Jan 15 2017

The fate of cancelled first-call NER300 awards

The EC is poised to publish a report on its “outcomes of the analysis” of NER300.

In September the EC warned Member States that 553 M EUR of awards were likely to be cancelled due to projects failing to meet a major December 2016 deadline. The report will set out an alternative use that can be made of that money.

Four options had been on the table, including a third NER300 call, giving more money to NER300’s active projects or rolling the money over to ETS Innovation Fund (suggested by Commissioner Cañete in June). In the end the EC, with the support of most Member States, has settled on “Option 2”, which involves topping up some of the EC’s non-grant financing schemes: EDP Innovfin, EFSI and maybe the Cleaner Transport Facility. An amendment to the NER300 Decision to allow this transfer will be put before the Climate Change Committee in April.

A reference to the need for “strong linkages” between ETS Innovation Fund and two of these financing schemes was made in the Accelerating Clean Energy Innovation Communication of 30 Nov 2016 (COM(2016) 763). DG CLIMA was one of four DGs involved in a “collective exercise” to write it. A reference to “an enlarged” EDP Innovfin appears in the Horizon 2020 scoping paper for the Energy Work Programme 2018-2020.

NER300 money handed to these instruments will be tracked separately to their existing capital. This is to ensure that the Member States (represented in the Climate Change Committee) can monitor the projects selected for financing and, if the NER300 portion of the capital is not fully subscribed by the end of 2020, have this remaining amount refunded to them. Projects funded with the infused NER300 capital will need to follow NER300’s rules for being innovative renewable or CCS, knowledge-sharing (though perhaps in modified form), and others.

“With the allocation from NER300 funds, the [Cleaner Transport] Facility would support the demonstration and deployment of innovative renewable energy technologies in the transport sector (e.g. rapid charging stations for electric vehicles along major motorways, alternatively fuelled buses, such as with electric and hydrogen fuel cells),” the EC says. The infrastructural examples in that list are outside NER300’s original scope. The EC has asked Member States to comment specifically on whether they have enough innovative transport-related projects to warrant giving a boost to the CTF.

The Zero-Emissions Platform, representing the CCS community, supports the re-allocation of unspent funds to financial instruments, but suggested in a November 2016 position paper that a special instrument dedicated to CCS should be set up. Instead the EC has chosen to expand the scope of EDP Innovfin to include CCS.

Jan 14 2017

Commission due to release update on NER300 status imminently

“Of the projects awarded under the first call only three projects have been withdrawn,” announced the European Commission a year and a half ago, even as ever more projects were pushing back their Date of Entry into Operation to the latest possible date.

The situation was presented more soberly in September 2016, 45 months after First Call projects had been notified of their award and 3 months before their deadline to obtain all relevant permits and reach their Final Investment Decision. The EC revealed that six projects out of the 19 in the First Call had reached Final Investment Decision. By the end of November, that number had risen to 9. The deadline for first call projects has now passed. “Full clarity on the scale of unused funds from the first call will be known by the end of February 2017,” states the EC.

Roman Doubrava, deputy head of the unit responsible for NER300 in the EC, said on 30 Nov, “We have been following the projects going on facing different difficulties, and there are some lessons learned. We will be publishing some outcomes of the analysis we are currently making towards the end of the year.” He was speaking at the SET Plan conference 2016 in Bratislava. That report is still not public, but is expected to be published before DG CLIMA’s conference, “Finance for innovation: Towards the ETS Innovation Fund” on 20 Jan 2017. This is the second conference on ETS Innovation Fund (details on the first one here).

The Commission’s only regular, formal and public report on the status of NER300 projects has, since 2014, been the annual publication of the latest version of the award decision. It contains the date that each project should enter operation. Every year more and more projects have pushed their date of entry into operation to the latest allowable date (details).

Oct 17 2016

Further delays to NER300 projects

The EC has published a new amended Award Decision detailing the current status of NER300 projects selected in the first and second calls.

The document shows changes to the dates that projects intend to begin operating.

The updates reflect the wishes of project sponsors and their host Member States as at late spring 2016, when the EC initiated this year’s annual process to amend the Award Decision.

Project withdrawn

One project was officially withdrawn, BE DRMc SLim. The White Rose CCS project, awarded 300 M EUR, has not been withdrawn even though the UK government scrapped its CCS demonstration programme a few months before the Award Decision amendment process began.

Delays

9 projects out of 37 have requested and been granted a later ‘date of entry into operation’ since their last opportunity to request this, in 2015. A tenth project, CY CSPe Helios Power, asked to postpone its date of entry in operation to 30 Jun 2020, but this is beyond the latest allowable date for its call of 30 Dec 2018, and the EC declined it.

6 of these 9 projects push their date of entry into operation to the latest allowable date for their respective calls, bringing to the total number of projects in this position to 23, which is 62% of all projects. This proportion has steadily increased since the first Award Decision of December 2012, when it was 13%. This compares to 34-36% in 2014 and 45% in 2015. All French, Spanish, Cypriot and Greek projects are in this position, as well as the single projects awarded to Austria, Hungary, Denmark, Latvia, Ireland and Finland.

