The State and Prospects of European Energy Research

ISSN 1018-5593 Community research EUROPEAN COMMISSION The State and Prospects of European Energy Research Comparison of Commission, Member and Non-Member States' R&D Portfolios EUR 22397

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The State and Prospects of European Energy Research Comparison of Commission, Member and Non-Member States' R&D Portfolios 2006 Directorate-General for Research Sustainable Energy Systems EUR 22397

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TABLE OF CONTENTS Foreword...5 Executive Summary...6 Introduction...9 Scope and Objectives...9 Definitions and Methodology...9 Global Research in Non-Nuclear Energy: Positioning EC Portfolio vis-à-vis other National Portfolios...12 Evolution of EC Research Portfolio...12 Key Objectives of EC Strategy in Non-Nuclear Energy research (NNE)...13 EC RTD Portfolio: Overall picture and trends...14 Hydrogen and Fuel Cells Portfolios...16 Overview: Major Fields of Research and Key Nations Involved...16 Research Priorities in EC, Member States and Third Countries...17 Funding for Hydrogen and Fuel Cells Research...23 Evaluation and Conclusions...25 CO 2 Capture and Storage...27 Overview: Major Fields of Research and Key Nations Involved...27 Research Priorities in EC, Member States and Third Countries...28 Funding For CO 2 Capture and Storage Research...31 Evaluation and Conclusions...34 Photovoltaics...36 Overview: Major Fields of Research and Key Nations Involved...36 Research Priorities in EC, Member States and Third Countries...37 Funding for Photovoltaic Energy Research...39 Evaluation and Conclusions...41 Concentrated Solar Thermal...43 Overview: Major Fields of Research and Key Nations Involved...43 Research Objectives in EC, Member States and Third Countries...44 Funding for Solar Thermal System Research...46 Evaluation and Conclusions...47 Wind Energy...50 Overview: Major Fields of Research and Key Nations Involved...50 Research Objectives in EC, Member States and Third Countries...51 Funding for Wind Energy Research...52 Evaluation and Conclusions...54 Ocean Energy...56 Overview: Major Fields of Research and Key Nations Involved...56 Research Objectives in EC, Member States and Third Countries...57 Funding for Ocean Energy System Research...59 Evaluation and Conclusions...60 Bioenergy...63 Overview: Major Fields of Research and Key Nations Involved...63 Research Objectives in EC, Member States and Third Countries...64 Funding for Bioenergy...67 Evaluation and Conclusions...68 3

Geothermal Energy...71 Overview: Major Fields of Research and Key Nations Involved...71 Research Objectives in EC, Member States and Third Countries...72 Funding for Geothermal Energy Research...73 Evaluation and Conclusions...75 Electricity Grids...76 Overview: Major Fields of Research and Key Nations Involved...76 Research Priorities in EC, Member States and Third Countries...76 Funding for Grid Technologies Research...80 Evaluation and Conclusions...82 Socio-Economic Research...84 Overview: Major Fields of Research...84 Research Objectives in EC...84 Funding and Key Conclusions for Socio-Economic Research...85 Strategic Conclusions on the EC RTD Portfolio...87 Comparison of RTD Overall Goals...87 Comparison of Portfolios Funding and Structure...88 Comparison of Portfolios Specific Objectives...92 Comparison of Portfolios R&D Orientation...94 Stakeholder Integration...95 Sources and Literature...96 Annexes...101 Annex I Hydrogen and Fuel Cells Portfolios...101 Annex II CO 2 Capture and Storage...106 Annex III Photovoltaics...109 Annex IV Concentrated Solar Thermal...111 Annex V Wind Energy...113 Annex VI Ocean Energy...115 Annex VII Bioenergy...115 Annex VIII Geothermal Energy...117 Annex IX Electricity Grids...118 Annex X Socio-economic Research...121 4

Foreword This publication is part of a wider set of studies and reports, undertaken since 2002 within the Unit in charge of strategic and policy aspects of energy research. This overall work dealing with analysis, reflection and proposals aims at offering a shared basis of knowledge and understanding to all stakeholders involved in energy research in Europe. Its objective is to provide sound information, quantitative and qualitative, which could help: To better design, implement and assess energy research activities in the European Union. To improve their efficiency through increased cooperation and collaboration, along the European Research Area approach. The study was carried out within a contract awarded to IZT and Frost & Sullivan under the supervision of Jacques Bonnin from the Services of the European Commission. The task entrusted to the contractors was to compare and assess the main differences and commonalities of energy research portfolios between Framework Programme (FP), major Member States' activities on the one hand and major third countries' programmes on the other in the same fields. The results presented here illustrate the need to improve synergies between FP and Members States' activities, to stimulate commitment and involvement of industry in these areas. They also highligt the necessity to strengthen our collective ability to anticipate major S&T developments, especially through careful analysis, including a dimension of "policy and technology watch" of what our main competitors are doing. I wish to conclude by thanking the numerous representatives from industry, public administrations and researchers who discussed with us and contributed to this report at the various stages of its development. Michel Poireau Head of Unit Energy Research Strategy and Policy 5

