Commission staff working document - Accompanying document to the communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee 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}
Date: 2009-10-07
Institutions: European Commission
Subjects: EU industrial policy, action programme, climate change, energy policy, energy research, environmental policy, impact study, reduction of gas emissions, renewable energy

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 7.10.2009 
SEC(2009) 1297 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying document to the  

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE 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} 

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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  Commission's  services  involved  in  its  preparation 
and does not prejudge the final form of any decision to be taken by the Commission. 

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TABLE OF CONTENTS 

1. 

2. 

Procedural issues and consultation of interested parties .............................................. 6 

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. 

2.3. 

2.4. 

Technology gap of low carbon technologies ............................................................. 11 

The financial gap to effectively support the SET-Plan .............................................. 15 

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. 

2.6. 

2.7. 

Current financing instruments and their gaps ............................................................ 21 

Effect of financial crisis on the financing of low carbon technologies...................... 23 

Added value of further EU action .............................................................................. 24 

2.7.1.  Co-ordination Failures ............................................................................................... 25 

3. 

3.1. 

3.2. 

3.3. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

5. 

5.1. 

5.2. 

Objectives................................................................................................................... 27 

Strategic objectives .................................................................................................... 27 

Specific objectives ..................................................................................................... 27 

Operational objectives................................................................................................ 28 

Policy options............................................................................................................. 29 

Business as usual (BAU)............................................................................................ 29 

Increased funding through the existing investment vehicles (option 1) .................... 30 

A strengthening of the investment vehicles within modified institutional 
arrangements (option 2) ............................................................................................. 31 

A set of new investment vehicles taking specific institutional arrangements (option 3)
.................................................................................................................................... 32 

Analysis of impacts .................................................................................................... 34 

Main assumptions....................................................................................................... 34 

Economic and social impacts ..................................................................................... 34 

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5.3. 

5.4. 

5.5. 

Environmental impacts............................................................................................... 35 

Assessment criteria..................................................................................................... 36 

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 .............................................................................................................. 47 

6.1.1.  Technology Group I: Technologies close to market competitiveness ....................... 48 

6.1.2.  Technology Group II: Technologies close to market competitiveness...................... 50 

6.1.3.  Technology Group III: New Technologies ................................................................ 52 

6.2. 

6.3. 

7. 

Summary of the comparison ...................................................................................... 54 

Recommendation........................................................................................................ 55 

Monitoring and evaluation ......................................................................................... 56 

ANNEX I: The SET-Plan Technology Challenges.................................................................. 57 

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ANNEX II: Potential of low carbon energy technologies........................................................ 59 

ANNEX III: Criteria for the grouping of low carbon 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 individual technology group ..... 71 

ANNEX VIII: Overview of recent initiatives in the context of the financial crisis................. 73 

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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  ambitious  plans  to  simultaneously  i)  fight 
against climate change, ii) improve the efficiency of EU energy market, and iii) guarantee 
a safe, reliable and sustainable supply of energy to EU consumers. 

–  Technology lies at the heart of the transition to a low carbon economy. Current low carbon 
technologies  are  too  costly,  hence  the  need  for  an  energy  technology  policy.  Without  a 
significant improvement in the currently available low carbon technologies, achieving our 
short term (2020) goals will be costly; in addition, without new technologies we will not 
achieve  our  long-term  (2050)  goals  of  cutting  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 leverage private investment, including private 
equity  and  venture  capital,  enhance  coordination  between  funding  sources  and  raise 
additional  funds.  In  its  conclusions  from  28  February  2008  the  Council  invited  the 
Commission to prepare this Communication. 

This  Impact  Assessment  addresses  the  financing  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 does not address the costs of the actual market deployment of 
energy  technologies  or  of  the  transition  to  a  low  carbon  economy.  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 target will be addressed in a Communication by 
the Commission in 2010. 

The financing can essentially be considered as part 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 

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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 need for a substantial increase 
of  private  and  public  energy-related  RDD  compared  to  current  levels,  working  towards  at 
least  a  doubling  of  global  energy-related  RDD  by  2012  and  increasing  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  impact  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 Technologies which is foreseen as part of the 
implementation of the European Strategic Energy 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  community  (including  energy-related  Technology  Platforms),  and 
also  with  Member  States  in  the  European  Community  Steering  Group  on  Strategic  Energy 
Technologies. 

In addition, this Impact Assessment is based upon:  

A consultation process with the Advisory Group Energy for the Energy theme of the 
Seventh Framework Programme for Research in 2008 and 2009; 

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 (EBRD, developers, financial agencies agents, 
industry)  who  have  been  informally  consulted  (several  of  the  stakeholders  were 
consulted ad personam). The EIB has been duly associated throughout the process; 

An  analysis  of  current  corporate  and  public  RDD  investments  towards  low-carbon 
technologies by the Institute for Prospective Technological Studies (IPTS) of the Joint 
Research  Centre  of  the  European  Commission.  During  the  preparation  of  this  work 
around 20 major companies active in the energy field and 10 industry associations or 

(1) 

(2) 

(3) 

1 

According to the International Energy Agency, public RDD expenditure in the EU, Japan and the US 
represents 87% of the total expenditure in OCDE countries. 
Impact Assessment [SEC(2007)1508] 

2 
Capacity Map of Energy - Analysis of Energy Research 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 

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technology platforms were contacted; a consultation process with Member States has 
been initiated and is on-going. The International Energy Agency (IEA) was contacted 
with regard to their database on RDD budgets; furthermore, members of the Advisory 
Group on Energy to the European Commission provided comments on the report;  

An assessment of projected RDD needs prepared by the Institute for Energy (IE) of the 
Commission's  Joint  Research  Centre3  based  on  the  consultation  and  inputs  from 
stakeholders and other Commission services received in the context of the definition 
of the European Industrial Initiatives. 

A 2007 preliminary analysis by the Commission services of the European research and 
innovation capacities in EU Member States, referred to  as  the ‘Capacity Map’ along 
with an analysis of the potential impact of energy technologies to achieve the energy 
policy  objectives  referred  to  as  the  ‘Technology  Map’.  The  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  Member  States,  and  in  Japan  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 industry. Both analyses were undertaken  within 
the Commission by its Joint Research Centre. 

A memo on Opportunities and Challenges of Innovation in the Energy Sector prepared 
by the European Commission's Joint Research Centre. 

During the SET-Plan consultation process, from March to June 2007, the Commission 
conducted  an  Expert  Consultation  with  established  advisory  and  stakeholder  groups, 
such as the FP7 Advisory Groups, relevant European Technology Platforms and other 
sectors.  A  series  of  hearings  and  workshops  were  convened  to  feed  into  the 
development of the SET-Plan. 

In parallel, a public consultation offered the opportunity to all interested stakeholders 
to express their views by means 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 
link: 
http://ec.europa.eu/energy/technology/set_plan/expert_consultation_en.htm  

consultations 

following 

found 

can 

the 

be 

at 

The inter-service group that was established for the SET-Plan was mandated to follow 
both the implementation of the SET-Plan and the Communication on Financing Low 
Carbon Technologies. It has met twice in 2008 and once in 2009. 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

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. 

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IE, 2008 
SEC(2007)1510 

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The potential for a further and more explicit prioritisation of technologies ought to be further 
analysed; indicating at what stage prioritisation of technologies 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 made 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 belonging to the same group require different types 
of funding. 

The problem definition needs to be further developed. In particular the IA should analyse in 
greater depth the shortcomings of current policy co-ordination and the drivers that underpin it. 
In  this  context  the  impact  of  measures  which  have  already  been  agreed  such  as  European 
Industrial Initiatives must be brought more fully into the analysis. The IA should be clearer 
about  the  political  context  of  this  initiative  and  include  a  presentation  of  the  process  of 
collecting and verifying investment 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  criteria,  outlines  the  intra-sectoral  prioritisation 
measures  which  will  be  taken,  and  explains  why  further  detailed  prioritisation  measures 
would be undesirable.  

Section  2.5  was  made  more  specific  in  response  to  the  critique  of  the  funding  mechanisms 
making  specific  links  between  the  technology  groups  and  the  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  technology  groups;  meanwhile  annex  III  now  has  a 
paragraph addressing the need to resolve the issues arising from the 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 their drivers (further detail can be found in the Capacities Map 
accompanying the SET-Plan Communication). Meanwhile annex V contributes significantly 
towards an explanation of the impact of the already 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 technology 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  overview  of  recent  initiatives  in  response  to  the  financial 
crisis.

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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 achieve the 2020 climate and energy targets. The acceleration of the 
development,  demonstration  and  commercialisation  of  strategic  energy  technologies  will 
require significantly higher investment, 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 response to the current financial 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  sector  that  can  guarantee  sustainable  economic 
growth,  in  line  with  the  Lisbon  strategy.  Nevertheless,  investment  remains  insufficient  to 
drive down energy sector CO2 emissions6; 2020 emissions from energy are projected to rise to 
4 253 Mt CO2 eq. 

Both  Council  and  Parliament  have  repeatedly  reaffirmed  their  commitment  to  the  SET  plan 
originally  approved  by  the  Council  in  February  2008.  In  this  context,  in  February  2009  the 
Council  invited  the  Commission  to  "Identify  the  necessary  legislative  and  non-legislative 
actions and appropriate financial resources" and to "prepare a Sustainable Energy Financing 
Initiative  as  a  joint  Commission  and  European  Investment  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 sustainable low greenhouse-gas-emitting 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  technologies;  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  into  force  2010  Member 
States  will  be  required  to  ensure  security  of  energy  supply  in  the  Union  and  to  promote 
measures at international level to combat climate 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 existing instruments and efforts to optimum use. 

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SEC (2007) 1508  
EEA Energy and Environment report 2008 and NEF Global Futures 2009 

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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 and low prices for consumers, 

–  high skilled jobs due to an influx of marketing 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 benefit not only the industries active in the 

'lead area' but also other industrial sectors.  

–  Other  secondary  impacts  would  include  lower  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 energy technologies and energy itself. As climate 
change and energy security top political agendas across the world 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  action  at  EU  level,  it  is  highly  unlikely  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 competitors 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  low  carbon  energy  technologies  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 technologies rather than on low carbon ones.  

The portfolio of low carbon technologies that could constitute a sustainable European energy 
system  and  its  potential  have  already  been  estimated  in  recent  studies,  for  example  in  the 
Technology  Map  of  the  SET-Plan10  and  the  IEA  ETP  2008  report.  There  is  a  significant 

7 
8 
9 
10 

See IPTS mimeo for a summary of challenges and opportunities of innovation in the energy sector. 
COM(2007)1 
COM(2008)0781 
SEC(2007)1510 

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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 benefit from its potential. 

