eu cleantech
annual briefing
2023

In 2022, cleantech rose to become the EU’s main strategic priority. What does 2023 hold for European cleantech?

2023 will be a decisive year for European cleantech

Jules Besnainou
Executive Director
2022 will go down as a difficult year for Europe. Russia’s war brought extreme suffering to Ukraine, and high energy prices to households across Europe. The climate crisis continued to worsen, with deadly heatwaves and fires. Increasing global competition threatened the EU’s future competitiveness and prosperity.

At the same time, 2022 triggered a common realisation that by transitioning to a clean economy, Europe would tackle the climate crisis, while becoming energy resilient and increasing our competitiveness. At last, cleantech rose to become the main strategic priority for policymakers in Brussels and member states. Members of the EuropeanParliament launched the Cleantech Friendship Group and later in the year, theEuropean Commission prepared to start new legislation on cleantech. We joined leading European companies to form a Cleantech Scale-up Coalition, with the support of European Energy Commissioner Kadri Simson and Bill Gates.

Despite an incredibly challenging financial environment, European cleantech investment experienced its second-best year ever, with more than double the investment of 2020, but decreasing from the 2021 all-time record. In particular, early-stage investment soared, while scale-up finance fell.

So what will 2023 hold for European cleantech?Political attention to European cleantech will continue to rise. The EU’s Net-Zero Industry Act will respond to the US Inflation Reduction Act. This could be transformative, but only if it is part of a comprehensive EU cleantech strategy addressing challenges around scale-up financing, demand, regulation, infrastructure, supply chains and skills, and only if it materialises in a matter of months, not years.

As it becomes more political, cleantech must not become a buzzword to legitimise grey investment. The EU should prioritise the most ambitious technologies available.

While this winter proved milder than expected, the next could be more challenging. Electrifying our energy system and building up our renewable base will be a race against the clock.

On the investment side, our ability to finance the scale-up of clean technologies will be our main test. If we don’t improve, we will see promising European technologies move to the US to scale.

We believe 2023 will be a decisive year for European cleantech. We will continue to mobilise the cleantech community to help the EU lead the global cleantech race.

Executive Summary

European cleantech investment experienced its second best year after 2021. Investments increased for early-stage venture capital deals
Cleantech investment fell by 14%year-on-year, compared to 17% for North America and 20% for Asia Pacific
Renewable hydrogen, green steel and electric vehicles among the top deals of the year
Following the energy crisis and theInflation Reduction Act (IRA), cleantech rose to the top of the EU Agenda as akey strategic priority
Important policy wins were delivered for cleantech, such as improvements of carbon pricing and the phaseout of fossil-fueled cars
Important policy packages are still under negotiation
A global cleantech race, challenges on raw materials and a continuing energy crisis will be elements of the backdrop of scale-up efforts in 2023
Sweden and Spain take over the presidency of the Council of the European Union, with cleantech and the EU’s response to IRA as key priorities
A number of critical policies for cleantech will be negotiated
The EU needs a concrete cleantech strategy to compete on the global stage. This strategy is needed now, not in 2years.
The strategy should focus on scale, and drastically improve funding, demand, regulation and infrastructure to win
The strategy should also take into account raw materials, manufacturing supply chains and skills

01

2022: a strong year for EU cleantech investment

10.6
billion

Invested in EU Cleantech in 2022

Early-stage investment soars, while scale-up capital decreases

EU trends

Following global headwinds for venture capital (VC), higher interest rates and “war shock”, European cleantech VC investment fell by 14% year-on-year, still logging its second highest year on record
This resistance was driven by soaring investments in early-stage cleantech: seed investments nearly doubled, from c.€ 600 million in 2021 to 1.1 billion in 2022, and series A investments rose by32%. Even series B, the start of the scale-up journey, rose by 38%.
The decrease in investments is due to a shortfall in scale-up capital, with growth equity falling by 35% year on year
The poor performance was concentrated after Q1, reflecting the general slowdown caused by the war in Ukraine and a tightening financial environment
EU27 Cleantech Seed, Series A, Series B and Growth investment, 2018-22
EU27 Cleantech Venture and Growth deals by stage, 2018-22

