Strategic Conclusions on the EC RTD Portfolio
| Author | European Union Publications Office, 2006 |
| Pages | 87-95 |
Page 87
The overall aim of this study is to obtain a broad picture of the EC NNE RTD portfolio, and this would not be complete without an overview of its key characteristics and features. The EC portfolio will be compared with activities at Member State level, and the European portfolio (EC plus European countries) will be compared with US and Japanese research.
It is generally understood that the EC RTD Portfolio aims to move increasingly from data to information and understanding, from a project to a portfolio approach, and from an EC-centred view to a European and global picture.
In order to evaluate the key characteristics of the EC NNE research portfolio, and to understand how far the EC has progressed in its ambition to develop a true portfolio approach, the following characteristics have to be evaluated and discussed:
* Goals
* Portfolio structure
* Funding levels and breakdown at fields of reference level
* Objectives
* R&D orientation
* Stakeholder integration.
All three regions - the EU, US and Japan - support three overall goals with their RTD activities:
* To secure long term energy supplies by moving towards renewable energy sources.
* To improve industrial competitiveness and gain global market leadership.
* To improve environmental performance.
Nevertheless, there are significant differences in prioritising these three goals.
The US clearly focuses on reducing the dependence on foreign oil and gas and promoting the competitiveness of domestic industry. This is reflected in the very high share of efficiency technologies and thus a smaller weighting of renewables as most of them still lack commercial competitiveness. Although the US can draw on the full spectrum of natural resources and features a broad RTD approach, the commercialisation perspective is a very strong element in structuring the portfolio.
As Japan, at least in a mid term perspective, has only limited natural resources, both in the conventional and renewable area, dependence on foreign energy resources will remain high. Consequently, Japan's RTD portfolio has a strong focus on efficiency technologies and is streamlined, concentrating on technologies which have the potential to develop new industrial sectors with future growth potential such as hydrogen and selected renewables. The great share of deployment and demonstration activities within the RTD portfolio aims at building up industrial capacities and gaining experience for future commercialisation on a global level.
In Europe policy aims at pursuing all three goals in equal measure. In combination with a wide spectrum of natural resources, this results in a high weighting for renewables, both in the EC portfolio and the aggregate of the national portfolios. By covering a broad technology spectrum at the EC level, the specific priorities of Member States are taken into account.
By signing the Kyoto Protocol, Europe and Japan have made it clear that they will make greenhouse gas reduction a key priority. In contrast, the United States has not set clear targets for its own emission reductions.
Page 88
Although the three policy goals are commonly agreed in Europe, there is no consistent overall concept for the European energy future that takes into account the constraints and opportunities of the different regions, and especially those of the new Member States. This is one prerequisite for the successful establishment of the European Research Area.
The following chart shows a top-level positioning of funding for NNE RTD in Europe as a whole (EC + Member States Funding), Japan, the US and the EC (reflecting the EC RTD portfolio) and is based on a mixture of IEA data, data from the EC, and feedback provided by different technology and portfolio experts contacted during the research.
[ GRAPHICS ARE NOT INCLUDED ]
Comparing funding at the overall NNE RTD level between the US, Japan and Europe is difficult because funding data is not available in a way to allow for easy comparison.
EC data is based on the available information for FP5 and FP6 at the time of writing, and is the sum of the funding in each field of reference.
Member States' funding data, as well as data for Japan and the US, is based on the IEA energy R&D statistics. The funding data provided by the IEA for renewables tends to correspond roughly with the same definitions as those used by the European Commission for its renewables portfolio and is therefore valid for comparison. The IEA data is not directly comparable with the EC NNE RTD portfolio for the following fields of reference:
* The IEA's classification includes fields of reference such as hydrogen, CO2 capture and storage, and fuel cells as part of a general field entitled "Other Technology or Research": it is virtually impossible to isolate this data and compare it with EC data. Some countries list budgets for "Energy Systems Analysis", while most do not. In many cases systems analysis and socio-economic research are embedded in technology-oriented research. Since no valid comparison is thus possible, socio-economic and systems analysis has been added to the category "Other".
* The IEA's classifications "Electricity Transmission & Distribution" and "Energy Storage" have been merged into the category "Grids and Storage" in order to create a category comparable with the relevant EU research field.
* "Electric Power Conversion" issues were not funded by the EC in FP6 but have been included in the overview to complete the picture of NNE RTD.
Comparability of data is further complicated by the problem of consistently assigning certain issues which refer to more than one field of reference to only one field of reference (e.g. biomass to hydrogen).