The current understanding on the potential of low carbon technologies 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 construction 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 technologies, with a prominent role for energy efficiency in buildings, 
transport  and  industry.  A  second  wave,  ranging  from  medium-to-long  term,  includes 
advanced technologies such as advanced solar, 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  such  as  ocean  technologies  and  generation  IV 
nuclear reactors. This will be complemented 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 technologies have been grouped into three families 
based on their common positioning in the innovation cycle and their mutual requirements for 
advancement.  These  groups  constitute  a  qualified  simplification  enabling  analysis  of  the 
policy options, yet without jeopardising the quality of the assessment.  

This characterisation of technologies is based in best available information, however it should 
be  noted  that  technological  breakthroughs  or  strong  regulatory  measures  could  significantly 
change the suggested grouping. Table 1 provides a brief overview of the technology groups; 
with a more in-depth analysis to be found in annex III. 

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Table 1: The main characteristics of the applied technology groups 

Innovation 
status 

Technological 
maturity 

Time  horizon 
before  return-
on-investment 

Upfront  RDD 
investments 

Composition 

Group  1:  Close 
market 
competetiveness 

to 

Group  2:  Emerging 
technologies  on  the 
of  mass 
verge 
market penetration 

Group 
3: 
technologies 

New 

for 

the 
Market 
exists 
technology 
exists with a maturing 
supply chain. 

Target  is  to  improve 
performance 
and 
reduce  costs  through 
incremental 
through 
innovation 
market 
replication, 
and supporting RDD.  

Incorporates 
High. 
risk  and  a 
limited 
significant 
likelihood 
of  market  success  due 
to  the  advanced  stage 
High 
of 
RDD. 
attractiveness 
to 
industry. 

These  are  up-and-
coming  technologies 
in emerging markets. 
They 
require 
enhanced  innovation 
schemes  (frequently 
based  on  large  scale 
demonstration) 
combined 
further research. 

with 

These 
technologies 
are  driven  by  RDD 
require 
and  hence 
based 
RDD 
schemes, 
innovation 
and 
pilot 
large 
scale 
demonstration 
projects  in  order  to 
reach market 

schemes 

Medium. 
The 
uncertainty regarding 
market  success  of 
investments 
RDD 
the 
limits 
attractiveness 
to 
private investments. 

Low.  The  high  risk 
uncertainties 
and 
associated  with 
the 
its 
technology  and 
market potential limits 
its  attractiveness 
to 
industry investments.  

Short 

Medium 

Long 

Medium. 
Further 
adaptation  of  existing 
infrastructure 
is 
required. 

Relatively 
high. 
Further  RDD  efforts 
are  required  as  well 
as 
additional 
adaptation/ 
reinforcement 
existing 
infrastructure 

of 

Relatively 
high. 
Includes  large  RDD 
needs  and  significant 
of 
adaptation 
technology 
and 
supporting 
infrastructure 

efficiency 
Energy 
for 
technologies 
buildings, 
transport 
and industry; on-shore 
wind,  solar  heating, 
solar photovoltaics (c-
Si), 
electricity 
transmission,  nuclear 

Off-shore wind, solar 
photovoltaics 
(thin 
film), 
concentrated 
power 
solar 
generation,  CCS,  2nd 
gen 
biofuels, 
electricity 
distribution 

fission 

Nuclear 
(G 
IV),  hydrogen  and 
fuel 
ocean 
cells, 
energy, geothermal 

EN 

13 

   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  varying  technologies.  Whilst  preparing  the  SET-
Plan11  an  assessment  was  conducted  in  order  to  establish  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 the 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 and concentrated solar power); 

•  Biofuel;  

•  Smart grid;  

•  Carbon capture, transport and storage; 

•  Nuclear fusion;  

•  Sustainable nuclear fission (Generation IV). 

Similar  assessments  of  low  carbon  technologies  and  sectors  will  be  conducted  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-sectoral  priorities  at  the  level  of  technology 
advancement actions. In particular, the proposed European Industrial Initiatives encompass a 
broad range of actions to be undertaken by industry and the research community. They take 
the form of a criterion, using the above criteria to identify the most suitable financing source; 
public  or  private,  national  or  community.  The  Technology  Roadmaps  2010-2020  for  the 

11 

Impact Assessment for the European Strategic Energy Technology Plan (SET-Plan) -SEC(2007) 1508 
from 22 November 2007 

EN 

14 

   EN 

 
 
                                                 
implementation  of  the  European  Industrial  Initiatives  [Staff  working  paper:  ‘A  technology 
Roadmap’ – SEC (2009) 1295] outline the result of this prioritisation exercise.  

One  final  point  would  be  with  regards  to  the  difficulties  inherent  within  any  further 
prioritisation. In particular, and given the wildly varying characteristics of the Member States 
economies,  research  set-up  and  regulatory  frameworks,  any  further  prioritisation  we  made 
would not be the most appropriate for each region, and could become more inappropriate over 
time. The proposed approach consisting of a menu of alternatives of strategic importance to 
the EU, and a criterion enabling the Member States to make informed choices between them, 
is the most appropriate mechanism under present circumstances.  

2.3. 

The financial gap to effectively support the SET-Plan 

The  first  step  is  to  better  understand  the  current  level  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)  conducted  an  analysis  [Staff  working  paper: 
‘R&D Investment in the priority technologies of the European Strategic Energy Technology 
Plan’ - SEC (2009) 1296] resulting 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 needs in SET-Plan priority technologies. 

Table 1: Current approximate investment in SET-Plan key technologies (2007) 

 Sector 

H2/FC 

Wind 

12 
13 
14 
15 

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€) 

380 

290 

70

11

170 

80 

620

380

e.g. not detailed by technology 
e.g. double accounting of EU and national budgets 
e.g. private sector investment 
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  would  not  exceed  ±  25%  of  the  total.  This  uncertainty  does  not  yet 
include the fact that the overall figures on corporate 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 

15 

   EN 

 
                                                 
Solar (PV and CSP) 

CCS 

Biofuels 

Smart Grids 

SUM (non nuclear LC Techs) 

Distribution by investor 

Nuclear Fission  

Distribution by investor 

Nuclear Fusion 

Distribution by investor 

270 

230 

270 

210 

1650

69%

205

45%

0

0%

Total 
SET-Plan 
energy technologies 

priority 

1860

32

17

13

14

157

7%

5

1%

204

42%

366

170 

40 

65 

50 

570 

24% 

250 

54% 

280 

58% 

1100 

470

290

350

270

2380

100%

460

100%

485

100%

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  European  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 
associations16.  On  this  basis  we  have  prepared  a  series  of  detailed  Technology  Roadmaps 
2010-2020 for the implementation of the EIIs [Staff 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  towards  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 

H2/FC 

16 

Estimated 
investment 
needed for the 
next 10 years 

(B€) 

5 

Justification for the estimation 

Updated  estimation  of 
resources  needed  made  by 
stakeholders  –  'Implementation  Plan'  of  the  hydrogen  and 
fuel cell technology platform (Study by the JRC) 

TPWind, EWEA, Solar TP, EPIA, ESTELLA, BiofuelsTP, Zero Emission Power Plan TP, Sustainable 
Nuclear TP, Hydrogen and fuel cells TP 

EN 

16 

   EN 

 
 
                                                 
Estimation  of  resources  needed  made  by  stakeholders  – 
Costing of the Wind Industrial Initiative 

Estimation  of  resources  needed  made  by  stakeholders  – 
Costing of the Solar Industrial Initiative 

Estimation  of  resources  needed  made  by  stakeholders  – 
Costing  of  the  CCS  EII  (including  the  7-12  B€  CCS 
demonstration projects - Study by McKinsey) 

Estimation  of  resources  needed  made  by  stakeholders– 
Costing of the Bio-fuels Industrial Initiative 

Estimation  of  resources  needed  made  by  stakeholders  for 
transmission  and by  Commission  for  distribution –  Costing 
of the Smart Grid Industrial Initiative 

Estimation  of  resources  needed  made  by  stakeholders  – 
Costing of the Nuclear fission Industrial Initiative 

Estimation  based  on  experience  from  CIVITAS  and 
CONCERTO initiatives and reviewed by the JRC 

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. 

Wind 

Solar 

5.5 

16 

CCS 

10.5 - 16.5 

8.5 

2 

5 - 10 

10 - 12 

Energy 
Alliance 

5 

Bio-energy 

Smart Grids 

Nuclear Fission  

Smart Cities 

European 
Research 
(EERA) 

Total  

Current 
contributing 
objectives 

investment 
these 
to 

67.5 - 80.5 

14 - 20 

The  Commission  estimates  that  50  to  70%  of  the  current 
investment can be directed to these objectives. 

Additional 
needs 

financial 

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  actions  proposed  under  the  SET-Plan  and  thereby 
address the key technology challenges identified therein. Fortunately, as indicated in the table, 
50  to  70%  of  the  current  investment  can  be  regarded  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  reports  (Stern,  Intergovernmental  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 

18 

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 methodological problems that are 
explained in more detail in Annex XX. 
Energy Technology Perspectives, 2008 

EN 

17 

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energy-related  RDD  by  2012  and  a  quadrupling  of  the  current  effort  by  2020.  Translating19 
this political guidance into monetary terms would 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 beginning to be filled. The European 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 300 million allowances have been allocated to 
large-scale demonstration projects for CCS and innovative renewables. At the current market 
this would represent 4.5B€. This  means that approximately 6 
price of CO2 (approx. 15€/ton) 
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  relate  to  the  specificities  of  the  energy 
technologies sector and a wide variety of other factors.  

2.4.1. 

Spill-over effects  

Due  to  positive  spill-overs,  the  overall  economic  value  to  society  of  a  research  effort  often 
exceeds the economic benefits enjoyed by the innovating firm. Three relevant distinct flows 
of spill-overs justifying public intervention can be distinguished:  

(1) 

(2) 

(3) 

Spill-overs  occur  because  the  working  of  the  market  for  an  innovative  good  creates 
benefits for consumers and other non-innovating firms (market spill-overs).  

Spill-overs  occur  because  knowledge  created  by  one  firm  is  typically  not  contained 
within  that  firm,  and  thereby  creates  value  for  other  firms  and  their  customers 
(knowledge spill-overs).  

The performance of interrelated technologies may also depend on each other, and as a 
result  each  firm  improving  one  of  these  related  technologies  would  create  economic 
benefits for other firms and their customers (networks spill-overs). 

The overall result is that the innovation efforts undertaken in the private sector will be smaller 
than the benefit created for the society as a whole. 

Basic  research  has  especially  high  spill-over  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 technologies. 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 

18 

   EN 

 
                                                 
Optimising  the  benefit  of  innovation  to  society  by  complementing  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 other 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 price 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 penetration of low-carbon technologies. The ETS thereby internalises the 
negative externality of carbon emissions by monetising 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 instruments. 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 terms of technology development, this is equivalent 
to  the  technologies  closest  to  the  market.  Thus,  market  based  policy  instruments  create  a 
powerful  stimulus  for  the  introduction  of  these  technologies.  At  the  same  time,  these 
instruments  also  create  incentives  and  accelerate  the  market  uptake  of  more  immature 
technologies by improving the expected long term rate of return of new technologies. 

