A crucial component to pave the way for decisive climate action is being able to not only come up with innovative cleantech solutions, but on finding ways to fund them. The sheer magnitude of investment commitments towards the wide deployment of cleantech solutions made by both the EU and the US over the past months signals one thing:
Public funding plays a catalyzing role in supporting the deployment and scaling of cleantech solutions and mobilizing private capital.
The European Union employs a multitude of financial instruments and funds at each stage of the cleantech innovation cycle, some of which are public, pertaining to the overall EU budget, while others stem from public-private partnerships. The plethora of EU financial instruments dedicated to climate innovation and the complexity to navigate these for start-ups and SMEs led us to co-create an interactive free tool to help cleantech innovators find the most suitable funding option for their venture.
Below, you can see some of the various EU funding avenues available to cleantech innovators.
At Cleantech for Europe, through our engagement with cleantech start-ups and scale-ups, we wanted to test the accessibility of the various EU funds. For this reason, we ran a pan-European survey of innovative cleantech start-ups and scale-ups backed up by the EU’s foremost cleantech investors to map their experiences with applying for EU and national funding programmes.
Survey respondents included 50 cleantech companies from 8 EU Member States, the UK, Norway and Switzerland that have received financial support from both EU and national funding programmes. The respondents represented cleantech companies of different sizes, with a quarter of companies with less than €1 million in revenues, and the remainder split between companies with revenues of €1 million to € 5 million.
Per number of applications per company:
Per success rate (dividing the number of competing applications funded by the sum of the total number of competing applications reviewed):
Below we discuss options which would enhance the chances of success for companies seeking public funding.
To make EU innovation funding more accessible and signpost firms towards the available public support, we put forward 4 proposals, which can help cleantech innovation break the cost curve and reengineer the current energy system.
A fossil free future goes hand in hand with creating a more business-friendly funding environment in the EU for the companies working to get us to zero. This means that the application processes for public funding for these companies to scale-up should not be perceived as an additional constraint. It should enable them to concentrate on their core activities and allow them to generate jobs and green growth.
The revision of the EU Financial Regulation has achieved some significant progress in cutting red tape from applications1. This includes:
However, a quarter of funding applications still have a length of around 130 pages accompanied with more than 1000 pages of guidelines and detailed eligibility rules. This is one example that shows why a simplified application process for all EU funding programs could make a difference for innovators.
A streamlined application process can include:
‘’Applications often require extremely detailed planning ahead for the entire project duration. This does not match reality of innovative research-driven (long-game) projects.’
“Funding programmes push and accelerate innovations, fast feedback loops on potential projects would improve the proposal process.”
With an innovation firepower of more than €100 billion over the period 2021-2027, funding opportunities in the EU exist and are ample in their design, but the extent to which they are easily accessible to early-stage innovators or scale-up companies can only be verified by experiences of those seeking funding. According to the respondents to our survey, more than half of them received support from national initiatives rather than from European ones.
This happens as, according to the respondents, national funding programs are more comprehensible and have less requirements than EU ones. In more detail: (1) knowledge for national programs is more widespread compared to EU ones; (2) no linguistic barriers exist in the completion of the application form; and (3) application requirements are laxer.
Simply put, for many innovators, applying to EU funding is not an investment worthy of their times and resources compared with national funding which seems to have a more accessible application process.
One lesson to be derived from this experience is that EU funding information and support should be as widespread as national initiatives in Member States, anchored into existing national practices. This can be done through developing capacity-building initiatives at Member States and across Member-States, at regional level. These initiatives can take the form of:
If these initiatives work efficiently, they will better prepare cleantech start-ups for the market and create conditions for them to scale.
Allocating public financial resources to support breakthrough innovation is inherently risky. As such, getting the most from funding innovation is more about managing risk than eliminating it. And while making bold policy commitments to create beneficial market conditions for these innovations is a step in the right direction, it cannot alone ensure that public money is optimally used.
Given the wide range of stakeholders, large amounts of funding and evolving climate goals, the EU could benefit from establishing an institutional forum comprised of cleantech start-ups, scale-ups and investors. The forum can have four general functions:
While Europe has undertaken serious efforts to create a truly Single Market, it is still a collection of dozens of different countries with their own legal imperatives. 15% of the survey respondents pointed to fragmentation in terms of markets legislation in Member States as holding them back from expanding within the EU. While
Market fragmentation in cleantech ranges from the development of transmission and distribution infrastructure in electricity markets which can favor fossil-fuel incumbents in the power sector to the different regulatory to permit granting procedures.
Take for example the scale up of waste heat recovery, one of the most cost-effective solutions to increase energy efficiency. Andreas Sichert, CEO of Orcan Energy, a Germany based converting industrial heat into useful energy, highlighted that the different rules at EU and national level on waste heat recovery create a whole different administrative universe to navigate when it comes to taxes, emissions certificates and relevant fees. These differences in Member States’ cleantech regulatory understanding compromise the EU’s climate neutrality goal by creating diverging objectives rather than a single common climate vision.
Undoubtedly, the appropriate balance can and should be struck between support for the Single Market and the need for appropriate regulation in individual jurisdictions. In this regard, the European Commission can use the newly formed Investors Dialogue on Energy to catalogue the key legislative pieces that create an unlevel playing field for cleantech innovators. A further path forward could be the development of an EU wide authority which would act as the sole handler of all the compliance procedures for ventures entering new markets in the EU.
Unless Europe catches up with other major regions on ending regulatory fragmentation, it will be vulnerable across all cleantech sectors on growth and competitiveness, hindering long-term energy resilience.
With fewer than 8 years remaining to reach the 2030 climate goals, EU funds should ensure that cleantech solutions fit for purpose receive the necessary ammunition. Seizing the opportunities that EU public funding offers can renew our economy, infrastructure, and industrial base—and thus set the foundation for a successful, climate-neutral industrial EU leadership.