Proposal for a COUNCIL REGULATION amending Regulation (EC) No 521/2008 setting up the Fuel Cells and Hydrogen Joint Undertaking
Date: 2011-04-20
Institutions: European Commission
Subjects: EU financing, EU research policy, European legal status, energy technology, fuel cell, hydrogen, joint venture, public-private partnership

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EUROPEAN COMMISSION 

Brussels, 20.4.2011 
COM(2011) 224 final 

2011/0091 (NLE) 

Proposal for a 

COUNCIL REGULATION  

amending Regulation (EC) No 521/2008 setting up the Fuel Cells and Hydrogen Joint 
Undertaking 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Grounds for and objectives of the proposal 

Joint  Technology  Initiatives  (JTIs)  are  introduced  in  the  Seventh  Framework  Programme 
(FP7)1 on the basis of Article 187 TFEU (ex Article 171 TEC), as a way of creating public-
private partnerships in research at European level. JTIs are an expression of the EU's strong 
commitment to coordinating research efforts, strengthening the European Research Area and 
reaching Europe's competitiveness goals. 

The  Joint  Undertaking  for  Fuel  Cells  and  Hydrogen  (FCH  JU)  was  established  by  Council 
Regulation (EC) 521/2008 of 30 May 2008. The three members, the Industry Grouping (IG), 
the  Research  Grouping  (RG)  and  the  European  Commission  share  the  funding  of 
administrative and operational costs. 

A requirement for the participation of industry from the outset was that industry should make 
a financial contribution of 50% of the running costs (shared with the Commission), and that 
industry's in-kind contribution to the operational costs should at least match the Commission's 
financial contribution. 

Since its establishment the FCH JU has published three calls for proposals: the first covering 
28.1 M€, the second 73.1 M€ and the third 89.1M€. 
The provision for matching contributions 
from industry for operational costs means that industry also has to cover contributions to the 
other participants (including universities, research centres, public bodies, etc.) for all types of 
activities (including basic research). 

The result in the first two FCH JU calls for proposals is that the maximum funding levels have 
to  be  systematically  evaluated  and  reduced  for  all  participants.  For  the  first  two  calls  the 
matching requirement resulted in a significant reduction of reimbursement of direct costs: for 
large  industries  from  50%  to  33%  FCH  JU  contribution  and  for  SMEs  and  research  bodies 
from 75% to 50%. 

These funding levels are substantially lower than in FP7 (including the European Green Cars 
programme  for  battery  electric  vehicles)  as  well  as  in  fuel  cells  and  hydrogen  R&D 
programmes  outside  Europe.  The  low  funding  rates  and  the  financial  and  economic  crisis, 
which affects the industry working with this future technology, result in the current level of 
participation in the actions of the FCH JU being below initial expectations. A general loss of 
interest by both industry and the research community can be expected if we  continue along 
the same path. 

Furthermore,  contributions  from  public  national  and  regional  sources  to  the  projects  are 
encouraged and are expected in several cases. However, the current Regulation does not take 
it  into  account.  The  new  text  states  that  the  matching  of  EU  funds  shall  allow  taking  into 
account not only industry's own contribution but also that coming from the other legal entities 
participating in the activities.  

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OJ L 412, 30.12.2006, p.1 

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Given  that  in  case  of  repeated  insufficient  matching  the  Commission  shall  first  analyse  the 
situation and then decide on appropriate measures to take, Article 12.7 second paragraph of 
the Annex to Regulation (EC) N° 521/2008 "the Commission shall…" has been modified to 
"the Commission may…". 

In  addition,  the  Industry  and  Research  Groupings  have  the  obligation  to  pay  their  cash 
contributions to the FCH JU budget for the running costs “in advance, before the start of each 
financial  year”.  The  Financing  agreement  between  the  Commission  and  the  FCH  JU, 
developed after the establishment of the FCH JU, provides for the Commission itself to pay 
only in instalments during the financial year. It is equitable that the two Groupings would be 
given the same conditions.  

At  present  the  funding  level  is  determined  after  each  evaluation.  To  increase  the  necessary 
predictability  for  the  beneficiaries,  a  possibility  to  specify  the  minimum  funding  level  for  a 
call is introduced. 

The objective of the proposal is to adapt the provisions to the above conditions. 

