FSR Director speaks at the Academic Symposium on “R&D in Energy”, in Barcelona, on 28 January

1. Supporting clean energy RD&D:
Grants for all?
Jean-Michel Glachant
Director Florence School of Regulation
European University Institute (Florence, Italy)

2. Symposium “R&D on Energy”
We talked today about
• The need for public support
– Environmental externality not adequately priced
– Innovation externalities and spillover effects
– Often high capital investments paired with substantial economic,
technological and regulatory uncertainties
• The effectiveness of public support
– Patenting as a proxy for innovation
BUT: Is public money also spent efficiently?
www.florence-school.eu
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3. Supporting clean energy RD&D
Billions of €
•
We do not talk about peanuts:
In 2010: EU + national
+ corporate RD&D investments
= >5bn €
Source: SETIS
• … and we talk about these billions of € in times of austerity
 Tight fiscal constraints on national budgets
 Countries are reconsidering what their tax payers can afford in terms of lowcarbon energy technology support
www.florence-school.eu
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4. Supporting clean energy RD&D
Grants for all? Some alternatives:
European Investment Fund:
Equity investments
•
E.g.: 2008 investment into Capricorn
Cleantech Fund, which in turn invests
into €4-6 mn projects
•
European Investment Fund provides
risk finance to SMEs via intermediaries
•
Investment tax credits
US ‘Storage Technology of Renewable and
Green Energy Act’ (issued in 2009) extends
investment tax credits to electricity storage
US Department of Energy:
Hydrogen technology prize
•
EIB: Low-interest loans
•
Awarded, for instance, to Energias de
Portugal for upgrading pumped hydro
plants
www.florence-school.eu
$ 1 million prize
•
Competition opened in 2010
•
Clearly specified technical criteria for
advancements in materials for H2 storage
– Who will be the first?

5. Innovation projects differ!
• Technology itself
Consumption- or production-oriented? …
• Level of maturity
Basic research? Development? Demonstration? …
• Type of innovation
Incremental innovation? Radical innovation?
• Typical innovating entity
Single brain in the garage? Large company? Regulated entity? …
• Capital intensity
• …
www.florence-school.eu
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6. Supporting clean energy RD&D
Grants being the most expensive type of instrument
Increasing public costs
Public loans/
Public equity
Subsidies
loan guarantees
Technology
prizes
www.florence-school.eu
Benefits
related to inv.
Grants and
contracts

7. Supporting clean energy RD&D
Check alternatives!
Increasing public costs
Public loans/
Public equity
Subsidies
loan guarantees
Prizes
Relevant e.g. if
illiquid capital
market
For mainly lowercost innovation
with well
quantifiable
market prospects
For larger
innovating
entities with
proven financial
capability
www.florence-school.eu
For risky, but
potentially highly
profitable
innovation
For investments
of modest size
For small- to
medium-sized
innovating
entities
For early lowcost innovation
Benefits
related to inv.
For near-tomarket
incremental
innovation
Grants and
contracts
If all other
instruments
would fail
Typically larger
innovator or
regulated firms
Grants should be an
instrument of last resort

8. Supporting clean energy RD&D
+ smart design of public support
Encourage efficiency while not discouraging private sector
participation
 Use competition for funds whenever possible
 Public funding should be output-driven whenever suitable with
engagement of private innovators
– High project costs can require the provision of funds upfront
– Projects with high probability of failure might require support unconditional
to performance
 Co-funding creates incentives on the innovator’s side to carry out its
function efficiently
 Institutions set up to allocate funds need to be lean and flexible enough to
avoid institutional inertia and lock-in
www.florence-school.eu
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9. Thank you for your attention
Email contact: jean-michel.glachant@eui.eu
Follow me on Twitter: @JMGlachant
Read the Journal I am chief-editor of: EEEP
“Economics of Energy & Environmental Policy”
My web site: http://www.florence-school.eu
www.florence-school.eu
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