Evaluation of Invest NI Sustainable Productivity Programme

Transcription

1 Evaluation of Invest NI Sustainable Productivity Programme December 2014

2 Contents Evaluation of Invest NI Sustainable Productivity Programme Executive Summary... i 1. Introduction and methodology Strategic context and rationale Programme overview Performance Business feedback and impact Economic impact and value-for-money Comparator programmes Conclusions and recommendations Annex A: Consultees... Error! Bookmark not defined. Annex B: Questionnaire... Error! Bookmark not defined. Annex C: Sampling approach... Error! Bookmark not defined. Annex D: Full business survey results... Error! Bookmark not defined. Contact: John Nolan Tel: JNolan@sqw.co.uk Approved by: Richard Hindle Date: 4/12/14 Director

3 Executive Summary Evaluation of Invest NI Sustainable Productivity Programme 1. In June 2014, SQW was commissioned by Invest Northern Ireland (Invest NI, or INI) to undertake an evaluation of the Sustainable Productivity Programme (SPP) covering the period 1st April 2012 to 31st March The evaluation involved: a desk review of background documentation and monitoring data; structured discussions with 28 stakeholders; a business survey of 170 firms involved in SPP; and short interviews with 25 non-beneficiary firms. Sustainable Productivity Programme (SPP) 2. The overarching aim of the programme is to improve the productivity, competitiveness and sustainability of businesses in Northern Ireland through the identification and realisation of cost saving opportunities in the use of materials, water and energy; and through the promotion of business opportunities in sustainable energy supply chains. 3. The SPP sets out to increase regional productivity by: helping business to implement resource efficiency projects that result in cost savings (or increased sales) of 22.5 million equivalent to 0.08% of annual Northern Ireland GVA per annum by 2015 helping sustainable energy businesses to achieve growth in turnover of 16.5 million over the period and in doing so, contribute to the growth of the Northern Ireland sustainable energy sector to 8.9% of NI GVA by The SPP is delivered by the INI Sustainable Development team and two External Delivery Organisations (EDOs), the Carbon Trust and International Synergies Limited. There is also a framework of consultants who deliver support on behalf of INI. During the evaluation period, the cost of the Programme has been just under 8m. This includes support from the European Regional Development Fund (ERDF) of 260,000 to part-fund the Industrial Symbiosis part of the Programme. Rationale 5. SPP fits well with the aims and objectives of INI for improving business productivity and competitiveness. Policy and strategies in NI, UK and across the EU are increasingly focusing on the need to reduce the environmental impact of businesses at the same time as making more efficient use of resources which thereby improves business performance. The rationale for the Programme was based around market failures (e.g. externalities and imperfect information) which prevent businesses from implementing energy and resource efficiency projects and the barriers to developing the sustainable energy sector. 6. Based on the evaluation evidence, these market failures still exist and the rationale for SPP remains valid. Although there is increasing awareness of the issues around energy and resource efficiency (not least because high and increasing energy costs have a i

4 disproportionate effect on the Northern Ireland economy), businesses continue to require support in identifying and implementing improvements. Inputs and activities 7. SPP has been delivered through four Key Areas: an Energy Efficiency Loan Fund managed by the Carbon Trust; a Resource Efficiency Capital Grant administered by INI; Industrial Symbiosis support delivered by International Synergies Ltd; and Project Management Support delivered by INI Technical Advisors with external consultants brought in to undertake Resource Efficiency Audits and Technical Consultancy projects. The INI Sustainable Development team which manages the programme also has a role in promoting and developing the sustainable energy sector with a particular focus on the marine (up to March 2014) and bioenergy sub-sectors. 8. The approved annual SPP budget over the last two years has been around 3.5m. The programme expenditure over the two years has been around 1m above this budget. However, this is because most of the SPP s budgeted direct financial support to business was allocated to the first two years of the three-year Programme. By the end of the three years, SPP expenditure will be in line with the approved budget. 9. Overall, the evaluation has found the systems and processes in place for managing and monitoring SPP to be robust, fit-for-purpose and effective. There are regular meetings between internal and external delivery partners and ongoing reporting to INI management. In addition, the mixed delivery model (in-house and external delivery) and programme management has been working well. An advantage of the model has been the in-built capacity for reflection at the centre on progress in delivery, and on what is being achieved in each area. Performance 10. The evidence from the monitoring data and stakeholder feedback indicates that the Energy Efficiency Loan Fund has been an important part of SPP. It is helping businesses to take forward energy efficiency projects and is proving to be very popular. It would appear that the links between the loan scheme and other parts of the Programme are reasonably strong and there have been referrals both ways between the Carbon Trust and INI. 11. The evidence also highlights that the availability of the Resource Efficiency Capital Grants has proved to be an important and popular element of the Programme. Especially in the context of tightening public sector resources and reduction in funding for business, the availability of this grant was welcomed by INI client executives and other delivery stakeholders and has been an important part of the programme. 12. According to the monitoring data, the Industrial Symbiosis support is generally performing well. However, it would appear that many stakeholders do not fully understand the role being played by this part of the Programme and as a result it is not fully integrated with the rest of SPP. The circular economy is a growing policy area and the development of these types of supply chain relationships should be a part of future resource efficiency ii

5 support. However, there needs to be a rethink on the branding of the support and its fit with the rest of the support package. 13. The Project Management Support provided by the INI Technical Advisors and the consultancy support provided through the Resource Efficiency Audits and Technical Consultancy projects has been successful in delivering support to a large number of NI businesses (nearly 800 businesses in total, with this engagement ranging from one meeting to five days consultancy support). The interaction between TAs and consultants has worked well and a range of specialist expertise has been available to businesses. 14. The SPP and work of the Sustainable Development team has clearly contributed to growing the sustainable energy sector (although measuring the contribution is challenging on the information currently available). Direct support to businesses to develop and implement resource and energy efficiency projects generates demand for NI suppliers. Information from the Carbon Trust and the business survey, suggests that around 80-90% of the energy efficiency loan funding is spent in Northern Ireland. The wider promotion of the sector will also contribute and has been welcomed by stakeholders. 15. SPP has been successful in meeting its business impact targets with slightly lower costs than anticipated in the original economic appraisal. Although SPP is managed as a programme, the extent to which businesses are engaged in more than one Key Area is fairly low. However, drawing and reflecting on the stakeholder interviews, it is clear that SPP is less of an escalator programme (in which businesses progress through a series of elements) than a bundle of themed interventions. The logic for this bundle is about a common theme and internal coherence for management; SPP is not promoted as such to the business community. 16. As it addresses business issues around resource and energy efficiency, SPP has a distinctive role within the INI portfolio. While other innovation-related INI projects also encourage the development of new products and processes, SPP s distinctive focus encourages businesses to become more efficient and productive through cutting costs and making environmental improvements, while leading into and linking with other business development areas such as management skills, exporting and supply chain development. SPP is therefore additional to, and complements, INI s other products. 17. The Sustainable Development team works closely with other organisations to ensure INI support is well aligned strategically with other initiatives in resource and energy efficiency. Although other programmes operate in this field in Northern Ireland, considerable efforts are made to coordinate and avoid overlap, and there is no evidence of confusion among businesses. Business and economic impact 18. The level of client satisfaction is very high, as evident in the business survey undertaken as part of the evaluation. Across all four Key Areas, around 80% of businesses involved in the Programme were found to be very or extremely satisfied. And 96% of all respondents stated that they would recommend the support to others. Many firms were able to identify cost reductions or positive impacts on sales, jobs or profits. Additional future impacts were iii

6 anticipated; in some cases, the effects of the support provided will take another year or so to come through. 19. The evidence from the business survey suggests a level of deadweight associated with SPP of approximately 40%, which is reasonable for this type of intervention. Substitution for other business development that would have taken place in participating firms was marginal, and displacement and leakage were not significant at the level of the Programme. 20. Over the two years, , it is estimated that SPP will have generated the following net impacts: 58.2m in cost savings for businesses; 211m in additional sales and 159.3m in safeguarded sales; 41.3m in additional profits and 13.9m additional spending on salaries. The additional profits and spending on salaries approximate to Gross Value Added, the main measure of economic output, and the cumulative total net GVA generated by the Programme is therefore 55.2m. These estimates of economic benefit are based on relatively conservative assumptions, which follow relevant government guidance. 21. Over the period to end 2019/20, the return (economic impact ratio) on the c. 8m invested in SPP over the two years, is estimated at 6.4:1. This type of return is reasonably high especially considering the nature of the Programme (mainly focussed on cutting business costs). 22. The main areas where the support has had a positive impact on businesses, both to date and expected in the future, are in improving their understanding of resource efficiency/sustainable development and improving their environmental performance. Including future impacts, two-thirds of businesses supported by SPP expect that the support will help them to make improvements benefiting the environment. Although not quantified in this study, this is an important aspect of the Programme and one which differentiates it from other INI products. 23. The wider effects of the Programme in growing the sustainable energy sector are harder to assess; available evidence points to a rapid growth during the SPP delivery period, and the focus on this area, and the specific resource provided by the Programme is likely to have contributed. But other public involvement, including direct assistance under SFA, will also have played a part, and the main factor may have been the broader, if patchy, recovery from recession offering a range of new business opportunities. Addressing the evaluation objectives Extent to which the principal objectives and targets of the intervention have been met 24. In its first two years, SPP generated net cost savings of around 58m which is more than double the target for the full three years of the Programme. The sustainable energy sector has grown by 23m over one year, again well over the three-year target of 16m, although it is not clear how much of this growth is attributable to the support provided by the Sustainable Development team and how much is attributable to other factors. Based on the available evidence, SPP is on target to exceed its headline objectives and targets. iv

