Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Investing in the Development of Low Carbon Technologies (SET-Plan) {SEC(2009) 1295} {SEC(2009) 1296} {SEC(2009) 1297} {SEC(2009) 1298}
Date: 2009-10-07
Institutions: European Commission
Subjects: EU industrial policy, action programme, climate change, energy policy, energy research, environmental policy, reduction of gas emissions, renewable energy

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 7.10.2009 
COM(2009) 519 final 

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

Investing in the Development of Low Carbon Technologies 
(SET-Plan) 

{SEC(2009) 1295} 
{SEC(2009) 1296} 
{SEC(2009) 1297} 
{SEC(2009) 1298} 

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

Investing in the Development of Low Carbon Technologies 
(SET-Plan) 

(Text with EEA relevance) 

1. 

INTRODUCTION 

A critical challenge 

One of the EU's key ambitions must be to develop a low-carbon economy. The EU has put in 
place  a  comprehensive  policy  framework,  including  among  others:  the  climate  and  energy 
targets  for  2020  and  a  carbon  price  through  the  Emissions  Trading  System.  We  are  also 
working  towards  the  successful  conclusion  of  international  climate  change  negotiations  at 
Copenhagen1 at the end of 2009. Now, we have to deliver, both in terms of the 2020 targets 
and,  in  the  longer  term,  aiming  for  an  80%  cut  in  greenhouse  gas  emissions  by  2050 
compared to 1990 levels. 

Reinventing our energy system on a low carbon model is one of the critical challenges of the 
21st Century. Today, in the EU, our primary energy supply is 80% dependent on fossil fuels. 
Networks and supply chains have been optimised over decades to deliver energy from these 
sources to our society. Economic growth and prosperity has been built on oil, coal and gas. 
But, they have also made us vulnerable to energy supply disruptions from outside the EU, to 
volatility in energy prices and to climate change. 

There are different possible pathways to a low carbon economy. Clearly, no single measure or 
technology  will  suffice,  and  the  precise  mix  in  each  country  will  depend  on  the  particular 
combination of political choices, market forces, resource availability and public acceptance. 

The technology fabric under pressure 

What is also clear is that technology and the efficient use of resources lie at the heart of the 
challenge.  We  need  to  stimulate  our  best  brains  to  push  back  the  frontiers  of  science,  in 
materials,  in  chemistry  and  physics,  in  nanotechnology  and  biotechnology,  to  find  new  and 
better  ways  of  producing  and  consuming  energy.  But,  at  the  same  time,  we  cannot  sit  back 
and wait for such potentially game-changing breakthroughs to  emerge from the  laboratories 
and make the often long and arduous journey to market. We have to act now, accelerating the 
development  of  those  technologies  with  the  greatest  potential.  This  puts  our  science  and 
technology fabric under pressure, to deliver solutions on time. 

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COM(2009) 475 sets out the Commission's proposal for a European blueprint for the Copenhagen deal. 

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Markets alone will not deliver 

Markets  and  energy  companies  acting  on  their  own  are  unlikely  to  be  able  to  deliver  the 
needed  technological  breakthroughs  within  a  sufficiently  short  time  span  to  meet  the  EU's 
energy and climate policy goals. Locked-in investments, vested interests, as well as the high 
risks and need for significant investments in less profitable alternatives, mean that change will 
be slow without a major push. Public policy and public investment partnering with the private 
sector is the only credible route to meet our goals, established for the public good. 

The SET-Plan is the technology pillar of the EU's energy and climate policy 

Similarly,  Member  States  are  also  unlikely  on  their  own  to  be  willing  or  able  to  accelerate 
technology  development  over  a  sufficiently  broad  portfolio  of  technologies.  The  European 
Strategic  Energy  Technology  Plan  (SET-Plan)2  is  the  EU's  response  to  the  challenge  of 
accelerating the development of low carbon technologies, leading to their widespread market 
take-up. It sets out a vision of a Europe with world leadership in a diverse portfolio of clean, 
efficient and low-carbon energy technologies as a motor for prosperity and a key contributor 
to growth and jobs. It proposes joint strategic planning and more effective implementation of 
programmes. It now needs to be taken forward to implementation. 

A global issue 

However,  the  EU's  transition  to  a  low  carbon  economy  would  be  meaningless  without  a 
global  transition.  This  is  why  strengthening  international  cooperation  is  an  integral  part  of 
climate  negotiations  and  why  the  G8  agreed  to  facilitate  the  development,  deployment  and 
diffusion  of  advanced  technologies  in  emerging  and  developing  economies,  as  well  as  the 
Major Economies Forum agreement to establish a Global Partnership to work together in the 
development  of  transformational  low-carbon  technologies.  An  active  international  trade 
policy  will  also  promote  the  growth  of  markets  inside  and  outside  Europe  and  increase  the 
take-up of low-carbon technologies. 

