About

"NER300" is a financing instrument managed jointly by the European Commission, European Investment Bank and Member States, so-called because Article 10(a) 8 of the revised Emissions Trading Directive 2009/29/EC contains the provision to set aside 300 million allowances (rights to emit one tonne of carbon dioxide) in the New Entrants’ Reserve of the European Emissions Trading Scheme for subsidising installations of innovative renewable energy technology and carbon capture and storage (CCS). The allowances have been sold on the carbon market and the money raised — 2.1 bn EUR — will be made available to projects as they operate. More information is available under the tab Basics. Official information is available on the Commission website here.

NER300.com is an unofficial, independent portal dedicated to renewable energy and grid integration projects wishing to access this instrument, providing
  • News
    ...to keep you up to date with the latest developments, key dates and deadlines
  • Analysis
    ...understand the NER300 instrument and how to use it for your project
  • Access to consultancy
    ...for specific guidance for your proposal.
Jul 15 2015

ETS review public consultation – summary of NER400-related answers

Roughly 450 public responses were sent to DG CLIMA’s public Consultation on revision of the EU Emission Trading System (EU ETS) Directive. The public consultation contained three open-ended questions on NER400 (also known as ‘Innovation Fund’). NER300.com has sifted the answers. The main points are below.

Is NER400 a good idea in principle?

Something is needed. “Deploying technologies for deep decarbonisation at sufficient scale requires additional focus on practical enabling policies and a range of regulatory and incentive measures, not the continuation of a simplistic assumption that a price for carbon under the ETS can overcome multiple barriers and provide a business case for investment,” warns E3G. CEFIC agrees: “In general, positive investment signals depend on a range of policies not just the EU ETS, and therefore a coherent and coordinated approach will be indispensable to tackle the question of how the EU policy on Innovation and the regulatory framework can be improved.”

The need for these incentives might be viewed with more suspicion in the industry sector than in the power sector for historical reasons. CEPI + 2: “The NER300 program was funded from the sale of 300 million emission allowances from the New Entrants’ Reserve, designed to support new investments in industry, to support research programs focused on renewable energy and carbon capture and storage. As such, it represented a financial transfer from the European industry to the energy sector.”

The hardest line against tampering with the ETS is taken by Glass for Europe: “The innovation fund should be funded by auctioning revenues and not by the diversion or use of any sort of potentially tradable allowances.” The association (but not its members) added this line: “We consider the financing scheme and the increase in the initial endowment from 300 to 400 million allowances not appropriate.” Why the hostility? “Firstly, the availability of funds will be linked to the price of emission allowances (EUAs) and thus will be very volatile, depending on the success of the EU’s climate policy. Secondly, the need for co-financing of such projects depends on the competitive position of low-carbon energy in the market, which is mainly linked to the cost of carbon emissions,” say companies in the non-ferrous metal sector among several others. It is left to BP to put the economists’ argument: “BP’s preference for EU ETS revenues is that they should be returned to the economy in a non-distortionary manner, e.g. via corporation and income tax reductions.” CPME and Eurochambres + 1 say that while “the ETS directive states that half of auctioning revenues should be spent on decarbonisation measures, this has not been the case so far.”

But the new reality, accepted by many more today than before the Oct 2014 European Council Conclusions, is that NER400 will happen. It is accepted with a tone of heavy resignation by GSV

The steel industry does not in principle support the removal of ETS allowances from the wider market […], but if allowances are to be removed it is vital that there is fair access to innovation funding for all sectors impacted by the EU ETS.

…and cheerfully by Austrian Federal Economic Chamber – Wirtschaftskammer Österreich (WKÖ):

We explicitly welcome the creation of the innovation fund, especially the extended scope to include low-carbon innovation in industrial sectors!

The next question is how to create the NER400 fund.

Kiss goodbye to any freely allocated allowances? No way!

Shell: “[NER 400 should] not replace other existing or future support mechanisms at EU or MS level. The fund should continue to use allowances under the existing cap. The fund should also avoid any impact to the level of free allocation for those on the current carbon leakage list.” It is clear from their responses that industry will fight hard not to lose a single freely allocated allowance in the creation of NER400.

