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UK clean energy investors face ‘valley of death’ warns fund manager

Low carbon investor says success in UK sector lies in following the American way of encouraging entrepreneurship

US R&D is supported by the government. (Pic: Daniel Derkacs/Solar Junction)

By Nilima Choudhury 

Investing in the UK green economy is like walking through the ‘valley of death’, according to a leading clean energy fund manager.

The country’s low carbon sector accounts for more than ÂŁ120 billion in annual sales and employs almost 1 million people, but Adam Workman from 350 Investment Partners says the numbers belie a challenging sector.

He told RTCC new entrants underestimate how fragmented it is “in terms of the range of technologies, the time it takes to grow and how to acquire customers”, suggesting the government learn from the USA’s experiences.

“I think the impression is with the US model is that it’s more fluid. If you had funding from the likes of the Department of Energy it’s usually one programme that takes you through all the various stages of development,” he said.

Talking on the sidelines of an event run by the UK’s National Physical Laboratory, Workman said government and leading technology institutions need to offer more support to budding entrepreneurs, avoiding what US analysts call the ‘valley of death’

“If you look at some of the US institutions like MIT a lot of those businesses will stay in the academic funding structure,” he said, pointing out that in the US start-ups have access to funds from the state and also from alumni already established in the sector.

The metaphorical ‘valley’ represents insufficient government policies and a lack of financing blocking the progress of innovative technologies from reaching the market.

Speaking at the same event in London, Energy and Climate minister Greg Barker said the government would take this message onboard, and cited the nascent Green Investment Bank and plans to leverage ÂŁ110bn investment for the wind industry as evidence of growing support.

“We understand that part of that response to the challenges must be more effective collaboration between government and the innovators,” he said.

“To quote from the PM earlier this year,’make no mistake we are in a race and the countries that succeed in that race are those that are green and energy efficient’.”

Uncertain trajectory

UK clean energy investment dropped from $2.8bn to to $1.7bn in the first quarter of 2013 according to figures from Bloomberg. Germany saw rates plunge from $6.3bn to $1.9bn.

According to a survey by the UK’s Carbon Trust financing for start-ups is the main barrier to business growth (81%), followed by access to government support (35.5%) and access to commercial opportunities (21%)

The UK is sixth in the G7 in terms of total research and development expenditure as a share of GDP, but measures of patent applications per head of population for the UK are lower than for major competitors.

Last month the European Institutional Investors Group on Climate Change issued a statement warning that the UK’s efforts to address climate change were “inadequate and inconsistent” and risked harming jobs and pensions.

“If we don’t get [decisive action] then we won’t be able to shift investment from high-carbon to low-carbon projects and there will be severe impacts from climate change over the longer term,” chief executive Stephanie Pfeifer said in a statement.

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