IN this week’s SME Focus a renewables entrepreneur underlines the potential value of competitions as a source of funding for firms that may be judged too young to interest some professional investors.

Name:

Euan Hogg.

Age:

32.

What is your business called?

Water Engine Technologies.

Where is it based?

Clovenfords, on the outskirts of Galalshiels in the Scottish Borders.

What does it produce?

We are commercialising an innovative low-head hydropower technology called the Water Engine used to generate renewable energy. Low-head hydropower is generated from water courses that drop 20 metres or less.

Whom does it sell to?

There are a wide range of potential customers. Our initial focus has been on landowners with rivers on their estates. There are a number of private and public landowners looking to establish a cash flow from their estates. We are also working with utility and energy companies who want to displace grid-purchased electricity, with renewable energy.

Ultimately, we want to get into a position where we have a joint partnership in place with an international developer to take the Water Engine technology into the developing world market.

What is its turnover?

We have taken our first commercial contract with a community group in the Scottish Borders for three initial units, with another eight in the pipeline.

How many employees?

Five.

When was it formed?

The company was incorporated in April 2015.

Why did you take the plunge?

Having worked in the renewable sector for a number of years, it seemed clear that the market was reaching saturation point for traditional technologies like wind turbines and solar PV.

I decided to invest in the business after I was asked to assess whether there was a market for the engine and concluded that there was.

Hydropower has been around for centuries, but low-head hydropower has never been exploited because of the relatively small-scale of the projects versus the impact on the local ecology and the cost.

The Water Engine was originally conceived in the late 1970’s by Alister Reid, who came up with the notion of a float-driven hydraulics system whilst watching canal boats in locks. The Water Engine was tested over a four year period by Salford university, which concluded that the technology was viable, efficient and reliable. Design processes and construction materials have improved remarkably since the Water Engine was first tested, so we fully expect to improve upon a tried and tested system.

Alister is a shareholder in the business.

What were you doing before you took the plunge?

I was working for a large environmental consultancy practice in Edinburgh, advising clients on energy efficiency strategies, Greenhouse Gas emissions accounting and working on renewable energy project development.

How did you raise the start-up funding?

Through the consultancy business we were able to raise a small amount of capital that allowed us to fund a small demo unit, which showcased the technology. We have also raised significant funding through competition awards and from Scottish Enterprise.

What was your biggest break?

We have had two big breaks that came within a month of each other. We were encouraged by our business mentors at the Edinburgh Centre for Carbon Innovation (ECCI) to apply for the Shell Springboard programme for innovative low-carbon technologies. In February our application was selected out of 150 submissions to be a regional winner and we were awarded a £40,000 prize.

We have also been working with the Energise Galashiels community group, which is looking to install a series of hydropower systems throughout the town’s water systems. The initial feasibility project was funded through the Local Energy Scotland Challenge Fund Programme. The community group then applied for £2 million Challenge fund money to restore the water systems and install a series of Water Engines. This application was a success and the project, which is our first commercial contract is due to kick-off soon.

What was your worst moment?

Very early on in the businesses life, we were invited to pitch the company to a group of private investors. At this stage, we were looking to raise £150,000 in exchange for equity within the business.

A couple of days later we received a call from the syndicate to say it would not be willing to invest in the business at this early stage of the company’s development.

At the time this felt like a massive setback to the business as we were concerned that we would be unlikely to be able to attract investment. However, this is probably the best thing that could have happened to us, as at such an early stage of the business we would have given away a massive stake in the company.

What do you most enjoy about running the business?

Meeting new potential customers and identifying new sites to deploy the technology.

I really enjoy developing new ideas and markets for the business.

What do you least enjoy?

The admin – enough said!

What are your ambitions for the firm?

We have huge expectations for the business. The Water Engine is an appropriate technology for the developing world as it is a simple engineering solution that doesn’t require extensive technical support and it can be maintained by blacksmith level knowledge.

We believe that the international potential for this technology is huge. Whilst in the short-term we are concentrating on the local markets and specifically the Scottish Borders where we are based, as the business expands, we fully expect to begin to export the technology. The Scottish Government’s renewable energy specialist who has been seconded into the Malawian government is actively looking for potential deployment sites for the Water Engine units.

What could the Westminster and/or Scottish governments do that would help? Establish a long-term energy policy for the UK and then stick to it.

There has been support in the UK for the deployment of the renewable projects from the Government through the Feed-in-Tariff (FiT) subsidy since 2010. This scheme was brought in to pump prime the renewable energy market to help reduce the use of fossil fuel in the energy mix.

When the FiT was introduced, it was extremely well subscribed to because the returns on investment for the new projects were extremely attractive. The solar and wind technologies were the first to take advantage of this financial return. As the subscription of FiT projects increased significant, the decision to slash the feed-in-tariff was made which has had a huge impact on the solar market.

Whilst there is still an attractive FiT subsidy available for hydropower projects, investors in renewable energy markets are extremely cautious given what has happened in the past. Raising investment in this sector has been made more challenging because of government intervention.

What was the most valuable lesson that you learned?

We began chasing external investment from private syndicates far too early.

How do you relax?

One of the great things about working in the renewables market is that you do find yourself in some very beautiful parts of Scotland looking at potential project sites.

Other than this, I do enjoy getting out into the countryside with my wife and our dog called Phoebe.

Beer also works!