Strategy for energy research, technology development and demonstration in Denmark. Advisory Committee on Energy Research (ACER)

Strategy for energy research, technology development and demonstration in Denmark Advisory Committee on Energy Research (ACER) April 2006

Members of the Advisory Committee on Energy Research (ACER) Name Organisation General Manager, Msc Ulla Röttger, I/S Amagerforbrænding Director Peder Andersen, Danish Economic Council Msc Søren Dyck-Madsen, The Ecological Council General Manager Jørgen Kjems, Risø National Laboratory R&D Manager Henrik Kjærgaard, NIRAS Consulting Engineers A/S Science Director Lene Lange, Novozymes A/S Planning Manager Helge Ørsted Pedersen (previously Elkraft System) R&D Manager Jørgen Stannow (previously Danfoss A/S) Account Manager Sonny Sørensen, Energi Horsens Sector Director, ph.d. Tom Togsverd, ITEK, Confederation of Danish Industry Director Mette Wier, Institute of Local Government Studies (AKF) Secretariat Danish Energy Authority Amaliegade 44 1256 Copenhagen K 33 92 67 00 e-mail ens@ens.dk www.ens.dk ISBN 87-78-44-591-4 www

Preface The Advisory Committee on Energy Research (ACER) hereby submits its strategy for energy research, technology development and demonstration initiatives in Denmark. The main messages in this strategy are: 1) that the work with the demonstration of technologies, energy systems and energy concepts should be targeted and given higher priority; 2) that research tenders should be targeted at consortia of companies and research institutions and at large-scale projects which include co-funding within fairly broad scopes as regards research areas; and 3) that there should be increased focus on the growth and business potential. The strategy submitted here presents a set of general criteria for prioritisation across different technology areas. Consequently, the strategy does not a priori select particular technologies to be given special priority. The prioritisation within each separate field of energy should be based on the sub-strategies, which have already been prepared through collaboration between the Danish Energy Authority, Energinet.dk, Dansk Energi - Net and other relevant partners within each individual area. These sub-strategies are accessible on the Danish Energy Authority s website. ACER is in full agreement with the Danish Globalisation Council s view that more funds must be allocated to strategic research, and that the basis for setting priorities in connection with the allocation of funds must be improved on a continuous basis through a mapping of the needs for research. Likewise, ACER agrees that such funds must be earmarked for strategic research within those areas which may contribute to the continued development of welfare or solve other major problems in our society. It is ACER s view that energy is an area which has such crucial importance for other sectors or society s opportunities for development, that it is in essence a crosssector framework and thus plays an all-important role for growth and industrial development. ACER is aware that its recommendations for giving increased priority to the demonstration may be difficult to implement within the existing funding levels. Therefore, it must be seen as a general precondition that sufficient funds are made available in order to ensure the continued, necessary R&D effort in the field of energy, including the necessary social science research. This strategy has been prepared within the framework established by ACER s mandate, which, i.a., stipulates that ACER has an advisory role in relation to the Danish Energy Authority as regards the formulation of strategies and the setting of priorities for energy research, technological development and demonstration, and that ACER, based on relevance assessments, is to submit general recommendations about the spending of public funds for research, development and demonstration in the field of energy. It is ACER s hope that the strategy will prove to be a useful tool in the future administration of the strategic allocation of funds in the field of energy. Ulla Röttger Chairman 30 March 2006 2

CONTENTS Preface.. 2 Strategy for energy research, technology development and demonstration in Denmark... 4 1. Introduction... 4 2. Challenges and conditions for RDD in the field of energy 5 2.1 Three challenges... 5 2.2 New conditions for RDD... 7 3. Overall goals and framework conditions for RDD in the field of energy.. 7 4. Strategic goals and public sector RDD-initiatives in the field of energy. 8 5. Collaboration with the other parties in the chain of development.. 15 Appendix A. Areas of activity and measures in the chain of development for energy technologies 17 Appendix B. Funds for innovation at the Ministry of Science, Technology and Research 18 Appendix C. Feed-back mechanisms in R&D programmes. 19 3

