REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Progress on competitiveness of clean energy technologies
Date: 2022-11-15
Institutions: Directorate-General for Energy, European Commission
Subjects: EU energy policy, carbon neutrality, clean technology, competitiveness, energy crisis, energy research, energy transition, innovation, investment, renewable energy

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 15.11.2022  COM(2022) 643 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL     Progress on competitiveness of clean energy technologies      
 
 
Table of Contents 

1. 

Introduction ........................................................................................................................ 1 

2.  Overall competitiveness of the EU clean energy sector .................................................... 3 

2.1 

Setting the scene: recent developments 

2.1.1 

Energy prices and costs: recent trends 

3 

3 

2.1.1  Global resources and materials supply chains: vulnerabilities and disruptions 5 

2.1.2 

Impact of COVID-19 and recovery 

2.1.3  Human capital & skills 

2.2  Research and innovation trends 

2.3  The global clean energy competitive landscape 

2.4  The innovation funding landscape in the EU 

2.5 

Impacts of systemic change 

7 

9 

12 

15 

17 

20 

3.  Focus on key clean energy technologies and solutions ................................................... 21 

3.1.  Solar photovoltaics 

3.2.  Offshore and onshore wind 

3.3.  Heat pumps for building applications 

3.4.  Batteries 

3.5.  Renewable hydrogen production through water electrolysis 

3.6.  Renewable fuels 

3.7.  Smart technologies for energy management 

3.8.  Main findings on other clean energy technologies 

21 

23 

25 

27 

29 

30 

33 

36 

4.  Conclusion ....................................................................................................................... 38 

ANNEX I: Methodological Framework for the Assessment of the EU’s competitiveness ..... 41 

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1.  INTRODUCTION   

Russia’s  unprovoked  and  unjustified  military  aggression  against  Ukraine  has  massively 
disrupted the world’s energy system. It has shown the EU’s over-dependency on Russian fossil 
fuels and emphasised the need to enhance the resilience of the EU’s energy system, which had 
already been challenged by the COVID-19 crisis1. The all-time high energy prices and the risk 
of supply shortages across the EU have made it even more urgent to accelerate the twin green 
and digital transition under the European Green Deal2 and to ensure a more secure, affordable, 
resilient, and independent energy system.  

The year 2022 has been marked by the REPowerEU plan3, a crucial element of the EU’s policy 
response to the unprecedented crisis. The plan is a roadmap to phase out the EU’s dependency 
on  Russian  energy  imports  as  soon  as  possible  through  measures  on  energy  saving,  the 
diversification of energy supplies, and the accelerated roll-out of renewable energy.  

Furthermore, with the “Save gas for a safe winter” Communication4, the Commission has put 
forward a plan to reduce gas use in the EU by 15% until next spring. The Council has adopted 
two regulations on storage and coordinated demand reduction measures for gas respectively5. 
In September 2022, the Council agreed on the Commission proposal for a “Regulation on an 
emergency intervention to address high energy prices”6 to alleviate the impact of energy prices 
on the EU’s consumers, while also addressing the unprecedented volatility and uncertainty in 
EU and global energy markets. In particular, this intervention includes a reduction of electricity 
consumption, a revenue cap for inframarginal power generation, and a temporary, mandatory, 
solidarity contribution from fossil fuel companies. 

Delivering on the REPowerEU objectives will require an additional cumulative investment of 
EUR 210 billion between now and 2027 in addition to the investment already needed to reach 
climate neutrality by 20507. This investment will support the massive scaling-up and speeding-
up of the deployment of clean energy technologies (e.g. solar photovoltaic, wind, heat pumps, 
energy  saving  technologies,  biomethane  and  renewable  hydrogen),  which  is  of  critical 
importance  to  face  the  double  energy  and  climate  urgency.  Overcoming  the  related 
technological and non-technological challenges will also require a strong and competitive EU 
clean energy sector.  

The REPowerEU plan confirmed the commitment to achieve the European Green Deal’s long-
term  goal of making the EU climate-neutral by  2050, and to fully implement the Fit for 55 
package  presented  in  July  20218.  Delivering  on  the  European  Green  Deal  objectives  will 
require the EU to develop, implement and scale-up innovative energy efficiency and renewable 
energies  solutions.  Half  of  the  greenhouse  gas  emissions  reductions  expected  by  2050  will 

1   COM(2021) 952 final and SWD(2021) 307 final (‘Progress on competitiveness of clean energy technologies’). 
2   COM(2019) 640 final (‘The European Green Deal’). 
3       COM(2022) 230 final (‘REPowerEU Plan’). 
4   COM(2022) 360 final (‘Save gas for a safe winter’). 
5   OJ  L  173,  30.6.2022.  Regulation  (EU)  2022/1032  of  the  European  Parliament  and  of  the  Council  of  29  June  2022 
amending Regulations (EU) 2017/1938 and (EC) No 715/2009 with regard to gas storage; OJ L 206, 8.8.2022. Council 
Regulation (EU) 2022/1369 of 5 August 2022 on coordinated demand-reduction measures for gas. 

6   COM(2022) 473 final (‘Proposal for a Council Regulation on an emergency intervention to address high energy prices’).  
7   COM(2021) 557 final (‘Amendment of Directive 2018/2001, Regulation 2018/1999 Directive 98/70/EC as regards the 

promotion of energy from renewable sources’).   

8        COM(2021) 550 final ('Fit for 55': delivering the EU's 2030 Climate Target on the way to climate neutrality’).  

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require technologies that are not yet ready for the market9, so research and innovation (R&I) 
activities are a crucial component to increase the EU’s technological sovereignty and global 
competitiveness. 

Within this framework, and in line with previous editions, this third annual competitiveness 
progress report10 presents the current and projected state of play for different clean and low 
carbon  energy  technologies  and  solutions11.  It  also  maps  the  research,  innovation  and 
competitiveness aspects of the EU’s clean energy system as a whole12.  

The  2021  edition  was  important  for  the  assessment  of  the  COVID-19  economic  recovery, 
because  it  highlighted  how  improvements  in  competitiveness  can  mitigate  the  pandemic’s 
economic and social impact in the short and medium terms.  

This year’s report must take into account the EU’s call for the higher roll-out of clean energy 
technologies and the impact of the energy crisis on the sector. Against this backdrop, the report 
builds on available data to provide insights into ways of reinforcing EU’s competitiveness in 
strategic energy value chains, while also increasing the penetration of the EU’s clean energy 
technologies. At the same time, ongoing and fast-changing geopolitical,  energy and climate 
developments mean that the most up-to-date quantitative data is not always able to reflect the 
unprecedented situation adequately. Therefore, this report focuses on progress made until the 
end of 2021, building on the consolidated data available until then. More recent data have been 
indicated when available and reliable. However, these are scarce and therefore cannot yet fully 
reflect  the  impact  of  the  current  energy  crisis  on  the  competitiveness  of  clean  energy 
technologies. Wherever possible,  and in order to take into account the recent challenges faced 
by the clean energy sector and their impact  on it, the analysis builds on the already visible 
implications and qualitative assessments for the year 2022; however the full impact can only 
be assessed in next year’s progress report. 

Competitiveness is a complex and multifaceted concept which cannot be defined by a single 
indicator13. This report therefore assesses the competitiveness of the EU’s clean energy system 
as a whole (Section 2), and of specific clean energy technologies and solutions (Section 3) by 
analysing a defined set of indicators (Annex I). As of this year, the Commission’s Clean Energy 
Technology  Observatory  (CETO)  will  carry  out  the  in-depth  evidence-based  analysis 
underpinning this report14.   

9       European Commission, Directorate-General for Research and Innovation, Research and innovation to REPower the EU, 

Publications Office of the European Union, Luxembourg, 2022, https://data.europa.eu/doi/10.2777/74947.  

10  Report  from  the  Commission  to  the  European Parliament  and  the  Council on  ’Progress  on  Competitiveness  of  clean 

energy technologies’ (first edition: COM(2020) 953 final; second edition: COM(2021) 952 final). 

12  

11   These  include:  Solar  Photovoltaics,  Offshore  and  Onshore  Wind,  Heat  Pumps  for  building  applications,  Batteries, 
Renewable  Hydrogen  production  through  water  electrolysis,  Renewable  Fuels,  Smart  technologies  for  energy 
management,  Hydropower,  Ocean  Energy,  Geothermal,  Carbon  Capture  Utilisation  and  Storage  (CCUS),  Bioenergy, 
Concentrated Solar Power and Heat (CSP), Nuclear. 
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. 

13   Based on the conclusions of the Competitiveness Council of 28 July 2020. 
14   https://setis.ec.europa.eu/publications/clean-energy-technology-observatory-ceto_en. 

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This  report  is  published  in  accordance  with  Article  35(1)(m)  of  the  Regulation  on  the 
Governance of the Energy Union and Climate Action15 and accompanies the State of the Energy 
Union report16. 

2.  OVERALL COMPETITIVENESS OF THE EU CLEAN ENERGY SECTOR  

2.1 Setting the scene: recent developments 

2.1.1  Energy prices and costs: recent trends  

As stated in previous competitiveness progress reports, industrial electricity and gas prices have 
been  higher  in  the  EU  than  in  most  non-EU  G20  countries  during  the  last  decade.  The 
unjustified and unprovoked Russian invasion of Ukraine has increased the already all-time high 
prices observed in 2021 in the EU and many other regions of the world. Wholesale gas prices 
in Europe were five times higher in the first quarter of 2022 than a year earlier and in August 
2022 reached an historical high point, before falling to lower levels. Due to gas power plants 
often being a price-setter in European markets, this has resulted in a similar trend for wholesale 
electricity prices17. They have also affected manufacturing costs for some sectors, in particular, 
energy-intensive  industries.  The  price  of  commodities  has  also  been  increasing.  The  fifth 
Energy Prices and Costs report18, which is due for adoption at the end of 2022, will provide 
updated quantitative data and analysis.  

The EU and Member States have already taken several measures since 2021 to help mitigate 
the  impact  of  high  energy  prices19.  The  Commission’s  proposal  for  a  Regulation  on  an 
Emergency Intervention to Address High Energy Prices, as agreed by the Council in September 
2022, includes tools to reduce the use of gas to generate power by around 4% over the winter, 
thereby reducing pressure on prices, and a proposal to raise more than EUR 140 billion for 
Member States to help alleviate the impact of high energy prices on consumers20.  

Although the impact of this trend on the clean energy technologies’ value chain remains mixed, 
it may indicate  an improvement in  their  competitiveness,  in  particular  as  compared to  non-
renewable alternatives21. For example, solar photovoltaic electricity generation is already the 
cheapest generation source in a growing number of countries. In the production of renewable 
hydrogen through water electrolysis, however, the cost of electricity is one of the main factors 
affecting the economic viability of electrolysers. 

Figure 1 provides more insights into the costs of clean energy technologies. It gives a snapshot 
of  levelised  cost  of  electricity  (LCOE)  calculations  for  the  year  2021  for  a  range  of 

15   OJ L 328, 21.12.2018. Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 

on the Governance of the Energy Union and Climate Action. 

16   COM(2022) 547 final (‘State of the Energy Union 2022’). 
17  European Commission, Directorate-General for Energy, Market Observatory for Energy, Quarterly Report on European 

gas markets, Vol. 15.  

18  Previous 2020 edition: COM(2020) 951 final (’Energy prices and costs in Europe’). 
19   Measures include the Commission’s Communication COM(2021) 660 final (’Tackling rising energy prices: a toolbox for 
action and support’), and Communication COM(2022) 138 final (’Security of supply and affordable energy prices’). 
20   COM(2022) 473 final (’Proposal for a Council Regulation on an emergency intervention to address high energy prices’). 
21  The International Renewable Energy Agency (IRENA), World Energy Transitions Outlook 2022: 1.5°C Pathway, Abu 

Dhabi. 

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representative conditions22 across the EU. The results indicate that technology fleets with low 
variable  costs  (including  variable  operational  costs  and  fuel  costs)  have  been  highly  cost-
competitive in 2021. This finding is most robust for solar- and wind-powered generation which 
have  LCOE  in  the  range  of  EUR/MWh  40  to  60.  Furthermore,  the  Combined  Cycle  Gas 
Turbine (CCGT) fleet appears to have been more competitive on average in 2021 than coal-
fired  generation.  CCGT  benefited  from  preferred  dispatch  during  the  first  three  quarters  of 
2021, while the fuel switch only became important in the fourth quarter of 2021. This allowed 
for significantly higher capacity factors for CCGT in 202123. The rise of gas prices continued 
to support gas-to-coal switching during the first quarter of 2022, despite the increase in carbon 
prices. However, the high coal prices at the beginning of the second quarter of 2022 started to 
close the gap, and recent announcements by some Member States to temporarily increase the 
use of coal-fired plants have led to expectations that coal prices will rise further in the coming 
months. 

Figure 1: Snapshot of technology-fleet specific levelised costs of electricity (LCOE) for the year 2021. The light blue bars 
display a range across the EU27. The thick blue lines denote median. 

Source: Joint Research Centre METIS model simulation, 202224 

The very high energy prices have generated large financial gains for electricity producers with 
lower  marginal  costs  (e.g.  those  operating  in  the  wind  and  solar  energy  sectors).  The 
Commission  therefore  proposed  a  regulation  on  an  emergency  intervention  to  address  high 
energy  prices25,  which  was  politically  agreed  at  the  extraordinary  meeting  of  the  Energy 
Council on 30 September. This regulation includes the temporary capping and redistribution 
of the inframarginal technologies revenues to alleviate difficulties for energy consumers and 
society in general. It also includes a mandatory temporary solidarity contribution applying to 

22      Data points are shown for first to third inter-quartile range to filter for outliers.  
23  The modelled capacity factors could overestimate actual fuel switching and thus differences in capacity factors to some 
extent (see section 2.1 in Kanellopoulos, K., De Felice, M., Busch, S. and Koolen, D., Simulating the electricity price 
hike in 2021, JRC127862, EUR 30965 EN, Publications Office of the European Union, Luxembourg, 2022). 
JRC127862 Kanellopoulos, K., De Felice, M., Busch, S. and Koolen, D., Simulating the electricity price hike in 2021, 
EUR 30965 EN, Publications Office of the European Union, Luxembourg, 2022. 

24  

25   COM(2022) 473 final (’Proposal for a Council Regulation on an emergency intervention to address high energy prices’). 
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the profits of businesses active in the crude petroleum, natural gas, coal and refinery sectors, 
which  have  significantly  increased  by  comparison  with  previous  years.  The  current 
energy/fossil fuel crisis is the latest reminder of the need for a change in paradigm in order to 
ensure future stability.   

