EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 7.10.2009 
SEC(2009) 1297 
COMMISSION STAFF WORKING DOCUMENT 
  
Accompanying document to the  
  
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
on Investing in the Development of Low Carbon Technologies  
(SET-Plan) 
  
IMPACT ASSESSMENT
 
{COM(2009) 519 final} 
{SEC(2009) 1295} {SEC(2009) 1296} {SEC(2009) 1298} 
 
EN 2   EN COMMISSION STAFF WORKING DOCUMENT 
IMPACT ASSESSMENT 
 
for the Communication on Investing in the Development of Low Carbon Technologies 
(Set-Plan) 
Disclaimer: This report commits only the Commi ssion's services involved in its preparation 
and does not prejudge the final form of any decision to be taken by the Commission. 
 
EN 3   EN  
TABLE OF CONTENTS 
1. Procedural issues and consulta tion of interested parties.............................................. 6 
2. Problem definition...................................................................................................... 10 2.1. Context and EU right to act........................................................................................ 10 2.1.1. Competitiveness of EU business and EU citizens are affected.................................. 11 2.2. Technology gap of low carbon technologies ............................................................. 11 2.3. The financial gap to effectively support the SET-Plan .............................................. 15 2.4. The underlying drivers of the financing gap.............................................................. 18 2.4.1. Spill-over effects ...................................................................................................... .. 18 
2.4.2. Environmental externalities ....................................................................................... 19 2.4.3. Uncertainty and risk aversion..................................................................................... 19 2.4.4. Various other market failures and the specificity of the energy sector...................... 20 
2.5. Current financing instruments and their gaps ............................................................ 21 2.6. Effect of financial crisis on the financing of low carbon technologies...................... 23 
2.7. Added value of further EU action .............................................................................. 24 2.7.1. Co-ordination Failures ............................................................................................... 25 3. Objectives.................................................................................................................. . 27 
3.1. Strategic objectives .................................................................................................... 27  
3.2. Specific objectives ..................................................................................................... 27  
3.3. Operational objectives................................................................................................ 28 4. Policy options............................................................................................................. 2 9 
4.1. Business as usual (BAU)............................................................................................ 29 4.2. Increased funding through the existing investment vehicles (option 1) .................... 30 
4.3. A strengthening of the investment ve hicles within modified institutional 
arrangements (option 2) ............................................................................................. 31 
4.4. A set of new investment vehicles taking specific institutional arrangements (option 3)
............................................................................................................................... ..... 32 
5. Analysis of impacts.................................................................................................... 34 5.1. Main assumptions....................................................................................................... 34 5.2. Economic and social impacts..................................................................................... 34 
 
EN 4   EN 5.3. Environmental impacts............................................................................................... 35 
5.4. Assessment criteria..................................................................................................... 36  
5.5. Policy Option 0: BAU................................................................................................ 38 5.5.1. Mobilisation of resources........................................................................................... 38 5.5.2. Suitability of financial instruments ............................................................................ 38 5.5.3. Flexibility of implementation..................................................................................... 39 5.5.4. Effectiveness of financial instruments ....................................................................... 39 5.6. Policy Option 1 (PO1):............................................................................................... 40 5.6.1. Mobilisation of resources........................................................................................... 40 5.6.2. Suitability of financial instruments ............................................................................ 40 5.6.3. Flexibility of implementation..................................................................................... 41 5.6.4. Effectiveness of financial instruments ....................................................................... 41 5.7. Policy Option 2 (PO2):............................................................................................... 41 5.7.1. Mobilisation of resources........................................................................................... 41 5.7.2. Suitability of financial instruments ............................................................................ 42 5.7.3. Flexibility of implementation..................................................................................... 43 5.7.4. Effectiveness ........................................................................................................... ... 43 
5.8. Policy option 3 (PO3): ............................................................................................... 43 
5.8.1. Mobilisation of resources........................................................................................... 43 5.8.2. Suitability of financial instruments ............................................................................ 44 5.8.3. Flexibility of implementation..................................................................................... 45 5.8.4. Effectiveness ........................................................................................................... ... 46 
6. COMPARING THE OPTIONS ................................................................................. 47 6.1. Methodology .............................................................................................................. 4 7 
6.1.1. Technology Group I: Technologies clos e to market competitiveness ....................... 48 
6.1.2. Technology Group II: Technologies clos e to market competitiveness...................... 50 
6.1.3. Technology Group III: New Technologies ................................................................ 52 6.2. Summary of the comparison ...................................................................................... 54 6.3. Recommendation........................................................................................................ 55 7. Monitoring and evaluation ......................................................................................... 56 ANNEX I: The SET-Plan Technology Challenges.................................................................. 57 
 
EN 5   EN ANNEX II: Potential of low carbon energy technologies........................................................ 59 
ANNEX III: Criteria for the grouping of low car bon technologies in this Impact Assessment
............................................................................................................................... ..... 61 
ANNEX IV: The SET-Plan at work......................................................................................... 63 ANNEX V: Financing instruments .......................................................................................... 64 ANNEX VI: Policy co-ordination failures and drivers............................................................ 68 ANNEX VII: Justification for EU action with  regards each indivi dual technology group ..... 71 
ANNEX VIII: Overview of recent initiatives in  the context of the financial crisis................. 73 
 
EN 6   EN  
1. PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES  
Lead DGs: TREN, ECFIN, RTD 
Other involved services in the Interservice Group: JRC, ENV, ENTR, REGIO, SG, COMP, 
DEV, INFSO, TAXUD, RELEX, TRADE, AGRI 
Agenda planning or WP reference: 2008/TREN+/050  
1.1. Background to the development of the proposal 
The context of this Impact Assessment is as follows: 
– The EU Energy and Climate Policy sets out am bitious plans to simultaneously i) fight 
against climate change, ii) improve the effici ency of EU energy market, and iii) guarantee 
a safe, reliable and sustainable s upply of energy to  EU consumers. 
– Technology lies at the heart of the transiti on to a low carbon econom y. Current low carbon 
technologies are too costly, hence the need for an ener gy technology policy. Without a 
significant improvement in the currently ava ilable low carbon technologies, achieving our 
short term (2020) goals will be costly; in addition, without new t echnologies we will not 
achieve our long-term (2050) goals of cu tting CO2 emissions by 80%. The European 
Strategic Energy Technology Plan (SET-Plan), adopted as part of the Energy and Climate 
Package, aims to accelerate the development of technologies to bring them to the market 
more quickly than would otherwise be the case.  
– The SET-Plan announced the Commission's intention to present a Communication on 
financing low carbon technologies . The Communication will address resource needs and 
sources, examining all potential avenues to le verage private investment, including private 
equity and venture capital, enhance coor dination between funding sources and raise 
additional funds. In its conclusions from  28 February 2008 th e Council invited the 
Commission to prepar e this Communication. 
This Impact Assessment addresses the financin g needs of the strategic energy technologies 
identified in the key challenges of the SET- Plan (see Annex I). It covers research, 
technological development and demonstration (RDD) needs. It also covers deployment 
measures to the extent that they contribute to  overcoming barriers to the market take-up of 
new technologies. However, it doe s not address the costs of the actual market deployment of 
energy technologies or of th e transition to a low carbon ec onomy. Such costs are several 
orders of magnitude higher than  the RDD needs. The question of  financing all the investments 
necessary to meet the 2020 renewable energy ta rget will be addresse d in a Communication by 
the Commission in 2010. 
The financing can essentially be considered as pa rt of the overall cost envelope of the Energy 
and Climate Package. By increasing RDD funding now, the aim is to lower the final cost of 
meeting the EU policy objectives, in addition to enabling the transition to a low carbon 
 
EN 7   EN economy. This will be achieved by accelerating technological change with its resulting 
efficiency gains arising from the development of low carbon technologies. 
In its conclusions of 02 March 2009, the Council confirmed the n eed for a substantial increase 
of private and public energy-related RDD compar ed to current levels, working towards at 
least a doubling of global ener gy-related RDD by 2012 and increa sing it to four times its 
current level by 2020.  
The European Union, Japan and the United States are the main1 players in energy-related 
RDD. Therefore, to at least double the global effort implicitly means that these main actors 
would at least double their investment. This imp act assessment is fully consistent with this 
policy. 
1.2. Organisation and consultation of interested parties 
This impact assessment was prepared to support the forthcoming Communication on 
Investing in the Development of Low Carbon Tec hnologies which is foreseen as part of the 
implementation of the European Strategic En ergy Technology Plan (SET- Plan). It builds on 
the impact assessment, the Capacities and Technology Maps and the consultation for the 
development of the SET-Plan in 20072. 
In the context of the SET-Plan implementation (e.g. European Industrial Initiatives, European 
Energy Research Alliance) the Commission has open dialogs with many stakeholders from 
industry and the research comm unity (including energy-relate d Technology Platforms), and 
also with Member States in the European  Community Steering Gr oup on Strategic Energy 
Technologies. 
In addition, this Impact A ssessment is based upon:  
(1) A consultation process with the Advisory Group Energy for the Energy theme of the 
Seventh Framework Programme for Research in 2008 and 2009; 
(2) The report on 'financing low carbon energy' by an internal DG TREN Task Force 
which has worked with the support of the SET-Plan Inter-service Group, as well as 
with a selected number of stakeholders (E BRD, developers, financ ial agencies agents, 
industry) who have been informally consu lted (several of the stakeholders were 
consulted ad personam) . The EIB has been duly associated throughout the process ; 
(3) An analysis of current corporate and public RDD investments towards low-carbon 
technologies by the Institute for Prospectiv e Technological Studies (IPTS) of the Joint 
Research Centre of the European Commi ssion. During the preparation of this work 
around 20 major companies active in the energy  field and 10 industr y associations or 
                                                 
1 According to the International Energy Agency, pu blic RDD expenditure in the EU, Japan and the US 
represents 87% of the total ex penditure in OCDE countries. 
2 Impact Assessment [SEC(2007)1508] 
Capacity Map of Energy - Analysis of Energy Resear ch Capacities in EU Member States [SEC(2007)1511], 
A brief and comprehensive description of the current status and prospects of key energy technologies aiming to 
provide information for the identification of potential European initiatives that could be considered as 
part of SET-Plan [SEC(2007)1510] 
Public consultation 
 
EN 8   EN technology platforms were contacted; a consu ltation process with Member States has 
been initiated and is on-going. The Interna tional Energy Agency (IEA) was contacted 
with regard to their database on RDD budgets ; furthermore, members of the Advisory 
Group on Energy to the European Commi ssion provided comments on the report;  
(4) An assessment of projected RDD needs prepar ed by the Institute for Energy (IE) of the 
Commission's Joint Research Centre3 based on the consultation and inputs from 
stakeholders and other Commi ssion services received in th e context of the definition 
of the European I ndustrial Initiatives. 
(5) A 2007 preliminary analysis by the Commission services of the European research and 
innovation capacities in EU Member States, re ferred to as the ‘C apacity Map’ along 
with an analysis of the potential impact of energy technologies to achieve the energy 
policy objectives referred to  as the ‘Technology Map’. Th e Capacities Map aims to 
prove a (non-exhaustive) overview on the energy  research capacities both in the public 
and in the private sector in the EU Memb er States, and in Ja pan and the USA for 
comparison. The Technology Map4 assesses the reduction of greenhouse gas 
emissions, the enhancement of the security of energy supply and the improvement of the competitiveness of the European industr y. Both analyses were  undertaken within 
the Commission by its Joint Research Centre. 
(6) A memo on Opportunities and Challenges of Innovation in the Energy Sector prepared 
by the European Commission's Joint Research Centre. 
(7) During the SET-Plan consultation process, from March to June  2007, the Commission 
conducted an Expert Consultation with esta blished advisory and stakeholder groups, 
such as the FP7 Advisory Groups, relevant European T echnology Platforms and other 
sectors. A series of hearings and work shops were convened to feed into the 
development of the SET-Plan. 
(8) In parallel, a public consultatio n offered the opportunity to all interested stakeholders 
to express their views by m eans of an on-line questionnaire, which was published on 7 
March 2007 and was open for public response until 13 May 2007. The reports of the SET-Plan consultations can be  found at the following link: 
http://ec.europa.eu/energy/technolo gy/set_plan/expert_consultation_en.htm
  
(9) The inter-service group that was established for the SET-Plan was mandated to follow 
both the implementation of the SET-Plan and the Communicati on on Financing Low 
Carbon Technologies. It has met twice in 2008 and once in 2009. 
1.3. Impact Assessment Board  
1.3.1.  IAB recommendations  
On the 1st of April 2009 the Impact Assessment Board received a preliminary draft of this 
Impact Assessment Report. The Board adopted its opinion on the 23rd of April 2009. The 
main recommendations were. 
                                                 
3 IE, 2008 
4 SEC(2007)1510 
 
EN 9   EN The potential for a further and more explicit pr ioritisation of technologies ought to be further 
analysed; indicating at what st age prioritisation of technologi es ought to be made, how, and 
on what criteria. The IA should take account of  recent policy developments and clarify the 
potential impact of the measures to be proposed on the mix of low carbon technologies 
modelled in that analysis. 
The analysis of funding sources should be ma de more thorough and forward looking, it should 
analyse the drivers of mobilising or stimulating different types of funding with relation to the 
different technology groups and should be complemented by a review of the initiatives 
planned or underway in the framework of the response to the economic crisis. The IA should 
also discuss to what extent technologies bel onging to the same group require different types 
of funding. 
The problem definition needs to be further deve loped. In particular the IA should analyse in 
greater depth the shortcomings of  current policy co-ordination a nd the drivers that underpin it. 
In this context the impact of measures which have already been agreed such as European 
Industrial Initiativ es must be brought more fully into the analysis. The IA should be clearer 
about the political context of th is initiative and include a pr esentation of the process of 
collecting and verifying investme nt needs for each technology. 
The subsidiarity analysis should be strengthened, in particular the IA should explain the scope 
of EU action for each of the identified technology groups.  
1.3.2.  Actions taken in response to IAB recommendations  
Section 2.2 has been amended and now includes the specific criteria under  which the priority 
sectors were identified within the scope of the SET-Plan. The section also notes how the 
technologies will be assessed against those criteri a, outlines the intra-s ectoral prioritisation 
measures which will be taken, and explains w hy further detailed prioritisation measures 
would be undesirable.  
Section 2.5 was made more specific in respons e to the critique of the funding mechanisms 
making specific links between the technology groups and th e most appropriate funding 
source. Annex V was also added which goes into much greater detail on the drivers of the 
different funding types for each of the tec hnology groups; meanwhile annex III now has a 
paragraph addressing the need to resolve the issues arising from th e likelihood that different 
technologies from within the same group will require different types of funding.  
Section 2.7 was amended and Annex VI added in order to provide further detail and content 
on co-ordination failures and thei r drivers (further de tail can be found in the Capacities Map 
accompanying the SET-Plan Communication). Mean while annex V contributes significantly 
towards an explanation of the impact of the al ready agreed measures and existing instruments. 
The political context of the initiative is made  clear in section 2.1; meanwhile the monitoring 
system regarding the needs of each te chnology is discussed in section 7.  
The amendments mentioned above to section 2.7 serve to strengthen the subsidiarity analysis, 
as does the inclusion of annex VI which outlines the scope of  EU action for each of the 
identified technology groups. 
The new Annex VII provides an ov erview of recent initiatives in response to the financial 
crisis.
 
EN 10   EN  
2. PROBLEM DEFINITION  
2.1. Context and EU right to act 
As outlined in the Impact Assessment of the SET-Plan5 Europe lacks cost effective 
technological solutions to achie ve the 2020 climate and energy targ ets. The acceleration of the 
development, demonstration and commercialis ation of strategic energy technologies will 
require significantly higher i nvestment, along with a greatly enhanced degree of coordination.  
This is recognised and supported at the highest  political level in the EU. Indeed, judging by 
the measures some Member States took in res ponse to the current fina ncial crisis one could 
argue that the crisis has, in itself, acted as an accelerator; as it allowed the low carbon 
technology sectors to emerge as a priority s ector that can guarantee sustainable economic 
growth, in line with the Lisbon strategy. Nevert heless, investment rema ins insufficient to 
drive down energy sector CO 2 emissions6; 2020 emissions from energy are projected to rise to 
4 253 Mt CO2 eq. 
Both Council and Parliament have repeatedly re affirmed their commitment to the SET plan 
originally approved by the Council  in February 2008. In this c ontext, in Febr uary 2009 the 
Council invited the Commission to "Identify the necessary le gislative and non-legislative 
actions and appropriate financial resources" and to  "prepare a Sustainable Energy Financing 
Initiative as a joint Commission and European In vestment Bank project to mobilise large-
scale funding from capital markets for investments".  In March 2009 the Council  stressed the 
importance of "a substantial increase of private and public energy-related RD&D compared 
to current levels, working towards at least a doubling of global energy-related RD&D by 
2012 and increasing it to four times its current level by 2020, with a significant shift in 
emphasis towards safe and sust ainable low greenhouse-gas-emit ting technologies, especially 
renewable energy". The Parliament is in full agreement with this approach having stressed the 
"need for resources to be deployed in partnership with industry, in order to leverage private 
sector investments in new low carbon technologie s; stresses the need for a clear long-term 
vision and financial framework". 
All of this should be taken in the context of the 2007 Berlin Declaration on the future of the 
EU where Member States affirmed their intent  to jointly lead the way in energy policy and 
climate protection. Furthermore, should the Lisbon Treaty enter in to force 2010 Member 
States will be required to ensu re security of energy supply in the Union and to promote 
measures at international level to combat clim ate change. Joining forces to finance strategic 
energy technologies could be a cost- effective way for Member States to comply with the 
potential requirements under the Lisbon Treaty. EU  action is, therefore, called for to bring 
coordination and synergies so as to put exis ting instruments and efforts to optimum use. 
                                                 
5 SEC (2007) 1508  
6 EEA Energy and Environment report 2008 and NEF Global Futures 2009 
 
EN 11   EN 2.1.1.  Competitiveness of EU business and EU citizens are affected 
Should the needed investment happen, important 'first-mover advantages' could result for the 
EU-based industry7 that could have positive spillover effects for the EU citizens. These may 
include:  
– sustainable global market leadership for companies in the lead market,  
– a substantial increase in exports,  
– a high degree of competition a nd low prices for consumers, 
– high skilled jobs due to an influx of marke ting and RDD functions in the lead market,  
– market attractiveness as an investment location for multinational firms which seek to 
become insiders in the lead market,  
– the creation of a pool of knowledge that would be nefit not only the indu stries active in the 
'lead area' but also other industrial sectors.  
– Other secondary impacts would include lowe r emissions, reduced dependency on energy 
imports and lower health bills due to the avoided health impacts of climate change. 
In addition, the global race for a transition to a low-carbon economy is expected to result in 
"low-carbon" becoming a 'quality label' for ener gy technologies and energy itself. As climate 
change and energy security top political agendas across the worl d and bring about a wave of 
legislation, global demand for low-carbon energy technologies is expected to increase; 
exponentially so if an ambitious post-Kyoto deal  to reduce emissions is struck in Copenhagen 
in 2009.  
If there is no coordinated acti on at EU level, it is highly unlik ely that the critical mass of 
investment and hence the necessary breakthrough RDD in low carbon technologies will be 
achieved. We would run the risk of allowing the market value for low carbon technologies to 
grow outside of the EU where global comp etitors do not face governance challenges. 
2.2. Technology gap of low carbon technologies 
As stated in the Commission Communication An Energy Policy for Europe8, the development 
and deployment of a diverse portfolio of lo w carbon energy tec hnologies is one of the key 
elements for meeting the goals of the European energy policy. However, according to the 2nd 
Strategic European Energy Review9, Europe is not heading towards the renewal of its energy 
technology base. Under a business-as-usual (BAU) scenario, the EU  energy system will 
continue to rely on conventional energy t echnologies rather than on low carbon ones.  
The portfolio of low carbon technol ogies that could constitute a sustainable European energy 
system and its potential have already been es timated in recent studies, for example in the 
Technology Map of the SET-Plan10 and the IEA ETP 2008 report. There is a significant 
                                                 
7 See IPTS mimeo for a summary of challenges and opportunities of innovation in the energy sector. 
8 COM(2007)1 
9 COM(2008)0781 
10 SEC(2007)1510 
 
EN 12   EN potential awaiting to be exploited on which a sustainable energy system can be built. 
However, additional RDD efforts are required to bridge the  technology gap so that 
Europe, and the World, can be nefit from its potential . 
The current understanding on the potential of low carbon technologi es with respect to the EU 
energy policy goals is illustrated in the Figure below. More details about the construction of 
this graph are available in Annex II. In brief,  it can be shown from the graph that several 
"waves" of technology deployment can be expected until 2050, each offering new opportunities in terms of the c onstruction of a low carbon and sustainable energy system. A 
first wave, with a short-to-medium time horizon, is mainly composed of today's established and/or high penetrating technologi es, with a prominent role for energy efficiency in buildings, 
transport and industry. A second wave, ra nging from medium-to-long term, includes 
advanced technologies such as advanced sola r, second generation biofuels, carbon capture and 
storage technologies, but also at later stage hydrogen and fuel cells  in the transport sector, the 
next generation of renewable technologies su ch as ocean technolog ies and generation IV 
nuclear reactors. This will be comple mented by fusion technologies beyond 2050. 
 
