DETAILED ASSESSMENT OF THE MARKET POTENTIAL, AND DEMAND FOR, AN EU ETV SCHEME. Contact name and address for this study:

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1 DETAILED ASSESSMENT OF THE MARKET POTENTIAL, AND DEMAND FOR, AN EU ETV SCHEME BUSINESS CASE ANNEXES To the European Commission DG Environment Under Framework Contract No. DG BUDG No BUDG06/PO/01/LOT no. 1 ABAC EU ETV Scheme June 2011 Contact name and address for this study: Jonathan Lonsdale, Principal jonathan.lonsdale@ghkint.com Tel: ; Fax: GHK Consulting, Clerkenwell House, 67 Clerkenwell Road European Policy Evaluation Consortium () Brussels contact address: 146 Rue Royale B-1000 Brussels Tel: Fax: contact@epec.info URL:

2 This report has been produced by the consortium with contributions from: Jonathan Lonsdale Mark Peacock Nihar Shembavnekar Ali Erbilgic Tamara Kulyk Philippe Larrue Patrick Eparvier Carlos Hinojosa The opinions expressed in this study are those of the authors and do not necessarily reflect the views of the European Commission

3 CONTENTS Annex 1 BUSINESS CASE: INSULATION... 1 Annex 2 BUSINESS CASE: BIOBASED PRODUCTS Annex 3 BUSINESS CASE: SITE INVESTIGATION TOOLS Annex 4 BUSINESS CASE: IN-LINE WATER MONITORING Annex 5 BUSINESS CASE: MICRO COMBINED HEAT AND POWER Annex 6 BUSINESS CASE: SOLAR HYBRID TECHNOLOGIES Annex 7 BUSINESS CASE: ANAEROBIC DIGESTION

4 ANNEX 1 BUSINESS CASE: INSULATION The following business case has been prepared on the basis of seven interviews. The interviews include four company representatives and three certification bodies. A total of eight companies and eight certification bodies and testing centres were contacted. A1.1 Introduction This business case builds on market analysis findings of the Cleaner Production and Processes technology area and Low Carbon Building Materials technology group (see main report). This showed that overall, the low carbon building materials technology group could strongly benefit from an ETV due to the lack of international recognition of existing certification schemes and the barriers to growth this may create. The insulation sector is a very large market (e.g. floor, wall and roof insulation as well as pipework) within which companies are required to obtain certification within different member states in order to access new markets. Despite the presence of a number of very large companies that dominate the current supply side, the insulation sector is also characterised by the presence of a large constellation of SMEs, often working at the local or national level, bringing to market both renewable-based and leading edge innovative insulation products (e.g. aerogels). These producers often have to prove to the market the extent to which some of their products offer both superior performance and stronger environmental credentials than traditional solutions. There are two dimensions to the environmental innovation of new insulation materials. In some cases, innovation is oriented towards the content of the insulation product (i.e. insulation panels made of biomass). In other cases, insulators are produced using traditional materials while achieving higher levels of performance, notably in terms of thermal transmission. Most often however, these two dimensions go hand in hand. There are two points which are important to consider when analysing the potential of an ETV in this sector. First, because insulation materials are parts of buildings, the safety for use dimension is crucial in product testing and certification. Second, buildings are long-term creations and as such, establishing long-term performance of innovative insulators is also a key element. The construction sector is highly conservative, because producers often have to deal with safety and insurances issues. Performance claims are not only insulation-related, they also concern the water, fire or sound resistance of the product. There are two major and overlapping uncertainties over performance claims in the insulation sector: medium to long-term performance (dynamic performance), and performance under real-life operating conditions. This is highly relevant for the market because the performance of the insulation product is dependent on the surrounding environment and materials. In other words, performance of insulation materials may vary considerably based on the types of additional products used in the construction of the building. In addition, the ease with which these products can be manipulated by installers is also a key priority for consumers. 1

