Market testing for low-carbon innovation support to energy intensive industry and to power generation : demand for innovation support.
Date: 2018-09-12
Institutions: Directorate-General for Climate Action
Subjects: energy industry, energy production, energy storage, fund (EU), innovation, market, reduction of gas emissions, testing

Market Testing for Low-
Carbon Innovation Support to 
Energy Intensive Industry and 
to Power Generation 

Demand for Innovation Support 

Written by Michiel Stork (Ecofys) and Oskar Krabbe (Ecofys) 
Reviewers: Ian Trim (Ecofys) and Roland Magnusson (Greenstream) 
August - 2018 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Market Testing for Low-Carbon Innovation Support to Energy Intensive Industry and 

to Power Generation - Demand for Innovation Support 

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EUROPEAN COMMISSION 

Directorate-General for Climate Action 
Directorate C — Climate Strategy, Governance and Emissions from Non-trading Sectors 
Unit C3 – Land Use and Finance for Innovation 

Contact: Roman Doubrava 

E-mail:  Roman.DOUBRAVA@ec.europa.eu 

European Commission 
B-1049 Brussels 

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Market Testing for Low-
Carbon Innovation Support to 
Energy Intensive Industry and 
to Power Generation 

Demand for Innovation Support 

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Market Testing for Low-Carbon Innovation Support to Energy Intensive Industry and to Power Generation 

Table of Contents 

1. 

INTRODUCTION ................................................................................................... 10 

2.  MARKET TESTING OF AN INNOVATION FUND PRODUCT DESIGN ................................ 11 

3. 

4. 

2.1.  Market  failures  in  low-carbon  innovation  need  to  be  addressed  to  meet 

climate targets ............................................................................................ 11 

2.2.  The  innovation  fund  can  play  a  pivotal  role  in  promoting  low-carbon 

innovation in the EU .................................................................................... 13 

2.3.  To  meet  various  market  needs,  the  Innovation  Fund  should  include  both 

grants and other financing instruments .......................................................... 16 

2.4.  The  market  needs  eligibility  and  selection  criteria  that  effectively  support 

different types of low-carbon innovation across different sectors ....................... 18 

2.5.  The  market  needs  the  right  level  of  support  at  the  right  time,  while 

minimizing administrative costs of application ................................................. 19 

EXPERT SURVEY METHODOLOGY ............................................................................ 21 

EXPERT SURVEY FINDINGS .................................................................................... 23 

4.1.  Composition of Expert Survey respondents ..................................................... 23 
4.2.  Factors in investment decision-making ........................................................... 24 
4.3.  Options to increase likeliness that innovative technologies/projects are taken 

up ............................................................................................................. 25 
4.4.  Weighted average costs of capital ................................................................. 26 
Internal carbon price ................................................................................... 27 
4.5. 
4.6. 
Internal return hurdle rate for regular and high-risk innovative projects ............. 29 
4.7.  Predictability of innovations .......................................................................... 30 
4.8.  Scope for competition among projects ........................................................... 31 
4.9.  Ranking criteria ........................................................................................... 32 
4.10.  Qualitative selection criteria .......................................................................... 32 
4.11.  Overlapping financing instruments ................................................................. 33 
4.12.  Complementary financing instruments ........................................................... 33 
4.13.  Frequency of calls ....................................................................................... 34 
4.14.  Application preparation time ......................................................................... 34 
4.15.  Staged application process ........................................................................... 35 
4.16.  Innovation types of reported technologies ...................................................... 36 
4.17.  Technology Readiness Level (TRL) ................................................................. 37 
4.18.  Expected market entry of the technology ....................................................... 38 
4.19.  Maximum obtainable market share ................................................................ 39 
4.20.  Expected market share development towards 2050 ......................................... 40 
4.21.  Future global market share ........................................................................... 40 
4.22.  Effect on exports ......................................................................................... 40 
4.23.  Technical lifetime ........................................................................................ 41 
4.24.  Retrofitting potential .................................................................................... 42 
4.25.  Cost reductions expectations ........................................................................ 42 
43 
4.26.  Risks 
4.27.  Barriers  43 
4.28.  Effects of financial support ........................................................................... 44 
4.29.  Financial products ....................................................................................... 46 
4.30.  Impact of the technologies ........................................................................... 48 
4.31.  Other benefits ............................................................................................. 48 
4.32.  Economic lifetime ........................................................................................ 49 
4.33.  Technology CAPEX and OPEX ........................................................................ 49 
4.34.  Simple payback period of technology ............................................................. 49 

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4.35.  Project development stages .......................................................................... 50 
4.36.  Lifetime used in project investment appraisal.................................................. 51 
4.37.  Project CAPEX ............................................................................................. 52 
4.38.  Project PBP ................................................................................................. 54 
4.39.  Financing structure ...................................................................................... 54 
4.40.  Minimum  tenor and maximum  interest  rate  for loans and minimum holding 

period and maximum return on equity for equity ............................................. 56 
4.41.  Project sponsors .......................................................................................... 57 
4.42.  Project sponsor balance sheet size ................................................................ 58 
4.43.  Willingness of regular financial partners to participate in financing ..................... 58 
4.44.  Geographical spread .................................................................................... 59 
4.45.  Final remarks .............................................................................................. 60 

5. 

BIBLIOGRAPHY .................................................................................................... 63 

APPENDIX A 

RESPONDENTS TO THE EXPERT SURVEY ........................................... 65 

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Market Testing for Low-Carbon Innovation Support to Energy Intensive Industry and to Power Generation 

List of Figures 

Figure 1: Industrial decarbonisation and investment cycles (Wyns, 2016) ............................. 15 

Figure 2: Different financing forms for innovative projects (ICF, 2016) ................................. 17 

Figure 3: Different financing forms for innovative projects (Jenkins, J., & Mansur, S, 2011) .... 17 

Figure 4: Organizations for which respondents filled in the expert survey .............................. 23 

Figure 5: Sectoral coverage of the expert survey ............................................................... 24 

Figure 6: Importance of factors in investment decision-making for lower and higher TRL projects
 ............................................................................................................................ 25 

Figure  7:  Means  for  the  Innovation  Fund  to  promote  uptake  of  innovative  technologies  and 
projects for strategic reasons ................................................................................... 26 

Figure 8: Weighted average cost of capital per sector ......................................................... 27 

Figure 9: Internal carbon prices currently used by companies .............................................. 28 

Figure 10: Comparison of carbon prices from expert survey with CDP findings ....................... 28 

Figure 11: Internal rate of return hurdle rate for regular projects ......................................... 29 

Figure 12: Internal rate of return hurdle rate for high-risk innovative projects ....................... 30 

Figure 13: Predictability of innovations ............................................................................. 30 

Figure 14: Scope for competition among projects............................................................... 31 

Figure 15: Appropriateness of ranking criteria across sectors ............................................... 32 

Figure 16: Importance of qualitative selection criteria......................................................... 33 

Figure 17: Overlapping financing instruments .................................................................... 33 

Figure 18: Complementary financing instruments .............................................................. 34 

Figure 19: Appropriateness of frequency of calls ................................................................ 34 

Figure 20: Expected time needed for preparing an Innovation Fund application ..................... 35 

Figure 21: Staged application process .............................................................................. 35 

Figure 22: Innovation types across industries .................................................................... 37 

Figure 23: Technology readiness levels of reported technologies .......................................... 38 

Figure 24: Expected market entry year for different TRLs.................................................... 39 

Figure 25: Maximum obtainable market share of reported technologies ................................ 40 

Figure 26: Expected market share globally compared to EU in 2030 ..................................... 40 

Figure 27: Expected impact of technology on export .......................................................... 41 

Figure 28: Technical lifetimes of reported technologies ....................................................... 41 

Figure 29: Retrofitting potential of technologies ................................................................. 42 

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Figure 30: Expected cost reductions after commercialization ............................................... 43 

Figure 31: Importance of risks ......................................................................................... 43 

Figure 32: Severity of barriers ......................................................................................... 44 

Figure 33: Effects of financial support on technologies ........................................................ 45 

Figure 34: Risks and effect of financial support .................................................................. 45 

Figure 35: Barriers and effect of financial support .............................................................. 46 

Figure 36: Appropriateness of financial products ................................................................ 47 

Figure 37: Comparison of financial product(s) preference between different TRLs .................. 48 

Figure 38: Other benefits for the implementing company .................................................... 48 

Figure 39: Economic lifetimes .......................................................................................... 49 

Figure 40: Technology payback period without financial support .......................................... 50 

Figure 41: PBP/economic lifetime ratio ............................................................................. 50 

Figure 42: Project development stages completed for reported projects ................................ 51 

Figure 43: Lifetimes used for project investment appraisal .................................................. 51 

Figure 44: Project CAPEX ................................................................................................ 52 

Figure 45: Effect of project CAPEX eligibility threshold ........................................................ 53 

Figure 46: Additional OPEX as share of additional costs ...................................................... 53 

Figure 47: Project PBP .................................................................................................... 54 

Figure 48: Envisioned financing structure for the project by TRL .......................................... 55 

Figure 49: Envisioned financing structure for the project by sector ....................................... 56 

Figure 50: Required IF support for different levels of technology readiness ........................... 56 

Figure 51: Minimum tenor and holding period, and maximum interest rate and return on equity
 ............................................................................................................................ 57 

Figure 52: Project sponsors ............................................................................................. 57 

Figure 53: Balance sheet size of project sponsor(s) ............................................................ 58 

Figure 54: Willingness of regular financial partners to participate in project financing ............. 58 

Figure 55: Geographical coverage of the expert survey ....................................................... 59 

Figure 56: Average project CAPEX and number of projects per region................................... 60 

List of Tables 

Table 1: Respondents to the Expert Survey ....................................................................... 65 

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Market Testing for Low-Carbon Innovation Support to Energy Intensive Industry and to Power Generation 

9 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.  INTRODUCTION 

This report forms the second part of the wider project “Market Testing for Low-Carbon 
Innovation Support to Energy Intensive Industry and to Power Generation” (the project), 
designed to provide DG CLIMA with insights into the market demand for the Innovation 
Fund, and to provide insights for the Impact Assessment.  

This report is designed to provide the EC with new insights into the possible design of the 
Innovation Fund by assessing the needs of market participants, and in particular the 
specific needs of the energy intensive industry sector. These needs may be of a financial, 
technical or other nature. For example, energy intensive industry may be exposed to 
different risk ratings, type of support or project milestones or may verify their CO2 
emissions in a different manner. It addresses the energy intensive industry sectors 
covered by the EU ETS (Steel, Iron, Aluminium, Copper, Oil refineries, Chemicals & bio-
based, Pulp & paper, Cement, Lime, Glass & ceramics) and compares them to the 
equivalent needs of the innovative RES, energy storage and CCS sector.  

As an input for this report, the consortium supported seven Expert Roundtables (ER) 
chaired by the Commission on Finance for Innovation: Towards the ETS Innovation Fund. 
The roundtables analysed, for all areas to be covered by the Innovation Fund, what type 
of support the EU could provide in facilitating the development and quick adoption of 
needed innovation and which modalities for such support would matter. The consortium 
joined the roundtables, provided input (an illustrative picture of the innovation needs of 
energy intensive industry, renewable energy sector and CCS) and specified the outputs 
(content and format) that the roundtables needed to deliver. The findings from the 
Expert Roundtables are reported separately, but are referred to regularly throughout this 
report. 

To complement the findings of the ER and gather a wider range of stakeholders’ views on 
design options, the consortium conducted an Expert Survey (ES) on the Innovation Fund. 
A total of 493 expert stakeholders were selected and contacted following agreement with 
the Commission, leading to 110 responses (including 12 pilot questionnaires). The 
purpose of the ES was to predict the performance of and potential market for the 
Innovation Fund once it is launched in the EU Member States. Its findings feed into the 
other reports that the consortium is drafting for the Commission. 

Chapter 2 of this report integrates findings from the ES with findings from the ER, and 
additional findings from literature.  

Chapters 3 and 4 of this report provide the methodology and the detailed results of the 
ES respectively. The ER is covered in a separate report. 

