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Conclusions

The present report provides an estimate ofthe current corporate and public European R&D investments in thoselow-carbon technologies that are of particular interest in the context of theEuropean Strategic Energy Technology Plan1('SET-Plan priority technologies'). Its ultimate objective is to offer abenchmark of the current R&D spending of those technologies to serve as abasis for the comparison with their future R&D needs.2

For corporate and Member States' nationalpublic R&D spending themost recent available data (2007) have been used from Eurostat (GBAORD) and theInternational Energy Agency, complemented by information that was directlyobtained from various Member States. Data missing for 2007 have been gap filledwith data from previous years back to 2003 if available. For an overview of theEU funding, the 6th Research Framework Programme and the EURATOMFramework Programme were assessed. An assessment of the basis ofindividual projects has been performed, going beyond projects financed underthe 'core energy budget line' 'sustainable energy systems' and also including relevant projects funded under budget lines such as 'sustainablesurface transport' or 'Horizontal research activities involving SMEs' etc. An annual average of thecommitments has been used for these multiannual programmes (2002-2006). Inorder to assess corporate R&D investments into SET-Plan prioritytechnologies, a new methodology has been applied on company level as existing data aresketchy. It is based on a refinement of data on individual companies taken fromthe EU Industrial R&D Investment Scoreboad and companies' annual reportswith other publicly available information as well as direct contacts withindividual enterprises and stakeholder groups. This combination of various informationsources with expert judgment allowed to estimate the part of a company'soverall R&D investment that is dedicated to individual SET-Plan prioritytechnologies. 

This methodology allows to estimate the order of magnitude of public and privateR&D investments into specific technologies at EU level, even though thecompensation of missing data by approximations causes some uncertainties. Thismeans that despiteimportant gaps in the basic data, the cumulative errormargin of total R&D investments in SET-Plan priority technologies aspresented here does not exceed ± 24%, even though higher uncertainties mayapply to the results related to one individual technology. The order ofmagnitude of theresults obtained in the present report is also supported by a comparison withother sources both on the overall level and at the level of individualtechnologies and funders.

The present analysis can thus beconsidered as a reasonable approximation of current R&D investments andallows to draw the following substantiated conclusions. Due to the differentnature of nuclear and non-nuclear energy research, the respective conclusionsare being kept apart with points (1) to (3) relating tonon-nuclear R&D, (4) on nuclear and (5) and (6) on nuclear and non-nuclear research.

(1)          R&D investments in non-nuclear SET-Plan priority technologiesamounted to €2.38 billion in 20073in the EU. The fact thatlarge parts of non-nuclear energy research are dedicated to these selectedlow-carbon technologies indicates that they are seen as a strategic researchfield by both public and industrial R&D investors.

National public non-nuclear energy R&Dbudgets in EU Member States amounted to more than €1.6 billion in 2007, out ofwhich €571 million were dedicated to non-nuclear SET-Plan prioritytechnologies. The increase of R&D investments in non-nuclear SET-Planpriority technologies since the late 1990s meant that their share in the totalnon-nuclear energy R&D spending rose from around 20% in 1999 to 34.5% in2007, indicating the rising importance being given to those technologies.

Under the 6th Research Framework Programme,the EU spent around €157 million on non-nuclear SET-Plan priority technologieson an annual average. No detailed figures could be obtained on the level ofdetail needed from FP7 (2007-13). However, taking into account that the averageannual non-nuclear energy R&D budget has increased substantially comparedto FP6, one may assume that also budgets directed to (some) non-nuclear SET-Planpriority technologies are above those of FP6. 

Almost 39% of the European public non-nuclearenergy research budget (including Member States and the EUFP6 contribution) are dedicated to the non-nuclear SET-Plan prioritytechnologies considered in the present report. This figure would increase tomore than 50% if instead of including only R&D on wind, PV, biofuels andCSP, all renewable energy-related research was included.

Both in absolute and in relative terms thisputs the EU in front of the US and Japanese public R&D funds dedicatedtowards a similar set of 'non-nuclear SET-Plan priority technologies', despiteboth countries having slightly larger total energy-related R&D budgets (yetincluding nuclear). However, such comparison is misleading as it disregards thefact that the US and Japanese energy programmes are strongly focussed, whilesynergies between EU Member States currently remain under-exploited due tolimited alignment of national programmes and the slow uptake of jointactivities.

