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# 52013SC0260

**COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a COUNCIL REGULATION on the Fuel Cells and Hydrogen 2 Joint Undertaking /\* SWD/2013/0260 final \*/**

  

TABLE OF CONTENTS

COMMISSION STAFF WORKING DOCUMENT IMPACT
ASSESSMENT......................... 1

1........... Procedural issues and consultation of interested parties.................................................... 1

1.1........ Background for the development of
the legislative proposal.............................................. 1

1.2........ Organisation and timing................................................................................................... 2

1.3........ Consultation and expertise.............................................................................................. 2

1.4........ Main stakeholder views.................................................................................................. 3

2........... Problem definition........................................................................................................... 5

2.1........ General Context............................................................................................................. 5

2.2........ FCH can contribute to growth,
jobs and competitiveness................................................. 6

2.2.1..... Europe's competitiveness needs to
be strengthened.......................................................... 6

2.2.2..... New jobs must be created in the
European FCH sector................................................... 7

2.3........ Public funding is supporting the
innovation chain from idea to the market.......................... 8

2.4........ Several technological challenges
need to be overcome..................................................... 8

2.5........ Underlying problem drivers............................................................................................. 9

2.5.1..... Market failure for first movers......................................................................................... 9

2.5.2..... Need for leveraging of available
funding......................................................................... 10

2.5.3..... Fragmentation and lack of critical
mass.......................................................................... 10

2.6........ The importance of public
intervention at EU level........................................................... 11

2.7........ Achievements of the current Joint
Undertaking............................................................... 12

2.7.1..... Bringing FCH technologies closer
to the market............................................................. 12

2.7.2..... A strong and strategic partnership
at the forefront of FCH technologies.......................... 12

2.7.3..... Leveraging effect.......................................................................................................... 12

2.7.4..... Industry and SME participation..................................................................................... 13

2.7.5..... Governance arrangement.............................................................................................. 13

2.7.6..... Challenges with respect to
complexity and cost-effectiveness......................................... 13

2.8........ Findings and recommendations from
the Interim Evaluation............................................ 14

2.9........ In summary: rationale for a FCH
Joint Undertaking........................................................ 15

3........... Objectives.................................................................................................................... 15

3.1........ General objectives........................................................................................................ 15

3.2........ Specific objectives........................................................................................................ 16

4........... Policy options............................................................................................................... 17

4.1........ Options...................................................................................................................... 177

4.1.1..... PO1 - Fuel Cell and Hydrogen
Public-Private Partnership in the current form (Joint Undertaking) within
Horizon 2020 (Business-as-Usual)     187

4.1.2..... PO2 - Use of collaborative
research projects under the EU Framework Programme Horizon 2020, thus not
prolonging the current FCH JU (Zero Option)      188

4.1.3..... PO3 - Implement Horizon 2020 for
the fuel cell and hydrogen technologies through a Contractual Public-Private
Partnership    188

4.1.4..... PO4 - Fuel Cell and Hydrogen
Public-Private Partnership through a modernised Joint Undertaking adapted to
Horizon 2020   19

4.2........ Budget allocation.......................................................................................................... 20

5........... Analysing the impacts by Policy
Option....................................................................... 222

5.1........ Well-designed intervention logic.................................................................................. 222

5.2........ Leveraging effect on deployment................................................................................. 222

5.3........ Critical mass............................................................................................................... 222

5.4........ Small and medium-sized companies............................................................................. 222

5.5........ Innovation.................................................................................................................. 233

5.6........ Economic growth and
competitiveness........................................................................ 233

5.7........ Coherence of the knowledge
triangle........................................................................... 243

5.8........ Broader policy coordination........................................................................................ 244

5.9........ Coherence with programmes of
Member States.......................................................... 244

5.10...... Cost efficiency............................................................................................................ 254

5.10.1... Cost neutrality and JUs as
effective means to achieve goals.......................................... 254

5.10.2... Possible improvements - efficiency.............................................................................. 255

5.10.3... Possible improvements -
effectiveness......................................................................... 266

6........... Preferred Policy Option................................................................................................ 26

6.1........ Comparing the impacts............................................................................................... 266

6.2........ Efficiency in addressing the
underlying problem drivers................................................. 277

6.3........ Preferred Policy Option.............................................................................................. 288

6.4........ Implementation and governance.................................................................................. 288

6.4.1..... Programme structure................................................................................................... 288

6.4.2..... Relation to Horizon 2020 activities
outside the FCH JU............................................... 311

6.4.3..... Governance and operations......................................................................................... 311

6.5........ Proposed budget for the option of
choice.................................................................... 311

7........... Evaluation and monitoring........................................................................................... 333

7.1........ Mid-term and final evaluations..................................................................................... 333

7.2........ Monitoring the FCH technology
progress.................................................................... 333

7.3........ Monitoring the operations of the
Joint Undertaking...................................................... 344

Annex 1 - Group of
Independent Experts advising on the Impact Assessment............................. 355

Annex 2 - Results of
the stakeholder survey............................................................................... 366

Annex 3 - Results of
the public consultation............................................................................... 488

Annex 4 - Public
consultation and stakeholder survey: difference and overlap between
respondents; minority views        622

Annex 5 - Relevance of
FCH technologies to Societal Challenges.............................................. 633

Annex 6 - Status and
targets of FCH technology....................................................................... 677

Annex 7 - Success
stories......................................................................................................... 688

Annex 8 - Results of
the Call for Proposals of the FCH JU........................................................ 700

Annex 9 - Challenges
with respect to complexity and cost-effectiveness..................................... 711

Annex 10 - Executive
Summary of the First Interim Evaluation of the FCH JU............................ 722

Annex 11 - Preferred
Policy Option from stakeholder survey and public consultation.................. 779

Annex 12 - Technology
development steps that will be followed until 2020 to bring the different
applications to market.  800

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a COUNCIL REGULATION

on the Fuel Cells and Hydrogen 2
Joint Undertaking

AIP                  Annual
Implementation Plan

CfP                  Call
for Proposals

CHP                Combined
Heat and Power

CIP                  Competitiveness and Innovation framework Programme

N.ERGHY       Research
Grouping (of the FCH JU)

EC                   European
Commission

ETP                 European
Technology Platform

EU                   European
Union

FCEV              Fuel
Cell Electric Vehicle

FCH                Fuel
Cells & Hydrogen

FP                   (Research)
Framework Programme

FP7                 7th
(Research) Framework Programme

GB                   Governing
Board of the FCH JU

GHG                Greenhouse
Gas

IEA                  International
Energy Agency

IPHE               International
Partnership for Hydrogen in the Economy

JTI                   Joint
Technology Initiative

JU                    Joint
Undertaking

LPG                 Liquefied
Petroleum Gas

LVH                Lower heating value

mCHP             Micro
Combined Heat and Power

MAIP              Multi-Annual
Implementation Plan

MS                  Member State

NEW-IG         New
Energy World – Industry Grouping (of the FCH JU)

PEM                Polymer
Electrolyte Membrane or Proton Exchange Membrane

PPP                 Public-Private
Partnership

R&D                Research
& Development

RCS                Regulations,
Codes and Standards

SET-Plan         (European)
Strategic Energy Technology Plan

SME                Small
and Medium Enterprise

USDOE           United
States Department Of Energy

COMMISSION STAFF WORKING DOCUMENT

IMPACT
ASSESSMENT

Accompanying the document

Proposal for a Council Regulation

on the Fuel Cells and
Hydrogen 2 Joint Undertaking

1.           Procedural
issues and consultation of interested parties

1.1.        Background
for the development of the legislative proposal

1.           Decision No 1982/2006/EC
of the European Parliament and of the Council of 18 December 2006 concerning
the Seventh Framework Programme provides the basis for a Community contribution
to the establishment of long term Public Private Partnerships (PPP) in the form
of Joint Technology Initiatives (JTIs).

2.           In 2008, Council
Regulation (EC) 521/2008 established the Fuel Cells and Hydrogen (FCH) Joint
Undertaking (FCH JU) for a period up to 31 December 2017, set-up as a PPP with
50/50 co-financing between the two founding members, the European Commission
and the FCH Industry Grouping. Shortly after the establishment of the FCH JU,
the Research Grouping became a member. The maximum EU contribution to the FCH
JU is 470M€.

3.           The Commission
Communication ‘Partnering in Research and Innovation’[1] indicates that the partnering
approach in PPP can help to address major societal challenges and strengthen
Europe's competitive position by making the R&I cycle more efficient and
shortening the time from research to market. It can also contribute to
environmental and resource efficiency objectives. When the necessary commitment
to partnering exists, Europe can excel in science and technology and achieve
critical mass.

4.           The Commission's proposal
for Horizon 2020[2]
provides a legislative basis for future EU PPPs in Research and Innovation. It
stipulates that Horizon 2020 may be implemented through PPPs where all the
partners concerned commit to support the development and implementation of
research and innovation activities of strategic importance to the Union's competitiveness and industrial leadership or to address specific societal challenges.

5.           According to the proposal,
the PPP shall be identified based on the following criteria:

(a)
the added value of action at Union level;

(b)
the scale of impact on industrial
competitiveness, sustainable growth and socio-economic issues;

(c)
the long-term commitment from all partners based
on a shared vision and clearly defined objectives;

(d)
the scale of the resources involved and the
ability to leverage additional investments in research and innovation;

(e)
a clear definition of roles for each of the
partners and agreed key performance indicators over the period chosen.

6.           The Commission's proposal
presents also a common set of rules for all initiatives supported under Horizon
2020 in order to simplify participation, while leaving the necessary
flexibility for individual initiatives to achieve their objectives.

1.2.        Organisation
and timing

7.           This Impact Assessment was
elaborated by DG RTD. In this context, a Commission Inter-Service Group (ISG)
has been created in June 2012. In addition to DGs ENER, MOVE and JRC, it included
DGs ENTR, CNECT, COMP, MARKT, SANCO, HR, SG, BUDG and Legal Service. Meetings
have been held for all major steps in the development of the initiative. In
relation to this Impact Assessment, the ISG met during 2012 on June 8th,
July 20th, September 20th, November 22nd and
December 12th.

1.3.        Consultation
and expertise

8.           In the preparation of this
Impact Assessment, the Commission has consulted stakeholder groups representing
the industry and research communities, the Member States and the general public.
Several workshops and ad-hoc meetings were organised in the course of 2012 to
discuss priorities for research on fuel cells and hydrogen, and define the best
mechanism to implement the research & innovation programme at European
level. The Impact Assessment has been carried out by DG RTD, with support from mainly
ENER, MOVE, JRC and the JU Programme Office. In June 2012, external experts
have been engaged to support the Commission services in the finalisation of the
report (see Annex 1). The different sources of information as well as the
consultation process are briefly described below.

9.           Several key reports have
been used in the preparation of the present Impact Assessment. In addition to
EU and USDOE reports[3]
on energy, transport and climate change, the most important ones are:

·
First Interim Evaluation of the Fuel Cell &
Hydrogen Joint Undertaking (2011)

·
IEA 2012 Energy Technology Perspective

·
Technology Map of the SET-Plan (JRC, 2011)

·
FCH JU Industry Grouping Financial and
Technology Outlook 2014-2020

·
Fuel Cell Today "Industry Review"
2010, 2011 and 2012, as well as the "Patent Review"

·
The McKinsey reports
"Pathways to a Low Carbon Economy" (2009) and "A portfolio of
power-trains for Europe: a fact-based analysis" (2010)

·
Pike Research, "Fuel Cells Annual Report
2012" and "Ten Trends to Watch in 2012 and Beyond"

10.         As part of the Impact
Assessment, a cost-benefit analysis[4]
concerning the JU as choice of administrative structure for the JTI instrument
has been carried out by the Commission Services.

11.         The Impact Assessment Board
(IAB) examined the draft during their meeting on 27th February 2013,
and proposed a number of improvements in its opinion dated March 1st
2013. Following this opinion, the present IA report was revised as follows: i)
The Problem Definition (chapter 2) has been revised, giving more prominence to
the results of the 1st Interim Evaluation and to the actual
performance of the FCH JU relative to the targets set in 2008. The implication
for the JU of the increasing role of hydrogen as a medium for storing renewable
electricity has been described in more detail. ii) The relevance, feasibility
and targets of the specific objectives have been better justified. iii) The
concretely available policy options within the Horizon 2020 framework have been
explained in terms of scope, governance structure and modus operandi. iv) The
preferred policy option has been underpinned by concrete evidence from the conclusions
of the interim evaluation, as well as by the results from the stakeholder
survey and the public consultation. Full summaries of all three documents are included
as annexes.

1.4.        Main
stakeholder views

12.         In November 2011, the Industry
Grouping (NEW-IG, a founding member of the JU) issued its Financial and
Technology Outlook for the European fuel cell and hydrogen sector for
2014-2020. This document, that identifies the technological priorities and
financing needs for the sector until 2020, underscores that support to
deployment would become increasingly important and that new support mechanisms
would have to be developed. The Industry Grouping calls for a prolongation of
the FCH JU, though with a broader scope, including extended support to early
deployment activities.

13.         The Research Grouping
(N.ERGHY, a member of the JU), through its answer to the public consultation as
well as through its official Position Statement, is very positive on the
achievements of the current JU, and believes that neither the industry alone
nor the fragmented support at national level only will allow the European FCH
sector to be competitive on the worldwide scene. N.ERGY therefore strongly
supports an intervention at European level, preferably through a modernised JU.
It also calls for a revision of the technology objectives, the budget and the
rules for participation and dissemination.

14.         The
two advisory bodies of the current Joint Undertaking, the Scientific Committee
and the Member States Representatives Group, have issued their opinions
supporting the continuation of the Joint Undertaking and provided recommendations
on its objectives, scope and operations, and on their own mandates.

15.         The
Scientific Committee of the FCH JU, in its "Views of the Scientific
Committee on the next phase of the FCH JU" commented in particular on the
type of activities to be implemented within the JU (basic and applied research,
technology development, demonstration, early deployment), and insisted on
increasing the interaction with other EU programmes under Horizon 2020 relevant
to energy and transport, such as "Advanced Materials" and
"Advanced Manufacturing and Processing".

16.         The
Member States Representative Group agrees on the importance of the JU, and
confirms that the JU model has proved to be an efficient way to coordinate
funding from different Commission DGs to develop a new energy technology.
Overall, Member States support the continuation of the JU, and are ready to
contribute to its follow-up in Horizon 2020.

17.         A study was commissioned by
the FCH JU on trends in terms of investments, jobs and turnover in the fuel
cells and hydrogen sector. As part of this study, a stakeholder survey
was sent to all the beneficiaries of the FCH JU (more than 400 entities),
including a detailed questionnaire to the 60 members of NEW-IG. The survey
enquired about their perception of the current market situation for fuel cells,
their forecast for commercialisation of products, their expenditures on R&D
and market introduction activities, and the personnel they employ. Feedback was
requested on the impact of the EU research programmes and of the Joint
Undertaking on the beneficiaries' activities to date, and on the policy options
for the implementation of fuel cells and hydrogen R&D in Horizon 2020. In
total 154 responses were received, including 46 from the IG. The survey shows
that 70% of the members of the Industry Grouping have seen their turnover on
FCH increase since 2007 and 70% have raised their expenditures on R&D (half
of those members by even more than 20%). About half of the responding members
report additional expenditures on R&D as a result of the establishment of
the JU. Regarding the stakeholders group as a whole (i.e. not restricted to the
Industry Grouping), 77% have increased their R&D expenditures, and 67% have
done so as a result of the establishment of the JU. A summary of the results
from the stakeholder survey is presented in Annex 2.

18.         FCH industry players also
indicate that the JU has provided stability and long-term commitment,
delivering support that neither national nor private programs can give,
including to nascent technologies. It has established a central focal point
from which coalitions can be built, allowing companies in other regions to find
and connect to JU members. Furthermore, it provides "one strong voice to
policy makers and stakeholders abroad". The survey shows that 93% of the
beneficiaries are in favour of continuation of the JU.

19.         Looking towards 2014-2020,
the industry players (half of them NEW-IG members) expect their turnover to
multiply by 8 and their expenditures on R&D and deployment activities to
more than double. Concerning R&D and deployment, it was clear from the
survey that the continuation of the JU (especially in its modernised version)
is the favoured option to trigger additional investment. In a modernised JU,
54% of the NEW-IG members would invest more. In the case of continuation of the
current JU, collaborative research or a Contractual PPP, these figures would be
37%, 30% and 28% respectively. In the majority view of the responding NEW-IG
members, the modernised JU is the most successful vehicle to enhance the
efficient use of research resources (72% of respondents), strengthen the
coordination of research between the JU and MS (61%), increase the impact on
product development (74%) and trigger the creation of jobs in the FCH sector
(59%).

20.         In parallel to the
stakeholders' consultation, a public consultation was conducted between
July and October 2012. 127 responses were received. Most respondents agree on
the fact that FCH technology will play a notable role in the future EU
low-carbon energy and transport sectors (98% of respondents), for the EU energy
security of supply (94%) and for the EU industrial competitiveness (95%). Most
also agree that the currently targeted applications can have an important
socio-economic impact by 2020, with a particularly strong support for the use
of hydrogen as storage medium for renewable energy (95% of respondents). Most
respondents also believe that both the European FCH industry and the FCH
research sector are more competitive or stronger than 5 years ago, and that
they have the potential to be even more competitive by 2020 (99% for industry,
95% for research). The support to FCH R&D in the EU is overwhelming (96% of
respondents). The continuation of the JU - in its current form or modernised -
is the favoured option (70% calling for a continuation, incl. 53% in a
modernised version), while a Contractual Public-Private Partnership is only
favoured by 4%. Most respondents believe that the aim and scope of the
initiative should go beyond R&D and include support to early deployment
activities and that the budget should increase. A summary of the results from
the public consultation is presented in Annex 3.

21.         Differences and overlap
between the stakeholder survey and the public consultation, as well as minority
views, are presented in Annex 4.

2.           Problem
definition

2.1.        General
Context

22.         Hydrogen, as an energy
carrier, and fuel cells as energy converters, are technologies that offer a
pathway for clean systems that reduce emissions, enhance energy security, and
stimulate the global economy. Their potential applications include a number of
strategic sectors, such as power generation and surface transport, and, on the
long term, are expected to contribute to the EU energy and climate objectives. Annex 5 provides a discussion on the likely impacts of the
technologies in certain areas that are relevant to the societal challenges that
Horizon 2020 addresses.