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2.  MARKET TESTING OF AN INNOVATION FUND PRODUCT DESIGN 

This chapter presents an overview and interpretation of stakeholder input from the 
Expert Survey (ES) and the Commission’s Expert Roundtables (ER) on the market’s 
needs from the Innovation Fund; some insights from other literature are added. The 
chapter is structured around five key hypotheses: 

1)  Market failures in low-carbon innovation need to be addressed to meet climate 

targets; 

2)  The Innovation Fund can play a pivotal role in promoting low-carbon innovation in 

the EU; 

3)  To meet various market needs, the Innovation Fund should include both grants 

and other financial instruments; 

4)  The market needs eligibility and selection criteria that effectively support different 

types of low-carbon innovation across different sectors; 

5)  The market needs the right level of support at the right time, while minimizing 

administrative costs of application. 

These hypotheses are addressed in the subsequent paragraphs. 

2.1.  Market failures in low-carbon innovation need to be addressed to meet 

climate targets 

Low carbon innovation is crucial in meeting the international climate goal of 
limiting global warming to 2 °C. A number of studies and reports have highlighted 
that although existing technologies can have a significant impact on decreasing 
greenhouse gas (GHG) emissions, new innovative technologies are crucial to meeting the 
2°C climate goal enshrined in the Paris Agreement (IEA, 2015). The energy and climate 
roadmaps made by several EU industrial sector associations further underpin the 
relevance of innovations for meeting the EU’s decarbonisation goals. 

There is significant potential for low-carbon innovation in the EU. The ES (see 
section 4.1) showed that innovative technologies of various types (e.g. integrated 
process improvements, product innovation or end-of-pipe technologies) are available 
across sectors (see section 4.16) and that moderate to significant cost reductions are 
expected after the first commercial plant is built (see section 4.25). The ER confirmed 
that there is a wide range of technologies which could be suitable for support, with over 
80 technologies identified across the different sectors. 

Several factors drive low-carbon innovation, and some are more important in 
different stages of technology maturity. The ER identified five key innovation drivers 
in companies: 

  Cost savings and competitiveness; 
  Carbon price; 
  Developing robust inter-industrial collaboration models; 
  Reduced environmental externalities resulting in improved corporate sustainability 

reputation; 
International competition for low-carbon products. 

 

The ES found that when deciding on investments in innovative projects, strategic reasons 
(such as developing a competitive advantage or meeting future market needs) are key 
for less mature technologies, whereas the business case is leading for more mature 
technologies (see section 4.2). 

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Technological, institutional, economic, financial, political, and transformation 
barriers hinder low-carbon innovation, most of which translate into a lack of 
financing (Polzin, 2016): 

  Technological barriers include technological risks and complexity and missing 
stakeholder involvement  (Polzin, 2016), disconnected supply chains and 
implementation risk for end-users (ICF, 2016); 
Institutional barriers include infrastructure problems (including physical and 
scientific infrastructure), and a lack of skilled staff and capabilities (Polzin, 2016); 
  Economic barriers include high discount rates, artificially low energy prices due to 

 

fossil fuel subsidies (Polzin, 2016); 

  Financial barriers include capital market imperfections and the lack of political and 
technical know-how (Polzin, 2016), but also risk aversion as a result of stricter 
financial regulation (ICF, 2016); 

  Political barriers include the lack of multi-level policy coordination across different 

levels (Polzin, 2016); 

  Transformation barriers include various lock-ins, including among financial market 

actors (Polzin, 2016). 

The barriers differ for different sectors, as the risks are different (e.g. political risk is 
more important in sectors such as CCS where the business case is driven by policies) 
(ICF, 2016). However, most of the barriers translate into a lack of financing for 
innovative projects (Polzin, 2016). 

The ES and ER substantiated the literature around barriers and found financing 
to be the key barrier. The expert survey found that financing is of key importance in 
increasing the likeliness of take-up of innovative technologies (see section 4.3). 
According to the ES respondents financing is the most severe barrier for most innovative 
projects (see section 4.27). The ES found that alleviating various types of risks is key to 
bring technologies to the next Technology Readiness Level (TRL) (see section 4.26). The 
ES also showed that payback periods of innovative low-carbon technologies typically 
exceed investment criteria, and range up to 50% of the economic lifetime of the 
technology for CCS and energy storage and smart grids (see section 4.34). The primary 
barrier identified in the ER is the lack of a business case for long-term innovation, but 
there are also barriers created by regulatory changes, permitting, licensing, technical 
quality requirements. Finally, the immaturity of collaborative solutions is a common 
theme. 

Improving the finance / business case of innovative projects is expected to stimulate 
company investments in such projects, noting however, that there are other non-
financial barriers to invest in innovative projects. 

Policies are needed to address financial barriers, as well as other barriers. The 
ES found that financial support has the potential to remove crucial barriers for bringing 
technologies to the next TRL (see section 4.28), with all respondents indicating that 
financial support would increase the likeliness of innovations reaching commercial 
viability and around half of the respondents indicated that financial support would 
remove the crucial barrier(s) for the technology. Several policy schemes are already in 
place that target the valley of death, but the support offered is insufficient.  

Governments should provide support beyond technology development to address 
policy and market barriers that typically arise at demonstration and deployment phases 
(IEA, 2015). These policies include technology push and market pull options. Technology 
push includes subsidies (e.g. refund schemes), in which focus areas can be prioritized, 
feed-in tariffs and renewable obligation certificates specifically for renewables, and the 
right innovation frameworks that promote public private partnerships (IEA, 2015) (Polzin, 
2016). Market pull includes measures such as withdrawing fossil fuel subsidies and taxes 
on products, emissions, or fossil fuels. 

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2.2.  The innovation fund can play a pivotal role in promoting low-carbon 

innovation in the EU 

The Innovation Fund will be able to offer a substantial amount of funding, for 
sectors with a significant demand for first-of-a-kind investments: 

  The Innovation Fund (IF) will be able to offer a substantial amount of 
funding. As part of the new EU ETS Phase, in 2021-2030, and assuming 
availability of 450 million allowances, and using a carbon price of EUR 5.85 (ICE 
Dec 25 Future)1, 450m EU allowances have a market value of EUR 2.63bn 
(subject to change as the carbon price obviously changes over time). The fund will 
focus on the sectors renewable energy, carbon capture and storage, smart grids & 
energy storage, and energy-intensive industries. 

  Not all investments need to come from the IF, so the amount of 

supported investments will be bigger than the amount of funding 
available. With an average envisioned 34% IF share in the financing structure, 
companies or other financing parties invest as well (see sections 4.39 & 4.42 & 
4.43). There are other, overlapping and/or complementary, support schemes (see 
sections 4.11 &  4.12). The ER suggested that the IF should not overlap with 
existing EU and national funding programmes; this means that projects eligible for 
other support schemes that offer the same type of support should not be eligible 
for IF funding. In practice, it might turn out that allowing (some) overlap between 
EU and national policies might be beneficial for certain innovative projects2. 

  Total first-of-a-kind investment needs for all projects for all sectors 

included in the IF are estimated to be somewhere between EUR 21 bn 
and EUR 68 bn3. This statement is underpinned by a few different approaches: 

-  The total CAPEX requirements for projects for which respondents from the 
ES filled in the CAPEX added up to EUR 4.5 bn; these 33 projects are 
expected to form just a small part from the total of all potential projects 
that could ask for IF funding; 

-  A high-level top-down “order of magnitude” estimation by Ecofys experts 
estimated the total investment needs for all included IF sectors at EUR 21 
bn to EUR 41 bn; 

-  An “order of magnitude” estimate for each of the sectors shows: 

  An indicative bottom-up estimation of investment needs when all 

identified innovations would be tried once for several sectors in the 
energy intensive industry is EUR 24 bn - EUR 33 bn; with an “order 
of magnitude correction” for non-covered sectors and adding an 
estimate for cross-sector innovative projects increases this 
estimation to EUR 31 bn to EUR 42 bn4; 

1 On 30 May 2017 the EUA price for December 2025 Future was EUR 5.85. Source: ICE Data Futures Report. 
2 In NER300, some Member States provided some form of support on top of the NER300 support. 
3 Due to the necessary significant assumptions used to calculate these investment estimates, further analysis 
needs to be conducted to determine the distribution of Innovation Funds money over the sectors. 
4 This range assumes that relevant innovations identified in the BEIS industrial decarbonization roadmaps (UK’s 
Department for Business, Energy and Industrial Strategy, conducted a series of sector decarbonisation and 
energy efficiency roadmaps published in 2015 (BEIS, n.d.)), provided in the expert survey and provided by 
sector associations in the preparation of the expert roundtables are all implemented once at full scale. This 
implies that multiple innovations are included for some of the major technology routes. 

For many innovations no CAPEX was reported: 

- 

The lower bound is the sum over all innovations with zero values for missing CAPEX values; 

- 
values, average over subsector). 

The upper bound is the sum over relevant innovations (with missing values replaced with average 

This range comes with a number of limitations: it is likely to be underestimated because (a) it does not capture 
all possible innovations; (b) it assumes that all the innovations identified would just be demonstrated once 
(projects implemented at lower TRL would thus not be repeated later at higher TRL); and (c) because it ignores 

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  The CAPEX to be financed for Wind, bio (including transport), solar 
PV, hydro and other renewables5 can be estimated to be around 
EUR 15 bn6; 

  The CAPEX to be financed for 1-2 innovative first-of-a-kind CCS 

projects can be estimated to be between EUR 0,5 bn and EUR 2,8 
bn (ICF, 2016)7; 

  The CAPEX to be financed for transmission (‘hybrid systems’ of 
renewable electricity generation plus storage) and distribution 
(innovative management in the distribution grid) could be estimated 
as around EUR 8 bn8. 

If the EU wants to meet its targets the low-carbon innovation financing gap 
needs to be addressed as soon as possible. The EU has set targets on industrial 
decarbonisation that are depicted in Figure 1. According to the pathway, current 
decarbonisation needs to be accelerated. Industrial innovation takes time because of the 
long development time and slow diffusion rates. The ER found that the likely 
development cycle for a successful technology that is at TRL7 would be 5-10 years. 
Additionally, it found that the opportunity to implement a new technology comes once 
every 15 years in a classic economic plant life-cycle. The ES also showed that technical 
lifetimes are typically much longer (around 25 years; see section 4.23) and that 
retrofitting is only possible for a 35% share of technologies9 (see section 4.24). This 
means that the technologies that need to be deployed to meet the 2050 target need to 
be developed before 2030 (see Figure 1 from (Wyns, 2016)). Other sources also 
recognize the need for innovation finance to meet international climate commitments 
(IEA, 2015). 

innovations below TRL 5. Conversely, the range might be an overestimation as it assumes that all innovations 
are implemented at full scale, while in reality some might be implemented at a smaller scale. Insights from 
sectoral roadmaps and other studies/publications on innovation needs (from sector associations) have not 
consistently been taken into account when preparing this number.  
5 Based on estimates from Ocean Energy Strategic Research Agenda, http://oceanenergy-
europe.eu/images/Publications/TPOcean-Strategic_Research_Agenda_Nov2016.pdf, and Renewable Heat 
Cooling – Platform, http://www.rhc-
platform.org/fileadmin/user_upload/members/Downloads/RHC_SRA_epo_final_lowres.pdf, the value for the 
category other renewables may be significantly underestimated. 
6 Top-down estimation based on average annual investments in the EU in the New Policies Scenario 2021-2030, 
multiplied by observed sector specific R&D intensities. R&D intensities from SETIS as follows:  
https://setis.ec.europa.eu/system/files/Technology_Information_Sheet_Wind_Energy_Generation.pdf for wind 
(2.6-3.0%), https://setis.ec.europa.eu/sites/default/files/Capacities%20Map%202009_0.pdf for solar (2.2-
2.5%), https://setis.ec.europa.eu/sites/default/files/Capacities%20Map%202009_0.pdf for biofuels (3.6-4.5%), 
https://setis.ec.europa.eu/sites/default/files/Capacities%20Map%202009_0.pdf for producers of electrical 
components and equipment (3.4%). For comparison: An estimated EUR 7,5 bn to EUR 18 bn is needed for first 
of a kind commercial demonstration projects in solar PV, wind and bioenergy up to 2020 (JRC, 2013). 
7 There may well be upward potential, as there are 4 European Projects of Common Interest on CO2 transport, 
and as the 2030 SET plan’s targets include at least one commercial scale whole chain CCS project operating in 
the power sector, and at least 3 pilots on promising new capture technologies, and at least one to test the 
potential of sustainable Bio-CCS at TRL 6-7 study and at least 3 new CO2 storage pilots in preparation or 
operating in different settings. This is not quantified further. 
8 Top-down estimation based on average annual investments in the EU in the New Policies Scenario 2021-2030, 
multiplied by observed sector specific R&D intensities, using 
https://setis.ec.europa.eu/sites/default/files/Capacities%20Map%202009_0.pdf for producers of electrical 
components and equipment (3.4%) and industrial machinery (2.6%) as a proxy for distribution and 
transmission. 
9 And partially for another 27%. 

