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European Commission

[Check Against Delivery]

Günther Oettinger

European Commissioner for Energy

The 2030 energy targets: What challenges for innovation?

Conference: "Europe's energy future. Efficiency and Competitiveness through Innovation and Smart Integration"

19 March 2014

The late Watts Humphrey is not a household name in Europe. But without him we would not have today's software systems.

He pioneered computer design teaching in the USA. His ideas were behind the engineering transformation which made IBM the first world leader in computing.

The same Watts Humphrey made the very wise remark I would like to quote now:

"Innovation is the process of turning ideas into manufacturable and marketable form."

And no, it's not "Commission English"!

But it is true.

We all have ideas.

How many of us had one idea at the breakfast table this morning, another when we read the paper, and another when we saw the programme for today's meeting?

There is no shortage of ideas. There is a shortage of innovation.

And - even more - there is a shortage of innovation which turns out "manufacturable" and "marketable" products, which consumers want and can afford.

We lack the ability to turn high quality research into products that are sold on the market. This is the major challenge of the energy innovation sector today: Turning ideas into markets. Turning ideas into wealth!

The Commission's energy and climate proposals for 2030 are full of ideas. That is the job of the Commission. To think, to plan, explain, promote, convince.

Our 2030 energy package is full of ambition: Reduce emissions. Increase the use of renewable energy. Keep energy affordable. Become more efficient. Integrate Europe. Renew our networks. Smarten up our energy use. Energy and climate diplomacy….

We need to be on course to reduce our greenhouse gas emissions by 80 % by 2050, in a way that is sustainable and keeps our economy competitive and our supplies secure.

We need to replace our old energy infrastructure with modern, low-carbon, flexible networks, in a smart and sustainable manner.

And we need to ensure that we have a competitive industry - able to compete globally- which will create the prosperity, jobs and skills our society needs.

But to get these suggestions to work, we need innovation.

Driving innovation, and driving a low-carbon future, are two sides of the same coin.

There are many "if"s and "but's" about any long term energy strategy. But there is one absolute certainty. That is the need for Technology. Innovative technology. Sustainable technology which can be used across the economy. Different technology which transform society. And technology skills for society, at work and at home.

So, we need innovation for our future world.

To reach our 2030 goals, we depend on dynamic, determined and driven people who understand innovation. People who can make things happen. People who believe in what they do, and get others to change.

But at the same time, innovators also need to certainty of a longer term perspective - to plan, invest and develop products. We need planning security to avoid stranded investments. Energy is a long-term sector, 2020 was yesterday evening, and 2030 is tomorrow morning.

Achieving our 2030 goals will not be solved by policy on its own. It will not be resolved by innovation on its own.

We will get there by a full and productive interaction between policy makers, and those able to produce, sell and use innovative products.

One approach is to plan ad hoc changes for individual sectors or individual technologies. This was the approach of the SET plan. It worked. Investments have risen. New markets are emerging.

The SET Plan focussed on 2020. Now we need to look further ahead. Shift up a gear.

That is why the Commission is working on a new Integrated Technology Roadmap.

That is why we are bringing innovation and energy policies closer together.

What does this mean in practice?

Starting at the beginning:

The beginning of innovation is the final user.

That sounds like a paradox. But if we want to succeed, our innovative products need a market, and a user.

Energy innovation must think more in terms of the whole system. Less in terms of isolated sectors.

For example. We are moving towards a more innovative and interconnected energy market in Europe. Smart grids. Intelligent metering technologies. The integration of renewable energy. The interconnection of PV panels and offshore wind farms.

But we have learned from experience that we cannot develop one element – such as renewable electricity - without considering what happens to the wider network. Including consumers.

More PV energy is one thing. But how about low-carbon back-up or demand-response? What about the effect on distribution systems? Can storage help? What about transportation? Smart technologies? Grid balancing solutions?

Each one can help – or sometimes hinder – the other.

The point is: You cannot really deal with one in isolation. It's a package, a system.

This means not just opening up markets to new technologies. But also making new technologies more adapted to market needs.

Another example: Energy Efficiency.

Europe is still the largest market in the world for energy efficient products and services.

But only a small part of our economic potential is exploited.

In buildings for example, up to half of energy use could be cut by the use of intelligent and energy saving technologies.

Europe's energy prices are higher than most other economies in the world. Energy intensive industries and SME's need more affordable energy efficient technologies to reduce their costs and become more competitive. Energy prices are more and more a disadvantage in our working places in the energy intensive industry, for example compared to the US, or the Middle East.

Many consumers can use energy saving techniques to cut their bills.

Last year I was at a technology conference in Dublin. There was an interesting demonstration of what was called the "Quantum System". This comprised smart electric thermal storage, giving lower-cost space and water heating for consumers, reducing energy demand, and helping to integrate renewables in the grid.

These sorts of products offer enormous opportunities and business potential.

Every sector, whether in energy or not, can benefit from energy efficiency!

Every sector can cooperate to exploit energy efficiency!

