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Annual report 2014 SINEF Energy Research

Annual report 2014 SINEF Energy Research

Key figures

Sources of finance, employees and publications
Sources of finance, employees and publications
Net operating income, net operating margin and investments
Net operating income, net operating margin and investments

REPORT OF THE BOARD: 2014

Annual Report 2014
The institute has a pronounced research profile and is involved in seven of the Research Council of Norway's Research Centres for Environmentally-Friendly Energy (FMEs) in partnership with the industry and other research institutions. SINTEF Energy Research maintains a strong position in the EU's Framework Programme for research, and participates in an extensive range of projects linked to issues such as energy planning, wind-power, CO2 transport, and cleaning technologies for gas- and coal-fired power plants. The institute's high-level technical profile, which has been generated in part as a result of the achievement of the Norwegian Parliament's (Storting) Climate Change Policy Consensus, provides an excellent basis for positioning its research community at the forefront of European energy research.

The company is part of the SINTEF Group, and is a universally beneficial research institute that works together with NTNU in support of teaching and research work which has natural links to the company's business activities. The company makes every effort to maintain good relations with energy sector enterprises engaged in its area of business activities.

The company is a non-profit organisation and awards no dividends to its owners. Any surpluses generated by the company's activities are allocated solely for the purpose of fulfilling the Company's objectives. The company is formally identified by the EU Commission as a non-profit organisation.

The company is located on the Gløshaugen university campus in Trondheim and its business address is Sem Sælands vei 11, 7034 Trondheim. The Company's owners consist of the SINTEF Foundation (61.0%), Energi Norge (33.4%) and Norsk Industri (5.6%).

'Technology for a better society'
The institute carries out R&D with the aim of promoting cost-effective and environmentally sound solutions for energy use and the supply of heat and power. These activities contribute towards the mitigation of negative environmental impacts, the generation of wealth by energy sector companies, and the enhanced exploitation of energy resources by society as a whole.

We also make a considerable contribution towards the increasing exploitation of Norwegian oil and gas resources in a safe and environmentally sound manner by means of developing innovative technologies, such as subsea power supply systems, for the oil companies and supply industry.

Clients
As a result of the Norwegian Parliament's cross-party Climate Change Policy Consensus, public sector funding of energy-related research increased considerably during 2008, 2009 and 2010 in comparison with previous years. These new levels have been maintained to the present day. The Research Council of Norway established the Research Centres for Environmentally-Friendly Energy (FMEs). SINTEF Energy Research has assumed the role of host institution for three of these centres, and participates in four others as a partner. These have now achieved excellent results following their mid-term assessments. The business sector and other Norwegian and international research institutes participate as partners in these technology centres that encompass the fields of wind-power, carbon capture and storage, the environmental design of renewable energy solutions, bioenergy and environmentally sound buildings. The two social science centres focus on the impact of regulatory frameworks and on studies of sustainable energy systems.

The role of host and its associated administrative responsibilities not only opens the door to important scientific and strategic opportunities, but also involves a certain level of commercial and reputational risk. SINTEF Energy Research works systematically to assess and manage these potential risk factors throughout all phases of its involvement with these centres. Even though these risks cannot be eliminated entirely, the beneficial aspects of exercising a key role in the Norwegian FME centres are currently regarded as so great that the total risk is regarded as acceptable.

The institute maintains an extensive project portfolio for the Research Council of Norway. The Council's tool is the so-called Knowledge-building Projects for Industry (KPN) scheme, which is of major importance to the development of new skills and expertise at the institute. In order to ensure that relevant research is carried out as part of these projects, commercial businesses and the public authorities also take part. In 2014 we launched a total of 26 new KPN and IPN (private sector innovation) projects, and have obtained assurances for the go-ahead of 30 new projects in 2015.

In the case of EU projects, the institute focuses on participation and taking on the role of project coordinator. This enables us to obtain funding for skills and expertise development and to establish networks with current and potential European clients and research institutes. Participation in EU projects enables us to make a contribution towards achieving the aims set out in the SET (Strategic Energy Technology) Plan, and to realise our vision – "we shape the future's energy solutions". We participated in 28 EU projects in 2014, acting as project coordinator in four, and achieved a turnover of NOK 26 million.

SINTEF Energy Research is an active participant in several of the EU's technology platforms in which strategies for the various research disciplines are shaped. It also participates in strategic fora such as the European Research Area Board (ERAB), the European Energy Research Alliance (EERA) and EARTO – an association of European research organisations. We also have a seat within the EU Commission's advisory group for energy issues as part of the Horizon 2020 programme.

Fourteen per cent of the institute's turnover is generated from foreign organisations based in countries both inside and outside the EU. The most important among the latter are Brazil and the USA.

