Cleantech Investor

First published in Cleantech magazine, January/February 2010. Copyright Cleantech Investor 2010

A ‘Cleantech Grand Prix’ took place in June 2009 – the first electric bike race around the Isle of Man Mountain Circuit during the 2009 Tourist Trophy, or Isle of Man TT, races. Battery powered bikes competed at speeds in excess of 100 mph during the first TTX Grand Prix (TTXGP). Average lap speeds were faster than the average for bikes in the 50cc class. Many bikes taking part were custom designed by specialist teams from universities or niche designers such as Electric Motorsport of the US, which has developed road and race electric motorcycles. As the major bike manufacturers launch electric versions, we can expect them to showcase their bikes at the TTXGP in future years.

The Isle of Man attracts thousands of motor sports fans during the annual two week TT races season. The island, where the roads famously have no speed limit, has a rich motor sports heritage: it is also the home of numerous early stage technology companies. Many Isle of Man-based entrepreneurs are also bikers. In fact, it is sometimes suggested that bikers and entrepreneurs share personality traits (comfortable with high levels of risk, self assured, confident decision makers, value their freedom).

One cleantech company located on the island has a particularly strong biking connection. Bladon Jets, a developer of micro turbine technology, was founded by the Bladon brothers, who previously worked for biking customers including the Honda and Yamaha factory motorcycle racing teams – and the management team are reportedly all bikers, with the exception of the Finance Director. (Perhaps more risk averse personality traits are appropriate for an FD?) Bladon Jets has developed micro turbine technology ideally suited for serial hybrid electric vehicles and other innovative applications.

Of course, there are ample reasons to locate a business in the Isle of Man which have nothing to do with bikes, the country’s favourable tax regime being perhaps the most obvious pull. Financial expertise has attracted a number of carbon trading companies, operating in both the regulated and voluntary carbon markets, to base their businesses on the island. The Isle of Man is considered to be a good place for companies to set up if they are planning to float on AIM, boasting more AIM flotations to date than any jurisdiction other than the UK.

The tax advantages are particularly attractive for technology companies which have valuable intellectual property (IP) – as evidenced by a tradition of high tech industry on the island, in fields such as aerospace as well as IT. IP is a capital asset, which incurs capital gains tax in most jurisdictions when sold or transferred. The registered office of a company and its IP can be a factor in determining eligibility for grants or funding, so it makes sense for an early stage technology company to register its IP somewhere where there is no threat that the authorities will demand a share of the value built up if it were to be moved. No capital gains tax is levied on the Isle of Man, which implies potentially significantly higher returns on investment in the future for any company which had the foresight to register on the Isle of Man at the early stages, before exploiting its IP worldwide.

Corporation tax is also currently zero rated, enhancing an investor’s returns on an Isle of Man business. And the absence of capital gains tax works to the advantage of potential angel-stage investors domiciled on the island. Although there is as yet no formal business angel network, the Isle of Man Government is extremely proactive with respect to help for early stage companies. The Chamber of Commerce provides active forums for networking and connections, making it easy to access the decision-makers in the Isle of Man Government, and is currently setting up a cleantech forum. In addition the Isle of Man Business Innovation Centre (BIC), established in 2008, provides a package of services to help incubate early stage companies. Bladon Jets is one of a cluster of more than 20 businesses under its wing, on the ‘Get Going’ programme. Many of these businesses benefit from office space at the BIC’s building near the Isle of Man Airport.

Kate Lord of the BIC points out that the Isle of Man is “not an island when it comes to business incubation”. The BIC is closely connected to the US National Business Incubation Network and has strong links with Coventry University – which, coincidentally, has expertise in the cleantech niche of electric vehicles.

In terms of its domestic energy consumption, the Isle of Man has achieved a dramatic de-coupling of its carbon footprint from economic growth. From 1990 to 2006 GNP increased 230% for just a 3% increase in CO₂ emissions. The Isle of Man also boasts much cleaner grid electricity than the UK with CO₂ emissions running at around 430g per kW hour, compared to about 540g per kW hour in the UK. This feat has been achieved in large part by the construction of an 84MW capacity combined cycle gas turbine (CCGT) fired power station in Douglas. The gas is supplied from a link to the high pressure subsea gas pipeline which runs from Scotland to Ireland. The gas fired power station typically contributes up to 95% of the electricity generated on the island (the total is around 500 million kW hours annually), with a proportion of the waste heat being used by the adjacent National Sports Centre. 

Other power sources on the island include two renewable sources: an energy from waste (EfW) plant and a small hydro electricity plant (combined capacity of between 8% and 9%). The EfW plant is described by Ashton Lewis, Chief Executive of the Manx Electricity Authority (MEA), as a “very successful investment”. The MEA plans to build a second small hydro plant.

In addition, nine diesel engines (which were used before the gas fired power station was constructed) are also available as back-up. However, back-up is rarely required: the Isle of Man has been a net exporter of electricity to the UK since the CCGT plant was constructed, typically exporting around 100 million kW hours annually, or 20% of the electricity generated.