A third example: Smart Cities.

In Cannes recently, I saw just some examples of how innovation is changing our cities.

  1. Low energy housing.

  2. Passive heating and cooling.

  3. Smart urban networks linking power generation, transport options, social housing and energy efficient workplaces.

  4. Intelligent energy metering and micro grids, giving access to local forms of power – solar, geothermal or combined heat and power – and giving consumers real control over their energy use.

  5. Zero emission transport, from electric vehicles, fuels cells, or bicycle pedals.

These changes are crucial to our 2030 energy goals.

But smart cities will not work without smart networks.

That means innovation in the electricity chain.

Electricity generators and transmission system operators are a vital link between local communities and energy supplies or storage hundreds of kilometres away.

Distribution system operators have a new importance in a low-carbon market: To balance large scale and micro-generation. To bring innovative technology to individual households and businesses.

In this new system, Consumers can, for once, be king. Smart consumers, integrated consumers.

With the benefit of smart meters, they can take control of their energy use. Get a better price by adjusting their usage. Avoid price peaks and cut their bills.

So, we see, Market players and services will have to be more innovative:

  1. Information and Communication specialists, to provide the hardware to make smart networks work.

  2. Creative urban planners, to integrate electric vehicles into a modern transport network.

  3. Innovative architects and designers, to think energy efficient, zero emissions and active housing.

  4. Marketing experts, to change consumer and investment behaviour.

EU policies and Technology Platforms on Smart Grids and Smart Cities go exactly in this direction. Our Technology Platforms are open to members from outside the EU.

We have also set ambitious goals for the roll-out of smart meters to consumers – 80% by 2020.

Funding plays a key role in making this happen.

Energy taxes, CO2 prices and energy subsidies need to be transparent, flexible and based on market factors.

No one denies that the shift towards more electricity, and more sustainable electricity, costs money in the short to medium term.

The question is – how can we ensure that the costs of taxes and subsidies are not too high and push up energy prices?

On the other hand, how can we ensure that the cost of CO2 emissions is not too low and fail to stimulate low-carbon investments?

It's a sensitive balance.

One way is to adapt tax and subsidy mechanisms. This is happening with cuts in Green Taxes in the UK or RES subsidy cuts in Spain.

We welcome cuts if they reflect reductions in generation costs, but we should try not to damage investors’ confidence. In this sense, it is important that the reform of the support schemes are carried out according to Commission's guidance and that stakeholders are closely associated and well informed.

I propose to make RES support schemes more market based, while at the same time accelerating innovation to bring more - and more competitive - technologies online.

Bringing the cost of innovation down is a perennial challenge.

Even with strong policies, it is unlikely to go away.

But European collaboration is a definite help!

The SET Plan has helped make better use of the funding we have. Horizon 2020 moves further in this direction based on the Energy Technology and Innovation Communication of last year May. For the first time, an EU RTD Programme spans the whole development process, from research to the final market.

We estimate large scale, cross-sectoral innovation projects can lead to reduction in investment costs for the various technologies of some 10-15 % of the total investment.

Now our challenge is to find and exploit the synergies between Horizon 2020 and other sources of funding for energy:

  1. Connecting Europe Facility, for network development and integration of renewables.

  2. Regional funding for energy efficiency and other "soft" measures, such as business networks and training.

  3. Or collaboration with the European Investment Bank, national programmes and regional initiatives.

Once again, we need to keep at the back of our minds: This is not about favouring one sector, or one group, over another. It is about getting all sectors together, all interested parties to cooperate. So that the funds we have are used with the greatest impact for Europe.

Finally, we need to remember: Innovation is about people.

Innovation is a continuous process between research, development, deployment, business planning, sales team and the ordinary user.

From the lab-floor to the work-floor. From the scientist to the end user.

But on its own, a new product does not change our energy landscape. Carbon Capture and Storage is a case in point. We have reached the demonstration stage, but where are the commercial projects?

I want to give due prominence to the idea of "software". Softer measures such as business models which make the link with markets, companies and the final purchaser and user.

This is a very interesting change. Technology developers, and policy makers, will need to talk to people active on the ground - for example, energy services companies, financiers, trainers, communication experts and all manner of businesses.

This idea is already being tried out in the Smart Cities and Communities European Innovation Partnership.

Through this sort of collaboration we are offering technology developers a wider market and quicker access to users.

This is just one way in which European collaboration brings products to market more quickly: Bridging the gap between the laboratory and the end user. Making new and unfamiliar technology more accessible to everyone, and all types of businesses.

Innovation and a low carbon future for Europe are mutually dependent.

Our 2030 proposals give the political stability needed for research and development to take risks.

At the same time, innovation and innovative businesses will enable the EU to deliver its 2030 goals.

Let me close with a quotation from another great inventor, a European this time, Alexander Graham Bell:

"Great discoveries and improvements invariably involve the cooperation of many minds."

Let's not forget that, and so let's work together!

Thank you for listening.

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