European RE industry directs Innovation Fund principles

Europe’s renewable energy (RE) industry associations, coordinated by Ocean Energy Europe, have published a position paper which establishes principles for the new Innovation Fund to be set up as part of the Emissions Trading System (ETS) reform.

The European Parliament (EP) is preparing its position on ETS reform, which will be the basis negotiating stance with the European Commission that is looking to use part of the excess emission certificates from the ETS (400 million of them) in the hope of raising between €4.5 billion and €11 billion for innovative renewable energy and industrial projects.

The initiative represents a successor programme to the NER 300, which awarded grants to five ocean energy projects, and will be named ‘Innovation Fund’.

Europe’s renewable energy industry suggests that the new Innovation Fund should build on the lessons learnt from the NER 300 to further boost investments in innovative and sustainable energy technologies, mainly in ‘some of the essential challenges faced by innovative and capital intensive technologies’ such as lack of upfront funding, and lack of clarity over who bears the risk in case of project failure.

The industry proposes the creation of a fit-for-purpose fund that would comprise the appropriate financial instruments to complement upfront funding and revenue support for the demonstration stage projects, that can also bear the risk of innovative project under-performance, which would in turn, the RE industry position paper states, help remove risk and make projects more investable.

Furthermore, the industry recommends setting the limit awards to individual projects to €300 million, which would reduce the risk of a handful of large awards drying out the fund without, necessarily, proving beneficial for innovation and stimulating further investments.

The Innovation Fund should focus on the technologies that have a high replicability potential, and therefore, significant potential for cost reductions through economies of scale, the position paper states, and posits that replicability criteria should be included as part of the ‘eligibility check’.

In addition, the associations advise the creation of a high and stable carbon price to maximise the value of the Innovation Fund and provide a real boost for EU innovative investments.

“NER 300 addresses the so-called ‘valley of death’ gap between R&D funding and revenue support, bringing forward innovative ocean energy pilot projects. With the Innovation Fund, we now have a chance to make this system more effective. The main financial barrier facing demonstration projects face is sourcing upfront finance, and the Innovation Fund will have the most impact by addressing this,” said Jacopo Moccia, Policy Director at Ocean Energy Europe.