REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Progress on competitiveness of clean energy technologies
Date: 2021-10-26
Institutions: Directorate-General for Energy, European Commission
Subjects: EU energy policy, carbon neutrality, clean technology, competitiveness, electricity storage device, heat pump, hydrogen production, innovation, motor fuel, smart technology, solar energy, wind energy

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.10.2021  COM(2021) 952 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Progress on competitiveness of clean energy technologies {COM(2021) 950 final} - {SWD(2021) 307 final}  
 
 
CONTENTS 

1. 

INTRODUCTION ....................................................................................................... 2 

2.  OVERALL COMPETITIVENESS OF THE EU CLEAN ENERGY SECTOR ........ 3 

2.1  Setting the scene: recent developments, Covid-19 impact, recovery, human 

capital, and value-added .................................................................................... 3 

2.1  Research and innovation trends ......................................................................... 8 

2.2  The clean technologies funding landscape in the EU ...................................... 11 

3.  FOCUS ON KEY CLEAN ENERGY TECHNOLOGIES AND SOLUTIONS ...... 14 

3.1  Offshore and onshore wind ............................................................................. 15 

3.2  Solar Photovoltaic (PV)................................................................................... 17 

3.3  Heat pumps for building applications ............................................................. 20 

3.4  Batteries ........................................................................................................... 22 

3.5  Renewable hydrogen production through electrolysis .................................... 25 

3.6  Smart  grids  (distribution  grid  automation,  smart  metering,  Home  Energy 

Management Systems and smart EV charging) .............................................. 27 

3.7  Renewable Fuels for Aviation and Shipping ................................................... 29 

4.  CONCLUSIONS ....................................................................................................... 32 

1 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.  INTRODUCTION   

The European Green Deal is the overarching framework for the EU clean energy policy. It is a 
new growth strategy that aims at making Europe the first climate neutral continent in the world, 
in a fair, resource efficient, cost effective and competitive way. To operationalise the climate 
objectives  of  the  European  Green  Deal,  the  EU  Climate  Law1  has  enshrined  into  law  the 
political  priority  of  becoming  climate  neutral  by  2050  and  of  reducing  greenhouse  gas 
emissions by 55% by 2030, compared to 1990 levels.  

This policy context is complemented by the release of unprecedented financial means at EU 
level,  comprising  both  a  new  EU  budget2  as  well  as  the  NextGenerationEU  recovery  and 
resilience package agreed in 20203. These will help translate into high contributions to deliver 
on the European Green Deal objectives, with an earmarked 30% of climate spending overall. 
In  particular,  fully  recognising  the  role  of  research  and  innovation  to  contribute  to  those 
objectives, the EU research and innovation programme Horizon Europe has been significantly 
strengthened4, as other funding programmes like the Innovation Fund or LIFE.  

Furthermore, in July 2021, the European Commission presented a comprehensive package to 
deliver  the  European  Green  Deal,  which  proposes  to  revise  existing  instruments  as  well  as 
propose new ones5 in order to set the EU on a path to reach its climate targets by 2030. This 
package constitutes one of the most comprehensive set of proposals on climate and energy the 
Commission  has ever presented. Among others,  it will contribute to  the development  of the 
clean energy system in the next decade by spurring innovation, investment, and creating new 
market  demand  in  the  EU,  while  ensuring  a  socially-just  transition,  cementing  EU  global 
leadership in the fight against the climate crisis.  

Technological advancement in the clean energy system6 is of critical importance to achieve the 
EU’s climate and energy objective by 2050, as highlighted in the “Impact Assessment of the 
Climate Target Plan 2030”7. The International Energy Agency (IEA) projects that, while most 
of the reductions in CO2 emissions through 2030 will come from technologies already on the 

1   Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021. 
2   The multiannual financial framework covering the period 2021-2027. 
3  

In 2018 prices and over seven years, the EU budget amounts to EUR 1 074 billion and NextGenerationEU to EUR 750 
billion.  

4   EUR 95.5 billion over 2021-2027, current prices. 
5   The legislative files include proposals to revise the Renewable Energy Directive (RED), the Energy Efficiency Directive 
(EED),  the  Energy  Performance  of  Buildings  Directive,  the  Energy  Tax  Directive  (ETD),  the  EU  Emissions  Trading 
System (EU ETS), the Revision of the Third Energy Package for gas, the Effort Sharing Regulation (ESR), the Alternative 
Fuels Infrastructure Directive (AFID), the Regulation on Land Use, Forestry and Agriculture, the CO2 emission standards 
for cars and vans, as well as also proposals to create a new emissions trading for the road transport and building sectors,  
a Carbon Border Adjustment Mechanism (CBAM), the ReFuelEU Aviation and FuelEU Maritime initiatives, an EU Forest 
Strategy and a proposal to create a Social Climate Fund.  
In this report, the clean energy system covers three market segments: (1) Renewable energy, including manufacturing, 
installation and generation; (2) Energy efficiency and management systems that include technologies and activities such 
as smart meters, smart grids, storage and renovation of buildings; and (3) Electric mobility, which includes components 
such as batteries and fuel cells essential for electric vehicles and charging infrastructures. 
Impact Assessment accompanying the Commission Communication on Stepping Up Europe’s 2030 climate ambition – 
Investing in a climate neutral future for the benefit of our people, SWD(2020) 176 final.  

7  

6  

2 

 
 
 
 
                                                 
market today, almost half of the reductions needed by 2050 will come from technologies that 
are currently at demonstration or prototype phase8. This second annual competitiveness report9 
tracks the current and projected state of play of different clean energy technologies and provides 
insight on how the clean energy system contributes to making the EU climate neutral by 2050, 
while  respecting  the  European  Green  Deal’s  green  oath  to  “do  no  harm”.  Looking  at  the 
different  facets  of  competitiveness,  this  report  identifies  strengths,  challenges  and  points  of 
attention for the EU clean energy system. In particular, it shows that trends in both gross value 
added and employment in clean energy – barring disparities within the sector – are surpassing 
those of the overall EU economy, while public investment in clean energy R&I continues to see 
a rebound trend over the last five years, though not yet reaching the level of 2010. The European 
innovation ecosystem is in a leading position when it comes to high value patenting as well as 
in  the  support  of  early-stage  climate  tech  start-ups.  However,  we  are  far  behind  other 
geographical regions when it comes to scaling up. From a technological perspective, the EU 
retains a strong position in the wind industry, however may be at crossroads in multiple other 
industries including solar PV, renewable hydrogen, heat pumps or renewable fuels.    

The assessment of the competitiveness of the EU clean energy system is done, in this report, in 
accordance with Article 35.1(m) of the Regulation on the Governance of the Energy Union and 
Climate Action, as part of the State of the Energy Union report. As competitiveness is a complex 
and multifaceted concept which cannot be defined by a single indicator10, this report proposes 
a  set  of  widely  accepted  indicators11  capturing  the  entire  energy  system  (generation, 
transmission and consumption) and analysed at three levels (technology, value chain, and global 
market).  The  underpinning  data  for  each  indicator  are  contained  in  the  accompanying  Staff 
Working Document. 

2.  OVERALL COMPETITIVENESS OF THE EU CLEAN ENERGY SECTOR  

2.1 Setting  the  scene:  recent  developments,  Covid-19  impact,  recovery,  human 

capital, and value-added 

2.1.1  Recent developments 

The European Union, like many other regions in the world, is currently facing a sharp spike in 
energy prices. The spike in prices is principally driven by increased global demand for energy 
at large and gas in particular, linked to the recovery from the COVID-19 crisis. The all-time 
high prices that have been observed in the last months12 are the result of a combination of factors 

IEA, Net Zero by 2050. A Roadmap for the Global Energy Sections. Flagship Report, May 2021. 

8  
9   The first Progress of Clean Energy Competitiveness report was COM(2020) 953 final. 
10   Based on the conclusions of the Competitiveness Council of 28 July 2020. 
11   The indicators assessed in the section 2 of the report are primary and final energy intensity, share of renewable energy 
sources, import dependency, industrial electricity and gas prices, turnover of the EU sector (clean vs fossil) compared to 
the rest of the economy, gross value added of renewable energy production, employment of the EU sector compared to 
the rest of the world including gender statistics, and COVID-19 disruptions.  
The indicators in the section 3 of the report are assessed for each technology and in the EU, unless otherwise mentioned. 
These include the capacity installed (today and in 2050), the cost and/or levelised cost of energy (LCoE), public R&I 
funding, private R&I funding, patenting trends and the level of scientific publications. The value chain analysis is assessed 
by the turnover, the gross value added growth, the number of EU companies in the supply chain, the employment in the 
value chain segment, the energy intensity and labour productivity, and community production. Finally, the global market 
analysis is assessed through trade considerations, global market leaders vs EU market leaders, and resource efficiency and 
dependence for segments of the value chain which depend on critical raw materials. 

12    In September, average wholesale electricity prices reached more than EUR 125 per MWh, gas prices reached almost EUR 

65 per MWh and EU ETS allowances reached more than EUR 60 per tCO2. 

3 

 
 
                                                 
primarily driven by a global demand for gas, resulting in the increase of electricity prices. In 
addition, electricity prices also increased because of seasonal weather conditions (low water 
and low wind over this summer). This has resulted in lower production of renewables in Europe. 
The European carbon prices have also risen sharply in 202113, albeit much less than the gas 
price. The effect of the gas price on the electricity price is nine times bigger than the effect of 
the carbon increase14. 

These factors translated into the increase of wholesale and retail electricity prices in most of the 
major economies of the world since the second half of 2020. The high wholesale electricity 
prices  have  reached  all  EU  Member  States,  although  some  of  them  have  been  hit  harder, 
depending in particular on the share of fossil fuels for generating electricity. The speed at which 
the  increase  in  wholesale  gas  prices  translates  into  retail  prices  also  depends  on  the  retail 
contract terms (i.e. contract length, fixed or variable prices, etc.). The European Commission is 
concerned about the negative impact of the price rise on households and  businesses. Having 
listened  to  Member  States  and  the  European  Parliament,  the  Commission  has  presented  a 
Communication to enact and support appropriate measures to mitigate the impact of temporary 
energy price rises and further strengthen resilience against future shocks15. 

The  increase  in  wholesale  electricity  prices  may  convey  a  signal  of  the  improved 
competitiveness of renewables. This may incentivise increased investment in the sector, which 
on  the  long  run,  will  help  to  reduce  electricity  prices  given  their  lower  production 
costs/operating  expenditures,  their  exclusion  from  carbon  pricing,  and  expected  decreasing 
capital cost. The current price hike in the European energy sector also shows the need to reduce 
the  EU's  dependency  on  imported  fossil  fuels.  Looking  ahead,  the  new  climate  and  energy 
targets will yield new investment needs. Over the next ten years, annual additional investments 
of EUR 390 billion will be needed compared to the annual amounts invested over the last ten 
years16.  A  significant  acceleration  of  deployment  is  needed  to  achieve  the  current  2030 
renewable energy target of 32%, and an even greater acceleration will be needed to meet the 
newly  proposed  40% target  of the July package  to  deliver on the European Green Deal.  As 
permitting delays constitute a major barrier for the transition to a decarbonised energy system, 
delaying  deployment  and  investments  into  clean  energy  infrastructures  and  technologies  by 
many years, the Commission will issue guidance in 2022 on accelerating permitting processes 
for renewable energies and continue working closely with national administrations to identify 
and  exchange  on  good  practice.  Urgent  simplification  and  streamlining  of  permitting 
procedures is needed to create a common market for renewables that facilitates efficient and 
cost-effective deployment as well as investor certainty, also in view of the massive investments 
needed.  

An integrated and well-functioning EU energy market would be the most cost-effective way to 
ensure secure and affordable energy supplies to all types of customers. It keeps prices in check 
by  creating  competition  and  allowing  consumers  to  choose  energy  suppliers.  The 
Communication  on  energy  prices17  proposes  short-term  measures  such  as  Member  States’ 

13   Coal power still has a 14% share in the EU.  
14     From January 2021 to September 2021, the ETS price has increased by about 30 EUR / tCO2, which translates into a cost 
increase of about 10 EUR / MWh for electricity produced from gas (assuming a 50% efficiency) and about 25 EUR / 
MWh for electricity produced from coal (assuming a 40% efficiency). This is clearly outweighed by the observed increase 
of the gas price of about 45 EUR / MWh over the same period, which translates into additional electricity production cost 
of about 90 EUR / MWh.  

15    COM(2021) 660 Tackling rising energy prices: a toolbox for action and support  
16   COM(2021) 557 final, Table 7, MIX Scenario, page 133. 
17   COM(2021) 660 final, Tackling rising energy prices: a toolbox for action and support  

4 

 
 
 
                                                 
emergency income support to households, state aid for companies, and targeted tax reductions. 
In the medium term, the Commission proposes inter alia to support investments in renewable 
energy and energy efficiency; examine possible measures on energy storage and purchasing of 
gas reserves. While there is of yet no clear evidence that alternative market framework would 
provide cheaper prices and better incentives, the Commission has also tasked the Agency of 
Cooperation for Energy Regulators (ACER) to assess the benefits and drawbacks of the current 
electricity market design and propose recommendations by April 2022.  