Each low carbon technology faces its own unique challenges, which require dedicated 
research and innovation efforts. The above mentioned Technology Map of the SET-Plan 
describes all these in detail; however, there are commonalities between technologies. In the 
context of this Impact Assessment, these techno logies have been grouped into three families 
based on their common positioning in the innovati on cycle and their mutu al requirements for 
advancement. These groups constitute a qualifi ed simplification enab ling analysis of the 
policy options, yet without  jeopardising the quality of the assessment.  
This characterisation of technologi es is based in best availabl e information, however it should 
be noted that technological br eakthroughs or strong regulatory measures could significantly 
change the suggested grouping. Table 1 provide s a brief overview of the technology groups; 
with a more in-depth analysis to be found in annex III. 
 
EN 13   EN Table 1: The main characteristic s of the applied technology groups 
 Group 1: Close to 
market competetiveness Group 2: Emerging 
technologies on the verge of mass market penetration Group 3: New 
technologies 
 
Innovation 
status Market for the 
technology exists exists with a maturing supply chain. 
Target is to improve 
performance and reduce costs through incremental innovation through market replication, and supporting RDD.  These are up-and-
coming technologies in emerging markets. They require enhanced innovation schemes (frequently based on large scale demonstration) combined with further research. These technologies 
are driven by RDD and hence require RDD based innovation schemes, pilot schemes and large scale demonstration projects in order to reach market 
Technological maturity High. Incorporates 
limited risk and a significant likelihood of market success due to the advanced stage of RDD. High attractiveness to industry. Medium. The 
uncertainty regarding market success of RDD investments limits the attractiveness to private investments. Low. The high risk 
and uncertainties associated with the technology and its market potential limits its attractiveness to industry investments.  
Time horizon before return-on-investment Short Medium Long 
Upfront RDD 
investments Medium. Further 
adaptation of existing infrastructure is required. Relatively high. 
Further RDD efforts are required as well as additional adaptation/ reinforcement of existing 
infrastructure Relatively high. 
Includes large RDD needs and significant adaptation of technology and supporting infrastructure 
Composition Energy efficiency 
technologies for buildings, transport and industry; on-shore wind, solar heating, solar photovoltaics (c-Si), electricity transmission, nuclear Off-shore wind, solar 
photovoltaics (thin film), concentrated solar power generation, CCS, 2
nd 
gen biofuels, electricity distribution Nuclear fission (G 
IV), hydrogen and fuel cells, ocean energy, geothermal 
 
EN 14   EN fission (GIII+), CHP.  
 
Prioritisation of technologies  
Given the significant scale of the public and private funding to be mobilised, it was necessary 
to differentiate between and prioritise the va rying technologies. Whilst preparing the SET-
Plan11 an assessment was conducted in order to es tablish these priority technologies, which 
then took the form of the proposed European Industrial Initiatives. The most fundamental 
criteria applied were: 
– the EU added value/additionality; 
– the willingness of actors to join forces; 
– the potential market penetration of th e technology in different time horizons; 
– the potential contribution to CO2 reduction, security of energy supply, and 
competitiveness. 
The key technologies/sectors identified were:  
• Hydrogen and fuel cells;  
• Wind;  
• Solar (including photovoltaics a nd concentrated solar power); 
• Biofuel;  
• Smart grid;  
• Carbon capture, transport and storage; 
• Nuclear fusion;  
• Sustainable nuclear fi ssion (Generation IV). 
Similar assessments of low car bon technologies and se ctors will be con ducted regularly by 
SETIS (SET-Plan information system) under the auspices of the Joint Research centre of the European Commission.  
It is also necessary, however to  establish intra-sector al priorities at th e level of technology 
advancement actions. In particular, the proposed  European Industrial In itiatives encompass a 
broad range of actions to be undertaken by industry and the re search community. They take 
the form of a criterion, using th e above criteria to identify th e most suitable financing source; 
public or private, national or communit y. The Technology Roadmaps 2010-2020 for the 
                                                
 
11 Impact Assessment for the European Strategic En ergy Technology Plan (SET-Plan) -SEC(2007) 1508 
from 22 November 2007 
 
EN 15   EN implementation of the European Industrial Ini tiatives [Staff working paper: ‘A technology 
Roadmap’ – SEC (2009) 1295] outline the re sult of this prioritisation exercise.  
One final point would be with regards to th e difficulties inherent within any further 
prioritisation. In particular, and given the wildly  varying characteristics of the Member States 
economies, research set-up and regulatory fram eworks, any further prioritisation we made 
would not be the most appropriate for each re gion, and could become more inappropriate over 
time. The proposed approach consisting of a menu of alternatives of st rategic importance to 
the EU, and a criterion enabling the Member Stat es to make informed choices between them, 
is the most appropriate mechan ism under present circumstances.  
2.3. The financial gap to effectively support the SET-Plan 
The first step is to better unde rstand the current le vel of public and private investment in 
research for the key sectors identified. This is difficult, however, as the statistical information 
available in this respect is too general12, in some cases unreliable13, and at times almost non-
existent14 .  
The SET-Plan information system (SETIS) co nducted an analysis [Staff working paper: 
‘R&D Investment in the priority technologies  of the European Strategic Energy Technology 
Plan’ - SEC (2009) 1296] resulti ng in the findings presented in  Table 1. The total figures are 
indicative with an uncertainty of 25%, due to the methodology applied15. However, the order 
of magnitude of the results obtained with this approach is considered a reasonable benchmark 
for the estimation of future research n eeds in SET-Plan priority technologies. 
Table 1: Current approximate investme nt in SET-Plan key technologies (2007) 
 Sector Corporate 
RDD 
investment in 
2007 
(approximation 
in Mio Euros)  Public EU 
(FP6 + 
EURATOM; 
annual 
average, 
approximation 
in Mio Euros  Public RD&D 
spending of EU 
Member States 
in 2007 
(approximation in 
Mio Euros)  Yearly Total 
2007 
(approximation 
in M€) 
H2/FC 380 70 170 620
Wind 290 11 80 380
                                                 
12 e.g. not detailed by technology 
13 e.g. double accounting of EU and national budgets 
14 e.g. private sector investment 
15 As data on corporate R&D investment are sketchy, a novel estimation-based approach was applied for 
assessing of corporate R&D investments, combining available data on R&D investment with other 
publicly available information and with expert judgment. Hence, the results only provide a rough estimation of research efforts and are subject to  substantial uncertainties. Applying an overall 
uncertainty of not more than ± 30% associated with corporate R&D investments, ± 19% for public 
national investments and ± 5% for the EU funds, the cumulative error on the total R&D investment in 
SET-Plan priority technologies w ould not exceed ± 25% of the total.  This uncertainty does not yet 
include the fact that the overall figures on corpor ate R&D efforts tend to be an underestimation whose 
extent cannot be quantified further. Nevertheless, the order of magnitude of the results shown above is 
also supported by a comparison with other sources both on the overall level and at the level of 
individual technologies and funders.  
 
EN 16   EN Solar (PV and CSP) 270 32 170 470
CCS 230 17 40 290
Biofuels 270 13 65 350
Smart Grids 210 14 50 270
SUM (non nuclear LC Techs) 1650 157 570 2380
Distribution by investor 69% 7% 24% 100%
Nuclear Fission  205 5 250 460
Distribution by investor  45% 1% 54% 100%
Nuclear Fusion 0 204 280 485
Distribution by investor  0% 42% 58% 100%
Total SET-Plan priority 
energy technologies 1860 366 1100 3330
Distribution by investor  56% 11% 33% 
 
The next step is to estimate the resources needed to accelerate developments across the 
varying sectors. To estimate the financial needs for the next ten years, we have made a cost 
analysis of the activities proposed in the Eur opean Industrial Initiatives (EIIs) of the SET-
Plan. This estimation has been made in close consultation with stakeholders and specialists in the different fields, mainly from the European Technology Platforms and sector 
associations
16. On this basis we have prepared a series of detailed Technology Roadmaps 
2010-2020 for the implementation of the EIIs [S taff working paper ‘A technology Roadmap’ 
– SEC (2009) 1295]. It should be stressed however that the cost estimates are preliminary and 
may be subject to changes as we progress to wards the actual implementation of the EIIs. 
(Refer to Annex IV for information about  the implementation of the SET-Plan). 
Table 2: Estimation of the financing needs for key technology and actions proposed in the 
SET-Plan 
 Sector Estimated 
investment 
needed for the 
next 10 years 
(B€) Justification for the estimation 
H2/FC 5 Updated estimation of resources needed made by 
stakeholders – 'Implementation Plan' of the hydrogen and 
fuel cell technology platform (Study by the JRC) 
                                                 
16 TPWind, EWEA, Solar TP, EPIA, ESTELLA, Biofuels TP, Zero Emission Power Plan TP, Sustainable 
Nuclear TP, Hydrogen and fuel cells TP 
 
EN 17   EN Wind 5.5 Estimation of resources needed made by stakeholders – 
Costing of the Wind Industrial Initiative 
Solar  16 Estimation of resources needed made by stakeholders – 
Costing of the Solar Industrial Initiative 
CCS 10.5 - 16.5 Estimation of resources needed made by stakeholders – 
Costing of the CCS EII (including the 7-12 B€ CCS 
demonstration projects - Study by McKinsey) 
Bio-energy 8.5 Estimation of resources needed made by stakeholders– 
Costing of the Bio-fuels Industrial Initiative 
Smart Grids 2 Estimation of resources needed made by stakeholders for 
transmission and by Commission for distribution – Costing 
of the Smart Grid Industrial Initiative 
Nuclear Fission  5 - 10 Estimation of resources needed made by stakeholders – 
Costing of the Nuclear fission Industrial Initiative 
Smart Cities 10 - 12 Estimation based on experience from CIVITAS and 
CONCERTO initiatives and reviewed by the JRC 
European Energy 
Research Alliance 
(EERA) 5 Estimation of resources needed made by the Commission in 
consultation with EERA – Based on input from EERA 
assuming that 30% of their future activities are jointly 
planned and implemented. 
Total  67.5 - 80.5  
Current investment 
contributing to these 
objectives 14 - 20 The Commission estimates that 50 to 70% of the current 
investment can be direct ed to these objectives. 
Additional financial 
needs 47.5 – 60.5  
In conclusion, an estimated total investment17 of 67.5 to 80.5 B€ is requ ired over the next 10 
years in order to effectively advance the ac tions proposed under the SET-Plan and thereby 
address the key technology challenges identified th erein. Fortunately, as i ndicated in the table, 
50 to 70% of the current investment can be re garded as contributing towards the SET-Plan 
objectives set out above, and therefore, the required additional investment will be in the 
region of 47.5 to 60.5 B€.  
This conclusion is in line with recent repo rts (Stern, Intergovernme ntal Panel on Climate 
Change, International Energy Agency18) which recognise the need to increase current efforts 
by between a factor of 2 and 10. It is also in line with the Council conclusions from 2 March 
2009, which confirmed the need for a substantial increase of private and public energy-related 
RDD compared to current levels. Specifically they targeted (at least) a doubling of global 
                                                 
17 This additional investment includes both private and public (Member States and Community). Note that 
for simplification, the estimated R,D&D needs (table 2) have been  compared with the approximate 
current R&D levels (table 1). This approach does not yet account for methodo logical problems that are 
explained in more detail in Annex XX. 
18 Energy Technology Perspectives, 2008 
 
EN 18   EN energy-related RDD by 2012 and a quadrupling of  the current effort by 2020. Translating19 
this political guidance into monetary terms w ould represent an additional annual investment 
effort of about 60 B€ for the ne xt ten years, which is in line  with the needs presented here. 
This financial gap is already be ginning to be filled. The Europ ean Energy Recovery Plan has 
allocated 1.5 b€ to CCS demonstration projects  and off-shore wind innovation activities. In 
addition, within the Emission Trading System 30 0 million allowances have been allocated to 
large-scale demonstration projects for CCS and innovative renewables. At the current market 
price of CO2 (approx. 15€/ton) this would represent 4.5B€. This  means that approximately 6 
B€ would be available to fill in the ga p identified in the next ten years. 
Annex VIII provides an overview of recent initiatives in the context of the financial crisis, 
which will contribute in the short term, but are not of such great relevance to the long term 
vision of this Impact Assessment. 
2.4. The underlying drivers of the financing gap 
The underlying drivers of the financing gap re late to the specificities of the energy 
technologies sector a nd a wide variety of other factors.  
2.4.1.  Spill-over effects  
Due to positive spill-over s, the overall economic value to society of a research effort often 
exceeds the economic benefits enjoyed by the i nnovating firm. Three relevant distinct flows 
of spill-overs justifyi ng public intervention can be distinguished:  
(1) Spill-overs occur because the working of the market for an innovative good creates 
benefits for consumers and other non-i nnovating firms (market spill-overs).  
(2) Spill-overs occur because knowledge created by one firm is typically not contained 
within that firm, and thereby creates va lue for other firms and their customers 
(knowledge spill-overs).  
(3) The performance of interrelated technologies may also depend on each other, and as a 
result each firm improving one of these re lated technologies would create economic 
benefits for other firms and their customers (networks spill-overs). 
The overall result is that the innovation efforts u ndertaken in the private sector will be smaller 
than the benefit created for the society as a whole. 
Basic research has especially high spill-ove r rates meaning that private actors will 
autonomously conduct less basic research than what is needed overall. Similarly, the spill-over effect is especially strong for low-carbon t echnologies. This is due to the strong social 
preference for a rapid and global diffusion of breakthrough low-carbon technologies, itself 
resulting from the uncertainties of non-linear climate change damage and its probable damage 
to the interests of future generations. 
                                                
 
19 Taking the approximately 3.3 B€ invested in 2007 as a reference level of spending in low carbon 
technologies (see previous section) 
 
EN 19   EN Optimising the benefit of i nnovation to society by compleme nting private RDD through 
public RDD is the justification of public research efforts20. Governments should invest in 
projects that are likely to have  a high social rate of return. On the othe r hand, the absence of 
government support would lead to a deficit on the public benefit side of the balance.21  
2.4.2.  Environmental externalities  
The EU Emissions Trading Scheme puts a pri ce on carbon emissions in the covered sectors, 
i.e. energy-intensive sectors in  industry and power generation. Thus, it provides a market 
incentive for higher penetrati on of low-carbon technologies. The ETS thereby inte rnalises the 
negative externality of carbon emissions by monetis ing them. Other instruments, in particular 
carbon taxes or in some cases standards, can be applied in sectors that are not in the EU ETS 
(e.g. in households, transport and services) to create similar cost-efficient incentives.  
The ETS as well as energy or carbon  taxes are cost efficient instru ments. This means that they 
create the incentives to introduce the cheapest and most efficient abatement technologies first, 
i.e. the technologies with lowest costs. In term s of technology developmen t, this is equivalent 
to the technologies closest to the market. T hus, market based policy instruments create a 
powerful stimulus for the introduction of th ese technologies. At the same time, these 
instruments also create incentives and accelera te the market uptake of more immature 
technologies by improving the expected long te rm rate of return of new technologies. 
Market based instruments alone may, on the other hand, prove insu fficient to provide 
incentives to develop those recently developed technologies which remain further from the 
market in the short term and at a sufficient pace. Additional support measures may therefore 
be required to foster RDD in le ss mature low-carbon technologies.  
The energy technologies identified by the SET-Pl an become competitive at a much higher 
carbon price than the current of €12/tn CO2 (e.g. offshore wind over €35/tn CO2, CCS over 
€70-90/tn CO2). The third phase of  the ETS due to start in 2013 is expected to bring about 
more visibility to the price of carbon - partic ularly against a backdrop of an ambitious post-
Kyoto international agreement for further emissi ons reductions - and is likely to be the basis 
for broader emission markets that will include more sectors and countries. Policy simulations 
of future climate policy scenarios point towards the need for higher global carbon prices in the 
long term. Limiting the global warming to 2 degrees has been estimated to correspond to a carbon price of €37/tn CO2 by 2020 and by €64/ tn CO2 by 2030
22. In this context, it is 
expected that the ETS will estab lish itself as a major driver for technology market uptake in 
the EU in the covered sectors over the medium and long term. For those sectors to which the 
EU ETS will not be applied due to high transac tion costs, CO2 related taxation would be the 
best alternative.  
2.4.3.  Uncertainty and risk aversion 
One underlying problem for the intr oduction of new technologies is  the risk aversion vis-à-vis 
new technologies shown by privat e investors, particularly in  the context of the present 
                                                 
20 NCEP, 2004 
21 In addition, the enforcement of private property rights through e.g. patenting is a way of limiting 
spillovers for the innovator (Stern, 2006). Following  this logic, the EU Commissioner for Industry 
proposed an accelerated patent application procedure for green technologies on 06. May 2008. 
22 IA to the Communication Limiting Global Climate Change to 2 degrees Celsius, SEC 2007(7) 
 
