Year: 2017

Syrinix – A new way of looking at water

Syrinix – A new way of looking at water

In this whitepaper, we interview Syrinix’s CEO, James Dunning. He outlines why access to water has turned into one of the hottest political issues on the planet. James also explores how enlightened utility companies are exploring new ways to improve the efficiency of water flows, using affordable technology that fundamentally changes the way water is managed in urban areas.

Syrinix, which specialises in pipe monitoring technology, monitors water mains with the aim of reducing leaks and bursts. Used for trunk mains, pipelines and pressurised wastewater pipelines, precision leak detection is fed into an electronic platform through which users can view data, configure alerts and download reports.

Factors such as climate change, asset degradation and changes to global regulations are driving the adoption of Syrinix’s technology. The current customer base includes more than 50 organisations spread across the UK, Europe, North America and the Far East.

 

 


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Dawn of the Abundant Free Energy System

Dawn of the Abundant Free Energy System

There is no logical, technical, economic or political justification for operating the future energy industry as we have the past one, or to attempt to make these markets operate by common rules.

The Low Carbon generators are so totally different from the legacy scarcity generators, for example: fixed vs marginal costs, abundant cheap energy flows vs costly fuels, vastly increased customer interaction through addition of transport and heat vs customer apathy, distributed energy resources vs centrally planned, digital vs analogue.

The Cost of Energy Review 2.0 (“CoER2.0”)

It is the season for one man bands to tell everyone how the energy system should work and I didn’t want to miss out on that.  Dieter Helm’s recent 200-page Cost of Energy Review (1) will no doubt sink into the mire of political reality as layer upon layer of advisers pick holes in it and political sandstorms erode its pointed edges.

What we need is an uplifting, innovative and thoroughly different ‘Cost of Energy Review 2.0’ (CoER2.0) and so I present mine here – why not? I take Dieter’s work as my reference but put back the missing bits and raise the innovation level a lot.

People of Britain, you have a wonderful opportunity to prosper with ‘free energy’ whilst at the same time cleaning up your environment. Let’s celebrate that and continue to support the fantastic new technologies that make it all possible, as they always have done.

A quite obvious omission by Dieter Helm is his commentary of the past that was dismissive of the subsidy of renewable technology. Subsidy of wind and solar has created an industry that has spectacularly outperformed on cost reduction, far greater that Dieter had ever imagined or forecast.

CoER2.0 Recommendation 1

Patient Capital is required to get new British low carbon technologies to commercialisation (2). Dieter has failed to support the increase in Patient Capital for hard tech in the energy market but does cover that in the report itself. Government could consider introducing a Patient Capital Obligation (PCO) on large institutional investors (e.g. pension funds, insurance companies, possibly also banks) requiring them to invest a small proportion of their overall assets in long term, patient capital funds that target industry sectors that match government priorities. There are various examples of government using such a mandate including in the energy generation sector with the Non Fossil Fuel Obligation (NFFO), Renewables Obligation (RO), etc.

Cost Of Energy Review RecommendationDieter HelmDavid Casale
1The cost of energy is too high, and higher than necessary to meet the Climate Change Act (CCA) target and the carbon budgets. Households and businesses have not fully benefited from the falling costs of gas and coal, the rapidly falling costs of renewables, or from the efficiency gains to network and supply costs which come from smart technologies. Prices should be falling, and they should go on falling into the medium and longer terms.When industry costs are falling and you remove legacy costs from the equation you can conclude that ‘energy costs are too high’; it is however slightly dismissive of the readers intelligence.
Abuse of market power is mentioned but not followed up, how about there really is none or very little. The problem is and its becoming even more so a lack of customer engagement
2Households and businesses have not benefited as much as they should because of legacy costs, policies and regulation, and the continued exercise of market power.
3The scale of the multiple interventions in the electricity market is now so great that few if any could even list them all, and their interactions are poorly understood. Complexity is itself a major cause of rising costs, and tinkering with policies and regulations is unlikely to reduce costs. Indeed, each successive intervention layers on new costs and unintended consequences. It should be a central aim of government to radically simplify the interventions, and to get government back out of many of its current detailed roles. This review explains how to do this.So true! Energy is simple really but it is in regulators interest to make it complex, so they do, and this needs to stop.
4The legacy costs from the Renewables Obligation Certificates (ROCs), the feed-in tariffs (FiTs) and low-carbon contracts for difference (CfDs) are a major contributor to rising final prices, and should be separated out, ring-fenced, and placed in a ‘legacy bank’. They should be charged separately and explicitly on customer bills. Industrial customers should be exempt. Once taken out of the market, the underlying prices should then be falling.Legacy costs can’t just be wished away but the bit about separating costs on customers’ bills is worth pursuing.

CoER2.0 Recommendation 2

The costs of energy supply are moving towards all being fixed cost in nature, using a universal prepayment (3), smart meter roll out the energy system is split into an ‘Abundant’ system and a ‘Scarce’ system, determined each 10 minutes of the day based on relative demand and supply. During energy Abundant periods (when low carbon generators are at high output and demand is low) energy is free or even customers will get paid to use it for certain purposes.  During Scarce periods energy is priced in bands as follows;

