Recent enforcement practice under the
R&D&I Framework
Prague, 18 July 2013
Paolo Cesarini
Head of Unit, DG Competition, State aid for R&D&I and risk capital
Some key issues from recent case practice
• The on-going discussions on the revision of the R&D&I Framework
have raised, amongst others, the following key issues
 Assessment of State funded research infrastructures
 Aid to pilot lines and prototypes involving subsequent commercial use
 Allocation of IPRs within collaborative research projects and distinction of
economic and non-economic activities
 Appropriateness of aid instruments and minimisation of aid for close-tomarket projects
• Four cases will illustrate the Commission’s approach to these issues
 The Green Labs/DK case (2011)
 The Wave Energy Demonstration Plant/SW case (2011)
 The Genesys/FR case (2013)
 The Diehl Aircabin/DE case (2009)
1. Research infrastructures: the Green Lab
case (2011)
• Objective and design of the scheme.
 Promoting innovation for climate, environment and energy efficient
technologies through the establishment of testing and demonstration
facilities (Green Labs)
 Targeted mainly at SMEs affected by coordination and sub-critical
mass problems hindering the set up of independent facilities
 Grants awarded to Green Labs selected via open calls and on the basis
of transparent, non-discriminatory criteria
 Open-access facilities for rent to users at market prices, without
prejudice to a discount applicable during a specified period
o 100% economic use
 50% private financing
 Private investors do not enjoy lower access prices but preferential
access conditions within strict limits (limited period and maximum
capacity utilisation)
1. Research infrastructures: the Green Lab
case (2011)
• Compatibility grounds construed on current R&D&I
 Currently no specific legal basis for assessing compatibility of
research infrastructures carrying out non-ancillary economic
 The Danish government conceived a complex construction by
designing the aid measure under two separate aid categories:
o Aid to innovation clusters => investment aid to Green Labs
o Aid for innovation advisory and support services => pass-on to
infrastructure users
 Possibility of de minimis aid at users' level, notably for large
2. Pilot lines and demonstrators: the Wave Energy
Demonstration Plant case (2011)
Project characteristics
• System of 420 wave energy converters
(WEC) with varying power output
• Transformation of the electricity to
alternating current suitable for
• Development of two submarine
electrical systems:
Low voltage marine substation (LVMS)
Medium voltage marine substation
• Connection to grid and testing
2. Pilot lines and demonstrators: the Wave Energy
Demonstration Plant case (2011)
• Design of the aid measure
 Project financing: contributions by Seabased (a spin-off of Upsala
university), Fortun (a Swedish electricity producer and distributor) and
an ad hoc grant to Seabased by Sweden
 Grant: 43% of Seabased R&D eligible costs
 Advantage for Seabased: ownership of patents possibly resulting from
successful experimental development of the pilot plant
 Transfer of ownership of the pilot plant to Fortun for connection to
the grid and further testing of plant properties
 Negative NPV: project with aid well below Fortun’s profitability rate,
even taking into account possible revenues from future electricity sales
 If NPV > 0 Fortun will repay the corresponding amounts with interest
 Safeguard: any subsequent commercial use of the prototype will be
monitored to ensure claw-back of revenues beyond break-even point
2. Pilot lines and demonstrators: the Wave Energy
Demonstration Plant case (2011)
• Assessment
 Positive effects and proportionality of the aid
o Market failure: bank financing unavailable absent demonstration of wave
energy technology; strong positive externalities
o Incentive effect: « no-project » as conterfactual scenario; profitability for
Seabased occurring only potentially from future applications; negative NPV
and slightly positive IRR for Fortun in a scenario with aid
o Proportionality: aid below maximum aid intensities coupled with claw-back
 Limited market distortions
o Market definition
o Undistorted dynamic incentives
o No market power
3. Allocation of IPRs within PPPs: the Genesys
case (2013)
• Objective and design of the aid measure
 R&D to develop 3rd generation bio-refineries (based on ligno-cellulose
biomass) for several downstream sectors (energy, food, chemicals)
 Grant and capital injection in a start-up (Pivert) set up to manage
fundamental and industrial research (articulated in clearly defined subprograms) within a 50%/50% Public/Private Partnership (PPP):
o Public actors: 3 universities and a consortium of 14 research organizations
o Private actors: 6 industrial partners
o Genesys project coming within the R&D programs of the ROs concerned
 Investment in open-access facilities (Biogis Center)
 Expected outcome:
o pool of 40 (enabling) patents in 10 years co-owned by the public actors
o licensing at market terms by Pivert
o knowledge dissemination through about 100 publications per year
3. Allocation of IPRs within PPPs: the Genesys
case (2013)
Subvention R&D
3. Allocation of IPRs within PPPs: the Genesys
case (2013)
• Assessment under the R&D&I Framework
 Necessary and proportionate aid to Pivert (beneficiary)
"external" technology licensing as economic activity
Proof of market failure and incentive effect
Aid kept to a minimum
 No aid to Academic members: revenues from Pivert licensing
activities allocated amongst members in line with their contributions
and re-invested in public independent research
 No aid to Industrial members:
Open access to Industrial Club by interested competitors
IPRs' ownership allocated to public partners (Academic members)
IPRs' management entrusted with the start-up (Pivert)
IPRs' access by Industrial Club members (on exclusive or non-exclusive
basis) at market conditions
Possibility for outsiders to compete for IPR licenses
4. Revolving instruments for close-to-market innovation:
the Diehl Aircabin case (2009)
• Objective of the aid measure
 Supporting two distinct R&D projects for the development of
systemic components by a tier 1 Airbus supplier (DA)
o Product specifications fixed by Airbus
o DA selected by Airbus through a competitive process
 Technological challenge: integration of advanced materials
for weight reduction and fuel efficiency
 Market failure mainly in the form of asymmetry of information
o High technical and commercial risks and long-term credit periods
o Presence of risk-sharing partners but profitability gap deterring
bank lending
4. Revolving instruments for close-to-market innovation:
the Diehl Aircabin case (2009)
• Design of the aid measure
 Aid awarded under the German "Aircraft Supplier Scheme"
 Eligible costs falling entirely under experimental development
 Two aid instruments
o A state aid-free loan (8% of eligible costs)
o A (25% of eligible costs)
o repayable advance
 Appropriate reimbursement conditions, interest rate and royalty
beyond full repayment for the repayable advance
 "Successful outcome" as a condition for repayment
 Risk mitigation and profitability levels of the project based on
different scenarios of future A 350WXB sales (determined through
independent expertise).
4. Revolving instruments for close-to-market innovation:
the Diehl Aircabin case (2009)
• Appropriateness of the instrument in view of its
positive and negative effects
 Aid necessary to ensure the participation of a tier 1 supplier to
the development of an innovative long haul aircraft
 Close-to market innovation for critical components
 The repayable advance was structured so as to correspond to a
risk-mitigation and profit-sharing balance based on a
prudent business scenario
 Same type of financial instrument initially sought by DA and
that the market could not deliver
 Compliance with all other conditions (incentive effect,
 Limited negative effects having regard to the nature of the
aid instrument
• Thank you for your attention

Recent enforcement practice under the R&D&I Framework