Investing in the future – an opportunity rather than a burden 

A  European  approach  is  essential  to  realise  the  ambition  of  seeing  low  carbon  technologies 
effectively developed in view of bringing them to the market: it allows key players to come 
together  on  a  continental  scale;  it  helps  to  identify  and  to  tackle  the  barriers  holding  back 
innovative  products  and  services  in  the  single  market;  and  it  allows  different  sources  of 
private  and  public  funding  to  be  brought  together.  The  estimates  of  resources  in  this 
Communication are not a proposal for funding from the EU budget. They represent an effort 
to  identify  key  areas  where  Europe  needs  to  invest  in  the  coming  years  to  give  concrete 
expression to its low carbon vision. The figures presented should be understood as indications 
of  orders  of  magnitude.  The  bulk  of  the  funds  required  will  have  to  come  from  the  private 
sector and from Member States, with a contribution from the EU budget towards some of it. 
In this way, the limited resources available from the EU budget can be used to leverage a step 
change  in  the  investment  provided  for  the  research  and  demonstration  of  low  carbon 
technologies. 

While  fully  appreciating  the  limitations  on  public  budgets  over  the  coming  years,  the 
Commission  firmly  believes  that  the  implementation  of  the  SET-Plan,  with  sufficient 

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COM(2007) 723, 22.11.2007. 

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resources, represents an opportunity that cannot be missed. New investment today will bring 
savings to public budgets in the long run, making the achievement of our policy goals closer 
and cheaper. 

2. 

WHAT  DO  WE  NEED  TO  FINANCE?  A  COSTED  EU  LOW  CARBON  TECHNOLOGY 
ROADMAP FOR 2010-2020 

Investments  over  the  next  10  years  will  have  profound  consequences  for  energy  security, 
climate  change  and  growth  and  jobs  in  Europe.  Working  together  with  stakeholders,  the 
Commission  has drawn up Technology Roadmaps 2010-2020 for the  implementation  of the 
SET-Plan. These roadmaps and the methodology followed to prepare them are detailed in a 
Staff Working Paper accompanying this Communication3. They prioritise the different needs 
of  the  various  technologies,  depending  upon  their  stage  of  development  and  maturity, 
balancing the short-term needs against longer-term innovation potential. 

The roadmaps and associated cost estimates are based on the best available information today. 
They  will  be  subject  to  periodic  review  and  amendment  in  the  light  of  progress  on 
implementation  and  changing  circumstances  and  priorities.  The  costings  include  private 
investment  and  public  funding,  both  at  EU  and  national  level.  They  include  the  costs  of 
research, technological development, demonstration and early market take-up, but exclude the 
cost  of  deployment  and  market-based  incentives,  such  as  feed-in  tariffs4.  While  helping  to 
build up an overall picture of the funding needs, they should not be taken as a proposal for the 
future allocation of EU funds. Future priorities for the EU budget will need to be defined as 
part  of  the  budget  review  and  in  the  context  of  the  preparation  of  the  next  multiannual 
financial framework. 

2.1 

European Industrial Initiatives 

In a carbon constrained world, technology mastery will increasingly determine prosperity and 
competitiveness. With the EU policy framework that has been put in place, European industry 
has the opportunity to lead the world in developing clean and efficient energy technologies. 
The  European  Industrial  Initiatives5  aim  to  turn  that  opportunity  into  reality  by  focussing 
effort on key challenges and bottlenecks and proposing concrete actions for the period 2010-
2020. 

The launching of the initiatives themselves will be accompanied by detailed implementation 
plans, building upon these roadmaps and further prioritising the actions proposed in function 
of the available resources and the logic of intervention at different levels. 

–  The European wind initiative 

Wind energy has to accelerate the reduction of costs, increasingly move offshore and resolve 
the  associated  grid  integration  issues  if  it  is  to  fulfil  its  huge  potential.  To  support  its  rapid 
expansion,  we  need:  to  develop  a  better  picture  of  wind  resources  in  Europe,  through 

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SEC(2009) 1296, 7.10.2009. 
Other  financing  needs,  mainly  for  deployment,  to  achieve  the  20% renewables  target  in  2020  will  be 
addressed in a Commission Communication in 2010. 
As proposed in the SET-Plan Communication of November 2007 and endorsed by the Council on 28 
February 2008 and the European Parliament on 9 July 2008 (the Buzek Report). 

