MEMO/09/437
Brussels, 7 October 2009
Questions and answers on the European Strategic
Energy Technology Plan (SET-Plan) and its financing
What is the SET-Plan?
The SET-Plan is the technology pillar of the EU's energy and climate policy. It is a
blueprint for Europe to develop a world-class portfolio of affordable, clean, efficient
and low emission energy technologies through coordinated research. It has been
proposed by the Commission in 2007 and endorsed by Member States and the
European Parliament as the appropriate way forward. It lays out the EU's strategy to
accelerate the development of these technologies and to bring them more quickly to
the market.
The SET-Plan describes concrete actions to build a coherent energy research
landscape in Europe. The idea is to better organize research efforts across Europe,
selecting technologies with the greatest potential and planning together how money
should be invested.
How is the coordination between different sectors organized?
The implementation of the SET-Plan is coordinated by the European Commission.
Member States are in the driving seat and are represented in the Steering Group on
Strategic Energy Technologies (see MEMO/08/657).
On the research side, the SET-Plan brings together the research capacities of the
major European institutes and universities which joined on 28 October 2008 in the
European Energy Research Alliance (EERA) (see IP/08/1587).
Industry is also involved in the building up of six technological European Industrial
Initiatives in the areas of wind, solar and bio-energy, electricity networks, carbon
capture and storage and nuclear fission.
A new initiative is being proposed in the new Communication, the Smart Cities
Initiatives, which focuses on energy efficiency in European cities.
How were the 6 energy sectors selected for the industrial initiatives?
The 6 technology avenues included in the SET Plan for European Industrial
Initiatives (Wind, solar, CCS, bio-energy, Nuclear, Grids) have been identified by the
Commission and the industry as those for which working at Community level will add
most value – technologies for which the barriers, the scale of the investment and risk
involved can be better tackled collectively. Furthermore for the 6 sectors the actors
expressed their willingness to join forces and work together. The choice was based
on an extensive consultation process involving the Information system of the SET
Plan (SETIS) which provided data and analysis on the current state of the art of the
technologies and their anticipated technological development and market potential.
However, the Communication also includes estimates on already existing initiatives
on fuel cells and hydrogen, energy efficiency and basic research.
What are low-carbon energy technologies?
Low-carbon energy technologies refer to technologies that emit less carbon dioxide
(CO2) than the energy technologies that rely on traditional fossil fuels (oil, coal, and
gas). They are based on renewable resources (like wind, sun and biomass) or
enable the sustainable use of fossil fuels (like carbon capture and storage).
Examples of low carbon energy technologies are the ones created through wind
power, solar energy (including photovoltaïcs and concentrated solar power),
bioenergy, new electricity grids, carbon capture and storage (CCS), nuclear fission
and fusion energy, fuel cells and hydrogen, energy efficiency in buildings or
transport.
Why does Europe need to move to a "low-carbon economy"?
There are several reasons why Europe should move to a "low-carbon" economy:
- To fight against climate change: fossil fuels are the chief culprits in the
production of greenhouse gases. According to the International Energy Agency,
limiting the temperature increase to 2ºC will require that CO2 emissions be
reduced globally by at least 50% by 2050. The IEA estimates that this reduction
in the energy sector will have to be achieved with increased energy efficiency,
renewable energy, nuclear power and Carbon Capture Storage.
- To ensure our energy security: today, in the EU, our primary energy supply is
80% dependent on fossil fuels and most of them are imported from outside the
EU. Moreover, supplies from fossil fuels are becoming scarcer, more expensive
and less secure. On the contrary, the majority low-carbon energy sources, like
wind, solar or energy efficiency are locally produced and far less dependent
from abroad.
- To create growth and jobs: the development of low-carbon technologies can
reduce our foreign energy bill and put Europe at the forefront of the fast-growing
economic sector of clean and efficient technologies. They will create many new
jobs. For example, a recent study of the Commission concluded that the 20%
EU's objective on Renewable Sources is likely to create more than 600,000
additional jobs in the EU, and the RES sector will employ 2,8 million people by
2020.