To this end, the EU strives to further develop interconnectors between Member States, ensuring 
that  as  much  as  possible  of  interconnectors’  capacity  is  available  for  trade.  It  monitors  the 
implementation  of the  existing acquis  (e.g. network codes)  and proposed  additional  tools to 
ensure liquid markets, such as, for example, the revision of the Renewable Energy Directive, 
including further promotion of corporate Power Purchase Agreements, as well as the proposal 
for the revision of the Energy Efficiency Directive, putting energy efficiency first at the heart 
of our economy. 

2.1.2 

Impact of Covid-19 and recovery 

While  the  European  Green  Deal  policy  framework  will  drive  demand  for  clean  energy 
technologies, their supply, development and competitiveness is certainly put to the test by the 
COVID-19 pandemic. The implementation of the energy and climate policies depends on the 
availability of renewable technologies, undisrupted value chains, retained competitiveness of 
companies and their skilled workforce. On the one hand, the economic impact of a pandemic 
threaten to be a major set-back for the competitiveness of the clean energy technologies. On the 
other  hand  economic  recovery  policy  also  provides  an  opportunity  to  refocus  and  enhance 
investment to the clean energy sector, thanks to the NextGenerationEU facility. 

Renewables have in fact been less affected worldwide by the Covid-19 pandemic than other 
energy sources18. Only biofuels for transportation were impacted more severely as consumption 
declined  due  to  a  combination  of  reduced  travel  and  low  oil  prices19.  Falling  capital  costs 
enabled an unprecedented number of solar and wind energy plants to be installed globally20. As 
a result, while electricity generation from coal, natural gas and nuclear decreased, renewables 
overtook  fossil  fuels  for  the  first  time  as  the  EU’s  main  power  source  for  the  year  2020 
(renewables 38% of EU electricity, versus 37% fossil fuels and 25% nuclear)21.  

To  recover  from  the  Covid-19  pandemic,  the  Recovery  and  Resilience  Facility  (RRF) 
Regulation is a first in its kind for the EU as a performance-based programme, proposed by the 
Commission as part of the NextGenerationEU package. Funding is available for Member States 
based on their comprehensive Recovery and Resilience Plans (RRP) and is unlocked through 
achievement of measurable milestones and targets. It requires Member States to allocate at least 
37% of their total allocation under the Recovery and Resilience Facility to the climate transition 
in their RRP, and to include measures consistent with the relevant country-specific challenges 

IEA, World Energy Outlook, 2020. 
IEA, Energy Technology Perspectives 2020, Special Report on Clean Energy Innovation, 2020. 

18  
19  
20   BloombergNEF, EnergyTransition Investment Trends, Tracking global investment in the low-carbon energy transition, 

2021. 

21   Agora Energiewende and Ember, The European Power Sector in 2020: Up-to-Date Analysis on the Electricity Transition, 

2021. 

5 

 
 
 
                                                 
and priorities identified in the context of the European Semester and the National Energy and 
Climate Plans. 

The analysis of the 2222 RRPs approved by the Commission by 5 October 202123 shows that 
EUR 177 billion have been allocated to climate-related investments, representing 40% of the 
total allocation of these Member States (grants and loans). About 43% of this amount (EUR 76 
billion) is dedicated to energy efficiency (27.9%) and renewable energy and network (14.8%)24, 
while around EUR 62 billion is dedicated to sustainable mobility (35%). 

Research  and  innovation  also  represented  an  important  share,  as  Members  States  allocated 
nearly EUR 12.3 billion to investment in R&I in climate change mitigation and adaptation and 
the circular economy in their Recovery and Resilience Plans25. 

2.1.3  Human capital and value-added 

While it is too  early to  tell  how the pandemic as well as recovery funding impacted human 
capital, latest Eurostat data indicate that clean energy was outperforming the overall economy 
shortly before the pandemic. In 2018, direct employment in clean energy26 reached 1.7 million, 
with  an  average  annual  growth  of  2%,  while  employment  in  the  overall  economy  grew  on 
average by 1% a year. While annual average growth in ’Energy efficiency and management 
systems’ employment averaged 6% since 2010, direct jobs in ‘Renewable energy’ and ‘Electric 
mobility’ declined by 3% (2010-2018). This is due to lower renewable energy growth in some 
Member States, e.g. complex permitting rules and exposure to legal  challenges hamper new 
wind installations in Germany where jobs decline is most prevalent (see also section 3.1). In 
addition,  technological  and  productivity  improvements  have  lowered  labour  intensity, 
particularly in mature markets (e.g. wind, solar). Job growth occurs increasingly in other clean 
energy applications such as smart meters, smart grids, storage and other products and activities 
related to energy efficiency and management. 

22   AT, BE, CY, CZ, DE, DK, EE, EL, ES, FI, FR, HR, IE, IT, LT, LU, LV, MT, PT, RO, SI, SK. 
23   The expenditures reported for the RRF are estimates processed by the Commission based on the information on climate 
tracking published as part of the Commission’s analyses of the recovery and resilience plans. The data reported cover the 
22 national recovery and resilience plans assessed and approved by the Commission by 05 October 2021 and the amount 
will evolve as more plans are assessed. 

24     Energy efficiency measures cover energy efficiency projects in SMEs or large enterprises, energy renovations in private 
buildings  and  public  infrastructure  and  construction  of  buildings.  Clean  energy  measures  cover  in  particular  production  of 
renewables, energy networks and infrastructure as well as hydrogen related investments.  
25   Figure on: Distribution of climate-related investments in MS’ RRPs. Source: Own preliminary assessment of 22 RRPs 

26  

adopted by the Commission (by 5 October), State of the Energy Union 2021, COM(2021) 950 final. 
In  comparison  to  last  year  CEPA1  is  added  to  better  reflect  the  scope  of  technologies  covered  in  the  report.  Thus, 
employment, gross value added and labour productivity figures in the report are based on Eurostat EGSS the following 
categories ’CREMA13A’, ’CREMA13B‘ and ’CEPA1’. ’CREMA13A’ includes Production of energy from renewable 
resources including also manufacturing of technologies needed to produce renewable energy (‘Renewable energy’  – in 
the  graph).  CReMA  13B  -  Heat/energy  saving  and  management  includes  heat  pumps,  smart  meters,  energetic 
refurbishment activities, insulation materials, and parts of smart grids (‘Energy management’ – in the graph). CEPA1 – 
Protection  of  ambient  air  and  climate  –  includes  electric  and  hybrid  cars,  buses  and  other  cleaner  and  more  efficient 
vehicles and charging infrastructure that is essential for the operation of electric vehicles. This includes also components, 
such as batteries, fuel cells and electric power trains essential for electric vehicles (’Electric mobility’ - in the graph).  

6 

 
 
                                                 
Figure 1 Clean energy systems employment vs total economy growth in EU27 2010-2018 and clean 
energy systems employment change by Member State over 2014-2018 

Source: JRC based on Eurostat ‘env_ac_egss1’27 

Similarly,  preceding  the  pandemic,  with  an  average  annual  growth  of  5%28,  the  gross  value 
added of the clean energy systems has outperformed the overall economy (3% growth) since 
2010. Clean energy represented 1% (EUR 133 billion) of the total value added in the EU in 
2018, which is more than double compared to that of fossil fuel extraction and manufacturing 
sector (EUR 59 billion)29. Within the clean energy system, gross value added in ‘Renewable 
energy’  (EUR  60  billion)  has  grown  with  an  average  annual  growth  of  2%,  while  ‘Energy 
efficiency and management systems’ (EUR 67 billion) has grown 9% in the same period. Gross 
value added in the ‘Electric mobility’ at EUR 7 billion has grown at less than 1% annually.  

‘Renewable energy’ jobs created, on average, EUR 104 000 of gross value added per employee 
in 2018, with an average annual growth30 of 5% since 2010. This is 60% more than in the rest 
of  the  economy  (EUR  64  000  of  gross  value  added  per  employee).  The  value  added  per 
employee in ‘Energy efficiency and management’ is EUR 64 000 and in ‘Electric mobility’ it 

27   Clean  energy  systems  include  CReMA  13A  -  Production  of  energy  from  renewable  resources,  which  includes  both 
generation  of  renewable  energy  and  manufacturing  of  technologies  needed  to produce  renewable  energy  (‘Renewable 
energy’ – in the graph); CReMA 13B - Heat/energy saving and management, which includes heat pumps, smart meters, 
smart grids, energetic refurbishment of buildings, and storage (‘Energy efficiency and management’ – in the graph); and 
CEPA1  -  Protection  of  ambient  air  and  climate,  which  includes  electric  vehicles  and  associated  components  and  the 
essential infrastructure needed to for the operation of electric vehicles (’Electric mobility’ In the graph).  

28   Eurostat ’env_ac_egss2’. Clean energy systems include CReMA 13A - Production of energy from renewable resources, 
which includes both generation of renewable energy and  manufacturing of technologies needed to produce renewable 
energy (‘Renewable energy’); CReMA 13B - Heat/energy saving and management, which includes heat pumps, smart 
meters, smart grids, energetic refurbishment of buildings, and storage (‘Energy efficiency and management’); and CEPA1 
-  Protection  of  ambient  air  and  climate,  which  includes  electric  vehicles  and  associated  components  and  the  essential 
infrastructure needed to for the operation of electric vehicles (’Electric mobility’). 

29   Data for fossil fuel extraction and manufacturing is from Eurostat Structural Business Statistics. The following codes are 
considered: B05 (mining of coal and lignite), B06 (extraction of crude petroleum and natural gas), B07.21 (mining uranium 
and thorium ores), B08.92 (extraction of peat), B09.1 (support activities for petroleum and natural gas extraction), and 
C19 (manufacture of coke and refined petroleum products). 

30   Compound average growth rate. 

7 

 
 
 
                                                 
is EUR 74 000, growing annually by 3% and 7% respectively during 2015-2018, faster than the 
rest of the economy at 2%. 

Considering the overall resilience of the clean energy sector during the pandemic, the strong 
performance of human capital in clean energy leading up to the pandemic as well as the EUR 
177 billion in climate-related investments planned by Member States in their national RRPs, 
there  is  room  for  cautious  optimism  that  clean  energy  will  continue  to  be  a  motor  for 
employment and growth as the EU economy recovers from the pandemic. 

2.1.4  Skills 

The transformation of the energy system requires re-skilling and up-skilling across all skills 
levels to deploy and further develop clean energy technologies and solutions across different 
sectors.  Demand  for  a  wide  range  of  occupational  categories  relevant  to  the  clean  energy 
transition is expected to increase until 2030, including mining (i.e. for critical raw materials), 
or construction, manufacturing, transport, building and related trades, as well as science and 
engineering31. By 2030, an additional 160 000 jobs could be created in the EU construction 
sector alone through the EU Renovation Wave32. 

To support the uptake of next-generation skills essential for the EU green  transition, the EU 
launched in 2020 the Pact for Skills33 where partnerships with industrial ecosystems such as 
construction and energy intensive industries are being set up through roundtables. 

In the case of offshore renewable energy, skills transfer are also possible from the offshore oil 
and gas sector, as well as from the military sector (e.g. during the exploration of potential project 
sites) 34.  

Women accounted for an average of 32% of the workforce in the renewables sector in 201935. 
Gender imbalances both in the energy sector workforce as well as in energy related research 
and  innovation  activity,  are  closely  –  but  not  exclusively  –  connected  to  the  women 
underrepresentation  in  higher  education  in  some  science,  technology,  engineering,  and 
mathematics (STEM) sub-fields. In the EU, women are overrepresented in tertiary education 
(54 % across all tertiary education levels and all fields); women are listed in less than 11% of 
applications, and over 15% for climate change mitigation technologies (CCMT). Yet, sub-fields 
highly relevant for the energy sector remain strongly male dominated, since in 2019 less than a 
third  of  engineering,  manufacturing,  and  construction  and  less  than  a  fifth  of  ICT  higher 
education students was female36.  

2.1 Research and innovation trends   

Research and innovation plays a key role in shaping the competitive industries of tomorrow. 
After the 2008 economic crisis, public investments in R&I prioritised by the Energy Union37,38 
went into a decline for half a decade, showing signs of recovery only after 2016 (Figure 2). 

31   CEDEFOP, Skills forecast: trends and challenges to 2030, 2018.  
32     A Renovation Wave for Europe - greening our buildings, creating jobs, improving lives, COM(2020) 662 final.  
33   European Commission, The Pact for Skills – mobilising all partners to invest in skills, 2020.  
34     D2.1-MATES-Baseline-Report-on-Present-Skill-Gaps.pdf (projectmates.eu) 
35  
36  
37   Renewables, smart system, efficient systems, sustainable transport, CCUS and nuclear safety, COM(2015) 80 final. 
38  

IRENA, Renewable Energy : A Gender Perspective, 2019.  
JRC based on Eurostat [EDUC_UOE_ENRT03].  

JRC SETIS https://setis.ec.europa.eu/publications/setis-reseach-and-innovation-data_en. 

