Energy Union video series part 1: Game-changing renewable projects await loan decisions

Plans to create an Energy Union were unveiled by the European Commission in February 2015. Its aim is to ensure Europe has secure, affordable, and climate-friendly energy.

The Energy Union provides a five-pillar framework into which future European energy policies should fit. In this five-part video series, ICIS looks at the most recent developments to have taken place under each of the five pillars. Part 1: research and innovation.

Three innovative renewable energy projects are undergoing due diligence to establish whether or not they are eligible for a loan under the InnovFin Energy Demo Projects (EDP) scheme.

The scheme, a joint venture between the European Commission and the European Investment Bank (EIB), launched in June. It is part of Horizon 2020, an EU research and innovation programme which began in 2014.

InnovFin EDP is a financial vehicle which will fund further development of pioneering renewable energy technology, something which is a target under the research and innovation pillar of the Energy Union.

Under the scheme the EIB offers loans of between €7.5m and €75m to innovative, first-of-a-kind projects in the field of renewable energy and hydrogen fuel cells.

“The current pilot project, which will run until 2020, has a total of €150m to offer. This may be expanded in the future based on the interest in and the success of the project,” a spokesman for the EIB said.

The €150m financing is ring-fenced within the European Fund for Strategic Investments (EFSI), a €315bn scheme to boost private investment in European infrastructure projects (see EDEM 25 November 2015).

As of January, 60 renewable energy developers had applied for funding under the InnovFin EDP scheme.

“Three projects are currently being appraised by our project services which includes engineers, social economists and environmental experts, to see if the projects are economically, socially, technically and environmentally viable,” the EIB spokesman said.

A hard cell?

Of particular interest is the expansion of fuel cell technology and ocean energy. Fuel cells have the potential to generate clean electricity using hydrogen and are already being used as back-up power generation in industry. They can also be used to power buildings and transportation.

Gareth Hinds, scientist at the National Physical Laboratory in London, talks about the latest developments in the fuel cell market in this video.

Ocean energy, meanwhile, could meet up to 10% of Europe’s total electricity demand by 2050, according to EU forecasts.

“Of the 60 projects to have applied for an InnovFin loan, 17 are ocean energy projects of varying types, so the technology is well represented,” Jacopo Moccia, policy director at trade association Ocean Energy Europe said.

He added that while the InnovFin EDP scheme may not necessarily boost innovation in the sector, it does offer an interesting proposition to those projects that are already more established, and are able to provide some visibility as to the potential electricity generation capacity of the technology.

“The main issue with the project in terms of further development of ocean technology is the size of the rather large loan,” Moccia said.

The minimum loan size for the project is €7.5m, and applicants are subject to rigorous due diligence. The costs of this mean it is not financially viable for the EIB to lend small amounts of capital, which in turn rules out small projects which may only require a loan of €1-2m.

But it is these small projects that could have the potential to further the development of the technology.

Drop in the ocean?

“Alternative sources of funding are of course available, but ask anybody involved in research and development and they will tell you it isn’t enough,” Moccia said.

He said ocean energy research has received a reasonable €60m in funding under another EU research funding scheme, Horizon 2020, and added there are also various financial instruments accessible for small and medium sized enterprises which some developers have applied for.

Financing at a member state level has also been forthcoming in some countries, with Wales in the UK highlighted as a particularly enthusiastic funder of ocean technology research.

“But the available funding is not really enough for an area which is expected to be able to generate around 10% of the continent’s electricity demand by 2050,” Moccia said. claire.wilson@icis.com