  • Band A – The Universal Service Obligation (USO) is set for each household in a similar way to Universal Credits to ensure the vulnerable citizens in our Great Britain are protected. The USO is a profile of consumption per day.
  • Band B – The Scarcity insurance market, this is an insurance policy with a fixed premium that is the revenue model for the legacy generators that are needed at times of Scarcity. Band B covers a certain (profiled) level of consumption per month. Consumers buy Band B power against a monthly premium payment to meet their individual needs.
  • Band C – The market clearing price for Scarcity periods using the old POOL model of marginal cost pricing. Expect these prices to be high but for ever diminishing duration as we move to 2050 and more low carbon generation assets are added to the system. Band C can be curtailed by the new Regional System Operators RSO thus introducing a rationing element to energy use; this stimulates energy efficiency further.
Cost Of Energy Review RecommendationDieter HelmDavid Casale
5The most efficient way to meet the CCA target and the carbon budget is to set a universal carbon price on a common basis across the whole economy, harmonising the multiple carbon taxes and prices currently in place. This price should vary so as to meet the carbon targets. It would be significantly lower than the cost of the current multiple interventions.Ok but, as the detailed analysis in the report itself says, this won’t actually work. This is a good economic policy but a hard-to-implement-in-reality policy.
6There should be a border carbon price to address the consequences of the UK adopting a unilateral carbon production target.I see so we tell Europe, once we have left, that there is a tax on carbon, I wonder how they will respond to that
7The FiTs and other low-carbon CfDs should be gradually phased out, and merged into a unified equivalent firm power (EFP) capacity auction. The costs of intermittency will then rest with those who cause them, and there will be a major incentive for the intermittent generators to contract with and invest in the demand side, storage and back-up plants. The balancing and flexibility of markets should be significantly encouraged.NO these are two completely different industries, they cannot and should not be blended together in some ‘expert’-driven averaging process (or EFP as Dieter proposes). It’s true you can’t teach an old dog a new trick but we need new tricks. Trying to squeeze the new technologies into the old format is unimaginative, overly complex, not possible for the Great British consumer to engage with and unnecessary.

CoER2.0 Recommendation 3

Low Carbon Generation (4) is a technology that collects free energy and distributes it. It is more akin to the water industry of the 1970s, where investment was made in collecting and storing water (if it rains, the system works = Abundance), bills are per month not per cubic meter. So, in electricity, investments would be made to collect wind and solar energy and distribute it, auctions are used to drive down the costs and low carbon generators are paid an availability payment as long as the low carbon generation technology is able and does collect the available energy. The energy is supplied into the grid and acts as negative demand; it is not metered other than to support the technical availability requirements of the availability payment. If needed, wind and solar can be turned down; this is fine and typical of energy systems generally.

We have now created an Abundant and Scarce system determined each 10 minutes of each day overseen by the new Regional System Operators (RSO’s) with the National System Operator taking a back seat.  As an industry we can market this; e.g. ‘use energy today between 2-4 pm, it’s going to be free to use’/’charge your car tonight at 11-12 pm its free etc.

’The availability payments are covered by a national taxation mechanism and become the same as roads and hospitals but charged to the consumer bill on a per kWh used basis (see CoER2.0 R2)

The POOL is brought back and all non-Low Carbon Generation bids its capacity into the POOL for Scarce periods. In effect this Scarce market is operated a bit like the RNLI Lifeboat crews over time, plants are not permanently staffed and when the ‘Scarcity red light’ goes on these trained staff take up roles to keep the lights on, prices for this can be quite low. This is a sunset market as over time, storage, demand side and interconnections mean that over time Scarce periods become increasingly well…scarce.  The revenue model for the scarcity legacy generators is from the Band B insurance premiums.

Cost Of Energy Review RecommendationDieter HelmDavid Casale
8After all existing commitments in respect of FiTs and low-carbon CfDs have been fully honoured, and in the transition to a proper, uniform carbon price and an EFP auction, they should be split into three parts: the construction and project-development phase; the operation of the plant; and decommissioning. The first should have a higher cost of capital, reflecting the equity risks; the second should be more akin to a regulatory asset base (RAB) in the utilities and closer to the cost of debt; and the third should be a charge to operating costs. The customers should benefit from the refinancing when the project comes into operation.Yes, for the Abundant market an infrastructure finance approach is used; this is not new and well understood. For an availability payment backed by a highly credit worthy entity the cost of capital will be much lower.
9The current RIIO (Revenue = Incentives + Innovation + Outputs) periodic review price caps for the transmission and distribution companies are already being significantly outperformed – in part because of mistakes in the assumptions – and have resulted in higher prices than need to be charged for the efficient delivery of their functions. Ofgem should consider what actions should be taken now.Agreed.
10For the networks, going forward, there should be no more periodic reviews in the current RIIO framework. Technical change is so fast that predicting costs eight–ten years hence is impractical.Agreed.
11The government should establish an independent national system operator (NSO) and regional system operators (RSOs) in the public sector, with relevant duties to supply, and take on some of the obligations in the relevant licences from the regulated transmission and distribution companies. The NSO and the RSOs should, where practical, open up the various functions and enhancements to the networks to competitive auctions and, at the local level, invite bids for network enhancements, generation and storage, and demand-side response (DSR) from energy service companies.Agreed.
12The separate generation, supply and distribution licences, at least at the local level, should be replaced by a simpler, single licence.Agreed.
13As a result of the above changes, the role of Ofgem in network regulation should be significantly diminished.Agreed.
14There should be a default tariff to replace the Standard Variable Tariff (SVT), based on the index of wholesale costs, the fixed cost pass-throughs, levies and taxes, and a published supply margin. The old Supplier Model should be abolished; it has never really worked, it adds little value and prevents deeper customer engagement. The new suppliers would sell insurance for Band B, smart meter services and home energy management, batteries and electric car services, much richer engagement and much more fun.
15Capping the margin would be the best way to meet the objectives of the new draft legislation. By focusing on the margin within the default tariff structure, competition would be enhanced, thereby encouraging new entrants.
16The government should issue an annual statement to Parliament, setting out the required capacity margins and providing guidance to the NSO and RSOs.Yes identifying the expected Abundant and Scarce periods.

Conclusions

1.0 There is no logical, technical, economic or political justification for operating the future energy industry as we have the past one, or to attempt to make these markets operate by common rules. The Low Carbon generators are so totally different from the legacy scarcity generators: fixed vs marginal costs, abundant cheap energy flows, vastly increased customer interaction through addition of transport and heat, distributed not centrally planned, digital not analogue.

2.0 A true revolution in energy, as proposed here, will happen in any case as these new technologies continue to emerge; the recognition of that by society and governments would lower the costs of the transition through greater engagement and increased speed of deployment.

3.0 The clear identification of the two opposite drivers of energy costs (The Abundant and Scarce Systems) would assist society to understand its own role, in this way both the Abundant market and the Scarce market would improve efficiency, demand side measures, batteries, electric vehicles and behaviours would change quicker.

