A new mission for the SET Plan: select non-price criteria for Member States' auctions for renewables support

By Greg Arrowsmith, Secretary General of EUREC
Summer 2024

Updated Renewable Energy Directive containing a target to deploy innovative renewable energy technology? ... tick
Net Zero Industry Act mandating the use of non-price criteria by Member States in their auctions for renewable energy support, these criteria supporting high performance technology? ... tick
Awareness in the European Commission that these measures reinforce each other? ... tick.

Ukasz Kolinski, Head of Unit C.1 in DG Energy said at a conference 22 May that together, they could "give a strong kick for innovative technology." The next question is how to make the magic happen for the remaining years up to 2030, and the answer is: with the SET Plan's help.

The SET Plan – what is it?
The Strategic Energy Technology Plan is the interface between EU policy for clean energy innovation and national policies. It's governed by the SET Plan Steering Group, a group of officials delegated by Member States and countries associated to Horizon Europe, and European Commission staff. Their job is to coordinate national energy technology policy with the EU’s strategy.

They do this with the help of input from experts outside the European Commission or government offices who work daily with specific technologies. These experts are gathered in groups called ETIPs (European Technology and Innovation Platforms). There is an ETIP on wind energy, one on photovoltaics, another on renewable heating and cooling technologies and so forth, covering the full spectrum of energy technology research.

It's time to ask these ETIPs prepare a kind of recommendation for the SET Plan Steering Group unlike those they have made so far, and the SET Plan Steering Group members to use it in their countries to meet the "5% innovative renewables" target. I'll get to nature of that recommendation in a moment, but first some background ...

What should qualify as 'innovative' technology under the Renewable Energy Directive and Net Zero Industry Act?
The target in the Renewable Energy Directive refers to the fact that "at least 5%" of the renewable energy capacity to be installed to 2030 should be "innovative".

If we estimate that total amount to be 1 TW, the Directive aims to deliver a minimum of 50 GW of capacity provided by such "innovative" technology across the EU. 50 GW is an amount beyond mere pilot-scale or "first commercial demonstration" examples. It is for companies that have proved that their technology works and that are trying to take market share from incumbents.

So the definition can't be too restrictive. Technologies that improve "in at least one way comparable state-of-the-art renewable energy technologies" would qualify under the Renewable Energy Directive, while under the similarly worded Net Zero Industry Act, they should "comprise genuine innovations that are not currently available on the Union market".

Some technologies improve on existing ones without any need of support, but NZIA anticipates that often the new technology will start by costing more. Article 26 allows Member States to abandon plans for an auction using non-price criteria if they "estimate based on objective and verifiable data" that the auction would attract bids at least 15% higher than if no NPC were applied.

With these guidelines in mind, each Member State will soon need to think about what, in its specific case, would qualify, aiming for things that are new, but not so new that the scale of deployment would be negligible compared to the approximately 50 GW capacity goal, and that don't cost much more than today’s equivalent.

Missed opportunity in National Energy and Climate Plans Member States failed to use the opportunity of their updates to their National Energy and Climate Plans to offer examples of the technologies they would use to reach the "5% innovative renewables" target.

In every single one of the country-by-country Recommendations it issued in Dec 2023, the European Commission urged Member States to "Include an indicative target for innovative renewable energy technologies by 2030 in line with Directive (EU) 2018/2001 as amended" in the second and final version of their NECP. This must happen by the end of June this year.

Our own work looking at 10 Member States identified some interest in helping new technology, but not at a GW scale (e.g. Spain with Measure 1.4 of its draft NECP or Italy, where 680 M EUR of National Recovery and Resilience Plan money would fund just 200 MW).

Given that the updating of NECPs happens only once every five years and that even when it does most countries allow little external input to the drafting, the EU needs another place where NZIA- and RED-qualifying innovative technology may be defined. Enter the SET Plan and its ETIPs.

New mission for ETIPs: advise on non-price criteria for NZIA auctions
ETIPs have traditionally produced documents called Strategic Research and Innovation Agendas every 2-3 years listing, fairly exhaustively, the research priorities for their sector. The SRIAs guide the European Commission in its choice of topics to fund with Horizon Europe or other programmes, and hope to influence Member States' spending, too.

Together, the EU and its Member states turned a historic threat into an equally historic opportunity. These foundations are our legacy and the basis for our work ahead.

With their transparency, public profile and balanced composition of members from industry and academia, ETIPs are qualified to look one step beyond the allocation of research grants to the kinds of advanced technology that are ready to receive a boost from auctions run under NZIA Article 26.

They should suggest which technologies or approaches should score highly for 'innovation', set thresholds, and determine the difficulty associated with particular performance goals. Every few years, when they are not busy with a SRIA revision, they should revisit their guidance and ratchet up the criteria to keep pace with technology development.

The final decision on the design of Article 26 auctions will of course lie with Member States, with one Member State considering 'innovative' a technology that its neighbour may not, but at least the ETIPs' work would serve as a baseline against which their decisions can be challenged. Our advice on the use of non-price criteria in Article 26 auctions is in the box below.

Sustainability a source of innovation
NZIA allows points to be earned not only for innovation but for sustainability, and often the two go hand-in-hand: a more innovative PV module, for example, may be one that converts sunlight with greater efficiency, increasing its productivity and therefore spreading any environmental harm associated with its manufacture over more kWh output.

As examples of the kinds of sustainability criteria that could apply to PV, the European Solar Industry Alliance has proposed values relating to carbon footprint, share of recycled content, recyclability, and inverter efficiency.

ETIP-PV could review these performance indicators and the thresholds attached to them, and ETIPs concerned with other technologies could draw up similar lists.

Checklist for successful application of non-price criteria in Art 26 NZIA auctions:

  •  Use the SET Plan (beefed up in Oct 2023 and in March 2024 with NZIA) and its ETIPs to get sectors' views on appropriately challenging non-price criteria on innovation, feeding them into national policy making via the Steering Group.
  •  Build on the experience some Member States already have of using non-price criteria in auctions for renewable energy support, as detailed in the European Commission's Guidance to Member States on Auction Design (May 2024).
  •  Accept that auctions using nonprice criteria necessarily have to be technology-specific.
  •  Be realistic about the capacity of NZIA to help made-in-EU PV in the short term. Because of widely suspected dumping by China, and the openness of the EU market to Chinese-made modules, EU module prices are so low that the ability under Article 26 auctions to ask for a price 15% higher than usual hardly even begins to close the price gap.
  •  As the Recommendation to Member States on auction design for renewable energy says, "Member States seeking to foster innovation through the use of non-price criteria should rather use them as award criteria" (Recommendation 14), i.e. innovation should mostly be scored so that the best technology can be distinguished from the good. However there are at least two possible exceptions where innovativeness should be laid down as a "pre-qualification criterion", i.e. assessed as pass/fail:

Case 1: new technologies with so little market share that the entire class of the technology may be innovative without further qualification and any deployment should count towards a Member State's Article 26 obligations, e.g. ocean energy and airborne wind generation (for which Germany has recently offered support).

Case 2: deployments of wind or PV where rich performance data from sensors on the operating plant will be collected and shared with defined groups, e.g. researchers in specific fields from specific categories of organisation. The data collected and conditions for sharing would have to be laid down very precisely ex ante, so here too, this innovation would need be applied in the 'pre-qualification' mode.

Always apply sustainability or innovation criteria alongside resilience criteria. As we've argued, resilience criteria protect Europebased industry from external competition. To prevent that situation eroding the performance of European technology in the long term, sustainability criteria or innovation criteria are needed as compensatory pressure to boost performance.