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Figure 1: Industrial decarbonisation and investment cycles (Wyns, 2016) 

15 

 
 
 
 
 
 
2.3.  To meet various market needs, the Innovation Fund should include both 

grants and other financing instruments 

The sectors targeted by the IF are different in many ways. The ER learned that the 
sectors targeted by the IF are different in structure, approaches, business models, size of 
companies, and maturities of innovations. Furthermore, the ES showed that project 
sponsors are diverse both in balance sheet size and project sponsor type (see sections 
4.41 & 4.42). According to the 2013 JRC report, there are differences in financing needs 
per sector. For example, some sectors expressed the need for equity instruments (i.e. 
bioenergy, fuel cells and hydrogen) while other sectors mention primarily grants or loan 
guarantees. These differences were not found in the ES or the ER, where the difference 
was more between different maturity levels. 

Grants are the type of support typically preferred by the market, but there is 
also preference for financing instruments. The ER found that the market needs a 
clear list of finance products on offer. The ER showed that there is a tendency for the 
market to prefer grants from all sectors, especially in the earlier stage development 
projects (TRL 6-7). The ES clearly found that (investment and project development) 
grants are the most appropriate financial products to help innovative technologies to 
develop, and that for higher TRL projects (TRL 7 to 9) also financing instruments can be 
appropriate (see section 4.29).  

However, the ER Summary Report reported that experts agreed that the IF should be a 
revolving fund, which implies the use of other types of financing products (from which 
returns are / can be generated after some time); grants do not lead to a revolving fund. 
This implies that grants need to be complemented by other financial instruments. The ES 
confirmed (some) interest for other financing products, such as loan guarantees, equity 
investments, guarantees on equity investment against projects not delivering as 
expected, performance-based grants, loan financing, and others. 

The ER found that: 

  At early stages of development (e.g. TRL 6-7) grants are preferred, as there are 
no predictable cash flows to repay other instruments and the risk of failure is still 
very high (although equity could also be an option). 

  At later stages of development (TRL 8-9) sufficient cash flow could be generated 
through the sale of low-carbon products to allow other sources of financing such 
as loans to enter, with de-risking instruments offered by the IF. 

The ES results show that, according to the market (see section 4.40): 

  For loans, the minimum tenor period would typically be 10 years, and the 

maximum interest rate would typically be 3%; 

  For equity, the minimum holding period would typically be 5 years, and the 

maximum return on equity would typically be 8%. 

The above is roughly consistent with other studies (ICF, 2016). Figure 2 shows this for 
ICF’s findings, although grants are not displayed in this overview, and Figure 3 shows the 
findings of Jenkins and Mansur (Jenkins, J., & Mansur, S, 2011). 

16 

 
Figure 2: Different financing forms for innovative projects (ICF, 2016) 

Figure 3: Different financing forms for innovative projects (Jenkins, J., & Mansur, S, 2011) 

In some cases, operational support is needed to enable investments in 
innovative projects. The ER found that the required payback time for innovative 
projects is strongly influenced by the policy and market framework. Related to that, 
some experts in the ER suggested support for OPEX, to guarantee a business case to get 
access to private financing. This picture is confirmed by the ES, where for 7 of the 
reported projects’ operational costs exceed operational benefits, and is also recognized 
by scholars on this topic (Polzin, 2016). 

17 

 
 
 
 
 
 
 
2.4.  The market needs eligibility and selection criteria that effectively support 

different types of low-carbon innovation across different sectors 

The ER showed that the market requires transparent and clear project selection and 
eligibility criteria. This reduces financial and regulatory risk (Wyns, 2016). The market 
needs are presented for eligibility and selection criteria separately. 

2.4.1.  Eligibility criteria 

The market needs support for TRL 6-9. A consensus of experts in the ER felt that 
support is needed for TRL 6-9. This includes technology demonstration in the relevant 
industrial environments (TRL 6), system prototype demonstration projects and 
qualification in their operating environments (TRLs 7-8) and actual system proofs in the 
competitive production and commercial environment allowing for roll-out (TRL 9). We 
interpret this to imply that: 

  A project that aims to take a technology to TRL 9 should be supported, as it is the 

first of a kind project the competitive and commercial environment, but 

  A project for a technology that is already at TRL 9 should not be supported as it 

would not be the first of a kind project in the competitive and commercial 
environment. 

In the ES, technologies currently at TRL 5 were reported more than any other TRL (the 
question allowing for TRL 5-9), especially in the energy intensive industry sector, while 
the renewable energy production sector reported (by far) most TRL 7 technologies (see 
section 4.17). Using a similar line of reasoning as above, technologies currently at TRL 5 
should be eligible for an instrument aiming to support achieving TRL 6-9. 

Funding is needed for relatively large projects with CAPEX of EUR 5m to EUR 
200m, so the eligibility criteria for project size should account for that. According 
to the ES, most projects are sponsored by large companies (see section 4.41). This is 
likely to be the reason the ER found that funding request between EUR 5m to EUR 200m 
should be considered, although there was no consensus on this. The ER showed that the 
amount of funding needed per innovation transaction varies significantly between sectors 
and technologies. The ES showed that required CAPEX differs significantly from project to 
project; around a quarter of the projects would have CAPEX higher than EUR 200m (see 
section 4.37), although this would not necessarily translate to funding needs of EUR 
200m. Literature supports these findings, with studies showing large differences in 
funding needs between projects and sectors (ICF, 2016). 

2.4.2.  Selection criteria 

The market has a preference for technology corridors or competition within 
sectors or subsectors. The ER concluded that as the IF does not know from the start 
the technologies that may be invented in the future, the projects should not be restricted 
to a predetermined list of technologies. The majority of respondents across all sectors of 
the ES reported that part of the innovations are predictable (see section 4.7), indicating 
that technology corridors could be an option. There was a consensus in the ER in favour 
of assessing projects within a technology corridor and not based on a list of technologies.  

Most of the respondents to the ES consider competition within sectors or subsectors 
appropriate for selection of supported projects (see section 4.8). 

Cross-sectoral cooperation should be encouraged by the IF. The ER showed that 
the IF could focus on supporting an enlargement of value chains, increasing cross 
industry cooperation and innovating horizontally applicable, integrated solutions. In the 
selection criteria, the formation of collaborative consortia with cross-sectoral technologies 
could be incentivized. This cross-sectoral collaboration is also mentioned by scholars as a 
way to accelerate innovation (Wyns, 2016). 

18 

 
Projects should be assessed based on multiple criteria. The ER showed a 
preference for a multiple criteria assessment of projects. Some clusters of criteria were 
mentioned: 

  CO2 savings potentials, costs, stabilization market prices for the technology to 

“work” 

  Addressable market, economics and sustainability of the technology; 
  Financial aspects of the project itself; 
  Cross-sectoral collaboration. 

The often-used IRR (internal rate of return) metric is found inadequate for project 
evaluation of high-risk investments by many of the experts in the ERs.  This was 
supported by the findings from the pilot of the ES. It is the consortium’s understanding 
that the reason for this inadequacy is that the purpose of (especially relatively low TRL) 
innovative projects is to learn from the project rather than to earn money with the 
project. The IRR is often assessed for the full innovation cycle (from lab-scale to wide 
commercial application), rather than just for one project “en route”; many ER 
participants stressed the importance of the strategic reasons as a driver for approval 
decisions for innovative projects (see section 2.1). 

The ES respondents expressed that they considered technical performance criteria (e.g. 
GHG emissions reductions or renewable energy production), economic criteria (e.g. cost 
per unit of performance) and innovation potential criteria (e.g. replicability and 
scalability) more or less equally appropriate to select projects, with limited differences 
between the sectors (see section 4.9). The importance decreased from economic 
viability, replicability, competitiveness and value chain effects to technology transfer, but 
all received considerable “importance points”. Hardly any importance was given to (non-
specified) other qualitative criteria (see section 4.10). While the ES did not explicitly ask 
for respondents’ preference for a multi criteria ranking system, the fact that none of the 
respondents awarded the full 10 points to one of the qualitative criteria could be taken as 
an indication in favour. 

2.5.  The market needs the right level of support at the right time, while 

minimizing administrative costs of application 

2.5.1.  Aid intensity 

Aid intensity required by the market ranges from 10-53% of the financing need, 
depending on the sector. According to the ES, required support from the innovation 
fund ranges from 25 to 53% of the financing structure, and lower TRL technologies rely 
more on balance sheet financing (see section 4.39), which might be counter intuitive, as 
one would expect these to require the bigger share of funding from the innovation funds. 
Average financing structures differ between sectors, with energy storage and smart grid 
projects having the highest average need for IF support (see section 4.39). Additional 
funding comes from other investors (sections 4.42 & 4.43) and policy schemes (see 
sections 4.11 & 4.12). For the renewable energy sector, other studies show typical 
support levels of 10-30% (ICF, 2016). In the Commission’s stakeholder consultation 
stakeholders asked for more funding for sectors with unavoidable emissions or where 
further emission reductions are not feasible with available technologies (EC, 2015). 

19 

 
 
 
 
2.5.2.  Pre-financing 

The market has a clear preference for a milestone-based approach. IF funding 
should be provided at the time the project needs it (i.e. when there is a funding gap) and 
this leads to a milestone-based approach, according to the ER. The experiences with 
NER300 confirm this picture: Risks associated with the conditionality and the timing of 
the grants resulted in cash flow uncertainties. Upfront funding removes this uncertainty, 
but in NER300 this was not possible in most cases (ICF, 2017). Also the Commission’s 
stakeholder consultation pointed towards a milestones-based approach (EC, 2015). 

The ER showed that developers and SMEs prefer front-end (or milestone) financing and 
companies with larger balance sheets can better sustain cash-flow timing differences. 
Additionally, the ER that projects which did not meet their milestones should have their 
IF funding commitments reviewed and potentially (after a warning and appropriate 
procedure) revoked to ensure that projects which fail, fail fast to ensure that new 
innovations which arise in later years can access the capacity “freed up” from funding 
pledges to failed projects. 

The ES showed that most of the reported projects have finished a feasibility study, and a 
large share of projects have been through front-end engineering and design (see section 
4.35). This different level of development ideally is taken into account. 

2.5.3.  Effective application process 

The market prefers a two-staged application process, and ideally would have a 
”one-stop-shop” for all innovation support. The ER found a consensus on the 
preference of a two-stage IF application process with stage 1 being “light” to pre-qualify 
projects against a grid of criteria and then stage 2 would involve a fuller project 
description and more detailed due diligence. The expected time needed for preparing an 
Innovation Fund application is 6 months (see section 4.14). As this is a significant 
investment, companies prefer a due diligence process that is effective, with less no-go 
criteria (i.e. “red tape”) and greater speed, according to the ER. The ER showed that the 
market desires a one stop shop for all kinds of financing needs and to streamline 
complex application procedures for funds at EU and national level. The Commission’s 
stakeholder consultation also showed a clear preference for simplification and more 
flexibility (EC, 2015). 