23.         At
EU level, the European Commission has supported
research and development in fuel cells and hydrogen technologies since the
early EU Framework Programmes (FP) with increasing funding levels over time
(e.g. 145 M€ in FP5, 315 M€ in FP6).

24.         In the absence of a clear
European strategy, these efforts were fragmented and uncoordinated across the
different FP sub-programmes, i.e. Energy (the main one), Transport, Materials
and Environment, and stakeholders, notably the European industry. It was not
until the launch of the FCH JU[5] in 2008 that the European private and
public sectors joined together to co-ordinate their efforts under a genuine
European strategy, with a common set of goals.

25.         In 2009 the European Union
adopted a set of legislation (known as "Climate and Energy Package"),
which sets a series of key energy objectives for 2020 with binding commitments
from the Member States: to reduce greenhouse gas emissions by 20%, rising to
30% if the conditions are right; to increase the share of renewable energy to
20%; and to make a 20% improvement in energy efficiency. This policy is a key
contribution for achieving the objective of the Europe 2020 strategy for smart,
sustainable and inclusive growth.

26.         The direction to be
followed after the 2020 agenda is presented in the Energy Roadmap 2050 adopted
by the Commission on 15th December 2011[6]. This Roadmap explores the
routes towards a secure, competitive and decarbonised energy system by 2050.
The Roadmap highlights the important role to be played by switching to
renewable energy sources, managing electricity in new ways and shifting towards
alternative fuels, including hydrogen.

27.         On January 23rd 2013
the Commission adopted a Communication "Clean Power for Transport: A
European alternative fuels strategy" which was accompanied by a legislative
proposal setting binding targets for the build-up of the minimum alternative
fuels infrastructure, with special emphasis on common standards. Hydrogen is
one of the alternative fuels included in the Package.

28.         The Commission proposal on
Horizon 2020 envisages activities supporting FCH technologies under the
Societal Challenge "Secure, clean and efficient energy" and “Smart,
green and integrated transport”.

2.2.        FCH
can contribute to growth, jobs and competitiveness

2.2.1.     Europe's competitiveness needs to be strengthened

29.         Overall, the FCH market has
shown a considerable growth. The global turnover for fuel cells and hydrogen is
expected to be US$785 million in 2012[7], which
is 2.5 times the figure of US$300 million in 2005[8]. Global
fuel cell shipments are anticipated to grow at a compound annual growth rate of
around 20% during 2012-2015[9]. The global market is expected to be worth $15.7 billion in 2017[10], and a recent US study estimates that it could be between US$ 43
billion and US$ 139 billion annually over the next 10 to 20 years[11][12]. The market share of Europe fluctuates around 12%.

30.         In terms of power
installed, 80 megawatts were shipped in 2011, of which stationary power
accounted for 62 MW and transport for 18 MW. Europe (with 11 MW shipped in
2010) is far behind North America (45 MW) and Asia (22 MW), in particular for
stationary power applications where Japan has commercialised 20,000 units of
residential CHP since in 2009[13]
using public subsidies. Europe's position is better in the transport
sector thanks to major development and demonstration initiatives[14] that have become international
references. However, Europe's global presence is insufficient to maintain its
leading position as a producer of vehicles. Early markets are dominated
by small portable devices and forklifts. Portable fuel cells account for 95% of
the total units produced[15],
boosted by sales of fuel cell auxiliary power units (APUs) in the leisure sector
where they offer a longer-running power solution than batteries. In forklift
applications, the US has a world leader position having deployed more than
1,000 fuel cell-based forklifts (versus only a few ones in the EU). However, Europe holds a strong global position with half of the world’s total production of
conventional forklifts that offers clear opportunities for the FCH sector.

2.2.2.     New
jobs must be created in the European FCH sector

31.         It is estimated that the
European fuel cell and hydrogen industry currently supports over 9,000 jobs
(more than 3,000 directly and over 6,000 indirectly). Worldwide, these figures
are 39,000 jobs in total (13,000 direct and 26,000 indirect)[16] . The stakeholder survey reports a 30%
increase of direct jobs since 2007 in Europe. Forecasts regarding the
development of employment in the FCH sector depend on different scenarios and
always have to be viewed in a global context.

32.         In a socio-economic
analysis under the FP6 Integrated Project HyWays[17], impacts of the deployment of
FCH technologies on employment were analysed according to different
export/import scenarios with a focus on 6 European countries (France, Germany, Greece, Italy, Norway, and The Netherlands). According to the “Optimistic”
scenario, when great efforts are undertaken to increase EU exports in hydrogen
vehicle and technologies, employment effects e.g. for Germany, France and Italy
could be substantial (in the order of 300,000, 125,000, and 40,000 over the
next 20 years respectively). On the other hand, the “Pessimistic”
scenario, which assumes that other world regions take over the leading position
and Europe has to import hydrogen vehicles, results in dramatic losses of jobs.

33.         In terms of new job
creation, the most pessimistic studies conclude that the overall impact on
employment is likely to be modest. More optimistic reports, such as several US
DoE studies[18][19], Fuel Cell Today[20] or Fuel Cell 2000, point to
the creation of up to several hundreds of thousands of jobs in the US by 2020 or 2030. The overwhelming majority of new jobs will be in stationary fuel cells.
Manufacturing jobs are expected to be largely found in Asia. For example, South Korea has announced a strategic plan to become a global leader in fuel cell
manufacturing, aiming at creating 560,000 jobs[21].
Installation and maintenance jobs will be created mostly in Europe and North America. As for the regional distribution, 51% of new jobs worldwide are estimated to
appear in Asia, 23% in North America, 21% in Europe, and 5% in the rest of the
world.

Although the FCH sector is small, it is of strategic importance due
to its potential knock-on effect for example on the European automotive
industry, which employs several millions of people. It is estimated that by
2040-2050, 10-15% of all cars manufactured in the EU will be FC-based. If Europe fails to become a competitive provider of FCH technologies, this would result in a
significant loss of jobs in the European automotive industry.

2.3.        Public
funding is supporting the innovation chain from idea to the market

34.         Public R&D support for
FCH technologies was estimated by the IPHE[22]
in 2010 at slightly over 1 billion US$ worldwide annually. Europe (EU + Member States) accounted for around 32% of this amount, the US 38%, Japan 20%, South Korea 6% and China 3%.

35.         In the US, the Congress earmarked approximately US$150 million in FY2011 for the DoE Hydrogen and Fuel
Cells Program, in addition to individual States' research programmes whereas Japan invested US$240 million in 2012 and has decided to build 100 new hydrogen refuelling
stations over the country in order to support the deployment of FC-vehicles. China and South Korea are catching up rapidly. China considers fuel cells and hydrogen as central to
its long-term science and technology development strategy[23],[24],[25] and also supports this
strategy with substantial industrial involvement[26]; South Korea has the ambitious
goal to supply 20% of the worldwide shipments of fuel cells by 2025 and offers
subsidies of 80% of the costs of residential fuel cells for heat and power,
gradually decreasing to 30% by 2020.

36.         The growing investment in
FCH R&D is reflected in the number of granted fuel cell patents in the
field. Worldwide, this number quadrupled from 403 in 2000 to 1,801 in 2010. The
majority of patents were granted to assignees in Japan (617) and the USA (598); Japan overtook the USA during this period to become the largest source of fuel cell
patents[27].
Globally, Europe lags in the field in patents (321 patents in 2010, 60% of
which in Germany).

37.         Overall, public investment
in R&D in Europe is comparable to its main competitors, although it is
still somewhat fragmented. Coordination at EU level is of paramount importance
to achieve effectiveness and efficiency of the R&D activities, and this has
been one of the drivers to establish the FCH JU.

2.4.        Several
technological challenges need to be overcome

Despite the progress in the past few years, the level of
performance, reliability, lifetime and cost required for a large-scale
deployment in most applications has not been achieved yet and a sustained
effort on RTD will be needed until 2020 to have these FCH-based solutions
competitive with incumbent technologies.

38.         In order to accelerate the
market readiness and roll-out of fuel cell and hydrogen applications, several
technological and cost-related challenges need to be overcome.

39.         Energy applications
for power production and combined heat and power. Current
electrical efficiencies of the different Fuel Cells used are competitive with
conventional alternatives (mainly gas turbines). The key factors that need
further attention are energy efficiency, cost, system durability, and
flexibility during operation.

40.         Transport applications.
Successful application in the automotive sector requires the combined
deployment of fuel cell electric vehicles and hydrogen refuelling
infrastructure. The cost of the fuel cells should decrease from more than 500€/kW
in 2012 (based on only several hundreds of units produced per year) to
approximately 50€/KW in 2020 in order to be competitive (based on
mass-production of 500,000 units per year). At the same time, their lifetime
should double from 2,500 hours now to 5,000 hours by 2020.

41.         Hydrogen refuelling
infrastructure. The deployment of affordable, efficient and safe hydrogen
fuelling infrastructure is a critical step towards the mass-market deployment
of FCH technologies. Approximately 200 hydrogen refuelling stations are already
installed worldwide, of which one third is located in Europe. A hydrogen cost
(delivered at refuelling stations) of less than 5 €/kg (corresponding to
approximately 1€/litre of gasoline) is required for FCEVs to become competitive
against other efficient solutions such as hybrid electric.

42.         Hydrogen production.
Hydrogen can be produced from various feedstock using conventional or
renewable energy sources. Globally, 48% of bulk hydrogen is produced from
natural gas steam reforming, 30% is oil-based, 18% is derived from coal
gasification and the remaining 4% are obtained via water electrolysis. In the
future, hydrogen should be produced through carbon-free or carbon-lean
processes. Hydrogen from water electrolysis using renewable electricity (e.g.
from wind turbines) or through biomass gasification may become dominant
technologies in the future. Other promising technologies (e.g. low temperature
solar, fermentation, photo-electrochemical processes) will still require
substantial public support in view of post 2020 applications.

43.         Hydrogen as an energy
storage medium. With the increase of renewable energy in the European mix,
producing hydrogen to store this intermittent and partially predictable source
has emerged as a valuable solution. Hydrogen would be particularly suitable for
long-term storage due to a higher energy density and potentially lower storage
cost. Large scale demonstrations (at least 100 MWe) will be needed to showcase
the feasibility and potential of this concept.

2.5.        Underlying
problem drivers

The underlying problem drivers are market failure for first movers,
sub-optimal leveraging of available funding, and fragmentation and lack of
critical mass.

2.5.1.     Market
failure for first movers

44.         The full scale deployment
and commercialisation of fuel cells is mainly hampered by (1) the high cost of
fuel cells and (2) the lack of hydrogen distribution infrastructure. This makes
it difficult for any player to move first. Without removing this “chicken
and egg” problem, it will be difficult to progress.

45.         More specifically, introducing
radical change, competing against well-established, mature technologies and
building the related infrastructures requires improving performance, lowering
cost of all parts of the FCH chain and developing appropriate standards. The
societal and environmental benefits that would result from these technologies
cannot be “internalised” and monetised on the short term. There is as yet only
a niche market for some early applications. In addition, Europe faces stiff
competition from the US, Japan and Korea. All these factors increase the
investment risk for "early movers" and are the substantial challenges
for market introduction and a clear example of market failure. It will not be
possible to overcome these challenges through market forces alone or dispersed
public and private initiatives only[28].

2.5.2.     Need
for leveraging of available funding

46.         The FCH JU funding for RTD
and demonstration for the period 2008-2013 amounts to 940M€. According to
estimates, this represents about 20% of total European funding – which is thus
in the order of 5B€. In 2011, the JU Industry Grouping estimated that the
required level of funding to implement their FCH Technology Roadmap should be
around 17.9B€ between 2014 and 2020[29].
This includes both public and private contributions, with R&D and
demonstration requiring 6.4B€ (3.3 for R&D and 3.1 for demonstration).
Around 11.5B€ should be devoted to market introduction, of which 9.4B€
dedicated to transport (fuel cell vehicles and refuelling infrastructure). This
is clearly beyond the public resources available for FCH research, both in the
Framework Programme and in the Member States. A significantly increased
leveraging of public funding will be needed to fully realise the objectives of
the Roadmap.

47.         The public consultation
identified the difficult access to risk finance for deployment activities (82%)
and limited public R&D funding (81%) as important problems.

2.5.3.     Fragmentation
and lack of critical mass

48.         The European FCH sector is
dispersed across different countries and types of organisations (major energy
and transport companies, high-tech SMEs, research institutes and universities)
which restricts the exchange and pooling of knowledge and experience. The
research needed is often multi-disciplinary and complex, involving different
cross-cutting sectors and no single company or research institution can perform
it alone. The absence of a long-term, integrated RTD and market strategy and
the sub-optimal leverage of funding leads to fragmented research coverage and
discourages the industry and the research community from committing more of
their own resources.

49.         The FCH JU is a Pan-European
public R&D programme with a budget of €940 million for 2008-2013, of which
470M€ EU contribution to be at least matched by participating legal entities. The
FCH JU represents a public funding of approximately €75 million per year. The
JU currently funds around 20% of European research activity in the field and
between 10 and 20% of technological development and demonstrations[30].

50.         The German National
Innovation Programme (NIP)[31]
on FCH Technology is comparable to the FCH JU in the deployment of resources
(€1,4 billion for 2007-2016, 50% public funds, 50% private funds), with an
obvious focus on support to German actors. Good connections exist between the JU
and the NIP programmes to ensure complementarity. The NIP programme, presented
in May 2006, aims at coordinating the different R&D government activities
on FCH being undertaken by the Federal Ministry of Economics and Technology
(BMWi) in the German Energy Research Programme with a set of new measures such
as the preparations for commercialization carried out by the Federal Ministry
of Transport, Building and Urban Development (BMVBS) in the framework of the
Federal Government's Fuel strategy. This strategy was motivated by political
priorities related to the increasing need for a secure and clean energy supply
after the decision of phasing out the nuclear power plants and to stimulate
knowledge-intensive industries in order to increase their competitiveness and
to create jobs.

51.         Several other European
countries are funding R&D of fuel cell and hydrogen technologies on a
national level. The beneficiaries from these countries are also actively
participating in the FCH JU. The national initiatives in the UK and France are
currently increasing in scope and aligning their programmes with the FCH JU.
The national programmes of Denmark, Italy, Sweden, Finland, Spain and Norway,
although of high quality, are more limited in scope and/or size.

52.         In the public consultation,
87% of the respondents believe that the industry cannot address the problems
alone and 67% agree that Member States support will not suffice. An
overwhelming 96% think that an intervention at EU level is required.

2.6.        The
importance of public intervention at EU level

53.         Although the FCH sector has
reached an advanced stage of innovation the industry sees it as still
pre-mature and vulnerable. Carrying FCH technologies from the drawing board to
full deployment in a global competitive environment requires a substantial
increase in public and private investment in Member States and Associated
Countries. Clearly, the 17.9B€ needed to implement the FCH Technology Roadmap
for the period 2014-2020 is beyond the public means available in the EU for FCH
research, both in the Member States and in the Framework Programme. However, a
collective effort to fund a strategic part of this Roadmap in the FCH 2 JU will
be a strong catalyser to leverage the additional private funding needed to
close the financing gap.

54.         The experience of the FCH JU
shows that a long-term budget plan and roadmap based on commonly agreed
strategic technical and market objectives provides stability and encourages
industry, Member States, Regions and the research community to commit more of
their own resources[32].
In the next programming period (2014-2020), complementarity also has to be
ensured between Horizon 2020 and other EU instruments such as the EU regional
policy[33][34] and the Programme for the
Competitiveness of Enterprises and SMEs (COSME). In particular, the
Structural Funds could be better exploited for innovative public procurement
and demonstrations of FCH technologies.

2.7.        Achievements
of the current Joint Undertaking

The FCH JU has put in place a significant project portfolio of
strategic importance, with high industry participation, in particular SMEs.

2.7.1.     Bringing
FCH technologies closer to the market

55.         The main objective of the
existing FCH JU was to accelerate the market breakthrough of FCH technologies,
and place Europe at the forefront of FCH technologies worldwide. Market
introduction has indeed been achieved for some early applications such as
forklifts and small back-up power units. For both energy and transport
applications substantial progress took place. As an illustration, between 2008
and 2012:

·
The cost of PEM fuel cells has dropped on
average by half (from 1,000 €/kW to 500€/kW) and their lifetime increased by
25% (from 2,000 to 2,500 hours);

·
The cost of fuel cells for forklifts has dropped
from 7,000 €/kW to 4,000 €/kW;

·
The cost of storing gaseous hydrogen has been reduced
from 1.0 to 0.5 M€/ton;

·
The cost of hydrogen refuelling stations has
dropped by 30% (today 0.7 to 2 M€ for capex depending on the quantity of
hydrogen available).

Annex 6 provides a
detailed overview of the achieved progress against the initial targets.

2.7.2.     A
strong and strategic partnership at the forefront of FCH technologies

56.         The FCH JU has structured
the R&D landscape in the FCH sector through the establishment of an
industry led public-private partnership with a long-term perspective, combining
the capacities of companies and research organisations, joint strategic
research agenda, multi-annual plan and a long-term public and private
commitment for funding. The present FCH JU groupings gather over 60 research
centres and universities as well as over 60 companies, representing the core
entities active in the sector in Europe.

57.         The FCH JU has enabled the
development of a strategic programme of activities as defined in the Multi
Annual Implementation Plan (MAIP), comprising long-term, breakthrough-orientated
research, applied research and technological development, demonstration and
supporting actions, including strategic studies, pre-normative actions and
technology assessment. More than 390 M€ in grants has already been allocated to
about 130 projects (completed, on-going and under negotiation) and several of
them can be considered as important success stories (see Annex 7).

2.7.3.     Leveraging
effect

58.         The establishment of the
FCH JU was expected to trigger from the industry an additional investment of
600M€ in RTD on top of their in-kind contribution to the FCH JU. The close to
80 private companies that have participated to the survey undertaken in the
framework of the impact assessment have together reported an annual € 1,5
billion of expenditures in R&D and market introduction in 2011 or 2012, 36%
seeing an increase of more than 10% annually since 2007. About 50% of the FCH
JU Industry Grouping members state they have increased their R&D expenditures
thanks to the existence of the JU, even during a period of severe economic and
financial crisis, suggesting that the industry has taken their commitment very
seriously. This illustrates that a public-private partnership with a mechanism
such as a JU does improve the investment environment and can indeed trigger
additional commitments.