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coordinated  measurement  campaigns;  to  build  5-10  testing  facilities  for  new  turbine 
components; up to 10 demonstration projects of next generation turbines; at least 5 prototypes 
of  new  offshore  substructures 
in  different  environments;  demonstrate  new 
manufacturing  processes;  and  test  the  viability  of  new  logistics  strategies  and  erection 
techniques in remote and often hostile weather environments. All of this must be underpinned 
by  a  comprehensive  research  programme  to  improve  the  conversion  efficiency  of  wind 
turbines. 

tested 

The total public and private investment needed in Europe over the next 10 years is estimated 
as  €6  bn.  The  return  would  be  fully  comp etitive  wind  power  generation  capable  of 
contributing up to 20% of EU electricity by 2020 and as much as 33% by 2030. More than 
250 000 skilled jobs could be created. 

–  The solar Europe initiative 

Solar  energy,  including  photovoltaics  (PV)  and  concentrated  solar  power  (CSP),  has  to 
become more competitive and gain mass market appeal. Problems derived from its distributed 
and variable nature need to be resolved. To support the development of PV, we need: a long-
term research programme focussed on advanced PV concepts and systems; up to 5 pilot plants 
for  automated  mass  production;  and  a  portfolio  of  demonstration  projects  for  both 
decentralised  and  centralised  PV  power  production.  For  CSP,  the  overriding  need  is  for 
industrial up-scaling of demonstrated technologies by building up to 10 first-of-a-kind power 
plants,  supported  by  a  research  programme  to  reduce  costs  and  improve  efficiency, 
particularly through heat storage. 

The total public and private investment needed in Europe over the next 10 years is estimated 
as €16 bn. Up to 15% of EU electricity could  be generated by solar power in 2020 as a result 
of such a programme coupled with market-based incentives. More than 200 000 skilled jobs 
could be created. 

–  The European electricity grid initiative 

Electricity networks have to respond to three interrelated challenges – creating a real internal 
market; integrating a massive increase of intermittent energy sources; and managing complex 
interactions between suppliers and customers. To ensure that our electricity networks are fit 
for  the  21st  Century,  we  need  a  strongly  integrated  research  and  demonstration  programme: 
research to develop new technologies to monitor, control and operate networks in normal and 
emergency conditions and develop optimal strategies and market designs to provide all actors 
with  the  right  incentives  to  contribute  to  the overall  efficiency  and  cost-effectiveness  of  the 
electricity  supply  chain;  up  to  20  large-scale  demonstration  projects  at  real  life  scale  to 
validate solutions and value their real system benefits, before rolling them out across Europe. 

The total public and private investment needed in Europe over the next 10 years is estimated 
as  €2  bn.  The  goal  is  that  by  2020,  50%  of  networks  in  Europe  would  enable  the  seamless 
integration  of  renewables  and  operate  along  'smart'  principles,  effectively  matching  supply 
and demand and supporting the internal market for the benefit of citizens. 

–  The sustainable bio-energy Europe initiative 

Bio-energy has to bring to commercial maturity the most promising technologies, in order to 
permit large-scale, sustainable production of advanced biofuels and highly efficient combined 

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heat  and  power  from  biomass.  Different  bio-energy  pathways  are  at  various  stages  of 
maturity.  For  many,  the  most  pressing  need  is  to  demonstrate  the  technology  at  the 
appropriate scale – pilot plants, pre-commercial demonstration or full industrial scale. Up to 
30 such plants will be needed across Europe to take full account of differing geographical and 
climate conditions and logistical constraints. A longer term research programme will support 
the development of a sustainable bio-energy industry beyond 2020. 

The total public and private investment needed in Europe over the next 10 years is estimated 
as €9 bn. By 2020, the contribution to the EU energy mix from cost-competitive bio-energy 
used in accordance with the sustainability criteria of the new RES directive6 could be at least 
14%. More than 200 000 local jobs could be created. 

–  The European CO2 capture, transport and storage initiative 

Carbon  capture  and  storage  (CCS)  technologies  have  to  be  widely  commercialised  if  the 
EU wants to achieve almost zero carbon power generation by 2050 and if the likely continued 
use of the vast global coal reserves is not to exacerbate climate change. The pressing need is 
to demonstrate at industrial scale the full CCS chain for a representative portfolio of different 
capture,  transport  and  storage  options.  At  the  same  time,  a  comprehensive  research 
programme  will  deliver  improved  components,  integrated  systems  and  processes  to  make 
CCS commercially feasible in fossil fuel power plants going into operation after 2020. 

The total public and private investment needed in Europe over the next 10 years is estimated 
as  €13  bn.  The  target  is  to  reduce  the  cost  of   CCS  to  30-50  €  per  tonne   of  CO2  abated  by 
2020, making it cost-effective within a carbon pricing environment. 

