Explanatory Memorandum to COM(2007)571 - Fuel Cells and Hydrogen Joint Undertaking - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2007)571 - Fuel Cells and Hydrogen Joint Undertaking. |
|---|---|
| source | COM(2007)571  |
| date | 09-10-2007 |
· Grounds for and objectives of the proposal
Joint Technology Initiatives (JTIs) are introduced in the Seventh Framework Programme (FP7) i as a way of creating public-private partnerships in research at European level. JTIs are an expression of the EU's strong commitment to coordinating research efforts, strengthening the European Research Area and reaching Europe's competitiveness goals.
JTIs arise mainly from the work of European Technology Platforms (ETPs). In a small number of cases, ETPs have achieved such an ambitious scale and scope that they will require the mobilisation of high public and private investments as well as substantial research resources to implement important elements of their Strategic Research Agendas. JTIs are proposed as an effective means of meeting the needs of these ETPs.
The 'Co-operation' Specific Programme i identifies fuel cells and hydrogen as one of six areas where a JTI could be particularly relevant, alongside aeronautics and air transport, innovative medicines, embedded computing systems, nanoelectronics and global monitoring for environment and security (GMES).
The Fuel Cells and Hydrogen Joint Undertaking resulting from the Technology Platform on Hydrogen and Fuel Cells contributes to the implementation of the Environmental Technologies Action Plan (ETAP) as foreseen in the Communication COM(2004) 38 which included this Technology Platform within priority actions of the ETAP.
Fuel cells are very quiet, highly efficient, energy converters capable of delivering substantial cumulative greenhouse gases (GHG) and pollutant reductions. They offer flexibility to the energy mix as they can be operated on hydrogen and other fuels such as natural gas, ethanol and methanol. Fuel cells using hydrogen are intrinsically clean energy converters because the only exhaust product is steam, while other types using natural gas and other fossil fuels also reduce emissions because they use less fuel owing to their higher efficiency. The introduction of hydrogen as a flexible energy carrier can contribute positively to energy security and stabilise energy prices as it can be produced from any primary energy source, and as such can introduce diversity into the transport mix, which is currently 98% dependent on oil. It can be used in fuel cells or it can be burned either to provide heat or to drive turbines or internal combustion engines for motive and electrical power. Hydrogen can also be used as a means of storing energy. For instance, when renewable electricity production is higher than demand, the excess energy could be used to produce hydrogen by electrolysis, thereby facilitating the integration of renewable electricity into the energy market.
Although significant EU public funds have already been directed to research into fuel cells and hydrogen, and they are already included in the FP7 energy and transport research portfolio as an important component of research, technological development and demonstration (RTD&D) strategy, the technologies are unlikely to be commercially available as quickly as is desirable. There is a danger of fuel cell and hydrogen industrial development stagnating and falling further behind global competitors. Contributing factors include:
· the research needed is often so complex that no single fuel cell company or public research institution can perform it alone;
· the absence of an agreed long-term budget plan and strategic technical and market objectives to encourage industry and the research community to commit more of their own resources;
· the sub-optimal application of funds leaving gaps and overlaps in a fragmented research coverage;
· an insufficient volume of funds for an integrated programme from fundamental research through to large-scale EU-level demonstrations;
· the European fuel cell sector is dispersed across different countries and activity areas (academia, new industrial companies, high-tech SMEs) which restricts the exchange and pooling of knowledge and experience;
· and technical breakthroughs are needed to improve performance, materials, reliability and durability and reduce system costs to meet the expectations of potential customers.