Strategy for energy research, technology development and demonstration in Denmark 1. Introduction 1.1 Introduction The Advisory Committee on Energy Research (ACER) advises the Danish Energy Authority on strategies, frameworks and priorities relating to energy research, technological development and demonstration. To fulfil this role, ACER has drawn up this strategy for energy research, technology development and demonstration (RDD). The increasing global demand for energy creates an enormous industrial development potential for new energy technologies. At the same time the energy sector is characterised by being very investment intensive. The International Energy Agency (IEA) estimates that during the period between now and 2030, the global need for investments in the energy sector will be USD 17,000 billion, equivalent to almost DKK 4,000 billion annually. One result of many years active energy policy and development work is that Denmark now has major strengths and competences in the field of energy. The energy sector thus gives a substantial contribution to economic growth and employment in Denmark. Exports of Danish energy technology have increased from approximately DKK 17 billion in 1996 to more than DKK 32 billion in 2004 in current prices. In addition to this, Denmark exports substantial amounts of oil and natural gas. The increasingly strained energy markets and the need to reduce environmental and climate effects of energy consumption, promotes a specific demand for increased efficiency in the exploitation of energy resources and the transition to using renewable energy resources. Denmark enjoys core strengths within the area of renewable energy resources, including experience in adapting the use of these into existing energy systems, efficient and clean power station technologies, and efficient and flexible exploitation of energy and energy saving. 1.2 Summary The Danish core strengths must be utilised and further developed if we are to avoid being outstripped by international developments. It is the objective of this strategy to achieve maximum effect from the Danish RDD-initiatives. The strategy is based on the political agreements 1 on the Danish energy policy and on Energy Strategy 2025 2. Therefore, the strategy also comprises fulfilment of the political ambitions for expanded and more focused activities with a view to demonstrating the strategy s elements. 1 Including the agreement of 10 June 2005 on the future energy saving efforts, the three agreements of 29 March 2004 on the development of the Danish energy sector, especially the agreement on wind energy and decentralised com- 4

The strategy should also be seen as a result of the fact that in late years more market players 3 have entered the stage as providers of public sector co-financing of RDD in the field of energy. The strategy describes the overall framework and indicates focused criteria for the setting of priorities, which may guide all players and programmes. The different elements incorporated into the strategy must be seen as a whole. Together they support both the general energy policy challenges and Denmark s industrial core strengths in the area. In particular, three elements in the strategy should be emphasised. First that effort to demonstrate newly developed technologies are targeted and given higher priority. Secondly that focus is placed on research contracts directed towards consortia consisting of companies and research institutions and towards large-scale projects which include cofunding and a relatively wide framework in terms of content. Thirdly that there is increased focus on potentials for growth and industrial development. These elements are important for exploiting the development and growth potential inherent in the Danish core strength. They entail large-scale commitments, and therefore it is important that better possibilities for using these instruments are implemented. The important collaboration with private sector capital investments can only be achieved, if government commitment towards research, development and demonstration are regarded as being sufficiently convincing. It should also be mentioned that public sector support for RDD only represents one part of the technological chain of development from initial idea to commercial utilisation. Another part is represented by major contributions from privately financed RDD and by innovation activities which are not R&D based, e.g. product development and user-driven innovation. However, solving the problem takes more than an increased commitment to focus more on RDD. It is also of vital importance that other measures (e.g. duties) and framework conditions are employed to support the desired development so that the long-term perspective is maintained to make it attractive for investors to participate in this development at an early stage. 2. Challenges and conditions for RDD in the field of energy 2.1 Three challenges The RDD-strategy is based on the three energy policy challenges described in Energy Strategy 2025: 1. Reliability of supply bined heat and power, etc., and the agreement of 9 May 2003 on the development of the Danish energy market and strengthening of the development of new technologies. 2 Energy Strategy 2025, Perspectives towards 2025 and Draft Action Plan for the future electricity grid and infrastructure, Ministry of Transport and Energy, June 2005. Energy Strategy 2025 was being negotiated at the political level when this RDD strategy was being finalised. 3 Reference is made to appendix B 5

