Tech Talk | Net zero technology manufacturing in Europe – challenges and opportunities
Image courtesy of Siemens Energy
Manufacturing of net zero technologies such as grids, wind, solar, batteries and others faces a range of challenges in Europe, a new independent study has found.
In a new independent study led by the Dutch consultancy Ecorys, the state of manufacturing of net zero technologies in Europe – from grids to renewables among others – is analysed with the key finding that while the region was the world’s second most attractive destination for net zero investments in 2023, it faces a range of challenges.
These include a competitive disadvantage due to subsidies in third countries it cannot match, higher labour and energy costs in Europe, dependency on critical raw materials, administrative burdens such as longer permitting times and a lack of skills.
Moreover the situation is exacerbated by a lack of stability and predictability of demand as these technologies generally require high upfront investments.
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The signals are that manufacturing capacity is moving abroad and there is an inability to scale up industrial production in Europe – this despite the EU’s strength in innovation and the region being one of the largest global markets for net zero technologies.
Net zero technologies in Europe
For example, and turning to specific technologies, the study, The net-zero manufacturing industry landscape across the Member States, shows that the EU holds technological and manufacturing global leadership in grid infrastructure, particularly in the production of high-voltage AC and DC cables.
However, the long lead times for projects due to permitting issues, a lack of skilled workers, bottlenecks in the supply for some components and reliance on material imports such as copper and aluminium are creating uncertainties for manufacturers and posing constraints on their ability to expand.
Similarly Europe’s battery market, while expanding rapidly, is strongly dependent on critical raw material imports and lengthy permitting for manufacturing, processing and mining operations, as well as uncertainties due to alternative emerging battery chemistries.
There is also an increased uncertainty about the pipeline of expansion projects following Northvolt’s recently announced bankruptcy.
The report finds the EU’s solar manufacturing to be at a critical juncture as the support for domestic manufacturing has lagged, with a decreasing share of global solar PV manufacturing, with limited production of modules and almost no domestic manufacturing of essential components like polysilicon, ingots, wafers, and cells.
Likewise for wind and other offshore renewables and while the region remains a leader in the local market, its position is weakening, mostly due to competition from China.
Other challenges also impact other technologies. For example, for heat pumps there has been a slowdown in demand alongside the reliance on imported components.
For electrolysers investments are slow to materialise with the dependency on the rollout of the hydrogen economy, for biogas and biomethane lengthy permitting and lack of feedstocks are key issues and for carbon capture and storage barriers include low investments and high technology costs.
Policy recommendations
At the EU-level, the Net-Zero Industry Act creates a regulatory framework to enhance European manufacturing capacity for net zero technologies and key components, addressing barriers to scaling up production in Europe.
However, while the introduction of the act has been widely welcomed by European industries, it now needs to be followed up with implementation at national level, the report recommends.
National contact points for permitting should be set up to enable shorter permit procedures and regulatory sandboxes could be used more widely.
A second recommendation is to leverage EU and national strengths to provide targeted support to specific net zero industries, based on factors such as manufacturing strengths and energy and labour costs.
Another recommendation is to stimulate private investment in the manufacturing of net zero technologies.
For example, a significant barrier to private investment is the lack of guarantees from banks. There also is a financing gap for innovation, particularly around equity finance.
A fourth recommendation is to draw on the EU’s sustainability leadership, for example with mandatory carbon footprint declarations and the use of EU sustainability and safety standards as a marketing tool.
Last but not least, there is a need for talent and skills development. While the assessment has identified skills and education programmes across 15 member states, these must be enhanced.
By 2025, over a million skilled workers are needed to meet ambitions alone in the battery, solar PV, and hydrogen industries and additionally, there is a growing need for specialised workers in deployment and installation, the assessment points out.
The Net Zero Industry Act foresees the establishment of net zero industry academies and these can be set up in sectors where skills shortages are most acute and anticipated.
An EU skills passport also is considered imperative for skills recognition across borders.
Jonathan Spencer Jones
Specialist writer
Smart Energy International
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