The renewable energy sector is not inclined to give the carbon-leakage-pleaders too easy a ride, though. EWEA says, “Certain industrial sectors receive large amounts of free ETS allowances, which in 2012 amounted to 14 billion EUR. Also, under the State Aid Guidelines, heavy industries can be exempted by up to 85% from their obligation to contribute to the development of renewables.” Solar Power Europe (formerly EPIA) also sticks the boot in: “For sectors benefitting from free allowances, the available funding should be deducted from the value of the free allowances to prevent double subsidisation and excessive distortion of competition.” Think-tank backing for getting tough on double handouts comes from the Regulatory Assistance Project: “The beneficiaries of free allocations [could] for instance […] be required to at least match the hypothecated innovation funding euro for euro with their own money; the obligation could be capped at the value of the free allocations they’ve received.”

Monetise phase III allowances or only allowances from phase IV?

The integrity of the ETS and its Market Stability Reserve is paramount say Eurelectric and four others from the electricity industry, adding “It is important that NER400 is fed by phase IV allowances, and that all unallocated allowances from phase III go directly to the MSR.” The CCSA, Alstom and IETA also eye up the “significant amount of funding returned to EU institutions as a result of successful NER300 applicants not taking projects through to delivery.” “This funding is readily available and would not further impact on the ETS market as allowances have already been monetised,” they and ZEP observe. ZEP and Alstom part company from the others by additionally calling on the EC to “monetise free allowances from the NER non-allocated in 2020 and free allocations allocated to plants that will close before 2020″. TVU and Shell have similar ideas. Shell would like to create an ‘allowance pool’ that could contain allowances “from within the Market Stability Reserve (MSR), the remaining [un-allocated] allowances at the end of each ETS phase or another source”. These would be monetised “in tranches properly sized to maintain the necessary supply”.

Having your cake and eating it

ZEP and Alstom also suggest, “Without being monetised, allowances from the ETS could be used as collateral at an agreed carbon price.” Bellona explains the idea as follows: “A ‘guarantee fund’ should be set up to guarantee targeted support for CCS in cases where the EUA price falls below a minimum threshold — a determined ‘strike price’ — and therefore the NER400 fails to deliver the necessary funding.” Scotland Europa and CCSA have a different name for the process: ‘backstopping’. The original promoter of the idea is the NGO Change Partnership, which did not make a contribution on the topic of NER400 to the public consultation, or if it did, it was either kept confidential or was not published.

The approach carries some risk for the carbon market. If carbon prices are high and so is demand for EUAs, the mechanism will keep prices high. If carbon prices fall and the guarantee fund must be called upon, the effect of the guarantee fund will be to drive prices lower. It would be a source of volatility. Many contributors call for a published schedule of the allowance monetisation programme (see below).

Another around of NER400 before 2022: the early start

Irrespective of the final decision on how funds may be accessed or created before the start of 2020, the need is clearly established. Ocean Energy Europe “calls on the Commission to take the necessary steps for the renewal, before 2020, of NER300 or a similar instrument that has the same focus and encompasses renewable energies.” ZEP and CCSA make the same request. CCSA estimates that the earliest start of NER400 in the absence of any specific action to start earlier is 2022 — a gap of seven years from today.

Their message has been taken up by the UK, with DECC (the UK ministry responsible for NER300) calling on the EC to consider “an early start to the application and award process for a limited number of projects that might be up and running and ready to receive operational funding as soon as the first allowances are monetised in 2021.” Scotland Europa says the fund “should be open for application in 2017 to allow its release in 2018.”

Timing of monetisation

CEPS hints at the problems caused by changing EUA prices: “With the significant volatility in EUA prices, the NER has not been able to provide a stable pool of money, especially for the larger projects, including CCS. A mechanism that would make the funds more predictable for such projects is something that should be considered.” Projekt21plus agrees: “Currently when the price for allowances is at a quite low level, the support for the innovation fund is at a quite low level as well. We prefer a future structure of the programme which is independent from the variability of prices for emission allowances and deliver a reliable basis for financing innovation projects seriously.”