2.5.4.  Right timing of support 

The market preference is divided between continuous opening and annual calls 
for applications. The ES respondents’ preferences are divided between continuous 
opening and annual calls, with considerably lower support for a system with biennial calls 
(see section 4.13). The ER confirmed there is similar support for continuous opening and 
annual calls. Companies in favour of continuous opening noted that there should be a 
consideration for sector balance. Companies in favour of multiple calls noted that this 
would allow for staged funding across the decade, and this would increase competition to 
focus and sharpen the projects. 

2.5.5.  Management 

The market needs a fast, transparent process involving independent experts. 
The ER consensus was that the IF should be independent, have robust and transparent 
procedures, and have a short evaluation process involving independent sector experts. 
The project assessment due diligence processes should be transparent and known to 
applicants in advance. The ER also showed that the market needs a fast evaluation 
process taking 2-3 months. 

20 

 
 
 
3.  EXPERT SURVEY METHODOLOGY 

The purpose of the expert survey (ES) was to obtain inputs from a representative sample 
of experts relevant to the market design of the Innovation Fund. Participants invited to 
respond to the survey were carefully selected in collaboration with the Commission and 
sector organizations. The survey was closed to the general expert public. The process for 
selecting participants and developing questions is explained in more detail below.   

Respondents 

493 stakeholders were invited to participate in the expert survey – with the aim of 
obtaining insights from experts working mainly in companies or organizations that could 
potentially apply for support from the Innovation Fund, sector organizations, financial 
institutions and representatives of member states of the EU. This resulted, after cleaning 
(see further on), 110 responses were received of which 73% came from company 
representatives, 11% from sector organizations, 6% from financial institutions, 3% from 
knowledge networks, 2% from member states of the EU and remaining 6% from other 
organizations. Analysis of the sample of the respondents showed that more or less 
representative input was obtained across the spectrum of sectors relevant for the 
Innovation Fund. All the participating individuals were contacted by email message 
including their personal login details and the web link to the online-based survey. 

The respondents were selected and invited in different calls, to ensure an adequate 
sample size with the below-expected response rate. Before the first call, a pilot survey 
was conducted with 12 experts, after which the survey was refined. The responses of 
pilot participants are also taken into account in this report. By having multiple calls, the 
consortium was able to retrieve many more expert views from the expert survey.  

Questions 

The initial list of questions was based on the information needs listed by the consortium 
for the different tasks, and the discussions between consortium members. The questions 
were based on information needs for each of the project tasks and were drafted by the 
consortium partner in charge of that task. During the consortium’s team days, the data 
needs were discussed to identify where they overlapped and where they could be 
combined. The questions were drafted to supplement. Rather than duplicate, the 
information from the expert roundtables. Some overlap between the ES and the ER was 
unavoidable because the dataset needed to be consistent, and because it was necessary 
to provide the deep knowledge required. 

After the creation of the initial list, it was refined by looking at the questions from various 
perspectives, thinking about applying the answers to the questions in the consortium’s 
analysis, and testing the survey in a pilot. In order to make sure that the questions make 
sense to all respondents, the consortium partners looked at the questions from different 
perspectives (e.g. small versus large companies, companies versus associations or NGOs, 
low TRL versus high TRL, etc.). To make sure that the outputs could be processed to get 
the desired insights, the consortium thought about how the answers to various questions 
would be combined. 

Cleaning of the dataset 

The expert survey was filled in by 130 unique respondents. However, a share of these 
respondents did not fill in any usable entries (i.e. no more than contact information), one 
respondent only filled in dummy data (like “adgadg”), and from some companies multiple 
respondents filled in the survey. In this last case, the answers of respondents were 
compared, and if they matched, only the respondent that filled in most of the questions 
was included; where different answers were given, both respondents were included 
because these formed different insights. The dummy data and respondents that did not 
provide any usable input were filtered out. 

21 

 
 
The technologies/projects that the respondents filled in (maximum 3 per respondent) 
were also subjected to a check, to filter out duplicates. Two technologies/projects were 
filtered out for this reason. 

Some responses to certain questions were highly unlikely. For example, in the question 
regarding the payback period of the technology, some respondents filled in 10 million, 
and such unrealistic answers are excluded. 

Any links that respondents referred to in their answers have not been assessed. 

22 

 
 
 
4.  EXPERT SURVEY FINDINGS 

This chapter presents the findings of the Expert Survey (ES). The findings are presented 
per topic, and structured based on the survey’s structure. 

4.1.  Composition of Expert Survey respondents 

The expert survey was filled in by the 110 respondents listed in Table 1 in Appendix A. 
The respondents were selected to represent a broad range of organizations and 
institutions, but the focus was on companies or other organizations that would apply for 
funding from the Innovation fund. Figure 4 shows that 73% of respondents were in this 
category. Sector organizations accounted for 12% of the respondents, and the remaining 
15% of respondents filled in the survey for knowledge networks, investors, member 
states, or other organizations. 

Figure 4: Organizations for which respondents filled in the expert survey 

As the Innovation Fund targets four sectors; energy-intensive industries, renewable 
energy production, energy storage & smart grids, and carbon capture & storage; the 
expert survey aimed at representing these sectors in its respondents. Figure 5 depicts 
that all four sectors are covered by over a fifth of respondents. Within the sectors, 
subsectors are defined to test whether the expert survey respondents are sufficiently 
diverse. The detailed breakdown in Figure 5 shows that all defined subsectors are 
covered by at least one of the respondents, and all but the lime manufacturing sector are 
covered by more than one respondent. Various other sectors were reported, including oil 
& gas production, fossil power generation, desalination, demand response, TSO, 
water/waste management, silicon and railways. 

Note that 39 out of the 104 respondents that reported their sector reported multiple 
sectors and therefore the percentages in Figure 5 do not add up to 100%. Six of the 
included respondents did not report a sector.  

To safeguard confidentiality, all subsectors that are covered by less than 5 respondents 
are grouped together in the Other category in the rest of the ES analysis. This concerns 
the energy-intensive industry subsectors pulp & paper manufacturing and lime 
manufacturing. 

23 

 
 
 
 
Figure 5: Sectoral coverage of the expert survey 

4.2.  Factors in investment decision-making 

In the section on company information, questions asked about companies’ decision 
making processes. The first set of questions identified how important certain factors are 
in investment decision-making for innovative projects. A differentiation was made 
between lower levels of technology readiness (TRL 5-7) and higher levels of technology 
readiness (TRL 8-9).  

Our analysis of the responses (depicted in Figure 6) shows that differences between 
sectors are marginal, and that the general trend is that strategic reasons are key in lower 
TRLs. The drivers behind this are the development of a competitive advantage and 
meeting market needs. The respondents indicated that projects at lower TRLs do not 
generate revenue and in some cases the business case is not quantified. However, there 
should typically be an expectation of a viable future business case in order to make the 
investment. The political and societal reasons are related to the strategic business case, 
as (the expectation of) policies shape the markets. Other factors (when filled in) are also 
considered highly important. The other factors included some overlapping responses, but 
some additions, such as the preference to spend resources on commercial activities 
rather than development.  

For the higher TRLs, a viable business case is more important than for the lower TRLs. 
The respondents indicated that this is the result of increasing project costs and more 
clarity on commercial application. Strategic reasons are still important, but a good 
business case might overrule this factor. At this stage the market demand is increasingly 
important. Societal and political reasons typically have the same importance as in lower 
TRLs. As the costs increase, management capabilities are increasingly important, but also 
regulatory requirements, market competition, and future bankability come into play. 

24 

 
 
 
Figure 6: Importance of factors in investment decision-making for lower and higher TRL projects 

4.3.  Options to increase likeliness that innovative technologies/projects are 

taken up 

Since the Innovation Fund will aim to stimulate the take-up of innovative technologies 
and projects, respondents were asked what the Innovation Fund could do to achieve 
that. Our analysis of the answers (depicted in Figure 7) shows that across sectors, 
financing (i.e. finance-related categories reduce project risks and costs, fill a financing 
gap, and improve terms of financing/lower the cost of capital) was recognized as the key 
contribution of the Innovation Fund. Driving cooperation, getting attention for the project 
within the company and other options (including helping to provide a stable regulatory 
environment, providing risk mitigation facilities, encouraging public administration to 
facilitate legal framework, and bankability) were mentioned to a lesser degree by the 
respondents. 

From this the consortium concludes that there is a confirmed need for a financial 
instrument such as the Innovation Fund. 

25 

 
 
 
Figure 7: Means for the Innovation Fund to promote uptake of innovative technologies and projects 
for strategic reasons 

4.4.  Weighted average costs of capital 

Companies often use a weighted average cost of capital (WACC) in investment decision-
making. Therefore the consortium asked respondents which WACC is used by the 
company implementing the technology or innovative project. Our analysis (depicted in 
Figure 8) shows that the majority of companies use a WACC between 5 and 10%. Some 
companies use a significantly higher WACC of over 20%. When comparing the WACC in 
different sectors, the results are similar. The median WACC in the carbon capture and 
storage sector is one category above the total median (i.e. 10-15%), but due to the 
limited number of responses in this sector, this deviation from the average is not 
considered significant.  

The assessment at the subsector level did not provide additional insights. The spread of 
WACC used was typically similar to that in the aggregated sectors. 

The WACC is mapped against balance sheet size, and this analysis did not indicate a 
correlation of WACC with balance sheet size, although the number of responses was 
insufficient to be considered fully representative. 

26 

 
 
Figure 8: Weighted average cost of capital per sector 

4.5. 

Internal carbon price 

Besides the WACC, another key input in decision-making is the internal carbon price (if 
present) used by the company. The expert survey shows that companies apply carbon 
prices that range between EUR 1 and EUR 50 per tonne CO2 (Figure 9). An internal 
carbon price below EUR 10 per tonne CO2 was reported most frequently, which is roughly 
in line with current EU ETS allowance price. However, a considerable number of 
respondents reported higher internal carbon prices and therefore the median is between 
EUR 10 and EUR 20 per tonne CO2.  

The number of respondents to this question is relatively low. The comments from the 
respondents on this question show that some respondents feel that the currently applied 
carbon price is not relevant for the time frame that the IF focuses on, some respondents 
do not use an internal carbon price, and some state that this differs based on the market 
and related policies. One respondent provided the carbon price needed for the technology 
to be economically feasible (this response is not included as it was not asked for). Many 
of the respondents that skipped this question did fill in other questions such as on WACC, 
which suggests that they did not fill in the carbon price because they do not use an 
internal carbon price. 

27 

 
 
 
Figure 9: Internal carbon prices currently used by companies 

When comparing the survey findings to other sources, the internal carbon prices are 
relatively low in the expert survey. CDP, for example disclosed internal carbon prices 
applied by companies10 (Figure 10). Looking at European companies in the Energy, 
Industrials, Materials, and Utilities sectors, we found that the median carbon price is EUR 
24 per tonne CO2. This is above the range that the expert survey respondents typically 
selected; note that the target audience is different though. 

Figure 10: Comparison of carbon prices from expert survey with CDP findings 

10 CDP (2015) Putting a price on risk: Carbon pricing in the corporate world. Available at: 
https://www.cdp.net/en/campaigns/commit-to-action/price-on-carbon  

28 

 
 
 
                                                 
4.6. 

Internal return hurdle rate for regular and high-risk innovative projects 

The internal rate of return (IRR) is often used by companies in decision-making to assess 
the profitability of a project. Generally, the higher the IRR, the more desirable it is to 
undertake the project. The survey results show that for regular projects companies 
typically apply an IRR threshold (hurdle rate) between 7 and 14% in decision making 
(Figure 11). For energy-intensive industries higher IRR hurdle rates are frequently used, 
and as a result the median IRR hurdle rate for this sector is higher. 

Figure 11: Internal rate of return hurdle rate for regular projects 

When asking the same question for high-risk innovative projects, the survey respondents 
indicated that the IRR hurdle rate was substantially higher (Figure 12). This can be 
explained by the company compensating for the risk in the potential reward of 
undertaking the project successfully. Of course, some innovation projects do not deliver 
revenues and therefore an IRR cannot be calculated for these projects. 

