Draghi’s report calls for power grid and automotive strategies to boost competitiveness

Mario Draghi’s long-awaited report, The Future of European Competitiveness, has been released, detailing why Europe needs a joint decarbonisation and competitiveness plan with power grid and e-mobility industrial strategies as key components.

Draghi, the former European Central Bank chief and Italian prime minister, said yesterday during a press debriefing in Brussels that, if European policy aligns with decarbonisation, it will create immense opportunities for growth.

But that’s a big ‘if’, he warned, adding that, “if we fail to coordinate, there is a risk that decarbonisation could run contrary to competitiveness and growth.”

Draghi’s report comes in response to the surge in competition from the US and China in the backdrop of a stagnating economy and energy crisis. It highlights why a joint decarbonisation and competitiveness plan will be needed with all EU policies aligning with EU objectives.

A critical part of this plan lies in the power grid and the automotive sectors.

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A new strategy: Collective focus on the grid

The report states: “A central element in accelerating decarbonisation will be unlocking the potential of clean energy through a collective EU focus on grids.

“If there is one horizontal area in the energy sector whose importance cannot be overstated, it is the EU’s energy grids.”

According to the report, delivering a step-change in grid deployment will require a new approach and strategy for planning at the EU and Member State levels, including the ability to effectively reach decisions and accelerate permitting, to mobilise adequate public and private financing and to innovate grid assets and processes.

Specifically, the report lists interconnectors and their installation as a primary focus, recommending first to establish a ‘28th regime’ – a special legal framework outside of the 27 different national legal frameworks – for interconnectors that are Important Projects of Common European Interest (IPCEIs).

This regime, states the report, would shorten the length of national procedures and integrate them into a single process, avoiding the possibility of projects being blocked by individual national interests.

Some very large renewable energy projects, such as large offshore wind in the North Sea, could also apply via this procedure, bypassing permitting delays at the local level.

Second, Draghi’s report says that the next Multiannual Financial Framework should reinforce the Connecting Europe Facility, an EU instrument dedicated to financing interconnectors.

Third, a permanent European coordinator should be created in charge of assisting in obtaining the necessary permits. This coordinator would be responsible for monitoring progress in the permit-granting process and facilitating regional cooperation to ensure political backing for cross-border infrastructure from all relevant Member States.

An automotive industrial plan

Also worth noting, Draghi’s report says that, as part of its decarbonisation strategy, the EU should develop an industrial action plan for the automotive sector.

In the short term, states the report, the main objective for the sector should be to avoid a radical delocalisation of production away from the EU or the rapid takeover of EU plants and companies by state-subsidised foreign producers, while continuing decarbonisation.

Looking forward, the report recommends that the EU develop an industrial roadmap that accounts for both horizontal convergence (electrification, digitalisation and circularity) and vertical convergence (critical raw materials, batteries, transport and charging infrastructure) of value chains in the automotive ecosystem. As part of this action plan, the report calls for the EU to evaluate support for IPCEIs in the sector.

In response to the report, AVERE, the European Association for Electromobility, endorsed the findings, saying that, from vehicles to batteries to materials, Europe faces rising competition pressures from China and other regions, requiring policy urgency to keep domestic manufacturing goals on track.

Commenting in a release was Chris Heron, AVERE’s secretary general: “The EU’s 2035 zero emission car sales target has created a lasting opportunity for Europe building up a full e-mobility ecosystem, including electric vehicles, batteries, materials, infrastructure, and services.

“European companies have committed to this opportunity with investment and innovation, but today our value chain faces major headwinds from intense global competition. The Draghi report is right in calling for an urgent and paradigm-shifting EU industrial policy.”

According to AVERE, although the continent has a pipeline of 1.7TWh battery projects that could theoretically be operational by 2030, over 220GWh of projects have been delayed or cancelled since the start of 2024. Europe, says the association, must also fix its midstream gaps in raw materials refining, precursor and cathode manufacturing.

Europe’s capital and operating costs are still far higher than its rivals, especially after recent subsidy programmes. Building an EU battery factory is 47% more expensive than in China, with 70% higher operating costs. The US IRA’s tax credits have helped to bridge this gap for US investments, but until now the EU has not delivered its own equivalent support package.

Heron continued: “We echo Mario Draghi’s call for game-changing EU action. Two years ago, the US turbocharged its clean technology investments through the Inflation Reduction Act. The EU’s Clean Industrial Deal needs to be just as revolutionary for Europe to seize all its e-mobility opportunities. Now we have the right diagnosis, we must work with speed on the cure.”

In their response, AVERE also called for the EU’s Clean Industrial Deal to focus on incentivising the full ecosystem for EVs – with the 2035 CO2 targets as its compass for investment.

As well as effective EU-level finance sufficient for addressing all supply chain bottlenecks, says AVERE, Europe needs dependable incentives to keep people buying and using electric cars, more regulatory consistency, programmes to develop the necessary skills base, a grid strengthening strategy, and a stronger global agenda to secure raw material supplies.

The grid and automotive sectors are two crucial elements in the joint plan, which lists three separate key priority areas that will need to be a focus going forward.

Firstly, the report calls for lowering energy costs by transferring the benefits of less costly energy produced by renewables to consumers, both at the household and industrial level.

Secondly, industrial opportunities from the green transition need to be fully captured by using all available solutions through a technology-neutral approach.

Thirdly, the playing field needs to be levelled in sectors more exposed to unfair competition from abroad and/or facing more exacting decarbonisation targets than their international competitors.