The Isle of Man is not part of the EU and is not beholden to the EU ETS; consequently there is no renewables target obligation on the MEA. However, the Government has signed up to the Kyoto protocol and the MEA recognises the prospective opportunities for exporting ‘clean’ power, and there is significant potential for the generation of more renewable energy on and around the island. In contrast to mainland UK, or islands such as the Isle of Wight, where the Crown Estate grants leases for offshore renewable energy exploitation, the Isle of Man has sovereignty over its own waters. The territory stretches for twelve miles offshore – and contains some of the best resources of offshore wind and tidal energy to be found in the UK. Harnessing this could mean the MEA can export even greater volumes of power in the future. The Isle of Man is closely involved with the British Irish Council work stream on marine renewable energy and is regarded as a good location for trials of new technologies. Dr Ken Milne, Senior Manager for Energy Policy at the Department of Trade and Industry, points out that the Government’s ability to control both the generation of electricity and the sale of electricity facilitates decision-making on tests and trials of new technologies. The island’s own network is able to take up to 20MW of wind capacity without reinforcement.

Alongside the switch to gas generation, the improved carbon footprint of the Isle of Man population can be attributed to a programme of energy effi ciency. The DTI has implemented targets for energy savings within government and industry. Dr Milne points to the ‘Energy Champions’ concept introduced by DTI in 2006, which has achieved energy savings of up to 40% by offering businesses free training and energy surveys . In addition, a tried and tested methodology for improving energy efficiency in school buildings has been developed and has achieved impressive results. This methodology is being shared with the UK Department of Energy and Climate Change and may be rolled out in UK schools.

The MEA is also innovating in the fields of energy monitoring, flexible tariffs, smart meters and the smart grid. Energy monitors (supplied by Current Cost) are promoted for domestic use; and the authority’s ‘Energy Eye’ services offer industrial customers half hour Venture investment load profiles through remote monitoring technology. A seven hour off-peak tariff for electric vehicle charging has been launched recently, the first stage in a programme aimed at shifting demand to off-peak times.

The Isle of Man’s unique topography means that the future choice of nationwide smart grid technology will not be taken lightly. Equally, however, the diverse conditions make it an ideal testing ground for new technologies. The MEA is currently in discussions with Hull University about rolling out smart grid technology trials. Reiterating Dr Milne’s point that the MEA is vertically integrated, Mr Lewis emphasises that the MEA system is available as a test bed for companies with appropriate technologies. He notes that, while the MEA is a quango, it is not constrained by a regulator and can move quickly and easily.

The MEA is also open to trials of other types of technologies. In the past, the authority has trialled prototype diesel engines, and Lewis comments that the “door is wide open” to companies wishing to undertake trials of innovative technological developments on the MEA’s diesel generators. He cites technologies to convert diesel engines to gas, or trials of technologies to improve fuel consumption, reduce waste gases or capture carbon emissions, as possible uses for the MEA’s backup power source.

Sticking with the theme of diesel engines, Brian Hammond, Business Development Manager in the Energy & Climate Change Group at the DTI, suggests that the island may be in a position to offer test bed opportunities for environmental technologies for marine engines. Ship management is one of the industry sectors which has been encouraged by the Government in recent years – and the island has built a significant marine register business.

On an island with such a strong association with motoring, it’s no surprise to learn that the DTI is also promoting fuel efficiency for vehicle fleets. A programme for remapping has been successful in achieving savings of between 10% and 14% in police vehicles. According to Mr. Hammond, the programme is being rolled out in other Government vehicles and the DTI plans to make the technology available to the private sector.

But the Isle of Man is far from being all about power and energy efficiency. Numerous cleantech businesses thrive on the Island and Brian Hammond believes there is the potential for many more. “Already we have aerospace, carbon trading and commercial space projects and have received interest from tidal and wind power generation businesses. Add in fuel modification technologies and software driven ‘smart metering’ solutions and we have the basis of a significant clean tech cluster.”

Many years ago the Isle of Man recognised the importance that telecoms would play in delivering future business opportunities. The island now sits at what Andrew Cairns of data centre operator, Domicilium, describes as “a great big junction box in the middle of the Irish Sea” – referring to the two self-healing fibre-optic rings and a high capacity spur to the UK, that ensure massive redundancy and high bandwidth capability for the islands' many telecoms based businesses.

When this telecoms capacity is coupled with a reliable, state of the art power generation facility, it’s no surprise that a thriving data centre industry has developed here. Data centre clients include both local Isle of Man users and those from further afield. The types of businesses which are based on the island tend to be users of data centre services: the Isle of Man has a well established base of financial industry companies, and over the past decade or more it has become home to an important cluster of online media and gaming companies.

A further advantage for a data centre on the Isle of Man is that the energy consumption levels can be less than for a data centre located elsewhere. The island is cooler than the mainland UK in the summer and warmer in the winter and this temperate climate can be used beneficially to generate ‘free cooling’. Domicilium, which manages a data centre, (see profile) has made good use of this and other energy efficient technologies and has won awards for its energy effi cient approach.

The Isle of Man Government is taking a proactive role, working closely with the private sector to both roll out and test bed clean technologies, and encouraging cleantech companies to locate on the island. The tax advantages may be especially attractive for those companies with potentially valuable IP. But the lifestyle advantages should not be overlooked: the freedom to ride an electric bike with no speed restrictions may just prove to be the carrot which attracts growing numbers of cleantech entrepreneurs to relocate to the Isle of Man.

See also: The Domicilium Data Centre