Looking to stay up-to-speed on the world of EU politics? This monthly newsletter is your one-stop-shop for all things cleantech policy! We compile news from across policy sectors and break down their potential impact on cleantech.
This month, we dive into:
Passed by the US Congress last year, the Inflation Reduction Act (IRA) entered into force on August 16, 2022. It permanently raised the bar for cleantech funding, offering speedy and radically simple access to public money. The IRA mobilises $369 billion of taxpayer dollars over the next decade, with experts predicting the ability to leverage trillions of private dollars.
Since its passage, more than a hundred clean energy projects have been announced. The dollars are pouring in by the billions, and the Act kicked off a global cleantech race in the quest to woo future industrial giants. At the same time, the US’s insufficient energy grid and the difficulty to reform permitting rules holds the IRA back from achieving its full potential.
Half a year later, the European Commission adopted the Net Zero Industry Act (NZIA) in response. NZIA does not mobilise any funding for cleantech companies, opting instead to streamline permitting and set domestic production targets for a set of strategic sectors.
On the funding side, the EU has loosened State Aid rules, and announced a €10 billion package known as the Strategic Technologies for Europe Platform (STEP), which will offer funding split between biotech, deep and digital tech, as well as clean technologies.
On September 13, European Commission President Ursula von der Leyen gave her fifth annual State of the European Union (SOTEU) speech – the last one of her mandate. The speech offered cleantech policy a prominent spot, as she commented:
"From wind to steel, from batteries to electric vehicles, our ambition is crystal clear: The future of our cleantech industry has to be made in Europe."
The speech went on to highlight the Commission’s dedication to keep supporting industry through the green transition, and touched on decarbonising heavy industry, launching a European Wind Power Package, and ensuring fair competition for Electric Vehicles produced in Europe. Furthermore, President von der Leyen announced that the Commission will host a series of “Clean Transition Dialogues.”
On March 16, the European Commission unveiled the Net-Zero Industry Act (NZ designed to set the regulatory and investment foundations for the wide deployment of a list of strategic net zero technologies (solar, wind, batteries and storage, heat pumps and geothermal energy, electrolyzers and fuel cells, biogas/biomethane, carbon capture, utilization and storage, and grid technologies, as well as their corresponding main upstream components). The NZIA’s aim is having the EU’s net-zero technologies manufacturing capacity reach at least 40% of the EU’s overall needs by 2030.
The NZIA proposal is currently being mulled over by the European Parliament’s Committees in charge of industry and energy (ITRE) and Environment (ENVI), and the governments of EU Member States. Below, we dive into their current respective positions.
ITRE, the lead committee on negotiating NZIA on behalf of the European Parliament, is still in the process of formulating its position. Key points of contention include whether the scope should be enlarged, the level of ambition regarding permitting reform, the deployment target and public procurement.
ENVI is only providing its recommendations regarding NZIA only in an advisory capacity. These recommendations are not binding for ITRE. ENVI adopted its recommendations on NZIA on September 20.
A key ENVI recommendation concerns prioritizing carbon capture and storage for sectors with unavoidable emissions. ENVI does not define which these sectors are, but calls for a clear methodology to develop a list. This list would take into account scientific evidence, the current state-of the-art of relevant technologies and appropriate demand-side emissions reduction measures.
While their official position has not yet been published, current word is that Member States are looking to expand the list of net-zero technologies covered by NZIA, while keeping the accelerated timeline of permitting proposed by the European Commission.
ITRE will be voting on NZIA recommendations on October 25. Then, it goes to the European Parliament plenary vote, which is currently expected in November. Once the European Parliament as a whole and Member States have adopted their respective positions on how NZIA should look like, they will be entering into negotiations on the final shape of the legislative proposal.
On August 29, the European Commission unveiled the Terms and Conditions for the first €800 million pilot auction under the European Hydrogen Bank. The Terms and Conditions cover: general auction design elements; qualification requirements; auction procedure; rights and obligations; the auction framework conditions.
The auction will grant a subsidy to hydrogen projects located in the European Economic Area of a fixed premium in €/kg of renewable hydrogen produced over 10 years. There will be no reference price. The maximum amount of grant requested by each project application cannot exceed 1/3 of the total available budget for the auction. A reference to additional calls and additional call structures is included in the Terms and Conditions, with an understanding that the need for these and for setting up broader “Auctions-as-a-Service” with additional national contributions will be considered, also depending on the number of applications received for this call.
The European Climate, Infrastructure and Environment Executive Agency (CINEA), which is the granting authority, will open the auction on November 23.
On September 14, the European Commission published two consultations seeking views on reviewing the EU Sustainable Finance Disclosure Regulation (SFDR). A public consultation for a broad range of stakeholders, and a targeted consultation, which will gather input from stakeholders more familiar with SFDR (investors, asset managers etc.).
In the target consultation, the European Commission is asking stakeholder input on a broad range of areas including:
The deadline to respond is December 15, 2023. On October 10, the European Commission will be organizing an online event to discuss on the current challenges of the SFDR and how to address its shortcomings. As for next steps, following the input received in the consultation, the European Commission will develop a legislative proposal to revise the SFDR, most likely in Q2 2024.
On March 16, the European Commission unveiled the Critical Raw Materials Act (CRMA). The CRMA lays a regulatory framework for selecting and implementing strategic raw materials projects in the EU, diversifying the EU's imports to reduce dependencies, and improving the EU’s capacity to monitor and mitigate risks of disruptions to the supply of critical raw materials.
With the global cleantech race ramping up, the critical raw materials (CRM) sector is booming globally: unprecedented amounts of venture capital is flowing into innovative solutions. That said, comparing EU venture investment into CRM technologies to that in the US reveals a stark difference: Europe is falling behind.
The EU consistently underperforms the US in number of deals & amounts invested. CRM venture deals were on average 3.5x larger in the US (€49 million) than in the EU (€14 million) in the first half of 2023. An improvement from 2022, when average US deal size was almost 10x larger.
Our new report explores in-depth, how to leverage the power of innovation at every step of the CRM value chain.
Agora Energiewende recently published a report on the role of EU cleantech manufacturing. The report analysed important cleantech value chains – Solar PV, wind (on-and offshore), electrolysers, heat pumps and batteries – to identify weak spots by way of raw material, refining and subcomponent. The report breaks down the estimated costs of deploying these technologies under different policy scenarios.
The International Energy Agency , the International Renewable Energy Agency, and the United Nations Climate Change High-Level Champions, jointly published the Breakthrough Agenda. The Breakthrough Agenda brings together 48 countries representing 80% of the global economy to collaborate in the decarbonisation of the most critical sectors and takes stock of the action countries have taken to this effect. The report indicates that while investments in clean energy technologies are rising, sectors such as steel, hydrogen and agriculture have not made sufficient progress to transition. Countries have, among other things, launched a series of new public and private finance commitments, developed innovative financial instruments and set clear priorities and roadmaps for regional grid initiatives. Less progress has been made on adopting higher minimum energy performance standards.