In short, IPCEI projects are conditionally but exempt from EU competition regulations on state aid. This allows for an increased level of aid intensity, as projects can be supported up to 100% of the funding gap.
1. GENERAL OVERVIEW
In most cases, the implementation of IPCEI projects also requires significant state support, as the initial level of development of the emerging technologies that are the subject of the tender and the lack of experience would typically not pay off on a free-market basis. Under Article 107 (1) of the Treaty on the Functioning of the European Union (TFEU), the granting of State aid is, in principle, prohibited because of its distortive effects on trade and trade between Member States. Exceptions are defined by the European Commission, which monitors Member States' aid policies, on the basis of the so-called exemption items in the TFEU.
Under Article 107 (3) (b) of the TFEU, State aid for Important Projects of Common European Interest (IPCEI) is compatible with the internal market. In 2014, the Commission adopted the "Criteria for the analysis of the compatibility with the internal market of State aid to promote the execution of major projects of European interest" OJ 2014 / C 188/02. which can be considered as the ‘basic document’ of the IPCEI.
According to the Communication, the preconditions for eligibility are the following:
- A stand-alone project, defined in terms of project objectives and implementation conditions, including its participants and funding, or an integrated project, which is a set of coherent projects with the same purpose, similar in structure and work program and complementary;
- The project contributes in a clear and identifiable way to one or more EU objectives, is essential for the European Research Area, the 2030 framework for climate and energy policy, the trans-European transport and energy networks and key EU initiatives and strategies, and has a significant impact the Union's competitiveness and sustainable growth;
- The project serves common European interests as a European strategic value chain;
- The project usually involves several Member States and is co-financed by the beneficiary;
- The benefits of the project will not only be felt in the funding Member States but in a significant part of the Union;
- The effects of the project go beyond the financing companies (spill-over effects): their specifically identifiable benefits are not only in the sector but also in the wider European economy and society;
- The project complies with EU environmental, energy security and internal market standards;
- R & D & I projects must represent a significant innovation or provide significant added value in terms of R & D & I;
- Environmental, energy and transport projects must make a significant contribution to the internal market;
- It is not a precondition, but a positive one in the evaluation, if the project allows for the widest possible accession of Member States, partners in more sectors, types, company sizes, etc. represent;
- The Commission or another body authorized by it (eg. the European Investment Bank) will be involved in the planning of the project;
- The Commission and the Member States will be involved in setting up the project management structure;
- The project is co-financed by the EU.
In summary, IPCEI aims to support large-scale, large-scale, cross-sectoral and high-innovation projects of strategic importance that address significant scientific and socio-economic challenges at European level. Given that the project would not be feasible under other frameworks due to its increased technology and financial risks, they require a joint, coordinated effort and transnational public and private investment from several Member States.
2. FLEXIBILITIES PROVIDED BY IPCE COMPARED TO TRADITIONAL EU STATE AID RULES
By adopting Communication 2014 OJ 2014 / C 188/02, which forms the basis of the IPCEI, the Commission aimed to provide some flexibility in the assessment of these projects compared to the existing state aid rules for research and development and innovation, the main elements of which are as follows:
- The 2014 Communication does not specify the maximum aid intensity that can be granted to a project as a percentage of eligible costs, but the amount of the funding gap calculated on the basis of the expected return on the project can be granted as aid and the aid can provide a reasonable profit. If justified by the analysis of the liquidity gap, projects can be supported up to 100% of the funding gap.
- Compared to other State aid provisions, the Communication allows for a variety of aid instruments (eg repayable advances, loans, guarantees, grants, etc.).
- In the case of IPCEIs, not only the R & D & I activity but also the first industrial exploitation of the new product or service can be supported (building mass production capacity is no longer). In general, the R & D & I support rules do not allow this (maximum costs for the preparation of the prototype can be the eligible costs of the project to be supported). Thus, IPCEI support is a kind of transition between the activities covered by R&D and regional investment support (which in turn can only be provided in lagging regions of the EU).
- The annex to the Communication defined the eligible costs of the projects relatively broadly (itemized): almost the total project costs can be taken into account in the calculation of the liquidity gap / state aid.
- The fact that the Commission (DG COMP, DG COMP) is ready to examine the notified projects very quickly, working with the Member States on short deadlines and prioritizing the closure of these procedures as a matter of priority is not a significant help in authorizing these grants to the Commission.
- The Commission also involves the European Investment Bank (EIB) in some elements of the financing of IPCEI projects, so that the Member States concerned do not have to finance the entire liquidity component from national resources, but the projects can be implemented with a smaller budgetary burden.
It can be said that the European Commission is designating industries along strategic value chains, which it will raise to the level of IPCEI. So far, it has designated four IPCEI industries, in chronological order:
At the end of 2018, the European Commission approved the “Important Project of Common European Interest (IPCEI) on Microelectronics” under the State Aid Act.
This regulation initially allowed four European Member States to jointly support transnational cooperation projects with significant synergies in microelectronics - for the first time until the end of the first industrial deployment. With the help of “IPCEI on microelectronics”, France, Germany, Italy and the United Kingdom wanted to maintain and further develop European competences in this field. They also wanted to ensure that the entire microelectronic value chain was reliably available to local actors.
“IPCEI on microelectronics” brings together a wide range of microelectronic topics: e.g. optical development, hardware design, process knowledge, manufacturing equipment, chip manufacturing and downstream applications in many industries.