8 

 
 
                                                 
Since then, EU Member States have invested on average EUR 3.5 billion per year, but spending 
is still lower than that observed a decade ago. At the global level, the trend is consistent with 
increased investments in energy in general – and clean energy in particular39 - however, does 
not keep pace with increases in GDP or R&I spending in other sectors. Measured as a share of 
GDP, EU investment rate (0.027%) is currently the lowest of all major global economies, just 
below the US, though levels seem to be decreasing or stable for all (Figure 3).  

Figure 2 Public (left) and total (right) R&I financing of Energy Union R&I priorities in the 
EU40. 

Source JRC41 based on IEA42and own work. 

Although  long-term  impacts  of  the  pandemic  on  renewable  energy  R&I  spending  remain 
unclear, early trends indicate general resilience. In global public spending on energy R&I there 
was continued, but slowed growth in 202043. EU private sector experienced a 7% reduction in 
overall energy R&I spending during 2020. However spending specifically in renewable energy 
R&I was more resilient and continued to grow44. 

Essential  in  maintaining  research  and  innovation  investment  levels  over  recent  years,  EU 
research  funds  have  been  increasing  annually,  contributing  on  average  EUR  1.5  billion. 
Combined  with  an  estimated  average  of  EUR  20  billion  of  private  spending45,  the  average 
annual total investment in the Energy Union R&I priorities over recent years (2014-2018) is in 
the order of EUR 25 billion46. Crucial in the recovery context, the world largest R&I programme 
“Horizon  Europe”,  the  Innovation  Fund,  together  with  the  cohesion  policy  funding  and  the 
“LIFE” programme,  are and will be stimulating climate and environmental  R&I and market 
uptake. 

39   https://www.iea.org/reports/world-energy-investment-2020/rd-and-technology-innovation  
40   Public R&I investment figures for 2020 are only available for a few Member States. Private R&I investment is estimated 

using patents as a proxy, resulting in a longer time-lag for data availability; 2018 data are provisional. 
41  
JRC SETIS https://setis.ec.europa.eu/publications/setis-reseach-and-innovation-data_en  
42   Adapted from the 2021 edition of the IEA energy technology RD&D budgets database.   
43  
44  
45   Private investment estimates have been revised upwards, due to changes in classification and the underlying data. 
46   The increased total compared to last year’s reporting is due to the revision of the private investment estimates.  

IEA, World Energy Investment, 2021. 
IEA, World Energy Investment, 2021. 

9 

 
 
 
                                                 
Figure 3: Public (left) and private (right) R&I financing in Energy Union R&I priorities as a share of 
GDP in major economies 

Source JRC47 based on IEA48, MI49, own work. 

In 2019, total public investment in Energy Union R&I priorities from all EU Member States 
was still 5% lower than in 2010 but had increased by 2% compared to 2015. About a quarter of 
the Member States have consistently increased spending overall throughout the 10-year period, 
with an equivalent number showing a decrease. For the remaining, the trend coincides with the 
EU  total,  or  information  on  R&I  spending  is  not  available50.  While  there  is  a  clear  need  to 
improve monitoring of  R&I investment,  there is  also  increased momentum  and engagement 
from  Member  States  in  view  of  the  reporting  foreseen  in  the  Energy  Union  Governance 
Regulation in 2023. This goes beyond public R&I investment, to also stepping up efforts at 
national  level  to  monitor  R&I  investments  from  the  private  sector.  The  Strategic  Energy 
Technology Plan (SET Plan) is the main European tool to align policies and funding on clean 
energy technologies R&I at EU and national level and to leverage private investments. 

Private investment in the Energy Union R&I priorities in the EU is estimated at 0.18% of GDP 
(Figure  3),  above  the  US  but  lower  than  other  major  competing  economies  (Japan,  Korea, 
China).  This  represents  12%  of  the  business  expenditure  on  R&D,  which  is  above  the  6% 
estimated for the US, but about half of the share observed for major Asian economies. 

The  declining51  patenting  trend  in  clean  energy  technologies52  (since  2012)  seems  to  be 
reversing, with annual filing levels in the EU, and globally, returning to those observed a decade 
ago. The EU has a greater share of ‘green’ inventions in climate change mitigation technologies 
in overall patent filings compared to other major economies (and the world average), indicating 
greater focus  and specialisation  of inventive activity in  this  field.  The EU  is  second only to 
Japan in high-value inventions53, mainly due to Japan’s advantage in transport technologies; 
however, the EU leads when it comes to renewables and energy efficiency (Figure 4). The EU 
also continues to host a quarter of the top 100 companies in high-value patents in clean energy 

47  
JRC SETIS https://setis.ec.europa.eu/publications/setis-reseach-and-innovation-data_en.  
48   Adapted from the 2021 edition of the IEA energy technology RD&D budgets database.   
49   Mission Innovation Tracking Progress http://mission-innovation.net/our-work/tracking-progress/.    
50   These Member States include Bulgaria, Greece, Croatia, Latvia, Luxembourg and Slovenia. 
51   With the exception of China, where local applications keep increasing, without seeking international protection. (See also: 

Are Patents Indicative of Chinese Innovation? https://chinapower.csis.org/patents).   

52   Low-carbon energy technologies under the Energy Union’s R&I priorities. This is the overall trend; there were exceptions 
for certain technologies (e.g. batteries) which kept increasing throughout the period. The same applies for broad ‘green’ 
patenting activity in Climate Change Mitigation technologies.     

53   High-value  patent  families  (inventions)  are  those  containing  applications  to  more  than  one  office  i.e.  those  seeking 

protection in more than one country / market.   

10 

 
 
 
 
                                                 
over the last 5 years. Nonetheless, there is an increasing (global) unease about the impact of 
state-  or  subsidy-  backed  technology  domination,  closed  markets  and  different  intellectual 
protection  rules  and  policies  on  innovation  and  competitiveness  in  the  sector,  especially  as 
manifested  by  China.  Despite  those  concerns,  over  a  quarter  of  the  clean  energy  inventions 
protected internationally over the last 5 years by EU applicants have also targeted the Chinese 
market. In terms of collaborations, beyond the alliances built within Europe due to geographical 
proximity  and  EU  collaborative  programmes,  EU  firms  tend  to  collaborate  most  with  US 
counterparts54.  EU  Member  States  generate  33%  of  co-inventions  through  intra-EU 
connections, 29% with the USA and only 6% with China.  

Figure 4: EU positioning in high-value patents in the Energy Union R&I priorities (2005-2018) 

Source JRC55 based on European Patent Office Patstat 

2.2 The clean technologies funding landscape in the EU 

The role of venture capital  

Together with the adoption of more mature generation technologies (e.g. solar photovoltaics 
and wind), the development and scale-up of novel technologies (e.g. long and short-duration 
energy storage, renewable hydrogen production and use in hard to abate sectors, carbon capture 
use and storage), and in particular the so-called climate tech56, will play a crucial role to achieve 
carbon neutrality by 2050.  

Since  the  2015  Paris  Climate  Change  Conference,  climate  tech  have  gained  a  significant 
momentum, and they are becoming highly attractive for venture capital (VC) investments, that 
are at the forefront of innovation. As climate tech involve long lead times to reach maturity, 
require a significant amount of capital throughout the start-ups’ funding lifecycle as well as 

54  

55  
56  

JRC118983 Grassano, N., Hernández, H., Tübke, A., Amoroso, S., Dosso, M., Georgakaki, A. and Pasimeni, F.: The 2020 
EU Industrial R&D Investment Scoreboard. 
JRC SETIS https://setis.ec.europa.eu/publications/setis-reseach-and-innovation-data_en  
‘Climate tech’ encompasses a broad set of sectors which tackle the challenge of decarbonising the global economy, with 
the aim of reaching net zero emissions before 2050. This includes low-to-negative carbon approaches to cut key sectoral 
sources of emissions across energy, built environment, mobility, heavy industry, and food and land use; plus cross-cutting 
areas,  such  as  carbon  capture  and  storage,  or  enabling  better  carbon  management,  such  as  through  transparency  and 
accounting. 

11 

 
 
 
 
                                                 
high  investments  in  R&I57,  government  action  to  de-risk  the  development,  and  the 
implementation at scale of new technologies to further stimulate private sector participation is 
key. 

Worldwide, the climate tech domain has also proved to be resilient to the COVID-19 outbreak58 
and has remained attractive to the venture capital investments, in spite of a downward overall 
investment  dynamic  and  the  redirection  of  significant  VC  funding  to  pandemic-related 
industries such as pharmaceuticals and healthcare59.  

In the climate tech domain, global VC funding reached EUR 14 billion in 202060, increasing 
more than 1250% since 2010. Within this, VC investments in EU-based climate tech start-ups 
and scale-ups have been 11 times higher over the past 5 years than they were between 2009 and 
2014, reaching about EUR 2.2 billion in 2020.  

In 2020, EU firms received 16% of global VC funding in the climate tech domain (compared 
to only 8% of overall VC funding in all domains)61. At the same time, 2020 was the first year 
where  early-stage  investments  in  EU  start-ups  were  higher  than  those  in  the  US  and  China 
(Figure 5).  

Figure 5: Venture Capital investments in Climate Tech start-ups and scale-up 

Source: JRC elaboration based on PitchBook data. 

However, EU-based climate tech start-ups still trail their counterparts in their ability to scale 
and total investments in those still range far behind the US (43%). Over the past 5 years, they 

57   Giving  rise  to  the  notion  of  Deep  Green  start-ups:  cutting  edge  technologies  focused  on  addressing  environmental 
challenges (e.g. green battery manufacturing, electric aircraft). Deep Green are at the intersection between Climate Tech 
and Deep Tech, defining the latter as companies building on scientific discovery in engineering, mathematics, physics, 
and medicine. Characterised by long R&D cycles and untested business models. 
IEA, World Energy Investment 2020. 

58  
59   Bellucci, A., Borisov, A., Gucciardi, G. and Zazzaro, A., The reallocation effects of COVID-19: Evidence from Venture 
Capital investments around The World, EUR 30494 EN, Publications Office of the European Union, Luxembourg, 2020, 
ISBN 978-92-76- 27082-9, doi:10.2760/985244, JRC122165. 

60   Accounting for: i) between 4 to 6% of total VC funding according to JRC elaboration based on PitchBook data and ii) PwC 

data based on Dealroom data. 

61   JRC elaboration based on Pitchbook data 2021. 

12 

 
 
 
                                                 
only benefited from 6.9% of all later stage investments in climate tech start-ups, far behind the 
US (44%) and China (40%)62. 

The energy domain accounted for 8.2% of global climate tech VC investment between 2013 
and 201963. Europe (EU and UK) is investing a larger share of VC in energy solutions (23.5%) 
compared  to  the  US  (9.4%)  and  China  (less  than  1%),  mostly  in  the  development  of  core 
technologies  for  renewable  energy  generation  (predominantly  PV  cells)  and  energy  storage 
(batteries) to support their proliferation64.   

Barriers and opportunities in the VC ecosystem 

Both the overall climate tech VC funding dynamics in the EU and the attraction of VC investors 
for EU energy companies are related to the number of overarching policy goals in the climate 
and  energy  areas  established  at  EU  and  Member  State  level,  together  with  tools  supporting 
climate tech (e.g. fund of funds, grants and financial instruments equity and debt co-investment, 
R&D). 

Structural barriers are still holding back the EU-based Climate Tech scale-ups compared to US 
and China, such as the EU’s market and regulatory fragmentation that hinders growth and lead 
to  different  maturity  of  VC  ecosystems.  The  difficulty  in  translating  a  strong  EU  research 
performance into innovation, the need of a clear pathway from early-stage funding to growth-
stage investment, the need to develop international partnerships and cross-border funds, and the 
lack of patient capital can also be listed among the main challenges that must be addressed.  

To  this  end,  the  Horizon  Europe  pillar  III  on  “Innovative  Europe”  aims  at  supporting  the 
development of disruptive and market-creating innovations through the European Innovation 
Council (EIC), as the one-stop shop to help innovators create markets, leverage private finance 
and  scale-up  their  companies.  Horizon  Europe  also  supports  the  European  Innovation 
Ecosystems  initiative  and  the  European  Institute  of  Innovation  and  Technology  (EIT).  For 
example, EIT InnoEnergy has a portfolio of more than 250 innovative start-ups and scale-ups 
set to save 1.1 gigatonnes of CO2e – equivalent to one-third of Europe’s 2030 carbon emissions 
reduction target – and EUR 9.1 billion in annual energy costs by the end of the decade65). The 
InvestEU  programme  as  well  as  cohesion  policy  also  support  access  to  and  availability  of 
finance primarily for SMEs, but also mid-caps and other enterprises. Moreover, the European 
Investment Bank (EIB), and the European Investment Fund (EIF), effectively support the deep-
tech development that Europe needs to achieve its sustainability goals.  

Moreover,  additional  funding  programmes,  such  as  the  Innovation  Fund,  the  Modernisation 
Fund, and the Social Climate Fund, help to convey revenues from climate-related policies in 
support of the energy transition. 