Executive Summary European Energy Research portfolio State and Prospects of European Energy Research This work is an attempt to map and compare the publicly funded research efforts carried out by the EC and Member States in the EU and those undertaken in the US and in Japan. Because of the resources available to the project it does not pretend to present an exhaustive picture of the situation in each of these countries but provides a number of interesting findings shedding a light on the various research agendas and the coordination and links (or absence of) between those agenda, including promising areas for collaboration, both at European and International levels. The figures presented in the tables below correspond to (civilian) public funding only and do not include private funding figures. Therefore an important part of the question is not dealt with. In particular, neither direct support to industry research through contracts given by national administrations is not taken into account, nor are efforts carried by industry on their own funds. The analysis has been broken down following traditional energy research fields (Hydrogen and fuel cells, CO 2 capture and storage, Photovoltaics, Concentrated Solar thermal, Wind Energy, Ocean systems, Bio energy, Geo Thermal Energy). A number of global remarks, findings, and questions come up from this study. European Public Research effort as a whole is important in financial terms when compared to its close competitors (i.e. mainly US and Japan) albeit with diverse effectiveness. With the limitations expressed above, Europe as a whole (European Commission and its Member states) puts more public resources in non nuclear energy research than its competitors, especially in the area of renewable energies. This situation can look paradoxical at a time when the US have been overtaking the EU in the gas turbine business, Japan is in the process of doing the same in the PV area and in the fuel cell domain where most of the industrial advances appear to be carried out in the US. The research scope appears very wide and multi faceted, however. This is mainly linked to the fragmented nature of European research, the wide difference of cultures and national circumstances between Member states and the institutional nature of the European Union. An important part of the research funded at EC level (approximately from 15% to 25% depending on the themes) Although the EC framework Programme represents a relatively large share of European Energy Research it is far to have the size to achieve the structuring effect that has been reached in an area such as nuclear fusion where Europe is the leading force in the world. It cannot have the same impact on the research scene as the DOE research programme and infrastructure funding has. Furthermore, because of the nature of the process leading to the definition of the various themes, it has to accommodate the various requests made by Member States through the council of by the parliament. Its resources are therefore spread over a very large range of themes. This clearly appears through the wide schemes of issues dealt with. The most important part is funded by Member States. This is in particular the case for CO 2 capture and sequestration where efforts carried out by three major Member States and Norway are each superior or at least at the level the ones carried out at EC level, while each of them is still not sufficient to engage in demonstration projects such as the Futuregen project supported by the DOE with a budget of 1 billion dollars 6

... On the one hand... This situation gives more flexibility to centralised systems. The US and Japan can more easily prioritise their programmes and ruthlessly cut activities in areas which do not appear as having a future such as geothermal and ocean energy for Japan. In the Bio energy area the US heavily focuses on a limited number of subjects such as Feedstock Interfaces, sugar Platform, Termochemical Platform, Products and Integrated Biorefineries with a research budget which is not very far from the global EU budget (leaving aside co firing, however). The chances of success of these research topics therefore appear important while the European choices appear random. In addition they can better coordinate at National levels their activities between various agencies. Coordinated efforts between the Department of Energy and the Department of Agriculture in the biomass sector are one example In the biomass sector, aside from the European Commission which carries out an important research efforts the most active countries are Finland, Netherlands and Sweden. However each country develops its own technology leading a very much fragmented research area, potentially leading to sub criticality. Areas where large investments are necessary (CO 2 capture and sequestration) might also benefit from a more coordinated central approach.... On the other hand... Europe has a wider range of Technologies/opportunities which are best suited to various regional/local circumstances. In addition to mainstream research in the fields of Hydrogen and fuel cells, bio energy, clean coal, Photovoltaic, Europe as a whole funds a wide range of technologies including wind energy, geothermal, solar thermal, ocean energy, all technologies which are not funded This policy has paid out for wind technologies where efforts of a limited number of countries including small countries aside from Germany such as Denmark, Netherlands, complemented by EC have handsomely paid off with EU industry taking the lead in the world. A similar approach with support mainly provided by another limited number of countries (UK, Denmark and Portugal) in Ocean energy could have the potential to yield similar results to wind. However, apart from wind where industry has definitely taken the lead following its economical success, most of the minor technologies (solar thermal, geo thermal, ocean energy, etc ) have still to materialise in terms of business success and significant contributors to the energy mix. The role of the EC Within this very much diversified picture one can wonder what should be the role of the EC and in particular its Research and Development Framework Programme. Compared to a DOE civilian research budget of around 3.5 billion dollars a year it is clear the EC cannot have as proactive a role in making strategic choices and in implementing them as the DOE can have. It is therefore important to draw the lessons to be drawn of this situation with respect to the role of the Commission in fostering energy research. A balance has therefore to be achieved between the necessary application of the subsidiarity principle and the legitimacy of Member states to carry out the actions they assume are the best according to their specific circumstances and the necessity to optimise European research efforts, avoid duplication of efforts and have an EU research strategy why satisfies the global EU objectives of competitiveness, security of supply and environmental leadership. A number of activities and tools such as ERA Nets, Technology Platforms, Joint Technology Initiatives and Joint Implementation of Research programmes are already available to support this process. 7

