Sgcp14england

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Sgcp14england

  1. 1. MARKET TRANSFORMING INNOVATION © Sentec 2014 ROUTES TO MARKET FOR ENERGY INNOVATORS Dr Mark England 6th SMART GRIDS & CLEANPOWER CONFERENCE 4 June 2014, Cambridge, UK www.hvm-uk.com
  2. 2. MARKET TRANSFORMING INNOVATION © Sentec 2014 What drives energy innovation ? !   Improvements in efficiency, reliability and cost !   Reduction of technical losses !   Automation and control !   Better quality of supply !   Driven by competition/profit, at least in part !   CO2 emission reduction !   Incorporation of renewable energy into generation !   Electrification of heating and transport !   Improvements in efficiency !   Driven mostly by policy 4th June 2014 2
  3. 3. MARKET TRANSFORMING INNOVATION © Sentec 2014 What limits rate of energy innovation ? !   Speed of technical innovation ? !   No ! !   Commercial and financial constraints !   Regulation and inertia §  Large infrastructure businesses are slow to change §  Regulatory cycle is long and rigid !   Poor linkage between investment and financial return §  Structural – benefit is diffuse across multiple players §  Complexity – multiple business cases across different functions §  Financial – low carbon technologies generally cost more 4th June 2014 3
  4. 4. MARKET TRANSFORMING INNOVATION © Sentec 2014 Energy innovators and their customers !   Most customers are large companies !   Most innovation comes from SME’s !   They struggle to sell to large companies 4th June 2014 4 Company Size AbilitytoInnovate
  5. 5. MARKET TRANSFORMING INNOVATION © Sentec 2014 Alternative routes to market !   License an enabling technology !   License to established large manufacturer !   Help manufacturer to design product !   Collect royalty !   Components !   Sell a key enabling component !   Get manufacturers to make and sell products that use it !   Joint ventures !   Partner with a large business to sell to large energy businesses !   Jointly create and sell products 4th June 2014 5
  6. 6. MARKET TRANSFORMING INNOVATION © Sentec 2014 IP licensing !   Innovations must be in the form of patents !   These can be pending patent applications !   Main claims must be clear and unambiguous !   License end-manufacturers !   They already have market access !   They can achieve scale !   A typical licence deal would include !   An up-front technology access fee !   A small royalty on each product sold !   There are many variables !   Territory, exclusivity, field of use, term, etc 4th June 2014 6
  7. 7. MARKET TRANSFORMING INNOVATION © Sentec 2014 IP licensing example !   Current sensor for electricity meter !   Enabling $5 saving for US-style electricity meter !   Enabling class 0.2 accuracy !   Patented by Sentec in 1999 !   Licensed exclusively to Invensys in 2000 !   Products !   4 generations of electricity meter !   Numerous product variants !   Products still being built, now by Sensus !   Revenues !   Over $10m licensing revenue generated for Sentec 4th June 2014 7
  8. 8. MARKET TRANSFORMING INNOVATION © Sentec 2014 IP licensing – good and bad points !   Advantages !   Low capital and low risk to innovator !   Long-term revenue streams are possible !   Disadvantages !   Hard to sell the licence §  Manufacturer takes all the risk up-front !   Complex commercial deal §  Long negotiations §  Slow sales process !   Deals need to be large to be worth it §  As patent/legal costs can be significant 4th June 2014 8 1000 10000 100000 1000000 10000000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 CumulativeDeployment
  9. 9. MARKET TRANSFORMING INNOVATION © Sentec 2014 Exploiting innovation: components !   Design a key component !   Ring fence the innovation in the component !   Find a route to manufacture !   Contract manufacturing !   Third party making similar products !   Create reference designs using the component !   Evaluation kits, simple products !   Sell components to end product manufacturers !   With appropriate margin !   Direct sales, catalogues, distributors 4th June 2014 9
  10. 10. MARKET TRANSFORMING INNOVATION © Sentec 2014 Component example: MicroMonitor !   Target end products: ubiquitous low-cost energy monitors !   Goal: built into every appliance or lead !   Key component !   Energy measurement and communications protocol IC !   Tiny package, minimal additional components !   Manufacturing route !   Existing semiconductor manufacturer !   Customised version of one of their existing chips !   Sales channel !   Direct engagement with energy monitor manufacturers 4th June 2014 10
  11. 11. MARKET TRANSFORMING INNOVATION © Sentec 2014 Components – good and bad points !   Advantages !   Manageable product development costs !   Not dependent on obtaining broad patent coverage !   Simple commercial model for product manufacturers !   Extensible business model – new components !   Wide range of products may result !   Disadvantages !   Revenue stream may be short lived (product lifecycle, IP) !   Share of final product margin may be small §  Depending on relative value/complexity of component 4th June 2014 11
  12. 12. MARKET TRANSFORMING INNOVATION © Sentec 2014 Innovation: joint venture !   Partner with a large organisation !   Complementary skills – e.g. manufacturing !   Jointly create new products !   Share the product development effort !   Provide the innovation !   Market and sell the products !   Partner has sales and marketing capability !   Partner contracts with end customers 4th June 2014 12
  13. 13. MARKET TRANSFORMING INNOVATION © Sentec 2014 Joint venture example: GridKey !   Low-voltage network monitor !   Customers: Distribution Network Operators !   Innovation: retrofittable without interruption !   Partnership between Sentec and Selex ES !   Sentec manufactures innovative current sensors !   Selex ES manufactures electronics !   Results in UK !   5 out of 6 DNO’s are customers !   800 systems installed to date !   Best system in independent testing 4th June 2014 13
  14. 14. MARKET TRANSFORMING INNOVATION © Sentec 2014 Joint venture: pro’s and con’s !   Advantages !   Successfully overcomes barrier to sales §  Commercial terms §  Warranties §  Credibility !   Disadvantages !   Large investment in product development !   Margin shared with JV partner !   Culture clash with large JV partner 4th June 2014 14
  15. 15. MARKET TRANSFORMING INNOVATION © Sentec 2014 Innovation winners and losers !   Winners !   Solutions that generate “enough” benefit !   Commercial deals that encapsulate the benefits !   The first solution that generates customer traction !   Losers !   The “best” technology, but with no customer traction !   Solutions where the route to market is blocked !   Innovations with diffuse benefits !   Mandated or regulated solutions 4th June 2014 15
  16. 16. MARKET TRANSFORMING INNOVATION © Sentec 2014 4th June 2014 Dr Mark England EVP Smart Grid mark.england@sentec.co.uk | +44 1223 303800 | www.sentec.co.uk Sentec 5 The Westbrook Centre n Milton Road n Cambridge n CB4 1YG n UK 16392PPT14 16

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