The significant corporate R&Dinvestments in non-nuclear SET-Plan priority technologies indicate that thesetechnologies are also being considered as important by industry. CorporateR&D investments exceeded €1.65 billion in 2007, implying an importantincrease from 2006 in the order of magnitude of some 15%.

No data are available that would allow foran assessment of the share of corporate R&D investments dedicated tonon-nuclear SET-Plan priority technologies within the overall energy-relatedR&D investments of industry. However, a very rough comparison with otherstudies indicates that research investments for SET-Plan priority technologiesplay an important role in total corporate energy R&D investments. The(rising) importance given to R&D into SET-Plan priority technologies byboth the corporate and the private sector would also be supported by the increasingnumber of patent applications in renewable energy technologies (Johnstone etal., 2008).

Even so, the R&D intensities in thosesectors for which a turnover could be obtained remain low compared to otheremerging sectors.4 For the wind, PV and biofuel sectors, the R&D intensitiesderived from the present report are in the order of 2.2-4.5%. Even though theyare well above the R&D intensities of traditional energy companies (seebelow conclusion 3), they fall largely behind the R&D intensities of othersectors that experienced a boom in recent years, such as the IT-related sectors'software', 'computer hardware' or 'semi-conductors' with R&D intensitiesin the order of 8% to 18% over the past five years5.

(2)        Aggregated public and corporate R&D investments are in a similarrange for most non-nuclear SET-Plan priority energy technologies. Exceptionsare R&D funds dedicated to hydrogen and fuel cells and those for concentratingsolar power.

European R&D investments dedicated toCCS, smart grids, biofuels, wind energy and photovoltaics are in-between €270million and €380 million each, making abstraction of the respective uncertaintymargins (see Table 7). Substantially larger R&D investments were found onlyfor hydrogen and fuel cells research. This may be explained by the fact thatthis field comprises a broad diversity of different technologies from variousways of hydrogen production to manifold areas of applications for fuel cells,and is thus of interest to a large number of large and small companies withdifferent backgrounds (e.g. car manufacturers; electric utilities; chemicalcompanies and component suppliers). On the other hand, R&D investments inConcentrating Solar Power are considerably below investments in other SET-Planpriority technologies due to the fact that this technology is of interest to alimited number of EU countries and companies only.

 

 

Corporate R&D investment

2007

(€ million)

Public EU

(FP6 respectively

EURATOM; avg per year) in € million

Public R&D spending of EU Member States in 2007

(€ million)

(Out of which demonstration in MS national budgets)

Total

Non-nuclear SET-P priority technologies

Hydrogen and fuel cells

375

70

171

(24)

616

Wind

292

11

81

(24)

383

PV

221

27

136

(15)

384

CCS

240

17

39

(0)

296

Biofuels

269

13

65

(19)

347

Smart Grids

212

14

47

(5)

273

CSP

48

5

33

(1)

86

SUM (non-nuclear LC techs)

1656

157

571

(88)

2385

Distribution by investor

69%

7%

24%

 

100%

Nuclear SET-P priority technologies

Nuclear Fission reactor (mainly reactor related research, thus without safety, waste, environment)

205

4

248

(0)

458

Nuclear Fusion

0

204

278

 

482

Total SET-Plan priority energy technologies

1862

366

1097

(88)

3325

Other relevant energy technology groups (including some of the above)

Fossil Fuels

n.a.

n.a

240

(5)

 

All Renewable Energies

n.a.

94

557

(142)

 

Bioenergy

n.a.

31

245

(94)

 

Total Nuclear Fission

550

115

587

(1)

1252

Table 7: Summary of results

Source: Own analysis, rounded numbers

The uncertainties resulting from themethodology applied in this report do not allow a precise ranking of R&Dinvestments by technology as uncertainties may reach the same order ofmagnitude as the actual differences between the R&D investments found forthose technologies. In particular, uncertainties for corporate R&Dinvestments are larger for those technological fields that attract largecompanies which are simultaneously active in research on various technologies.This is the case e.g. for hydrogen and CCS, while many of the companies activein e.g. wind energy research primarily work in this area. In the latter caseuncertainties are reduced as no assumptions would need to be made on howR&D investments are distributed across different technologies. At the sametime, public R&D budgets may be underestimated for novel technologies suchas CCS, biofuels or smart grids, thus creating an additional uncertainty.