–  The sustainable nuclear fission initiative 

Nuclear  fission  has  to  move  towards  long-term  sustainability  with  a  new  generation  of 
reactor type – the Generation-IV reactor. They will be designed to maximise inherent safety, 
increase  efficiency,  produce  less  radioactive  waste  and  minimise  proliferation  risks. 
Commercial  deployment  of  these  reactors  is  foreseen  for  2040,  but  to  achieve  that  target, 
work  has  to  start  now.  The  bulk  of  the  programme  up  to  2020  will  be  the  design  and 
construction  of  prototypes  and  demonstrators,  fuel  fabrication  workshops  and  experimental 
facilities and a research programme to develop new materials and components to improve the 
industrial and economic viability of the reactors. This effort will build upon a solid basis of 
competences and  experience  in  current nuclear technology which is contributing  to meeting 
the 2020 SET-Plan objectives. 

The total public and private investment needed in Europe over the next 10 years is estimated 
as  €7  bn.  By  2020,  the  first  Generation-IV  protot ypes  should  be  in  operation.  The  first  co-
generation reactors could also appear within the next decade as demonstration projects to test 
the technology for coupling with industrial processes. 

–  Fuel cells and hydrogen 

The  Joint  Technology  Initiative  (JTI)  on  fuel  cells  and  hydrogen  was  established  for  2008-
2013 with a budget of 470 M€ of Community fu nding to be at least matched by industry. 

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Directive 2009/28/EC of 23 April 2009. 

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The  JTI  has  the  minimum  critical  mass  needed  to  develop  and  validate  efficient  and  cost-
competitive  technologies  for  the  various  applications.  However,  meeting  the  market  entry 
targets set by industry will require substantial additional effort. In particular, more and larger 
scale  demonstrations  and  pre-commercial  deployment  activities  for  portable,  stationary, 
transport  applications  will  be  required,  as  will  long-term  research  and  technology 
development  to  build  up  a  competitive  fuel  cell  chain  and  a  sustainable  hydrogen 
infrastructure  across  the  EU.  The  additional  public  and  private  funding  needed  is  currently 
estimated as €5 bn  for the period 2013-2020. 

2.2 

Energy efficiency – Smart Cities Initiative 

Energy  efficiency  is  the  simplest  and  cheapest  way  to  secure  CO2  reductions.  In  transport, 
buildings  and  industry,  available  technology  opportunities  must  be  turned  into  business 
opportunities.  This  new  European  initiative  –  Smart  Cities  –  has  the  objective  to  create  the 
conditions to trigger the mass market take-up of energy efficiency technologies. 

The  initiative  will  support  ambitious  and  pioneer cities  (e.g.  from  the  Covenant  of  Mayors) 
that would transform their buildings, energy networks and transport systems into those of the 
future,  demonstrating  transition  concepts  and  strategies  to  a  low  carbon  economy. 
Participating  cities  and  regions  will  be  expected  to  test  and  demonstrate  the  feasibility  of 
going beyond the current EU energy and climate objectives – i.e. towards a 40% reduction of 
greenhouse  gas  emissions  through  sustainable  production,  distribution  and  use  of  energy  by 
2020. 

The total public and private investment needed in Europe over the next 10 years is estimated 
as  €11  bn.  By  2020,  the  Smart  Cities  initiative  should  put  25  to  30  European  cities  at  the 
forefront of the transition to a low carbon future. These cities will be the nuclei from which 
smart  networks,  a  new  generation  of  buildings  and  low  carbon  transport  solutions  will 
develop into European wide realities that will transform our energy system. 

2.3 

European Energy Research Alliance 

The  European  Energy  Research  Alliance  (EERA)  is  elevating  cooperation  between  national 
research  institutes  to  a  new  level  –  from  an  ad-hoc  participation  in  uncoordinated  joint 
projects  to  collectively  devising  and  implementing  joint  programmes.  To  accelerate  the 
development  of  new  generations  of  low  carbon  technologies,  we  need  to  build  on  the 
momentum  of  the  Alliance  and  boost  the  scale  of  its  joint  programmes  through  additional 
investment. Taking ideas out of the laboratory and developing them to the point where they 
can be taken up by industry is a step that needs to be shortened considerably. The involvement 
of  universities  in  the  Alliance  through  the  platform  created  by  the  European  University 
Association will help ensure that the best brains can be mobilised. 

Over the next two years, the Alliance will launch and implement joint programmes addressing 
the key challenges of the SET-Plan with concrete technological objectives. Strong links will 
be  developed  with  the  Industrial  Initiatives  to  ensure  industrial  relevance.  On  the  basis  of 
current  progress,  we  estimate  that  the  Alliance  could  expand  its  activities  to  effectively 
manage an additional public investment, EU and national, of €5 bn over 10 years. 

