelled mCHP system could have its product tested for safety under the Gas Appliances Directive. An approval for all the EU could then be issued by the third party notified body.

The Ecodesign Directive – which the European Commission is currently consulting stakeholders on – comprises a number of “Lots” which in turn cover a series of technologies. The objective is to end up with EU energy labels that allow consumers to compare and choose between different products. Lot 1 of the Ecodesign Directive is valid for condensing boilers, mCHP systems and heat pumps. Under the current format the Lot requires four steady state test points. Each test point lasts one hour and so the total test should take between 6-8 hours. For mCHP systems, this is regarded as a much more comparative test with gas boilers. According to one developer “the ideal would be to align Lot 1 in the Ecodesign Directive to avoid multiple tests in multiple Member States.”

At a national level, building regulations tend to specify minimum levels of performance for energy using products. These include Part L of the Building Regulations (UK) where condensing boilers are now prescribed by law; DIN V 1 covering energy-efficiency in building regulation in Wallonia (Belgium); and 8599 in Germany71. Unlike the UK, Germany has never needed a law to prescribe condensing boilers. However, lower carbon products like mCHP are now being stimulated by regulations that insist on upgrading boilers to “beyond current practice”.

The replacement boiler market is not yet a regulated market. However, this will change once the Ecodesign Directive comes into effect at the end of 2011. However, this will still only mandate condensing boilers. According to one technology developer, there is potential for ETV to show the green credentials of new technologies.

Feed-In Tariffs (FITs) are a very important incentive being implemented at the national level to aid the uptake of new low carbon technologies - though sometimes they support only

71 Unlike the UK, Germany has never needed a law for condensing boilers

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mainstream technologies, not stimulate new technologies like mCHP72. The economic viability of mCHP currently depends on prevailing subsidies within each Member State. In the Netherlands, for example, there is a €4-6,000 subsidy for HRe boilers (i.e. mCHP units) and field trials involving utilities (e.g. Eneco recently installing 100 Stirling engine-based mCHP units supplied by Ariston73). The FIT is also attractive with the export rate the same as import (i.e. net metering) and so can be optimised. By comparison, the FIT in the UK is not regarded as economically attractive, whereas Italy pays double the import rate for exports to the grid. Overall, as one developer noted “without a FIT structure, it will take 10 years not 2 years to achieve market scale-up.” Verification of performance is a prerequisite to achieve certification to enable FITs to be granted for a mCHP system. An ETV might be able to speed up the granting of such certifications.

As another developer noted, however, FITs are not ideal if the subsidy is used up or is cut back (as has been seen in several EU member states recently). Hence, any focus by developers on producing more electricity than a household requires is to take a gamble on the long term certainty of FIT rates. Those companies that optimise the electricity and heat outputs to match household demand may well minimise longer term political risks.


Energy utilities play an important role in validating new energy generation technologies at all scales, including mCHP, due to their captive customer base (see Box). The opportunity to use utilities to trial new technologies can provide crucial feedback to developers concerning operational requirements, usability and a product’s longevity in the field. These in turn will lead to product refinements including around desired performance levels.

A major European energy utility noted that it had been involved with mCHP for several years and had established close relations with three developers, all with different underpinning engine technologies (e.g. Stirling engine, ORC, fuel cell) and all at different stages in their commercialisation.

The company’s motivation to work with new technologies is based around a new customer relationship – one in which embracing new technologies can help to strengthen the relationship by offering ‘best of breed’ technologies that can bring benefits to customers, as well as providing a mechanism that can optimise the overall system of power generation (in this case through decentralised power) and profitability.

The utility conducts its own testing of a few units to determine technology limits and to “get under the skin” of the technology. If successful, it will then trial a particular technology (e.g. 50 unit trial). This enables it to learn about and assess the technology’s performance and, importantly, to determine likely customer requirements.

Its approach to partnering is an effective way of doing things in the mCHP market. A forward commitment to purchase technologies provides exclusivity to the utility and provides the technology manufacturer with a captive customer base to provide scale to build.

Some fuel cell mCHP developers aim to create decentralised power stations by having a very large number of installed systems across the grid. This could result in mCHP acting as a virtual grid balancing mechanism by reducing overall demand on centralised power stations. However, it seems too early to tell how such a mechanism might work in the EU:

“Demand side management and demand response is still a very nascent debate across the EU. All utilities are trying to understand how to play in this future landscape.”

– major EU energy utility

72 Comment from Technology Developer 73 See for more details www.duurzaamameland.nl (in Dutch only)

http://www.duurzaamameland.nl/

http://www.duurzaamameland.nl/

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A number of mCHP variants are currently being commercialised with system architecture dependent on the engine or fuel cell design (see Figure A5.2). Smaller, domestic units tend to be wall mounted while larger, free standing units are generally suited to larger buildings. The challenge is to match heat and electricity outputs to end user needs. Single dwellings in the EU might typically work well off a 1kW electric (kWe) load, whereas for multiple-occupancy dwellings the mCHP size will need to rise to over 5 kWe.

Figure A5.2: The type of underpinning mCHP technology leads to a different combination of thermal and electrical efficiency

Source: Delta Energy & Environment, 2009

Initial market adoption in Japan and the EU was based on internal combustion engines running off natural gas. Stirling engine-based mCHP systems are now being sold (e.g. Baxi’s Ecogen) and Organic Rankine Cycle (ORC) engines are also close to market (e.g. Energetix Genlec Ltd’s Kingston mCHP boiler). Fuel cell based mCHP systems – using different are still at a pre-commercial stage in the EU.


The drawback of both Stirling and Rankine engines are they are heating load driven systems. This means they have much lower electrical efficiency than fuel cell based mCHPs which have the potential to generate significant excess electricity which can then be used for selling into the electricity grid, ideally at a premium through a FIT – if one exists.

Trade association, COGEN Europe, believes that over the next two years, fuel cell mCHP (of which this business case covers three leading developers) will become commercial.

Companies consulted for this business case note that the level of improvement in environmental performance for their next generation of products could be anything from a 10% to 100% improvement. This is likely to mean that for those products which provide a step-change in performance, technology developers may be more inclined to use an ETV scheme to showcase the superior claims of their systems.

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It is likely to be at least another five years before sufficiently large numbers of mCHP units have been deployed in EU for there to be further refinements to existing designs. The key objective for the moment is bringing the costs down for components. Over time there is likely to be a degree of convergence around mCHP designs. The emergence of the ‘Smart Grid’ is also likely to lead to a number of standards being introduced to help bring a degree of conformity and interoperability of energy efficiency products in buildings (e.g. smart controls that can be remotely adjusted during peak energy demand periods as well as report back centrally on overall power outputs).

A5.5 Technology developers being examined in this business case Company A - has developed a SOFC mCHP product74 designed to run off natural gas for the residential market. With a manufacturing site in the UK, the company aims to sell in the UK and Ireland, as well as across Europe, North America and Asia.

Company B – is Australian owned with a manufacturing plant in Germany (capable of manufacturing 17,000 units per year) and research centre in the UK. It launched a SOFC mCHP product in April 2010 with a very high electrical efficiency. This will require a different market adoption approach compared to the heat-led boiler market, but it can be installed anywhere where there is a gas connection in a building with some heat demand. The company’s long term aim is to replace centralised power stations. Markets being targeted include Germany, the Netherlands, Italy and the UK.

Company C – is a R&D focused company with 40 employees that is involved in bringing to market both a PEM and SOFC fuel cell mCHP systems. Its parent is a leading North American fuel cell developer working on global mCHP systems.

Company D - has to date sold over 300 units of its gas-fired mCHP system in Germany. It is undertaking a beta prototype deployment of a novel biomass pellet powered mCHP system which incorporates a patented pellet burner with a unique and compact design75.

Company E – is part of a large multinational boiler group already selling a Stirling engine mCHP unit that generates 1kWe and 5kWth. Whilst the product uses all the heat generated, there is marginal electricity production which can be exported to the grid. Currently the economics of the unit do not yet make it completely viable without a substantial FIT. However, the company is aiming for a 5-6 year payback in the Netherlands based on volume production. The firm is well positioned to calculate the environmental impacts of their products.

Company F – is a 15 year old manufacturing company employing 13 people that has spent around €200 million on product development of its market leading Stirling engine. The engine is now mass manufactured and sold under licence to a number of European mCHP manufacturers (OEMs) who integrate it into their final products.

Table A5.3, which profiles each developer, shows that most companies in the mCHP market are small to medium sized and many take a long time to commercialise their innovations. Additionally, it is important to note that most firms are well capitalised (either through venture backing or else because of existing product sales). This reflects the considerable investment required to bring novel mCHP technologies to market.

74 A range of four product sizes (i.e. 15kW, 24kW, 28kW and 30kW) is now available along with three sizes of heat storage tank (i.e. 160, 180 and 200 litres) 75 This allows high temperature combustion generating steam using a very small pressure vessel which falls below specific regulations for high pressure machinery. Heat led, the system produces 3-16kWth and 0-2kWe.

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Table A5.3: Technology Developers

Organisation information A B C D E F

Member State UK Germany Denmark Austria NL UK

Size Medium Medium Small Small Large Small

Age (years) 6-10 11-20 3-5 6-10 20+ 11-20

Products in development 1 1 3-5 0 NA NA

Market ready products 1 0 2 1 NA NA

Products in market 0 1 5+ 1 1 1

Product description

Fuel cell mCHP unit

Integrated fuel cell micro-

generator running off biogas to produce

electricity & hot water

Fuel cell mCHP unit

for household

use

mCHP system

using both proprietary burner (for biomass)

and engine

Stirling engine

mCHP unit

Stirling engine supplier

NEED FOR ETV



Table A5.4 shows that the two key barriers are that the:

• new product price is higher than incumbent boiler technologies which alone could prevent market penetration despite well proven environmental performance claims;

• validation procedures for fuel cell mCHP products are particularly onerous.

In general, the main market barrier for mCHP is the extremely high cost of the product compared to HE boilers, coupled with a general reluctance of consumers to spend more money on more energy efficient products. The cost of buying a Stirling engine in Germany from a manufacturer for example has been estimated by one company at €20,000. The margins applied through the value chain mean that such a Stirling engine mCHP unit will cost €30-40,000 once installed - compared to a HE boiler costing less than €5,000 with installation of less than €1,000. There is clearly a large differential at the moment. Once the payback time is down to a reasonable level, the end user will benefit, particularly if excess electricity can be sold to the grid for a premium.

The responses also illustrate the difficulties of new companies in bringing products to market such as limited track record (one developer stated that “if you’re in the ‘Club’ then fine”; another commented on the ability of incumbents to offset high commercialisation cost with

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existing product revenues), insufficient scale of business and achieving quality standards like ISO9001 (usually based around certifying a manufacturing production line which is hard when products are still at late prototype stage, etc).


Technology Developer76

Barriers A B C D

We have limited or no track record of sales X X

Our company is of insufficient scale (e.g. turnover) to provide credible guarantees to customers X X

Our new product price is higher than incumbent technologies X X X X

Customers are uncertain as to how suitable our product is to their operations (i.e. fitness for use) X X

Validation procedures for this new technology are very onerous X X X

We have yet to achieve the right quality standards / accreditations (e.g. ISO9001/14001) to satisfy customers X X

Other : UK PAS 67 was written around Stirling engine based products, not fuel cells. X


The European Norm for fuel cell mCHP is prEN50465 (for Fuel Cell Gas Heating Appliances of nominal heat input inferior or equal to 70 kW) which sets out how to do steady state test points. For the main gas using countries in the EU, there are already established microgeneration steady state tests (e.g. through Blue Angel in Germany, Gas Kur in the Netherlands and PAS67 in the UK). According to one developer it is essentially the same test across Europe. Technology developers who would like their products to benefit from feed in tariffs (FITs) in any particular EU country must perform these steady state tests to receive an appropriate certificate.

According to one developer, “there are common EU standards to a certain level but then slight adaptations are added by individual Member States.”

In Germany, DIN 4701-10 is the official method of calculating primary energy savings of buildings according to EnEV 2007 (Energieausweis). Coverage of demand is determined by thermal power output, however electrical power output is not considered, neither are primary energy savings as a result of power from the mCHP unit.

In the UK, the Publically Available Standard (PAS 67: 2008) is a laboratory test principally written for Stirling engines, but with sufficient flexibility to allow for fuel cells mCHP to also be tested77. A leading test centre in the UK said that comparable mCHP products should undergo the same testing. PAS 67 determines the heating and electrical performance of heat-led micro-cogeneration packages primarily intended for heating dwellings. It is equivalent to EN50465 and requires 24 hour testing of mCHP at various thermal outputs at various regimes such as 30%, 100%.