The REPowerEU plan calls for a massive scaling-up and speeding-up of renewable energy in 
power  generation,  industry,  buildings  and  transport  -  not  only  to  accelerate  the  EU  energy 
independence, and give a boost to the green transition, but also to lower electricity prices and 
reduce fossil fuel imports over time26. Measures will include boosting renewable energy which 
will require an electricity infrastructure that is fit for purpose. To deliver on the REPowerEU 
objectives, renewable energy deployment needs to be combined with energy-saving and energy 
efficiency measures27.  

2.1.1  Global  resources  and  materials  supply  chains:  vulnerabilities  and 

disruptions 

Together  with  concerns  about  the reliability of existing supply  chains,  and in  particular  the 
supply of natural gas, both the COVID-19 pandemic and the current geopolitical context have 
led to disruptions in some global supply chains of materials and resources, and have therefore 
affected the clean energy sector. The EU heavily relies on supplies from third countries and the 
twin green and digital transition will be fuelled by access to raw materials. The recent trends 
in  the  global  supply  chains  of  materials  and  resources  have  highlighted  the  urgency  to 
strengthen the EU’s resilience and its energy supply security through materials and resources 
independence, and technology sovereignty.  

The availability of materials and the resilience of supply chains is a prerequisite for delivering 
on REPowerEU, because the increased demand for clean technologies goes hand in hand with 
a  higher  demand  for  resources  such  as  metals  and  minerals.  Technologies  that  are  heavily 
reliant  on  imported  raw  materials,  or  components  containing  these  materials  include  wind 
(permanent  magnets,  rare  earth  elements),  solar  PV  (silver,  germanium,  gallium,  indium, 
cadmium,  silicon  metal),  and  batteries  (cobalt,  lithium,  graphite,  manganese,  nickel)28.  The 
International Energy Agency (IEA) forecasts that the total global demand for minerals, due to 
the announced renewables rollout, is set to double or even quadruple by 204029. 

Surging  raw  material  prices  affect  the  costs  of  clean  energy  technologies.  The  prices  of 
commodities needed for these technologies, like lithium and cobalt, more than doubled in 2021, 
while those for copper and aluminium increased by around 25% to 40%30. In the same year, 
the decade-long trend of cost reductions for wind turbines and Solar PV modules was reversed: 
compared to 2020, their prices increased by 9% and 16% respectively. Battery packs will be at 
least 15% more expensive in 2022 than in 202131.  

26   See Section 3, Page 6 COM(2022) 230 final (’REPowerEU Plan‘).  
27   COM(2022) 360 final (‘Save gas for a safe winter’). 
28  European  Commission,  Critical materials  for  strategic  technologies  and  sectors  in  the  EU  - a  foresight  study,  2020, 

https://ec.europa.eu/docsroom/documents/42882. 
IEA, The Role of Critical Minerals in Clean Energy Transitions, revised version in May 2022.  

29  
30   Kim, T., Critical minerals threaten a decades-long trend of cost declines for clean energy technologies, IEA website, 

May 2022.  
IEA, The Role of Critical Minerals in Clean Energy Transitions, revised version of May 2022. 

31  

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An  emerging  challenge  is  to  avoid  replacing  fossil  fuel  dependency  with  a  dependency  on 
imported  raw  materials  and  the  technological  expertise  for  their  processing  and  for 
manufacturing components. For instance, China has a near monopoly in mining and processing 
the rare earth elements crucial for clean energy technologies, combined with a strong market 
position within their production chain. 

The resource dependency challenge comes in three parts. Firstly, the EU faces an increased 
competition for access to critical raw materials as other countries increase their own efforts to 
build  up  their  capacity  and  potentially  restrict  their  exports.  Half  of  the  30  Critical  Raw 
Materials  listed  by  the  EU32  are  imported  in  proportions  above  80%  in  volume,  which  is 
especially concerning when supply is concentrated in very few countries.  

Secondly, despite the significant progress made in terms of circular economy and recycling 
rates (more than 50% of some metals33 are  now recycled, covering more than 25% of their 
consumption34), secondary raw materials alone will not be sufficient to address high - and still 
growing  -  demand.  Secondary  raw  materials  also  present  additional  challenges  (e.g.  higher 
recycling costs for some materials, technical feasibility and the insufficient availability of end-
of-life assemblies). However, the economics of recycling will improve as the cost of primary 
sourced materials and the volume of available end-of-life assemblies increase. Secondary raw 
materials  will  therefore  be  an  important  source  of  supply  after  2030  -  provided  that  the 
necessary investment starts now. Innovative recyclability design is also very important. 

Thirdly, there is theoretical potential to cover between 5 and 55% of Europe’s 2030 needs by 
extracting  raw  materials  from  European  soils35.  However,  fostering  domestic  mining 
capabilities  faces  obstacles  due  to  long  permitting  procedures  and  environmental  concerns, 
insufficient refining capacity, and a lack of skilled labour and expertise. The new proposal for 
a Battery Regulation36 is an example of a flagship initiative which will help Europe to become 
a leader in the circular economy of batteries - starting with sustainable mining and ending with 
recycling. 

Scarcity of resources, such as land and water – whether for siting of solar, wind or bioenergy, 
or  for  water  electrolysis  to  produce  renewable  hydrogen  –  could  constrain  the  further 
deployment of clean energy technologies at the desired level in the EU. Facilitating multiple 
uses of space such as agri-PV (combining agriculture and solar PV production) and designating 
sites  in  maritime  spatial  planning  for  simultaneous  activities  such  as  fisheries  and  offshore 
renewable  energy  can  help  in  overcoming  these  constraints.  At  the  same  time,  taking  into 
account  water  availability  is  of  outmost  importance  for  Member  States  to  consider  when 
designing the energy mix. 

Iron, zinc or platinum. 

32   COM(2020) 474 final, Critical Raw Materials Resilience: Charting a Path towards greater Security and Sustainability.  
33  
34   European Commission, Directorate-General for Energy: Guevara Opinska, L., Gérard, F., Hoogland, O., et al., Study on 
the resilience of critical supply chains for energy security and clean energy transition during and after the COVID-19 
crisis 
2021, 
of 
https://data.europa.eu/doi/10.2833/946002 

Publications  Office 

European  Union, 

Luxembourg, 

report, 

final 

the 

: 

35   KU Leuven, Metals for Clean Energy: Pathways to solving Europe’s raw materials challenge, 2022.  
36   COM(2020)  798  final,  (’Regulation  of  the  European  Parliament  and  of  the  Council  concerning  batteries  and  waste 

batteries, repealing Directive 2006/66/EC and amending Regulation (EU) No 2019/1020’). 

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An effective approach to the EU’s dependency on imports of the raw materials required for the 
manufacturing  of  clean  energy  technologies  will  be  crucial  to  ensure  the  sector’s  future 
competitiveness (in terms of costs, technology sovereignty and resilience) and to deliver on the 
twin  green  and  digital  transition.  The  Commission  published  an  action  plan  in  202037  to 
alleviate supply risk. This included actions to diversify sourcing outside the EU (e.g. through 
strategic raw materials partnerships); fostering the circular economy (e.g. through eco-design, 
R&I or mapping the availability of critical raw materials in the urban mine or tailings); and 
enabling domestic potential (e.g. using earth observation technology). In addition to securing 
supply,  the  EU  may  also  have  to  build  up  strategic  reserves  where  supply  is  at  risk.  The 
President of the European Commission therefore announced a European Critical Raw Materials 
Act in her State of the Union address on 14 September 2022. 

2.1.2 

Impact of COVID-19 and recovery  

COVID-19’s mixed economic impact was a major threat to the EU’s clean energy sector in 
2020-2021. 

On the one hand, with a turnover of EUR 163 billion in 2020 and a gross value added (GVA) 
of EUR 70 billion, the EU’s renewable energy industry increased by 9% and 8% respectively 
by comparison with 2019 figures. Overall, it generated approximately four times more value 
added per euro of turnover38 than the fossil fuel industry, and nearly 70% more than the EU’s 
overall manufacturing sector39. However, this ratio worsened slightly in 2020, indicating an 
increased leakage (e.g. in the form of imports).  

In  2021,  the  EU‘s  manufacturing40  of  most  clean  energy  technologies  and  solutions  largely 
increased, reversing the trend seen in 2020. The EU’s production of batteries had a bumper 
year with production value quadrupling by comparison with 2020 values as more capacity came 
online. Heat pump, wind and solar PV production grew by 30% in 2021 (heat pumps had a 
record year; wind bounced back to pre-pandemic levels; and solar PV reversed the declining 
trend seen since 2011). Production of biofuels, mainly biodiesel, grew by 40% and increased 
widely across Member States, while production of bioenergy (e.g. pellets, starch residues and 
wood chips) increased by 5%. Hydrogen production41 rose by nearly 50% as the Netherlands 
more than doubled its production in 2021.   

The  simultaneous  increase  of  prices  that  started  in  2021  may  nevertheless  give  an  overly 
positive picture of production growth. In addition, some technologies experienced an increase 
of imports to meet the growing demand in the EU. For example, 2021 was the year with the 
greatest relative increase in the EU trade deficit in heat pumps (EUR 390 million in 2021 as 
compared with EUR 40 million in 2020, with 2020 being the first year in which the EU trade 
surplus turned into a deficit), followed by biofuels (EUR 2.3 billion in 2021; EUR 1.4 billion 
in 2020) and solar PVs (EUR 9.2 billion in 2021; EUR 6.1 billion in 2020). Nonetheless, the 
EU maintained a positive trade balance in wind energy technology (EUR 2.6 billion in 2021; 

37   COM(2020) 474 final (’Critical Raw Materials Resilience: Charting a Path towards greater Security and Sustainability’). 
38   The fossil fuel industry’s gross  value added per euro of turnover is less than EUR 0.10 (Eurostat Structural Business 

Statistics).  

39   The GVA to turnover ratio for manufacturing (NACE C) in the EU is about EUR 0.25 (Eurostat SBS_NA_IND_R2 data). 
40   This refers to production value in monetary terms (EUR).  
41   This includes all hydrogen, irrespective of production route. 

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EUR 2 billion in 2020) and in hydropower technology, despite a decreasing trend observed 
since 2015 (EUR 211 million in 2021; EUR 232 million in 2020). 

The  EU’s  economic  recovery  policies,  such  as  the  Recovery  and  Resilience  Facility  (RRF) 
within the NextGenerationEU42, are a key driver for refocusing and enhancing investments in 
the clean energy sector. In October 2022, the Council agreed43 on the European Commission 
proposal44  to  add  a  dedicated  REPowerEU  chapter  into  Member  States’  Recovery  and 
Resilience  Plans  (RRPs)  in  order  to  finance  key  investments  and  reforms  which  will  help 
achieve the REPowerEU objectives45. 

The reforms  and investments proposed by  the  Member States in  their  RRPs have exceeded 
both  the climate and digital  expenditure targets  so far  (at  least  37% and  20% of the  RRPs’ 
expenditure respectively)46.  In the 2647 RRPs approved by the Commission by 8 September 
2022,  measures  worth  approximately  EUR  200  billion  have  been  dedicated  to  the  climate 
transition and EUR 128 billion to digital transformation 48, representing 40% and 26% of the 
total allocation of these Member States (grants and loans) respectively. 

42      COM(2020) 456 final (’Europe’s moment: Repair and Prepare for the Next Generation’).  
43   https://www.consilium.europa.eu/en/press/press-releases/2022/10/04/repowereu-council-agrees-its-position/ 
44  COM(2022) 231 final, (’Proposal for a regulation  of the European Parliament and Council amending Regulation (EU) 
2021/241 as regards REPowerEU chapters in recovery and resilience plans and amending Regulation (EU) 2021/1060 , 
Regulation (EU) 2021/2115, Directive 2003/87/EC and Decision (EU) 2015/1814’). 

45   The proposal includes additional EU budgetary reallocations to complement the still available EUR 225 billion of RRF 
loans and calls for an increase in funds for the RRF. The European Commission has initiated bilateral discussions with 
Member  States  to  identify  reforms  and  investments  that  could  potentially  be  eligible  for  financing  under  the  new 
REPowerEU chapters. The EU funding complements other available public and private financing, which will play a key 
role in delivering the investments needed for REPowerEU. 

46  Progress in implementing the RRP‘s can be followed live on the Recovery and Resilience Scoreboard, an online platform 

set up by the Commission in December 2021. 

47   AT, BE, BG, CY, CZ, DE, DK, EE, EL, ES, FI, FR, HR, IE, IT, LT, LU, LV, MT, NL PL, PT, RO, SE, SI, SK. 
48   The RRPs had to specify and justify to what extent each measure contributes fully (100%), partly (40%) or has no impact 
(0%) on the climate objective. The contribution to the climate objective has been calculated using Annex VI of the RRF 
Regulation, respectively. Combining the coefficients with the cost estimates of each measure makes it possible to calculate 
to what extent the plans contribute to the climate target. 

8 

 
 
 
                                                           
Figure 2: R&D&I in green activities in the RRPs as a share (left axis) and absolute amount (right axis). The R&D intensity 
vs GDP (right axis) is also given for comparison. 

Source: JRC based on DG ECFIN data 

The 25 RRPs approved by the Council 8 September 2022 include measures related to R&I for 
a  total  budget  of  EUR  47  billion49  (including  both  thematic  and  horizontal  investments50). 
Within  this  figure,  EUR  14.9  billion  have  been  allocated  to  investments  in  Research, 
Development and Innovation (R&D&I) in green activities (Figure 2). 

2.1.3  Human capital & skills 

The latest data on worldwide human capital show that, while the clean energy sector has been 
resilient during the COVID-19 pandemic, skills gaps and shortages increased in 2021 and are 
expected to continue in 2022.   

Employment in the EU’s broader clean energy sector51 reached 1.8 million in 2019, with an 
average annual growth of 3% since 201552 and representing 1% of total EU employment. By 
comparison,  employment  in  the  overall  economy  grew  by  1%  a  year  on  average53,  while 

49   The figures are based on the pillar tagging methodology for the Recovery and Resilience Scoreboard and correspond to 
the  measures  allocated  to  the  policy  areas  ‘R&D&I  in  green  activities’,  ‘digital-related  measures  in  R&D&I’  and 
‘R&D&I” as primary or secondary policy areas. The Council has not yet adopted the NL RRP, and therefore no data is 
yet  available  under  the  pillar  tagging  methodology.  More  information  on  the  Recovery  and  Resilience  Scoreboard  is 
available at https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/ 

50   Thematic R&I investments include those targeted at the green transition, digital technologies and health, while horizontal 
R&I  investment  involve  cross-cutting  measures  that  e.g.  strengthen  innovation  ecosystems,  upgrade  research 
infrastructure  and  support  business  innovation..  For  more  information,  the  Recovery  and  Resilience  Scoreboard  is 
available at: https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/. 