Compared to global peers

While European cleantech investment fell by a 14% year-on-year, the decrease was more significant in North America andAsia Pacific, respectively falling by 17% and 20%
This milder decrease helped the EU increase its share of global cleantech investment, from 14.9% in 2021 to 15.5%in 2022
In North America, scale-up capital resisted better than in Europe, but series B fell. In Asia Pacific, scale-up capital performed very well, but early-stage investments fell.
Asia Pacific was the only region showing a strong rebound in Q4 2022, raising the possibility of a 2023 rally
North America Cleantech Seed, Series A, Series B and Growth investment, 2018-22
Asia Pacific Cleantech Seed, Series A, Series B and Growth investment, 2018-22

Top deals
project finance and structured debt

€4.55b

Steel
Sweden
Construction of a hydrogen-powered green steel plant in Northern Sweden

€1b

Batteries
Sweden
Expansion of EV battery cell and cathode material production in Europe

€855m

Photovoltaics
Germany
Expanding Enpal’s business and meet demand for residential solar power

€475m

Wind power
Denmark
Develop a new offshore wind turbine, and to finance other RDI projects

€250 m

Batteries
France
Pilot production of the company’s  battery cells with a production capacity of 150 MWh
2022-Q3-chart__transportation-logistics
Transportation & Logistics
Belgium
€20M
€20M
2022-Q3-chart__carbon-management-02
Carbon Management
Sweden
€45.7M
€45.7M
Germany
€10.9M
€10.9M
2022-Q3-chart__food-waste
Food waste
Sweden
€65.7M
€65.7M
2022-Q3-chart__energy-services
Energy Services
Germany
€214.7M
€214.7M
2022-Q3-chart__green-steel
Green steel
Sweden
€297.8M
€297.8M
2022-Q3-chart__advanced-materials
Advanced Materials, Fuels & Chemicals
Netherlands
€15.1M
€15.1M
Denmark
€11.7M
€11.7M
Netherlands
€11.2M
€11.2M
Denmark
€10.2M
€10.2M
2022-Q3-chart__alternative-proteins
Alternative Proteins
France
€16.8M
€16.8M
Finland
€15.3M
€15.3M
2022-Q3-chart__energy
Energy, Energy Storage & Networks
Netherlands
€30.5M
€30.5M
France
€13.9M
€13.9M
Netherlands
€12.3M
€12.3M
2022-Q3-chart__electric-vehicles-02
Electric Vehicles
Germany
€50.3M
€50.3M
2022-Q3-chart__supply-chain-logistics
Supply Chain & Logistics
Germany
€153.7M
€153.7M
2022-Q3-chart__crop-inputs-02
Crop Inputs
Slovenia
€14.5M
€14.5M
2022-Q3-chart__biomass-waste
Biomass & waste to energy
Germany
€37.7M
€37.7M
2022-Q3-chart__fuel-cells
Fuel Cells
Denmark
€54.4M
€54.4M
2022-Q3-chart__electric-vehicles
Electric Vehicles
Netherlands
€159.7M
€159.7M
2022-Q3-chart__hydrogen
Hydrogen
Germany
€271.3M
€271.3M
2022-Q3-chart__agriculture-food
Agriculture & Food
France
€485.3M
€485.3M
2022-Q3-chart__carbon-management
Carbon Management
Sweden
€11.6M
€11.6M
2022-Q3-chart__hvac
HVAC
Czech Republic
€15.7M
€15.7M
2022-Q3-chart__solar
Solar
Sweden
€22.9M
€22.9M
2022-Q3-chart__crop-inputs
Crop Inputs
France
€23.9M
€23.9M
2022-Q3-chart__construction
Construction
Spain
€37.9M
€37.9M
2022-Q3-chart__ev-charging
EV Charging
France
€180M
€180M
Denmark
€47.2M
€47.2M
Netherlands
€19.9M
€19.9M
Lithuana
€7.2M
€7.2M

2022 Eu Cleantech
top deals and activities

(Seed and series A)
(Series B and Growth Equity)

investor news

€600m

Blackrock and Temasek launched Decarbonization Partners, a $600 million partnership to launch a series of investment funds focused on carbon emissions reduction

€80m

Demeter announced the closing of four funds: a €300m infrastructure fund, a €150m circularity fund, an €80m regional industrial fund and an €80m fund dedicated to the ecological transition of the wine industry

€50m

The European Investment Fund invested €50million in World Fund, its largest ticket in an impact-related fund.