Introduction Scope and Objectives The overall aim of the study is to obtain a broad picture of the EC NNE RTD portfolio in comparison to Member States and Third Country RTD by means of a comparative and synthetic approach. The analysis primarily seeks to define the broad characteristics of the portfolio, establish gaps and duplications and highlight success stories. The study also aims to provide recommendations on how to structure and orient the portfolio and thereby assist the Commission in progressing: from data to information and understanding from a project view to a portfolio perspective from an EC-centred view to a European (EC and Member States) and global perspective featuring important Third Countries. It is important to note that the focus of this study is strictly on R&D and does not address the more market-related aspects of the innovation process. Definitions and Methodology Methodology The core part of the study is to identify and assess the EC NNE research portfolios in the different fields of reference and to compare these with corresponding portfolios in Member States, Associated States and key Third Countries. In order to achieve results representative for the whole portfolio on the one hand and to produce an in-depth analysis that allows generation of practical recommendations on the other, a broad mix of quantitative and qualitative analytical methods has been employed. The starting point for the characterisation of the EU RTD portfolio in the fields of reference was a mapping of all research activities with regard to the number of projects and volume (allocated public funds), their distribution between the technology paths and their development over time. For a deeper understanding and an in-depth examination of the EC RTD portfolio in the different fields of reference, extensive interviews were conducted with the scientific officers at the European Commission, together with desk research of published information from the Commission and project websites. The study also encompassed a survey of RTD portfolios of Member States, Associated States and Third Countries. A semi-standardised questionnaire was used for the telephone interviews with key individuals responsible for research in the different fields of reference in the various countries. Some strategic interviews were also conducted with the heads of research and other key individuals in different countries to get a broad perspective of their national non-nuclear energy research portfolios. Where possible, data was collated to present funding information for important Member States and key Third Countries. Note: The study only covers public funding at the EC and national levels. Public funding on a sub-national level (federal state, province or municipal) as well as industry funding is not covered in this report. We are aware that the inclusion of sub-national funding and industry funding could change the funding landscape presented here, but reliable data is not available. Even on a qualitative basis the net effect is unclear as, for example, the substantial state-level funding of the US could be matched by the sub-national funding of major European countries like Germany, Spain and Italy. 9

Lighthouse Project Criteria The study identifies certain initiatives in the fields of reference analysed in the report as lighthouse projects. These reflect current Best Practice and are used to exemplify and illustrate the main findings of the study. A lighthouse project has been defined as a project that combines some or all of the following key characteristics: Involves large-scale demonstration. Facilitates significant technology improvement/technology infrastructure development/world leadership. Influences policy decisions in terms of defining R&D priorities. Increases public awareness and acceptance of the technology by showcasing the technology. Paves the way for future research and development. Allows major improvements in technical specification and standardisation to pave the way for commercialisation throughout Europe. Facilitates integration of new technologies into existing infrastructures. Key Countries The research and development activities in the key European Member States and Third Countries have been analysed in the respective fields of reference. This analysis helps highlight the respective objectives and focus of national research portfolios. The key countries highlighted in the report have been selected on the basis of the level of funding they contribute to research in the various fields of reference and also on the basis of feedback received during face-to-face discussions with the scientific officers in Brussels. The funding information has been obtained from the IEA database and from literature review (published policy papers, presentations, etc.), as well as through interviews with the technology and strategy experts in different countries. Currency Conversion Rates To allow for easier comparisons, all amounts in foreign currencies mentioned in the present report have been systematically converted into the euro currency. The indicative exchange rates applied are the interbank rates as at 31 March 2005: Foreign Currency Equivalent in 1 US Dollar 0.84 1 Australian Dollar 0.64 1 Canadian Dollar 0.72 1 Norwegian Kroner 0.13 1 Japanese Yen 0.0072 1 British Pound 1.455 1 Chinese Yuan 0.09368 Key Abbreviations used in the Report DOE US Department of Energy DOE-EERE US Department of Energy Office for Energy Efficiency and Renewable Energy EC European Commission ERA European Research Area ERA-NET European Research Area NETwork ETPs European Technology Platforms EU European Union FC Fuel Cells FP Framework Programme FP5 5 th Framework Programme (1998 2002) FP6 6 th Framework Programme (2003 2006) FP7 7 th Framework Programme (2007-2013) 10