7 Does the intervention represent good Value for Money (VFM) and appropriate use of public funds? 25. Yes, with respect to each of the three elements to Value for Money. In terms of cost (economy), some expenditure has been brought forward, but overall SPP has been delivered for less than was originally anticipated. The Programme has been efficient and effective in its use of public funds, is delivering well against targets, and generating a return of more than 6:1 in GVA for the Northern Ireland economy. Value of moving from a suite of individual programmes to the current consolidated SPP 26. SPP has provided a more coordinated and strategic approach to delivering this type of energy and resource efficiency support to businesses. Under the programme delivery model, INI Technical Advisors take a holistic approach to assessing the support needs across all areas of the Programme and broker the relevant support. This independent brokering role is an important difference from the previous model of support, and we concur with many stakeholders in seeing it as adding value. Recommendations 27. The headline findings from the evaluation on SPP s role and operations are strongly positive and it is recommended that the Programme continues beyond March To help shape thinking on future delivery, the following recommendations are suggested. R1: Develop a more holistic approach to programme management - the Sustainable Development team regularly meets with the EDOs bilaterally, but it is recommended that there should be more events bringing together all partners and consultants to review the performance of the Programme as a whole. R2: Retain the existing team of Technical Advisors - assuming that a similar type of Programme continues beyond the current approval up to March 2015, at least the same level of staffing will be required in the future. If INI increases its external promotion of the Programme (as per recommendation 4), then it is likely that either a more focused approach will need to be applied or additional resource will be required. These issues should be explored in the Economic Appraisal. R3: Retain in-house capacity for strategic management and review, to ensure the potential to respond quickly and flexibly to new emerging needs and opportunities within a fastmoving UK and European policy context. R4: Develop a more distinctive form of branding for increasing energy and resource efficiency and continue to promote examples of SPP support through use of case studies although this Programme can only support a proportion of the NI business base, the businesses taking forward energy and resource efficiency projects can act as role models for other businesses. Linked to this, there should be more effective promotion of the programme internally within INI and to external partners. R5: Move the focus of the Programme towards supporting more larger companies. INI s strategic focus is on larger firms, the growth of which will drive productivity in the Northern v

8 Ireland economy. There is scope to involve more of INI s account-managed companies in the Programme. A new threshold of spending above 40-50k each year on energy and materials could be introduced in most cases this higher threshold will result in INI supporting firms generating higher levels of turnover and GVA. R6: Continue to provide an energy efficiency loan fund this funding was found to be a core part of the SPP. The demand is clearly there and it is enabling energy projects to be implemented during a time when businesses are still finding it difficult to access business finance. R7: Continue to provide a resource efficiency grant - although some stakeholders suggested that the loan scheme could be broadened (to cover both energy and resource efficiency projects), it is recommended that there should continue to be a separate grant element for resource efficiency projects, as there is a specific market failure in this area, relating to a lack of funding models and limited availability of finance. R8: Continue to include Industrial Symbiosis support in SPP but review the branding of the support to promote wider participation and confirm its fit with the other parts of the support package. Improving and clarifying the terminology would be an important start R9: Combine Resource Efficiency Audits (if required by a company) with Technical Consultancy projects in order to provide a more integrated service, and reduce the risk of a company dealing with two different consultants at the entry stage. R10: Continue with the consultancy framework model to help deliver Technical Consultancy projects. Any future framework should be consciously designed to include a balance of consultants with a wide range of expertise and those with more specialist skills expanding the current number of consultants to include additional expertise is recommended. The pipeline of project briefs sent to the consultants on the framework should be managed to ensure a good response to briefs, and to allocate consultants appropriately to projects. R11: Alongside involving more account-managed companies, provide support where needed to implement projects. The impact of the Programme depends on companies being able to take forward projects. R12: Explore how multiple assistances can be partly-funded rather than fully funded. This will help to relieve some of the resource constraints for helping businesses to implement projects and will be in line with the INI Technical Development Incentive (TDI) Scheme. R13: Review the use of ongoing business surveys although the NISRA surveys provide the Sustainable Development team with important ongoing feedback on the anticipated savings, it is not possible to capture the achieved impact of the projects. R14: Put in place a SMART objective and linked performance measure for the growth of the wider sustainable energy sector, so that the contribution of the Sustainable Development team can be more accurately captured. R15: Ensure companies are fully aware of the requirement to participate in future evaluation studies, and that the central monitoring database has detailed information on the contacts involved in different parts of the Programme. vi

9 1. Introduction and methodology Evaluation of Invest NI Sustainable Productivity Programme The Sustainable Productivity Programme 1.1 In June 2014, SQW was commissioned by Invest Northern Ireland (Invest NI, or INI) to undertake an evaluation of the Sustainable Productivity Programme (SPP) covering the period 1st April 2012 to 31st March The overarching aim of the programme is to improve the productivity, competitiveness and sustainability of businesses in Northern Ireland through the identification and realisation of cost saving opportunities in the use of materials, water and energy; and through the promotion of business opportunities in sustainable energy supply chains. 1.3 The SPP sets out to increase regional productivity by: helping business to implement resource efficiency projects that result in cost savings (or increased sales) of 22.5 million equivalent to 0.08% of annual Northern Ireland GVA per annum by 2015 helping sustainable energy businesses to achieve growth in turnover of 16.5 million over the period and in doing so, contribute to the growth of the Northern Ireland sustainable energy sector to 8.9% of NI GVA by The SPP is delivered by the INI Sustainable Development team and two External Delivery Organisations (EDOs), the Carbon Trust and International Synergies Limited. There is also a framework of consultants who deliver support on behalf of INI. During the evaluation period, the cost of the Programme has been just under 8m. This includes support from the European Regional Development Fund (ERDF) of 260,000 to part-fund the Industrial Symbiosis part of the Programme. 1.5 The support provided through SPP can be categorised as follows: Key Area A: Energy Efficiency Loan Fund delivered by the Carbon Trust Key Area B: Resource Efficiency Capital Grant grants provided by the INI Sustainable Development team Key Area C: Industrial Symbiosis services delivered by International Synergies Ltd Key Area D: Project management support provided by the INI Sustainable Development team drawing in support from consultants to undertake Resource Efficiency Audits and Technical Consultancy projects. Study objectives 1.6 The study objectives as set out in the consultants brief were to: determine the extent to which the principal objectives and targets of the intervention have been met 1

10 determine the extent to which the intervention represents good Value For Money (VFM) and appropriate use of public funds assess the value of any impact of moving from a suite of individual programmes to the current consolidated SPP. 1.7 The timeframe for the evaluation was the two full years of the Programme, 2012/13 and 2013/14. Approach 1.8 The logic chain we developed for SPP (see Figure 1-1 below) provides a framework for the evaluation. We start by assessing the rationale and aims of the Programme before moving on to reviewing the inputs (costs and resources) and activities which have taken place under the four project areas. We then assess the performance of the SPP in terms of outputs, outcomes and impacts and to what extent it has met its original objectives. Methodology 1.9 The study was carried out between July and October 2014 and involved the following tasks: Desk review of background documentation and programme monitoring data this included the various approval papers, economic appraisal, relevant strategies and the monitoring data from the four areas of the Programme Desk review of other similar initiatives reviewing the available evidence on policies and interventions in other countries to tease out findings that are relevant to the SPP Structured discussions with INI staff, delivery organisations and other stakeholders we consulted with 28 individuals from INI, the Carbon Trust, International Synergies Ltd and other stakeholders; also with other framework consultants, and the administration team. The list of consultees (included as Annex A) was agreed with the client and we are grateful for the assistance provided to arrange these consultations Meetings with the INI Steering Group set up for this evaluation, including early dialogue on project design, and an interim presentation of findings and discussion of progress and implications Telephone survey of business beneficiaries our research partner Qa Research carried out a survey of 170 Programme beneficiaries Telephone survey of non-beneficiaries Qa also undertook a short survey of 25 nonbeneficiaries these were either businesses who had been unsuccessful in applying for loan or grant funding within the Programme or were INI client companies who had attended a briefing event on the SPP but had not received any support. 2

11 Figure 1-1: SPP logic model Rationale and context (Section 2) The context for the Programme is based on lower levels of productivity in NI compared to other parts of the UK, the need to support businesses to become more resource efficient, and the need to support the growth of the sustainable energy sector. The market failures for business resource efficiency are around: Externalities - full negative impacts of carbon emissions are not experienced by businesses and similarly all of the benefits of addressing carbon emissions will not accrue to businesses Imperfect information there is a lack of information, awareness and expertise about the potential benefits and opportunities which hold back investment Investment is also held back by competing priorities for investment within businesses and hidden costs associated with implementing energy efficiency In terms of developing the sustainable energy sector, the market failures are around lack of capital, difficulty in securing finance and the small scale of the NI sustainable energy sector Aims and objectives (Section 3) The SPP sets out to increase regional productivity by: helping business to implement resource efficiency projects that result in cost savings (or increased sales) of 22.5 million equivalent to 0.08% of annual Northern Ireland GVA per annum by 2015; helping sustainable energy businesses to achieve growth in turnover of 16.5 million over the period and in doing so, contribute to the growth of the Northern Ireland sustainable energy sector to 8.9% of NI GVA by Evaluation of Invest NI Sustainable Productivity Programme Impacts (Sections 5&6) Cost reductions 58m Increased turnover 211m Safeguarded turnover 159m Increased profits 41m Increased spending on salaries 14m GVA 55m Inputs (Section 3) 3.65m 2012/13 4.3m 2013/14 260k ERDF 14 core staff Activities (Section 3) Key Area A: Energy Efficiency Loan Fund Key Area B: Resource Efficiency Capital Grant Key Area C: Industrial Symbiosis support Key Area D: Project management support Programme marketing Performance monitoring Outputs (Section 4) Number of loans committed Number of companies supported No. of audits completed Identified cost savings ( ) Identified annual CO2 savings (tco2e) Identified annual energy savings (KwH) Leveraged co-funding Outcomes (Section 4) Energy cost savings implemented ( m) Carbon savings (ktco2 pa) Jobs created/safeguarded Additional sales implemented Lifetime implemented savings ( m) Lifetime implemented carbon savings (MtCO2) 3

12 Report structure and status 1.10 This evaluation report is structured as follows: Strategic context and rationale summarises the NI, UK and EU strategies which provide the context for the Programme and discusses the extent to which the rationale for intervention remains valid Programme overview sets out the Programme aims and provides costs compared to the original budget. It also provides a summary overview of the different project areas, the delivery model, the marketing and application process, and the risks involved in the Programme Performance provides a description of the four project areas, summarising the key monitoring data and feedback from stakeholder consultations. We also summarise SPP s fit with other business initiatives Business feedback and impact describes the feedback from the beneficiary survey on motivations, satisfaction levels and effects of the support on their business. We also summarise the main feedback from the non-beneficiary survey Economic impact and value for money uses the quantifiable impact from the business survey to estimate the gross and net economic impact and Net Present Value (NPV) of the Programme Wider learning provides learning from other similar types of interventions Conclusions and recommendations pulls together our main findings from the evaluation study The following Annexes are also included: Annex A List of consultees Annex B Business questionnaire Annex C Sampling approach Annex D Full business survey results. 1