Our projects are funded by the industrial sector. Private sector project funding is a prerequisite for obtaining additional funds from the Research Council of Norway and the EU. It is thus crucial to SINTEF Energy Research that our research work continues to make a contribution towards growth in knowledge and wealth generation within the industrial and business sectors.

Research
The global community is facing major challenges in terms of obtaining sufficient energy to meet its needs and in implementing the shift in energy supply systems that is essential to ensure that the impacts of climate change can be resolved as quickly and as cost-effectively as possible. The institute is engaged in many research disciplines within the fields of energy supply, energy use and oil and gas technology, all of which are relevant in this context. Our ambition is to become a world leader in the field of energy-related research. Key disciplines will be energy efficiency, CO2 management, LNG, gas technology, selected disciplines in the field of renewable energy including hydropower, bioenergy, marine wind power and system integration, electrical grids/'smart' grids and subsea power supply systems. The institute also aims to maintain a high global profile in the field of energy policy research.

The power supply system is of crucial importance to a renewable future, and today's ageing system must be restructured if it is to meet future energy demand. So-called 'smart metering' has a role to play in this process. In partnership with 33 other organisations, SINTEF has carried out the DeVID project, in which Norwegian homes and holiday cabins have provided a research laboratory for an evaluation of the benefits of smart metering technologies. Researchers and consumers have brought the entire country together to help fuel the development of tomorrow's smart electrical grid.

In 2014 a product called ZEN entered the stage. This is an entirely new and revolutionary recessed wood-burning stove design, now launched on the European market. The shallow stove cassette is equipped with a patented combustion chamber and has been developed in collaboration with SINTEF Energy Research, based on a concept developed by the client.

Our collaboration with and close proximity to NTNU is our greatest scientific comparative advantage. We make good use of our shared resources such as laboratories, workshops and instrument servicing agreements, and are closely involved in each others' research activities. Collaboration between SINTEF and NTNU is exercised systematically at all levels of the two organisations.

In 2013 SINTEF Energy Research entered into a strategically significant turnkey contract with construction and property developers NCC AS for the building of a new laboratory at Blaklia. The budget for the project is NOK 121 million, and the laboratory is planned to be completed in September 2015.

People
At the close of 2014 the institute employed a total of 253 people, of which 207 were research scientists with a university degree. Seven were engineers and the remainder technical and administrative support personnel. Our personnel comprised 75 women and 178 men from 19 different countries, with an average age of 44. Since 2011, the number of employees at the institute has increased by 35.

The institute also employs five people in Oslo whose research focuses on political issues and policy management in the fields of energy and climate change.

In collaboration with NTNU, NVE, BKK Nett, Lyse Elnett, Statnett and Energi Norge, the institute has established a trainee scheme under which two new persons are employed every year on two-year contracts. This has become a popular initiative and has drawn attention from outside the institute.

In 2014, our summer job project was implemented for the seventh time, involving a total of 32 students. The project attracts the best students at NTNU with the deliberate aim of promoting recruitment to SINTEF Energy Research. Many of these students have subsequently joined the institute as permanent employees. A one-day seminar is arranged every autumn for the students' supervisors and the institute's management team at which the summer students present their projects. The project receives applications from students attending several of the study courses at NTNU. Only a minority of students are recruited from outside NTNU, reflecting the fact that NTNU educates about 90% of employment candidates qualified in SINTEF Energy Research's key disciplines in Norway.

Ethics
SINTEF operates with a code of ethics published both as a pocket handbook and posted on the institute's intranet. This handbook is an excellent aid in the institute's day-to-day activities.

SINTEF has established a system by which employees can apply in confidence to an Ethics Council and an Ethics Ombudsman if they wish to discuss an ethical issue outside the line management hierarchy.

SINTEF is a member of the anti-corruption organisations Transparency International and UN Global Compact which work in the fields of human rights, employee rights, the environment and anti-corruption.

Diversity and equal opportunity
The institute meets the requirements of its special needs employees, including facilitation of access. In 2011, the institute was granted status as an Inclusive Working Life (IA) organisation, and we enjoy good working relations with the Norwegian Labour and Welfare Administration (NAV).

In order to help foreign employees settle in, SINTEF has established an integration programme for personnel from other countries and their families. The programme offers traditional integration and ex-pat services, free Norwegian language courses, and tuition in English at the SINTEF School. During the recruitment process we evaluate applicants' qualifications in compliance with the intentions set out in legislation.

Work to promote equal opportunity is a fundamental principle exercised by SINTEF Group Management. Our personnel policy and personnel administrative procedures meet all the requirements set out in the Norwegian Equal Opportunities Act (likestillingsloven). The proportion of women employed at the institute is 31 per cent, and 44 per cent of the institute's management team is female. We are making every effort as part of our recruitment policies to increase the proportion of women and are preparing plans to promote career development among our senior female research scientists. Fifty per cent of shareholder-elected, and 33 per cent of employee-elected, Board members are women. The institute operates with flexible working hours and employment benefit arrangements. We contribute towards the running of kindergartens via the Aurora Foundation.

