COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a COUNCIL REGULATION on the Fuel Cells and Hydrogen 2 Joint Undertaking
Date: 2013-07-10
Institutions: European Commission
Subjects: European Joint Undertaking, energy policy, fuel cell, innovation, public-private partnership, renewable energy, research and development













EUR-Lex - 52013SC0261 - EN











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52013SC0261

COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a COUNCIL REGULATION on the Fuel Cells and Hydrogen 2 Joint Undertaking /* SWD/2013/0261 final */









COMMISSION STAFF WORKING DOCUMENT
EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Accompanying the document
Proposal for a
COUNCIL REGULATION
on the Fuel Cells and Hydrogen 2
Joint Undertaking
1.           Purpose, procedures and main conclusion
of the Impact Assessment
1.           The purpose of this
document is to consider different policy options for implementing the fuel
cells and hydrogen (FCH) research and innovation programme under Horizon 2020,
given that the end of the FCH Joint Undertaking (JU) is approaching and decisions
have to be taken on what to do next. The considered policy options are:
·              
PO1: Continuing the FCH Public-Private
Partnership in the current form (Joint Undertaking) within Horizon 2020. This
is the base-case scenario against which all other options are being assessed; 
·              
PO2: Using collaborative research projects under
the EU Framework Programme Horizon 2020, thus not prolonging the current FCH JU;