2. Global climate changes 3. Growth and industrial development These three challenges are of particular relevance. In the following, some elements, which ACER has seen as important in connection with the preparation of the strategy, are highlighted. Reliability of supply. The rapidly increasing energy consumption in the world leads to increased pressure on fossil energy resources. In future, a larger and larger share of both oil and natural gas supplies will come from politically unstable regions in the world. In future, the Danish economy must maintain a high degree of robustness towards too high and unstable energy prices, since Denmark will become a net importer of both oil and natural gas in the not too distant future. Reliability of supply also involves the issue of the function of the energy systems. The objective to incorporate a larger share of renewable energy resources must be realised; better balance between energy consumption and energy production must be achieved and it is necessary to work towards a reduced dependency on oil in the transport sector. Blackouts must be avoided in the electricity system. In this connection it is a core challenge that the regulation of and the demands made on the quality of electricity supply are specifically linked to the Danish system. This challenge is closely linked to the existing high level of renewable energy and combined heat and power in the system, combined with the objective to incorporate additional, large amounts of renewable energy in the future. Thus, the development of the Danish energy systems poses specific challenges. Global climate changes. The adoption of the Kyoto Protocol and the future fulfilment of the Climate Convention s goal to limit man-made changes to the world s climate below danger-levels, require massive, global reductions of greenhouse gas emissions, including not least the emissions of CO2 from energy consumption and energy supply. Also, local and regional effects on the environment, and thereby also possible health consequences, are important in connection with the RDD-strategy. Especially, the demands on air quality (reduction of NOx, aldehydes, etc.) together with other new conditions, such as those described in the Executive Order on emissions from large heating plants 4 and in the Air Quality Guideline 5, constitute challenges for the Danish energy system. The fulfilment of these environmental targets also creates demands on the RDD-effort. Growth and industrial development. Energy Strategy 2025 describes this challenge as one which includes both well-functioning markets and technological development. The liberalisation of markets must be followed up and developed further, and Danish research and knowledge about energy technologies must be converted into exports and jobs. The development of new, efficient energy technologies, including energy-saving technologies, are pivotal in the long-term climate protection, and at the same time, the technological development in the energy sector must be able to make a specific contribution to fulfilling the government s overall ambition to make Denmark a leading growth and knowledge society. Already in 2004, Denmark s energy exports (excluding 4 Executive Order no. 808 of 25/09/2003 on reduction of certain air polluting emissions from large heating plants. 5 Instruction no. 2 2001 from the Danish National Agency of Environmental Protection on Reduction of air pollution from enterprises. 6

raw materials) amounted to DKK 32 billion annually. A special challenge regarding growth and industrial development lies in the progressing internationalisation of industrial development often referred to by the concept of globalisation. The latest evaluation 6 of the Energy Research Programme (EFP) estimates that the programme fulfils its goals, and that it has contributed to maintaining Denmark s strong research and industrial position in the field of energy. However, at the same time, a tendency towards lower commercial utilisation of the research efforts has been registered. The evaluation also points out that companies, and especially energy companies, co-financing during the project period has fallen and now is at a lower level than during previous programme periods. These conclusions pose a distinct challenge for the future structure of the RDD-effort. A lower level of business participation in the projects reduces the number of possibilities to carry out the demonstration activities which are a key requirement to the commercial utilisation of research results. Successful demonstration projects may be necessary for achieving market-based financing of further technological development (in the form of seed-capital or venture-capital). However, demonstration is often very costly. 2.2 New conditions for RDD In addition, the new market conditions characterising the energy market including liberalisation as well as internationalisation have created new conditions for an RDD-effort directed towards these challenges. These new conditions are a challenge in their own right. The development of energy markets means that the focus areas for research and development in the field of energy are no longer a direct result of national energy planning. Rather, they are determined by wider energy policy goals and the actual economic conditions, e.g. as laid down in Energy Strategy 2025. Therefore, a more specific stipulation of strategy and goals is called for in the RDD-programmes. Industrial policy goals, such as innovation and growth, play an independent and increasingly important role. In areas where the point of departure is taken in specific energy policy goals, the liberalised markets mean that the implementation of RDD results, as a general rule, will take place through commercialisation of products and services. Thus, the business perspective of RDD in the field of energy is strengthened further. 3. Overall goals and framework conditions for RDD in the field of energy The following are relevant, general energy policy goals including the political agreements and the government s Energy Strategy 2025 7 : The high level of security of supply must be maintained also in the long run and contribute to general economic robustness towards unstable and possibly high oil prices. 6 Danish Energy Authority: Evaluation of the Energy Research Programme 1998-2002. Sub-report 1: Summary of sub-analyses. Kvistgaard Consult and Management & Industrial Development for the DEA. December 2004, page 15. 7 The quotations come partly from page 33 in Energy Strategy 2025, and partly from page 1 in the 2005 political agreement on the future energy saving plan. 7