51  The  clean  energy  sector  figures  in  the  report  refer  to  data  based  on  Eurostat  EGSS  (categories  ’CREMA13A’, 
’CREMA13B‘  and  ’CEPA1’).  ’CREMA13A’  (production  of  energy  from  renewable  resources)  includes  the 
manufacturing of technologies needed to produce renewable energy. CREMA 13B (heat/energy saving and management) 
includes  heat  pumps,  smart  meters,  energetic  refurbishment  activities,  insulation  materials,  and  parts  of  smart  grids. 
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 also includes 
components such as batteries, fuel cells and electric power trains that are essential for electric vehicles. 

52     Eurostat [env_ac_egss1]. 
53     Eurostat [lfsi_emp_a]. 

9 

 
 
 
                                                           
employment in the fossil energy industry declined by 2% on average in the last decade54. China 
ranked first in the world in 2020 (39%) followed by the EU (11%)55 in worldwide employment 
in the “Renewable Energy” sector, which in total accounted for 12 million jobs56. 

The composition of jobs in the EU broader clean energy sector has changed in several ways57. 
The heat  pump  industry58  is  overtaking the solid biofuels59 and wind energy sectors, as the 
largest employer. This is mainly due to the increase in installation of heat pumps. This trend is 
likely  to  continue  with  the  REPowerEU  plan  and  new  product  offerings  available  for  the 
renovation sector60. In addition, the clean energy sector is 20% more productive than the overall 
economy on average. Since 2015, labour productivity has been increasing faster in the clean 
energy sector (2.5% annually) than in the overall economy (1.8% annually). This increase has 
been  driven  by  the  e-mobility  sector  (5%  annually)  and  renewables  (4%  annually),  with 
different trends observed depending on the technologies. 

However, nearly 30% of EU businesses involved in electrical equipment manufacturing61 have 
experienced labour shortages in 2022, reaching even higher levels than in 2018. This is mainly 
due  to  the  overall  economic  recovery  from  the  pandemic  combined  with  the  clean  energy 
sector’s slowness in building the skills capacities required by the green and digital transition62. 
With  over  70%  of  EU  businesses  involved  in  electrical  equipment  manufacturing  facing 
materials shortages in 2022, these trends show the growing risk of clean energy supply chain 
disruptions (Figure 3). 

54   Eurostat [sbs_na_ind_r2]. 
55 

International Renewable Energy Agency (IRENA) and International Labour Organization (ILO), Renewable Energy and 
Jobs – Annual Review 2021, Abu Dhabi and Geneva. 

56    This includes direct and indirect employment. 
57   EurObserv’ER. The State of Renewable Energies in Europe – Edition 2021 20th EurObserv’ER Report, 2022. This figure 

includes heat pumps. 

58   Heat pumps accounted for 24% of all jobs in renewables, whereas solid biofuels and wind energy each contributed 20%. 
Based on: EurObserv’ER. The State of Renewable Energies in Europe – Edition 2021 20th EurObserv’ER Report, 2022. 
59   Methodological revisions have affected especially biofuel data, which is updated based on project data from the Horizon 

2020 project ADVANCEFUEL. 

60   European Heat Pump Association (EHPA). European Heat Pump Market and Statistics Report 2021, 2022.  
61   The NACE ‘27 – Manufacture of electrical equipment’ code is used as a proxy for clean energy manufacturing industry 
as  many  clean  energy  technologies  fall  under  this  category.  It  is  also  used  as  a  proxy  for  the  renewables  industrial 
ecosystem in the EU’s industrial strategy [COM(2020)108 final and its recent update COM(2021)350 final]. 

62   The  slowness  is  due  to  various  job  misalignments  (e.g.  spatial,  sectoral,  occupational  and  temporal).  The  fast-paced 

change towards green and digital contrasts with the time to build skills capacity.  See, for example:  
  Czako, V., Skills for the clean energy transition, 2022. (forthcoming); 
  Asikainen,  T.,  Bitat,  A.,  Bol,  E.,  Czako,  V.,  Marmier,  A.,  Muench,  S.,  Murauskaite-Bull,  I.,  Scapolo,  F.  and 
Stoermer,  E.,  The  future  of  jobs  is  green,  Publications  Office  of  the  European  Union,  Luxembourg,  2021, 
doi:10.2760/218792, JRC126047; 

  Cedefop  (European  Centre  for  the  Development  of  Vocational  Training),  An  ally  in  the  green  transition  –  VET, 
especially apprenticeship, can provide the skills needed for greening jobs – and in turn help shape them, Publications 
Office of the European Union, Luxembourg, 2022, http://data.europa.eu/doi/10.2801/712651. 

10 

 
 
                                                           
Figure 3: Labour and material shortages experienced by EU electrical equipment manufacturers and by the EU’s total 
manufacturing sector [%]. 

Source: JRC based on Business Survey data from DG ECFIN63 

The REPowerEU plan calls for increased efforts to overcome the skilled labour shortages in 
various  segments  of  clean  energy  technology.  To  this  end  and  building  on  already  existing 
activities within the EU64, the plan announces support for skills through ERASMUS+65 and the 
Joint Undertaking on Clean Hydrogen66. The EU solar energy strategy also proposes specific 
actions67. The 2022 Clean Energy Industrial Forum (CEIF) adopted the Joint Declaration on 
Skills68, undertaking to take concrete steps to address the skilled labour shortages that have 
been identified69. In 2022, the Council also adopted a recommendation inviting Member States 
to adopt measures which address the employment and social aspects of climate, energy and 
environmental policies70. The European Commission proposed on 12 October 2022 to make 
2023 the European Year of Skills in order to make the EU more attractive for skilled workers71.  

Gender imbalances in the energy sector’s workforce and in the energy-related research and 
innovation continue, although consistent and continuous gender-disaggregated data is largely 
lacking72. The under-representation of women in the decision-making of energy companies and 
in higher education in science, technology, engineering, and mathematics (STEM) sub-fields 
is reflected in a lower share of patent applications with women inventors (only 20% in all patent 
classes in 202173 and just over 15% for climate change mitigation technologies74), a lower share 
of start-ups founded or co-founded by women (less than 15% in the EU in 2021)75 and lower 

63   Business and consumer survey data  [industry_subsectors_q8_nace2] 
64     For example, the 2020 European Skills Agenda, its flagship Pact for Skills and its partnerships with industrial ecosystems, 

and the Just Transition Mechanism. 

65      Erasmus + https://www.erasmusskills.eu/eskills/  
66   Clean  Hydrogen  Joint  Undertaking,  Strategic  Research  and  Innovation  Agenda  2021–2027,  https://www.clean-
hydrogen.europa.eu/system/files/2022-02/Clean%20Hydrogen%20JU%20SRIA%20-%20approved%20by%20GB%20-
%20clean%20for%20publication%20%28ID%2013246486%29.pdf. 

67      COM(2022) 221 final (’EU Solar Energy Strategy’). 
68  

in 

Joint  Declaration  on  Skills 
https://ec.europa.eu/info/news/clean-energy-industrial-forum-underlines-importance-deploying-renewables-2022-jun-
16_en. 

the  Clean  Energy  Sector,  published  16  June  2022.  Available  at: 

69   For example, it is estimated that 800 000 workers will need to be trained to work in the batteries value chain to meet the 
REPowerEU  goals.  About  400  000  workers  will  have  to  be  trained  and  upskilled  in  the  heat  pump  value  chain,  not 
including those experts currently working in heat pumps and facing retirement in the next few years (see footnote 69). 

70   2022/C 243/04, Council Recommendation on ensuring a fair transition towards climate neutrality. 
71 COM(2022) 526 Final  
72   COM(2020) 953 final, COM(2021) 952 final (’Progress on competitiveness of clean energy technologies’). 
73   For those inventions where at least one inventor is based in Europe. Figures based on European Patent Office 2022. 
74  

International  Energy  Agency,  https://www.iea.org/commentaries/gender-diversity-in-energy-what-we-know-and-what-
we-dont-know. 

75   European Innovation Council and SMEs Executive Agency (EISMEA), 2022. 

11 

 
 
 
                                                           
amounts of capital invested in women-led companies (only 2% in all-female start-ups and 9% 
in mixed teams in the EU in 202176).  

The EU is stepping up its efforts to ensure a balanced and equal ecosystem. Initiatives include 
the gender equality strategy for 2020-202577, the Women TechEU initiative launched in 202278, 
the new eligibility criterion included under Horizon Europe79, and the concrete target measures 
in the 2022 New Innovation Agenda80. Bridging the gender gap will not only help address the 
EU’s jobs and skills challenges in order to achieve the twin green and digital transition, but 
will  also  support  the  inclusion  of  women  in  these  work  fields  and  thus  address  societal 
challenges. 

2.2 Research and innovation trends 

The rising environmental, geopolitical, economic and social instability in the world requires an 
agile  EU  R&I  policy  that  can  effectively  respond  to  a  crisis  situation  and  at  the  same  time 
ensure the implementation of the European Green Deal.  

The  EU’s  R&I  policy  shapes  the  direction  of  innovation  and  the  portfolio  of  clean  energy 
technologies. The world’s largest R&I programme, Horizon Europe (with its budget of EUR 
95.5  billion  dedicated  to  R&I  in  2021-2027),  and  other  EU  funding  programmes  (e.g.  the 
innovation  fund  and  the  cohesion  policy  funding)  are  intended  to  strengthen  the  EU  R&I’s 
ecosystem and help achieve the EU’s policy objectives 81. Together with joint and coordinated 
efforts across the Member States (notably through the Strategic Energy Technology Plan (SET 
Plan))82, R&I activities increase the resilience of the EU’s clean energy sector. 

Most  EU  Member  States  increased  their  public  R&I  investments  in  the  EU  Energy  Union 
priorities in 202083,84, with more than EUR 4 billion reported so far. The final total figures for 
2020  are  expected  to  be  comparable  with  pre-financial  crisis  values  in  absolute  terms. 
Nonetheless, when measured as a proportion of Gross Domestic Product (GDP), investment in 
public R&I, at the national and EU levels, remains below 2014 levels (Figure 4).  

IDC European Women in Venture Capital report, 2022. 

76  
77   European Commission, gender equality strategy. 
78   European 
and 
Innovation 
https://eismea.ec.europa.eu/programmes/european-innovation-ecosystems/women-techeu_en. 

Executive 

Council 

Agency 

SMEs 

(EISMEA), 

2022. 

79   Horizon Europe has a new eligibility criterion where research organisations applying for funding must have an actionable 
Gender Equality Plan, with a target for a gender balance of 50% in all Horizon Europe related decision-making bodies 
and  evaluators.  More  information  available  at:  https://research-and-innovation.ec.europa.eu/strategy/strategy-2020-
2024/democracy-and-rights/gender-equality-research-and-innovation_en#gender-equality-plans-as-an-eligibility-
criterion-in-horizon-europe.  

80   COM(2022) 332 final (’The New Innovation Agenda’). 
81   European Commission, Directorate-General for Research and Innovation, Science, Research and Innovation Performance 

of the EU report 2022, Publications Office of the European Union, Luxembourg, 2022. 

82     The SET plan is the EU’s main tool to align policies and funding on clean energy technologies R&I at EU and national 
level  and  to  leverage  private  investments..  For  more  information:  :  https://energy.ec.europa.eu/topics/research-and-
technology/strategic-energy-technology-plan_en.  

83   Renewables,  smart  system,  efficient  systems,  sustainable  transport,  CCUS  and  nuclear  safety,  COM(2015)  80  final 

(’Energy Union Package’).  
JRC SETIS https://setis.ec.europa.eu/publications/setis-reseach-and-innovation-data_en. 

84  

12 

 
 
                                                           
Figure 4: Public clean energy R&I investments in EU Member States as a share of GDP since the start of Horizon 
202085. 

Source: JRC based on IEA86 and own work87. 

In 2020, Horizon 2020 funds supporting Energy Union R&I priorities added EUR 2 billion to 
the Member States’ national programmes’ contributions. While national contributions alone 
remain low among major economies, with the inclusion of Horizon 2020 funds, the EU ranked 
second among major economies in public clean energy R&I investment in 2020 (Figure 5)88, 
both  in  absolute spending (EUR 6.6 billion, with the US  leading at  EUR 8 billion) and as  a 
share of GDP (0.046%, with Japan leading with 0.058%, but just ahead of the US and South 
Korea89).  

According to global assessments, the corporate sector invests on average at least three times as 
much in clean energy R&I as the government sector90. Investment by the EU’s business sector 
accounts for 80% of the R&I spending in the Energy Union R&I priorities. In 2019, estimated 
private  R&I  investment  in  the  EU  amounted  to  0.17%  of  GDP  (Figure  5),  and  11%  of  the 
business  and  enterprise  sector’s  total  R&D  spending.  Estimates  for  the  EU  show  that 
investment in absolute terms (EUR 18-22 billion per year) has been comparable with the US 
and Japan since 2014. In terms of percentage of GDP, however, despite the EU’s investment 
being  above  the  US,  the  EU  remains  lower  than  other  major  competing  economies  (Japan, 
South Korea, and China). 

‘EU FP’ means the EU Framework Programme; and ‘na’ refers to countries which did not provide any data 

85  
86  Adapted from the 2022 edition of the IEA energy technology RD&D budgets database.   
87 
JRC SETIS https://setis.ec.europa.eu/publications/setis-reseach-and-innovation-data_en. 
88   The graph overlaps the first two categories of Figure 4 for the EU. The values in the two figures are slightly different, as 

the figure for Italy in Figure 5 is an estimate. 

89   These figures include Member States and EU framework programme funds. Last year’s report only referred to Member 
States funds, which are also shown in Figure 5 and remain below other major economies‘ funds as a share of GDP. 
IEA, Tracking clean energy innovation - A framework for using indicators to inform policy, 2020. 

90  

13 

 
 
 
                                                           
Figure 5: Public and private R&I financing in Energy Union R&I priorities in major economies as a share of GDP 

Source: JRC based on IEA91, MI92, own work. 

Since 2014, half of the EU Member States have increased their patenting activity in line with 
the  Energy  Union  R&I  priorities,  with  green  innovation  champions  such  as  Germany  and 
Denmark performing strongly both in absolute numbers and in the share of green patents in 
their overall innovation portfolio. The EU remained the top worldwide patent applicant in the 
fields of climate & environment (23%), energy (22%) and transport (28%).  

Worldwide, there were slightly fewer scientific publications addressing low carbon energy 
technologies in 2020 than in 2016-2019. In the EU, this number increased more modestly in 
2016-2019 (when compared to the global average), and declined more strongly in 2020. The 
EU contributed just over 16% of scientific articles worldwide, but did continue to produce more 
than twice the global average number of publications per head of population93.  