13 2. Strategic context and rationale Evaluation of Invest NI Sustainable Productivity Programme 2.1 In this section we examine the strategic context in which the SPP was developed and has been delivered. We also discuss the rationale for the intervention and whether this remains valid. Questions of where and how the Programme fits with or overlaps other business support provided in Northern Ireland are considered as part of the Programme Overview, in section 3, which follows. Strategic context 2.2 The SPP has been delivered in the context of increasing focus and awareness among policymakers about the need to make businesses more productive (which includes reducing the cost of inputs) and at the same time encouraging businesses to be more sustainable in terms of how they use energy and other resources. The Programme s fit with Northern Ireland strategies is summarised in Table 2-1, below. Table 2-1: SPP s fits with other NI strategies Strategy/policy document INI Corporate Plan SPP strategic fit and relevance The Plan focuses on the key drivers of economic growth as recognised in the Northern Ireland Executive s Programme for Government. One of these is Stimulating innovation and creativity and this includes encouraging business efficiency Another driver is Economic infrastructure which includes energy infrastructure this is relevant in the context of developing the sustainable energy sector The Plan also states that support will concentrate on building those sectors where Northern Ireland has existing capability or has the potential to develop it, including the creative industries, renewable and sustainable development DETI Corporate Plan Northern Ireland Economic Strategy 2012 Northern Ireland Sustainable Development Strategy 2010 This highlights DETI s goal to promote the growth of a competitive and export-led economy. Through rebalancing the economy towards highervalue added private sector activity and rebuilding to address the impact of the global downturn, the Plan s aim is to improve the economic competitiveness of the Northern Ireland economy since SPP was set up to help businesses to reduce energy and resource costs this will therefore contribute to improved competitiveness The Strategy s overarching goal is to improve the economic competitiveness of the Northern Ireland economy. It sets out the key drivers of economic growth with two being most relevant to SPP Stimulating innovation and creativity and Economic infrastructure (as discussed above) The Strategy s first objective is Building a dynamic, innovative economy that delivers the prosperity required to tackle disadvantage and lift communities out of poverty. Under this objective, the aim is to increase the number of jobs in the low carbon economy; increase the energy efficiency and resource efficiency of businesses; and ensure the provision of learning and skills responds to the needs of the low carbon economy. Another relevant objective is Ensuring reliable, affordable and sustainable energy provision and reducing our carbon footprint through reducing greenhouse gases and increasing the proportion of energy from renewable sources. 2

14 Strategy/policy document Northern Ireland Waste Management Strategy - Delivering Resource Efficiency 2013 SPP strategic fit and relevance This updated Strategy sets out the waste policy framework not just in terms of waste management but also prevention and highlights that there needs to be greater focus on resource efficiency through re-use and recycling. The Strategy recognises the role of WRAP 1 and INI in building supply chain confidence and working closely with companies to support the development of sustainable markets for recyclable materials. It also profiles the SPP as one of the main mechanisms for addressing the issue of waste and resource efficiency. Source: SQW desk review 2.3 In addition, the Programme contributes to the policy aims set out in various UK and EU strategies. Some of the main strategies are listed below. In 2008, the UK passed the Climate Change Act which aims to reduce the UK s greenhouse gas emissions by at least 80% (from the 1990 baseline) by The EU has also committed to cutting its emissions to 20% below 1990 levels by Table 2-2: SPP s fits with UK/ EU strategies Strategy/policy document Enabling the Transition to a Green Economy: Government and business working together 2011 The Plan for Growth 2011 The Energy Efficiency Strategy: The Energy Efficiency Opportunity in the UK 2013 Europe 2020: Europe s Growth Strategy SPP strategic fit and relevance This document sets out the UK Government s commitment to developing the green economy and ensuring sustainable economic growth. The strategy highlights the challenges and opportunities for businesses. It highlights the market opportunities from improved energy- and resource-efficiency, delivering major cost savings and increased competitiveness. This will encourage businesses to innovate and develop new technologies, processes and business models across supply chains. The Plan is based around four ambitions: to create the most competitive tax system in the G20; to make the UK one of the best places in Europe to start, finance and grow a business; to encourage investment and exports as a route to a more balanced economy; and to create a more educated workforce that is the most flexible in Europe. One of the Growth Review measures is the low carbon economy. The Plan sets out the Government support for developing new markets in green goods and services such as the Green Deal, the Renewable Heat Incentive, and feed-in-tariffs for micro-generation. The Strategy sets out the benefits of energy efficiency in terms of boosting growth and creating jobs in our economy; saving households and businesses money on fuel bills; creating a more sustainable and secure energy system; delivering cost effectively against our climate change goals; and reducing energy imports. Focusing on the economic benefits, it is highlighted that installing energy efficiency measures often generates demand for local labour, encourages wider innovation, and overall can bolster productivity, increasing growth and reducing inflation. The Strategy has objectives on employment, innovation, education, social inclusion and climate/energy to be reached by The most relevant to SPP are; limiting greenhouse gas emissions by 20 % or even 30 % compared to 1990 levels, creating 20 % of our energy needs from renewables and increasing our energy efficiency by 20% 1 Waste and Resources Action Programme 3

15 Strategy/policy document SPP strategic fit and relevance One of the flagship initiatives is Resource-efficient Europe which aims to help decouple economic growth from the use of resources. It supports the shift towards a low-carbon economy, an increased use of renewable energy sources, the development of green technologies and a modernised transport sector, and promotes energy efficiency. Roadmap to a Resource Efficient Europe 2011 Energy Efficiency Plan 2011 This document sets out the potential to increase competitiveness, growth and jobs through cost savings from improved efficiency, commercialisation of innovations and better management of resources over their whole life cycle. The Plan details the Commission s proposals to encourage energy efficiency measures across Member States. It highlights existing initiatives for the manufacturing sector (which accounts for 20% of the EU's primary energy consumption) such as the Emissions Trading Scheme and the Energy Taxation Directive. For SMEs, the Commission encourages Member States to provide information (for e.g. legislative requirements, criteria for subsidies to upgrade machinery, availability of training on energy management and of energy experts) and to develop appropriate incentives (such as tax rebates, financing for energy efficiency investments, or funding for energy audits). This is directly relevant to what has been delivered through SPP by INI. Source: SQW desk review 2.4 The SPP also directly addresses the aims not only in Northern Ireland but across the UK and EU of improving the environmental performance of businesses and making the transition to what is described as the circular economy. This is delivered through different parts of the Programme but particularly through the Industrial Symbiosis support in Key Area C. 2.5 Traditionally, there has been a linear take-make-dispose approach towards the use of raw materials. The circular economy involves retaining materials in productive use as long as possible. The policy context around, and understanding of, the concept is developing quickly. For example, building on its Resource-efficient Europe initiative, the EU recently published its strategy for developing the circular economy 2. Support programmes like the SPP are needed to help businesses make the transition to this new approach to managing resources. Key findings The SPP remains central to the aims of DETI and INI in terms of improving the competitiveness of Northern Ireland firms and growing the sustainable energy sector. It also contributes to policy aims as set out in various UK and EU strategies and legislation including the 2008 UK Climate Change Act and the EU s commitment to cutting emissions to 20% below 1990 levels by SPP directly addresses the aims, not only in Northern Ireland but across the UK and EU, of improving the environmental performance of businesses and making the transition to what is described as the circular economy. 2 European Commission (2014), Towards a circular economy: A zero waste programme for Europe 4

16 Rationale Evaluation of Invest NI Sustainable Productivity Programme 2.6 An economic appraisal was undertaken in 2011 for the SPP and this provides the background to the setting up of the Programme. The drivers and rationale for the SPP are highlighted in the background documents and discussed below: these were also discussed in our consultations with stakeholders. Although the Programme was expected to generate both economic and environmental outcomes, INI s remit is to support the economic performance of NI businesses. In designing the SPP, INI drew on its experience of managing similar schemes and designed a Programme it believed would address the issues around business resource efficiency and the performance of the sustainable energy sector, whilst delivering environmental outcomes. The main drivers were as follows. Consolidating business support 2.7 At the time of setting up the Programme, INI was seeking to reduce the number of business development initiatives, with the aim of developing a more strategic approach to helping businesses and reducing any confusion amongst businesses about where to access support. This was in response to the Independent Review of Economic Policy (IREP) 3 carried out in 2008 which highlighted the need to reduce the number and complexity of programmes offered to businesses in Northern Ireland. Around the same time as the IREP, a review by Defra 4, resulted in the consolidation of business support on resources efficiency in England and Wales to a single body (WRAP), in tandem with similar changes in Scotland. 2.8 Prior to SPP, INI had funded other resource efficiency programmes since it was formed in Most recently, INI provided funding to the Envirowise Programme, National Industrial Symbiosis Programme (NISP) and Carbon Trust. These programmes were complemented by INI s Sustainable Development team which provided advice and information directly to businesses, arranged for external technical consultancy provision and delivered a wide range of sustainable energy business development support. In addition to resource efficiency support, the INI Energy Group and INI Renewables Sector Support initiatives promoted business opportunities in sustainable energy markets. The list of previous initiatives funded by INI is listed below. Table 2-3: Previous resource efficiency/ sustainable energy business development support Name of programme National Industrial Symbiosis Programme (NISP) Envirowise Programme Carbon Trust NI Carbon Now Programme Carbon Trust Loan Scheme INI Direct Delivery Lead organisation Funded by INI Delivered by International Synergies Ltd Funded by INI Delivered by AEA Technology and Serco Funded by INI Delivered by the Carbon Trust Funded by INI Delivered by the Carbon Trust Funded and delivered by Invest INI 3 DETI/ INI (2009), Independent Review of Economic Policy 4 Defra (2009) Resource Efficiency Delivery Landscape Review 5

