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Brussels, 22 November 2007
On 22 November, the European Commission will present the European Strategic Energy Technology Plan (SET-Plan) (see IP/07/1750). Low carbon technologies will play a vital role in reaching our energy and climate change targets. The main goal of the SET-Plan is to accelerate the development and implementation of these technologies. This background note sets out the details of the SET Plan. Its rationale accompanied by some useful background figures and charts is set out in MEMO/07/494.
Technology is vital for reaching energy and climate change objectives
The inter-related challenges of climate change, security of energy supply and competitiveness are multifaceted and require a coordinated response. We are piecing together a far-reaching jigsaw of policies and measures: binding targets for 2020 to reduce greenhouse gas emissions by 20% and ensure 20% of renewable energy sources in the EU energy mix; a plan to reduce EU global primary energy use by 20% by 2020; carbon pricing through the Emissions Trading Scheme and energy taxation; a competitive Internal Energy Market; an international energy policy.
Technology is vital in reaching all the above-mentioned objectives. We need a dedicated policy to accelerate the development and deployment of cost-effective low carbon technologies. To meet the 2020 targets, we need to lower the cost of clean energy and put EU industry at the forefront of the rapidly growing low carbon technology sector. In the longer term, if we are to meet the greater ambition of reducing our greenhouse gas emissions by 60-80% by 2050, new generations of technologies have to be developed through breakthrough in research.
The transition to a low carbon economy will take decades and touch every sector of the economy, but we cannot afford to delay action. Decisions taken over the next 10-15 years will have profound consequences for energy security, for climate change, for growth and jobs in Europe.
Weaknesses in energy innovation today
Since the oil price shocks in the 70s and 80s, Europe has enjoyed inexpensive and plentiful energy supplies. The easy availability of resources, no carbon constraints and the commercial imperatives of market forces have not only left us dependent on fossil fuels, but have also tempered the interest for innovation and investment in new energy technologies. In short, there is neither a natural market appetite nor a short-term business benefit for such technologies. This market gap between supply and demand is often referred to as the 'valley of death' for low carbon energy technologies. Public intervention to support energy innovation is thus both necessary and justified.
Public and private energy research budgets in the EU have declined substantially since 1980s. This has led to an accumulated under-investment in energy research capacities and infrastructures. If EU governments were investing today at the same rate as in 1980, the total EU public expenditure for the development of energy technologies would be four times the current level of investment.
The energy innovation process, from initial conception to market penetration, also suffers from unique structural weaknesses. It is characterised by long lead times, often decades, to mass market due to the scale of the investments needed and the technological and regulatory inertia inherent in existing energy systems. New technologies are generally more expensive than those they replace while not providing a better energy service.
Key technology challenges for the next 10 years
To achieve the 2020 targets a twin-track approach is needed. Reinforced research has to lower costs and improve performance. Pro-active support measures are to create business opportunities, stimulate market development and address the non-technological barriers that discourage innovation and the market deployment of efficient and low carbon technologies.
To achieve the 2050 vision, towards complete decarbonisation, we need to develop a new generation of technologies through major breakthroughs. Even if some of these technologies will have little impact by 2020, it is vital that we reinforce efforts today to ensure that they come on-stream as early as possible. We also have to plan for major organisational and infrastructure changes.
Key EU technology challenges for the next 10 years to meet the 2020 targets:
Key EU technology challenges for the next 10 years to meet the 2050 vision:
What is the Commission proposing?
The SET-Plan proposes to deliver the following results: (i) a new joint strategic planning, (ii) a more effective implementation, (iii) an increase in resources, and (iv) a new and reinforced approach to international cooperation.
1) Joint strategic planning will enable a better orientation of efforts and would be the seed to bring together our researcher and our industry.
Early 2008 the Commission will establish a Steering Group on Strategic Energy Technologies to steer the implementation of the SET-Plan, reinforcing the coherence between national, European and international efforts. The Group, chaired by the Commission, will be composed of high level government representatives from Member States.
In the first half of 2009, to review progress the Commission will organise a European Energy Technology Summit that will bring together all stakeholders in the entire innovation system, from industry to customers, as well as representatives of the European institutions, the financial community and our international partners.
To support the definition of energy technology objectives, as well as to build consensus around the SET-Plan programme, the Commission will establish an open-access information and knowledge management system on energy technologies.
2) For effective implementation we need more powerful mechanisms that can leverage the potential of European industry and researchers.
In 2008 the Commission proposes to launch six new European Industrial Initiatives that will target sectors 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.
The initiatives are as follows:
Several initiatives that are already being implemented, or are well advanced in their preparation, serve as illustrative examples: the European fusion research programme and its flagship 'ITER'; the Single European Sky air traffic management research programme (SESAR); the proposed Joint Technology Initiative on Fuel Cells and Hydrogen; and the proposed 'Clean Sky' Joint Technology Initiative on the environmental impacts of aviation.
To bring about a move from today's model of collaborating on projects towards a new paradigm of implementing programmes and to align these programmes with the SET-Plan priorities, the Commission proposes to create a European Energy Research Alliance.
The European Institute of Technology could provide an appropriate vehicle to realise this ambition, through a Knowledge and Innovation Community on energy and climate change.
The Commission proposes to initiate in 2008 an action on European energy infrastructure networks and systems transition planning. It will contribute to optimise and harmonise the development of low carbon integrated energy systems across the EU and its neighbouring countries. It will help the development of tools and models for European level foresight in areas such as smart, bi-directional electricity grids, CO2 transport and storage and hydrogen distribution.
Implementation of the SET-Plan will help overcome the fragmentation of the European research and innovation base, leading to a better overall balance between cooperation and competition. Encouraging more focus and coordination between different funding schemes and sources will help to optimise investment.
Two challenges need to be addressed: mobilising additional financial resources, for research and related infrastructures, industrial-scale demonstration and market replication projects; and education and training to deliver the quantity and quality of human resources required to take full advantage of the technology opportunities that the European energy policy will create.
At the end of 2008 the Commission intends to present a Communication on financing low carbon technologies that will address resource needs and sources, examining all potential avenues to leverage private investment, including private equity and venture capital, enhance coordination between funding sources and raise additional funds.
4) International cooperation should be a fundamental pillar in our European strategy.
We need to take our international cooperation on energy technology to a new dimension. The measures proposed in the SET-Plan (e.g. the Steering Group, European Industrial Initiatives and the European Energy Research Alliance) should bring about a reinforced international cooperation strategy. We also need to ensure that the EU increasingly speaks with one voice in international fora, where appropriate, to achieve a more coherent and stronger partnership effect.
Annex 1. The advantages and disadvantages of different sources of electrical energy
Annex 2. Summary table of the Technology Map
The purpose of the Technology Map is to underpin the SET-Plan Communication. Based on it the SET-Plan proposes actions to accelerate low carbon energy technology development and deployment through European Industrial Initiatives. The Technology Map provides a quantification of the potential contributions of key technologies to: Environment - CO2 emission reductions; Security of Energy Supply - fossil fuel savings; and Competitiveness - changes in the cost of energy.
The following table from the Technology Map summarises for each technology: the description of the current status and the anticipated developments; the current and future potential share in the European energy demand; the quantified impacts of technology penetration (Environment - Greenhouse gas emissions; Security of supply; and Competitiveness); the barriers to penetration in the European energy market; the needs to realise its potential and the synergies with other technologies and sectors.