29 

 
 
 
Figure 12: Internal rate of return hurdle rate for high-risk innovative projects 

4.7.  Predictability of innovations 

The extent to which commercially viable innovations can be predicted for the next 10-15 
years is important when designing the Innovation Fund. According to the survey 
respondents some of the innovations are typically predictable (Figure 13). This does not 
differ per sector. Twenty percent of respondents reported that the majority of 
innovations are predictable. According to two respondents, all innovations are 
unpredictable. These respondents were in the energy-intensive industries and renewable 
energy production sectors. 

Figure 13: Predictability of innovations 

30 

 
 
 
4.8.  Scope for competition among projects 

Respondents were asked to select what they considered to be the appropriate scope for 
competition among projects, under the assumption that there would be a competitive 
process for selecting projects. Respondents could select competition within the same 
sector (e.g. energy-intensive industry, renewable energy technologies, carbon capture 
and storage), competition within more narrowly defined sectors (e.g. subsectors such as 
cement, lime and aluminium), competition within more narrowly defined innovation 
categories (e.g. categories such as energy efficiency, fuel switch and material efficiency), 
or competition between all areas and technologies. 

The results show that most of the respondents think that competition should take place 
within sectors or subsectors (Figure 14). Also, a share of respondents think competition 
within innovation categories is most appropriate.  

Figure 14: Scope for competition among projects 

About a third of respondents selected multiple categories, indicating that competition 
should take place within innovation categories and within (sub)sectors. Some 
respondents would like to see competition between all projects, irrespective of sector and 
technology.  

Among the specifications from the respondents that selected Other, some notable 
answers were:  

 

 

 
 

“Wise allocation based on technology gap versus benefit potential, thereafter 
competition within more narrowly defined sectors” 
“The choice for one of the aforementioned approaches is dependent on the choice 
of the indicator by which the competitiveness in the process will be measured” 
“Competition within the same TRL level of development” 
specifically for the case of CCS: “Please note that CCS is not a sector in the 
traditional sense and instead is an abatement technology that can be applied to 
multiple sectors. This includes the power sector which should not be restricted 
only to renewable generation as is implied in some of the questions”. 

When looking at the distribution of the responses over the different sectors, the 
consortium observed that all proposed scopes for competition are selected across 
sectors, except for the option “Between all areas and technologies covered by the 
innovation fund”, which is only selected by respondents from the energy-intensive 
industries sector. 

31 

 
 
 
 
 
4.9.  Ranking criteria 

Respondents were asked what ranking criteria would be most appropriate in selecting 
projects for funding from the Innovation Fund. The responses show that on average 
there is not much difference in importance of technical, economic and innovation 
potential criteria (Figure 15). Also between different sectors, the differences are small. In 
other criteria, the respondents mentioned a reduction of energy imports, manageability 
of generation, time to commercial application, performance of products, cost 
effectiveness, effect on local economy, capacity to increase exports, potential global 
impact after scale-up, and product value. 

Figure 15: Appropriateness of ranking criteria across sectors 

4.10.  Qualitative selection criteria 

In addition to the ranking criteria, the respondents were asked to score qualitative 
selection criteria based on their relative importance. Participants were asked to award 
each of the different criteria a share of ten points. The results show that on average 
respondents think that economic viability is most important (Figure 16). This is the case 
for all sectors. Replicability and competitiveness are also considered important. Value 
chain effects and technology transfer are considered less important. Under other criteria, 
respondents reported criteria: cross-sectoral spill over effects, innovativeness, improved 
GHG performance in intermediates and products, and chance of success. 

32 

 
 
Figure 16: Importance of qualitative selection criteria 

4.11.  Overlapping financing instruments 

The respondents were asked whether they knew any financing instruments that would 
overlap with the Innovation Fund. The responses show a variety of overlapping 
instruments on EU level as well as on MS and even local level (Figure 17). Note, 
however, that it is already known that some of the instruments will not be in place at the 
time the Innovation Fund will be implemented. The results on subsector level show that 
the overlapping financing instruments are present in all subsectors. 

Figure 17: Overlapping financing instruments 

4.12.  Complementary financing instruments 

Next to overlapping financing instruments, the respondents were asked whether they 
know of any financing instruments which have a degree of complementarity to the 
Innovation Fund. More respondents indicated that they knew complementary instruments 
than knew overlapping instruments (Figure 18). However, many of the instruments 
mentioned in response to this question were the same as those listed as overlapping with 
the Innovation Fund. This indicates that these instruments are partially overlapping, and 
partially complementary. 

33 

 
 
 
 
Figure 18: Complementary financing instruments 

4.13.  Frequency of calls 

When asked which frequency of financing calls respondents think is most appropriate, 
only a small share (i.e. 15%) answered that a bi-annual call is most appropriate (Figure 
19). The majority of respondents are either in favour of an annual call or a continuous 
call. The respondents seem to be divided nearly equally between these two options. 
Between sectors, this can be different. For example, in the carbon capture and storage 
sector respondents prefer continuously open financing calls. 

The consortium did not find a preference for different TRLs, although the data suggests a 
preference for continuously open financing calls from respondents that filled in a 
technology in TRL 5. 

Figure 19: Appropriateness of frequency of calls 

4.14.  Application preparation time 

The respondents were asked how much time they expected to need to prepare for an 
Innovation Fund application. The responses show that typically 6 months are needed for 
preparing an Innovation Fund application (Figure 20). The subsector level analysis 
showed that this holds true for all subsectors. 

34 

 
 
 
Figure 20: Expected time needed for preparing an Innovation Fund application 

4.15.  Staged application process 

A staged application process could reduce the risk of projects not selected for the 
Innovation Fund incurring the full administrative costs of the application. Most 
respondents indicated that they would welcome such a process (Figure 21). This was also 
the case within all subsectors. The respondents that reported technologies in a lower TRL 
more often would not welcome a staged application process. 

Figure 21: Staged application process 

When asked for elaboration on their answer, most notable answers from the respondents 
that would welcome a staged application process were:  

 

 

 
 

 

“A staged approach should be designed in a way that enables the project 
consortia with little expenditures to compile submissions, which clearly capture 
the essence of the proposed project, so that in case of non-selection the 
frustrated investments are limited” 
“A staged process could be combined with a price that would help finance the very 
costly application” 
“Pre-screening is necessary to avoid unnessesary work” 
“However, to our experience the difference of such proposals is sometimes quite 
small and for sake of efficiency a completely worked out application can to be 
submitted for a one step process” 
“Innovation projects evolve permanently, progressing with technologies and state 
of the art. It is not adapted to have a 1 stage procedure asking for 6 months of 
work + 1 year of evaluation. As for the project, the evaluation has to be dynamic, 
even after acceptance” 

35 

 
 
 
 
 

 

“This would result in a better understanding of the complete process (what 
documentation is necessary / what are the succes factors... )” 
“Finding proper project partners and drafting the project is very difficult. Hence it 
is of importance to reduce this first initial effort and start with smaller projects 
with managably higher risks.” 

Notable answers from respondents that would not welcome a staged approach were: 

 

 

 

 

 

“An application to IF should be a by-product of the project/product development 
activities and documentation anyway. Thus there should be synergies and 
efficiencies, which should allow to keep admin costs for an application at a 
reasonable level. Projects should not be just invented or triggered by the 
existence of IF, but projects/product development should already be ongoing, 
whilst then support by IF should help to bridge the gap (or valley of death, if you 
like)” 
“The preparation time for a 2-stage proposal is nearly the same as a 1-stage. 
However a 2-stage process will substantially increase the time to grant while 
there is also the possibility of deviating opinions of evaluators in stage 1 versus 
stage 2.” 
“Before application a counselling by an agency that is responsible for evaluation of 
projects and the administrative process of granting should be mandatory and to 
be established.” 
“A staged process has the risk of prolonging the process beyond what will be 
needed for a due diligence. If continuous open financing calls are applied, projects 
can mature to the level needed to start application. Transparency of criteria and 
practicability is key for effective project execution and support application.” 
“In order to have a short frequency of calls, companies need to be fast in 
applying. And the EU institutions need to be fast in assessing and decision making 
as well as implementation!” 

4.16.  Innovation types of reported technologies 

Respondents were asked to report about innovative technologies they had in mind. All 
respondents were allowed to fill in this section for up to 3 technologies. Data was filled in 
for 96 technologies in total. The subsequent findings are presented on a per-technology 
basis. 

Innovations can be categorized in several ways. One categorization is used to map 
innovations in the expert survey. Respondents were able to fill in a maximum of three 
innovative projects and were asked to specify the type of innovation. The results of this 
are depicted in Figure 22.  

The first thing these results show is the distribution of innovations within each sector 
over the innovation types. Although according to the survey’s results the material 
efficiency improvement innovations are limited to the energy-intensive industries sector, 
the other innovation types are available across sectors. The 4 projects that innovate 
regarding recycling and re-use in the carbon capture and storage sector are carbon 
capture and utilisation projects. Also note that most technologies are specified as fitting 
multiple innovation types. The definitions of innovation types can also overlap in practice. 
For example, a new technology to capture CO2 from flue gases can be considered a new 
process to capture CO2, but the technology provider probably would consider the 
technology a product innovation. This explains unexpected product innovations reported 
in e.g. the CCS sector. Product innovations reported in the renewable energy sector 
included for example new wave energy technologies. 

The second observation from Figure 22 is that relatively few respondents specified their 
innovative project(s) as “Other”, suggesting that the technology categories cover the 
bulk of innovations that could be suitable for the Innovation Fund. Technologies 
mentioned in “Other” included: sector coupling, chemical innovations, integration of 
technologies, disruptive process innovation, cost reduction, and upscaling. 

36 

 
Figure 22: Innovation types across industries 

This analysis shows that innovation takes place across innovation types and sectors and 
suggests that in-box thinking is not appropriate when supporting innovation. 

4.17.  Technology Readiness Level (TRL) 

The respondents were asked to specify the technology readiness level of the technologies 
they reported. The responses are depicted in Figure 23. Most of the reported 
technologies are in the lower TRLs (5-7) and only 12% of reported technologies are in 
the higher TRLs (8-9). While the coverage of the survey is not 100%, the results suggest 
that there are more technologies with lower TRLs than with higher TRLs. This makes 
sense when considering the innovation funnel: a higher share of innovations fails in the 
lower TRLs than in the higher TRLs. 

There are clear differences in TRLs of reported technologies of different sectors. Energy-
intensive industries predominantly reported technologies in TRL 5. Renewable energy 
production reported mostly technologies in TRL 7. For the energy storage & smart grids 
and carbon capture & storage sectors the technologies are more spread over the TRLs. 
Subsector-level assessment of TRL did not provide additional insights. 

37 

 
 
 
Figure 23: Technology readiness levels of reported technologies 

The TRL data is used to check for relations of other variables with TRL in the following 
sections. 

4.18.  Expected market entry of the technology 

When asked for the expected entry into operation at commercial scale, unexpected 
answers were given. Most notably, 31% of the TRL 5 technologies are expected to enter 
the market in 2020. This is highly unlikely, since technologies typically take much more 
time to develop. Additionally, the curves in Figure 24 are within a bandwidth that is 
rather narrow when considering the typical time frame of innovations progressing 
through TRL 5 to 9. 

Because the results cannot be explained logically, the consortium suspects that a share 
of respondents misinterpreted the question. Therefore, this data is not used in our 
analysis. 

38 

 
 
Figure 24: Expected market entry year for different TRLs 

4.19.  Maximum obtainable market share 

The expert survey respondents estimated the maximum obtainable market share for 
their reported technologies as a percentage of total production11. The aggregated findings 
are depicted in Figure 25. The total median market share that can be obtained is 35%. 
However, when individual sectors are observed, there are significant differences between 
renewable energy production and other sectors. This can be explained by the large range 
of technologies that are applied in the renewable energy production sector to produce a 
homogeneous product (i.e. electricity).  

11 In the survey, the market was defined as the total European production of the basic product which can be 
produced by the innovative technology after commercialisation (and by the reference technology). The basic 
product the respondent referred to should be similar to its activity unit stated before. The respondent was 
asked to assume for this estimation that the market circumstances would be constant. Examples were provided 
for illustrative purposes. 