Consumption and production of energy as well as development and adoption of new energy technologies must conform to national environmental requirements and support Denmark s observance of current and future international environmental and climate obligations. An increased commitment to achieve concrete, documented energy savings, equivalent to an average of 7.5 PJ per year during the period 2006 2013 must be fulfilled. It must be possible to purchase electricity and natural gas on well-functioning, competitive markets characterised by genuine choices for the consumers and equal competitive conditions for companies in the EU. Denmark s technological strengths in the field of energy must be translated into growth and jobs and support the development of an efficient and environment friendly Danish energy sector. Public sector RDD-funding for strategic research in the field of energy comprises four programmes: The Ministry of Transport and Energy has three programmes: The Energy Research Programme (EFP) and the two PSO-programmes for environment friendly electricity production technologies (ForskEL) and efficient electricity use (ELFORSK). In addition, the Ministry of Science, Technology and Research has one programme 8, i.e. The Strategic Research Council s programme area for Energy and Environment (EnMi), which, to a large extent, covers the same area that is also covered by the programmes of the Ministry of Transport and Energy. In total, these four programmes have an annual sum of approximately DKK 300 million at their disposal. This situation requires coordination but also obvious possibilities for collaboration. These possibilities are already exploited at the practical level through a series of coordinated activities. The present strategy includes a proposal for actively developing coordination and a division of responsibilities further. Public support for innovation activities in general, also including the High Technology Fund, is available in the Ministry Science, Technology and Research. Support for these activities is normally administered across sectors. An overview of financial means is available in appendix B. 4. Strategic goals and public RDD-initiatives in the field of energy An RDD-strategy must support the implementation of the Danish energy policy, including the objective as an element hereof to achieve the highest possible degree of innovation and growth effect in the energy sector. Public sector RDD in the field of energy must thus support: The energy policy goals included in the political agreements and Energy Strategy 2025. The commercial development of energy technologies. Efficiency of the development chain from initial idea to commercial utilisation. Development of internationally competitive Danish knowledge environments. The realisation of the strategic goals must happen through six strategic efforts (see box). 8 Formally, ACER s advisory role is limited to the Energy Research Programme (EFP), and the two PSO-financed programmes, which are administered by Energinet.dk and Dansk Energi Net (former ELFOR), respectively. 8

A. An overall, long-term and robust basis for determining focus areas and evaluation of applications relevance. B. Improvement of the interaction between the RDD-programmes and the companies in the energy sector as well as financial markets. C. A targeted effort to demonstrate newly developed technologies. D. Maintenance of Denmark s position in international RDD-programmes and improved interaction regarding the utilisation of international knowledge. E. Development of a basis for current feedback of experience on a continuous basis. F. Active coordination and clearer division of responsibilities between the RDD-programmes. These six goals are further described in the following together with concrete, proposed guidelines for their implementation. A. An overall, long-term and robust basis for determining focus areas and assess applications relevance Based on experience, the effects of RDD in the field of energy have been long term. The first commercial results of the efforts in the wind power area thus came more than 10 years after the research and development work in the area commenced. A targeted effort is necessary to ensure a quick commercial utilisation of RDD. At the same time it is important that there is a sufficiently long-term perspective to the work, especially in relation to the building up of qualified knowledge environments. Figure text in English. Markeder = Markets, Energiområdets udvikling = Development of the field of energy, Teknologi = Technology, Systemer= Systems Traditionally, focus areas in energy research have been linked to individual technologies or to limited technology areas comprising few separate technologies. In the framework of this strategy, it is seen as more expedient to apply some broader, more long-term focus areas in order to realise the overall goals. The development of the field of energy is determined by the development of energy technologies, the development of energy markets and the development of energy systems 9. However, the new internationalised and liberalised conditions make a distinction between market and system increasingly difficult. Therefore, it has been decided to divide the RDD- 9 The energy systems refer to the technical systems where different supply technologies are linked together and where consumption and supply interact so that heat is supplied when the radiator is turned on and electricity when the switch is turned on. The reason for using the plural form is that, even if there are also links here, it is possible to speak about separate systems for electricity, heat (gas) and transport. 9