4.0 This is not a fanciful proposal, it is technically feasible today.

5.0 This would result in £110bn of energy savings; I put this in hoping the media will pick it up, no justification is given here but I could if you want one?

 

 

 

Notes:

  1. See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/654902/Cost_of_Energy_Review.pdf
  2. See Turquoise response to the Patient Capital Review
  3. See https://davidcasale.wordpress.com/2016/08/03/universal-prepayment-in-the-national-interest/
  4. I take solar and wind power as my examples of Low Carbon Generation but this applies for all types of low carbon generation based on the premise of lowest cost first.


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Recycling in the Anthropocene Age

Recycling in the Anthropocene Age

I think it’s fairly safe to say that technological advances on their own will not reduce per capita use of the Earth’s resources. That requires different ways of doing things, some new regulation and above all, changes in attitudes amongst consumers themselves to what they actually need. The Brookings Institution predicts that the “global middle class” of 3.2bn will rise to 5bn by 2030 and they’re the ones with the money to consume!

A study released by the Massachusetts Institute of Technology earlier this year gathered data on 57 common goods and services to analyse whether there had been a reduction in the amount of materials used to meet overall demand for them, so called “dematerialisation.” The only products for which overall consumption had fallen were chemicals whose use had been restricted for safety reasons.

In fact it threw up a stunning example of how technological improvements had stimulated the demand for one material by 345% over the last four decades….silicon. The conclusion of one of its authors, Professor Christopher Magee, was blunt: “There is a techno-optimist’s position that says technological change will fix the environment. This (study) says probably not.”

So that is why recycling is such an important activity now and will become increasingly more so in the years to come. To make it work properly, it needs to be based on good economics so that people see it as a potential business opportunity rather than something which they reluctantly engage in because of regulations. And its potential rewards need to stand up to scrutiny by people who see it as a threat to their existing businesses.

Surfers against Sewage have pointed me in the direction of a piece of work undertaken by Eunomia Research & Consulting in 2015 on behalf of Zero Waste Scotland which indicates that a deposit refund system on single-use beverage containers like water bottles would lead to savings by local authorities in Scotland of £4.6m a year. Since then, they have been commissioned by various charities and campaign groups to look at the economics of a similar scheme in England.

They examined the effect that such a scheme would have on collections, sorting, revenue from recycled materials and disposal costs as well as on the money spent litter picking on the streets and road verges.  They also delved into the murky area of the distribution of savings and costs between the waste collection authorities and the waste disposal authority, something crucial to making such a scheme work.

The conclusion was that if it was scaled up across England as a whole, a deposit refund system would produce annual savings of £35m or £1.47 per household when introduced. The most important component of this would come from a reduction in disposal costs of between 54p and £4.55, with less materials being sent to landfill or for incineration.

And this is without any help from industry which is well placed to take advantage of recycling as a broad business opportunity. Reprocessing tools need to be developed so that waste can be efficiently separated into its original components for reuse. The former Saudi Oil Minister, Sheikh Yamani, once referred to plastic as one of the noble uses of oil. That may have been a valid point of view in the seventies but as we move into the “Anthropocene” age, I doubt if many people would see it that way anymore!


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Bactest – Why the happiness of bacteria matters

Bactest – Why the happiness of bacteria matters

Have you ever wondered about how happy bacteria are? Probably not, but for some industries it’s a critical question.

Bactest has combined microbiology and computer science to develop a technique for quickly and accurately detecting and measuring bacterial activity in liquids, outside of a laboratory. The uses for this technology are varied, from testing liquid nutrients administered intravenously to babies in the UK NHS to monitoring the efficiency of waste water treatment plants around the world.

This whitepaper contains an interview with Bactest’s CEO, Annie Brooking, providing insight into the application of the company’s product in the waste water industry.

Bactest Whitepaper


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Streaming 2.0

Streaming 2.0

Spotify has just announced reaching a target of 60 million paying users and as a result is now getting ready for a NYSE listing before the end of the year. Although global music sales have started growing for the first time since 2000, music streaming services still have to turn a profit. An example is SoundCloud, which had to let go almost half of its staff last month, and is still fighting for its survival.

In the mass music streaming market, you can’t avoid the big majors (Sony, Universal and Warner) if you want to be a meaningful player. If you are thinking of making some money out of it, you need to be thinking of targeting millions of streamers! But behind the scenes, a new market is emerging for music and video streaming where anyone can monetize any content to a growing audience who are only willing to pay for the material they actually want.

This “pay-as-you-go” streaming business model is getting more and more traction as it not only allows artists to maximise the value of their content, but also enables any business or content creator to have direct access to his or her customers or fan base. And they are the ones who are willing to pay for a service or support their favourite artist. This new streaming 2.0 business model is scalable and can be adapted to cover a wide range of areas such as Education, Sports, Health/Well-being, DIY, etc.

One such company is SupaPass which has refined its business model over the past two years to offer  a unique mobile platform enabling monetisation of any content not just music through a subscription paid monthly or annually. Content owners can have their own, fully branded subscription service and receive up to 100% of the revenues (if the owner pays a monthly fixed fee) paid directly to themselves as the channel owner without “middle man” taking a slice.

It’s a white label offering which generates real revenues from day one for the various content owners (such as Football Clubs, TV presenters, yoga teachers, etc) and also helps to foster a new and growing industry of smaller independent and specialised content creators. It is also creating targeted groups of users who will, in the future, prove to be very valuable to advertising agencies and large and small brands around the world.

The Low Carbon Innovation Fund (LCIF), managed by Turquoise, has been supporting SupaPass since the beginning and through its transformation from an exclusive music streaming platform into a white label, SaaS company serving a larger addressable market than just musicians. We hope they’ll find a faster route to profitability than their more famous peers.