39 

 
 
 
                                                 
Figure 25: Maximum obtainable market share of reported technologies 

4.20.  Expected market share development towards 2050 

The expert survey included a question on the expected market share development of the 
technology towards 2050. In analysing the results, the consortium found that most of the 
respondents filled in market shares that exceeded the maximum obtainable market share 
as depicted in the previous section. Therefore, the consortium suspects that the question 
was misinterpreted by the respondents, and the data from this question cannot be used. 

4.21.  Future global market share 

When asked how the respondents expected the global market share in 2030 to compare 
to that in the EU, most respondents expected a similar market share globally as in the EU 
(Figure 26). Of the respondents that expected a difference, most expected it to be lower 
globally than in the EU. This suggests that respondents expect the EU will lead in terms 
of technology diffusion compared to the rest of the world. 

Figure 26: Expected market share globally compared to EU in 2030 

4.22.  Effect on exports 

Nearly all respondents reported that they expect the development of their technologies to 
increase the export compared to the current technology (see Figure 27). Of the four 
technologies that are not expected to increase exports one is in renewable energy 
production and the other three in energy-intensive industries. 

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Figure 27: Expected impact of technology on export 

4.23.  Technical lifetime 

Technical lifetimes of reported technologies (i.e. the total time period during which an 
asset or machine can technically perform or function before it must be replaced) is 
typically 25 years (Figure 28). Half of the reported technologies have lifetimes between 
20 and 35 years. The technical lifetimes in energy storage and smart grids are lower than 
in other sectors. The average technical lifetime in the carbon capture and storage sector 
is higher than three quarters of the technologies due to some notably high technical 
lifetimes (i.e. one of 160 and some of 100 years). 

Figure 28: Technical lifetimes of reported technologies 

41 

 
 
 
 
At a subsector level, some differences in lifetimes can be observed. This is most evident 
for CCS technologies with power generation which have high technical lifetimes (43 years 
on average) mainly caused by one technology with a lifetime of 160 years. Also, energy-
intensive industry subsectors have high average technical lifetimes, such as cement, with 
an average of 34 years and a maximum of 100 years, and iron and steel with an average 
of 33 years and a maximum of 100 years. Subsectors with low technical lifetime 
technologies are ocean energy and electricity storage, both with an average of 19 years. 

4.24.  Retrofitting potential 

Some technologies are applicable for retrofitting of existing installations. This means that 
the technology can be applied as a modification of an existing installation and is not just 
available for newly built plants. Of the reported technologies, about a third cannot be 
retrofitted, a third can be retrofitted to a share of existing installations, and a third can 
be retrofitted to all existing installations (Figure 29). There are significant differences 
between sectors in retrofitting potential. The potential is relatively high in energy storage 
and smart grid technologies and relatively low in renewable energy production. Our 
analysis at a subsector level suggests that in all subsectors there are technologies that 
can fully be retrofitted, but also technologies that cannot be retrofitted.  

Figure 29: Retrofitting potential of technologies 

If only a share of installations could be retrofitted, this share ranged from 3 to 90% of 
existing installations. No significant differences between subsectors in this share were 
observed. 

4.25.  Cost reductions expectations 

The respondents indicated that for most (96%) technologies cost reductions are expected 
after the first commercial plant due to learning effects and economies of scale (Figure 
30).  

42 

 
 
Figure 30: Expected cost reductions after commercialization 

4.26.  Risks 

Respondents were asked to rate the importance of alleviating risks to bring the 
technology to the next TRL. Most respondents rated technology and performance risks as 
the most important (Figure 31). Financial risks and market policy and regulatory risks 
were typically rated as “more important”. Completion and construction risks and planning 
and permitting risks were rated of average importance and social acceptance risks the 
least important. 

Figure 31: Importance of risks 

The risks specified in the other category included CCS directive related obligations, 
dealing with green intermittency, political environment, installation risks, carbon prices, 
hydrogen costs, and raising awareness. 

4.27.  Barriers 

The respondents were asked to rate the severity of barriers for the technologies they 
specified. The results show that the lack of funding sources is the key barrier, but also 

43 

 
 
 
 
the profitability is insufficiently attractive (Figure 32). In many cases the risks of the 
project are prohibitively high. The technology not being perceived as of “core 
importance” by decision-makers and the business opportunity only usable for a small 
share of company turnover are considered less important barriers. 

Figure 32: Severity of barriers 

In “other”, the respondents mentioned reluctance of investors to innovate plants, 
customer acceptance of solutions, financial barriers, non-financial barriers, stability of 
regulatory and political environment, uncertainty regarding future carbon prices, oil 
prices, upscaling risk, OPEX of technology foreseen to exceed existing technologies, and 
specific arrangements with current banks. 

4.28.  Effects of financial support 

Respondents were asked to select the best of three phrases describing the expected 
effect of financial support on the innovative technology. All technologies would have an 
increased likeliness of reaching commercial viability with financial support (Figure 33). 
For about half of the technologies financial support would additionally remove the crucial 
barriers and for the other half of technologies it would not. 

The consortium analysed the differences between these two groups of technologies in the 
importance of risks (Figure 34). The chart shows that the group of technologies that 
would have the crucial barrier removed by financial support, rate financial and technology 
and performance risks together the most important. The group of technologies that 
would not have the crucial barrier removed by financial support, rate market and policy 
and regulatory risks more important. From this can be concluded that the latter group of 
technologies likely has additional risks (e.g. market or regulatory risks) that are not 
affected by financial support. 

44 

 
 
Figure 33: Effects of financial support on technologies 

Looking at the differences between the two groups of technologies in the severity of 
barriers (Figure 35), similar differences are observed. For the group of technologies for 
which financial support is more effective, lack of funding is the most important barrier 
and for the group of technologies for which financial support is less effective the project’s 
profitability is more important. This can also be related to the market risks (e.g. a carbon 
price or oil prices). 

Figure 34: Risks and effect of financial support 

The effect of financial support was compared between sectors. This showed that the 
share of technologies for which financial support would remove the crucial barrier was 
highest is the carbon capture and storage sector (60%), and lowest in the energy-
intensive industries sector (42%). For the other sectors it was 58%. The share was 
highest in subsectors; concentrated solar power, other renewable energy production, 
CCS in power generation and CCS in industrial applications. 

45 

 
 
 
 
Figure 35: Barriers and effect of financial support 

4.29.  Financial products 

The respondents were asked which financial products would be most appropriate to help 
the innovative technology to proceed to the next TRL. The results are depicted in Figure 
36. The investment grant is selected slightly more often than the project development 
grant. The reasons respondents have specified for this were mainly focused on the 
project’s inability to generate revenues, or for CCS specifically the extremely high 
market-related risks. Also, they indicated that this is a simple way to nudge projects 
from a no-go decision to a go-decision. 

Respondents that selected equity investment indicated that this has a lower relevance 
because standard technology users will be mid to large size companies having access to 
low interest loans. Guarantees can be useful in some cases to de-risk the project for 
other investors. In the category other, respondents mentioned OPEX grants and 
insurance. 

The respondents that selected equity as a financial product specified a number of reasons 
for this. Respondents indicated that this product is suitable for financing joint ventures 
and start-ups, and most relevant for small companies, because medium to large 
companies typically have access to loans. Respondents stated that an equity investment 
could attract other equity investors, and would offer some additional political certainty. 

One respondent stated that loan financing is not an option, because there is there is 
always a need for repayment of loans, whether the project is successful or not. However, 
another stated that a low financing cost will lower support costs necessary for the 
project. 

46 

 
 
Figure 36: Appropriateness of financial products 

The analysis of differences between sectors show that the same preference for grants is 
present in all sectors, but in the energy storage and smart grids sector the project 
development grant is selected more often than the investment grant. In the energy-
intensive industries sector the performance based grant is considered appropriate 
relatively often and equity type debt and loan financing are considered appropriate 
relatively often for the renewable power production sector. 

The appropriate financial products are compared against the balance sheet size of the 
project sponsor, and that analysis showed that the preference of grants is not related to 
the balance sheet size of the project sponsor. 

The comparison of responses from lower-TRL technologies (5&6) with higher-TRL 
technologies (7-9) shows a clear difference in preference. Lower TRLs have a clear 
preference for grants only, while higher TRLs are also open to other financial 
instruments. 

47 

 
 
 
Figure 37: Comparison of financial product(s) preference between different TRLs 

4.30.  Impact of the technologies 

The expert survey asked the respondents to indicate the electricity and fuel consumption 
of the specified technology, the substitution of fossil fuels or feedstocks, and process-
related greenhouse gas emissions, all compared to the reference technology. As the 
specific application and reference technology differs per technology, it was not possible to 
perform aggregated quantitative analysis on this data. Instead, the data is interpreted 
qualitatively and used as input in the modelling of impact. 

4.31.  Other benefits 

Besides the impacts listed above, technologies can have additional benefits to the 
implementing company. The reduction of local emissions and the adaptation to power 
systems with high shares of renewables are the most common other benefits (Figure 38). 
After that, cost reductions are most frequently indicated. Increased reliability, material 
efficiency and productivity gains are indicated less frequently as benefits from innovative 
technologies. 

Figure 38: Other benefits for the implementing company 

48 

 
 
 
The category other in the chart includes extended asset lifetime, product quality 
improvement, added value of the product, reduced health risks, higher process 
efficiency, and adaptation to gas grids with high shares of renewables. 

4.32.  Economic lifetime 

The economic lifetime is the expected period of time during which an asset is useful to 
the average owner. The economic lifetime of an asset could be different than its actual 
technical lifetime. However, the results from the expert survey (Figure 39) show that the 
economic lifetimes and technical lifetimes are very similar; this might indicate that the 
term “economic lifetime” has not been well understood by respondents. A notable 
difference is the smaller spread. 

Figure 39: Economic lifetimes 

4.33.  Technology CAPEX and OPEX 

The expert survey asked for the total capital expenses (CAPEX) of the technology once 
mature and the additional CAPEX of the technology compared to the reference 
technology. The same questions were asked for the operational expenses (OPEX). As the 
survey asked for these expenses in million Euro per unit of activity, the responses of the 
different technologies are incomparable and therefore not analysed on an aggregate 
level. Instead, the data is interpreted qualitatively and used as input in the modelling of 
impact. 

4.34.  Simple payback period of technology 

Respondents were asked for the simple payback period (PBP; i.e. upfront CAPEX divided 
by revenues minus OPEX) without an intervention from the Innovation Fund, assuming 
current prospects on fuel prices and carbon prices. The results show that this PBP is 
typically between 5 and 10 years (Figure 40). Although there are differences between 
sectors in this, they are not very large. PBPs in the energy-intensive industries sector are 
typically lower than in other sectors, although some of the lowest PBPs are reported in 
the energy storage and smart grids sector. 

49 

 
 
 
Figure 40: Technology payback period without financial support 

To contextualize the expected PBPs, they are expressed as a share of the economic 
lifetime of the technology (Figure 41). This shows that a typical technology in the 
energy-intensive industries sector takes 25% of its economic lifetime to pay back the 
initial investment. In the other sectors, this is typically higher (closer to 50%). 

Figure 41: PBP/economic lifetime ratio 

Comparing the expected PBP to the TRL level did not provide additional insights. 

4.35.  Project development stages 

After the questions for the technology in general, the respondents were asked to fill in 
questions regarding projects in which their company considers investing that would 
contribute to the development of the innovative technology. The subsequent findings are 
on a per-project basis. 

In innovative projects (to bring an innovative technology to the next TRL), different 
stages can be distinguished. The respondents were asked what project development 
stages had already been completed for the project in their company (Figure 42). The 
responses show that for the majority of reported projects a feasibility study is conducted. 
For a large share of reported projects the front-end engineering and design is completed. 

50 

 
 
 
For fewer projects a financial plan has been developed or a permitting procedure has 
started. 

Figure 42: Project development stages completed for reported projects 

4.36.  Lifetime used in project investment appraisal 

The respondents were asked for the lifetime that is used in the project investment 
appraisal (i.e. the IRR calculation). The responses show that these lifetimes typically 
range between 11 and 25 years (Figure 43). This is substantially lower than the reported 
technical and economic lifetimes of the technology. 