Market  based  instruments  alone  may,  on  the  other  hand,  prove  insufficient  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 less mature low-carbon technologies.  

The  energy  technologies  identified  by  the  SET-Plan  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 - particularly against a backdrop of an ambitious post-
Kyoto international agreement for further emissions 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 establish 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 transaction costs, CO2 related taxation would be the 
best alternative.  

2.4.3.  Uncertainty and risk aversion 

One underlying problem for the introduction of new technologies is the risk aversion vis-à-vis 
new  technologies  shown  by  private  investors,  particularly  in  the  context  of  the  present 

20 
21 

22 

NCEP, 2004 
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. 
IA to the Communication Limiting Global Climate Change to 2 degrees Celsius, SEC 2007(7) 

EN 

19 

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economic  downturn.  The  final  result  of  the  research  and  innovative  effort  is  genuinely 
uncertain, as not all projects generate marketable 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 technologies or too little diversification of technology options 
compared  to  what  is  needed  to  retain  the  flexibility  to  achieve  more  stringent  emission 
reductions in the future. 

The  energy  technologies  identified  by  the  SET-Plan  involve  high  upfront  learning 
investments,  and  long  lead  times.  Particularly  in  the  present  global  financial  and  economic 
downturn, debt financiers show a pronounced reluctance to provide funds for as yet unproved 
technologies. The uncertainty about the technologies also has a bearing on the cost estimates 
for  the  demonstration  plants.  There  is  a  need  for  demonstration  projects  to  help  gain 
knowledge, and thus drive cost reductions and commercial competitiveness in the industries 
involved. The technological risk warrants support to cover the costs 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 area 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  property  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 important factors in this 
respect is the development of future oil and energy prices, as they influence the rate of return 
on  the  investment  in  alternative  energy  sources.  The  last  year  has  showed  that  these  price 
developments can be very uncertain and volatile. The crude oil price peaked close to $150 per 
barrel in July 2008, reflecting a more than a quadrupling 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  investments  in  the  energy  sector  (e.g.  full-scale  CCS 
about  €1  billion)  combined  with   the  long  life  cycles  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 established technologies and thus impedes innovation of 
new technologies in the energy sector. Established technologies have undergone a long path 
along  the  experience  curve,  enabling  them  to  attain  low  production  costs  and  economics  of 
scale.  Hence,  large  investments  in  both  innovation  and  deployment  are  required  for  new 

23 

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2008:2872:FIN:EN:PDF  

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20 

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energy technologies in order to become competitive. 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 technologies 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 example 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  European  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 3rd 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 the energy sector, public 
funding could  make a difference through providing support for the high initial research and 
development  costs,  but  also  by  supporting  the  early  deployment  stage  of  some  low  carbon 
technologies.  This  can  be  done  by  various  financial  instruments,  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  based  financing,  Venture  Capital  Funds,  Infrastructure  Funds 
and  market-  based  instruments  (see  Annex  V).  The  matrix  below  gives  an  indication  of  the 
applicability of each of the available instruments for the specific technology groups and also 
highlights any particular needs those instruments may have with regards to a given technology 
group. 

EN 

21 

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Table  2:  Overview  of  the  existing  investment  vehicles  and  applicability  to  the  technology 
groups.  

Investment vehicles 

RTD 
(EU/ MSs) 

programmes 

Group  1:  Technologies 
close 
market 
to 
competitiveness 

Group  2 
:  Emerging 
technologies on the verge 
of 
market 
penetration 

mass 

Group 
technologies 

3: 

New 

Applicable,  but  further 
resources 
and 
coordination required. 

Applicable,  but  further 
resources 
and 
coordination required. 

Innovation 
programmes 
MSs) 

(EU/ 

Applicable,  but  further 
resources 
and 
coordination required. 

Applicable,  but  further 
resources 
and 
coordination required. 

Debt Based financing 
(EIB  /  national)  incl. 
RSFF 

Venture capital funds 
(private 
public-
/ 
private) 

Applicable. 

Applicable,  but  further 
resources desirable. 

Infrastructure 
(EIB / national) 

funds 

Applicable,  but  further 
resources required. 

Applicable,  but  further 
resources 
[and 
coordination] required. 

Limited 
further 
desirable.  

applicability, 
resources 

Applicable,  but  further 
resources 
and 
coordination desirable. 

Market-based 
instruments 

Applicable. 

Limited Applicability 

Applicable,  but  further 
resources required. 

Market based instruments, the last category in the table above, have a very important role in 
supporting  the  last  step  to  commercialisation  and  market  deployment  of  new  low  carbon 
technologies. However, the design of targeted market 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  therefore  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  and  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,  and  in  some  cases  enhanced  co-ordination 

with regards to Group 1 technologies. 

EN 

22 

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•  Clear  benefits  could  also  be  gained  from  increased  resources  to  venture  capital 

instruments. 

See Annex V for further discussion of the individual instruments and their drivers.  

2.6. 

Effect of financial crisis on the financing of low carbon technologies 

The financial crisis has transformed into disrupted trade flows and stagnating or contracting 
domestic  private  demand  in  most  EU  Member  States,  leading  to  an  economic  crisis.  These 
trends  fuel  uncertainty  about  the  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 businesses 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 effort. There are clear evidences that cuts in 
investment,  if  spread  on  a  significant  scale,  could  create  disproportionate  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 further demand reductions in the short-term and 
weakens incentives to invest in the rapid market deployment of the most mature low-carbon 
technologies. Nonetheless, global  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.  Besides,  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-efficient  production  and  consumption  patterns, 
wherever it can bring productive 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,  some  companies  may  see  the  crisis  also  as  an 
opportunity for carrying out those structural shifts, which have been considered as necessary 
over  the  past  years,  in  a  radical  way.  RDD  is  widely  acknowledged  for  being  central  for 
ensuring such a shift.  

However,  the  crisis  may  induce  a  tendency  to  shift  corporate  investments  from  more  basic 
research  to  RDD  activities  that  are  considered  less  risky  and  provide  a  faster  return  on 

24 

25 

26 

Public-Private  Infrastructure  Advisory  Facility:  "Financial  crisis  affecting  new  private  infrastructure  projects",  article  to  be  downloaded  from 
http://www.ppiaf.org. 
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. 
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.  

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investment.  At  the  same  time,  the  financial  crisis  makes  merger  and  acquisition  deals  less 
likely, but there  seems  to be a qualitative shift  from 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 higher 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  the  combination  of  uncertainty  and  the  societal 
need for developing low-carbon technologies, it becomes 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  recovery  plans  very  appropriately  comprise 
actions targeting low-carbon technologies. 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  private  investments  in  low-carbon 
innovation, meanwhile Denmark has established a new major 12.5 bn EUR investment plan 
over  2009-2020  to  upgrade  its  transport  infrastructure  to  higher  economic  and  energy 
efficiency  levels.  Similarly,  Germany,  Luxembourg,  France  and  Ireland  have  set  up  actions 
aiming  at  demonstrating  low-carbon  energy-efficient  buildings,  which  is  a  way  to  realise 
important  economies  of  scale  to  mainstream  low  carbon  technologies  in  this  sector,  with 
accompanying positive spill-over effects 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  nature  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  finance  the  programmes  and  create  the  incentives 
necessary  to  generate  the  necessary  technologies  and  market  innovations.  The  main  global 
players, the United States and Japan, but also emerging economies such as China, India and 
Brazil all face the same challenges, and are multiplying their efforts to bring about low carbon 
technologies.  

In particular, it should be noted that, at present the EU is not making full use of the potential 
for  innovation  of  the  internal  market  to  exploit  the  synergies  which  exist  between  Member 
States with regards to the development and deployment of new energy technologies. Action to 
make  full  use  of  the  available  synergies  could  only  be  taken  at  EU  level,  is  necessary  and 
would have substantial benefits.  

Furthermore,  it  should  especially  be  borne  in  mind  that  the  market  alone  cannot  be  relied 
upon  to  finance  the  required  transformation.  Although  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  transformation.  Again  therefore,  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 

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will  require  public  and  EU  level  effort  in  order  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 strongly 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 failures which prevent European industry from 
achieving its full potential. They range from engineering and technical failures to strategy and 
planning failures and, perhaps most importantly, implementation failures. 

–  Engineering and technical coordination failures: 

–  New technologies have to be compatible with exiting energy systems 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 investments in high risk technologies.  

–  Strategy and planning coordination failures 

–  Multiple, uncoordinated individual programmes lead to a tendency to over-focus 
on  the  most  attractive  short  term  technology  options,  whilst  starving  promising, 
but further from the market technologies, of sufficient support. 

–  Uncoordinated  and  unstable  market  incentives  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 leads 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 
unexploited29.  

–  In  addition,  there  are  a  number  of  other  sources  of  funding  (from  financial 
institutions  e.g.,  EBRD,  WB  and/or  national  support  programmes)  which  could 
provide valuable additional synergies alongside EU resources.  

28 

29 

Wiesenthal  et  al,  "R&D  Investment  in  the  priority  technologies  of  the  European  Strategic  Energy 
Technology Plan". 
IPTS, 2009  

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Annex VI presents a further insight into EU policy coordination failures and Annex VII goes 
into  further  detail  on  the  exact  justification  for  EU  action  with  regards  to  each  of  the 
Technology Groups. 

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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  objectives  by  proposing, 
developing and implementing an Energy Technology Policy for Europe. It complements EU 
policy  in  energy  and  climate  change  and  can  enable  cost  effective  compliance  with  legally 
binding  targets.  These  include  the  realisation  of  the  internal  market  in  electricity  and  gas; 
compliance  with  emissions'  reductions  and  the  revised  and  strengthened  Emissions  Trading 
Scheme;  the  increased  contribution  of  renewables  to  the  EU's  electricity  generation;  the 
measures to enhance energy efficiency; the EU car emissions standards; the negotiation of a 
post-Kyoto international agreement; 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 objective of accelerating innovation 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 and 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, currently 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 through the full and timely 
implementation  of  the  SET-Plan,  both  the  Council  and  Parliament  call  for  an  increase  in 
resources. 

3.2. 

Specific objectives 

There  is  consensus  that  industry  investment  should  be  the  main  driver  to  achieve  the  SET-
Plan  objective  in  a  cost-effective  manner,  with  public  research  efforts  playing  a  supporting 
role.  However,  despite  all  measures  taken  and  policies  proposed,  the  sector  faces  several 
market failures and in particular has accumulated 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 targets and has no incentive to do so.  

Hence, the specific objectives to be pursued are: 

•  to  stimulate  a  substantial  increase  in  private  investment  in  research,  technological 

development, demonstration, and market replication of SET-Plan technologies. 

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•  to  ensure  the  provision  of  sufficient,  appropriate  and  efficient  financial  resources  in 
support of the development of the low carbon technologies identified in the SET-Plan, so 
as to secure a level of innovation 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 the SET-Plan for the next ten years. 

