For green technology pioneers, government funding can make all the difference, as they strive to transform a clever idea into a successful product. For governments, the goal is a thriving sector that can cut carbon footprints and create jobs.

Many are dedicating substantial funds to the sector. The European Union has earmarked €1.8bn ($2.2bn) for environmental research projects under the Framework Programme 7. In the US, more than $80bn has been allocated in clean energy investments, under President Obama’s pledge to invest $150bn over 10 years on clean energy.

China’s green technology spending is soaring, according to figures compiled by Bloomberg New Energy Finance. It reached $34.6bn last year, compared with $2.5bn five years ago. The UK has set aside £22m ($32m) for marine energy, part of an £80m budget for green technology announced in October 2009.

Even small amounts can be crucial at the early stage, says Michael Black, chief financial officer of AlertMe, a Cambridge, UK-based start-up developing energy control systems that help monitor domestic power usage. AlertMe received about £20,000 from a Regional Development Agency (RDA) to assess potential markets and price points.

“RDAs are good at early-stage small-scale funding because they are low-bureaucracy and quick,” says Mr Black. “Covering this sort of out-of-pocket expense is useful for small start-ups.”

However, he says that tax credit schemes via tax returns are “the most significant government funding and the easiest to operate”.

Stuart Evans, executive chairman of Novacem, a spin-out from Imperial College London, also praises the simplicity of the tax credit system. Novacem, which is developing a cement that absorbs carbon dioxide from the atmosphere, has had a range of government grants, including £750,000 from the Technology Strategy Board as part of a £1.5m funding involving Laing O’Rourke, WSP Group and Rio Tinto.

Where sums of £500,000 to £1m are required, companies often need to form consortia to share administrative costs.

The trouble is that, almost inevitably, some participants will change their minds, or even go out of business, during the bid. This complicates and jeopardises applications.

Government funding can be a big incentive for companies deciding where to locate. Australia-based Dyesol chose the UK to develop its dye solar cells. It has received £5m from the Welsh government for a collaborative project with Corus to integrate Dyesol cells into steel roofing.

Dr Gavin Tulloch, Dyesol’s managing director, says: “The company needs to go wherever there are governments and industries that want to develop the technology, and the UK is good at funding these projects.”

Germany, the Netherlands and Ireland also have good government grants, he says.

US companies tend to enjoy larger grants. Some $2bn has been awarded solely to develop the next generation of batteries. In solar, three Californian companies, Alta Devices, Solar Junction and Tetra Sun, along with North Carolina-based Semprius, are to receive up to $3m each for early stage development.

Grants awarded in the US recently for solid-state lighting, include $23m for manufacturing, shared by eight companies including Applied Materials, GE Lumination, Ultratech and Veeco Instruments. Other companies are sharing $4m for core technology research, and $10.3m for product development. And in biofuels, two US consortia have been awarded nearly $80m.

Government funding helps establish credibility, and enables entrepreneurs to punch above their weight. Mr Evans of the UK’s Novacem, recently returned from China, a “massive opportunity” with more than half the world’s concrete market. He says: “It definitely helps that we don’t look like a tin-pot company but have substance behind us.”

Magnomatics, a Sheffield, UK-based specialist in magnetic transmission systems that make motors and generator turbines lighter and more compact, says government funding enabled it to persuade Volvo to become a partner on hybrid vehicles.

Since the Volvo deal, Magnomatics has attracted interest from companies in battle tanks, wind and tidal power, aerospace and marine propulsion. “We can’t find all these markets ourselves. But a little government money facilitates working with multinationals,” says Chris Kirby, managing director.

Intellectual property (IP) issues can be a problem for small companies working with larger partners on government-funded projects. Usually the inventor retains the IP rights, but difficulties can arise when there is joint development.

Junior engineers and scientists need to be made aware that they should not blurt out new ideas, in case there is a disagreement about where they originated. Accurate minutes should be signed off by all participants in joint-venture meetings.

“If you’re a young high-tech company your IP is your main asset and you have to cling on for dear life, because someone is always trying to grab it.”

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