59.         The leveraging effect is
also apparent from the funding rates of the JU, which have been lower than for
FP7 due to the obligation of the legal entities participating in the projects
to match the EU contribution. For example, an SME or a university that could
claim a 75% reimbursement of direct cost plus up to 60% of indirect cost under
FP7 has seen the EU contribution reduced to an approximate 50%-60% of direct
cost plus 20% of indirect cost. As a consequence, the JU budget has allowed
supporting a larger number of projects.

2.7.4.     Industry
and SME participation

60.         Statistics of the Grant
Agreements awarded by the FCH JU Calls (details in Annex 8) indicate several
positive trends. The weight of the private sector in the applicant consortia
has increased, indicating that the JU calls are more attractive to industry,
particularly SMEs, than FP7. Industry (including SMEs) takes 66% of the funding
compared to 47% in FP7. SME participation is significantly higher than in FP7:
SMEs take 25% of the funding compared to 18% in FP7. These figures refer to the
Energy Theme of FP7 in the period 2008-2012.

2.7.5.     Governance
arrangement

61.         The Joint Undertaking for
Fuel Cells and Hydrogen (FCH JU) was established by Council Regulation (EC)
521/2008 of the 30th May 2008 on the basis of Article 187 TFEU (Article 171
TEC) for a period up to 31 December 2017 when it shall be wound up. The FCH JU
was conceived as a public-private partnership with 50/50 co-financing between
the two original founding members, the European Commission and the Industry
Grouping. Soon after the establishment of the FCH JU, the Research Grouping
became a member. The contribution of all beneficiaries is taken into account in
the 50/50 co-financing rule. The maximum EU contribution to the FCH JU is
470M€, covering running costs (up to 20M€) and research activities costs
(450M€). This contribution is provided from the 7th Framework Programme budget
allocated to 6 different Directorates in 3 Directorates General, DG RTD (330 M€
), DG ENER (125 M€) and DG MOVE (15 M€).

62.         During its first period of
operation (transition phase), the FCH JU was mainly managed by the European
Commission. Since November 2010 it is fully autonomous. The executive bodies of
the FCH JU are the Governing Board and the Executive Director, supported by the
Programme Office. There are three advisory bodies: the Scientific Committee,
the State Representatives Group and the Stakeholders General Assembly. The
present JU groupings gather over 60 companies as well as more than 60 research
centres and universities active in the sector. This represents the bulk of the
entities active in the sector in Europe. SMEs have a strong presence in the JU operations:
50% of the 60 companies of the Industry Grouping are SMEs. Two seats in the
Governing Board are currently occupied by SMEs.

2.7.6.     Challenges
with respect to complexity and cost-effectiveness

63.         JTI
JUs were set up as innovative instruments under the 7th Framework
Programme. The first experiences gathered with implementing the JTI instrument
via the Joint Undertaking – own dedicated administrative structure – have
highlighted a number of challenges with respect to
complexity and cost-effectiveness, as noted by the Sherpa report, the JTI
interim evaluations, and the Court of Auditors reports on JTIs[35].

64.         These challenges are mainly
the lack of suitability of the general legal framework to the specificities of
JTI JUs, the lack of options for tailoring in the JU establishment act,
statutes, staff and financial rules and the delegation of the overall
responsibility for the day-to-day management of the JU to the Executive
Director. These identified shortcomings stem from the initial design and constitute
a starting point for an improved design for the Horizon 2020 JTI JUs. The
notable examples of the abovementioned shortcomings are presented in Annex 9.

2.8.        Findings
and recommendations from the Interim Evaluation

65.         The interim evaluation,
finalised in 2011[36]
with the help of independent experts, concluded that the JU approach generally
succeeds to enhance public-private activities in technology development and
demonstration, and that the JU should be supported during the entire course of
FP7 to implement its work as originally envisaged. The independent experts
believed that there will be a need for continuation of this initiative. The
technical objectives of the FCH JU were judged ambitious and competitive; the
JU was perceived to provide stability for the R&D community given the
cyclic nature of political interest and visibility: its presence is a
reassuring “constant”.

66.         The experts identified some
areas where operations could be improved. It endorsed the recommendations of
the Sherpa report to streamline the legal framework and to review the current
‘Community body’ status that could reduce the administrative burden of such a
small entity. It also noted that the Programme Office had insufficient
technical resources for effective monitoring of the programme and portfolio
management of the funded projects. As few projects have been completed so far,
it was found difficult to assess the overall impact of the JTI mechanism alone
in terms of new commercial products, patents or publications.

67.         Furthermore, the experts
made several recommendations regarding cooperation with Member States,
international cooperation, and communication and outreach. These issues had
received less attention in the take-off phase of the FCH JU. Several of these
recommendations are currently being implemented. For example, the JU Programme
Office has started developing international cooperation activities reaching a
level similar to other energy areas. It has also developed a communication
strategy and organised several events to promote the EU and the FCH JU
programme. Outreach to key local and national actors (policy makers,
enterprises, research organisations, multipliers, local authorities and press)
is now also a priority area. Communication efforts at national level are being
developed in close coordination with the State Representatives Group. Cooperation
with Member States continues to be strengthened and widenend, in particular
with Germany and the UK.

68.         The Executive Summary of
the First interim Evaluation of the FCH JU is presented in Annex 10.

2.9.        In
summary: rationale for a FCH 2 Joint Undertaking

·
Fuel cells and hydrogen can play an important
role in combatting climate change and increasing Europe's energy security.

·
Full deployment of these technologies could have
large direct and indirect (e.g. automotive industry) economic effects (e.g. the
creation of up to 200,000 jobs by 2030).

·
But they are not yet fully deployed because for
the moment they are not cost-competitive.

·
Industry alone cannot address the technological
challenge of reducing costs. This is because there are very high market risks
associated with such a dramatic shift in energy systems which require the
complex coordination of a many different actors. Also, firms cannot fully
appropriate the environmental and security benefits flowing from their
investment (market failures).

·
These problems can only be tackled at the level
of the single pan-European market – in other words, public intervention at
individual Member State level is insufficient.

·
Traditional collaborative research is
insufficient as a tool for intervening at EU level. A JU is needed to reduce
risks, to provide a stable budgetary framework, to develop and implement a
sector-wide R&D strategy, and to ensure a clear industrial commitment to deployment.

3.           Objectives

69.         In abbreviated form, the
general objectives of the existing FCH Joint Undertaking have been
defined in the Council Regulation as follows:

·
Aim at placing Europe at the forefront of FCH
technologies worldwide and at enabling the market breakthrough of FCH
technologies;

· Focus on developing market applications and facilitate additional
industrial efforts towards a rapid early deployment of FCH technologies;

· Support the implementation of the R&D priorities of the FCH JU
by awarding grants following competitive calls for proposals;

· Encourage increased public and private research investment in FCH
technologies in the Member States and Associated countries.

70.         The existing JU has
successfully made important steps forward in reaching these objectives. For the
proposed continuation of the FCH JU, the general objectives go in the same
direction, but have been re-defined and re-focused. The new objectives take
account of the widened scope and the emphasis on demonstration, innovation and
support to activities on market introduction, and in recognition of the fact
that the technology is getting closer to market.

3.1.        General
objectives

71.         The general objective of
the FCH 2 Joint Undertaking for the period of 2014-2024 is to develop a strong,
sustainable and globally competitive fuel cells and hydrogen sector in the
Union. This will allow supporting the EU policies on sustainable energy and
transport, climate change, the environment and industrial competitiveness as
embodied in the Europe 2020 strategy for growth, and help achieve the EU’s
overarching objective of smart, sustainable and inclusive growth.

3.2.        Specific
objectives

72.         Ambitious objectives are
needed to contribute to realising the FCH Technology Roadmap. The above general
objective is therefore translated into the following specific objectives:

–
Specific objective 1: Reduce the production cost of fuel cell systems to be used in
transport applications, while increasing their lifetime to
levels competitive with conventional technologies,

–
Specific objective 2: Increase the electrical efficiency and the durability of the
different fuel cells used for power production, while reducing costs, to levels
competitive with conventional technologies,

–
Specific objective 3: Increase the energy efficiency of production of hydrogen from
water electrolysis while reducing capital costs, so that the combination of the
hydrogen and the fuel cell system is competitive with the alternatives
available in the marketplace, and

–
Specific objective 4: Demonstrate on a large scale the feasibility of using hydrogen to
support integration of renewable energy sources into the energy systems,
including through its use as a competitive energy storage medium for
electricity produced from renewable energy sources.

73.         The specific objectives
have been defined collectively by the Industry Grouping in consultation with
the Research Grouping. The four specific objectives address the main priorities
of the Technology Road Map 2010-2020 proposed to the FCH JU Governing Board by
the Industry Grouping and adopted by the Steering Group of the SET Plan. The
target values set in each of these objectives have been defined using a
"market-gap" approach based on the assessment of the existing
baseline and track records available as well a comparison of targets for
incumbent competing technologies. The updated MAIP of the FCH JU will have a
higher number of specific targets related to the above-mentioned specific
objectives.

Based on the progress achieved so far and on
the developments in other world regions (e.g. US, Asia), the concerned
Commission services (RTD, ENER and MOVE) consider that these objectives are
achievable provided the level of EU funding is maintained, the industry
commitment (inside and outside the normal calls) at least matches the EU
contribution, and synergies are developed with other activities under Horizon
2020 (e.g. FET, ERC, European Green Vehicles Initiative) and the Structural
Funds.

In addition,
the following operational objectives have been defined, to be reached by
2020:

·
Operational objective 1: Leverage private and public (including Member States) investment
for R&D and innovation on FCH technologies worth at least two times the
size of the EU contribution.

·
Operational objective 2: Maintain, and if possible increase, SME participation in the JU's
activities at or over the current 25%.

·
Operational objective 3: Unlock the excellence and innovation potential in Member States
and Regions – in particular those benefitting from the EU Structural Funds - in
the field of FCH technologies through their hosting of FCH JU demonstration
projects.

·
Operational objective 4: Ensure the efficient implementation of the FCH JU programme by substantially
shortening the time-to-grant and time-to-pay.

4.           Policy
options

74.         In this section, policy
options for organising research and innovation on fuel cells and hydrogen
during the next programming period 2014-2020 are presented. The different
options are compared in Table 1. The "no-EU action" option to
discontinue public research funding at European level is discarded. The
"no-EU action" is appropriate where technologies are either
sufficiently mature to enter the market or are unlikely to have sufficient
Europe-wide impact, and this does not apply to fuel-cells and hydrogen. FCH
technologies are a key to sustainable energy and transport systems, and can
contribute significantly to achieving the objectives of the EU energy policy,
the Energy Roadmap 2050 and the Europe 2020 strategy for growth. The Commission proposal on Horizon 2020 therefore envisages
activities supporting FCH technologies under the Societal Challenge
"Secure, clean and efficient energy".

4.1.        Options

75.         Within the Horizon 2020
framework, four policy options are concretely available:

·
Continuing the Fuel Cell and Hydrogen
Public-Private Partnership in the current form (Joint Undertaking) within
Horizon 2020. This is the Base-Case scenario against which all other options are
being assessed;

·
Using collaborative research projects
under the EU Framework Programme Horizon 2020, thus not prolonging the current
FCH JU;

·
Implementing Horizon 2020 for the fuel cell and
hydrogen technologies through a Contractual Public-Private Partnership;

·
Implementing a Fuel Cell and Hydrogen
Public-Private Partnership through a modernised Joint Undertaking
adapted to Horizon 2020.

The policy options differ when considering their:

·
Scope (balance
between research, demonstration, support to early deployment, transport and
energy applications, energy storage);

·
Governance (level
of coordination between the industry and research community, between transport
and energy actors and between MS and the EU);

·
Modus operandi (funding
rates; simplicity of access to funding; efficiency of the programme
implementation);

·
Stability (continuity
provided both on the policy and financial side; the more stable the
'environment', the more likely the private sector, in particular SMEs, will
invest in R&D in the FCH sector and the more likely the MS will align with
the EU programme. This will be directly reflected in attaining a higher leverage
effect, critical mass and wide participation of SMEs).

4.1.1.     PO1
- Fuel Cell and Hydrogen Public-Private Partnership in the current form (Joint
Undertaking) within Horizon 2020 (Business-as-Usual)

76.         The base-case (or business-as-usual)
scenario relies on the continuation of the JUs under Horizon 2020 as they
currently exist under the 7th Framework Programme, i.e. retaining
their current scope of objectives, governance (same division of
powers and responsibilities between the Executive Director, the Governing
Board, the Commission, and the private participants) and their current modus
operandi (financial rules, funding rules, etc.).

77.         Regarding the funding rules,
derogations from Horizon 2020 Rules for Participation will be required in order
to maintain the status quo.

78.         PO1 will prolong the stability
provided by a public-private partnership with a long-term perspective, joint
strategic research agenda, multi-annual plan and a long-term public and private
commitment for funding.

4.1.2.     PO2
- Use of collaborative research projects under the EU Framework Programme
Horizon 2020, thus not prolonging the current FCH JU (Zero Option)

79.         Modus operandi: the
R&D would be implemented through the standard funding schemes of the EU
Framework Programme and, separately, through national and regional programmes.
It is a well-established mechanism, proven over time and well-understood by
industry and the research communities. It is efficient and well-managed with
clear objectives and expected impacts, has a traditional emphasis on scientific
quality and innovation, a mature approach to technical follow-up and financial
auditing, and a respected peer review process. In the spirit of simplification,
the rules for participation and dissemination of Horizon 2020 would de facto
be applied to all FCH projects. In particular, the funding rate would be
re-aligned with other programmes of Horizon 2020 and would be higher than in
the current FCH JU.

80.         Governance:
Comitology would be re-introduced. The implementation of demonstration projects
targeting the societal, economics and environmental objectives within the
energy and transport sectors could become fragmented, as they are distributed
over several services and overseen by different Programmes Committees, each
with different priorities. The industry and research actors would no longer be
in the driver seat for defining the programme priorities and timelines, even if
a consultation mechanism such as a European Industrial Initiative or a Technology
Platform would be established.

81.         Stability: EU public
support would again depend on annual or biennial budgets and work programmes,
and would not be guaranteed.

82.         Scope: The industry
and research stakeholders would be asked to advice in an informal way on
the programme’s scope and objectives. Member States may have easier insight
into – and influence on - the successive work programmes through their
participation in a Programme Committee.

4.1.3.     PO3
- Implement Horizon 2020 for the fuel cell and hydrogen technologies through a
Contractual Public-Private Partnership

83.         Modus operandi:
Within a Contractual Public-Private Partnership, the Commission services or an
executive agency would manage projects in the framework of successive work
programmes. A contractual arrangement for the PPP between the European
Commission and the relevant stakeholders would be signed. Private partners will
not contribute to the administrative costs for a programme office, but the
commitment to the research agenda would have to be made explicit.

84.         Governance:
Comitology would be re-introduced. Portfolio management of funded projects
towards common goals would become more difficult. A Contractual Public-Private
Partnership would allow a good level of collaboration both within the different
EC services and between the EC and its partners, but these services would
manage their programme separately, and launch separate calls for proposals,
which will multiply the potential access paths to funding for potential
beneficiaries.

85.         Stability: a
constant, stable level of EU public support for FCH technologies could not be
guaranteed as the budget would be subject to an annual decision, even if an
overall budget for the period 2014-2020 would be indicated.

86.         Scope: the industry
and research stakeholders would be asked to advice in a formal way on
the programme’s scope and objectives, but would not co-decide and not be in the
driver seat.

4.1.4.     PO4
- Fuel Cell and Hydrogen Public-Private Partnership through a modernised Joint
Undertaking adapted to Horizon 2020

87.         Modus operandi: The
modernised JU option builds upon the past experience and the lessons learned
and it further improves the design and suitability of the instrument to the new
challenges under Horizon 2020 by simplifying the
administration, introducing lighter financial
procedures, exploring possibilities of establishing common services/functions,
and increasing stakeholder
dedication to the JU. The modernised JU keeps the basic elements of an EU body:
legal status, application of the Staff Regulations, application of the Protocol
on Privileges and Immunities, liability, jurisdiction and applicable law,
protection of the financial interests of the Members, rules on confidentiality
and transparency. At the same time the modernised JU simplifies a series of
other important elements: reference to the PPP-specific financial rules,
harmonized provisions on control and audit, application of the Horizon 2020
rules (subject to eventual derogations where appropriate), set-up under the
responsibility of the existing JUs, no mandatory host agreement, streamlined
financial and operational planning and reporting, and harmonized approach to internal
audit.

88.         Governance: In the future legal environment tailored-made for the JUs, the modernised JU could contribute to improving
the shared programme governance, providing a stable long term perspective to
the stakeholders and simplifying the administration and operations of the JU. The modernised JU would keep the basic elements of the Statutes such
as the JU bodies and their responsibilities, but would allow strengthening the
coordination with Member States and Regions. Regions might become a permanent
observer in the States Representatives Group. Furthermore, the role of the
States Representatives Group is planned to widen in the new Regulation to
include coordination, and not only advising the JU. Both MS and Regions will be
important for securing additional funding for demonstration projects through
Structural Funds.

89.         Scope: A modernised JU
will allow a re-orientation of the objectives and
activities of the FCH JU, structuring the programme around two main innovation
pillars, respectively dedicated to Transport and Energy Systems, and one
cluster of cross-cutting research activities. This would allow putting more emphasis on energy applications, hydrogen as a storage
medium, and a variety of activities
to support market introduction. It would also allow putting more emphasis on
large scale demonstrations. The reorientation of activities,
in particular by increasing the support to demonstration and market
introduction, is expected to trigger additional industry funding to accelerate
full deployment of FCH technologies.

90.         Stability: PO4 will
provide a stable public-private partnership with a long-term perspective, joint
strategic research agenda, multi-annual plan and a long-term public and private
commitment for funding.

4.2.        Budget
allocation

91.         The four options will be
compared assuming the allocation of the same overall EU contribution, which is
based on the Horizon 2020 proposal, and amounts to maximum €700 million. The EU
contribution is further justified in section 6.5.