5 A1.2 Current status of the market and technology A1.2.1 Nature of the market opportunity The insulation market is a mature market, with a large number of technologies available. However, innovative technologies represent a small share of the total turnover of the insulation market in the European Union (around 5%). Some member states dominate the innovative market: Nordic countries, Germany and Austria. With policy makers and civil society increasingly focusing on energy efficiency and the environmental impact of construction products, more innovative products are entering the market. Due to the highly competitive nature of the market, there is an innovation push for highly energy-efficient technologies. The new building business relies increasingly on green-oriented products, and the same process is starting in the retrofit sector even though retrofit activities are far less targeted by regulation. Potentially, the market for new high efficiency technologies in the insulation sector is unlimited. Even when taking into account the diversity of insulation needs across Europe (depending for instance on climate specificities), all individual homes, buildings and industries could be the target of these technologies. Growing environmental regulation is likely to provide producers with great opportunities to expand this market. Overall, the market opportunity for EU producers of new insulation technologies is high. With energy efficiency being a European flagship action in the EU 2020 strategy, awareness among producers and end users should rise, and drive the market to further take into account the environmental-related performance of the products. A1.3 Innovation drivers A1.3.1 Main EU and Member states regulations influencing the development of the technology At EU level, the Energy Efficiency in Buildings Directive 2002/91/EC (2002) is the central piece of regulation. This directive has far reaching implications for home-owners and the construction sector. It has helped turn attention towards the energy efficiency of construction products, especially insulating products. This has stimulated R&D expenditure in insulation technologies. At the member state level regulation is indeed particularly relevant to the insulation sector. The diversity in climate and land conditions across countries has meant construction regulations vary significantly. Several member states have adopted very demanding regulation for insulation. For example, in France, the new building regulation code (RT 2012) demands high energetic performance for new buildings and takes into account the insulating capacity of the building. The UK has developed a special code for sustainable homes (2007), aimed at changing practices in the construction of new houses by introducing minimal standards for energy efficiency. Owing to differences in national construction regulations and building standards, the construction material market is highly fragmented. Companies have a very difficult time entering new markets due to the cost of adapting their products to local regulations. A1.3.2 Non-regulatory end user requirements on innovation and performance With rising energy prices, reduction of energy needs is of great concern for final users. Fundamentally, insulating products aim to reduce the demand and use of energy. This 2

6 explains the high level of acceptance from home and building owners regarding the use of high performing insulating materials. End users choice is also price-driven: the product and duration (life-long cycle price) have great influence on end users, explaining why innovative companies focus on R&D in order to develop products at competitive prices. The economic efficiency of new technology use is therefore as important as their environmental impact. In addition to the demand for products with greater insulating properties, users also express concerns regarding safety for use. In particular, high performance against fire and water damages. In the end, the users demand guarantees across supporting aspects of the insulation products that go beyond its core function. A1.4 Current and future performance of technologies A1.4.1 A1.4.2 A1.4.3 Current technology provision A small number of large companies, such as Rockwool (Denmark), Saint-Gobain (France), Knauf insulation (Germany) or Uralita (Spain) dominate the European insulation market. These companies generally offer traditional products, derived from glass or plastic and invest heavily in R&D activities, focusing on increasing the lambda value of their products and making the products thinner. At the same time, hundreds of innovative micro and SMEs are trying to access the insulation market, offering highly innovative products (e.g. aerogels, eco-based materials, etc.). These SMEs however more often target local or national markets, whereas large companies operate internationally. Indication of State-of-the-art for current technologies Because building-related energy consumption represents a large share of the total energy consumption, the opportunity to introduce more effective insulating products is obvious. Reducing energy consumption and the carbon footprint of buildings at the same time is possible, by relying on new materials but also by working on the interaction between very diverse products. It is indeed the effective combination of these different products that helps increase the energy efficiency of buildings. The idea is to reduce as much as possible the lambda (λ) value of the entire building 1. The development of more energy efficient technologies has then to be coupled with development of technologies used to monitor and assess a building s real performance. Technology developers are also trying to reduce the thickness of insulating products while increasing their insulating properties. Providing the general public with thinner and more efficient insulating products is a good opportunity for new technology producers to introduce radically innovative products. Likely developments of technology performance standards The development of performance standards in this particular sector will be determined by the regulation and building requirements adopted at the national and European level. Therefore, predicting the evolution of performance standards is not always easy. 1 The lambda value, or thermal conductivity, is the rate at which heat is transmitted through a material, measured in watts per square metre of surface area for a temperature gradient of one Kelvin per meter thickness, simplified in W/mK. The lower the value, the better the thermal efficiency of the material. 3