As a replacement for boilers, mCHP product testing is expected to follow a typical boiler cycle such as continuously operating; operating once a day or operating twice a day, etc. Where products are being ‘range rated’ (i.e. to see results at different power settings) then

76 Company E and F did not answer this question 77 At the time of writing, PAS 67 was being rewritten

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the complete testing procedure is likely to be extended. Likewise, if a product is particularly innovative then the testing time might be extended – from two weeks to two months. Indeed, a test centre noted that some products need redesign and redevelopment which can extend the period to over a year.

PAS 67 (2008) is referenced in a number of UK codes such as for buildings, SAP200978, and the Microgeneration Certification Scheme (MCS). The MCS provides access to the UK’s feed in tariff for renewable energy as well as providing consumer protection. The Box below illustrates the leading requirements to ensure compliance with the MCS.

UK Microgeneration Certification Scheme

Key normative references required to be considered as part of the MCS79 include:

- PAS 67: 2008;

- BS EN 15036-1: 2006 Heating boilers – Test regulations for airborne noise emissions from heat generators – Part1: Airborne noise emissions from heat generators;

- G83/1: September 2003, Recommendations for the connection of small-scale embedded generators (up to 16A per phase) in parallel with Public Low-Voltage Distribution Networks;

- Method to evaluate the annual energy performance of micro-cogeneration heating systems in dwellings, October 2008, Prepared for Defra by BRE80;

- Boiler Efficiency Database81;

- CEN/TR 1749: 2005, European scheme for the classification of gas appliances according to the method of evacuation of the combustion products (types).

To be certified under the MCS, applicants must:

- undertake independent third party testing by an accredited test laboratory;

- submit an independently verified, energy performance report produced from the comprehensive set of test conditions detailed in PAS 67;

- have a full set of data produced from the annual energy performance evaluation method for micro-cogeneration packages recorded in the Boiler Efficiency Database;

- have a table in their installation instructions of the Heating Plant Emission Rate (HPER) value for plant size ratios between 0.5 and 4.0 in steps of 0.1.

One fuel cell mCHP developer believes the UK standards are onerous, expensive and out of date. The product accreditation standard was based around Stirling engine heat led mCHP systems. A working group had to write a new standard for electricity led mCHP. This enabled their fuel cell mCHP to comply with the MCS, but it turned into a long drawn out process, taking the company 18 months to achieve MCS, compared to less than one month for the equivalent KVK certification system in Germany. They noted that “where accreditation arises, time to market is critical because of the extra monthly cash burn and overheads which might otherwise go into product cost reductions”.

Trialling and demonstration of technologies

Verification of environmental performance is always required for mCHP systems as a requirement of market access. It is quite normal for mCHP developers to have long term trials to prove performance as well as enter into agreements with utility companies to trial their prototype systems. Table A5.5 provides insights into the long time to market for BAXI’s PEM mCHP product.

78 SAP 2009, The UK government’s standard assessment procedure for energy rating of dwellings 79 Source: Product Certification Scheme Requirements: Heat-led micro-cogeneration packages in dwellings, Issue 1.1, MCS: 014, February 2011 80 Available from: http://projects.bre.co.uk/SAP2005/supporting-technical-documents.html 81 see www.sedbuk.com

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Table A5.5: Example of the 9 year product design evolution and trialling period to prove performance for BAXI’s PEM mCHP product

Beta development Beta 1.5/1.5 plus GAMMA unit Series

2002 – 2005

Design of a field test unit

2005 – 2008

Field trial with gas and power utilities.

45 units deployed

2010 – 2012

Pre-series unit for demonstration

Market entry programme 2013

Source: BAXI, presentation to COGEN Europe, April 200982

To date, field trials for mCHP (in the range of 50 to 200 units) have occurred in several EU member states, backed by companies who often commit to purchasing systems that meet their design specification. This process has been greatly helped by a National Innovation Programme (NIP) established in Germany, running from 2008 to 2012, to aid mCHP developers. NIP works in in collaboration with German utilities to help with market preparation and development across the EU.

Examples of the approaches taken by companies in this business case include:

Company A – has received £20 million of investment from a major EU energy utility and has also entered into an agreement with a national EU gas supplier to supply 16,000 residential mCHP products operating on natural gas over a four year period starting in around 2012 upon successful completion of a trial phase;

Company B – has trials with several utilities across the EU with the promise of a forward order commitment from one for 100,000 units from 2012 should it achieve its technical milestones. It notes that a lack of verification has restricted international market access to date into both EU and non-EU countries;

Company C – is already in a development partnership with fuel cell component suppliers and energy utilities which is trialling the products in private homes. Key commercialisation challenges include the safety of using hydrogen gas as a feedstock (which might make it hard to gain CE approval for their SOFC mCHP unit) and variable levels of nitrogen in natural gas which can affect the PEM reformer.

Company D - is beta prototyping over 25 units of its novel biomass mCHP system in Austria, Germany, France and Czech Republic. The technical status of the technology is deemed sufficient but efficiency needs proving in the field. The company intends to focus on Austria for the immediate future so as to be close to its main test sites. This will ensure that problems are solved rapidly and customer confidence built up. As a result modest production growth is expected over the next 1-2 years. Since there is no European Norm for their product due to its unique design, and given the world class reputation of Austrian biomass manufacturers, “Austrian approval is sufficient to get a ‘foot in the door’ of potential customers in France, Italy, Spain and Slovenia”.


Table A5.6 summarises the overall methods used by company to prove performance in the current absence of an ETV scheme. Test data from credible test houses is a preferred method of proving performance. However, the need to fulfil a raft of certification schemes, including Gas Appliances Directive and Machinery Directives, are also cited as mechanisms for aiding sales (i.e. being able to prove safety).

82 Mike Small, Baxi, Marketing micro CHP in Europe today – when can we expect what?, April 2009

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Table A5.6: Summary of methods used by companies for proving performance claims to potential customers


Approaches to proving performance claims A B C D E F

Previous sales to customer X X

Company reputation in the market X

Test data from a credible testing organisation X X X

Joint development with potential future customers X X

Demonstration at customer site X

Other forms of certification scheme relevant to the technology area

e.g. Gas Appliance Directive, Microgeneration Certification Scheme, Austrian government testing scheme to qualify for a FIT, Self certification under Machinery Directive

X X X X X X



Table A5.7 illustrates the main benefit from ETV is to assist developers to enter other EU markets and to increase market acceptance of products by customers. Several developers also see value in ETV helping both domestic market access and non-EU access. Other clear perceived advantages from undertaking an ETV are to enable products to compete with market leading rivals and, importantly, to provide insights to clients on the product’s potential environmental impacts.

Table A5.7: Benefits from having an ETV for technology developers



Facilitates market entry for our product into our home market

X X

Facilitates market entry for our product into other EU markets

X X X

Facilitates market entry for our product into non-EU markets

X

Increases the speed at which our product reaches market

X X

Increases market acceptance of our product by customers

X X X


Allows our product to compete with market leading/rival products

X X

Clients gain insights on environmental impacts from our product

X

Note: Responses relate to a “Significant benefit” unless in bold which is regarded by the developer as a “Highly Significant benefit”

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Company A - would like an ETV to prove product performance and be recognised like a CE mark.

Company B - would like an ETV to prove performance once for Europe (and ideally globally) rather than “100 times over”. This would accelerate market entry lead times – a critical issue for young companies - and save considerable costs, particularly if utility commitments to purchase products fell through. It sees an ETV as a pre-requisite for FIT territory in the EU. An additional benefit of ETV is to help achieve market entry for innovative companies who are unable to ‘loss lead’ through an existing business: “ETV would improve credibility and increase compliance”.

Other responses indicate a subdued interest in an ETV scheme, at least at the moment:

Company C – has a small willingness to have and to pay for an ETV scheme since it feels “there are no real disadvantages to NOT having it” – this is primarily because its current commercialisation strategy involves the entire value chain including a leading testing centre that will help it gain CE approval.

Company D – is only focused at the moment on its home market so is only potentially interested in an ETV scheme in the future when it is ready to sell directly into other member states. However, it notes that distributors are likely to be used in other member states since they would also install the machines. Consequently, the company only requires CE approval and self certification to the EU Machinery Directive.

Company E - their product has borrowed around 90% of a standard boiler, so it fulfils the Gas Appliances Directive and fits perfectly into Lot 1 of the Ecodesign Directive. It therefore does not believe there to be much merit from an ETV scheme although it might make it faster to achieve the Ecodesign Directive requirements.

Company F - had already spent around £300,000 on taking the engine towards CE mark approval (under the Gas Appliances Directive), but then decided against it: “if pushed we would have gone down the CE route at great expense but discovered it was not necessary”. The company’s product is now self-certified to the EU Machinery Directive because they realised this was the only certification required to sell to their clients, such as BAXI, Remeha, Vaillant, Viessmann, etc. These customers also happen to be the company’s main shareholders and have injected money into the business to keep it in operation. This close and successful supply chain relationship eliminates the company’s need to demonstrate the performance of their engine through an ETV scheme. Besides satisfied with its own current sales position, it did note that “the idea of having one centralised validation scheme has some merit in this market”.


An ETV scheme, particularly for developers of fuel cell mCHP units, could:

• Assist developers in entering other EU markets;

• Help to overcome multiple verifications in Germany (through Blue Angel), the Netherlands (through Gas Kur), the UK (through PAS67), etc. This might be of real value to companies bringing new innovations to market;

• Enable products to be fast tracked through the process of gaining an EU Energy label (under the Energy Using Products Directive).

Both benefits would reduce overall costs to firms.


The major European energy utility we consulted felt that currently there was not a level playing field in the mCHP space, partly due to the applicability of certain standards (i.e. for

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gas boilers) to more novel technologies. It sees an EU ETV scheme as a good thing as it might help to level the playing field. At the corporate level, an ETV might help raise the profile of certain developers, helping them to get their ‘foot in the door’, but potentially nothing more given the necessity to offer more than just a potentially superior product:

“an ETV label would help us to engage with a technology developer. But other factors would ultimately have to be taken into account, such as financial health, make up of the Board of Directors, investors, etc. However, anything that helps galvanise a good fit with a potential

partner is valuable.”

The EU Micropower Council felt that an EU wide verification scheme made a lot of sense: “if it could give accredited carbon or renewable energy performance, it would give additional weight with challenging the planning authorities as well as showing off performance to end users.” In addition, the Micropower Council felt that an ETV could help to overcome some of the challenges of companies selling across Member States and qualifying for FITs83.

A test centre felt that an ETV was well timed with the market status of mCHP as it could help to accelerate sales into this new market. It felt that an ETV could also illustrate some of the key environmental validations that might become commonly demand in the future including:

• Carbon emissions;

• Carbon savings;

• Whole life costs;

• Embodied carbon.



1. Cost of testing the technology to enable it to apply to the ETV;

2. Costs of testing the technology in the event that the verification Body requires further testing;

3. Official ETV fee – which the developer / vendor will need to pay to the verification programme;



A5.9 The costs of potential verification for technology developers Company A - has yet to go through the UK (PAS) testing procedure because not only is it inappropriate to their product, but the potential permutations of their products (i.e. electric rating plus heat storage capacity) would make the testing and resulting costs extremely

83 For example, it was aware of an Austrian heat pump manufacturer who found it challenging to go through the UK’s MCS scheme because MCS does not recognise if a company already manufactures over 100,000 units or has ISO9001 – a company would still have to pay for a MCS representative to visit their factory.

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onerous. Total testing costs are €12,000 to €18,000 for each power output84 so costs “could easily reach eight times that level or €96,000 to €144,000. The company is willing to pay around €10k for ETV. One full time employee at €40,000 per annum would probably be required to oversee the process.

Company B - is focused 100% on R&D and has spent around €200 million to date on product development. It is willing to pay up between €10,000 and €20,000 for an ETV if it achieves EU wide approval. This sum is based on existing certification schemes costs around €5,000 in Germany and around €7,000 (plus an annual maintenance fee of around €1,200) in the UK. Internal administration costs are perceived to be fairly substantial and potentially between €20,000 to €30,000. The maximum time for an ETV is six months and ideally three: “if it takes longer than this then ETV is no better than existing schemes.”

Company C - has been involved in a €17m R&D project, half of which is funded by industry and utilities, and runs between 2006 and 2012.

Table A5.8 summarises these various costs to companies. Key conclusions are almost universal agreement amongst the three fuel cell based mCHP developers that:

• Willingness to pay is around €10,000;

• Maximum allowable time for verification is less than 6 months;

• Likely sales attributable to an ETV are too difficult to establish.