€390m

Energy Impact Partners (EIP) announced the closing of its €390 million European Fund

€210m

Alantra and Enagás achieved a final €210 million close for their Energy Transition Fund, Klima, above the initial target size of €150million and with oversubscription

€150m

Eurazeo announced the 2nd closing of its Smart City II Venture fund at €150 million with new institutional and corporate partners in Europe and Asia

02

2022: cleantech rose to the top of the EU agenda as a key strategic policy priority, but this has to be followed up with actionable proposals in 2023

Following the energy crisis and the IRA, cleantech became the EU’s top strategic priority

Key policy wins were delivered for cleantech, such as improvements of carbon pricing and the phase out of fossil-fueled cars. Important policy packages are still under negotiation while new proposals are in the process of being tabled.

2022:
Clean technologies made their way to EU policymaking

Fit for 55

The  co-legislators spent 2022 negotiating the 'Fit for 55' package, the EU’s main tool to implement the European Green Deal. It is amending current legislation and setting new emission reduction requirements across the whole economy. Thus far, the co-legislators have greenlighted several major legal frameworks under the Fit for 55 package:
The EU’s carbon pricing system (EU ETS), updating it to include twice as fast annual emission reduction rates for the power and heavy industry sectors; 
The expansion of carbon pricing to cover imports under the Carbon Border Adjustment Mechanism (CBAM), due to already start its pilot phase in October 2023; the free allocation of permits for industrial emitters is set to decrease by half to 2030;
The reduction targets for emissions from buildings, transport, waste and agriculture were increased 10% average for every Member State to 2030;
A 2035 ban on sale of new internal combustion engine (ICE)

Key wins for cleantech

Green reindustrialisation: by reforming the rules on free carbon permits allocation and increasing the firepower of the EU Innovation Fund, an-EU wide framework for sustained cleantech financing is within sight 
Significant impetus for road decarbonisation: through the direct mandate to ban ICE cars and positive consumer demand trends,Europe could electrify road transportation faster than other regions
Promotion of cleantech in agriculture and forestry: the revised LULUCF encourages Member States to start thinking of their land use policies holistically and incentivises them to develop solutions in the covered sectors, from forestry, to soils and regenerative agriculture.
Safeguard cleantech innovation funding: the budget for cleantech research and innovation in Horizon Europe was retained in spite of threats of potential cuts

Fit for 55 files still in the pipeline

Renewable Energy Directive: negotiations on the final target of renewable energy in the EU are expected to be heated, with the EuropeanParliament aiming for a 45% target and for a 5% target on innovative renewables 
Energy Efficiency Directive: The three co-legislators have different views on the EU’s final energy savings target. The European Parliament wants a14.5% target, the European Commission a 13% target, and the Council wants thecurrent target of 9% to remain.
Energy Performance of Buildings Directive: with the European Parliament scheduled to adopt its position on the file by mid-March, EU countries are still debating on the minimum energy performance targets for buildings
Ecodesign Regulation and Construction Products Regulation: having faced strong pushback against product-climate regulation, the EU institutions have yet to adopt their negotiating positions. Sweden is the leading EU country in Green Public Procurement and is expected to be vocally supportive of taking this further
Sustainable Aviation Fuels (SAFs) : the co-legislators have differing views on what percentage of SAFs should be mandated. The three co-legislators have yet to find an agreement on what feedstocks should be designated as sustainable

2022:
Clean technologies made their way to EU policymaking

REPowerEU

In the wake of Ukraine’s invasion, the European Commission presented its emergency €300 billion REPowerEU plan to reduce the EU's reliance on Russian fossil fuels. The REPowerEU plan revolves around three key pillars:
(i) saving more energy;
(ii) producing more renewable energy in the EU and accelerating the clean energy transition;
(iii) diversifying the EU's energy supply.
Following through on the implementation of the REPowerEU plan, the European Commission proposed an emergency Regulation to fast track permitting for clean energy projects. The Regulation entered into force on December 30, 2022 and its measurers will be in force for a limited period of 18 months. To streamline the permit-granting process, the Regulation provides that:
(i) the permit-granting process must not exceed six months;
(ii) environmental impact assessments if applicable, must be limited to assessing significant impacts.