7 However, today s trends in the sector provide us with hints regarding likely development of technology performance standards. First, companies focus on increasing the insulating capacity of their products, in order to cope with national or European regulations. Second, production is becoming increasingly green-oriented, using renewable materials as raw materials and aggregates to their final product. Third, some producers are trying to reduce the thickness of their products (that is especially the case with aerogels, which is two times thinner than standard products, with better insulation properties). In addition, the long-term performance of new products is also tested, and is likely to increase in oncoming years. A1.5 Technology developers being examined in this business case Company A - develops aerogel-based insulation products that may be used in all types of buildings. It characterises itself as an R&D company working mainly on a businessto-business basis. It develops aerogel-based materials for producers of insulation materials, for final users. The company spends a large amount of its budget on R&D, in order to reduce the total cost of its products (aerogel-based products are generally more expensive than traditional products). Company B - has developed pre-insulated wall panels from recycled material such as paper. The product is currently in a pre-commercial stage, within two months of being available on the market. Regarding environment-related performance, the product has a very low carbon footprint in comparison to traditional solutions, mainly as a result of the low-carbon content of the product (a paper industry by-product). Company C - has developed insulating panels from hemp. Constructors have been using hemp as an insulation product for a very long time, but the raw material is now being used as an innovative material, given its green credentials combined with high insulation properties. With three products on the market, and two in development, it operates across the EU including in Germany, France, Sweden and Czech Republic. Company D - is a multinational producer of construction materials. It recently developed a highly innovative binding technology, used in traditional insulation products (mineral or glass wool). The new product is derived from renewable materials, making the binding more sustainable. It is a radical innovation, in comparison to oil-based chemicals generally used for binding insulation materials. The company also is nowadays working on instruments to better assess the overall insulation properties of buildings. Table A1.1: Overview of technology developers in this business case Organisation information Technology developer A Technology developer B Technology developer C Technology developer D Member State Sweden UK / Ireland Germany Germany Size Micro Small Small Large Age (years) Products in development Market ready products Products in market NA 3 2 NA NA 4 1 NA NA

8 Product description Environmentally friendly and recyclable aerogels for insulation purposes Pre-insulated panel from recycled materials Insulating panels from hemp Glucose-based insulation binder technology NEED FOR ETV A1.6 Routes to market for companies A1.6.1 Summary of the key barriers to market acceptance Table A1.2 illustrates the main barriers encountered by companies wishing to place new insulation products on the market. Responses generally depend on the type of company and the product being considered. The main barrier, encountered by three companies, is that their product costs more than incumbent technologies... Two companies have difficulties demonstrating performance in real world operational conditions. Table A1.2: Rationale for ETV - Barriers Technology Developer Barriers A B C D Our new product price is higher than incumbent technologies X X X Customers are uncertain as to how suitable our product is to their operations (i.e. fitness for use) X We lack legitimacy for our environmental performance claims X We are unable to demonstrate the performance of our technology in real world operational conditions Our customers are highly risk averse and prefer to buy market proven technologies X X X Validation procedures for this new technology are very onerous X A1.6.2 Current standards, norms and labelling that are used for the technology (family) Due to the high level of maturity of the insulation sector, there is a wide array of standards and certification schemes that apply to this type of material. Existing mechanisms are either implemented at the European level or at the national level. European standards and norms In order to sell their products in the European Economic Area (EEA), building products have to conform with legally required minimum safety characteristics, leading to the CE marking. This is one of the outcomes of the Energy Efficiency in Buildings Directive. This Directive also paved the way for the development of European standard (EN). European standards are adopted by the CEN (European Committee for Standardization 2 ) and apply to all Member States, and supercede all existing conflicting 2 CEN draws up voluntary technical specifications to help achieve the Single Market in Europe 5

9 national standards. Members of the CEN have now developed the Keymark for thermal insulation products. This is a voluntary quality mark, aimed to show insulation products conformity to the array of European product standards. The Keymark is a voluntary third-party certification based on the following product standards: DIN EN 13162: "Thermal insulation products for buildings - Factory made mineral wool (MW) products - Specification" DIN EN 13163: "Thermal insulation products for buildings - Factory made products of expanded polystyrene (EPS) Specification" DIN EN 13164:2001:10 "Thermal insulation products for buildings - Factory made products of extruded polystyrene foam (XPS) Specification" DIN EN 13165: "Thermal insulation products for buildings - Factory made rigid polyurethane foam (PUR) products Specification" DIN EN 13166: "Thermal insulation products for buildings - Factory made products of phenolic foam (PF) - Specification" DIN EN 13167: "Thermal insulation products for buildings - Factory made cellular glass (CG) products - Specification" DIN EN 13168: "Thermal insulation products for buildings - Factory made wood wool (WW) products - Specification" DIN EN 13169: "Thermal insulation products for buildings - Factory made products of expanded perlite (EPB) Specification" DIN EN 13170: "Thermal insulation products for buildings - Factory made products of expanded cork (ICB) - Specification" DIN EN 13171: "Thermal insulation products for buildings - Factory made wood fibre (WF) products - Specification" Another way to gain European technical approval is to obtain its approval from a member of the UEAtc (The European Union of Agrément 3 ). The UEAtc was created in the 1960 s in order to facilitate international trade of construction products from one European country to another. Members of the UEAtc are responsible for issuing national technical approvals, and through the UEAtc it is possible to obtain approval in another country based on work already carried out. The technical approval is a useful tool to assess the fitness of use of a product. Membership to the UEAtc is voluntary and the methodology for approvals is made through consensus among members. National Agréments and technical assessments Most national approval/certification bodies offer voluntary product certification that relate to testing and assessment to national standards or other normative documents. The British Board of Agrément (BBA - UK), or CSTB (in France) offer Agrément certificates, based on rigorous examination of the product, the production process and its fitness for use and safety. This process helps move the product from a confidential market to the general market. However, this type of certification is regard by producers as onerous because it is a long and expensive process and better fit for mature products with a history on the market. As a result, there is demand for a similar, less 3 UEAtc is the European network of independent institutes, Centres or Organisations that are engaged in the issue of technical approvals for innovative construction products or systems 6