Filling the scale-up gap between EU and other major economies also requires mobilisation of 
private investors to participate more actively in the European VC market and in the funding of 
climate tech and deep climate tech start-ups66. As an example, the pilot EUR 100 million joint 

JRC elaboration based on PitchBook data 2021. 

62  
63   Pwc, The State of Climate Tech 2020. The next frontier for venture capital, 2020. 
64   Pwc, The State of Climate Tech 2020. The next frontier for venture capital, 2020. 
65   EIT InnoEnergy, Impact Report 2020. 
66   Deep  Tech  start-ups  build  on  scientific  knowledge  and  are  characterised  by  long  R&D  cycles  and  untested  business 

models. Deep Climate tech start-ups are companies using cutting edge technology to address environmental challenges. 

13 

 
 
                                                 
fund  established  by  the  European  Commission,  the  European  Investment  Bank  (EIB)  and 
Breakthrough Energy Ventures Europe (BEV-E) allows for the blending of institutional (risk-
averse)  with  a  VC  (less  risk-averse)  investment  approaches67.  The  EIB  played  a  role  in 
attracting private investment in Northvolt - the Swedish green battery company founded in 2016 
- that is building the first European commercial-scale battery plant in Sweden and raised EUR 
1.4 billion in financing in June 2020. EIT InnoEnergy supported the company to put together a 
consortium  of  investors  and  access  EIB  funding:  the  EUR  350  million  loan  from  EIB  is 
accompanied by EUR 886 million from private investors. 

The  EU  taxonomy  for  sustainable  activities  provides  a  framework  to  facilitate  durable 
investments and defines environmentally sustainable economic activities. The 2020 European 
Industrial  Strategy  package,  including  the  EU  Start-up  Nation  Standard  within  the  SME 
Strategy,  indicates  that  the  EC  will  deploy  new  initiatives  to  boost  the  scale  of  VC  funds, 
increase private investment  and facilitate the  cross-border expansion and scale-up of SMEs. 
The  2021  European  Sustainable  Finance  Strategy  aims  at  providing  the  right  tools  and 
incentives to access transition finance stressing the importance to support SMEs. The Digital 
Innovation  and  Scale-up  initiative  focuses  on  the  early  stage  and  the  scale-up  of  innovative 
start-ups and deep tech SMEs in the Central, Eastern and South Eastern Europe region. Other 
mechanisms to increase the take-up and scale-up of innovative solutions include the Connecting 
Europe Facility and the cohesion policy funds. 

Streamlining these mechanisms in the right way and making use of synergies across instruments 
can lead to a further flourishing of EU climate tech start-ups, enhancing and accelerating VC 
funds’ support across all sectors, thus strengthening the link between technological innovation 
and implementation. 

3.  FOCUS ON KEY CLEAN ENERGY TECHNOLOGIES AND SOLUTIONS 

The  following  section  assesses  the  competitiveness  of  selected  technologies  relevant  in  the 
context of the package of legislative proposals adopted by the European Commission in July 
2021 to deliver on the European Green Deal.  

This report focuses first on wind and solar power that are projected to show the higher relative 
growth  up  to  2030.  The  analysis  then  looks  into  electricity  storage  technologies,  such  as 
batteries  and  renewable  hydrogen,  given  their  critical  importance  for  increasing  the  overall 
flexibility  of  the  energy  system,  while  optimizing  the  market  integration  of  renewable 
electricity.  In  the  context  of  electrification  of  our  societies,  the  study  investigates  the 
competitiveness  of  heat  pumps,  given  their  high  value  in  helping  decarbonise  the  buildings 
sector.  The  report  also  looks  at  the  renewable  fuels,  which  are  needed  to  facilitate  the 
decarbonisation of certain transport modes. Finally, smart  grids are analysed as a horizontal 
technology which will facilitate the combination of different technologies. Each technology is 
firstly assessed through its current situation and outlook, then through an analysis of its value 
chain, and finally through an analysis of its global market. 

67   The European Commission, European Investment Bank and Breakthrough Energy Ventures establish a new EUR 100 

million fund to support clean energy investments (eib.org) 

14 

 
 
 
 
                                                 
3.1 Offshore and onshore wind  

Technology Analysis 

In  2020,  the  EU  installed  10.5  GW  of  wind  power  capacity  (both  onshore  and  offshore), 
bringing its cumulative wind power capacity to 178.7 GW68. Offshore wind energy alone has 
surged from 1.6 GW cumulative capacity in 2010 to 14.6 GW in 202069. Current national targets 
as expressed in the NECPs suggest that the offshore renewable energy targets for 2030 (at least 
60 GW) can be achieved. Most of the offshore wind installations deployed until 2030 will be 
in  the  North  Sea  (47  GW),  yet  substantial  capacities  can  be  expected  in  other  sea  basins 
particularly in the Baltic Sea (21.6 GW), the Atlantic Ocean (11.1 GW), the Mediterranean Sea 
(2.7  GW),  and  the  Black  Sea  (0.3  GW).  The  move  to  new  sea  basins  will  require  further 
developments of floating technology and the development of port infrastructure. Building the 
future offshore grid around hybrid projects70, in cases where they can reduce costs and use of 
maritime space will also be important to step up offshore wind deployment. 

Following current projections on the future costs of bottom-fixed offshore wind, levelised costs 
of electricity (LCoE) in the range of EUR 30-60 per MWh are expected by 2050 (similar to 
onshore installations)71. 

For onshore wind, a reduced annual addition observed since 2018, originates from moderate 
deployments  in  Germany  due  to  complex  permitting  rules  and  potential  exposure  to  legal 
challenges.  The  age  structure  of  the  EU  onshore  and  offshore  wind  fleet  indicates  that 
repowering will play a crucial role in the coming years. Replacing wind turbines at end of life 
with new turbines, or lifetime extension through upgrading some of the components presents 
an opportunity for modernising the assets, using the resource at the best wind sites and may 
improve social acceptance, as existing turbine locations remain in use, preserving local jobs 
and revenues for local municipalities. However, the decommissioning and renewal of current 
wind energy installations represents a challenge in terms of resource efficiency, supply of raw 
materials and waste production, because many components of the current wind turbines cannot 
be reused or recycled yet. Circularity of wind mills still requires R&I and deployment efforts. 
Wind asset owners’ choice between decommissioning and the different repowering options is 
influenced by electricity prices, support schemes and permitting procedures. The current share 
of  total  electricity  generation  for  onshore  wind  is  13.7%  (2020).  The  2030  Climate  Plan 
scenarios project a production of 847 TWh of onshore wind in 2030 (share of total electricity 
generation: 27.3%), and 2 259 TWh in 2050 (share: 32.9%)72. 

Over the last decade, private R&I spending in wind technology held a constant level between 
EUR  1.6  billion  and  EUR  1.9  billion  per  year73.  It  topped  public  R&D  investments  tenfold 
during this period.  

JRC based on GWEC, 2021. 
JRC based on GWEC, 2021. 

68  
69  
70   A  so-called  offshore  hybrid  asset  has  dual  functionality,  combining  transport  of  offshore  wind  energy  to  shore  (for 
consumption) and interconnectors. See Recital 66 of Regulation 2019/943 on the internal market for electricity, as well as 
COM(2020) 741 final., page 14.  

71   Beiter P., Cooperman A., Lantz E., Stehly T., Shields M., Wiser R., Telsnig T., Kitzing L., Berkhout V., Kikuchi Y. (2021) 
Wind  power  costs  driven  by  innovation  and  experience  with  further  reductions  on  the  horizon,  WIREs  Energy 
Environ. 2021. 
72   EC CTP-MIX. 
73   WindEurope, 2021. 

15 

 
 
                                                 
With 57% of the share in the period 2015-2017, the EU is a global leader in high value patents 
in wind energy technologies. Shares of other major economies include the US with 18%, Japan 
with  11%,  China  with  5%,  and  Korea  with  1%74.  Top  global  high  value  patent  countries 
between 2015 and 2017 were Denmark, Germany, US, Japan, and China. Major EU Original 
Equipment  Manufacturers  (OEMs)  file  most  of  the  high  value  patents,  yet  experiencing  a 
decrease since 2012, due to strong performance in high-value patents by major companies from 
the  US  (e.g.  General  Electric)  and  Japan  (e.g.  Mitsubishi  Heavy  Industries,  Hitachi).  EU 
Research organisations active in wind energy are among the most recognised in the field. In 
terms of citation impact, 9 organisations within the Top 20 are in the EU.  

Value Chain Analysis 

Wind based energy production is a strategic industry for Europe. It is estimated that this sector 
offers between 240 000 and 300 000 jobs75. Most European manufacturing facilities are in the 
country of the company’s headquarter or countries with  increased  wind energy deployment. 
48%  of  active  companies  in  the  wind  sector  are  headquartered  in  the  EU.  214  operational 
manufacturing facilities are located in the EU (26 % of all global facilities)76. In 2018 the wind 
energy value chain in the EU produced a turnover of EUR 36 billion77. 

The EU wind sector has shown its ability to innovate. The EU is leading in the parts of the value 
chain  dealing  with  sensing  and  monitoring  systems  for  onshore  wind  turbines,  including 
research and production.  Also, the EU wind industry has  high manufacturing capabilities in 
components with a high value in wind turbine cost (towers, gearboxes and blades), as well as 
in  components  with  synergies  to  other  industrial  sectors  (generators,  power  converters  and 
control systems).  

However, efforts are still needed to improve the circularity of the wind energy components. We 
also need research on the cumulative impacts of offshore wind in ocean ecosystems. 

Global Market Analysis  

Among the top 10 Original Equipment Manufacturers (OEMs) in 2018, European OEMs led 
with  43%  of  market  share,  followed  by  the  Chinese  (32  %)  and  North  American  (10  %) 
companies. The European OEMs in the wind energy sector held a leading position in the last 
few years. In 2020, they were surpassed for the first time by Chinese OEMs (EU: 28%; China: 
42%)78, which can be explained by a surge in new installations in the Chinese wind market 
following China’s shift from Feed-in-Tariffs towards a tender-based support scheme.  

The EU has had a positive trade balance in wind energy related equipments in the last 20 years. 
Yet there is some stagnation in the growth of this indicator79. This is in part a consequence that 
other economies are catching up on the EU’s early mover advantage, but also partially due to 
third country policies aimed at protecting their domestic market or forcing EU companies to 
localise production capacity (e.g. through local content requirements). To illustrate, exports of 

JRC based on European Patent Office Patstat. 

74  
75   WindEurope, 2021. 
76   WindEurope, 2021. 
77  

JRC, commissioned by DG  GROW, European climate-neutral industry competitiveness scoreboard (CIndECS) (Draft, 
2021). IEA codes: 32 Wind Energy.   

78   When analysing the Top10 OEMs in terms of market share. GWEC, Global Offshore Wind Report 2020, 2020. 
79  

JRC based on Eurostat (Comext). 

16 

 
 
 
                                                 
wind  generating  sets  to  China  have  fallen  drastically  since  2007  after  the  introduction  of  a 
supportive  policy  framework  for  their  domestic  industry,  and  have  not  recovered.  On  the 
opposite,  21%  of  Chinese  wind-related  exports  in  2018  were  destined  for  the  EU  market, 
representing just under 10% of the EU market. 

Since 2016, earnings before interest and taxes (EBIT) margins of EU OEMs are declining due 
to  high  competition  in  turbine  orders  particularly  in  the  period  2017-2018  and  increased 
material  costs  for  main  turbine  components.  Despite  the  record  year  in  2020  installations80, 
these factors were further intensified through the impact  of Covid-19 which created logistic 
challenges for all manufacturers. 

Many of the critical raw materials  for wind generators are imported from China81 and more 
generally  face  concentration of the upstream  supply  chains. Potential future material  supply 
challenges would pose a potential risk to EU wind energy production industry. Environmental 
concerns have also been raised, related to the composite blades of installations reaching their 
end of life as these are still difficult to recycle. In line with the Commission’s 2020 Action Plan 
on  Critical  Raw  Materials82,  actions  are  underway  to  diversify  the  supply  of  critical  raw 
materials  from  both  primary  and  secondary  sources  and  improve  resource  efficiency  and 
circularity  while  promoting  responsible  sourcing  worldwide.  Circularity,  including  re-use, 
recycling, and substitution are moreover priority areas of innovation to abate these risks while 
improving  the  overall  sustainability  of  the  sector  and  are  included  in  the  2021-2022  Work 
Programme of Horizon Europe. The European wind industry has also committed to reusing, 
recycling or recovering 100% of decommissioned blades, and is aiming to develop a roadmap 
for further accelerating wind turbine blade circularity83. 

The  EU  has  commercialised  42%  of  the  global  offshore  wind  market,  with  a  cumulative 
installed capacity of 14.6 GW in 2020. Within the next decade, it is expected that Europe will 
maintain its leadership position in annual growth of offshore wind. Yet China, Asia Pacific and 
North America are expected to develop a significant market share (i.e. installed capacity) of the 
offshore wind segment84 in the coming years. With respect to onshore wind, China will remain 
the  largest  market  (average  annual  market  share  of  about  50%  in  the  period  2020-2025) 
followed by Europe (18%), North America (14%) and Asia (excluding China) (8%). 