(3)          Corporate R&D investments account for an important share inoverall R&D spending for almost all non-nuclear SET-Plan priority energytechnologies. Component suppliers, machinery industry and specialised (alternative)energy companies play an important role for innovation in the energy sector.

Corporate R&D investments account for almost70% of the total R&D spending in non-nuclear low carbon technologies. Thishints at the active role of EU-based companies in these technologies and theacknowledgment of the importance of R&D for maintaining a strong profile inthose promising technologies.

The assessment indicates that innovation inthe energy sector may not predominantly being carried out by classical energy companiessuch as electric utilities or oil/gas suppliers. Industries with elevatedresearch activities in low-carbon energy technologies include companies activein industrial machinery, chemicals, energy components or those that areexclusively active in one area. This finding is also confirmed by the R&Dintensities (2.2%-4.5%) found for a number of SET-Plan priority sectors, whichare well above those of companies active in the electricity sector (0.6%) andoil and gas producers (0.3%). Their order of magnitude rather compares to theR&D intensities of producers of electrical components and equipment (3.4%)and industrial machinery (2.6%). This indicates that important parts of theenergy research are being carried out by companies other than traditionalenergy companies (and that companies may consider the SET-Plan prioritytechnologies as important research areas).

This result is supported by previousassessments (e.g. Jacquier-Roux and Bourgeois, 20026). It is in linewith the hypothesis that classical energy companies show a limited R&Dintensity due to the fact that they produce a homogenous good (electricity;fuels) with price competition being the main competition success criterion; theenergy sector could thus be described as a 'supplier-dominated sector'following the classification of Pavitt (1984).

(4)         Substantial investments are also dedicated to R&D in nuclear SET-Planpriority technologies (approx. €0.9 billion). Fusion R&D receives highpublic budgets due to the capital investment needs of the on-going ITERconstruction.

Even though all nuclear electricityproduction is considered low carbon, the focus of the nuclear-fission relatedresearch in the SET-Plan lies on generation IV reactors. Unfortunately, noestimation of the R&D investments for generation IV reactors could be madewithin the present report. Nonetheless, in order to narrow down the nuclearfission related nuclear R&D investments, research efforts on nuclearreactor technologies have been used as a proxy, even though this approachoverestimates the generation IV-related parts of the R&D spending. Nuclearreactor related R&D investments total around €460 million, almost half ofwhich is being financed by industry (45%). Both private and public R&Defforts are largely concentrated in France. Public sector financingtends to concentrate on commercially riskier, longer-term and pre-competitiveR&D, e.g. that currently being undertaken on generation IV reactor systems.

Fusion-related energy research constitutesan exception in a threefold way. Firstly, it is implemented through a singleEuropean Programme, which explains the high contribution of EU EURATOM funds.Secondly, there is currently hardly any industry investing in fusion given thelong time horizon of this research area. Thirdly, the forthcoming constructionphase of ITER is associated with high capital investments on a large scaleresearch infrastructure that will be used by the global fusion researchcommunity for a long period of time. These factors explain the R&Dinvestments in nuclear fusion of around €482 million in 2007 and the furtherincrease of the budgets for the next years, all of which are publicly financed.In FP7, the Euratom contribution has risen to €1947 million over 5 years.

(5)         Both public and corporate R&D investments in SET-Plan prioritytechnologies are largely concentrated in a limited number of EU Member States.For many technologies, the countries with high public R&D fundssimultaneously account for the largest corporate R&D investments.

The assessment of the present reportindicates that more than 99% of the aggregated national (nuclear andnon-nuclear) R&D budgets directed towards SET-Plan priority technologiesoriginate from eleven Member States: France, Germany, the UK, Denmark, Italy,Spain, Sweden, Belgium, the Netherlands, Finland and Austria with the firstthree accounting for almost 70% of the total. At the same time, the R&Dinvestments from companies located in Germany,France, the UK, Denmark,Spain and Sweden were found to make up almost95% of the total corporate investments.