29 European companies are directly involved in the “IPCEI on Microelectronics” program. 40 closely related sub-projects will be implemented. During the projects, these companies will be able to work with a number of other partners, research organizations or SMEs outside the four participating Member States of the European Union.
Microelectronics IPCEI is divided into five technology areas:
- Energy efficient chips
- Power Semiconductors,
- Smart Sensors,
- Advanced optical equipment
- Compound materials
The technological knowledge generated by the participating companies through “IPCEI on Microelectronics” would like to be disseminated to the European microelectronics industry outside the four participating Member States in order to benefit as many countries and companies as possible.
The latest development in the field of microelectronics is that, at the initiative of Thierry Breton, the Commission intends to launch a new call in February following the 2014-2018 projects. The Commissioner for the Internal Market attaches high priority to raising Europe's microelectronics capacity to self-sufficiency due to recent supply chain shortcomings.
Negotiations are currently underway with political, industrial and advocacy organizations on microelectronic sub-areas that are important for Hungary. This serves the purpose of making proposals to the Commission for the designation of the IPCEI Microelectronics sub-areas and of making the subsequent call better suited to Hungarian market participants.
The hydrogen option of the IPCEI support framework is intended to facilitate the creation of a comprehensive European (green) hydrogen supply value chain. Hydrogen projects have been eligible for IPCEI support since 2019, after in 2019 the European Commission Strategic Value Chains (SVC).
At the international level, the hydrogen-themed IPCEI project proposals and the related partner negotiations and partner-finding forums are provided by Hydrogen Europe and the European Clean Hydrogen Alliance established in July 2020, therefore it is advisable to carry out all further Hungarian initiatives with their involvement. Hydrogen Europe has held several online and Brussels-based information forums over the past six months.
Hydrogen-related IPCEI projects are being prepared. This includes a significant number of projects in areas important for hydrogen, such as:
- Production of green hydrogen from renewable energy sources using electrolysers
- Transport of hydrogen on lorries and railway pipelines, freight ships and pipelines in various packaging forms (liquefied, pressurized, LOHC, NH3, etc.)
- fuel cells in heavy goods vehicles, public transport buses, trains, barges, seagoing ships, etc. mobility sectors, including hydrogen refueling stations on roads, in ports and at bus and coach terminals
- Industrial applications such as green steel, fertilizers, cement or industrial heat production for many production sectors (mixed in varying percentages with natural gas) as well as refineries and hydrogen in the chemical industry
- Energy sector applications such as temporary and seasonal storage, use of reduced energy to switch off the electricity grid, generators for electricity generation from excess hydrogen
- Replacement of natural gas in specific applications in the cogeneration housing sector
- In end-user-driven applications such as supermarket chains that want to make their logistics greener or on shipping, they strive to meet customers ’clean travel needs
Recent developments in the field of IPCEI Hydrogen on 15th of February, a “match making” event took place between the V4 countries, which helped to establish bilateral relationships between companies interested in IPCEI projects.
6 Hungarian presenting companies participated (MVM, MOL, Tungsram, Waberer’s, Horge Technologies, Linde Kft.) and another 10 listeners. A similar number of participants took part from Slovakia, Poland and the Czech Republic, but from there specific project ideas were presented, while Hungarian participants mostly plan to join existing initiatives.
The European Commission has announced the next designated strategic value chain IPCEI area, the deployment of industrial cloud services and the deployment of edge-clouding infrastructures.
It is essential for the European Union to build a smart technology base for the production, storage, retrieval, analysis, processing, access, sharing and exchange of data for the benefit of the European economy, businesses, public institutions and communities. The European Commission has repeatedly emphasized the need for strategic investment in the next generation of European cloud and edge capacities.
These include such as:
- in the European Data Strategy;
- "Scale up" projects under the Recovery and Flexibility Instrument presented by the EU Commission and managed in an EU priority area,
- in the conclusions of the European Council of 1-2 October 2020
- in a joint declaration by the Member States. on building the next generation cloud in Europe, 15 October 2020
The IPCEI Cloud includes both research, development and innovation (R & D & I) and the first industrial deployment (FID). This means cloud-based state-of-the-art infrastructures and services, including related middleware, based on state-of-the-art open source frameworks based on distributed, sustainable, and highly scalable architectures. The IPCEI Cloud will benefit sectors of the European economy such as manufacturing, energy, mobility or healthcare.
Focus on the establishment of cutting edge infrastructure and services spread across Europe. It lays the foundation for the next generation of Europeans future data economy.
The main objectives comprise:
- Strengthening of EU digital industry at both infrastructure and service levels
- Full alignment with the objectives of the EU Data Strategy, Industrial Strategy…
- Directly linked to other European Initiatives, e.g. GAIA X standards and rules
- An open, global and federated reference architecture for mobile edge cloud computing
- Development of cutting edge open source frameworks and European Open Source technologies
- Openness and accessibility across Europe
- Boost Cyber Security and resilience
- Increase of Energy efficiency
- Spill over effects in different sectors (MES) etc.
Since the last EU intergovernmental consultation, Hungarian political actors have contacted advocacy / professional bodies and asked market participants to express their interest in the IPCEI Cloud without committing themselves. So far, approximately 10-15 companies have indicated their interest, which will be discussed in the next round of consultations with the other Member States.
The IPCEI Cloud strategy is still in its infancy, so more information is expected.