•  General context 

Fuel cells and hydrogen (FCH) technologies are promising, long-term energy options that can 
be used in all the sectors of the economy and that offer a broad range of benefits for energy 
security,  transport,  environment  and  resource  efficiency.  They  are  expected  to  play  a  major 
role  in  the  transition  of  the  EU  to  a  low-carbon  society  and  to  achieve  the  goal  of  cutting 
GHG emissions by over 85% by 2050.  

FCH technologies offer to the end-user a variety of applications: (i) stationary, e.g. to generate 
electricity  and/or  heat,  (ii)  transport,  e.g.  to  power  vehicles,  buses  and  trains,  and  (iii) 
portable,  e.g.  to  power  laptops  and  cell  phones.  Over  the  last  years,  the  FCH  industry  has 
made considerable progress both in terms of technology development in all these application 
areas, particularly in performance improvement, and cost reduction.  

For example, in the transportation sector, the market with highest visibility and potential for 
GHG  reduction,  a  recent  in-depth  study  using  factual  data  from  the  industry  concludes  that 
fuel  cell  electric  vehicles  (FCEVs)  and  battery  electric  vehicles  (BEVs)  have  significant 
potential to reduce CO2 and local emissions and that both will be viable and complementary 
alternatives  to  conventional  vehicles  with  internal  combustion  engines  (ICEs)  by  2025,  or 
earlier with appropriate tax exemptions and/or incentives. The study also estimates that over 
the course of the next decades, costs for a hydrogen distribution and retail infrastructure will 
be 5% of the overall cost of FCEVs (€1,000-2,000 per car) which is  comparable to rolling out 
a  charging  infrastructure  for  BEVs  and  plug-in  hybrids  (PHEVs)  and  justifies  building  a 
dedicated hydrogen infrastructure.  

In  order  to  enable  the  full  contribution  of  FCH  technologies  continuous  and  stable  public 
support  and  accompanying  policy  measures  are  still  needed  to  overcome  the  remaining 
technological,  economic  and  institutional  barriers  to  their  widespread  commercialization. 
Despite  the  financial  crisis  the  major  EU  competitors  in  this  field  (US,  Japan,  South  Korea 
and  China)  continue  to  conduct  comprehensive  efforts  to  overcome  these  barriers  via  RTD 
programmes, policy measures and commercialisation exercises. 

Existing provisions in the area of the proposal 

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There are four other Joint Undertakings established under Article 187 TFEU (ex Article 171 
TEC): CLEAN SKY, IMI, ARTEMIS and ENIAC. Each JU has its provisions adapted to the 
specificities of its area of activity. 

Consistency with the other policies and objectives of the Union 

As one of the initiatives launched in January 2007 in the communication 'An Energy Policy 
for  Europe'2,  the  European  Commission  is  developing  a  European  Strategic  Energy 
Technology  Plan  (SET  Plan)3  to  guide  the  course  of  energy  technology  innovation  over  the 
coming  decades,  deliver  efficient  and  low-carbon  technologies  including  fuel  cells  and 
hydrogen, and arrive at a more sustainable energy system. The European Parliament adopted a 
Written Declaration4 in May 2007 which called upon the EU Institutions to support fuel cell 
and  hydrogen  technologies  for  portable,  stationary,  and  transport  applications  through  a 
partnership with committed regions and cities, SMEs and civil society organisations. 

The  proposed  Council  Regulation  is  consistent  with  EU  policies  in  research.  It  is  also 
consistent  with  the  renewed  Lisbon  strategy5  and  the  Barcelona  objectives  for  the  EU  to 
invest  3%  of  its  GDP  in  research  and  development  by  2010.  The  Seventh  Framework 
Programme (FP7) (2007-2013) plays an important role for Europe to meet these objectives. It 
also  reflects  a  consensus  that  Europe  must  re-double  its  efforts  to  improve  returns  from  its 
RTD&D investments in order to equip itself as a competitive and dynamic knowledge-based 
economy. 

This initiative is part of a broad, ambitious EU strategy aimed at tackling the innovation gap 
which includes the proposal to establish a European Institute of Technology. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

Consultation of interested parties and use of expertise 

NOT APPLICABLE 

Impact assessment 

NOT APPLICABLE 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

The  proposal  consists  of  a  Council  Regulation  amending  the  Council  Regulation  on  the 
establishment of the Fuel Cells and Hydrogen Joint Undertaking. 

