Europe has achieved technological leadership in a range of strategic cleantech sectors, but our innovators continue to face serious hurdles as they industrialise and reach commercial scale. At the same time, global peers like China and the US are ramping up their own cleantech investment plans. The EU must also contend with a massive investment gap of 50+ billion euros to scale just six of the many technologies needed to reach net zero: solar, wind, batteries and storage, heat pumps and geothermal energy, electrolyzers and fuel cells, biogas/biomethane, carbon capture and related tech, and grid technologies. In the coming years, European cleantech companies will need unprecedented amounts of financing to scale and industrialise their technologies.

The challenges facing the EU’s cleantech industry have not gone unnoticed by policymakers. Indeed, both the European Commission’s official stocktaking of the Clean Transition Dialogues, held with innovators and other key stakeholders in the green transition, as well as the recent report on the future of the Single Market by former Italian Prime Minister Enrico Letta make clear that strengthening the business case for scaling cleantech manufacturing capacity is essential to ensure the EU’s long-term economic competitiveness. This will be a core task of the European Commission’s next mandate. With EU-wide elections scheduled for June and a new political cycle starting in Brussels, it’s vital that cleantech competitiveness and investment remain at the heart of the policy agenda.

In the past quarter, two key trends emerged: a historic debt investment boom supporting cleantech companies to build first, second and Nth-of-a-kind projects, as well as the narrowest ever cleantech investment gap between Europe and North America. We calculate that in Q1 2024 EU cleantech debt investment – which comprises loans, loan guarantees, project finance, and structured debt – amounted to a record-setting €16.7 billion. For context, that figure is more than six times greater than the quarterly average of €2.5 billion over the two-year period from 2022 - 2023.

We’re closing in on a fiscally efficient playbook for financing the scale up of cleantech manufacturing in Europe, which leverages funding from institutions like the European Investment Bank to crowd in private investment. The recent debt rounds raised by Cleantech for Europe Scale-up Coalition members H2 Green Steel and Sunfire demonstrate how the layers of the capital stack can interact to finance large-scale projects.

However, such cases remain the exception, not the norm. To unlock the private investment volumes needed to scale and deploy our home-grown European innovators, we urgently need a Cleantech Competitiveness Deal. In a recent open letter, Cleantech for Europe, alongside 23 leading cleantech investors, innovators, NGOs and think-tanks, called for a Cleantech Competitiveness Deal based on the following pillars:
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• A Cleantech Investment Plan that focuses on public guarantees, leverages institutional investors and unleashes the full potential of Europe’s Emissions Trading System (ETS) revenues.

• Action Plans to support the competitiveness of each strategic cleantech sector. These include battery gigafactories, electrolysers and long-duration energy storage systems, solar factories and others where the EU has a technological advantage, but is at risk of losing the scale-up race.

• A vision for the next generation of cleantech innovation, with safeguarded funding for innovation and scaleup.