·              
PO3: Implementing Horizon 2020 for the FCH
technologies through a Contractual Public-Private Partnership;
·              
PO4: Implementing a FCH Public-Private
Partnership through a modernised Joint Undertaking adapted to Horizon 2020 
2.           In the analysis, the same overall
EU contribution was assumed for all the options.
3.           From the comparison of the
different Policy options, it is concluded that PO4 is the most efficient option
to address the underlying problem drivers and reach the stated objectives. This
assessment is supported by the results from a stakeholder consultation and a
public consultation.
4.           In the preparation of this
Impact Assessment, the Commission has consulted the industry and research
communities, the Member States and the general public. This was done through
meetings, surveys and consultations. A stakeholder study was launched on trends
in terms of investments, jobs and turnover in the fuel cells and hydrogen
sector. In addition, a public consultation was launched in July 2012 to collect
the views of other stakeholders and the wider public.
2.           Problem definition and context
5.           In 2009 the European Union
adopted a set of legislation (known as "Climate and Energy Package"),
which sets a series of key energy objectives for 2020 with binding commitments
from the Member States: to reduce greenhouse gas emissions by 20%, rising to
30% if the conditions are right; to increase the share of renewable energy to
20%; and to make a 20% improvement in energy efficiency. This energy policy is
a key contribution for achieving the objective of the Europe 2020 strategy for
smart, sustainable and inclusive growth. 
6.           The Roadmap 2050, adopted
by the Commission on 15th December 2011, explores the routes towards
a secure, competitive and decarbonised energy system by 2050. The Roadmap
highlights the important role to be played by switching to renewable energy
sources, managing electricity in new ways and shifting towards alternative
fuels, including hydrogen.
7.           On January 23rd
2013 the Commission adopted a Communication "Clean Power for Transport:
A European alternative fuels strategy" which was accompanied by a
legislative proposal setting binding targets for the build-up of the minimum
alternative fuels infrastructure, with special emphasis on common standards.
Hydrogen is one of the alternative fuels included in the Package.
8.           Hydrogen, as a clean
energy carrier, and fuel cells as efficient energy converters, are technologies
that offer a pathway for clean systems that reduce emissions, enhance energy
security, and stimulate the economy. Their potential applications include a
number of strategic sectors, such as power generation and surface transport,
and, in the long term, are expected to contribute to the EU energy and climate
objectives. 
9.           At
EU level, the European Commission has supported
research and development in fuel cells and hydrogen technologies since the
early EU Framework Programmes (FP) with increasing funding levels over time
(e.g. 145 M€ in FP5, 315 M€ in FP6).
10.         In 2008, Council Regulation
(EC) 521/2008 established the Fuel Cells and Hydrogen (FCH) Joint Undertaking
(FCH JU) for a period up to 31 December 2017, set-up as a PPP with 50/50 co-financing
between the two founding members, the European Commission and the FCH Industry
Grouping. Shortly after the establishment of the FCH JU, the Research Grouping
became a member. The maximum EU contribution to the FCH JU is 470M€.
11.         The Commission proposal on
Horizon 2020 envisages activities supporting FCH technologies under the
Societal Challenge “Secure, clean and efficient energy” and “Smart, green and
integrated transport”.
12.         Although the FCH sector is
small, it is of strategic importance due to its potential knock-on effect for
example on the European automotive industry. It is estimated that by 2040-2050,
10-15% of all cars manufactured in the EU will be FC-based. If Europe fails to become a competitive provider of FCH technologies, this would result in a
significant loss of jobs in the European automotive industry.
13.         Several technological and
cost-related challenges need to be overcome. Despite the progress of the past years,
the level of performance, reliability and cost required for a large-scale
deployment in most applications has not been achieved yet and a sustained
effort on R&D will be required until 2020 to have these solutions
competitive with incumbent technologies. 
14.         The underlying problem
drivers are market failure for first movers, sub-optimal leveraging of
available funding, and fragmentation and lack of critical mass.
·              
Market failure. The
full scale deployment and commercialisation of fuel cells is mainly hampered by
(1) the high cost of fuel cells and (2) the lack of hydrogen distribution
infrastructure. This “chicken and egg” problem makes it difficult for any
player to move first. In addition, the societal and environmental benefits that
would result from these technologies cannot be “internalised” and monetised on
the short term. It will not be possible to overcome these challenges through
market forces alone or dispersed public and private initiatives only. 
·              
Need for leveraging of available funding. The scale and scope of the industry research agenda for developing
FCH technologies during 2014-2020 go beyond the capacity of individual
companies or Member States, both in terms of financial commitment and of the
research capacity involved. 
·              
Fragmentation and lack of critical mass. The sector is dispersed across different countries, activity areas
(energy, transport) and actors. This restricts the exchange and pooling of
knowledge and experience. The coordination at EU level of the activities of
different FCH stakeholders is needed. 
15.         The existing FCH JU has put
in place a significant project portfolio of strategic importance. Market
introduction has been achieved for some early applications such as forklifts
and small back-up power units. For both energy and transport applications
substantial progress took place. It has also encouraged industry, Member States
and the research community to commit more of their own resources. Industry and
SME participation is stable and significantly higher than in FP7. 
16.         The interim evaluation,
finalised in 2011 with the help of independent experts, concluded that the JU
approach generally succeeds to enhance public-private activities in technology
development and demonstration, and provides stability for the R&D
community. The overall technical objectives of the FCH JU were judged ambitious
and competitive. 
3.           Objectives
17.         The general objective of
the FCH 2 Joint Undertaking for the period of 2014-2024 is to develop a strong,
sustainable and globally competitive fuel cells and hydrogen sector in the Union. This will allow supporting the EU policies on sustainable energy and transport,
climate change, the environment and industrial competitiveness as embodied in
the Europe 2020 strategy for growth, and help achieve the EU’s overarching
objective of smart, sustainable and inclusive growth.
18.         The above general objective
is therefore translated into the following and operational objectives, to be
reached by 2020:
Specific objectives
·              
Reduce the production cost of fuel cell systems
to be used in transport applications, while increasing their lifetime to levels competitive with conventional
technologies,
·              
Increase the electrical efficiency and the
durability of the different fuel cells used for power production, while
reducing costs, to levels competitive with conventional technologies,
·              
Increase the energy efficiency of production of
hydrogen from water electrolysis while reducing capital costs, so that the
combination of the hydrogen and the fuel cell system is competitive with the
alternatives available in the marketplace, and
·              
Demonstrate on a large scale the feasibility of
using hydrogen to support integration of renewable energy sources into the
energy systems, including through its use as a competitive energy storage
medium for electricity produced from renewable energy sources.