17 Name of programme INI SD Consultancy Framework INI Energy Group INI Renewables Sector Support Evaluation of Invest NI Sustainable Productivity Programme Lead organisation Funded and delivered by Invest INI Funded and delivered by Invest INI Funded and delivered by Invest INI Source: INI Board Casework 2.9 As discussed later in the report, the designation of SPP signalled a shift from the delivery of a series of programmes (listed above) with related objectives to a single programme, managed and coordinated by INI s Sustainable Development team. Some elements of the Programme have been delivered by the INI Sustainable Development team and other parts have been sub-contracted to two External Delivery Organisations (EDOs), the Carbon Trust and International Synergies Limited. There is also a framework of consultants who deliver support on behalf of INI The prevalent view from stakeholders is that SPP provides a more coordinated and strategic approach to delivering this type of energy and resource efficiency support to businesses. Under the programme delivery model it is envisaged that businesses engage initially with INI Technical Advisors who can then take a holistic approach to assessing the support needs across all areas of the Programme and broker the relevant support. This independent brokering role was seen as an important difference from the previous model of support. Barriers and market failures 2.11 The economic appraisal sets out the barriers and market failures relating to the two strands of the SPP: supporting businesses to become more resource efficient; and helping to grow the sustainable energy sector. Helping businesses to become more resource efficient 2.12 In terms of the first strand, there are reported to be the following market failures 5 which causes businesses to underinvest in measures to become more resource efficient. Externalities the full negative impacts of carbon emissions and pollution are not experienced by businesses, while all of the benefits of addressing carbon emissions will not accrue to the business. Combined, these factors result in a sub-optimal level of investment. Imperfect information a lack of information, awareness and expertise about the potential benefits and opportunities holds back investment. This is compounded by a lack of available capital driven by perceived risk and long payback periods. Issues related to a lack of awareness or expertise are not unique to the resource efficiency field, but may be particularly prevalent here due to the technical nature of resource efficiency work, and the fact that businesses often do not have dedicated internal resources to address these issues. 5 As stated in HM Treasury Green Book (2003), a market failure refers to where the market has not and cannot of itself be expected to deliver an efficient outcome 6

18 Investment is also held back by competing priorities for investment within businesses and hidden costs associated with implementing energy efficiency. In small and micro businesses which make up the vast majority of firms in NI, there is limited capital available to address those areas where solutions may take some time to reduce energy costs and produce identifiable benefits to business The issue of businesses struggling to address these hidden costs came through strongly in the consultations. In some businesses, it was reported that technical staff find it difficult to make the case to company managers for investing in resource efficiency projects, especially when the payback period is relatively long. The economic climate over recent years has also meant that many businesses have tended to focus on maintaining sales and other elements of their business perceived as short-term critical. Another aspect of the information deficiencies market failure is difficulties in keeping up-to-date and understanding new environmental legislation. Developing the sustainable energy market 2.14 The economic appraisal also identifies issues which constrain the growth of the sustainable energy market in Northern Ireland. Market power lack of capital, difficulty in securing finance and the small scale of the NI sustainable energy sector is holding back investment, and there is a lack of critical mass in some sustainable energy sub-sectors. Imperfect information uncertainty related to planning permissions, technological risks and availability of government grants/subsidies are also factors limiting investment in sustainable energy markets. Externalities as discussed above, there are negative externalities associated with fossil-fuel power, which are avoided in the case of renewable energy generation. However, renewable energy is still generally more costly than fossil fuel generation, and investors frequently do not factor such aspects into their investment decisions Although not detailed in the economic appraisal, constraints within Northern Ireland s energy infrastructure were also viewed by stakeholders as a barrier to developing the sustainable energy sector. The national grid infrastructure requires upgrading to integrate an increasing number of onshore and offshore renewable developments Stakeholders stated that although there have been some success stories in Northern Ireland s sustainable energy sector, growing the business base will continue to rely on subsidies and wider public sector support (as is the case in other parts of the UK and elsewhere). Rising energy costs 2.17 The issue of energy costs was highlighted in most of the consultations with stakeholders as an important reason for setting up the Programme (which in effect continued much of the support which was already being delivered). Stakeholders noted that over time, Northern Ireland has had higher energy costs than other parts of the UK and EU because of its 7

19 geographic location, higher energy transport costs, and the small size of energy market. The latest figures produced by the Utility Regulator reinforce this argument showing that for both small to medium and larger companies, the average cost of electricity (per kwh) is close to being the highest in Western Europe (behind only Italy for larger companies). Figure 2-1: Non Domestic electricity prices in NI compared to EU countries (Jul-Dec 2013) Source: Utility Regulator (2014) 2.18 The evidence for high energy costs is reinforced by the perceptions and experience of business. The most recent Northern Ireland Chamber of Commerce Quarterly Economic Survey 6 (2014, Quarter 2) reported that: In comparison to business energy costs elsewhere in the UK, 77% of businesses interviewed believed that costs in Northern Ireland were higher; 1% thought they were lower and 7% that they were similar to elsewhere in the UK Looking at business energy costs over the past year, 71% indicated their costs had increased whilst 2% indicated their costs had decreased. Just over one quarter (26%) stated their energy costs had remained the same Asked if they had taken any actions in relation to business energy costs, just under one fifth of respondents (19%) had reduced energy usage. Sixteen percent had installed energy efficiency devices, 15% had changed energy provider, 11% had renegotiated energy tariffs, while 36% had taken no action. 6 NI Chamber of Commerce, Quarterly Economic Survey - available at 8

20 2.19 The feedback from stakeholders suggests that since the SPP was launched energy costs have continued to rise, presenting a significant challenge for Northern Ireland businesses to improve productivity. Stakeholders agreed that whilst general awareness of the need to address rising energy costs may have increased, there remains a gap in firms knowledge about how to address these costs. It was also stated that the Northern Ireland economy has a small number of major employers which need to be supported in terms of managing their energy and resource efficiency. Examples were highlighted to us where foreign owned plants were being continually pressured by their parent company to increase efficiency in order to keep the plant sustainable Most consultees saw it as appropriate that SPP supports all sizes of businesses spending more than 30,000 each year on energy and raw materials. While market failures may be more prevalent in SMEs (as they are less likely to have internal expertise and resources), it was argued that even Northern Ireland s large employers need support in what is still an emerging area for policy. Key findings The creation of SPP signalled a shift for INI from the delivery of a series of programmes with related objectives to a single programme, managed and coordinated by INI s Sustainable Development team. This study has found that SPP is providing a more coordinated and strategic approach to delivering this type of energy and resource efficiency support to businesses. Overall, the rationale and case for intervention remains largely the same as it was three years ago when SPP was developed. Although there has been some shift in awareness of the need to address energy and resource costs, energy cost data, business survey feedback and views from stakeholders suggest that there is a continued need and demand for this type of intervention. Northern Ireland has traditionally had higher energy costs than other parts of the UK and EU because of its geographic location, higher energy transport costs, and the small size of energy market. This reinforces the need for this type of programme of support. 9

21 3. Programme overview Evaluation of Invest NI Sustainable Productivity Programme In this section we review the overarching objectives for the SPP, how the Programme is structured and resourced and how tit is managed. This includes considering the delivery model, application and appraisal processes, and the main risks relevant to this intervention. We also consider the fit with other support provided to businesses in Northern Ireland. Programme aims and objectives 3.1 The aims and objectives of the SPP are set out in the various approval papers 7. The overarching aim of the Programme is to improve the productivity, competitiveness and sustainability of businesses in Northern Ireland through the identification and realisation of cost saving opportunities in the use of materials, water and energy; and through the promotion of business opportunities in sustainable energy supply chains. 3.2 The SPP set out to increase regional productivity by: helping business to implement resources efficiency projects that result in cost savings (or increased sales) of 22.5 million equivalent to 0.08% of annual Northern Ireland GVA per annum by 2015; helping sustainable energy businesses to achieve growth in turnover of 16.5 million over the period and in doing so, contribute to the growth of the Northern Ireland sustainable energy sector to 8.9% of NI GVA by Programme structure 3.3 SPP provides a portfolio of resource efficiency and supply chain activities aimed at assisting the wider business community achieve operational savings in water, energy and materials use, in addition to increasing turnover in sustainable energy supply chains. 3.4 The Programme is delivered by the INI Sustainable Development team and two External Delivery Organisations (EDOs), the Carbon Trust and International Synergies Limited. There is also a framework of consultants who deliver support on behalf of INI. 3.5 The four elements of the Sustainable Productivity Programme are summarised below. Table 3-1: SPP Project Areas Project Area Description Lead organisation Key Area A: Energy Efficiency Loan Fund Provides interest free loans of between 3k and 400k to businesses to support the installation of more energy efficient equipment. Loans are available to businesses looking to invest in energy efficiency and low-carbon equipment. Incorporated businesses are required to have been trading for at least 12 months and non-incorporated businesses Delivered by the Carbon Trust 7 INI (March 2012) Submission to INI Board Sustainable Productivity Programme 2012/13 to 2014/15 10

22 Project Area Description Lead organisation trading for at least 36 months. Key Area B: Resource Efficiency Capital Grant Key Area C: Industrial Symbiosis Services Key Area D: Project management support Provides grants of up to 50k (later revised to 40k) to businesses for the purchase and/or installation of new equipment which will reduce water/material costs. Eligible costs are the capital costs associated with the third party design, purchase, installation and commissioning of material or water saving processes or equipment including equipment to recover, re-use or recycle waste materials that are generated on a company site. For small companies, there is an intervention rate of 55%, for medium sized firms 45%, and large companies 35% Generates commercial opportunities for the exchange of commodities including waste material. The concept of industrial symbiosis is defined as a collective approach to competitive advantage through the physical exchange of materials, energy, water and/or by-products, or the shared use of assets, logistics and expertise Technical Advisors in INI s Sustainable Development provide businesses with initial support and guidance on energy and resource efficiency projects. They then refer clients onto another part of the Programme or organise consultancy support for a Resource Efficiency Audit or Technical Consultancy project. The Technical Advisors also have a broader role in raising awareness of renewable energy supply chain opportunities and promoting expertise in the sector Delivered by the INI Sustainable Development Team Part-funded by ERDF and delivered by International Synergies Limited Delivered by Technical Advisors drawing in consultancy support as appropriate In terms of the wider sector role, this is delivered by the INI Sustainable Development Team in the areas of Marine renewables and bio-energy - from 1st April 2014 supply chain opportunities in Marine has transferred to the Sector and Cluster Development Team in INI Source: INI background documentation Programme costs 3.6 According to the programme approval papers 8, it was forecast that annual expenditure would be just over 4m, and therefore 8m for two years. The breakdown across the four project areas is shown in Table 3-2, below. 8 INI (April 2012) Submission to DETI Board Sustainable Productivity Programme 2012/13 to 2014/15 11