IEA IP IPHE MCFC METI MS NEDO NNE NoE PAFC PEM FC PV RITE RTD SOFC STREP International Energy Agency Integrated Project International Platform for Hydrogen Economy Molten Carbonate Fuel Cell Ministry of Economy, Trade and Industry (Japan) Member States (of European Union) New Energy and Industrial Technology Development Organisation (Japan) Non Nuclear Energy Network of Excellence Phosphoric Acid Fuel Cell Proton Exchange Membrane Fuel Cell Photovoltaic Research Institute of Innovative Technology for the Earth (Japan) Research and Technological Development Solid Oxide Fuel Cell Specific Targeted Research Projects. Research Horizon and Focus The EC FP6 portfolio is the focus of analysis of this study. However, the FP5 portfolio has also been studied to understand the shift in research priorities and level of funding from FP5 to FP6. Some forward-looking comments about FP7 have also been provided to analyse future research trends. Note: Since the complete information relating to FP6 was not available at the time of writing, only the funding data relating to the first, second and third calls for FP6 has been included in the funding analysis. However this represents approximately 90% of FP6 funding available. Certain forward-looking comments regarding the 4 th call for proposals for FP6 have been mentioned, wherever possible, to facilitate understanding of the FP6 portfolio structure. However, caution must be exercised when analysing funding data on the FP6 portfolio as it may not be a true reflection of the entire portfolio. The R&D includes both basic research that is typically long-term research aimed at improving technologies, and applied research that is shorter-term research aiming to bring the technologies to the market. Short to medium-term research is defined as research that aims to achieve the 2010 energy policy objectives. Medium to long-term research, on the other hand, is defined as research that is aimed at delivering results in a time horizon beyond 2010. The demonstration component of projects has also been considered as a part of R&D and examples have been provided for each of the technologies to illustrate the nature and the scope of the research across regions (Europe, US and Japan). There are references to both projects and programmes in this document. A project is typically set up to produce a unique and pre-defined outcome or result at a pre-specified time and using pre-determined resources. In comparison, a programme is a coordination of projects organised to achieve benefits of strategic importance. 11

Global Research in Non-Nuclear Energy: Positioning EC Portfolio vis-à-vis other National Portfolios Evolution of EC Research Portfolio Background Europe is suffering from structural weaknesses where research is concerned 1. Europe lags behind the United States and Japan both aiming to be world leaders in research and innovation in terms of public research spending as a proportion of GDP, of researchers, and of the number of patents and high-technology exports per capita. Furthermore, a decisive factor characterising research in Europe is the co-existence of national and EU-funded research activities. This is in stark contrast to the nationally organised research areas of Japan and USA. In the context of increasingly complex and interdisciplinary research, a significant step in overcoming the obstacles is to establish a European Research Area (ERA). The overall aim is to make a tangible improvement in Europe s innovation performance, in the short, medium and long term, by stimulating a better integration between research and innovation, and by working towards a more coherent and innovation-friendly policy and regulatory environment across the European Union 2. Amongst other elements this strategy includes: Organising co-operation at different levels both within Europe and internationally. Creating conditions that make it possible to increase the impact of European research efforts by strengthening the coherence of research activities and policies conducted in Europe. Enhancing coordination between research conducted at national and EU level. Developing appropriate mechanisms for networking national and joint research programmes in order to take greater advantage of the concerted resources devoted to R&D in the Member States. Improving the environment for private research investment and R&D partnerships. Stepping up public and private-sector research efforts in the EU. The sixth framework programme for Research and Technological Development (FP6) is the main financial and legal instrument of the European Commission for implementing the ERA. Thus, a main objective of FP6 is to contribute to the establishment of the European Research Area by improving integration and coordination of research in Europe which, so far, is largely fragmented 3. At the same time research will be targeted at strengthening the competitiveness of the European economy, solving major societal issues and supporting the formulation and implementation of other EU policies. The work programme embodies specific programmes emphasising strategic research areas such as Sustainable development, global change and ecosystems. One part gives attention to the Sustainable Energy System. 1 http://europa.eu.int/comm/research/growth/gcc/projects/in-action-virtual-instit.html 2 OJ L 294, 30.9.2002, p. 48 3 Compare inter alia: DG Research; DG TREN (2003), Clean, Safe And Efficient Energy For Europe. Impact Assessment of Non-Nuclear Energy Projects Implemented under The Fourth Framework Programme. Synthesis Report, Brussels, p. 38; Greer, Heather (2002), Assessment of The Development of The European Research Area In Non-Nuclear Energy Research. Study Report to the EC Research Directorate- General (Energy Programme), Brussels, p. 39 12