Table 1. Comparison of the policy options

|| Option 1 Continuation of current JU || Option 2 Horizon 2020 – collaborative research || Option 3 Contractual Public-Private Partnership || Option 4 Modernised JU

Multiannual budget commitment by the EU || Yes || No || Indicative budget. Not legally binding || Yes

Support activities for innovation and early deployment || Limited as in FP7 || As in Horizon 2020 || As in Horizon 2020 || As in Horizon 2020 5-10% of budget allocation

Support to research activities || 50-55% of budget allocation || R&D and demonstration ratio can be defined annually || R&D and demonstration ratio can be defined annually || 30-40% of budget allocation

Multiannual Strategic Research Agenda || Defined by Industry and Research Groupings. Decided jointly with the Commission || Advised by Technology Platform and/or Industrial Initiative. Decided by EC through comitology || Defined through PPP consultations. Decided by EC through comitology || Defined by the Industry and Research Groupings. Decided jointly with the Commission

Structure of Multiannual Strategic Research Agenda || 5 application areas, incl. cross-cutting || Horizon 2020 societal challenges || Horizon 2020 societal challenges || Clustering of application areas into 2 axes (energy and transport), plus cross-cutting, in line with Horizon 2020 societal challenges

Role of Member States || As with the current State Representatives Group (SRG) || Programme Committee || Programme Committee || SRG with a greater possibility to contribute (joint actions)

Implementing body || Joint Undertaking, Programme Office || Commission/Executive Agency || Commission/Executive Agency || Joint Undertaking, Programme Office

Funding mechanism & rates || Matching rule (50/50 co-funding), with assessment of in-kind contribution || Horizon 2020 funding rates || Horizon 2020 funding rates || Horizon 2020 based funding rates

5.           Analysing
the impacts by Policy Option

92.         The four Policy Options
identified and presented in Chapter 4 are compared using a set of criteria described
in the sections below. It should be noted that, FCH being a new technology,
some impacts can only be described qualitatively rather than quantitatively. The
opinion of the stakeholders and of the respondents to the public consultations
on the expected impact of the Policy Options is presented in Annex 11.

5.1.        Well-designed
intervention logic

93.         PO1 and PO4 offer the best
opportunity to develop a logical and coherent intervention in both the
technical and organisational dimensions. The institutional arrangements of the
JU permit industry and the Commission services to design a strategic agenda
over an extended period, backed by known and adequate, secure funding. PO3 also allows industry intervention in the design
of the programme logic and substance, but with a lower sense of ownership and,
above all, no secure funding. The overall objective of the intervention is to
develop technologies to market readiness. The actors best-placed to identify
the necessary actions are the industrial partners. The JU mechanism is the best
suited for that purpose, as shown by the high industry participation in the
current JU (Industry accounts for 66% of the funding, to be compared to 47% in
FP7).

5.2.        Leveraging
effect on deployment

94.         The modernised JU (PO4),
with its increased support to demonstration activities, hydrogen (production,
storage and distribution) and market introduction - which is a main feature
differentiating it from the existing JU (PO1) - is best placed to trigger the
required additional funding for full deployment of FCH technologies. According
to the FCH Technology Roadmap, in excess of 11B€ will be needed for full
deployment of FCH technologies, in particular in the field of hydrogen
infrastructure. This is several orders of magnitude higher than what the
Framework Programmes can put on the table.

5.3.        Critical
mass

95.         The scale and scope of the
FCH research agenda goes beyond the capacity of individual Member States, both
in terms of financial commitment and of the research capacity involved. In
addition, the relatively fragmented nature of the European scientific community
necessitates institutional scaffolding around which a critical mass can
assemble. The establishment of a PPP in FCH research is intended to bring
together a critical mass of researchers and industrial actors to address
obstacles to commercial deployment. The current JU has answered to this need,
as it has established a central focal point from which coalitions can be built,
allowing companies in other regions to find and connect to JU members, and it
provides "one strong voice to policy makers and stakeholders abroad".

5.4.        Small
and medium-sized companies

96.         SMEs are often unable to
make their own way along the value chain and need support from the large,
global companies. The opportunity to work within a strong, international institutional
context can support the dissemination of innovative ideas to those that can
bring them to mass markets. The more stable arrangements of PO1 and PO4 are
best placed to provide an environment conducive to the uptake of innovative
practice and the incorporation of innovative actors into future value chains.
The high participation of SMEs in the current JU, receiving 25% of the funding
as compared to 18% for FP7, confirms this aspect. The simplification of
procedures in the Horizon 2020 options can be especially beneficial for SMEs.
This places PO2, PO3 and PO4 - ahead of PO1. Furthermore, PO4 would allow - in
contrast to PO1 - access to the Guarantee Fund. PO4 is therefore the best
option to achieve the objective of maintaining, and if possible increasing, SME
participation in the JU’s activities at or over the current 25%.

5.5.        Innovation

97.         Horizon 2020 is intended to
stimulate innovation through continuous support along the innovation chain from
the idea to the market. This will put emphasis on result-oriented research,
dissemination, piloting and demonstration, strengthened provision for market
take-up, funding along the innovation chain and supporting demand-side
measures. PO4 will have a broader scope to put more emphasis on demonstration,
and specifically include actions to support innovation and market-uptake.

98.         An important pre-condition
for innovation will be the access to venture capital schemes for activities
with high technical and market risks, such as the Risk-Sharing Finance Facility
(RSFF) and CIP financial instruments developed under FP7. Access to these and
other improved sources of finance would be facilitated in all policy options
that operate under the rules of Horizon 2020, but the opportunities will be
greatest where there is a clear research agenda and institutional focus that
situates the venture capital investment in a convincing, wider commercial
context. Balancing these aspects, PO4 is the most attractive option; PO3 is
superior to PO2 as it has some element of strategy and continuity; PO1 can
provide a degree of strategy and continuity, but only access with more
difficulty the new tools.

5.6.        Economic
growth and competitiveness

99.         The impacts on economic
growth and competitiveness will depend strongly on whether European companies
establish a leading position in the field. The impacts on employment and growth
may be positive, but not dominant in case jobs gained in the FCH industries
will be matched by losses in the traditional industries that they replace. A
major contribution to growth in GDP and employment therefore will be achieved
only if European companies establish a strong export market; in this respect
first mover advantages may be significant. The broader scope of PO4, with more
emphasis on demonstration and support to market uptake, is best placed to
accelerate the time-to-market.

100.       Creation of a leading
position in a future market requires establishing common norms and standards.
This is particularly relevant to the development of a hydrogen infrastructure,
which is unlikely to develop at the desired pace if left entirely to commercial
motivation; the first mover risks will outweigh first mover benefits. The
coordination of policies, regulations and standards across the energy and
transport sectors and across European member states, together with the finance
and deployment of infrastructure cannot be achieved by the R&D programme or
by the efforts of the JU alone, but the JU can be an effective interlocutor and
lobby for the necessary administrative and political actions. PO4, with its
broadened scope, is best placed to contribute to the development of a hydrogen
infrastructure by supporting demonstration at large scale of the feasibility of
hydrogen as a competitive energy storage medium, and by activities to support
early deployment.

5.7.        Coherence
of the knowledge triangle

101.       One of the aims of Horizon
2020 is to improve the coherence of the knowledge triangle comprising research,
innovation, and training. Fostering innovation and training of researchers has
substantial relevance to the FCH programme, because financial support is needed
to bring scientific ideas into commercial practice. This is particularly true
for SMEs, for whom training may be otherwise excessively costly. Of all policy
options, PO4 will be best placed to extract maximum benefit because it can
integrate these other tools into the research programme with assured funding.

5.8.        Broader
policy coordination

102.       The linkage of Horizon 2020
to societal challenges facilitates the development of strong connections with
sectorial policies. This will be important in commercialisation, because there
needs to be strong regulatory and policy interventions in order to reflect, in
the market prices, the economic and societal benefits of the technologies.
There may also be opportunities to seek support for the provision of
infrastructure, from cohesion funding. Under this criterion all policy options
based on Horizon 2020 would benefit, but this would be seriously off-set in the
case of PO2 by the absence of an institutional interlocutor. To some degree the
same would apply to PO3; PO4 does best by this criterion.

5.9.        Coherence
with programmes of Member States

103.       During the first years of
operation of the FCH JU, the main focus was to engage Member States in the
operation of the JU through the States Representatives Group. Although the FCH
JU has had a positive influence and contributed to the inclusion of FCH
technologies in the Energy R&D programmes of MS, links with the JU
activities in complementary and synergetic ways were not systematically
exploited with the exception of Germany. This MS has developed a very ambitious
FCH programme, comparable in budget and scope with the FCH JU. Concerning
Regions, the JU was fundamental in the establishment in 2008 of the 'Hydrogen
Fuel Cells and Electromobility for European Regions' (“HyER”)[37], which offers a platform for
the increasing role of regions in strategy, policy, deployment and funding
decisions concerning the roll-out of economically and environmentally
sustainable vehicles and refuelling/recharging infrastructure. HyER represents
over 30 regions and cities in Europe and actively participates in several FCH
JU and FP7 projects.

104.       Looking towards the future,
the FCH JU will aim not only to a better alignment and coherence of the
national, regional and JU programmes but to foster jointly funded actions,
including smart specialisation in regions and the use of Structural Funds. All
the proposed options allow for the participation of Member States and Regions
if they so desire, but the options PO1 and PO4 that include a long-term
strategic agenda and a budget commitment will permit a more focused effort. In
particular for PO4, it is expected that as energy applications in the modernised
JU activities increase in scope due to the need to store renewable electricity
in all MS, this will attract more attention, and promote coordination and
synergies between national programmes.

5.10.      Cost
efficiency

5.10.1.   Cost
neutrality and JUs as effective means to achieve goals

105.       The first experiences with
the JUs indicate that they constitute a highly effective means of implementing
the 7th Research Framework Programme. The use of a JU to implement
the JTI has the following main benefits compared to using the standard means of
implementation of a framework programme:

·
a clear commitment of the stakeholders;

·
visible legal, contractual and organisational
framework to structure the specific joint
commitments to which stakeholders are ready to sign up;

·
firm governance structure for the JU, including shared decision-making powers and management
by the public and private partners, is visible to all stakeholders;

·
budgetary certainty via the budget ceiling for EU contribution to cost of the
operations and the private partners' financial commitment;

·
efficient use of public resources as the Commission passes operational roles to the JU while
retaining focus on regulation and supervision.

106.       Furthermore, the use of a JU
to implement the JTI with the current small-sized body is already at least cost
neutral and probably more cost-effective for the Commission, as shown by the
cost-benefit analysis performed in-house DG RTD, in comparison to collaborative
research initiatives and Contractual PPPs in terms of administrative, supervision,
establishment and winding up costs because the private partner pays 50% of the
running costs of the JU. Increasing the size of operations of the JUs and
simplifying their functioning on the basis of common participation rules for
Horizon 2020 will make the JU a cost-effective means of implementation.

5.10.2.   Possible
improvements - efficiency

107.       The
"business-as-usual" scenario, which is one of the considered methods
of implementing JUs under Horizon 2020, relies on the continuing of the JUs
under Horizon 2020 as they currently exist under the 7th Framework
Programme. In contrast, the "modernised JU" option simplifies and
improves the legal framework, governance, and operational modalities of the
current JUs. In particular, in order to ensure a good balance between
cost-neutrality of the JUs under Horizon 2020 and increase their
cost-effectiveness, the following simplification measures are being considered:

·
Foreseeing a single set of Rules for
Participation and Dissemination that will, subject
to derogations where appropriate, render participation easier and ensure a
single and sufficiently flexible regulatory framework, will create a more
coherent set of instruments covering both research and innovation and increase
the scientific and economic impact while avoiding duplication and
fragmentation.

·
Introducing lighter financial procedures, which in particular will provide simplified procedures for the
establishment and the adoption of the budget and corresponding reporting. This
is due to the new Financial Regulation which permits bodies like JTIs adopt
lighter financial rules based on a new, tailor-made, simplified
"model" Financial Regulation.

·
Using common IT systems, including the proposal evaluation system for Horizon 2020,
increases harmonisation, reduces the costs for such services and allows JU
staff to better adapt to the common software management programme. Moreover, by
using the "commons" of the programme, the JUs coordinate better their
internal processes regarding portfolio management, as well as monitoring and
reporting towards the legislator and the Commission regarding management of
programmes and projects.

·
Exploring different options regarding
establishing common services/functions (IT, Audit,
Legal issues) for PPP/JTIs. These options are:

(a)
Commission provides common services to JUs and
requests from them the payment of a proportional contribution;

(b)
JUs set up their own common functions, which are
specific and shared among them; for example in the context of the internal audit
or for the accounting officer (the latter case being explicitly provided for by
the Rules of Application (RAP), Service Level Agreements, common service and
supply contracts and exchange of information among JU colleagues.

(c)
Each JU organises itself individually.

·
Continuity of staff between the current and
future JUs for the period when the current project
portfolio is closed down and the future portfolio is build up.

5.10.3.   Possible
improvements - effectiveness

108.       At the same time, the above
simplifications envisaged for the new JUs to be set up under Horizon 2020 will
also allow them to become more effective by:

·
Clear stakeholder commitment to the JTI through (1) a definition, in a dedicated annex to the regulation,
of the contribution to the JTI of industrial members, rendering their
contribution more visible, (2) improved representation of the public and
private partners in governing bodies, (3) a balance of influence between the
Commission and Industry in the appointment of the Executive Director, etc.).

·
Introducing more flexible budgetary and
procurement procedures through adjusted legislative
framework building on the new Financial Regulation.

·
Increasing the accessibility of the
programmes. The Horizon 2020 JUs shall apply the
common set of rules of the Horizon 2020 Rules for Participation, thus providing
a coherent legal framework. Any derogation requested by the JU would have to be
duly justified for specific needs and should be cost-effective for the
implementation of Horizon 2020.

6.           Preferred
Policy Option

6.1.        Comparing
the impacts

109.       The table below assesses the
impacts of each option according to the discriminating criteria used in Section
5. The criteria have been grouped to indicate those that reflect best the three
high-level criteria of effectiveness, coherence and efficiency. A plus sign
indicates an improvement over the existing reference arrangement that is taken
to be the continuation of the existing JU (PO1); a negative sign indicates less
good performance and an equal sign indicates equality.

Criteria || PO1 JU under Horizon 2020 – current form || PO2 FP under Horizon 2020 || PO3 Contractual PPP || PO4 JU under Horizon 2020 – modernised form

Effectiveness || || || ||

Intervention logic || = || - || - || =

Leveraging effect || = || - || - || +

Critical mass || = || - || = || +

SMEs || = || = || = || +

Innovation || = || - || + || +

Economic growth and competitiveness || = || - || = || +

Coherence || || || ||

Coherence of the knowledge triangle || = || + || + || +

Broader policy coordination || = || - || = || +

Coherence with programmes of MS || = || - || - || +

Efficiency || || || ||

Cost-efficiency || = || - || = || +

Operational simplicity || = || + || + || +

Table 2 Comparison of options

110.       Compared to the existing JU
(PO1), the modernised JU (PO4) has a similar clarity of focus and broadly equal
intervention logic; both these options are superior to the alternatives that lack
the assurance of long-term funding and strategic orientation from industrial
leadership. The JU-type options will achieve a stable critical mass along the
FCH value chain at programme and project level, with agreed priorities and
directions. In this respect they are preferable to the options with less
focused partnerships and priorities, i.e. the Horizon 2020 "only"
option (PO2) and to a lesser extent also the Contractual PPP (PO3).

111.       PO4 offers some improvements
to the existing arrangements. For example, the easier access to support for
innovation and the simplification of mechanisms are likely to benefit SMEs in
particular. The existence of a strategic partnership under both PO1 and PO4 is
beneficial to the development of good relationships between the SMEs and big
companies, which is likely to contribute also to effective commercial value
chains. PO4, which can address early deployment support actions, promises to
offer better integration of research results into the policy and regulatory domain
and this in turn will help in the deployment of FCH technologies through
well-designed regulatory instruments. PO4 may actually have a self-enhancing
effect on innovation.

6.2.        Efficiency
in addressing the underlying problem drivers

The options based on a Joint Undertaking (PO1
and PO4) are the most efficient in addressing the underlying problem drivers,
i.e. alleviating market failure, leveraging available funding and providing a
critical mass. Firstly, shared governance between industry, the research community
and the EC allows for close coordination and prioritisation of the R&D
programme. This helps to create the right products, applications and standards
to be competitive in a global market. Secondly, a
long-term budget plan and roadmap provides stability and encourages industry,
Member States and the research community to commit more of their own resources.
Looking towards the programming period 2014-2020, the private sector involved
in the current JU expects to invest at least 5B€. Thirdly, the members of the FCH JU groupings form the core entities active in
the sector in Europe. This represents a critical mass; a focal point from which
coalitions can be - and have been - built, and which can communicate with a
single strong voice.

112.       Since PO4 is the only option
that provides support to market introduction activities, it is best suited to
attract further leverage for the deployment actions from industry and other
stakeholders. Furthermore, it provides a stable critical mass along the FCH
value chain, including infrastructure and hydrogen providers, which facilitates
the simultaneous coverage of technology and infrastructure development, thus
contributing to solving the chicken-and-egg problem.

6.3.        Preferred
Policy Option

113.       From the analysis and
comparison of the different impacts by Policy Option it can be concluded that
PO4 is either superior or equal to PO1 and PO3 by all criteria, essentially
because of its stability and the strategic relations that it permits across the
board. PO4 is also generally superior to PO2 in terms of effectiveness.
Importantly, PO4 is also the most efficient option to address the underlying
problem drivers.

114.       This analysis is strongly
supported by the stakeholders. The stakeholder survey shows that 93% of the
beneficiaries are in favour of continuation of the JU. The responses from the
Industry Grouping in particular unambiguously identify the modernised JU (PO4)
as having the strongest impact. This is underlined by the results from the
public consultation, showing that a convincing majority of respondents favour
the continuation of the JU in a modernised form, i.e. PO4 (see Annex 11, Figure
6).

115.       Central to this analysis is
the assumption of the solid financial commitment of the private sector in
addition to the EU funding, which is a precondition for providing stability,
leverage and strategic direction, thus reaping the full benefits of PO4.