EN 20   EN economic downturn. The final result of the res earch and innovative effort is genuinely 
uncertain, as not all projects generate marketab le results. Thus, unproven technologies entail 
large risks and high learning investments, i.e. high  technology risks . The private actors are not 
able to incorporate the positive benefits on the society as a whole by bringing these low 
carbon technologies to the market. The overall result is too little investment in the 
development of these types of te chnologies or too little divers ification of technology options 
compared to what is needed to retain the fl exibility to achieve more stringent emission 
reductions in the future. 
The energy technologies id entified by the SET-Plan invol ve high upfront learning 
investments, and long lead time s. Particularly in the presen t global financial and economic 
downturn, debt financiers show a pronounced relu ctance to provide funds for as yet unproved 
technologies. The uncertainty a bout the technologies also has a bearing on the cost estimates 
for the demonstration plants. There is a need  for demonstration proj ects to help gain 
knowledge, and thus drive cost reductions and commercial competitiveness in the industries 
involved. The technological risk warrants support to cover the co sts arising from accelerated 
and large-scale investment in  these unproved technologies. 
The fact that the demand for low-carbon energy technologies is partially policy driven 
exposes the sector to high regulatory risks . Key legislation, in particular the climate change 
and energy package, is now in  place and provides a stable policy framework within the EU. 
This is expected to act as a driver for the quick implementation of the SET-Plan. However, 
the effectiveness of EU legislation in this ar ea largely depends on the development of climate 
policy, post- Kyoto. The stability of  the regulatory system remains an important factor in this 
regard for the consolidation of investor confidence.  
Continued uncertainty also exists within other policy areas, e.g. trade policy. The 
liberalisation of trade in environmental and energy services and goods and hence the 
protection of intellectual pr operty rights and other barriers  to technology and know-how 
transfer remains an important issue for the development of new low carbon technologies.  
A range of other market factors will also have  an impact on the risks and uncertainties facing 
the development of new low carbon technologies. One of the most importa nt factors in this 
respect is the development of futu re oil and energy prices, as they  influence the rate of return 
on the investment in alternativ e energy sources. The last year has showed that these price 
developments can be very uncerta in and volatile. The crude oil price peaked  close to $150 per 
barrel in July 2008, reflecting a more than a qu adrupling of the price since 2003. At present, 
crude oil is around a third of  the price at the peak. 
2.4.4.  Various other market failures and the specificity of the energy sector  
The inherently high upfront learning investme nts in the energy sect or (e.g. full-scale CCS 
about €1 billion) combined with  the long life cycl es of existing plants  (e.g. 40 years for a 
coal-fired plant, 25 years for a CCG plant23) and infrastructure and network investments 
create a lock-in effect- that favours establis hed technologies and thus  impedes innovation of 
new technologies in the energy se ctor. Established technologies  have undergone a long path 
along the experience curve, enabli ng them to attain low pro duction costs and economics of 
scale. Hence, large investments in both i nnovation and deployment are required for new 
                                                 
23 http://eur-lex.europa.eu/LexUriServ/LexU riServ.do?uri=SEC:2008:2872:FIN:EN:PDF   
 
EN 21   EN energy technologies in order to become competitiv e. In addition, the existence of high initial 
(transaction) costs to enter the market due to the need of distribution and grid system is 
another difficulty for new technolog ies to enter the market. Hence,  these different features of 
the energy system constitute barriers to entry for new technologies. The difficulties to reach the market with new technologies also act as  a disincentive for innovation in the energy 
sector. 
Furthermore, the regulatory framework for new infrastructure deployment might still be too 
fragmented to enable sound competition between  emerging technologies options envisaged to 
serve new demands. This concerns for exampl e undefined legal framework about who should 
bear the costs of building "carbon grids" to connect large scale CCS to carbon producers.  
The problems with competition on the Europ ean electricity and gas markets reduce the 
pressure on the incumbent companies to develop new technologies and to reduce costs. Barriers to entry, both in terms of access to the grid/network and the competitive situation on 
the wholesale markets, limits the possibilities for companies that apply new technologies to enter the market. The 3
rd legislative internal energy market package due to be adopted in 2009 
aims to address and improve this situation.  
To overcome these various market failures and specific features of th e energy sector, public 
funding could make a difference through providing support for the high in itial research and 
development costs, but also by supporting the early deployment stage of some low carbon 
technologies. This can be done by various financial instrument s, with different leveraging 
potentials for public funds.  
2.5. Current financing instruments and their gaps 
At present available financing instruments include RTD Programmes (national and EU), 
innovation programmes, debt base d financing, Venture Capital Funds, Infrastructure Funds 
and market- based instruments (s ee Annex V). The matrix belo w gives an indication of the 
applicability of each of the av ailable instruments for the specific technology groups and also 
highlights any particular needs those instrument s may have with regards to a given technology 
group. 
 
EN 22   EN  
Table 2: Overview of the ex isting investment vehic les and applicability to the technology 
groups.  
Investment vehicles Group 1: Technologies 
close to market 
competitiveness Group 2 : Emerging 
technologies on the verge 
of mass market 
penetration Group 3: New 
technologies 
RTD programmes 
(EU/ MSs)  Applicable, but further 
resources and 
coordination required. Applicable, but further 
resources and 
coordination required. 
Innovation 
programmes (EU/ 
MSs) Applicable, but further 
resources and 
coordination required. Applicable, but further 
resources and 
coordination required.  
Debt Based financing 
(EIB / national) incl. 
RSFF Applicable. Applicable, but further 
resources [and coordination] required. Applicable, but further 
resources required. 
Venture capital funds 
(private / public-
private) Applicable, but further 
resources desirable. Limited applicability, 
further resources 
desirable.   
Infrastructure funds 
(EIB / national) Applicable, but further 
resources required. Applicable, but further 
resources and 
coordination desirable.  
Market-based 
instruments Applicable. Limited Applicability  
 
Market based instruments, the last category in th e table above, have a very important role in 
supporting the last step to co mmercialisation and market deployment of new low carbon 
technologies. However, the design of targeted ma rket based instruments such as feed-in tariffs 
or green certificates remains the competence of the Member States ; work on taxation 
instruments is on-going within the Commission;  and the EU Emissions Trading Scheme has 
just been reviewed. These mechanisms are th erefore left outside the scope of the policy 
options considered in this impact analysis.Based on the table above, the following specific needs have been identified: 
• A need for both further resources a nd co-ordination across the RTD and 
Innovation programmes. 
• A need for further resources and co-ordination of all instruments with regards to 
Group 2 technologies, and particularly large scale demonstration projects. 
• A general need for further resources, a nd in some cases enhanced co-ordination 
with regards to Group 1 technologies. 
 
EN 23   EN • Clear benefits could also be gained fr om increased resources to venture capital 
instruments. 
See Annex V for further discussion of the i ndividual instruments and their drivers.  
2.6. Effect of financial crisis on the fi nancing of low carbon technologies 
The financial crisis has transformed into disr upted trade flows and stagnating or contracting 
domestic private demand in most EU Member States, leading to an economic crisis. These 
trends fuel uncertainty about th e profitability of a number of investment projects. Actually, 
bank lending to the private sector is declining (the Public-Private Infrastructure Advisory 
Facility  has already registered trends in increased costs, delays and cancellations, which are 
expected to continue24). With public finances weakened by recession, governments may also 
come under increasing pressure to cut spending on investment. If the current crisis lasts for a 
longer period of time, there is a risk that  governments and businesse s may not only postpone 
closing the RDD investment gap necessary to support the EU long-term growth potential, but 
even reduce their current research and innovation e ffort. There are clear evidences that cuts in 
investment, if spread on a significant scale, could create disproportio nate reduction in EU 
economy productive capacity with long-lasting effects25. In this context, it is all the more 
important the ensure that scarce public and private capital resources are directed to 
investments with the highest economic rates of return26, taking into account long-term social 
benefits. 
In particular, currently falling demand in OECD countries translated in abrupt fall in oil and 
carbon prices. This trend fuel expectation of fu rther demand reductions in the short-term and 
weakens incentives to invest in the rapid market deployment of the most mature low-carbon 
technologies. Nonetheless, gl obal demand for energy can only be expected to rebound once 
the economic situation improves, especially as demand growth from emerging markets is 
likely to be sustained. Achieving the legally- binding EU targets to increase the share of 
renewable energies and to reduce emissions of greenhouse gases by 2020 will reduce our exposure to future energy price shocks. Besi des, when the upturn starts, low carbon 
technologies will be among the lead markets. Hence, the economic slowdown is not a reason 
to slow the shift to low-carbon energy-effi cient production and consumption patterns, 
wherever it can bring produc tive efficiency gains.  
Under the assumptions of a stable favourable framework for low-carbon energy technologies, 
it is likely that cuts in corporate RDD activities could be less severe for low-carbon technologies than in other sectors. Indeed, so me companies may see the crisis also as an 
opportunity for carrying out those structural shif ts, which have been considered as necessary 
over the past years, in a ra dical way. RDD is widely acknow ledged for being central for 
ensuring such a shift.  
However, the crisis may induce a tendency to shift corporate investme nts from more basic 
research to RDD activities that are consider ed less risky and provide a faster return on 
                                                
 
24 Public-Private Infrastructure Advisory Facility: "Financial crisis affecting new private infrastructure projects", article to b e downloaded from 
http://www.ppiaf.org. 
25 For example, Servén, L. (2007): "Fiscal discipline, public investment and growth". In: Perry, G., Servén, L., Suescun, R. (eds) : "Fiscal Policy, Stabilization and 
Growth". World Bank Publications. Also IMF (International Monetary Fund) (2003): "Fiscal adjustment in IMF-supported programs".  Washington DC: IMF. 
26 For example, Japan in the 1990s undertook massive public infrastructure projects that arguably resulted in waste of resources, created a large debt burden for 
Japan, while were not successful to counter the recession and failed to have a long term impact on the supply side.  
 
EN 24   EN investment. At the same time, the financial crisis makes merger a nd acquisition deals less 
likely, but there seems to be a qualitative shift fr om debt financed to equity financed deals, 
making deals in technologically challenging activities such as offshore wind energy more 
probable, which could possibly lead to a hi gher concentration of RDD investments.  
Currently, no common business strategy in response to the current  crisis can be observed. In fact, a 
non-exhaustive review of press releases shows cuts  in workforce, whilst RDD budgets likewise have 
announced constant, and even rising figures. Given th e combination of uncerta inty and the societal 
need for developing low-carbon technologies, it becom es even more important for the public sector to 
ensure favourable incentives and market conditions in  order to trigger corporate RDD 
investments in these technologies.  
In these circumstances, the EU and many MS r ecovery plans very ap propriately comprise 
actions targeting low-carbon tec hnologies. The bulk of national measures are frontloading of 
the ongoing or planned projects27 . However, it is worth noting that some MS have embarked 
in designing new measures thus  creating an additional impetus towards the completion of the 
EU climate and energy objectives. A good example of  this is Finland which has established a 
strong participation in risk capital funds to sustain priv ate investments in low-carbon 
innovation, meanwhile Denmark has establishe d a new major 12.5 bn EUR investment plan 
over 2009-2020 to upgrade its transport infra structure to higher economic and energy 
efficiency levels. Similarly, Germany, Luxemb ourg, France and Ireland have set up actions 
aiming at demonstrating low-carbon energy-effi cient buildings, which is a way to realise 
important economies of scale to mainstream lo w carbon technologies in this sector, with 
accompanying positive spill-over ef fects throughout the EU.  
2.7. Added value of further EU action 
As outlined above the transition to a low carbon economy is both necessary and beneficial for 
the Community. Yet, taking into account the na ture of energy research, the investments 
needed and the urgency to bring about change, it seems to be evident that very few Member States have the capacity to individually fi nance the programmes and create the incentives 
necessary to generate the necessary technol ogies and market innovations. The main global 
players, the United States and Japan, but also emerging econom ies such as China, India and 
Brazil all face the same challenges, and are multip lying their efforts to bring about low carbon 
technologies.  
In particular, it should be noted  that, at present the EU is no t making full use of the potential 
for innovation of the internal market to expl oit the synergies which exist between Member 
States with regards to the development and de ployment of new energy technologies. Action to 
make full use of the available synergies could only be taken at EU le vel, is necessary and 
would have substantial benefits.  
Furthermore, it should especia lly be borne in mind that the market alone cannot be relied 
upon to finance the required transformation. Alt hough cost efficient, it lacks a long term 
strategic outlook, is risk averse, and suffers from the market failures outlined above which 
prevent it from being the sole agent of tran sformation. Again therefor e, the transformation 
                                                
 
27 Estonia has confirmed the funding for its support programme developing low carbon biomass 
technologies and Austria its programmes to support RDD and Innovation in climate change mitigation 
technologies; Portugal has frontloaded 145 million EUR investment as exceptional support to fasten the 
market replication of wind and solar technologies, etc 
 
EN 25   EN will require public and EU level effort in orde r to bridge the financial gap and address the 
market failures outlined in earlier sections; as well as compensating for the coordination 
failures set out below which prevent European  industry from achieving its full potential.  
2.7.1.  Co-ordination Failures  
Worryingly, at present, and unlike the str ongly focussed and coordinated energy technology 
policies in e.g. Japan and the US28 no single European programme  currently exists. With the 
exception of fusion, pan-European co-operation is limited, and possible synergies underused.  
In the EU, there are many such coordination fa ilures which prevent European industry from 
achieving its full potential. They range from engi neering and technical failures to strategy and 
planning failures and, perhaps most im portantly, implementation failures. 
– Engineering and technica l coordination failures: 
– New technologies have to be compatible wi th exiting energy syst ems if they are to 
spread widely. For example, the lack of compatibility with electricity networks can hold back the market take-up of low carbon electricity generation 
technologies. 
– The variety of national regulations and technical specifications fragment the 
market and inhibit industry investme nts in high risk technologies.  
– Strategy and planning coordination failures 
– Multiple, uncoordinated individual programme s lead to a tendency to over-focus 
on the most attractive short term tec hnology options, whilst starving promising, 
but further from the market technologies, of sufficient support. 
– Uncoordinated and unstable market incen tives and support schemes add to the 
map of incoherence and, in  certain circumstances, act as innovation deterrents.  
– Implementation coordination failures: 
– Fragmentation of effort and resources l eads to duplication and sub-critical mass, 
leading to underperformance with respect to other regions, even if the overall 
R&D spend is similar. 
– Transnational co-operation in low carbon energy RDD concentrates on those MS 
with the highest spending, and a high potential for co-operation remains 
unexploited
29.  
– In addition, there are a number of othe r sources of funding (from financial 
institutions e.g., EBRD, WB and/or na tional support programmes) which could 
provide valuable additional syne rgies alongside EU resources.  
                                                 
28 Wiesenthal et al, "R&D Investment in the priority technologies of the European Strategic Energy 
Technology Plan". 
29 IPTS, 2009  
 
EN 26   EN Annex VI presents a further insight into EU  policy coordination failures and Annex VII goes 
into further detail on the exact justificati on for EU action with re gards to each of the 
Technology Groups. 
 
EN 27   EN  
3. OBJECTIVES  
The EU's Strategic Energy Technology Plan (SET- Plan) is part of the Energy and Climate 
Change policy framework. It contributes to the overall policy obje ctives by proposing, 
developing and implementing an Energy Techno logy Policy for Europe. It complements EU 
policy in energy and climate change and can en able cost effective compliance with legally 
binding targets. These include the realisation of the internal ma rket in electricity and gas; 
compliance with emissions' reductions and the revised and strengthened Emissions Trading 
Scheme; the increased contribution of renewabl es to the EU's electricity generation; the 
measures to enhance energy efficiency; the EU car emissions standards; the negotiation of a 
post-Kyoto international agreem ent; and the development of an external energy policy. 
3.1. Strategic objectives  
The subject of this impact assessment is the financing of low carbon technologies to achieve 
the objectives of the SET-Plan. The SET-Plan aims 'to focus, strengthen and give coherence 
to the overall effort in Europe, with the obj ective of accelerating i nnovation in cutting edge 
European low carbon technologies.'   
The strategic objective to be  pursued within the framework of the SET-Plan is: 
• to accelerate the development a nd facilitate the market take -up of low carbon technologies 
which have the potential to be competitive in the long-run;  
The SET-Plan proposes a comprehensive set of  actions at governance and implementation 
level to achieve this objective. Overall, these actions would lead to a better use of resources 
by focussing and bringing coherence to the overall  effort in Europe, curre ntly characterised by 
its fragmentation and general downward trend in public energy research and development 
expenditures over the last decades (which remain well below its levels from the mid-1980s despite the upturn in more recent years). To achieve this objective thr ough the full and timely 
implementation of the SET-Plan, both the Coun cil and Parliament call for an increase in 
resources. 
3.2. Specific objectives 
There is consensus that industry investment s hould be the main driver to achieve the SET-
Plan objective in a cost-effective manner, w ith public research effo rts playing a supporting 
role. However, despite all measures taken an d policies proposed, the sector faces several 
market failures and in particular has accumula ted a significant underinvestment (as explained 
in chapter 2).As things stand, industry is not investing with  the intensity required by the 
agreed energy and climate policy targ ets and has no incentive to do so.  
Hence, the specific objectives to be pursued are: 
• to stimulate a substantial increase in priv ate investment in research, technological 
development, demonstration, and market replication of SET-Plan technologies. 
 
EN 28   EN • to ensure the provision of sufficient, appr opriate and efficient financial resources in 
support of the development of the low carbon t echnologies identified in the SET-Plan, so 
as to secure a level of innovati on in line with EU policy goals. 
3.3. Operational objectives 
To achieve the specific objectives in relation to the SET-Plan, public policy should pursue, 
inter alia, the following operational objectives: 
• to at least double financial resources to the research, development and demonstration of the 
low carbon technologies identified in th e SET-Plan for the next ten years. 
• to ensure a more flexible and effective us e of currently existing instruments; and  
• to modify or develop new flexible and effective instruments and/or institutional 
arrangements, as appropriate,  and in cooperation with industry, the research community 
and Member States.  
The SET-Plan information system (SETIS) provides a 'technology neutral' performance 
management framework to meaningfully monitor progress towards these objectives. 
 