10 burdensome, type of certification which which is more adapted for market-ready innovative products. In response to this demand, a limited number of national certification bodies such as BBA and CSTB have developed specific mechanisms for innovative products, known as assessment reports 4. These offer producers a first point of entry into the market and larger scale performance testing (they can be a precursor for an Agrément certificate for example). Assessment reports also help innovative producers reassure first consumers and insurance companies about the readiness of the products and the fitness for use. It is worth highlighting however that the certification landscape in Europe in the field of construction materials remains strongly fragmented and confined to each Member State. This reflects differences g among national regulatory frameworks and building requirements; and the differences in testing and certification cultures in each Member State. For instance, Belgian or French certification bodies take into account the fitness for intended use of a product when assessing its performance (dynamic performance), whereas in Germany certification tends to concentrate performance of the product in itself (static performance). Additional National labels Several member states have developed green labels, such as Natureplus in Germany, Ecolabel in Scandinavia or Environmental Profile certification (issued by the BBA). These labels aim to differentiate eco-friendly products from traditional products. However, most of these labels do not provide consumers with data on the insulating performance of the product. At the European level, the EU Ecolabel aims to provide consumers with sufficient information about the environmental performance of a product. A1.6.3 Trialling and demonstration of technologies Company A - has conducted extensive in-house trials, in addition to working with intermediaries (installers, architects, construction companies) who provide the company with specific on-site testing requests. Company B - uses internal tests to carry out demonstration of its product. It has already spent 100,000 in R&D for its product, with an annual testing budget of about 20,000. The key challenge is to find a way to differentiate its product from traditional products to increase its access to the market. Their product has very good carbon footprint credentials, but there are no existing mechanisms that allow the display and marketing of this. Company C - has carried out a number of tests, both internally and through third-party testing. Through this it has obtained several national or international labels, such as Natureplus or Stiftung Warentest. It is well able to carry out trialling and demonstration of technologies and as a result, these do not necessarily represent a burden for them. Company D - has developed over the years considerable experience in quality procedures and internal testing within its own facilities A1.7 Rationale and value added for technology developers from undertaking an ETV 4 Pass Innovation in France 7

11 A1.7.1 Overview of companies issues Table A1.3 illustrates the mixed views insulation companies have regarding the benefits from the potential introduction of an ETV scheme. Aside from company A which did not identify any potential benefit from an ETV scheme, the other companies thought an ETV would increase the speed at which their product could reach the market. Additional benefits would be to facilitate entry into other EU markets and increase market acceptance by customers. 8

12 Table A1.3: Benefits from having an ETV for technology developers Technology Developer Benefits of ETV A B C D Facilitates market entry for our product into other EU markets X X Facilitates market entry for our product into non-eu markets X Increases the speed at which our product reaches market X X X Increases market acceptance of our product by customers X X Clients gain insights on environmental impacts from our product X No benefit from an ETV X Company A - carries out itesting internally, working with final producers to develop specific products. An ETV scheme would have limited added value, because the product has no real problem entering the European market. Their production is largely driven by high consumer demand and their aerogel-based products are only slightly more expensive than usual products, allowing them to be competitive in the market. Company B - sees the lack of differentiation between its environmentally-friendly product and traditional products as its main barrier to market entry. It is looking for a way (label, etc.) to show the added sustainability value of its product, in terms of its content and method of production. It has no problem testing the insulating properties of its product, so the added value of an ETV scheme would be limited. However, it would help to access the market faster, by increasing end user confidence in the product. Company C - uses both internal and external product testing, but could use ETV as a complementary route to market, both inside and outside the EU. The increased speed for entering the market which an ETV scheme could facilitate would be an additional benefit given the large amount of money it has spent in developing and testing its product. Company D - sees the real added value of ETV in reducing the number of testing and verification processes required to enter national markets. ETV could increase the speed at which its product reaches market. It should also help reduce end user (as well as insurance companies) reluctance to use innovative products (include also insurance companies). A1.7.2 Conclusions - why developers of this technology would want to undertake an ETV In the insulation market, where there is already a significant number of national and European performance certifications, testing and labels, an ETV scheme would have added value for developers. It would: allow them to gain credibility among end consumers; potentially reduce the number of testing and certification processes SMEs would have to undergo before entering different European markets; increase the speed at which products enter the market. 9

