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Think positive – somebody has to

Think positive – somebody has to
The European Commission recently issued a report on the prospects for the EU economy which said that, because of its overdependence on financial services, the UK will be one of the hardest hit of all the 27 member countries.

The European Commission recently issued a report on the prospects for the EU economy which said that, because of its overdependence on financial services, the UK will be one of the hardest hit of all the 27 member countries.

That was depressing enough but, just to rub salt in the wound, the report also suggested that Britain’s manufacturing base was now so small that it couldn’t possibly take advantage of a weaker pound.

The value of the pound against the US dollar and the euro – in case you hadn’t noticed – has fallen through the floor in the past couple of months.

It seems, therefore, that we are now in a situation where – led by the banks – not only has the financial services sector managed to pretty much destroy itself, but as Energy has pointed out on many occasions, it has also failed miserably to support the productive sector – the manufacturers and technology developers – leaving us with little or nothing on which to base an economic recovery.

I want here to give you one example of the type of damage this foolish strategy has caused.

A year or so ago, the Inverness-based company, Wavegen, was bought by a division of the German company, Siemens. Wavegen has developed a wave-energy system which is aimed mainly at static applications such as breakwaters, but had seemingly found it difficult to raise funding.

In January this year, it was announced that Wavegen had done a deal with npower renewables to build a 4MW wave farm on Lewis.

It’s small beer in comparison with the output of modern windfarms, but it is an important step in commercialising this type of wave-energy technology because, if this works, it opens the door to much larger installations.

But what you can’t get away from is that this is a German-owned electricity utility company doing a deal with a German-owned wave-generation technology company. Strategically, it’s a brilliant move which will give the German renewables industry a major boost, assuming, of course, all goes well, which it probably will.

Should we be really worried about this or other examples? Well yes, we damn well should be. It’s not that we should object to the Germans or others doing this sort of thing, but we should be extremely concerned that we are not playing a similar game.

And it’s also no good saying that it’s OK because we have companies like Pelamis Wave Power, of Edinburgh, because having one company simply isn’t enough, and in any event, this is only one bit of the renewables sector and there are so many other bits in which we are not competing at all.

George Soros side-kick Jim Rogers says that, because we the UK don’t make very much and so have little to export, because North Sea oil&gas production is fast declining, and because our international financial services business has collapsed, then the value of the pound will continue to fall. So it is very important that we look at ways of dealing with what is probably best described as a “market failure”.

How do we develop and grow our export businesses without the support of the financial services sector?

Well, the first thing you need is a range of products to sell. Now, some UK companies have developed a first-class range of products and have already built their export markets. But in the energy sector, many of these companies are relatively small and very “nichey”.

So it is important to develop products with a wider market appeal. To achieve that now in an oil&gas sector with a dubious future would be difficult, although perhaps not impossible.

So we need to look more closely at opportunities within the broader alternative energy sector. However, even here we know that opportunities are becoming limited because we are nothing like as active as our competitors. There are already too many things that we don’t do or don’t make.

It’s perhaps critical then that we look at leapfrogging existing technologies and developing the next generation of energy systems. To do that will require a lot of R&D funding. But, most of all, it will require strong leadership, imagination and a strategy built around specific aims.

It will also require some rethinking of Government policy. In particular, the rules on state aid need to be thrown out of the window so that the lack of availability of private-sector funding – especially risk equity capital – does not hold back the commercialisation of new technologies.

It’s interesting then that the day after the Energy Technology Institute announced a range of new projects, Scottish Enterprise CEO Jack Perry revealed it was absorbing ITI Scotland into its existing operation because it believes integration will allow much greater alignment with other SE commercialisation programmes and projects, bringing increased efficiency and impact.

That, of course, depends entirely on who provides the oversight to make sure that it is actually working as it should.

Now how do I put this nicely? The fact is that the UK’s national Energy Technology Institute’s (ETI) projects are pretty uninspiring, and one in particular which I happen to know was looked at by Scotland’s ITI Energy probably hasn’t got a cat’s chance in hell of working.

It also concerns me that some of the companies involved are from overseas, and I don’t happen to believe – especially now – that public money should be spent on supporting our competitors. Yes, folks, I’m an industrial patriot. So, too, is Energy’s editor.

As to the changes at ITI, I think we need to give them time to bed down and see how it all pans out. Certainly, I gave a sigh of relief when I learned that the ITI Scotland board was to be disbanded, because I believe the leadership they provided was ineffective.

However, what I really want to know is where the technology inspiration is going to come from. Where are the people who will develop the bright ideas and make the judgments on what should, and should not, be funded?

Strikes me that there is still a lot of detail to be worked out.

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