European offshore manufacturing at ports (6-8 GW/year current estimated production capacity) 
will need to grow substantially to serve annual capacity additions up to an estimated 16 GW to 
satisfy the demand in the period 2030-205085.  

3.2  Solar Photovoltaic (PV)  

Technology Analysis 

Solar photovoltaics emerges as a very large and innovative industry, growing with unexpected 
speed.  This  is  the  combined  result  of  an  accelerated  technology  development,  deployment 

80   Global Wind Energy Council, Global Wind Report, 2021. 
81   European Commission, Critical Raw Materials in strategic technologies and sectors – a foresight study, 2020. 
82   COM (2020) 474 final. Critical Raw Materials Resilience: Charting a Path towards greater Security and Sustainability. 
83     Wind industry calls for Europe-wide ban on landfilling turbine blades | WindEurope. 
84   GWEC, Global Offshore Wind Report 2020, 2020. 
85  

JRC Wind manufacturer database,2021, and WindEurope, 2020. 

17 

 
 
                                                 
policies and implementation of large-scale manufacturing facilities with low costs, mostly in 
Asia. The technology is central to future climate neutral electricity generation systems.  

More than 3.1 TW of photovoltaic power capacity are projected to be installed - globally - in 
2030  and  about  14  TW  in  2050.  The  investment  required  in  the  2020-2050  period  for  the 
additional solar power capacity is estimated at about USD 4.2 trillion86. In the EU, 0.4 TW of 
solar photovoltaic capacity is projected to be installed by 2030 (estimated to reach almost 160 
GW  by  2021) and  1  TW  by  205087,88.  Scenarios  from  the  industry  itself  project  even  larger 
penetration89. 

The residential systems, predominant five years ago in the EU, are now second (25.4%), after 
the utility scale segment (30.5%), in terms of share of installed capacity. After peak investments 
in  2011,  the  EU  total  public  investment  in  photovoltaic  research  development  and 
demonstration has declined and is now below the level it was at the beginning of the decade90.  

Over the last year, the EU has slipped from second in high value inventions (after Japan) to 
third (after Japan and Korea)91. If the current trend continues, Chinese “high value” inventions 
will  soon  also  surpass  the  EU.  In  terms  of  viability  of  EU  manufacturing,  cell,  and  module 
design,  particularly,  tend  to  become  increasingly  complex,  requiring  further  investments  to 
remain at the cutting edge.  

Value Chain Analysis 

The  EU  is  a  global  leader  in  several  parts  of  the  photovoltaic  value  chain:  research  and 
development, polysilicon production, equipment and machinery for PV manufacturing92. 

The EU hosts one of the leading polysilicon manufacturers. Furthermore, EU companies are 
more competitive in the downstream part of the value chain with key roles in the monitoring 
and  control,  and  balance  of  system  segments,  especially  inverter  and  solar  trackers 
manufacturing. European companies have also maintained a leading position in the deployment 
segment.  

On the other hand, the EU has lost its market share in solar cells and module manufacturing. In 
case of a revival of an European silicon solar cell and module manufacturing industry, which 
looks not too unrealistic, given the current number of possible projects, the dependence on some 
critical raw materials like boron, gallium, germanium and indium would need attention at the 
supply  chain.  A  recent  study93  shows  that  the  EU  has  the  best  performance  in  terms  of  the 
energy produced compared to that used in manufacturing and operating photovoltaic systems, 
followed by China and the US. Similarly the EU also has the lowest carbon intensity for the 
energy produced by PV systems, followed by USA and then China. The EU also has the highest 
energy return on carbon, while China has the worst performance, and the US are in the middle94. 

IEA, WEO 2020 Sustainable Development Scenario. 
International Renewable Energy Agency (IRENA), World Energy Transitions Outlook: 1.5°C Pathway, 2019.  

https://www.solarpowereurope.org/wp-content/uploads/2020/04/SolarPower-Europe-LUT_100-percent-Renewable-

86   EC CTP-MIX. 
87  
88  
89 
Europe_mr.pdf?cf_id=11789 
90  
91  
92   BNEF, Solar PV Trade and Manufacturing, A Deep Dive, 2021. 
93   F. Liu and J.C.J.M. van den Berg, Energy Policy 138 (2020) 111234. 
94   F. Liu and J.C.J.M. van den Berg, Energy Policy 138 (2020) 111234. 

JRC 2021, based on IEA data. 
JRC 2021, based on EPO Patstat. 

18 

 
 
                                                 
This latter indicator reflects the carbon intensity of the production cycle of the electricity used 
in the manufacturing processes.  

In 2018, 109 000 direct and indirect jobs in photovoltaics are reported in the EU, with a 42% 
increase between 2015 and 201895.  The preliminary  results of a more recent  study indicates 
about 123 000 direct and 164 000 indirect full-time jobs in the EU PV industry, in 2020, for a 
total of 287 000 jobs96.  

From the job skills perspective, the photovoltaic sector employs a highly educated work force 
in the areas of R&D, polysilicon and wafer production and cells and module manufacturing. 
EPC  (engineering,  procurement  and  construction),  O&M  (operation  and  maintenance), 
decommissioning and recycling are also demanding activities in terms of skills required. 

Global Market Analysis 

With the increase of PV system installations, the trade deficit for the EU for the import of solar 
modules has started to increase again since 2016, after it had declined between 2011 and 2016, 
due to a shrinking deployment of PV systems. It has grown to more than EUR 5.7 billion in 
2019.  This  imbalance  reflects  the  volume  of  the  imports,  as  the  exports  have  not  changed 
dramatically over the years. EU solar photovoltaic imports are strongly dependent from Chinese 
and other Asian companies97. 

The  polysilicon,  ingots,  and  wafer  production  together  with  the  solar  cells  and  modules 
manufacturing currently have a global value of about EUR 57.8 billion. The EU’s share (12.8%) 
corresponds to EUR 7.4 billion. This share is mostly due to the polysilicon production. Almost 
all of the growth in manufacturing of photovoltaic cells and modules has taken place outside 
the  EU98.  With  market  demand  accelerating  in  Europe  and  around  the  world,  and  new 
production technologies emerging, European manufacturers are showing a renewed interest in 
setting up production capacity within the EU based on the latest technologies. In that respect, 
the  European  Commission’s  updated  European  Industrial  Strategy99 welcomed  efforts  of  the 
industry-led European Solar Initiative to scale up manufacturing of solar photovoltaics. Several 
projects are already taking off in the EU for manufacturing wafers, solar cells and modules. The 
European Commission will publish a communication on solar energy in 2022.  

The role of prosumers and energy communities 

The take up and production  of renewable  energy such as solar photovoltaic but  also  energy 
efficiency can be strengthened by energy communities which allow consumers to take an active 
role in the energy market. Today, at least two million European citizens collectively engage in 
more  than  8 400  energy  communities,  having  realized  a  minimum  of  13000  projects  since 
2000100. Current total renewable capacities installed by energy communities in Europe can be 
estimated  at  least  as  high  as  6.3  GW,  contributing  typically  about  1-2%  to  the  nationally 

JRC 2021, based on EurObserv'ER data.  

95  
96   Solar Power Europe, Solar PV job market study for the European Union, 2021. 
97  
98  
99   Updating the 2020 New Industrial Strategy: Building a stronger Single Market for Europe’s recovery, COM(2021) 350 

JRC Report: EU energy technology trade - https://publications.jrc.ec.europa.eu/repository/handle/JRC107048 
JRC PV Snapshot 2021. 

final. 

100   Schwanitz, V. J., Wierling, A., Zeiss, J. P., von Beck, C., Koren, I. K., Marcroft, T., … Dufner, S. (2021, August 22). The 
contribution of collective prosumers to the energy transition in Europe - Preliminary estimates at European and country-
level from the COMETS inventory. https://doi.org/10.31235/osf.io/2ymuh. 

19 

 
 
                                                 
installed capacities, the top contribution is as high as 7% in the case of Belgium. The lion’s 
share of installed capacities is taken by solar PV, followed by onshore wind. A conservative 
estimate of the total invested finances amounts to at least EUR 2.6 billion101. 

Today,  energy  communities  are  organized  in  various  legal  forms.  Areas  of  activities, 
technology portfolios, size, and membership structures differ. Currently, energy communities 
raise technology awareness and acceptance, promote energy efficiency, produce and distribute 
renewable-based  electricity  and  heat,  provide  services  around  e-mobility,  and  run  energy 
consulting services. They experiment innovatively with business models and self-sufficiency 
concepts  for  the  benefit  of  local  communities.  The  continuation  and  extension  of  energy 
communities in Europe depends on favourable legislation and financial incentives as well as on 
the competitiveness of technologies that are accessible to citizens.  

Whilst the EU policy frameworks aim to trigger the development of energy communities across 
the EU102, including across borders, much will depend on how Member States will implement 
the enabling framework for these types of models103. The National Energy and Climate Plans 
(NECP) framework already has a requirement for Member States to report on renewable energy 
communities, however only a few Member States included quantitative targets  and concrete 
measures  for the development  of energy  communities in  their NECPs. In order to  boost the 
development of energy communities in the sense of the EU Directive, the Commission is in the 
process  of  setting  up  an  Energy  Community  Repository  which  will  contribute  to  the 
dissemination of best practices and provide technical assistance for the development of concrete 
energy community initiatives across the EU. 

Similarly  as  for  energy  communities,  the  EU  framework  will  support  the  uptake  of  self-
consumption  (i.e.  prosumers),  with  the  requirement  to  enable  individual  and  collective  self-
consumption and the exemption from network tariffs. Again, much will depend on the design 
of the legal framework, applicable network tariffs and taxes, and single points of information 
to  stimulate  collective  self-consumption  in  multi-level  apartment  buildings  -  and  beyond,  if 
Member States decide to do so. Legal constraints and unfavourable taxation can pose serious 
barriers to the uptake of self-consumption. 

3.3  Heat pumps for building applications 

Technology Analysis 

Heat pumps for building applications104 are mature, commercially available products. They can 
be classified according to the source from which they extract renewable energy (air, water or 
ground), the heat transfer fluid they use (air or water), their purpose (space cooling / heating, 
domestic water heating) and the market segments targeted (residential, light commercial and 
heat networks).  

101   Ibid. 
102 Including in making financial support available such as through cohesion policy  
103   Consisting of the Renewable Energy Directive II and the Electricity Market Directive. Both Directives set the conditions 
for  Member  States  to  include  options  for  cross-border  implementation  of  energy  communities  in  their  national 
transpositions. 

104   Industrial heat pumps are not in the scope of this report. 

20 

 
 
                                                 
Heat generation by heat pumps has been growing at 11.5% per year over the last 5 years in the 
EU, reaching 250 TWh in 2020105. This trend is to increase because electrification of heating 
will be a key contributor to the building sector path to climate neutrality.   

Heat pumps are very efficient; their typical seasonal coefficient of performance of 3 means that 
for  each  kWh  of  electricity  consumed,  3  kWh  of  heat  are  generated106.  Consequently,  the 
operation  of  a  heat  pump  for  building  heating  may  only  be  cost  effective  compared  to  gas 
boilers, if the electricity to gas price ratio is not higher than 3. This ratio varies greatly, from 
1.5 to 5.5 between Member States107, often due to higher taxes and charges on electricity with 
respect  to  fossil  fuels  and  the  lack  of  internalisation  of  the  external  cost  of  greenhouse  gas 
emissions in the gas/oil prices. These issues are addressed by the policy package presented in 
July 2021 to deliver on the European Green Deal, specifically by the amendment proposals for 
the Energy Taxation Directive and the introduction of a new emissions trading for the building 
and road transport sectors.    

The heat pumps sector is characterized by a global and competitive market, where innovation 
is of key importance. The adaptations to evolving EU climate and environmental regulations 
and strategies are competing with the improvement of products performances and costs in the 
small, medium or large enterprises of the EU, where R&D capacities are limited. Nevertheless, 
they offer opportunities for industry to propose innovative products.  

Over  the  2011-2021  period,  out  of  the  highly  cited  scientific  publications  on  heat  pump 
technology, more than 37% belong to the EU, followed by China (23%) and the USA (20%). 
The  EU  is  also  leading  in  inventions  in  the  ‘mainly-heating  heat  pumps  for  buildings 
applications’: over the period 2015-2017, 42% of high-value inventions were filed in the EU, 
followed by Japan (20%), US (8%), South Korea (7%) and China (4%)108.  

Building on this knowledge and innovation base, the EU research institutions and industry have 
the  capacity  to  propose  innovations.  Over  the  period  2014-2020,  heat  pump  projects  for 
building applications represented a total funding of EUR 146.8 million under Horizon 2020, 
the EU R&I programme. The largest share was dedicated to the integration of heat pumps with 
other  renewables  (60.9%),  compared  to  the  development  of  heat  pumps  for  residential 
applications (6.5%) and for district heating applications (32.6%). 