23 Table 3-2: Original business case programme costs Project area Annual costs to INI 2 year costs Key Area A: Energy Efficiency Loan Fund Key Area B: Capital Grant Scheme 1m new capital m management costs = 1.187m 0.550m 2.374m 1.100m Key Area C: Industrial Symbiosis 0.252m 0.504m Key Area D: Project management support 2.026m 4.052m Total 4.015m 8.030m Source: INI Submission to DETI Board March In practice, the programme budgets actually approved by INI were somewhat lower 9. The approved annual SPP budget over the last two years has been around 3.5m 10. This includes the staffing and marketing costs for the INI Sustainable Development team. The team employs 14 core staff including Technical Advisors and admin staff. 3.8 The programme expenditure over the two years has, however, been around 1m above the approved budget. This is because most of the SPP s budgeted direct financial support to business was allocated to the first two years of the three-year Programme. In 2013/14, an additional 700k was paid into the Carbon Trust Energy Efficiency Loan Fund 11 and all of the Resource Efficiency Capital Grant was paid out in the first two years of the Programme. Table 3-3: Programme costs vs approved budget 2012/13 and 2013/14 m 2012/ /14 2 year total Budget Actual Budget Actual Budget Actual % Key Area A:Energy Efficiency Loan Fund Key Area A: Revenue Costs Key Area B: Resource Efficiency Capital Grant Key Area C: Industrial Symbiosis Services Key Area D: Project Management Support % % % % % INI SD staff costs % Total % Source: INI 9 This was simply down to internal resourcing decisions at the time of approval 10 Although the original economic appraisal estimated annual staff costs of 4m, by the time of budget approval this had been revised down to 3.5m 11 At the end of Year 2 of the programme instead of the start of Year 3 12 In 2012/13, 726.6k was spent on staffing costs and 29.7k on marketing. In 2013/14, 748.1k was spent on salaries and 21.5k spent on marketing 12

24 ERDF support Evaluation of Invest NI Sustainable Productivity Programme 3.9 The Industrial Symbiosis element of SPP is 50% match-funded by the European Regional Development Fund; over the two years around 260k has been contributed by ERDF. This funding has been managed by INI and quarterly claims are submitted to DETI as the Managing Authority in Northern Ireland The basis for this is that, in 2009, INI secured an annual ERDF funding allocation for Industrial Symbiosis support to NI businesses up to 2015 under Priority 1 of the EU Sustainable Competitiveness Programme. Prior to the SPP, ISL was funded to deliver the NISP in Northern Ireland; match-funding for the European contribution has been 50% throughout There are two mechanisms for checking the expenditure and processes in ERDF funded projects. Article 13 visits are annual spot checks undertaken by DETI to review the ERDF projects being managed and delivered by INI. The Industrial Symbiosis ERDF project has been one of the sampled projects: it passed the inspection and no issues were highlighted. Article 16 inspections are also undertaken by DETI s Audit Authority each year. At the time of writing, the 2013 report which included the Industrial Symbiosis project was expected to be finalised shortly. Programme management 3.12 Most consultees believed that the Programme has been and is well managed by the INI Sustainable Development team and its two External Delivery Organisations, the Carbon Trust and International Synergies Ltd. Each month, INI meets with its delivery partners (separately) to review progress against targets and any operational issues Monthly internal team meetings take place, involving all Technical Advisors and administrative staff. These meetings provide an opportunity to review the performance of the four elements of the Programme, in particular the management of the consultancy projects, and overall progress against the SPP objectives The performance of the SPP is also reported to the monthly internal divisional meetings. The figures reported by the INI Sustainable Development team in March 2013 and March 2014 are provided below. These provide an update on progress against the annual targets. 13

25 Table 3-4: Reporting against headline targets 13 Performance indicator Annual target Progress reported at end March 2013 Identify resource savings Identify 15m savings 34.54m 20.95m Progress reported at end March 2014 Achieve resource savings Achieve 7.5m savings 8.19m 11.26m Turnover increase in the sustainable energy sector 14 Turnover increased by 5.5m 14.63m 56.28m - incl 6m Carbon Trust & 48.8m offshore and marine (excl bioenergy) Source: INI 3.15 Overall, we found the systems and processes for managing and monitoring SPP to be robust, fit-for-purpose and effective. There are regular meetings between internal and external delivery partners and ongoing reporting to INI management. Although the Sustainable Development team meets with the EDOs individually, there would, however, be value in having more events that bring together all partners and consultants to discuss progress and relevant issues at programme level. Delivery model 3.16 As we will go on to discuss in detail in the next section, although the Programme is managed by the INI Sustainable Development team, delivery of the support involves in-house Technical Advisors, External Delivery Organisations (Carbon Trust for the Loan Fund and International Synergies Ltd. for the Industrial Symbiosis support) and a framework of external consultants The view across the stakeholders is that this delivery model has worked well. The central role of INI is acknowledged in providing the initial advice and overview of support to companies and then bringing in the external expertise as and when required. Consultees see the internal resource as providing a good checking system for programme operation and delivery. It is recognised that to cope with current levels of demand, INI Technical Advisors could not deliver the support by themselves; also that they need the specific technical expertise of external consultants as well as additional capacity The general view was that the current team of Technical Advisors is working at capacity and some stated that team members were being stretched due to the continuing levels of demand from businesses for this type of support. Assuming that a similar type of Programme continues beyond the current approval up to March 2015, we believe that an equivalent level of staffing will be required in the future (perhaps with some refocusing of activity, providing more assistance to a lower volume of businesses). 13 SPP data aggregated across the four Key Areas as reported by the INI SD team 14 As previously highlighted, the SD team have a role in helping to grow the sustainable energy sector and turnover growth has been used to measure progress in this area of activity. In Section 4 we discuss the use of this metric and how it can be linked to the work of the SD team 14

26 Programme marketing Evaluation of Invest NI Sustainable Productivity Programme 3.19 The main areas of external SPP marketing are on the INI website, promotion at resource efficiency events organised by INI or delivery partners, notably International Synergies Ltd. Members of the INI Sustainable Development team also attend other business support events and are members of stakeholder forums. The team also produces best practice guides (discussed in the next section) which profile the support available through the Programme Internally, the INI Sustainable Development team promotes the Programme to sector teams and client executives. Client executives are one of the main points of referral into the Programme. If they feel their company would benefit from SPP support, they put the company in contact with one of the INI Technical Advisors. The SPP also supports non-ini clients and Technical Advisors promote the Programme to this wider audience of businesses. There is an acknowledgement that this type of support needs to be broadened out to cover all types of businesses In addition to the promotion of the overall Programme, each of the two External Delivery Organisations, the Carbon Trust and International Synergies Ltd. (ISL), promotes its own element of the Programme. In the case of the Carbon Trust, the marketing of the loan scheme is broadly confined to information on its website and some partner websites. However, as was highlighted by Carbon Trust this level of promotion is sufficient when there is already high demand for the loans. ISL has a membership newsletter and runs events to promote its support to businesses The project management support provided to businesses by Technical Advisers and external consultants under Key Area D also promotes support available through the other parts of the Programme (loans, grants and industrial symbiosis services) Overall the main feedback from consultees was that although some marketing takes place, and there is evident demand for the various elements, the Programme would nevertheless benefit from more effective promotion internally and externally. Within INI, there were some suggestions that the specific technical nature of the support (and difficulties for some businesses in identifying the issues of energy and resource costs), mean that the Programme is less well-integrated with other INI support than might be expected Those involved in delivering the Programme also stated that it is sometimes difficult to know who the best person is in the business to contact regarding SPP. The obvious entry point is through the technical staff responsible for energy and resource utilisation, but these may not be the budget-holders, and it can be more difficult to engage and persuade business managers of the potential benefits of investing to deliver the recommended improvements.. Consultants and Technical Advisors suggested there needs to be more implementation support to ensure projects are taken forward, linked in to more generic business development support More marketing would clearly have implications on the INI Sustainable Development s workload which is already stretched. However, this might involve a more focused approach, targeting certain sectors or export orientated firms. 15

27 Application and appraisal processes Evaluation of Invest NI Sustainable Productivity Programme 3.26 The application and appraisal processes for the four different parts of the Programme are summarised in Table 3-5, below. As would be expected, the more detailed processes relate to the two financial products. Based on the feedback received these processes have been appropriate and effective. A couple of issues were highlighted. First, some INI client executives suggested that there should be closer working between the Carbon Trust and INI in deciding whether to approve a loan fund application. However, care would need to be taken to ensure a closer relationship is in line with INI s External Delivery Organisation guidance. It was also suggested that, initially, there was some confusion, or at least uncertainty, within INI about the level of innovation required for eligibility for Resource Efficiency Grants. The final call for projects introduced innovation as one of the criteria owing to limited availability of funds, and a rise in demand as the grant became better known among potential clients. Table 3-5: Application and appraisal processes Project area Application process Appraisal process Key Area A: Energy Efficiency Loan Fund Key Area B: Resource Efficiency Capital Grant Key Area C: Industrial Symbiosis support Key Area D: Project management support Online application requires information on the company s energy performance, the project description and costs, technology being proposed and anticipated CO2 savings. Application process judged to have been appropriate and effective Relatively straightforward application form requesting project description and costs, anticipated cost savings and evidence of need/ additionality. In most cases the process worked well with client executives supporting the applications (only a small number of bids submitted cold ) Application process judged to have been appropriate and effective No application process ISL advisor visits the company and completes an Advisory Visit Report No formal application process a Resource Efficiency Audit or Technical Consultancy project is agreed between the business and the Technical Advisor and a de CT engineers assess the project and expected CO2 savings. There is also an independent assessment of credit worthiness/ trading history. CT make sure they keep a strict 1-1 relationship with the clients and would occasionally speak to the INI client executives for background information prior to approving an application. Appraisal process judged to have worked well in light of relatively low default rate. Assessed by INI client executives and Technical Advisors. Changes in eligibility implemented after low response to first call for applications and these were implemented to ensure the limited grant funding would go where best needed according to the Invest NI intervention criteria This resulted in a significant increase in applications in the second round and the three year grant allocation was fully committed by halfway through the second year of the Programme. The Sustainable Development team felt this was appropriate given the level of demand for this type of support. Although some changes made to appraisal process between calls, overall it is judged to have worked well. No appraisal process this is considered to be appropriate for this type of intervention Eligibility assessed up front a company is eligible for support if they are spending more than 30k per annum on energy and materials - if too small they are referred to the smaller council programmes. There are no size or 16