Technology Developers

A B C

Annual testing budget >€1m – single test of entire product

configuration could cost €90k to €130k

Not specified €47,000 (actual test costs)

Total R&D invested to date85 Not specified €200m €18m

Annualised R&D invested to date (i.e. based on the age of company) - ~€11m ~€3m

Willingness to pay ETV fee (a) €10k €10k-€20k €10k

Administration costs for verification (b) €40k €20k-€30k Unknown

Total costs for verification (a + b) €50k €30k-€50k -

Likely unit/product sale price (c) Not specified Not specified Not specified

Likely increase of sales expected from certification of performance claim (in value) (c) Unknown

“Too hypothetical an issue but substantial

potential savings from reduced

multiple verifications”

Unknown

Maximum amount of time willing to wait for verification <6 months <6 months and

ideally 3 months <6 months

84 The cost alone of the G20 reference gas used for testing is £3-4k (€3.6k-€4.8k) as it requires a week’s worth of gas. 85 Note that some firms have only been able to provide a total annual development cost which often includes test costs

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We attempted to speak to a number of test centres across Denmark, Germany, Netherlands, and the UK in order to establish likely supply side costs of providing both testing and verification. It was only possible to speak to two test centres, both in the UK. One of these is a major player in the European mCHP testing market (it has tested 15-20 product ‘iterations’ over the past five years, with this number ‘accelerating’ in recent years); the other has been closely involved with mCHP development and testing over the past ten years but currently does not offer specific testing services, although is very familiar with the cost structure.

Table A5.9 illustrates the estimated cost range for performance testing in the UK together with an estimate of the cost of undertaking the UK Microgeneration Certification Scheme. These costs provide indicative costs for the verification and testing of the technologies involved in this business case. Test centres have commented that there is generally no standard price list – it all depends on the nature of the product. We are confident that they provide the right order of magnitude for the business case.

Table A5.9: Costs of providing testing and verification services across the mCHP sector

Performance testing Certification / Verification

UK €8.4k - €12k (to PAS 67) -

Microgeneration Certification Scheme (UK)

- €11k


We are able to draw the following tentative conclusions about the costs of supplying verification services for ETV in the mCHP sector. A typical verification fee is likely to be in the order of €10,000 to €15,000 depending on the technology type, its complexity and innovativeness.




The high level of interest for ETV amongst the three fuel cell mCHP developers sampled (two out of three were keen to undertake; a third was lukewarm) suggests strong demand for this type of verification for this type of technology.

Developers are willing to pay an ETV fee of at around €10,000 (and up to €20,000 in one case). The costs of supplying an ETV verification for this subsector is likely to cost in the

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order of €10,000-€15,000. We conclude therefore that verifications of this type of technology are likely to be self-financing at the outset.

A key finding is that all mCHP systems must be tested against and fulfil a raft of mandatory health and safety requirements in order to be placed on the market. This includes the need to mandatorily assess performance under the CHP Directive. Whether this latter requirement is sufficient to illustrate the innovativeness and uniqueness of any one product is debateable. An ETV could therefore enable SME’s an opportunity to ‘showcase’ their products’ green credentials such as carbon savings.

A5.11.2 Key challenges for technology

There are a small number of independent mCHP developers, many of which are located in Northern European countries. They exist alongside established boiler manufacturers who are also slowly bringing new mCHP products to market. Incumbent boiler manufacturers can afford to offset development and verification costs with revenues from boiler sales and can bide their time in transitioning towards mCHP.

The market focus for mCHP (i.e. generally replacing gas boilers) means that scale up challenges and channels to market being taken by developers are very similar.

There is a lot of energy utility interest in the market, especially in assisting developers in product validation (which in turn provides a degree of exclusivity for the utility) and providing forward order commitments for bulk purchases of mCHP - especially given potential for decentralised power, opportunity to develop new utility business models, as well as finding novel technologies that can fulfil carbon reduction obligations.

The very high cost of current mCHP systems compared to gas boilers means that both substantial and long term feed in tariffs86, ideally combined with bulk purchase (most likely through energy utilities), are the only ways that this expensive technology will rapidly drop down the cost curve.

Some developers voice concerns about their ability to obtain fast and modestly priced certification when prevailing standards were primarily written with novel innovations such as fuel cells in mind. Others believe that existing testing and certification systems are sufficient (at least in the short term), especially for those companies that may be selling directly to OEMs or are operating in a highly niche market area where an ETV is of little perceived value.

However, in the event that utilities decide against purchasing mCHP, some developers see value in an ETV.

A5.11.3 Value added for firms from undertaking the ETV

An ETV scheme could:

• Assist developers in entering other EU markets;

• Help to overcome multiple verifications across Member States;

• Enable products to be fast tracked through the process of gaining an EU Energy label (under the Energy Using Products Directive).

Stakeholders feel that an ETV could help to prove the environmental performance credentials of products (e.g. carbon emissions, whole life costs and embodied carbon) that

86 There is an inherent risk that FITs could be reduced unexpectedly as has happened in several EU member states. This would substantially reduce the premium for exported electricity and thus could jeopardise the sector.

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are separate issues and currently not covered by either safety compliance or performance testing.

It is clear that an ETV has to offer something distinctly different from existing testing and certifications.

A5.11.4 Potential number of firms who might be interested in scheme

The potential number of mCHP developers likely to be interested is assumed to be modest. This business case consulted many of the leading players in the sector: two companies were keen to undertake an ETV; the other four had mixed opinions. This equates at least a 33% take up level and potentially up to a 50% to 65% level.

We assume that most incumbent boiler manufacturers have generally no interest in ETV, given that they can happily wait 5-10 years for the market to take off whilst selling their current products or have already decided to buy in technology from overseas (e.g. Vaillant have sourced Honda’s ECOWILL mCHP system to which it has added its control system).

This leaves the independent developers. The EU supply side has seen a number of recent company failures including Enertech and Disenco. This is not an easy market in which to become established and to be successful requires a lot of investment and trials over several years to gain market confidence.

In total, across the EU, we estimate that there are likely to be around 20-30 developers of mCHP systems, half of which are probably boiler manufacturers or companies in that supply chain. Total interest in an ETV to 2020 is therefore likely to be at least 5-10 companies and potentially up to 15-20. We estimate that over the next 2 years around 3-5 companies might choose to apply for an ETV.


The energy efficiency in industry and buildings market is characterised by high levels of consolidation, with only a few key players establishing the major trends within the markets. These players are also the major innovators in these fields. However, the EU is also one of the largest global markets for energy efficiency products - estimated to represent 35% of the global energy efficiency market (€157bn) rising to between €300bn and €350bn by 202087 (growth that will be largely driven by the shift to a low-carbon energy system which in turn has brought about a renewed interest in technologies aimed at improving energy efficiency in industry and buildings88). This provides excellent opportunities for the hundreds of innovative R&D companies in this EU sector to bring new products to market.

We believe there will be strong demand for ETV across a number of energy efficiency subsectors. Key benefits from an ETV could be to show the superior performance levels of new technologies against incumbent technology providers who dominate the channels to market as well as whole life cycle costs.

However, agreement on the benefits of an ETV is not universal across the energy efficiency technology group. One company that has developed a proprietary air cooling system for buildings noted that their filter membrane does not fit standard norms and customer will typically only procure based around robust on-line test data and a year's trial at any particular site – not whether the product has a performance verification from an ETV scheme.

A5.12 Operational challenges for an ETV in this area 87 Roland Berger strategy consultants (2007): Innovative environmental growth markets from a company Perspective. Federal Environment Agency Germany. 88 World Economic Forum (2009): Green Investing: Towards a Clean Energy Infrastructure.

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In some cases it is likely that some developers will grudgingly bear the full costs of the ETV if they perceive a key benefit to accelerate market adoption:

“New technology areas are never that urgent an issue for incumbent suppliers, but for independent smaller companies, it’s life or death. We would have no option but to spend out on an ETV scheme.” – technology developer


At the EU level, COGEN Europe believes support for mCHP and fuel cell development should be more widely covered within the EU SET Plan and FP7/889. FP7 has also been mentioned by developers.

At member state level, a typical route for R&D funding is through national innovation agencies and programmes (e.g. Technology Strategy Board competitions in the UK)


The highly specialist nature of the mCHP sector, coupled with its geographical focus in Northern European countries, suggests that just one verification body is likely to be required for the entire EU.


No potential barriers were identified.

A5.13 Making a success of ETV – how to maximise value going forward Verification bodies would need to communicate all requisite tests alongside names of testing bodies, relevant standards and regulations.

A dedicated and obvious website for ETV is vital – not something buried away on the Commission’s site.

89 COGEN Europe, December 2010

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ANNEX 6 BUSINESS CASE: SOLAR HYBRID TECHNOLOGIES The following business case has been prepared on the basis of seven interviews, and one completed technology developer questionnaire. The interviews include three company representatives, one trade association and three certification bodies. A total of four companies and ten certification bodies and testing centres were contacted.

A6.1 Introduction This business case builds on the market analysis findings of the Energy Technology Area (see main report). This analysis found that solar energy is a highly innovative sector, with many new innovations on the market, in many cases supplied by SMEs. It also suggested that new generations of products ready to enter the market, often go beyond existing standards, increasing the likeliness of users demanding verification. However, there are already a number of mechanisms and paths to market for technology developers which include established test houses (e.g. TUV and world renowned institutes such as the Fraunhofer Solar Institute) market reputation (especially for larger companies) and testing and verification on behalf of universities90.

The market analysis also identified solar hybrids as one of the most innovative niche markets within the solar sector, with a global potential. Firms in this sector face considerable challenges testing their products against existing standards, and can thus often be impeded from benefiting from Government support programmes.

Some of the major uncertainties in the market regarding solar hybrid technologies are related to their levels of performance in comparison to mainstream renewable and non-renewable technologies. The two main criteria of performance in this case refer to the thermal and electric energy output of the device, and the coefficient of performance (COP). According to technology producers, potential buyers are still very sceptical when it comes to recognising the added value that these technologies.

As will be explained in the following sections, hybrid technologies may combine the different components that they include in many different ways. Giving additional importance to one of the components is usually done at the expense of another. Thus combining these components in order to optimise overall performance is a difficult process which technology developers are not always able to control.

The other major concern, which is mostly cost-oriented, relates to the performance stability of the devices over time (dynamic performance), in order to ensure payback. Being able to prove this would reassure consumers that despite a higher first-cost in comparison to traditional alternatives, these technologies offer the possibility of making long-term savings or benefits91 in energy consumption and production.

A6.2 Current status of the market and technology Solar technologies cover both thermal (T) and photovoltaic (PV) energy producing devices. These technologies have undergone impressive growth over recent decades and now represent one of the leading technologies for heat and electricity generation.

In 2010 the global solar photovoltaic market (PV) reached a total turnover of €34 billion92. The European share of this market is estimated to represent roughly 60%93, with Germany

90 Dave Raval, Head of Entrepreneurs Fast Track, Carbon Trust 91 In case feed-in tariffs apply to the product. 92 European Photovoltaic Industry Association (EPIA), Solar Generation 6, October 2010 93 PV Status Report 2009, Joint Research Council, Renewable Energy Unit

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being at the forefront of European production and innovation. At the global level, the EPIA Global Market Outlook report shows that the annual PV market has developed from less than 1 GW in 2003 to more than 7.2 GW in 2009.

The volume of investment in the solar power sector investment has also been one of the highest among all clean energy sector alternatives. In 2009, the solar power sector accounted for around €17.8 billion ($24.3 billion) or 21% of all financial investments in sustainable energy94. That same year, total VC investment in solar power in Europe was about €1.22 billion, accounting for 24% of worldwide VC investment in all clean energy sectors95.

In addition the significant market dynamism displayed by solar technologies, there is also considerable innovation taking place within this sector. For the most part however, innovation taking place in solar technologies is incremental, and mostly dominated by large non-European firms such as Sharp, Canon and Sanyo.

One particular sub-sector within the solar technologies family in which more radical innovation is taking place relates to hybrid solar technologies. European firms, and particularly SMEs, are at the cutting-edge of innovation for this particular type of technology.

In the context of this business case, the term ‘hybrid’ refers to two types of innovating products in the solar technologies sector:

• Technologies mixing photovoltaic and thermal panels (PV-T) within one single device. These are hybrid solar panels consisting of photovoltaic (electrical – PV); and thermal (heating - T) functionalities – usually separate – which will contribute towards a house’s electricity demands while heating hot water;

• In the second case, hybrid technologies refer to devices that do not necessarily combine photovoltaic and thermal, but rather mix two or three energy solutions at once in order to optimise outputs. This includes for example devices using solar collectors (thermal or photovoltaic) connected to heat-pumps from which heat is generated.

PV-T are photovoltaic collectors that generally produce heat as a byproduct. Panels collect electro-magnetic radiation from the sun (direct current) which is changed by an inverter into an alternating current (AC), suitable for use in the home. The process naturally generates heat, which is transferred via an aluminium heat exchanger to a closed circuit through which runs an antifreeze heat transfer fluid; the fluid takes the heat to the hot water cylinder. When set up correctly, this process actually aids the functionality of the PV module, as it causes the heat in the cells to dissipate and PV cells are more efficient when they are cooler96.