Page 89
[ GRAPHICS ARE NOT INCLUDED ]
Although the same NNE technologies tend to be researched across Europe, the United States and Japan, there are significant differences in the structure of the portfolios in terms of concentration and respective level of funding. Whereas the US concentrates largely on hydrogen, fuel cells and efficiency technologies (75%), Europe spends almost half its NNE budget and Japan about 35% on renewable energy research.
There are no obvious gaps in the European NNE RTD portfolio whereas a few areas, such as ocean in the United States and solar thermal in Japan, are absent from their national portfolios. While Europe's portfolio covers all technology paths there is one area, power conversion, where the EC stopped funding under FP6, leaving the initiative to the Member States, and another area, CO2 capture and storage, where funding comes almost entirely from the EC.
The fact that the European portfolio covers almost the whole spectrum of NNE technologies can be attributed to varying priority settings in Member States, in line with the respective energy policy objectives, available natural resources, existing knowledge and expertise, and the competence of the different industrial players in the countries concerned. There is no specific trend for heavily supporting one technology to the detriment of others. This relative balance is mainly due to the fact that the different European regions/countries have different goals, priorities and skills: this positions Europe as one of the most thriving and diverse research areas, contributing to a healthy variety of subjects covered.
The structure of the EC RTD portfolio leads to a series of challenges and debates that some respondents have raised during the course of this study. The key issues include in particular the viability of researching a wide diversity of subjects (the risk of spreading resources in areas without reaching the critical mass that would ensure technology commercial breakthrough, the chances of competing in technology areas where other regions focus specifically on a limited number of targeted technologies and issues, etc).
Page 90
The consensus seems to be that the EC should support a broad range of technologies in the case of those that are at the pre-commercialisation stage, as it makes more sense to have a diversified portfolio. Take for instance the example of the US in the field of CO2 capture and storage, where the strategy has been to adopt a flexible approach, given the diversity of geological formations, and to promote research into different fields through regional partnerships in seven key regions.
For closer term commercialisation strategies it is considered better to concentrate efforts on some key technologies and areas for development, in order to ensure global competitiveness (as in the case of the EC in wind energy and solar PV).
[ GRAPHICS ARE NOT INCLUDED ]
In terms of structure the renewable RTD portfolios of Europe and the US on the one hand, and Japan on the other hand, show considerable differences. Whilst Europe and the US place a comparable degree of priority on PV, bioenergy and wind - which add up to roughly 80% of the total respective renewable budgets - Japan concentrates its efforts on the two technology paths of PV (68%) and bioenergy (17%).
With the exception of geothermal, the average level of funding in Europe was higher than the funding provided in the US and Japan for each of the different renewable technologies. Only in 2004 was Japan investing more on PV than Europe.
By breaking down the portfolios into the different fields of reference the following funding picture emerges:
Europe has the highest funding for fuel cells and hydrogen research and is ahead of both Japan and the US who have roughly equal levels of funding. EC funding is now focused equally on hydrogen and fuel cells. The funding for hydrogen and fuel cell research has increased in the last few years across the US, Europe and Japan.
Europe has the highest funding in the area of CO2 capture and storage, although Japan and the US are not far behind. Although US funding is still the smallest of the three, the budget has grown massively over the past few years, with further increases ahead.
Funding for hydrogen, fuel cells, carbon capture and storage technologies has been increasing at a faster rate than funding to other NNE technologies, denoting the growing interest at European level in research in these areas.
Page 91
Over the last five years Europe and Japan have almost equally invested in photovoltaic RTD (roughly euros 110 M and euros 100 M per year respectively). However, the trends vary: the European budget has fallen over the last decade, while Japan has increased its budget dramatically, increasing by 80% to euros 147 M in the period 2003-2004. The US is spending roughly 55% of Europe's PV budget. In relative terms Europe and the US distribute about 30% of their renewable RTD budgets to PV research, whereas Japan allocates about two-thirds (68%) of its overall renewable funding to PV. Between 60% and 80% of funding is allocated to RTD on materials, cells and modules.
As for concentrated solar thermal power (CSP), Europe has the highest funding with an average of roughly euros 40 M per year, of which euros 24 M was spent by Italy. It has to be noted that Italy started late on CSP and Italian activities are rather isolated. US funding has fallen to euros 9 M per year, less than half the level of the 1990s. In Europe 12.6% of the renewable RTD budget is attributed to concentrated solar energy research, whereas the figure for the US dropped to less than 5%. Very recent trends hint at stronger funding for CSP in both the United States and Europe (especially Germany).