Key wins for cleantech

Recognition of cleantech as  a strategic priority: by referencing several areas of cleantech to support the transition – including energy storage, hydrogen pathways for industry, and geothermal energy;
Increased funding for cleantech: overall spending associated with the measures in REPowerEU totals roughly €300bn, with €225bn in loans and €75bn in grants. €210bn is tobe spent by 2027, rising to €300bn by 2030. 96% of this money will go to fossil-free infrastructure. The plan also specifically provides for the roll-out of carbon contracts for difference (CCfDs) for the hydrogen sector
Permitting: the new permitting regulation cuts red tape and enables permitting within 6 months. The good news is that the revision of the RenewableEnergy Directive will also be taking into account the new permitting provisions. This helps move beyond the additionality issue in green hydrogen production as it gives a faster approval for those wishing to move into this direction and develop this technology. 

Look out for

Fossil fuel lock-in: The addition of loopholes forLNG infrastructure in the REPowerEU chapters of Recovery Plans isa covert fossil subsidy worth up to Euro €60 billion.
Lack of operational strategies: despite the recognition of several clean technologies, REPowerEU does not lay out a concrete plan for how to unleash the potential of these breakthrough technologies
Destabilisation of the carbon market at the expense of Innovation Funding: using allowances from the EU ETS Market Stability Reserve to fund REPowerEU hampers investors’ ability to predict the EU carbon price and plan cleantech investments accordingly

2022:
The US passed the world’s largest cleantech investment package

Inflation Reduction Act

In August 2022, the US Congress passed the Inflation Reduction Act (IRA), a landmark climate and competitiveness package dedicating hundreds of billions of dollars in tax credits to clean technologies over ten years.

IRA has a level of ambition and simplicity that is difficult for the EU to match. While US federal climate policy used to be stop-and-go, innovators now enjoy durable policy certainty around tax credits for energy (wind turbines, solar panels, batteries), transportation (electric vehicles, zero-emission trucks, sustainable aviation fuels), and buildings (heat pumps, rooftop solar, HVAC), to name but three sectors.

Although IRA’s ambitions are similar to Fit for 55’s, the instruments used to reach those ambitions are quite different. The US is primarily using financial incentives such as assigned financial envelopes for specific technologies and infrastructure, tax credits, and loans. Meanwhile, the EU is prioritising carbon pricing, binding targets, performance standards, sectoral regulation, direct technology mandates, grants, and financial support.

IRA vsFit for 55: A comparison

Clean Energy: IRA offers $30 billion in production tax credits for solar panels, wind turbines, batteries and critical minerals, as well as a $27 billion GHG reduction fund for climate technologies. The US is taking the lead over the EU in long-duration energy storage, with IRA providing $10 billion to scale up energy storage. Meanwhile, the EU is reforming its carbon market and setting a sub-target for the deployment of innovative renewables
Industrial Decarbonisation: The US provides generous subsidies to “clean” hydrogen, whereas the EU pursues a complex regulatory approach. Elsewhere, IRA adds billions of dollars in tax credits and direct investments, while the EU leans primarily on its carbon market
Transport: The US allocated direct funding for specific infrastructure development projects, and tax credits for vehicles, whereas the EU opted for an eventual phase-out, with interim targets and incentives to manufacturers
Buildings: IRA provides $5.4 billion for building material innovation, whereas the EU focuses on mandates and targets, such as a binding national energy efficiency target
Scale-up funding: IRA authorizes $350 billion in new loan and loan guarantee authority for DOE’s LoanPrograms Office (LPO), which combines with LPO’s rigorous diligence, “always-open” calls, and proactive outreach to innovators. The EU has no equivalent funding program, although the European Investment Bank and EU Innovation Fund have tremendous potential