This trend is mostly due to the increasing number of scientific publications in other domains 
and to the fact that high-income economies no longer seem to dominate in topics related to 
clean energy and innovation94. The EU was leading in energy research 10 years ago, but the 
massive  improvement  in  the  quantity  and  quality  of  Chinese  output  in  energy  research  has 
pushed the EU down into second position. Chinese researchers are in the lead when it comes 
to the most cited publications related to energy (with a 39% share)95. Nonetheless, EU scientists 
collaborate and publish internationally in clean energy topics, to a degree that is well above the 
global  average  and  there  is  a  higher  level  of  collaboration  between  the  public  and  private 
sectors  in  the  EU.  The  Horizon  2020  R&I  framework  programme,  the  European  Regional 
Development Fund and the seventh framework programme for R&I were ranked among the 

91   Adapted from the 2022 edition of the IEA energy technology RD&D budgets database.   
92  Mission 

Innovation  Country  Highlights, 

6th  MI  Ministerial 

2021, 

http://mission-innovation.net/wp-

content/uploads/2021/05/MI_2021v0527.pdf.  

93  European  Commission,  Directorate-General  for  Research  and  Innovation,  Provençal,  S.,  Khayat,  P.,  Campbell,  D., 
Publications as a measure of innovation performance in the clean energy sector: assessment of bibliometric indicators, 
Publications Office of the European Union, Luxembourg, 2022 

94   Schneegans  S.,  Straza,  T.,  and  Lewis,  J.  (editors),  UNESCO  Science  Report:  the  Race  Against  Time  for  Smarter 

Development, UNESCO Publishing, Paris, 2021. 

95   European  Commission,  Directorate-General  for  Research  and  Innovation,  Science,  Research  and  Innovation, 

Performance of the EU report 2022, Publications Office of the European Union, Luxembourg, 2022. 

14 

 
 
 
                                                           
 
global top 20 acknowledged funding schemes supporting clean energy science in the period 
2016-202096. 

The need to improve the monitoring of public and private clean energy R&I activity and the 
quantitative assessment of competitiveness was highlighted in the last edition of the report97 
and has since become even more crucial. The review of the SET Plan and the planned update 
of the National Energy and Climate Plans (NECPs)98 due in June 202499, are together creating 
the momentum to reinforce the dialogue on clean energy R&I and competitiveness between 
the EU and its Member States.  

2.3 The global clean energy competitive landscape 

Worldwide,  the  urgent  commitment  to  accelerate  the  energy  transition  has  led  to  the 
development  of  many  clean  energy  solutions,  ranging  from  niche  technologies  to  global 
industry and international value chains. It is estimated that global markets will be worth EUR 
24 trillion for renewable energy and EUR 33 trillion for energy efficiency by 2050100.  

The  EU’s  leadership  in  science,  its  strong  industrial  base  and  its  ambitious  clean  energy 
framework conditions provide a good technology base for the anticipated market development 
of  several  clean  energy  technologies.  The  EU  has  maintained  its  good  position  in 
internationally protected patents since 2014, thus confirming the trend highlighted in last 
year’s report101. The EU remains second only to Japan in high-value inventions102, it leads in 
renewables, and shares the lead with Japan  in energy efficiency, thanks  mainly to the EU’s 
specialisation in materials and technologies for buildings. The EU’s patenting data also show 
its  leadership  in  renewable  fuels;  batteries  and  e-mobility;  and  carbon  capture,  storage  and 
utilisation technologies. 

Most new investments in clean energy technologies are expected to take place outside the EU 
and necessary raw materials are traded internationally103. This makes the EU’s strong presence 
and performance in global value chains and its access to third country markets essential. The 
increase in measures taken by third country governments (introducing market access barriers, 
local content requirements and other discriminatory measures or practices) can nevertheless 
distort international trade and investment dynamics. These measures can have a negative 
impact on EU jobs, growth and tax base, and undercut the benefits that the EU would normally 
reap from being a first mover in this area. They also create a clear risk of “contamination”, 
because  they  can  prompt  other  third  countries  to  take  similar  measures  which  create 
inefficiencies in international supply chains and in the longer-term affect incentives to invest 

96   Elsevier,  Pathways 

to  Net  Zero:The 

at: 
https://www.elsevier.com/__data/assets/pdf_file/0006/1214979/net-zero-2021.pdf. Publications are counted as net-zero 
energy research if they advance knowledge about clean energy research and innovation and the pathway toward achieving 
a net-zero future. The data is sourced from Scopus database. 

of  Clean  Energy  Research, 

2021.  Available 

Impact 

97   COM (2021) 952 final and SWD(2021) 307 final (’Progress on competitiveness of clean energy technologies’) 
98   Further  details  on  NECPs:  https://energy.ec.europa.eu/topics/energy-strategy/national-energy-and-climate-plans-

necps_en.   

99   OJ L 328, 21.12.2018. Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action sets out 
the regular revision of NECPs to align them with latest policy developments. The draft NECPs are expected by June 2023.  

100   IRENA, Global energy transformation: a roadmap to 2050, Abu Dhabi, 2019.  
101   COM(2021) 952 final (’Progress on competitiveness of clean energy technologies’). 
102   High-value patent families (inventions) are those containing applications to more than one office (i.e. they are applying 

for protection in more than one country or market).  

103   International Energy Agency, Net Zero by 2050 - A Roadmap for the Global Energy Sector, 2021. 

15 

 
 
                                                           
in the sector. This would in turn increase costs for the transition overall and could erode the 
general public’s ongoing commitment to global decarbonisation. 

Concern also  persists and is  increasing throughout  the world about  the impact  of state- and 
subsidy- backed technology domination; closed markets; different intellectual protection (IP) 
rules; innovation and competitiveness policies in the sector especially those implemented by 
China,  as  well  as  other  third  countries.  The  current  geopolitical  crisis  has  also  affected 
competition  in  the global clean energy market, and it remains to  be seen how new national 
measures  on  accelerating  the  domestic  roll-out  of  clean  energy  technologies  (e.g.  the  US 
inflation  reduction  act104)  might  negatively  impact  the  global  competitive  clean  energy 
landscape. 

Within this framework, international cooperation in R&I will not only further accelerate the 
clean energy transition, but will also counteract  disruption of the global energy market. EU 
programmes and policies, such as Horizon Europe and Erasmus+, have consistently supported 
R&I  cooperation  with  trusted  global  partners.  The  Commission’s  Communication  on  “The 
global  approach  to  research  and  innovation”105  provides  an  improved  framework  for 
developing  international  cooperation.  The  Commission’s  Communication  on  “EU  external 
energy engagement in a changing world”106 envisages the intensification of such cooperation 
and the development of partnerships to support the green transition on crucial topics such as 
renewable and low carbon hydrogen, and access to raw materials and innovation. In addition, 
the Commission’s Communication “A new ERA for research and innovation”107 calls for the 
guiding principles for knowledge valorisation to be updated and developed. A code of practice 
for the smart use of IP is expected by the end of 2022108. The Commission is helping to advance 
international  cooperation  on  energy  innovation  and  technology  by  continuing  to  engage  in 
Mission  Innovation109  and  the  Clean  Energy  Ministerial.  Furthermore,  the  new  EU  global 
connectivity strategy, the Global Gateway110, the Commission’s Communication “Trade policy 
review”111  and  the  International  Just  Energy  Transition  Partnership  with  South  Africa112 
underline the importance of deepening international cooperation and trade relations in order to 
leverage the competitiveness of clean energy technologies in synergy with the openness and 
the attractiveness of the EU’s single market.  

International research cooperation, technology transfer, trade policy and energy diplomacy will 
need to work together to ensure undistorted trade and investment in the technologies, services 
and raw materials that are needed for the transition both inside and outside the EU. The EU 
will also need to further exploit its potential to upscale innovation in order to avoid the risk of 

104   FACT SHEET: The Inflation Reduction Act Supports Workers and Families | The White House 
105   COM(2021) 252 final (’Europe's strategy for international cooperation in a changing world’).  
106  JOIN(2022) 23 final (’EU external energy engagement in a changing world’). 
107  COM(2020) 628 final (‘A new ERA for Research and Innovation’).  
108  A  new  guide 

the  valorisation  of 

available  on 

results 

is 
https://data.europa.eu/doi/10.2826/437645. 

already 

from  Horizon  Europe 

at:  

109   http://mission-innovation.net/. After first five successful years, MI 2.0 was launched with a new set of ‘missions’. 
110      JOIN(2021)  30  final  (’The  Global  Gateway’),  Joint  Communication  from  the  European  Commission  and  the  High 
Representative  of  the  Union  for  Foreign  Affairs  and  Security  Policy  to  the  European  Parliament,  the  Council,  the 
European Economic and Social Committee, the Committee of the Regions and the European Investment Bank. 

111     COM(2021) 66 final (’Trade Policy Review - An Open, Sustainable and Assertive Trade Policy’). 
112     Just Energy Transition Partnership with South Africa (europa.eu). 

16 

 
 
                                                           
increasing its dependency on other major economies for imported technologies needed in the 
energy transition and in the new energy system architecture.  

2.4 The innovation funding landscape in the EU113  

Climate tech solutions114 are fostering the EU’s competitiveness and technology sovereignty. 
Together with the adoption of more mature generation technologies, they will play a crucial 
role in achieving carbon neutrality by 2050115. 

The EU climate tech domain has over the last 6 years attracted an increasing amount of venture 
capital (VC) investment116 that is at the forefront of innovation. Climate tech can require long 
lead times before reaching maturity, so there is a crucial need for a significant amount of capital 
throughout start-ups’ funding lifecycles; investments in R&I117; government action to de-risk 
the  development  of  climate  tech  solutions,  and  further  encouragement  for  private  sector 
participation. 

Worldwide,  VC  investment  in  the  climate  domain  has  shown  impressive  resilience  to  the 
pandemic, with already higher levels of investments in 2020 (EUR 20.2 billion) and new all-
time  highs  in  2021  (EUR  40.5  billion,  a  100%  increase  compared  to  2020118).  Within  this 
figure,  EU-based  climate  tech  start-ups  and  scale-ups  attracted  EUR  6.2  billion  of  VC 
investment in 2021, more than double the 2020 level119. This accounts for 15.4 % of global 
climate tech VC investment. 2021 was also the first year in which later-stage investments in 
EU-based climate tech were higher than in China120. However, early-stage investment reached 
new highs in the US and China in 2021, but peaked in the EU (Figure 6). 

113   The analysis presented in this section is based on Pitchbook data. PitchBook currently identifies more than 2 750 venture 
capital companies in its Climate Tech vertical (compared with more than 2 250 at the time of publication of the 2021 
edition of the CPR report). The figures for historical VC capital investment in the CPR 2020 and 2021 reports are therefore  
not directly comparable. 

114   PitchBook’s climate-tech vertical is a selection of 2 760 companies that are developing technologies intended to help 
mitigate  or  adapt  to  the  effects  of  climate  change.  Most  companies  in  this  vertical  are  focused  on  mitigating  rising 
emissions  through  decarbonisation  technologies  and  processes.  Applications  within  this  industry  vertical  include 
renewable  energy  generation;  long  duration  energy  storage;  electrification  of  transportation;  agricultural  innovations; 
industrial process improvements; and mining technologies. 

115   The  section  was  developed  in  close  collaboration  with  the  European  Commission’s  Clean  Energy  Technology 
Observatory:  Georgakaki, A. et al, Clean Energy Technology Observatory Overall Strategic Analysis of Clean Energy 
Technology in the European Union – 2022 Status Report, European Commission, 2022, JRC131001. 

116   Venture capital deals are defined as early-stage deals (including pre-seed, accelerator/incubator, angel, seed, series A and 
B occurring within 5 years of the company's founding date) and later-stage deals (usually series B to series Z+ rounds 
and/or  occurring  more  than  5  years  after  the  company's  founding  date,  undisclosed  series  and  private  equity 
growth/expansion). 

117   This  gives  rise  to  the  notion  of  deep-green  start-ups  (i.e.  start-ups  that  use  cutting-edge  technologies  to  address 
environmental challenges such as green battery  manufacturing and electric aircraft). Deep green is at the intersection 
between climate-tech and deep tech (deep tech is the application of scientific discoveries in engineering, mathematics, 
physics, and medicine. It is characterised by long R&D cycles and untested business models). 

118   This accounts for 5.2% of total VC funding in 2021 according to JRC elaboration based on PitchBook data (4.6% in 

2020). 

119   COM(2021) 952 final (’Progress on competitiveness of clean energy technologies‘).   
120   The sole investments in Swedish EV Battery developer Northvolt have a significant impact on the overall VC investment 
trends in EU Climate Tech firms over the past years. As the company transitioned towards later investment stages, early-
stage investments in EU Climate Tech firms decreased in 2021 while later stage investments increased to reach for the 
first time a higher value than reported in China. 

17 

 
 
                                                           
Figure 6: Venture capital investments in climate tech start-ups and scale-ups 

Source: JRC elaboration based on Pitchbook data. 

The energy domain accounted for 22% of global climate tech VC investments in 2021 (clean 
energy  generation121  and  grid  technologies122  accounted  for  13.2%  and  8.7%  respectively). 
With levels almost four times higher (x 3.8) than in 2020123, the energy domain remains behind 
the Mobility and Transport domain (46%), but has for the first time overtaken the Food and 
Land use domain (19.6 %). 

In the EU, VC investments in energy firms confirmed the sustained growth seen over the past 
4 years (up by 60% on 2020). Despite this good performance, the relative share of the EU’s 
VC investments in energy halved in 2021. With 10% of VC investment in energy firms, the 
EU ranks third, far behind the US (62%) and China (13.3%), which both displayed outstanding 
2021 investment levels driven by megadeals in clean energy generation.  

Despite the positive VC funding dynamics in the EU and the attraction of EU-based climate 
tech for VC investors, structural barriers and societal challenges124 are still holding back EU-
based climate tech scale-ups by comparison with other major economies. The EU taxonomy 
for sustainable  activities  nevertheless  provides a  framework to  facilitate durable  investment 
and defines environmentally sustainable economic activities. In addition, the EU’s innovation 
policy has expanded over the years and the institutional landscape has changed with it125. 

Horizon Europe’s pillar  III  on “Innovative Europe” has  provided tools  to support start-ups, 
scale-ups and Small and Medium-Sized Enterprises (SMEs). Within this context, the European 
Innovation Council (EIC) is, with  its EUR 10.1 billion budget  between 2021  and 2027, the 
EU’s flagship innovation programme for identifying, developing and scaling-up breakthrough 

121   Including solar, wind, nuclear, waste-to-energy, ocean and hydro and geo-thermal energy. 
122   Including long-duration energy storage, grid management, analytics, battery technology, smart grid and clean hydrogen 

production. 

123    Investments  in  clean  energy  generation  technologies  are  the  main  driver  of  this  growth.  Pushed  by  significant  large 
investments  in  nuclear  fusion  in the  US  and  wind  in  China,  it  has  increased  2.4  times  faster  than  investment  in  grid 
technologies and climate-tech VC investments in general. 