Value Chain Analysis 

According to EurObserver109, the turnover of heat pumps in EU amounted to EUR 26.6 billion 
in 2018, growing by 18% compared to 2017. In parallel, the direct and indirect jobs amounted 
to 222 400 in 2018, growing by 17% versus 2017. These data include all types of heat pumps, 
including  air-to-air  heat  pumps  used  only  for  cooling  or  for  heating  and  cooling,  which 
represented 86% of the units sold in 2019.  

105   European Heat Pump Association database. 
106   The coefficient can be lower or higher depending on climate zone, heat source nature and temperature. 
107   Energy prices and costs in Europe, COM(2020) 951 final. 
108   JRC, based on EPO Patstat, CPC codes: Y02B 10/40, 30/12, 30/13, 30/52. 
109   EurObserver, The state of renewable energies in Europe, 2019.  

21 

 
 
                                                 
From the skills perspective, the heat pump sector employs a well-educated work force in the 
areas  of  R&D,  components  and  heat  pump  manufacturing,  thermo-technical  engineers  and 
geologists, installers (including drillers) and service & maintenance.   

Global Market Analysis 

Asia and America are dominating exports in the residential air conditioning market110 of air-to-
air  heat  pumps.  The  unbalance  is  less  pronounced  when  considering  reversible  air 
conditioners111:  Asian  countries  are  still  leading,  followed  by  European  countries.  When 
considering  ‘mainly-heating  heat  pumps’112,  EU  countries  are  leading  exports,  followed  by 
Asia. However, over the last 5 years, the EU market growth of ‘mainly-heating heat pumps’ has 
been captured by the imports from Asia, growing at an average annual rate of 21% from 2015 
to 2020. Therefore, the trade balance has been degrading from a surplus of EUR 249 million in 
2015 to a deficit of EUR 40 million in 2020.    

Based on projections from the EU long-term strategy113, sales of heat pumps are expected to 
increase rapidly until 2030 in the EU for electrification in the building heating sector, followed 
by a slower penetration growth thereafter. The faster penetration in the EU front runner market 
is an opportunity for the EU industry to grow and develop competitive production until 2030, 
then to seize the sustained growth globally, as projected by the IEA114. 

The high costs in Europe are partly attributable to a high level of fragmentation and nationally 
focused markets. In some cases, national laws differ, notably on product approval requirements 
and permitting rules. Better marketing and distribution networks in the EU and outside, and 
potentially  more  cooperation  with  partners  with  relevant  competences,  would  contribute  to 
increase the competitiveness of EU companies. Nevertheless, recognising the significant role 
of heat pumps in the energy system integration, the Commission announced to further promote 
the use of heat pumps in its Renovation wave Communication115. The Commission will also 
seek to increase the role of heat pumps in the flexibility of the energy systems, for example with 
the development of a network code on demand-side flexibility.  

3.4 Batteries 

Technology Analysis 

This report focuses on lithium ion (Li-ion) battery technology, given its importance to electro-
mobility,  which  dominates  demand  for  batteries  related  to  clean  energy  transition116.  In  the 
wider energy system, stationary batteries will be critical as an energy storage mean, enabling 
high contribution to the energy from intermittent renewable sources in the electricity mix. In 
addition, the interaction of electric vehicles with the electricity grid has great potential to be 
exploited). 

In  2020,  Electric  Vehicles  (EVs)  became  cost  competitive  in  more  than  50%  of  the  total 
European automotive market, based on the total cost of ownership. Li-ion EV battery average 

110   UN-COMTRADE 8415 ‘air conditioning machines’. 
111   UN-COMTRADE 841581 ‘air conditioning machines incl. a valve for reversal "reversible heat pumps’. 
112   UN-COMTRADE 841861 ‘heat pumps, excluding air conditioning machines of heading 8415’. 
113   In-depth analysis in support of Long Term Strategy COM(2018) 773 final. 
114   IEA, Net zero by 2050, May 2021. 
115   A Renovation Wave for Europe - greening our buildings, creating jobs, improving lives, COM(2020) 662 final. 
116    Avicenne energy, EU battery demand and supply (2019-2030) in a global context, 2021.  

22 

 
 
                                                 
pack prices have fallen 89% in real terms since 2010 to USD 137 per kWh (EUR 115 per kWh) 
in  2020.  By  2023,  average  pack  prices  are  projected  to  be  USD  101  per  kWh  and  by  2027 
purchase price of EVs are expected to be less than conventional cars117. 

Average battery energy density of EVs is rising at 7% per year118, while average battery pack 
size  across  electric  light-duty  vehicles  (electric  only  and  hybrid)  increased  from  37  kWh  in 
2018 to 44 kWh in 2020, the battery for pure electric cars in most countries is in the 50-70 kWh 
range119. Trends in growing car size threaten energy efficiency gains and availability of critical 
raw materials. 

Deployment of battery technology in the EU has reached historic highs, with 2020 EV sales of 
10.5% of the car market (an increase from 3% in 2019)120, yet there is a strong disparity within 
the EU, with EV sales ranging from 0.5% in Cyprus to 32% in Sweden. The number of EVs on 
the road doubled to more than two million in the EU in course of 2020, an equivalent of more 
than 60 GWh storage capacity. By 2030, over 50 million EVs are expected on EU roads121. 

The  nascent  stationary  battery  market  in  the  EU  grew  roughly  to  1.3  GWh  in  2020,  with  a 
cumulative installed capacity of roughly 4.3 GWh (mostly Li-ion batteries)122. Promoting self-
consumption has gained Germany two-thirds of the European residential battery storage market 
(2.3 GWh)123. By 2030 stationary batteries may store nearly as much as pumped hydro storage 
today, measured in energy throughput Li-ion batteries can efficiently provide storage for up to 
5  hours,  while  emerging  technologies,  including  flow  batteries,  can  better  cater  for  longer 
storage durations.  

In view of additional cost elements, system cost of grid scale Li-ion applications is between 
EUR 300 and EUR 400 per kWh, while the cost of home storage systems is roughly double. 
Reducing  battery  energy  system  cost  to  half  the  current  price  is  key  for  mass  deployment 
throughout Europe124.   

Two multi-billion  Important Projects  of Common European  Interest (IPCEI)125  involving  12 
Member States and dozens of companies and research organisations display increasing priority 
of batteries in R&I funding. The EU, in turn, has earmarked EUR 925 million for the Batteries 
Partnership under Horizon Europe over the 2021-2027 period.  

Value Chain Analysis 

Despite rising interest in mining projects in Europe, especially in lithium and natural graphite 
as  far  as  the  minerals  of  relevance  for  batteries  are  concerned,  supply  of  both  primary  and 
secondary battery raw materials requires major upscaling to keep up with the rising demands 
for battery materials126. The EU is highly dependent on international trade for supply of cobalt, 

117   BloombergNEF, Electric Vehicle Outlook 2021, 2021. 
118   BloombergNEF, Electric Vehicle Outlook 2021, 2021. 
119   IEA, Global EV outlook 2020, 2021. 
120   Transport and Environment, CO2 targets propel Europe to 1st place in e-mobility race, 2021.  
121    Central MIX scenario of the Fit for 55 proposals. 
122   EASE, EMMES 5.0 market data and forecasts electrical energy storage, 2021.  
123   Solar Power Europe, European market outlook for residential battery storage 2020-2024, 2020. 
124   Batteries Europe, WG on stationary integration, 2021. 
125   IP/21/226: https://ec.europa.eu/commission/presscorner/detail/en/IP_21_226.  
126   Aperio Intelligence Ltd. – commissioned by Eurobattery Minerals, Critical materials and e-mobility, 2021. 

23 

 
 
                                                 
lithium and graphite and those materials are on the EU list of critical raw materials127. Although 
the supply of nickel is more diversified, the EU relies on imports of the high-purity material 
necessary for battery production with a share of ~56%. Future anode and cathode materials such 
as silicon, titanium and niobium are also on the EU list of critical raw materials128. 

Other  than  cobalt  refining  (second  after  China),  the  EU  generally  holds  a  weak  position  in 
battery related materials refining. While the EU has strong players in cathode materials field, 
the EU is still a net importer of cathode materials from Asia. Battery cell production capacity 
is projected to approach 400 GWh and largely satisfy domestic demand by 2025129.  

As of 2021, EU subsidiaries of foreign, mostly Korean companies, encompassed 44 GWh Li-
ion cell production capacity130. In the meantime, 10 EU headquartered companies will start Li-
ion cell production in the coming years. Leading world producers are also establishing factories 
in the EU. Li-ion cell production capacities are growing in the EU, amounting to 6% of global 
capacity as of 2021131, up from 3 % in 2018. European producers maintain a strong position in 
Li-ion  niche  applications,  but  continue  to  depend  on  Asian  companies  for  battery-cell-
production equipment132. 

The EU has its strongest role in final products. All EU automotive companies embraced the 
switch to e-mobility, one even aiming to sell 1 million electric cars in 2021. EU has a number 
of recyclers, but with limited capacities. Currently, batteries are mostly sent to Asia at end of 
life133. Once the supportive framework of the new Battery Regulation134 is in place, Europe can 
become the leader in the circular economy of batteries – from mining to recycling. A growing 
value chain requires more effort in education and training, as 800.000 direct jobs and from 3 to 
4 million jobs in total will be created by 2025135. To this end, the EU has launched the EBA250 
Academy. 

Global Market Analysis 

China controls 80% of the world's battery raw material refining capacity, 77% of cell production 
capacity and 60% of battery component manufacturing capacity136. EU trade deficit in Li-ion 
batteries was EUR 3.6 billion in 2018 and EUR 4.2 billion in 2019. Most of the battery cells 
were still imported in 2020 and all leading battery producers were non-European (but several 
of  which  having  manufacturing  in  the  EU).  In  2020,  Li-ion  battery  global  market  roughly 
amounted to USD 40-47 billion137. With investment projects under way, by 2025, the EU is set 
to become the second largest battery cell producer in the world, behind China.138 

127   European Commission, Internal Market, Industry, Entrepreneurship and SMEs https://ec.europa.eu/growth/sectors/raw-

materials/specific-interest/critical_en  

128   European Commission, Study on the resilience of critical supply chains for energy security and clean energy transition 
during and after the COVID-19 crisis, 8 October 2021. 
129   IP/21/1142: https://ec.europa.eu/commission/presscorner/detail/en/speech_21_1142  
130   EBA 250.  
131    EBA250; US Department of Energy, National blueprint for lithium batteries 2021-2030, 2021. 
132   Decisive Market Insights, Lithium battery manufacturing equipment market report, 2021. 
133   EBA250. 
134   COM(2020) 798/3 final. 
135   IP/21/1142: https://ec.europa.eu/commission/presscorner/detail/en/speech_21_1142  
136   Marian Willuhn, National lithium-ion battery supply chains ranked, PV Magazine, 16 September 2020.  
137   Avicenne energy, EU battery demand and supply (2019-2030) in a global context, 2021. 
138   Fraunhofer ISI, Li-ion Battery cell production capacity to be built up, April 2021; Benchmark Minerals, Li-ion battery 

cell capacity by region, 2021. 

24 

 
 
                                                 
The EU only had a slight trade deficit in electric cars in 2020, while exports grew faster than 
imports139.  Simultaneously,  EU  automotive  companies  expand  their  production  facilities  in 
Asia  and  the  US  competing  with  companies  there.  The  EU  also  has  strong  players  in  the 
stationary storage market: e.g. including global leaders in grid-scale applications and residential 
storage market. 

In  electric  bus  production  and  deployment,  the  EU  is  lagging  far  behind  China  which  has 
already electrified 60% of its bus fleet. Only 1 714 electric buses were sold in EU in 2020140 
compared to 61 000 in China141. 

3.5 Renewable hydrogen production through electrolysis 

Technology Analysis 

Renewable hydrogen obtained through water electrolysis (also called Renewable Fuels of Non 
Biological Origin) has the potential to decarbonize hard-to-electrify and hard-to-abate sectors 
such as industry and heavy-duty transport, and to contribute to energy services such as seasonal 
storage. The main technology challenge includes the energy efficiency losses associated with 
converting  renewable  power  into  hydrogen,  as  every  unit  of  renewable  hydrogen  produced 
requires 1.5 unit of renewable electricity. This requires massive amounts of renewable energy, 
mainly wind and solar, as well as the costs of renewable power to decline to make it competitive 
with fossil-based hydrogen. 

The current EU industrial demand for hydrogen of about 7.7 million tonnes per year142 is largely 
produced from fossil fuels. Hydrogen produced from water electrolysis is estimated to be less 
than 1% of the overall production143. The EU’s current 2030 objective is to install 40 GW of 
electrolysers, to produce up to 10 million tonnes of renewable hydrogen per year144. By 2050, 
electrolyser capacity forecasts for the European market range from 511 GW145 to 1 000 GW146. 

Some  key  performance  indicators  (KPIs)  for  water  electrolysers  are  summarized  below  for 
different  technologies:  Alkaline,  Polymer  Electrolyte  Membrane  (PEM),  Anion  Exchange 
Membrane (AEM), and Solid Oxide (SO) Electrolysers. Anion Exchange Membranes do not 
have the same level of maturity as the other technologies (still in development but available for 
limited commercial use). Solid Oxide Electrolysis is starting to be deployed for demonstrations. 
Alkaline and Polymer Electrolyte Membrane (PEM) are fully commercial technologies.  