EN 29   EN  
4. POLICY OPTIONS  
To cover as much as possible the broad range of potential policy measures, the following four 
main policy options have been selected, to specifically illustrate and exemplify the 
alternatives available. These are: 
(1) the continuation of the existing investment vehicles within the current institutional 
arrangements (BAU) 
(2) increased funding channelled through the exis ting investment vehicles within the 
existing institutional arrangements (option 1) 
(3) a strengthening of the existing investment vehicles within modified institutional 
arrangements (option 2) 
(4) new investment vehicles, taking specific institutional arrangements, filling in gaps and 
removing recurring weaknesses of  the existing portfolio of i nvestment vehicles (option 
3). 
In this context, "investment vehicles" are defined as the specific means through which the 
emergence of a low carbon economy is furt hered and promoted, and "institutional 
arrangements" represent the governance structur e under which the invest ment vehicles are 
managed. 
4.1. Business as usual (BAU) 
One possibility is to continue with the cu rrent energy technology innovation process, which, 
although aiming at a common goal, the sustainability of the European energy system, is 
mainly based on individual research programmes,  with their own priority setting mechanisms, 
governance and funding. These are implemented at different levels: EU, national, regional, 
corporate, etc and rely on non-aligned roadmaps  that are influenced  by fragmentation and 
developed to suit a ‘single client’; they also in vary in terms scope and scale of allocated 
resources. The SET-Plan proposed the creati on of a European Commu nity Steering Group on 
Strategic Energy Technologies to address this  fragmented landscape. However, although the 
Group has been established, it will take time until its impact is significant.  
These currently existing programmes would all continue under the Business As Usual 
scenario, and include mainly: 
• Innovation efforts in energy under the CI P programme amounting to €730 million for 
2007- 2013.  
• National and EU level RDD funding, amounti ng to € 683 million in 2007 for non-nuclear 
RDD and € 700 million for nuclear fission.  
• EIB Group activities including the EIB's typical infrastructura l and corporate loans (EUR 
20 bn for Energy related activit ies 2009/2010), the RSFF program me (EUR 2 bn-joint with 
the Commission), its Global loans for SMEs, in vestments in infrastr uctural funds, and the 
 
EN 30   EN EIF's venture capital and guarantee activity (p articularly under the CIP mandate conferred 
on the EIF- € 550 million 2007-2013).  
• Additional measures under the European Econom ic Recovery Plan, including both national 
and EU level measures. If approved by the Council and the Parliament, the European 
Energy Programme for Recovery adopted as part of the European Economic Recovery 
Plan could amount to an additional €3.5 billio n to improve electric ity and gas networks, 
kick-start the demonstration of CCS and s timulate the developmen t of offshore wind 
technologies.  
Some efforts are also currently  undertaken through transnati onal agreements (EU framework 
programmes, ERA, bilateral agreements) the a im being to improve the level of coordination 
between programmes to create the optimal cri tical mass and raise the necessary additional 
funding to address the challeng es facing the energy sector.  
4.2. Increased funding through the existing investment vehicles (option 1) 
One option would be to genera lly increase the amount of fundi ng and resources heading to 
these investment vehicles. In many cases the pr oblems defined in the problem definition arise 
from a lack of adequate resour cing; and provision of such re sourcing could have a significant 
impact in terms of encouraging the deve lopment of low carbon technologies. Specific 
measures here could include: 
• Allocating further financial resources to the Energy Theme within the RTD Framework 
Programmes (EC and EURATOM) without cha nging the instruments used to finance 
projects. The EU could encourage Member St ates to similarly reinforce National RDD 
programmes, without changing th eir current implementation m odalities. Under this option, 
the European Industrial Initiatives and the Eu ropean Energy Research Alliance of the SET-
Plan could be implemented as 'soft' partners hips, not involving legi slative proposals to set 
up new institutional arrangements. 
• Allocating further financial resources to th e energy components with in the CIP programme 
(which focus on non-technologica l barriers and seek to br idge the gap between the 
successful demonstration of i nnovative technologies and their effective broad market take-
up) without changing the instru ments used to finance projec ts. Particular emphasis might 
be placed on the Intelligent Energy-Europe segment of CIP within which prominence is 
given to energy efficiency and renewable en ergy technologies. The EU could encourage 
Member States to similarly reinforce Na tional Innovation programme s, without changing 
their current implementation modalities. 
• Allocating further resources to venture capit al projects in the field of low carbon 
technology, mainly through the "eco-innovation" budget under the CIP manda te to the EIF. 
These resources would be particularly desira ble with regards to supporting small firms 
adapting and transferring new, previously de monstrated (but not widely available) 
technologies to the market.  
• A significant increase in the RSFF budget may be thought wise so as to enable the requisite 
leveraging of significant amounts of  financing towards the realisa tion of riskier projects, in 
particular large scale demonstration projects.  These projects, which also require a 
significant cooperation are, at present, the onl y ones in which their size and complexity 
might prevent a meaningful RSFF contribution. (for example in the case of CCS the large 
 
EN 31   EN scale demonstration programme may require  the roll out of up to 12 large scale 
demonstration plants at  a cost of EUR 7-12 bn30).  
• In the case of infrastructure funds, the Commi ssion could take a participation in Marguerite 
(fund created by the EIB to support the financi ng sustainable energy infrastructures) in 
order to spur the financing of low carbon t echnologies; moreover a strengthening of the 
currently existing instruments could take the form of increased EIB participation in infrastructural funds in the energy sector, a nd particularly those focussed on mitigating the 
effects of climate change. The aim would be to  increase funds capacity to bring products to 
market, and particularly to leve rage participation in SET plan technologies so as to better 
enable the construction of large demonstration projects. One aspect of this is simply scale, 
EIB investments in private infrastructure funds  are relatively small at present, this is 
something that could be significantly expanded in financial terms and then aimed at both 
large scale demonstration and market replication. 
• Further resources could be deployed under the various technical assistance programmes of 
the EIB Group (e.g., JASPERS). These would help to facilitate market take up and enhance 
the benefits gained from the EIB Group's programmes.  
• Cohesion Funds – planned allo cations directly s upporting energy efficiency, renewables, 
clean urban transport investments account for approximately €15.2bn or 4.4% of total 
Cohesion Policy funds for the period 2007-2013; th ese funds can play an important role 
supporting market replication and technology  dissemination. In the context of the 
European Economic Recovery Plan, Cohesion Po licy has taken a number of steps allowing 
Member States to increase suppor t for low carbon technologies.
31 For example, the 
proposed amendment of the ERDF  regulation, allows Member St ates to dedicate up to 4% 
of their total ERDF allocation to energy effici ency and renewables investments in housing. 
This, should offer new possibilities for demand -side measures, and might therefore also 
provide some incentive for enhanced supply in the field of renewables and energy efficiency. Member States are encouraged to ensure that investments in low carbon 
technologies under Cohesion Policy support the priorities of the SET-Plan.  
4.3. A strengthening of the investment vehi cles within modified institutional 
arrangements (option 2) 
This policy option considers supplementing, where appropriate, the measures to strengthen 
the instruments described in Option 1, with an institutional restructuring aiming to increase 
the co-ordination and overall effectiveness w ith which those instruments are implemented. 
• For an accelerated development of technologies the implementation of the SET-Plan offers 
new opportunities for modified institutional a rrangements mainly in the context of the 
European Industrial Initiatives (EIIs) and the European Energy Research Alliance. These could take a number of forms, including form alised Joint Programming (between MSs and 
the EC) of research to achieve critical mass in given sectors, on the basis of Art 168 or 169 
of the Treaty, and the setting up of Public-Pri vate Partnerships (PPP) through legislative 
proposals, such as Joint Technol ogy Initiatives or Jo int Undertakings on  the basis Article 
                                                
 
30 McKinsey 
31 COM(2008) 876/3 Commission Communication "Cohesion Policy: Investing in the real economy" 
 
EN 32   EN 171 EC. Such options amount to changes from the business as usual option, even if they 
have already been applied in other sectors. 
• On the innovation side, examples of possibl e measures could be the creation of new 
institutional arrangements to greatly expand the market replication activities of the CIP or 
new partnerships/structures to  change the current paradigm  of investment in energy 
efficiency activities which are by their very na ture highly dispersed and fragmented, due to 
the multiple market actors and customers. Th e changing nature of the energy services 
industry, encouraging energy savi ngs rather than simply supplying energy may need to be 
supported by innovative new instruments and appr oaches that are not currently envisaged 
in the CIP or other policies. 
• With regards to venture capital, the idea of refocusing the Capacity Building Scheme 
(CBS) under CIP towards low carbon technologie s could be explored. This would come 
under the scope of the CIP decision, and would fo cus above all on providi ng grants so as to 
improve financial institutions capacity to asse ss the commercial viabil ity of projects with a 
significant eco-innovation component. 
• In the case of Debt Financing the possibility of establishing a far st ronger link between the 
SET-Plan Steering Committee and the EIB coul d be explored. Under this scenario, the 
Steering Committee might be able to mobilis e increased joint (Community, Industry and 
Member State) financing and better coor dinate efforts in support of low carbon 
technologies on a more frequent and more effective basis than is currently the case.  
• When discussing infrastructural funds it might be possible to envisage a specific mandate 
for the EIB to invest in infrastructural funds focussed on low carbon technologies. The 
establishment of such a mandate would allow for increased support, and increased emphasis being placed on these funds by the EIB. It would also permit an increased development of expertise rega rding infrastructural funds wi thin the EIB, meanwhile the 
new mandate would gain a degree of levera ge through being associated with the high 
repute of the EIB.  
4.4. A set of new investment vehicles taking  specific institutional arrangements  
(option 3) 
In many cases the problems concerning the coordi nation of the current instruments are severe, 
and it might be considered that the additional coherence brought by SET-Plan Steering 
Committees and new institutional arrangements mi ght be insufficient. In addition, there are 
some areas where the existing instruments, ev en if strengthened could be viewed as not 
containing the necessary ingredients for the ne eded promotion of low carbon technologies. In 
these cases it might be thought necessary to comb ine an increased level of investment with 
new and more efficient vehicles. In respect of the previous policy options, this can be 
considered as the 'radical change' option.  
• One possibility is to set up new 
centralised structures  for energy research and innovation with 
the remit of devising and im plementing a strategy on energy innovation at the EU level in 
line with the EU policy objectiv es. Such structures could follow an Intergovernmental 
approach (c.f. the European Space Agency ), new Community bodies or public-private 
bodies. They would be autonomous bodies wi th their own Governance structures and 
would set, endorse and review a multi-annual strategy and detailed work plan managed and 
monitored by its own management structure. Ob jective evaluation of such a structure could 
 
EN 33   EN be met via different formats and advice to  it could be provided through the SET-Plan 
governance. Funding would be increased above the current level and provided by the Member States, the European Commission and the industry either on a case by case basis 
or through fixed grants, and would be alloca ted by the Governing Bo ard through its work 
plan. As an illustrative example, as proposed  by the America COMPETES Act, the US is 
setting up a new Advanced Res earch Projects Agency for Energy (ARPA-E), within DoE 
to change the current paradigm of basic research funding in the US. The new body will 
focus on transformational and innovative high- risk/high pay-off energy research and is 
devised specifically to alleviate many of the shortcomings, including bureaucracy, poor 
coordination and lack of innovation within th e DoE's current appro ach to energy RDD. 
Another possibility would be a move to EU procurement-based RDD, such as long been 
practised at national level in the defence s ector, which would requi re new institutional 
arrangements. Such a scheme is currently in operation within the European Defence 
Agency. 
• With specific regards to the EIB Group act ivities (including Venture Capital, 
Infrastructural Funds, and De bt Financing), ne w investment vehicles and altered 
institutional arrangements would appear to be unnecessary except in the case of large scale 
demonstration projects; as co-ordination is not a problem except in these cases which of 
necessity involve a large num ber of actors and significan t amounts of funding. Here it 
might be thought worthwhile to consider an  EIB structured action in support of large 
demonstration projects across various techno logies. One could envi sion providing support 
to a number of organisations by combining a variety of financing mechanisms, including 
channelling grants from RDD and innovation pr ogrammes, ETS allowances, infrastructural 
funds and debt based financing. The increased funding would be provided to the action by 
the Member States, the European Commissi on, the EIB and the industry on a case by case 
basis. The actions to be funded would be sel ected through calls for proposals, open to all 
stakeholders. 
 
EN 34   EN  
5. ANALYSIS OF IMPACTS  
5.1. Main assumptions 
This analysis focuses on the impact of the polic y options described in th e previous Chapter on 
the successful development of low carbon energy technologies and their timely availability 
for market take-up. In other words, this analys is aims at identifying th e right policy measures 
that can best trigger the de velopment of low carbon technol ogies, leverage the required 
additional investment in resear ch spending, and address the di fferent market failures, as 
explained in Chapter 2.  
Building on the commonalities of technologies with  regards to innovation needs that led to the 
forming of technology groups in Chapter 2.2, this assessment focuses on the identification of the best policy option per group of technolog ies, rather than on a technology-by-technology 
basis. 
5.2. Economic and social impacts 
The EU energy and climate change policy comes at an overall cost to the economy. In 
particular, the impact assessment of the energy and climate package
32 indicates that the cost 
efficient reference scenario with a 20% reduction of the GHG emission by 2020, combined 
with a renewable energy share of 20%, results in a loss of GDP of around 0.35%. This impact 
would be restricted to a loss of 0.21%, however, by a redistributi on of the nationa l targets in 
the Non-ETS sectors and by allowing for emissi on reductions outside the EU through the use 
of the Clean Development Mechanism of the Ky oto Protocol. These calcu lations are based on 
the technological development expected under a "business as usual" ap proach, which includes 
the continuation of existing technology developm ent trends and implementation of the already 
agreed decided policies (inc luding the ETS as of 2005).  
Market-based instruments such as the ETS or  carbon taxation can orient  the technology base 
of the energy system towards low carbon technol ogies that are commerci alised and/or at the 
verge of large scale deployment by influenc ing their cost competitiveness. Whether 
deployment will be motivated by the ETS alone to meet the required pace and scale to address climate change is doubtful. The fa ct that energy efficiency m easures, which would themselves 
pay-off in the long term, are not adopted is an ar gument that the ETS alone is not likely to be 
sufficient. Likewise the significant taxes on trans port fuels have in the past been helpful in 
fostering the market penetration of biofuels in so far as the latter have enjoyed exemptions from these taxes; on the other hand, the tax syst em alone might be insufficient to prompt the 
necessary R&D investment in those alternativ e fuels which remain far from marketability. 
Therefore, it is self-evident th at transformational, high-risk te chnologies and technologies that 
are not nearly marketable will not be directly influenced by the EU's ETS in the short term.  
Recent research indicates that an active pol icy to stimulate technology development in 
parallel to an emission tradi ng system could be more cost efficient in achieving the set 
abatement target than relying solely on the em ission trading system. This policy could address 
                                                
 
32 SEC(2008)85, Impact assessment: Package of Implementation measures  for the EU's objectives on 
climate change and rene wable energy for 2020. 
 
EN 35   EN the positive spillovers effects of research through both gene ral RDD subsidies and through 
more targeted subsidies for the adoption of  the new technologies, (Otto and Reilly (2008)33 
demonstrate this with respect to the introduc tion of the CCS technology with a CGE model 
for the Netherlands;34).  
To the extent that this policy reduces the cost s to achieve the emission reductions targets, the 
negative impact on employment can also be assumed to be mitigated. The IA of the climate and energy package estimated a small negative im pact on employment in the cost efficient 
reference case (-0.04%
35), which actually turned positive in the case with redistribution of the 
Non-ETS targets and the use of the Clean Development Mechanism (+0.05%). The policy 
analysed here can be assumed to mitigate and po ssibly amplify this effect, as the costs of the 
emission reduction policy is reduced. However, the impact can be expected to be small as the 
original impact of the target is limited.  
Hence, even if it can be assumed that the ove rall impact of a doubling of the financial support 
to the development of low car bon technologies can reduce the ove rall costs to the economy of 
achieving the carbon emission reduc tion target, there is no reason to assume that any policy 
option considered in this Impact Assessment w ill produce purely economic  or social benefits 
of a significantly greater magnitude than anot her (excluding ‘business as usual’). All the 
policy options assume a doubling of the financia l resources, and mainly differ thereby in the 
pace, timing and manner in which the various  technologies are deployed. Although the chosen 
policy option will influence the environmental and societal characteristics of the energy system, in view of its impact on the availabil ity and cost competitiveness of new technologies, 
there is no direct unambiguous relationship be tween RDD activities on  energy technologies 
and their consequent market deployment. This  has been demonstrated by the results of a 
recently finalised FP6 project f unded by DG RTD (S RS NET AND EEE
36). Market roll-out is 
a result of the combined effects of technol ogy development, and market incentives and 
regulation, such as the EU's emission trading system (ETS).  
5.3. Environmental impacts 
The overall environmental impact will accumulate over time as the technologies are deployed. 
Again the difference between the options will mainly affect both the timing and the nature of the closing financial and industrial deals,  and thereby accelera te progress along the 
technology roadmaps towards the environmen tal goals set. An illustration of the 
                                                
 
33 Otto, V.M. and Reilly, J. (2008), Directed tech nical change and the adoption of CO2 abatement 
technology: The case of CO2 capture and storage, Energy Economics, 30, p. 2879-2898. See also Fischer (Fisher, C. (2008), Emission pricing, spillovers, and public investment in environmentally 
friendly technologies, Energy Economics, 30, 487 - 502)
33 which similarly finds R&D policy to be a 
complement to an emission reduction policy, in partic ular in cases where the carbon externality is not 
fully internalised 
34 It is shown that an optimal set of differentiated RDD subsidies across industrial sectors in combination 
with an emission trading system (differentiati ng between CO2-intensive and non-CO2-intensive 
industries) both leads to a faster  adoption of the CCS technology and is the most cost effective policy 
choice. However, it is also demonstrated that a di rected RDD subsidy to CCS with an emission trading 
system would be more cost effective than the emi ssion trading system alone, and lead to a somewhat 
faster take-up of the technology. The result is similar for an adoption subsidy, which would induce a 
much faster take-up of the technology, while still being more cost-effective than a situation with an emission trading system alone. 
35 Assumes full auctioning with in ETS and recycling through transfers to households. 
36 Scientific Reference System on new energy techno logies, energy end-use e fficiency and energy RTD 
 
EN 36   EN environmental benefits arising from the depl oyment of the different technology groups with 
respect to CO2 emissions are shown in the Chart 2 below. 
Chart 2. Additional CO2 Reduction Pote ntial Compared to the Baseline37 
050100150200250300
2020 2030 2050CO 2 reduction potential index (2020=100)Group III
Group II
Group I
 
This graph reveals that each gr oup of technologies will deliver its potential at different times 
due to their status of maturity. The achievement of the long term goals of the European energy 
policy requires a portfolio of technologi es from all technology groups. Beyond 2030, the 
technologies in Group II have a potential for CO2 reduction equivalent to that of the 
technologies in Group I. Group III constitutes a n ecessary long term investment to fulfil the 
imperative of a sustainable energy system beyond 2040. 
5.4. Assessment criteria 
The revitalisation of the financ ing environment of RDD for th e development of low carbon 
energy technologies will have a direct impact on: 
• Competitiveness, investment flows and business operations:  
                                                 
37 This Figure shows the additional CO2 reduction potential to the baseline37 (see EU energy and transport 
trends 2007, BAU scenario) that can be achieved at  different time scales by each Technology Group, 
normalised to the 2020 potential. More specifically, an optimistic s cenario for the deployment of each 
group of technologies until 2050 has been developed, based on the 2007 Technology Map –
SEC(2007)1510- and recent inputs from stakeholders in the context of the preparation of the EIIs. The 
analysis was based on scenarios that have been de veloped for each technology  individually and did not 
consider systemic effects. Therefor e, it shows the theoretical maximum potential that can be achieved at 
a given time horizon. Part of it will be realised as the energy infrastructure evolves and system effects 
will enter into play. The CO2 emission reduction achi eved by this scenario compared to the baseline 
was normalised by the CO2 emission reduction achieved in 2020. 
 