•  to ensure a more flexible and effective use 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. 

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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) 

(2) 

(3) 

(4) 

the  continuation  of  the  existing  investment  vehicles  within  the  current  institutional 
arrangements (BAU) 

increased  funding  channelled  through  the  existing  investment  vehicles  within  the 
existing institutional arrangements (option 1) 

a  strengthening  of  the  existing  investment  vehicles  within  modified  institutional 
arrangements (option 2) 

new investment vehicles, taking specific institutional arrangements, filling in gaps and 
removing recurring weaknesses of the existing portfolio of investment vehicles (option 
3). 

In  this  context,  "investment  vehicles"  are  defined  as  the  specific  means  through  which  the 
emergence  of  a  low  carbon  economy  is  furthered  and  promoted,  and  "institutional 
arrangements"  represent  the  governance  structure  under  which  the  investment  vehicles  are 
managed. 

4.1. 

Business as usual (BAU) 

One possibility is to continue with the current 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 creation of a European Community 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  CIP  programme  amounting  to  €730  million  for 

2007- 2013.  

•  National and EU level RDD funding, amounting to € 683 million in 2007 for non-nuclear 

RDD and € 700 million for nuclear fission.  

•  EIB Group activities including the EIB's typical infrastructural and corporate loans (EUR 
20 bn for Energy related activities 2009/2010), the RSFF programme (EUR 2 bn-joint with 
the Commission), its Global loans for SMEs, investments in infrastructural funds, and the 

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EIF's venture capital and guarantee activity (particularly under the CIP mandate conferred 
on the EIF- € 550 million 2007-2013).  

•  Additional measures under the European Economic 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  electricity  and  gas  networks, 
kick-start  the  demonstration  of  CCS  and  stimulate  the  development  of  offshore  wind 
technologies.  

Some efforts are also currently undertaken through transnational agreements (EU framework 
programmes, ERA, bilateral agreements) the aim being to improve the level of coordination 
between  programmes  to  create  the  optimal  critical  mass  and  raise  the  necessary  additional 
funding to address the challenges facing the energy sector.  

4.2. 

Increased funding through the existing investment vehicles (option 1) 

One  option  would  be  to  generally  increase  the  amount  of  funding  and  resources  heading  to 
these investment vehicles. In many cases the problems defined in the problem definition arise 
from a lack of adequate resourcing; and provision of such resourcing could have a significant 
impact  in  terms  of  encouraging  the  development  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  changing  the  instruments  used  to  finance 
projects.  The  EU  could  encourage  Member  States  to  similarly  reinforce  National  RDD 
programmes, without changing their current implementation modalities. Under this option, 
the European Industrial Initiatives and the European Energy Research Alliance of the SET-
Plan could be implemented as 'soft' partnerships, not involving legislative proposals to set 
up new institutional arrangements. 

•  Allocating further financial resources to the energy components within the CIP programme 
(which  focus  on  non-technological  barriers  and  seek  to  bridge  the  gap  between  the 
successful demonstration of innovative technologies and their effective broad market take-
up) without changing the instruments used to finance projects. Particular emphasis might 
be  placed  on  the  Intelligent  Energy-Europe  segment  of  CIP  within  which  prominence  is 
given  to  energy  efficiency  and  renewable  energy  technologies.  The  EU  could  encourage 
Member States  to  similarly reinforce  National Innovation  programmes,  without  changing 
their current implementation modalities. 

•  Allocating  further  resources  to  venture  capital  projects  in  the  field  of  low  carbon 
technology, mainly through the "eco-innovation" budget under the CIP mandate to the EIF. 
These  resources  would  be  particularly  desirable  with  regards  to  supporting  small  firms 
adapting  and  transferring  new,  previously  demonstrated  (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 realisation of riskier projects, in 
particular  large  scale  demonstration  projects.  These  projects,  which  also  require  a 
significant  cooperation  are,  at  present,  the  only  ones  in  which  their  size  and  complexity 
might prevent a meaningful RSFF contribution. (for example in the case of CCS the large 

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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 Commission could take a participation in Marguerite 
(fund  created  by  the  EIB  to  support  the  financing  sustainable  energy  infrastructures)  in 
order  to  spur  the  financing  of  low  carbon  technologies;  moreover  a  strengthening  of  the 
currently  existing  instruments  could  take  the  form  of  increased  EIB  participation  in 
infrastructural funds in the energy sector, and 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 leverage 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  allocations  directly  supporting  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;  these  funds  can  play  an  important  role 
supporting  market  replication  and  technology  dissemination.  In  the  context  of  the 
European Economic Recovery Plan, Cohesion Policy has taken a number of steps allowing 
Member  States  to  increase  support  for  low  carbon  technologies.31  For  example,  the 
proposed amendment of the ERDF regulation, allows Member States to dedicate up to 4% 
of their total ERDF allocation to energy efficiency 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  vehicles  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 with which those instruments are implemented. 

•  For an accelerated development of technologies the implementation of the SET-Plan offers 
new  opportunities  for  modified  institutional  arrangements  mainly  in  the  context  of  the 
European  Industrial  Initiatives  (EIIs)  and  the  European  Energy  Research  Alliance.  These 
could take a number of forms, including formalised 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-Private  Partnerships  (PPP)  through  legislative 
proposals, such as Joint Technology Initiatives or Joint Undertakings on the basis Article 

30 
31 

McKinsey 
COM(2008) 876/3 Commission Communication "Cohesion Policy: Investing in the real economy" 

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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  possible  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 nature highly dispersed and fragmented, due to 
the  multiple  market  actors  and  customers.  The  changing  nature  of  the  energy  services 
industry, encouraging energy savings rather than simply supplying energy may need to be 
supported by innovative new instruments and approaches 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  technologies  could  be  explored.  This  would  come 
under the scope of the CIP decision, and would focus above all on providing grants so as to 
improve financial institutions capacity to assess the commercial viability of projects with a 
significant eco-innovation component. 

•  In the case of Debt Financing the possibility of establishing a far stronger link between the 
SET-Plan  Steering  Committee  and  the  EIB  could  be  explored.  Under  this  scenario,  the 
Steering  Committee  might  be  able  to  mobilise  increased  joint  (Community,  Industry  and 
Member  State)  financing  and  better  coordinate  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  regarding  infrastructural  funds  within  the  EIB,  meanwhile  the 
new  mandate  would  gain  a  degree  of  leverage  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 coordination 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  might  be  insufficient.  In  addition,  there  are 
some  areas  where  the  existing  instruments,  even  if  strengthened  could  be  viewed  as  not 
containing the necessary ingredients for the needed promotion of low carbon technologies. In 
these  cases  it  might  be  thought  necessary  to  combine  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 implementing a strategy on energy innovation at the EU level in 
line  with  the  EU  policy  objectives.  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  with  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. Objective evaluation of such a structure could 

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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 allocated by the Governing Board through its work 
plan. As an illustrative example, as proposed by the America COMPETES Act, the US is 
setting up a new Advanced Research 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  the  DoE's  current  approach  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  sector,  which  would  require  new  institutional 
arrangements.  Such  a  scheme  is  currently  in  operation  within  the  European  Defence 
Agency. 

•  With  specific  regards 

to 

the  EIB  Group  activities  (including  Venture  Capital, 
Infrastructural  Funds,  and  Debt  Financing),  new  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  number  of  actors  and  significant  amounts  of  funding.  Here  it 
might  be  thought  worthwhile  to  consider  an  EIB  structured  action  in  support  of  large 
demonstration projects across various technologies. One could envision providing support 
to a number of organisations by combining a variety of financing mechanisms, including 
channelling grants from RDD and innovation programmes, ETS allowances, infrastructural 
funds and debt based financing. The increased funding would be provided to the action by 
the Member States, the European Commission, the EIB and the industry on a case by case 
basis. The actions to be funded would be selected through calls for proposals, open to all 
stakeholders. 

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33 

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5. 

ANALYSIS OF IMPACTS 

5.1.  Main assumptions 

This analysis focuses on the impact of the policy options described in the previous Chapter on 
the  successful  development  of  low  carbon  energy  technologies  and  their  timely  availability 
for market take-up. In other words, this analysis aims at identifying the right policy measures 
that  can  best  trigger  the  development  of  low  carbon  technologies,  leverage  the  required 
additional  investment  in  research  spending,  and  address  the  different  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 technologies, 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 package32 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 redistribution of the national targets in 
the Non-ETS sectors and by allowing for emission reductions outside the EU through the use 
of the Clean Development Mechanism of the Kyoto Protocol. These calculations are based on 
the technological development expected under a "business as usual" approach, which includes 
the continuation of existing technology development trends and implementation of the already 
agreed decided policies (including 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 technologies that are commercialised and/or at the 
verge  of  large  scale  deployment  by  influencing  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 fact that energy efficiency measures, which would themselves 
pay-off in the long term, are not adopted is an argument that the ETS alone is not likely to be 
sufficient.  Likewise  the  significant  taxes  on  transport  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 system alone might be insufficient to prompt the 
necessary  R&D  investment  in  those  alternative  fuels  which  remain  far  from  marketability. 
Therefore, it is self-evident that transformational, high-risk technologies 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  policy  to  stimulate  technology  development  in 
parallel  to  an  emission  trading  system  could  be  more  cost  efficient  in  achieving  the  set 
abatement target than relying solely on the emission 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 renewable energy for 2020. 

EN 

34 

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the  positive  spillovers  effects  of  research  through  both  general  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 introduction of the CCS technology with a CGE model 
for the Netherlands;34).  

To the extent that this policy reduces the costs 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  impact  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 possibly 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 overall impact of a doubling of the financial support 
to the development of low carbon technologies can reduce the overall costs to the economy of 
achieving the carbon emission reduction target, there is no reason to assume that any policy 
option considered in this Impact Assessment will produce purely economic or social benefits 
of  a  significantly  greater  magnitude  than  another  (excluding  ‘business  as  usual’).  All  the 
policy options assume a doubling of the financial 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 availability and cost competitiveness of new technologies, 
there  is  no  direct  unambiguous  relationship  between  RDD  activities  on  energy  technologies 
and  their  consequent  market  deployment.  This  has  been  demonstrated  by  the  results  of  a 
recently finalised FP6 project funded by DG RTD (SRS NET AND EEE36). Market roll-out is 
a  result  of  the  combined  effects  of  technology  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  accelerate  progress  along  the 
the 
technology  roadmaps 

the  environmental  goals  set.  An 

illustration  of 

towards 

33 

34 

35 
36 

Otto,  V.M.  and  Reilly,  J.  (2008),  Directed  technical  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 particular in cases where the carbon externality is not 
fully internalised 
It is shown that an optimal set of differentiated RDD subsidies across industrial sectors in combination 
with  an  emission  trading  system  (differentiating  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 directed RDD subsidy to CCS with an emission trading 
system would be more cost effective than the emission 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. 
Assumes full auctioning with in ETS and recycling through transfers to households. 
Scientific Reference System on new energy technologies, energy end-use efficiency and energy RTD 

EN 

35 

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environmental benefits arising from the deployment of the different technology groups with 
respect to CO2 emissions are shown in the Chart 2 below. 