6.4.        Implementation
and governance

6.4.1.     Programme
structure

116.       In its Financial and
Technology Outlook for the European FCH sector, the Industry Grouping has
described the technology development steps that will be followed until 2020 to
bring the different applications to market (see Annex 12). The detailed content of the JU programme is being defined in the Multi Annual Implementation Plan (MAIP).

117.       The implementation of the FCH JU programme of research, development and demonstration for fuel cell and hydrogen
technologies for the period 2014 – 2020 is structured around two main
innovation pillars, respectively dedicated to Transport and Energy Systems,
and one cluster of cross-cutting research activities, complementing the
technical research activities. The two innovation pillars have an area of
overlap (integrated energy and transport systems). Figure 1 lists the specific
FCH applications for the two innovation pillars as well as the overlapping
area.

Innovation
pillar 1: FCH Technologies for Transportation Systems

·
Road vehicles

·
Non-road mobile vehicles and machinery

·
Refuelling infrastructure

·
Maritime, rail and aviation applications

Figure 1. Innovation pillars and building blocks of
the FCH JU programme

Innovation
pillar 2: FCH technologies for Energy Systems

·
Hydrogen production, storage and distribution,
including through gas networks

·
Hydrogen technologies for electricity storage
and grid balancing

·
Heat and power generation with stationary fuel
cell systems for residential and industrial uses

·
Mini, micro and portable fuel cell systems

118.       The integration of a large
share of intermittent renewable sources in the electricity production mix is
considered as one of the most crucial issues of the transformation into a
low-carbon energy system. Therefore, the development of efficient and cost
competitive solutions for storing renewable electricity in large quantities and
for a longer term is one of the main priorities of the EU energy policy. Using
hydrogen as a medium to store this electricity is one of the possible options,
since hydrogen has a great potential for storing large quantities of renewable
electricity. The advantages of hydrogen storage over conventional energy
storage technologies include its higher energy density and potentially lower
storage cost, its flexibility for other off-grid end uses like fuel in fuel cell
electric vehicles, its utility as an industrial gas and the power-to-gas
storage and distribution easiness. For that reason, the use of hydrogen as a
storage medium, its distribution through the existing natural gas
infrastructure and its potential grid and off-grid applications will be an
important priority of the FCH JU, directly addressing the societal challenge of
improving energy security.

Cross-cutting
part:

·
Social acceptance and public awareness issues;

·
Education and training for FCH sector scientists,
engineers, technicians and decision/policy makers outside the sector;

·
Policy and strategy development;

·
Pre-Normative Research;

·
Regulations, Codes and Standards, including
safety standards and norms.

·
Identification and developments of investment
and financing mechanisms and structures

119.       Over
the whole FCH JU period duration from 2014 to 2020, research and development
should account for 30 to 40% of the total effort while 40
to 60% of the effort is expected to be devoted to demonstration and pilot
activities, reflecting the fact that hydrogen and fuel cell technologies are
approaching market introduction. In line with the current FCH JU
characteristics, it is proposed to dedicate 5 to 10% of the JU total budget to
complementary cross-cutting research activities, including support to
market-introduction of market-ready applications.

Activity distribution || R&D || Demonstration

Transports Systems || 15-20% || 20-30%

Energy Systems || 15-20% || 20-30%

Cross-cutting (incl. early deployment) || 8-12%

Table 3. Indicative distribution of the FCH JU
budget

6.4.2.     Relation
to Horizon 2020 activities outside the FCH JU

120.       Although the FCH JU is the
principal instrument for joint European FCH research, it should maintain an
effective interaction with related activities in Horizon 2020. For example, the
JU shall develop synergies with the Future Emerging Technologies (FET)
activities and the activities of the European Research Council (ERC) in the “Excellent
Science” priority. Similarly, research on key enabling technologies (KET) such
as materials, nanotechnologies and processes will be carried out in the
“Industrial Leadership” priority. It will also be important to build/strengthen
relations with transport and energy-related initiatives at European level, such
as the SET-Plan Industrial Initiatives (wind, solar, grids) or the transport
PPP (European Green Vehicle Imitative). Furthermore, ERA-NET and the EERA Joint
Programme on FCH can coordinate and integrate national and regional activities
in the field, and can be effective partners for the JU.

6.4.3.     Governance
and operations

121.       In line with the current
structure, the FCH JU Programme is implemented by a dedicated Programme Office,
under supervision of the FCH JU Governing Board (GB). The GB consists of
representatives of the three members. The distribution of seats changes
slightly compared to the current FCH JU; the NEW-IG keeps six seats, the EC reduces
from five to three seats and N.ERGHY keeps one seat.

122.       The main task of the FCH JU
Governing Board is to oversee the proper execution of the research and
innovation programme in line with strategic and specific objectives. From the
experience of the current FCH JU, it is strongly recommended that the GB should
be as much as possible relieved of daily administrative and management
decisions, which should be entirely within the Programme Office Executive
Director’s province. The GB will elect its chair and the vice-chair.

123.       The
Governing Board will translate the strategic objectives of the FCH JU into a
Multi Annual Implementation Plan (MAIP) and Annual Implementation Plans (AIPs),
and will oversee the delivery of the JU Programme. The MAIP and AIPs will
constitute the principle business documents of the FCH JU. The MAIP may be
revised over the lifetime of the FCH JU. The AIPs will be drawn up annually and
will reflect the priorities of the FCH JU. Both documents will be established
by the three partners in the Governing Board, with input from other
stakeholders, including the Scientific Committee and the States Representatives
Group.

6.5.        Proposed
budget for the option of choice

124.       The proposed activities of
the modernised JU show a re-orientation towards more demonstration, more
emphasis on energy applications, hydrogen (production, storage and
distribution) and activities to support market introduction. This also implies
a re-focussing of the budget. However, even with a re-focussing of the budget,
it will not be fully possible to carry out the new programme of activities with
a budget similar to that of the existing FCH JU. In particular, widening the
scope of the JU's activities to include energy storage in a meaningful way requires
an additional EU contribution of at least 15M€/yr. An further allocation of
50M€ over the period 2014-2020 to cross-cutting issues and support actions in
order to address the entire innovation value chain would seem appropriate to
achieve the objectives of the JU.

125.       It is envisaged that the
staff number and administrative expenses of the Programme Office will not
change much, since the burden of handling a larger overall budget will be
offset by the efficiency gains through simplification and other measures. As a result, the running cost of the
modernised JU is estimated at
€40 million (with a maximum EU contribution of 20 M€), supporting a staff of
around 20, similar to the existing FCH JU. Thus, in relative terms, the
operational cost of PO4 will be lower than that of PO1.

126.       The maximum EU contribution
to the activities of the existing JU for the period 2008-2013 is 470M€,
composed of 450M€ (i.e. 75M€/year) for R&D and 20M€ to support the
Programme Office. An increase with 15M€/year in R&D for the period
2014-2020 would amount to 630M€ (90M€/year). Including 20M€ to support the
Programme Office, and 50M€ for increased support to early deployment, the
required EU contribution would amount to 700M€ (see table below).

127.       || R&D activities || Additional activities in support of early deployment || Programme Office || Total maximum EU contribution

Current FCH JU (2008-2013) || 6 \* 75 || - || 20 || 470

New FCH JU (2014-2020 || 7 \* 90 || 50 || 20 || 700

Table 4. Breakdown of the maximum EU contribution
to the existing and new FCH JU (M€).

128.       The above EU contribution will
not only benefit the members of the FCH JU. The budget allocated to R&D and
activities in support of early deployment will be used through fully open Calls
for Proposals and Calls for Tender. It is noteworthy that many beneficiaries
(60%) of the current FCH JU are not members.

129.       The proposed EU contribution
to the FCH JU is based on the Commission proposal for the budget of Horizon
2020. Since the FCH JU is a priority of the Energy Theme, the proposed EU
contribution remains unchanged even if the overall budget for Horizon 2020
would fall short of the Commission's proposal by up to 15%. However, should
this budget be reduced even further, the EU contribution to the FCH JU could be
reduced to between 630-700M€, with an across-the-board reduction in all
activities.

130.       In case the EU contribution
would be reduced to below 630M€, the FCH JU activities would have to be refocused
taking into account the technology development layout proposed in the Industry
Grouping's Financial and Technology Outlook 2014-2020 (see Annex 12).

131.       The private funding in the
FCH JU will be both inside and outside the calls for proposals:

·
The Industry and Research Groupings agreed to reduce the maximum funding rates for all beneficiaries,
thus increasing their co-funding of the programme. This reduction could
mainly apply to demonstration and close-to-market actions/projects. The foreseen split between research and demonstration
activities is close to 50/50.

·
Discussions are on-going with the Industry
Grouping to precise in detail their commitments outside
calls for proposals. The private contributions have to be robust and
measureable. The funded activities will support the achievement of the
objectives of the FCH JU.

132.       The modernised JU complies
with the three guiding principles governing funding models and private
contributions in Horizon 2020:

·
EU contribution will be allocated on the basis
of transparent, open competition and excellence;

·
Participation in FCH JU activities will follow
essentially H2020 funding rules;

·
Industry is to make commitments that are
measurable, verifiable and can be valued.

133.       The private sector is
convinced that the FCH JU will play a major role as a catalyst for growth and
declared its readiness to invest in total around 4 B€ in the period 2014-2020.

7.           Evaluation
and monitoring

7.1.        Mid-term
and final evaluations

134.       The Commission will carry
out both the final and the mid-term evaluations of the FCH JU with the
assistance of independent experts. It will cover the quality and efficiency of
the Joint Undertaking and its progress towards its objectives. The Commission
will communicate the conclusions of the evaluation to the Council and the
European Parliament.

135.       The general objectives will
be monitored continuously by the Industry grouping, using performance
indicators such as market share and number of new jobs created.

7.2.        Monitoring
the FCH technology progress

136.       A set of Key Performance
Indicators (KPIs) is proposed to monitor the FCH JU during the period
2014-2020, in line with the specific objectives of the Programme (as described
in Chapter 3). The proposed KPIs are also consistent with the current
Multi-Annual Implementation Plan (MAIP) of the FCH JU.

Area || Description || 2012 || 2016 || 2020

|| || Current status || Target || Target

Transport || Specific Objective 1 || || ||

|| Automotive fuel cell system cost [€/kW] || >500 || 100 || 50

|| Automotive fuel cell system lifetime [h] || 2,500 || 4,000 || 5,000

|| Bus fuel cell system cost (€/kW) || >3,500 || <2,000 || <400

|| Bus fuel cell system lifetime (hrs) || 6,000 || 9,000 || 12,000

Energy || Specific objective 2 || || ||

|| Industrial/commercial power, H2 based, cost (€/kW) || 4,500 || 3,000 || 1,500

|| Industrial/commercial power production fuel cell system, H2 based, efficiency (%) || 45 || 50 || 55

|| Industrial/commercial power production fuel cell system, H2 based, durability (hrs) || 8,000 || 20,000 || 40,000

Hydrogen || Specific Objective 3 || || ||

|| Distributed H2 production, electrolysis, capex (M€/t/d) || 8 || 4 || 2

|| Distributed H2 production, electrolysis, efficiency (%) || 67 || 72 || 77

|| Specific Objective 4 || || ||

|| Capacity of storage of energy through hydrogen ||  - || 10 MWE || 100 MWe

7.3.        Monitoring
the operations of the Joint Undertaking

137.       The operations of the JU
will be closely monitored at different levels. An internal monitoring will
result in an Annual Activity Report.. The annual Stakeholders Forum will
contribute to the exchange of information - and to help coordinating activities
between - the JU, other EC initiatives, and national and regional and private
actors. The annual Programme Review will allow an assessment of the progress of
the FCH-funded projects and will report on the progress of the FCH technology
in Europe. The following KPIs are proposed to monitor the
operations of the JU:

Area || KPI description || Target || When?

Operational objective 1 || Private and public expenditures in R&D, innovation and early deployment activities in Europe (triggered by JU) || > €1,4 billion over 2014-2020 || By 2020

Operational objective 2 || SME participation in the JU programme || ≥25% || Every CfP

Operational objective 3 || FCH JU demonstration projects hosted in Member States and Regions benefitting from EU Structural Funds || 7 projects || By 2020

Operational objective 4 || Time to grant (from call closing to grant signature) Time to pay || < 180 days < 90 days || Every CfP

Annex 1 -
Group of Independent Experts advising on the Impact Assessment

An independent expert panel was appointed
to contribute to this Impact Assessment and was composed of three members
chosen from different areas of expertise in fuel cell and hydrogen
technologies. Consideration was also given to geographic balance in the
membership of the panel. The experts have provided a valuable contribution in
describing the current situation of the fuel cell and hydrogen sector in
Europe, defining the possible options for the future implementation of research
activities in this field and assessing and comparing the potential impacts of these
options. They have worked independently under the coordination of the
Commission. The members of the panel were:

1.
Nigel Lucas has more than 30 years' experience
in the energy sector and is a reference in the field of fuel cell and hydrogen
in Europe. He also has a sound socio-economic and environment background. He is
very familiar with the European Commission processes. In 2007, he played a
leading role in the preparation the Impact Assessment of the first FCH JU, and
has since chaired evaluation panels of the JU.

2.
Pierre Millet has more than 20 years' experience
in the energy sector, including fuel cell and hydrogen technology. As an
academic he has participated in several evaluations of calls for proposals -
with the FCH JU but also for several energy themes.

3.
Manfred Horvat has more than 30 years'
experience in technology development and policy, including in the energy
sector. He has a sound socio-economic and environment background, and is
knowledgeable on European research and innovation. He is familiar with the fuel
cell and hydrogen sector and has participated in previous impact assessments as
well as in the interim evaluation of the FCH JU in 2010-2011.

Annex 2 -
Results of the stakeholder survey

Introduction

The Fuel Cells and Hydrogen Joint Undertaking
(FCH JU) commissioned this report to a consultancy to get a better
understanding of the past and future evolution of the European Fuel Cell and
Hydrogen (FC&H) sector, and the role that public support has in that
evolution.

The results of this report are based on
three data sources:

·
Survey results: A
survey was sent out to 458 companies that are liaised to the FCH JU. 154 people
responded. (see list in annex).

·
Desk research: A
wide range of industry reports was consulted to supplement and cross check the
results of the survey. However, given the still nascent state of the industry,
the information gathered with this exercise was limited.

·
Interviews: Key
stakeholders in the European FC&H sector were interviewed to get the
qualitative story behind the results from the survey and the desk research.
These stakeholders varied from fuel cell manufacturers to government officials,
from energy companies to automotive OEMs.

1.           Substantial growth in
recent years

Europe has set itself a goal to reduce CO2
emission levels by 2050 to 80% of what they were in 1990. To reach this target,
Europe will have to change both its energy supply and demand side. Fuel cells
and hydrogen have potential to contribute to overcoming the energy challenges
that accompany this change.

·
Mobility:
Worldwide, mobility applications have made up the largest share of fuel cell
production in recent years. Hydrogen fuel cells in passenger cars and public
transport reduce local emissions without compromising range. The cost
trajectory of fuel cells vehicles (FCEVs) shows they will get closer to the
cost- competitive range of incumbent and new technologies within the next
decade. Niche applications, like forklifts, are already available on a
commercial scale. Pilots and pre-commercialization projects are increasing in
size and commitment. The most prominent example is H2 Mobility (H2M), the
German hydrogen coalition of car manufacturers, energy companies and fuel
providers who are jointly developing a business and implementation plan for a
hydrogen refueling infrastructure that allows for fuel cell vehicles to go to
market. In other European markets, such as the UK, France, the Netherlands,
Denmark and Norway, similar coalition efforts are being undertaken or launched.

·
Power and heat:
Stationary fuel cells offer highly efficient and reliable combined heat and
power (CHP). The market can be roughly segmented into:

–
Residential CHP (1 kW systems)

–
Backup and off-grid solutions (3-20 kW)

–
Commercial scale (50 kW and up)

Fuel cells are gaining market share
especially in the middle segment, where they are competitive with the incumbent
technologies (e.g., gas and diesel gensets) despite high technology costs.

·
Energy storage:
Hydrogen energy storage solutions have grown in importance given the
intermittency issues that arise with increasing penetration of renewable
energies (RES). This fact is further underlined by the many opportunities that
have been created over the past years for hydrogen storage demonstrations:
Vattenfall and Total have built a hydrogen storage project of EUR 21 million in
Prenzlau, and the Eco Island of Wight (with IBM, ITM Power and others) has
attracted over EUR 300 million of investment, part of which is used for
hydrogen storage.

The FC&H sector in Europe has done well
over the past five years: Survey respondents report that, on average, annual
turnover has increased by 10% (on a 2012 total of EUR 0.5 billion), R&D
expenditures by 8% (on a 2012 total of EUR 1.8 billion) and market deployment
expenditures by 6% (on a 2012 total of EUR 0.6 billon).

This has led to increase in employment.
Survey respondents estimate the total number of jobs has been increasing by
about 6% per year since 2007, to around 4,000 FTE today. Even though this
number excludes companies that have ceased to exist, the overall trend is
significantly better than that of the average EU job market, which, over the
same period, has actually contracted, registering a 0.3% annual reduction in
employment.

Exhibit 1

In the number of patents granted, the
FC&H sector also outpaced the rest of the industry: it saw a 16% annual
increase in the number of patents granted in the EU to European companies,
while the average annual growth for all EU industries was 1.5%. However, in the
US and Asia the growth in FC&H patents outpaced that of Europe.

The rise in employment, turnover,
expenditures and R&D activity is strengthened by combined public and
private funding to improve hydrogen and fuel cells.

Exhibit 2 shows that private funding has
been steadily rising in Europe, while public has remained constant (EU) or even
declining (national budgets). Private funding is and has been the biggest
contributor to R&D spend, totalling more than an estimated EUR 2.5 billion
over the period 2005-2010. This figure roughly corresponds with the estimation
that was made at the beginning of the period (corresponding to the launch of
FP7 and preparation of the FCH JU) , the private sector has lived up to its
original investment promise.

Exhibit 2

Survey respondents claim that national
programs (estimated at EUR 1 billion from 2005¬2010) and EU programs (estimated
at almost EUR 0.5 billion from 2005-2010) play a pivotal role in enabling
private investment, though: larger companies depend on a stable investment,
policy and "direction" climate to secure their funding levels. In
addition it is mentioned that, small R&D companies - responsible for
researching and realizing cost reductions in the sector -still depend on public
funding from both national and European programs.