(6)         Public and industrial research investments seem to complement oneanother.

In many cases, the group of countries that givestrong support to research into a certain technology from public fundssimultaneously shows the largest R&D investment of industry into thattechnology. This may be seen as an indication of a positive correlation betweenpublic research support and industrial R&D investments. Such a hypothesiswould be supported by Jaumotte and Pain (2005), who found that an increase ofnon-business R&D had a positive effect on both private sector R&D andpatenting.

Such a relation, is however notstraight-forward. Without being exhaustive, Member States may decide to supportresearch to those technologies for which a domestic industry exists. At thesame time, technologies that are considered strategic within a national energystrategy would be supported both through push (R&D) and pull (deployment)instruments, which may trigger the creation of a domestic industry for thattechnology. In this context, Johnstone et al. (2008) demonstrate on the basisof patent applications for renewable energies that both R&D policies andmarket introduction policies have a significant impact on the innovationactivity in a country.

According to the classical innovationtheory, technologies that are close-to-market and thus require expensive pilot plantsand up-scaling would face larger industrial contribution, while technologiesthat are further from market are mainly publicly financed as industry would notwant to take the risk. At the same time, the share of support that targetsdemonstration activities within public budgets would be elevated for moremature technologies.

This theory can partially be supported bythe assessment of the present report, even if the scope of the report includesdemonstration only to a very limited part (see chapter "Methodology"). Besides, data gapsprevent a clear proof. Nevertheless, it can be observed that the share ofcorporate R&D investments is elevated for rather mature technologies likewind energy and biofuels7. Also thepublicly funded demonstration activities are comparably large for wind andbiofuels. At the same time, PV, generation IV reactors and CSP experiencerelatively less industrial support (and a lower part of the public R&Dfunds is dedicated to demonstration). Following the above hypothesis, this maybe explained by the fact that the latter three technologies can be consideredas less mature if one assumed that research in PV largely focuses on newtechnologies rather than dealing with the more mature crystalline siliconcells. On the extreme end, all fusion related research is publicly funded.Hydrogen and fuel cell research somehow constitute a hybrid due to the factthat this category comprises a wide variety of technologies both on the fuelproduction as well as on the (mobile and stationary) consumption side, with theindividual technologies having reached different levels of maturity.

However, the above finding must beinterpreted with care. The direct comparison between public and corporateR&D investments faces some uncertainties that result from likelydifferences in the definitions of R&D between these actors (see also chapter "Methodology" for a definition of the scope of R,D&D covered). The publicly(co-) funded research budgets assessed in the present report probably tend tofocus on basic research and pre-competitive industrial research, while industrywould be inclined to finance more applied research, including pilotprojects.  

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1 Technologies included are: hydrogen and fuel cells; wind energy; photovoltaics; concentrating solar power; carbon capture and storage; biofuels; smart grids; nuclear fission (Gen IV reactors); nuclear fusion.

2 See chapter "Methodology" for a definition of the boundaries of R&D. The underlying data also include some support to some demonstration activities (in particular the public national budgets), but the focus of the assessment lies on the R&D investments.

3 2007 figures are provided for corporate and Member States' national public R&D spending while the relevant EU R&D investments are annualised figures under FP6

4 Note that from a methodological point of view R&D intensities cannot directly be compared between different sectors due to the considerable differences in their innovation systems (see e.g. Malerba, 2004, on sectoral systems of innovation; Kaloudis and Pedersen, 2008, on the energy sector).

5 Figures relate to EU-based companies and are taken from various versions of the EU Industrial R&D Investment Scoreboards (Hernandez Guevara et al., 2008).

6 See also Kaloudis and Pedersen (2008) who state that "Very schematically, we could claim that the sector is polarised between large, non-R&D process innovating incumbents on the one hand, and on the other hand small new entries, often R&D-based and specialised on one type of renewable energy technology."

7 It is also elevated for CCS. This may, however, be due to an under-estimation of the public R&D efforts.