139   Eurostat, 2021. Data retrieved: https://ec.europa.eu/eurostat/web/products-eurostat-news/-/ddn-20210524-1  
140   ACEA, Medium and heavy busses (over 3.5t) new registrations by fuel type in the EU, 2020. 
141   https://insideevs.com/news/481987/ev-buses-sales-2020-china-byd-yutong/ 
142   Fuel Cell Observatory: https://www.fchobservatory.eu/observatory/technology-and-market/hydrogen-demand  
143   In addition, 2%-4% is estimated to come from Chlor-Alkali Electrolysis. 
144   A hydrogen strategy for a climate-neutral Europe, COM(2020) 301 final. 
145   A Clean Planet for all. A European long-term strategic vision for a prosperous, modern, competitive and climate neutral economy, 

COM(2018) 773 final. 

146   Kanellopoulos,  K.,  Blanco  Reano,  H.,  The  potential  role  of  H2  production  in  a  sustainable  future  power  system  -  An 
analysis with METIS of a decarbonised system powered by renewables in 2050, EUR 29695 EN,Publications Office of the 
European Union, Luxembourg, 2019, ISBN 978-92-76-00820-0, doi:10.2760/540707, JRC115958. 

25 

 
 
 
                                                 
Table 1 Key Performance Indicators for the four main water electrolysis technologies in 2020 and 
projected in 2030. Stack degradation is defined as percentage efficiency loss when run at nominal 
capacity. 

Characteristic Temperature [°C] 
Cell Pressure [bar] 
Efficiency (system) [kWh/kgH2] 
Degradation [%/1 000h] 
Capital Cost Range [€/kW - 
based on 100 MW production ] 

2020 

Alkaline 

70-90* 

<30* 
50 
0.12 

PEM 
50-
80* 
<70* 
55 
0.19 

AEM 
40-
60* 
<35* 
57* 
- 

600 

900 

- 

SO 
700-
850* 
<10* 
40 
1.9 

2700 

2030 

Alkaline 

PEM 

AEM 

- 

- 
48 
0.1 

400 

- 

- 
50 
0.12 

500 

- 

- 
<50* 
- 

SO 

- 

- 
37 
0.5 

- 

972 

Source: Addendum to the Multi - Annual Work Plan 2014 – 2020, FCH JU, 2018 and for parameters 
labelled with ‘*’, DG ENERGY (European Commission) elaboration based on IRENA data from the 
“Green Hydrogen Cost Reduction” report”, 2020.  

The Fuel Cell and Hydrogen Joint Undertaking (FCH JU) invested about EUR 150.5 million 
since 2008 in Electrolyser technologies development (EUR 74.7 million for research actions 
and  EUR  75.9  million  for  Innovation  Actions).  The  main  beneficiary  countries  have  been 
Germany, France and the UK with about EUR 31, 25 and 18 million respectively. The Horizon 
2020 Green Deal Call made circa EUR 90 million funding available for three project consortia 
to develop and operate 100 MW electrolysers in real life environments. While Japan has been 
patenting  consistently  in  this  technical  area  for  many  years,  in  other  regions  (in  particular 
China) the number of inventions related to electrolysers has steadily increased in recent years. 
For electrolysers, Europe (including UK) files proportionally higher numbers of International 
Patent Families (patent applications filed and published at several international patent offices) 
than other leading economies147. 

Value chain analysis  

It is difficult to have accurate information on renewable and low-carbon hydrogen related value 
chains and their predicted growth, but the work of the European Clean Hydrogen Alliance with 
its over 1 500 members points to a very dynamic and rapidly developing sector. To date, the 
European Clean Hydrogen Alliance has already collected information on projects for about 60 
GW of electrolyser by 2030, out of which the large majority are to be powered by renewable 
electricity. 

The  electrolysis  market  shows  strong  potential  for  development.  An  overview  of  the 
manufacturers of medium to large scale electrolysis systems, reporting only manufacturers of 
commercial systems and not considering manufacturers of laboratory-scale electrolysers, shows 
that Europe has a strong international position for both alkaline and PEM electrolysis and a 
very strong position for SO electrolysis, while the only AEM manufacturer is also located in 
the  EU148.  The  large-scale  deployment  of  these  electrolysers  will  depend  inter  alia  on  the 
availability of renewable and low carbon electricity required for the production of renewable 
and low carbon hydrogen, as well as other factors such as increasing the number of operational 
hours of electrolysers and reduction of electricity prices.  

147   JRC  based  on  European Patent Office,  EPO Patstat  data, 2020  and  https://iea.blob.core.windows.net/assets/b327e6b8-

9e5e-451d-b6f4-cbba6b1d90d8/Patents_and_the_energy_transition.pdf.  

148   A. Buttler, H. Spliethoﬀ, Renewable and Sustainable Energy Reviews 82 (2018) 2440–2454 updated with IRENA Green 

Hydrogen Cost Reduction, 2020. 

26 

 
 
  
  
 
                                                 
Global Market Analysis 

The EU has established a technological lead in electrolysis and associated technologies but so 
far still has a relatively small production of electrolysers that, however, is expected to grow 
significantly in the coming years. Around 30 raw materials are needed for producing fuel cells, 
electrolysers and hydrogen storage technologies. Of these materials, 13 materials are deemed 
critical for the EU economy according to the 2020 Critical Raw Materials list (electrolysers not 
included in the assessment)149. In particular PEM electrolysis, requires the use of noble metal 
catalysts  like  iridium  for  the  anode  and  platinum  for  the  cathode,  both  of  which  are  mainly 
sourced from South Africa; while SO electrolyser require rare earth metals, which are mainly 
coming from China. 

3.6 Smart  grids  (distribution  grid  automation,  smart  metering,  Home  Energy 

Management Systems and smart EV charging)  

The take-up of smart grid technologies is expected to remain a robust trend during this decade 
and beyond, in close correlation with electrification, decentralisation and the need for improved 
grid  reliability  and  operating  efficiency  and  increasing  investments  to  upgrade  aging  grid 
infrastructure. Technologies such as smart metering, automation or electrification of mobility 
will  each  contribute  with  around  8%  of  the  estimated  investment  in  EU  and  UK  in  power 
distribution  grids  until  2030150.  It  is  widely  anticipated  that  markets  for  associated  digital 
services will also continue to grow. This section analyses four areas of digital technologies and 
services  that  are  particularly  important  for  the  EU’s  ambitions  in  relation  to  buildings  and 
mobility, namely distribution grid automation, Home Energy Management Systems (HEMS), 
smart meters, and smart charging. 

Technology analysis 

Distribution  automation  and  smart  metering  can  rely  on  mature,  market-ready  devices  and 
software, whose deployment has been ongoing for a decade. For instance, by the end of 2020, 
almost 150 million smart meters were installed in the EU, Norway, Switzerland and UK (49% 
average penetration rate). This number is expected to grow to almost 215 million by 2025 (69% 
penetration rate)151 with the second wave technology focussing more on decentralization and 
services to consumers. 

On the other hand, HEMS and smart charging are in early take-up, with still many promising 
research  projects  running  in  the  EU  and  elsewhere  advancing  the  state  of  the  art  of  the 
technology  and  influencing  this  early  growth.  Standardisation,  interoperability  and  cyber 
security are common challenges across the board for all technologies and risk slowing the up-
take in an often fragmented market.  

Value chain analysis 

The value chain of the four technologies is made of a combination of hardware, software and 
services  providers.  This  contributes  to  the  fragmentation  of  EU  value  chains  among  many 
players, especially in the area of HEMS and smart charging. The distribution automation and 
smart  metering  value  chains,  on  the  other  hand,  are  more  concentrated.  In  distribution 

149   CRMs_for_Strategic_Technologies_and_Sectors_in_the_EU_2020.pdf (europa.eu). 
150   Connecting the dots: Distribution grid investment to power the energy transition - Eurelectric – Powering People 
151   ESMIG, based on figures from Berg Insight Report, June 2020. 
27 

 
 
                                                 
automation, some European companies are present in the full value chain and are significant 
global players or market leaders, while smart metering value chains are typically dominated by 
regional players. 

Overall, over 50 companies, mostly European, are somehow active in  the HEMS market152, 
some of which have a strong legacy in energy. More recently, aggregators and tech companies 
have  appeared  in  this  market,  focusing  their  business  models  solely  around  HEMS  and 
sometimes offering products or services to major companies, avoiding these ones to cover the 
whole HEMS production chain. 

The three key insights gained with regards to the supply chain of EV charging infrastructure153 
are: (i) the supply chain of manufacturers is mainly local and/or regional, in particular for EU 
based vendors, (ii) the basic electronic parts are  purchased in  Asia, and (iii) the market  and 
value chain are not fully mature yet as vendors develop, design, and manufacture mainly in-
house, with some contract manufacturing. But as the adoption of Distributed Energy Resources 
(DER) and EVs will progress at speed during this decade, the smart charging sector will also 
consolidate as a growing part of a multibillion euro EV charging market especially in the slow-
charging part that will be bigger than the fast-charging one according to the IEA in its latest 
Global EV Outlook154. 

It is worth mentioning that with the increasing importance of the software in smart grid related 
technologies, the business model is partially aligning with that of the pure software industry 
and evolving more towards a services market, with much of the revenues coming in after the 
initial deployment155.   

Global market analysis 

All four markets are growing at around 10% CAGR (Compound Annual Growth Rate), with 
charging infrastructure at 26%156. Distribution automation, the biggest global market  among 
the four with  an estimated USD 12.4 billion  value in  2020, is expected to grow by  a 7.4 % 
CAGR to reach USD 17.7 billion by 2025. The Smart Meter market was estimated at USD 21.3 
billion in 2019 and projected to grow to USD 38-39 billion in 2027 (due to growth mainly in 
Asia). The global HEMS market is projected to grow from nearly USD 4.4 billion in 2019 to 
more than USD 12 billion in 2028, at a CAGR of 12.3% (and of 12.1% in EU).  

Finally, EV charging infrastructure and platforms may experience a genuine boom in EU during 
this decade, with their combined markets expected to grow from EUR 0.63 billion in 2020 to 
EUR 6.7 billion by 2030, at a CAGR higher than 26%. The  booming EV market will create 
enormous opportunities for the HEMS market, as this will become one of the most important 
electric loads in the home.The early regulatory push created a growing EU market for smart 
meters,  supplied  by  mostly  EU  producers,  at  least  when  it  comes to  hardware;  the  software 
market for smart meters and management systems, even in the EU, seems to be more balanced, 
with  the  presence  of  some  strong  US  actors.  On  the  other  hand,  the  Asian  (and  especially 
Chinese) markets are huge in terms of shipped units compared to the European one157.  

152   Delta-EE, Accelerating the energy transition with Home Energy Management, New Energy Whitepaper, February 2020. 
153   Guidehouse Insights, Asset Study on Digital Technologies and Use Cases in the Energy Sector, 2020. 
154   International Energy Agency (IEA), Global EV Outlook 2021, Accelerating ambitions despite the pandemic, 2021. 
155   Alexander  Krug,  Thomas  Knoblinger,  Florian  Saeftel:  Electric  vehicle  charging  in  Europe,  Arthur  D.  Little  Global, 

website publication, January 2021, www.adlittle.com/en/insights/viewpoints/electric-vehicle-charging-europe.     

156   Guidehouse Insights, Asset Study on Digital Technologies and Use Cases in the Energy Sector, 2020.  
157   See the accompanying Staff Working Document for further data. 

28 

 
 
 
 
 
 
 
 
 
                                                 
With ambitious policy objectives (e.g. European Green Deal, Energy system integration, etc.), 
favourable  regulatory  environment  (e.g.  the  Electricity  Directive)  and  public  funding  (e.g. 
Horizon  Europe,  Cohesion  policy,  European  Innovation  Fund,  Recovery  and  Resilience 
facility), the EU aims to lead the way in deploying smart grids. This, together with the existence 
of long established EU companies providing grids technologies will support having European 
market leaders and solid technology manufacturers in all four technology domains. At the same 
time, as the global market analysis reveals strong developments in the US, as well as in Asia 
Pacific  (China,  Japan,  South  Korea)  too,  European  companies  will  have  to  face  tough 
competition along the way to 2030. 

3.7 Renewable Fuels for Aviation and Shipping 

Technology Analysis 

Renewable fuels, including advanced biofuels158 and renewable synthetic fuels159, are the only 
commercialised solution to decarbonise the aviation and shipping sectors in the near-term160. 
Renewable fuels are projected to supply 5% (i.e. 2.3 Mtoe) of total EU jet fuel consumption by 
2030  and  63%  (i.e.  28  Mtoe)  by  2050161.  Announced  total annual  capacity of  renewable 
aviation  fuels  in  the  EU is about  1.7  million  tonnes  by  2025,  making  up  0.05%  of  total  EU 
aviation fuel. By comparison, US installed capacity is twice as large (3.6 million tonnes) and 
roughly 60% of global capacity162. The share of renewable maritime fuels is negligible today 
but it is projected to reach 8.6% of the total fuel mix by 2030 and 88% by 2050163.  