124     COM(2020) 953 final (’Report on Progress of Clean Energy Competitiveness‘), and COM(2022) 332 final (’The New 

Innovation Agenda’). 

125   COM(2022) 332 final (’The New Innovation Agenda’).  

18 

 
 
 
 
                                                           
technologies  and  game-changing  innovations.  Horizon  Europe  also  supports  the  European 
Innovation  Ecosystems  initiative  and  the  European  Institute  of  Innovation  and  Technology 
(EIT). EIT  InnoEnergy  has built  the largest  sustainable energy innovation ecosystem in  the 
world and is also spearheading the move to a decarbonised EU by 2050 through the leadership 
of three industrial value chains (the European Battery Alliance, the European Green Hydrogen 
Acceleration Centre and the European Solar Initiative).  

As regards EU funding programmes, the Innovation Fund is one of largest in the world126 for 
demonstrating  clean innovative technologies and deploying them at  an industrial  scale. The 
InvestEU programme is a major element of the EU’s recovery plan, supporting access to, and 
availability of, finance for SMEs, mid-caps and other enterprises. The cohesion policy provides 
large scale and long-term investments, especially for SMEs, in innovation and industrial value 
chains  in  order  to  boost  the  development  of  renewable  and  low-carbon  technologies  and 
business models. Moreover, the European Investment Bank (EIB) and the European Investment 
Fund (EIF), effectively support the deep-tech development that the EU needs to achieve its 
sustainability  goals.  Other  funding  programmes,  such  as  the  Modernisation  Fund  and  the 
proposed  Social  Climate  Fund127,  aim  at  helping  to  funnel  revenues  from  climate-related 
policies in support of the energy transition. 

These programmes and other EU initiatives, such as the capital market union (CMU)128, aim 
to further mobilise private investors in the funding of climate tech  and deep129 climate-tech 
start-ups.  For  instance,  the  pioneering  partnership  between  the  European  Commission  and 
Breakthrough Energy Catalyst130 is another example on how to  boost  investments in critical 
climate technologies bringing together the public and private sectors. 

Creating synergies between EU programmes and instruments and increasing cohesion between 
the EU’s local innovation ecosystems can help the EU to become a global leader in climate 
tech, thus closing the scale-up gap between the EU and other major economies by leveraging 
its diverse talents, intellectual assets and industrial capabilities. The 2022 European Innovation 
Scoreboard131 highlights the importance of establishing a pan-European innovation ecosystem, 
and  the  2022  Commission  Communication  “the  New  European  Innovation  Agenda”132 
represents  already  a  step  forward  because  it  aims  at  leveraging  the  strengths  of  the  EU 
innovation ecosystem133.  

126   EUR 38 billion of support from 2020 to 2030, assuming a carbon price of EUR 75/tCO2. 
127   https://ec.europa.eu/clima/eu-action/european-green-deal/delivering-european-green-deal/social-climate-fund_en 
128   https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/capital-markets-union_en 
129   Deep-tech start-ups build on scientific knowledge and typically have long R&D cycles and untested business models. 
Deep-climate-tech start-ups are companies that use cutting edge technology to address environmental challenges. 

130   Commission 

and 

Breakthrough 

Energy 

Catalyst 

partnership 

(europa.eu): 

https://ec.europa.eu/commission/presscorner/detail/en/IP_21_2746 

131   European Commission, European innovation scoreboard 2022, Annual Report, 2022.  
132   COM(2022) 332 final (’The New Innovation Agenda’).  
133   The Communication states that the EU will take forward concrete measures to improve access to finance for EU start-ups 
and scale-ups; improve rules to allow innovators to experiment with new ideas; help create ‘regional innovation valleys’; 
attract and retain talent in the EU; and improve innovation policy-making through clear terminology, indicators and data 
sets as well as policy supports to Member States. 

19 

 
 
 
                                                           
 
2.5 Impacts of systemic change 

To achieve the twin green and digital transition and deliver on the European Green Deal and 
Fit for 55 objectives, the EU clean energy sector needs to accelerate a paradigm-shift already 
in motion: the need to break down the silos between sectors and to strengthen cooperation in 
horizontal areas (e.g. the critical role of raw materials, the digitalisation of the energy system 
and the interaction of different technologies in industrial processes, individual buildings, and 
cities).  Examples  of  this  systemic  transformation  include:  building-related  clean  energy 
technologies;  digitalisation of the energy system;  and energy communities and sub-national 
cooperation. 

Building-related  clean  energy  technologies:  compulsory  solar  PV  installations  on  roofs  and 
doubling the current rate of deploying individual heat pumps134 will help to achieve climate 
and energy targets. Achieving these targets will also require the building sector to integrate a 
broad set of complementary solutions for new buildings, such as efficient insulation methods 
and control systems, but also resource efficient measures. This should go hand in hand with 
increasing the renovation rate and fostering deep renovation. On-site energy storage (batteries) 
is another important element to enable higher shares of heat pumps and avoid extreme peaks 
in  electricity  generation  and  transmission/distribution.  In  addition  to  product  availability, 
installation skills and operational services for the different technologies is crucial for the EU’s 
clean energy sectors and its competitiveness.  

Digitalisation of the energy system: digitalisation is expanding exponentially: internet traffic 
has tripled in the last 5 years alone, and around 90% of the data in the world today were created 
over the last 2 years135. Decentralisation of energy - at the generation level as well as through 
millions of connected smart appliances, heat pumps and electric cars - is transforming the local 
energy  system.  An  assessment  for  Hamburg  (Germany)  indicated  a  significant  cost  savings 
potential: investing EUR 2 million in smart charging to decrease peak demand can avoid the 
need to invest EUR 20 million for the necessary grid reinforcement to cater for a share of 9% 
of  electric  vehicles  in  the  city136.  Without  intelligent  management  of  local  energy  needs, 
capacity limits in distribution networks can slow clean energy transformation. However, some 
digital solutions may increase energy consumption and GHG emissions without appropriate 
efficiency measures, like recovering heat waste from data centres. 

Energy communities and sub-national cooperation: at least two million European citizens have 
engaged in more than 8 400 energy communities and carried out over 13 000 projects since the 
year  2000137.  Energy  communities  represent  an  important  test  bed  and  application  field  for 
clean  energy  technologies  and  solutions.  The  total  renewable  capacities  installed  by  energy 
communities  in  Europe  is  currently  estimated  to  be  at  least  GW  6.3  (i.e.  around  1-2%  of 
installed capacity at national level). Solar PV constitutes the lion’s share of installed capacity. 
Onshore  wind  comes  next.  Developing  participatory  models  for  more  clean  energy 

134   COM(2022) 230 (’The RePowerEU plan’).  
135   International Energy Agency, Digitalization and Energy, 2017, https://iea.blob.core.windows.net/assets/b1e6600c-4e40-

4d9c-809d-1d1724c763d5/DigitalizationandEnergy3.pdf.  

136   Stromnetz  Hamburg,  Elektromobilität  –  Netzausbaustrategie  und  Restriktionen  im  Hamburger  Verteilnetz,  Hamburg, 

2018,https://www.hamburg.de/contentblob/10993526/1f90214d9b07e4de6323c078ff779d9d/data/d-anlage-13-
pra%CC%88sentation-snh-20180504-energienetzbeirat-snh.pdf.    

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

20 

 
 
                                                           
technologies, in particular targeted for lower income households, can trigger the development 
of more energy communities across the EU and,  at  the same time, contribute to  addressing 
energy poverty.  

Enhancing  the  interaction  across  horizontal  areas,  while  factoring  in  the  interdependencies 
between  different  sectors  both  at  Member  States  and  EU  level  is  key  for  accelerating  the 
deployment  and  upscale  of  clean  energy  technologies  and  for  strengthening  the  EU’s 
competitiveness in the global clean energy market138.  

3.  FOCUS ON KEY CLEAN ENERGY TECHNOLOGIES AND SOLUTIONS 

This section presents the competitiveness assessment of a range of clean energy technologies 
and solutions that are key for energy generation, storage and system integration. It also provides 
insights into how the technology and the market are evolving to meet the European Green Deal 
and  REPowerEU  objectives.  This  section  includes  an  analysis  of  solar  photovoltaics,  wind, 
heat  pumps  for  building  applications,  batteries,  hydrogen  production  through  electrolysis, 
renewable  fuels,  and  digital  infrastructure.  It  also  provides  an  overview  of  other  important 
technologies139. This evidence-based analysis - based on the indicators listed in Annex I - was 
performed  within  the  framework  of  the  Commission’s  in-house  Clean  Energy  Technology 
Observatory  (CETO),  which  is  executed  by  the  Joint  Research  Centre.  The  in-depth 
technology-specific reports are available on the CETO web site140.  

3.1. Solar photovoltaics141 

Solar  Photovoltaics  (PV)  has  been  the  fastest  growing  power  generation  technology  in  the 
world over the last decade. All the scenarios towards a climate neutral energy system142 assign 
a central role to PV. The recent European solar energy strategy communication143 calls for about 
450 GWac of new photovoltaic system capacity between 2021 and 2030. Given the current 
trend of installing a DC capacity 1.25 to 1.3 times the AC capacity to optimise the use of the 
grid connection144, this would bring the total nominal PV capacity in the EU to approximately 
720  GWp.  The  EU  solar  energy  strategy  addresses  the  main  bottlenecks  and  barriers  to 
investment  with  a  view  to  accelerating  deployment,  ensuring  security  of  supply  and 
maximising  the  socio-economic  benefits  of  PV  energy  throughout  the  value  chain145.  The 

138   SAPEA (Science Advice for Policy by European Academies), A systemic approach to the energy transition in Europe, 

Berlin, 2021, https://doi.org/10.26356/energytransition. 

139   Hydropower,  Ocean  energy,  Geothermal  energy,  Concentrated  solar  power  and  heat,  Carbon  capture  utilisation  and 

storage, Bioenergy, Nuclear energy 

140    https://setis.ec.europa.eu/publications/clean-energy-technology-observatory-ceto_en 
141    Evidence-based analysis from CETO (Chatzipanagi, A. et al, Clean Energy Technology Observatory: Photovoltaics in 
the  European  Union  2022  Status  Report  on  Technology  Development,  Trends,  Value  Chains  and  Markets,  European 
Commission, 2022, doi: 10.2760/812610 JRC130720) unless otherwise noted. 

142   Most notably, the scenarios projected by non-governmental organisations such as Greenpeace, the Energy Watch Group, 
Bloomberg New Energy Finance, the International Energy Agency, the International Renewable Energy Agency, as well 
as by PV industry associations. 

143   COM(2022) 221 final (’EU Solar Energy Strategy’).  
144   Kougias  I.  et  al,  The  role  of  photovoltaics  for  the  European  Green  Deal  and  the  recovery  plan,  2021,(doi: 

10.1016/j.rser.2021.111017). AC: Alternating Current; DC: Direct Current. 

145   The  flagship  actions  announced  in  the  EU’s  solar  energy  strategy  include  the  EU  solar  rooftops  initiative;  the 
Commission’s permitting package – including a legislative proposal, recommendations and guidance; the EU’s large-
scale skills partnership for onshore renewable energy, including solar energy; and the EU solar PV industry alliance). In 
particular, the EU solar rooftops initiative would make the installation of rooftop solar energy compulsory for (i) all new 
public  and  commercial  buildings  with  useful  floor  area  greater  than  250  m²  by  2026;  (ii)  all  existing  public  and 

21 

 
 
                                                           
European Solar PV Industry Alliance, one of the concrete initiatives of the EU solar energy 
strategy, was formally endorsed by the Commission in October 2022, and it aims at scaling up 
manufacturing technologies of innovative solar photovoltaic products and components146. 

Technology analysis: The average efficiency of silicon cell-based modules has increased from 
15.1% in 2011 to 20.9% in 2021147. This is thanks to the use of larger cut wafers and higher 
efficiency solar cells, including multi-junction cells designs. Europe has notable expertise and 
a lead in the promising perovskites technology, for which several EU companies such as Evolar 
(Sweden),  Saule  Technologies  (Poland)  and  Solaronix  (France)  are  currently  setting  up 
production lines.  

The EU’s solar strategy148 aims to reverse the declining trend observed in public and private 
funding in the PV industry 149. The EU remains nonetheless a strong innovator in the field, with 
a significant number of publications and patent applications recorded in 2017-2019. Germany 
alone ranks fifth in the world in the patenting of high-value inventions in PV.  

Value  chain  analysis:  Both  production  data  and  new  investment  projects  confirm  the 
dominance  of  Asia,  and  in  particular  China,  in  the  PV  manufacturing  landscape.  All  of  the 
additional polysilicon manufacturing capacity of 80 000 t announced at the beginning of 2021 
(to be added to a total capacity of ~650 000 t in 2020), as well as the 118 000 t already under 
construction, is being built in China150. Silicon solar cells, which are mostly produced in China, 
represent over 95% of worldwide production. The EU nonetheless retains a considerable share 
in the production equipment (50%) and inverter (15%) manufacturing segments of the PV value 
chain.  

Global market analysis: Worldwide investment in new solar generation increased by 19% in 
2021  to  reach  USD  205  billion  (EUR  242.5  billion151).  However,  2021  saw  a  further 
deterioration  of  the  EU’s  trade  balance,  because  its  imports  increased  while  its  exports 
remained  stable,  representing  13%  of  global  exports.  Higher  material  costs  experienced  in 
many industrial sectors in 2021 and 2022 led to an exceptional and unprecedented increase in 
production  costs  for  cells  and  modules,  reversing  a  decade-long  cost  reduction  trend. 
Nevertheless, the competitiveness of PV further improved by comparison with non-renewable 
electricity sources152. The number of countries where photovoltaic electricity generation is the 

commercial buildings with useful floor area greater than 250 m² by 2027; and (iii) all new residential buildings by 2029. 
It is expected that these measures will in combination significantly increase investment in PV assets and increase PV 
manufacturing capabilities in the EU. 

146   https://ec.europa.eu/info/news/commission-kicks-work-european-solar-photovoltaic-industry-alliance-2022-oct-11_en 
147    VDMA, International Technology Roadmap for Photovoltaic (ITRPV), 2022. 
148   It particularly aims to develop a solar energy R&I flagship in the next Horizon Europe work programme, establish an 
R&I pillar in the proposed EU Solar Photovoltaics Industry Alliance, and develop a joint R&I agenda on solar energy 
with Member States in the European Research Area framework. 

