Apr 17 2016

Merging: towards a “NER 2020” and a “Horizon 400”?

NER400 projects are set to look more like Framework Programme demonstration projects (FP7, Horizon 2020) than NER300 projects do. They will share more of the same features.

Ocean Energy Europe, representing the tidal stream and wave energy sectors, appreciated NER300’s positioning: It “plugs the gap between Horizon 2020, which lacks the scale needed for energy demonstration/pilot projects, and revenue support instruments such as Member States’ renewable energy support schemes, which do not address the risks of early-stage technologies.” ETS Innovation Fund will look more like Horizon 2020 than NER300 does (but enough of its unique features will be retained to keep Ocean Energy Europe happy):

  • The EC proposes that the Innovation Fund allow up to 40% of any award to be disbursed dependent on Project Sponsor effort rather than project performance (ETS proposal, p19). This will add burden to project reporting obligations because (in contrast to NER300) effort will now also have to be proved instead of performance alone. EU Research Framework Programme projects (Horizon 2020 projects) also pay out on effort rather than result.
  • Guided by a mandate from the European Council, the Innovation Fund will be sure to “include small-scale“ projects. It remains to be seen how this will be interpreted. The text in the ETS Directive of 2009, which paved the way for NER300, did not include a reference to small-scale projects. Horizon 2020 also funds projects smaller than many of those funded under NER300.

These proposals are popular with stakeholders (for details on the appeal of small-scale projects, see future article ‘What size of projects for ETS Innovation Fund?’).

Milestones for money

Cembureau wants NER300’s successor to “acknowledge the technical risks involved and provide financing for the development stage without coupling the actual payment to a successful outcome.” CCSA, Scotland Europa, GSV, WWF, Fortum, Fertilizers Europe and two of its members say the same. Électricité de France would additionally like periodic “reviews” at which “one should think about allowing changing the power output of a power generation installation during the development phase, because of technology improvements.”

The renewable energy associations Wind Europe, EGEC, Solar Power Europe and Ocean Energy Europe are also all keen on shifting project risk away from project sponsors, with Solar Power Europe more inclined than the others to look to the Member States to take on risk: “In the future there should be better arrangements between the Member States and the project promoters to alleviate the project failure risk and to cover part of the upfront investment cost.” Svebio will be content with the EC’s proposals, having called for “Payments to the projects [to] be made at least partly up-front, not only after start-up of the operation.”

As for the Member States, one of them, Estonia, proposes a mechanism to pass on its risk to a third party, the European Investment Bank: “We suggest to consider the approach where the EIB alone or EIB together with the Member State are co-guarantors of the project. The risks would be shared so that the risk of the Member State will not exceed 50% and will enable the project to receive crucial pre-operation investment.” (This is not the only example of a move to push risk onto the EIB — see ‘When is the right time to monetise allowances?’.)