effort into two main areas: Development of energy technologies and Development of energy systems and markets. For each of these two, a division into four, respectively three, concrete focus areas are proposed. Production technologies, already applied Development of energy technologies New production Regulation, storage and technologies other system technology Energy use Development of energy systems and markets Interaction between transport sector and energy systems Energy systems, markets, interaction production/consumpti on Energy and society, etc. Development of energy technologies. The reason for dividing into technologies already used in the energy system and new production technologies is that it may be difficult to assess projects within these areas against each other. Those technologies which are already used (coal, bio mass, wind, natural gas, combined heat and power), will be documented in terms of operating economy, regulatory capability, environmental consequences, lifetime/total economy, while the new technologies (solar cells, fuel cells, bio fuels, etc.) will have to be assessed on the basis of their potential and expectations for their performance. The development of new technologies includes technologies which may have a substantial importance for the transport sector. This is especially the case for fuel cells and liquid bio fuels. The focus area Regulation, storage and other system technology comprises technological development in relation to the energy systems, including hydrogen as an energy carrier. Development of energy systems and markets. The focus area Energy systems, markets, interaction production/consumption, comprises areas such as development of the energy markets, the interaction between production and consumption (not least the price signals sent out into the systems), non-technical measures for the incorporation of large amounts of renewable energy into the energy system, etc. The focus area Interaction between transport sector and energy systems comprises research themes relating to the transport sector s energy consumption in relation to the introduction of new energy technologies. The focus area Energy and society includes research projects which are to assess whether the market functions properly as well as projects which assess conditions in the transport area. It must be emphasised that the division into focus areas is to be regarded as a practical tool for the relevance assessment of projects. The possibility to create projects (and consortia) across focus areas must be fully present. Due to the limitations in the formal basis of individual programmes, it may be necessary to further distinguish between electricity-producing technologies and other technologies. During the past few years, very thorough strategies have been developed for eight technology areas. These strategies have been developed as joint strategies for the PSO-programmes and EFP. The strategies are important tools in assessing the strategic relevance of otherwise professionally qualified projects, particularly when it comes to new technologies. It is recommended that the strategies for new technologies are supplemented by roadmaps, as this will 10

make it possible to take into account the fact that these technologies are at different stages on the technological learning curve. The assessment of the relevance of applications may comprise criteria such as: 1. The project s potential for creating international growth and industrial development assessed on the basis of, i.a., environmental performance (e.g. price of CO2-displacement), economic performance (e.g. price per kwh or price per displaced litre of diesel fuel) combined with expected or likely possibilities for improvement. The assessment may include the knowledge-intensity of the technology (seen in relation to wage-intensive technologies, for example). 2. To what extent the project may contribute to achieving the milestones laid down in the strategy s roadmap, or in the absence of a roadmap contribute to making progress on a learning curve (new technologies). 3. The project s potential for realising energy policy goals (e.g. fulfilment of goals for CO2- reduction, supply security, energy efficiency, energy system efficiency). 4. The applicants organisational and managerial competences as well as their qualifications/abilities to enter into interaction with relevant investors or project partners at the national and international levels. 5. The competences of the participating companies (level of innovation, comparative advantages). 6. The participating scientists competences (international front-end competences and comparative advantages) as well as attachment to or building-up of a sufficiently strong teaching and knowledge environment in the relevant technology area, so that the necessary number of experts may be educated for industry. B. Improved interaction between the RDD-programmes, the energy sector s companies and the financial markets Both in Denmark 10 and internationally there is a massive focus on the gap between RDDprogrammes on the one hand and market-based innovation on the other. This problem goes under many names: funding gap, missing link or valley of death. It is strategically important to remove this gap, or at least to reduce it. Part of the problem is that the orientation of the energy research programmes towards the market players is not sufficiently strong. No matter whether the rationale behind this is one of energy policy or industrial policy, technologies these days have to be brought to the free market. However, the RDD-programmes seen in isolation cannot remove the gap entirely, because areas like framework conditions and market features in the pre-commercial and supported commercial areas are outside the scope of the programmes. Within the RDD-programmes the following are proposed: 1. Research tenders directed towards consortia of companies (including supply companies) and research institutions. 2. Concentration on major projects with substantial co-financing and larger degrees of freedom for the project description (e.g. more weight on participants than description of methods). 10 This topic was on the agenda at the ACER-conference Energy Research the pathway to growth on 15 September 2005. 11