13 A1.7.3 Stakeholder views on the need for ETV in this technology area The development of ever more stringent regulations for improved insulation performance is stimulating the need for more innovative products to enter the market. Tightening regulations have also paved the way for more demanding testing and evaluation from certification and verification bodies. According to representatives from several verification bodies, the use for ETV would be great if it gives developers a way to differentiate products on the market. However, verification bodies in the UK, France and Belgium have found it difficult to understand the added value of an ETV, compared to the services they are already carrying out, and how it could be built and structured. The common concern is that the methodologies and priorities among verification bodies across Europe, as well as among national regulators is too diverse. Differences in geography (i.e. climate) or evaluation history have led to very different views about what should or should not be assessed and accepted when testing a new product. In conclusion, verification bodies want to emphasize the specificity of testing in the context of insulating products. Because buildings must have specific safety and fireresistance standards, testing and verification are not always simple and come become highly politicised. An ETV scheme would help innovative producers as long as it relies on rigorous testing of fitness for intended use and life-long performance. COSTS AND WILLINGNESS TO PAY FOR ETV A1.8 Introduction This section reviews the implementing, operating and user costs of an ETV scheme. It provides an overview of the likely costs to developers including: 1. Cost of testing the technology to enable it to apply to the ETV; 2. Costs of testing the technology in the event that the verification Body requires further testing; 3. Official ETV fee which the developer / vendor will need to pay to the verification programme; 4. Other internal costs to the firms. The section continues by looking at the costs of supplying verification services to companies. A1.9 The costs of potential verification for technology developers Company A - has invested approximately 70,000 in testing equipment. A large amount of work time is dedicated to R&D and testing, as the company works directly with final producers to develop new products with very specific use. 10

14 Company B - has invested over 100,000 to date in research and development, and spends 20,000 every year on testing (with administrative cost being around 10,000). It considers that the verification fee range should not be more than 5,000. Company C - has invested around 200,000 in R&D for its hemp-based product, with an annual testing budget around 15,000 (including 5,000 for operational costs). It considers the verification fee range has to be around 3,000, emphasising the heavy existing costs of product testing ( 6,000) and certification ( 4,000). Company D - has spent approximately 200,000 per year in testing its product. Testing for new products can take up to 10 years for very innovative or step-changing products. The company is unable to assess specific costs of verification given the very large amount of time and money spent on various testing and verification procedures. Table A1.4 summarises the potential cost of verification for some of the companies interviewed in this business case. Despite the limited information provided, it is possible to conclude that companies are: not willing to pay more than 5,000 for a verification; generally only willing to wait approximately 2 months for verification; Table A1.4: Costs to developers of undertaking testing and willingness to pay for verification for ETV Technology Developer A B C D Annual testing budget NA 20k 15k 200k Total R&D invested to date5 NA 100k 200k 1m Willingness to pay ETV fee (a) NA < 5k 3k NA Administration costs for verification (b) NA 10k 5k NA Total costs for verification (a + b) NA 15k 8k NA Maximum amount of time willing to wait for verification NA 2 months 2 months NA A1.10 The costs of supplying verification services to technology developers A Overview of costs The following tables show that the cost of testing largely depends on the results companies want to achieve: simple testing can be relatively cheap; further evaluations (including assessment report of certification) can however cost up to 35,000 depending on the complexity of the tests. Table A1.5: Costs of providing testing and verification services across the insulation sector 11