Many of the interviewees conclude that the
combined effort of public and private funding has worked very well over the
past years.

The FC&H sector is building momentum in
and outside the EU. In the US, forklift trucks are being commercialized, and
Japan leads commercialization of micro CHP. Europe could soon follow the same
trend. This is recognized by the survey participants, who expect all FC&H
applications to become commercial by 2020 (see exhibit 3).

Exhibit 3

2.           Industry is expected to
continue to thrive

In most application areas, commercialization
has been slower than industry experts had anticipated in 2007. Car
manufacturers are the exception: they have been very consistent, estimating
commercialization by 2015. These expectations of car manufacturers are further
underlined by promising statements from Asian and European car manufacturers.

In other application areas, many
interviewees mention the increased focus on energy storage through
electrolysis: Although delayed in commercialization by about a year, recent
developments in renewables roll-out have imposed new dynamics on transmission
& distribution grids, but also on peak versus base power pricing - storage
solutions like hydrogen are regarded by many as a potential mitigation and
business opportunity in this space.

Although delayed in commercialization by
about a year, recent developments in renewables roll-out have imposed new
dynamics on transmission & distribution grids, but also on peak versus base
power pricing - storage solutions like hydrogen are regarded by many as a potential
mitigation and business opportunity in this space.

When asked for their expectation on
turnover and Research, Development & Demonstration (RD&D), the
respondents predict an exponential increase towards the end of the decade (see
exhibit 4).

Exhibit 4

On average, they expect turnover to
increase by 35% year on year towards 2020 (i.e., the turnover for the period
2013-2012 should be eight times higher than during the current period
corresponding to the FP7 and the current FCH JU). At the same time the RD&D
is expected to increase by 12% year on year - or a doubling over the period
2013-2020.

The fact that turnover is outpacing
RD&D expenditures is an indication that commercialization is within sight.
This is supported by the perspectives of the interviewees (see exhibit 5).

Survey participants expect their future
activity to be evenly spread across Transport, Energy, and H2 production &
storage. The most progress is expected in hydrogen mobility and in energy
storage.

·
Mobility: Car
manufacturers expect to FCEVs in Germany by 2020, thanks to the H2M coalition
effort. Similar projects are being undertaken in the UK and Denmark and
expected to start in France and the Netherlands.

·
Energy storage:
Groups of utilities and electrolysis companies are partnering up to develop
energy storage solutions for intermittent RES power generation. The scale of
these programs is moving beyond "demo scale".

·
Industry:
Projects to deliver CO2 free hydrogen to industry are being examined .
Recently, a group of companies studied a demonstration opportunity in Rotterdam
to build a gas based hydrogen production facility (Steam Methane Reformer,
SMR), combined with offshore storage of CO2. In doing so, it would create a CO2
abatement option for heavy industries.

·
Power: Although
not as thriving as the micro CHP programs in Japan (ENE Farm), fuel cell
manufacturers are starting to commercialize fuel cells in small - but still
significant - market segments. German programs, for instance the Callux
program, and the ENEFIELD project (deploying 900 domestic CHP units in the
coming years) prove helpful in this. Commercialization options include backup-
and off-grid solutions, but also industrial sites with excess hydrogen.

Exhibit 5

As a result of this progress, companies
expect employment to increase even more sharply than in recent years:
respondents expect 9% growth per annum, amounting to a doubling of the jobs
over the period 2013-2020. In addition, the average number of people per
respondent organization is growing faster (from 28 to 67), which might indicate
a concentrating effect in a sector currently composed of small firms (see
exhibit 6).

Exhibit 6

3.           Critical challenges to
overcome

The outlook set forward in the previous
section is not guaranteed. Key stakeholders indicate in their interviews that
there are five critical challenges that need to be overcome in order to be
successful: the commercialization rate, infrastructure, the continuation and
maturity of research, competition with other regions and technologies, and public
acceptance.

Commercialization rate: The expected date of commercialization has systematically fallen
behind promises. Although the influence of the financial crisis and "usual
setbacks" should not be neglected, many interviewees do worry that the
time is "now or never". As one interviewee said: "Fuel cells and
hydrogen have been said to commercialize within the next 10 years ... since
1954". Missing a credible and accurate time path is also a risk in
attracting and retaining investors. Some interviewees indicate that large
companies with a widespread portfolio of R&D activities might deprioritize
or abandon FC&H if the industry does not mature in line with expectations.

Infrastructure: In the mobility segment, fuel cell vehicles depend fully on a
widespread fuelling infrastructure to attract customers. This poses the
well-known "chicken and egg" problem: energy and fuel companies will
invest only if there is a sizeable market of FCEV owners, and car manufacturers
will produce FCEVs at scale only if the necessary infrastructure is present.
Although these problems can be solved by cohesive, coalition-led activities,
this is by no means an easy route. The German H2 Mobility is advanced in
getting a joint suite of investments in place - but it is still too early to
claim success for that effort, mention some interviewees.

Research:
Beneficiaries and respondents mention that Research and Development is vital
for commercialization, and especially domestic and commercial CHP. The majority
of this research along various parts of the supply chain is done by small
companies. These companies depend on national and European funds and grants to
finance their activities. The financial crisis might put this support for
sustainable FC&H technology at risk. Respondents also mention that the
research focus and quality of these companies do not always correspond with the
priorities of companies further down in the value chain, and this limits the
impact of the R&D done.

Competition from other regions and
technologies: Thus far, interviewees say that the
US and Asia have been more successful in bringing FC&H products to market.
Forklifts applications are introduced in the US, while Japan has a successful
ENE Farm project. The challenge of competition is also illustrated by the shipment
of technology in sectors where Europe is lagging (see exhibit 7) and by
comparing national investment levels and patent applications (see exhibit 8).
Although the majority of mobility related hydrogen activities occurs in Europe,
many say the European industry sector should be careful that the nucleus of
knowledge development does not permanently shift out of Europe. "This
could put the current and expected employment opportunities at risk and
jeopardize Europe's competitive advantage in sustainable technologies".

Exhibit 7

Exhibit 8

Public acceptance: The press coverage for FC&H technologies is limited to the
perspective provided by industry players - and to this date, have not received
wide-spread public attention. Although the arguments put forward progressively
indicate a preference of fuel cells, as for instance stated recently by Toyota
officials, the opinion makers are not yet pronounced in their stance towards
hydrogen. Once commercialization is nigh, public awareness and acceptance will
need to be very carefully managed. Recent activities like the EU Hydrogen
Roadshow are good examples of how to manage this awareness and acceptance

4.           Public support required in
the coming years

Interview and survey participants say the
EU should keep investing in fuel cells and hydrogen production development in
2013 -20 to overcome the challenges of deployment. They also mention it should
continue to co-fund R&D to drive down costs and enhance performance of
products (see exhibit 9).

Out of 153 survey participants, 55
indicated that efficiency of research would be most affected in case the FCH JU
would be discontinued, and 44 indicated that the research budget itself would
be most impacted.

The latter is further illustrated by the
fact that 56% of the respondents depend on EU financing of their RD&D
expenditures for at least 25% or more. It proves to show that EU needs to
continue to co-fund R&D to drive down costs and enhance performance of
products.

Exhibit 9

Interviewees add that maintaining a
consistent investment policy is crucial to ensure the survival of the nascent
FC&H industry: demand of fuel cell technology will only pick up when the
supply side has matured sufficiently and vice versa. They mention it is too
early for the industry to reach sufficient maturity on private sector
investments alone. Furthermore, Europe should keep up with the rest of the
world in investments in R&D. These investments could sustain the leading
position Europe currently has in mobility. Public opinion is required to change
from fear for safety to vocal support for carbon-neutral FC&H technology.
The industry needs a consistent and facilitating policy to make the FC&H
industry into a success.

5.           Way forward for European
support

Survey participants indicate that the FCH
JU has sparked investments across the FC&H industry, resulting in
significant leverage: almost 60% out of 150 organisations asked have increased
their R&D expenditures/budgets because of the FCH JU's existence (exhibit
10).

Exhibit 10

In addition, interviewees and survey
respondents acknowledged the achievements of the FCH JU in the past years:

Providing stability and long-term
commitment to the industry: The FCH JU has united
the various stakeholders in the European FC&H community. Due to the support
it receives from a collective of public and private stakeholders, the
individuals inside and outside the FCH JU find stability in this collective.
The existence and longer term outlook provide a stable environment and, as one
interviewee said, "Without the FCH JU being there, our company would have
exited hydrogen in dire economic times."

Leading as one voice to address policy
makers: The collective of stakeholders has a single
voice towards regulators in the EU via the FCH JU. Many interviewees applaud
the connections that the FCH JU has fostered, and the inroads that have been
made - especially when compared to similar other industry bodies they are
involved in.

Building coalitions as a central focal
point that brings parties together: Interviewees
mention as a clear example of this the recent Bus study - the FCH JU took the
initiative and led the effort of comparing the various bus drivetrains. In
situations where individual companies cannot or will not be the frontrunner in
taking initiative, the FCH JU can.

Supporting nascent technologies beyond
local or private possibilities: The FCH JU has
funded a broad range of research projects in the FC&H space. Without these
funds, it is said by interviewees, many technology breakthroughs would not have
occurred, nor would some of the smaller companies involved in this research
have been able to thrive.

Interviewees and survey respondents also
suggested some improvements for the FCH JU to maintain its momentum:

Focusing on an overarching strategy to
increase effectiveness. Most interviewees see an
ever larger role for the FCH JU in actively shaping the R&D agenda for
FC&H. Some suggest that investments are at times too piecemeal, not
assessed on "bang for the buck", and following a logic of spreading
the funding evenly across FCH JU participants, instead of awarding more funding
to a smaller number of players. Interviewees suggest that the FCH JU shapes an
agenda of topics that are deemed most critical, within and across
sectors/applications, and assigns funding accordingly based on "return on
investment". This also requires the FCH JU to take a stance on what they
believe to be true priority areas in technology development.

Ensuring a first "big
success", which can be celebrated and promoted.
The long and often slipping timeline of commercialization has led stakeholders
of various sizes to a point where they will need to convince their internal and
external stakeholders that FC&H truly is near commercialization. Many
interviewees therefore ask the FCH JU to ensure a large success, which can be
celebrated across the sectors and used to demonstrate the viability of a number
of applications. The German H2M project is often mentioned in this context:
successfully bringing this to a close is regarded as pivotal for the survival
of the entire sector: "If even large companies cannot find a way to make
this work, this clearly is not a sector with a bright future".

Improving execution speed and lowering
complexity for the grant award process. Some of the
respondents mentioned that, although the process of securing project funding
through the FCH JU has significantly improved over the past years, it is still
too slow. If research priorities are more clear and broadly shared (as proposed
in the first improvement point listed above), it would reduce the complexity
and assessment time of proposals.

Annex 3 -
Results of the public consultation

Background information and methodology

The on-line questionnaire for a public
consultation concerning a Public-Private Partnership (PPP) in Fuel Cell and
Hydrogen under Horizon 2020 (the next framework programme for the period
2014-2020) was launched on 11 July 2012 and was closed on 4 October 2012. It
was available at the following website:

http://ec.europa.eu/research/consultations/fch\_h2020/consultation\_en.htm

All citizens and organisations were invited
to submit their views and opinions. Contributions have particularly been sought
from companies, including SMEs, and research organisations active in research
and innovation on FCH technologies. In addition to being published on the ‘Your
voice in Europe’ website, the information about the public consultation was
widely disseminated by highlighting the initiative at a series of dedicated
stakeholder meetings that took place during the summer 2012, publishing it on
the FCH JU website, informing the members of the advisory groups of the FCH JU
(States Representatives Group and Scientific Committee), contacting project participants
and sending information to a large list of stakeholders.

The consultation aimed at gathering key
views relating to the possible extension of the FCH JU under Horizon 2020. For
this purpose, a comprehensive set of questions was drawn up to identify the
current key challenges in FCH research and innovation, the added value and
potential impact of addressing these challenges via a PPP Joint Undertaking
(JU) under Horizon 2020. The consultation also included questions addressing
possible legal structures based on the options available under Horizon 2020 and
recommendations from a high-level expert group. Respondents were moreover
queried about lessons learned from the 1st FCH JU.

In total 127 respondents answered the
questions. The participants were given the possibility to add further comments
at the end of their contribution, and also to upload any position paper or
document relevant for the consultation. 17 position papers were uploaded as
well as 39 "further comments". The analysis of the data is presented
in this document, together with a summary of the papers and the list of
comments. Some participants chose to remain anonymous, and three requested
their contribution not to be made public.

Key messages

The consultation responses can be
summarised as follows:

·
Respondents know about the FCH JU, since 57
declared to be very familiar and 49 to be familiar with the organisation. These
answers combined represent 83.5% of all answers. Almost 50% of respondents had
applied for FCH JU funding, and 42% were actually funded.

·
Most respondents agree on the fact that FCH
technology will play a notable role in the future EU low-carbon energy and
transport sectors (98% of respondents), for the EU energy security of supply
(94%) and for the EU industrial competitiveness (95%).

·
Most also agree that the currently targeted
applications can have an important socio-economic impact by 2020, with a
particularly strong support for the use of hydrogen as storage medium for
renewable energy (95% of respondents).

·
Most respondents also believe that both the
European FCH industry and the FCH research sector are more competitive or
stronger than 5 years ago, and that they have the potential to be even more
competitive by 2020 (99% for industry, 95% for research).

·
87% of the respondents believe that the industry
cannot address the problems alone and 67% agree that Member States support will
not suffice. An overwhelming 96% think that an intervention at EU level is
required.

·
Regarding the main problems faced by Europe, the
lack of support of decision makers (87%), of access to risk finance for
deployment activities (82%) and of public awareness (75%) are the main problems
to be addressed in Europe. The lack of competitiveness of the technology comes
last in this question (only 37% of respondents agree with this aspect).

·
The lack of public RD&D funding is by far
the most quoted underlying problem (81%). Research infrastructure does not seem
to be a problem (38%).Other possible underlying problems range from approx. 55%
to 65% of agreement.

·
Regarding the current FCH JU, the majority of
the respondents think that the FCH JU has reach most of the EU objectives. In
order of importance, they believe this mechanism has provided medium-term
stability on research, development and demonstration (RD&D) public funding
for the FCH sector (79% of respondents), has contributed to increase European
competitiveness (76%), has increased and improved coordination between
stakeholders at EU level (72%) and has increased the involvement of the industry
in RD&D on FCH (71%). Many other aspects score above the 50%. For EU-12
involvement, outreach, and simplification of access to funding, the score is
below 50%.

·
Regarding future priorities, the 2 most quoted
areas are hydrogen as a storage medium for renewable energy (80% of support)
and refuelling stations for transport applications (75%).

·
65% of the respondents support the
recommendation of the Sherpa group, i.e that it should be possible for JUs to
support, to a certain extent, activities which do not directly qualify as
RD&D, provided they contribute to the achievement of their innovation
ecosystem goals.

·
The continuation of the JU - in its current
format or "modernised" - is the favoured option (70% calling for a
continuation, incl. 53% in a modernised version), while a contractual
Public-Private Partnership is only favoured by 4%.

·
Most respondents believe that the FCH JU will
have an impact on the EU competitiveness (77% of positive feedback at
short-term, 88% at medium-term and 84% at long-term).

Response to the public consultation

Respondent profile

Respondents originate from at least 22
different countries, including 5 from associated countries. France is the most
represented (30% of respondents), followed by Germany and the UK (approx. 13%
each). The participation of Nordic countries and EU-12 countries is low.

Most
respondents are individual citizens (28%), followed by SMEs and research
organisations (19% each). No national or regional administration has answered
to the consultation. Only a few MS and decentralised authorities answered to
the survey.

Most
respondents declared that they are very familiar or familiar with the Joint
Undertaking (83.5%), but the majority has never applied for funding nor got any
funding from the FCH JU, which is seen as a logical consequence of the number
of individual citizens that have participated in the consultation.

Relevance of the sector

An overwhelming
majority of respondents believe that FCH technology will have a notable role in
the future EU low-carbon energy and transport sectors (98% of respondents), for
the EU energy security of supply (94% of respondents) and for the EU industrial
competitiveness (95% of respondents).

The majority of
respondent have a positive opinion on the potential of socio-economic impact of
all of the currently targeted applications by 2020. There is a very strong
support to the use of hydrogen as storage medium for renewable energy (95% of
respondents). Other applications such as transport, residential or industrial
CHP or back-up power score higher than 80%. Only 3 applications gather less
than 80% of positive opinion (but still more than 60%): biogas reforming for
hydrogen production, micro fuel cells and material handling equipment.

Identification of the problems

The respondents
have mixed views on the European industry: only slightly more than half of the
respondents (55%) think that it is competitive on the worldwide scene (20% have
no opinion). The past and future trend looks more positive though, with 77% of
respondents believing that it is more competitive than 5 years ago, and an
impressive 99% believing that the industry has the potential to be more
competitive by 2020.

The views on
the EU research sector are more positive, 79% thinking that it is competitive
today and 77% that it is more than 5 years ago and 95% believing that the
European research sector will be stronger by 2020.

Regarding the
main problems faced by Europe, the lack of support of decision makers (87%), of
access to risk finance for deployment activities (82%) and of public awareness
(75%) are the main problems to be addressed in Europe. Surprising, the lack of
competitiveness of the technology comes last in this question (only 37% of
respondents agree with this aspect).

Regarding the
underlying problems leading to the issues mentioned above, the lack of public
R&D funding is by far the most quoted (81%). Research infrastructure does
not seem to be a problem (38%).Other possible underlying problems range from
approx. 55% to 65% of agreement.

European added value

87% of the
respondents believe that the industry cannot address the problems alone and 67%
that Member States support will not suffice. 96% think that an intervention at
EU level is therefore required.

Support to
achieve the critical mass required for technological breakthroughs,
contribution to the required large-scale investment in R&D and
demonstration and definition of common goals for all relevant European
stakeholders are the 3 most quoted EU added values (all above 70% of
respondents).

Objectives

85% of the
respondents believe that the FCH research & innovation programme should
include both research & development and demonstration. There is no wish to
see the EU programme focusing to either research or demonstration only.

The 2 most
quoted priority applications are hydrogen as a storage medium for renewable
energy (80% of support) and refuelling stations for transport applications
(75%).

