Thepresent report aims at estimating the current research and development(R&D) investments in selected low-carbon energytechnologies in the EU-27 funded by the Member States, through the 6thEU Research and Euratom Framework Programmes and by companies with headquartersregistered in the EU. Its ultimate objective is to offer a benchmark of thecurrent R&D spending on those technologies to serve as a basis for thecomparison with theirfuture research investment needs.
Thereport has been prepared by the Institute for Prospective Technological Studies(IPTS) of the European Commission's Joint Research Centre (JRC) as a centralreference input to the Communication on Financing Low Carbon Technologies. TheCommunication is part of the implementation of the Strategic Energy Technology Plan (SET-Plan)for Europe and will address the financing needs of selected low-carbontechnologies in Europe.
This1 report forms part of the regular mapping of energy research capacities that isbeing undertaken within SETIS (SET-Plan Information System). It benefitedsubstantially from the review organised within the European Commission's JointResearch Centre in the context of SETIS and from comments provided by expertsfrom the European Commission's Directorate Generals for Energy and Transport(TREN) and for Research (RTD), who initiated this work. Furthermore, numerousexternal experts provided valuable inputs at various stages of this report. A consultationprocess with Member States in the frame of the SET-Plan Steering Group largelycontributed to the analysis of public R&D investments, while information suppliedby companies and industry associations was important for assessing corporateR&D efforts.
Thetechnologies considered in the present analysis include those for which theSET-Plan proposed to launch European IndustrialInitiatives and those for which a dedicated European programme already existed:wind energy,photovoltaics (PV) and concentrating solar power (CSP), carbon dioxide captureand storage (CCS), biofuels, hydrogen and fuel cells, smart grids, nuclear fission (with a focus on generation IV reactors), and nuclearfusion. Forsimplification, this group of technologies will be called 'SET-Plan prioritytechnologies' in the following, often grouped into nuclear and non-nucleartechnologies.
For corporate and Member States' nationalpublic R&D spending the focus of the analysis lies on figures from the year2007 while the relevant EU R&D investments are annualised figures under FP6(2002-2006). Withregard to public national R&D funding, basic data were taken from the Eurostatdatabase on Government Budget Appropriations or Outlays on R&D (GBAORD) andin particular the International Energy Agency's (IEA) statistics on Research,Development and Demonstration (RD&D). They were complemented by nationalinformation that was directly provided by a number of Member States.Unfortunately, both the GBAORD and the IEA databases miss some entries at thelevel of technological detail needed, and only 19 of the EU Member States arecovered in the IEA RD&D statistics as the remaining Member States arenot IEA members. Data missing for 2007 were gap filled with data from previousyears if available or data taken from official national sources. Relevant EU R&Dfunding under the 6th Research Framework Programme and the EURATOMFramework Programme has been taken into account. Funds under these programmes havebeen assessed on the basis of individual projects, going beyond projectsfinanced under the 'core' energy budget line 'sustainable energy systems', andalso including relevant projects funded under budgetlines such as 'sustainable surface transport' or 'horizontal researchactivities involving small and medium sized enterprises (SMEs)' etc. An annual average of thecommitments has been used for these multiannual programmes (2002-2006).
In orderto approximate the current (2007) corporate R&D investments into SET-Planpriority technologies, a novel bottom-up approach has been applied. It is basedon a refinement of basic data on individual companies taken from the EUIndustrial R&D Investment Scoreboad and companies' annual reports with otherpublicly available data as well as direct contacts with individual enterprisesand stakeholder groups. This combination of various information sources withexpert judgment allowed to estimate the part of a company's overall R&Dinvestment that is dedicated to individual SET-Plan priority technologies.
