EU Proposes NZIA & Critical Raw Materials Regulation

The European Commission (EC) has presented its Critical Raw Materials Regulation and Net Zero Industry Act (NZIA) claiming these will create ‘best conditions’ for sectors crucial to the bloc’s net zero goal of 2050, including solar PV. But PV industry association SolarPower Europe (SPE) isn’t too thrilled saying the industry needs a dedicated financing vehicle to incentivize local solar manufacturing to cover both opex and capex.

One of the big concern areas for SPE and for the industry at large is the proposal under the Critical Raw Materials Regulation to not entertain more than 65% of a strategic raw material from a single country outside EU.

Following this will be tough for the bloc as currently it is heavily dependent on Chinese solar imports and it doesn’t have its own manufacturing at economies of scale to match up the demand and the need for EU to install 600 GW AC solar by 2030 (see EU Announces 600 GW AC Solar Target By 2030).

SPE’s Policy Director Dries Acke said the NZIA and related proposals ‘offer a stick but not a carrot’ in the industry’s pursuit of establishing multi-GW vertically integrated PV fabs. He explained, “The current proposal is asking Member States to reduce support for technologies from dominant geographies in the supply chains, like solar PV. That’s the stick. If we don’t want to risk slowing solar deployment, we need a bigger carrot, especially in terms of financing solar plants in Europe.”

“The solar sector remains convinced that rewarding high performing ESG solar products in tenders or subsidy schemes is the effective and WTO-compatible way to leverage demand for European, Best-in-Class, solar equipment,” stated Acke.

European solar is increasingly divided – while the few manufacturing stakeholders are asking for measures that match the lucrative incentives of the US Inflation Reduction Act (IRA), big developers are eying easy access to large volumes of low cost modules – and these are being supplied by big Chinese PV companies today. In late February, Gunter Erfurt, CEO of Meyer Burger, the EU’s only cell manufacturer today told the Financial Times’ fDi intelligence, “We believe in the market, but if the industrial policy scheme under which we are operating is better elsewhere, then we will go elsewhere.” Meyer Burger is currently expanding its capacities in Europe but will also start production in the US.

Here’s a quick look at the salient features of both the new proposals from the EC:

Critical Raw Materials

To support net zero technologies scale up and ensure a sustainable supply, the commission has proposed trade actions for critical raw materials. The 4 critical raw materials identified are rare earths, nickel, lithium and platinum group metals.

This regulation proposes clear benchmarks for domestic capacities along the strategic raw material supply chain and to diversify EU supply by 2030. These are:

• At least 10% of the EU’s annual consumption for extraction,
• At least 40% of the EU’s annual consumption for processing,
• At least 15% of the EU’s annual consumption for recycling,
• Not more than 65% of the Union’s annual consumption of each strategic raw material at any relevant stage of processing from a single third country.

Net Zero Industry Act

It supports strategic net zero technologies that are either commercially available or are to enter the market soon and carry a significant potential to be rapidly scaled up to contribute to EU achieving its decarbonization targets. These will provide at least 40% of the bloc’s annual deployment needs for the net zero objective by 2030. With SolarPower Europe estimating that the EU’s annual solar market will be around 125 GW in 2030, this would translate into a rounghly 50 GW market for PV products made in EU.

NZIA should reduce administrative burden and simplify permit granting processes by giving priority to net-zero strategic projects that can then come online sooner. Member states will need to consider sustainability and resilience criteria for net zero technologies in public procurement or auctions to boost diversification of supply.

It also proposes measures like setting up Net Zero Industry Academies among others to ensure skilled workforce availability. Regulatory sandboxes to promote innovative technologies will also be set up.

An EU level Net Zero Europe Platform will be set up to oversee the measures under the act.

However, this is only the EC’s proposal. Next comes the European Parliament’s reaction and the Council, representing the heads of the EU member states. In this discussion process, which can take up to 2 years many things can change. Still, investors in China reacted sharply – stocks of Chinese solar companies traded in China generally fell today.