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“An Energy Policy for Europe; COM(2007)1 final; 10th January 2007 
Towards a European Strategic Energy Technology Plan; COM(2006)847 final; 10th January 2007 
Written Declaration pursuant to Rule 116 of the Rules of Procedure on establishing a green hydrogen economy and 
a  third  industrial  revolution  in  Europe  through  a  partnership  with  committed  regions  and  cities,  SMEs  and  civil 
society organisations, European Parliament 0016/2007, May 2007 
COM(2005) 24 

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Legal basis 

The legal basis of the proposal is Article 187 of the Treaty on the Functioning of the European 
Union. 

Subsidiarity and proportionality 

NOT APPLICABLE 

Choice of instrument 

Council regulation for amending the Council Regulation (EC) No 521/2008. 

4. 

BUDGETARY IMPLICATION 

There are no financial implications compared to the budget initially adopted for this Council 
Regulation. The amendments suggested will improve the possibilities to eventually spend the 
budget foreseen. 

The  EU  contribution,  totalling  470  million  EUR,  will  come  from  the  following  FP7 
"Cooperation"  Specific  Programme  budget  lines:  Energy;  Nanosciences,  Nanotechnologies, 
Materials  and  New  Production  Technologies;  Transport  (including  Aeronautics);  and 
Environment  (including  Climate  Change)  in  DG  RTD  and  Transport  in  DG  MOVE  and 
Energy in DG ENER. 

5. 

OPTIONAL ELEMENTS 

[…] 

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2011/0091 (NLE) 

Proposal for a 

COUNCIL REGULATION  

amending Regulation (EC) No 521/2008 setting up the Fuel Cells and Hydrogen Joint 
Undertaking 
(Text with EEA relevance) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 187 and 188 thereof, 

Having regard to the proposal from the European Commission,  

Having regard to the opinion of the European Parliament6, 

Having regard to the opinion of the European Economic and Social Committee7, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

The Fuel Cells and Hydrogen Joint Undertaking (FCH JU) was established on 30 May 
2008 by its founding members, the Industry Grouping and the Commission.  

The  Research  Grouping  became  a  member  of  the  FCH  JU  on  14  July  2008.  This 
Grouping  contributes  both  financially  and  in  kind  to  the  objectives  of  the  FCH  JU. 
Account taken of the specific composition of the FCH JU as well as its rules and the 
nature,  objectives  and  scope  of  its  activities,  the  Research  Grouping's  members  may 
benefit  from  the  results  achieved  like  the  members  of  the  Industry  Grouping.  It  is 
therefore  justified  to  allow  the  in-kind  contribution  from  both  the  Industry  and 
Research Groupings to be counted for as matching funds.  

The Research Grouping became a member of the Joint Undertaking, it is appropriate 
to  consider  that  the  in-kind  contributions  of  research  organisations  (including 
universities and research centres) match the Community's contribution, in the sense of 
Article 12(3) of the Statutes. 

The FCH JU has been in operation for more than two years during which time the full 
operational  cycle  with  publishing  calls  for  proposals,  evaluations  of  proposals, 
negotiations  of  funding  and  closing  of  grant  agreements  has  been  completed.  The 
experience  gained  from  that  period  is  that  the  maximum  funding  levels  in  FCH  JU 
projects had to be significantly decreased for all participants. As a result, the level of 

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OJ C […], […], p. […]. 
OJ C […], […], p. […]. 

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participation  in  the  actions  of  the  FCH  JU  proved  to  be  considerably  below  initial 
expectations. 

In accordance with Article 26 of the Annex to Regulation (EC) No 521/2008 setting 
up  the  Fuel  Cells  and  Hydrogen  Joint  Undertaking8,  the  Governing  Board  approved 
the amendments of this Regulation. 

Allowing in-kind contributions from all legal entities participating in the activities to 
be counted for as matching funding, would recognise the membership of the Research 
Grouping  and  would  improve  the  funding  levels  while  still  respecting  the  basic 
principle  of  matching,  as  well  as  the  need  to  apply  fair  and  balanced  funding 
reductions to the different types of participants. 

The  running  costs  of  the  Programme  Office  of  the  Joint  Undertaking  should  be 
provided  by  its  three  members.  It  is  appropriate  to  provide  that  all  members  of  the 
Joint Undertaking have the same payment schedule. 

The Commission should be given some flexibility as to the measures to take in case of 
insufficient matching.  