EN 37   EN – through the proposed revitalis ation of RDD investment  in the energy sector, 
– the foreseen reallocation of investme nt to low carbon energy technologies 
– the strengthening and possible modifi cation of existing instruments and 
institutional arrangements, and  
– the enhancement of the current investment cycle. 
• Innovation and research in the energy sector:  
– through the promotion of a new innovati on model in Europe capitalising on 
public-private risk sharing partnerships,  
– the strengthening of cooperation and join t funding structures between academic 
and industrial research, 
– the restructuring of technology and the res earch base of the en ergy system through 
the development and deployment of low carbon energy technologies. 
For the purpose of this assessment, these imp acts have been clustered into four main 
indicators (described in the table below), namely: 
• mobilisation of financial resources, which reflects the ability of the policy option to 
increase RDD funding, both private and public 
• suitability of financial instruments, which analyses how the instruments envisaged in a 
policy option match with the specific technology needs 
• flexibility of implementation, which addresses the capacity of the policy option to adjust 
quickly to evolving trends 
• effectiveness of financial instruments, which re fers to the impact of the implementation of 
the policy option at system level  
Our assessment of the various policy options w ith respect to each of these indicators will 
guide our determination of the most suitable option.  
Mobilisation of 
financial resources Suitability of financial 
instruments Flexibility of 
implementation Effectiveness of 
financial instruments 
• Adequacy for 
financing technology needs 
• Financial flows to 
match 
infrastructure development needs 
• Stimulation of 
private 
investment • Tailored to the type 
of innovation activities required for each technology.  
• Appropriate to the 
given innovation risk 
• Proportional to the 
level of actions and 
needs 
• Ability to engage all 
necessary actors • Degree to 
which the institutional arrangements under the policy option are able to respond quickly and effectively to an altered environment. • Stimulates the 
improvement and restructuring of the European innovation base 
• Increase of 
competitiveness of 
the European industry
 
EN 38   EN  
5.5. Policy Option 0: BAU 
5.5.1.  Mobilisation of resources 
Main Strengths  
• The increase in investment levels will be left to the private sector, which would avoid 
cherry picking and would maximise competition between technology options.  
Main Weaknesses 
• Table 2 (section 2.4) highlighted  a number of areas in which further financing is either 
necessary or desirable, but would not be provided under this option: 
– Further resources are required fo r all RDD and Innovation programmes. 
– Further resources are also necessary for all investment vehicles concerned with 
the financing of large scal e demonstration projects. 
– Further resources are also necessary to aid the market replication of low carbon 
technologies, particularly through the i nnovation programmes, and venture capital 
and infrastructural funds. 
5.5.2.  Suitability of finan cial instruments 
Main Strengths 
• Diverse and well-established portfolio of instru ments already in place that cover different 
aspects and types of innovation and scales of implementation (alt hough these instruments 
differ in terms of the scope and scale of al located resources for the same technology). A 
degree of instrument strengthening is proceeding in a number of Member States e.g., 
creation of a French Research demonstrator Fu nd to finance early st age of development of 
new energy technologies (€ 400 million). 
• As shown in table 2 (section 2.4) the current level of co-ordination with regards to EIB 
Group instruments is both appropriate and ade quate, (with the notable exception of large 
scale demonstration projects), t hus helping to addre ss the uncertainty and risk associated 
with long term investments.  
• For technologies with a high degree of matu rity and close to cost competitiveness (e.g. 
energy efficiency, on-shore wind, PV, etc), the instruments in place are effective, (albeit 
underfunded) with respect to th e specific technology needs as indicated by th eir growing, 
but still insufficient, market shares. 
• Diversity of programs capitalising on regional  strengths and resources , hence tailored to 
the industrial preference and the increased region al character of the ma jority of low carbon 
technologies, e.g. energy e fficiency, renewables, etc. 
Main weaknesses 
 
EN 39   EN • Insufficient to mobilise and coordinate the necessary actors for large scale projects on 
technology and infrastructure that spans across countries or is used by several 
technologies, e.g. off-shore, CCS, H2 & FC.  
• Limited consideration of dissemination of in formation across the EU, with concomitant 
effects on technology roll-out and hence partial exploitation of the benefits offered by the 
European internal market.  
• Limited co-ordination of innovation and RTD programmes.  In particular current 
transnational cooperation concentrates on a sma ll number of MS with the highest spending.  
• Diverse and uncoordinated admini strative procedures; which fr agment the market and add 
to the cost of high risk, capital/research in tensive or information sharing programmes (a 
good example being the non harmonised IPR issues). 
• Not having rigid partnerships allows the syst em to remain technology neutral while making 
temporal efforts where they have the greatest potential 
5.5.3.  Flexibility of implementation 
Main Strengths 
• The large numbers of relatively uncoord inated, independent instruments have 
demonstrated flexibility in response to a changing situation. Both the level of energy 
spending, and the framework in which it is c onducted have changed significantly over the 
past few years,  
• The EIB Group with its 50% increase in Energy lending as a response to the financial crisis 
showed its ability to adapt its implementation to the requirements of a given environment. 
In particular, the EIB Group has an establishe d record of creating new instruments, when 
appropriate, in order to fu lfil its objectives (e.g. RSFF). 
Main Weaknesses 
• Although the individual instruments can reac t relatively quickly and effectively to 
changing environments, they are incapable of doing so in a coordinated fashion.  
5.5.4.  Effectiveness of financial instruments 
Main Strengths  
• Many success stories both at the European and National level that  have significantly 
contributed to strengthening the European indu stry and the research base resulting from 
good management and implementation practices. 
• A significant (albeit insufficien t) recent increase in  the amount of resources and priority 
designated to energy related research. To the extent that the various EIB instruments are 
used, a significant higher leverage of the prov ided financial resource s can be achieved as 
compared to only relying on RTD and innovation programmes. 
Main weaknesses 
 
EN 40   EN • Duplication of efforts and sub-optimal use of research capital due to the absence of an 
integrated European innovation system for energy technologies or a holistic structural 
mechanism for the alignment of priorities of  individual programmes across the EU, despite 
the ongoing efforts with ERA-Net schemes to enhance cooperation. 
• Continuous reliance on an innovation system fo r the energy sector th at was not developed 
for a liberalised energy market.  
5.6. Policy Option 1 (PO1):  
5.6.1.  Mobilisation of resources 
Main Strengths  
• The strengthening of the existing investment vehicles that brings about the doubling of 
annual RDD investments can bri dge the financial gap for the development of low carbon 
technologies identified in Section 2.  
• Sufficient pull of public resources to strengthen the incremental innovation needs of 
technologies through market replication, as we ll as to fund demonstration projects of 
technologies that are on the verge of commercia lisation and hence are attractive for private 
investment. 
• The increased public funding will stimulate priv ate investment through soft partnerships to 
at least the same level, or higher for EIB Group activities, hence helping to generate the 
necessary critical mass for key projects. 
• The increase in funding will improve technical assistance that will stimulate market take-
up and generate further re sources for EIB activities. 
Main Weaknesses 
• It seems unlikely that the existing instruments or soft partnerships can secure and focus 
their financial resources to  the degree necessary to su pport very large scale RDD 
programmes over long time period.  
5.6.2.  Suitability of finan cial instruments 
The strengths and weaknesses of this Poli cy Option in terms of coordination and 
implementation are the same as of the BAU Po licy Option since no changes are foreseen in 
the instruments and arrangements used to finance projects.  
That being said, the strengthening of the existing instruments by increasing budget and 
possibly enhancing cooperation th rough soft partnerships will re duce to a degree some of the 
weaknesses of the BAU policy op tion. In particular, the incr eased public funding combined 
with the development and sharing of common st rategic research agendas and implementation 
programmes will stimulate and guide the mobilisation of indus trial actors on large projects 
(e.g large demonstration projects for emergi ng and new technologies); and the increased 
resources ought to help both grant and financia l instruments in compensating for the particular 
market failures towards which they are targeted.  
 
EN 41   EN Notice should be taken, however, of the fact  that this policy option cannot guarantee the 
necessary coordination of Eur opean efforts and the implementation of common agendas over 
long time periods. On the other hand, not having rigid partnerships allows the system to 
remain technology neutral while making temporal  efforts where they have the greatest 
potential, hence it provides a logic for shifting re sources between technol ogies and over time 
according to the latest developments. 
5.6.3.  Flexibility of implementation 
Main Strengths 
Since no changes are foreseen in the institutiona l arrangements used to finance projects, the 
flexibility under BAU is maintained. However the possibilities to fram e RDD activities with 
soft partnerships that do not require legisl ative proposals allow for a quick and flexible 
implementation of the strategic agendas of EIIs and joint RDD programming activities and 
any reallocation of efforts based on the achieved progress. 
Main Weaknesses 
Due to the soft nature of part nership envisaged, it is likely th at implementation will occur at 
the project level hence not guaranteeing the c oherence of the European efforts and the 
implementation of all necessary activities e nvisaged in the sector ’s work programme. 
5.6.4.  Effectiveness of financial instruments 
The strengths and weaknesses of this Policy Option are the same as in the BAU Policy 
Option. The possibility of soft partnerships co mbined with the increase in funding delivered 
may stimulate the innovation chains of the id entified key technologies and kick-start the 
reinforcement of the European innovation base. However, the extent that can be achieved by 
such soft measures may not be sufficient and comprehensive enough to bring about the 
necessary restructuring of the European innovation system to m eet its long term challenges. 
As in all cases with in creased public funding, there is a risk of "crowding out" or a situation in 
which public funding substitutes for rather than being additional to private funding. 
5.7. Policy Option 2 (PO2):  
5.7.1.  Mobilisation of resources 
Main Strengths 
• In general the strengths of this Policy option are similar to PO1. In this case however due 
to the combination of having strong public a nd private partnerships  and increased public 
funding resulting from the strengthening and modification of the institutional 
arrangements, the risk aspect for large scale technology and infrastructure development projects for new and emerging technologies is  better addressed and hence such projects 
become even more attractive to private invest ment. A recent example is the FC & H2 JTI. 
• The establishment of a specific mandate for the EIB to invest in infrastructural funds might 
result in an increased degree of security a nd increased investments over that which would 
be the case under PO1. 
 
EN 42   EN • The re-establishment of the Capacity Building Scheme (in particular Partnership Action) 
will increase the capacity of venture capital funds to deal with eco-innovation projects and 
should thereby increase the amount of funding generated for these projects. 
Main Weaknesses 
• It is expected that there will be possible investment crowding  effect for technologies with 
an industrial chain ready to absorb the increa sed investment (such as CCS, wind or solar) 
at the detriment of others with a more em erging supply chain (e.g. ocean and geothermal). 
In addition, in view of the difficulty to esta blish and dismantle institutional arrangements, 
it will take time to reallocate financial resources due to the shifting of priorities, as may be deemed necessary on the basis of the monitoring framework.  
5.7.2.  Suitability of finan cial instruments 
Main Strengths 
• The modified institutional arrangements allow for strengthening the coherence and the 
leverage of market replication type of activ ities in confronting the uncertainty and risk 
associated with new technologi es (although acting at the Eur opean level may not be the 
optimal implementation mechanism to account for regional specificities). In particular, stronger links between the EIB and the SET Plan Steering Committee could allow for 
increased mutual contributions from both Eu ropean and National in stitutions, who through 
focussing their resources on sp ecific objectives could there by increase their combined 
leverage.  
• Technology-focused partnerships formed under a coherent implementation framework and 
legal base help to ensure that the innova tion requirements of those emerging and new 
technologies are met, even when environmental externalities and other market failures lead 
to a need for significant cross-s ector and international support. 
• The proposed instruments and arrangements res pond to the needs of funds with shortage of 
experience and risk analysis capability in the specific sect or of low carbon technology 
SMEs. They should help to increase funds capability to reach those SMEs, and thereby 
increase the effectiveness of public interventions in the venture capital sector. 
Main weaknesses 
• Compromises may have to be made for the agr eement of investment between technologies.  
• The formation of industrial partnerships in  PPPs may be inhibited due to competitive 
issues and pervasive know- how monopolies, hence hinderi ng economies of scale and 
leverage effects.  
• The creation of further levels of organisation will absorb a degree of time and energy while 
being founded; and could possibl y add further complexity a nd rigidity to the overall 
institutional structure.  
• The modification of institutional arrangements  linked to a regulati on will take time 
delaying the innovation process. 
 
EN 43   EN 5.7.3.  Flexibility of implementation 
Main Strengths 
• Due to the strong nature of partnership envisaged, implementation will occur at 
the programme level hence ensuring the coherence of the European efforts and the 
implementation of all necessary activiti es envisaged in the sector’s work 
programme over the necessary timeframe. Th is policy option has some flexibility 
within each technology programme with resp ect to the allocation of resources to 
activities to better match the evolving maturity level. 
Main Weaknesses 
• Having legal based partnerships focusing on single technologies will create rigidity for 
shifting resources and priorities as could be necessary, based on the progress of technology 
development. 
5.7.4.  Effectiveness 
Main Strengths 
• The combination of increased resources, stre ngthened coordination and strategic steering 
can accelerate the delivery of technologies, hence ensuring the competitiveness of the 
European industry on a global scale.  
Main weaknesses 
• It is possible that centralisation and increased co-ordination at a European level could lead 
to the stifling of regional a nd local creativity and innovation. 
• The need for consultation liaison and agreem ent, with decision making authority being 
spread over a large number of bodies may lead to initially slow and cumbersome responses 
to crises or opportunity.  
• The funding which can be distributed under th e Capacity Building Scheme is limited by 
competition law, and will, therefore, be restricted to a relatively limited impact. 
5.8. Policy option 3 (PO3):  
It should be noted that this option proposes bo th new institutions (with respect to energy 
research and innovation) and a new EIB Group st ructured action channelling funding from a 
variety of sources to support large scale demonstration proj ects. This option, therefore, 
contains two different but complementary proposal s and for that reason the analysis has been 
split; although it should be noted that many of the points  are relevant to both sets of 
instruments. 
5.8.1.  Mobilisation of resources 
Main Strengths 
Innovation and energy research: 
 
EN 44   EN • Same as in PO2, however a reinforced public (Community, intergovernmental, EIB, etc) 
institutional base at European level addressing technologies a nd infrastructure can facilitate 
the provision of very large am ounts of investment when requir ed, such as for CCS, nuclear 
fission-Generation IV and off-shore grid.  
• The setup of Community bodies will ensure strong financial commit ment to technology 
priorities for which the EU added-value is maximised. 
• Intergovernmental bodies may be the most suit able vehicle to attract  financial resources 
from public and private national bodies from Member States interested and committed in 
the development of a specific portfolio of technologies. 
EIB Group financing: 
• A specific and dedicated EIB structured actio n may be the most a ppropriate vehicle to 
attract large amounts of financ ing from its partner organisa tions alongside EIB resources. 
Main Weaknesses 
• It may be difficult to rise th e necessary funding for the propos ed structure(s) to execute 
their mission due to competition for resources with the existing national and European 
programmes and organisations. In particular, Member Stat es may be less willing to 
delegate financial resources to an external or ganisation (or action), than  they would be to a 
partnership within which they  played a significant role. 
5.8.2.  Suitability of finan cial instruments 
Main Strengths 
Innovation and energy research 
• Large scale technology and infrastructu re demonstration programmes are best 
implemented through the centralised  structure(s) due to the provi sion of enhanced level of 
steering, critical mass of actors, and economies of scale for implementation.  
• Centralised structures with a broad technology portfolio ca n facilitate the necessary 
coherence and balance of RDD activities and provide the nece ssary support to accompany 
the shift of the European indus try towards new and emerging tec hnologies with an inherent 
element of risk.  
• Direct transposition of policy objectives into  a visible strategy and action plan through a 
dedicated European structure for RDD and innovation ensures coherence between policy 
objectives, technology development and funding. 
• The increased level of coordination of grants  and loans within a clear policy framework 
may well ensure improved targeting of resources so as to address the most severe market 
failures, above all helping to address the high costs associated with basic research, and the 
helping to mitigate for the impact of environmental externalities.  
EIB Group 
 
EN 45   EN • EIB leadership and organisation of the struct ured action will ensure a large degree of 
coherence between the activities of the various actors, and EU policy objectives. 
• The participation and close coordination of  EIB and partner capital should ensure the 
necessary level of coordination on large scale proj ects, and the ability to alter priorities as 
appropriate.  
Main weaknesses 
Innovation and energy research 
• A centralised structure for RDD and innovation which supports mainly large 
demonstration and infrastructure projects is not necessarily suitable to meet the innovation 
needs of all low carbon technologies. 
• Like in most established organisations, there are increasing risks over time of: (i) 
bureaucratisation, (ii) operati onal inflexibility, and, (iii) lo cked-in infrastructure, which 
may hinder the capacity of the RDD and innovati on organisation to adju st its priorities as 
required, could cause market distortions, and may lead to restrictions on the activities of 
smaller more innovative institutions.  
• Unless the interfacing and integration with existing programmes is established via the 
statute of the newly formed organisation fo r RDD and innovation, there is a risk of the 
latter becoming an additional organisational layer with no clear positive impact on the 
optimisation of the current innovation process. 
• Subsidiarity concerns may limit the scope of  action of the centralised structure(s), as 
research and innovation is a shared compet ency between the Member States and the 
European Union. 
• Community bodies that address a limited number  of technologies may lead to favouritism 
over long times due to thei r institutional character. 
• The setup of new centralised structures may re quire significant amount of time since it will 
be subject to subsidiarity issues and will require long periods for negotiations, decisions 
and implementation, hence delaying the innovation process. 
EIB Group 
• The continued need for partnership with othe r actors in the case of the EIB structured 
action might lead to a relatively slow  and complex decision making process. 
5.8.3.  Flexibility of implementation 
Main Strengths 
Innovation and energy research 
• New Community bodies that consider a set of technologies can allow shifting of priorities 
according to the latest technology and policy developments.  
 
EN 46   EN • The Intergovernmental approach is flexible  as it is tailored to the willingness and 
commitment of partners with common in terests to advance specific technology 
developments with respect to their energy mix. 
EIB Group 
• The EIB structured action is a fl exible vehicle that is able to respond rapidly to meet the 
needs of a wide variety of different technologies 
Main Weaknesses 
• Having strong institutional bodies focusing on single technologies will create rigidity 
holding back the necessary rea llocation of resources and pr iorities in response to 
technological and market developments. 
5.8.4.  Effectiveness 
Main Strengths 
Innovation and energy research 
• Intergovernmental structures spearhead the i nnovation change based on  the willingness of 
a few Member States hence meeting short te rm targets (industrial competitiveness, EU 
goals) while they can expand to allow more Me mber States to join hence propagating this 
new impetus for innovation. 
• A common monitoring mechanism embedded in th e centralised structure and covering the 
whole energy technology innovation process (i ) enables the benchmarking of the progress 
of the actions of a portfolio  of technologies, (ii) stimul ates feedback between RDD, 
demonstration and business support, and, (iii ) promotes synergies between technology 
options.  
• EIB Group 
• The continued provision of funding for the EI B structured action through competitive calls 
for proposals will help secure the most co mpetitive and effective means to achieve 
European policy goals. 
• The EIB structured action can best combine the skills and expertise of the EIB with those 
of its partner organisation towards this achieve ment. It would also be  flexible in creating 
new mechanisms to address the rapidly chan ging environment for the financing of low 
carbon technologies. 
Main weaknesses 
• As explained above, such an institutional arrange ment can best supp ort only a limited 
number of technologies and i ndustries, those requi ring large up-front investment and the 
coordination of a large number of actors. 
 
