On 11 January, Breakthrough Energy Catalyst published a request for proposals for large-scale deep green technology projects based in Europe.
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What is the EU-Catalyst partnership?
The EU-Catalyst partnership brings together the Commission, the European Investment Bank and Breakthrough Energy Catalyst. It was first announced at the Mission Innovation Ministerial Conference in June 2021 by Commission President Ursula von der Leyen and Bill Gates, founder of Breakthrough Energy. The partnership will mobilise up to 820 million ($1 billion) between 2022-2026 to accelerate the deployment and rapidly commercialise innovative technologies that will help deliver on the European Green Deal ambitions and the EU’s 2030 climate targets. Each euro of public funds is expected to leverage three euros of private funds. Investments will be directed towards a portfolio of EU-based projects with high potential, in four sectors:
- clean hydrogen;
- sustainable aviation fuels;
- direct air capture; and
- long-duration energy storage.
How does the partnership work?
The EU-Catalyst partnership will target technologies with a recognised potential to reduce greenhouse gas emissions, but which are currently too expensive to roll out at scale and compete with fossil fuel-based technologies. The projects will be large-scale, pre-commercial demonstration projects for clean technologies, seeking to demonstrate at scale, lower the costs and accelerate their deployment as well as providing jobs and spillover effects within the relevant ecosystems.
By supporting these innovative technologies in the demonstration process and creating a market for the green products, the EU-Catalyst partnership will drive down their ‘green premium’, in other words reduce their costs to a level that is eventually competitive with fossil-fuel based options. This will help to accelerate their adoption worldwide and end the current reliance of these technologies on public support schemes. One such example where this has worked successfully in the past is photovoltaic.
The partnership will bring together the public and private sectors to invest in large-scale demonstration projects. Both the European Investment Bank (using a Commission Guarantee) and Breakthrough Energy Catalyst will provide equivalent amounts of grants and investments in the projects. EU funding for the partnership will be drawn from Horizon Europe and the Innovation Fund and will be managed under InvestEU. Breakthrough Energy Catalyst will leverage equivalent private capital and philanthropic funds and mobilise partners to invest in projects and/or purchase the resulting green products. The EU-Catalyst partnership will be open to national investments by EU Member States through InvestEU or at project level.
Who can apply and how?
As from 2022, all types of organisations based in Europe (EU and associated countries), which are developing innovative technologies in the four specific areas, with high potential for deployment and scale-up, will be able to apply. They can do so either to Breakthrough Energy Catalyst-led requests for proposals, or directly to InvestEU for financing through the InvestEU Green Transition Facility (which will manage the EU contribution to the partnership). Further details on the application process and timelines will be published in due course.
Who pays for what in the programme?
The Breakthrough Energy Catalyst contribution is funded entirely by private entities signing up to the Catalyst partnership, who wish to accelerate the development and uptake of green technologies. In September, a group of seven private enterprises was announced as the first anchor partners, and further expressions of commitment, including from Europe-based companies, are expected. Breakthrough Energy covers its own expenses for running the evaluation and selection process for projects submitted to the Catalyst.
The EU contribution to the Catalyst comes from Horizon Europe (the Cluster on Climate, Energy and Mobility) and the Innovation Fund set up under the EU Emissions Trading Scheme. Starting in 2022, both programmes will top up the InvestEU Green Transition Product, which will allow the EIB to deploy the funding directly to the beneficiary and match the private funding.
Why giving money to the EU-Catalyst partnership instead of spending it directly on EU research or innovation projects?
Climate challenge is global in nature. Breakthrough Energy recognises the importance of working in various regions, and they are committed to climate leadership. With the Catalyst, Europe has a partner fully committed to contributing to the partnership on equal terms with the EU, both financially and in other ways.
A key element in this initiative is to safeguard the EU’s interests by directing the investment only to those projects which are based in Europe, and ensure a tangible EU added value. The European Investment Bank has a strong experience and track record of efficient delivery of this type of financing, and management of the funds under InvestEU predecessor programmes. To be considered for funding, projects must be European and show very strong potential for scalability, impact and deployment. The positive impact and potential benefits for Europe in being a partner in the Catalyst partnership are therefore very high.