At present the funding level is determined after each evaluation of received proposals. 
In  order  to  allow  the  beneficiaries  to  estimate  the  extent  of  the  potential  funding,  a 
possibility to specify the minimum funding level for a call should be provided for. 

(5) 

(6) 

(7) 

(8) 

(9) 

(10)  Regulation (EC) No 521/2008 should therefore be amended accordingly, 

HAS ADOPTED THIS REGULATION: 

The  Regulation  (EC)  No  521/2008  is  amended  in  accordance  with  the  Annex  to  this 
Regulation. 

Article 1 

Article 2 

Notwithstanding  Article  12(3)  of  the  Annex  to  Regulation  No  521/2008,  the  amending 
Regulation shall not affect the rights and obligations arising from grant agreements and other 
contracts  concluded  by  the  Joint  Undertaking  prior  to  the  date  of  entry  into  force  of  this 
Regulation. In particular, it shall not affect the upper funding limits set therein. 

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OJ L 153, 12.6.2008, p. 1. 

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Article 3 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

However, point 3(a) of the Annex shall apply from 14 July 2008. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the Council 
The President 

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ANNEX 

The Regulation (EC) No 521/2008 is amended as follows: 

1. 

Article 6 is amended as follows: 

(a) Paragraph 2 is replaced by the following: 

"2. The FCH Joint Undertaking may have its own internal audit capability." 

The Annex to Regulation (EC) No 521/2008 is amended as follows: 

2. 

Article 2 is amended as follows: 

(a) The first and second indents of paragraph 2 are replaced by the following: 

"—  ensure  that  its  contribution  to  the  resources  of  the  FCH  Joint  Undertaking, 
according  to  Article  12  of  these  Statutes  is  provided  in  advance  as  a  cash 
contribution  to  cover  50%  of  the  running  costs  of  the  FCH  Joint  Undertaking  and 
transferred to the budget of the FCH Joint Undertaking in agreed instalments , 

— ensure that industry's contribution to the achievement of the RTD activities funded 
by the FCH Joint Undertaking together with the other beneficiaries' contributions at 
least matches the Union contribution"; 

(b)  The  fourth  indent,  second  subparagraph  of  paragraph  3  is  replaced  by  the 
following: 

"—  ensure  that  its  contribution  to  the  resources  of  the  FCH  Joint  Undertaking, 
according  to  Article  12  of  these  Statutes  is  provided  in  advance  as  a  cash 
contribution  to  cover  1/12  of  the  running  costs  of  the  FCH  Joint  Undertaking  and 
transferred to the budget of the FCH Joint Undertaking in agreed instalments ". 

3. 

Article 12 is amended as follows: 

(a) Paragraph 3 is replaced by the following: 

"3.  The operational costs of the FCH Joint Undertaking shall be covered through 
the  financial  contribution  of  the  Union,  and  through  in-kind  contributions  from  the 
legal  entities  participating  in  the  activities.  The  contribution  from  the  participating 
legal entities shall at least match the Union's financial contribution.  

Receipts shall be dealt with in accordance with the Rules of Participation set out in 
the Decision No 1982/2006/EC of the European Parliament and of the Council of 18 
December  2006  concerning  the  Seventh  Framework  Programme  of  the  European 
Community  for  research,  technological  development  and  demonstration  activities 
(2007-2013)9.  This  provision  shall  apply  from  the  date  on  which  the  Research 
Grouping became member of the FCH Joint Undertaking."; 

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OJ L 412, 30.12.2006, p.1. 

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(b) Paragraph 7 is amended as follows: 

(i) The second and third subparagraphs are replaced by the following: 

"If  the  assessment  establishes  that  the  in-kind  contribution  from  the  participating 
legal  entities  does  not  reach  the  required  level,  the  Commission  may  reduce  its 
contribution the following year. 

If  it  is  established  that  the  in-kind  contribution  from  the  participating  legal  entities 
does  not  reach  the  required  level  for  two  consecutive  years,  the  Commission  may 
propose to the Council to terminate the FCH Joint Undertaking.". 

4. 

In Article 15, the following paragraph 4 is added: 

"4. The Governing Board may decide to specify a minimum funding level for each 
category of participant for a particular Call for proposals." 

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LEGISLATIVE FINANCIAL STATEMENT FOR PROPOSALS 

This proposal for an amendment has no impact on the EU budget. 

(Articles 28 of the Financial Regulation and 22 of the implementing rules)]  

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