Look out for

Implementation challenges: There will be more scrutiny by the Republican-controlled House of Representatives over the LPO and every agency that is deploying IRA funds, potentially slowing down implementation.The only major achievable US legislative opportunities in the next two years are in permitting
International tensions over domestic content requirements: Ensuring as few EU-US trade frictions as possible will be key to bringing costs down and enhancing transatlantic collaboration to accelerate innovation in breakthrough technologies and counter China’s cleantech supply chain dominance
European response to IRA: As Europe will have limited opportunities to tap into IRA tax credits, the EU looks likely to loosen its state aid rules to preserve its industrial competitiveness. In doing so, it must avoid an internal subsidy race that would distort the single market and likely benefit only large incumbents. Rather, it should raise new funds (through joint EU borrowing) with a clear mandate to scale clean technologies. On 17 January 2023, European Commission President Ursula von der Leyen announced the Net-Zero Industry Act to increase cleantech funding and accelerate permitting for relevant production sites, in addition to establishing a European Sovereignty Fund for strategic industrial investments. Additionally, the Commission seeks to offer companies more “simple tax-break models” and accelerate the process for approving other state aid

03

2023: a decisive year for EU cleantech

A global cleantech race, challenges on raw materials and a continuing energy crisis will be elements of the backdrop of scale-up efforts in 2023

Sweden and Spain take over the presidency of the Council of the European Union, both with cleantech a key strategic priority. A number of critical policies for cleantech will be negotiated.

2023
macro themes coming up

Global Cleantech Race

Increased competition from the US with the Inflation Reduction Act, and from China with its industrial policy, have triggered a global cleantech race that will play out in 2023
Worsening climate and energy crisis will contribute to this race, which will broaden to climate adaptation technologies

Raw & Rare Materials

Disrupted global trade will continue to put an emphasis on supply chain resilience and availability of raw materials
EU to develop a Critical Raw MaterialsAct
Waste Exports EU legislation to seek to minimise exports of precious materials, as well as a of scrap steel, and plastic, encouraging more circularity, which will have ripple effects on third countries

Food security concerns

The impact of the war in Ukraine on food availability throughout the world adds an extra burden to the already difficult scenarios painted by climate change, leading to further price increases.Depleting soil and increased droughts will accelerate the trend.
Urgent need to transition to less carbon-intensive land use and adopt plant-based foods
Citizens’ Assemblies start being organised at the EU level as part of regular consultations, with food waste being at the forefront

Energy Prices

Volatility of energy prices and uncertainties over supply bound to continue into 2024
Inflation in the broader economy will be attributed by some to the energy transition and will affect prices of low-carbon products
Will push governments to enact regulation for electricity markets, producers, consumers and institutions.

Water Issues

The Summer of 2022 revealed a critical issue around scarcity of water in the EU with impact on agriculture, use of nuclear energy, etc.
Water treatment innovations in cleantech are becoming increasingly important.

Climate Finance & Biodiversity

COP27 saw agreement from International Financial Institutions to align financing with the Paris Agreement
The agreement on implementation of Art. 2 of the Paris Agreement is an overhaul of the international climate finance system to date
At COP15, 196 countries including EU member states agreed to “halt and reverse” biodiversity loss by 2030.

EU Presidency priorities

Swedish Presidency

The Swedish Presidency is expected to focus on the negotiation of the remaining Fit for 55 files, the Gas Package and the Electricity Market review. Out of the four priorities of the Swedish Presidency, the ones to follow the most closely look to be “Resilience – Competitiveness” as well “Prosperity – Green & Energy Transition”.
Competitiveness: theSwedish programme names the new Ecodesign Directive, as well as the ConstructionProducts Regulation as topics of focus, alongside the upcoming Single MarketEmergency Instrument
Green & Energy Transition: OutstandingFit for 55 issues to deliver on this package include the Renewable EnergyDirective as well as the Energy Efficiency Directive, the trilogues ofwhich will be overseen by the Swedish Presidency
Critical Raw Materials Act: This initiative, announced at the end of 2022 by the Commission,  will be a vital topic to follow for the beginning of this year. With supply chain resilience being a key concern of innovators and investors in the cleantech space and beyond, this is shaping up to be a key file
Electricity Market Design: The Commission is expected to propose a reform of the EU electricity market in March. Due to the considerable impact of this reform, as well as substantially divergent positions of member states, this reform is going to take up a lot of Brussels’ political bandwidth