How will you ensure that projects will be selected in an open and fair competition?
The final decision on awarding EU funds to projects will be governed under InvestEU and entrusted to the European Investment Bank, which will carry out an independent assessment of projects, including those proposed by Breakthrough Energy Catalyst. Breakthrough Energy Catalyst will have no say in the allocation or award of EU funds.
Equally, it is logical that Breakthrough Energy Catalyst reflects the EU funding decision process in its own selection process, so as not to invest in costly evaluations which run a risk of not being accepted for funding by the EIB under InvestEU. By applying these principles, Breakthrough Energy Catalyst will obtain trust from the public and from project sponsors who engage with the programme.
The selection and evaluation of projects for funding through InvestEU will be delegated to the EIB (and possible other implementing partners), which will independently assess the projects based on competitive criteria. However, the confirmation of a project’s eligibility will rest with the Commission under the InvestEU ‘policy check’ procedure.
Can Horizon Europe or the Innovation Fund not do this alone?
The cooperation allows to pool public and private funds into best initiatives reflecting highly aligned priorities in a simplified approach for beneficiaries. The role of Horizon Europe and the Innovation Fund in forming the EU counterpart to Breakthrough Energy Catalyst shows that we have compatible but also highly synergetic instruments in place. InvestEU greatly simplifies the available range of EU-funded financial instruments, while the EIB and other partners have a recognised track record in providing, under EU guarantees, financial support where it matters the most. And by cooperating with Breakthrough Energy Catalyst, the EU will be able to benefit from a strong leverage effect, which means more money and momentum for priority projects throughout its development to deployment journey. By enlarging the offering on the EU side to its projects and technologies, the EU can only gain in terms of closing technological gaps and accelerating the green transition. Finally, implementation via InvestEU ensures a single stop shop for projects, including those part-funded by Horizon Europe.
When can we expect the first projects to achieve results?
For large-scale demonstration projects at pre-commercial level, it will take more than an EU financial allocation to enable the selected projects to achieve concrete results. Nevertheless because of the maturity of European technology providers notably in hydrogen, in which we support Horizon Europe partnerships for example, we expect to see impactful deployment of these innovative technologies by 2026 when the current phase of financial support to the Catalyst will come to an end. We also expect significant results for sustainable aviation fuels or long-duration energy storage. This is crucial as the clock is ticking towards 2030.
What is the expected impact?
The initiative will accelerate the reduction of the green premium in key areas, allow for wider, faster up-take and contribute to the creation of jobs in the EU in green industries. Unprecedented investment is needed to turn climate policy targets into reality. Attaining the 2030 target of at least 55% net emissions reduction is estimated to require 350 billion of additional annual investment.
Blended finance is a crucial tool to mobilise urgently needed private capital, especially in domains considered too risky for the markets to function autonomously. This is the case for the technologies selected, which will benefit from investments in demonstration and scaling-up. In turn this will lead to increased confidence among market participants, economies of scale in production and deployment, and significant cost reductions. The project pipeline of the InnovFin Energy Demonstration Projects scheme (implemented under Horizon 2020 with the support of the EIB), as well as the high number of submitted proposals under the first Innovation Fund calls and the Horizon 2020 European Green Deal call, indicate the richness of the EU ecosystem for innovative technologies.
How much grant money will the projects receive?
The maximum grant intensity is expected to be 20%, deployed in equal amounts by both the EU and Breakthrough Energy Catalyst. Before grant funds are deployed, the Commission and EIB as well as Breakthrough Energy Catalyst will analyse carefully the risks and the quality of the project, taking into account the funds the projects and other sponsors can contribute.
How much will the private sector contribute?
Grants and other financial support from the EIB, using Commission resources, will be matched 1:1 by Breakthrough Energy Catalyst, which will draw money from private anchor partners. The EU-Catalyst partnership will not seek a controlling stake in a project but work towards closing a remaining financial gap, hence it will not make available more than 50% of the project costs. The projects need to raise at least 50% of the financing needs themselves. This means the EU-Catalyst partnership has a leverage of at least 1:1, and the public funds (EU), which are matched by Breakthrough Energy Catalyst will achieve a leverage of 1:3.