Without a focused and coherent industrial RTD&D programme that is able to draw on public and private sources of RTD&D investment at European level, efforts addressing the research bottlenecks and the search for technological breakthroughs will continue in a scattered and unstructured manner. A public-private Joint Technology Initiative implemented through a Joint Undertaking based on Article 171 of the Treaty establishing the European Community, would allow large companies and SMEs throughout the EU including the new Member States to collaborate between themselves and with other stakeholders towards the following shared objectives:
· to enable the market breakthrough of fuel cell and hydrogen technologies, enabling commercial market forces to drive the substantial public benefits;
· to place Europe at the forefront of fuel cell and hydrogen technologies worldwide;
· to reach the critical mass of research effort to give confidence to industry, public and private investors, decision-makers and other stakeholders to embark on a long-term programme;
· to leverage further industrial, national and regional RTD&D investment;
· to build the European Research Area through close cooperation with research carried out at national and regional levels - whilst respecting subsidiarity;
· to integrate research, development and demonstration, and focus on achieving long-term sustainability and industrial competitive targets for cost, performance and durability and overcome critical technology bottlenecks;
· to stimulate innovation and the emergence of new value chains including SMEs;
· to facilitate the interaction between industry, universities and research centres on basic research;
· to encourage the participation of the new Member States and candidate countries;
· to perform broadly-conceived socio-techno-economic research to assess and monitor technological progress and non-technical barriers to market entry;
· to perform research to support the development of new, and review existing regulations and standards to eliminate artificial barriers to market entry and support interchangeability, inter-operability, cross-border hydrogen trading, and export markets whilst ensuring safe operation and not inhibiting innovation;
· to provide reliable information to the general public on hydrogen safety, and the benefits from the new technologies to the environment, security of supply, energy costs, and employment.
· General context
Energy is fundamental to modern society and to sustainable development. Any energy shortage or insecurity would have serious implications for individuals, communities and business, both immediately and in their planning for the future. Recent disruptions and future uncertainties in the supply of oil and gas and the resulting price volatility dampen economic growth and raise inflation and unemployment and depress the value of financial and other assets. Oil and gas resources are depleting and, in the view of some experts, peak production will soon be reached i; what is certain is that the remaining resources are increasingly concentrated in a few countries to which political access is constrained, and security of supply will be an important problem for most industrialized countries and especially the EU. In the context of competitive and gradually integrating global transport and energy markets, energy demand is growing rapidly in large emerging countries. Globally, we face the major issue of climate change with levels of greenhouse gases rising. There are many uncertainties, but leading scientific opinion is agreed that large reductions in greenhouse gas emissions are needed immediately and must be sustained over a long time i.
The present structure of the fuel cell and hydrogen industries in Europe is unsatisfactory and leads to concerns as to its ability to adapt to change. Although the EU has some world-class research facilities and for instance leads the world in fuel cells for large submarines and fuel cell membranes, the industry is in general immature and large-scale manufacturing processes and infrastructure deployment for refuelling and support services such as trained personnel are not yet available. The fuel cell industry worldwide is characterised by very large corporate companies and very small, highly innovative SMEs. Europe has many of the latter, and it is crucial that their innovation potential is realised as these companies can form the future backbone of an EU component supply chain.
The fuel cell and hydrogen industries are strongly inter-related, but not wholly inter-dependent. The nature and degree of competition in the two industries is highly complex. The use of bulk hydrogen in process industries is long-standing and well-established and industrial enterprises see the prospect of new markets in energy and transport opening up through the wider adoption of fuel cell technologies on the one hand and hydrogen combustion engines on the other. At the same time, fuel cell manufacturers, who are very much at the start-up stage, are not wholly reliant on hydrogen because some fuel cells can use alternative fuels including natural gas, methanol and ethanol.
Market entrants employing fuel cell and hydrogen technologies face barriers to entry erected by stakeholders with large economic interests locked into industries and physical infrastructures under threat from a change to the energy mix. Market entry is also made more difficult by the lack of a pricing mechanism to reward internalisation of externalities i (e.g. carbon value); the long-term investment needed to change over to a new generation of products and build up infrastructure for fuel cells and hydrogen; and the difficulties of establishing common regulations, codes and standards to facilitate global market development. An integrated strategy is required to maximise the benefits of transition technologies with fuel cells using natural gas, biogas, methanol and ethanol, if possible combined with carbon capture and storage (CCS) in the pathway and exploiting strategic niche markets in a planned and optimised framework to avoid economic disruption.