3. Determination of clear milestones (cut-off demands) for project results (as a consequence of lower requirements for the description of methods) combined with dynamic project follow-up. 4. Drawing up of tender and demand specifications, which give incentives to planning projects in collaboration with subsequent investors. 5. A specific effort regarding standardisation, testing, approval arrangements and certification. C. A targeted effort to demonstrate newly developed technologies Demonstration is one of the means to reduce the gap between R&D and market-based innovation. In this context, demonstration means development, construction and testing of a prototype of a given technology, or in the case of small-scale plants a first-time series on a scale of 1:1. This type of demonstration will make it possible to assess whether the technology works in the real world, to estimate life-time/durability, to ascertain production prices (e.g. DKK/kWh) and to identify possibilities for reducing the price, etc. This is crucial in relation to commercial investors.. The financing through RDD-funds of demonstration projects is formally limited by the EU s rules on state aid, under which it may not be possible to transform such demonstration projects into industrial use or commercial utilisation. 11 The selection of demonstration projects may be based on general criteria, such as: 1. The expected commercial potential, including the project s possibilities on the future (international) market. 2. The expected energy policy potential (including fulfilment of the goals for reduction of CO2 emissions, supply security, energy efficiency, energy system efficiency). It is important to include transversal system considerations. 3. The need for demonstration as a basis for development of models for simulating features. 4. The possibilities, through demonstration, to be able to identify interesting areas for subcontractors. D. Strengthening of Denmark s position in the international RDD-programmes and strengthening the interaction with and utilisation of international knowledge Denmark participates in several international collaboration fora about RDD in the field of energy. Most important of these is the collaboration within the EU and the participation in the EU s framework programmes for research. Other important fora include the Nordic energy research collaboration and the work in the International Energy Agency, IEA. Finally, there are also possibilities for developing bilateral collaboration. Historically, Denmark has had a strong position in the EU s research programmes in the field of energy. EU-funding of Danish research institutions and companies has generally exceeded 11 Quoted here from Communication from the EU-Commission 96/C 45/06 12

Denmark s financial contributions to the programmes. The EU now tenders projects with multiple participants from more countries, which requires good European networks and strong players, as well as international acceptance of the project ideas. Participation in the projects requires good liquidity and a relatively high level of co-funding (including demonstration plants). These conditions create a barrier for small companies. In addition, the work associated with preparing applications is extensive, time-consuming, expensive and requires substantial, specific knowledge. Denmark s position in relation to EU-programmes can be strengthened through participation in alliances, e.g. ERA-networks, technology platforms, etc. In these areas, the Danish presence is relatively weak, however. The Ministry of Science, Technology and Innovation has limited means to finance pre-projects (for small and medium-sized companies) in preparation of a later European application. In total, these conditions mean that Danish players with a good resource base manage well, while small or inexperienced players give up. In the other international collaboration fora it is also important to ensure a focused and qualified Danish participation. Part of this participation has traditionally been supported through the RDD-programmes, particularly the EFP-programme. To maintain a strong Danish position and exploit and expand the Danish core strengths, the following are recommended: 1. that the Danish research programmes are designed to interact with international programmes in the form of support for network formation, coordination and alignment of goals and RDD-priorities, joint tenders and funding in collaboration with other countries, focused and open prioritisation of the activities in which Danish players participate 2. that Danish players enter into alliances with the strongest partners abroad 3. an increased, active Danish participation in and utilisation of ERA-networks, technology platforms, implementing agreements, the IEA-collaboration and focus on competence producing projects 4. increased assistance (financial and otherwise) to small and inexperienced Danish players, e.g. in the form of dissemination of knowledge about possibilities, liquidity and risk management, cofunding and top-up funding as well as support for project preparation 5. a more targeted effort to lobby in relation to the international programmes, not least the EU s framework programmes 6. that the work also comprises participation in international standardisation work. E. Development of a basis for current feedback of experience In order to achieve the best possible effect of the funds granted as subsidies, current feed back of experience from projects (results) as well as programmes (effects) is necessary. The result assessment in the form of project evaluation can be carried out on the basis of project goals and milestones and must determine whether the expected results were achieved. Also goals which are not fulfilled or results which are not fully satisfactory may lead to learn- 13