Chart 2. Additional CO2 Reduction Potential Compared to the Baseline37 

Group III
Group II
Group I

)
0
0
1
=
0
2
0
2
(
x
e
d
n

i

l
a
i
t
n
e
t
o
p
n
o
i
t
c
u
d
e
r

2

O
C

300

250

200

150

100

50

0

2020

2030

2050

This graph reveals that each group 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  technologies  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 necessary long term investment to fulfil the 
imperative of a sustainable energy system beyond 2040. 

5.4. 

Assessment criteria 

The  revitalisation  of  the  financing  environment  of  RDD  for  the  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 scenario 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 developed for each technology individually and did not 
consider systemic effects. Therefore, 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  achieved  by  this  scenario  compared  to  the  baseline 
was normalised by the CO2 emission reduction achieved in 2020. 

EN 

36 

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–  through the proposed revitalisation of RDD investment in the energy sector, 

–  the foreseen reallocation of investment to low carbon energy technologies 

–  the  strengthening  and  possible  modification  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  innovation  model  in  Europe  capitalising  on 

public-private risk sharing partnerships,  

–  the  strengthening  of  cooperation  and  joint  funding  structures  between  academic 

and industrial research, 

–  the restructuring of technology and the research base of the energy system through 

the development and deployment of low carbon energy technologies. 

For  the  purpose  of  this  assessment,  these  impacts  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 refers to the impact of the implementation of 

the policy option at system level  

Our  assessment  of  the  various  policy  options  with  respect  to  each  of  these  indicators  will 
guide our determination of the most suitable option.  

of 
Mobilisation 
financial resources 

Suitability  of  financial 
instruments 

Flexibility 
implementation 

of 

Effectiveness 
financial instruments 

of 

•  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

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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 for all RDD and Innovation programmes. 

–  Further  resources  are  also  necessary  for  all  investment  vehicles  concerned  with 

the financing of large scale demonstration projects. 

–  Further  resources  are  also  necessary  to  aid  the  market  replication  of  low  carbon 
technologies, particularly through the innovation programmes, and venture capital 
and infrastructural funds. 

5.5.2. 

Suitability of financial instruments 

Main Strengths 

•  Diverse and well-established portfolio of instruments already in place that cover different 
aspects and types of innovation and scales of implementation (although these instruments 
differ in  terms of the scope and  scale of  allocated 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 Fund to finance early stage 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 adequate, (with the notable exception of large 
scale  demonstration  projects),  thus  helping  to  address  the  uncertainty  and  risk  associated 
with long term investments.  

•  For  technologies  with  a  high  degree  of  maturity  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 the specific technology needs as indicated by their growing, 
but still insufficient, market shares. 

•  Diversity  of  programs  capitalising  on  regional  strengths  and  resources,  hence  tailored  to 
the industrial preference and the increased regional character of the majority of low carbon 
technologies, e.g. energy efficiency, renewables, etc. 

Main weaknesses 

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38 

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•  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  information  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 small number of MS with the highest spending.  

•  Diverse and uncoordinated administrative procedures; which fragment the market and add 
to  the  cost  of  high  risk,  capital/research  intensive  or  information  sharing  programmes  (a 
good example being the non harmonised IPR issues). 

•  Not having rigid partnerships allows the system 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 

instruments  have 
demonstrated  flexibility  in  response  to  a  changing  situation.  Both  the  level  of  energy 
spending, and the framework in which it is conducted have changed significantly over the 
past few years,  

relatively  uncoordinated, 

independent 

•  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 established record of creating new instruments, when 
appropriate, in order to fulfil its objectives (e.g. RSFF). 

Main Weaknesses 

•  Although  the  individual  instruments  can  react  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  industry  and  the  research  base  resulting  from 
good management and implementation practices. 

•  A  significant  (albeit  insufficient)  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 provided financial resources can be achieved as 
compared to only relying on RTD and innovation programmes. 

Main weaknesses 

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39 

   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 for the energy sector that 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 bridge 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  well  as  to  fund  demonstration  projects  of 
technologies that are on the verge of commercialisation and hence are attractive for private 
investment. 

•  The increased public funding will stimulate private 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 resources 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  support  very  large  scale  RDD 
programmes over long time period.  

5.6.2. 

Suitability of financial instruments 

The  strengths  and  weaknesses  of  this  Policy  Option  in  terms  of  coordination  and 
implementation are the same as of the BAU Policy 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 through soft partnerships will reduce to a degree some of the 
weaknesses of the BAU policy option. In  particular, the increased public funding combined 
with the development and sharing of common strategic research agendas and implementation 
programmes  will  stimulate  and  guide  the  mobilisation  of  industrial  actors  on  large  projects 
(e.g  large  demonstration  projects  for  emerging  and  new  technologies);  and  the  increased 
resources ought to help both grant and financial instruments in compensating for the particular 
market failures towards which they are targeted.  

EN 

40 

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Notice  should  be  taken,  however,  of  the  fact  that  this  policy  option  cannot  guarantee  the 
necessary coordination of European 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 resources between technologies and over time 
according to the latest developments. 

5.6.3.  Flexibility of implementation 

Main Strengths 

Since no changes are foreseen in the institutional arrangements used to finance projects, the 
flexibility under BAU is maintained. However the possibilities to frame RDD activities with 
soft  partnerships  that  do  not  require  legislative  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 partnership envisaged, it is likely that implementation will occur at 
the  project  level  hence  not  guaranteeing  the  coherence  of  the  European  efforts  and  the 
implementation of all necessary activities envisaged 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 combined with the increase in funding delivered 
may  stimulate  the  innovation  chains  of  the  identified  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 meet its long term challenges. 
As in all cases with increased 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  and  private  partnerships  and  increased  public 
institutional 
funding  resulting  from 
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 investment. A recent example is the FC & H2 JTI. 

the  strengthening  and  modification  of 

the 

•  The establishment of a specific mandate for the EIB to invest in infrastructural funds might 
result in an increased degree of security and increased investments over that which would 
be the case under PO1. 

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41 

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•  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 increased investment (such as CCS, wind or solar) 
at the detriment of others with a more emerging supply chain (e.g. ocean and geothermal). 
In addition, in view of the difficulty to establish 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 financial instruments 

Main Strengths 

•  The  modified  institutional  arrangements  allow  for  strengthening  the  coherence  and  the 
leverage  of  market  replication  type  of  activities  in  confronting  the  uncertainty  and  risk 
associated  with  new  technologies  (although  acting  at  the  European  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 European and National institutions, who through 
focussing  their  resources  on  specific  objectives  could  thereby  increase  their  combined 
leverage.  

•  Technology-focused partnerships formed under a coherent implementation framework and 
legal  base  help  to  ensure  that  the  innovation  requirements  of  those  emerging  and  new 
technologies are met, even when environmental externalities and other market failures lead 
to a need for significant cross-sector and international support. 

•  The proposed instruments and arrangements respond to the needs of funds with shortage of 
experience  and  risk  analysis  capability  in  the  specific  sector  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 agreement of investment between technologies.  

•  The  formation  of  industrial  partnerships  in  PPPs  may  be  inhibited  due  to  competitive 
issues  and  pervasive  know-how  monopolies,  hence  hindering  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  possibly  add  further  complexity  and  rigidity  to  the  overall 
institutional structure.  

•  The  modification  of  institutional  arrangements  linked  to  a  regulation  will  take  time 

delaying the innovation process. 

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42 

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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  activities  envisaged  in  the  sector’s  work 
programme over the necessary timeframe. This policy option has some flexibility 
within each technology programme with respect 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,  strengthened  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 and local creativity and innovation. 

•  The  need  for  consultation  liaison  and  agreement,  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  the  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  both  new  institutions  (with  respect  to  energy 
research and innovation) and a new EIB Group structured action channelling funding from a 
variety  of  sources  to  support  large  scale  demonstration  projects.  This  option,  therefore, 
contains two different but complementary proposals 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: 

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•  Same  as  in  PO2,  however  a  reinforced  public  (Community,  intergovernmental,  EIB,  etc) 
institutional base at European level addressing technologies and infrastructure can facilitate 
the provision of very large amounts of investment when required, such as for CCS, nuclear 
fission-Generation IV and off-shore grid.  

•  The  setup  of  Community  bodies  will  ensure  strong  financial  commitment  to  technology 

priorities for which the EU added-value is maximised. 

•  Intergovernmental  bodies  may  be  the  most  suitable  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  action  may  be  the  most  appropriate  vehicle  to 
attract large amounts of financing from its partner organisations alongside EIB resources. 

Main Weaknesses 

•  It  may  be  difficult  to  rise  the  necessary  funding  for  the  proposed  structure(s)  to  execute 
their  mission  due  to  competition  for  resources  with  the  existing  national  and  European 
programmes  and  organisations.  In  particular,  Member  States  may  be  less  willing  to 
delegate financial resources to an external organisation (or action), than they would be to a 
partnership within which they played a significant role. 

5.8.2. 

Suitability of financial instruments 

Main Strengths 

Innovation and energy research 

•  Large  scale 

technology  and 

infrastructure  demonstration  programmes  are  best 
implemented through the centralised structure(s) due to the provision of enhanced level of 
steering, critical mass of actors, and economies of scale for implementation.  

•  Centralised  structures  with  a  broad  technology  portfolio  can  facilitate  the  necessary 
coherence and balance of RDD activities and provide the necessary support to accompany 
the shift of the European industry towards new and emerging technologies 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 

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•  EIB  leadership  and  organisation  of  the  structured  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 projects, and the ability to alter priorities as 
appropriate.  

Main weaknesses 

Innovation and energy research 

•  A  centralised  structure  for  RDD  and 

large 
demonstration and infrastructure projects is not necessarily suitable to meet the innovation 
needs of all low carbon technologies. 

innovation  which  supports  mainly 

•  Like  in  most  established  organisations,  there  are  increasing  risks  over  time  of:  (i) 
bureaucratisation,  (ii)  operational  inflexibility,  and,  (iii)  locked-in  infrastructure,  which 
may hinder the capacity of the RDD and innovation organisation to adjust 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  for  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  competency  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 their institutional character. 

•  The setup of new centralised structures may require 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  other  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.  

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•  The  Intergovernmental  approach  is  flexible  as  it  is  tailored  to  the  willingness  and 
technology 

to  advance  specific 

interests 

commitment  of  partners  with  common 
developments with respect to their energy mix. 

EIB Group 

•  The EIB structured action is a flexible 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  reallocation  of  resources  and  priorities  in  response  to 
technological and market developments. 

5.8.4.  Effectiveness 

Main Strengths 

Innovation and energy research 

•  Intergovernmental structures spearhead the innovation change based on the willingness of 
a  few  Member  States  hence  meeting  short  term  targets  (industrial  competitiveness,  EU 
goals) while they can expand to allow more Member States to join hence propagating this 
new impetus for innovation. 

