Jun 09 2017

Previewing Monday’s DG CLIMA event: the sectoral roundtable wrap-up

This article previews some of the ideas that might be aired at DG CLIMA’s event on 12 June 2017, Final event: Presentation of the report of recommendations from the sectorial consultation roundtables.

What kind of fund is ETS Innovation Fund?

The financial community understands “fund” as something quite different to the way the word is usually used in Brussels. A banker told the roundtable he was chairing, “I didn’t hear the word ‘IRR’ once […]. There’s quite a lot of work to be done on how this fund is going to look like a fund.” Tomas Wyns, in his January 20th presentation, displayed slides saying that Innovation Fund “can enable/provide next layers of finance (equity, mezzanine, senior & minor debt, guarantees)”. The roundtables did not reach consensus on which of ‘enable’ or ‘provide’ the Innovation Fund should aim to do.

Grants, please

“The line ‘grants are highly appreciated’ could be the quote of the day,” joked Vincent Gilles, the moderator of the finance session for renewables and storage at the 6 April event. Various speakers had spoken up for grants while recognising the usefulness of other forms of financing.

Size of projects

“Investment needs for industry-size low carbon plants/processes may be in the range of 0.5-1 bn EUR for one single large process,” wrote Wolfgang Eichhammer on his January 20th slides. The rapporteur for the ferrous metals roundtable sensed tacit agreement for the suggestion that a commercial first-of-its-kind demonstration project could cost twice that amount. This would imply 300 M EUR of funding, said Theo Henrar, thinking of his company’s clean steel production technology ‘Hisarna’. This is line with the maximum found to be necessary by the consultancy Adelphi.

While stakeholders have argued about the extent to which ETS Innovation should fund early-stage research, Jos Delbeke (Director General of DG CLIMA) has clear ideas: “It is a fund for demonstration new technologies in the private sector […] and not PhDs”. This was also the line he took in June 2016.

Rules of the game

Summing up the deliberations of the renewables roundtable on 6 April, Hans Bünting said “There are a lot good things that can be taken from NER300 into the new fund. There are some proven procedures and principles but also of course there’s some room for improvement […]: clear and transparent selection criteria which go beyond the technology evaluation.” Patrick Clerens shared the following on behalf of the energy storage sector: “It is really necessary to make sure that on one side we have technology neutrality but if you end up with the situation that of the 5-6 sectors that could make up the fund only one is selected [there should be possibility “to balance out” the funding].”

The cement sector came up with a number of specific ideas for project selection rules including a ranking criterion that evaluates the CO2 saving of demonstration projects in different sectors against a recognised benchmark.

The metals sector pleaded for a programme that is “simple and flexible as possible in all respects such as what TRL levels to be financed, number and size of applications, funding tools applied, their tenor, potential interaction with other funding tools, etc.”

But the EC dampened expectations that Innovation Fund would be a one-stop shop providing all financing needs. Artur Runge-Metzger said on 20th January, “What we know from the experience of NER300 is that this will require a more flexible approach than we had in the past. It might require a more tailored approach. This might imply an increase in administrative complexity. It’s not going to be as simple and straightforward as the NER300. The instrument must be manageable. The one-stop shop sounds absolutely great, but it could be a big marketplace with many things and could create complication.”

  1. NER400.com’s comment

    The strangest feature of these roundtables was that participants were not briefed on the primary legislation now being negotiated between Council and European Parliament. The time spent discussing the desirability of making NER300 support dependent on reaching construction milestones rather than on successful plant operation was time wasted. Payment-by-milestones will be allowed to between 40% to 60% depending on whether the final text more closely reflects the Council’s or EP’s wishes.

    Equally, there was no point complaining about the involvement of Member States in the ETS Innovation Fund (which many did). Their involvement is about to be fixed in law. Neither Commission, Council or EP have proposed to change the wording that shaped NER300, namely that “support for projects shall be given via Member States”.

    Given the closeness of the text being finalised now to the text that defined NER300, it is difficult to see how the two could operate very differently.