149   Latest figures available for 2018 and 2019. 
150   Jäger-Waldau, Arnulf (2022) Overview of the Global PV Industry. In: Letcher, Trevor M. (eds.) Comprehensive 

Renewable Energy, 2nd edition, vol. 1, pp. 130–143. Oxford: Elsevier. Doi. 10.1016/B978-0-12-819727-1.00054-6 

151   Using 

the 

average 

exchange 

rate  of  EUR  1.1827 

for  USD  1  over 

the  year  2021.  See 

https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/eurofxref-graph-
usd.en.html 

152   This 

is  because  natural  gas,  oil  and  coal  prices  have  risen  much  faster  over 

the  same  period.  See 

https://www.iea.org/reports/renewable-energy-market-update-may-2022. 

22 

 
 
                                                           
 
cheapest source is therefore growing.  Increases in fossil fuel prices due to natural disasters, 
accidents or international conflicts, can only reinforce this trend. 

In  conclusion,  the  latest  available  data  for  2021  and  2022  confirm  the  previously  observed 
trend153. The EU has confirmed its position as one of the largest markets for PV and as a strong 
innovator especially in emerging PV technologies and applications (such as agri-PV, building-
integrated PV and floating PV). However, the EU is heavily dependent on imports from Asia 
for  several  crucial  components  (wafers,  ingots,  cells  and  modules),  and  retains  significant 
presence only in the production equipment and inverter manufacturing segments (which are 
currently facing a bottleneck due to the shortage of chips154). Additional bottlenecks due to 
affordability limitations (especially for low-income households and SMEs), excessively long 
waiting times (e.g. linked with insufficient skilled PV installers) are already impacting the large 
deployment  of  PV.  The  measures  and  flagship  actions  announced  in  the  EU’s  solar  energy 
strategy provide the main opportunities to invest in PV assets and develop PV manufacturing 
capacities  in  the  EU,  as  well  as  the  diversification  of  imports.  In  parallel,  continuous 
technological advances towards more efficient and sustainable cell designs and manufacturing 
processes have made it possible to further improve the competitiveness of PV technologies by 
comparison with non-renewable energy sources – even though raw material costs have risen. 
These elements strengthen the business case for boosting both production and deployment in 
the EU, including innovative applications. 

3.2.Offshore and onshore wind155 

Wind energy has a central role in the EU’s climate and energy policy, as the acceleration of 
wind energy deployment is essential to deliver on the European Green Deal, the Fit for 55 and 
the  REPowerEU  objectives.  REPowerEU  calls  for  the  faster  installation  of  wind  energy 
capacities, with 510 GW of wind to be installed by 2030156, projected to correspond to a 31% 
share of EU installed power production capacities157. 

The EU has been a worldwide leader in wind energy R&I since 2014, with public spending 
accounting for EUR 883 million in the period 2014-2021, and it currently  hosts  38% of all 
innovating companies, with the biggest pool of start-ups and innovating corporates. In 2021, 
however,  only  11  GW  of  wind  energy  (10  GW  onshore  wind;  1  GW  offshore  wind)  was 
installed in the EU, and perspectives for 2022 are still below the pace needed to achieve the 
REPowerEU  targets.  China  is  currently  leading  in  terms  of  cumulative  wind  energy 
installations, with a capacity of 338 GW, mainly due to increased deployment rates in 2021. In 
the same year, the EU reached about 190 GW of cumulative installed capacity. 

153  COM(2021) 952 final (’Progress on competitiveness of clean energy technologies’).  
154    EU Chips survey report. European Chips Report | Internal Market, Industry, Entrepreneurship and SMEs (europa.eu). 
155   Evidence-based analysis  from CETO (Telsnig,  T. et al , Clean Energy  Technology  Observatory:  Wind Energy in the 
European  Union  -  2022  Status  Report  on  Technology  Development,  Trends,  Value  Chains  and  Markets,  European 
Commission, 2022, doi:10.2760/855840, JRC130582.) unless otherwise noted. 

156   SWD(2022)  230  final  (‘Implementing  the  REPower  EU  Action  plan:  investment  needs,  hydrogen  accelerator  and 
https://eur-lex.europa.eu/legal-

Available 

at: 

achieving 
content/EN/TXT/PDF/?uri=CELEX:52022SC0230&from=EN. 

bio-methane 

targets‘). 

the 

157   SWD(2022) 230 final (’According to PRIMES modelling projections of the net installed power capacity in REPowerEU 
in 2030‘), Figure 3: Net installed capacity in REPowerEU in 2030 (GWe). Available at: https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:52022SC0230&from=EN.  

23 

 
 
                                                           
To deliver on the REPowerEU objectives, speeding- up wind energy deployment will be crucial 
and  will  require  clear  investment  pipelines  and  translating  political  objectives  into  actual 
implementing measures, including the enactment of commitments to facilitate permitting for 
wind farms. 

Technology  analysis:  Total  global  installed  onshore  wind  capacity  was  769  GW  in  2021, 
almost three times higher than a decade earlier158, with 72 GW capacity installed in 2021 alone. 
2021 was also a record year for offshore wind, with 21 GW of new capacity installed globally, 
more than triple the previous record in 2020. Total global installed capacity accounted for 55 
GW in 2021159.  China led the increase in the global installed capacity with 30.6 GW of onshore 
wind capacity and 16.9 GW offshore wind capacity installed in 2021. 

The EU had a total installed onshore wind capacity of 173 GW and total installed offshore wind 
capacity of about 16 GW at the end of 2021. Total wind capacity was equivalent to about 14% 
of the EU’s total electricity consumption. 2021 also saw the second highest annual contribution 
by onshore wind capacity in the EU since 2010 (10 GW annual deployment160). However, only 
1  GW  of  offshore  wind  was  deployed  in  the  EU  in  2021161.  Industry  players  highlight  the 
granting of permits as one of the main bottlenecks to the continuing and massive deployment 
of  wind  energy,  because  it  causes  delays  and  fewer  completed  projects.  This  in  turn  puts 
pressure  on  supply  chain  profitability.  The  Commission  has  made  legal  proposals  and  a 
guidance to accelerate permitting as part of the REPowerEU package. 

Value chain analysis: The wind energy sector has developed into a global industry with about 
800 manufacturing facilities. Most of these are in China (45%) and Europe (31%)162. The EU 
has kept the lead in terms of high-value patents in wind energy technologies: its share of high-
value inventions was 59% in 2017-2019. EU turbine manufacturers continue to lead in terms 
of quality, technological development and investment in R&I. The EU’s wind industry also has 
high manufacturing capabilities for high-value-added components (e.g. towers, gearboxes and 
blades) and for devices that can also be used by other industrial sectors (e.g. generators, power 
converters and control systems). The EU’s manufacturing value chain for offshore wind mainly 
sources  its  components  from  EU  manufacturers.  For  onshore  wind,  by  contrast,  the  EU’s 
original  equipment  manufacturers  (OEMs)  source  their  components  from  many  different 
foreign suppliers.  

Many of the raw materials for generators are imported mostly from China. Potential difficulties 
in increasing raw materials production output to reach the 2030 targets could pose challenges 
for the EU wind industry. The increase in resources’ prices in 2021 and supply uncertainties 
also constitute an obstacle. The industry has also raised environmental concerns with respect 
to  the  recycling  of  composite  blades.  Both  national  and  EU  research  programmes  in  wind 
energy therefore focus increasingly on circularity.  

Global market analysis: The EU has, over the last decade, maintained a positive trade balance 
with the rest of the world, ranging between EUR 1.8 billion and EUR 2.8 billion. However, the 

158   Renewable Capacity Statistics 2022, IRENA, Abu Dhabi, 2002. 
159   Renewable Capacity Statistics 2022, IRENA, Abu Dhabi, 2002. 
160   Wind Energy in Europe: 2021 Statistics and the outlook for 2022-2026, WindEurope, Belgium, 2022. 
161   Wind Energy in Europe: 2021 Statistics and the outlook for 2022-2026, WindEurope, Belgium, 2022. 
162   Followed by India (7%), Brazil (5%) and North America (4.5%). See also: WindEurope/Wood Mackenzie, Wind energy 

and economic recovery in Europe, Belgium, 2020. 

24 

 
 
                                                           
EU has had negative trade balances with China and India since 2018. Chinese OEMs for the 
first time overtook their EU counterparts in terms of global market share in 2020. The EU’s 
leading markets, nevertheless, host a substantial number of domestic manufacturers163. 

In conclusion, the EU’s wind sector remains a world leader in terms of R&I and high-value 
patents.  This  is  thanks  to  the  manufacturing  capacity,  workforce  and  skills  at  its  disposal. 
However,  the  industry  will  have  to  more  than  double  the  current  annual  rate  of  capacity 
installation in the EU in order to achieve the 2030 targets.  

The  implementation  of  the  Renewable  Energy  Directive164,  the  recent  proposal  for  its 
amendment165 as well as the respective 2022 Commission recommendation and guidance166, 
are  expected  to  overcome  the  main  permit-related  barriers  to  deployment.  Clear  advance 
indication  of  the  Member  States’  wind  installation  plans  will  also  allow  for  the  timely 
preparation of future capacities. In parallel, R&I on circularity will move the industry forward 
by  addressing  environmental  concerns  and  supply  disruptions,  thus  improving  the 
competitiveness of the EU’s wind energy sector.  

3.3.Heat pumps for building applications 

At  EU  level,  heat  pumps  are  increasingly  supported  within  the  framework  of  the  European 
Green Deal, the Fit for  55 package, and by the REPowerEU plan167. The REPowerEU plan 
calls  for  a  doubling  of  the  current  deployment  rate  of  individual  heat  pumps,  which  would 
result in a total deployment of 10 million heat pumps over the next 5 years and 30 million by 
2030, and would be matched by the scaling-up of the EU’s manufacturing capacity. It also calls 
for  faster  deployment  of  large  heat  pumps  in  district  heating  and  cooling  networks.  The 
widespread  joint  deployment  of  both  rooftop  PV  (and  solar  thermal)  and  heat  pumps,  with 
smart  controls  responding  to  grid  load  and  price  signals,  would  contribute  to  heating 
decarbonisation and reduce grid integration challenges. 

Technology  analysis:  Heat  pumps  for  building  applications  are  commercially  available 
products.  They  can  be  classified  according  to  the  source  from  which  they  extract  thermal 
energy  (air,  water  or  ground),  the  medium  to  which  they  transfer  heat  (air  or  water),  their 
purpose  (space  heating  or  cooling  a  space,  domestic  water  heating)  and  market  segments 
(commercial or residential buildings, and networks). 

As regards heat pumps that are mainly used for space and sanitary water heating, the installed 
stock measured for this sector reached nearly 17 million units in Europe at the end of 2021, 
while sales reached 2.18 million units in 2021, a compound annual growth rate of 17% over 
the last 5 years, and 20% over the last 3 years168.  

163  WindEurope/Wood Mackenzie, Wind energy and economic recovery in Europe, 2020. 
164   OJ  L  328,  21.12.2018.  Directive  (EU)  2018/2001  of  11  December  2018  on  the  promotion  of  the  use  of  energy  from 

renewable sources. 

165   COM(2021) 557 final (’Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 
2018/2001 of the European Parliament and of the Council, Regulation (EU) 2018/1999 of the European Parliament and 
of the Council and Directive 98/70/EC of the European Parliament and of the Council as regards the promotion of energy 
from renewable sources, and repealing Council Directive (EU) 2015/652’). 

166  SWD(2022)  0149  final  (’Guidance  to  Member  States  on  good  practices  to  speed  up  permit-granting  procedures  for 

renewable energy projects’). 

167  COM(2022) 230 final (’REPowerEU Plan’).  
168  European Heat Pump Association (EHPA), 2022, https://www.ehpa.org/market-data/. 

25 

 
 
                                                           
R&I activities for individual heat pumps are driven by the demand for more efficient, compact 
and  silent  units;  larger  ambient  temperature  operating  ranges;  digitalisation  for  optimal 
integration with energy grids; and local energy generation and storage. They are also driven by 
evolving EU regulations for more energy efficiency and lower life-cycle environmental impact, 
including materials circularity and low global warming potential (GWP) refrigerants. R&I on 
commercial heat pumps addresses, for example, the integration of simultaneous supply of heat 
and cold with thermal storage. 

The EU’s R&I position is strong and improving. It leads in patents for ‘mainly-heating’ heat 
pumps  for  building  applications.  In  2017-2019,  48%  of  patents  for  ‘high-value  inventions’ 
were filed in the EU, followed by Japan (12%), the United States (8%), Korea (7%) and China 
(5%)169.  In  2014-2022,  Horizon  2020  provided  a  total  of  EUR  277  million  in  funding  for 
projects on heat pumps for building applications.  

Value chain analysis: Turnover for heat pumps manufacturing, installation and maintenance 
activities in the EU amounted to EUR 41 billion in 2020, and has grown at an average annual 
rate of 21% over the last 3 years. Direct and indirect jobs amounted to 318 800 in 2020, an 
average annual growth of 18% over the last 3 years. These data include all types of heat pumps, 
including air-to-air heat pumps used for cooling and/or heating170. 

Heat pumps do not require critical raw materials for their production, but they are affected by 
the current worldwide shortage of semiconductors. 

Global  market  analysis:  In  the  EU,  the  ‘mainly  heating’  heat  pump  value  chain  consists  of 
many  SMEs  and  a  few  large  players.  The  proportion  of  heat  pumps  that  are  imported  is 
increasing and the trade deficit reached EUR 390 million in 2021, in contrast to the surplus of 
EUR 202 million  recorded 5  years earlier171.  Imports  from  China doubled in 2021 to  reach 
EUR 530 million. 

In  conclusion,  the  deployment  of  heat  pumps  is  already  proceeding  rapidly,  but  needs  to 
accelerate still further in order to meet the REPowerEU objectives. EU-based suppliers need 
to ramp up production in order to partake in the EU’s growing demand for heat pumps. Some 
industry  associations  argue  that  a  faster  phasing-out  of  high  GWP  refrigerants  would  slow 
down  the  ramping-up  for  specific  applications,  but  the  prohibition  dates  in  the  proposal  to 
amend the F-Gas regulation172 are designed to give industry sufficient time to adapt. A lack of 
trained installers and high upfront cost may slow deployment in the EU. 

Industry  is  calling  for  a  ‘Heat  Pump  Accelerator’  platform  that  would  bring  together  the 
Commission, Member States and the sector itself. The platform would be supported by clear 
and  sustained  policy  signals  that  would  create  confidence  in  long-term  planning;  ensure  a 
favourable regulatory framework; drive down costs through more cooperation and R&I; and 
develop  a  pact  for  skills  focussed  on  heat  pumps.  As  part  of  the  REPowerEU  plan,  the 
Commission will support the Member States’ efforts to pool their public resources via potential 

169    Lyons, L.  et al, Clean Energy Technology Observatory Heat Pumps in the European Union  - 2022 Status Report on 
Technology Development, Trends, Value Chains and Markets, 2022 Status Report on Technology Development, Trends, 
Value Chains and Markets, European Commission, 2022, JRC130874 

170   Based on EurObserv’ER data, 2020 
171  COMEXT, code 841861.  
172   COM(2022)  150  final  (’Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  fluorinated 

greenhouse gases, amending Directive (EU) 2019/1937 and repealing Regulation (EU) No 517/2014’).  