Perhaps the solution lies in doing what was suggested by Catalonia: “The EIB could sell in advance a portion of credits before the call of proposals” This approach could satisfy the UK’s wish for “further clarity on how the funding will be handled, both to ensure that projects of each type are considered for and able to receive funding, and to have a greater understanding of the number of projects that could be funded in each area.” (DECC)

The electricity sector speaks as one to say, “The timing of inflow of these NER400 allowances into the market should also be made predictable for market parties,” with support from Hungary and IETA. The latter adds that the release should be “gradual and clarified well in advance”. But they are countered by voices saying the EIB could be given the freedom to be a little more canny in when it chooses to monetise EUAs. CEPS: “The EIB is currently strictly required to act as a price-taker. It could be considered to allow the EIB more freedom in determining when to monetise, so that the total amount of funds available would be maximised.” DECC: “The timescale for the auctioning of any allowances for the Innovation Fund [NER400] (as well as the Modernisation Fund) needs to be carefully considered to maximise the value of the Fund whilst minimising the impact on the wider carbon market. This may suggest a more flexible or staggered approach than was adopted in the NER300.” EFET (on a collision course with IETA): “Allowing the European Investment Bank more freedom in determining when to monetize allowances (setting temporal windows) will enable to maximise revenues and exploit the Fund as a market stabilizer.”

Mar 04 2015

More NER300 might come from 2018 and yet more from 2020

More NER300 in the period 2018-2025…

Further funding for innovative renewable energy technologies and CCS could come from 2018 under proposals from the European Parliament’s Environment, Public Health and Food Safety Committee, which last Wednesday adopted a Report (unofficial version available here) on the Emission Trading Scheme’s carbon Market Stability Reserve (MSR). The MSR is a measure that would be applied to Europe’s Emissions Trading Scheme to adjust the amount of carbon allowances that are in the market. 300 M allowances might be drawn from the MSR and ‘gradually’ made available in the period 2018-2025 for low carbon projects, according to the Committee’s amendment 18. At the current price of 7 EUR, 300 M allowances would fetch 2.1 bn EUR when monetised.

The Committee wants the scope of the future scheme to be broadened to include so-called ‘Annex 1′ installations. These are the industrial plants covered by this list.

…and even more in the period 2020-2030

EU Heads of State agreed in October 2014 to create ‘NER400′, insisting as they did so on the inclusion of ‘industrial sectors’ in its scope. The EC interpreted that mandate restrictively in its Energy Union Communication of 25 Feb 2015 compared to the position it laid out in January 2014 in the Communication A policy framework for climate and energy in the period from 2020 to 2030.

EC in January 2014

In line with the Union’s innovation and industrial policies, the concept of an expanded NER300 system will, therefore, be explored as a means of directing revenues from the ETS towards the demonstration of innovative low carbon technologies in the industry and power generation sectors.

EC in February 2015

[…]there are additional research priorities which merit a much greater level of collaboration between the Commission and those Member States who want to use these technologies:

  • A forward-looking approach to carbon capture and storage (CCS) and carbon capture and use (CCU) for the power and industrial sectors, which will be critical to reaching the 2050 climate objectives in a cost-effective way. This will require an enabling policy framework, including a reform of the Emissions Trading System and the new Innovation Fund, to increase business and investor clarity, which is needed to further develop this technology.

‘Innovative renewables’, the primary beneficiary of NER300 in its first two rounds, are not linked to ETS-related funding schemes here, nor are non-CCS or non-CCU approaches to decarbonisation in industry.

Member States do not so far share the European Parliament committee’s view that before 2020 there should be an interim scheme. It remains to be seen whether, in the closed-door Council-Parliament negotiations that will now start, the lead MEP in the negotiations, Ivo Belet, can change their minds.

Jan 09 2015

Second DG CLIMA public consultation on NER300/NER400

DG CLIMA has launched the second public consultation in a year explicitly asking about NER300. In the table below, the questions it asks are compared with the earlier consultation, which closed on 31 July 2014. The deadline for responses is 16 March 2014.

Latest consultation: Consultation on revision of the EU Emission Trading System (EU ETS) Directive
— closing 16/03/2015
Earlier consultation: Consultation on Emission Trading System (ETS) post-2020 carbon leakage provisions
— closed 31/07/2014
  • Do you see reasons to modify the existing modalities applied in the first two calls of the NER300? Are there any modalities governing the NER 300 programme which could be simplified in the design of the innovation fund? If you see the need for changes, please be specific what aspects you would like to see changed and why.
  • Do you consider that for the extended scope of supporting low-carbon innovation in industrial sectors the modalities should be the same as for CCS and innovative renewable energy technologies or is certain tailoring needed, e.g. pre-defined amounts, specific selection criteria? If possible, please provide specific examples of tailored modalities.
  • Are there any complementary aspects regarding innovation funding you would like to add to the replies given to the previous written consultation in the light of the European Council conclusions?
  • Currently the European Commission implements the NER300 programme to provide from EU ETS specific support for large-scale demonstration of Carbon Capture Storage (CCS) projects and innovative renewable energy. 300 million allowances, representing ca. 2% of total phase 3 allowances, are dedicated for this purpose. What share of the post-2020 allowance budget should be dedicated to such innovation support?
  • At the moment, EU ETS rules do not contain a specific support scheme for industrial innovation and deployment of new low-carbon technologies (apart from support for CCS and renewables under the NER300). Do you think there should be such a financial support scheme?
  • If innovative low carbon technologies in the industry are to be further supported, which could be possible sources of funding?