Individually, solar thermal and photovoltaics are relatively mature technologies. However, the idea of bringing electricity and hot water together in a single panel has only recently occurred and represents a step changing innovation.



Two regulatory mechanisms influence the levels of innovation taking place in this sector: restrictions and incentives. The former include European Directives such as the EU energy performance of buildings. On the incentive side, one example of the many mechanisms

94 Global Trends in Sustainable Energy Investment, UNEP, SEFI, New Energy Finance (2010). 95 Global Trends in Sustainable Energy Investment, UNEP, SEFI, New Energy Finance (2010). 96 http://www.homebuilding.co.uk/feature/solar-panels-next-generation

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being implemented at the national level are the UK’s Renewable Heat Incentive (RHI) and Feed-In Tariff (FIT). Both these Government-backed measures enable homeowners to ‘sell’ or be financially rewarded for the renewable heat and electricity they produce. Both types of measures have strongly accelerated the installation of renewable energy capacity in Europe97.


Rising energy prices are also leading consumers to seek alternatives to traditional heating and electricity production. Although hybrid solar technologies remain more expensive than the majority of incumbent technologies, they have now become competitive with gas for example. As a result, one of the main innovation objectives is to be more cost-competitive both on an initial cost basis and over the life of the product.

Solar hybrid technologies are also an appealing solution to heat and electricity generation because of their reduced carbon footprint. Consumers are increasingly sensitive to this dimension of product quality and performance, making it one of the leading drivers of innovation. As indicated by one technology developer, “environmental awareness is playing a key role in driving innovation in this sector”.



Competition in the hybrid solar market is extremely limited due to the low number of existing technology developers. Currently, there are only a handful of companies in the world who produce hybrid solar technologies. In Europe, there are approximately ten companies operating mainly out of Sweden and the UK. Most of these companies are micro-businesses98. As a result, total annual turnover at the European level is currently estimated at just €20-€25 million.

Despite the small size of the sector at present, it is expected to undergo significant expansion as technologies become cost-competitive and performance of new products is validated. According to one technology producer representative, as this technology reaches increasing levels of maturity, the potential for growth and demand will continue to increase. In the words of another technology producer “there is lot of research going on in this field, and a lot of projects taking place, so competition is springing”.


By combining two types of technologies into one, solar hybrids are generally able to produce higher outputs than incumbent ‘individual’ technologies. For example, a household using a PV-T technology produces more heat and electricity than a household using the same installed capacity of separate PV and T technologies.

Existing PV-T devices have been designed to maximise the electrical return of PV panels, while producing as much heat as possible. As an example, the peak output for one PV-T technology recently placed on the market is 190/460 watts electrical/thermal respectively. The producer of this technology claims that under optimal conditions the hybrid collector produces 20% more electricity than conventional PV. When the connected heat pump is running the electrical output may increase by a further 25% under certain weather conditions.

97 http://www.rhincentive.co.uk/ 98 Under €2 million in turnover and less than 10 employees

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Contrary to these claims however, a testing body representative indicated that most existing hybrid solutions only offer 5% in efficiency gains in comparison to incumbent technologies.

Hybrid technologies also offer the possibility of making gains in terms of the surface used by solar collectors. According to the hybrid collector producer mentioned above, 28m2 of their PV-T panels produce the equivalent annual electrical output from 38m2 of conventional monocrystalline PV and the same amount of thermal energy as 8m2 of conventional solar thermal collectors (without any contribution from the heat pump). Using hybrid panels allows to make a 18m2 gain in occupied surface.


Due to their recent emergence, hybrid solar technologies are likely to undergo significant improvements in the near future. One can expect to see products with improved output capacity, higher coefficients of performance (COP) and reduced vulnerability to cyclical weather changes.

Technology developers are also likely to come up with solutions that make better use of the complementarities of different technologies (PV-T panels, heat pumps) in order to optimise the overall output by single integrated devices. With this, we can also expect to see the emergence of improved energy storage technologies. One Swedish company has produced a ‘solar chiller’ which is a salt-based technology allowing to charge, heat and cool using stored energy collected by thermal panels, and making use of a heat pump. Further improvements such as the introduction of electricity frequency regulators will also improve the efficiency of these devices.

A6.5 Technology developers being examined in this business case Company A - specialises in the development and production of hybrid PV-T, solar PV and solar thermal products. It is one of the few producers of hybrid PV-T in the world, which combines three different energy solutions (PV, thermal and heat pump) into a single system that is able to meet the heating and hot water requirements of well insulated homes. It has developed a unique hybrid PV-T panel that allows thermal and electric energy to be produced simultaneously, with increased output levels compared to traditional single photovoltaic or thermal solutions.

Company B - produces indoor climate solutions (heating and cooling) powered by renewable energy sources, notably solar energy. This is mainly done by integrating large solar thermal panels and a chemical heat pump into a single device. Its products are based on a patented ‘triple-state’ absorption technology using salt to store thermal energy, which is then used to cover the heating needs of buildings and homes. The product is aimed at single family homes and housing projects, as well as larger commercial and industrial buildings such as shopping centres, hotels, offices and hospitals.

Company C - specialises in the production of solar heating systems for commercial, residential, industrial use. Its heating system is composed of glass roof tiles or wall panels, a special absorption felt and additional beams allowing the air to circulate when heated. This system can be connected to additional heating devices such as heat pumps in order to optimise the levels of outputs.

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Table A6.1: Overview of technology developers in this business case Organisation information Technology developer A Technology developer B Technology developer C

Member State UK Sweden Sweden

Size Micro Small Small

Age (years) 1-2 10 5

Products in development 2 3 NA

Market ready products 1 1 NA

Products in market 3-5 1 NA

Product description Hybrid PV-T heating system Solar cooling Solar roof tiles

NEED FOR ETV



Based on the interviews carried out with technology developers, it appears the main barriers to market acceptance for new products in this subsector relate to four main issues:

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

• Customers are uncertain as to how suitable products are to their operations (fitness for use);

• Prices are higher than those of incumbent technologies;

• Customers are uncertain about the product’s environmental performance.

Most of these barriers relate to the need to reassure potential consumers of the performance levels of new products.



Barriers A B C

Our company is of insufficient scale (e.g. turnover) to provide credible guarantees to customers X

Our new product price is higher than incumbent technologies X X

Customers are uncertain about our product’s environmental performance X X

Customers are uncertain as to how suitable our product is to their operations (i.e. fitness for use) X X

Our customers are highly risk averse and prefer to buy market proven technologies X X X


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There are a number of existing mechanisms to measure and test the quality and performance of PV and thermal products, facilitating their market access and diffusion. Most of these are carried out on the basis of existing international or European standards.

However, due to the novelty of solar hybrid technologies, this existing family of standards does not directly apply to them. Although European Norm EN 12975A does not exclude hybrid solar devices from its scope, its applicability in this particular case is extremely low due to its lack of details regarding this type of technology. As mentioned by a testing body representative “EN 12975 does apply to PV-T, but when you go into the details of testing there are a lot of undefined situations that are not satisfactory… it is a grey zone, it is not excluded by a standard, but when you do apply it, it is very difficult to do so”.

This Catch-22 situation is created by the fact that standardisation is a relatively slow process. As expressed by a representative of a certification body “standardisation is always slower than the market… standards come after the products are placed on the market, in order to create them, you need a certain level of development of the product”.

As a result, there is no specific set of parameters against which the performance of solar hybrid technologies can be measured against. This limits the capacity of solar hybrid technology producers to make use of existing quality and performance testing mechanisms such as national, European or international certifications.

This raises three challenges for the development of these technologies:

• The absence of standards makes it difficult for solar hybrid technologies to be certified and benefit from government support programmes such as feed-in tariffs and other types of subsidies and incentives. As a result, solar hybrids are less competitive than incumbent certified technologies;

• Measuring performance becomes very time and resource-consuming. Developing new standards is a long, expensive and complex procedure which cannot be undertaken by a single company wishing to commercialise a new technology. Due to the hybrid nature of these technologies, producers are often forced to obtain two or three certifications for a single product, considerably increasing costs;

• Potential buyers express higher levels of scepticism with regards to the potential performance levels of the new technology, decreasing the likelihood of market adoption of the technology.

In the absence of specific standards for solar hybrid technologies, producers and certifying bodies have, in a number of cases, used existing standards to individually test each of the components of solar hybrid devices. Due to the combination of technologies that usually go into hybrid solar devices (thermal, PV, heat pumps, energy storage devices, etc) different norms and standards may apply to individual components of the integrated solution. Table A6.3 presents published European standards that apply to solar thermal products.

Table A6.3: Standards applying to solar thermal products

Published standards for Solar Thermal Products

Standards under development

• EN 12975-1:2006. Document title Thermal solar systems and components - Solar collectors - Part 1 (General Requirements) and Part 2 (Test methods).

• EN 12976-1:2006. Document title Thermal solar systems and components - Factory made systems - Part 1: (General

• prCEN/TS 12977-1 Thermal solar systems and components - Custom built systems - Part 1 (General requirements for solar water heaters and combisystems)

• prCEN/TS 12977-2 Thermal solar systems and components - Custom built systems - Test methods for solar water

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requirements) and part 2 (Test methods).

• ENV 12977-1:2001. Document title: Thermal solar systems and components - Custom built systems - Part 1 (General requirements), part 2 (Test methods) and part 3 (Performance characterisation of stores for solar heating systems)

• EN ISO 9488:1999. Document title: Solar energy - Vocabulary (ISO 9488:1999).

heaters and combisystems

• prEN 12977-3 Thermal solar systems and components - Custom built systems - Part 3: Performance test methods for solar water heater stores

• prCEN/TS 12977-4 Thermal solar systems and components - Custom built systems - Part 4: Performance test methods for solar combistores

• prCEN/TS 12977-5 Thermal solar systems and components - Custom built systems - Part 5: Performance test methods for control equipment

Source: www.estif.org

Additional standards that may apply to solar hybrid products include: EN12977 (storage boilers), EN13203-3, EN61215, and EN61646 (solar PV).

All thermal technology testing standards are European standards. For PV technologies, most of the standards being used are international standards produced by the International Electrotechnical Commission (IEC).

Certification is required In order for solar products to be eligible for most government support programmes and subsidies. As a result, certification is implicitly mandatory for any product wishing to be competitive on the market. There are mainly two types of certification schemes: national and European schemes.

National certifications There are numerous national marks that certify conformity to individual Member State standards and requirements. One of these is the UK’s Microgeneration Certification Scheme (MCS). MCS is a quality assurance scheme which demonstrates the quality and reliability of approved products by satisfying tested standards. It certifies microgeneration technologies used to produce electricity and heat from renewable sources. The MCS allows technologies to benefit from financial incentives including FITs and RHI99.

A UK technology developer who recently obtained MCS certification for two of its hybrid solar solutions explained the difficulties they encountered due to the novelty of their product and the lack of standards for this particular type of technology. It took approximately two and a half years before the products were certified, representing approximately 50% of the time it took the company to make the product commercially viable. The MCS working group in charge of certifying the product certified it using two separate sets of standards: photovoltaic and thermal. As a result, this particular integrated technology is still officially recognised as two separate components operating within a single device.

European certifications

Technology producers can also seek to obtain European certifications such as the Solar Keymark certification. As opposed to national certifications which certify conformity with requirements of national markets, Keymark certifies conformity with European standards. Keymark also differs form the obligatory CE marking which shows conformity with European directives, primarily around proving safety of a product.

The Solar Keymark certification was developed by the European Solar Thermal Industry Federation (ESTIF) and the European Committee or Standardisation (CEN) with the support

99 www.microgenerationcertification.org

http://www.estif.org/

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of the European Commission100. It is a voluntary third-party certification mark which currently applies only to solar thermal products. It is awarded on the basis of three parts:

• initial type testing to EN 12975 or 12976 European standards;

• an implemented manufacturing quality management system; and,

• an annual review of QMS and bi-annual product inspection.

This means the certification is awarded based on the quality of the manufacturing process of the product, not only on the performance of the product itself. As a result, by obtaining the Solar Keymark, producers aim to demonstrate the consistent factory made quality of their products and to qualify for regulatory and financial incentive schemes in European national markets.

Products that obtain the Keymark certification are generally eligible for national public support schemes, and do not need to obtain additional national certification. However, in what some consider to be a form of market protectionism, some support schemes (national, regional or local) do require products to be certified by national bodies.

According to a Portuguese certification body offering both national certifications and the European Keymark certification, there are no major significant differences between the two. There are even some situations in which technically, national certifications follow the guidelines of Keymark. Pricewise however, national certification is less expensive to obtain. As a result, companies operating only at the national level usually only seek to obtain the national certification.