The wind energy area in Europe has evolved into a strong and competitive sector over the last decade. The
European funding budget in the period 2000-2004 in this area was euros 57.7 M, compared with euros 32.1 M for the US and euros 7.4 M for Japan. Although the US has the highest single budget for RTD in wind energy, in terms of public funding levels Europe is still ahead of third countries. The difference in absolute annual funding between Europe and the US has diminished over the last 10 years, from euros 46 M to euros 17M, mainly due to a significant reduction in German funding. In Europe and the US, roughly 17% of the renewable RTD budget is accounted for by wind energy research, whereas the corresponding figure for Japan is 5%.
Two major factors differentiate Europe's public funding for ocean energy systems from that of third countries. The first is the level of funding. Since 2002 only Europe has provided significant funding for this technology field. The average annual funding of euros 6.5 M in the period 2000-2004 corresponds to 2% of the overall renewable budget. Up to 2001, Japan had a level of funding comparable to Europe. The second and perhaps more significant distinction is the continuity of funding that OES research is receiving in Europe. For the US OES was never very important in terms of public RTD funding. Japan massively reduced and later phased out its public research efforts.
The level of public RTD funding for bioenergy in Europe (euros 103.3 M) is nearly 50% higher than in the US Nearly 30% of overall European public funding for bioenergy is spent by the EC, as compared to about 15-20% in other renewable areas: this suggests that RTD in bioenergy is not receiving adequate attention in most European countries.
The US, with euros 69.4 M, has the biggest single country annual budget. In reorienting its earlier programme strategy towards the biorefinery concept, areas supported earlier (e.g. co-generation) now lack backing. The Japanese funding for bioenergy RTD (euros24.6M) is at the same level as that of the EC. Japan increased its funding for biomass RTD dramatically in 2004. About one-third of the renewable RTD budget in Europe (31%) and the US (35%) is allocated to bioenergy research, whereas the corresponding share for Japan is 17%.
With euros 21.9 M, the US had by far the highest funding for RTD in geothermal energy systems, compared with euros 16.0 M for Europe and euros 9.7 M for Japan, though with a gradually decreasing trend for Europe and the US and a phasing out for Japan since 2003. According to the Director of the US Geothermal Programme, this downward shift in the US is largely due to the recent shift of funding to hydrogen and fuel cells. By contrast with this trend, the European Commission and some Member States like Germany and France have increased their efforts. In Europe about 5% of the renewable RTD budget is allocated to geothermal energy research: the corresponding figure for the US is 11.2%.
Europe's funding of electricity grids research is smaller than that of Japan and the US Nevertheless, direct comparisons are very difficult as significant research funding is categorised with other technologies such as renewables and fuel cells.
Funding data for socio-economic research is extremely hard to compare. While the EC and some selected Member States conduct socio-economic research under special budget lines, for many countries socio-economic research is integrated with technical research projects or at least funded under the same budget lines. Consequently it is impossible to compare EU, US and Japanese funding. However, it can be said that the Member States put a stronger emphasis on socio-economic research than the EC does.
Page 92
Studying the nature and degree of precision of objectives at the field of reference level provides an interesting perspective for understanding the peculiarities of the different RTD portfolios.
[ GRAPHICS ARE NOT INCLUDED ]
One of the key characteristics of the Japanese and American portfolios is that they tend to feature clearly defined and specific sets of objectives at the fields of reference level. A good example is hydrogen and fuel cells, where specific commercialisation and cost reduction objectives are defined in both the Japanese137 and American138 roadmaps.
By comparison, objectives at EC RTD level are not so specific, tending to be more general. There are several reasons for this:
* The EC has to balance the various priorities and objectives of the key stakeholders when formulating European research objectives, keeping objectives at a general level to facilitate consensus.
* For technologies that are researched at a very early stage, it makes sense to have broad research objectives, hence not prioritising any technology on the basis of early signs of promise. This means that the EC portfolio tends to create an environment conducive to fostering a multitude of ideas and creating a truly broad base for future research.
However, by setting more general objectives, the EC portfolio fails to lend itself to easy project review, making it difficult to assess the progress of different research programmes and take corrective actions in order to realign projects to the initial objectives. This becomes a bigger issue towards the later stages of technology development, when it would make more economic sense to focus research and resources on a few promising technologies rather than spread efforts across the technology spectrum.
The hydrogen and fuel cells research objectives are broadly similar in Europe, the US and Japan. For hydrogen, these are the development of production and storage technologies, while for fuel cells the objectives are to reduce costs and improve performance. Different Member States put varying degrees of emphasis on the different fuel cell technologies, reflecting the research focus of national companies in that field.