The reponses to the earlier consultation, which were analysed by NER300.com have now been analysed by the EC. The NER300.com article has been updated with a link to the EC’s official summary of the responses.

Nov 27 2014

Analysis of inputs to public consultation on future of NER300

***UPDATE 9 Jan 2015: The EC’s official summary of the public consultation responses is now available here. NER300.com’s comments on this summary appear at the bottom of this article.***


On July 31 2014 a public consultation closed on ‘Emission Trading System (ETS) post-2020 carbon leakage provisions’. The consultation included the question, “Currently the European Commission implements the NER300 programme to provide from EU ETS specific support for large-scale demonstration of Carbon Capture Storage (CCS) projects and innovative renewable energy. 300 million allowances, representing ca. 2% of total phase 3 allowances, are dedicated for this purpose. What share of the post-2020 allowance budget should be dedicated to such innovation support?” with an invitation to respondents to explain their answer.

Respondents were asked to indicate whether they would allow their replies to be made public. These replies have been posted on the homepage of the public consultation. An analysis of them is given below.

Freshest thinking

The NGO Change Partnership offered advice on how the pot of a new NER300-type scheme could be filled with allowances: “The allowances should come from a combination of a ‘haircut’ on the Market Stability Reserve (MSR) together with a dedicated fund of allowances. This should replace any ‘New Entrants Reserve’. Importantly, allowances should not be monetised but used as collateral to leverage additional funding.” The MSR is a measure that would be applied to Europe’s Emissions Trading Scheme to adjust the amount of carbon allowances that are in the market, with the expected effect (at least in the near term) of boosting the carbon price. It could begin in the next 2 to 7 years, depending on the will of the Council and European Parliament. The mandate to launch additional calls under NER300 rules, or to start NER400 early, could be linked to this dossier.

Alstom, which has been involved in a number of awarded and un-awarded NER300 proposals, fleshed out Change Partnership’s ideas:

[…] We fully support the continuation of the NER300 beyond 2015 and before 2020. To be meaningful and credible, the Fund should make available a very large amount of money.

  • From the ETS: free allowances from the NER non-allocated in 2020, free allowances allocated to plants that will close before 2020 (IED regulation) and EUAs from the Market Stability Reserve could be monetised. Without being monetised, EUAs could also be used as collateral to leverage financing at an agreed carbon price.
  • From the 2014-2020 EU budget: ‘Smart or Inclusive Growth’ or ‘Sustainable growth: Natural Resources’ lines, European Structural and Investment Funds, Research Fund for Coal and Steel, Horizon 2020, Connecting Europe Facility and the tax on financial transactions.[…]

The need to look beyond NER300 for stimulating innovation in energy technology was a theme in a large number of responses. Only one respondent, Holcim, mentioned “risk-sharing” in its submission, of which the EUAs-as-collateral approach could be one example.

Veterans’ responses

Industry

The ‘veterans’ in this context are companies that had already applied for NER300 funding. Alstom, above, was one. Air Liquide described NER300 as Europe’s “only tool for funding large scale demonstration European projects” (supported by the European Industrial Gases Association). The utilities ENEL (responding via its Slovakian subsidiary) and RWE recognised the value of support for innovation in energy technology, but could not accept that distorting the Emissions Trading Scheme in the way NER300 has done is a price worth paying. This was a widely held view. ENEL wanted to see “analysis of [NER300’s] effectiveness and achievements”, which two other organisations, BDI and the Swedish Forest Industries Federation, also called for. Shell parted company from other oil companies and their associations by expressing its “full support” for NER300 and calling for any follow-up to be better resourced. Finally, Magnesitas Navarras, whose technological approach was confirmed ineligible by the EC in its answer to FAQ 29, looked on the bright side: “We are going to present the project in the topic LCE 15 under Horizon 2020.”

