ICTU Round Table24th June 2009

Dr. Peter Brennan, Managing Director

Business (and Job) Opportunities in the Environmental Goods and

Services Sector

www.epsconsult.ie

Opening Remarks

Regulatory framework largely agreed; good news as investors respond to clear policy signals

Peak oil, sustainable development and global warming are the key drivers

Ireland is playing catch-up Areas of Ireland’s competitive advantage known but awaiting full

commercial exploitation Very significant investments in EGS at global level Who is in charge? 21 agencies/Departments in this space Critical that all perceived barriers to investment be removed Significant jobs potential if quick, well-resourced and ambitious

projects are supported by Exchequer with private investment Rapid expansion of the EGS sector should be the Government’s over-

arching priority; Green Jobs are a fact not a myth

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Defining the Sector

The EGS sector encompasses a very wide range of activities and definitions of the sector can, and do, differ.

The US Department of Commerce defines it as those environmental technologies that "advance sustainable development by reducing risk, enhancing cost-effectiveness, improving process efficiency, and creating products and processes that are environmentally beneficial or benign”.

The European Commission has adopted the OECD/Eurostat definition which states that: “The environmental goods and services industry consists of activities which produce goods and services to measure, prevent, limit, minimise or correct environmental damage to water, air and soil, as well as problems related to waste, noise and eco systems. This includes cleaner technologies, products and services that reduce environmental risk and minimise pollution and resource use.”

www.epsconsult.ie

The Irish EGS Sector

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

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The Green Economy

Global market estimated at €3 trillion Non-energy element valued at $650 billion i.e. four times size of

global software industry UK market forecast to be worth £152 billion by 2020 US to invest $140 billion as part of economic stimulus package EU has approved €105 billion in co-financing for green economy

projects; with €48 billion ear-marked for climate change projects High Level Action Group on the Green Economy set up (May 2009) Key growth sectors in Ireland were identified in August 2008 and

include: Water and waste water treatment Renewable energy Energy efficiency

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Venture Capital Activity

The year 2008 - the coming of age of the “Greentech” or “Cleantech” sector Global VC investments was €6.3 billion; up from €4.7 billion in 2007 The UK was the main source of cleantech investment in Europe, with 40%

of all European venture capital backed cleantech companies based in the UK

It is estimated that almost half of the UK cleantech deals completed in 2006 received public sector support

With the exception of the water sector, the vast majority of the investment is in renewable energy (solar, wind and biofuels)

In the US, investment in solar energy has overtaken investment in biofuels To date, with notable exceptions (including ESB’s Novus Modus, BoI, AIB,

KBC, Dolmen Green Effects Fund, Green Investments), little investment in EGS sector by VC community in Ireland

75% of VC investments are under £2m (UK, 2009)IS IRELAND GETTING ITS SHARE OF THIS INVESTMENT AND IF NOT WHY NOT?

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Drivers in Renewable Energy/Energy Efficiency

Climate change Energy Security Oil depletion Aging power infrastructure

(developed world) Energy as development

bottleneck (rapidly-industrialising countries)

Energy poverty(slowly developing countries)

Deregulation: innovation, funds, entrepreneurship

Breakthroughs in materials science

Low-cost communication technologies

LEADING TO: Fundamental re-engineering of the world’s energy industry around low carbon solutions and architecture

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Drivers – Environmental Consultants’Survey

Which are the most important growth markets for your business? (Consultants answers only)

Private sector work Waste management Public sector work Climate change/CO2 emissions Renewable energy Contaminated land EIA/SEA Water/Wastewater treatment CSR/environmental reporting Hazardous waste Air quality/pollution control IPPC Cleaner production

© 2007 Faversham House Group www.epsconsult.ie

Where Will The Jobs Come From? Big Ideas!

Electric Vehicles Retrofitting Energy efficiency Smart transport Wind Other Renewables Forestry Water Green Tourism

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Electric Vehicles

Potentially the single biggest carbon project for the island of Ireland Simon Coveney’s report makes the case Key Messages:

Current level of ambition far too low By 2030 all cars should be EVs (350,000 by 2020) Technology developing fast Ireland the ideal laboratory 8m/tonnes+ reduction in carbon per annum

Jobs potential arises in relation to: R&D for roll-out at EU level Manufacturing of EVs (EVs cost a fraction of combustion vehicles) Battery/re-charging infrastructure (including domestic) Grid connections

WHAT IS THE JOB POTENTIAL OF THIS INITIATIVE?

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Retrofitting

Some 1m of 1.5m Irish homes pre-date 1990 (275,000 houses vacant at time of 2006 census)

Households spend some €2.2 billion on energy (average of €1,600 (2005)) and emit 11.9Mt of carbon pa; around 8 tonnes per house – twice that of an average cow!

