Innovation Norway

How Governments Support Clean Energy Start-Ups highlights and unpacks government initiatives that help entrepreneurs get new clean energy technologies to the market, and offers recommendations to inspire innovation policy for net zero emissions. Read the report, and explore the case studies.

Government: Norway

Responsible government entity: Innovation Norway

External partner: N/A

Target type of innovator: Norwegian (or Norwegian-based) start-ups and small and medium-sized enterprises (SMEs) looking to validate, demonstrate and hone their technology for market entry.

Links: www.innovasjonnorge.no/en/start-page/our-services/innovation-and-development/

Key elements:

• An account manager is assigned to every start-up that applies to Innovation Norway. These advisers help the start-ups navigate and understand the different programmes offered by Innovation Norway to find the best match.
• Start-ups can apply any time of the year and do not have to wait for specific calls.
• Innovation Norway typically offers grants and loans to start-ups and accepts only companies registered in Norway.

The Norwegian government established Innovation Norway in 2004 to support Norwegian enterprises, including start-ups, in bringing new products to market, and to promote innovation and value creation in Norway as well as internationally. In 2020, start-ups featured strongly, with 26% of all of Innovation’s Norway’s primary lines of funding going to companies less than five years old. Innovation Norway supports Norwegian companies within most sectors that have international scope. For start-ups in particular, support focuses on high technology and cutting-edge science and engineering. In recent years, the share of funding directed to environmental issues has grown, including renewable energy and energy systems more broadly.

A notable feature of Innovation Norway’s approach is that, as of 2021, start-ups apply in a common system, and Innovation Norway subsequently guides them towards appropriate financial support, if appropriate. This process starts with registering online, where applicants present their idea and relevant information on project scope, business model and funding needs. Once registered, Innovation Norway assigns the applicant an account manager from an appropriate regional office to assess the fit between the company’s needs and the services that Innovation Norway can provide. This assessment focuses primarily on product-market fit, the strength of the team and the long-term commitment to building a business. If the initial assessment leads to a recommendation that the company may be suitable for funding, the account manager helps them to submit a formal application for evaluation by Innovation Norway. Innovation Norway may also help start-ups to identify potential partners for environmental technology grants or innovation contract projects.

Innovation Norway has three main ways of supporting start-ups financially:

• start-up grants and loans
• environmental technology grants
• innovation contracts.

Start-ups are eligible for environmental technology grants and innovation contracts, which are both open to larger company applicants.

Start-up grants and loans

These funding tools help start-ups to cover the costs of establishing a new business. Typically, loans are provided for business ideas that are expected to reach market quickly with a relatively low risk of failure. They have a four-year tenor. In contrast, grants are generally provided to start-ups with a longer remaining development phase. In some cases, a grant might precede a loan. Most recipients of start-up grants and loans are less than three years old.

Environmental technology grants

These grants fund projects that make and pilot new environmental technologies, defined in 2021 in line with the categories defined as technology eligible for the EU taxonomy for sustainable activities. In the context of EU state aid regulation, the projects are exempt because they address R&D (Article 25) or, if they require demonstration in commercial conditions, they concern process and organisational innovation (Article 29) or environmental protection (Section 7).

Innovation Norway makes environmental technology grants available through open calls for consortium projects. In addition, each year one call specific to clean energy and climate change mitigation is included in co‑operation with the Research Council of Norway and Enova. This call is part of the Pilot-E programme through which Norway aims to co‑ordinate consortium projects towards national “missions”. While start-ups are not frequently part of the consortium projects, the open call allows start-ups (and other companies) to enter the Innovation Norway system at any time.

Innovation contracts

Innovation Norway also provides grants for technology development projects structured as contracts between a Norwegian developer (generally an SME, including start-ups, but occasionally large companies if certain criteria are met) and a potential customer, which can be from any country. The potential customer – called the Pilot Customer – must cover at least 20% of total project costs as a signal that they are dedicated to the project and dedicated to the search for a solution to the specific problem being addressed. In addition, this financial commitment from the Pilot Customer provides some confirmation that there is a good product-market fit. In line with EU state aid rules, grants may cover up to 45% of the development costs incurred by an SME developer, and occasionally this can rise to up to 50% for a start-up.

Innovation Norway funds clusters, such as the Marine Energy Test Centre, which provide expertise and testing facilities in certain areas.

Innovation Norway can help connect start-ups to business services in accordance with applicants’ evaluated needs. Innovation Norway also helps start-ups with intellectual property and market research. To a certain extent, Innovation Norway offers in-house business guidance, especially concerning the refinement of business models and market entry strategies.

Innovation Norway also has internal experts in specific technology areas, including clean energy. These experts give feedback on novelty and market potential of proposed projects when relevant. They also maintain contact with industrial actors and stimulate potential project opportunities.

Regional account managers may help applicants connect with relevant external assistance regardless of whether they receive financing or not. These include other government agencies and incubators, among others.

Innovation Norway’s extensive network of international offices seeks to introduce Norwegian start-ups to potential partners and opportunities around the world. It helps start-ups registered in Norway undertake international market research through their international offices.

Project proposals and project reports estimate the environmental impacts of projects. In terms of climate impact, this does not include potential emissions avoidance downstream from the technology (for example by the users of the products of the Pilot Customers), which leaves much of the potential impact of clean energy start-ups unquantified. Estimates of potential emissions reduction made during the application phase are updated in the final report for comparison.

Innovation Norway tags all project funding according to ten categories of environmental impact that follow the EU taxonomy for sustainable activities, which is broader than climate impact alone. This helps Innovation Norway to track how much funding projects in each area have received. In 2021, 60% of funding had one of these tags by December.

Innovation Norway requests that recipients respond to a survey four years after funding to evaluate the progress and performance of enterprises receiving funding.

Enova SF is a state-owned agency tasked since 2001 with promoting a shift towards more environmentally friendly energy consumption and production, as well as the development of energy and climate technology. Enova funds projects contributing to energy, climate and low-carbon technology solutions in Norway, including, since 2015, the transport sector. Among its initiatives to speed technology deployment, Innovation Norway, the Research Council of Norway and Enova launched Pilot-E in 2016. This co‑operation targets consortiums of companies developing clean energy and climate change technologies with TRL 5-9. The idea is to accelerate the market launch of these technologies.

This publication has been produced with the financial assistance of the European Union as part of the Clean Energy Transitions in Emerging Economies programme. This publication reflects the views of the International Energy Agency (IEA) Secretariat but does not necessarily reflect those of individual IEA member countries or the European Union (EU). Neither the IEA nor the EU make any representation of warranty, express or implied, in respect to the article's content (including its completeness or accuracy) and shall not be responsible for any use of, or reliance on, the publication.

The Clean Energy Transitions in Emerging Economies programme has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 952363.