The annual world turnover of the fuel cell industry in 2005 amounted to about 300 M€, with market shares of 52% for North America, 14% for Japan, 12% for Europe and 22% distributed around the rest of the world. There are relatively fewer companies in Europe compared to North America and Japan developing their own fuel cell stack and component technology – especially for road transport. Private RTD&D investment is estimated at about 700 M€ per year, of which 78% is made in North America and only 10% in Europe. European industry needs additional stimulation to invest in these technologies to become more competitive. Major competitors are pressing ahead with ambitious programmes of integrated research and development designed to bring products to market and establish de facto standards which latecomers will be obliged to follow. An EC study i estimates that the EU is 5 years behind Japan and North America on the demonstration of fuel cell vehicles. The US and Japanese programmes are strategically managed in close co-operation with the respective industries. The US DoE has developed a Hydrogen Posture Plan i - the result of extensive consultation with the main stakeholders. The Ministry of Economy, Trade and Industry (METI) in Japan provides targeted support for basic research. In addition, Japan supports an ambitious programme for demonstration of domestic combined heat and power (CHP) fuel cell systems, the development of hydrogen distribution infrastructure, and the testing of a range of hydrogen production options in their Fuel Cell Commercialisation Conference of Japan (FCCJ) i.
The US and Japanese programmes thus have well-developed processes for managing the research and technology validation, which are difficult to achieve in the current nationally-dispersed EU research environment. The Joint Undertaking would put the EU on an equal footing by establishing a single legal entity to manage all the JTI funds allocated from the public and private sectors through research, technological development and demonstration contracts to develop the key technologies for fuel cells and hydrogen.
· Existing provisions in the area of the proposal
There are no existing provisions in the area of the proposal.
· Consistency with the other policies and objectives of the Union
As one of the initiatives launched in January 2007 in the communication Energy for a Changing World - An Energy Policy for Europe i, the European Commission is currently developing a European Strategic Energy Technology Plan (SET Plan) i to guide the course of energy technology innovation over the coming decades, deliver efficient and low-carbon technologies including fuel cells and hydrogen, and arrive at a more sustainable energy system. The European Parliament adopted a Written Declaration i in May 2007 which called upon the EU Institutions to support fuel cell and hydrogen technologies for portable, stationary, and transport applications through a partnership with committed regions and cities, SMEs and civil society organisations.
The proposed Regulation is consistent with Community policies in research. It is also consistent with the renewed Lisbon strategy i and the Barcelona objectives for the EU to invest 3% of its GDP in research and development by 2010. The Seventh Framework Programme (FP7) (2007-2013) plays an important role for Europe to meet these objectives. It also reflects a consensus that Europe must re-double its efforts to improve returns from its RTD&D investments in order to equip itself as a competitive and dynamic knowledge-based economy.
The proposed initiative is part of a broad, ambitious Community strategy aimed at tackling the innovation gap which includes the proposal to establish a European Institute of Technology.
· Consultation of interested parties and use of expertise
In the preparation of its proposals for setting up Joint Technology Initiatives, the Commission took into account the views expressed by many stakeholders from the research community and industry in a broad consultation involving the Member States and the European Parliament. The Commission also consulted the European Hydrogen and Fuel Cell Technology Platform (HFP) i which produced the Strategic Research Agenda, the Deployment Strategy, and the Implementation Plan 2006, which is the main reference document and which outlines the 'Snapshot 2020' technical and market objectives for fuel cells and hydrogen technologies. The Implementation Plan sets out priorities for a comprehensive, integrated programme of RTD&D, with timelines and recommended budget allocations over seven years to accelerate commercialisation of the new technologies. The HFP Member States Mirror Group was also consulted at all stages of the process. In addition to the HFP bodies, information has been widely disseminated through the HFP web-site and newsletters, enabling all stakeholders to contribute to the debate. Stakeholders included Original Equipment Manufacturers (OEMs), fuel cell and energy equipment companies including many SMEs i, utilities, industrial gas companies, energy companies, universities and research centres.
The three-year consultation process has involved several hundred stakeholders, public internet consultation on the above-mentioned platform documents, contributions from EC research projects, and studies on the wide-ranging socio-economic and environmental impacts of hydrogen and fuel cell technologies and the economic feasibility of their deployment. The Commission also organised four major conference events (three General Assemblies and the Technical Review Days), and workshops for regions and the research community.
A Peer Review Group of four internationally-acknowledged, independent experts was engaged to help finalise the Impact Assessment i.
· Impact assessment
This proposal for a Council Regulation has been subject to a Commission Impact Assessment which compared the potential impact of a JTI with the alternatives, in particular the Business as Usual FP7 plus national and regional actions.