26 

 
 
                                                           
Important  Projects  of  Common  European  Interest  (IPCEIs)  focused  on  breakthrough 
technologies and innovation along the heat pumps value chain; and to establish a large-scale 
skills partnership under the pact for skills. 

3.4.Batteries 

Batteries  will  play  a  crucial  role  in  achieving  the  European  Green  Deal  objectives  and 
implementing the REPowerEU plan173, because they can reduce dependency on fuel imports 
in transport as well as ensure maximum use of renewable electricity and reduce curtailments. 
Over  50  million  electric  vehicles  (EVs)  are  expected  to  be  operating  on  the  EU’s  roads  by 
2030174 (with at least 1.5 TWh of batteries) and over 80 GW/160 GWh of stationary batteries175. 
The EU is gradually moving towards zero-emission new cars by 2035, in line with the objective 
of an EU entire car fleet of 270 million vehicles that should be zero-emission (mostly electric) 
by  2050.  E-mobility  is  the  main  driver  of  demand  for  batteries.  Lithium-ion  batteries  are 
expected to dominate the market well beyond 2030, but other technologies are being developed 
in parallel.  

Technology  analysis:  Despite  chip  and  magnesium  supply  disruptions,  the  deployment  of 
battery technology in  the EU  has reached  historic highs: 1.7 million  new EVs  were sold  in 
2021,  reaching  18%  of  the  market  (compared  to  3%  in  2019  and  10.5%  in  2020176)  and 
surpassing China (16%). National EVs sales ranged from 1.3% in Cyprus to 45% in Sweden. 
The  stationary  EU  battery  market  is  also  growing  rapidly  and  is  forecast  to  reach 
8GW/13.7GWh  by  the  end  of  2022177.  However,  further  acceleration  is  needed  to  reduce 
dependency on gas peaking plants, in line with the objectives of REPowerEU. 

In 2021, the average battery price fell by 6% to around EUR/kWh 116178 in the global market 
and to around EUR/kWh 150 in the EU market. This continues a long-term trend. However, 
with prices rising in 2022 due to supply-side shocks, the trend is now reversing (for example, 
in spring 2022 the price of lithium carbonate was up by 974% on 2021179). Battery packs will 
be at least 15% more expensive in 2022 than in 2021180. The system cost of grid-scale Li-ion 
applications  was  around  EUR/kWh  350  in  2021181  and,  for  home  storage  systems,  roughly 
twice that.  

Value chain analysis: Almost all the EU’s 2021 mass-production of lithium-ion batteries was 
still  carried  out  by  Asian  manufacturers  established  in  the  EU  (Hungary  and  Poland).  The 
construction of new gigafactories means that the EU (particularly Germany and Sweden) is set 

173  COM(2022) 230 final (’REPowerEU Plan’).  
174   Policy  scenarios  for  delivering 

the  European  Green  Deal,  European  Commission,  2021.  Available  at: 

https://energy.ec.europa.eu/data-and-analysis/energy-modelling/policy-scenarios-delivering-european-green-deal_en. 

175   Policy  scenarios  for  delivering 

the  European  Green  Deal,  European  Commission,  2021.  Available  at: 

https://energy.ec.europa.eu/data-and-analysis/energy-modelling/policy-scenarios-delivering-european-green-deal_en. 
176   European Automobile Manufacturers' Association (ACEA), February 2022, https://www.acea.auto/fuel-pc/fuel-types-of-

new-cars-battery-electric-9-1-hybrid-19-6-and-petrol-40-0-market-share-full-year-2021/ 

177  European Market Monitor on Energy Storage, sixth edition  (EMMES 6.0), https://ease-storage.eu/publication/emmes-6-

0-june-2022/ 

178  BNEF, Battery Pack Prices Fall to an Average of $132/kWh, November 30, 2021. Exchange rate of EUR .8826 for USD 

1 on 30 November 2021/11/2021. 

179   Energy Storage News, ‘BloombergNEF predicts 30% annual growth for global energy storage market to 2030’, 4 April 

2022. 

180   IEA, Global EV outlook 2022, 2022. 
181   Based on Aurora Energy Research 21 April 2022 webinar ’How high can battery costs get?’ 

27 

 
 
 
                                                           
to gradually gain importance on the market. Swedish Northvolt produced its first battery cell 
made  with  100%  recycled  nickel,  manganese  and  cobalt  at  the  end  of  2021,  and  started 
commercial  deliveries  in  2022.  It  states  to  have  a  highly  efficient  recycling  process  with 
recovery of up to 95% of battery metals182.  

The EU is expected to reach over 75 GWh183 installed production capacity by the end of 2022 
(compared to 44 GWh in mid-2021). The projects currently underway show that the EU is on 
track to meet 69% of demand for batteries by 2025 and 89% by 2030184. This is largely thanks 
to the European Battery Alliance’s initiatives185.  

The  upstream  raw  materials  segment  remains  the  least  resilient  in  the  battery  value  chain. 
Despite several EU initiatives, the supply gap for battery raw materials increased in 2021186. 
Spent batteries are still mostly sent to Asia for recycling187. 

The EU is  rapidly advancing  in  Li-ion  technology  (notably  the highest  performing NMC188 
strand), but it is progressing too slowly in stationary battery technologies based on abundant 
raw  materials  (e.g.  flow  batteries  and  sodium-ion  batteries  –  the  latter  also  have  good  EV 
potential  given  developments  in  China  among  other  factors).  The  EU  is  also  slower  in 
embracing  cheaper  Lithium  (ion)  Iron  Phosphate  (LFP) technology,  which  are  increasingly 
used in Asia and less dependent on critical raw materials. 

Global market analysis: China controls 80% of the world's Li-ion battery raw material refining 
capacity,  77%  of  cell  production  capacity  and  60%  of  battery  component  manufacturing 
capacity189. The EU’s trade deficit in Li-ion batteries continued to grow in 2021 and reached 
EUR  5.3  billion190  (up  25%  on  2020).  The  EU  carries  out  roughly  19%  of  global  EV 
production191, but it has very little of the upstream supply chain (with the exception of cobalt 
processing).  Electric  bus  production  and  deployment  in  the  EU  (7  356  e-buses  were  in 
circulation at the end of 2021) is insignificant compared to China, which has over 90% of the 
global stock of 670 000 e-busses192. 

In conclusion, the EU is increasingly building up the highly needed technological capability in 
cheaper  storage/longer-term  storage  (e.g.  technologies  for  sodium-ion;  zinc  based;  flow 
batteries) and is strong in final products (especially EV production and deployment, with the 
exception of the electric buses segment). It is also quickly catching up in cell manufacturing 
when it comes to Li-ion technology and is on track to becoming nearly self-sufficient in battery 
production by 2030. The lack of domestic raw materials and advanced materials production is 
a persistent problem despite current ongoing initiatives. The EU aims to increase its effort to 

182    NorthVolt.com, ’Northvolt produces first fully recycled battery cell’, 12 November, 2021. 
183   Including LG Chem (Poland): 32 GWh; Samsung SDI (Hungary): 20 GWh; Northvolt (Sweden): 16 GWh; SK Innovation 
(Hungary): 7.5 GWh (Benchmark Minerals: Europe’s EV gigafactory capacity pipeline to grow 6-fold to 789.2 GWh to 
2030 - Green Car Congress). Other producers, e.g. SAFT, MES and Leclanché contribute with smaller scale capacities, 
but are increasing their production volumes. 

184   EIT InnoEnergy, Contribution for High-Level ministerial meeting on batteries, February 2022. 
185   European Battery Alliance (europa.eu) 
186   EIT Innoenergy, Contribution for High-Level ministerial meeting on batteries, February 2022. 
187   EBA250, the industrial development programme of the European Battery Alliance, https://www.eba250.com/. 
188   NMC = Nickle Manganese Cobalt.  
189   Willuhn M., National lithium-ion battery supply chains ranked, PV Magazine, 16 September 2020. 
190    COMEXT 2022 data. 
191    Based on Prodcom 2021 production data for EU, and IEA data on 2021 global sales of EVs. 
192   2022 IEA EV Outlook. 

28 

 
 
                                                           
address these challenges from extraction to refining, from processing to recycling with e.g. the 
announced European Critical Raw Material Act. 

3.5. Renewable hydrogen production through water electrolysis 

Renewable  hydrogen193  has  a  great  potential  to  contribute  to  the  EU’s  climate  and  energy 
objectives. It can be used as fuel for sectors that are difficult to electrify (e.g. long-distance and 
heavy-duty  transport);  as  chemical  feedstock  (e.g.  fertilisers  and  other  chemicals);  and  in 
industrial processes (e.g. steel or cement production). Hydrogen and its derivatives are forecast 
to  represent  12%  of  the  global  energy  mix  in  2050194,  yet  renewable  hydrogen  using  water 
electrolysis represents currently only 0.1% of the overall EU production. 

REPowerEU has further strengthened the policy objectives of the 2020 hydrogen strategy195, 
setting  the  2030  targets  for  renewable  and  low  carbon  hydrogen  to  10  Mt  of  domestic 
production and 10 Mt of imports (partly in the form of ammonia).  The setup of a European 
Hydrogen  Bank  will  accelerate the  production  and  the  use  of  renewable  hydrogen  and  help 
develop the necessary infrastructures in a coordinated manner196.  

The  Commission  and  leading  EU  electrolyser  manufacturers  committed  themselves  to 
increasing  manufacturing  capacity  tenfold  to  17.5  GW  in  hydrogen  output  by  2025197.  In 
addition, the Member States’ RRPs allocate around EUR 10.6 billion to hydrogen technologies 
and two IPCEIs were approved by the Commission in 2022 (July and September), for EUR 5.4 
and 5.2 billion of investments, involving 15 and 13 Member States respectively.  

Technology analysis: Out of a worldwide capacity of 300 MW in 2020198, Europe (including 
the UK and the EFTA countries) accounted for 135 MW of installed capacity in 2021. Proton 
Exchange Membrane (PEM) and alkaline electrolysers make up 55% and 44% of the installed 
capacity deployed on European territory respectively (including EFTA and the UK)199. 

The  levelised  cost  of  electricity  is  the  main  factor  impacting  the  economic  viability  of  the 
electrolysers’ investments and rising electricity prices remain one of the key challenges for the 
economic viability of a competitive production of electrolyser hydrogen.  

The  cost  of  European  hydrogen  production  using  renewable  sources  varies  from  a  (2020) 
median of EUR/kgH2 6.8 (Solar PV-based production), to a median of EUR/kgH2 5.5 in (wind-
based  production)200.  Costs  of  electrolysers  are  expected  to  fall  due  to  high  temperature 
electrolysis: from 2130 EUR/kW in 2020 to 520 EUR/kW in 2030. The 2030 cost targets for 
PEM and alkaline electrolysers are at EUR/kW 500 and 300 respectively201. 

193    The EC defines renewable hydrogen as hydrogen that is produced using renewable electricity or that is obtained from 
biomass which meets 70% of the CO2 emissions reductions (as compared to fossil fuels). The EC has defined a threshold 
for the ‘low carbon hydrogen’ in the Gas and Hydrogen Decarbonisation Package of 15 December 2021 (COM(2021) 
803 final). 

194   IRENA, Geopolitics of Energy Transformation: the Hydrogen Factor, Abu Dhabi, 2022. 
195   COM(2020)301 (‘A hydrogen strategy for a climate neutral Europe’).  
196   As 

2022 
https://ec.europa.eu/commission/presscorner/detail/ov/SPEECH_22_5493 

the  Union  Address 

announced 

State 

the 

of 

in 

on 

Declaration of 5 May 2022, https://ec.europa.eu/documents/50014/. 

197  Joint  
198   Global Hydrogen Review, IEA, 2021. 
199   The Clean Hydrogen Monitor, Hydrogen Europe, 2021. 
200  The Clean Hydrogen Monitor, Hydrogen Europe, 2021. 
201    Strategic Research and Innovation Agenda 2021-2027, Clean Hydrogen partnership. 

29 

14 

September 

2022. 

 
 
                                                           
 
Value  chain  analysis:  The  2021  manufacturing  capacity  for  water  electrolysers  has  been 
estimated at 2.5 GW/y in Europe202. Global manufacturing capacity was estimated at around 
6-7  GW/y  (about  two  thirds  alkaline  and  one  third  PEM  for  both  European  and  global 
markets)203. 

Manufacturing volumes in Europe are lower than in China and the United States. It is estimated 
that Chinese companies have half of the world’s alkaline electrolysis manufacturing capacity, 
and  that  American  companies  have  most  of  the  world’s  PEM  electrolysis  manufacturing. 
Europe leads in terms of number of manufacturing companies and in Solid Oxide electrolysis 
but depends on countries such as China, Russia and South Africa for the supply of necessary 
critical raw materials, and it is able to source only 1-3% of them domestically204. 

Water  consumption  (currently  around  17  l/kgH2)  associated  with  the  roll-out  of  more 
renewable  hydrogen  production  will  increase  stress  on  freshwater  resources,  so  new 
electrolyser locations should comply with the Water Framework Directive205 to also safeguard 
against water-related production bottlenecks. 

Global  market  analysis: Only 0.2%  of the European total annual (non-renewable)  hydrogen 
demand  of  8.4  M  tonnes  is  supplied  via  international  trade206.  Even  though  international 
hydrogen  trading  is  still  not  a  reality,  there  are  significant  trade  opportunities  in  the  future 
supply of renewable hydrogen for the EU as identified in the REPowerEU plan.  

In conclusion, without bigger assembly systems, more automation and economies of scale, the 
EU cannot compete with China in alkaline technology.  

Currently high electricity prices and reliance on imports of critical raw materials concentrated 
in a few suppliers are fundamental weaknesses of the EU electrolysers’ value chains. Long-
term  cooperation  agreements  are  needed.  There  is  also  a  need  for  dedicated  research  into 
alternatives to the rare metals and other critical raw materials that are currently necessary for 
water electrolysis. Furthermore, long-term success depends on sustainable water supply and 
sufficient recycling capacity in the EU as well as a comprehensive approach to pull demand 
and supply. The support of EU regulatory and funding frameworks, as well as large investments 
through the recovery funding, IPCEIs, cohesion policy, Horizon Europe, the Clean Hydrogen 
Joint Undertaking207 and the  Innovation  Fund are crucial for the competitiveness of the EU 
renewable hydrogen industry. 