The prominence of energy in the development of welfare in the European Union and its competitiveness on global markets, as well as the challenge of reducing Europe s increasing energy dependence 4 and meeting climatic and environmental concerns 5, are major features in structuring the framework within which RTD in Non-Nuclear Energy takes place. Numerous legal instruments such as Directives 6 are complementing the efforts to meet the objectives. Key Objectives of EC Strategy in Non-Nuclear Energy research (NNE) The key objectives and priorities for EC research in NNE have been identified in a linked evaluation, design and decision-making process using a variety of approaches to assess impacts, taking into account lessons learnt from FP5, and involving various European bodies as well as Member States and stakeholders from industry and the research community. Reflecting the above-mentioned objectives and concerns of Europe s future development, the thematic focus of NNE research is to achieve more sustainable energy systems and services by aligning research activities to the development of cleaner energy systems, including renewable energies, economical and efficient use of energy, and socio-economic aspects of energy. Three mutually connected elements frame the scope of RTD in NNE. Structuring research activities in different fields of reference to ensure that the diversity of promising technologies is represented and that RTD is arranged according to the varying time-frames that technologies have on their avenue to commercialisation. Coordinating the strategic outline of research through developing and promoting a European Research Area in conjunction with the application of new instruments: ERA-NET: Designed to step up the cooperation and coordination of research activities carried out at national or regional level, through the networking of research activities conducted at these different levels, and the mutual opening of national and regional research programmes. NoE: Here the objective is to strengthen scientific and technological excellence on a particular topic through the durable integration of the research capacities of the participants (both in terms of resources and expertise) in order to overcome the fragmentation of European research. IP: Designed to support objective-driven research, where the primary deliverable is new knowledge on products, processes, services, etc. Strengthening the collaboration of RTD between countries and researchers and industry, leading to added value in form of targeted results and international front-line competence as well as enhanced competitiveness. Some interesting trends have been noticed between FP5 and FP6: Along the lines of decreased funding in NNE, certain thematic areas such as hydrocarbons and coal are no longer specifically addressed. An increased effort is laid on coordinating and clustering RTD in order to reach critical mass, through an enhanced exchange of information and better linking of EU and Member State RTD programmes. The European Research Area is strongly addressed through using new procedures, instruments and initiatives such as ERA-NET scheme, CA and European Technology Platforms. EC RTD moving towards larger volumes and more integrated projects and with more involvement of industry. 4 European Commission: Green Paper on the Security of Energy Supplies (COM(2000)769) 5 European Commission: Energy for the Future: Renewable Sources of Energy. White Paper for a Community Strategy and Action Plan (COM(97)599 26.11.1997) 6 for example: Directive 2001/77/EC on the promotion of electricity from renewable energy sources, 27 Sept 2001 13

The Work Programme differentiates clearly between research with a potential for exploitation in the short to medium term and that having an impact in the medium to longer term. Budgetary appropriations are intended to be split equally between the two time-frames: > With an emphasis on 2010 energy policy objectives, short to medium term project design, with an optional research component of up to about 20 %, is designed to achieve greater efficiency, cost reduction and transfer through: - Integrated demonstration action under full-scale operation conditions, including effective production procedures - Implementation and integration of new technologies into existing technologies/infrastructure/systems - The combination of different technologies with their respective advantages - Input for future development of energy policy and legislation as well as improvement of existing regulatory measures. > Medium to long term research should deliver results with a time horizon generally beyond 2010, and should address: - Further development before technologies are ready for full-scale commercial use - Pre-normative and socio-economic research as well as the validation of technical and economical feasibility in pilot plants and prototypes - The generation, exploitation and dissemination of new knowledge. EC RTD Portfolio: Overall picture and trends The NNE RTD portfolio in FP6 comprises five clusters of technologies, which are: Fuel Cells (FC), including their applications New technologies for energy carriers/transport and storage, in particular hydrogen New advanced concepts in renewable energy technologies Capture and sequestration of CO 2 associated with cleaner fossil fuel plants Socio-economic tools and concepts for energy strategy. The existing budget for NNE is roughly divided into a share of 40% for renewables, 55% for the other technologies and 5% for coordinating and cross-cutting activities. For every technology cluster the Commission has specified research areas and topics (see below), which are addressed in different calls 7. Diverse (new) instruments with different purposes are used in order to meet identified challenges in research areas, to bridge gaps and meet objectives. The application of these instruments influences the layout of research (programme approach, objective-driven, providing leadership etc.), the degree of vertical or horizontal integration expected, and the amount of potential funding. Another step in building the NNE RTD portfolio applies at the level of final project selection: this depends on the quality of proposals submitted, which are competing within the whole area addressed in the call. The Commission intervenes in this process when areas of research assessed to be strategically important are not appropriately covered by approvals. Although a complete overview of the 6 th Framework Programme was not available at the time of writing, some key trends are already visible. Reflecting the implementation of the new instruments compared with FP5, the number of projects in FP6 has decreased (see table below). On the other hand, the average project funding has increased from about 1.4 M to about 3.5 M. Based on the provisional information the ratio between funding and eligible costs deteriorated from FP5 to FP6. Although the third call was not complete and the fourth call was not taken into account at all with respect to funding allocation, some areas like hydrogen, fuel cells, wind and ocean systems already have a bigger absolute funding than in FP5. 7 This analysis comprises information from the first three calls of FP6 14