From our discussions with technology producers and certification bodies, it became apparent that Solar Keymark has now become the reference for certification in the field of solar thermal technologies at the European level. Despite the fact that solar hybrid technologies fall outside of the original scope of Solar Keymark, the certification scheme is likely to grow to include solar hybrids in the near future.

In addition to existing European certification schemes (Solar Keymark, CE, etc), it is likely that solar hybrid technologies, or some of their components, will be subject to the Ecodesign Directive (Framework Directive 2009/125/EC) which lays out ecodesign requirements for energy-using products (EUP). As a framework Directive, it does not include binding requirements on products or product families by itself. Instead, this is done through the further adoption of implementing measures adopted on a case by case basis for each product group101. For the time being, no implementing measures have been adopted for technologies in the solar hybrid sector. The Working Plan adopted under the Directive does however foresee the adoption of implementing measures for the air-conditioning and ventilation systems technology family. If and when this happened, solar hybrid manufacturers would be required to:

Assess the environmental aspects and impacts of the products;

Design and construct the products in compliance with eco-design requirements;

Possibly use harmonised standards and eco-labels for presumption of conformity;

Carry out an appropriate conformity assessment (generally this is self-assessment);

Affix the CE marking102.

100 http://www.cen.eu/ 101 http://ec.europa.eu/enterprise/policies/sustainable-business/ecodesign/index_en.htm 102 http://www.conformance.co.uk/directives/ce_eup.php

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Other internationally recognised quality and performance testing organisations The solar sector is characterised by the existence of a number of test houses, the work of which is recognised internationally. Producers in the sector have a strong tendency to refer to these houses in order to obtain third party testing of the quality and performance of their products. These include the TÜV Rheinland Photovoltaic Testing Laboratory LLC (US) and the Fraunhofer Institute for Solar Energy (DE). Fraunhofer is a service provider for technology developers wishing to carry out testing of their product before being able to apply for certification, and thus does not issue certifications directly.


Company A – has done trailing and demonstration through testing to obtain the CE mark, national certification, as well as demonstration sites allowing to test the performance of products under real operating conditions and serve as a reference for future purchasers.

Company B - has carried out a number of certifications that apply to the product, which have in turn allowed it to carry out third party testing, including CE marking. It has also set up a number of pilot and demonstration sites, notably in Spain, customer field trials and carries out continuous internal testing.

Company C – uses the European solar Keymark certification as its main source of trailing and demonstration of its products, which it uses for the thermal components of its products. In addition to their internal testing, solar Keymark represents their main third party verification mechanism. They also try to get as many installations as possible on the market, through a thorough commercialisation process. These real life installations serve as references for future sales.



The following table illustrates the main potential benefits of an ETV identified by the three technology producers interviewed for this study. Company C identified no added value for itself. Instead, the answers provided relate to what it saw as being the potential benefits for smaller and younger technology developers in the sector. The perceived benefits of an ETV by technology developers cover a wide array of issues. Some of the most frequently cited include: facilitating market entry into EU markets, increasing the speed at which products reach markets, and reducing the risk of the company when investing in R&D.


Benefits of ETV A B C

Facilitates market entry for our product into our home market X

Facilitates market entry for our product into other EU markets X X X

Increases the speed at which our product reaches market X X



Allows our product to compete with market leading/rival products X

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Enables our company to secure finance from third parties X



Company A – considers that “anything which is going to give the market confidence (on the quality and performance of their product) would be of benefit for us”. It has experienced significant difficulties getting the message across to the market regarding the performance of its product, and the potential gains users can make in terms of cost and energy savings. It has already used a national certification scheme to verify their product, but this process ended up being long and expensive. According to them however, this certification is not enough, and they “need to go further in order to prove the quality and performance of the product in order to open up markets… giving potential buyers the confidence that the product they are offering is technically accurate would be very helpful indeed”.

Company B - sees the fact that solar technologies are not very well known to potential consumers as the most limiting factor to the market take-up of their product. This lack of knowledge with respect to what these technologies are able to do creates resistance in the market. It believes the introduction of an ETV would make the technology more mature, while helping to overcome some of these barriers.

Company C - expressed limited interest in using an ETV scheme, mainly because their trialling and demonstration needs are covered by existing certifications. Instead, it believed the advantages of such a scheme would be greater for smaller and younger companies, with limited cash flow. An ETV scheme could represent a cost and time-friendly alternative to traditional existing certifications which are currently too expensive and lengthy for companies which have not generated sales or a positive cash flow.


Due to the highly innovative nature of solar hybrid technologies, developers are seeking ways to reassure potential buyers of the performance levels, both static and dynamic, of their products. Existing performance testing and certification mechanisms, both internal and external are not entirely adapted to their technologies for the time being. In addition, most technology developers in this subsector are micro or small companies, with limited capacities to carry out large scale demonstration projects, and communicate results across across Europe. An ETV scheme could offer a means for these companies to climb out of these two pitfalls. There is a clear correlation between the perceived added value of an ETV scheme and the size, age, and sales record of the technology developer.


Additional stakeholder views on the need for an ETV were mainly extracted from interviews with testing and certification bodies. The overall feeling expressed is that in the field of solar hybrid technologies, there is currently a gap that limits the eligibility of this type of product to undergo existing certifications and testing. There is thus a strong need to develop standards that apply to these technologies, in order to ensure satisfactory performance and quality control on a large scale.

These stakeholders agreed however that it will take at least three years before these standards are developed. Differences in opinion begin to appear with regards to what is to be done in the mean time.

One European certification organisation stated that it does not see the added value from an ETV scheme. Using existing standards correctly will enable the certification of solar hybrid products, before adequate standards are created;

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According to one major European testing organisation representative, an ETV scheme would be useful to bridge the gap for innovative products such as PV-T, solar air heaters, or polymer solar cells, for which standards do not yet exist. However, the end goal should still be the development of a European standard;

• Finally, one certification body representatives clearly identified the need for an ETV scheme, even if standards for hybrid solar products were to be developed. According to him, certification does not always allow products with an average performance to be distinguished from those with above average performance. There is thus a need for a mechanism creating stronger differentiation among products. According to him “currently many average-quality solar products are able to meet the standards and are thus certified and are thus set on the same level as high performing products…there might be some room for improvement in this sense”.

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A6.9 The costs of potential verification for technology developers Company A - spends approximately €100,000 on testing and certification of its new products yearly. It is only willing to invest up to €5,000 on verification, due to the already heavy financial burden created by CE marking (€70,000) and national certification (€30,000). Based on the company’s previous experience in obtaining certification, and its limited size and availability of resources, the internal administrative costs of applying for ETV would represent approximately €10,000. The company declared not being willing to wait more than six months in order to obtain verification. Longer waiting periods would strongly limit its usefulness to them.

Company B - invests approximately €30,000 annually in product testing, and has invested over €8 million in R&D to develop one market ready product. Internally, costs for testing activities are estimated to represent €50,000. The interviewed company representative was not able to provide an estimate on the cost they would be willing to pay to carry out an ETV. According to him this “depends on how long time it would take and what level of guarantees it would provide to financial institutions, policy makers and customers”.

Company C - did not provide a specific amount for the price it would be willing to pay to obtain an ETV verification. According to its representative “it is very difficult to estimate how much this type of verification would be worth to us, there are too many criteria that need to be taken into account when calculating the price of verification for a specific type of technology”. However, given the limited added value the company representative identified, it can be inferred that the maximum price they would be willing to pay would not be over €5,000. At the same time, the company highlighted that in order for an ETV to be effective, it would have to provide results in less than six months.

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A B C

Annual testing budget €100k €30k NA

Total R&D invested to date103 NA €8m NA

Willingness to pay ETV fee (a) <€5k NA <€5k

Administration costs for verification (b) €10k €50k €5k

Total costs for verification (a + b) €15k +€50k €10k

Likely unit/product sale price (c) NA NA NA

Return on investment in verification/admin fee, based on sale of one unit (c/(a+b))

NA NA NA

Maximum amount of time willing to wait for verification <6 months <2 months <6 months



Based on the data provided by technology testing and certification bodies, it is possible to establish an estimate for the cost of verifying solar hybrid technologies and additional testing in case this is required. The costs of technology certification, and notably for solar thermal technologies, are used as proxy for verification. However, most of the interviewees were extremely cautious when providing estimates of costs (for both testing and certification) indicating that these may fluctuate considerably from on product to another. According to them, the more complex the product, the more complex it is to test and certify it, and thus the more expensive the process becomes. In addition to this, the costs presented in the following section mostly apply to testing and certification of mature thermal technologies. Certification of photovoltaic is estimated to be 25 to 50% more expensive, as is that of innovative products usually requiring supplementary work.

TableA6.6: Costs of providing testing and verification services in the solar sector

Certification / testing body Approximate cost

Testing for Keymark (Germany) €10k (T)

German test centre €15k (T)

Testing for Keymark (Portugal) €6k (T)

Keymark Certification (EU average) €15k (C)

Microgeneration Certification Scheme (MCS) (UK) €23k (C)

CE marking (UK) €56k (T & C)

Notes: The cost of MCS is calculated on the basis of certification of two types of components that make up a single hybrid device. The cost of certifying one component is approximately €11 000. The cost of an initial Keymark certification is approximately €3,000. However, certification holders must carry out annual follow-ups at roughly the


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same cost. The estimate provided is based on a five-year period of certification, which is the period of validity of one certification. Key: T = testing; C = certification


Based on collated information, we conclude that the cost for technology verification of solar hybrid products would be between €20,000 and €30,000. Furthermore, it is likely that the procedure would require additional testing, which would represent an additional cost of up to €15,000. Overall, therefore, verification costs for developers could rise to between €35,000 and €45,000.

The cost of verification will vary considerably on the basis of the technology being certified, the availability of testing centres and labour costs in the testing and verifying country, and even the existence of adequate weather conditions.

When compared to the cost developers are willing to pay for verification, there is an average shortfall of approximately €30,000.

Testing and certification bodies indicated that if things go as planned it usually takes between three to six months to verify solar technologies104. However, an ETV could take much longer - as reflected in the 2.5 year delay one developer experienced in obtaining MCS certification in the UK for its hybrid PV-T product.




Existing mechanisms designed to test quality and performance of solar technologies are clearly not suited currently to the solar hybrid technology family. The lack of standards and norms against which these can be measured make it virtually impossible for technology producers to make use of existing certification schemes, as well as for testing bodies to carry out reliable, short and standardised testing procedures. In addition, certifications are usually better applied to more mature products that have existed on the market for longer periods of time, and for which there is already a knowledge base of performance indicators. Finally, certification is a relatively long and expensive process which may be of limited access for new firms not yet generating sales.

However, work is currently being undertaken to develop standards for solar hybrid technology verification. European actors such as the Fraunhofer Institute for Solar Energy and the Solar Keymark are actively involved in this process and are at the forefront of efforts to develop performance-testing methods and criteria for this type of technology. An ETV scheme would therefore clearly directly compete against these existing well-established players.

Based on the willingness to pay for an ETV of the firms interviewed in the framework of the present case study, and the cost of current testing and certification schemes for solar technologies, there would be a shortfall of between €15,000 and €25,000 for the verification process. This number could increase to €30,000 to €40,000 in the event that additional testing was required.

104 Based on estimates to obtain a solar Keymark certification

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The time needed for verification would represent less of a constraint than the cost, as it seems likely verification could be done within a six-month period. This corresponds to the time producers expressed to be willing to wait in order to obtain verification.


The key challenges to market uptake and diffusion for products within this technology family stem mainly from two issues:

• The size and age of the companies operating in the sector – companies are mostly young and micro/small businesses. As a result, they lack the necessary scale to provide credible guarantees to potential buyers of their products. They generally do not have a solid sales record and the necessary means to carry out a large scale marketing campaign for their new products.

• The need to reassure the market of the performance levels of innovative solar hybrid alternatives - customers display very high levels of scepticism regarding the fitness for use of these products and are generally very risk averse, preferring to buy technologies that have been proven in the market.


The creation of an ETV scheme could offer added value in two ways:

• By mitigating the constraints created by the lack of dedicated standards against which these products can be tested and certified;

• By providing a service that goes beyond certification, offering producers the possibility of verifying performance that goes beyond the scope of existing standards. Doing so would allow greater possibilities for differentiation among new high-performing products, and existing alternatives.

An ETV scheme could also offer technology producers a means of reassuring potential consumers of the static and dynamic performance levels of their products. In this sense, an ETV could serve as a powerful marketing tool for technology producers.

Finally, verification could also potentially contribute to make solar hybrid products eligible for certain public support schemes. This however would depend on national legislation in each Member State and their willingness to recognise ETV as a reliable source of product testing.