There are some differences in the area of CO2 capture and storage. The EC is not currently researching power plant efficiency improvement technologies, although most other key countries in Europe and the world are doing this. Japan is particularly focusing on ocean sequestration where it is the global leader, while both Europe and the US are looking at other forms of geological storage.
On a general level the PV research targets for Europe, the US and Japan are similar. The general objective is to make efficiency gains and cost reductions for industrial mass-production processes. The technological spectrum is comparable, with the main emphasis on materials, cells and modules for silicon, thin film and dye-sensitised cell types. Within Europe there is a degree of specialisation on materials, cells and applications - individual countries put a strong focus on specific technologies, e.g. Grätzel cells or building integration. Compared to Europe, the US puts greater emphasis on concentrating modules with high-efficiency cells.
Page 93
Europe's concentrated solar thermal research portfolio consists of predominantly central tower and solar trough projects. By contrast, key focus areas of research in the U.S are solar dishes and solar troughs. The focus is increasingly on high-temperature and thermochemical applications (gas reforming and hydrogen production). Independently of the other European research efforts, Italy focuses on molten salt solar trough systems.
In Europe and the US, wind energy research is strongly focused on the development of new enhanced technologies, but different technology paths driven by a different market orientation are being promoted. European wind energy research is focusing explicitly on future and up-scaled wind energy systems, such as offshore wind farms and next-generation turbines, as well as related issues like grid connection. EC objectives are commonly pursued by the most active Member States in this field, Germany, the Netherlands and Denmark. The US strategy aims to develop turbine designs that are well-suited to low wind regimes in order to exploit the wind energy potential of lower wind sites close to consumer markets: this represents the most promising market segment for wind energy application in the US. In contrast, the main R&D focus in Japan is on deployment and research as such is only pursued in the context of optimal site management and grid integration.
Globally, the EC - together with some Member States - is playing the leading role in ocean energy system research. Though in this area many technology paths (wave, tidal, thermal, salinity) are pursuable, the technological focus of RTD at EC level is concentrated on a few promising wave energy system technologies. Demonstration activities, strongly supported by private investment, show increasing confidence in the perspectives of this technology.
For all countries active in bioenergy research, in contrast to previous research strategies, biomass is now clearly seen as an innovation sector not only addressing energy and climate issues but also creating new and alternative products for other industrial sectors. The significant distinction between the RTD portfolios of the EC and the US is in the degree of integration of technology research into a coherent concept, focusing funding on the related technological and socio-economical RTD requirements. The US emphasise the generation of added value through the combined production of chemicals, raw materials and biofuels in biorefineries. In contrast, the EU has not streamlined all research to meet one specific goal but is pursuing more diverse research requirements which are - each in itself - important in terms of achieving improvements in specific areas such as liquid fuel production, combustion and co-firing. The first biorefinery projects are under way in Europe, and this topic is likely to receive further attention in FP7. As Japan is not an agriculture-intensive country, RTD efforts are concentrated on technologies related to the utilisation of organic waste such as fluidised bed combustion, co-firing and pyrolysis.
The technological focus of geothermal RTD in Europe is on enhanced geothermal systems (EGS) and is comparable to the strategy of the main competitor, the US Both technology paths - Hot Dry Rock (HDR) and water-bearing systems - are being explored, but the EC and most Member States focus on HDR, whereas the US and Germany pay almost equal attention to HDR and water-bearing technology. Depending on their specific geological environments, countries like Italy and Iceland are addressing high-enthalpy resources as an additional technology path.
The European portfolio in electricity grids is broadly comparable to that of the US and Japan. However, the latter places a greater emphasis on the integration of solar PV and fuel cells than on the integration of wind power, which tends to be a key focus area of research in Europe and the US.
Socio-economic research objectives in Europe are very much dedicated to sustainable development. In contrast, in the US, socio-economic assessments are to a great extent performed in a market perspective, i.e. to arrive at cost-reduction goals for energy RTD. Socio-economic research funded by the EC has shifted from a concentration on modelling towards a broader approach, including normative research for sustainability, stakeholder inclusion and the analysis of behavioural patterns and acceptance of technologies.
Page 94
Another aspect to consider when characterising the EC Research portfolio is relative R&D orientation, in order to judge the extent to which it is balanced in this respect.
[ GRAPHICS ARE NOT INCLUDED ]
Many investigations, comparing the role of RTD and innovation in Japan, the US and Europe, indicate that the Japanese as well as the US research systems are more focused on producing results that directly improve and strengthen domestic industries and their position in global markets.
There are numerous features underlining this assessment: measures to offset the high risk associated with certain projects, orientation on strict cost-competitive performance, and focus on technologies that are most likely to achieve the goal of being commercially viable.