Anonymised working environment surveys are carried out every two years. These have demonstrated that our employees regard the work carried out by the institute to promote equal opportunity is adequate, and that there is no gender discrimination in terms of opportunity. An in-house survey carried out by SINTEF in 2008 concluded that there was no gender discrimination in terms of salary policy at the institute. Salaries and conditions of employment are determined by negotiation and discussion with employee representatives in the respective labour organisations. We are a signatory to the agreements that the Confederation of Norwegian Enterprise (NHO) has entered into with the employee organisations Tekna, NITO, NTL and the Norwegian Association of Researchers (Forskerforbundet). SINTEF only rarely enters into temporary employment contracts.

In order to consolidate its expertise, focus and capacity in the field of external communication, a new Director of Communication was appointed in October 2014.

Health, Safety and the Environment (HSE)
Sickness absence was at 3.7 per cent in 2014, an increase of 0.6 per cent on 2013.

The institute has an active sports club which receives internal financial support. The "Get into Shape" (Kom i Form) project, which focuses on the systematic promotion of health awareness by means of measuring physical condition combined with individual guidance, continues to be a great success.

HSE issues are regularly on the agenda at the institute's meetings. SINTEF Energy Research works systematically to reduce the risk of accidents and unwanted incidents. In 2014, the institute recorded six incidents that were categorised as 'accidents'. One of these was also defined as a 'personal injury incident', involving a graze. No personal injuries requiring absence from work were recorded in 2014. A total of eight 'near misses' were recorded, together with 103 situations involving hazardous circumstances or observations accompanied by suggestions for action with the aim of reducing risk exposure in the future. The majority of HSE issues were formally closed, concluded or approved during the year.

The institute operates with proactive procedures designed to ensure that our activities give consideration to the protection of the external environment. These include the management of various types of waste, including hazardous waste. The institute carries out systematic risk assessments and analyses that include consideration of the external environment. Our activities do not result in pollution of the external environment that is in contravention of legislative provisions.

The decentralised emergency response arrangements established for the SINTEF Group in 2010 are maintained without modification. Emergency response managers meet each month to discuss response strategies with the aim of preparing the organisation in the best way possible for any incidents that may require such response. Emergency response exercises are carried out at all the eight institutes within the SINTEF Group, together with a joint exercise at which SINTEF Group management participate together with individual institute managers and the Group's overall emergency response manager.

In order to consolidate its expertise, focus and capacity in the field of HSE, a new Director of Quality and Safety was appointed in January 2014.

Finances
The institute's Annual Accounts for 2014 have been prepared under the going concern assumption, and reveal an after-tax profit of NOK 21.0 million. Total net operating revenues were NOK 316.0 million, with an operating profit of NOK 17.2 million. The pre-tax profit was NOK 27.1 million, and net financial revenues NOK 10.0 million.

Equity as of 31 December 2014 is NOK 406.1 million, and constitutes 65.2% of the institute's total capital, of which the company's share capital is NOK 7.5 million. The institute's liquidity situation is described as good.

The institute is exposed in some degree to currency exchange fluctuations in that 7 per cent of its project revenues are in foreign currencies. On the other hand, project costs are entirely or in part in Norwegian kroner. This exposure is primarily in Euros and US dollars. In order to mitigate this risk, we operate with future exchange contracts in the currencies concerned. The institute also operates in a global and highly competitive market in which several of our competitors are located within the Euro zone.

SINTEF has established a joint arrangement for the investment of its liquidity reserves. The portfolio is allocated according to the "Rules governing financial management", which are revised annually.

The Board is not aware of any circumstances that have arisen since the balance sheet date that affect its opinion regarding the financial position of the Company.

In the opinion of the Board, the Annual Accounts as presented provide a true picture of the company's financial status as of 31 December 2014.

Corporate management
Since 1999, the institute has been working with a dedicated focus on the introduction and implementation of a value-based management system, and with organisational development initiatives that continue to operate at all levels within the organisation. Focus is directed on the development of human capital in which the abilities to build networks and promote continuous innovation are assigned high priority. As a part of this process, a one-year management development programme has been launched for all of the institute's Research Managers.

In 2007, SINTEF's quality assurance system was certified by the Norwegian Technological Institute (TI) as approved in compliance with the ISO 9001:2000 and OHSAS 18001 standards. In 2014 focus has been directed towards revising procedures, and in moving procedure documentation from the intranet to a new interface in SharePoint. The entire SINTEF management system is now available in both Norwegian and English. Simplification of the processes linked to financial project management has also been an important area of focus during 2014. Furthermore, SINTEF Energy Research has prepared the implementation of new support processes, such as a new archive (Archive360), and has launched the development of "level 2" of the management system (our local procedures).