Associations

Companies that have tasted NER300 like it. That feeling is shared by their industrial associations. The two European renewable energy industry associations that responded, Ocean Energy Europe and EWEA, praised NER300. The CCS Association said NER300 had had “limited success” in promoting CCS and that a better funded future programme “should focus on delivering large-scale deployment of CCS in the EU post-2020.”

Member States

Estonia considered NER300 “an important funding programme for innovative carbon projects which helps to reduce greenhouse gas emissions and [which] should definitely continue after 2020.” The UK, whose three projects were between them awarded one sixth of the NER300 pot (more than any other Member State), would like any future pot of money for low carbon innovation not to be created by raiding allowances from the Emissions Trading Scheme. Poland shared this view, adding that if a new scheme were created the focus should move from CCS to technologies for cleaner combustion of fossil fuels. Regions also gave input. Wallonia and Flanders insisted on the principle of geographical balance. Bavaria, Thüringen and Vienna, which were the only other local government administrations to give a public reply, dismissed CCS.

NER300 newbies

The ‘newbies’ in this context are organisations from which nothing or little on NER300 has so far been heard or that have had no direct connection to the instrument. They include, above all, industrial sectors at risk of shifting production outside Europe if the EU puts too high a cost on carbon dioxide emissions. The EC intends these sectors to benefit from NER300-type funding in future.

To a great extent, however, the companies concerned and the associations that represent them reject the idea that they should give up any allowances that would otherwise be given to them for free. The taking of allowances that would otherwise have been freely allocated to new entrants was the way in which the original NER300 pot was formed. Solvay said, “The ETS is an instrument that must curb emissions at the lowest costs for participants,” echoed by Ineos, a manufacturer of oils and olefins: “The Commission should prioritise protection for industries at risk of carbon leakage to allow EU companies to remain competitive.”

One drawback noted by many of basing the pot size on a number of allowances is that the amount of money it ultimately contains will depend on an unknown quantity: the price at which the allowances are monetised. Eurometaux, repeated by 10 metal producers or their associations, pointed out that the availability of NER300 funding will be inversely proportional to the need for it: when carbon prices are high, this on its own can suffice as the driver of innovation, yet the NER300 pot will be huge. When they are low, the carbon price will not be sufficient, but the pot, if linked to it, will also be too small. USG proposed to deal with very large pots apparently by demanding more technical risk in projects: “The higher the carbon price is targeted to be, the higher the benchmark level should be.”

Support is stronger for the idea of linking the revenues from auctioned allowances to spending on low carbon innovation because this would not reduce the number of allowance available for free allocation. But can Member States be trusted to spend the revenues on ambitious technology programmes? The chemical industry lobbies CEFIC and VNCI think not. They both write, “It is seen as unlikely that Member States will free resources from auctioning revenues due to national budgetary challenges.”

A number of purists responded, opposing any use of the ETS to fund technology programmes and insisting that general taxation be the source of funding instead. This fully insulates the size (and therefore design) of the programme from the vagaries of the carbon market.

Recommendations

Broader

Many, from a variety of sectors, called for the future NER300 to be broader in scope:

In which direction should NER300 be broadened? The NGOs can perhaps provide a disinterested view

Energy efficiency in industry

Energy efficiency in buildings

Energy efficiency in fossil fuel combustion

General energy efficiency

Facilitate cross-border projects

EON & German Association of Energy and Water Industries

Calls every two years from now on

Bellona Europa

No returning of money in case of project failure

Swedish Steel Producers´ Association says NER300 payouts should not be reduced or cancelled if the project is built but ultimately does not perform, which is a feature of current NER300 rules that the cement industry (CEMBUREAU + 18) also considers to be a drawback.

Greater share of costs should be covered by EC?

Bellona Europa says, somewhat contradictorily, that “a higher share [should be] covered by the EC,” but also “any projects should require a substantial financial or in-kind commitment from industry”. Humberto Delgado Rosa (Director responsible for NER300 in DG CLIMA) speaking at The EU Energy Challenge said that the rules on NER400 were far from being decided and that an increase in the proportion of costs covered could be considered. He is unlikely to go as far as one respondent’s wishes: ‘Marek Kucharski Bełchatów’, writing as a citizen but using an email address of Polish electricity company PGE said grants of 100% of costs should be allowed for CCS. PGE had made the same statement at the SET Plan conference in Warsaw 2011.