•  A common monitoring mechanism embedded in the 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)  stimulates  feedback  between  RDD, 
demonstration  and  business  support,  and,  (iii)  promotes  synergies  between  technology 
options.  

•  EIB Group 

•  The continued provision of funding for the EIB structured action through competitive calls 
for  proposals  will  help  secure  the  most  competitive  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 achievement. It would also be flexible in creating 
new  mechanisms  to  address  the  rapidly  changing  environment  for  the  financing  of  low 
carbon technologies. 

Main weaknesses 

•  As  explained  above,  such  an  institutional  arrangement  can  best  support  only  a  limited 
number  of  technologies  and  industries,  those  requiring  large  up-front  investment  and  the 
coordination of a large number of actors. 

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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  options  is  performed  for  each  Technology  Group  as  defined  in 
Chapter 2. This evaluation relies on a qualitative grading of each indicator, 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  increasing,  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  that  address  different  innovation  schemes  and 
market  failures,  they  neither  cover  the  needs  of  all  technologies  in  terms  of  scope, 
coherence  and  magnitude,  nor  address  the  market  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  large  investment  and  the  mobilisation  of  a 
significant number of actors. 

–  Flexibility of implementation: There is some flexibility to adjust financial flows to evolving 
technology needs however, there are limitations to shifting priorities and building critical 
mass at the scale required to advance the low carbon energy technology portfolio.  

–  Effectiveness  of  financial  instruments:  The  current  financial  support  to  low  carbon 
technologies is fragmented and hence is not able to deliver technologies at the right pace, 
with detrimental effects to European industrial competitiveness. 

•  A (++) grade is granted when the indicator for a given policy option provides a significant 

improvement to the financing environment. 

•  A (+) grade is granted when the indicator for  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 

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6.1.1.  Technology Group I: Technologies close to market competitiveness 

It is remembered that this group 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  critical  factor  is  the  need  to  tailor  innovation  measures  to 
market conditions. The industrial fabric is heterogeneous, ranging from large 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.  Furthermore,  funding  for  the  adaptation  of  the  infrastructure  is 
adequate,  and  the  proposed  increase  of  public  funding  should  trigger  further  private 
investment.  Some  problems  may  occur  due  to  the  currently  limited  co-ordination  of 
innovation instruments. As a consequence 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  CIP,  and  the  establishment  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 delay private investment for the technologies in 
Group I. On the other hand, the centralised authority of PO3 may be more efficient than the 
distributed  authority  of  PO2,  since,  sometimes  a  rigid  hierarchical  structure  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 base is already developed and 
mostly  requires  further  and  targeted  financial  assistance  in  mitigating  the  risks  and 
uncertainties associated with new technology. 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  industrial  fabric  of  this  Technology  Group.  In  particular,  a  stronger 
coordination  and  the  concentration  of  innovation  resources  can  have  a  positive  impact  on 
infrastructure  development;  whilst  stronger  linkages  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 Policy Option is granted (++).  

Policy Option 3 does not bring any clear added-value for this Group of technologies due to 
the strong regional character of some technologies and the need for considering different scale 

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of projects and market status of actors, except possibly for the 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  allows  for  a  flexible  and  quick 
implementation of sector  strategic  agendas and the reallocation of efforts 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 technologies in this Group with regards to overcoming 
the initial barriers to market deployment, the increase in financial resources complemented by 
the  possibility  to  develop  soft  partnerships  should  be  sufficient  to  significantly  mitigate  for 
technological and regulatory risk, accelerate and deliver cost competitive technologies. This 
Policy  Option  is  likely  to  boost  the  competitiveness  of  the  industries  around  these 
technologies. This Policy Option is granted (++). 

The advantage of Policy Option 2 lies in its ability to strengthen the industrial supply chain 
by  aligning  the  available  resources  with  strategic  planning  through  strong  partnerships.  A 
concern could be  the  comprehensiveness and the complexity  of the envisaged  arrangements 
with  respect  to  a  diversified  industrial  fabric,  spanning  from  large  utilities  to  SMEs.  It  is 
uncertain whether this option will bring significant improvement in terms of speeding up the 
roll-out of technologies to the market. This Policy Option is granted (+). 

The  institutional  centralisation  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  restructuring  of  the  European  innovation  system, 
however it is questionable how necessary this is for this group of technologies. Nonetheless, 
there may be some added value regarding infrastructure issues. This Policy Option is granted 
(0). 

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The scores for Technology Group I are summarised in the Table below. 

Mobilisation

Suitability

Flexibility 

Effectiveness

BAU 

PO1 

PO2 

PO3 

0 

+ 

++ 

+ 

0 

+ 

++ 

+ 

0 

++ 

- 

- 

0 

++ 

+ 

0 

6.1.2.  Technology Group II: Technologies close 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 corporations 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 technologies of Group II. Furthermore, the funding for 
the development of new infrastructure is adequate; however, problems may arise due to lack 
of guarantee for the sustainability 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 consequence a grade of (++) is granted. 

Policy  Option  2  has  similar  characteristics  with  Policy  Option  1  with  regards  to  the 
mobilisation  of  financing.  Funding  for  large  technology  and  infrastructure  demonstration 
projects,  so  as  to  overcome  the  large  uncertainties  surrounding  these  technologies,  will  be 
easier  due  to  an  increased  coordination  at  a  European  level.  Hence,  this  Policy  Option  is 
granted (++). 

Policy  option  3  has  the  same  attributes  with  respect  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 possibility for soft partnerships, envisaged in Policy Option 
1  can  meet  part  of  the  requirements  for  this  group  of  technologies.  Nevertheless,  the 
technological  risk  involved  and  the  magnitude  of  investments  necessitate  a  more  sustained 
and  coordinated  approach,  involving  different  instruments  and  greater  public  participation 
than is the case for technology group 1. This Policy Option is granted (+). 

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Policy Option 2 brings both stronger coordination and the development of a coherent and all-
inclusive  framework  better  able  to  mobilise  the  requisite  financing  and  absorb  the  risks 
integral  to  the  research  and  demonstration  work.  The  strong  public-private  collaborative 
character  of  this  Policy  option,  from  joint  programming  for  research  to  coalitions  for 
demonstration projects, echoes the driver for the development of these technologies, which is 
currently more policy than market driven. Technology risk is reduced due to the involvement 
of a critical mass and the stronger engagement of the public sector. 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  innovation  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  large  scale  technology  and 
infrastructure  demonstration  projects.  For 
framework  of 
implementation can stimulate the formation of partnerships, 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 will be subject to subsidiarity issues and will 
require long periods for negotiations, decisions and implementation. Hence, it is granted (+). 

technologies, 

these 

this 

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 and the reallocation of efforts based on progress 
monitoring.  However  at  the  detriment  of  the  required  stability  and  sustained  RDD 
commitment which are essential for these technologies. This Policy Option is granted (+). 

Policy  Option  2  may  cause  some  rigidity  with  regards  to  shifting  resources  between 
technologies  as  may  be  necessary.  However,  this  Policy  Option  will  allow  flexibility  of 
activities  within  a  coherent  and  stable  strategic  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,  based  on  the  progress  of  technology  development. 
However,  a  centralised  structure  that  addresses  a  portfolio  of  technologies  will  be  able  to 
accelerate  technology  development  by  allowing  the  shift  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 financing, technical assistance and coordination resulting 
from soft partnerships, will bring improvements 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 restructuring of the innovation system through a 
degree  of  coordination  to  accelerate  the  development  of  the  concerned  technologies  and 
mitigate  for  the  market  failures  which  would  otherwise  result  in  sub-optimal  research 

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expenditure. It is  clear  that,  although  some  delays  can  be  expected for the modification and 
setup  of  institutional  arrangements,  this  option  through  the  EIB  link  with  the  SET  Plan 
Steering committee, and the improved co-ordination of research and innovation instruments, 
unlocks a major weakness of the current system. This Policy Option is granted (++). 

Policy  Option  3  is  best  suited  for  very  large  scale  technology  and  infrastructure  projects, 
having a strong positive impact on the industrial fabric of these technologies. However, since 
a centralised organisation risks stifling creativity 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 

PO1 

PO2 

PO3 

0 

++ 

++ 

++ 

0 

+ 

++ 

+ 

0 

+ 

++ 

+ 

0 

+ 

++ 

+ 

6.1.3.  Technology Group III: New Technologies 

These technologies require strong RDD and pilot/demonstration activities to be tested under 
market  conditions  and  to  prepare  the  ground  for  large  scale  roll-out.  These  technologies  in 
most cases are developed by innovative SMEs, under 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 foresee JTIs, with the 
exception  of  hydrogen  and  fuel  cells  that  has  already  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 view of the fact that these technologies have a long term prospect 
and carry significant technological, market and financial 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  coupling  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 (++). 

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Policy  option  3  has  the  same  attributes  with  the  above  option  with  respect  to  funding.  The 
centralised institutional approach can secure the necessary funding over the long term period 
required for the development of these technologies. 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  carry  significant  risks,  due  to  the  combined 
effects  of  large  requirements  for  RDD  and  early  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 result 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  innovative  SMEs  and  funds  for  prototype  and  infrastructure 
demonstration which matches the needs of these technologies. This option allows for a strong 
public  intervention  in  the  development  of  technologies,  which  reduce  the  innovation  risk 
linked  to  their  long  term  market  prospective.  The  European  dimension  embedded  in  this 
policy  option  is  proportional  to  their  future  market  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  associated  with  every  large  bureaucratic  organisation  is  of 
locked  in  policies,  operational  complexity,  and  frameworks  which  stifle  rather  than  abet 
innovation. Hence, this policy 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  technologies  compared  to  BAU.  It  contains  some 
flexibility of implementation of sector strategic 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 framework 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 constraints. This Policy Option is granted (++).  

Policy  Option  3  brings  the  necessary  stability  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. 

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Policy Option 1 as explained above, although it increases the financing, does 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.  Although  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 development. 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  having  enhanced  decision  making  mechanisms  can 
have a strong influence on the restructuring of the European innovation system regarding long 
term  technologies,  hence  positioning  the  European  industry  in  the  market  of  new 
technologies. This Policy Option is granted (+). 

The scores for Technology Group III are summarised in the Table below. 

Mobilisation 

Suitability 

Flexibility 

Effectiveness 

BAU 

PO1 

PO2 

PO3 

0 

+ 

++ 

++ 

0 

0 

++ 

++ 

0 

0 

++ 

+ 

0 

0 

++ 

+ 

6.2. 

Summary of the comparison 

The comparison of the policy options brings out the following key aspects: 

•  Policy Option 2 emerges as a universal option 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  adopting  hybrid  structures  integrating  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  where  the  element  of  time  is  crucial  and  taking 
political  factors  in  consideration),  and  that  hybrid  options  may  be  considered  where 
appropriate. 

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6.3. 