Summarised EC Funding of Non-Nuclear Energy RTD in different fields of reference Sustainable Energy Systems Technology Paths (Strategically important areas and topics) EC Funding in FP5 1 FP6 2 Number of Eligible Total EC Number of Eligible Total EC Projects Costs in M Contribution Projects Costs in M Contribution in M in M New Advanced Concepts in Renewable Energy Technologies Others NNE PV Bioenergy Wind Geothermal Systems Ocean Concentrated Solar Thermal Total renewables Fuel Cells CO 2 storage and capture Hydrogen Grid Socio-economic Total Others Total 85 93 20 1 7 7 213 41 9 25 48 11 134 347 268.26 549.85 44.69 24.60 11.67 25.10 924.17 228.52 31.80 72.10 121.06 8.10 461.58 1,385.75 105.30 110.48 24.36 6.50 6.85 11.79 258.78 97.43 16.00 38.57 62.61 5.99 220.59 479.37 1 Derived from different project synopses, EC officers information and CORDIS 2 Preliminary data; third call projects covered partially, fourth call of FP6 not covered; where no eligible costs are available, those figures were created by adding an average share of 60% to the funding. Note: EC funding figures mentioned in this report include the funding provided by different departments of the Commission, e.g. DG RTD J (Energy), DG RTD H (Transport), DG TREN, etc. 19 30 10 5 7 6 77 33 18 38 15 20 124 201 137.11 250.97 79.74 39.49 30.78 17.35 555.44 286.65 121.86 213.99 84.76 23.57 730.83 1,286.28 75.73 127.36 31.59 13.36 14.03 10.33 272.40 153.92 68.71 125.69 50.54 23.59 422.45 694.85 15

Hydrogen and Fuel Cells Portfolios Overview: Major Fields of Research and Key Nations Involved Fuel Cells Hydrogen R&D Areas MCFC, PEMFC, SOFC, Materials, Hydrogen production, hydrogen storage, safety codes and standards safety codes and standards State of Commercialisation Medium term (around 2015-20) Long term (around 2050) Key Nations Expected contribution to EU Energy policy targets Japan, US, Germany Ensuring energy supply security while mitigating climate change to allow sustainable development EC Policy Backing Key Member States Fuel Cells RTD Fossil Fuels Economy Stationary FC for niche applications MCFC/SOFC (<500kW) PEMFC (<300kW) No EC Directive on hydrogen and fuel cells as yet, although the Biofuels Directive (Directive 92/81/EEC) promotes the use of hydrogen as an alternative fuel for transportation Germany, UK, France, Italy 1st Generation on H 2 vehicule fleet SOFC (<10MW) FC for passenger cars and micro-applications RTD Demonstration, Niche Applications 2nd Generation H 2 vehicule fleet Penetration of Fuel Cells in DG applications H 2 powered Fuel Cells vehicules Widespread use of Fuel Cells in DG, automotive and transportation applications Increasing Market Penetration 2000 2010 2020 2030 2040 2050 2000 2010 2020 2030 2040 2050 Hydrogen RTD H 2 from gas reforming and electrolysis H 2 powered Fuel Cells in aviation Developing refueling stations with local H 2 production onsite H 2 from fossil fuels with carbon sequestration H 2 from renewables, interconnection of H 2 distribution grids Development of H 2 pipeline infrastructure Increase in production of hydrogen from renewables and CO 2 sequestration Hydrogen Economy Direct H 2 production from renewables, de-carbonised H 2 economy Graph 1: Global Hydrogen and Fuel Cell Technology Development (2000-2050) 8 8 Chart based on the Hydrogen and Fuel Cells Technology roadmap prepared by HYNET 16

Significant advances are expected in the field of hydrogen and fuel cell technology development in the coming decades. These technologies are still at a nascent stage and it is expected that, backed by research, fuel cells will be commercialised, even though only for niche applications, by around 2015-2020. With the passage of time and development of technology, they will be mass commercialised and used in industries as diverse as automotive, power generation and consumer electronics by around 2035-2040 9. The next couple of decades will also see the development of hydrogen infrastructure and the development of hydrogen production technologies. The focus of hydrogen research after 2020 will be on expanding and integrating the hydrogen infrastructure and on increasing production from renewables and carbon sequestration to achieve the goal of the development of a Hydrogen Economy 10. Research Priorities in EC, Member States and Third Countries The current strategic areas of research of the EC RTD in hydrogen 11 are: Clean production Development and techno-socio-economic assessment of cost-effective pathways for hydrogen production from existing and novel processes. Much research focuses on production of hydrogen from different renewable technologies. The RTD effort on hydrogen production from renewable sources has mainly involved processing different biomass feedstocks often linked to applications in high-temperature fuel cells like SOFCs. In FP6 the projects in this field aim to develop the production of hydrogen-rich gases through energy- and cost-efficient methods. There is also research and development to produce SOFCs that can produce power from biomass and agricultural residues. Storage Exploration of innovative methods, including hybrid storage systems that could lead to breakthrough solutions. Basic materials Functional materials for electrolysers and fuel processors, novel materials for hydrogen storage and hydrogen separation and purification. Safety Pre-normative research and technology development required for the preparation of regulations and safety standards at EU and global level. Preparing the transition to a hydrogen energy economy EC-funded research in the area of fuel cell systems is aimed at: Reducing the cost and improving the performance Durability and safety: Improving the durability and safety of fuel cell systems for stationary and transport applications Materials and process development Optimisation and simplification of fuel cell components and sub-systems as well as modelling, testing and characterisation Long-term goal: The long-term goal is to achieve commercial viability for many applications by 2020. 9 HyNet 2004: HyNet Towards a European Hydrogen Energy Roadmap 10 IPHE International Partnership for the Hydrogen Economy 11 EC 2003b: European Hydrogen and Fuel cells projects 1999-2002 17

