The European Union (EU) is inching closer to promote clean energy technology production in the bloc under the Net-Zero Industry Act (NZIA), as the local industry deals with cheaper production from China and incentives being doled out elsewhere.
Considered as the bloc's response to the US' lucrative Inflation Reduction Act (IRA), it is expected to promote EU as a major clean technology manufacturing destination, especially for solar PV technology.
The European Council and Parliament have reached a provisional agreement on the much-awaited NZIA that still needs to be endorsed and formally adopted by both the institutions to become a law.
According to the agreement, the NZIA will have a single list of net-zero technologies that have a greater potential for decarbonization. Of these, the EU will identify 'strategic' projects that can better contribute to decarbonization. Member states will be able to pick and choose between different energy sources.
To accelerate commissioning of clean technology manufacturing projects of over 1 GW annual capacity and even those not measured in GWs, member states will need to grant permits within a maximum of 18 months. Similar projects under 1 GW capacity will need to be cleared within 12 months.
Projects identified as strategic will have a shorter deadline for clearance.
The agreement has also weaved in non-price criteria, namely sustainability and resilience, to be mandatorily considered for public procurement and auctions for certain net-zero technologies by member states. Other non-price criteria are cybersecurity, responsible business conduct and the ability to deliver the projects fully and on time.
These non-price criteria will need to be applied by a member state to at least 30% of the total volume or 6 GW auctioned every year.
The European solar PV industry body SolarPower Europe's (SPE) Policy Director Dries Acke welcomed the non-price criteria. He said, "This is a positive, measured, approach, which will help EU solar manufacturers finance project pipelines, knowing that there is reliable demand for their product. This also means the rest of the auction market should remain unaffected, maintaining the necessary pace of solar deployment."
Regarding public procurement of net-zero technology related goods, works and services, the EU states, "The environmental sustainability contribution will be a mandatory minimum requirement, while the resilience contribution will be applied if there is a third-country dependence of more than 50% for a specific strategic net-zero technology (or for its components). This criterion will only be considered if the Commission has first assessed the level of dependence of each technology from a particular third country."
NZIA will also promote the development of net-zero acceleration valleys to establish industrial clusters for a certain technology. It will contribute to increasing the attractiveness of the EU as a manufacturing location, further streamline administrative procedures to set up net-zero manufacturing capacity and contribute to the reindustrialization of regions.
Here's a quick recap of the NZIA. Proposed by the EU in March 2023, the NZIA is part of the Green Deal Industrial Plan. It is aimed at creating necessary conditions to facilitate investments in net-zero technology manufacturing projects including solar PV, solar thermal, wind, electrolyzers, grid technologies, among others.
Under NZIA, the EU targets to raise its manufacturing capacity of net-zero technologies to a minimum of 40% of the bloc's annual deployment needs by 2030. Its progress will also be measured in comparison with the global production for products like solar panels (see EU Proposes NZIA & Critical Raw Materials Regulation).
"The EU needs those technologies and the whole world needs those technologies: today the EU underlines its commitment to invest in manufacturing of these technologies so that they are available for the EU and for the world," said the Executive Vice-President for European Green Deal, Interinstitutional Relations and Foresight, Maroš Šefčovič.
As the domestic PV manufacturing industry deals with module oversupply, mainly from China, there are rumors of the bloc considering safeguard measures against Chinese panels. However, EU Financial Services Commissioner Mairead McGuinness recently said the commission will 'carefully weigh the impact of any potential trade defence measures against Europe's energy and climate targets', according to the SPE.
Meanwhile, SPE's Acke calls for swift implementation of the NZIA act saying, "while landing the NZIA sends a strong signal to EU solar manufacturers, it doesn't negate the need for emergency support. Manufacturers have weeks left of survival, this emergency requires urgent action from EU and national authorities."
Recently, the European heterojunction solar cell and module manufacturer Meyer Burger threatened to shut down its module production from Germany by April 2024 in the absence of resilience measures in the EU (see Meyer Burger May Shutter German Module Fab By April 2024).
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