The latest official status on all projects is available here.

Sep 06 2016

Cañete confirms NER300’s date with destiny in December 2016 and the recycling of unused NER300 money to NER400 Innovation Fund

Speaking at the Environment Council of 20 June the Commissioner for Climate Action Miguel Arias Cañete said, “Before the end of 2016 we will know how much money remains unused from those projects awarded in the first NER300 call.” By mid-December of this year NER300 rules say that projects in the first call, for which awards totalling 1.089 bn EUR were made, need to reach final investment decision and have secured all the permits necessary for their construction.

The unused money will be recycled to NER400 Innovation Fund, Cañete said: “The EC proposal foresees also that the money remaining for NER300 projects is added to the Innovation Fund. This was envisaged by the co-legislator when the Market Stability Reserve was agreed last year.” He hinted that it could allow NER400 Innovation Fund to start early, i.e. before Phase 4 of the Emission Trading Scheme begins in 2021: “If it turns out that a considerable amount remains unused, we may want to reflect how we can speed up the reuse of this money to boost innovation and accelerate the roll-out of innovative low-carbon technologies.”

The extent to which the following statement by DG CLIMA Director General Jos Delbeke is reality or caricature is unknown. He made it at the 9 June High Level Roundtable on Low carbon innovation (14:40:00). Referring to the risks inherent in designing funding mechanisms, he said that they’re at risk when “the business cycle turns around. The perspectives are less attractive and half of the projects fall apart because while they were put up before Lehman brothers, they were delivered after Lehman Brothers and a lot of the good intentions did not materialise because of that.” There’s an allusion in there to the amount of money that may be at stake. At the same event, Delbeke appealed for leniency when it comes to judging whether NER400 has succeeded or failed.

Sweden senses that many projects will be declared dead in December. In a written statement to the Council of Ministers it commented that “the NER300 program has significant volumes of funds which have not been disbursed,” preferring to use this non-disbursed money to boost the size of NER400 Innovation Fund than to sell another 50 M tonnes of carbon. The country is home to three NER300 projects, including one, GoBiGas Phase 2, that is “not currently being delivered” (presentation of 21 June at Stakeholder Plenary Meeting, European Biofuels Technology Platform). This project was awarded 58 797 168 EUR. The Belgian project ‘SLIM’, on smart grids, is also withdrawn (8 165 192 EUR).

An MEP has joined the chorus of concern over unused funds. Ivo Belet said at the meeting of the European Parliament’s Environment Committee of 21 June 2016 that, learning from the NER300 experience, it will be important in NER400 Innovation Fund to “make sure there’s no money left at the end of the period” (10:34:44).

The agenda for the Climate Change Committee meeting of 22 September carries an item with the terse description ‘Full deployment of NER 300 funds’, indicating that the EC and Member States are considering options.

May 25 2016

NER400 Innovation Fund Impact Assessment reveals interesting information about NER300

An ‘Impact assessment’ is an explanatory document released by the EC alongside a legislative proposal to provide substance for the policy choices made in the proposal. This article refers to the Impact Assessment of the EC’s 2015 proposals for revision of EU Emissions Trading Scheme.

Maximum upfront financing was limited to 60%

“Maximum 60% of the awarded NER 300 funding can be provided as upfront funding”

This policy had been stated orally by ex-NER300 Head of Unit Piotr Tulej in a meeting with Member States and Project Sponsors on 10 April 2013.

By Jul 2015 the NER300 pot had swelled by 23 M EUR from asset management

The EC reveals that in 2014 23 M EUR was yielded from investment of the money not yet paid out to projects, and claims that this exceeds by “several times” the cost of “the EIB’s involvement” in NER300. It also says,

“All available funds resulting from the monetisation of 300 million allowances are now allocated to awarded projects, with the exception of a minor surplus of €2.6 million.”

  1. NER300.com’s comment

    The phrase concerning the cost of the EIB’s involvement is misleading: in a summary paper referenced by the EC in the Impact Assessment, the EIB writes, “The EIB sold 300,000,000 EUAs for a total value of EUR 2,156,830,800 EUR (before deduction of expenses and EIB fees)”. The sum of the total awards made to projects is 2,104,867,924 EUR. If the surplus is 2.6 M EUR, then the cost of administering NER300 (excluding the time of EC personnel) is 49 M EUR, which is double the income so far from asset management. This is consistent with the amount of 34,729,701 EUR used by the EIB to cover “expenses, market fees and its own fee” in the first round, an amount which is disclosed in the above-referenced paper.

We now know what the EC’s ‘eligibility check’ consisted of

As part of the eligibility check, projects were screened for innovation. The EC “estimate[s] that almost 80% of the NER 300 awards went to highly innovative or even potentially game changing projects.” An early draft of the Impact Assessment (which leaked) is more explicit: they were scored 1-4, one presumes according to the same scheme described in footnote 99 of the final version: “1. Little or no innovation 2. Some innovation demonstrated, but mainly incremental 3. Highly innovative project for some component or aspect of technology 4. Highly innovative project that is likely to represent a game changing step in technology.”