Operational objectives
·              
Leverage private and public (including Member
States) investment for R&D and innovation on FCH technologies worth at
least two times the size of the EU contribution.
·              
Maintain, and if possible increase, SME
participation in the activities at or over the current 25%.
·              
Unlock the excellence and innovation potential
in Member States and Regions - in particular those benefitting from the EU
Structural Funds - in the field of FCH technologies through their hosting of
FCH demonstration projects.
·              
Ensure the efficient implementation of the FCH
programme, in particular by substantially shortening the time-to-grant and
time-to-pay.
4.           The Policy
Options considered
19.         In
this Impact Assessment, four policy options are discussed for organising
research and innovation on fuel cells and hydrogen during the next programming
period 2014-2020. The "no-EU action" option to discontinue public
research funding at European level is discarded; research for fuel cells and
hydrogen is included in the Horizon 2020 Framework Programme for Research and
Innovation as part of the effort to develop key technologies for sustainable
energy and transport systems. The four policy options (PO) are:
·              
PO1: Fuel Cell and Hydrogen Public-Private
Partnership in the current form (Joint Undertaking) under Horizon 2020
(Business-as-Usual)
The business-as-usual scenario relies on the
continuing of the JUs under Horizon 2020 as they currently exist under the 7th
Framework Programme, i.e. retaining their current scope of objectives and their
current implementation arrangements (governance, financial rules, funding
rules, etc.)
·              
PO2: Use of the collaborative research projects
under the EU Framework Programme Horizon 2020, thus not prolonging the current
FCH JU
R&D would be implemented through the standard
funding schemes of the EU Framework Programme and, separately, through national
and regional programmes. Comitology would be re-introduced. EU public support
would depend on annual or biennial budgets and work programmes and would not be
guaranteed. The industry and research actors would no longer be in the driver
seat for defining the programme priorities and timelines.
·              
PO3: Implement Horizon 2020 for the fuel cell
and hydrogen technologies through a Contractual Public-Private Partnership
Within a contractual Public-Private
Partnership, the Commission services or an executive agency would manage
projects in the framework of successive work programmes. A contractual
arrangement for the PPP between the European Commission and the relevant
stakeholders would be signed. The industry and research stakeholders would be
asked to advice in a formal way on the programme’s scope and objectives, but
would not co-decide. A constant, stable level of EU public support for FCH
technologies could not be guaranteed as the budget would be subject to an
annual decision, even if an overall budget for the period 2014-2020 would be
indicated.
·              
PO4: Fuel Cell and Hydrogen Public-Private
Partnership through a modernised Joint Undertaking adapted to Horizon 2020
A "modernised JU" will allow a
re-orientation of the objectives and activities of the FCH
JU, structuring the programme around two main innovation pillars, respectively dedicated to Energy
and Transport Systems, and one cluster of cross-cutting research activities.
This would allow putting more emphasis on energy
applications, in particular on the use of hydrogen as a storage medium for
renewable electricity, hydrogen infrastructure and a
variety of activities to support market introduction.
It would also allow putting more emphasis on large scale demonstrations.
The "modernised JU" option builds
upon the past experience and the lessons learned and it further improves the
design and suitability of the instrument to the new challenges under Horizon
2020 by simplifying the administration, financial procedures and rules for
participation. It would also allow strengthening the
coordination with Member States and cooperation with Regions. 
5.           Comparison of
Policy Options and identification of preferred option 
20.         Since PO4 is the only
option that provides support to market introduction activities, it is best
suited to attract further leverage for the deployment actions from industry and
other stakeholders. It provides a stable critical mass along the FCH value
chain, including infrastructure and hydrogen providers, which facilitates the
simultaneous coverage of technology and infrastructure development, thus
contributing to solving the chicken-and-egg problem.
21.         The options based on a
Joint Undertaking (PO1 and PO4) are the most efficient in addressing the
underlying problem drivers, i.e. alleviating market failure, leveraging
available funding and providing a critical mass. Firstly, shared governance
between industry, the research community and the EC allows for close coordination
and prioritisation of the R&D programme, which helps to create the right
products, applications and standards. Secondly, a
long-term budget plan and roadmap provides stability and encourages industry,
Member States and the research community to commit more of their own resources.
Looking towards the programming period 2014-2020, the private sector involved
in the current JU expects to leverage an additional investment of approximately
4B€. Thirdly, the members of the FCH JU groupings form
the core entities active in the sector in Europe. This represents a critical
mass; a focal point from which coalitions can be built, and which can
communicate with a single strong voice.
22.         The comparison of the
different Policy Options, leads to a conclusion that PO4 is the most efficient
option to address the underlying problem drivers and reach the stated
objectives. PO4 (the modernised JU) would also allow incorporating the
recommendations of the Interim Evaluation of the FCH JU.
23.         This conclusion is strongly
supported by the stakeholders. The stakeholder survey shows that 93% of the
beneficiaries are in favour of continuation of the JU. The responses from the
Industry Grouping in particular identify the modernised JU (PO4) as having the
strongest impact. This is underlined by the results from the public
consultation, showing that a majority of respondents favour the continuation of
the JU in a modernised form, i.e. PO4.
6.           Implementation, budget and governance
24.         The FCH 2 JU programme of research
and innovation for the period 2014 – 2020 is structured around two main
innovation pillars, respectively dedicated to Transport and Energy Systems, and
one cluster of cross-cutting research activities. The two innovation pillars
have an area of overlap (integrated energy and transport systems). The
modernised JU will put more emphasis on energy
applications (in particular on using hydrogen for storage of renewable
electricity) and activities to support market introduction. In addition, it
will increase the share of demonstration.
25.         The proposed maximum EU
contribution to the FCH 2 JU is €700 million. This amount has been established
in order to meet the specific and operational objectives described in the
impact assessment. The proposed budget is higher than the €470 million
earmarked for the existing JU. This increase reflects the fact that the
modernised JU will have a re-orientation of priorities, which also implies a
re-focussing of the budget. The private funding in the FCH 2 JU will take place
inside and outside the calls for proposals.
26.         In line with the current
structure, the FCH 2 JU Programme is implemented by a Programme Office, under
supervision of the FCH 2 JU Governing Board (GB). The GB consists of
representatives of the Industry Grouping (six seats), the EC (three seats) and the
Research Grouping (one seat). The Governing Board will
translate the objectives of the JU into a Multi Annual Implementation Plan and
Annual Implementation Plans.
27.         The Commission will carry
out both the final and the mid-term evaluations of the FCH 2 JU with the
assistance of independent experts. The performance of the JU will be monitored
using Key Performance Indicators in line with its specific objectives.