Options and impact

Of the four
options considered to implement future research on FCH, only the contractual
Public-Private Partnership gathers less than 50% of positive opinions. The
favourite option is the continuation of the JU, in a "modernised"
format, i.e. different scope and simplified implementation.

More than 67%
of respondents believe that the aim and scope of the initiative should go
beyond RD&D and include support to deployment activities and close to 50%
that the budget should evolve (i.e. increase).

Most
respondents believe that the FCH JU will have an impact on the EU
competitiveness, this impact increasing over time (77% of positive feedback at
short-term, 88% at medium-term and 84% at long-term).

65% of the
respondents support the recommendation of the Sherpa group, i.e that it should
be possible for JUs to support to a certain extent activities which do not
directly qualify as R&D, provided they contribute to the achievement of
their innovation ecosystem goals.

50% of the
respondents have a positive opinion on the establishment of the Joint
Technology Initiatives.

The majority of
the respondents think that the FCH JU has reach most of the EU objectives. In
order of importance, they believe this mechanism has provided medium-term
stability on RD&D public funding for the FCH sector (79% of respondents),
has contributed to increase European competitiveness (76%), has increased and
improved coordination between stakeholders at EU level (72%) and has increased
the involvement of the industry in RD&D on FCH (71%). Many other aspects
score above the 50% satisfaction. Some fields below the 50% mark will require
attention for the future (EU-12, outreach, simplification of access to
funding).

Annex 4 -
Public consultation and stakeholder survey: difference and overlap between
respondents; minority views

Affiliation
of respondents (154) to the stakeholder survey

Most respondents are large companies (30%) or SMEs (27%), followed
by research centres (public: 13% and private: 13%). Universities account for
7.8%. Half of the private industries (large enterprises and SMEs) are members
of the Industry Grouping.

Affiliation
of respondents (127) to the public consultation

Most respondents are individual citizens (28%), followed by SMEs and
research organisations (19% each). Large businesses represent 14%, business organisations
5.5%, NGOs 4.7% and MS and regional administrations around 2% each.

In total, 34 respondents have answered
to both surveys.

·
7 large companies (incl. 6 Industry Grouping)

·
9 SMEs (incl. 8 Industry Grouping)

·
11 research centres (private, public, universities)
– some repeated (several people of the same organisation)

·
1 business organisation

·
4 citizens from research entities

·
The Industry Grouping and Research Grouping as
business/research organisations did take part to the public consultation

Minority views

One out
of 127 respondents of the public consultation disagreed with the need of
an EU intervention for R&D on FCH. Analysing the other answers to the
questions, it might actually be a mistake. This company, which wishes to remain
anonymous, is very active in the current JU, has a positive opinion of the
current JU and favour a 'modernised' JU for Horizon 2020.

Thirteen
out of 127 respondents (10%) of the public consultation disagreed with
the favoured option of a modernised JU. They are equally distributed in the
research centres, SMEs and large businesses. 2 groups can be identified:

·
Either they favour collaborative research or a
contractual PPP to align participation rules and (more importantly) funding
rates with the framework programme;

·
Or they wish to continue the current JU as it is
today, to ensure continuity with a tool that they perceived positively.

Seven
per cent of the respondents to the stakeholder survey do not favour a
continuation of the Joint Undertaking (10 entities). These include 2 large
companies (members of the NEW-IG), 3 research centres and 3 universities. The
criticism is the following:

·
Low and unpredictable funding rates with respect
to FP7;

·
No reduction of the administration effort to
prepare and implement projects;

·
The industry-led FCH JU created a gap between
Future Emerging Technology (FET) concepts of the FP programme and
industry-focused targets required by the Annual Implementation Plans.

Annex 5 -
Relevance of FCH technologies to Societal Challenges

Climate
change. Fuel cells and hydrogen offer the
possibility of GHG reductions in transport industry, the tertiary sector and in
power generation. In transport the impact is potentially very high and
strategically significant as the alternatives to hydrocarbons for transport are
few. The Roadmap for moving to a competitive low carbon economy in 2050
produced by the Commission prescribes the most cost-effective path to achieve
the EU target of an 80-95% reduction by of greenhouse gas emissions in 2050
compared to 1990; the Roadmap estimates that a reduction of emissions from
transport of between 54% and 67% compared to 1990 will be needed[38]. Decarbonisation of
electricity production is the centre-piece of the strategy; the virtual
decarbonisation of electricity by 2050 has the consequence that the impact of
vehicles using electric drives on greenhouse gas emissions can exceed the 2050
targets.

Hydrogen storage can be an important
adjunct to renewable energy and greatly facilitate the achievement of the
decarbonisation goals for the power sector. Renewable energy is intermittent
and only partially predictable. Wind power, which is a major future source of
renewable energy in Europe, is especially problematic and subject to hourly,
daily and weekly fluctuations. This complicates the planning and operation of
power systems with large quantities of renewables. Shortfalls in renewable
energy can be met by back-up conventional generating plant, but this will
increase GHG emissions. An alternative is to use surplus renewable energy to produce
hydrogen by electrolysis and then to generate electricity in a fuel cell at a
time when costs on the power system are high.

Fuel cells may be used for stationary power
generation in the same way as any other generator. The fuel supply will be a
hydrocarbon either fossil or from biomass. The commercial impact will depend
upon how it compares in terms of capital and operating costs with conventional
electro-mechanical generators. There may be a more promising application for
small CHP units in the residential and tertiary sector as the units will be
quiet and can achieve high efficiencies. There is potentially a very large
market in the residential sector, but the impacts on climate change through
emissions of GHG in Europe may be relatively low. The main load in the
residential sector is for low temperature heat for space heating. Condensing
boilers are extremely efficient in this application; the savings in fuel use
from associated electricity generation in a residential CHP unit may therefore
be small. If the decarbonisation goals for the power grid are met then the
carbon intensity of electricity generation will fall dramatically and the
benefits in GHG emissions from the CHP units will be even smaller. This
analysis is borne out by case studies and theoretical modelling of micro-CHP in
the UK[39].

The commercial impact of CHP applications
is more promising where the heat to power ratio is higher and/or the delivery
temperature of the heat is higher (mainly industry or commercial properties
with high demands for hot water). The impact on the societal costs of carbon
will be greater in countries where the carbon intensity of grid generation is
high (e.g. China). Export markets would thus have greater impact on climate
change than domestic markets.

Energy security. Security of supply is a central of energy policy laid down in the
Lisbon Treaty[40],
but EU-27 dependency on energy imports has increased from less than 40 % of
gross energy consumption in the 1980s to 45.1 % in 1999 and then to 53.9 % by
2009[41].
Decarbonisation of electricity supply has the advantage of improving energy
security because the likely primary sources would be renewable energy, nuclear
and fossil-fuels with carbon capture and storage (CCS). Security can be further
enhanced if mobility is provided through electric vehicles because, as long as
constraints on low carbon resources are not binding, the security of
electricity supply is passed through to security of mobility. Applications of
hydrogen for transport, as a storage medium for electricity and for stationary
power generation including CHP can all potentially improve energy security. In
particular, the use of hydrogen as storage medium for renewable energy is
indeed a priority for Europe in the near future. The stakeholders’ survey shows
that the private sector has already integrated this trend in their planning, as
their turnover is expected to grow strongest in the hydrogen production and
storage application until 2020 (23% annual increase) Equally, the R&D for
this application will grow 28% annually.

Employment.
Hydrogen and fuel cells have direct, indirect and induced impacts on jobs and
growth. If fuel-cell applications simply replace conventional applications in
providing energy services without gain or loss in the presence of European
companies in the value chains for those services, then the overall impact on
employment is likely to be modest. This conclusion may change depending upon
whether Europe manages to extend its export markets by gaining first-mover
advantage in FCH technology, or whether it loses market share as a consequence
of a deficiency in research and development. This issue is especially acute for
mobility, where Europe is at present a major international provider and a few
percentage points either way in its international market presence could have
large implications for employment.

International competition. If European companies are able to forge a lead in hydrogen
technologies, and if the technology proves to be viable internationally then
European global competitiveness will be fostered. As noted by the European
strategy on clean and energy efficient vehicles, the European automotive
industry is a world leader in developing clean and energy efficient
technologies based on combustion engines; this is a consequence of substantial
investment over some fifteen years of research and development. It is also a
crucial European industry, competitive, innovative and supporting a wide range
of related sectors[42].

Technological development and
innovation. R&D in this field will stimulate
technological innovation across a wide range of disciplines including: surface
chemistry; catalysis; membranes; nanotechnology; materials and control
engineering. There is also an indirect influence on innovation in grid
technology as the ability to produce and to store hydrogen at off-peak periods
and to interrupt hydrogen production again in favour of electricity at peak
times can be an advantage for intermittent renewable energy sources and can
stimulate innovation in smart grid technologies.

Value chains in the transport sector will
need to adjust, but there will also be complex implications of stationary power
generation on relationships in the power industry. It is not evident that
generators on the central power system would wish to own and operate
large-scale hydrogen storage; the technologies involved are quite different
from conventional electro-mechanical systems. The same is true for distribution
operators. It may be that natural gas companies would be best placed. Whatever
the ownership, there would however need to be constructive relationships with
distributors within the overall concept of a smart grid. The development and
deployment of storage solutions will therefore need new R&D partnerships
and eventually new business models.

SMEs. The value chain of the automotive industry generally comprises
assemblers, global mega-suppliers, first-tier suppliers, second-tier suppliers,
third-tier suppliers and the aftermarket. A shift to low-carbon vehicles and to
fuel cell vehicles in particular, gives to European manufacturers and SMEs the
chance to reassert market leadership in the technologies of the future. Vehicle
manufacturers should set goals for the SMEs regarding quality, reliability and
cost and work with them to develop the designs and engineering processes that
will meet the goals. As the FCEV programme is rolled out, eventually on a
global scale, so the SMEs will evolve in parallel towards Tier 2 or Tier 1
suppliers.

Health. Zero-emission power trains do not generate local pollution in their
“tank-to-wheel” process. The recently completed Aphekom project on 25 selected
cities of Europe of varying character and size calculated that the economic
cost of local pollution was €31.5 billion[43]. The
impacts and costs are proportionally greater when extrapolated from the sample
of 25 cities to the whole of Europe. Europe is heavily urbanised; at present
72% of Europeans live in urban areas; this will increase to around 80 % of
Europeans by 2020; in several countries the proportion will be 90 % or more[44]. These impacts would be eliminated by FCEVs.

Consumers. Consumers
will have to pay more for mobility whatever technical option is chosen in the
future. The value of the FCEV over alternative power-trains in terms of total
cost of ownership (including the cost of the hydrogen infrastructure) is
positive beyond 2030. The extra cost per tonne of carbon saved is equivalent to
an abatement cost of carbon of between €150 - €200 per tonne in 2030, which is
somewhat higher than the values calculated for example by the UK[45] and French[46] governments, but it becomes negative after 2030 as the relative
costs of ICEs and FCEVs move favourably for the FCEV. Applications of hydrogen
storage in power systems will reduce the costs of decarbonisation of
electricity supply and therefore lower electricity bills. There may also be
consumer benefits from residential CHP applications, but this will require a
large decrease in the costs of fuel cells if they are to compete with
condensing boilers and grid supplies.

Government budgets. Deployment of transport applications will make a significant impact
on government budgets because it is unlikely that either consumers or vehicle
manufacturers will accept to pay the entirety of the extra costs. State
contributions to infrastructure will be needed as well as fiscal incentives to
first-adopters of vehicles. A roll-out of 100,000 FCEVs in 2015, 1 million in
2020 and a 25% share of the total EU passenger car market in 2050 will
accumulate a loss of €25 billion by 2020 compared to an ICE scenario, mainly
arising from the extra cost of the vehicles. After 2030, the technology should
be competitive.

Hydrogen storage options to complement
renewable deployment are also likely to need initial government support. At
prevailing prices multi-day hydrogen storage is not economic and support,
perhaps in the form of a feed-in tariff for fuel cells deployed in this manner
will be needed. This should be time-limited as, if the planned renewable
penetration is achieved, the technology should be commercial in the medium-term.

Residential, commercial and tertiary
applications of stationary power will also need support if it is considered
socially desirable that they proceed. Germany has introduced several subsidy
schemes for fuel cell CHP in all sectors; the UK had a limited feed-in tariff
for micro-CHP. These support schemes will need to be sustained and extended to
other countries if a rapid take-up of the technology is thought desirable.

Annex 6 - Status
and targets of FCH technology

Key Performance Indicators are consistent
with the current Multi-Annual Implementation Plan (MAIP) of the FCH JU

\*HyTransit and High V.Lo-City share a
station in Aberdeen to fuel a total of 10 buses

\*\* The range is caused by different
technology development stages for alkaline and PEM and different output
pressures

Annex 7 -
Success stories

In the area of transportation and
refuelling infrastruc­ture, dominated so far by large demonstration
projects, more than 40 FCEV and more than 40 buses are being tested in real
condition (approx. 10% of worldwide fleet), with more vehicles expected to be
rolled-out. For example, the project CHIC aims at integrating 26 FCH buses in
daily public transport operations in five locations across Europe. The project
is supported by the FCH JU with funding of €26 million (total cost is €81.9
million), and has 25 partners from across Europe, which include industrial
partners for vehicle supply and refuelling infrastructure, academics, local
authorities and operators.

ITM Power has become one of the world leading
PEM electrolyser manufacturers thanks to the bottom-up approach of the FCH JU.
It has developed a number of commercial applications such as the recently
deployed HFuel vehicle refuelling unit. ITM Power achieved its progress due to
participation in FP7 projects as well as in FCH JU projects like ELECTROHYPEM.

Stationary and CHP projects in the FCH JU
focus primarily on the RTD pathway – understanding degradation and lifetime
funda­mentals, through applied research related to component improvement,
control and diagnostics to advance the area to a position of being successfully
demonstrated.

One of the leading companies in the field,
SOFCpower S.P.A., is specialised in high temperature electro-ceramic devices
based on Solid Oxide Fuel Cells technology. SOFCpower is involved in 11 FCH JU
and FP7 projects, where it obtained expertise in residential micro-CHP,
improved stack durability, control strategy and diagnostics and strategic
long-term development for new or improved products. Another key player, Nedstack
(the largest fuel cell stack producer in Europe) participates in the FCH JU
project IRAFC, in which an Internal Reforming Alcohol High Temperature PEFC
Stack is being developed. This system can be applied in various areas such as
portable fuel cells, stationary back-up and UPS systems and remote and off grid
areas.

The early markets portfolio covers
different sectors such as forklifts, back-up power, portable applications and
micro fuel cells. With support of the FCH JU, the Danish based SME H2Logic A/S
has developed and facilitated the commercialisation of its two innovative
products: H2Station® - Hydrogen refuelling stations for automotive, bus and
materials handling applications, and H2Drive® - Fuel cell systems for materials
handling vehicles such as forklift trucks and airport tow tractors. The
company´s first move was supported by Danish national programmes and the Nordic
Energy Research; the further optimisation of a cost effective fuel cell system
was carried out in the FCH JU- supported HyLift-DEMO-project. In 2011, H2Logic
A/S installed four 70MPa H2Stations in less than 12 months; one of them
operates on the premises of SINTEF as part of the FCH JU H2moves Project - the
large scale demonstration of fuel cell vehicles and refuelling infrastructure in
Oslo.

The hydrogen production and distribution
portfolio mainly focuses on research and development. One of the FCH JU
flagship projects, ADEL, brings together a high level European consortium in
the field of Intermediate Temperature Steam Electrolysis coupled to renewable
energy sources for efficient hydrogen production. The ADEL project develops a
new steam electrolyser concept that should optimise the electrolyser life time
by decreasing its operating temperature while maintaining satisfactory performance
level and high energy efficiency. The device will first target the current H2
market and, in the mid-term, will be used for carbon free transportation
applications. In addition, the technology will be applied in the field of
long-term energy storage. The FCH JU will fund €2 million of the total €4.1
million. More recently, the project Don Quichote has been launched. Its focus
is the extensive demonstration of hydrogen production by renewable electricity,
and the compression, storage and end use of hydrogen in transport applications
or for grid balancing. The project will show that the use of hydrogen as a
large scale renewable energy storage solution can be an interesting business
case for end customers. It will demonstrate system level technology readiness,
as well as conduct R&D on PEM electrolysis and novel cost-effective and
compact compression technology. The JU contributes €2.9 million to the total
budget of €4.9 million.

Last but not least, European Summer Schools
on FCH technology were started within the framework of the FP6 projects
Real-SOFC & LargeSOFC. These Summer Schools continued successfully in the
FCH JU project "TrainHy" and have contributed in educating more than
300 PhD students and young professionals from industry. Several FCH companies
heavily relied on this activity as an element of training for their new staff.

Annex 8 - Results
of the Call for Proposals of the FCH JU

Key data
regarding the results of the 5 calls for Proposals launched under the FCJ JU.
In addition, data on the 1st FP7 call and last managed by the EC is
provided. Note: the results of the 2012 call are indicative, as negotiations
are ongoung. Source: FCH
JU Annual Activity reports and EC Annual Progress reports 2008, 2009, 2010,
2011 and 2012(\* for "awarded contracts", the figures cover the period
2008-2011).

Application Areas || TOTAL

€m %

Transportation & Refuelling Infrastructure || 109 (144-162) || 36 (32-36%)

Hydrogen Production & Distribution || 36 (45-54) || 12 (10-12%)

Stationary Power Generation & CHP || 106 (154-167) || 35 (34-37%)

Early Market || 43 (54-63) || 14 (12-14%)

Cross-cutting Issues || 8,1 (27-36) || 2,7 (6-8%)

TOTAL (€m) || 302 (450) || 100%

Achieved and targeted (in brackets)
deployment of resources by application area (2008-2011)

Application Areas || TOTAL

€m %

Basic research || 69 (60-68) || 23 (13-15%)

Research & technological development || 78 (142-157) || 26 (31-35%)

Demonstrations || 137 (183-208) || 45 (41-46%)

Support actions || 18 (39-49) || 6 (9-11%)

TOTAL (€m) || 302 (450) || 100%

Achieved and targeted (in brackets)
deployment of resources by project type (2008-2011)

Annex 9 -
Challenges with respect to complexity and cost-effectiveness

Notable examples of the Shortcomings with
respect to the implementation of JTIs as identified by the Sherpa report, the
JTI interim evaluations, the CoA reports on JTIs, etc.