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Meet the Turquoise team: Luke Taylor

Meet the Turquoise team: Luke Taylor

Career

Describe your career journey

After Cambridge I joined Operis, spending close to three years there building and auditing financial models and advising on PPP/PFI projects. I then took a year off to go to South America, before joining Lightsource at the start of 2015 where I helped close a number of deals at the height of the solar boom. I’ve been at Turquoise since the beginning of 2016.

What are the key ingredients to delivering innovation?

You need entrepreneurs with good ideas and the conviction to try and realise them. Then they need money. Thankfully there are incentives like (S)EIS that are effective at spurring investment in innovation (at least when used for their intended purpose) and otherwise it falls to VCs or large corporates to have enough faith in early stage technology to take some of the financing burden off entrepreneurs.

What’s been your biggest business challenge?

Getting back into the 9-5 after a year of earning a living playing poker in Colombia was quite a culture shock.

What is your proudest business moment?

I have completed deals at all of the companies where I’ve worked that were new challenges to me at the time – it’s hard to choose between them. The feeling of relief when a challenging deal completes is very enjoyable, as it’s invariably been so much harder to get to that point than it perhaps ought to be.

Who would you like to have dinner with – and why?

Nassim Nicholas Taleb – I’m interested in risk and our ability to judge probabilities, and, whatever you make of his writing style, his books are interesting and easy to understand.

Business

What has been the most significant technological development of recent years?

I’ll go for 3G and 4G. It’s amazing how a lot of people, myself included, have become reliant in such a short space of time on having the internet everywhere we go.

What has been the most influential legislative change in recent years?

The introduction of the Feed-in-Tariff for solar and subsidies for renewables in general. They have been instrumental in bringing the costs of clean energy technologies down and the electricity generation mix has changed drastically in the last 7 years as a result.

How do you see the legislative environment changing through to 2040/2050?

I think it will continue to follow, rather than lead, the progress made in both the private and public sectors. You don’t want to set impossible or totally unrealistic goals so, as progress is made with new technologies, legislation will hopefully be introduced to encourage fast adoption.

How has the perception of cleantech, energy, environment and efficiency evolved in your view in recent years? What do you envisage for the future of the sector?

My opinion on this has been largely influenced by the people I sit around at Turquoise, as I haven’t been in the sector for long enough to know how it was perceived 10 years ago. From an investor’s point of view, it seems to have gone through a bubble where people got burned, then retreated and are now starting to come back. Hopefully, going forward, people will be willing to support good ideas again and entrepreneurs will have realistic valuation expectations.

From an investment point of view, what do you see as the key challenges for emerging technologies attracting finance? How do you see those being overcome in the coming decades?

I think its human nature to fundamentally misunderstand risk based on your own experiences rather than the collective experience of society. That results in repeated bad investment decisions, muddying the water and using up capital that could have been used for potentially better ones. The only way to solve this is through learning from the mistakes of the past, present and future, so will take time.

From a global point of view, what impact (if any) do you think political change is having on the energy, environment and efficiency sectors? How do you think this will change?

Add me to the list of cynics about the importance of politics. Whilst it would be great if governments could create policies and frameworks to encourage innovation and efficiency improvements to occur more quickly, the reality is that it’s more often reactionary. Businesses will innovate regardless or they’ll be left behind by someone who does.


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Avoiding value slippage

Avoiding value slippage

Co-authored by Sophie Maugan, Partner at Cleveland Scott York, and Ian Thomas, MD at Turquoise.

 

What is IP?

There is a tendency to equate intellectual property with ‘technology’, as we imagine that any innovative product is immediately surrounded with patents and other forms of legal protection to prevent competitors from copying it. Actually, much of what we know as technology relies on execution of a business model and doesn’t have much (or any) meaningful IP protection.  Many digital economy businesses have been built on being first to market with a new product or service and rely heavily on marketing and branding to maintain their position.  In fact, such businesses (think Uber, eBay, AirBnB) almost always attract imitators who do not face any significant IP-related barriers to entry.

‘Hard’ IP has to be something genuinely innovative, i.e. different to what has come before, like a new medicine, piece of hardware or chemical process.  Because it can be protected via patents and/or other registrations, it can have standalone value, independent of the person or business that created it and the party that currently owns it.  Moreover, that value can be long-lasting, as IP protection typically extends out 15-20 years or longer.

Companies in IP-intensive industries tend to generate double the sales, have greater long-term growth and generate trade surpluses compared with non-IP intensive organisations.

 

The VC perspective

IP-heavy businesses present both a challenge and an opportunity for venture capital investors.  This type of technology tends to be capital-intensive to develop and slow to commercialise.  Against that, it can be particularly valuable to larger acquirers who can use their established sales channels to sell it on a much larger scale than would ever be possible for the original owner of the IP.  And, of course, there is a risk that the original innovation does not turn out to be as commercially valuable as expected.

Where an investor does decide that an investment is justified, it is essential to ensure that the IP of the business is secure and continues to be so.  If not, the technology may fulfill its potential only to be copied by competitors, leaving little value in the investment.  Even where IP has been registered, there are considerations around to what extent possible infringement should be monitored and how to respond if it occurs.

 

Know your © from your ™

There are four main types of IP protection that can be registered:

  • Patents: exclusive rights to manufacture, import, use or sell an invention (and exclude others from doing so)
  • Copyright: right of authorship over a piece of work, allowing the holder to make and sell copies (and limit how others can use it)
  • Trademark: a recognisable mark that identifies a product or service to differentiate it from others
  • Designs: protecting the appearance of a product in order to distinguish it from others.

VC investors are typically only interested in patented IP; other forms of registration are nice to have but not felt to offer much protection.  Of course, patents are not available or appropriate for all businesses but we are focusing here on those that can benefit therefrom.

 

The basics of protection

There are a number of basic steps that companies should take to identify, evaluate and protect their IP:

  • Know what you have: companies should maintain an internal IP register that records all significant innovations so that they can be assessed for possible patenting
  • Make sure it’s yours: employment contracts need to ensure that IP created by employees is assigned to the company and that confidentiality is maintained
  • Decide what it’s worth: only commercially valuable IP is worth registering, so innovations should be evaluated rigorously (see below)
  • Invest in protection: IP registration can be expensive but is almost always the best form of protection on a cost-benefit analysis
  • Avoid the ‘trade secrets’ trap: keeping IP as a trade secret to avoid the costs of registration is usually a false economy and the value of IP that cannot be patented needs to be looked at closely to determine what it is really worth.