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2.4 

Complementary activities and initiatives 

–  Other technology avenues 

At the request of Council and Parliament, the Commission7 is examining other avenues with 
great  potential  such  as  other  sources  of  offshore  renewable  energy8,  energy  storage  and 
renewable heating and cooling. In the nuclear sector, to sustain its current contribution to low 
carbon electricity, two key challenges identified in the SET-Plan have to be tackled – lifetime 
extension of facilities and solutions for nuclear waste. 

–  Fusion energy 

Fusion  is  a  promising  source  of  energy  for  the  long  term.  Euratom,  as  host  member  of  the 
ITER International Agreement, remains fully committed to the success of the ITER project, 
where high capital investment is needed for the construction phase.  

–  Breakthrough science 

Motor  fuels  direct  from  sunlight,  solid-state  (digital)  light  sources  that  last  for  decades, 
batteries  that  store  electricity  at  ten  times  the  current  density.  These  are  some  of  the 
technologies of the future. But to master them we have to explore new levels of complexity in 
the physical and chemical phenomena that control how materials perform and interact9.  

Basic  research  is  chronically  underfunded  in  the  EU.  The  European  Research  Council  is 
starting to address this problem, but does not foresee a specific energy related programme. By 
contrast, the US has recently announced the creation of 46 Energy Frontier Research Centres, 
with a budget of $777 million (555m€) over the next  5 years. Without a similar effort, Europe 
will  eventually  fall  behind  as  new  discoveries  overtake  current  technologies.  To  lay  the 
foundations  of  our  future  competitiveness  in  the  face  of  strong  international  competition,  a 
further investment of €1 bn should be made in  basic research over the next 10 years. 

–  Activating poles of science and research 

In addition to the Energy Research Alliance, other poles of science and research must also be 
activated  to  work  on  energy  and  climate-related  challenges.  Cohesion  Policy  provides 
significant  investment  to  strengthen  and  further  develop  the  EU's  research  capacity,  to 
promote the emergence of new centres of excellence and to reinforce human capital potential. 
The  expertise  of  other  sectors  can  also  be  harnessed  to  support  EU  energy  policy.  For 
instance,  the  European  Space  Agency  could  help  transfer  advanced  insulation  materials  and 
ultra-efficient  energy  systems  to  the  terrestrial  energy  sector,  or  make  use  of  space 
applications to monitor and manage energy systems and to enforce legislation. 

The  proposed  Knowledge  and  Innovation  Communities  (KIC)  on  sustainable  energy  and 
climate change adaptation and mitigation of the European Institute of Technology (EIT) will 
have  an  entrepreneurial  outlook,  fostering  new  talent  and  fully  exploiting  new  innovation 
opportunities.  The  annual  budget  of  each  KIC  is  expected  to  be  in  the  order  of  €50-100  m, 

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Through SETIS, the information system of the SET-Plan. 
Including wave, tidal, currents, and thermal gradients. 
COM(2009) 512, 30.9.2009, sets out a basis for a common strategy for key enabling technologies in the 
EU. 

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with  a  quarter  coming  from  the  EIT.  The  participation  of  KIC  actors  in  the  SET-Plan 
initiatives would help ensure complementarity and avoid overlaps. 

–  International cooperation 

Cooperation  on  technology  development  will  be  a  key  element  of  the  Copenhagen 
negotiations  and  the  associated  costs  and  implementing  arrangements  will  form  part  of  the 
negotiations. The G20 has committed to stimulate investment in low carbon technologies and 
energy  efficiency,  as  well  as  to  provide  financial  and  technical  support  for  such  projects  in 
developing countries. This includes taking steps to facilitate the diffusion or transfer of clean 
energy technology while ensuring the protection of intellectual property rights. 

The EU is ready to contribute its fair share of this international support, through multilateral 
instruments  and  by  strengthening  and  expanding  its  bilateral  low  carbon  technology 
cooperation activities. 

The Commission is already working closely with the US and Japan to define concrete action 
plans  to  reinforce  our  cooperation  on  energy  research.  We  will  build  on  this  experience  to 
ramp up cooperation with other key strategic partners. At the same time, we will continue to 
improve the coordination of Member States' and EC actions to step up strategic cooperation 
with  partners  worldwide.  The  EU  Strategic  Forum  for  International  Scientific  and 
Technological  Cooperation10  will  be  instrumental  in  improving  the  framework  conditions 
under which international research is conducted. 