CPUP

The International Association of Oil & Gas Producers and its member Total made an interesting point about CPUP. CPUP was based around the wrong metric for CCS plants: “The criterion should not be the extra cost per tonne of stored CO2, but rather the extra cost per kWh of electricity.”

“It’s the regulatory framework, stupid”

The paper industry (CEPI + five) said that success in energy innovation “is not so much a matter of budget allocated, but of policy uncertainty.” They were joined by three other Nordic associations/companies. The Swedish Forest Industries Federation wrote, “some of the [NER300 projects] have not been made. This is not due to the amount of allowances used for NER300 but to the low credibility of the European energy and climate policy. To increase the amount of NER300 allowances will not change this. A clear, transparent and stringent policy would mean much more.”

Avoid RES/CCS competition within the programme

Eurogas: “The direct competition with renewables under NER300 should be reduced and additional funding instruments for low-carbon investments be considered.”

Complexity

Many said NER300 should be made less complex, but without saying how.

Attitudes to CCS

The question of whether CCS is a valuable technology divided opinion as follows. The summary neglects the small number of replies declared to be personal responses.

Pro-CCS Anti-CCS
  • Eurometaux + 10 “Financing of CCS should not be a priority for the allowance budget.” But ERAMET is more conciliatory: “CCS can be a useful tool to decarbonise the power sector and also the industry.”
  • Regional public authorities as mentioned above
  • Central Europe Energy Partners (mentioned above) and Poland prefer efficiency in fossil fuel combustion
  • Danish Ecological Council
  • European Salt Producers’ Association
  • European Ceramic Industry Association + 55 companies and national associations representing the ceramics sector: “the Ceramic Roadmap shows that CCS will remain prohibitively expensive for some time after it is installed in other industries.” Also the Portuguese Association for Ceramics and Domestic Glass.
  • Terremilia (concerns over CO2 storage)
  • Wopfinger Baustoffindustrie
  • ver.di (German trade union)
  • Vetropack
  • Committee of PET Manufacturers in Europe (“Is CCS the correct or appropriate technology for Europe?”)
  • European Dairy Association + 2
    1. NER300.com’s comment

      Using EUAs to guarantee loans…? Why not. Change Partnership and Alstom propose a model set up and operated in a similar way to the EEEF. The selection process could be devolved entirely to the EIB or an agent and could be much lighter, for example, operated on a first-come-first-served basis. But an appetite exists also for free money. The future NER300 should continue to award a large part of its pot as cash.

      Like the respondents suggest, the rules governing the ranking of NER300 proposals make it difficult for the sponsor of a particular project to estimate his chance of success. Nonetheless, the rules do perform the difficult task of treating ‘apples and pears’ equally. If NER300 changed from a competition that pays up only upon reaching performance milestones (production of MWh or tonnes CO2 sequestered) to one where awards are paid regardless of ultimate performance, it would attract technology that is less mature. Reporting would still be mandatory and would become more onerous and similar to Horizon 2020‘s.

      In the case of a high carbon price, it would be wiser to fund more projects than to try to incentivise the building of projects using ever more speculative technology by, for example, offering ever higher awards per project. NER300 money handed out either in the conventional manner or as financial instruments is inappropriate for such technology.

      CCU, carbon capture and usage, should mostly be avoided. Many of the materials that could be made using CO2 have lifetimes that are too brief to be of any use for climate protection. Exceptions are materials that mineralise CO2, locking it into stable, long-lasting compounds. CCU is relevant to energy policy only by its application in methanation, a technique for storing energy also known as ‘power-to-gas’.

      EC’s official summary

      In view of the target of the public consultation, the EC should not be too surprised by the answers it has received. It concludes, “Many agree that the scope for future ETS-financed innovation funding should go beyond CCS to include support for low-carbon technologies in industry,” but this is to be expected if the question is being asked to sectors not currently in the programme (carbon leakage sectors). Similarly, in a survey targeting industry, it is to be expected that the part of the innovation chain area where it is seen as “most important” to “strength EU innovation support” should be “large-scale pilot [plants]”.

      “Some underlined that these funds could be used to ensure cheaper loans for industry,” writes the EC. Only two public responses mentioned this (see Freshest Thinking, above), but because it’s an interesting idea, it gets a mention.