 

What to protect

Venture-backed companies will typically have some patents in application (or, possibly, granted) but will still be developing their technology and expect to register additional IP in due course.  As a result, establishing a monetary value for the IP on a standalone basis is rarely possible or worthwhile.  Of more use is a framework for deciding which innovations are worth protecting and which are not, focusing on protecting inventions that are likely to improve market power or provide a competitive edge.

The following questions provide a starting point for deciding whether or not to patent:

  • How easy is it for competitors to design around the patent? If this can be easily achieved then there may be no advantage in patent protection. However, if a patent could potentially obstruct competitors from bringing a similar product to market then it is likely to be worth patenting if the expected extra profits justify the registration costs
  • Will it be possible to detect infringement? If you cannot detect infringements then you cannot take action against infringers.  This could be the case for a patent on a manufacturing process, if it is not possible to determine what process has been used to produce a rival product simply by examining that product itself.  Backend processes involved in Cloud-based systems is another example; it may not be possible to access the full backend systems of a suspected infringer, therefore it will be difficult to determine whether any infringement is taking place
  • Can the innovation be reverse engineered by competitors? If so, then a patent may be a valuable, or even the only, deterrent
  • Are competitors likely to be working on similar innovations? Patenting in areas that competitors are working in can make it difficult for them to launch and protect similar inventions. It can also deter competitors from initiating litigation in case they fear retaliation and can create cross-licensing opportunities
  • Is it a radical new technology or an incremental improvement? Patents for breakthrough technology will have longer lasting value compared to incremental improvements that may be superseded quickly.
  • Can it be kept a secret? Patents in most countries last for 20 years from filing, after which the invention will be available for all to use.  Keeping the invention as a trade secret may be appropriate in occasional circumstances; for instance if the idea could have very long term value and where the details cannot be obtained through reverse engineering.  However, this strategy relies on maintaining confidentiality which can be challenging.

There may be other factors to consider, such as the publicity benefits of having a portfolio of patents or, in the UK, reduced rates of corporation tax under the ‘Patent Box’ scheme.

 

Other things to consider

Freedom to operate

Having a patent provides its owner a right to exclude others from exploiting that invention but does not automatically guarantee freedom to use the patented technology without risk of infringing third party rights.  For example, a company may have patented an improvement on a competitor’s earlier innovation but that improvement may fall within the scope of the competitor’s patent for the earlier innovation, in which case the improvement cannot be exploited without permission from the owner of the original patent.  Of course, the competitor will not be able to exploit the subsequent innovation without permission of the more recent patent holder.  Therefore, simply having a patent does not provide freedom to operate (FTO) and establishing FTO can be a lengthy process in its own right.

IP insurance

The upfront costs to launch patent infringement proceedings can be very high, which can deter IP holders from enforcing their rights (particularly when they are small companies with much larger competitors).  However, it is possible to obtain insurance to cover the costs of enforcing IP rights as well as for defending allegations of infringement (which can be equally important for small players faced with predatory tactics from deep-pocketed incumbents).  Policies and premiums vary depending on the risks associated with the relevant industry and there are specialist IP insurance brokers who can advise in this area.

Valuing IP

In cases where a company has moved beyond the technology development phase and has launched a commercial product, it may be possible to value its IP as a total package.

Methods for doing so include:

  • Cost: assessing the cost to develop and create the IP rights (including how much it would cost a 3rd party to invent something similar); however, this method does not take into account the market value of the product, so may under- or over-estimate the value of the IP
  • Market value: assessing the product’s market value based on sales of similar offerings; while this provides a realistic figure, it can be difficult to obtain reliable data within a competitive environment or if there is no existing market-place for the innovation
  • Economic benefit: assessing the future net income stream from the product after costs are taken into account and discounted at an appropriate rate to reflect risks and financing costs; in many ways this is the best way to evaluate new technology but relies on key assumptions that may prove to be inaccurate.

Extracting more value

Early-stage companies often do not consider whether there is potential value in licensing existing IP into market applications that do not form part of their business plan.  Whilst this may require additional investment by the licensee in developing a product specifically for the new application, it can represent an additional future income stream (possibly royalty-based rather than upfront).  Often the barrier to realising this value is lack of resource within the company that holds the IP for exploring the wider commercial opportunities and negotiating deals.

IP is a vast topic and the options available need careful thought. It is something that every organisation who is looking to protect its current and future potential value should be considering.  Making the time at the beginning to identify what approach the company should adopt in relation to safeguarding its intellectual property is a crucial element for any business wanting to succeed.

 

For further information on IP law issues, please contact:

Author Sophie Maughan

 


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Meet the Turquoise team: Ian Thomas

Meet the Turquoise team: Ian Thomas

Turquoise team members share their thoughts on business issues and give some career insights.

 

Business

What has been the most significant technological development of recent years?

Although perhaps more in the realm of manufacturing, the reduction in cost of wind turbines and, in particular, solar modules has had a huge impact on the deployment of renewables globally. In terms of pure technology, the increasing electrification of the automotive sector, from mild hybrids to full EVs, is impressive.

What has been the most influential legislative change in recent years?

If the Paris accord counts as legislation then, notwithstanding the US withdrawal, that is a significant milestone. Global automotive emissions and fuel efficiency regulations are also very important. Less known but also globally significant is the IMO Ballast Water Convention which requires ships to eliminate potentially harmful aquatic organisms from their ballast water discharges. And we should not underestimate the impact of changes occurring at the micro level, in the form of product standards, packaging regulations, energy efficiency requirements and so on.

How do you see the legislative environment changing through to 2040/2050?

I would like to believe that it will continue to improve from an environmental perspective and that fossil industries, starting with coal and progressing to oil and gas, will ultimately be eliminated or have their emissions mitigated through carbon capture.

