Public Research and Development Funding for Photovoltaics in Europe—Past, Present, and Future

Why is facilitating investment into research and development of the photovoltaics (PV) sector important for the EU? Renewable energy sources have an important role to play at the global level—not only in Europe. This refers first to the positive effect they have on lowering CO₂ (and other greenhouse gas) emissions, which in turn then has a direct effect on fighting global warming, and second to the contribution they make to a more diversified energy mix, as well as energy security and independence (El-Agraa 2017). The EU has set ambitious climate and energy targets to be achieved by 2030 (EC 2018a), and electricity generation through PV can help in meeting those targets by contributing attributes like: scalability of solar parks; vast availability of raw materials; easy installation; simplicity of operation; and the low maintenance costs of PV plants (Twidell et al. 2006).

Europe has been at the top in terms of technology innovation for PV for decades (EC 2017a), providing important support for creating the necessary conditions that make PV nowadays a feasible electricity production alternative (Popp 2006; Gallaher et al. 2012). The combination of cost reduction, increased international competitiveness and continuous technological innovation (IRENA 2017) has enabled the accelerated growth of PV capacity in the EU since 2007 (Fig. 1). This growth coincided with a growing market and an increase in electricity consumption in the EU of about 24% from 1990 to 2016 (EC 2018b), resulting in a year-over-year increase of approximately 0.84%. The trend is in part driven by the growing appetite of the European population to increase its level of comfort by using electrical devices, which at the same time can be highly energy intensive (Pezzutto et al. 2016) and to partly offset energy efficiency improvements (EC 2012a).

To enable the transition to a higher use of PV, public investments in research and development (R&D) is a priority. The resulting innovation also contributes to the affordability and access to critical technologies (Mission Innovation 2015) and helps to bridge the gap between theoretical studies and commercial deployments and attracts private investments by de-risking technology (EC 2019a). Exemplary publications that emphasize the importance of R&D toward the development of renewable energy sources (RES) and thus meeting named targets until 2030 are among others: the Energy Roadmap 2050 (EC 2012b); the European Strategic Energy Technology Plan (SET-Plan 2017); and the European Energy Security Strategy (EC 2014). Except for the Mission Innovation initiative, which specifically stipulates that members will double their clean energy R&D investment by 2021, other publications do not provide any specific quantitative targets on PV R&D in order to meet the 2030 climate and energy targets. To potentially inform the development of such targets, as an initial step, this study focuses on tracking all public investments made in the EU, plus Norway and Turkey (Iceland and Switzerland have not been taken into consideration because they are not members of the SET-Plan PV Temporary Working Group (Hünnekes et al. 2017), aiming to address these research questions:

At the beginning of this study, a thorough analysis of the sources of public funding for PV R&D provided by Member States (MS), plus Norway and Turkey and by the EU, has been carried out, to answer the research questions just listed. With regard to questions 1 and 2 on funding at the national level, the International Energy Agency’s (IEA) database was used as the main source (IEA 2019a). A comprehensive database including nominal values of PV R&D funding was then assembled, including inputs that date back to 1974. To adjust these values to 2018 prices, EU inflation values from the International Monetary Fund (IMF 2018) have been applied to ensure consistency throughout the analysis. To gain further input to question 2, a considerable number of EU funding programs were screened. However, when analyzing those more in depth, immediately a highly unequal distribution of share became evident. The European Framework Programs for Research and Innovation have historically represented the largest individual sources of funding. The most recent one—Horizon 2020—provides for approximately 85% of PV R&D funding. Accordingly, the Community Research and Development Information Service (CORDIS) database was used as the main source of information for EU funding (EC 2019). Using all the historical data collected with regard to questions 1 and 2, adjusted to 2018 prices, a future scenario (Business as usual (BAU), please see Sect. 2.2) for each case (national and EU funding) was produced, to answer question 3. These scenarios estimate both the annual and accumulated funding stock until 2030.