Spanish Presidency

While a lot is yet to be announced with regards to the Spanish presidency, the Spanish government has outlined the following two focus areas: energy and European governance, both of which promise to contain legislative content relevant to cleantech.
Energy: in order to wean Europe off of its Russian gas dependency, the upcomingSpanish presidency reiterated the need to speed up the development of renewable energy sources. They also highlighted the importance of better energy efficiency and the Europeanisation of gas and electricity markets
European Governance: faced with rampant inflation and a skyrocketing cost of living, theSpanish government declared that an overview of EU fiscal rules is in order, and that investment in the green and digital transitions must be ramped up and enabled
Key work pillars: The Spanish minister for foreign affairs outlined the upcomingpresidency’s core topical fields: revising the COVID Recovery Plans, working onthe Social Agenda of the EU, completing the European Pillars of Social Rightsand the Social Pillar Action Plan; and finally the continuation of the GreenAgenda of the EU, relating to biodiversity, the reform of the energy market andthe further development of European interconnectivity in fields such as gas andelectricity

eu policy
what to look for in 2023

Cleantech Strategy

Green Deal Industrial Plan / Net-Zero Industry Act
The EU’s response to IRA, aims to increase funding, simplify regulation and increase skills for cleantech

Circular Economy 

Construction Products Regulation 
Aims to make construction productions more sustainable and reduce their environmental footprint  
Ecodesign Regulation
Aims to improve EU products’ circularityand make sustainable products the norm

Supply-Chain Resilience

European Critical Raw Materials Act
Aims to secure a stable supply of critical raw materials for European industries

Energy & Transport

Electricity Market Design
Aims to tackle soaring electricity prices and cutting dependency from fossil fuels
CO2 Emission Standards for Heavy Duty Vehicles
Aims to set  EU CO2 emission standards for new heavy-duty vehicles
EU Hydrogen Bank
Aims to roll-out a contracts-for-difference scheme under the Innovation Fund to support the uptake of green hydrogen

Agriculture  

Sustainable Food Systems
Aims to make the EU food system sustainable and to integrate sustainability into all food-related policies
Carbon Removals Certification
Sets an EU-wide framework to reliably certify high-quality carbon removals, including for soil carbon sequestration

Waste

EU Waste Framework
Revamps food waste and textiles aspects of the EU Waste Framework Directive
Waste Shipment Regulation
Aims to set new terms for exporting plastics, scrap steel and other products (some containing rare materials) to third countries

04

2023-30: Shaping the EU’s cleantech strategy

The EU needs a concrete cleantech strategy to compete on the global stage. This strategy is needed now, not in 2 years.

The strategy should focus on scale, and drastically improve funding, demand, regulation and infrastructure to win. The strategy should also take into account raw materials, supply chains and skills.

2023-30
Shaping the EU’s cleantech strategy

The EU needs a concrete cleantech strategy to compete on the global stage. This strategy is needed now, not in 2years, and tackle these six barriers to scale

Create a Demand Shock

Tax breaks and incentives for cleantech: Commission President Ursula Von der Leyen proposed “simple tax-break models” in her cleantech plan. This is a step in the right direction to match the simplicity and predictability of demand policy in the IRA
Support innovative cleantech through green public procurement: Mobilise green public procurement for innovative cleantech, including via an EU Sovereign Fund. Explore the inclusion of qualitative criteria such as life-cycle assessment in public tenders.
Create a coalition of European Corporates acting as off-takers: Advanced market commitments (AMCs) have succeeded in bringing to market vaccines for Covid-19 in record speed. The EU could emulate the US’ First Movers Coalition to boost European cleantech demand and standard-setting opportunities.
A strong carbon price: a faster phase-out of free permits to pollute, along with safeguarding the carbonMarket Stability Reserve, will accelerate demand for clean technologies, making the polluting alternative more expensive.
Accelerate the use of (carbon) contracts for difference to create demand and reduce green premiums. Those should be designed with simplicity and predictability to increase the bankability of projects.