Why the chosen technologies?
Investments will be directed towards a portfolio of EU-based projects with high potential, in four sectors: clean hydrogen; sustainable aviation fuels; direct air capture; and long-duration energy storage:
Clean hydrogen
In July 2020, the Commission adopted the Hydrogen Strategy with the aim of decarbonising its production and to expand its use to store, transport and accelerate the use of renewable energy, as well as replacing fossil fuels in specific sectors, aiming to substantially increase electrolyser capacity by 2030. Investments in production capacity are estimated at 180-470 billion in the EU until 2050 at least, ‘renewables’ producing up to 10 million tonnes of clean hydrogen. The strategy identifies as a clear priority the production of renewable hydrogen, i.e. hydrogen produced through electrolysis using renewable electricity, while remaining open to new or breakthrough technologies for producing renewable hydrogen. In this context, a top priority is to demonstrate larger size, more efficient and cost-effective electrolysers, with capacities reaching 100 MW and above. The necessary coordination, along the value chain with the European Clean Hydrogen Alliance, and on data and knowledge with the observatory and database set up under the Fuel Cells and Hydrogen Joint Undertaking, is foreseen.
Sustainable aviation fuels
Aviation is the second highest transport sector after road vehicles, and the fastest growing. Reducing aviation emissions is challenging, considering the long operational life of aircraft and the fact that zero-emission aircraft configurations and powertrain options for commercial air transport are far from technological and commercial maturity. Sustainable aviation fuels can significantly reduce aviation reliance on fossil fuels, while relying on existing infrastructure and propulsion systems, but the transition will require significant investments. While several sustainable aviation fuels production pathways are certified, their use in the fuel mix is still negligible (less than 0.1%) due to high production costs. The price of the most innovative and sustainable types of fuels is estimated at up to 3 to 6 times the price of fossil aviation fuels depending on the production pathway, while their lifecycle emissions savings are 85% or more compared to fossil fuels. As part of the Fit for 55 package, the Commission has therefore proposed the ReFuelEU Aviation initiative to boost the supply and use of sustainable aviation fuels in the EU. The action will support the development of the most innovative sustainable aviation fuels notably advanced biofuels and Renewable Fuels of Non Biological Origin in line with the ReFuelEU Aviation and Renewable Energy Directive sustainability framework.
Long duration energy storage
At any moment in time, electricity consumption and generation have to be perfectly matched. This balance is necessary not only in the short term for power grid stabilisation (for which short duration storage solutions exist), but also over the long term, by compensating for weekly fluctuations, for meteorological dark and still periods that can last a few weeks, and for seasonal variations between summer and winter. Long duration renewable energy storage needs weekly to seasonal will expand as both the electrification of demand and the share of renewable energy sources in the total supply mix will grow. Sustainable long duration energy storage therefore has a key role to play in the transition towards a carbon-neutral economy. Sustainable storage solutions for renewable energy, involving an energy vector that can be used for other purposes than regenerating electricity are also eligible. The topic is open to all technologies: chemical (including hydrogen and its derivatives), electrochemical, thermal and mechanical technologies (other than pumped hydro which is mature and available commercially).
Direct air capture
Commission scenarios reaching net-zero emission by 2050 show extensive use of carbon dioxide removal, including direct air capture of CO2 (a new technology that removes carbon directly from the atmosphere, which differs from carbon capture and storage in that it does not have to be placed directly at the source of emissions) . Most IPCC scenarios modelling 1.5°C paths also include a share of carbon dioxide removal. Direct air capture offers promise as a new technology to help meet this ambitious goal, but several challenges remain for a large-scale deployment. The future operational and financial viability shall also be investigated in function of the fate of the captured CO2 (i.e. underground storage or use), renewable energy source used for the capture process, and vicinity to CO2 transport and storage infrastructure (in case of underground storage). The International Energy Agency estimates current direct air capture costs to be within a wide range of $100-$1000 per captured tonne of CO2. Stakeholders claim that costs can be reduced to 50-100 by 2030 with sufficient investments in R&I and deployment.
Source: European Commission