Its conclusions are that the Joint Technology Initiative has a number of clear advantages over the Business-as-Usual alternative:
· time to market shorter by between 2 and 5 years - the importance of being first in a new market cannot be over-emphasised, and pays off in reducing the cumulative investment, bringing forward the break-even point, and strengthening the competitive position of the early market entrants, of which many could be SMEs;
· long-term commitment and a clear-cut budget encourage confidence in public and private investors;
· additionality: the co-financing principle will leverage at least 600 M€ more than Business-as-Usual, corresponding to almost two and a half times as much private research investment;
· making correspondingly earlier gains on improving energy efficiency and security of supply and reducing greenhouse gases and pollution.
An increase in RTD&D expenditures as induced by the JTI compared to Business-as-Usual has the potential to reduce the time to reach the break-even point by 2–5 years and reduce the cumulative costs by about 20-30%. The positive effects on EU competitiveness in the short, medium and long term would, as indicated by model simulations, be accompanied by an order of magnitude of tens of billions of euros of benefits to the public good in reductions of greenhouse gases and pollution, improved security of energy supply, more sustainable transport, and higher efficiency and cleaner energy production and end-use over the period 2025 to 2050.
· Summary of the proposed action
The proposal consists of a Council Regulation on the establishment of the Fuel Cells and Hydrogen Joint Undertaking.
· Legal basis
The legal basis of the proposal is Article 171 of the Treaty establishing the European Community.
· Subsidiarity and proportionality
The subsidiarity principle applies since the proposal does not fall under the exclusive competence of the European Community.
The objectives of the proposal cannot be sufficiently achieved by the Member States because the scale of the challenge exceeds the capacity of any Member State to act alone. The pooling and coordination of research and development efforts at EU level stand a better chance of success, given the trans-national nature of the infrastructure and technologies to be developed, and also the need to achieve a sufficient mass of resources. The intervention of the European Community will help to rationalise research programmes and ensure inter-operability of the developed systems not only through common pre-normative research to support the preparation of standards but also through the de facto standardisation which will arise from the close research cooperation and the trans-national demonstration projects. This standardisation will open a wider market and promote competition. The scope of the proposal should encourage the Member States to pursue complementary initiatives at national level, in the spirit of reinforcing the European Research Area - indeed the very intention of the JTI is to leverage these national and regional programmes to make best use of the combined efforts.
In accordance with the principle of proportionality, the provisions of this regulation do not go beyond what is necessary to achieve its objectives.
· Choice of instrument
Proposed instrument: regulation.
Other means would not be adequate for the following reason:
The creation of an undertaking in which the Community participates requires a Council regulation.
4)
Contents
The 'legislative financial statement' attached to this draft regulation sets out the budgetary implications and the human and administrative resources, and provides indicative figures for the period 2007-2013.
The EC budget, totalling 470 million EUR, will come from the following FP7 'Cooperation' Specific Programme budget lines: Energy; Nanosciences, Nanotechnologies, Materials and New Production Technologies; Transport (including Aeronautics); and Environment (including Climate Change) in DG RTD and Transport in DG TREN.
The running costs of the FCH Joint Undertaking will be covered in equal parts (50/50) by the EC and the Industry Grouping (IG) from the outset. If a Research Grouping is established and applies to join the FCH Joint Undertaking, the Research Grouping shall have one seat in the Governing Board and shall then contribute 1/12 of the running costs.
The research activities shall be jointly funded by the EC, the IG and the participating universities, public research centres etc with the EC contribution paid in cash and the participants contribution paid in kind within the projects.
· Transition period
The Work Programme 2007 provides for a Coordination and Support Action as a “bridging” activity to make detailed preparations for the JTI during 2007-2008.
· Review
The EC will present an annual report on the progress achieved by the FCH Joint Undertaking. The EC will also perform a mid-term review and a final review at the termination of the JTI.
Discharge for the implementation of the budget of the FCH Joint Undertaking will be given by the European Parliament, upon recommendation of the Council, taking into account the specificities of the JTI as a public-private partnership.
· Review/revision/sunset clause
The proposal includes a review clause.
The proposal includes a sunset clause.