ing. Experience from these may, i.a., be used for the development of assessment criteria and formulation of tenders. Efficiency assessments must determine whether the intended (or other) effects have been achieved, e.g. in the form of commercialisation. Consequently, these must be made some years after the completion of the projects. Experience from these may, i.a., be used for the development of strategy and focus areas. Reference is made to the model in appendix C. It is recommended that experience be gathered on a continuous basis in order to utilise this in the best possible way through: 1. Project follow-up in each individual project 2. Project evaluation, where each individual project is assessed on the basis of its own goals and milestones 3. Efficiency assessment, where the effects of the projects within a given technology area are assessed together. F. Active coordination and clearer division of responsibilities between the RDDprogrammes A certain, limited overlap and improved coordination among the four RDD-programmes in the field of energy are required. Likewise necessary is active coordination among, partly, the four RDD-programmes in the field of energy themselves, and, partly, between these programmes and the general innovation programmes, including those under the Danish National Advanced Technology Foundation. ACER exercises a role in the active coordination of these programmes. It is suggested that the proposed division of responsibilities is not based on a formal delimitation between the programmes, beyond what is already given. On the contrary, there are advantages of a certain overlap. The method to achieve a reasonable division of responsibilities is to lay down a clear profile for each individual programme and to balance these profiles against each other. Determination of profiles must comprise both the individual programme s position in relation to the focus areas and assigning their role within the areas of strategic research, technology development and demonstration. The Strategic Research Council s programme area for Energy and Environment (EnMi) overlaps considerably with the research part of PSO (ForskEL and ELFORSK) and EFP, and this programme area should therefore be part of the division of responsibilities. The PSO-programmes are formally limited to production and consumption of electricity. The programmes of the Strategic Research Council, and to a certain extent also EFP, must primarily deal with research. A draft overview of this division of work is shown in figure 1 below. EnMi covers almost all sub-areas and is not included in the overview in figure 1. 14

Figure 1: RDD-programmes position in relation to the focus areas Development of new energy technologies Development of energy systems and markets Production technologies, already applied New production technologies Regulation, storage and other system technology Elec ForskEL ForskEL ForskEL Energy use ELFORSK EFP Energy systems, markets, interaction production/ consumption Interaction between transport sector and energy systems Energy and society, etc. ForskEL EFP EFP EFP Non-elec EFP EFP EFP EFP EFP EFP EFP The desired focusing first of all means that EFP must be focused on the energy system and development of technologies which do not produce electricity and on energy efficiency in the electricity area. Furthermore, a division of responsibilities in relation to the activity areas Research, Development and Demonstration is required, in accordance with which research with substantial elements of basic research is the responsibility of the Strategic Research Council, currently EnMi. A draft outline of this division of responsibilities is shown in figure 2. Figure 2: RDD programmes position in relation to state-of-the-art research in the area Research Development Demonstration ForskEL EnMi (DSF) ELFORSK EFP EnMi: The Strategic research Council s programme commission on Energy and Environment ForskEL: Programme on environment friendly electricity production ELFORSK: Programme on efficient electricity use EFP: Energy Research Programme 4. Collaboration with the other parties in the chain of development The RDD-strategy directs itself towards strategic research, development and demonstration in the field of energy. However, there are also a number of important relations between the RDD com- 15

prised by the strategy, and areas like basic research and pre-commercial and commercial innovation activities. The implementation of the work performed under the RDD-programmes must thus greatly consider the conditions elsewhere in the chain of development ( from initial idea to commercial utilisation ). Post RDD-work may be important for the strategy s focus areas, but is at the same time outside the strategy s focus area. Already today there is interaction, but it is also necessary that this interaction is improved. Therefore, interaction with these areas forms part of the strategy. In addition, the work with the present strategy document has led to observations relating to framework conditions for technology development in the field of energy which must also be considered. For example, the special framework conditions for the energy sector do not always support the creation of a market pull, which may promote innovation. Examples are special taxes and duties in the field of energy. 12 12 At the ACER-conference Energy research the pathway to growth on 15 September 2005 the example with conversion from natural gas to bio mass in decentralised combined power and heating plants was mentioned. 16