Figure 43: Lifetimes used for project investment appraisal 

The lifetimes are mapped against TRL levels to check for differences, but due to limited 
responses in the higher TRLs (1 in TRL 8 and 2 in TRL 9), it was not possible to draw any 
conclusions from the data. The lifetimes per subsector were also assessed, but the same 
problem occurred there. 

51 

 
 
 
 
4.37.  Project CAPEX 

The respondents filled in the total CAPEX of the reported project. The responses show 
that there is a very wide spread in the reported CAPEX figures (Figure 44). The median 
(typical) values in the sectors also differ substantially. However, the average is within the 
same bandwidth. Energy storage and smart grids stands out with a relatively high 
CAPEX. However, as the median for this sector is above the average, this sector contains 
more higher than lower CAPEX projects and most of them are only slightly above the 
median value of EUR 200m. The high-CAPEX projects had a wider scope: two projects 
were wider than the energy storage and smart grids sector, and one project was a 
collection of innovations within the energy storage and smart grids sector. 

Figure 44: Project CAPEX 

Subsector level data analysis did not provide additional insights due to the limited 
number of projects per subsector. Plotting the CAPEX against balance sheet size revealed 
that all projects with CAPEX above EUR 200m have sponsors with a balance sheet size 
over EUR 1bn. 

The survey contained a follow-up question asking for the additional CAPEX share of the 
innovative technology compared to the reference technology. Only limited answers were 
provided to this question, and some respondents reported additional CAPEX that could 
not be explained (either filled in an additional CAPEX that exceeded the total project 
CAPEX or filled in an additional CAPEX that was equal to or lower than zero, indicating 
that no support was needed). Of the 15 projects that reported realistic values, the 
weighted average additional CAPEX was 87% of the total project CAPEX. In absolute 
terms this differs significantly between technologies due to different reference technology 
and CAPEX. 

To assess the effect of implementing a minimum project CAPEX threshold as an eligibility 
criterion, the share of both projects and CAPEX that is above the threshold CAPEX is 
studied (see Figure 45). The range of thresholds from EUR 5m to EUR 15m was 
assessed, and showed that a threshold of up to EUR 6m project CAPEX did not rule out 
any projects. 88% of projects exceeded CAPEX of EUR 15m, and ruling these four 
projects out reduced total project CAPEX by only 1%. Note that this is based on a limited 
set of 33 projects for which project CAPEX data was available. 

52 

 
 
Figure 45: Effect of project CAPEX eligibility threshold 

Although the expert survey data on additional CAPEX and OPEX was insufficient for 
analysis of differences between groups of projects, the data does indicate that the share 
of additional CAPEX to additional OPEX tends to differ from project to project (see Figure 
46). Some projects reported in the expert survey have no additional CAPEX but only 
additional OPEX. These projects would not receive any support under this definition of 
relevant costs. The median additional OPEX in additional CAPEX+OPEX was 38% for a 5-
year time frame and 55% for a 10-year time frame. This means that on the 10-year 
timeframe the OPEX contributes more to total additional costs than CAPEX. However, the 
project lifetime is not accounted for in this analysis and project sponsors typically keep 
the project lifetime as low as possible for projects with high additional OPEX to reduce 
costs (with the notable exception of CCS). Note that the respondents were not asked for 
additional revenues and therefore the concept of “relevant costs” from NER 300 could not 
be reconstructed with the data. 

Figure 46: Additional OPEX as share of additional costs 

53 

 
 
 
 
4.38.  Project PBP 

Besides the PBP for the technology in general, the survey asked for the PBP for the 
specific project. As expected, results were similar (Figure 47). However, a notable 
exception was the PBP for CCS technologies, which are close to double that of the 
technology. This can possibly be explained by the role of carbon prices in the business 
case for CCS.  

Figure 47: Project PBP 

Because the PBP was lower than expected, the results were checked against the reported 
CAPEX, OPEX, and revenues. This check was possible for only a limited share of 
responses due to data gaps. Of the projects for which this was possible, about 60% was 
correct and 40% was significantly different than calculated from the other results. Of the 
confirmed PBPs, about 40% was below 10 years. This suggests that a significant share of 
the reported projects have a relatively low PBP, but also that the quality of the data is 
not necessarily high. 

4.39.  Financing structure 

Respondents were asked to indicate what the envisioned financing structure looks like for 
their project and the different average financing shares for projects in different TRLs are 
analysed below (see Figure 48). For the higher TRLs 8 and 9 only 1 and 2 technologies 
were reported, respectively. However, the lower TRLs clearly display a slight preference 
for balance sheet financing in TRL 5 compared to 6 and 7. In total, the average required 
support from the innovation fund was 34% and this ranges from 25 to 53% in the 
different TRLs. Note that the financing need here is the total financing need of the 
project, and not only the innovative part of it. Therefore, it is not comparable with the 
additional CAPEX mentioned under Project CAPEX. 

54 

 
 
Figure 48: Envisioned financing structure for the project by TRL 

In the category other, respondents mentioned funding from regional funds, from the 
sector organization or bank credit.  

There are clear differences between the financing structures of different sectors (Figure 
49). Energy-intensive industries show a preference for Innovation Fund support and 
balance sheet financing, renewable energy production shows a preference for a more 
diverse mix including project finance debt and equity, energy storage and smart grids 
shows a preference for Innovation Fund support and support from other public support 
schemes, and carbon capture and storage shows a preference on Innovation Fund 
support, balance sheet financing and other financing types. 

The comparison of financing structure between innovation types did not provide 
additional insights. 

55 

 
 
 
 
Figure 49: Envisioned financing structure for the project by sector 

To estimate what level of aid intensity is needed for different TRLs, the expert survey 
data is converted to create Figure 50. The figure suggests that lower TRL projects have a 
higher need for IF support. 

Figure 50: Required IF support for different levels of technology readiness 

4.40.  Minimum tenor and maximum interest rate for loans and minimum 

holding period and maximum return on equity for equity 

The respondents were asked for the minimum tenor (or duration) of a loan or a loan 
guarantee provided by the innovation fund necessary to successfully implement the 
project and in the case of equity financing the minimum required holding period (exit 
window) necessary to successfully implement the project. Whether the tenor and holding 
period started at the point of application or at the point of funding was not specified in 
the survey.  

As expected, the minimum tenor is higher than the minimum holding period (Figure 51). 
The spread in minimum tenor is significant. Maximum interest rates are relatively low 
(partly due to the current economic climate). The maximum ROE ranges between 5 and 
15%. 

56 

 
 
Figure 51: Minimum tenor and holding period, and maximum interest rate and return on equity 

No significant differences between sectors and TRL have been identified. 

4.41.  Project sponsors 

The project sponsor is the entity financially backing the project, i.e. overall responsible 
for securing the financing and taking on the risks and opportunities associated with the 
project. The respondents indicated that the project sponsor is usually a large company 
(Figure 52). Utilities are often a project sponsor, especially in the renewable energy 
production and energy storage and smart grids sectors. SMEs and individual investors 
are less frequently project sponsors. Other project sponsors included governments, 
institutional investors and associations. 

Figure 52: Project sponsors 

The low share of SMEs as project sponsors versus the high share of large companies 
might indicate a bias towards larger companies within the respondents. However, for the 
sake of this expert survey the consortium did not aim for a representative selection of 
experts from all company sizes, but focussed on the distribution of expertise among 
sectors and the expertise of the respondents. 

57 

 
 
 
 
4.42.  Project sponsor balance sheet size 

Respondents were asked to indicate the balance sheet size of the project sponsor (i.e. 
the entity financially backing the project, i.e. overall responsible for securing the 
financing and taking on the risks and opportunities associated with the project). In case 
multiple sponsors would be implementing the project, they were asked to indicate their 
cumulative balance sheet size. Figure 53 shows the responses. The results indicate that 
neither large nor small balance sheets are overrepresented. It appears that the projects 
are diverse in the size of the project sponsor. 

Figure 53: Balance sheet size of project sponsor(s) 

The results are mapped against the type of project sponsor. This confirms that also 
within the project sponsor type balance sheet sizes differ substantially.  

4.43.  Willingness of regular financial partners to participate in financing 

The respondents were asked to specify whether current partners were (expected to be) 
willing to participate in financing of the project. The results show that overall, the regular 
partners are often willing to participate (Figure 54). However, it also shows that for most 
reported projects the regular financial partners have not been contacted yet. 

Figure 54: Willingness of regular financial partners to participate in project financing 

58 

 
 
 
When comparing this outcome for different envisioned financing structures, most of the 
projects that do not expect regular financial partners to participate in financing this 
project indicate a higher required share of financing from the innovation fund. 

Comparing the answers to this question to the PBP of the project did not offer additional 
insights as the number of respondents that filled in both this question and PBP was too 
limited. 

4.44.  Geographical spread 

To assess the geographical distribution of the respondents, the IP addresses of 
respondents were linked to locations. This was not possible for all IP addresses, and 
some of the locations were outside of the EU. However, this was the best proxy available. 
The results of the assessment are depicted in Figure 55. It is clear from this chart that 
the expert survey is biased towards Western Europe. This bias can be explained by the 
approach to find respondents (i.e. through the roundtables in Brussels and through the 
networks of the consortium and the Commission). Figure 55 also shows the reported 
technologies. This chart does not provide evidence for a balanced distribution of 
innovative technologies across geographies, but also does not prove the opposite due to 
the before mentioned bias towards Western European countries. 

Figure 55: Geographical coverage of the expert survey 

The comparison of geographical spread of technologies within sectors shows that the 
same distribution is more or less seen in all sectors, except for the renewable energy 
production sector, where Northern Europe and Southern Europe are leading instead of 
Western Europe. 

The assessment of regional spread between different TRL levels and different innovation 
types did not result in additional insights. 

To further analyse the potential geographical concentration of the need for innovation 
funding, the average CAPEX of the reported projects is mapped to the different regions. 
Figure 56 shows that Western Europe is not only overrepresented in the number of 
projects, but also reported on average larger projects (in terms of CAPEX). A notable 
outlier on the high end is Germany, with an average CAPEX of EUR 300m over 5 projects. 

59 

 
 
 
Figure 56: Average project CAPEX and number of projects per region 

4.45.  Final remarks 

Some respondents shared some final remarks. A selection of learnings and views from 
these final remarks are: 

  CPUP from NER300 was a good criterion. 
  Advertising policy support schemes within an industry is key, and reduces the 

 

hurdles for the industry to participate. 
It is better to start with many small projects, which are efficient, where the 
financial and technical risks are covered, and with less bureaucracy. 
  CCU needs the same recognition regarding GHG savings as renewable 

technologies and CCS, where carbon is permanently removed. 

  Protecting IP is essential. 
  When selecting the projects to be financed under the Innovation fund there should 
be a balance between projects in industries and projects concerning renewable 
energy sources. 

  Make sure that only real projects (TRL>5), and not research and early-stage one, 

are financed under the Innovation Fund. 

  Ensure that the Innovation Fund is effectively complemented by other financial 

instruments covering the debt part (i.e. InnovFin). 

  Development funding as extension to successful collaborative projects (no new 

consortia). 

  No “3 out of 3” (min. 3 partner from min. 3 states) requirement for existing 

consortia. 

  Fund investment cost not just depreciation 
  Provide non-refundable grants not loans. With today’s interest rates, cheap 

borrowing is trivial. 

  Ease of administration is paramount. Adhere strictly to “do as you always do” in 
accounting. (H2020 has a bad reputation for very tedious accounting processes 
under the name of “transparency”.) 

  Please consider how national, regional and local authorities could get involved. 

Permissions are a serious obstacle to “quick” breakthroughs. 

  For CCS the cost reduction potential of projects (via tie-ins of potential other 
users’ hubs-and-clusters) should be an element in the eligibility criteria. 

60 

 
 
 
  The new fund should have a marketing plan. It is not enough to launch the fund 

and await applications.  

  The new fund should be delivered and led by knowledgeable, committed and 
passionate people who are given the maximum amount of flexibility to shape 
funding for projects that will deliver the funds desired outcomes. 

  The new fund should actively seek out and work with potential co funders to 

shape the interventions that the fund delivers to fit with existing interventions and 
particularly to avoid delivering what is already available but to ensure delivery of 
a fund that fills the gaps. 