EN 47   EN  
6. COMPARING  THE  OPTIONS   
The strengths and weaknesses of each indicator for every policy option are herein evaluated 
based on a common methodology. The aim is to identify the optimal policy option(s) that 
could help overcoming best the issues identified in Section 2. 
6.1. Methodology 
The evaluation of policy opti ons is performed for each Technology Group as defined in 
Chapter 2. This evaluation relies on a qualitative grading of each indicato r, on a scale from (-) 
to (++), based on a comparison to a BAU, which by definition is set to (0). More specifically: 
The BAU  refers to the process of financing low carbon technologies  as it stands today. This 
entails: 
– Mobilisation of financial resources:  There is funding available,  however not sufficient to 
bridge the gap required to make all low carbon technologies well performing and cost-
competitive. Although private investment is in creasing, the coverage of risk associated 
with most of these technologies  is insufficient and deters the required boost of private 
investment.  
– Suitability of financial instruments : Although there is currently a portfolio of financial 
instruments and institutional arrangements th at address different innovation schemes and 
market failures, they neither cover the n eeds of all technologies  in terms of scope, 
coherence and magnitude, nor address the ma rket failures driving the financial gap. A 
particular problem is mitigating for the significant risks faced by new and emerging technologies which in many cases require la rge investment and the mobilisation of a 
significant number of actors. 
– Flexibility of implementation : There is some flexibility to ad just financial flows to evolving 
technology needs however, there ar e limitations to shifting prio rities and building critical 
mass at the scale required to advance th e low carbon energy technology portfolio.  
– Effectiveness of fi nancial instruments : The current financial support to low carbon 
technologies is fragmented and hence is not ab le to deliver technologies at the right pace, 
with detrimental effects to European industrial competitiveness. 
• A (++) grade is granted when the indicator fo r a given policy option provides a significant 
improvement to the financing environment. 
• A (+) grade is granted when the indicator fo r a given policy option provides satisfactory 
improvement compared to the BAU. 
• A (0) grade is also granted when no decisive impact is made. 
• A (-) grade indicates a possible deterioration compared to BAU 
Grading 
 
EN 48   EN 6.1.1.  Technology Group I: Technologies cl ose to market competitiveness 
It is remembered that this gr oup of technologies requires mostly  market replication measures 
with supporting RDD to lift the last bottlenecks to competitiveness and spear the development 
of improved generations, accompanied by the adaptation and reinforcement of the existing infrastructure. Furthermore, a cr itical factor is the need to tailor innovation measures to 
market conditions. The industrial fabric is hete rogeneous, ranging from la rge corporations to 
SMEs, with a rather well- established supply chain. 
Mobilisation of financial resources
 
The BAU Policy Option  is granted (0) by definition. 
The increase in financial resources proposed in Policy Option 1  meets the requirements of the 
technologies of Group I. Furtherm ore, funding for the adaptati on of the infrastructure is 
adequate, and the proposed increase of pub lic funding should trigger further private 
investment. Some problems may occur due to the currently limited co-ordination of 
innovation instruments. As a conseq uence a grade of (+) is granted. 
Since  Policy Option 2  has broadly similar characteristics to PO1 with regards to the 
mobilisation of financing. The refocusing of  the Capacity Building Scheme, the new 
innovation instruments and approaches under CI P, and the establishm ent of a specific 
mandate for infrastructural funds under the EIB Group might be expected to mobilise further 
funding for market replication activities, however . Hence, this Policy Option is granted (++). 
Policy option 3 has the same attributes with respect to funding. Centralised structures might 
better secure better necessary funding, however, the associated centralised administrative 
character of this Policy Option may deter or dela y private investment for the technologies in 
Group I. On the other hand, the cen tralised authority of  PO3 may be more efficient than the 
distributed authority of PO2, since, sometimes a rigid hierarchical st ructure can be more 
effective and fast moving than a committee. Hence, a grade of (+) is given. 
Suitability of financial instruments  
Policy Option BAU  is granted (0) by definition. 
The existing instruments , envisaged in  Policy Option 1 , match to a certain extent the 
innovation requirements of these technologies. Their industrial ba se is already developed and 
mostly requires further and targeted financial assistance in mitigating the risks and uncertainties associated with new tec hnology. This Policy Option is granted (+). 
The strength of Policy Option 2  lies on the provision of a stronger coordination and the 
extension of the remits and eligibility of the existing instruments, which match quite well with 
the needs of the indu strial fabric of this Technol ogy Group. In particular, a stronger 
coordination and the concentra tion of innovation resources can  have a positive impact on 
infrastructure development;  whilst stronger linka ges between the EIB Group and the SET 
Plan steering committee could result in more  appropriately targeted funding, and aid in 
demonstrating the bankability of  these technologies. This Po licy Option is granted (++).  
Policy Option 3 does not bring any clear added-value fo r this Group of te chnologies due to 
the strong regional character of some technologies and the need for considering different scale 
 
EN 49   EN of projects and market status of actors, except possibly for th e adaptation and reinforcement 
of infrastructure. Hence, it is granted (0). 
Flexibility of implementation  
Policy Option BAU  is granted (0) by definition. 
The possibility to setup soft partnerships in Policy Option 1 that do not require legislative 
proposals maintains the flexibility  of BAU. Furthermore, it al lows for a flexible and quick 
implementation of sector strategic agendas a nd the reallocation of e fforts based on progress 
monitoring. This Policy Option is granted (++). 
Policy Option 2 will create rigidity for this Group of technologies, for which activities 
need to respond quickly to evolving market trends. This Policy Option is granted (-).  
Policy Option 3 brings additional inflexibility due to its strong centralised character, hence 
does not offer an added-value for this Group of technologies. Hence, it is granted (-). 
Effectiveness of financial instruments  
Policy Option BAU  is granted (0) by definition. 
Policy Option 1  makes the most of the existing innovation system hence is already 
operational. In view of the needs of the technol ogies in this Group with regards to overcoming 
the initial barriers to market deployment, the in crease in financial resources complemented by 
the possibility to develop soft partnerships should be sufficien t to significantly mitigate for 
technological and regulatory ris k, accelerate and deliver cost competitive technologies. This 
Policy Option is likely to boost the competi tiveness of the indu stries around these 
technologies. This Policy Option is granted (++). 
The advantage of Policy Option 2  lies in its ability to strength en the industrial supply chain 
by aligning the available resources with stra tegic planning through strong partnerships. A 
concern could be the comprehensiveness and th e complexity of the envisaged arrangements 
with respect to a diversified industrial fabric, spanning from large utilities to SMEs. It is 
uncertain whether this option wi ll bring significant improvement in terms of speeding up the 
roll-out of technologies to the market. This Policy Option is granted (+). 
The institutional centr alisation of innovation activities in Policy Option 3  may cause some 
delays in the delivery of cost-competitiveness due to the time required to create new institutional arrangements. It brings the re structuring of the European innovation system, 
however it is questionable how n ecessary this is for this group of technologies. Nonetheless, 
there may be some added value regarding infrastr ucture issues. This Policy Option is granted 
(0). 
 
EN 50   EN The scores for Technology Group I are summarised in the Table below. 
 Mobilisation Suitability Fl exibility Effectiveness
BAU 0 0 0 0 
PO1 + + ++ ++ 
PO2 ++ ++ - + 
PO3 + + - 0 
 
6.1.2.  Technology Group II: Technologies cl ose to market competitiveness 
It is reminded that this group of technologies requires large scale demonstration programmes 
to prove their commercial viability, along with  RDD support to pursue their development. The 
industrial fabric comprises mainly large corpor ations with further consolidation expected.  
Mobilisation of financial resources  
The BAU Policy Option  is granted (0) by definition. 
The increase in resources proposed in Policy Option 1  meets the financial requirements of 
large scale projects as needed by the technolog ies of Group II. Furthermore, the funding for 
the development of new infrastructure is adeq uate; however, problems may arise due to lack 
of guarantee for the sustainabi lity of funding and of strong coordination which is needed for 
this type of technologies. Finally, the proposed increase of public funding will reduce the risk 
perception for private investment. As a c onsequence a grade of  (++) is granted. 
Policy Option 2  has similar characteristics with Po licy Option 1 with regards to the 
mobilisation of financing. Funding for large technology and infrastructure demonstration 
projects, so as to overcome the large uncer tainties surrounding these technologies, will be 
easier due to an increased coordination at a Eu ropean level. Hence, this Policy Option is 
granted (++). 
Policy option 3 has the same attributes with resp ect to funding with  PO2. Centralised 
structures can secure the necessary funding and match the scale of actors and projects 
involved. Hence, a grade of (++) is given. 
Suitability of financial instruments  
Policy Option BAU  is granted (0) by definition. 
The existing instruments and the pos sibility for soft partnerships , envisaged in  Policy Option 
1 can meet part of the requirements for th is group of technologie s. Nevertheless, the 
technological risk involved and the magnitude of investments necessitate a more sustained 
and coordinated approach, invol ving different instruments a nd greater public participation 
than is the case for technology group 1. This Policy Option is granted (+). 
 
EN 51   EN Policy Option 2  brings both stronger coordination and th e development of a coherent and all-
inclusive framework better able to mobilise th e requisite financing and absorb the risks 
integral to the research and demonstration work. The strong public-p rivate collaborative 
character of this Policy option, from joint programming for research to coalitions for 
demonstration projects, echoes th e driver for the development of these technologies, which is 
currently more policy than market driven. Tech nology risk is reduced due to the involvement 
of a critical mass and the strong er engagement of the public sect or. The need for economies of 
scale for the development of these technologies, is fulfilled. It is however noted that strong partnerships may require time for their setup, delaying the i nnovation process. This Policy 
Option is granted (++).  
Implementing  Policy Option 3 is not necessarily proportional to the needs of all technologies 
in Group II. It is best suited to technologies that require very larg e scale technology and 
infrastructure demonstration projects. Fo r these technologies, this framework of 
implementation can stimulate the formation of pa rtnerships, and it is uncertain whether further 
coordination would bring significant improvement . In addition, this policy option may require 
significant amount of time to be setup since it w ill be subject to subsidiarity issues and will 
require long periods for negotiati ons, decisions and implementati on. Hence, it is granted (+). 
Flexibility of implementation
 
Policy Option BAU  is granted (0) by definition. 
The possibility to setup soft partnerships in Policy Option 1 allows for a flexible and quick 
implementation of sector strategic agendas a nd the reallocation of e fforts based on progress 
monitoring. However at the detriment of the required stability and sustained RDD 
commitment which are essential for these tec hnologies. This Policy Op tion is granted (+). 
Policy Option 2  may cause some rigidity with regards to shifting resources between 
technologies as may be necessary. However, th is Policy Option will allow flexibility of 
activities within a coherent and stable stra tegic framework of implementation, which is 
essential for this group of technologies. This Policy Option is granted (++).  
The new centralised structures in Policy Option 3 m may create rigidity for shifting resources 
and priorities as could be necessary, base d on the progress of technology development. 
However, a centralised structure that addresses a portfolio of technologi es will be able to 
accelerate technology development by allowing the shif t in priorities according to the latest 
technology and policy developments . Hence, it is granted (+). 
Effectiveness of financial instruments Policy Option BAU  is granted (0) by definition. 
Policy Option 1 , through increased financ ing, technical assistance and coordination resulting 
from soft partnerships, will bring improvement s in accelerating technology development, yet 
it is questionable if this Policy Option will be  able to address all technology challenges which 
require sustained effort over long periods of time along with a clear strategy at a programme 
level. This Policy Option is granted (+). 
Policy Option 2 brings about the necessary restructur ing of the innovation system through a 
degree of coordination to accel erate the development of the concerned technologies and 
mitigate for the market failures which would otherwise result in sub-optimal research 
 
EN 52   EN expenditure. It is clear that, although some delays can be e xpected for the modification and 
setup of institutional arrangements, this op tion through the EIB link with the SET Plan 
Steering committee, and the improved co-ordina tion of research and innovation instruments, 
unlocks a major weakness of the current sy stem. This Policy Option is granted (++). 
Policy Option 3  is best suited for very large scale technology and infrastr ucture projects, 
having a strong positive impact on the industrial fa bric of these technologies. However, since 
a centralised organisation risks stifling creativit y and increasing organisational complexity, it 
is not necessarily beneficial for all technologies within this  group. As a result, this Policy 
Option is granted (+). 
The scores for Technology Group II are summarised in the Table below. 
 Mobilisation Suitability Flexibility Effectiveness 
BAU 0 0 0 0 
PO1 ++ + + + 
PO2 ++ ++ ++ ++ 
PO3 ++ + + + 
 
6.1.3.  Technology Group III: New Technologies 
These technologies require strong RDD and pilo t/demonstration activities to be tested under 
market conditions and to prepare the ground for large scale roll-out. Th ese technologies in 
most cases are developed by innovative SMEs, u nder contracts by large industrial players and 
public research centres.  
Mobilisation of financial resources  
The BAU Policy Option  is granted (0) by definition. 
The increase in financial resources proposed in Policy Option 1  meets the requirements of the 
technologies of Group III. Considering that this  policy option does not fo resee JTIs, with the 
exception of hydrogen and fuel cells that has al ready been formed, the main issue is to 
commit and sustain financing for all these technologies with broadly consented multi-annual strategies. This is critical in vi ew of the fact that these technologies have a long term prospect 
and carry significant technological, market and fi nancial risks. As a consequence a grade of 
(+) is granted. 
The increased financial resources  envisaged in Policy Option 2 meet the requirements of 
these technologies. Furthermore, the couplin g of increased funding with the enhanced 
coordination under which, multi annual strategies can be consented and pursued makes this 
Policy Option suitable for triggering public and private investments. Hence, this Policy 
Option is granted (++). 
 
EN 53   EN Policy option 3 has the same attributes with the a bove option with resp ect to funding. The 
centralised institutional approach can secure the necessary funding over the long term period 
required for the development of these techno logies. Hence, a grade of (++) is given. 
Suitability of financial instruments  
Policy Option BAU  is granted (0) by definition. 
The existing instruments , envisaged in  Policy Option 1 , are in many cases, insufficient for 
technologies in Group III. These technologies ca rry significant risks, due to the combined 
effects of large requirements for RDD and ear ly demonstration, and an emerging industry. 
Although EIB Group debt financing might be capable  of financing such risks, it is uncertain 
that any other instrument would be able to guarantee the required programme level approach 
for a sustained period of time. As a re sult this Policy Option is granted (0). 
The strength of Policy Option 2  lies on the provision of legally bound joint RDD 
programming, the support to i nnovative SMEs and funds for pr ototype and infrastructure 
demonstration which matches the needs of these technologies. This opti on allows for a strong 
public intervention in the development of t echnologies, which reduce the innovation risk 
linked to their long term market prospective.  The European dimens ion embedded in this 
policy option is proportiona l to their future mark et perspectives. Finally this policy option 
establishes a pan-European framework to engage  all relevant actors. This policy option is 
granted (++). 
Policy Option 3 combines the positive elements of PO2 with a more focused and secure 
framework for investment in innovation, needed for the development of this type of 
technologies. The danger, as a ssociated with every large bur eaucratic organisation is of 
locked in policies, operational complexity, a nd frameworks which stifle rather than abet 
innovation. Hence, this polic y option is granted (++). 
Flexibility of implementation  
Policy Option BAU  is granted (0) by definition. 
The possibility for soft partnerships in Policy Option 1 does not improve significantly the 
environment for the development of technolog ies compared to BAU. It contains some  
flexibility of implementation of sector strategi c agendas and the reallocation of efforts based 
on progress monitoring, however due to the upstream  nature of these technologies more stable 
frameworks are needed. This Policy Option is granted (0). 
Policy Option 2  will create the necessary stable framew ork to build up an industry, perform 
the necessary RDD activities and avoid shifting resources to other technologies with shorter 
pay-back time in times of resource constrai nts. This Policy Option is granted (++).  
Policy Option 3 brings the necessary stabili ty due to its strong centralised character, hence 
does offer an important added-value for this Group of technologies, however it may prove too 
rigid when there is a future need to adjust radically priorities and resources. Hence, it is 
granted (+). 
Effectiveness of financial instruments  
Policy Option BAU  is granted (0) by definition. 
 
EN 54   EN Policy Option 1  as explained above, although it increases  the financing, doe s not contribute 
to the acceleration of delivery of  the technologies in Group I. This Policy Option is granted 
(0). 
The strength of Policy Option 2  is the provision of a broad portfolio of instruments, available 
in a flexible manner that is essential during the building phase of an  emerging industry. The 
proposed scheme can bring about the necessary changes to the innovation system, allowing for the development of these technologies. A lthough some delays can be expected for the 
modification and setup of institutional arrangements, these may have a limited impact in view of the time scale for technology developmen t. This Policy Option is granted (++). 
Policy Option 3  is suitable only for technologies with  a very intensive RDD programme. In 
this case, the required preparation time of these RDD programmes allow for the setup of new institutional arrangements. This option havi ng enhanced decision making mechanisms can 
have a strong influence on the restructuring of  the European innovation system regarding long 
term technologies, hence positioning the Eu ropean industry in the market of new 
technologies. This Policy Option is granted (+). 
The scores for Technology Group III ar e summarised in the Table below. 
 Mobilisation Suitability Flexibility Effectiveness 
BAU 0 0 0 0 
PO1 + 0 0 0 
PO2 ++ ++ ++ ++ 
PO3 ++ ++ + + 
 
6.2. Summary of the comparison 
The comparison of the policy options br ings out the following key aspects: 
• Policy Option 2 emerges as a universal opti on that could be suitable for all three 
technology groups; 
• Policy Option 1 (or parts thereof) could be suitable for Group 1 technologies 
(close to market competitiveness); 
• Policy Option 3 (or parts thereof) could be  suitable for Group 3 technologies (new 
technologies). 
This assumes an equal weighting given to all the assessment criteria. It furthermore does not 
include the possibility of a dopting hybrid structures integr ating proposals contained under 
different policy options. It is clear, however that , in reality, some criteria may turn out to be 
more important than others (particularly wher e the element of time is crucial and taking 
political factors in consideration), and th at hybrid options may be considered where 
appropriate. 
 
EN 55   EN 6.3. Recommendation 
The first recommendation emerging from the asse ssment is that achieving the objectives of 
this policy requires significantly increased re sources. A provisional estimation of the 
resources necessary to effectively implement this policy, maintaining the desired broad and neutral technology portfolio, reveals the need to double the current level of investment.  
But, this should be combined with new appr oaches to implementati on. Although it would be 
possible to recommend solely PO2, it remains the case that different  technologies are in 
different stages of development and face different  financing challenges intrinsic to the nature 
of the technology, the sector st ructure and the market conditions. The multidimensional nature 
of this policy leads us to recommend a combination of the assessed policy options. 
At the present time it is absolutely crucial to realise the short term potential of technologies 
within Group 1 (close to market) notabl y energy efficiency. For a number of these 
technologies it might be appropriate to impl ement PO2. In particular, establishing new 
institutional arrangements to greatly expand the market replication activities of the CIP or 
new partnerships/structures to change the current paradigm of investment in e.g. energy 
efficiency activities which are by their very na ture highly dispersed an d fragmented, due to 
the multiple market actors and customers.  
For other technologies in Group 1 and in Gr oup 2 (emerging technologies), and given the 
urgency to act quickly, there is a strong ar gument for a hybrid policy option, combining PO1 
and PO2. An immediate start with PO1 is therefore recommended, with a subsequent 
migration towards PO2 and/or PO3 were the changes put into pla ce not to deliver the 
necessary acceleration of technol ogy development or if  the involved actors were to develop a 
particular interest in stronger and more stable  partnerships. The degr ee of migration may of 
course vary depending on the technology and investment vehicles concerned.  
With regards to Group 3 (new) technologies, it should be noted that some already benefit 
from the sort of dedicated institutional arrangements pr oposed under PO2 (the joint 
undertaking established under EURATOM for th e implementation of ITER and the Joint 
Technology Initiative for Fuel Cells and H ydrogen). The development of Generation IV 
nuclear fission reactors coul d also benefit from PO3. 
The European Commission is already working jo intly with industry, th e research community 
and Member States to establish European Indu strial Initiatives and the European Energy 
Research Alliance (new institut ional arrangements). Similarly the EIB Group, in concert with 
the Commission, has and will continue to e xplore the possibilities offered by new and 
innovative instruments. In order to effectivel y implement these varied actions, however, the 
mobilisation of additional resources will be essential.  
 