How has the perception of cleantech, energy, environment and efficiency evolved in your view in recent years? What do you envisage for the future of the sector?

At Turquoise, we focus on industrial technology and avoid referring to cleantech simply because of negative investor experience in that sector. We believe that all industrial innovation has to be cleaner and more efficient otherwise it is not commercial.

From an investment point of view, what do you see as the key challenges for emerging technologies attracting finance? How do you see those being overcome in the coming decades?

Industrial technologies require longer investment horizons and larger amounts of capital. Neither of those are insurmountable challenges although they do require investors to have greater imagination as regards what is possible and achievable. Right now, there are too few investors with that kind of mind-set.

From a global point of view, what impact (if any) do you think political change is having on the energy, environment and efficiency sectors? How do you think this will change?

Although politics makes headlines, it is the underlying progression within the private sector that is most important in the long run. Politicians can, and should, lead on the big issues around climate change (although they don’t always do so) but business is increasingly taking the initiative in making change occur on the ground.

 

Career

Describe your career journey in less than 100 words

I went into investment banking straight from university and spent the best part of 11 years working on the financing of large scale energy and natural resources projects in Europe, South America and the Middle East. After that I lived in Saudi Arabia for a couple of years, working as an adviser to a privately-owned petrochemicals group. I joined Turquoise in 2004 and have been here ever since.

What are the key ingredients to delivering innovation?

There are many types of innovation, ranging from incremental to transformative, and all can be valuable. There is no secret formula that I am aware of but having vision and perseverance and avoiding group-think will help.

What’s been your biggest business challenge?

Competing for capital in a world where most investors like everything digital and don’t understand hardware is sometimes hard going.

What is your proudest business moment?

At Turquoise, we have helped a large number of entrepreneurs and innovators to raise capital and/or have invested ourselves. Not all have been successful but I believe that all of them deserved being given a chance to succeed.

Who would you like to have dinner with – and why?

Napoleon. As a former history student, I am sceptical of the idea that the past is mostly the result of the actions of ‘great’ individuals but, if there are exceptions, he is one of them.


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Gatwick gone bonkers

Gatwick gone bonkers

Gatwick has become the first UK airport to announce that it will be Carbon Neutral: http://www.mediacentre.gatwickairport.com/press-releases/2017/gatwick-becomes-first-uk-airport-to-join-global-renewable-electricity-alliance.aspx.

I have never been a fan of the concept of Carbon Neutrality. The level of certification required to substantiate such a claim makes the Brexit negotiations look like a tea party. All we really want is to reduce emissions, not claim some isolated, innocent status by declaring ourselves Carbon Neutral. The government tried it with Zero Carbon Homes, a scheme now abandoned, but to declare that ‘Gatwick Airport is Carbon Neutral’ – now that is bonkers.

Gatwick Airport plays host to hundreds of thousands of cars, trains, trucks and planes every day; it is an epi-centre for the release into the atmosphere of vast quantities of carbon.. Whilst we need to decarbonise, air travel is an area that no one has a solution for at this time so Gatwick needs others to save carbon on its behalf because it is certainly NOT Carbon Neutral.

To pronounce that Gatwick will achieve this lofty aim by next spring produces a number of very unhelpful effects:

  1. Many people will think they mean the planes as well, thereby solving an impossible problem by next spring. We need folk to engage with this issue in an informed manner and this does not help.
  2. Even for those who do not fall for the above, travellers will feel very uncertain that any science is valid. How on earth can Gatwick be Carbon Neutral? It can’t unless you employ some very creative assumptions. For more insight on the dangers of green labels, I’d invite you to watch our recent TEDx talk: ‘Cleantech does not exist’ (see TEDxOxford.co.uk)
  3. It makes Gatwick look silly. This simply draws attention to a piece of corporate Group Think that expects everyone to believe that you are part of the solution when in fact you embody the problem. Better to acknowledge that you need people like me and the investors and entrepreneurs in New Energy to solve this issue for you. And I believe that we will, which is why I will continue to fly from Gatwick.

Please go ahead and buy some renewable electricity and replace oil with gas; that’s great and I’m all for it. You can put it in your CSR report and announce it all over the terminals. But, Carbon Neutral? No, thank you.


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Meet the Turquoise team: Desmond Astley-Cooper

Meet the Turquoise team: Desmond Astley-Cooper

Turquoise team members share their thoughts on business issues and give some career insights.

 

Business

What has been the most significant technological development of recent years?

Quantum computing because it has the potential to revolutionise the way computers work and how data is stored and transmitted. In terms of process, it’s Blockchain because it has so many uses that simplify the way of doing business.

What has been the most influential legislative change in recent years?

The creation of the Enterprise Investment Scheme. It encourages people with capital to invest in ground-breaking technology. I’m in favour of keeping the focus tight so that established businesses with ‘normal’ commercial risk are excluded.

How do you see the legislative environment changing through to 2040/2050?

Where to begin? At the minute, there’s an irrationalist political backlash against the liberal consensus somewhat reminiscent of the Middle Ages! Obscurantism is not a great driver of economic growth so I just hope distrust of scientific evidence doesn’t become embedded in our legislation. On a different point, I also feel that the rules around tax havens have to change which is about my only area of agreement with nationalists.

How has the perception of cleantech, energy, environment and efficiency evolved in your view in recent years? What do you envisage for the future of the sector?

Despite the many setbacks, its adoption has become irreversible. I see the insurance industry becoming key, providing the data to drive change. I also hope that miners and oil producers will come to see recycling as the new mining and develop, or commission others to develop, the processes to make it work.

From an investment point of view, what do you see as the key challenges for emerging technologies attracting finance? How do you see those being overcome in the coming decades?

Look at it the other way round: what do most investors prefer? High-yielding bank deposits in my experience! However, there’s a body of people who will take risk in developing technology and they need to be encouraged. After all, huge fortunes can be made if you get it right. But it’s a Darwinian system and only a small number of enterprises will succeed regardless of the underlying technology. So you need a combination of an accommodative tax system which encourages risk taking, entrepreneurial managers and experienced NEDs to guide them.