Due toimportant gaps in the basic data and the subsequent need to approximate missinginformation in order to derive results at EU level, the results of the presentassessment are associated with uncertainties, which have been identified andquantified to the extent possibleThe estimates of industrial R&D investments of thepresent report most likely lie below the actual level of industrial researchefforts as only the largest R&D investors of every technology field were includedin the assessment. .Basic data on corporate R&D investments broken down by technology are inherentlysketchy due to the fact that companies are not systematically obliged to reportthis information and many companies consider it as confidential or use it as a strategicelement in optimising their market value (Gioria, 2007). This becomes even moreproblematic when, instead of focusing on some individual companies, anaggregated figure on corporate R&D investments by technology shall beprovided for the whole EU. With regard to publicR&D investments, sources of uncertainties in the basic data lie in thedifferences of how individual Member States include regional funding,institutional budgets and support to demonstration activities in their figures submittedto the International Energy Agency. Furthermore, the way in which the definitions of R&D and ofindividual technologies are applied may vary among different data sets. The methodology applied in this assessment can only partiallycompensate this lack of data - and causes some limited uncertainties due to necessaryapproximations where data are missing - but has allowed for the first time toestimate the order of magnitude of public and private R&D investments intothese specific technologies at the EU level. Overall, it is estimated that thecumulative error margin of total R&D investments in SET-Plan prioritytechnologies as presented here does not exceed ± 24% (even though higheruncertainties may apply to the results related to one individual technology)despite the low availability of basic data. Future work may reduce theuncertainties associated with the estimation of corporate R&D investmentsby expanding the list of companies assessed, enhancing direct contact withindustries, and making a more systematic use of indirect indicators such aspatent applications. However, significant improvements in the error margin areonly expected to be obtained by a more structured data collection, e.g. througha reporting obligation for private companies, and a more detailed methodologyof collecting data at supra-national level.
The order of magnitude of the results obtained in thepresent report is supported by a comparison with other sources both at the aggregatedlevel and at the level of individual technologies and funders. It can thus beconsidered as a reasonable approximation of the present R&D investments.Hence, the present analysis allows to draw some policy-relevant conclusions:
- Investments dedicated to R&D in non-nuclear SET-Plan priority technologies amounted to €2.38 billion in 20072007 figures are provided for corporate and Member States' nationalpublic R&D spending while the relevant EU R&D investments areannualised figures under FP6 (2002-2006). with a division that is roughly balanced across individual technologies
Investments in non-nuclear energy R&D in SET-Plan priority technologies are estimated at €2.38 billion. The R&D investments dedicated to CCS, smart grids, biofuels, wind energy and photovoltaics are in-between €270 million and €380 million each, making abstraction of the respective uncertainty margins.
The substantially larger investments for hydrogen and fuel cells research (€616 million) may be explained by the diversity of technologies that are subsumed under this heading, thus attracting R&D investments from many large and small companies from a broad variety of sectors (e.g. car manufacturers, electric utilities, chemical companies and component suppliers). At the same time, few countries and companies are active in research on concentrating solar power technologies (CSP), explaining the comparatively low R&D investments in this field (€86 million).
- Industry finances large parts of the R&D of non-nuclear SET-Plan priority technologies
Corporate R&D investments in non-nuclear SET-Plan priority technologies reached €1.66 billion in 2007, thus accounting for 69% of the total investments.The share of corporate R&D investments drops to 56% ofthe total if nuclear SET-Plan priority technologies are also included, seeFigure 1. This highlights the active role of EU-based companies in those technologies and the acknowledgment of the need for further research in order to strengthen the position of the EU in these promising technologies. However, the R&D intensities found for some of the sectors relevant for the SET-Plan (in-between 2.2% and 4.5%) remain well below the intensities in other industrial sectors that experienced a boom in recent years; for example, the IT-related sectors 'software', 'computer hardware' or 'semi-conductors' experienced R&D intensities in the order of 8% to 18% over the past five yearsNote, however, that R&D intensities cannot directly becompared between different sectors due to the considerable differences in theirinnovation systems (see e.g. Malerba, 2004; Kaloudis and Pedersen, 2008, on theenergy sector). , Figures relate to EU-based companies and are taken fromvarious versions of the EU Industrial R&D Investment Scoreboards (HernandezGuevara et al., 2008). .
The share of corporate R&D investments is elevated for the more mature technologies wind energy and biofuelsIt is also elevated for CCS. This may, however, be due to anunder-estimation of the public R&D efforts. . In comparison, the share of corporate R&D investments is lower for PV, hydrogen and fuel cells and CSP, as well as for generation IV nuclear reactors and nuclear fusion. These may be considered as less mature, in particular if we assume that research in PV concentrates on new technologies instead on the more mature crystalline silicon cells. Note, however, that the results describing the distribution of R&D spending by investor must be interpreted with care due to the differences in the nature between corporate and public R&D spending.
The assessment indicates that innovation in the energy sector may not predominantly being carried out by classical energy companies such as electric utilities or oil/gas suppliers, which invest only a very small percentage of their revenues in R&D. Industries with elevated research activities in low-carbon energy technologies include companies active in industrial machinery, chemicals, energy components or those that operate exclusively in one area (such as a specialised wind energy company).