15 Certification Assessment report Testing Belgium 10k - - France 15-20k 12k 3-4k UK 17 to 35k 12k - A Summary of what would be the cost for developers of this technology when undertaking an ETV From the various interviews carried out with companies and verification bodies, it is possible to draw some conclusions regarding the potential cost of an ETV for developers in the insulation sector. Most of the estimates provided in the following sections are calculated by using existing testing and certification costs as proxies. The verification fee for an insulating product should range from 5,000 to 15,000, if no additional testing is required. Verification fees will vary depending on the: number of parameters that firms are seeking to verify - insulation properties, moisture, fire or noise resistance, relation with other building products; number of parameters ETV encompasses; complexity and novelty of the technology; tests the company has previously done and the need for additional testing; location of the certification and testing bodies. Compared to the cost technology producers are willing to pay for technology verification, there could be a difference of up to 5,000 approximately between the real price of verification and the maximum price producers would be willing to pay. Certification and testing bodies estimate the time for certification to be between 3 months and one year, depending on the numbers of parameters and the novelty of the products. They also stated the time needed for verification must be not too long, the life cycle of an insulating product being generally around 5 years. ETV MARKET POTENTIAL A1.11 Conclusions from the business case A Business case conclusions A European-wide verification scheme offers the possibility of gaining recognition of the performance levels of a product in multiple countries, reducing the time and cost of obtaining multiple certifications. An ETV scheme could also be set up to represent a time and cost-friendly alternative to existing certifications and agréments, which are often difficult to obtain for young companies. Insulation materials represent a dynamic, high growth sector that will continue to expand because of rising consumer demand from and more stringent building requirements and regulations. Innovation is thus bound to flourish, particularly throughout the constellation of SMEs making up the 12

16 sector. The market is still currently largely confined to national borders, and companies often encounter difficulties entering new markets, due to the differences in stringent building regulations and certification cultures among member states. An ETV however would be created within the context of a pre-existing set of national and European certification and testing schemes and risks being drowned in this spaghetti bowl of schemes. In addition, Member States and additional stakeholders may not recognise ETV as credible and relevant owing to the particular demands of national construction sectors, for example safety issues, insurance certification and national building requirements. Key challenges for technology The main challenges are: how to assess the life-long performance of a new product. Evaluators and product developers need to do more research in order to provide consumers with valid indicators assessing the life-long performance of their products; Assessing the suitability of a new insulation product according to insulation performance as well as other criteria, for example safety, resistance to fire or moisture. This could only rely on a set of well developed and recognised tests, built on agreement between testing and certification organisations; Accommodating differences in construction material markets and building standards and managing a multiplicity of certifications in accordance to each national market. Value added for firms undertaking the ETV For this technology family, the creation of an ETV scheme would: facilitate access to the EU market, particularly for SMEs; increase the speed for accessing the market for innovative companies; allow greater possibilities for differentiation between average and high performing products. In a broader sense, an ETV scheme would provide a Europe-wide verification which would sit above member state certifications. Assuming Member States accept ETV, there is an opportunity to obtain fast track approval (saving costs to the developer). Finally, ETV could represent a shorter, less expensive alternative to traditional accreditations/certifications such as the European Keymark verification. This would be benefit small companies in particular, which lack a sales record, as well as the necessary cash flow in order to obtain full accreditation or certification. Potential number of firms who might be interested in scheme The number of firms who might be interested in the ETV scheme is difficult to assess. A rough estimate of the number of firms who might be interested in an ETV is between 100 and 200 the insulation sector is dominated by major companies across the EU but there are a large number of SMEs and numerous innovative companies. Overall, the number of products and national regulations is also very high, so the issues companies face are rather unique. We estimate that given the fairly low demand for ETV that the number of developers likely to apply for an ETV over the next 1-2 years would be between 10 to

17 A Sector wide conclusions This business case can be used to draw conclusions about the need for an ETV scheme across the wider low carbon building technology group. The insulation sector faces the same commercialisation challenges and framework conditions (existing standards, certifications, testing procedures) as other low carbon building sectors. It is important to note however, that there may be differences among products which may affect the rationale for an ETV scheme. These differences generally relate to the: maturity of the technology group/family; existence of methods of performance certification and testing, notably at the European level; existence of standards, and standardised testing methods; size and reputation of the main innovators; rate of innovation; differences among Member State regulatory frameworks, and the willingness to recognise a European verification scheme. As a result, this case study s conclusions should be applied cautiously to other technology families. A1.12 Operational challenges for an ETV in this area A Possible funding support mechanisms for ETV users There are a limited number of member state and European funding mechanisms available for market introduction projects in the insulation field. However a detailed analysis of this issue, especially at the national level, would require looking into the hundreds of innovation support mechanisms in all Member States. For example, in France, companies may receive financial assistance for insulation projects within the framework of the national competitiveness cluster policy. There is a dedicated cluster to positive energy building technologies, Alsace Energivie. There are also a number of funding opportunities at the European level, mainly through the Competitiveness and Innovation Framework Programme (CIP). An example of a CIP-funded project is MDFCYCLE, aimed at establishing a functional pilot plant to convert waste medium density fibreboard into recycled wood fibre for insulation purposes. A Number and location of verification bodies required to establish verification at the European level Due to the size of the European insulation sector, and the broader construction materials sector, establishing an ETV scheme would probably require establishing at least three verification bodies, whose work could be carried out in partnership with member state certification and testing bodies. A Potential barriers to market introduction and diffusion The main challenges for the implementation of an ETV scheme dedicated to this technology group are: 14