    Oct 24 2014

    Successor programme to NER300, “NER400″, agreed

    As part of their deliberations on the EU’s Framework for Climate and Energy 2020-2030, European leaders last night mandated the creation of a successor programme to NER300, “NER400″, which would be “initially endowed with 400 million carbon allowances”. The current programme raised 2.1 bn EUR for innovative renewable energy projects and one CCS project. The next one would raise over 9 bn EUR on the assumption of a carbon price of 23 EUR/tonne. This price is a forecast made in August 2014 by Thomson Reuters for the period 2021-2030.

    The European Council wants NER400 to cover “low carbon innovation in industrial sectors” as well as CCS and renewables. A reference to “small projects” has been included in the four lines devoted to the topic in the summit’s Conclusions.

    1. NER300.com’s comment

      The creation of NER400 turned out to be one of less contentious parts of last night’s deal. According to a source, the form of words had been agreed last week. What a difference six years makes. As this account from a similar European summit in 2008 shows, the setting up of the original NER300 was a much harder fought battle.

    Oct 20 2014

    Notes from NER300 meeting 20 Oct 2014 – afternoon MS, PS + 6

    Hot news

    EC (Kerstin) is willing to allow projects flexibility on the requirement to generate at least 75% of the energy they bid to generate in their first five (10 for CCS) years of operation in order to get 100% of their Award.

    She said, “If a majority of projects find that, 2-3 years after their entry into operation, they are not on track to generate 75% of the amount they bid for technical reasons, the EC might be prepared to look again at the rule.”

    Oct 20 2014

    Notes from NER300 meeting 20 Oct 2014 – morning MS and PS only

    Annual conference

    EC proposes an annual NER300 conference in Brussels every autumn to showcase funded projects. Also (Andreas): EC presentations at “conference like EWEA or the biomass conference” and “this year there will be presentations at the SET Plan conference in Rome (10-11 December).”

    Best questions so far

    What if, in the case of upfront funding, the MS can’t recover Award money from the PS and the PS is not entitled under NER300 rules to keep money it has already been paid?

    EC confirms (Kerstin): “The MS is still liable towards the EIB to repay the money.”

    Relevant costs: how will the EC check the relevant costs at FID?

    If the RC are less than the ones quoted in the application, the EC may need to reduce the award. EC (Lorenzo): “We are confident that the relevant costs as identified at the time of the selection process [i.e. quoted in the application] are the ones that will apply at FID.”

    Best new info

    Disaster averted

    EC (Kerstin): “Up to half of projects in the first call would have not been able to reach FID and therefore would have lost entitlement to their Award if we had not extended the deadlines“.

    Reporting MWh production

    The EC is prepared to be flexible in the reporting deadlines as these are “not laid down in the Award Decision”. The questioner used the example of a national grid operator that fails, by the start of Year N+1, to report the electricity fed into the grid in year N. This info is necessary to calculate the NER300 award disbursement to the project.

    Award Decision amendments

    Amendments to Award Decisions collected throughout the year by EC, EC bundles them into one leglislative procedure done once a year. Suggestion that a deadline might be March for the procedure completed by June.

    Oct 16 2014

    EC hosts invitation-only meeting on NER300 20 October

    DG CLIMA will hold a ‘Second NER300 Information Event’ on NER300 on 20 October. The invitation and programme sent to the Member States is here.

    The morning session will be taken up with a series of presentations similar to those given to First Call awardees and their host Member States on 10 April 2012. One difference will be that the thinking on ‘Knowledge Sharing’ obligations is now much more advanced than it was in 2012, with DG CLIMA having published (here) the templates of Knowledge Sharing collection forms and preliminary details of the techniques it will use to obfuscate the knowledge shared. Also key deadlines have been extended.

    Five representatives from associations linked to CCS, wind, ocean energy and biomass and one NGO have been invited to join in the afternoon for ‘Session II: Exchange of experiences and views on NER 300′. DG CLIMA took the position that only renewable energy associations representing particular technologies are eligible to attend, as opposed to associations having a more general view. No webstream will be available.

    The renewable energy associations will push for another NER300-type programme, beginning before 2020 if possible.

    1. NER300.com’s comment

      Bellona, the invited NGO, has interests in a number of the technology areas funded by NER300, so why should it have a seat but not an association like Eurelectric or EREF?