A step-change in financing for cleantech

Create an EU Sovereign Fund providing grants, loans, procurement and project finance for critical clean technologies over a 10-year timeframe
Ringfence a significant portion of the upcoming Pan-European Scale-up Fund and relevant national growth funds to clean technologies
Rethink existing EU and national funding instruments to proactively target cleantech innovators and streamline applications, a standard practice in the US
Increase the budget of the EU Innovation Fund and make it easily accessible to scale-ups by working with continuous open calls and building more internal capacity to track the state-of-the art of clean technologies
Fast-track the development of loans programs and financing of performance guarantees for cleantech scale-ups, allowing them to go directly from successful demonstration to large-scale production
Incentivise banks, insurance and pension funds to invest in cleantech scale-up projects,and provide public de-risking for first losses of asset managers’ funds incleantech scale-up projects

Unlock supply chain bottlenecks

Map supply chain bottlenecks: REPowerEU calls for the installation of 600 GW of new solar photovoltaics, and 75% of renewable hydrogen in the EU mix by 2030. However, the EU is currently experiencing shortages of raw materials and manufacturing capacity such as cobalt, lithium, aluminum and various materials needed for photovoltaics and electrolyzers. An important first step is to map these supply chain bottlenecks.
Secure critical raw materials:  Diversifying and localizing supply chains for critical raw materials and components for wide cleantech deployment are key to  building supply chain resilience. In the short-term, promoting recycling and reuse could help limit demand for these materials
Reshoring: Strategic re-shoring could be achieved via strict sustainability rules, financial incentives for companies and offtakers, and public procurement.
International collaboration: The EU and like-minded allies could explore opportunities for vertical integration of supply chains, by setting up multilateral funding pipelines in countries that will become reliable suppliers. Gradually, foreign firms’ eligibility to participate in the single market (R&D, manufacturing, imports) should be conditioned on reciprocity and transparency

Build the necessary Infrastructure

Update the grid: the successful integration and deployment of a massive power infrastructure build-out will depend heavily on the availability of transmission and distribution networks. Currently, there are three main challenges hindering the grid upgrade: access to critical raw materials based on global supply chain disruptions, access to a skilled workforce, and not enough investment capital
Deploy an EU wide-charging network: the large uptake of EVs needs extensive grid updates to distribute electricity to new charging stations and accommodate substantial renewable-energy capacity additions. Currently, there are two bottlenecks constraining this uptake: not enough clean energy to reduce the carbon footprint, and high costs of EVs hardware, installation and planning
Repurpose gas pipelines: the most flexible way to transport renewable hydrogen is through using existing gas pipelines. However, currently there are both technical challenges and legal challenges hindering this transport. On the technical side, existing gas pipelines need to be modified to carry green hydrogen, whereas from a legal standpoint ownership of these pipelines in unclear

Remove regulatory hurdles

Revamp state aid rules: in light of the increasing subsidies for clean technologies at a global level, EU state aid rules and thresholds should be adjusted to ensure a level playing field for EU companies competing globally
Harmonise standards: current EU standards hinder cleantech uptake. For instance, cement standards only provide for what cement type can be used in the composition of concrete and do not leave room for innovation
Avoid unnecessary regulatory hurdles: This includes requiring all renewable hydrogen producers to source electricity from dedicated green-energy projects, with grid-sourced electricity allowed only when it could be offset with dedicated supply within the hour

Improve Skills

Map needs in cleantech skills: better understanding of cleantech jobscan help policymakers identify the skills gap and take necessary action
Create public-private partnerships for green upskilling: engaging public and private partners in practice- and outcome-oriented initiatives
Encourage companies to invest in skills development for cleantech growth: help scale private initiatives like battery schools and solar training centers already being developed acrossEurope.

acknowledgments

We thank
Thomas Pellerin-Carlin, Director, EU Programme, Institute for Climate Economics (I4CE),
and
Peter Sweatman, CEO, Climate Strategy & Partners,
for their review and contributions

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