The CUTE project is an outstanding example of targeted coordination and collaboration between hydrogen and fuel cell research at the European level, with the objective of helping Europe harvest the full economic, social and environmental benefits of these technologies. By demonstrating the feasibility of fuel cell buses across Europe, the project is helping promote their acceptability. The development of fuelling stations will further the integration of hydrogen and fuel cell technology within the existing infrastructure. The overall cost of the project is 52.4 M and the EC contribution is 18.6 M. As part of the CUTE project different stakeholders, both public and private, across the eight major countries of Europe came together to develop the hydrogen infrastructure and demonstrate the feasibility of fuel cell buses under different climatic, topological and traffic conditions with the aim of: Collecting data from the operation of fuel cell buses in different conditions, and operating decentralised hydrogen production facilities. Exploring a wide range of pathways to produce hydrogen as a vehicle fuel. Gaining experience in the operation of novel small-scale hydrogen steam reformers. Developing a 350 bar hydrogen technology for both filling stations and onboard hydrogen gas cylinders. The project was initiated in November 2001 and will continue until May 2006. Successful demonstration of the fuel cell buses in major European cities is helping assess and validate the costs and efficiency of hydrogen production and of the buses themselves. It is also helping to increase public awareness and acceptance of the technology. Data collected during the operation will contribute to developing the technologies further. The project: involves large-scale demonstration of fuel cell buses in real-life conditions, thereby increasing the acceptability of fuel cell and hydrogen technologies promotes the development of a hydrogen infrastructure (hydrogen filing stations etc). One of the key initiatives in promoting coordination of hydrogen and fuel cell R&D was the establishment of The European Hydrogen and Fuel Cells Technology Platform, launched in Jan 2004 to facilitate and accelerate the development of fuel cell and hydrogen energy systems and components. This aims to improve the effectiveness of research in Europe by developing a common vision and consistent strategic framework at the European level, structuring research into these technologies and promoting public and private funding in research and development. The European Hydrogen and Fuel Cells Technology Platform has developed a Strategic Research Agenda (SRA) as a guide to the development of a comprehensive research strategy for Europe in the field of hydrogen and fuel cells. It defines priorities for investment in R&D based on the strengths and weaknesses of European research and includes an immediate-term research programme (to 2010), medium-term strategy (to 2030) and a long-term strategic outlook (to 2050). Note: For further details of the key cost and quality targets set by SRA for stationary applications of fuel cells, please refer to Annex I-1 The European Hydrogen and Fuel Cells Technology Platform has also developed a Deployment Strategy to promote the development of commercially viable fuel cell applications and a hydrogen infrastructure. The deployment strategy is aligned to the goals and timelines of SRA in order to ensure that the targets for European research are met. The European Hydrogen and Fuel Cells Technology Platform brings together the key stakeholders in European research (the research community, industry, public and government institutions, the financial community and the general public) to leverage expert knowledge in Europe and meet the interests of the diverse stakeholders. This process facilitates coordination between European, national and regional research, and contributes to the achievement of overall European research goals and the development of the European Research Area (ERA). Note: For details on deployment status for fuel cells applications by 2020, please refer to Annex I-2 The broad research priorities of the key Member States (UK, France, Germany and Italy) involved in research into hydrogen and fuel cells are quite similar to those of the EC. 18