EN 56   EN  
7. MONITORING AND EVALUATION  
The proposal for financing low carbon technologies contains provisions for the periodic 
evaluation of its activities. The purpose is to ensure that the necessary financial resources are mobilized and are most efficien tly used for the development of  low carbon technologies and 
the improvement of their cost competitiveness a nd marketability. To this end, and in view of 
the fact that flexibility of implementation is a key element for the timely deployment of low 
carbon energy technologies, financ ing activities and its results should be monitored on a 
continuous basis, with inde pendence and objectivity.  
The proposed financing effort will benefit from the SET-Plan monitoring and evaluation 
information system (SETIS), which has recentl y been established. SETIS is operated by the 
EU's Joint Research Centre (JRC), which se cures its independence and objectivity. In 
particular, the monitoring of financial research  investment in low ca rbon energy technologies 
will be done continuously and reported period ically in the Capacities Map published by 
SETIS. Similarly, the impact of research  financing on technology development and 
deployment will be closely monitored by SETIS on a continuous basis, and its analysis will be 
published bi-annually in the Technology Map. In addition, technology developments 
performed under the SET-Plan umbrella, through the European Industrial Initiatives or other 
programmes in the context of the European En ergy Research Alliance will be reviewed 
periodically by SETIS based on Key Performan ce Indicators (KPIs) that address both the 
technology and the sector. These KPIs will be de vised jointly by SETIS and stakeholders as 
part of the process for the c onception and definition of corre sponding SET-Plan activities. 
Typically, KPIs will address costs and performances of technologies. 
The continuous monitoring of financing and technology development act ivities, performed by 
SETIS will enable the evaluation of the measures proposed in this Communication and the identification of corrective measures if neede d. It will ensure the pursuit of a portfolio 
approach with a set of technologies at various st ages of technological development, in view of 
reaching our energy policy goals and strongly linked with innovation policies. It does not 
create new layers of bureaucracy; it will inst ead create greater communication, transparency 
and coherence to approaches an d decisions to support technologies and thei r differing stages 
of innovation. In addition, it will provide the Co mmunity with unbiased information to allow 
strengthening efforts in the most promising areas while avoiding ‘loc k-ins’, satisfying the 
required neutrality in supporting the developmen t of low carbon technologies to achieve the 
policy objectives. 
 
EN 57   EN  
ANNEXES 
ANNEX I: The SET-Plan Technology Challenges 
The SET-Plan identified a series of key challeng es that need to be addressed in the next 10 
years, not only to meet the 2020 ta rgets, but also to ensure that  the EU is on track to address 
the 2050 ambition of reducing gree n house gas emissions by 60-80%. 
Achieving the 2020 targets 
Key EU technology challenges for the next  10 years to meet the 2020 targets: 
– Make second generation biofuels competitive a lternatives to fossil fuels, while respecting 
the sustainability of their production; 
– Enable commercial use of technologies for CO2 capture, transport and storage through 
demonstration at industrial scale, includi ng whole system efficiency and advanced 
research; 
– Double the power generation capacity of the la rgest wind turbines, with off-shore wind as 
the lead application; 
– Demonstrate commercial readin ess of large-scale Photovolta ic (PV) and Concentrated 
Solar Power; 
– Enable a single, smart European electricity grid able to accommodate the massive 
integration of renewable and decentralised energy sources; 
– Bring to mass market more efficient energy co nversion and end-use devices and systems, 
in buildings, transport and industry, su ch as poly-generation and fuel cells; 
– Maintain competitiveness in fission tec hnologies, together with long-term waste 
management solutions; 
Achieving the 2050 vision 
Key EU technology challenges for the next 10 years to meet the 2050 vision: 
– Bring the next generation of renewable ener gy technologies to market competitiveness; 
– Achieve a breakthrough in the cost-effic iency of energy storage technologies; 
– Develop the technologies and create the conditi ons to enable industry to commercialise 
hydrogen fuel cell vehicles; 
– Complete the preparations for the demonstr ation of a new generation (Gen-IV) of fission 
reactors for increased sustainability; 
– Complete the construction of the ITER fusion facility and ensure early industry 
 
EN 58   EN participation in the preparat ion of demonstration actions; 
– Elaborate alternative visions and transition strategies towards the development of the 
Trans-European energy networks and other systems necessary to support the low carbon 
economy of the future; 
– Achieve breakthroughs in enabling research for energy efficiency: e.g. materials, nano-
science, information and communication tec hnologies, bio-scien ce and computation.  
 
EN 59   EN ANNEX II: Potential of low carbon energy technologies 
The graph in Section 2.2 is a mapping of th e potential of low-carbon energy technologies over 
the next fifty years. It attempts to answer three inter-related key questions: 
• When a set of technologies could be considered  as "established" to become a "relevant" 
option for the energy sector? 
• How challenging is the development and deployment of the technologies? 
• What is the relative pote ntial of the technologies? 
It is based on the findings  of the Technology Map38, but also includes re cent inputs from 
stakeholders in the context of the preparatio n of the EIIs and the potentials of energy 
efficiency measures in end-use sectors as de scribed in the Energy E fficiency Action Plan.  
For each technology, the maximum potential, on a fi nal energy basis, is indicated by the size 
of the corresponding circle. The colour shading differentiates between the maximum potential 
expected to be exploited in the business-as-usual (BAU) scenario39 (light coloured part of the 
circle) and the remaining poten tial that could be exploite d provided that sufficient RDD 
support is given. The level of e xploitation of the a dditional potential of each technology, as 
well as its timing, could be assumed as the SET Plan leverage effect . An exception to this 
presentation format is energy efficiency (in tran sport, buildings and industry). In this case, the 
size of the circle represents  only the savings potential, which is additional to the baseline40, 
calculated based on the potential identified in the Energy Efficiency Action Plan41. The 
relative position of each technology on the Time Horizon axis  indicates the approximate time 
period when a specific technology or set of tec hnologies are expected to become a tangible 
option for the energy sector. The Challenge for Implementation  axis indicates in relative 
terms how demanding the development and deployme nt of a given technology is with respect 
to other technologies within the same time period. 
It is noted that for graphical purposes, the ener gy potential, indicated by th e size of the circles, 
is shown in a static way and does not evolve over time. In reality the exploitation of the 
potential is dynamic and can not be captured "o ver night". A conical sh ape would have been 
more appropriate, but more difficult to graphi cally represent in a 2D space. Therefore, the 
exploitation of the potential of  each technology over time is embedded also in the deployment 
"waves". For instance, wind technologies, cons idering their current market penetration and 
growth rates can be assumed as a nearly esta blished technology stream, therefore belonging to 
short-to-medium timeframe. However, its maximum potential, including off-shore 
technologies, will not be captured before th e medium term horizon. Consequently, wind 
technologies belong graphically to the first technology wave, with its maximum potential 
being shown at that time horizon. However, as indicated by the waves and its relative position 
on the y-axis, wind potential will not be exploite d completely within this time frame and 
requires further efforts and development. The same rational could be use to explain the 
                                                 
38 SEC(2007)1510 
39 Derived from the EU Energy and Transport Trends 2007, “Business as usual scenario” 
40 This is done for presentation reasons, since the total energy savings due to energy efficiency (BAU and 
additional) are larger than the energy potential of  other technologies, hence the corresponding circle 
would mask the potential of other tech nologies presented in this graph.  
41 COM(2006)545. 
 
EN 60   EN relative position of current nuc lear fission technologies and ge neration IV nuclear reactors 
that have different time horizons. 
 
EN 61   EN ANNEX III: Criteria for the grouping of lo w carbon technologies in this Impact 
Assessment  
Each low carbon technology faces its own tec hnology challenges, which requires specific 
research and innovation e fforts. The Technology Map42 of the SET-Plan de scribes all those in 
detail. However, there are commonalities between technologies. In the context of this Impact 
Assessment, these technologies have been grouped into three families based on their common positioning in the innovation cycle and thei r requirements for advancement through the 
innovation chain. These groups constitute a qualifi ed simplification enabling analysis of the 
policy options, yet without jeopardising the quality of the assessment. This characterisation of technologies is based in best available in formation, however it should be noted that 
technological breakthroughs or  strong regulatory measures c ould significantly change the 
suggested grouping.  
It is accepted that technologies  within the same group may requi re different types of funding. 
However, it is thought that further specifica tion of appropriate fundi ng for each individual 
technology within a group would be undesi rable as it would introduce unnecessary 
inflexibility into the operations of the SET-Pl an and make the analysis overcomplicated. The 
toolbox approach allows each technology within a group to select the source which is most 
appropriate to it from within a range of available sources. Diffe rent technologies will require 
different funding, but this is best dealt with at  this stage by implementing monitoring through 
the SET-Plan information system and retaining a sufficient degree of flexibility within the 
system to respond to changing circumstances. For th is reason the flexibility of the instruments 
used was one of the criteri on used in the analysis.  
These technology groups were formed by applyi ng the following criter ia and are described 
below.  
A. Technological maturity, reflected on th e timing of mass market deployment 
(1) Short to Medium (2010, 2020+) 
(2) Medium to Long (2020 to 2035)  
(3) Long term (> 2035) 
B. Technological innovation needs (1) Market replication/early commercialisation 
(2) Large scale demonstration, coupled with RDD to remove competitiveness bottlenecks 
(3) RDD programmes to mature the technology and large scale pilot/demonstration  
C. Implementation in the existing energy infrastructure (1) compatible with the current energy infrastructure 
(2) adaptation/reinforcement of the energy infrastructure needed 
                                                
 
42 SEC(2007)1510 
 
EN 62   EN (3) development of new infrastructu res and/or new industry required 
 
EN 63   EN ANNEX IV: The SET-Plan at work 
The implementation of the SET-Plan begun offi cially in June 2008 with the launch of the 
Steering Group. The SET-Plan proposes new in stitutional arrangeme nts to render the 
European research and innovation system more efficient. Within the framework of these 
arrangements, industry, the research commun ity, the Commission and Member States are 
working together to define their common objectiv es and activities, as well as to assess the 
financing needs. 
The European Industrial Initiatives are amb itious industry-led programmes established as 
public-private partnerships which aim to ch ange the prevailing philosophy and strengthen 
industrial energy research and innovation in a cost-effective way. They will focus, rationalise 
and when needed increase the efforts of indus try, the financial sector, the Community and the 
Member States to collectively achiev e concrete technological objectives.  
Initially six sectors for EIIs ar e: CCS, wind, solar, bioenergy, th e electricity gr id and nuclear 
fission; all of which have co rresponding European Technology Platforms containing industry 
specific visions and strategies. Discussions ha ve been initiated across all sectors (mainly 
through the corresponding Technology Platform s) seeking to establish an effective 
implementation of those st rategies through the EIIs. 
The Commission is working with research centre s to establish the European Energy Research 
Alliance (EERA). The mission of the EERA is to  strengthen, expand and optimise EU energy 
research capabilities th ough the sharing of worl d-class national facilities in Europe and the 
joint realisation of pan-EU programmes. The first step is the amalgamation of existing 
research resources into join t activities, thereby building experience and trust through a 
learning-by-doing approach. Once the structures  and capacities are in place the Alliance will 
become a powerful force in the energy research landscape and will be capable of delivering the knowledge and technologies needed; fo r this, it will require increased funding. 
 
EN 64   EN ANNEX V: Financing instruments 
This section will aim to expand on section 2.5, outlining the investment vehicles available; 
before going into some detail on the drivers of each of these investment vehicles in the 
context of the technology groups43 to which they are relevant.  
Overview of the existing inves tment vehicles and app licability to the te chnology groups.  
Investment vehicles Group 1: Technologies 
close to market 
competitiveness Group 2 : Emerging 
technologies on the verge 
of mass market 
penetration Group 3: New 
technologies 
RTD programmes 
(EU/ MSs)  Applicable, but further 
resources and coordination required. Applicable, but further 
resources and coordination required. 
Innovation 
programmes (EU/ 
MSs) Applicable, but further 
resources and 
coordination required. Applicable, but further 
resources and 
coordination required.  
Debt Based financing 
(EIB / national) incl. 
RSFF Applicable. Applicable, but further 
resources [and 
coordination] required. Applicable (for pilot and 
demonstration projects), 
but further resources required. 
Venture capital funds 
(private / public-
private) Applicable, but further 
resources desirable. Limited applicability, 
further resources 
desirable.   
Infrastructure funds 
(EIB / national) Applicable, but further 
resources required. Applicable, but further 
resources and 
coordination desirable.  
Market-based 
instruments Applicable. Limited Applicability  
 
In this context, it is important to note that although the EIB Group instruments44 are cost 
effective (they only loan on market rates and r ecover what they loan), add to rather than 
distort the market, and can leverage  significant private sector support45. On the other hand, 
however, because they only ever operate on ma rket terms, no EIB Group instrument can fully 
compensate for spill-over effects or environmental externalities; and no EIB instrument can function independent of a sufficiently secure re venue stream, hence the importance of market 
based instruments such as the ETS or taxes which put a price to carbon.  
                                                
 
43 Technology group 1; Close to market competitiveness: Group 2; emerging technologies on the verge of 
mass market penetration: Group 3; new technologies. See section 2.2 and annex III for further details.  
44 Debt, Venture Capital or Equity. All are supported by JASPERS (Joint Assistance to Support Projects 
in European Regions), is a joint initiative of the European Commission and EIB and ERBD which 
provides assistance for the prepara tion of major infrastructure projects financed under Cohesion Policy. 
The environment, including energy efficiency and renewable energy, as  well as clean urban and public 
transport are key areas for JASPERS support. 
45 up to 6 times for venture capital 
 
EN 65   EN RDD Programmes–.  
• Characteristics: Public RDD programmes usually aim to enhance the transformation of 
the research results into commercially valuable innovati ons through support for research 
projects that can bring high so cietal benefits. Both Member States and the European Union 
have dedicated research budgets. On the Eur opean level, energy research is supported 
under the Seventh Framework Programme (FP7, 2007-2013). FP7 funding in the form of grants is normally allocated through the public ation of "calls for pr oposals", and usually 
requires a trans-national part nership structure. Through f unding for projects aiming at a 
longer-term paradigm shift in the way Eu rope generates and c onsumes energy, FP7 
funding directly contributes to providing the knowledge base needed to support EU climate 
and energy policy. In addition, the  Cohesion Policy support to regional innovation and 
RTD. Cohesion policy aims to support the harm onious and sustainable development of the 
EU and in this regard, it s upports regional investments in research, technological 
development and innovation. Therefore, in order to assist regions la gging behind in these 
areas, Cohesion Policy has allocated € 86 B for innovation between 2007 and 2013; this 
includes € 50 B for RDD and innovation. A part of these allocations can be dedicated to 
the energy sector according to the operationa l programmes of the assisted regions. In 
addition, Cohesion allocations are supported by National co-f inancing helping leverage 
considerable private investment. 
• Drivers- Group II: The funding source and driver of  RDD programmes is the public 
sector, whether that be the Member States or the Community. The political priorities, 
capabilities and co-ordination of  the public bodies ar e, therefore, key in determining the 
amount and effectiveness of the RDD funding av ailable. The co-ordination and motivation 
of the political actors is particularly im portant for group 2, as many of the large 
demonstration plants in question (particula rly CCS) require large, up-front investments 
which require significant political and economic capital.  
• Drivers- Group III: As for Group II, RDD funding is driven by the political will, 
priorities, and capacities of the Member St ates and the Community; the key difference 
being that Group III is even further from th e market and even more dependent upon RDD 
funding. An important limiting factor for this gro up is the availability of research expertise 
and infrastructure; as without a sufficient pipe line of high quality rese arch projects even a 
significant public support will make little short term difference.  
Innovation programmes –  
• Characteristics: These aim to encourage the competitiveness of European enterprises, 
often through leveraging EU support for small and medium-siz ed enterprises (SMEs). Such 
programmes support innovation activities (inc luding eco-innovation), pr ovide better access 
to finance and deliver business support services  in the regions. Many of the EU innovation 
programmes come within the framework of the Competitiveness and Innovation 
Framework Programme (CIP). Through grants  to business and publ ic actors all over 
Europe and beyond, the CIP Progra mme co-finances pilot and ma rket replication projects 
and fosters best-practice exch ange and networking. To this end, grants are determined on 
the basis of calls for proposals and evaluation procedures, which are highly competitive. In order to complement national programmes, activities funded from CIP must have a 
“European added value”.  
• Drivers- Group I:  a key driver is public policy in re spect of the political choices made 
regarding the national energy mix. Innovation pr ogrammes are more likely to support those 
technologies that can contribu te to national priorities, su ch as expanding wind power 
generation or solar power because of resource availability. At EU level, with no preferred 
 
EN 66   EN energy mix, the main driver is to foster the emergence of a broad portfolio of technologies 
that can become widely applicable.  
• Drivers- Group II:  as for Group I, but w ith a greater emphasis on bringing forward new 
generations of technolog ies that bring additiona l benefits to those already on the market.  
Debt based financing including the RSFF –  
• Characteristics: These can take the form of  loans from the EIB or other financial 
institutions in a variety of forms. Although flexible, most de bt based finance is used to 
fund infrastructural projects regardless of the developmental stage of the technology 
concerned. Within this category, the RSFF is particularly useful  in funding riskier projects, 
whereas EIB Global Loans and the SME guarant ee facility under the CIP can be used to 
help support SMEs seeking to market ne w technology. EIB debt instruments are 
particularly useful with regards to assuming or mitigating the uncertainty associated with 
large scale long term energy projects.  
• Drivers- Group I: All EIB loans are essentially driven by the provision of a sufficiently 
sure revenue stream (including from the ETS and renewable energy support schemes); 
which for group I technologies amounts to any additional revenue from the use of this particular technology on the markets. Limiting factors here are the availability of co-
financiers, the ease of access to collateral and liquidity, the availabil ity of viable bankable 
projects (with guarantors if necessary ), and the overall economic situation.  
• Drivers- Group II: As for Group I technologies, the driv er here is the provision of a 
sufficiently sure revenue stream. Group II te chnologies, however, ar e generally riskier 
investments than Group I due to their lowe r technological maturity, and higher time 
horizon before return on investment. As a result some of the loans might need to be against 
future revenues from grants; and in many cas es might need guarantees (from the state, a 
corporate or a financial institut ion) or risk sharing devices in  order to become viable. The 
provision of guarantees, the availability of ba nkable projects, the willingness of the public 
sector to share risks, the overa ll economic situation, the ease with which the EIB (and other 
IFIs) can access funding, and the availability of co-financier s are all key for this group.  
• Drivers- Group III: Here it is unlikely that it will be possible to lend against future 
market revenues to the high risk, long time to market, and inherently speculative nature of 
many of the investments. The key drivers will be the availability of viable projects backed by sufficiently secure revenue streams in the form  of grants or other public sector support, 
alongside the ease with which the EIB can access funding.  
Venture Capital Funds -  
• Characteristics : this takes the form of equity inve stments in newly created and innovative 
firms; and through it public investment can ty pically leverage signif icant private sector 
contributions. It is most efficient at suppor ting a portfolio of rela tively small firms and 
projects, mitigating against the uncertainties  related to new technologies, leveraging 
significant private sector participation, adapting relatively late stage technologies to market 
needs and broadening their take-up by the market . In particular, a number of successful 
solar and wind power investments have been  financed by the EIF through intermediary 
funds; notably under the mandates conferred on it by the EIB and the Community (above 
all the GIF and the Eco-Innova tion facility under the CIP). Similarly, venture capital 
supporting energy investments can be provide d through the Cohesion policy initiatives 
JEREMIE (Joint European Resources for Mi cro to medium Enterprises) and JESSICA 
(Joint European Support for Sustainable Invest ment in City Areas) initiatives led by the 
Commission together with the Eu ropean Investment Bank Group (EIB ). 
 
