A Case For Cleantech Manufacturing In European Union

• The EU needs to invest significantly in scaling up its clean-tech manufacturing to make itself resilient against supply chain risks 
• It includes investing in raising EU's solar manufacturing share for wafers to 55%, up from 2% now  
• Strategic partnerships with leading clean-tech suppliers to establish manufacturing in Europe should be part of the solution  

German think tank Agora Energiewende believes the European Union (EU) would need to invest between €10 billion and €30 billion until 2027, and between €32.9 billion and €94.5 billion during 2028 to 2034, to scale up its clean technology manufacturing to minimum levels if it wants to become resilient against supply chain risks.  

"Europe's successful transition to climate neutrality relies on solar panels, wind turbines, heat pumps, batteries, and electrolyzers," explained Agora Energiewende's Director Europe, Matthias Buck. "Clean-tech value chains play a critical role in delivering these technologies, but their smooth functioning cannot be taken for granted. Our analysis shows which minimum shares of EU clean-tech manufacturing are needed to achieve resilience." 

In its joint report with Agora Industry titled Ensuring resilience in Europe's energy transition, based on an analysis by Roland Berger, Agora Energiewende recommends a package of measures that it says can help insure EU's clean-tech value chains for solar PV, wind energy, electrolyzers, heat pumps and batteries.  

These measures, it says, will diversify its supply chains through domestic mining and strategic international partnerships, and enhance material circularity as well.  

For solar PV, the analysts recommend a 55% share of EU manufacturing for wafers, 50% for cells and 51% for modules, compared to its current manufacturing shares of 2%, 4% and 28%, respectively.  

Calling solar PV the most challenging sector in the European clean-energy manufacturing landscape that once was a leader in this domain, analysts believe any effort to ramp up EU's domestic production will have to pick up from a very low starting point, especially in wafer and cell production.   

Even though costs are just a single dimension of competitiveness for clean technologies, and Europe shouldn't seek to compete on this basis alone, Agora analysts argue that it is nevertheless a key factor hindering the establishment of a competitive manufacturing industry in the continent.  

To ensure these challenges are looked into, they recommend the Net Zero Industry Act (NZIA) and the Critical Raw Materials Act are complemented with the following elements:   

1. A Clean-Tech Manufacturing Fund for closing the OpEx and CapEx cost gaps;
2. A clean-technology manufacturing contribution to provide revenues for the fund; 
3. Privileged access to favorable investment and finance costs, to shorten the payback period on investments in new manufacturing sites and facilitate larger-scale investments; 
4. Market differentiation of EU-manufactured clean-tech products through mandated reporting on the sustainability of clean technologies and critical raw materials sold in Europe; 
5. Long-term demand creation for EU-manufactured clean-tech products, based on superior sustainability performance, by systematically linking public procurement decisions and public support for private investment to superior sustainability performance, not only the cheapest price; 
6. Attracting leading clean-tech suppliers to establish manufacturing in Europe, while using safeguards to achieve a gradual de-risking of value chain dependencies; and 
7. Investment into strategic innovation projects in clean-tech sectors, to build on the high innovative potential of European companies and ensure the long-term competitiveness of clean-tech manufacturing in Europe.

"It is important to recognize that Europe will also benefit from cooperation with global technology and value chain leaders. We recommend that governments invite leading clean-tech suppliers to establish manufacturing in Europe. Such cooperation should, however, include safeguards to ensure a lasting commitment of companies and a gradual de-risking of current value-chain dependencies," said Director of Agora Industry Frank Peter. 

The complete report is available on Agora Energiewende's website for free download.   

Recently, SolarPower Europe (SPE) urged the European Commission to save domestic solar energy supply chain in the face of Chinese competition by including measures such as the formation of a Solar Manufacturing Bank and acquiring module inventories from local suppliers (see European PV Industry Worried About Low Module Prices).