Webinar: Maintaining grant funding for early TRL technologies
27 February 2018
3.00pm (Brussels, Berlin, Paris)
2.00pm (London, Dublin, Lisbon)
Peter Coyle, Chairman, MRIA
Andrew Smith, Founder, Deja Blue Consulting
Supporting R&D through grant funding is a tried and tested way of bringing innovative technologies closer to market. This model helps develop technologies to a point where they can start to generate some revenues and attract investment. Public and private budgets for R&D are limited however, so it is vital that funding schemes are designed to have a maximum return on investment.
In this webinar, ocean energy finance experts analyse different funding schemes and explain why some of them are more successful than others.
- Grants support for ‘low TRLs’ must cover substantial part of cost of projects. When ’low TRL’ research is excessively funded by commercial finance, there is a risk that unduly short-term perspectives can divert research away from optimal paths. Pressure to speed up progress to reach commercial markets can result in technology which has been rushed and which is deployed despite not being yet ready.
- By its very nature, ‘low TRL’ research is less predictable. There are a wide number of different development routes that early stage technology can follow, compared to ‘higher TRL’ research, where a development path has already been chosen, and progress is much more directly imcremental. Grant support for ‘low TRL’ research needs to reflect this reality, while still being governed to ensure optimal spending of public funds.
- Typical sources of finance of OE companies at early TRLs are equity and some ‘soft loans’ (primarily from friends and family) and grants. Only occasionally do OE companies benefit from private investors who can afford a long–term perspective
- Tailored Instruments for Low TRLs:
- Special funds for early TRLs which is specifically dedicated to the OE sector (e.g. Ireland’s Prototype Development Fund, Scotland’s Renewable Energy Investment Fund). Such sector specific special funds for early TRLs are very important at national level.
- To provide a path for companies out of early TRLs, there is a need for Wave Energy Scotland (WES) initiatives – i.e. a stage-gate pre-commercial procurement process - but with a Prototype funding dimension.
- Ireland is preparing a WES equivalent (will complement topics of WES) and EU is drafting something similar in the SET Plan.
- Projects need different types of funding:
- Income support schemes (such as FiTs, CfDs, etc) to support debt,
- Equity is a bet by those with the resource and risk appetite,
- Grant is a strategic mechanism that supports progress at the right time. But it is not “free” money. It comes with obligations which must be respected.
- For the developing agencies is very important to agree on the following points: What is to be achieved? The development of the sector? The economic growth in the region? Employment? Are grants too large or too small for their specific objectives? Is a co-financing requirement realistic? Are attached timelines absolutely necessary and achievable?
- The challenge for funding agencies is to find the optimal balance between good governance and sufficient flexibility. Clear rules are needed to ensure that public funds are accounted for and deliver the maximum benefit. Yet excessively rigid rules may inadvertently exclude valuable opportunities for innovation. This is a very difficult balance to find, as it will vary on a case by case basis.
- Other types of money will find their way into the marine energy sector when the risk in the sector will match the risk-appetite of investors beyond the sector. The majority of enterprises in the ocean energy sector are not there at the moment.
- Grants for ‘early TRLs’ must cover substantial part of cost of project.
- Widespread commercial finance for ‘early TRL’ ocean energy research is not a realistic prospect at present.
- Wider issues of scale and collaboration must be dealt with at same time. EU-wide initiatives for funding and for collaboration (such as the proposed stage-gate pre-commercial procurement process for wave or ETIP Ocean) remains essential. We need instruments that will allow and incentivise companies to work together.
- Don’t look for a blue-print. This (the development of ocean energy sector) was not done before.
- There is a constant need to evaluate whether the optimal balance is being struck between good governance and sufficient flexibility. This is not an easy task.