SIPF’s second wave: innovation and decarbonisation

• 4 years ago (2020-09-11)
• Junior Isles

Renewables 772

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By Deborah Greenwood , Senior Consultant, Bryan Cave Leighton Paisner LLP

UK Research and Innovation (UKRI) has recently announced a second wave of seed funding from its Strength in Places Fund (SIPF). This investment is welcome news for the UK’s R&D sector generally, but in particular for the 17 projects that have been selected in this highly competitive round.

SIPF is the UKRI’s key programme for investing in projects which aim to bolster research and innovation in specific areas of the UK, in order to support local economic development and achieve greater parity with national growth. Consortia comprised of university and research organisations and local leadership and businesses from a wide range of sectors can benefit. SIPF is a cornerstone of the UK government’s commitment to invest up to 3 per cent of GDP in R&D over the longer term and is integral to delivery of the UK’s Industrial Strategy.

The fund has already awarded £186 million to eligible projects and now looks set to expand its programme even further. The projects, which were chosen in July’s process, have been offered a total of £821 000 of seed funding, with each receiving up to £50 000 to develop their full-stage bids. Projects successful at full-bid stage may be awarded an additional £10 to 50 million by UKRI in a process that will start later this year.

Debt and capital for early-stage R&D initiatives are often hard to come by and, against a backdrop of continuing market fallout from the COVID-19 crisis as well as the UK’s impending exit from EU-wide regimes, funding constraints in the UK market may become even more acute in the near term. This is particularly true of the energy sector where R&D funding in the UK sometimes lags behind that offered in other European countries.

Renewables and the low carbon economy, for example, have more recently been the focus of a number of investment initiatives. This has been driven by the UK’s need to decarbonise to meet the aggressive emission reduction targets that it has set for itself. However, notwithstanding that, the amount of funding presently available is still widely acknowledged as being insufficient to support the UK’s climate change ambitions. There remains a significant shortfall between the emission reductions likely to be delivered by government’s current policies and their commitment to achieve net-zero emissions by 2050.

R&D schemes, which develop and promote cutting-edge, low carbon processes and technologies, as well as local expertise and supply chains, can help to address this shortfall. In light of this it is no surprise that a number of the recipients of SIPF’s second wave reflect these broader government policies around decarbonising the UK’s economy.

One such project will be led by the University of Strathclyde in Scotland and involves three geothermal projects. It aims to demonstrate that water from old, flooded mines can be used to produce green, cost effective heating, cooling and heat storage. If successful there is the potential to implement similar projects across Scotland in former mining communities looking to re-purpose their sites.

Such geothermal projects have the potential to contribute upwards of £300 million to local economies. However the selection of this project also reinforces key messaging by UK government that investment in low carbon heat is critical if environmental targets are to be met. Historically the heat sector has not benefited from the same degree of government support for decarbonisation as electricity, and this is reflected in the contribution that each of these sectors makes to national emissions reduction levels. Hopefully initiatives like SIPF can help to redress this balance by funding new technologies and schemes that fast-track the heat sector’s transition.

Two other projects selected reflect another focus area for the UK government’s decarbonisation drive – offshore energy. One successful consortium, led by the University of East Anglia, seeks to capitalise on the key role that the Suffolk and Norfolk coast can play in the UK’s offshore energy industry to potentially attract up to £30 billion for clean energy infrastructure projects around the North Sea. Another, led by Wave Hub Ltd, aims to fast-track the development of large-scale offshore wind farms using floating technology, a first for the UK and essential for regions like Cornwall and Plymouth with their deeper continental shelf.

These projects, if successful, could cement the UK’s reputation as a world leader in the field of offshore energy, and in particular offshore wind. The UK was an early mover in this space, with significant investment in multiple auctions for the construction of very large-scale offshore wind farms and transmission projects dotted around the coast. The UK government has been clear about the important role that offshore wind will play in the UK’s generation mix going forward, and the scale of these two projects will help them to meet these lofty ambitions.

Based on the success of its offshore wind programme, the UK has also become a profitable exporter of offshore wind investment and services with many UK-based companies participating in global procurements such as those launched in Asia and the Americas. However, the Cornwall floating offshore wind accelerator, in particular, may also offer the UK the opportunity to develop and export new technology and manufacturing expertise in an area of the market that is set to grow exponentially.

Programmes like SIPF can be instrumental in bridging the funding gap such challenging projects face at the outset, as well as providing them with a pathway to more significant investment for continued development and up-scaling in future.