Recommendation 

The  first  recommendation  emerging  from  the  assessment  is  that  achieving  the  objectives  of 
this  policy  requires  significantly  increased  resources.  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 approaches to implementation. 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 structure 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)  notably  energy  efficiency.  For  a  number  of  these 
technologies  it  might  be  appropriate  to  implement  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  nature  highly  dispersed  and  fragmented,  due  to 
the multiple market actors and customers.  

For  other  technologies  in  Group  1  and  in  Group  2  (emerging  technologies),  and  given  the 
urgency to act quickly, there is a strong argument 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  place  not  to  deliver  the 
necessary acceleration of technology development or if the involved actors were to develop a 
particular interest in stronger and more stable partnerships. The degree 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  proposed  under  PO2  (the  joint 
undertaking  established  under  EURATOM  for  the  implementation  of  ITER  and  the  Joint 
Technology  Initiative  for  Fuel  Cells  and  Hydrogen).  The  development  of  Generation  IV 
nuclear fission reactors could also benefit from PO3. 

The European Commission is already working jointly with industry, the research community 
and  Member  States  to  establish  European  Industrial  Initiatives  and  the  European  Energy 
Research Alliance (new institutional arrangements). Similarly the EIB Group, in concert with 
the  Commission,  has  and  will  continue  to  explore  the  possibilities  offered  by  new  and 
innovative instruments. In order to effectively implement these varied actions, however, the 
mobilisation of additional resources will be essential.  

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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 efficiently used for the development of low carbon technologies and 
the improvement of their cost competitiveness and 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,  financing  activities  and  its  results  should  be  monitored  on  a 
continuous basis, with independence and objectivity.  

The  proposed  financing  effort  will  benefit  from  the  SET-Plan  monitoring  and  evaluation 
information system (SETIS), which has recently been established. SETIS is operated by the 
EU's  Joint  Research  Centre  (JRC),  which  secures  its  independence  and  objectivity.  In 
particular, the monitoring of financial research investment in low carbon energy technologies 
will  be  done  continuously  and  reported  periodically  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  Energy  Research  Alliance  will  be  reviewed 
periodically  by  SETIS  based  on  Key  Performance  Indicators  (KPIs)  that  address  both  the 
technology and the sector. These KPIs will be devised jointly by SETIS and stakeholders as 
part  of  the  process  for  the  conception  and  definition  of  corresponding  SET-Plan  activities. 
Typically, KPIs will address costs and performances of technologies. 

The continuous monitoring of financing and technology development activities, performed by 
SETIS  will  enable  the  evaluation  of  the  measures  proposed  in  this  Communication  and  the 
identification  of  corrective  measures  if  needed.  It  will  ensure  the  pursuit  of  a  portfolio 
approach with a set of technologies at various stages 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 instead create greater communication, transparency 
and coherence to approaches and decisions to support technologies and their differing stages 
of innovation. In addition, it will provide the Community with unbiased information to allow 
strengthening  efforts  in  the  most  promising  areas  while  avoiding  ‘lock-ins’,  satisfying  the 
required neutrality in supporting the development of low carbon technologies to achieve the 
policy objectives. 

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ANNEXES 

ANNEX I: The SET-Plan Technology Challenges 

The SET-Plan identified a series of key challenges that need to be addressed in the next 10 
years, not only to meet the 2020 targets, but also to ensure that the EU is on track to address 
the 2050 ambition of reducing green 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 alternatives 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,  including  whole  system  efficiency  and  advanced 
research; 

–  Double the power generation capacity of the largest wind turbines, with off-shore wind as 

the lead application; 

–  Demonstrate  commercial  readiness  of  large-scale  Photovoltaic  (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 conversion and end-use devices and systems, 

in buildings, transport and industry, such as poly-generation and fuel cells; 

–  Maintain  competitiveness  in  fission  technologies,  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 energy technologies to market competitiveness; 

–  Achieve a breakthrough in the cost-efficiency of energy storage technologies; 

–  Develop  the  technologies  and  create  the  conditions  to  enable  industry  to  commercialise 

hydrogen fuel cell vehicles; 

–  Complete the preparations for the demonstration of a new generation (Gen-IV) of fission 

reactors for increased sustainability; 

–  Complete  the  construction  of  the  ITER  fusion  facility  and  ensure  early  industry 

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participation in the preparation 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 technologies, bio-science and computation.  

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ANNEX II: Potential of low carbon energy technologies 

The graph in Section 2.2 is a mapping of the 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 potential of the technologies? 

It  is  based  on  the  findings  of  the  Technology  Map38,  but  also  includes  recent  inputs  from 
stakeholders  in  the  context  of  the  preparation  of  the  EIIs  and  the  potentials  of  energy 
efficiency measures in end-use sectors as described in the Energy Efficiency Action Plan.  

For each technology, the maximum potential, on a final 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  potential  that  could  be  exploited  provided  that  sufficient  RDD 
support is given. The level of exploitation of the additional 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 transport, 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 technologies 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 deployment of a given technology is with respect 
to other technologies within the same time period. 

It is noted that for graphical purposes, the energy potential, indicated by the 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 "over night". A conical shape would have been 
more  appropriate,  but  more  difficult  to  graphically  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,  considering  their  current  market  penetration  and 
growth rates can be assumed as a nearly established technology stream, therefore belonging to 
short-to-medium 
including  off-shore 
technologies,  will  not  be  captured  before  the  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  exploited  completely  within  this  time  frame  and 
requires  further  efforts  and  development.  The  same  rational  could  be  use  to  explain  the 

its  maximum  potential, 

timeframe.  However, 

38 
39 
40 

41 

SEC(2007)1510 
Derived from the EU Energy and Transport Trends 2007, “Business as usual scenario” 
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 technologies presented in this graph.  
COM(2006)545. 

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relative  position  of  current  nuclear  fission  technologies  and  generation  IV  nuclear  reactors 
that have different time horizons. 

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ANNEX  III:  Criteria  for  the  grouping  of  low  carbon  technologies  in  this  Impact 

Assessment  

Each  low  carbon  technology  faces  its  own  technology  challenges,  which  requires  specific 
research and innovation efforts. The Technology Map42 of the SET-Plan describes 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  their  requirements  for  advancement  through  the 
innovation chain. These groups constitute a qualified simplification  enabling analysis of the 
policy options, yet without jeopardising the quality of the assessment. This characterisation of 
technologies  is  based  in  best  available  information,  however  it  should  be  noted  that 
technological  breakthroughs  or  strong  regulatory  measures  could  significantly  change  the 
suggested grouping.  

It is accepted that technologies within the same group may require different types of funding. 
However,  it  is  thought  that  further  specification  of  appropriate  funding  for  each  individual 
technology  within  a  group  would  be  undesirable  as  it  would  introduce  unnecessary 
inflexibility into the operations of the SET-Plan 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. Different 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 this reason the flexibility of the instruments 
used was one of the criterion used in the analysis.  

These  technology  groups  were  formed  by  applying  the  following  criteria  and  are  described 
below.  

A. Technological maturity, reflected on the 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) 

(3) 

Large scale demonstration, coupled with RDD to remove competitiveness bottlenecks 

RDD programmes to mature the technology and large scale pilot/demonstration  

C. Implementation in the existing energy infrastructure 

(1) 

(2) 

compatible with the current energy infrastructure 

adaptation/reinforcement of the energy infrastructure needed 

42 

SEC(2007)1510 

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(3) 

development of new infrastructures and/or new industry required 

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ANNEX IV: The SET-Plan at work 

The  implementation  of  the  SET-Plan  begun  officially  in  June  2008  with  the  launch  of  the 
Steering  Group.  The  SET-Plan  proposes  new  institutional  arrangements  to  render  the 
European  research  and  innovation  system  more  efficient.  Within  the  framework  of  these 
arrangements,  industry,  the  research  community,  the  Commission  and  Member  States  are 
working  together  to  define  their  common  objectives  and  activities,  as  well  as  to  assess  the 
financing needs. 

The  European  Industrial  Initiatives  are  ambitious  industry-led  programmes  established  as 
public-private  partnerships  which  aim  to  change  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 industry, the financial sector, the Community and the 
Member States to collectively achieve concrete technological objectives.  

Initially six sectors for EIIs are: CCS, wind, solar, bioenergy, the electricity grid and nuclear 
fission; all of which have corresponding European Technology Platforms containing industry 
specific  visions  and  strategies.  Discussions  have  been  initiated  across  all  sectors  (mainly 
through  the  corresponding  Technology  Platforms)  seeking  to  establish  an  effective 
implementation of those strategies through the EIIs. 

The Commission is working with research centres to establish the European Energy Research 
Alliance (EERA). The mission of the EERA is to strengthen, expand and optimise EU energy 
research  capabilities  though  the  sharing  of  world-class  national  facilities  in  Europe  and  the 
joint  realisation  of  pan-EU  programmes.  The  first  step  is  the  amalgamation  of  existing 
research  resources  into  joint  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; for this, it will require increased funding. 

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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 investment vehicles and applicability to the technology groups.  

Investment vehicles 

RTD 
(EU/ MSs) 

programmes 

Group  1:  Technologies 
close 
market 
to 
competitiveness 

:  Emerging 
Group  2 
technologies on the verge 
of 
market 
penetration 

mass 

Group 
technologies 

3: 

New 

Applicable,  but  further 
resources 
and 
coordination required. 

Applicable,  but  further 
resources 
and 
coordination required. 

Innovation 
programmes 
MSs) 

(EU/ 

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 
resources 
required. 

further 

Venture capital funds 
(private 
public-
/ 
private) 

Applicable,  but  further 
resources desirable. 

Infrastructure 
(EIB / national) 

funds 

Applicable,  but  further 
resources required. 

Limited 
further 
desirable.  

applicability, 
resources 

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  recover  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 market 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 revenue stream, hence the importance of market 
based instruments such as the ETS or taxes which put a price to carbon.  

43 

44 

45 

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.  
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 preparation 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. 
up to 6 times for venture capital 

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RDD Programmes–.  