18 The existence of a well developed and recognised set of testing and certification organisations, which operate at the European level; The fact that most companies must go through a long and expensive testing and certification process, limiting their capacity to undergo additional verification; The importance of the safety dimension in construction product testing and certification. Technology producers, public authorities and insurers are often hesitant to recognise the value of any certification or testing scheme, unless they can be fully certain of the precision and technical quality of these schemes; The considerable differences that exist among Member States in terms of building requirements and regulations, as well as certification and testing cultures. This may reduce the possibilities of an ETV being accepted and recognised across all Member States. In addition to this, technology producers and certification bodies expressed difficulties identifying the exact role, objectives and added value of an ETV scheme. As a result, their willingness to participate, and by extension their willingness to pay, is strongly reduced. A1.13 Making a success of ETV how to maximise value going forward The success of an ETV will depend on a number of underpinning issues including: Marketing the ETV brand: As most other labels and certifications, the ETV brand will have to be strongly marketed in order to increase its visibility. Technical excellence will not suffice to ensure ETV s success. Instead ETV operators must ensure that ETV is branded correctly, to technology developers and consumers. Making the need visible and understood: Based on the experience preparing this business case, it soon became clear that technology developers and certification bodies were unable to identify the need an ETV scheme would answer to. Despite their understanding of the general logic behind ETV (improve market entry for market-ready innovative environmental technologies), it was unclear to these stakeholders where the added value of an ETV lies in comparison to existing routes to the market. It will therefore be necessary to effectively communication on the rationale of an ETV, the potential benefits for users, and its position in the landscape to existing certification, testing and labelling schemes. Building on complementarities: Due to the existence of multiple testing and certification alternatives already on the market both at the national and European level, an ETV scheme should seek to develop complementarities with these mechanisms. For example, an ETV scheme could fast-track the certification under the Keymark, or other multiple national certifications schemes, those offered by the British Board of Agrément. The links between these types of mechanism and ETV would have to be made clear and explicit, and would have to be institutionalised. Making it cost-competitive and reasonably simple: ETV will have to be cost competitive in comparison to existing performance certification, testing and 15

19 labelling mechanisms. In addition to this, the procedure to obtain the verification should be as simple and transparent as possible. 16

20 17

21 ANNEX 2 BUSINESS CASE: BIOBASED PRODUCTS The following business case has been prepared on the basis of seven interviews. The interviews include four company representatives, one R&D centre, one trade association, one technology centre and one certification body. A total of 12 companies were contacted as well as two certification bodies. A2.1 Introduction This business case builds on the market analysis of the biobased products 6 technology group (see main report) which found that the overall turnover for this market is huge and growing with particularly large potential markets including automotive, aerospace and construction sectors. Market opportunities exist for biocomposite materials to replace expensive and energy intensive metals or finite fossil fuel derived plastics (particularly with rising oil prices). This creates potentially large raw materials cost savings combined with enhanced sustainability. Several large players dominate the EU biobased product market, although a very large number of SMEs are trying to enter it. However, these firms face considerable challenges, including: they are often in pre-profit phase due to the need for long-term investments required to commercialise products; there is a lack of existing standards for biobased products; biobased products are a higher price than standard products; and hence, the necessity of highlighting the additionality from specific characteristics of biobased products, such as biodegradability, recyclability, low toxicity, etc. Being able to prove biobased product performance against standard products through an ETV would help SMEs in accessing the EU market. A2.2 Current status of the market and technology Novel bioplastics have been sold for over 20 years. Manufactured from either biobased or petrochemical feedstocks, they were originally intended to help reduce waste and free up landfill capacity by rapidly biodegrading. Market interest for biobased plastics often came from producers of single use applications. The focus has now shifted towards the advantages of biodegradabilty in helping to counter climate change. Bioplastics are compounds based on a polymer such as PLA or PHA and additives (e.g. processing aids, stabilisers, colorants, etc.). The polymers can be made from up to 100% renewable resources; colorants and additives can also be formulated from renewable resources. Biodegradability 7 is dependent on the chemical structure rather than the origin of the raw materials. As a result, there are synthetic polymers, which are certified biodegradable. This distinguishes them from conventional standard plastics, which are neither biodegradable nor compostable. A2.1 shows the level of biodegradability of the main products. 6 Biobased products are commercial or industrial products composed, in whole or in significant part, of biological products or renewable domestic agricultural materials (including plant, animal, and marine materials) or forestry material. 7 The terms biobased and biodegradability may be related, but they are not synonymous nor are they interchangeable. If a material is biobased it comes from plants or animals, but it does not necessarily follow that it is biodegradable. A material is biodegradable only if microbes in the environment can break it down and use it as a food source. 18