What are the
technologies?
obstacles
to
the
development
of
low
carbon
The problem lies in the fact that the abundant availability of resources, such as oil,
gas and coal, has held back Member States and the industry from investing in
energy research. Indeed, public and private energy research budgets have
decreased since 1980s. We have to act now and to urgently increase the level of
investment in research to develop low carbon technologies.
We are aware that markets and energy companies acting on their own are unlikely to
be able to deliver the needed technological breakthroughs within a sufficiently short
time span. Locked-in investments, vested interests, as well as the high risks and
need for significant investments in less profitable alternatives, mean that change will
be slow without a major push. Public policy and public investment partnering with the
private sector is the only credible route to meet our goals, established for the public
good.
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How much additional investment is needed?
With today's level of knowledge, the Commission believes that investment in the EU
has to increase from the current €3 bn per year to around €8 bn per year to
effectively move forward the SET-Plan actions1. This would represent an additional
investment, public and private, of €50 bn over the next 10 years.
These estimates and actions required have been defined by the industry, the
research community, the Commission and Member States. Together, they have
drawn up Technology Roadmaps for the development of low carbon energy
technologies that show the way up to 2020.
Each Roadmap presents the technology objectives that are critical for making each
low-carbon technology fully cost-competitive, more efficient and proven at the right
scale for market roll-out. Investment should cover basic and applied research, pilot
projects (small scale trials), demonstration programmes (actual large scale trials) and
market replication measures (successful transfer into fully viable, profitable low
carbon technologies available for public use). Costs of deployment are excluded in
these estimates.
The assessment and monitoring of these technologies can be found on the new
online Strategic Energy Technologies Information System (SETIS)http://setis.ec.europa.eu.
What is the current level of investment in research in low carbon
technologies?
Investments dedicated to R&D in non-nuclear SET-Plan priority technologies
amounted to €2.38 billion in 2007 with a division that is roughly balanced across
individual technologies. If one adds research in nuclear SET plan priority
technologies, the investment amounts to a total of around €3.3bn.
The R&D investments dedicated to CCS, smart grids, biofuels, wind energy and
photovoltaics are in-between €270 million and €380 million each. The share between
public and private participation depends on the maturity level reached by these
technologies, but the overall breakdown in 2007 was 70% private and 30% public
sector. 80% of the public investment in R&D was at national level. The larger
investments for hydrogen and fuel cells research (€616 million) may be explained by
the diversity of technologies that are subsumed, thus attracting R&D investments
from many large and small companies from a broad variety of sectors (e.g. car
manufacturers, electric utilities, chemical companies and component suppliers). At
the same time, few countries and companies are active in research on concentrating
solar power technologies (CSP), explaining the comparatively low R&D investments
in this field (€86 million). This level of investment is not sufficient if we are to achieve
our ambition to shift our current energy system into a low carbon model.
What would these additional investments finance?
Investments should remove the bottlenecks in the development of low-carbon
technologies. Together with the industry, the Commission identified the following
priorities up to 2020:
1
A detailed explanation of these figures is presented in the accompanying Impact Assessment
SEC(2009)1297 of 07.10.2009.
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Six European Industrial Initiatives: these public-private initiatives, bringing together
researchers and the industry, target sectors for which working together at EU level
will add most value.
- The European wind initiative has to accelerate the reduction of costs,
increasingly move offshore and resolve the associated grid integration issues if
it is to fulfil its huge potential.
Objective: up to 20% of EU electricity to be produced wind energy technologies by
2020. The programme is estimated at 6b€ over the next 10 years. More than 250
000 skilled jobs could be created.
- The solar Europe Initiative including photovoltaics and concentrated solar
power has to help these technologies become more competitive and gain mass
market appeal. Objective: up to 15% of EU electricity to be generated by solar
power in 2020. The programme would cost an estimated 16b€ over the next 10
years. More than 200 000 skilled jobs could be created.