Still, the evaluation of innovation processes shows that a simple equation, saying that a focus on the immediate transition of RTD findings into marketable products leads to leadership on the markets, is short-sighted. Other components which shape the overall framework of the innovation process - such as the relationship of public and private partners in general as well as in a specific environment, transfer mechanisms for disseminating results, the quality of RTD etc. - also enhance the potential for developing marketable products and services.
To shift the orientation of priorities in the EC RTD portfolio toward the transition into products and services would, due to the specific constellation of Europe as a community of 25 countries, require an intensive consultation process with the Member States. As long as the EC keeps, by and large, its research open to all promising EU-wide technology options, acceptance of EU RTD strategy will be high. A closer connection of RTD with commercialisation not only runs up against property rights, but also against national interests in supporting domestic industries. The EC's challenge is to encourage RTD which leads to commercialisation without causing distortion of competition.
The current EC RTD orientation has certain advantages that a strictly short-term focus is unable to offer. Keeping technology options open as long as possible, and not cutting technology paths when they fail to show the cost-competitive success expected, can lead to technology frontline competence and industrial leadership in the medium and long term. An example is the wind sector where, in the 1980s, the US had RTD leadership but did not show continuity and reduced its efforts as objectives were not met. Today, the US is playing catch-up with Europe in this field.
Nevertheless, in terms of a more pronounced product and service orientation for research, there are some features in the US and Japanese approaches that are worth considering and, if found compatible, should be integrated into the European scheme:
* There has to be a stringent link between energy, climate and competition objectives and related RTD that is appropriate to achieve these goals on time.
* On the way to marketability, precise milestones need to be defined in terms of time frames, cost reductions and technical performance.
* This means constant monitoring and evaluation, and making the relevant adjustment decisions.
Page 95
Achieving stakeholder integration in the NNE RTD area is a key challenge for the EC and has been stated as one of the key goals of the European Research Area.
[ GRAPHICS ARE NOT INCLUDED ]
The stronger focus on short to medium term RTD, as well as the higher product and service orientation in Japan and the US, implies both a limitation and a reduced intensity of stakeholder integration. On the one hand, this usually leads to efficient and targeted project realisation. On the other hand, this "technology push" approach carries the risk of developments which do not reflect societal needs or, in the long run, do not win a high degree of acceptance.
The EU approach emphasises stakeholder diversity. Provision for a multiplicity of stakeholders from different SB countries, with different cultural and professional backgrounds, reflects the EU policy of taking into account the, various requirements of Europe's regions in developing sustainable energy systems. As a result, the procedure of priority setting as well as roject management is more complex and coordination efforts are intense. Several measures, such as the European Technology Platforms and roadmaps, have been initiated in Europe to define RTD requirements better, to set priorities and to encourage a greater commitment of the stakeholders involved. Through the integration of these different stakeholders and their respective competences, these measures will help identify RTD demand precisely, enhance the focus of EU and Member State research and send signals to the private and public research community about European RTD priorities.
One of the key challenges for the EC in terms of stakeholder integration is promoting, facilitating and encouraging greater commitment by the new Member States (MS).
Recommendations on the strategy to ensure competitiveness in research and to bring new Member States to the level of the developed European nations could include the following:
Assessment of the strengths and weaknesses of the new Member States, not only from the point of view of the technologies but also in terms of socio-economic factors. This would give a fair indication of exploitable strengths and restraints on further development of research. The most active countries in Europe have set priorities for their energy future reflecting their natural potential, knowledge base (research and industry) and the competitiveness of their industrial structures. Priority setting and the definition of a clear energy policy at new Member State level is important, and EC RTD could contribute to this approach, helping the new MS in their research strategy prioritisation exercises.
Bringing the research together will be a key milestone in the process of integrating MS RTD activities. Industry associations, government ministries and central/state research institutions should come together and define research priorities, and assess the budgets available and required. This process is under way with the ERA-NET scheme where energy RTD portfolios in specific technology areas are being analysed: but the tasks should be widened to permit comprehensive research into how to implement the new technologies - for instance in environments where, due to formally centralised economic planning, energy production was almost exclusively devoted to the industrial sector and energy supply, despite being cheap, was highly inefficient.
Once the priorities for research have been set, the EC will be able to play a major role in facilitating the development of research by bringing in other Western European partners and funding.
Throughout this process, the EC will be able to exchange experience and facilitate the task by sharing Western countries' best practices on internal evaluation procedures and the management of research.
----------------------------
[137] - Japan's Approach to Commercialization of Fuel Cell / Hydrogen Technology, METI
[138] - DoE's Multi-Year Research, Development, and Demonstration Plan