•  Characteristics:  Public  RDD  programmes  usually  aim  to  enhance  the  transformation  of 
the  research  results  into  commercially  valuable  innovations  through  support  for  research 
projects that can bring high societal benefits. Both Member States and the European Union 
have  dedicated  research  budgets.  On  the  European  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  publication  of  "calls  for  proposals",  and  usually 
requires  a  trans-national  partnership  structure.  Through  funding  for  projects  aiming  at  a 
longer-term  paradigm  shift  in  the  way  Europe  generates  and  consumes  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 harmonious and sustainable development of the 
EU  and  in  this  regard,  it  supports  regional  investments  in  research,  technological 
development and innovation. Therefore, in order to assist regions lagging 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  operational  programmes  of  the  assisted  regions.  In 
addition,  Cohesion  allocations  are  supported  by  National  co-financing  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  are,  therefore,  key  in  determining  the 
amount and effectiveness of the RDD funding available. The co-ordination and motivation 
of  the  political  actors  is  particularly  important  for  group  2,  as  many  of  the  large 
demonstration  plants  in  question  (particularly  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  States  and  the  Community;  the  key  difference 
being that Group III is even further from the market and even more dependent upon RDD 
funding. An important limiting factor for this group is the availability of research expertise 
and infrastructure; as without a sufficient pipeline of high quality research 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-sized enterprises (SMEs). Such 
programmes support innovation activities (including eco-innovation), provide 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  public  actors  all  over 
Europe and beyond, the CIP Programme co-finances pilot and market replication projects 
and fosters best-practice exchange 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  respect  of  the  political  choices  made 
regarding the national energy mix. Innovation programmes are more likely to support those 
technologies  that  can  contribute  to  national  priorities,  such  as  expanding  wind  power 
generation or solar power because of resource availability. At EU level, with no preferred 

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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 with a greater emphasis on bringing forward new 
generations of technologies that bring additional 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  debt  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 guarantee facility under the CIP can be used to 
help  support  SMEs  seeking  to  market  new  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 availability of viable bankable 
projects (with guarantors if necessary), and the overall economic situation.  

•  Drivers-  Group  II:  As  for  Group  I  technologies,  the  driver  here  is  the  provision  of  a 
sufficiently  sure  revenue  stream.  Group  II  technologies,  however,  are  generally  riskier 
investments  than  Group  I  due  to  their  lower  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  cases  might  need  guarantees  (from  the  state,  a 
corporate or a financial institution) or risk sharing devices in order to become viable. The 
provision of guarantees, the availability of bankable projects, the willingness of the public 
sector to share risks, the overall economic situation, the ease with which the EIB (and other 
IFIs) can access funding, and the availability of co-financiers 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 investments in newly created and innovative 
firms;  and  through  it  public  investment  can  typically  leverage  significant  private  sector 
contributions.  It  is  most  efficient  at  supporting  a  portfolio  of  relatively  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-Innovation  facility  under  the  CIP).  Similarly,  venture  capital 
supporting  energy  investments  can  be  provided  through  the  Cohesion  policy  initiatives 
JEREMIE  (Joint  European  Resources  for  Micro  to  medium  Enterprises)  and  JESSICA 
(Joint  European  Support  for  Sustainable  Investment  in  City  Areas)  initiatives  led  by  the 
Commission together with the European Investment Bank Group (EIB). 

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•  Drivers-  Group  I:  The  main  driver  of  Venture  Capital  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 underdeveloped European Market.  

•  Drivers- Group II: Venture Capital is of only very limited use to group II technologies; 
but  again  the  possibility  of  future  profits,  and  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 other 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  required,  mitigating  for  long  term  uncertainties  and 
leveraging significant private sector participation.  

•  Drivers- Group I: As for the all other market instruments the provisions of a sufficiently 
secure revenue stream in the form of bankable projects (supported by e.g. ETS); alongside 
the availability of liquidity and sufficient expertise in Infrastructural Funds are key.  

•  Drivers-  Group  II:  Infrastructural  funds  tend  to  have  longer  maturities  than  most  other 
types  of  funds,  which  means  they  can  be  more  relevant  to  Group  II  technologies. 
Nevertheless, however, the projects must be bankable 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  include  feed-in  tariffs  and  certificate  systems  for 
renewable electricity. 

•  Drivers- Group I: These instruments, through increasing 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  adaptation  of  these  low-carbon  technologies.  This  is 
also important because without a revenue stream no EIB Group support (or other financial 
support independent of the state) can be provided.  

•  Drivers  Group  II:  as  for  group  I,  market  based  instruments  can  also  have  a  facilitating 
role  for  increasing  the  attractiveness  of  emerging  technologies,  although  in  these  cases 
additional and more direct ways of supporting R&D investment will in any case be needed 
in parallel. 

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ANNEX VI: Policy co-ordination failures and drivers 

Introduction 

Currently,  the  EU  is  not  using  the  full  potential  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 described 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 organisational 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 clearly 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 active 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  are  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 were used by the ERA-NETS to develop and test 
possible strategies of future cooperation. 

Eleven joint calls have been launched by these 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  transnational  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  mode,  enabling  countries  and  regions  to  apply 
existing  national  procedures  and  to  pay  for  their  own  participants,  without  trans-national 
flows of national funding.  

46 
47 
48 

http://ec.europa.eu/energy/renewables/doc/sec_2008_85-2_ia_annex.pdf 
http://register.consilium.europa.eu/pdf/en/08/st11/st11935-ad01.en08.pdf 
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,  Spain,  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. 

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The  budget  committed  by  these  five  ERA-NETS  to  the  eleven  joint  calls  has  been  €  23,3 
Million  (2.3%  of  the  aggregate  low-carbon  energy  R&D  budgets  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  subcritical  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 energy 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  programmes  and  create  the  necessary  incentives  to 
generate  the  necessary  breakthrough  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 them to make use of greater 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 technologies 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, within which a large part of the non-nuclear 
energy R&D support is dedicated towards low-carbon technologies.  

Much  of  the  fragmentation  and  incoherence  results  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  tailored  to  the  investment  needs  of  the  low-

carbon energy technologies sector.  

•  Both the EU and the Member States appropriate 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  Group  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  and  loan  guarantees,  equity,  technical  assistance, 

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interest  rate  subsidies,  etc.  It  remains  the  case  that  the  EU  lacks  a  strategy  in  using  public 
spending  to  boost  investment  in  low-carbon  technologies  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 potential 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  Competitiveness  and  Innovation  programmes.  In  this 
context,  there  are  certainly  other  sources  and  instruments  of  important  funding  either  from 
financial  institutions  (EBRD,  WB)  or  national  support  programmes  which,  among  other 
things, can bring synergies to EU funding. 

Data on international co-operation 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) and 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 structures is currently 
is in the set-up phase, and therefore, their exact impact on coordination at EU level cannot yet 
be analysed.  

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Targets 

Needs 

Drivers 

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 the context of each. It does not in itself constitute 
a justification; but sums up the information given with regards to the financing gap and co-
ordination failures.  

Group 

Group I 

Group II 

Group III 

•  Widespread 
adoption 
market, 
winning 
acceptance 
short term. 

the 
by 
including 
public 
the 

in 

•  Immediate  financing 
for 

adoption 

and 
public use. 

•  Market  adoption  in  the 

•  Long term adoption by 

medium term. 

market. 

•  Greater  understand  of 
practical  needs  in  the 
short term.  

•  In  the  Short  term  to 
greater 
a 
of 

gain 
understanding 
potential.  

•  Large 

demonstration 

•  Intensive research. 

projects. 

•  These  are  close  to 
the  market; 
and 
should  be  driven  by 
and 
the  market 
market 
based 
instruments 
(particularly ETS). 

•  Adoption 

infrastructure. 

of 

•  Further research. 

projects 

•  The  market  potential  of 
is 
these 
unproven. 
They 
represent  risky  project 
and  will  need  public 
support.  

•  Demonstration  projects, 
if  unprofitable, 
even 
some 
produce 
will 
and  market 
revenue 
drivers, could, therefore 
become involved. 

Scope for 
public 
sector 
action 

•  Overcoming 

the 
market 
failures 
identified  in  section 
risk  aversion 
2.4; 
and  other  market 
failures  specific  to 
energy. 

•  Working 

towards 

•  Providing 

and 

co-
ordinating  funding  for 
scale 
large 
and 
demonstration 
infrastructural changes.  

•  Overcoming 
ordination 
regulatory 

the  co-
and 
failures 

•  Solely  public  support. 
These technologies are 
generally 
too 
too  risky, 
unproven, 
and  too  far  from  the 
market to be attractive 
to private finance. 

•  Ensure  the  existence 
of  a  well-resourced, 
vibrant 
research 
community. 

•  Distributing grants and 
resources'  strategically 
targeted  to  the  SET-
Plan technologies. 

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public 
knowledge 
and  acceptance  of 
the 
new 
technologies. 

identified 
in 
capacities map. 

the 

•  Researching  and  aiding 
the  development  of  the 
SET-Plan technologies. 

Scope for 
EU 
action 

•  Co-ordinating 

and 
funding  cross-border 
actions 
at 
addressing  market 
failures. 

aimed 

•  Driving 

and 

co-
the 
ordinating 
implementation  of  very 
large 
demonstration 
projects. 

•  Facilitating  EU  wide 
synergies  through  the 
unification 
of 
standards, 
and  EU 
wide programmes. 

•  Ensuring the transfer 
of 
and 
expertise 
good  practise  across 
borders. 

•  Working 

towards 
consistent  EU  wide 
and 
regulations 
specifications.  

•  Promoting EU policies 
and focussing research 
in  priority 
activities 
areas.  

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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 positive 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  enhanced  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 financial context. The EERP 
provides the right balance to combine an immediate 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 and 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  efficiency  is  being  put  in  place  to  tap  into  the 
enormous  potential  for  energy  savings  in  every  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 signals to turn the undoubted technology potential 
into profitable business opportunities. 

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 research and investing in R&D intensive sectors 
in Europe. 

The European Economic Recovery Plan (EERP) 

The EERP has prioritised action to raise skills, to boost investment in research, to promote the 
conditions for innovation, to renew existing energy infrastructure, including through increased 
use  of  public  private  partnerships,  to  upgrade  energy  efficiency  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 energy and kick-start the demonstration of carbon 
capture  and  storage  technologies.  In  addition,  three  new  Public  Private  Partnerships  in  the 
fields  of  'green  cars',  'energy  efficiency  buildings'  and  'manufacturing',  with  a  combined 
budget  of  7b€,  will  contribute  to  reducing  gree nhouse  gas  emissions  in  key  sectors  of  the 
economy. 

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The EU is now entering a new phase of implementation 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 recovery plans in response to the EERP and their 
implementation  is  now  under  way.  These  National  measures  will  also  play  a  role  in 
stimulating investment in clean technologies. 

Examples  of  measures  adopted  include:  tax  breaks  on  more  environmentally-friendly  cars 
(AT, DE, FR, LU, IT, NL, PT, SK, ES, UK, RO); R&D programmes 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 (with 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 innovative carbon capture and storage technologies and renewable 
energy  sources  in  the  period  between  2013  and  2015.  Also  at  the  European  Council  of  12 
December  2008,  Member  States  declared  their  willingness  to  use  at  least  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  gas  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. Investment 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 technologies 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 Recovery 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 eco-innovation under the new CIP mandate. Further 
measures include the Risk Sharing Finance Facility, jointly developed by the EC and EIB and 
which is expected to create a total financing 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 authorities shall ensure that network operators 
are  granted  adequate  incentive,  over  both  the  short  and  long  term,  to  increase  efficiencies, 

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foster market integration and support the related research activities". This should stimulate 
much-needed research into energy networks.  

Re-orientating the implementation of these increased funds towards SET-Plan priorities will 
provide  a  substantial  boost  to  the  development  of  technologies  with  the  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. 

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