  The new fund should be able to provide debt, equity and a mix all in the same 

project  

  The new fund should be prepared to fail - the areas in which the fund should 

operate will inevitably have some projects that fail - that must not be seen as a 
failure of the fund. 

  The Innovation Fund should include renewable heating & cooling 
  The Innovation Fund should also focus on reducing GHG emissions in the use 

phase of products (e.g. increasing material efficiency). 

61 

 
 
 
 
 
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5.  BIBLIOGRAPHY 

BEIS, https://www.gov.uk/government/publications/industrial-decarbonisation-and-energy-efficiency-

roadmaps-to-2050. 

EC. (2015). Impact Assessment accompanying the Directive proposal SWD(2015) 135 final. Brussels: 

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ICF. (2016). Innovative Financial Instruments for First-Of-A-Kind, commercial-scale demonstration 

projects in the field of Energy. Brussels: European Commission. 

ICF. (2017). NER 300 lessons learnt. Brussels: European Commission. 

IEA. (2015). Energy Technology Perspectives 2015: Mobilising Innovation to Accelerate Climate 

Action. Paris: International Energy Agency. 

IEA. (2015). Energy Technology Perspectives 2015: Mobilising Innovation to Accelerate Climate 

Action. Paris: International Energy Agency. 

Jenkins, J., & Mansur, S. (2011). Bridging the Clean Energy Valleys of Death: Helpping American 

entrepreneurs meet the nation's energy innovation imperative. Oakland, CA: Breakthrough 
Institute. 

JRC. (2013). Report on Innovative Financial Instruments or the Implementation of the SET Plan, First-

Of-A-Kind projects. Brussels: European Union. 

Polzin, F. (2016). Barriers to low-carbon innovation, consequences for finance and policy responses. 

Utrecht, the Netherlands: Sustainable Finance Lab. 

Wyns, T. (2016). Decarbonisation & industrial dynamics of energy intensive sectors. Brussels: Institute 

for European Studies, Vrije Universiteit Brussel. 

63 

 
 
 
 
 
64 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
APPENDIX A 

RESPONDENTS TO THE EXPERT SURVEY 

Table 1 lists the experts that provided input in the expert survey. 

Table 1: Respondents to the Expert Survey 

Organization 
TITAN CEMENT Co. SA 

Process Systems 
Enterprise Ltd 
Laborelec 

Job title 
Environment, Quality & Sustainable 
Development Senior Manager 
Vice President Strategic Business 
Development 
expert 

Name 
ALEXANDROS 
KATSIAMBOULAS 
Alfredo Ramos 
Plasencia 
Ana Novak 
Zdravkovic 
Ana Santos 

Andreas Bode 

Andreas Ioannou 

Andrew Green 

Andrew Smith 
Anne-Sophie 
Chamoy 
Antoine Aslanides 
Bart van As 

Bartosz Rusek 

Benoit DOME 

CEMEX Research Group 

BASF New Business 
GmbH 
Alfa Mediterranean 
Enterprises Ltd 
Energy Technologies 
Institute 
DP Energy 
Energy Pool 

EDF 
Brightlands Chemelot 
Campus 
Amprion GmbH 

European Copper 
Institute 
CMI 
voestalpine AG 
AAT Geothermae d.o.o. 
Electrcity Supply Board 
Ervia 

Bernard Germay 
Bernhard Kohl 
Bodo von Düring 
Brendan Barry 
Brian Murphy 
Carl van der Horst  Tata Steel 
Christopher Gittins  TAQA Energy BV 
Claude Lorea 
Cyril HARRY 

CEMBUREAU 
EURELECTRIC 

Damien 
VALDENAIRE 
Daniel Rennie 
David Cuesta 
David NEVICATO 

CONCAWE 

Calix 
i-deals 
TOTAL SA 

Davide Garofalo 

Donal O'Riain 
Dr. Eberhard 
Gschwindt 
Dr. Karl Josef Wolf  RWE Generation SE 
Dr. Petra 
Schüsseler 

Fachagentur 
Nachwachsende 
Rohstoffe e.V. 
VICAT 
RHI AG 

ERIC BOURDON 
Erik Hagander 

Novel Technologies & Research 
Funding Advisor 
Senior Manager New Business 
Incubation 
Project Sponsor 

Programme Manager - CCS 

Head of Investment 
Head of Legal, Strategy and Public 
Affairs 
Senior Advisor 
Campus / Innovation Ecosystem 

Manager of Department Technology 
Management 
consultant 

Project Funding manager 
Strategic Environmental Management 
Director and CEO 
Manager, Technology Innovation Unit 
European Affairs Manager 
Director European Affairs 
CCS Project Manager 
Deputy Chief Executive 
Chair of the Working Group Gas to 
Power 
Science Executive Refinery 
Technology 
Project Coordinator 
Manager 
Research Program Manager- 
CO2/CCUS 
Managing Director 

Kubikenborg Aluminium 
AB 
Ecocem Materials Limited  Managind Director 
Technical Advisor 
European Investment 
Bank 

R&D Hed of special Functions 
Project manager - Biogas 

Deputy CEO 
VP Corporate Development 

65 

 
 
Name 
Eva Maria Plunger  VERBUND Solutions 

Organization 

Job title 
Project Coordination (R&D&I projects) 

Federico D'Alberti 

GmbH 
Enel SpA 

Global Bioenergies 

François-Henri 
Reynaud 
Frédéric  de 
Meulemeester 
George Skarpetis 
Giorgi Komakhidze  EPPSA - European Power 

Vesuvius 

BA Glass 

Graeme Sweeney 
Guido Magneschi 
Günther 
Baumgartner 
Hendrik Möller 
Heribert Hauck 
Ignacio Sanchez 

Jan Lindstedt 
Jarmo Saaranen 
Javier Alonso 

Jean-Pierre BIRAT 
Johannes Rath 

Johny Bultheel 

Plant Suppliers 
Association 
ETIP ZEP 
Global CCS Institute 
Lasselsberger 

Schwenk Zement KG 
TRIMET Aluminium SE 
Spanish Climate Change 
Office 
SEKAB E-Technology 
VNT Management Oy 
GAS NATURAL FENOSA, 
SDG 
IF STEELMAN 
Wienerberger AG, A-1100 
Vienna 
Argex nv 

Endesa 

JOSÉ A. NEBRERA  ACS SCE- COBRA 
Juan Garrigosa de 
Sigmaringa 
Julien Marchal 
Jüri Roos 
Karen Perrey & 
Christoph Gürtler 
Ketil Rye 
Kevin Bradley 

Alcoa 
BSEF - The International 
Bromine Council 

Elkem AS 

Kornelia Sedlacek  Salzburg AG 
Kristin Karlstad 
Lamberto Eldering  Statoil ASA 
Lars Skaarup 
Jensen 
Luke Warren 

FLSmidth 

Marcel Bial 
Marco Baresi 

Markus Becker 

Carbon Capture and 
Storage Association 
ESTELA 
Turboden/Mitsubishi 
Heavy Industries 
GE 

Markus Oles  
Wiebke Lueke 
Markus Schopf 

Martin Schneider 

thyssenkrupp AG 

Borealis Polyolefine 
GmbH 
VDZ 

Head of EU Funding, Innovation and 
Research 
Chief Financial Officer 

Thermal Processes & Energy 
Conservation Plan Manager 
SEE Energy and Environment 
Deputy Secretary General 

Chair of Advisory Council 
Senior Adviser - Carbon Capture 
Member of the Board - Director 
Technical Division 
Member of the Executive Board 
Head of Energy Affairs 
Deputy Director General 

Senior Advisor 
Managing Partner, Chairman 
Head of Innovation Planning and 
Technology Scouting 
CEO 
CTO, Business Unit CBME 

Plant manager - Technical and 
Operational Director 
ACS SCE GENERAL MANAGER 
Head of Innovation 

Development 
Technology Manager 
Secretary General 

Company development 
VP Public Relations 
Business Developer CCS 
R&D Specialist and project manager 

Chief Executive 

Secretary General 
Institutional Relations Director 

Government Relations Leader, EU 
Energy and Global Steam Power 
Systems 
Head of technology, innovation, and 
strategy 
Manager Open Innovation 

Chief Executive 

66 

DCNS Energies 
Baltanoa 
Covestro Deutschland AG  Energy Strategy / Process 

Secretary General 
co-owner, manager 

 
Name 
Mathias Deckers 
Matthijs 
RUITENBEEK 
Michael Pope 

Organization 
Siemens Power & Gas 
Dow Benelux 

Job title 
Technology Management 
R&D manager 

Shell 

Senior Manufacturing Strategy 
Advisor 

Michael Schneider  SCHOTTEL HYDRO GmbH  Finance Director 
Michalis Agraniotis  Mitsubishi Hitachi Power 

Systems Europe GmbH 
Stora Enso Oyj 
REPSOL SA 

Mikael Hannus 
Mónica García-
Ruiz 
Mukund BHAGWAT  Aurubis Belgium 
Niels Henriksen 

Olaf Wachsen 

Oliver Lüdtke 

DONG Energy Thermal 
Power 
Clariant Produkte 
(Deutschland) GmbH / 
Group Technology & 
Innovation 
VERBIO Vereinigte 
Bioenergie AG 
Fuel Cells and Hydrogen 
Joint Undertaking 
Aalto University 
EGEC-geothermal 
CarbonOrO 

Pedro GUEDES DE 
CAMPOS 
Pertti Kauranen 
philippe DUMAS 
Pieter Verberne 
Randolf Weterings  Port of Rotterdam 

Richard Northcote  Covestro 
Rob van der Meer  HeidelbergCement 
ROLAND SCHULZE  EIB - EUROPEAN 

Rolf Kuby 

INVESTMENT BANK 
Aurubis AG 

Rudolf Knapp 
Sandra Hinz 

Slovalco as 
Dupont Industrial 
Biosciences 
Nickel Institute 
Sean O'Sullivan 
Shane O'Sullivan 
ESB 
Stefania Pescarolo  Biochemtex - Italian Bio 

Stephan 
Stollenwerk 
Stephen Aherne 

Stephen Blyth 
Thomas Kudela 
Tobias 
Griesshaber 
Torben Vintther 

Torkil Tyvold 
Ugo Simeoni 

Uwe Fuchs 

Products - M&G Group 
innogy SE 

Gaelectric Energy 
Storage Ltd 
Sappi Europe 
Dong Energy 
Innogy SE / Nordsee One 
GmbH 
Veja Mate Offshore 
Projects Gmbh 
Norsk Hydro ASA 
European Turbine 
Network 
Siemens AG 

Vincent Gilles 
Volker Hoenig 

Credit Suisse 
VDZ 

engineer at Innovation & New 
Products Department 
VP, R&D Innovation 
Technical Advisor 

Corporate Energy and Climate Affairs 
Senior Advisor 

Head of Group Process Technology 

COO 

Financial Engineering Officer 

Specialist 
secretary general 
Founder and general manager 
Business Developer Energy & 
Industry 
Chief Sustainability Officer 
Director Public Affairs 
Managerial Adviser  - Low Carbon 
Energy Technology 
Head of Group Office / Director 
External Affairs 
CFO 
Senior Scientist 

Consultant 
Senior Strategist 
Head of R&D Public funding 

Manager Energy Systems and 
Storage 
Chief Geologist 

CFO & VP Finance 
Regulatory Manager 
Shareholder representative for 
Innogy SE 
CFO 

VP Corporate Business Development 
Technical Project Manager 

Sales and Business Devolpment 
Energy Storage 
Global head of utility research 
Managing Director 

67 

 
 
Name 
Will Lochhead 
wim van der 
stricht 
Wolfgang 
Dienemann 
Xenios 
Xenophontos 
Zlatko Cus 

Organization 
BEIS 
ArcelorMittal 

HeidelbergCement AG 

PFXT THERMOSOLAR 
RENEWABLES LTD 
TALUM 

Job title 
Head of CCS Policy 
CTO Technology Strategy - Business 
Development 
Director Global Research & 
Development 
CEO 

Board Member 

68 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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