From a global point of view, what impact (if any) do you think political change is having on the energy, environment and efficiency sectors? How do you think this will change?

I think it’s time to shift to a bottom-up approach rather than just relying on government rules. For example, it’s now dawning on some parents that the fumes from the 4X4s they drive little Johnny or Jane to school in actually aggravates their children’s asthma. And that realisation is a positive thing. Likewise, not taking measures to slow the flow of rainwater off the hills often leads to flooding downstream. It’s time for people to realise that everything they do has a consequence for someone, including themselves!

 

Career

Describe your career journey in less than 100 words

After driving trucks in the Omani desert for a year, I became a journalist with a specialist oil and finance publication based in Cyprus. Four years later, I decided to try my hand at something else and switched to stockbroking in London with de Zoete & Bevan (later BZW) before moving to Robert Fleming (now JP Morgan). Then I spent thirteen years working for a Saudi family in Bahrain before returning to London to manage a venture capital fund on their behalf. I joined Turquoise four years ago.

What are the key ingredients to delivering innovation?

That magic moment when a new idea finds a ready market. But it takes self-belief to raise the funds to exploit that idea and skill to turn it into a business.

What’s been your biggest business challenge?

Finding the right environment to work in.

What is your proudest business moment?

Buying 5% stake of GW Pharmaceutical shortly after it was set up. Although the company has raised a lot of capital since, its market capitalisation is now $3bn.

Who would you like to have dinner with – and why?

Don Corleone. Because he teaches you what business schools don’t: “Hold your friends close and your enemies even closer.”


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Fighting for all technology to be clean

Fighting for all technology to be clean

On February 5th, I had the pleasure of presenting at TEDxOxford outlining my belief that there is no such thing as ‘Cleantech’, arguing that technology which operates efficiently is by its very nature environmentally friendly.

My talk, titled ‘Cleantech Changes Everything’, discussed how there is no such thing as ‘cleantech’, just technology. To be efficient, technology must by its very nature be on the development journey to clean.

The pretext of calling things ‘cleantech’, ‘green’, ‘sustainable’ and ‘smart’ has detracted from the celebration of the considerable technological progress humankind has made. Indeed, labels such as these can act as barriers to the finance sector’s confidence levels for innovative new technologies.

Energy use, environmental impact and resource efficiency have always been significant considerations to the industrial sector. The bar is simply and, quite correctly, being raised.

We are seeing increasing numbers of investment opportunities in industrial technology and this is indicative of a hunger for technology that reduces emissions. It should no longer be about ‘cleantech’; it is about all technology needing to be more efficient to meet the changing demands of the world’s economy.


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‘By means of industry … you will rise higher and higher’

‘By means of industry … you will rise higher and higher’

(Robert Schumann)

At the start of February, I received an invitation from a former colleague, now at the European Commission, inviting me to moderate a panel session at the EU Industry Day. My first reaction was to be flattered at being asked to participate in what was no doubt a long-established fixture on the Brussels calendar. My second, upon realising it was taking place only 4 weeks later, was that I must have been a late replacement for someone who had pulled out. In the event, neither assumption proved correct.

This was, in fact, the first ever EU Industry Day. Surprising, given that the European Union was founded on coal and steel and that manufacturing currently accounts for 24% of GDP and 50 million jobs within the bloc. Whereas it had not previously been felt necessary to look at EU industry as a whole or to consider an overarching industrial policy or strategy, the event had suddenly moved up the priority list from later in the year. Nonetheless, even with only 4 weeks’ notice, the European Commission had no trouble in attracting over 1,000 attendees and a series of high-level speakers.

So why the new focus on EU industry and the urgency in getting together to discuss it? The answer lies in the confluence of China, Trump, Brexit and technological disruption.

It seems that the US (under its new president) and the UK (in preparation for Brexit) have a new-found belief in the merits of government-led industrial strategy. Of course, China has had such a policy for decades and has recently announced plans to create national champions in 10 industrial sectors of the future.

It can be debated whether ‘Made in the US’ is consistent with the realities of complex global supply chains or whether the UK government is capable of devising a coherent strategy after 30 years of mostly leaving it to the free market. However, what is certain is that political focus in the US and UK has turned to how to support domestic industry in an age of globalisation.

Driving this is the impact of new technology. One aspect is the disruption created by new business models in sectors that have experienced little change for years (the Uber effect) as well as automation of work hitherto undertaken by human beings (e.g. robotics and AI). The other is how to capture the benefits of such technology in a way that produces economic growth and new jobs.

EU Industry Day was a small but highly visible response on the part of the European Commission to these challenges, a way of demonstrating that the EU is aware of the issues and is actively seeking to address them. Of course, what was of most interest to me was the discussion around technology and, as moderator of that panel discussion, I had the opportunity to listen to the thoughts of some well-informed participants from the private, public and non-governmental sectors.

Anyone interested in seeing and hearing the proceedings can do so here: http://bit.ly/2mbbjsT. The Advanced Technologies panel discussion and questions can be found 2:31 hrs into the video. The wrap-up of the key points, including some Brexit humour (yes, even in Brussels!), is 8:32 hrs in.

Alternatively, stay tuned for a summary in part 2 of this blog…


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A Breath of Fresh Air?

A Breath of Fresh Air?

A recent study from Aarhus University in Denmark has shown that student performance can be improved by up to 7% when the level of fresh air in the classrooms is increased. Now, what teacher or parent wouldn’t want that? Classrooms often have over 30 students and, if not properly ventilated, levels of CO2 can rise substantially. Poor ventilation can also cause other problems like a build-up of harmful condensation and volatile organic compounds and other chemical gases from carpets and furniture.

In summer, it’s simple – ventilation can be achieved by opening windows. However, in winter this leads to cold draughts and high heating bills. The UK government is well aware of the issues and has published detailed guidance for architects and contractors involved in building new schools. One solution is to use mechanical ventilation, which uses fans to push fresh air around the building. This is generally combined with heat recovery, transferring heat from outgoing stale air to incoming fresh air. But mechanical ventilation uses significant amounts of electricity, unlike the ingenious solution developed by Cambridge-based Breathing Buildings.