Hydrogen European countries are focusing on the development of hydrogen production and hydrogen storage technologies. Within the hydrogen storage technologies, storage in metal hydrides is a key research area in Europe, as is development of a hydrogen infrastructure. UK: Research in the field of hydrogen focuses on developing hydrogen production technologies and metal hydrides storage technologies Italy: Key research areas in the field of hydrogen include hydrogen production from fossil fuels and storage in metal hydrides France: Hydrogen research focuses on developing hydrogen production technology and new materials for hydrogen storage The Netherlands: Most hydrogen research focuses on hydrogen production, there is also funding for hydrogen usage and the development of hydrogen storage technologies Switzerland: Hydrogen production (solar thermal and photoelectric water splitting are the key strengths) and hydrogen storage are the principal research areas Spain: Focus areas include production of hydrogen (from renewables, nuclear or fossil fuels) and hydrogen storage. Fuel Cells The broad goals of research are to reduce costs and increase the durability and reliability of fuel cells in order to encourage their commercialisation. However, different European countries are researching different fuel cell technologies, depending on their competences and the level of interest of companies in the technology: for instance, in Germany, numerous technology companies (such as Vaillant and Ballard for PEM and MTU for MCFCs) and automotive companies (such as Opel, Daimler-Chrysler, etc.) are working on the development of fuel cells. UK: Focus on SOFC and PEM technologies France: Development of PEM fuel cells (nearly 80% of the fuel cells funding) Italy: PEM and molten carbonate fuel cell (MCFC) technologies Germany: All different fuel cell technologies for all key applications: automotive, stationary and mobile. There is also on-going research in the field of fuel cell and hydrogen components in various European countries Netherlands: Strong focus on PEM and SOFC technologies Switzerland: PEM fuel cells and SOFC Spain: PEM fuel cells and the development of high-temperature fuel cells (SOFCs and MCFCs). There is considerable research across Europe on cross-cutting issues such as: Safety Codes and standards Raising awareness and acceptance of the hydrogen and fuel cell technologies. An important project in Germany in the field of hydrogen and fuel cell research is the Clean Energy Partnership launched in June 2002. The German Federal Government s Sustainable Energy Strategy for Germany has invested a total of 33 M in this project, which can be considered a lighthouse project as it involves large-scale demonstration of fuel cell-powered cars, facilitates technology improvement and infrastructure development and helps to increase public awareness and acceptance of the technology. 19

In Germany, the Clean Energy Partnership 12 is aiming to develop hydrogen and fuel cell technologies along the same lines as the CUTE project. Key vehicle manufacturers BMW, Daimler Chrysler, Ford and GM/Opel are collaborating with companies like Aral, Linde, Hydro, TOTAL, Hydro Berlin Public transport (BVG) and Vattenfall to demonstrate the operation of 16 hydrogen-powered passenger cars and a hydrogen filling station. The demonstration project, launched in November 2004, is expected to continue for a period of five years. The aims of the project are to: Show the system viability of a range of readily developed technologies. Test the viability of commercial production and distribution of hydrogen from renewable energy at a commercial filling station in daily operation. Achieve rapid hydrogen refuelling. Demonstrate the everyday use of high-performance vehicles approaching series production quality. Optimise administrative tools and the authorisation processes involved in the build-up of a new energy infrastructure and the use of hydrogen vehicles. The project can be considered a lighthouse project as: It involves large-scale demonstration of fuel cell-powered vehicles, thereby increasing public awareness. It promotes the development of hydrogen infrastructure (hydrogen filling station). Though the broad goals of research are similar across Europe, Japan and the United States in terms of technology development, fuel cell commercialisation and hydrogen infrastructure development: The research objectives of EC-funded projects tend to be more general in nature when compared with the objectives set in the US and Japan. The penalty of non-achievement or delayed achievement of the project targets is not as stringent in the case of EC-funded projects as it is for the projects funded in the US and Japan. There is a stricter review and monitoring of the projects in the US and Japan, and there have even been instances where project funding has been discontinued when it was felt that the project was not going to meet its objectives. At an overall level Europe, the US and Japan have specific efficiency and cost targets for development of fuel cells at different stages 13. The targets set by the EC for European research in the Strategic Research Agenda are broadly in line with the targets set by the US and Japan. The Priority Areas for Research in the field of hydrogen in the US are: Hydrogen Production and Delivery Techniques Producing hydrogen from renewables and feedstock, developing cost-competitive, safe and efficient hydrogen delivery technologies. Hydrogen Storage Technologies Research focuses on metal hydrides, carbon-based materials and chemical hydrogen storage. Safety Codes and Standards Infrastructure Validation, Education and System Analysis Note: For further details of the priority areas for research in the field of hydrogen in the US, please refer to Annex I-3. The Priority Areas for Research in the field of fuel cells in the US are: Transportation Fuel Cell Systems Developing compressor/expandor technologies, thermal and water management technologies, and system analysis. Distributed/Stationary Systems Developing power systems for back-up or peak shaving applications and developing high-temperature membranes for distributed generation applications. Subsystems and Components Developing onboard fuel processors and improving reformer performance at start-up. Note: For further details of the priority areas for research in the field of Fuel Cells in the US, please refer to Annex I-4. 20 12 http://www.cep-berlin.de 13 METI (2003): Japan s Approach to Commercialisation of Fuel Cell / Hydrogen Technology, DOE 2005: Multi-Year Research, Development, and Demonstration Plan