- Public R&D spending on non-nuclear SET-Plan priority technologies is increasing despite a decline in the overall energy research budgets, but synergies across Member States have not yet been fully exploited
Despite an overall decrease in energy research budgets over the past two decades (largely due to shrinking nuclear R&D budgets) with a slight upward trend in more recent years, investments in non-nuclear SET-Plan priority technologies have been more or less stable throughout the 1990s with an important increase since the beginning of the new century. In 2007, Member States invested €571 million in R&D related to the non-nuclear SET-Plan priority technologies, which is equivalent to 34.5% of their total public non-nuclear energy R&D budgets, and indicates the importance given to these technologies. On top of the national funding, EU investments under FP6 added another €157 million for the public research on those technologies.
One may be led to compare these R&D investments of €728 million with a similar selection of public funds in other world regions. This would put the EU ahead of the US American and Japanese 'non-nuclear SET-Plan R&D spending', in spite of both regions having slightly higher overall energy R&D budgets.
Such comparison, however, may be misleading as it hides important differences in the way energy R&D is being financed and carried out across the different regions. Unlike the strong focus and coordination provided for energy (research) in the US by the Department of Energy (DoE) and in Japan through the Ministry for Economy, Trade and Industry (METI), no unified European programme currently exists for fostering low-carbon technologies with the exception of fusion related research. Instead, pan-European cooperation is limited and synergies between Member States in the development of new energy technologies have so far not been fully exploited, although recent initiatives such as the SET-Plan or the ERA-NET scheme have started to address this problem. Furthermore, R&D activities within Member States are often also fragmented, often due to the complexity created by the involvement of several ministries and agencies in the management of different parts of national programmes. This fragmentation would tend to distort any benchmarking of the US and Japanese funds with the aggregated R&D investment of EU Member States and the EU.
- On top of the €2.38 billion invested in non-nuclear SET-Plan priority technologies, €0.94 billion are dedicated to nuclear SET-Plan priority technologies, with fusion research receiving high public support due to the capital investment needs of the ITER construction
Investments dedicated to R&D in nuclear SET-Plan priority technologies (excluding treatment of nuclear waste, radioprotection etc.) are estimated at €939 million, with an almost equal split between reactor-related fission research and fusion research. Nuclear-fission related research in the context of the SET-Plan focuses on R&D investments for Generation IV reactors. As data on nuclear R&D budgets are not available in the necessary detail, they were approximated by all nuclear reactor related R&D investments, which implies the risk of overestimating the Generation IV reactor R&D investments. Total nuclear reactor R&D investments sum to €458 million, almost half of which is financed by the private sector (45%). France accounts for more than half (52%) of the aggregated EU Member States' public nuclear reactor R&D spending and French companies hold an even higher share in the industrial nuclear reactor related R&D investments. The total investment dedicated to fusion research is around €480 million but there is hardly any private sector R&D investment due to the long time horizon of this research area and the high capital investment needed for the construction phase of the International Thermonuclear Experimental Reactor (ITER). The Member States account for 58% of all R&D investment in fusion, while the EU share is 42%.
- Corporate and public R&D investments in SET-Plan priority technologies largely concentrate in only few Member States
Both public and private R&D investments in (nuclear and non-nuclear) SET-Plan priority technologies are largely concentrated (see Figure 1). For many technologies, the countries with high public R&D funds simultaneously account for the largest corporate R&D investments. The estimates of the present report indicate that 99% of the aggregated national R&D budgets on SET-Plan priority technologies originate from eleven Member States namely France, Germany, Italy, the UK, Denmark, Spain, the Netherlands, Belgium, Sweden, Finland and Austria with the first three accounting for two thirds. At the same time, R&D investments in SET-Plan priority technologies from companies located in Germany, France, the UK, Denmark, Spain and Sweden were found to account for almost 95% of the total corporate R&D investments. In many cases, the group of countries that give strong public support to research into a certain technology simultaneously accounts for the largest R&D investment of industry into that technology. This may be seen as an indication of a positive correlation between public research support and industrial R&D investment.
- Figure 1: Approximate R&D investment in SET-Plan prioritytechnologies (nuclear and non-nuclear) by Member State
Source: Own analysis, rounded numbers
Note: Figures are subjectto uncertainties in particular for industrial R&D investments.Uncertainties become more elevated when displaying corporate R&Dinvestments at Member State level given thatthe availability of data differed between countries. Furthermore, the regionalallocation of R&D investment by site of the registered companies'headquarters needs to be considered when interpreting the above figure.