·
Lack of tailoring of legal framework. The legal framework governing a JU is
essentially composed of four elements: the Council Regulation, the Statutes,
the JU’s own Financial Regulation and the EU Staff Regulations. These are
largely based on rules applicable to the European Institutions with little
regard to the size of the JUs and nature of their activities. According to the
interim evaluations of the JUs, this legal framework is not conducive to the
efficient management of a small JU.

·
Human resources.
Due to the demanding legal and financial rules applying to the current JUs on
the one hand, and the small overall size of the current JUs on the other hand,
the structure of the JUs is one-sided when comparing administrative human
resources with operational human resources: on average 50% of the JUs’ staff is
dedicated to work on administrative tasks. This percentage is high compared to
the 22% ratio of the somewhat bigger European Agencies, also set up as union
bodies.

·
Recruitment rules. Under current regulation, due to the fact that JTI JUs are Union bodies, their staff recruitment rules follow the EU Staff Regulation. Accordingly,
when planning recruitment, the grades and functions of new staff must be
foreseen in the multi-annual staff policy plan and the annual budget. These
require approval from the Governing Board and the European Commission as well
as compliance with the multi-annual planning cycle starting at end of year N-2.
Therefore, the recruitment procedures take a significant amount of time.

·
Public procurement rules. The public procurement rules applied by the JU are similar to
those used by the European Institutions. Moreover, the financial regulation
does not permit a JU to conclude a Service Level Agreement (SLA) with another
JU. Consequently, this prohibits the sharing of services between JUs in order
to reduce costs (for instance, sharing the internal auditor function between
two or more JUs).

·
Delegation rights to the Executive Directors. Under the statutes governing the JU, the Executive Director is
responsible for the day-to-day management of the JTI JU. While the financial
regulation perhaps should give the authorising officer, i.e. the Executive
Director, the overall responsibility for the financial management of the JU,
their regulations require also the approval of the Governing Board - this
delays decision-making. As a consequence, recurrent administrative decisions
are brought up to the level of the Governing board, thus hampering its focus on
strategic issues.

·
The funding and participation rules applied to/by JTI JUs as compared to mainstream FP7 legal and
financial framework result in different and often lower funding rates for
participants in JTI JU managed projects than collaborative research, which
compromises the accessibility (new rules have to be learned) and attractiveness
(funding rates are lower) of the JTIs.

Annex 10 -
Executive Summary of the First Interim Evaluation of the FCH JU

This
review was undertaken by an Independent Expert Group (IEG) in support of the
first interim review of the Fuel Cell and Hydrogen Joint Undertaking (FCH JU).

The
primary outcome is that the IEG recommends that the FCH JU should be maintained
and supported to implement its work as originally envisaged. Its potential role
in a new phase of EC support for innovation following FP7 should be reviewed at
a later date when outputs of its projects start to become available, as none
are presently available to assess. However the IEG believes that there will be
a need for continuation of this, or an equivalent, initiative. The IEG has also
identified some areas where its operation could be improved, and makes a number
of specific recommendations to this end.

The
Joint Undertaking was created as a Community Body on 30 May 2008 and became
autonomous in November 2010. Between May 2008 and November 2010 the Joint
Undertaking was managed by the European Commission. This review was therefore
undertaken in the first few months of autonomous operation and at a point when
none of its projects were completed or at the stage of producing formal results
or outcomes. Consequently its conclusions are based primarily upon evidence
obtained from interviewing stakeholders about activity and performance of the
Joint Undertaking and from the background material procured by the Commission.

The FCH JU has as its strategic objectives the positioning of Europe
at the forefront of fuel cell and hydrogen technologies and enabling their
market breakthrough by supporting RTD in a coordinated manner with a focus on
market applications, and by encouraging increased public and private RTD
investment in FCH in Member States and Associated Countries.

The review found that the overall technical objectives of the FCH JU
as defined in the Multi-Annual Implementation Plan (MAIP) remain ambitious and
competitive in comparison with efforts world-wide. It also concluded that the
JU approach is generally regarded as a good means to enhance public-private
activities in technology development and demonstration. The IEG is satisfied
the FCH JU is perceived by participants as overall an improvement to the
RD&D landscape, with strong stakeholder representation. In some areas it is
also perceived as providing welcome stability for the R&D community given
the cyclic nature of political interest and visibility: its presence is a
reassuring “constant”.

Some problems have been encountered:

·
the set-up of the FCH JU took too long and
especially the establishment of structures and activities in the first two
years was not as efficient as would have been wished and expected. Steps should
be taken to ensure similar problems are not repeated elsewhere in future,
possibly in progressing initiatives such as European Industry Initiatives of
the SET Plan (EII). The IEG endorses the recommendations of the Sherpa report[47] to streamline the legal framework and review the current ‘Community
body’ status which would address the problem;

·
the funding rates for FCH JU projects have
proved variable from year to year but are always considerably lower than those
of FP 7

·
the Programme Office has insufficient technical
resource for effective monitoring of the developing programme;

·
cohesion and collaboration with Member States’
related programmes is insufficient;

·
the FCH JU lacks a formal communications plan
and international engagement strategy.

Lessons learned here can and should be applied to any future Joint
Technology Initiatives (JTIs) or EIIs. In particular the uncertainty of funding
rates is a material failing and must be addressed.

A number of recommendations are made on changes to improve the
operation and effectiveness of the FCH JU which are summarised below. Also it
should be noted that a start has been made by the new permanent Executive
Director on improving some of these aspects.

Recommendation 1. Reinforce
portfolio management

The FCH JU needs to assume more responsibility for delivering its
overall technical objectives and have an active management of its project
portfolio through targeted call processes and on-going project review. The
balance between application areas of the MAIP needs to be reviewed and methods
implemented to ensure projects interact where appropriate.

To achieve its objective of placing Europe at the forefront of fuel cell and hydrogen technologies worldwide and at enabling
the market breakthrough of these technologies, FCH JU
should emphasise industrial leadership for large-scale projects.

The Scientific Committee (SC) has the potential to provide support
to, and verification of, the above portfolio management approach, and
opportunities to widen its present role to do this should be actively explored.

Recommendation 2. Ensure high agility of operations and adaptability
to changing competitive forces

Over the last few years, technology development has brought fuel
cells and its applications from research on how to make it work, to development
on how to make it cheaper. The latter is to a large extent about cost
reductions in systems and Balance of Plant (BOP) and will eventually lead to
commercialisation and new products. To achieve its objectives, the FCH JU needs
to maintain its focus on innovation and respond to emergent competing technologies.

The FCH JU must reinforce efforts to engage stakeholders from the
complete value chain in addition to the manufacturers and researchers who
represent the great majority of participants in the FCH JU.

Recommendation 3. Improve
visibility, communication and outreach

International outreach and engagement should be a key role and
responsibility for the FCH JU. There is an urgent need to increase FCH JU
visibility, with a clear identity and mission.

The awareness of FCH JU initiatives and achievements also outside Europe should be increased and the FCH JU needs to establish what international engagement
or participation should be sought to support the faster or cheaper achievement
of its programme objectives.

Recommendation 4. Improve
collaboration and alignment with Member States

It is clear that there is scope for improvement in the performance
of the States Representatives Group (SRG) for the coordination with Member
States’ parallel activities. The SRG needs members connected to policy and
programme management, not scientific experts, able to identify and to progress
opportunities for alignment of national activities and those of the FCH JU.

Recommendation 5. Ensure high
efficiency of operations

The current legal framework as a “Community body” is not well-suited
to industry led public-private partnerships like JTIs and should be
streamlined. The IEG supports the related recommendations of the JTI’s Sherpa
Group.

The time scale involved from publication of calls to negotiated call
is around one year and should be improved upon. Currently the management
structure is unbalanced in terms of administrative resources compared to
project management, leaving the project management capability (just 25 % of the
staff) under- resourced and probably insufficient to ensure delivery of
objectives. A sufficiently skilled resource is needed for project monitoring
and programme management (including portfolio management) greater than that
presently in place.

Given the innovative nature of JUs it is recommended that an
exchange of experience and advice between senior staff of all PPPs be
organised, and that a dialogue is set up between FCH JU and other SET Plan
initiatives of a similar nature to ensure exchange of best practice related to
operation and implementation of objectives. Also, project monitoring and
benchmarking of best practise should be introduced.

The full detailed recommendations are presented in the table below:

1. Reinforce portfolio management

|| Action: || Action for:

1.1 || The MAIP should be thoroughly reviewed and updated where necessary before the production of the AIP for 2012. This exercise should be repeated no less than every 2 years to ensure the technical priorities remain valid in relation to results achieved and developments elsewhere. || FCH JU GB

1.2 || The current project portfolio is evidently light on hydrogen production, storage and distribution and efforts should be made to increase activity. || FCH JU GB, FCH JU SC

1.3 || Priorities and work on RCS should be led by industry. || FCH JU Executive Director

1.4 || The structure and composition of the annual calls should explicitly support the objectives of the FCH JU, the interests of Europe, and competition in the market place through projects that clearly have industrial leadership. || FCH JU GB, FCH JU Executive Director

1.5 || The EC must ensure appropriate support is provided for basic research in the FP. || FCH JU GB, EC

2. Ensure high agility of operations and adaptability to changing competitive forces

2.1 || Actively involve all stakeholders of the value chain. || FCH JU SRG, FCH JU Executive Director

2.2 || Establish an SME contact point at the Programme Office || FCH JU Executive Director

2.3 || Explore opportunities for complementarity between FC electric cars and BEV in the market place || FCH JU Executive Director, EC

2.4 || Commission a report on status, opportunities, and priorities for stationary fuel cells. || FCH JU Executive Director

3 Improve visibility, communication and outreach

3.1 || Develop an effective communication strategy and web site. || FCH JU GB, FCH JU Executive Director

3.2 || The communication plan should be aligned with the FCH-JU objectives and integrate both external and internal communication. || FCH JU GB, FCH JU Executive Director

3.3 || Use SRG and SC actively in supporting FCH JU awareness. || FCH JU GB, FCH JU Executive Director

3.4 || Develop strategy and priorities for international outreach, engagement and cooperation. || FCH JU GB, EC

3.5 || Outputs from the FCH JU projects should be integrated into and used to support relevant EU policies. || EC Policy Directorates

 4 Improve collaboration and alignment with member states

4.1 || Adjust SRG Rules of Procedure in order to better define the profile of the SRG representatives so that they are appropriately connected to political decision makers in their Member States. || FCH JU GB

4.2 || To raise interest and attention from Member States involve representatives more proactively – candidate areas for this are developing project portfolio, communication and joint profiling events. || FCH JU GB FCH JU Executive Director

4.3 || Explore joint funding schemes between FCH JU and Member States. || EC, FCH JU SRG

5 Ensure high efficiency of operations

5.1 || The current legal framework should be streamlined to fit the purposes of setting up and implementing JTIs. The staff rules must be tailored to the needs of a PPP of this scale and in particular the number of staff for project management must be raised. Review the possibility of sharing resource for required administrative functions between JUs to reduce costs to each and so allowing extra skilled project management resource to be included with no marginal cost increase. || EC, FCH JU GB and FCH JU Executive director

5.2 || Plans should be developed and implemented for interaction and exchange between projects supported by the JU || FCH JU Executive director

5.3 ||  Establish as soon as possible a high quality, robust system for project monitoring and assessment. || FCH JU Executive director

5.4 || Undertake international benchmarking to establish best practice for project commissioning. || FCH JU Executive director

Annex 11 -
Preferred Policy Option from stakeholder survey and public consultation

Figure 1. Industry Grouping (N=46) opinion
on the impact of the four options on their research expenditures in the field
of FCH over the period 2013 - 2020

Figure 2. Industry Grouping (N=46) opinion
on the impact of the policy options on research efficiency in the field of FCH
over the period 2013 - 2020

Figure 3. Industry Grouping (N=46) opinion
on the impact of the policy options on the coordination of research between the
FCH JU and MS programmes

Figure 4. Industry Grouping (N=46) opinion
on the impact of the policy options on product development in the field of FCH
over the period 2013-2020

Figure 5. Industry Grouping (N=46) opinion
on the impact of the policy options on staff in 2020

Figure 6. Favoured option from the public
consultation

Annex 12 -
Technology development steps that will be followed until 2020 to bring the
different applications to market.

From: Financial and Technology Outlook for
the European Fuel Cell and Hydrogen sector for 2014-2020[48]

[1]               COM(2011) 572 final of
21.09.2011

[2]               COM(2011) 809 final of
30.11.2011

[3]               http://www.hydrogen.energy.gov/library.html

[4]               http://intranet-rtd.rtd.cec.eu.int/int\_com/docs/CBA\_JU.pdf

[5]               Council Regulation (EC) No 521/2008 of 30 May 2008

[6]               Energy Roadmap 2050, COM/2011/0885, 15.12.2011

[7]               Pike
Research, Ten Trends to Watch in 2012 and Beyond, http://www.pikeresearch.com/research/smart-energy/fuel-cells

[8]               2007
FCH JTI Impact Assessment

[9]               “Fuel Cell Market Forecast to 2015”. Research Report. RNCOS. July
2012; see: http://www.marketresearch.com/RNCOS-v3175/Fuel-Cell-Forecast-7063439/

[10]             Pike
Research, Fuel Cells Annual Report 2012

[11]             US
DoE Hydrogen and Fuel Cells Program Plan, September 2011

[12]             Joint
Research Centre: 2011 Technology Map of the European Strategic Energy Technology
Plan (SET-Plan). European Commission. Joint Research Centre. Institute for
Energy and Transport. 2011. p. 125

[13]             http://www.fuelcelltoday.com/analysis/analyst-views/2012/12-02-29-ene-farm-update

[14]             See for example the Clean Energy Partnership (CEP), the H2 Mobility
initiative in Germany, the Scandinavian Hydrogen Highway Partnership (SHHP) and
the Clean Hydrogen in European Cities (CHIC) project (http://chic-project.eu/)

[15]             Fuel
Cell Today Industry Report 2011

[16]             A Compendium of Job Estimates in the Fuel Cell Industry, Fuel Cell
2000, http://www.fuelcells.org/Fuel\_Cell\_Industry\_Job\_Estimates.pdf

[17]             Wietschel,
M. et al.: HyWays Socio-economic analysis. Final Report. 18.12.2005

[18]             See
e.g. U.S. Department of Energy: Effects of a Transition to a Hydrogen Economy
on Employment in the United States. Report to Congress. July 2008. http://www.hydrogen.energy.gov/pdfs/epact1820\_employment\_study.pdf

[19]             U.S.
Department of Energy: Hydrogen and Fuel Cell Program Plan 2011. pp. 5 and 28

[20]             Fuel
Cell Today Industry Review 2010

[21]             U.S.
Department of Energy: Hydrogen and Fuel Cell Program Plan 2011. p. 27

[22]             IPHE,
2011 Global policy update; http://www.iphe.net/docs/iphe\_policy\_update\_120911\_web.pdf

[23]             State
Council of the PR of China: Long-term Science and Technology Plan (2006-2020).

[24]             Chinese
Ministry of Science and Technology: 12th Five Year Plan for National Science
and Technology Development (2011-2015)

[25]             Sun,
G.: R&D Activities of Fuel Cells in China. 29 March 2012; see: http://www.climate-change-solutions.co.uk/pictures/content989/dr\_shangfeng\_du\_-\_uob.pdf

[26]             Fuel
Cells Today: Hydrogen and Fuel Cells in China. 2012, p. 7

[27]             Fuel
Cell Today, Patent Review 2011; http://www.fuelcelltoday.com/media/948977/the\_2011\_fuel\_cell\_patent\_review.pdf

[28]             FCH
JU Industry Grouping Financial and Technology Outlook 2014-2020

[29]             FCH
JU Industry Grouping Financial and Technology Outlook 2014-2020, http://www.fch-ju.eu/page/publications

[30]             First
interim evaluation of the FCH JU http://www.fch-ju.eu/sites/default/files/EvalFuelCellHydroReport2011\_ALLBROCHURE\_WEB.pdf

[31]             http://www.iphe.net/docs/Meetings/Canada\_5-11/Germany%20country%20update%20May%202011.pdf

[32]             First
interim evaluation of the FCH JU, op. cit., p. 4

[33]             New
Energy World Industrial Grouping (NEW-IG): Fuel Cell and Hydrogen technologies
in Europe. Financial and technology outlook on the European sector ambition
2014-2020. 2011, p. 39

[34]             European
Commission: Synergies between FP7, the CIP and the Structural Funds. Final
Report of the Expert Group. Directorate-General for Research and Innovation.
Brussels, June 2011

[35]             http://eca.europa.eu/portal/pls/portal/docs/1/22482779.PDF

[36]             http://www.fch-ju.eu/sites/default/files/EvalFuelCellHydroReport2011\_ALLBROCHURE\_WEB.pdf

[37]             http://www.hyer.eu/

[38]             A Roadmap for moving to a competitive low carbon
economy in 2050, COM (2011)112

[39]             Micro-CHP Accelerator, Carbon Trust, March 2011

[40]             Article
194 of the Consolidated Version of the Treaty on The Functioning of the
European Union, O.J., 30.3.2010

[41]             Energy
production and imports, www.epp.eurostat.ec.europa.eu/statistics\_explained/index.php/Energy\_production\_and\_imports

[42]             A
European strategy on clean and energy efficient vehicles, COM(2010)186

[43]             Summary
report of the Aphekom project 2008-2011: Improving Knowledge and Communication
for Decision Making on Air Pollution and Health in Europe, www.aphekom.org

[44]             Urbanisation
in Europe: limits to spatial growth, Uhel, R., EEA. Key note speech to the 44th
International Planning Congress, 20th September 2008, Dalian, China.

                http://www.eea.europa.eu/pressroom/speeches/urbanisation-in-europe-limits-to-spatial-growth

[45]             The
UK Low Carbon Transition Plan, DECC (July 2009).

[46]             La
valeur tutélaire du carbone, Alain Quinet, et al., La Documentation Française -
Paris, mars 2009

[47]             ”Designing
together the ideal house for public-private partnerships in European research”,
JTI Sherpa’s Group. Final Report. January 2010

[48]             FCH JU Industry Grouping Financial and Technology
Outlook 2014-2020, http://www.fch-ju.eu/page/publications

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