Low Carbon Innovation Fund (LCIF), managed by Turquoise, has been investing since 2010 in energy efficient technologies. One of these investments was in Breathing Buildings, a spin-out from the BP Institute at Cambridge University, that pioneered the concept of ‘mixing ventilation’ and is the world leader in controlled, hybrid ventilation systems. These systems efficiently mix warm air from buildings with incoming cold air, reducing electricity bills and operating costs by approximately 50% compared to conventional mechanical ventilation technology.

LCIF led an investment round in Breathing Buildings in 2012 to help fund expansion of the business. Since then, the company has performed very well and we are delighted that Breathing Buildings has recently been acquired by Volution Group plc, a leading player in the ventilation industry. Breathing Buildings will no doubt continue to grow strongly and we are very pleased to have played a role in its success.


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In Retail Energy – More meddling is needed!

In Retail Energy – More meddling is needed!

The CEO’s of major British energy challengers have called for an end to ministerial meddling in the UK energy market. I am acutely aware of the downsides handing back my licence for Open4Energy out of disgust at the Labour ‘Price Freeze’ proposed by Ed Milliband, a Herculean effort in meddling of the worst kind. I also understand the desire for stability for the current energy market participants. However, as Chairman of the Energy Research Partnership committee looking at the utility of 2050 and as an innovator and financier in energy my current concerns are for the long term.

We need much more meddling. The retail energy design is the way meters, distribution companies, wholesale energy, bills, suppliers and customers all interact and it is a relic of a previous era in computing when folk talked about ‘main frames’. Now we need a retail energy design that looks like Alexa, requires the same training as Spotify and is run by tech-centred companies that embrace technology rather than ignore it. Customers would buy energy when they wanted, from whom they wanted, at any time in any amounts, pay for it in advance with a simple bill delivered at the point of sale, with a sprinkle of complete trust and totally open. This can be done now (in fact, it could have been done years back), would be cheaper to run than the current system and no one would need to miss out, we would all be on pre-payment.

So why has this not been actioned? Well, it’s a combination of political uncertainty (no party is in power long enough to take a long term view) and regulators (by their own admission) always playing catch up. Moreover, neither of these two are renowned for being a hive of innovation, rather more for a culture of procrastination.

Such a redesign of the way we buy energy is an essential step as we tackle the increasing pressure on our society and the global community to decarbonise not only power but also heat and transport. The utility of 2050 will need to have such a simple customer-centric system and the earlier we set about designing it the better but currently no one is doing this.

A cross-party, cross-industry group should be set up to start this work now, with a clear mandate to redesign using modern digital designs to meet customer objectives and not to put a patch on a broken and fatally flawed design from 1994 that has long outlasted its welcome.

David Casale
Former CEO and co-founder of Utilita (2003-2009), Fellow of the IMECHE, Associate of Poyry and Chairman of the Energy Research Partnership Steering Committee looking at the #UTILITY2050.


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Trypanophobia Investin’!

Trypanophobia Investin’!

Fear of needles (trypanophobia) is a surprisingly common thing. Approximately 20% of the general population have some fear of injections and about half of those have an acute fear of them! With modern medicine making increased use of blood tests and injectable medications, foregoing medical treatment because of a fear of needles can be dangerous to one’s health. An obvious example of this is when diabetics skip glucose monitoring and insulin injections, putting themselves at serious risk of complications.

As well as increased use of injections, another trend is the development and use of more protein-based drugs, often referred to as “biologics.” These drugs come in all shapes and sizes; some are recombinant human proteins like growth hormone and erythropoietin while others are based on monoclonal antibodies of which Remicade, Rituxan and Erbitux are good examples. In addition, there are viral and bacterial proteins which are used as vaccines in order to elicit a specific immune response from the patient.

What these therapeutic proteins all have in common is that nature did not evolve them for manufacture by pharma companies ex vivo and therefore they have to be carefully stored and administered to maximise their biological activity in the patient. And this is where Oval Medical, which has just been sold to SMC, a US contract manufacturer of single-use devices, comes in.

The company has two lines of business. One is designing auto-injectors for pharma customers to use with whatever drugs they see fit to put in them. And the other is a radical re-design of the epinephrine auto-injector which will compete, in due course, with the device currently being marketed by Mylan. The Epi-pen, as it is known, has attracted adverse publicity because of recent, sizeable price hikes . And these have taken place at a time when Oval has been concentrating on reducing the size of its competing product and making it easier to use.

The company has also made its new range of auto-injectors more effective by containing the forces generated when squeezing the vial’s contents through the narrow needle within the device itself. In this respect, it’s worth noting that some protein drugs can be as viscous as oil! So when a patient is injecting him or herself, he or she does not have to press hard on the plunger with the result that the chances of suffering a painful injection are reduced. Also, the improved needle shielding makes auto-injectors much safer to use than regular syringes by avoiding inadvertent needle stick injuries.

Low Carbon Innovation Fund, managed by Turquoise, was a significant shareholder in Oval Medical. It‘s always satisfying as an investor to have an exit, especially one which enables the investee company to pursue its innovative programs more vigorously due to having more resources at its disposal. The investment was originally made on the basis of carbon reduction arising from saved on trips to the hospital, clinic or doctor’s office by enabling more patients to inject themselves safely at home.

But this ignores some of the other the benefits of better auto-injector design. It can reduce the amount of expensive drug wasted by overfilling and simplifying the construction so that only the sub-assemblies including the needle and vial may need to be changed in future and not the body. Medical waste is becoming an increasing problem and there has been little innovation in this area since Denis Papin invented the steam digester, the forerunner of the autoclave, in 1679.

Although we are saying farewell to Oval Medical as a shareholder, we have high hopes for the company’s progress under its new owners and look forward to the day when its auto-injectors become the new standard for adrenaline and protein-based drug delivery.


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