Client satisfaction surveys are carried out at the close of selected projects. The results reveal an overall high level of satisfaction with our products and services. Negative feedback is recorded as a non-conformance and is followed up.

All institutes at SINTEF have introduced a system of quarterly risk reporting. These reports are discussed by the Company's Board and risk-mitigating measures implemented, as appropriate.
Shared corporate risk and uncertainty are linked to factors such as the market and our major clients, the terms and conditions of participation in EU projects, industrial espionage and intelligence, reputation, liabilities linked to major contracts, the loss of core expertise, IPR management, recruitment, and safety linked to laboratory and field work.

Future prospects and challenges
The global economic situation has resulted in many companies reducing their research budgets during recent years. Even though there are signs that the global economy is in recovery, the drastic fall in the oil price and ongoing dramatic developments in the financial situations of the major European energy producers have continued to generate uncertainty. Challenges stemming from climate change continue to attract major political focus throughout Europe, resulting in policy decisions triggering major levels of public sector investment in research and technology development. This in turn is tempting the private sector to focus on capturing market shares linked to new energy technologies that have to be included in the mix. The world's largest research programme, known as Horizon 2020, is following this trend, reflected in an almost two-fold increase in funding for renewable energy projects. The Norwegian cross-party Climate Change Policy Consensus represents an explicit result of increased R&D investment in the fields of renewable energy and carbon management.

In the long term, oil and gas will continue to be important energy carriers, including in scenarios in which global warming is restricted to +2 degrees Celsius. It is important for Norway to ensure that this sector also has a role to play within the framework of a future, sustainable, energy supply system. This is best achieved by developing technologies linked to both environmentally sound oil and gas production, such as subsea power supply systems, and the environmentally-friendly use of fossil fuels, such as carbon management. These are important areas of focus for SINTEF Energy Research.

In 2014, the institute has worked within the framework of its modified strategy, adopted in 2013. The institute takes its lead from SINTEF's main strategy, with an emphasis on energy-related research.

The key drivers behind this strategy are as follows:

  1. Secure and cost-effective energy systems for application in Norway
  2. Wealth generation based on Norwegian energy resources
  3. Technology development in the global market place

Eleven strategic areas of focus have been identified, and all are now linked to specific action plans:

  1. Energy efficiency
  2. CO2 capture, transport and storage
  3. Hydropower
  4. Marine wind power
  5. Bioenergy
  6. System integration of renewable energy sources
  7. Distribution and consumption of electricity
  8. Transmission and hook-up of Norwegian electrical power to Europe
  9. Gas technology and LNG
  10. Subsea power supply and processing systems
  11. Regulatory frameworks governing energy policies

The implementation of a new strategy for SINTEF will be integrated into the institute's plans during the course of 2015.

The EU's aggressive and long-term focus on energy research provides a sound foundation for international collaborations in which the institute can participate as a project partner. It is to our advantage that the EU's energy research strategies encompass the entire range of activities within the sector, and that they are compatible with both Norwegian and our own strategies. In June, the Norwegian Government issued a clear and normative strategy for the interplay between Norwegian and European research activities, in which it specifically wishes to regard these arenas as two sides of the same coin. SINTEF regards this as a positive and desirable development and is working actively in both arenas to promote such a strategy.

Expansion in the energy aspect of the Horizon 2020 programme, and the Norwegian Government's expectations in terms of increased levels of interaction and participation, mean that the volume of research that Norwegian research institutes can expect to obtain from Europe is almost half of that earmarked in Norway. Our participation in strategic energy fora within the EU, combined with our good name and willingness to assume the role of project coordinator, will improve our opportunities both to be able to participate in the shaping of the research agenda and to take part in projects. Moreover, anticipated increases in levels of coordination demand that we, together with other Norwegian research institutes, are working with the revision of Norwegian funding instruments so that these can actively promote this development.

The institute has consolidated its academic alliances with research centres in the USA. Together with NTNU we are also expanding our working relationships with R&D institutes in China and India. In addition to our focus on collaboration on the European stage, we will have the opportunity to strengthen our collaborative efforts with both existing and new, financially robust, global arenas.

In the future it will be important to be able to adapt and focus on areas where the institute is or has the potential to be in the forefront of global research. It will also be important to build the right kind of alliances both in domestic and international arenas. Our clients will continue to an ever-increasing degree to seek out the best international research institutes. This trend represents both a challenge and a major opportunity for the institute. SINTEF Energy Research's focus on the industry's needs, combined with its close working relationships with industrial sector partners, provides us with a good base from which to make the most of these opportunities.

Thank you
The Board takes this opportunity to thank all employees at SINTEF Energy Research for an excellent year's work, both in terms of our scientific and financial results.