22 Figure A2.1: Current and emerging biobased plastics and their biodegradability Source: PROBIBP, Product overview and market projections of emerging biobased plastics, University of Utrecht, June The EU currently accounts for about 30% of the global 58 billion biobased products market which is expected to more than treble by In 2010, biobased products 9 accounted for 10% of sales within the global chemical industry, accounting for $125 billion ( 90 billion) in value. This share could rise to as much as 20% depending on the development of technologies, feedstock prices and an appropriate policy framework. Germany is the third-largest producer of plastics worldwide (7.5% market share) and has a 24% market share in the EU. Accordingly, plastics producers - as well as converters interested in biobased materials - find ideal framework conditions for their businesses in Germany which holds a leading position in the bioplastics industry worldwide. Several biobased products are already sold in the European market. For example, the chemical industry currently uses 8-10% renewable raw materials to produce various plastics. These plastics are used for food packaging, bags, hygiene products, packaging for biological waste, plant pots, etc. The current market is characterized by high growth and strong diversification. Not only is there a growing number of materials, applications and products, but the number of manufacturers, converters and end-users has also increased considerably from a base that a few years ago was dominated by US food major, Cargill. Significant financial investments have been made into production and marketing 10. In 2010 the global market for bioplastics achieved estimated sales of 2 billion. The market is expected to grow by 32.4% a year from 2011 to 2015, reaching an estimated value of 8.2 billion in The worldwide capacity of biobased plastics is expected to increase from 0.36Mt to 2.3Mt in 2013 and to 3.5Mt in This is equivalent to average annual growth rates of 36% between 2007 and 2013 and 6% between 2013 and Biochem, Putting SMEs at the core of bio innovation, Definition of bio-based products refers to industrial products made from biological feedstock and/or biotechnological products EL Insights, Critical Insights into Energy and Environmental Technology - Bioplastics, Issue # 17,

23 A2.3 Innovation drivers A2.3.1 Main EU and Member states regulations influencing the development of the technology The key policy drivers for the biobased market and bioplastics in particular include the: Renewed EU Sustainable Development Strategy (2006) 12 ; Environmental policies and legislation - with respect to packaging, waste, landfill, pollution control, etc.; Lead Market Initiative for biobased products 13 - this aims to stimulate EU demand for promising new innovative technologies or business models, resulting in early adoption of new business solutions. It is intended to create a virtuous circle of growing demand that will in turn reduce costs through economies of scale, rapid product and production improvements and a new cycle of innovation. This will fuel further demand and spinouts into the global market 14. The action plan covers issues relating to standardisation, labelling and certification to ensure the quality and consumer information on the new products. A2.3.2 Non-regulatory end user requirements on innovation and performance The key non-regulatory drivers of innovation include: Price rises for fossil fuels; Reduced availability of fossil fuels in the future; Opportunities to substitute other solid resources with biobased products; Changes in consumer behaviour. There is a presumption that in the long-term, due to fossil fuel scarcity and resulting price increases together with climate change pressures, there will be a shift from petroleum and gas based raw materials towards biobased products. However, knowing at what point this switch will occur is difficult to determine and creates market uncertainty. Biobased materials can substitute metals and mineral-based materials in certain applications, thus helping to free up potentially valuable resources for other uses. In some cases, these can also offer new functionalities and higher product qualities, opening up new business opportunities. Advanced biomass production and new bio-chemical conversion technologies can also lower resource use (e.g. energy, water and other inputs) in the production of existing and new industrial (biobased) products, thereby contributing to more sustainable industrial production and greener industries. The recyclability, reduced greenhouse gas emissions, high biodegradability and full compostability is also appealing to the European consumer, whose behaviour is increasingly affected by green product qualities. Recent research also shows consumers willingness to pay a premium for more sustainable products. 12 European Commission, Renewed EU Sustainable Development Strategy, European Commission, Accelerating the Development of the Market for Bio-based Products in Europe Report of the taskforce on bio-based products, European Commission, Accelerating the Development of the Market for Bio-based Products in Europe Report of the taskforce on bio-based products,