EN 67   EN • Drivers- Group I: The main driver of Venture Capita l is the possibility of gaining 
revenues and making a profit on the investment; something which is strongly linked to the 
overall economic circumstances, the market framework (including any incentives towards 
green technologies, particularly  the ETS), and the availability  of Venture Capital expertise 
in the still underdevel oped European Market.  
• Drivers- Group II: Venture Capital is of only very li mited use to group II technologies; 
but again the possibility of future profits, an d the availability of the requisite venture 
capital expertise is key.  
Infrastructure Funds -  
• Characteristics: this takes the form of equity investments in infrastructure projects, 
including Public Private Partnerships (PPPs).  Such investments can  support large scale, 
relatively late stage, demonstration projects as  well as bundles of smaller projects. Notable 
in this field is "Marguerite", the 2020 fund for Energy, Climate Change and Infrastructure 
currently under development by the EIB and othe r institutional investors. As in the case of 
the debt instruments, infrastructural funds are particularly competent at contributing to the 
large sums of capital which may be require d, mitigating for long term uncertainties and 
leveraging significant private sector participation.  
• Drivers- Group I: As for the all other market instrume nts the provisions of a sufficiently 
secure revenue stream in the form of bankabl e projects (supported by e.g. ETS); alongside 
the availability of liquidity and sufficient expertise in Infrastr uctural Funds are key.  
• Drivers- Group II:  Infrastructural funds tend to have longer maturities than most other 
types of funds, which means they can be mo re relevant to Grou p II technologies. 
Nevertheless, however, the projects must be ba nkable with a more or less secure revenue 
stream, and in some cases might need to be backed up by a state guarantee.  
Market Based Instruments -  
• Characteristics: these instruments are particularly useful to support technologies in the 
market deployment stage, i.e. when the aim is to create economies of scale and reduce 
costs. The EU Emissions Trading Scheme is one general instrument which creates 
incentives to invest in low carbon technologies  as do taxes which put  a price on carbon. 
Examples of more targeted instruments incl ude feed-in tariffs and certificate systems for 
renewable electricity . 
• Drivers- Group I: These instruments, through increasi ng the price of carbon increase the 
incentives for investment in low-carbon technologies. As, outlined above, this is absolutely key both for the spread and market adaptati on of these low-carbon technologies. This is 
also important because without a revenue st ream no EIB Group support (or other financial 
support independent of the st ate) can be provided.  
• Drivers Group II:  as for group I, market based instru ments can also ha ve a facilitating 
role for increasing the attractiveness of em erging technologies, a lthough in these cases 
additional and more direct ways of supporting R&D investment will in any case be needed 
in parallel. 
 
EN 68   EN ANNEX VI: Policy co-ordination failures and drivers 
Introduction 
Currently, the EU is not using the full potentia l for innovation of the internal market for 
exploring synergies between Member States in the development and deployment of new 
energy technologies.  
In particular, and as describe d in the Impact Assessments of  the climate and energy package46 
and the Joint Programming Communication47, pan-European cooperation in low carbon 
energy technologies is hampered by diverse or ganisational structures and support schemes in 
energy R&D and the lack of a strategic approach to technology development  
The following analysis of spending under FP6 clear ly demonstrates the lack of transnational 
cooperation.  
Joint Programmes and Cooperation- ERA-NETS 
NETWATCH data show that transnational R&D co-operation in low carbon energy R&D 
has been rather limited until now .  
Under FP6 energy R&D represents 7% of  the whole ERA-NET activity , or 5 ERA-NETS 
in 5 different low carbon energy areas .48 Unsurprisingly, those countries accounting for the 
majority of European low-carbon R&D expenditure  are also the most ac tive in ERA-NET. So 
far 22 countries have been involved (albeit with widely varying degrees of participation): 19 
EU Member States and 3 associated countries, Norway being very active with 3 participations.  
The fields covered by the FP6 ERA-NETS ar e Photovoltaic solar energy (PV-ERA-NET), 
innovative energy technologies (INNER), Hydrogen and fuel cells technology (HY-CO), 
clean energy fossil technologies (FENCO-ERA) and bio-energy (BIOENERGY). Most of the 
calls had a clear experimental character and we re used by the ERA-NETS  to develop and test 
possible strategies of future cooperation. 
Eleven joint calls have been launched by th ese five ERA-NETS between 2006 and 2008, with 
it taking an average of two years from the start of the ERA-NETS to the first call (this seems 
to be a standard in all ERA-NETS, not only energy). Future transn ational co-operation 
initiatives will therefore have to take into account a certain delay in the launch of first calls. 
All calls were funded through a virtual pot m ode, enabling countries and regions to apply 
existing national procedures and to pay for th eir own participants, without trans-national 
flows of national funding.  
                                                
 
46 http://ec.europa.eu/energy/renewables/doc/sec_2008_85-2_ia_annex.pdf 
47 http://register.consilium.europa.eu/ pdf/en/08/st11/st11935-ad01.en08.pdf 
48 Those EU countries originating 98% of the aggregated public national (nuclear and non-nuclear) low-
carbon R&D budgets are on  average also the ones being most active in ERA-NETS, Germany and The 
Netherlands being the only ones participating in all 5 co-operations, and also co-ordinating all ERA-
NETS in energy. Sweden, Denmark, Austria, Spai n, France and United Kingdom participate in 4 of 
them. Italy is underrepresented with participation in only 1 ERA-NET. The new Member States on 
average participate in only in 1 ERA-NET in this field, Poland leading with 2 participations and 1 
observer role. 
 
EN 69   EN The budget committed by these five ERA-NETS to the eleven joint calls has been € 23,3 
Million (2.3% of the aggr egate low-carbon energy R&D budge ts of the MS. Clearly, given 
the low spending, and widely varying degree of participation, there remains a high 
potential for transnational co-operation in this field.  
Regulatory fragmentation  
Adding to the fragmentation, non-aligned research  strategies and subcri tical capacities; the 
variety of national regulations and technical specifications (as described in the climate and 
energy package impact assessment) fragment the market and inhibit industry investments in 
high- risk technologies.  
The merits of centralised and fragmented systems can be argued in favour of one or the other. 
However, taking into account the nature of en ergy research, the investments needed and the 
urgency to bring about change, it  seems to be self evident that Member States working in 
isolation will be unable to finance the progr ammes and create the necessary incentives to 
generate the necessary break through new technologies and market innovation. By way of 
contrast, global competitors invest in a more  coherent research and innovation system; and 
they have larger domestic markets, allowing th em to make use of grea ter efficiency savings 
and economies of scale.  
In this case fragmentation is a key problem that requires action. The message from the 
stakeholder consultation is clear. The inability to  harness the potential of the internal market 
to overcome the intrinsic barriers  to the innovation of energy t echnologies constitutes a severe 
lost opportunity.  
Drivers of the lack of coordination 
While EU policies are addressing  the problems stemming from a lack of coordination through 
e.g. the EU Research Framework Programmes, w ithin which a large part  of the non-nuclear 
energy R&D support is dedicated to wards low-carbon technologies.  
Much of the fragmentation and incoherence resu lts from a lack of strategy in streamlining 
public funding and financing instruments with the set EU policy goals. In particular  
• Most funding and financing instruments were  designed before 2007, when the EU policy 
goals were set.  
• There is currently no funding mechanism tailo red to the investment needs of the low-
carbon energy technologies sector.  
• Both the EU and the Member States appropr iate money for individual projects which may 
bear little or no relation to each other.  
• There is uncertainty as to the extent existing instruments that are not geared to achieve EU 
climate and energy policy targets can deliver the scale and type of  funding required.  
The picture is similar on the financing front.  In this case, although the EC and the EIB Gr oup manage a set of financial sources and 
instruments dedicated to low- carbon energy technologies.; and which allow contributions and 
interventions in the form of grants, loans a nd loan guarantees, equit y, technical assistance, 
 
EN 70   EN interest rate subsidies, etc. It remains the ca se that the EU lacks a strategy in using public 
spending to boost investment in low-carbon tec hnologies since most of these instruments 
appropriate money for individual projects which may bear little or no relation to each other.  
Given their number, complementarities and poten tial overlap, these instruments could be put 
to better use through stronger coordination and dissemination efforts and in some cases by 
better focussing, in particular by using the full potential for leveraging private investment 
from Cohesion Policy funds and Competitiven ess and Innovation programmes. In this 
context, there are certainly ot her sources and instru ments of important funding either from 
financial institutions (EBRD, WB) or na tional support programmes which, among other 
things, can bring synergies to EU funding. 
Data on international co-opera tion in low carbon energy R&D are very limited but show high 
importance of energy R&D co-operation with Brazil, Russia and India. 
SET-Plan structures 
The SET-Plan hopes to correct this and make the most out of the synergistic effects of Joint 
Programming. Specifically, a SET- Plan Steering Group will progressively become the main 
structure for strategic coordination of energy research priorities at EU level; it is expected that 
the situation will improve.  
The implementation of the SET-Plan priorities  will happen in the context of the European 
Industrial Initiatives (EIIs) a nd the European Energy Research Alliance (EERA) on the basis 
of agreed Key Performance Indicators (KPIs). The EIIs currently discuss what could be joints 
objectives and activities at  EU level, whilst the EERA is in the process of identifying areas for 
Joint Programming at EU level. The 'construction' of these coordination st ructures is currently 
is in the set-up phase, and ther efore, their exact impact on coor dination at EU level cannot yet 
be analysed.  
 
EN 71   EN ANNEX VII: Justification for EU action with  regards each individual technology group 
This table by giving further specific details on the targets, needs, drivers of financing and 
scope for public action with regards to each of  the specific technology groups; aims to further 
detail the justification for EU level action in th e context of each. It does not in itself constitute 
a justification; but sums up the information gi ven with regards to th e financing gap and co-
ordination failures.  
Group Group I Group II Group III 
Targets • Widespread 
adoption by the 
market, including winning public acceptance in the short term. 
 • Market adoption in the 
medium term. 
• Greater understand of 
practical needs in the short term.  • Long term adoption by 
market. 
• In the Short term to 
gain a greater understanding of potential.  
Needs • Immediate financing 
and adoption for 
public use. • Large demonstration 
projects. 
• Adoption of 
infrastructure. 
• Further research. • Intensive research. 
Drivers • These are close to 
the market; and 
should be driven by the market and market based instruments (particularly ETS). • The market potential of 
these projects is 
unproven. They represent risky project and will need public support.  
• Demonstration projects, 
even if unprofitable, 
will produce some revenue and market drivers, could, therefore become involved. • Solely public support. 
These technologies are 
generally too unproven, too risky, and too far from the market to be attractive to private finance. 
Scope for public sector action • Overcoming the 
market failures 
identified in section 2.4; risk aversion and other market failures specific to energy. 
• Working towards • Providing and co-
ordinating funding for 
large scale demonstration and infrastructural changes.  
• Overcoming the co-
ordination and 
regulatory failures • Ensure the existence 
of a well-resourced, 
vibrant research community. 
• Distributing grants and 
resources' strategically 
targeted to the SET-Plan technologies. 
 
EN 72   EN public knowledge 
and acceptance of the new technologies. identified in the 
capacities map. 
• Researching and aiding 
the development of the 
SET-Plan technologies. 
Scope for EU action • Co-ordinating and 
funding cross-border actions aimed at addressing market failures. 
• Ensuring the transfer 
of expertise and 
good practise across borders. • Driving and co-
ordinating the implementation of very large demonstration projects. 
• Working towards 
consistent EU wide 
regulations and specifications.  
 • Facilitating EU wide 
synergies through the unification of standards, and EU wide programmes. 
• Promoting EU policies 
and focussing research 
activities in priority areas.  
 
 
EN 73   EN ANNEX VIII: Overview of recent initiatives in the context of the financial crisis 
The recognition of the need to reinforce financing of technology development in the energy 
sector is already producing posit ive results. The EU has put in place an enabling framework 
which establishes clear market conditions and contributes to lower financial risks. New 
measures have been agreed and others enha nced to reverse the downward trend in energy 
research investment seen since the 1980s. The EU  is currently demonstrating it is maintaining 
its commitment to shift to a low carbon economy despite the dire financ ial context. The EERP 
provides the right balance to combine an immedi ate stimulus with the long-term perspective 
needed to meet the challenges of a world economy geared towards low-carbon and innovative 
activities. 
The overall policy framework 
The EU is piecing together a far-reaching jigsaw of policies a nd measures: binding targets for 
2020 to reduce greenhouse gas emissions by 20% and ensure 20% of renewable energy 
sources in the EU energy mix; a plan to reduce EU global primary energy use by 20% by 
2020; carbon pricing through the Emissions Trading Scheme and energy taxation; a 
competitive Internal Energy Market; an international energy policy. 
A comprehensive set of measures on energy effici ency is being put in place to tap into the 
enormous potential for energy savings in ev ery sector of our economy. Building codes, 
appliance standards, lead market policies, public procurement and so on are all directed 
towards giving the right price and policy signa ls to turn the undoubted technology potential 
into profitable bus iness oppor tunities. 
EU research policy is directed towards achieving a new vision of a European Research Area, 
in which all actors fully benefit from the “Fifth Freedom” across the ERA: free circulation of 
researchers, knowledge and technology. The ERA aims to provide attractive conditions and 
effective and efficient governance for doing res earch and investing in R&D intensive sectors 
in Europe. 
The European Economic Recovery Plan (EERP) 
The EERP has prioritised act ion to raise skills, to boost invest ment in research, to promote the 
conditions for innovation, to renew existing ener gy infrastructure, incl uding through increased 
use of public private partners hips, to upgrade energy efficien cy and to increase renewable 
energy. 
The EERP will provide an additional 3.5b€ to imp rove gas and electricity interconnections, 
stimulate the development of offshore wind ener gy and kick-start the demonstration of carbon 
capture and storage technologies. In addition, th ree new Public Private Partnerships in the 
fields of 'green cars', 'energy efficiency bu ildings' and 'manufacturing', with a combined 
budget of 7b€, will contribute to reducing gree nhouse gas emissions in key sectors of the 
economy. 
 
EN 74   EN The EU is now entering a new phase of implemen tation of its Recovery Plan, with a need for 
effective co-ordination of the measures being taken to ensure that they work to best effect on 
the real economy. 
National Recovery Programmes 
Most Member States have drawn up national rec overy plans in response to the EERP and their 
implementation is now under way. These Nationa l measures will also play a role in 
stimulating investment in clean technologies. 
Examples of measures adopted include: tax br eaks on more environm entally-friendly cars 
(AT, DE, FR, LU, IT, NL, PT, SK, ES, UK, RO); R&D programme s for green cars (FR, DE, 
UK); investment in energy-saving materials and green technologies (AT, HU, LU, SI, EE, IE, 
ES, FR, DE, IT); and, increased R&D for the development of green and sustainable 
technologies (DE, ES, FR, SE, UK). 
The EU Emissions Trading Scheme 
Aside from the incentive effect of the ETS itself for innovation, the revised ETS Directive 
[ref]  sets aside up to 300 million allowances (wit h a possible monetary value in the range of 
6-9b€) from the New Entrants Reserve to be made available for the funding of large-scale 
demonstration projects for innov ative carbon capture and storag e technologies and renewable 
energy sources in the period between 2013 an d 2015. Also at the European Council of 12 
December 2008, Member States declared their willi ngness to use at leas t half of their ETS 
auctioning revenues for the period between 2013 and 2020 (possibly in the region of 50-70b€) 
in support of actions to reduce greenhouse ga s emissions, mitigate and adapt to climate 
change, including research and development.  
Increasing investments in energy R&D 
By 2013, the annual budget for energy research in the Seventh EU Research Framework 
Programme will be double that at the start. Inve stment in energy technology research has also 
ticked upwards in several Member States after two decades of stagnation at a low level. In 
2007, total EU public investment in energy technol ogies reached 2.38b€, but this is still a long 
way off the 5.24b€ invested in 1985 and only starts to address the accumulated under-
investment in energy research capacities and infrastructures [ref IPTS paper] . 
In the framework of the European Economic R ecovery Action Plan, the EIB has increased its 
lending target in the energy field to €9.5bn in 2009 and €10.25bn in 2010. In addition to 
which the EIF has increased its support to ec o-innovation under the new CIP mandate. Further 
measures include the Risk Sharing Finance Faci lity, jointly developed by the EC and EIB and 
which is expected to create a total financi ng capacity from the EIB of up to €10bn, of which a 
significant percentage of which will be  taken up by energy technology projects. 
The Third Internal Energy Market package [not yet approved]  includes the provision: " In 
fixing or approving the tariffs, the regulatory aut horities shall ensure that network operators 
are granted adequate incentive, ov er both the short and long term, to increase efficiencies, 
 
EN 75   EN foster market integration and support  the related research activities ". This should stimulate 
much-needed research into energy networks.  
Re-orientating the implementation of these increas ed funds towards SET-Plan priorities will 
provide a substantial b oost to the development of technologies with th e greatest EU added 
value. 
International developments 
Globally, the total new investment in clean energy increased from $33 billion to $148 billion 
between 2004 and 2008, two-thirds of this outside the EU. In the US, the Stimulus Package 
adopted in February 2009 includes $2.5 billion for energy efficiency and renewable energy 
research, $6 billion for new loan guarantees  for low carbon electricity, $11 billion to 
modernise the electricity grid. 
Even if the current economic situation has dampened the trends, the underlying dynamics 
should quickly reassert themselves. These prospects forecast growing global market 
opportunities in low-carbon technologies. The EU has every interest in maintaining its strong 
and competitive knowledge base in this domain.