To determine eligibility, the EC performed “a qualitative analysis […] based on difference of the project’s technology from existing solutions, availability of the project’s technology amongst other vendors, availability of previous tests for the chosen technology, potential for scale-up and replicability and availability of resources to be used by the project.”

Project sponsors were never officially told their eligibility score, nor what the EC considered distinguished their technology from “existing solutions”, or of the EC’s assessment of the “availability” of the technology their projects would use.

  1. NER300.com’s comment

    With the existence of such information now confirmed, Project Sponsors will find it easier to request access to it in respect of their projects. They need to ask for the “report on the verification of Eligibility Criteria Assessment”, which, for first-call projects appears as item 22 on Table 1 at para 80 of the first-call Procedures Manual, or, for second-call projects, as item 14 on the table at para 69 of the second-call Procedures Manual.

White Rose’s award of 300 M EUR was 34% of its relevant costs

…meaning, from arithmetic, that its relevant costs were around 880 M EUR. According to NER300.com’s calculations and on the assumption that the NER300 project corresponds to the full 448 MWe project described here, the ‘relevant costs’ are about the same as the extra investment costs of applying CCS on the White Rose plant. This is because the ‘avoided cost’ of not having to buy CO2 allowances for the sequestered CO2 corresponds roughly to the additional cost of the coal needed to power the sequestering process.

EC declined half of applications for upfront finance

“It should be noted that although not all projects that required upfront funding were granted it this has not jeopardised their implementation. (Six projects awarded under the second NER 300 call applied for upfront funding but only three received it.)”

May 25 2016

Session on NER300 at European Geothermal Congress 2016 on 21 Sept

On Weds 21 Sept 2016 in Strasburg, the three NER300 Project Sponsors in geothermal energy will present their “state of play and current developments” as part of EGC 2016.

The session begins at 16:30 with a presentation of NER300 including its knowledge-sharing rules by DG JRC (to be confirmed).

Link to the conference homepage

May 25 2016

Project Sponsors sending feedback to EC on NER300 via survey

The consultants hired by the EC to help it analyse the implementation of the NER300 funding programme (see contract award notice of 31 Dec 2015 and specifications) have created an online survey for Project Sponsors to fill in. Access to the survey is restricted to Project Sponsors.

ICFI, SQ Consult, Vito and their client DG CLIMA (who will have direct access to individual answers) commit to keeping the responses secret.

The survey’s questions are available here. They explore many aspects of NER300’s functioning. Although the deadline for responses was 20 May, the survey appears still to be active.

Apr 17 2016

Launch of NER400.com

NER300.com has a sister site, NER400.com, providing information on the NER400 Innovation Fund currently at an early stage of development.

Mar 24 2016

No more big changes to first call projects allowed

***UPDATE 17 October 2016: One first-call project, FI BIOe Ajos BTL was allowed to push back its date of entry into operation.***


In a letter to Member States dated 22 March 2016 the EC has told them, “We are of the opinion that changes to projects funded under the first call of NER300 […] are not feasible any more.”

This is traditionally the time of year that DG CLIMA invites Member States to make known any changes that Project Sponsors wish to make. The changes may be very substantial, involving changes in project location, Project Sponsor and financial performance. But because in DG CLIMA’s words “there are only 9 months left” for first call projects (i.e. awarded in Dec 2012) to meet a major deadline of 31 Dec 2016, the EC is minded to withdraw the possibility to propose big changes.

By 31 December 2016 all awarded projects from the first call are required to have reached a ‘Final Investment Decision’ based on the financial model of the project that will actually be built, secured all relevant national permits (e.g. for construction or grid connection) and secured the approval by the EC (DG Competition) of any State Aid that will be given to the projects.

It typically takes the EC 4-5 months to declare whether it accepts proposed changes to projects.

Nov 04 2015

NER300 presented at Ocean Energy Europe 2015 conference

Kerstin Lichtenvort, Co-ordinator for the implementation of the CCS Directive and the NER300 funding programme at the European Commission, presented NER300 to the Ocean Energy Europe 2015 conference (Dublin 21 Oct, session “Public Funding for Ocean Energy: Breaking Through to the Mainstream”).

She said two projects would reach Final Investment Decision in 2015, with another four expected to do so in 2016. The 39 awarded projects in the programme have, in her view, “a lot of multiplication impact”. She said thought must be given to “how the performance of such an important programme for innovation should be measured”.

The EC launched the debate with the Council and European Parliament on the successor to NER300, NER400 Innovation Fund, with its proposal of 15 July 2015. “At the moment it’s more the discussion ‘if we will have this Fund’,” Lichtenvort said. Secondary legislation will cover “technical details”.

Lichtenvort said, “If you read the ETS proposal carefully you’ll see it says ‘support’ instead of ‘grant’.” She invited feedback on whether “financial instruments”, including loans or equity, should be given to projects or if the financing should continue to be provided through grants.