EU Innovation Fund as energy industry experts would want it

The European energy industry experts have expressed their views on how the proposed Innovation Fund could be designed to support the energy innovation investment needs.

The new Innovation fund, to be set up as part of the Emissions Trading System (ETS) reform as a successor program to the NER 300, is meant to be used to finance demonstration of innovative renewable energy, including ocean energy projects, and low carbon projects, among others.

Over January – June 2017 period, the European Commission conducted an extensive consultation process with over 250 energy industry experts to collect their recommendations on the design of the proposed Innovation Fund.

The high-level summary of expert workshops was compiled by a specialist low carbon finance consultant Climate Strategy & Partners in a report titled ‘Summary Report of Expert Consultations for Finance for Innovation: Towards the ETS Innovation Fund (2017)’.

The key expert recommendations state that the Innovation Fund (IF) should have clear project selection criteria and a transparent set of requirements, procedures and decision-making processes to avoid confusion and overlap with other funding instruments.

The IF should mainly offer grants, complemented with partial grants and/or de-risked loans or equity, depending on the maturity of the technology, with higher levels of grant intensity for early stage projects, according to the report.

While a strong consensus of experts across groups believes that the IF should be a ‘revolving fund’, many note that this was at odds with having grants as the major product on offer.

Also, experts have agreed that the IF application process should be kept simple, with two stages offering multiple competitive calls. The evaluation process should also be kept ‘short’, according to the experts who have proposed a 1-year time-frame from submission in the first stage, to decision after the second stage.

IF funding should be provided when the project has a funding gap, leading to a form of contracted ‘funding against milestones’ approach, the report states.

This has the advantage of providing timely funding to successful projects which are meeting their milestones and also quickly terminating those which fail, freeing up spare capital for new innovation funding rounds.

The experts have also agreed that the IF should complement and not overlap with existing EU and national funding programs, and encouraged the IF to promote the formation of ‘collaborative consortia’ with ‘cross-sectorial’ technologies.

This expert consultation will be followed by a wider public consultation, during which all stakeholders and general public will be invited to express their views and opinion.