It needs to be noted that, according to metadata specifications provided by the IEA (2020), the possible overlap between national and EU R&D funding is reduced to a minimum. Data are submitted by national institutions, such as ministries and agencies, which in dedicated country notes outline related considerations and measures to avoid double counting. However, overlaps cannot be completely excluded.

The following sections provide further insights into methodological considerations with regard to data sources, scenarios development and cumulative funding stock calculations.

The outcomes are divided into four sections: (Sect. 3.1) funding provided at national level; (Sect. 3.2) funding provided by the EU; (Sect. 3.3) the sum of both sources; and finally (Sect. 3.4) a snapshot of the cumulative funding stock.

As for going beyond the scope of this paper, the results are presented at an aggregated level and not at national/regional levels and have not been indicated as a percentage of GDP. A more in-depth discussion is expected to occur in any follow-up publications.

The provided results over three to four decades indicate how PV R&D funding has been highly sensitive to world events with an impact on the energy markets, resulting in the exploration of alternative means of production. Originally forced by the energy crises in the 1970s, the EU quickly sought alternative sources to achieve energy security and found a momentarily effective solution in nuclear power (Bointner 2016b). However, as the market cooled down in subsequent years and the cold war came to an end, a lower necessity to explore substitutes to traditional energy sources emerged, as the world economy thrived thanks to cheap and abundant fossil fuels from new markets. Thus, the political will to advance on the subject dwindled down. During this period, a stagnation in PV R&D occurred, so when a policy shift started in the EU in the 1990s, the funding had to be considerably increased. Largely due to the signing of international agreements (Rio ’92, Kyoto ’97, Cancun ’10, Paris ’15), a growing number of natural disasters linked to a changing climate (Fang et al. 2019) and later on fueled by Fukushima’s 2011 nuclear disaster in Japan (Goebel et al. 2015), the notion of energy security became more renewable energy inclusive, encompassing also climate change and security concerns. Furthermore, a growing population with an appetite for energy intensive devices that provide higher living comfort (Pezzutto et al. 2019) create pressure on demand that is only partly offset with increasing efficiency levels for buildings and appliances. RES and as such PV technology partially provide a solution to these problems, particularly, as the EU agreed to comply with stricter climate and energy targets for 2030 and 2050 and their likely upward revision due to a dire necessity to keep global warming at lower values (EC 2019c).

Since the late 2000s, PV has experienced a dramatic price drop to date (Wang and Barnett 2019), but it has been largely due to economies of scale. Installed capacity grows by giant leaps each year (IRENA 2019), so PV R&D has become fundamental to enable developments that make possible fully unleashing the potential of the technology. To accomplish an efficient allocation of resources and prevent the duplication of research, the EU should take a comprehensive approach to fostering knowledge transfer and joint initiatives, as well as developing policies that make financing provided for the sector more transparent.

The results illustrate how, within the past three to four decades, PV R&D funding from the MS, Turkey and Norway is almost five times higher than that provided at the EU level. Considering the size of the EU budget and its approach to technological neutrality, this is not surprising, although it highlights the importance of improving the effectiveness by combining EU and Member State efforts. More importantly, in contrast to national funding, EU expenditures are characterized by high and repeated fluctuations. This makes it difficult to forecast annual values—especially when the ending of the funding program occurs. It also puts into question whether the investments can be considered sufficiently steady. Overall, national and EU R&D funding for PV are expected to reach an all-time maximum value of about 260 million € in 2030.

In light of growing PV R&D funding (national and at EU level) over the past 30–40 years, the expected importance of this type of RES in contributing to climate and energy objectives set for 2030 becomes evident. Sufficient public expenditures for PV will be fundamental to preserve and increase the impact of such a crucial technology. In this sense, a constant and less fluctuating funding provision for PV R&D would be of advantage, lowering the possibility of knowledge loss, as well as achieving innovation more efficiently and effectively.

Finally, it has to be highlighted that R&D is key to the generation of innovation, which in turn nourishes economic and social growth. Hence, in light of potential upcoming economic crisis, an adequate funding provision for such a relevant RES sector can be considered of high importance to the EU and its MS.