The current EU market for hybrid solar technologies is extremely small and there are at the most ten companies in Europe who have developed or are currently developing solar hybrid products. As a result, despite the high level of interest in undertaking an ETV, the absolute number of potential users of an ETV scheme is estimated at between 5-10 over a 2 year period.

The sector is expected to undergo considerable growth however in the oncoming years, and the number of companies potentially interested in the scheme might increase to 50 to 100 in the next ten years.


The conclusions drawn from this business case could serve as the basis for the analysis of the need for an ETV in two closely related technology sub-groups: solar thermal and solar photovoltaics. However, our conclusions cannot be systematically applied to other products in the larger ‘production of heat and power from renewable sources of energy’ technology

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group. The main reason for this is that within the same technology group, there can be considerable differences among different types of products, which may strongly influence the level of relevance of an ETV scheme. These differences mainly relate to the:

• level of maturity of the technology group/family;

• existence of methods of performance certification and testing, notably at the European level;

• existence of standards, and standardised testing methods;

• size and reputation of the main innovators;

• rate of innovation;

• differences among Member State regulatory frameworks, and the willingness to recognise a European verification scheme.

On the basis of these criteria, it is possible to draw conclusions and compare the ‘solar hybrid’ technology family, to the ‘solar photovoltaic’ and ‘solar thermal’ technology groups. This comparison makes it easier to understand to what extent ETV would be relevant at a larger scale, according to the analysis presented in the previous sections of this business case (see Table A6.7).

Table A6.7: Comparison of solar technology sectors

Criteria Solar hybrid Solar photovoltaic Solar thermal

Maturity of technology group/family

Low Medium/High Medium/High

Existence of methods of performance certification

Limited Yes: Mainly national certifications, none at

the European level

Yes: National and European (Solar

Keymark)

Existence of standards, and standardised testing methods

No Yes Yes

Size and reputation of the main innovators

Small and micro companies, with limited visibility.

SMEs and large companies

SMEs and large companies

Rate of innovation Step changing Incremental Incremental

Willingness to recognise a European verification scheme.

High High High

Additional differences and commonalities between the technology groups include:

The solar hybrid sector is for the time being a niche sector. This justifies to a large extent the need for an ETV scheme. This does not necessarily apply to other better know and more mature actors and technologies in solar thermal and PV;

Drivers for innovation and barriers to market entry are similar across all three technology groups;

All technology groups are characterised by the existence a group of highly innovative small and micro firms, in need of proving the performance of their products in order to gain market access and visibility of their products;

In all cases, the standardisation process is always slower than market and innovation rates. As a result, there is a permanent gap created by the arrival of highly innovative products to which existing standards to not apply;

In all cases, existing certification schemes do not allow to distinguish performance levels of different products certified. Existing schemes only verify fulfilment of

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standards, and do not necessarily highlight the differences in performance levels among all products being certified.

All in all, based on the analysis of the solar hybrid technology group, it can be inferred that there is potential for the introduction of an ETV scheme in the solar thermal and PV.

This is justified by the fact that:

• current certification mechanisms do not allow for differentiation between certified products;

• there is no existing certification scheme at the European level for solar PV;

• regulatory framework differences among Members States are low, and thus their willingness to accept a common European verification is potentially high.

However, the potential for an ETV scheme in solar thermal and PV could be significantly limited, in comparison to solar hybrid for a number of reasons. These include: the existence of a European-wide and highly recognised certification for solar thermal (Keymark), the lower rate of innovation in solar thermal and PV, and a number of existing standards that apply to innovative solar thermal and PV products.

As a result, over the next five years between 100 and 200 developers could potentially be interested in submitting their products to an ETV scheme.



Funding opportunities at the national level to cover ETV fees for future users seem to be limited for the time being. As one certification body representative noted, “we do not have a national public financial mechanism to support companies which have certified their products or have applied for the certification of their products”.

A detailed analysis of this issue would require looking into the hundreds of innovation support mechanisms in all Member States. In France for example, it is likely that businesses may receive funding eligible to cover certification/verification, in the framework of competitiveness cluster-funded projects. Additional support may be obtained by the National Environmental Agency (ADEME) through its Heat Fund. In the UK, one certification body was not aware of any specific funding related to certification other than support offered by the Manufacturing Advisory Service which focuses on SMEs. In some cases, private arrangements are reached between foreign manufacturers and importers to cover the cost of certification fees.

At the European level, funding may be available through the EU’s Framework Programme. The EU has long supported RTD activities, including demonstration in the solar sector. Examples of this include the PV technology platform and PV-ERA-NET, both started under FP6. FP7 has also funded a number of projects in the solar sector, such as the APOLLON project, HETSI or ULTIMATE. The 2008 call also included a predominantly demonstration-focused component105.

In addition to this, Certification bodies are financially autonomous and generally do not receive any assistance from public agencies.


105 Menna P, et al, European Photovoltaic RTD and demonstration programme, European Commission. Available at: http://ec.europa.eu/energy/renewables/studies/solar_electricity_en.htm

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Due to the limited size of the solar hybrid sector for the time being, there would only be a need for one verification body in Europe. This centre could work in collaboration with existing testing facilities. Since this single body would cater to the needs of all companies in the sector, it would need to be centrally located.


The two main challenges for the implementation of an ETV scheme dedicated to this technology group are:

• The existence of a well developed and recognised set of testing and certification organisations, which operate at the European level;

• The fact that most companies must go through a long and expensive testing and certification process, limiting their capacity to undergo additional verification. This barrier is worsened by the fact that most producers in the field are micro and small companies, for which the financial burden is higher. To illustrate this, a British firm specialised in the production of PV-T had to pay €24,000 (£20,000) for national certification in addition to €67,200 (£56,000) for CE marking. As expressed by a company representative, “this a big deal for SMEs. For companies that are in the initial phases of product development and still not making sales, financing this can be a very big challenge”.

In addition to this, technology producers and certification bodies expressed difficulties identifying the exact role, objectives and added value of an ETV scheme. As a result, their willingness to participate, and by extension their willingness to pay, is strongly reduced. Technology producers also express reluctance to adopt an additional performance verification mechanism due to the additional administrative burden it could create. As expressed by one technology producer “such an exercise just adds red-tape to those trying to innovate”.

A6.13 Making a success of ETV – how to maximise value going forward The success of an ETV will depend on a number of underpinning issues including:

• Marketing the ETV brand: As most other labels and certifications, the ETV brand will have to be strongly marketed in order to increase its visibility. Technical excellence will not suffice to ensure ETV’s success. Instead ETV operators must ensure that ETV is branded correctly, to technology developers and consumers;

• Making the need visible and understood: Based on the experience preparing this business case, it soon became clear that technology developers and certification bodies were unable to identify the need an ETV scheme would answer to. Despite their understanding of the general logic behind ETV (improve market entry for market-ready innovative environmental technologies), it was unclear to these stakeholders where the added value of an ETV lies in comparison to existing routes to the market. It will therefore be necessary to effectively communication on the rationale of an ETV, the potential benefits for users, and its position in the landscape to existing certification, testing and labelling schemes;

• Building on complementarities: Due to the existence of multiple testing and certification alternatives already on the market both at the national and European level, an ETV scheme should seek to develop complementarities with these mechanisms. For example, an ETV scheme could fast-track the certification under the Solar Keymark, or other multiple national certifications schemes, such as the British MCS. The links between these types of mechanism and ETV would have to be made clear and explicit, and would have to be institutionalised;

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• Making it cost-competitive and reasonably simple: ETV will have to be cost competitive in comparison to existing performance certification, testing and labelling mechanisms. In addition to this, the procedure to obtain the verification should be as simple and transparent as possible.

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ANNEX 7 BUSINESS CASE: ANAEROBIC DIGESTION The following business case has been prepared on the basis of nine interviews and two questionnaires. Interviews included four company representatives (three of whom responded to the original ETV survey), two test centres and three stakeholders (including a former end user). Questionnaires were received from a developer and test centre.

A7.1 Introduction This business case builds on the findings of the market analysis of the water treatment technology area (see main report). This found that:

• water companies are generally highly risk averse in a number of EU member states

• the process of adopting new technologies can be lengthy and costly;

• whilst some water companies are more progressive in their approach to new innovations and will be willing to test out new innovations, others will await the results of tests before considering any investment.

• water companies may be unwilling to trust the results from tests at other water companies even though effluent streams will often be more or less exactly the same;

• for industrial end users, there are often large variations in effluent streams and hence the nature of the resulting sludges. This will often require site testing before the company commits to a purchase.

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 sectors106. It seeks to show the benefits that ETV will bring to both technology developers and end users.

A7.2 Current status of the market and technology 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

106 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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treatment and disposal. Overall, the market opportunity is large and globally very attractive, particularly when considering the opportunity to generate energy from the waste.



Wastewater treatment works have to comply with a raft of EU legislation including:

• The Water Framework Directive;

• Drinking Water Directive;

• Bathing Water Directive;

• Priority Hazardous Substances Directive;

• Urban Wastewater Treatment Directive.

These Directives have created the need for more efficient and higher quality processes. There has also been a shift away from the use of chemicals in water treatment due to the adverse environmental impacts they produce. This has stimulated growth in membrane filtration and UV technologies as alternatives to chlorine and other chemicals.

The digestion and treatment of sewage sludges is not as regulated as other processes in the water treatment sector, primarily because it does not impact directly on the quality of water delivered to the consumer or discharged to the environment: any effluent arising from treatments is likely to be redirected back into the wastewater plant. Thermal treatment of sewage sludges requires compliance with the Waste Incineration Directive and is a critical component of market acceptance for technologies such as fluidised bed incineration, pyrolysis and gasification.

Several EU countries have strict regulations for spreading sludge on the ground. For example, the Netherlands and Sweden have outlawed sludge spreading on land, necessitating sludge treatment and disposal. In the UK, sewage sludge spreading on farmland is dependent on the end use of the products being grown as well as whether the area is a ‘nitrate vulnerable zone’. In the EU there are 12 million dry tonnes of sludge per year; in the USA there are 7 million dry tonnes of sludge.


The primary driver for investment in new technologies in the sludge digestion market is regarded as the economics of the process. The potential and ability to reduce energy costs, and to utilise the energy from sludges, is becoming ever more important, especially with rapidly rising fossil fuel prices.

AD operators do not make a lot of money in running AD plants – profitability is low and subsidies (e.g. feed in tariffs) are often required to make plant economics viable. However there is clearly money to be made in plant construction.



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There a large number of competing technologies in sludge pre-digestion, AD and sludge treatment. There are over 100 turnkey providers of AD plants across the EU107. Companies licence technologies and systems from a large number of technology providers across the EU and globally.

At least three established European companies specialise in pre-digestion systems – Cambi (Norway), Monsal (UK) and Veolia (France). Besides these, a number of smaller developers supply new innovations into the market, including several featured in this business case.

Sludge dewatering equipment (belt presses, centrifuges) and thermal dryers are used to reduce sludge volumes down to levels that can then be either destroyed through thermal treatments or spread on land or landfilled. Fluidised bed incineration, pyrolysis and gasification all compete for the final destruction of sludge (assuming it has not been possible to apply it to land). The rate of innovation is extremely slow in the sludge treatment sector with the industry locked into combustion processes.


“A lot of anaerobic digestion operators are ‘firefighting’, keeping their systems operational with limited investment in capital or maintenance programmes. Operators are focused on reducing sludge volumes and not optimising the production of methane gas from the process which is an emerging and growth market” - technology developer

There is a clear opportunity to introduce advanced technologies into the AD market. Extracting more energy from sludge digestion is possible through improving the efficiency of the AD process. A number of proprietary methods have been developed to achieve this. Most are focused on increasing the surface area of the cellulose in the sludge (e.g. by increasing pressure in the vessel, or through the use of ultrasound, etc) so that it is more effectively digested. New techniques to more accurately monitor and control the digestion process are also now coming to market.

Once digested, dewatering the resulting sludge and then either thermally treating it or disposing of it is another costly operation for water companies and industry. Extracting energy from wastewater sludges represents an opportunity due to the huge amount of water that must be evaporated in drying it. Avoiding evaporation will save very large amounts of energy and hence be more energy positive and generate carbon savings.


Given the current immature status of the industry it is likely that performance standards will take some time to be adopted. In the meantime, demand for progressive end users who are seeking potential step changes in environmental performance and energy savings will drive increased standards through procurement channels across the sector.

A7.5 Technology developers being examined in this business case Company A - is the developer and owner of a proprietary AD technology which uses pressure to break up the sludge cell structure to increase surface area. The technique increases the volume of biogas generated which significantly reduces costs and creates more opportunities for revenue (e.g. from feed in tariffs). A full scale (20 tonnes/hour) commercial unit is currently being trialled at a purpose built digestion site at a UK water utility. Other commercial products, including a sludge treatment process that uses lime to stabilise the sludge, are also being sold.