Differing  circumstances  in  developing  countries  require  differentiated  actions  and  levels  of 
ambition. Over the past few years, a number of developing countries have formulated national 
climate  change  strategies,  including  China,  India,  South  Africa  and  Brazil.  The  EU  is 
supporting developing countries to embark on low carbon development paths. The EU-China 
Near Zero Emissions Coal (NZEC) project is a concrete example of technology cooperation, 
in  this  case  demonstrating  carbon  capture  and  storage.  The  Global  Energy  Efficiency  and 
Renewable Energy Fund (GEEREF)11 will invest in renewable energy and sustainable energy 
infrastructure  funds  and  similar  investment  structures  tailored  to  regional  needs  and 
conditions.  Other  initiatives  include  Mediterranean  Solar  Plan  and  the  Africa-EU  Energy 
Partnership. 

3. 

SHARING RISKS AND POOLING RESOURCES 

With today's level of knowledge, the Commission believes that investment in the EU has to 
increase from the current €3 bn per year to ar ound €8 bn per year to effectively move forward 
the SET-Plan actions12. This would represent an additional investment, public and private, of 
€50 bn over the next 10 years. 

The  continuum  of  risk  faced  by  low  carbon  technologies  at  different  stages  of  the 
development  cycle  calls  for  a  risk  sharing  approach  in  which  all  relevant  actors,  public  and 

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The Forum has been set up by CREST, the Scientific and Technical Research Committee, an advisory 
body of the European Commission and the Council of the EU. 
Established by European Commission, Germany and Norway. http://www.eif.org/about/geeref.htm 
A  detailed  explanation  of  these  figures  is  presented  in  the  accompanying  Impact  Assessment 
SEC(2009) 1297, 7.10.2009. 

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private, take on that part of the risk corresponding to their own sphere of activity and logic of 
intervention.  In  general  terms,  the  higher  the  technological  uncertainties,  the  more  public 
support  is  needed,  and  with  a  greater  proportion  of  grants.  Where  the  market  risk  is 
predominant due to market failures, public support is also justified to level the playing field – 
and regulation can also help to address market failures. Otherwise, the private sector should 
be able to cope on its own. 

Industry needs to be ready to accelerate the development of new technologies and roll them 
out  rapidly.  Banks  and  private  investors  will  have  to  finance  and  invest  heavily  in  the 
companies that will drive the transition to a low carbon economy. Of course, this represents a 
major  challenge  in  the  context  of  the  financial  crisis,  where  risk-aversion  is  higher  and 
investment  in  new,  riskier  technologies is not high in investors' priorities.  Public authorities 
must  therefore  be  prepared  to  offer  the  appropriate  incentives  and  consistent  policy  signals, 
and,  as  necessary,  to  be  ready  to  significantly  increase  the  public  funding  of  low  carbon 
technology development13.  

The overall breakdown of non-nuclear energy research financing in 2007 was 70% private to 
30%  public.  Given  the  public  policy-driven  nature  of  the  energy  transition  and  the  current 
economic  situation,  a  significant  rise  in  the  public  share  of  the  burden  in  the  short  term 
towards a more equal level of commitment would have to be explored. 

Currently,  80%  of  public  investment  in  non-nuclear  energy  research  financing  has  been  at 
national level and 20% at Community level. Given the need to enable a rapid implementation 
of  focused,  integrated  programmes  on  technologies  that  have  widespread  deployment 
potentials across the EU, an increase in the proportion of the public investment at Community 
level may need to be one of the options explored in the budget review.  

The level of Community funding required would depend, inter alia, on the interest of Member 
States  to  co-finance  the  SET-Plan  initiatives,  through  Joint  Programming14  on  a  variable 
geometry  basis.  Such  a  process  will  allow  different  partnerships  of  Member  States  to 
cooperate  on  those  technologies  of  most  interest  to  them,  depending  upon  their  preferred 
energy mix, indigenous resource base and exploitation potential. 

Logic of intervention at Community level 

The EU landscape of publicly funded research consists mainly of a European 'common pot' 
managed by the Commission, the Research Framework Programme, and national programmes 
managed  independently  by  the  Member  States.  Each  must  capitalise  on  their  own  strengths 
and opportunities. 

Action at EU level can take on high risk, high cost, long-term programmes beyond the reach 
of  individual  Member  States,  sharing  the  risk  and  generating  a  breadth  of  scope  and 
economies  of  scale  that  could  not  otherwise  be  achieved.  It  can  help  generate  an  optimum 
programme  of  activities  and  maximise  knowledge  sharing  and  information  dissemination, 
lowering  the  overall  costs  of  achieving  a  given  objective.  It  can  address  cross  border 
challenges and quickly mobilise a wider pool of talent, competencies and multi-disciplinarity 
than is available at national level. And it can have a strong leverage effect on industry, as well 

13 

14 

Public funding constituting State Aid in the sense of Article 87(1) of the EC Treaty requires notification 
to the Commission and must be in line with existing State Aid rules. 
COM(2008) 468, 15.7.2008. 

