Vantage Power benefits from the Energy Entrepreneurs Fund – The Telegraph

“When we look at the big challenges that we face as a society now – clear air, carbon [emissions] – our instinct must be to try and find the entrepreneurs who see the challenge and believe they can be part of the solution.”

This is how climate change and industry minister, Nick Hurd, explains the thinking behind the Energy Entrepreneurs Fund (EEF), a scheme now run by the Department for Business, Energy and Industrial Strategy.

Over the past five years, the government has invested almost £40m in more than 80 projects by means of the EEF. The fund is specifically targeted at SMEs that are looking to develop low-carbon-footprint solutions for energy usage. It’s also leveraging private investment, to go alongside the public funds, with investors having put in £31m so far. In the latest phase of the fund, announced on Sunday, the government is investing up to £9m in projects over three years.

Mr Hurd – speaking while on a site visit to Vantage Power, a beneficiary of the EEF –  believes that the scheme is a vital way to grow low-carbon technology ideas into something marketable: “[If they can] take a good idea and build it into a business model so that the solution can be magnified and achieve scale, then we’re getting closer to solving some of those big societal issues.”

But there’s no question that the scheme will invest in projects that won’t come to fruition. For Mr Hurd, that’s a price that has to be paid: “If you’re in the innovation business, you have to allow for failure. That’s really hard for government. That’s historically why government has been so bad at innovation, because of a failure to embrace that reality [of risk]. That’s the price of success. We all learn through failure.”

It’s a process that’s leading to the development of some unusual ideas, such as Celtic Renewables, which converts byproducts from the Scottish Malt Whiskey industry into high-performance biofuels.

Automotive engineering company Vantage Power proposed the idea to retrofit bus engines with batteries and data-gathering software, to reduce vehicle emissions. These hybrid systems reduce fuel consumption by up to 40pc and cut nitrogen dioxide and nitric oxide (known together as NOx gas, which contributes to toxic smog and acid rain) by as much as 90pc.

Vantage Power received £320,000 to develop its prototype into a scalable product. With that money came £50,000 worth of incubator support from industry specialists, Carbon Limiting Technologies. “We were offered a menu of things,” explains co-founder and chief executive, Alexander Schey.

“The most valuable guidance was some in-depth market research on the battery market, which meant we could do serious due diligence on our supply chain, including a trip to China where we met three possible suppliers,” he says.

Mr Schey and Vantage Power’s co-founder, chief technology officer, Tony Schulz, were also given legal support for handling the intellectual property side of the business. Mr Schey believes this was the most valuable part of the grant-funding process.

Would Mr Schey recommend that other businesses think about the scheme? Yes, but only in the right circumstances, and not without careful thought. “If you have something innovative that you feel needs funding, give it a chance. But you have to be wary of the impact on your business.

“You’ve got to report on progress regularly and you’ve got to find match-funding to get the grant. It shouldn’t be [in order to fund] a tangential part of your business. It needs to be for a core part of your operation.”

This isn’t the only grant that Vantage Power has received; TSB and Innovate UK have also backed the venture.

With any grant, he warns, reporting levels can be onerous and time consuming. “The applications can take a long time to fulfil. You should be aware of the impact on the business. It can take a lot of resources and be intensive on both your cash and people.”

Venture capitalists also play a part in the EEF. After a business applies for the scheme, part of the decision of which project to fund is taken by VCs, who are looking for ideas that wouldn’t be immediately suited to private investment, but have potential, once developed, to appeal to the market.

This approach – collaboration between business and government to solve societal problems – is, Mr Hurd believes, here to stay: “Business-led, market-driven entrepreneurial decisions will play a very important role in helping to find the carbon solutions we need.”