35% of the greenhouse gas emission reductions expected by 2050 will be achieved using technologies that are not yet on the market, according to a report published by the International Energy Agency (IEA). Globally, the clean energy technology market is growing rapidly. Spurred by policy support and favourable economic conditions, it is a highly competitive environment. The IEA projects that it will reach €605 billion annually by 2030, tripling the current levels.
Opportunities and challenges
As one of the world’s most competitive, innovative and interconnected regions, and a front-runner of the global energy and climate transition, Europe is well-positioned to make the most of the unique opportunity presented by the rapid growth of the clean energy technology market.
Investing in clean energy technologies is not only important in terms of maintaining the EU’s industrial leadership and securing new EU jobs, but also essential to maximising Europe’s energy security in the future.
The recent energy crisis was an all-too-real reminder of the vulnerabilities that come with an over-reliance on a single supply chain, in this case, Russian fossil fuels. Establishing domestic production capacity and diversified supply chains for clean energy technologies allows Europe to avoid creating new clean energy technology dependencies – to replace its historic fossil fuel dependencies.
‘If Europe wants to play a lead role in the clean energy transition, we need to ensure a strong European manufacturing capacity and create better conditions for investing in new projects. We have to avoid becoming dependent on just a single supplier.’
Commissioner for Energy, Kadri Simson
Although these opportunities offer significant benefits to Europe, they exist in a fiercely competitive global market. Countries worldwide are actively pursuing opportunities in the clean-tech market alongside the EU. Major economies like the US, India, China and Japan are heavily investing in green innovation, which, while beneficial, intensifies competitive pressures.
Currently, the EU imports more net-zero energy technologies than it exports, risking industrial and technological dependencies. For example, the EU gets 98% of its rare earth supply and 97% of its magnesium from China, about 80% of its lithium from Chile, and more than 60% of its cobalt from the Democratic Republic of Congo. In 2022, Chinese companies provided at least three-quarters of global capacity in all steps in the PV supply chain.
While EU production capacity is higher for other technologies, such as heat pumps - estimated to have covered 75% of the total EU demand for individual hydronic heat pumps in 2021 - EU manufacturers still depend on imports for components largely imported from China and South-East Asian countries and the U.S.
EU solutions
In order to achieve its climate neutrality objectives and avoid supply chain over-dependencies amid evolving and complex geopolitical dynamics, the EU must address challenges at home including high energy prices, critical raw materials supply chain disruptions and skills shortages.
Net-zero technologies and critical raw materials
The Net-Zero Industry Act is a key piece of EU legislation, proposed by the Commission as part of the broader Green Deal Industrial Plan in March 2023, and agreed by the Council and European Parliament in February 2024. It aims to strengthen the resilience and competitiveness of key net-zero technologies in the EU and create the right conditions to attract investments.
The Net-Zero Industry Act aims to allow the EU to manufacture 40% of its annual deployment needs for net-zero technologies by 2030 and make Europe the home of 15% of world production by 2040.
As we progress on the path towards decarbonisation, there is an increasing need for critical raw materials. As an example, EU demand for lithium batteries powering e-vehicles and energy storage is set to increase 12-fold by 2030 and up to 21 times by 2050. Our demand for rare earth metals, needed for wind turbines and electric vehicles, is set to rise 5 to 6 times by 2030 and up to 6 to 7 times by 2050.
The Critical Raw Materials Act is addressing such vulnerabilities and provides, together with the Net-Zero Industry Act, an EU roadmap to reduce Europe’s high dependency on imports from China and other single suppliers of net-zero technologies.
Competitiveness progress reports
Every year since 2020, the EU has published annual progress reports on its clean energy technology competitiveness. They take stock of the current and projected states of play – with the aim of informing policy decisions and thus bolstering competitiveness.
The 2023 report found that the cost of clean energy technologies remained highly competitive in 2022, despite the rising energy and materials costs that followed the energy crisis, leading to an increase of around 50% in the rate of wind and solar roll-out across the EU, compared to the previous year.
It includes dedicated sections assessing the competitiveness of strategic energy technologies outlined in the Net-Zero Industry Act proposal, namely solar PV, solar thermal, onshore and offshore wind, ocean energy, batteries, heat pumps, geothermal energy, water electrolysis to produce renewable hydrogen, sustainable biogas and biomethane, carbon capture and storage and grid technologies.
Related links
Details
- Publication date
- 15 May 2024
- Author
- Directorate-General for Energy