Appendix A Appendix A. Areas of activity 13 and measures in the chain of development for energy technologies Areas of activity in the chain of development Players 14 Policy formulation and measures 15 Basic research/free research Strategic research (which may also include laboratory experiments, etc.) Development (which may include pilot testing, often small scale, industrial participation) Demonstration (testing in full scale, industrial project management) The Danish Councils for Independent Research The Danish National Research Foundation The universities EFP (Danish Energy Authority) ForskEL (Energinet.dk) ELFORSK (ELFOR) The Strategic Research Council s programme committee for Environment and Energy The High Technology Fund Ministry of Science, Technology and Innovation Denmark s Council for Research Policy Research policy Allocations for independent research and basic research Ministry of Transport and Energy Danish Energy Authority ACER The Danish Council for Strategic Research Allocations for strategic research Energy policy/industrial policy Strategies Pre-commercial innovation (testing in small series, interaction with buyers, project management, either industrial or large buyer, for example the projects Sun 300, Sun 1000. Supported commercial market development (buyers are players), subsidies may be direct or in the form of special settling prices for deliveries to the electricity grid. Commercial (neither directly nor indirectly supported) The Danish National Advanced Technology Foundation Ministry of Science, Technology and Innovation Council for Technology and Innovation (CTI) 16 Approved Technological Service Ministry of Science, Technology and Innovation; focus area collaboration on innovation. Council for Technology and Innovation (CTI) Danish Energy Authority, National Agency of Environmental Protection Funding for innovation 17 Energy policy and environment policy, e.g. in connection with executive directions/prohibitions Special settling prices for renewable energy Subsidies for capital equipment Standardisation, testing. Approval and certification Council for Technology and Innovation (CTI) General industrial policy (framework conditions) 13 The reason why the concept of phases is not applied is that it is not a question of a serial development. On the contrary, research into innovation indicates that the most efficient innovation is non-serial. 14 The description of players only includes public players related to project financing. As a rule of thumb, those public or private players who work with industrial development and corporate financing (innovation environments, the Growth Fund, venture-capital companies, etc.) are not included. 15 This column comprises both policy formulating players and examples of measures. 16 Reference may be made, for example, to the Ministry of Science, Technology and Innovation s focus area Collaboration about innovation, which includes innovation consortia, technological service, innovation environments, Nordic Innovation Centre, etc. 17 In the government s budget for 2006 this refers, i.a., to funds stated in the table in appendix B. 17

Appendix B Appendix B. Funds for innovation at the Ministry of Science, Technology and Innovation Innovation section 2005 DKKm Collaboration on innovation, including Approved Technological Service and innovation consortia 2006 DKKm 2007 DKKm 2008 DKKm 2009 DKKm 316 364 389 89 389 Collaboration about networks 58 23 23 25 25 Collaboration about competences 64 64 64 50 50 Regional initiatives, high technology 17 41 41 39 39 Co-funding of innovation environments 121 120 120 120 120 Total 576 612 637 623 623 Source: Budget proposal 2006 The High Technology Fund 2005 DKKm 2006 DKKm 2007 DKKm 2008 DKKm Expenditure appropriation 100 268 n.a. n. a. n. a. Income 100 279.8 n. a n. a n. a Source: Budget proposal 2006 2009 DKKm The capital in the Danish National Advanced Technology Foundation is to be built up gradually over the period 2005-2012, so that by 2012 the goal is for the Fund to have a basic capital of DKK 16 billion. The table includes items from the budget proposal. The budget agreement lays down that the Fund will receive an allocation of DKK 2 billion in 2006. In 2005, the Fund is able to distribute approximately DKK 200m. 18

Appendix C Appendix C. Feedback mechanisms in R&D programmes The figure below is a schematic description of some of the possibilities of asking questions in relation to development projects. The schema involves three, in principle, different questions, each of which gives feedback to the management of the development activities. 1. How has the project developed? The benchmark for this assessment is the project description of the project plan. Feedback is current and is reported to the programme management as part of its supervision of the project in order to keep the projects on track. 2. What results are achieved? Here, the benchmark is the goals set as regards results contained in the project description (adjustments may be made in connection with assessment and approval of project application). In the project report those who are responsible for the project describe its results and these may be compared to the goals set for these results. An external project evaluation may be carried out and used as feedback in the determination and application of assessment criteria and the assessment process itself. 3. What effects have been achieved? The benchmark for this assessment is a fixed strategy for a focus area and the strategic goals that form part hereof. These strategy goals may be measurable and equipped with milestones. By carrying out assessments of effects in this way, it is possible to provide feedback for the strategic planning, and similarly it is possible to assess the usefulness of the effort for society. Extract from an analysis contributed by Tage Dræbye to ELTRA s Environmentally friendly electricity production 2004 19