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as on coordinating national efforts, through the use of funding instruments that promote the 
European Research Area. 

4. 

POSSIBLE SOURCES OF PUBLIC FUNDING 

The new European Emissions Trading System15 enables, from 2013 onwards, the creation of a 
virtuous cycle of auctioning revenues being reinvested at national level in the development of 
more efficient and lower cost clean technologies. The use of the revenues is determined by the 
Member  States,  but  at  least  50%  should  be  used  for  climate  change  related  activities, 
including in developing countries. 

The 300 million  EU Allowances  set aside from the New Entrants Reserve of  the Emissions 
Trading  Scheme  (ETS)  will  be  used  to  support  carbon  capture  and  storage  and  innovative 
renewables.  These  allowances  will  be  made  available  via  Member  States  to  fund 
demonstration projects selected on the basis of criteria defined at Community level. However, 
this scheme does not cover technological risks, but only facilitates the commercialisation of 
existing technologies by compensating for additional costs over conventional technologies. 

At EU level, current Community Programmes, such as the Research Framework Programme 
and  the  Intelligent  Energy-Europe  Programme,  and  the  European  Energy  Programme  for 
Recovery16  (for  CCS  and  offshore  wind),  are  the  natural  instruments  for  the  purpose,  but 
current resources are not on the scale needed to address all the actions proposed in the SET-
Plan. 

The Commission's concrete proposals to implement the SET-Plan are based on the need for 
rapid action, a coordinated approach across the EU and the desire to reduce overall costs by 
optimising  the  portfolio  of  funded  projects.  The  approach  is  grounded  in  the  belief  that  EU 
action can offer real added value, with an emphasis on the achievement of specific objectives, 
effective implementation and more efficient use of scarce resources. 

5. 

IMPROVING COHERENCE AND MOBILISING THE FINANCIAL COMMUNITY 

Funding is only half of the story. We also have to spend it well – to maximise the incentive 
and leverage effect of public financing and ensure the highest possible societal returns.  

The  funding  instrument  'toolbox'  is  fairly  comprehensive.  It  includes:  RTD  and  innovation 
programmes  at  national  and  EU  level;  debt  based  financing;  venture  capital  funds; 
infrastructure  funds;  and  market-based 
insufficient  resources, 
fragmentation and the lack of cross-fertilisation is a problem. Grant, subsidy, loan and equity 
providers  tend  to  act  individually  without  any  overall  guiding  strategy  or  optimisation 
process. The SET-Plan should help to address this, by instigating a more coherent partnership 
approach. 

instruments.  However, 

15 
16 

Directive 2003/87/EC as amended by Directive 2009/29/EC of 23 April 2009. 
Regulation (EC) No 663/2009 of 13 July 2009 (OJ L 200, 31.7.2009). 

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Improving the coherence of public programmes 

To  increase  effectiveness  and  efficiency,  the  Commission  will  focus  on  the  implementation 
phase  of  the  SET-Plan  and  continue  to  improve  the  coordination  of  existing  Community 
Programmes in the field of energy and of other Community initiatives, such as the European 
Energy  Programme  for  Recovery  and  the  use  of  the  300  million  EU  Allowances  set  aside 
under the ETS for demonstration projects. 

In implementing the SET-Plan, we will progressively move away from the current paradigm 
of  financing  individual  projects  to  one  of  co-investing  in  programmes.  Combining  public 
resources effectively and creating flexible Public-Private Partnerships with industry should be 
the future model for pan-European energy research cooperation. 

Such  an  approach  calls  for  effective  Public-Private  Partnerships  that,  while  fully  protecting 
the public financial interests, strike the right balance between control and risk and are flexible 
enough to permit an efficient cooperation with the private players. 

At  the  same  time,  in  order  to  mobilise  sufficient  resources  to  finance  large-scale 
demonstrations,  we  will  look  for  new  ways  to  combine  resources  from  different  actors  and 
instruments, such as grants, loans and loan guarantees. The European Investment Bank (EIB) 
could play a pivotal role in improving the coordination and continuity of available funding, as 
illustrated by the Risk Sharing Finance Facility (RSFF) which  combines  resources from the 
FP7  budget  with  those  of  the  EIB  to  finance  higher-risk  R&D  projects,  including  in  the 
energy sector. 

In  the  medium  and  longer  term,  the  EU  should  develop  a  framework  to  ensure  a  more 
significant,  predictable  and  stable  financing  approach  for  the  development  of  low  carbon 
technologies. This would: enhance the coherence between existing and new actions; increase 
the  effectiveness  of  our  policies;  gain  focus  and  adequacy  to  the  purpose;  enhance 
transparency  and  avoid  overlaps;  and  facilitate  the  comprehension  of  our  actions  by 
stakeholders and European citizens. 