35% of heat loss through walls and 25% through roof; not technology intensive SEI’s HESS has budget (2009) of just €49m i.e. a grant of €3,500 for 14,000

homes. Is this enough? If average cost of typical household retrofit was €7,500 then an investment of

€13.5 billion needed In addition, public buildings and commercial offices also need to improve their

energy efficiency in line with the NEEAP Retrofitting is labour intensive, is capable of using Irish materials, will return

40% of spend to the Exchequer: so why then is level of activity so low?COULD RETROFITTING 2M HOMES/BUILDINGS OVER FIVE YEARS GENERATE 20,000 JOBS?

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Energy Efficiency

Most cost efficient way to reduce dependence on fossil fuels (and consequently to reduce GHG emissions)

NEEAP (2009-2020) sets out Government’s plans but detailed implementation budget not announced

Could 2 million smart meters be installed at same time as water meters? (only 2,223 smart meters installed to date (March 2009))

Expanding scope of ACA Scheme would leverage more investment Potential jobs content of NEEAP (assuming full implementation) should be

assessed Also look to export potential: McKinseys has estimated (2009) that global

energy efficiency investment opportunities could be worth €131 billion

AS MOST ENERGY EFFICIENT EQUIPMENT IS IMPORTED IS THERE SCOPE FOR MORE INDIGENOUS MANUFACTURE?

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Smart(er) Transport

smartertravel>>> sets ambition but specific measures not costed (within overall budget envelope of €4.5bn over 11 years)

What is CIE’s carbon footprint and what is being done to invest in public transport to reduce GHG emissions?

Electrify the Belfast to Cork line and all Dublin and Cork commuter lines using surplus wind energy

Replace all petrol/diesel vehicles with EVs Reform legislation to incentive private investors; more buses – more

jobs Promote e-working – quality of life issues a significant issue for

commuters Start planning now for Transport 22 and factor in potential

carbon/energy savings into capital appraisal guidelines

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Wind

1,077 Mw connected to the national grid (June 2009) i.e. supply for 700,000 homes; wind accounted for some 40% of all generation in recent months

2020 target requires another 6,480 Mw Micro-generation (4,500 units) will also contribute €16bn + of potential investments in the pipeline awaiting CER approval Deloitte’s estimate (June 2009) jobs could rise from 1,500 to over 10,000 by

2020. Turbines account for 75% of total cost Spirit of Ireland’s wind storage project a major innovation BUT>>>> Offshore only viable at $200/barrel; hence need for REFIT Turbine manufacturing opportunity not identified as a priority (Galway’s C&F Group

the pathfinder) Skills shortages a real problem Offshore planning legislation (Foreshore Acts) should be replaced by more modern

legislation

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Other Renewables

Biomass: Bioenergy Action Plan (2007); BioSpark’s €40m investment in Claremorris; GEGA a major player

Biofuels: must be sustainable; in past year algal biofuel projects got $1 billion in VC investments; bio-refinery and bio-energy competence centres set up

Ocean: AEA Technologies forecast of global market is €200 billion; Bacon/ESRI study (2005) estimate 1,900 Irish jobs could be created by 2020; SEI a lead player

Tidal: Ireland’s OpenHydro leading the way Solar: Genersys Ireland believes solar could cater for 30% of

household’s heating needs; but 10-year payback Geothermal: GAI examining regulatory framework; also 10-year +

payback

HOW MANY IRISH COMPANIES WILL BECOME WORLD LEADERS?

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Forestry

Some 40% of total GHG emissions come from land use (12.2 million cattle primarily)

Forests act as a carbon sink hence NCCS target of 5Mt of offsets by 2020 (from 2Mt currently)

Not achievable unless massive increase in annual level of planting; has fallen to just 6,000 hectares – 20,000 hectares is (1996) target

Has Coilte a conflict of interest? Has anyone realised that carbon sequestered in forests has a value?

(5Mt @ €35/tonne equals €175m per annum)? Remove the barriers preventing investment

AS FORESTRY CAN CREATE RURAL JOBS WHO IS DRIVING THE INVESTMENT OPPORTUNITIES?

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Water

Water is a finite commodity; global warming will put a price on this scarce resource

World Economic Forum Water Project highlights scale of problem EU WFD the driver Need one National Authority not 32 Significant additional jobs will be created only when domestic water

is metered NDP (to 2013) spend of €4.7 billion scattered among local

authorities; no economies of scale and unit cost of procurement too high as a result

Very limited R&D activity Investment Programme for Greater Dublin Region (to 2035) the

largest job creation project

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Green Tourism

Consumers are now far more aware of the impact of flying and travelling in terms of carbon emissions and are prepared to pay more

Some companies turning this into a business opportunity Bord Failte published Eco-Tourism Handbook (March 2009) Airlines should introduce carbon offset products to attract tourists to

Ireland NCC could offer offsets to attract convention visitors UK’s ICARUS Project helps companies implement a Carbon Reduction

Programme US car rental companies are offering carbon offsetting Inchydoney Island Hotel and Spa has largest (80 sq metres) array of

solar panels in Ireland Carbon offsets could be invested in Irish projects such as forests

COULD IRELAND BECOME A TRULY ‘GREEN’ TOURISM DESTINATION?