28 Project area Application process Appraisal process minimis 15 form is completed by the business to ensure eligibility sector constraints but the support is focused on those businesses estimated by the Technical Advisor to have the potential to deliver cost savings. Source: SQW consultations Programme risks 3.27 According to consultees, the main risks of delivering this type of programme are as follows. Promoting the Programme to reach the intended targets without overpromising there was general consensus that the Programme currently has a relatively low profile. Whilst it is clearly important to raise awareness of the issues and opportunities to cut costs, there is a limit to what can be done with the available resource. The Carbon Trust Energy Efficiency Loan Fund had to introduce a queuing system at certain times (awaiting repayments which were then reinvested as new loans).also, the team of INI Technical Advisors is already at capacity and would struggle to support a higher volume of businesses. Managing the quality of the consultants involved in delivering the SPP whilst Technical Advisors provide some of the support and advice to companies, Project Area C (led by International Synergies Ltd) and much of Project Area D is delivered by consultants. The Technical Advisors have had an important role in brokering the support provided to businesses and ensuring it is of good quality (managing the tendering of the relevant consultants and reviewing audits/ reports). Based on feedback from both the Technical Advisors and the consultants, this relationship has been managed effectively. It was also stated the use of a framework panel has ensured a good range of specialisms and expertise. Liability for poor advice linked to the quality issue, there is a risk that following on from SPP support a company decides to take forward a project which then has a negative impact on the business. This risk is owned by the businesses themselves, but managed by the consultants and the Carbon Trust when providing loans: businesses are explicitly informed that there can be no repercussion for INI following their acceptance of support. Crowding out other private sector support this is a risk with any support programme. In this case, the risk is that SPP takes business away from engineering consultancies which might provide this type of resource efficiency guidance and support without public sector intervention. This risk is judged to be low as the Programme is seeking to widen engagement, and to increase awareness and demand for work in the area of resource efficiency, and it is expected to stimulate the market in the longer term. Feedback from the consultants indicated some examples where they had been retained by businesses for follow-on work. 15 De minimis aid is used to describe small amounts of state aid that do not require European Commission approval 17

29 Key findings Evaluation of Invest NI Sustainable Productivity Programme Over the first two years of SPP, the programme has cost just under 8m which has been around 1m above the approved budget (but below what was set out in the Economic Appraisal). This is because most of the SPP s budgeted direct financial support to business was allocated to the first two years of the three-year Programme. The Industrial Symbiosis element of SPP is 50% match-funded by the European Regional Development Fund; over the two years around 260k has been contributed by ERDF. This project has been audited by DETI in an Article 13 check and no issues were highlighted. The evaluation found the systems and processes for managing and monitoring SPP to be robust, fit-for-purpose and effective. There are regular meetings between internal and external delivery partners and ongoing reporting to INI management. Based on the feedback of stakeholders it is clear that the delivery model (in-house and external delivery) is working well but the team of Technical Advisors is becoming stretched owing to levels of demand. The programme s application and appraisal processes have also proved to be appropriate and effective. Recommendations R1: Develop a more holistic approach to programme management - the Sustainable Development team regularly meets with the EDOs bilaterally, but it is recommended that there should be more events bringing together all partners and consultants to review the performance of the Programme as a whole. R2: Retain the existing team of Technical Advisors - assuming that a similar type of Programme continues beyond the current approval up to March 2015, at least the same level of staffing will be required in the future. If INI increases its external promotion of the Programme (as per recommendation 4), then it is likely that either a more focused approach will need to be applied or additional resource will be required. These issues should be explored in the Economic Appraisal. R3: Retain in-house capacity for strategic management and review, to ensure the potential to respond quickly and flexibly to new emerging needs and opportunities within a fastmoving UK and European policy context. R4: Develop a more distinctive form of branding for increasing energy and resource efficiency and continue to promote examples of SPP support through use of case studies although this Programme can only support a proportion of the NI business base, the businesses taking forward energy and resource efficiency projects can act as role models for other businesses. Linked to this, there should be more effective promotion of the programme internally within INI and to external partners. R5: Move the focus of the Programme towards supporting more larger companies. INI s strategic focus is on larger firms, the growth of which will drive productivity in the Northern Ireland economy. There is scope to involve more of INI s account-managed companies in the Programme. A new threshold of spending above 40-50k each year on energy and materials could be introduced in most cases this higher threshold will result in INI supporting firms generating higher levels of turnover and GVA. 18

30 Fit with other support to business in Northern Ireland Invest NI products 3.28 Invest NI provides its client companies with a broad range of products to support skills development, exporting, innovation, knowledge transfer and general business development. More intensive support is provided to around 1,200 account-managed companies which are regarded as most strategically important to NI economy (based on growth and export potential) Each account-managed company has its own client executive who acts as the key point of contact for accessing all INI support. Client executives therefore have an important role, along with the INI Sustainable Development team, in promoting SPP. Some of those companies receiving support through SPP are account-managed but many are not (see para 4.11 for a breakdown) The INI products which are most closely aligned to SPP are listed below in Table 3-6. These products are delivered by INI s Innovation and Technology Solutions (ITS) division and Selective Financial Assistance is delivered by the Skills and Strategy division. As SPP aims to improve firms understanding of resource efficiency and improve the competitiveness and export potential of INI businesses, the Programme complements a range of INI products delivered by other divisions such as Trade and Skills and Strategy. This was confirmed by feedback from INI client executives. Table 3-6: Closely aligned INI programmes Project name Productivity Improvement and Supply Chain Improvement Technical Advisory Services and TDI Grant Scheme Innovation Vouchers Selective Financial Assistance Summary Supply chain improvement is based around the provision of advice, guidance and support to companies wishing to deliver improvements to their supply chain to improve their competitive position. The team of experienced practitioners assists companies to deliver productivity improvement through the application & understanding of "Lean thinking and Lean principles". Technical Advisory Unit (TAU) provides advice to businesses on a range of technical issues and Intellectual Property (including IAM Audit, Integrated Management Systems Advice, Product Type Approval Advice, Workplace Health and Safety Advice). The TDI grant gives up to 50% support towards investigating new technologies or processes, product & process problem resolution, product approval/global technical compliance, process & quality management schemes, Intellectual Property and improved product design & performance. This scheme offers a 4000 voucher, which can be used to access specialist skills and expertise to solve a business issue. The voucher allows businesses to work with one of the 39 public sector Knowledge Providers across NI and the Republic of Ireland. SFA supports NI investment and job creation projects that involve setting up new businesses, expanding existing businesses and attracting inward investment. Source: Background data from INI 19

31 Other NI programmes Evaluation of Invest NI Sustainable Productivity Programme 3.31 Since the SPP was launched, INI has worked closely with other relevant organisations to ensure there the support provided fits with other initiatives. For example the SPP Technical Advisors sit on stakeholder forums (e.g. NI Waste Strategy) and also attend meetings of the councils economic development teams to coordinate resource efficiency support As part of the stakeholder consultations we spoke with two of the resource efficiency programmes being delivered by local councils. In both cases, strong links were cited with the INI Sustainable Development team and an agreement was in place that companies with spending on resources of over 30k receive support through the SPP, with smaller scale and less complex requirements met by the councils. This was regarded by SPP stakeholders as a sensible threshold. Table 3-7: Examples of other similar initiatives in NI Initiative Business Improvement through Environmental Solutions (BITES) Programme Cookstown Resource Efficiency Programme Project summary and links with SPP Project has been running for around 10 years but current programme running from Joint funded by INI (incl ERDF) Project delivered across Belfast City, Carrickfergus, Newtownabbey and Lisburn council areas Support provided by Mabbett consultants (also part of SPP) Series of six workshops in Environmental Management Systems, resource efficiency leading to Institute of Environmental Management and Assessment (IEMA) Foundation Certificate Up to three days one-to-one mentoring support starting with a mini audit on site Small financial contribution of 250 required from the business Target of supporting 105 businesses Project started March 2013 Close cooperation between the Council and INI in designing the programme and securing INI funding (incl ERDF) Project managed by Cookstown District Council and delivered by South West College s InnoTech Centre Support involves: a Resource Efficiency Audit to identify where savings could be achieved; a Resource Efficiency Action Plan; and up to 5 days specialist support to implement the Action Plan s recommendations Target of supporting 40 companies over two years to generate cost savings, new jobs and safeguarded jobs INI involved in screening applications and same consultants involved (Action Renewables, B9 Solutions) Source: SQW consultations 3.33 In addition to these initiatives, a cross border STEM (Sustainable Together through Energy Management) project brings together nine councils from Northern Ireland and four from the Republic of Ireland. It is part-funded by the EU s INTERREG IVA Cross Border Programme and aims to support 220 businesses over two years. Businesses can receive up to five days site specific support from an Environmental Officer and are helped to implement an Environmental Management System (EMS). Again, we understand that there is 20

32 ongoing dialogue between the INI Sustainable Development team and this project to ensure there is no overlap in support and that SPP is providing support to the larger companies Based on the consultations with stakeholders, the other main initiatives involved in similar support are: the Rethink Waste Programme delivered by WRAP Northern Ireland on behalf of the Department of the Environment; and the Smart Eco Hub Project which is an EU INTERREG IVA Cross Border Programme funded cluster organisation for the sustainable energy sector. Key findings As SPP aims to improve firms understanding of resource efficiency and improve the competitiveness and export potential of INI businesses, the Programme complements a range of INI products delivered by other divisions notably Trade, and Skills and Strategy. Other innovation-related INI projects also encourage the development of new products and processes, but SPP provides a distinctive focus on businesses becoming more efficient and productive through cutting costs and making environmental improvements. This leads into and links with other business development areas, including management skills, exporting and supply chain development. The Sustainable Development team works closely with other organisations to ensure INI support is well aligned strategically with other initiatives in resource and energy efficiency. 21