- The European electricity grid initiative has to respond to three interrelated
challenges – creating a real internal market; integrating a massive increase of
intermittent energy sources; and managing complex interactions between
suppliers and customers.
Objective: by 2020, 50% of networks in Europe operate along "smart principle"
effectively matching supply and demand. The programme is estimated at 2 b€.
- The sustainable bio-energy Europe initiative has to bring to commercial
maturity the most promising technologies, in order to permit large-scale,
sustainable production of advanced biofuels and highly efficient combined heat
and power from biomass.
Objective: At least 14% of the EU energy mix would be from cost-competitive,
sustainable bio-energy by 2020. The initiative will need about 9 b€ for its
implementation. More than 200 000 local jobs could be created.
- The European CO2 capture, transport and storage initiative has to allow a
wide commercialisation of Carbon capture and storage (CCS) technologies. The
pressing need is to demonstrate at industrial scale the full CCS chain for a
representative portfolio of different capture, transport and storage options.
Objective: to reduce the costs of CCS by 2020. The total public and private
investment needed in Europe over the next 10 years is estimated as 13 b€.
- The sustainable nuclear fission initiative has to move towards long-term
sustainability with a new generation of reactor type that improves safety
measures, optimise the use of fuel and reduce the volume of radioactive waste
– the Generation-IV reactor. They will be designed to maximise inherent safety,
increase efficiency, produce less radioactive waste and minimise proliferation
risks. Commercial deployment of these reactors is foreseen for 2040, but to
achieve that target, work has to start now.
Objective: the first Generation-IV prototypes should be in operation in 2020. The
investment for the next 10 years to come will be about 7 b€.
Other initiatives have been launched by the Commission and are included within the
additional financing for their contribution to developing clean energy technologies.
- The Joint Technology Initiative (JTI) on fuel cells and hydrogen was
established for 2008-2013 with a budget of 470 M€ of Community funding to be
at least matched by industry. The JTI has the minimum critical mass needed to
develop and validate efficient and cost-competitive technologies for the various
applications. However, meeting the market entry targets set by industry will
require substantial additional effort. Additional funding is estimated at 5 b€ in the
next decade.
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- Energy efficiency is the simplest and cheapest alternative to reduce CO2 and
improve energy security. In transport, buildings and industry, available
technology opportunities must be turned into business opportunities. This new
European initiative – called Smart Cities – has the objective to create the
conditions to trigger the mass market take-up of energy efficiency technologies.
The programme envisages 25 to 30 smart cities which will be the starting points
from which small networks, a new generation of buildings and alternative
transport means will develop into European wide realities. Around 11 b€ will be
needed in the next ten years.
- Additional investment should support the European Energy Research Alliance
(EERA) which will launch and implement joint programmes addressing the key
challenges of the SET-Plan with concrete technological objectives. The Alliance
could expand its activities to effectively manage an additional public investment,
EU and national, of around 5 b€ over 10 years.
- To lay the foundations of the EU future competitiveness a further investment of
around 1 b€ should be made in basic research in the area of energy related
programs.
What is the link between the SET-Plan and the European Energy
Programme for Recovery (EEPR)?
The EEPR has as its primary objective to help in getting our economy going, after
the downturn we have suffered. However, the intelligent investment decisions taken
by the European Union with this programme goes beyond recovery and puts in place
key building-blocks for the CCS and the Wind European Industrial Initiatives of the
SET-Plan. € 1.6 bn have been allocated to get started with the first demonstration
plants for carbon capture and storage and to boost innovation in Off-shore Wind. The
first projects supported by this programme will be signed before the end of 2009.
This programme confirms the commitment of the EU to low carbon technologies.
Who will contribute to the additional investment needed?
The massive need for additional investment can't be supported by a sole actor, be it
from the public or private sector. A European approach is essential to realise our
ambition. The bulk of the funds required will have to come from the private sector
and from Member States, with a contribution from the EU budget towards some of it.