Commercialisation and scaling up of renewable fuels are hindered by high capital expenditures 
(CAPEX), reaching as much as EUR 500 million for one plant and 80% of total production 
costs.  In particular, the production costs of renewable fuels are currently estimated at 3 to 6 
times the current market price of conventional fuels164. Co-processing (or co-hydrotreating in 
the case of aviation fuels) in existing refineries and other industries is maturing and presents an 
advantage for lowering capital costs.  

The EU contributes significantly to cost reduction of renewable fuels by maintaining a strong 
global position in R&I investments. Public R&I funding from Member States for biofuels165, 
including advanced biofuels, has remained constant at roughly EUR 400 million per year since 
2008.  In  addition,  EU  funding  of  renewable  fuels  increased  from  EUR  430  million  for  the 
period  2012-2016  to  531  EUR  million  during  2017-2020.  Specific  dedication  of  funding  to 
aviation and maritime fuels increased from EUR 84 million to EUR 229 million for the same 
time periods166. 

158   Fuels derived from organic material listed in Annex IX of Directive (EU) 2018/2001. Current EU installed capacity of 
advanced biofuels is 0.36 Mt/y,  mainly  from cellulosic ethanol, hydrocarbon fuels  from sugars and pyrolysis oils. An 
additional 0.15 Mt/y is under construction, and another 1.7 Mt/y is planned with about half of it from biomass gasification. 
Power-to-gas and liquid capacity in the EU is currently very limited, amounting to only 0.315 Kt/y. 

159   Fuels based on renewable energy, according to Article 2 (36) of Directive (EU) 2018/2001. 
160   IRENA (2021), Reaching Zero with Renewables: Biojet fuels, International Renewable Energy Agency. 
161   Impact assessment report - SWD(2021) 633, pg. 38. 
162   Based on data compiled from internal database of Flightpath 2020. 
163   Impact assessment report - SWD(2021) 635, pg. 53. 
164   Depending on the cost of petroleum jet fuel and the feedstock used to make renewable fuels. 
165   Data reported after 2014 depend on how funding is allocated between biofuels and other bioenergy technologies and lacks 

the granularity to distinguish between conventional and advanced biofuels. 

166  Data  compiled 

from  European  Commission  database  of  EU-funded 

research  and 

innovation  projects 

https://cordis.europa.eu/projects/en. 

29 

 
 
 
 
                                                 
Evidence  is  limited  for  private  R&I  investment  but  suggests  that  China-based  companies 
average the highest annual investments (EUR 809 million) in renewable fuels, followed by EU 
(EUR 652 million) and US (EUR 578 million) companies167. However, the largest share of top 
R&I investing companies are in the EU, followed by China and the US. 

Consistent  investment  may  have  placed  the  EU  amongst  global  innovation  leaders.  Yet 
evidence suggests falling behind US companies in particular, which have twice as many patents 
in aviation fuels as EU based companies, and a larger number of leading innovators168. Japanese 
and  EU  based  companies  each  make  up  one  third  of  all  patents  in  the  maritime  sector,  but 
evidence is inconclusive due to inclusion of some technologies beyond renewable fuels and a 
lack of granularity in the data.  

Value Chain Analysis 

Overall, renewable fuels in the aviation and maritime sector are not only a strategic element for 
moving towards a climate-neutral economy, but can also provide an opportunity for growth and 
employment. The package delivering the European Green Deal is expected to increase demand 
of renewable fuels for shipping and aviation in the EU. This could contribute up to an annual 
growth  value  added of several  billion  euro by  2030.  Considering  current  liquid  biofuel 
production of 16 Mtoe in the EU employs nearly 230 000 people169, the respective increase in 
domestic  production  could  create  up  to 270 000  additional  jobs  by  2050170.  Current  biofuel 
employment also suggests a strong basis of the job skills needed for expansion of the market 
already exists, but increased job skill training may be required for a potential doubling by 2050. 

EU value chains benefit from diverse expertise in various production pathways and feedstocks 
as  well  as  synergies  from  increasing  number  of  joint  ventures  between  renewable  fuel 
companies,  oil  and  gas  companies  and  ports  and  airports,  demonstrating  preparedness  for 
expansion of renewable fuel markets to aviation and shipping.  

Advanced biofuels are mainly based on non-recyclable waste and residues, which is  a more 
sustainable option, with less impacts on land use and biodiversity, than food and feed biofuels. 
The choice of biomass feedstock may have implications for sustainability, production costs and 
potential  supply  bottlenecks.  Particularly  when  scaling  up  advanced  biofuels,  maturity  of 
alternative  production  pathways  based  on  diverse  feedstocks,  other  than  wastes,  will  be 
necessary to avoid bottlenecks.  

Global Market Analysis 

The market for renewable fuels in aviation and shipping is currently very limited. New policies 
in the package delivering the European Green Deal171 are expected to largely increase demand 
and expand these markets  within this  and then following decades. The  strong  global market 

167   JRC SETIS 2021. 
168   JRC SETIS research and innovation data: https://setis.ec.europa.eu/publications/setis-reseach-and-innovation-data_en 
169   Data compiled from IRENA jobs database: https://irena.org/Statistics/View-Data-by-Topic/Benefits/Renewable-Energy-

Employment-by-Country 

170   Based on projected renewable fuel production and employment figures in Impact assessment report - SWD(2021) 633 and 

Impact assessment report – SWD(2021) 635. 

171   Particularly: COM(2021) 562 final, COM(2021) 561 final and COM(2021) 557 final. 

30 

 
 
 
 
 
 
 
 
                                                 
position of the EU in road transport biofuels172, as well as concentration of leading advanced 
biofuel producers, suggest a good start position to fill these new markets. Yet, with dedicated 
initiatives173 and twice the installed capacity of the EU174, and US production of sustainable 
aviation fuel may also compete for EU markets.  

Due  to  the  dependence  of  power-to-liquid  on  low-cost  renewable  electricity,  production  of 
synthetic  fuels  could  require  larger  dependence  on  Middle  East  and  North  Africa  (MENA) 
region. On the other hand, the synergies with existing fuel manufacturing facilities in the EU 
(integration with refineries, re-use of production and ancillary infrastructures, availability of 
skilled  employees,  availability  of  CO2  for  capture  and  reuse  and  other  factors)  offer  the 
potential of economically competitive production of synthetic fuels in the EU. 

Importance of Breakthrough Technologies – Example of solar fuels 

The need for alternatives to liquid fossil fuels drives research and innovation to develop cost-
efficient  renewable  fuels  with  high  energy  density  and  ample  feedstock  availability.  While 
advanced biofuels  and synthetic fuels  mature and some even reach commercialisation, solar 
fuels  are  still  low  Technology  Readiness  Level  (TRL)  technologies,  at  conceptual  or 
experimental  phase.  However,  by  2050  scaled  investment  could  enable  this  example  of 
breakthrough  technologies  to  increase  the  availability  of  cost-effective,  high  energy  density 
fuels while reducing feedstock and resource pressure.  

By 2050, in addition to rapidly deploying available technologies, reaching net zero emissions 
will require bringing further technologies to market that are low TRL today175. Similarly in the 
past, through dedicated research and innovation actions it was possible to bring technologies to 
the market which, thirty years ago, were only low TRL or even just concepts, such as offshore 
wind, renewable fuels and lithium-ion batteries for EVs. 

Solar fuels generation embodies a number of anthropogenic and biologically assisted processes 
to convert solar energy directly to fuels,  chemical products, and materials from sunlight, air 
(e.g., CO2 and nitrogen), and water. It includes using light energy directly from sunlight, often 
termed artificial photosynthesis,  as well as the heat  from  sunlight  to  drive high-temperature 
thermal processes176.  

Particularly  photo-electro-chemical  (PEC)  water  splitting  is  a  promising  solar-to-hydrogen 
pathway for hydrogen production, offering the potential for high conversion efficiency at low 
operating temperatures using cost-effective thin-film and/or particle semiconductor materials. 

172   The EU is currently a global leader in the production of conventional biofuels with a net trade balance of roughly EUR 4 

million. 

173   I.e.  Federal  Strategy  on  Alternative  Jet  Fuels  adopted  in  2016  and  the  ongoing  work  on  the  Commercial  Aviation 

Alternative Fuels Initiative (CAAFI). 

174   Including planned capacity by 2025. Data compiled from internal database of Flightpath 2020. 
175   IEA, Net-zero by 2050- a roadmap for the global energy sector, 2021. 
176   Mission Innovation, Innovation Challenge 5: Converting Sunlight into Solar Fuels and Chemicals Roadmap 2020–2050, 

2021. 

31 

 
 
 
 
                                                 
With scaled investments, PEC could reach cost-competitiveness with fossil fuels and market 
introduction by 2040177.   

4.  CONCLUSIONS 

The  Green  Deal  objectives  cannot  be  achieved  without  significantly  increasing  public  and 
private research and innovation in clean energy technologies and more efforts to move from 
laboratory to market. This will not only provide the new solutions needed to achieve carbon 
neutrality by 2050 while tackling biodiversity loss, pollution and natural resources depletion, 
but also further growth and jobs in the EU clean energy sector.  

While the private sector itself will have to take the main responsibility for investment, the role 
of  the  EU  is  to  put  the  right  regulatory  and  financial  framework  conditions  in  place.  This 
includes  stimulating  demand  through  a  number  of  measures  included  in  the  Fit-for-55 
legislative  package.  In  addition,  the  Recovery  and  Resilience  Fund,  InvestEU,  and  the  new 
generation  of  EU  programmes  under  the  2021-2027  EU  budget  offer  a  strong  stimulus  for 
addressing some of the challenges, by increasing available scale up capital, removing market 
barriers, and driving policy reforms. While gradually decarbonising the EU energy sector and 
rolling  out  clean  energy  technologies,  there  is  a  need  to  focus  on  competitiveness,  jobs  and 
growth. 

This report shows that the EU stays at the forefront of clean energy research.  The declining 
trend in clean energy patents seems to be reversing, with annual filing levels in the EU, and 
globally, returning to those observed a decade ago. At global level, the EU has a greater share 
of  ‘green’  inventions  in  climate  change  mitigation  technologies,  compared  to  other  major 
economies. With a positive trade balance and substantial market share, the EU retains a strong 
position in the wind industry, however it may be at crossroads in multiple other industries. In 
the PV industry, European manufacturers are showing a renewed interest to invest in the EU 
based on the latest technologies. Similarly, the EU batteries industry is catching up through a 
combination of investment in battery production, increased demand in EV combined with the 
shift  of the EU car industry, and  focus on recycling to  address  the raw  materials  issue. The 
European heat pump, renewable fuels, smart grids and renewable hydrogen industries are in a 
good position to benefit from the growing future demand based on policy driven expansion of 
speed  of 
relevant  markets.  Their  competitive  position  will  depend  of 
penetration/development,  the  engagement  of  planned  investments/markets  getting  ready,  as 
well  as  a  favourable  legal  framework,  and  developments  of  other  sectors  (e.g.  aviation  and 
maritime transport). The deployment of clean energy requires also a sound assessment of the 
environmental impacts of the technologies, and mitigating measures.  

their 

Further efforts  are also  needed to  bridge the  gap between innovation and market.  EU-based 
climate tech start-ups still trail their counterparts in their ability to scale, thus challenging the 
EU  from  reaping  the  climate  and  competitiveness  benefits  of  EU  innovation  and  leading 
promising ventures to move to US or Asia to reach scale. Despite the fact that many national 
and  local  ecosystems  exist,  the  EU’s  natural  market  and  regulatory  fragmentation  hinders 
growth and lead to different maturity of VC ecosystems, and entrepreneurs face challenges in 
scaling up breakthrough technologies. Uptake of technologies is also hindered by demand side 
issues such as permitting, repowering and other structural barriers as well as market distortions 
from  international  subventions  where  European  companies  operate.  Intensified  work  on 

177   Artifical Photosynthesis: Potential and Reality, EUR 27987 EN. 
32 

 
 
                                                 
European standards addressing digitisation, reliability and sustainability issues is also critical 
to support the uptake of innovative technologies.  

In parallel to fostering research, innovation and market uptake of clean energy solutions, the 
EU  must  secure  reliable,  sustainable  and  undistorted  access  to  raw  materials.  Resource 
efficiency, circularity and sustainable domestic feedstock resourcing will be essential to avoid 
bottlenecks as demand increases. This, in many cases, requires further R&I. Securing further 
value  chain  segments  within  the  EU  will  require  strengthening  the  innovation  funding 
landscape. 

The  recent  rise  in  energy  prices  has  made  it  clear  that  Europe  needs  to  decrease  its  energy 
dependency. The European Green Deal and an increasing share of clean energy will lead the 
way forward. The European Commission will continue to monitor progress of the clean energy 
sector and will further develop its methodology and data collection in cooperation with Member 
States178 and stakeholders, with the aim to inform policy decisions and contribute to making 
Europe competitive, resource efficient and carbon neutral by 2050. 

178   Including via the upcoming Governance Regulation Implementing Act.  

33