33 4. Performance Evaluation of Invest NI Sustainable Productivity Programme 4.1 We now move on to review the performance of SPP, in terms of how many businesses have been supported, assessing in turn how each of the component parts of the Programme has performed against initial targets. 4.2 This section draws on the monitoring data from each part of the SPP and feedback from stakeholders. It complements what follows in Section 5, which summarises the qualitative and quantitative feedback collected through our business survey. 4.3 The data on business impact in the two sections are not, however, comparable. For example, where monitoring data is provided on the cost savings from energy efficiency loan funded projects this is information collected by the Carbon Trust relating to anticipated cost savings from its projects. The business survey data provides estimates of achieved and anticipated cost savings generated by SPP as a whole. 4.4 It is also worth highlighting that most of the monitoring data presented in this section relates to the delivery of the four Key Areas of SPP which link directly into the first strategic objective of reducing businesses energy and resource costs. SPP and the work of the Sustainable Development team also has a role in helping to grow the sustainable energy sector in Northern Ireland. As we will discuss later in this section measuring the Programme s contribution towards this wider objective is more challenging. Programme beneficiaries and overall demand 4.5 First we summarise the overall scale and coverage of the Programme. Based on the SPP business database provided, SPP supported 1242 individual businesses in Northern Ireland in 2012/13 and 2013/ Feedback from stakeholders indicated that overall demand for the Programme has exceeded original expectations, with particularly strong demand encountered from the food and drink, construction, engineering and hospitality sectors. The introduction of new legislation in the UK and EU is considered to have been a major factor in driving demand, along with Government incentives to encourage the adoption of new renewable energy technologies (e.g. Renewables Obligation Certificates, Feed-In Tariffs and Renewable Heat Incentives). 4.7 With regard to the extent of companies engagement with the Programme, 72% received support from just one Key Area, with the remaining 28% involved in more than one Key Area (mainly two). It should be noted that a company can receive multiple interventions, within one Key Area or across Key Areas. 4.8 The fact that so many of the Programme beneficiaries have only been involved in only one Key Area might raise a question about the extent to which SPP operates as a coherent programme: businesses might be expected to be referred into and through different types of support. As highlighted earlier, although the Technical Advisor support is often the entry point into the Programme, some firms go directly to the Carbon Trust or ISL for support. However, drawing and reflecting on the stakeholder interviews, we do not 22

34 see SPP as an escalator programme (with businesses progressing through the different elements) but instead as a bundle of themed interventions that it makes sense to manage collectively. Table 4-1: Companies and interventions by number of Key Areas One Key Area More than one Key Area Total Companies % % 1242 Interventions % % 2940 Source: SQW analysis of SPP Business Database 4.9 Table 4-2, below, shows the number of companies involved in one and multiple Key Areas. This is based on the total population of 1242 businesses supported in 2012/13 and 2013/14. Table 4-2: Companies by number of projects One Key Area % More than one Key Area % Total Key Area A: Energy Efficiency Loan Fund Key Area B: Resource Efficiency Capital Grant Key Area C: Industrial Symbiosis Services Key Area D: Implementation Framework (5 day support) Key Area D: Technical Support (incl. Resource Efficiency Audits and advisory meetings) % 61 25% % 40 83% % 93 18% % % % % 768 Source: SQW analysis of SPP Business Database 4.10 These 1242 companies have received 2940 interventions or engagements through SPP, ranging from receiving a grant or loan to a half-day meeting. As noted above, a company may receive multiple interventions within one Key Area (e.g. two loans under Key Area A, or four advisory visits under Key Area D). The breakdown of interventions is provided below (Table 4-3). Table 4-3: No of companies and interventions 16 No of companies No of interventions Key Area A: Energy Efficiency Loan Fund Key Area B: Resource Efficiency Capital Grant Key Area C: Industrial Symbiosis Services The monitoring figures in Table 4.3 and those reported in Tables 4.6, 4.8 and 4.9 are taken from different sources (INI and the EDOs) and do not correspond because of timing issues i.e. when a business is actually recorded as being assisted 23

35 No of companies No of interventions Key Area D: Implementation Framework (5 day support) Key Area D: Technical Support (incl. Resource Efficiency Audits and advisory meetings) Total 1242* 2940 Source: SQW analysis of SPP Business Database * note: companies can receive multiple intervention within and across Key Areas Profile of beneficiaries 4.11 In the last section we summarised how the SPP fits with other INI support. Out of the 1242 businesses supported through SPP, 75 are account-managed companies which represents 6% (Table 4-4). With INI supporting around 1200 account-managed companies, it would appear that there is scope to do more work with these firms. The challenge will lie in balancing this with work with other INI clients and non INI clients. Table 4-4: Involvement of account managed companies in SPP All businesses INI account managed companies All interventions Key Area A: Energy Efficiency Loan Fund Key Area B: Resource Efficiency Capital Grant Key Area C: Industrial Symbiosis Key Area D: Implementation Framework Key Area D: Technical support (incl. Resource Efficiency Audits and advisory meetings) All SPP projects Interventions with INI account managed companies Source: SPP Business Database 4.12 Based on our survey of SPP supported businesses we can see that the Programme has provided support across the broad range of sectors, although nearly half of the companies involved were manufacturing firms. The majority of businesses in the other category were retail businesses; leisure and training were also represented. It should be noted that some firms highlighted the sectors in which they work, rather than their own product or service: e.g. some of those indicating that they are in the agriculture sector actually sell their products or services primarily in to this sector. 24

36 Figure 4-1: Sector profile of SPP businesses Agriculture and fishing 7% Energy 13% Manufacturing 47% Construction 12% Distribution and wholesale Tourism & hospitality Transport and communications Financial and business services Public admin, education, health Other services 8% 11% 5% 2% 4% 8% Other 26% 0% 10% 20% 30% 40% 50% % of SPP businesses Source: SPP Business Survey SPP contribution to Invest NI Equality Scheme 4.13 Invest NI complies with Section 75 of the Northern Ireland Act 1998 and has a commitment to equality: We are helping to create a successful economy in Northern Ireland which provides equal opportunities for all citizens. We strive to meet our responsibilities across the spectrum of government policy relating to equality, the Lifetime Opportunities - Anti-Poverty and Social Inclusion Strategy and human rights SPP has a broad remit and is aimed at improving the productivity and sustainability of all types of businesses that spend more than 30k on energy and materials. As the support is promoted and made available to all businesses that meet this criteria, it is clear that the SPP is fully compliant with, and contributes to, Invest NI s commitment to equality issues. Key findings SPP supported 1242 individual businesses in Northern Ireland in 2012/13 and 2013/14. Overall demand for the Programme has exceeded original expectations. Nearly three-quarters (72%) of businesses have received support from just one Key Area, with the remaining 28% involved in more than one Key Area (mainly two). The fact that so many of the Programme beneficiaries have only been involved in only one Key Area might raise a question about the extent to which SPP operates as a coherent programme. However, as highlighted in this study, SPP has acted more as a bundle of themed 17 INI website 25

37 interventions rather than an escalator programme (in which businesses progress through different elements). Out of the 1242 businesses supported through SPP, 75 are account-managed companies. With INI supporting around 1200 account-managed companies, it would appear as though there is scope to do more work with these firms. SPP has provided support across the broad range of sectors, although nearly half of the companies involved were manufacturing firms. Since the support is promoted and made available to all sectors, SPP is contributing to the delivery of Invest NI s commitment to equality issues. Key Area A: Energy Efficiency Loan Fund 4.15 The first element of the Programme we discuss is the Energy Efficiency Loan Fund managed by the Carbon Trust. The Carbon Trust has a substantial track record in providing energy efficiency loans to businesses in Northern Ireland. As outlined in its Business Plan for SPP 18, from 2003 to 2012 the organisation provided 20m in interest free loans to 420 businesses, leveraging around 20m in private sector investment and estimated to result in over 100m in lifetime energy cost savings Prior to SPP, the Carbon Trust was funded by INI to deliver both a loan scheme and an energy efficiency support programme which involved site visits, training and delivering events. There was therefore a strong relationship between INI and the Carbon Trust. The credentials of the organisation in delivering this type of scheme were validated in reviews undertaken by Ernst and Young 19 in 2013 and KMPG 20 in Under SPP, it was agreed that the Carbon Trust would provide interest free loans of between 3k- 400k to businesses using a carbon saving criteria of 1.5tCO2 per 1k lent. The Fund has been managed by a Loan Scheme Manager and Loans Administrator in the Carbon Trust s Belfast office with financial and technical support brought in from other parts of the organisation. The following outcomes from the Fund were agreed with INI in the funding agreement. It was subsequently agreed 21 that INI would provide 1.7m in 2013/14 and 0.3m in 2014/15. Table 4-5: Agreed budget and outcomes for the Energy Efficiency Loan Fund 2012/ / /15 Total Allocated budget (new capital m) Value of loans committed ( m) Expected leveraged co-funding ( m) No of loans committed Carbon Trust (2012) Request for funding to deliver the energy efficiency interest free loan scheme over the period Ernst & Young (2013), Review of Carbon Trust Energy Efficiency Loan Fund 20 KPMG (2014), DETI External Delivering Organisation Inspection Visit Carbon Trust 21 INI (2014), Amendment to Letter of Offer to the Carbon Trust 26

38 2012/ / /15 Total Energy cost savings implemented ( m) Carbon savings (ktco2 pa) Lifetime implemented savings ( m) Lifetime implemented carbon savings (MtCO2) Source: CT Energy Efficiency Loan Fund Business Plan The interest free loans are available to businesses looking to invest in energy efficiency and low-carbon equipment. Incorporated businesses are required to have been trading for at least 12 months and non-incorporated businesses trading for at least 36 months. The payback period is a maximum of four years, which reflects the length of time that new technologies should start generating efficiencies. Loans have been used to fund building technologies such as air conditioning, heating, insulation, heat recovery and lighting. There have also been projects involving industrial process technologies such as materials handling equipment, process controls and refrigeration. Monitoring performance 4.19 The data in Table 4-6, below, is derived from the monthly monitoring reports from March 2013 and March 2014 provided by the Carbon Trust to INI 22. Over the two years, 348 loans were offered, against a target of 324. These had a loan value of 9.7m, which again is higher than the target of 8.3m for the two years. The loans are expected to result in nearly 5m in annual cost savings, again slightly above target. We note that there are some significant variations between the annual targets in Table 4.5 and Table 4.6. However, we have been assured that the targets and actuals set out below are the most recent agreed figures between INI and the Carbon Trust. Table 4-6: Energy Efficiency Loan Fund monitoring Loan Fund Targets target offered target offered 2 year target 2 year actuals New Capital '000 1,000 1,000 1,000 1, ,000 2,700 Value of loans offered/disbursed '000 Expected/actual leverages co-funding '000 Number of loans committed Energy costs savings identified ( m pa) Carbon savings identified (ktco2 pa) 3,960 5,192 4,300 4,525 8,260 9,717 1,228 1,610 1,333 1,403 2,561 3, Lifetime implemented We have used these months to review end of financial year figures 23 As highlighted earlier, some Year 3 expenditure including new capital for the Carbon Trust was brought forward slightly and therefore was allocated in Year 2 (2013/14) 27