In this way, the limited resources available from the EU budget can be used to
leverage a step change in the investment provided for the research and
demonstration of low carbon technologies. The EIB would also be involved.
The level of risk faced by low carbon technologies at different stages of their
development calls for a risk-sharing approach in which all relevant actors, public and
private, take on the part of the risk corresponding to their own field of activity. In
general terms, the higher the technological uncertainties, the more public support is
needed. But the Commission also wants the industry to take greater technological
and market risks as well as banks and private investors.
Where will the extra public funding come from?
Times are difficult now and public spending and budget deficits are under pressure in
the Member States. This limitation should act as incentive to prioritise public
investments. Investment in energy technology development has to increase
substantially – starting immediately. Focused public finance on the development of
low carbon technologies is in line with achieving public policy goals
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For the time being, it has been agreed that the ETS will help financing the SET Plan
in two ways. Firstly, the 300 million EU Allowances set aside from the New Entrants
Reserve of the ETS will be used to support carbon capture and storage and
innovative renewables. These allowances will be distributed by Member States for
demonstration projects selected according to European Community criteria.
Secondly, from 2013, the auctioning revenues from the ETS can be reinvested at
national level in the development of more efficient and lower cost clean technologies.
The use of the revenues is determined by the Member States. At least 50% should
be used for climate change related activities, including in developing countries.
Is an intervention at Community level appropriate?
In the EU landscape of publicly funded research, the funding consists of a European
'common pot' managed by the Commission, the Research Framework Programme,
and national programmes managed independently by the Member States. In this
way, each can capitalise on their own strengths and opportunities. Action at EU level
can take on high risk, high cost, long-term programmes beyond the reach of
individual nations. This would allow risk-sharing and generate a breadth of scope
and economies of scale that could not be achieved otherwise.
Combining public resources effectively and creating flexible Public-Private
Partnerships with industry should be the future model for pan-European energy
research cooperation.
What will be the contribution of the European Investment Bank (EIB)?
The EIB increased its overall lending target in the field of energy to €9.5bn in 2009
and €10.3bn in 2010 (compared to €6.5bn in 2008), including energy efficiency and
renewable energy. This also includes the new equity fund (the “2020 Fund –
Marguerite”) dedicated to investments in Members States’ renewable energy, TENT and TEN-E.
Which is the timeline for the implementation?
Overall, the SET Plan has originally been designed both to reach the 2020 targets of
reducing the emission of greenhouse gases by 20% and increasing the share of
renewable energy sources by 20% and to move forward towards the vision of a
complete decarbonisation of the energy system by 2050. However, the technology
and financial roadmaps of this communication cover specifically the next 10 years,
i.e. 2010-2020.
What's next?
In the 21-22 October 2009, the second European Energy Technology Summit will
take place in Stockholm. During the summit, the European Industrial Initiatives will
meet in eight parallel sessions to discuss and review the technology roadmaps of the
SET Plan. The participants will represent European actors in the innovation system
for energy technology – financial community, industry, researchers, customers and
public policy makers, as well as representatives from the European institutions and
international partners. The initiatives will subsequently be launched in 2010.
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Background
Today, 80% of EU energy supply comes from fossil fuels. These sources of energy
are the chief source of greenhouse gases. To achieve the EU's environmental and
energy goals, the EU has to focus on the development of low carbon technologies
using renewable resources (e.g. wind, sun and biomass), enabling the sustainable
use of fossil fuels (like carbon capture and storage), and promoting energy efficiency.
The SET-Plan, adopted in November 2007, is designed to optimize and coordinate
the EU's effort to develop these technologies.
See also IP/09/1431 on the SET-Plan
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Annex:
KEY MILESTONES FOR THE EUROPEAN INDUSTRIAL INITIATIVES
The global roadmap that appears below shows the key milestones of each EII,
assuming that all activities start in 2010. More details are given in the individual
roadmaps.
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