      Two of the three renewable energy associations admitted to the meeting were chosen because they were the first to take the initiative to request a seat when they saw the invitation.

      Dissenting voices seem to be absent (specifically Project Sponsors whose proposals were rejected in either the First or Second Call or who withdrew or suspended their projects), so are those of the sectors that NER300 might include in future: heavy industry at risk of delocalisation.

    Oct 06 2014

    Extensions to NER300 deadlines

    ***UPDATE 19 November 2014: The amendment extending the deadlines***

    ***UPDATE 20 October 2014: adopted unanimously***

    ***UPDATE 15 October 2014: Reuters reports the Climate Change Committee approved DG CLIMA’s proposal***


    DG CLIMA — pending a vote in the Climate Change Committee on 15 October — is to push back NER300’s deadlines by two years.

    For a project awarded in the First Round (i.e. selected for award in Dec 2012), the deadlines applicable to

    • Dec 2014 (final investment decision, receiving all permits, State Aid clearance) will be extended to 31 December 2016.
    • Dec 2016 (date of entry into operation) will be pushed to 31 December 2018, with an obligation to generate at least some renewable energy in the year that follows. For this extension, notification of the EC by the Member State hosting the project is required.

    The EC says, “The extension of time-limits would apply to any project under the first and second calls,” implying that two-year extensions will be available to second call projects, too.

    1. NER300.com’s comment

      The EC finally gave in to pressure to extend NER300’s deadlines after seven Member States (France, UK, Germany, Italy, The Netherlands, Sweden and Finland) co-signed a letter pressing for extensions. Its refusal to countenance this in 2013 had meant that the Westwave project (OCNa, Ireland) felt it necessary to hand back its First Round award and reapply in the Second Round, which was a big and (it turns out) unnecessary risk. Since then, there have been changes to State Aid rules around renewable energy, a debate on the ‘2030 Framework for climate and energy’ has got underway and the ILUC Directive has hit an inter-institutional blockage. This made pressure to extend irresistible.

      Many of the countries signing the letter were awarded colossal sums for bioenergy projects. There is no sign of a target for renewable energy in transport in the ‘2030 Framework for climate and energy’, let alone one involving advanced biofuels. It may turn out that extensions by themselves are not what projects need in order to survive, but rather supportive regulatory frameworks.

      Instead of a day of reckoning coming two months from now, the viability of awarded projects will not be known for two years at the earliest. To recall, NER300 rules give Member States no incentive to reveal the viability of their projects (or the true intentions of their Project Sponsors) at any point before the Final Investment Decision/permits/State Aid clearance deadline. Projects need to report their progress annually before their entry into operation, but there is no sanction attached to slow progress.

      The consequences of the deadline extension are

      1. while it was already unlikely that waiting-list NER300 projects (See Annex II here) would be funded, it is now extremely unlikely that they will. The 2009 Emissions Trading Directive stipulates that all awards must be made by 31 December 2015 (See page 18), which is one year before the new 2016 deadline.
      2. With no new NER300 awards now seeming possible, money for failed projects will have to be returned to the Member States or, better, channeled to first-of-a-kind demonstration energy demonstration projects via Horizon 2020 (another EU funding programme).
      3. The innovative quality of these projects may be quite out-of-date by the time they become operational. Benchmarks for innovation that were determined in 2009 became the basis for the NER300 calls for proposals in 2010 and 2013 and may now only be realised in installations that enter into operation in 2019 — fully a decade later. The purpose of the awards, which was to reward first movers, may be redundant by the time they come to be paid out.

      The decision to grant the extension appears to have been made in the last month. On 4 September, in documentation circulated to the contractors that the EC outsources some of its NER300 tasks to, the EC requested that they review the progress reports of Project Sponsors only in 2014 and 2015. Under the deadline extension, progress reports would need to be monitored in 2016 and 2017, too.

    Sep 01 2014

    Strongest push yet for a third NER300 call…

    … comes from the Member States. A leak of draft ‘Conclusions’ for the European Council of 23-24 October 2014, which will define the main features of the EU’s climate and energy policy for the foreseeable future, suggests that maybe 5% of allowances required by the Emissions Trading Scheme to reach a 40% GHG emissions cut by 2030 be used as an ‘initial endowment’ for an ‘enlarged’ NER300-like fund that would include industry.

    The EIB would manage it. The focus of the fund would be ‘new innovations’.