39 Loan Fund Targets savings ( m) target Evaluation of Invest NI Sustainable Productivity Programme offered target offered 2 year target 2 year actuals Lifetime implemented carbon savings (MtCO2) Source: Carbon Trust monthly monitoring reports to INI revised target figures provided by CT in Sept 2014 using revised conversion rates 4.20 The five largest loans are summarised below and provide examples of the types of projects funded over the last two years. Table 4-7: Largest energy efficiency loan projects offered in Project Loan value ( ) Sector Installation of a replacement gas fired melting furnace for the melting of aluminium. This will be used in the casting of aluminium cylinder heads for the automotive industry. Setting up an anaerobic digester to supply renewable electricity for the aggregate recycling and concrete production. Installation of new energy saving equipment to improve efficiency in cereal production. The equipment consists of a vibronet cereal damping system, an infra-red micronizer with heat recovery system, and flaking mill with hydraulic roll tension. Various improvement to boiler system including: boiler plant replacement; upgrading building management systems; increasing levels of automation; installing energy efficient lighting and controls; and converting cooking appliances in the kitchen from electricity to natural gas supply Installation of a new 400kw biomass boiler to replace existing oil boilers. 400k 390k 250k 210k 200k Manufacture of motor vehicles and parts Manufacture of glass, ceramics & cement Food processing Hotels Wholesale plant growers Source: INI monitoring data 4.21 The loans element of SPP is regarded as an extremely important and successful part of the Programme, enabling energy efficiency projects to actually be implemented. We understand from speaking to the Carbon Trust that there have been high levels of demand over the last two years; on two occasions, a queuing system was introduced whilst the Fund awaited repayments. In these situations, applicants needed to wait until the new funds were available 24. Based on feedback from the Carbon Trust we understand that applicants have been quite patient when these situations have occurred A high level of demand is perhaps not that surprising as it is interest-free money and, in general, businesses continue to face difficulties in accessing finance. Those consulted across SPP believe the loan scheme is well-managed. The loans are performing well, and a low default rate of 5% is reported. There have been reasonably strong links with other parts of SPP and 25% of all loan recipients have also received from at least one other Key Area of SPP support (see Table 4-2) Since this funding has been available since before 2012, stakeholders believe that there is good general awareness of the loan scheme across businesses and other delivery 24 There is also prioritisation of sectors when the queuing system is in place 28

40 organisations. The Carbon Trust has not had to do any specific marketing (beyond the information on CT and INI websites) as it is already meeting its targets in terms of the number of businesses supported and loans issued The evidence from the monitoring data and stakeholder feedback indicates that the Energy Efficiency Loan Fund has been an important part of SPP. It is helping businesses to take forward energy efficiency projects and is proving to be very popular. It would appear that the links between the loan scheme and other parts of the Programme are reasonably strong and there have been referrals both ways between the Carbon Trust and INI. There are three main reasons why we feel that, subject to resources being available, this element of the Programme should continue: NI businesses continue to have difficulties in accessing external finance especially for this type of business development activity; there are high levels of demand (illustrated by the need to introduce queuing); and the availability of this support is delivering results within companies, and likely to raise the profile of other related energy and resource efficiency support. Key findings Over the two years, 348 loans were offered, against a target of 324. These had a loan value of 9.7m, which again is higher than the target of 8.3m for the two years. The loans element of SPP is regarded to be an extremely important and successful part of the Programme, enabling energy efficiency projects to actually be implemented. Recommendations R6: Continue to provide an energy efficiency loan fund this funding was found to be a core part of the SPP. The demand is clearly there and it is enabling energy projects to be implemented during a time when businesses are still finding it difficult to access business finance. Key Area B: Resource Efficiency Capital Grant 4.25 The aim of this funding was to encourage businesses to install equipment or implement new processes that would result in water or material efficiencies beyond regulatory requirements through provision of a capital grant of up to 50k. Beneficiaries already had to be INI clients and the funding was provided directly by the INI Sustainable Development team According to the original guidance to grant applicants 25, eligible costs are the capital costs associated with the third party design, purchase, installation and commissioning of material or water saving processes or equipment including equipment to recover, re-use or recycle waste materials that are generated on a company site We understand that the first call for applications resulted in a relatively low number of projects coming forward. However, after some internal promotion with client executives and some flexibility on the level of innovation required, there was significant demand in the 25 INI (2012), INI Resource Efficiency Capital Grants Notes for applicants and application form 29

41 second call. In fact, demand was greater than expected, and instead of allocating the funding over a three year period as originally envisaged, the funding was fully committed in the first 18 months of the Programme. Monitoring performance 4.28 Table 4-8, below, shows that over the first two years of the SPP, nearly 1.8m in grants was committed to 52 projects. Nearly all of this funding was committed in 2012/13. Some firms were successful with multiple projects, and overall 39 businesses were supported, of which ten were INI account-managed companies. There were different levels of funding interventions depending on the size of the business (55% for small companies, 45% for medium sized firms and 35% for large companies). The average grant was 34k. This part of the SPP helped to lever in over 2m in private sector investment. Table 4-8: Resource Efficiency Capital Grant outputs ( ) Number of projects 52 Number of companies supported 39 Number/ value Value of grants 1,780,531 Average grant per business 34,241 Private sector investment 2,035,853 Total investment 3,816,384 Average value of investment 73,392 Source: SQW analysis of approved RE capital grants 4.29 Similar to the loan scheme, the main strength of the grant funding was to allow the actual implementation of projects, in this case on resource efficiency. In recent years, following the recommendations of the Independent Review of Economic Policy in 2008, there has been a significant decrease in the amount of grant funding provided by INI. However, many smaller firms in Northern Ireland are reluctant to borrow, and many that may be willing have struggled to access external finance because of the contraction in bank lending. The grant funding has allowed firms to make improvements to their equipment and machinery which would otherwise probably not have gone ahead, at least in the short term Some consultees suggested companies should only be allowed one grant per company. It was also stated that committing all of the funding so early in the Programme was perhaps a mistake. There were clearly reasons for this (helping companies to make efficiencies in difficult market conditions, and ensuring the full grant amount was allocated within the three year timescale of the SPP) but the lack of funding to implement projects in the second half of the Programme was highlighted as a potential weakness This need to ensure the grant was allocated was reinforced by the Sustainable Development team and the fact that the final grant payment was paid in October 2014 would appear to justify the early allocation of funding 30

42 4.31 If the decision is taken to focus on loans as the main mechanism for funding businesses to implement projects, it was stated that there would be a case for broadening the loans to cover both energy and resource efficiency projects The evidence highlights that the availability of the Resource Efficiency Capital Grants has proved to be an important and popular element of the Programme. Especially in the context of tightening public sector resources and reduction in funding for business, the availability of this grant was welcomed by INI client executives and other delivery stakeholders. Key findings Over the first two years of the SPP, nearly 1.8m in grants was committed to 52 projects. Some firms were successful with multiple projects, and overall 39 businesses were supported, of which ten were INI account-managed companies. The main strength of the grant funding was to allow the actual implementation of resource efficiency projects. Recommendations R7: Continue to provide a resource efficiency grant - although some stakeholders suggested that the loan scheme could be broadened (to cover both energy and resource efficiency projects), it is recommended that there should continue to be a separate grant element for resource efficiency projects, as there is a specific market failure in this area, relating to a lack of funding models and limited availability of finance. Key Area C: Industrial Symbiosis 4.33 The organisation International Synergies Ltd (ISL) was contracted by INI to deliver the industrial symbiosis element of the SPP. Between 2007 and 2012, ISL was funded by INI to deliver the UK-wide National Industrial Symbiosis Programme (NISP) in Northern Ireland. According to ISL s Delivery Plan for 2012/13 27, during this five year period ISL expanded its regional membership to over 1200 member companies and has achieved 129,560t of landfill diversion, 131,350t of CO2 reduction, diverted 2,189t of hazardous waste. The business benefits have included additional sales of 6.83m, cost savings of 6.56m, private investment of 1.76m, the creation of 32 jobs and the safeguarding of 39 jobs The concept of industrial symbiosis describes a collective approach to competitive advantage through the physical exchange of materials, energy, water and/or by-products, or the shared use of assets, logistics and expertise. 29 ISL uses a bespoke Synergy Management Software System CRISP (Central Resource for Industrial Symbiosis Practitioners) that stores resource information and data on business haves and wants. This system allows ISL to create potential resource matches and track synergies as they progress through to completion. 27 ISL (2012), Industrial Symbiosis Delivery Plan Northern Ireland Note: these figures relate to delivery of the NISP in Northern Ireland WRAP website 31

43 4.35 The approach taken by ISL to support business in developing synergies or relationships is shown below. The time it takes to complete this process and generate the economic and environmental outcomes can vary significantly. Sometimes this takes weeks but it can often take months and in some cases years before a company is matched up and agreement is finalised. As well as supporting the business partners in finalising their agreement, ISL also provides guidance on any legislation related implications e.g. end-of-waste assessments. The average timescale for the process is around four months. Figure 4-2: Overview of industrial symbiosis process Source: ISL 2012/13 Delivery Plan Monitoring performance 4.36 The tables below summarise the activities and outputs reported in ISL s annual reports to INI. In term of the agreed activities over the two years, this part of the programme has broadly met its targets. The only major exception has been the lower than expected number of referrals to the INI Sustainable Development team. Over the two years, 427 businesses have been engaged which is also slightly lower than the original target of In addition to monitoring reports, ISL also provides INI with a copy of the Advisory Visit reports which are produced; these summarise the advice given, areas for potential synergy and the companies resources ( haves and wants ). 32