107 Consultation with technology developer

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Company B - has developed a pipeline of both lab-based and in-situ technologies to sense, monitor, control and evaluate methane levels from AD plants as well as to improve the energy generation from plants by around 20%. The value proposition is not only to have more control over the AD process but also to make analysis more efficient and dynamic, both of which will yield cost savings.

Company C - is an established supplier of sludge dewatering systems and has very good relationships across the EU water industry built up over 20 years of trading. It has two main product lines and is gradually increasing its market share in these product areas into several EU markets including Finland, Germany and Poland. The company spent over 5 years commercialising a novel system to enhance wastewater sludge digestion.

Company D - is the developer and owner of a market ready, supercritical water oxidation, sludge treatment process that is designed to destroy all organics in the waste and generate significant surplus energy as part of the process. The process involves no combustion or harmful emissions and hence is a strong alternative to thermal treatment of sludges.

Company E108 - developed its own biogas production technology which is fed into an onsite gas engine to generate electricity. It currently uses its own reference plant for agricultural wastes and is keen to sell its first product into the rapidly growing biogas market.

A summary of each developer is shown in Table A7.1. Three companies are micro-businesses; most have at least one product in the market and a pipeline of innovations in development.







Member State UK Sweden Finland Ireland Poland

Size Micro Micro Small Micro Medium

Age (years) 6-10 6-10 +20 3-5 3-5

Products in development 0 3-5 2 3-5 1

Market ready products 1 0 1 3-5 1

Products in market 3-5 1 +5 1 0

Product description

Enhanced sludge

digestion using pressure

differential

Optimisation of anaerobic

digestion using sensors

& controls

Ultrasonic cavitation of

sludge digestion process

Supercritical oxidation of

wastewater & sludges

Proprietary sludge

digestion process

NEED FOR ETV



108 Company response mainly based on a survey response, not a detailed discussion with the company.

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Table A7.2 illustrates the overwhelming problem of demonstrating performance in real world operating conditions and clearly links to the resulting uncertainty that end users therefore have in the product. A lack of mutual recognition and harmonised standards is regarded as important for several as it a higher product price than incumbent technologies.



Barriers A B C D E

We have limited or no track record of sales X X

Our company is of insufficient scale (e.g. turnover) to provide credible guarantees to customers X X

Our new product price is higher than incumbent technologies X X X

Customers are uncertain about our product’s environmental performance X X X

Customers are uncertain as to how suitable our product is to their operations (i.e. fitness for use) X X X

We lack legitimacy for our environmental performance claims X X

We are unable to demonstrate the performance of our technology in real world operational conditions X X X X X

Our customers are highly risk averse and prefer to buy market proven technologies X X X

Validation procedures for this new technology are very onerous X X

Our company must comply with stringent health, safety, and environmental standards as a condition of sale X X

We have yet to achieve the right quality standards / accreditations (e.g. ISO9001/14001) to satisfy customers X X

Lack of mutual recognition and harmonised standards prevents market access X X X

Other : references required in home country and each member state; lack of clear accreditation of products; lack of state support; uncertainty of legislation X X X


Standardisation provides a set of specific parameters against which technologies can be tested. A limited number of standards have been found for AD (see Box below). This does not provide scope for allowing technologies to show more sophisticated levels of treatment. For example, if a technology is able to achieve the same water treatment level as another technology but using 20% less energy then there is a market to show this off. For example, an ETV could verify that a technology does the same as current technology but also saves money, recycles water and also reduces the number of components at the same time.

ISO requirements in the anaerobic digestion sector

• ISO 13641-1:2003 - Water quality determination of inhibition of gas production of anaerobic bacteria Part 1: General test;

• ISO 15985:2004 - Determination of the ultimate anaerobic biodegradation and disintegration under high-solids anaerobic-digestion conditions -- Method by analysis of released biogas;

ASTM International

• ASTM E1535 - 93(2006) Standard Test Method for Performance Evaluation of Anaerobic Digestion System.

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Company A - previously designed an 8-10m3/hour unit which was demonstrated at a UK water utility site and showed a trend of increased biogas production. The firm asked Imperial College to independently verify product performance. However, the utility ended the trial prematurely as it was pleased with the success. Current trials require 45 days of testing which involves three complete digestion cycles. The water company will commit to payment once they are satisfied with the test results and are interested in a further six units. The unit has a 3 year payback. Five other UK water companies have expressed interest in the technology including one multinational utility which has a £10m budget for sludge pre-treatment technologies which can demonstrate revenue potential. The firm also has a benchscale unit being tested with a Scandinavian utility who could apply the technology at five sites in Sweden as well as one in South Korea.

Company B – launched its first commercial, lab-based product in 2010 which is now sold through an extensive distributor network providing 90% global coverage in over 25 countries across the EU, USA and Asia Pacific. Further products are now reaching market-ready status including a methane optimisation process to enrich the gas, increasing it from a concentration of 65% to 85%. The key challenge is to find suitable reference plants at water companies and industry site where the technologies can be tested. Only then can the data confirm the forecast efficiency gains. It has spent a lot of time trying to create demand for their products, including marketing itself as bigger than it was to build market credibility.

Company C - previously tested its ultrasonic cavitation sludge digestion technology at a municipal wastewater treatment works in Finland in 2007. Throughput was around 4-6m3/hour. Refinements were made to the system but commercialisation plans were put on hold due to the economic downturn. It is now funding a second demonstration/reference unit (of a similar throughput to the first) at a municipal wastewater treatment works in Poland which is expected to start operating in May 2011. Performance data from this site are crucial and will determine resources to be spent on marketing the new system to water companies, followed by small farms and food and beverage manufacturers once sales have been established. The biggest challenge is getting the reference plants built. Furthermore, this is a highly competitive market with several alternative systems available, mostly supplied by small EU technology developers. In the absence of an ETV, the company would use a technical university to verify the performance.

Company D – has done its own testing on an initial 250kg / hour pilot plant which is reviewed by outside consultants. The plant is used to demonstrate the technology to potential end users. A complete testing period can take up to two years. Three different systems have been designed depending on sludge throughput, from 2.5t/hr, 10t/hr up to a maximum of 20t/hr. Once performance is proven, the modular system requires minimal adaptation per client depending on the pre-feed (i.e. whether the sludge needs grinding/macerating etc). When the various components of their system are combined, it is a unique product and has nothing to certify against. The challenge is to convince people that new technologies are good. The company is trying to overcome this challenge through a commercial scale demonstration plant at an industrial site, where sludge is currently dried in a biomass boiler with the waste product shipped to Germany for incineration.


Table A7.3 summarises the overall methods to prove performance in the current absence of the ETV. Several approaches are used including existing sales and reputation (i.e. where an established company is introducing a new product to its portfolio). Overall, test data is a common method, backed by demonstration at a customer site, either funded independently or through joint development with the end user.

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Table A7.3: Summary of methods used by companies for proving performance claims to potential customers


Approaches to providing performance claims A B C D E

Previous sales to customer X X

Company reputation in the market X X

Test data from a credible testing organisation X X X

Joint development with potential future customers X X

Demonstration at customer site X X

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Table A7.4 illustrates the main benefit from ETV is to assist developers to enter other EU markets. Several developers also see value in ETV helping both domestic market access and non-EU access. Other strong perceived advantages are to enable products to compete with market leading rivals and to provide insights to clients on the product’s potential environmental impacts.



Facilitates market entry for our product into our home market X X X

Facilitates market entry for our product into other EU markets X X X X X

Facilitates market entry for our product into non-EU markets X X X

Increases the speed at which our product reaches market X X

Increases market acceptance of our product by customers X X X

Reduces risk for our company when investing in RD&D X

Allows our product to compete with market leading/rival products X X X X

Enables our company to secure finance from third parties X X X

Clients gain insights on environmental impacts from our product X X X X


Company A - receives market ‘verification’ by demonstrating at a utility site, inviting potential clients to look at the plant. It does not intend to build another similar plant so an ETV could really help companies in a similar situation to them, particularly if it can open up markets across the EU.

Company B - sees certification as of use as a differentiating component in an established and/or competitive market and of use in gaining market access in new markets (where it should be used as a third party validation for technologies). Overall, it regards ETV as having potential as a “market accelerator”:

“I can definitely see the need for verification. A company could use it as a way to get a demonstration/reference site set up, especially if it is 1-3 years old when it is most difficult to get such sites. There is a need to create a sense of achievement and credibility in the eyes of the customer for young firms without a sales track record. ETV then becomes a validation instrument.”

“If the EU ETV had existed it would have helped because the market was not extremely competitive to start with, so it would have built up trust with potential clients.”

Company C – regards the Polish market as having large potential since biogas is still an immature market and there are emerging economic drivers to reduce plant operating costs and enhance revenues. Being next to Germany means that potential clients also easily inspect the reference plant. An ETV would be significant in opening up these markets as well as in Sweden, Norway and Denmark. China is also being considered.

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Company D - feels that an ETV would help to open up the EU market by showing “here is a product that works in a certain operational environment” etc. It sees an ETV label as an additional tool in the toolbox for helping facilitate market access, not a panacea, and believes it will add legitimacy to its product claims and help “build for the future by going larger.” It is targeting UK and Italian water companies as well as industrial operators in Ireland and elsewhere. Longer term prospects are in the USA, the biggest non-EU market.


Where an environmental technology has been tested successfully at a reference trial site, this will generally lead to a sale. The reference site will also allow potential customers to view the performance. However, technology developers have made clear that an ETV could complement reference site results by providing the independent validation that would help persuade other customers of the merits of the technology. In summary, we find that ETV has the following benefits to SMEs:

• Validating test data from reference site to clients across the EU and beyond;

• Gaining credibility and a “licence to operate”;

• Providing verification against other rival companies in a highly competitive market;

• Demonstrating environmental performance.


Some member states recognise the difficulties of finding demonstration sites for new water treatment technologies and believe test centres should be established to support innovators in real life conditions. This issue was raised by a Swedish trade body, where water municipalities are understood to be reluctant to buy technologies from innovators. One leading water test centre has taken over a pilot plant facility at a municipal water treatment works. This facility allows new technologies to be tested using the same effluent as a standard water treatment works. However, it is zero risk because, if something goes wrong with the technology, the effluent can be pumped directly back into the main water treatment works. This means innovative companies do not require access to large plants. The test centre noted that: “there should be pilot plants for water treatment alongside an ETV scheme.”

The issue has also been recognised in Ireland where water delivery is owned by local authorities. Enterprise Ireland, a public support agency, is aiming to pay for test centres and demonstration sites for innovative water technology developers109.

In the UK, the water industry is generally only able to invest in pilot scale projects, rarely larger scale demonstrations. While there is plenty of money to invest in R&D the biggest risk to everyone is demonstrator funding: “a mechanism for verifying full scale technologies would help enormously”110. There is currently a plan to establish a Water Technology Platform in Yorkshire which would test and verify the performance of new technologies. An EU ETV scheme would sit well above this support facility to companies. The aim would be for water companies across the EU to accept the process results and hence ease the transition of a new product into the market.

However, in the UK verification is seen as being only of use to water companies if there was either a regulatory or an economic need111. A general rule is that in the UK water industry an innovation needs to pay back within 3 years to make the investment worthwhile. However,

109 Consultation with stakeholder 110 Consultation with stakeholder and former end user 111 Consultation with stakeholder and former end user

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Framework Agreements act against this because they filter out companies without a track record in delivery or financial viability. So if the innovation provided market leading performance or there was no comparable technology used by the water company then confidence - at least in the technology performance – would be achieved by having an ETV.

In other Member States the market situation is often different because much water treatment is municipally operated and hence fragmented. There is an incentive to improve water supply and treatment quality to serve the voting public. The openness to innovation could be higher and hence potentially it is less critical to have an ETV label.

Test centres provided some different perspectives also on the need for ETV:

“At the moment, technology developers use reference plants so there is value in producing a verification because the results will be applicable in a certain range of conditions and that will

give the confidence to end users despite the fact that parameters might have to change slightly.” – Test centre

“If the product is near market and proven, the developer will still have to adapt the operational parameters between end users as there will always be differences between

wastewater streams. However, this does not mean having to replace parts of the technology to suit client needs.” – Test centre

Often there are no particular standards available because industrial processes and closed loop processes are so different and unique and hence an ETV could illustrate benefits. One test centre looked at condensate recovery and the reuse of water. In one example, the water temperature was 40-50 degrees and so energy could be recovered from it. This additional benefit of energy recovery would be proved by the ETV, on top of the technology’s recognised ability to recycle the process water.