Actions with the European Investment Bank (EIB) – mobilising the financial community 

EIB lending has the ability to mobilise and leverage other public and private sector resources. 
In  the  framework  of  its  response  to  the  financial  crisis  and  as  set  out  in  the  European 
Economic Recovery Plan17, it has increased its lending target in the energy field to €9.5bn in 
2009 and €10.25bn in 2010, a significant enhancement  compared to the €6.5bn target in 2008. 

On this basis, the Commission and the EIB are working together on the following initiatives 
which will enable the Bank to target the increased lending to finance the SET-Plan: 

–  To reinforce the RSFF in order to allow it to support the SET-Plan. In particular, it will be 
necessary to assess its risk-capital base in order to deliver the scale of finance required to 
achieve the objectives of the Technology Roadmaps by 2020. This assessment should be 
included in the mid-term review of the RSFF. 

17 

COM(2008) 800, 26.11.2008. 

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–  To  significantly  increase  resources  to  the  "2020  European  Fund  for  Energy,  Climate 
Change and Infrastructure" (the Marguerite Fund), set up by the EIB and other public long-
term financing institutions from the Member States.  

–  To develop a dedicated joint energy efficiency and renewable energy instrument to finance 
the  initial  market  take-up  of  low  carbon  technologies.  As  a  pilot  joint  Commission-EIB 
initiative, a EUR 15 million instrument providing technical assistance to local authorities 
for  the  development  of  bankable  projects  under  their  sustainable  energy  action  plans  is 
being launched in 200918. 

–  To  increase  EU  support  for  venture  capital  markets,  particularly  to  encourage  increased 
investment  in  low  carbon  technologies  through  the  High  Growth  and  Innovative  SME 
Facility (GIF) under the Competitiveness and Innovation Programme (CIP).  

–  To  assess  the  optimal  financial  packages  for  large  demonstration  or  market  replication 

projects, including potential blending of grants with loans or risk-sharing products.  

–  To establish stronger links between the EIB and the European Community Steering Group 
on  Strategic  Energy  Technologies,  if  appropriate  by  inviting  the  EIB  to  participate  in  its 
work.  

6. 

CONCLUSIONS 

Moving  towards  a  low  carbon  economy  needs  new  technology  to  be  conceived,  tested,  and 
then  deployed.  To  make  this  happen,  the  EU  has  given  policy  direction  through  the 
comprehensive policy framework proposed in the energy and climate package. The SET-Plan 
is  the  technology  development  pillar.  Now,  the  private  sector  has  to  take  up  the  challenge, 
secure  in  the  knowledge  that  they  will  have  public  support  when  the  risks  are  too  high 
because of the importance of delivering a low carbon economy.  

It  is  now  clear  that  public  and  private  investment  in  energy  technology  development  has  to 
increase substantially – starting immediately. An injection of public finance is fully justified 
to achieve public policy goals and help overcome market failures. Stronger intervention at EU 
level could be one of the most effective ways to bring forward the desired broad portfolio of 
technologies.  

The Commission therefore calls on the Council and Parliament to: 

–  Support the Technology Roadmaps 2010-2020, and, on this basis, invite the Commission 

to launch the European Industrial Initiatives in 2010. 

–  Agree to focus existing Community programmes to support the SET-Plan initiatives. 

–  Invite  Member  States  to  increase  their  efforts  to  support  the  financing  of  low  carbon 
technologies,  including  through  an  appropriate  focus  of  support  instruments;  and  to 
contribute  to  the  implementation  of  the  SET-Plan  initiatives  according  to  a  variable 

18 

The  Sustainable  Energy  Financing  Initiative  of  the  European  Economic  Recovery  Plan,  financed 
through the Intelligent Energy – Europe II Programme. 

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geometry joint programming approach in which sovereignty over national research funding 
is preserved. 

–  Welcome  the  proposed  reinforcement  of  financial  instruments  involving  the  EIB  Group, 
such as the RSFF, the Marguerite Fund and the High Growth and Innovative SME Facility 
(GIF), to contribute to the financing of the SET-Plan. 

–  Welcome  the  intention  of  the  Commission  and  the  EIB  to  assess  the  optimal  financial 
packages  for  large  demonstrations  and  market  replication  projects;  and  to  develop  a 
dedicated  joint  energy  efficiency  and  renewable  energy  instrument  to  finance  the  initial 
market take-up of low carbon technologies; and welcome the Commission's ideas for the 
medium term to drive forward the financing of low carbon technologies. 

–  Agree to strengthen ongoing and new international technology-oriented initiatives. 

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