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One Company’s Contribution

The ESB announced the creation of 3,700 ‘green economy jobs’ as follows:

Smart networking 750 Smart metering 750 EVs 600 Wind energy 300 Property construction 550 New technologies 350 Home insulation 250 Other 150

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R&D

2020 Vision: Ireland will be at the forefront of energy research supporting the development of energy efficiency and renewable technologies (NEEAP)

About €35 trillion will be needed to develop and deploy new clean technologies between now and 2050 (IEA)

Not at all clear how much being spent annually on EGS R&D in Ireland SEI, including Ocean Energy Development; €7m (2009) Charles Parsons Energy Research Awards; €20m over seven years EI’s R&D Fund and Competence Centres Irish Energy Research Council has identified priority areas (May 2008) SFI’s remit now includes sustainable energy and energy-efficient

technologies with a €90m budget (six years to 2013) 7FP has strong EGS focusIS THIS LEVEL OF EGS R&D ENOUGH TO ACHIEVE 2020 VISION?

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Where Will We Get The Money?

Carbon tax could easily raise €1bn a year ETS auctioning revenue available from 2013 and could be worth €630

per annum by 2020 (assuming 18Mt of allowances sold at €35/tonne) Hypothecate monies into a Green Fund(s)? Go one step further: set up Anglo Irish as a bank with a dedicated

mandate to provide project finance and working capital for Green Economy jobs, and to trade carbon offsets to support Ireland’s aim to become a Green Economy

Many claims on this windfall so how best to use this green revenue? Publication of MACC will inform decision-taking What are your views on this split?

25% for fuel poverty 30% for retrofitting 15% for REFIT 15% for NEEAP 15% for other green economy incentives

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What Works In Europe

The WRAP Capital Grant Scheme (UK) The Carbon Trust Enhanced Capital Allowance Scheme (UK) Fideme Investment Fund (F) Programme for Cleaner Technology (DK) Green Financing Measure (N) Energy Investment Tax Relief Scheme (N) SenterNovem Carbon Reduction Plan (N) kfW Bank Programme for investment in renewable energy (D)

(Source: EPS Consulting, August 2008)

WHAT TYPES OF INCENTIVE SCHEMES COULD WORK IN IRELAND?

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What Others Are Doing

US to invest $6.6 billion in green economy R&D Siemens have already manufactured 6,400 wind turbines Denmark’s wind turbine industry now consists of 200 companies and

has a 35% share of global markets BP to invest €500m in Energy BioScience Institute (UC Berkeley) Austria has a Master Plan for Environmental Technologies and funds

sector and sub-sector EGS networks UK’s Commission on Environmental Markets and Economic

Performance has already set national strategy (November 2007); Carbon Reduction Commitment (which will save business £1 billion by 2020) and Low Carbon Industrial Strategy launched

IN CONTRAST, IRELAND HAS JUST SET UP A HIGH LEVEL ACTION GROUP ON THE GREEN ECONOMY; WE ARE WAY BEHIND OUR COMPETITORS

www.epsconsult.ie

Sources

EPS Consulting report on EGS sector:www.epsconsult.ie/news/greeneconomy

NEEAP: http://www.dcenr.gov.ie/NR/rdonlyres/FC3D76AF-7FF1-483F-81CD-52DCB0C73097/0/NEEAP_full_launch_report.pdf

Smarter Travel:http://www.transport.ie/upload/general/11284-0.pdf

Simon Coveney’s EV report:http://www.oireachtas.ie/documents/committees30thdail/j-climate_change/reports_2008/20090428.pdf

www.epsconsult.ie

Think About It

Business must become green to grow and to do this it is necessary to include climate change policies into corporate DNA (CBI, November 2007)

Whatever uncertainties exist regarding future oil production and project demand growth, the ultimate effect will be that the price will at first escalate and then soar (International Energy Agency, 2008)

The development of alternative energy should create more than 20 million jobs globally, with 3.5 million green jobs possible in Europe and the US in the area of energy efficiency alone (ILO, September 2008)

I realise that there are those out there who say that these plans are too ambitious. To them I say that the challenges we face are too large to ignore (Barack Obama, March 2009)

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