A7.9 The costs of potential verification for technology developers Company A - has spent over €2.4m in developing and testing the technology. The verification fee range has to be less than €5,000, based on two factors:

• Verification of performance and an independent report by a leading technical university (from UK, Finnish, Italian institutions) would cost around £2,500 (€3,000);

• ETV verifiers will have access to robust data presented by the company and the water utility that is testing it, so it should not be a hugely complex process.

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A sliding scale of fees was seen as fair depending on the complexity of the system and performance claims made. Other costs involved with staffing and expenses relating to the verification are estimated at less than €10,000.

Company B - has invested around €750,000 to date in developing and testing their set of technologies. It considers the verification fee range has to initially be less than €5,000. However, in due course the fee could be based on potential turnover, like an ecolabel which also uses third party verification. For example, a fee might be a maximum of 5% of sales (based on average revenue and sales volume) which is suited to the size of product and company. It is difficult for the company to estimate other costs.

Company C - has spent around €300,000 to date in developing and testing the technology. The verification fee range has to be less than €5,000 however. This is because “it is hard to price – depends on what you get for the money” as well as the financial situation has been tough for the past two years. It would clearly aim to market the results from their trial and a verification would fit in well with these marketing materials. It is too difficult for the company to assess other costs involved in the verification process but they are expected to be of a similar scale to the verification fee.

Company D - estimates the costs of development to date are in the order of €6m. The verification fee range has to be €5-10,000, based on several factors:

• Verification of performance and an independent report by a consulting engineer would cost the firm around €10-15,000;

• Most of the work and tests are done by the company anyway; • Any higher and it will be too expensive for smaller firms.

Other costs involved would be €10-15,000 for staffing and other expenses with the verification. The firm commented that “achieving market access from ETV would be priceless, but assigning an actual value to it is hard. One sale would make doing ETV worthwhile but it may be ‘chicken and egg’ - the sales value might be €3.5m but that is not of relevance to the cost of verification before you have made any sales.”

Table A7.5 summarises these various costs to companies. Key conclusions are that

• firms are generally willing to pay no more than €5,000 for a verification;

• there appears to be no correlation between a firm’s willingness to pay for the verification fee and the potential return on investment in the fee;

• firms would accept a timescale for verification between less than 6 months and a year.



A B C D E(a)

Annual testing budget No specific budget

€50-€100k €1-€25k €250-

€500k No

specified

Total R&D invested to date112 €2.4m €750k €300k €6m N/A


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Annualised R&D invested to date (i.e. based on the age of company) €300k - - - -

Willingness to pay ETV fee (a) <€5k <€5k <€5k €10k-15k <€5k

Administration costs for verification (b) <€10k n/k <€5k €10k-15k N/A

Total costs for verification (a + b) <€15k €5k-10k <€10k €20k-30k ≥€5k

Likely unit/product sale price (c) €0.5m €20k €100k €3.5m N/A


Unknown Unknown Unknown Unknown N/A

Maximum amount of time willing to wait for verification

<6 months

<6 months <1 year <6

months <1 year

Note: (a) company only provided survey data



To illustrate the potential variation in costs of verification services across the water sector we spoke to several EU test centres, two of which had been involved in ETV verification schemes. Table A7.6 illustrates the estimated range of costs from three centres.

These costs provide indicative, not actual, costs for the verification and testing of the specific technologies involved in this business case. They also reflect the challenges of gaining estimates that adequately cover a number of technologies, rather than specific product families. However, we are confident that these provide the right orders of magnitude for the business case. The responses show a fairly similar cost structure across different test centres (and hence member states).

Test centres that have been or are currently involved with ETV type verifications, note that it is difficult to specify precisely what costs will end up being without knowing exactly the performance claim parameters that are to be verified.

These costs are generally higher than those for water monitoring, reflecting the general complexity and scale of water treatment technologies.

Table A7.6: Costs of providing testing and verification services for water treatment

Testing

Verification or Certification

Testing & Verification / Certification

Denmark* - €9.5-40k (V)

(average €28k113)

€22-94k (T&V)

Poland* €25-€50k

€25-€50k (C) €50-100k

Sweden* €25-€50k ≤ €10k (V) €35-€60k

Key: * = original respondent to ETV survey conducted under EPEC study. T = testing; IPT = initial product testing; V = verification; C = certification

113 Cost estimates of verification are based on over 20 verifications across a number of sectors where verification on average totalled 43% of total costs. Testing/verification costs of €50-100k for water treatment technologies were estimated.

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Furthermore, based on ETV experiences from current European practitioners in this sector there is often a need to undertake further testing as part of the verification. This is due to the difficulties of relying upon submitted test data from developers as well as the data often found to not correspond directly to the verification application.

Estimates of verification range from around €10,000 or less depending on the technology up to €40,000. Certification at one test centre cost up to €50,000; at another test centre cost estimates suggests several more steps involved in the verification compared to standard testing requirements (which already factor in reporting back to the developer).


We are able to draw the following conclusions about the costs of supplying verification services for ETV in the water sector. A typical verification fee is likely to range from around €10,000 to €40,000 depending on the technology. Based on forecast costs from two leading test centres in Northern Europe, fee costs will vary according to:

• The number of parameters that firms are seeking to verify;

• Location of the verification and testing - for example, Sweden has double the hourly rates for staff compared to test centres in Portugal and Greece;

• Complexity of the technology - for example, whether the technology is a discrete piece of equipment or an integrated, closed loop systems versus;

• Access to test facilities – for example, potential sites for testing technologies often have to be found although dedicated demonstration facilities that sit alongside an operational wastewater treatment works are one mechanisms for providing easy access and risk free testing for developers.

• Location of developers, testing houses and verification bodies – communications between parties will increase administration costs and lengthen the verification procedure. Where test centres are not alongside the main verification body, the increased need for communications will increase costs.




The very high level of interest for ETV amongst the five developers sampled (i.e. 100% interest) shows very strong demand for verification in the AD and sludge treatment subsector.

For sludge digestion and treatment we believe there will be a funding shortfall of at least €5,000, and potentially up to €35,000, between what developers are prepared to pay as a fee and the cost of providing the service to developers.

The scheme also needs to be running efficiently for firms to sign up to a verification, since there is a clear message from companies that the shorter the timescale the more likely they will participate (i.e. ideally less than 6 months, and not longer than a year).

Based on the low willingness to pay, however, the perceived value of ETV is currently not large; and there appears to be no correlation between a firm’s willingness to pay for the

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verification fee and the perceived benefits from investing in the ETV. This illustrates the uncertainty of quantifying benefits in the mind of the developer114.


Willingness to pay only €5,000 might indicate that developers in this technology group generally have to go through an extensive and expensive R&D and demonstration phase. This already generates high quality performance data and a reference site for clients which in many cases will be sufficient to attract future sales. ETV is therefore a ‘nice to have’, but not a necessity for such developers.


An ETV will have the following benefits for SMEs in this particular technology group:

• Validating test data from reference site to clients across the EU and beyond;

• Gaining credibility and a “licence to operate”;

• Providing verification against other rival companies in a highly competitive market;

• Demonstrating environmental performance.

Fast tracking of ETV holders through national certification (and similar) schemes would be advantageous.


Many developers interviewed for this business case do not have a clear idea about the nature of the EU competition in their respective fields. This is partly due to the localised/national nature of the markets they operate in; it also partly reflects a nascent supply side with a lack of visibility.

Having sampled five companies, all from different EU member states, we estimate that there are around 20-25 companies in the EU (likely to be SMEs and developing market ready products) who would be interested in an ETV over the next 1-2 years. We believe the total number of EU firms offering products in this market to be in the range of 50-75.


Our market survey of technology developers obtained three questionnaires from well established developers of water/wastewater treatment technologies – see Table A7.7 for a summary. Despite the varying size of the firms (i.e. micro to large), and from different member states, each stated exactly the same significant or highly significant benefits from an ETV, including:

• facilitating access to both the home and EU market;

• increasing the speed to market;

• increasing market acceptance of products by customers;

• allowing their product to compete against market leading rival products;

• gaining insights on the environmental impacts of products.

Table A7.7: Developer responses covering a variety of water and wastewater treatment technologies

Organisation information Technology developer A Technology developer B Technology developer C

114 A certain amount of clarification was also required with firms in talking through the benefits.

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Member State Germany Spain Ireland

Size Micro Medium Large

Age (years) 11-20 20+ 20+

Products in development 1 3-5 5+

Market ready products 2 0 1

Products in market 3-5 0 5+

Product description Water & Wastewater treatment technologies

Adsorption technique to treat industrial wastewater Not specified

WTP ETV fee €5-10k €50-100k €5-10k

Max time period <1 year <2 years <6 months

Despite the small sample size, we conclude from this random cross-section of the market that there is indeed demand for ETV across the wider Water Technology Area.

Furthermore, in two of the three cases, there are parallels with the AD/sludge responses regarding willingness to pay (i.e. €5-10,000) and timescales (less than 6 months to a year).

Given the very large size of the EU municipal and industrial water market and the number of water and wastewater treatment technologies that constitute the supply side115, we estimate that demand for ETV in this area could be in the order of five to ten applications per technology family per year.

If we assume that there are at least five main technology ‘families’ that cover primary, secondary, tertiary water treatments plus sludge digestion and treatment, then we estimate that total demand for an ETV could be in the region of 25-50 applications per year or 125-250 over a five year period.



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.

“If ETV can demonstrate sales are accelerated then it will improve a developer’s willingness to pay. Once you move into the area that ETV provides a licence to operate, you could start

to charge more for the service. This could be based on a self-declaration model.” – Technology developer


ETV clearly dovetails with core EU policy objectives, particularly if focused on technologies that help reduce pollution, energy and carbon emissions and improve resource efficiency and security of supply. The extent to which EU funding programmes can offer support is one obvious way of overcoming apparent funding gaps.

LIFE+ for new technology demonstrations would be a good method of supporting the ETV process for larger innovations. A LIFE+ demonstration project would need to be done in an ETV compatible manner so that additional measurements were not required. This would

115 Filtration and disinfection were analysed in detail for the main market study

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unlock a critical barrier since testing is where the cost lies and it would streamline the verification process. Something similar for smaller projects would be helpful.

At the Member State level, support is highly variable:

• In Sweden, if there is a public interest then product development funding can be obtained from either the Swedish Energy Agency or Swedish Innovation Agency (VINOVA). Whilst this support supports product testing, it excludes verification.

• In Finland, one company developed its technology in collaboration with another Finnish company and received support from the Finnish Innovation Agency (TEKES) to undertake R&D and preliminary testing of their system, the performance of which was verified by VTT, the Finnish Technical Research Centre.


Given the size of the EU water market and the potentially large number of developers interested in an EU ETV scheme, we conclude the following about the number of VB’s that would be required to run an effective ETV scheme for water treatment technologies:

• The need to satisfy geographical and language issues suggests that at least 3 VBs are required, potentially catering to Northern/Eastern Europe, Central Europe and Southern Europe.

• There might be scope for increasing the number of VB’s to two in some regions, but only where it can be sufficiently proved that there are enough verifications to be carried out.

• Broadening the number of VB’s beyond three means that ETV will have to be well promoted, both by the VBs themselves as well as Member States and the EU Commission, in order to show the benefits of participation.

Test requirements from one test centre should be transferable to others for the Scheme to work effectively. Each EU member state would require a testing house to facilitate multiple visits as the machinery would be expensive to ship around.


Company views

There are uncertainties for developers around the fees required for ETV, including:

• whether there be any annual maintenance costs (e.g. a nominal fee for holding the ETV which is based on declared sales for example). This could help with overall system operating costs.

• the point at which a new verification be required (e.g. second generation product).

Stakeholder views

Without sufficient awareness of the ETV scheme amongst end users it risks achieving limited successes. One stakeholder criticised the Commission for not doing more to raise awareness of the benefits of undertaking an ETV:

“The EU has not pushed ETV enough. Even with pilot ETV projects carried out awareness remains poor. Many people simply do not understand what it is all about.” - Test centre

There is a big risk for the pre-programme practitioners because it is a new system and will require a marketing budget (which isn’t included in the grant from Commission).

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A7.13 Making a success of ETV – how to maximise value going forward KPIs and evaluation

• It will be critical to put in place key performance indicators (KPIs) to see what value is created from each verification.

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

• Marketing of ETV is important because it can be used to increase the credibility of the test results, especially from demonstration plants.

• Part of the verification fee would need to be allocated to marketing the ETV because this would help to drive awareness and acceptance of the Scheme amongst the key target market for the ETV ‘product’. Without this industry are unlikely to recognise the value of the ETV ‘badge’:

“It is important to stress the additional benefit of verification for both suppliers and purchasers as well as having “branding” activities to increase the

acceptance of ETV.” - Test centre

• One test centre noted that “it is very difficult to explain to SMEs what is the difference between certification and verification.”

detailed assessment of the market potential, and … · detailed assessment of the market...

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