3.6.Renewable fuels  

Renewable  fuel  technologies  can  significantly  contribute  in  the  short  term  to  the 
decarbonisation  of  transport,  and  ensuring  the  security  of  energy  supply  and  energy 

202   Joint Declaration of the European Electrolyser Summit Brussels, 5 May 2022. 
203   BNEF, 2021. Note that Different sources provide varying estimates of annual production capacity. 
204   Dolci,  F.  et  al,  Clean  Energy  Technology  Observatory:  Hydrogen  Electrolysis  --  2022  Status  Report  on  Technology 

Development, Trends, Value Chains and Markets, European Commission, 2022,  JRC130683. 

205   OJ L 327, 22.12.2000. Directive 2000/60/EC of the European Parliament and of the Council establishing a framework 

for the Community action in the field of water policy 

206   Hydrogen Europe, Clean Hydrogen Europe, 2021. The yearly hydrogen demand includes Iceland, Norway, Switzerland 

and the UK.  

207   The Clean Hydrogen Joint Undertaking has allocated EUR 150.5 million, the Horizon 2020 programme made EUR 130 

million available, and the Innovation Fund supported four projects with EUR 240 million until mid-2022. 

30 

 
 
                                                           
diversification.  The  REPowerEU  plan208  identifies,  in  particular,  biomethane209,  as  key  to 
diversify EU gas supplies by increasing its production twice above the EU 2030 target, thus 
putting biomethane on top of renewable energy priorities. 

The  Fit  for  55  legislative  proposals210  would  introduce  a  significant  demand  for  renewable 
energy in the transport sector in 2030, considerably above the targets for the shares of advanced 
biofuels and renewable fuels of non-biological origin set in the revised RED II proposal211. 
This is due to the greenhouse gas (GHG) saving target of 13% in transport (which is not likely 
to be met by electrification alone), and the higher GHG saving targets of 40% and 61% in the 
revised  proposals  for  the  Efforts  Sharing  Regulation212  and  the  Emission  Trading  System 
Directive213 respectively (if these are to be met with equal contributions from transport). The 
REPowerEU plan proposes to further increase required renewable fuel quantities. Contrary to 
road  transport,  whose  decarbonisation  is  expected  to  rely  for  a  large  part  on  electricity  and 
hydrogen,214  the  RefuelEU  Aviation  and  FuelEU  Maritime  proposals  project  that  renewable 
fuels  will  supply  5%  and  6.5%  of  the  EU’s  total  jet  and  shipping  fuel  consumption  in  the 
aviation and maritime sectors215, 216.  

Technology analysis: Commercial pathways do exist (e.g. anaerobic digestion to biomethane, 
hydrogenated vegetable oil and lignocellulosic ethanol production), but there is little installed 
capacity (0.43 Mt/y) and planned production is limited (1.85 Mt/y). A variety of innovative 
technologies (e.g. biomass gasification to Fischer-Tropsch synthetic fuels, pyrolysis-derived 
fuels and biomethanol production) have been demonstrated in industrial environment and are 
ready to take-off. Noticeable progress is being made with several next generation technologies. 
The EU focuses its actions on advanced biofuels, mainly based on non-recyclable waste and 
residues, and limits its support for biofuels based on food and feedstock. 

Technologies for other renewable synthetic fuels (solar fuels, 2nd generation microbial fuels 
and micro-algae fuels) are mostly still at lab-scale. Even for electro-fuels, the most advanced 
technologies  are  not  yet  commercial  because  of  still  existing  technological  challenges, 
currently  high  electrolysis  costs,  high  conversion  losses  (50%)  and  high  transportation  and 
distribution costs217.  

208  COM(2022) 230 final (’REPowerEU Plan’).  
209   Especially  when  produced  from  organic  waste  and  residues,  thus  resulting  in  an  advanced  biofuel  when  used  in  the 

transport sector. 

210  COM(2021) 550 final (‘Fit for 55’: delivering the EU’s 2030 Climate Target on the way to climate neutrality’). 
211  COM(2021) 557 final (’Amendment of Directive 2018/2001, Regulation 2018/1999 Directive 98/70/EC as regards the 

promotion of energy from renewable sources’).  

212   COM/2021/555 final ("Proposal for a Regulation of the European Parliament and of the Council  amending Regulation 
(EU) 2018/842 on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 contributing 
to climate action to meet commitments under the Paris Agreement"). 

213   COM/2021/551  final  ("Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  amending  Directive 
2003/87/EC  establishing  a  system  for  greenhouse  gas  emission  allowance  trading  within  the  Union,  Decision  (EU) 
2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission 
trading scheme and Regulation (EU) 2015/757"). 

214   The main policy drivers in the sector are CO2 emissions standards and Alternative Fuels Infrastructure Regulation (AFIR) 

proposed as part of the ‘Fit for 55’ package.  

215   SWD(2021) 633 final, (’Impact assessment accompanying the Proposal for a Regulation of the European Parliament and 

the Council on ensuring a level playing field for sustainable air transport‘). 

216   COM(2021) 562 final (’Proposal for a Regulation  on the use of renewable and low-carbon fuels in maritime transport’).  
217  50% for electro-fuels. Today’s electro-fuel costs of 7 EUR/litre are expected to decrease to 1-3 EUR/litre until 2050, due 

to economies of scale, learning effects and anticipated reduction in the renewable electricity price.  

31 

 
 
                                                           
Value chain analysis: The main challenge for the market uptake of advanced biofuels is their 
competitiveness  with  existing  conventional  biofuels  derived  from  food  crops.  The  cost  of 
advanced biofuels is estimated at 1.5 to 3 times the market price of traditional biofuels such as 
biodiesel  and  bioethanol  (set  at  50-100  €/MWh).  Advanced  biofuels  also  have  high  capital 
expenditures (up to EUR 500 million for a single plant) and are linked to the availability of 
sustainable biomass feedstock. There is significant potential to cut capital costs by 25-50% and 
feedstock costs by 10-20%, namely through R&I, large scale deployment and co-processing in 
existing plants.  
Private R&I Venture Capital biofuels funding218 was on average EUR 250 million per year in 
2010-2021. The US and Canada dominated (albeit with different definitions of biofuels), while 
the EU’s share has been only 6% in the last 5 years. However, the EU is in the lead with twice 
as  many  high-value  patents  as  the  US.  China  holds  most  low  innovation  patents  and  EU’s 
patent applications are increasing in US and China.  

Global market analysis: The EU has roughly 7% of the global biofuel market worth (i.e. about 
EUR 105 billion in 2020) and is mostly generated from first-generation biodiesel. Turnover 
peaked  at  EUR  14.4  billion  in  2018219  with  most  being  generated  in  France,  Germany  and 
Spain. 250 000 direct and indirect jobs were created along the value chain in the EU. The EU 
is also home to 29% of the world’s innovation companies, while the US and Japan have the 
most. 

The advanced biofuels sector is only just emerging. The number of commercial plants is still 
quite low and international trading is very limited. The EU is the world leader with 19 of the 
24 operational commercial advanced biofuels plants. Sweden and Finland have the most (12 
between them)220. 

All  biofuels  can  be  traded  internationally.  International  trade  is  lower  than  for  its  fossil 
counterparts,  and  barely  exists  for  advanced  biofuels.  The  EU’s  biofuel  imports  have  been 
constantly increasing since 2014. It had a biofuel trade deficit of more than EUR 2 billion in 
2021, with imports mainly coming from Argentina, China and Malaysia. The Netherlands and 
Germany are the biggest EU producers and global biofuel exporters. 

In conclusion, although the installed and planned renewable fuels production capacity for 2030 
is  minimal  and  the  potential  of  advanced  biofuels  from  sustainable  feedstock  in  the  EU  is 
limited, this sector can nevertheless contribute to the Fit for 55 GHG emission savings targets 
and sufficiently cover any transport electrification lag. Some technical and economic risks must 
still be overcome in order to fully realise the potential of renewable fuels in transport. The cost 
of all renewable fuels and, in particular, of synthetic ones, are still high because they rely on 
renewable  energy  and  hydrogen  prices.  Nevertheless,  advanced  biofuels  rely  on  local 
sustainable biomass  resources and short supply  chains  that create  a large  number of skilled 
jobs, reduce energy poverty and drive industrial competitiveness. The EU is the clear market 
leader  in  operational  commercial  advanced  biofuels  plants  and  high-value  innovations.  EU 

218   Private investments include venture capital, angel and seed, and grants. 57% of the investment since 2010 was in the US, 

28% in Canada and only 10% in the whole EU (JRC CETO 2022 Advanced Biofuels report). 

219   Advanced  Biofuels  reports  that France  had  the  highest  turnover  in  2020  (just over  EUR  2  500  million),  followed  by 
Germany and Spain (around EUR 1 500 million each) and Hungary, Romania and Poland (a little less than EUR 1 000 
million each) (see Clean Energy Technology Observatory: Advanced biofuels in the European Union - 2022 Status Report 
on Technology Development, Trends, Value Chains and Markets,, JRC130727). 

220  Sweden has 8 plants, Finland has 4, Spain and Italy each have 2, and France and the Netherlands each have 1. Outside 
the EU, the US has 2 and China, Indonesia, Japan and Norway each have 1 (JRC CETO 2022 Advanced Biofuels report). 

32 

 
 
                                                           
companies  are  currently  among  the  world’s  top  ten  but  they  risk  losing  their  technological 
leadership  due  to  the  lack  of  private  funding.  Therefore,  besides  the  energy  domestically 
produced, the export potential of underlying European technologies should also be considered. 

3.7.Smart technologies for energy management  

EU and national policymaking have clearly recognised the importance of smart electricity grids 
in  recent  years.  The  2020  EU  strategy  for  energy  system  integration221  acknowledged  the 
importance  of  smart  grids  in  achieving  the  EU’s  energy  and  climate  policy  objectives.  The 
2022  revised  Trans-European  Energy  Infrastructure  Regulation222  refers  to  smart  electricity 
deployment  as  a  priority  thematic  area223.  In  their  Recovery  and  Resilience  Plans  (RRPs), 
Member  States  recognised  the  potential  of  digital  solutions  to  upgrade  the  smartness  of 
electricity  grids224.  Electrification  and  smartening  of  the  grid  are  progressing,  but  more  is 
needed to reinforce the electricity infrastructure in order to implement the REPowerEU plan. 
The  challenges  include  reduction,  data-sharing  between  different  players,  flexibility, 
interoperability  and  technology  readiness.  The  EU’s  action  plan  on  digitalising  the  energy 
system225 presents a series of measures to overcome these barriers.  

Given the large number and wide range of smart energy technologies, this section focuses on 
presenting an assessment of the relevant technological and market developments for just three 
key technologies: i) advanced metering infrastructure; ii) home energy management systems; 
and iii) smart electric vehicle charging.  

i) 

Advanced Metering Infrastructure (AMI) 

AMI  systems226  offer  many  advantages  for  both  energy  service  providers  and  consumers, 
including  reduced  electricity  bills  through  better  consumption  management;  better  grid 
observability and therefore better outage management; reduced costs for grid updates due to 
better  management  of  electricity  peaks;  and  better  customer  control  through  the  use  of 
advanced customer infrastructure (i.e. smart applications and web portals)227. 

The  roll-out  of  intelligent  metering  systems  is  progressing  in  the  EU,  although  it  needs  to 
further accelerate. In 2020, only 43% of consumers had been equipped with a smart electricity 
meter (corresponding to about 123 million units in the EU and UK)228. Functionalities offered 

221    COM (2020)299 final (’Powering a climate-neutral economy: An EU Strategy for Energy System Integration’).  
222    OJ L 152, 3.6.2022. Regulation (EU) 2022/869 of the European Parliament and the Council of 30 May 2022 on guidelines 
for trans-European energy infrastructure, amending Regulations (EC) No 715/2009, (EU) 2019/942 and (EU) 2019/943 
and Directives 2009/73/EC and (EU) 2019/944, and repealing Regulation (EU) No 347/2013. 

223   The Regulation requires that smart grid projects contribute to at least two of the following criteria: (i) security of supply; 

(ii) market integration; (iii) network security, flexibility and quality of supply; and (iv) smart sector integration. 

224    European  Commission,  Recovery  and  Resilience  Scoreboard.  Thematic  Analysis:  Digital  public  services,  December 

2021. 

225   COM (2022)552 final, Digitalising the energy system – EU action plan 
226    AMI  systems  are  comprised  of  different  components.  Smart  meters  are  the  core  part,  and  are  complemented  by 

communication networks and data management systems. 

227   Advanced Metering Infrastructure and Customer Systems, Results from the Smart Grid Investment Grant Program, Office 

of Electricity Delivery and Energy Reliability, U.S. Department of Energy, 
https://www.energy.gov/sites/prod/files/2016/12/f34/AMI%20Summary%20Report_09-26-16.pdf. 

228   Estonia, Spain, Italy, Finland and Sweden: 90%; Denmark, France, Luxembourg, Malta, the Netherlands and Slovenia: 
70-90%; Latvia and Portugal: 50-70%; Greece, Austria and the UK: 20-50% (Vitiello, S., Andreadou, N., Ardelean, M. 
and Fulli, G., Smart Metering Roll-Out in Europe: Where Do We Stand? Cost Benefit Analyses in the Clean Energy 

33 

 
 
                                                           
 
by AMI vary: in most countries, they offer detailed information via a meter interface about 
consumption  data  (e.g.  consumption  level/date/time)  and/or  information  on  cumulative 
consumption data. 

Exploiting AMI’s full potential will require further integration with home energy management 
systems  and  smart  appliances  (including  smart  EV  charging)  as  well  as  with  new  energy 
services. 

ii) 

Home energy management system (HEMS) 

The increasing roll-out of smart appliances229 indicates that HEMS should become the hub for 
data  aggregation,  optimisation  and  externalisation  to  third  parties  (e.g.  energy  brokers  and 
service providers). The Commission is preparing a code of conduct for energy smart appliances 
manufacturers,  which  will  define  interoperability  requirements  and  the  principles  for  data 
sharing between appliances; home and building automation systems; EV chargers; aggregators; 
and distribution system operators230. 

Current home energy management solutions range from direct-to-customer energy monitoring 
applications to white-label software platforms for utility customers, which can later be rolled 
out  to  end-users.  In addition to  “traditional” companies  with  track records in  energy  and/or 
electronics231,  large  software  companies  such  as  Google,  Apple,  and  Cisco  now  distribute 
HEMS  products232.  This  trend  emphasises  the  increasing  role  of  software  engineering  in 
Internet of Things (IoT) devices.  

Demand for HEMS is expected to grow significantly in the coming years. For example,  the 
German market, which is the biggest national HEMS market in the EU, is expected to grow to 
nearly USD 460 million (EUR 544 million233) by 2027, and the French HEMS market could 
have  a  compound  annual  growth  rate  (CAGR)  of  20.3%  between  2021  and  2027234.  This 
reflects  global  trends.  The  global  HEMS  market  was  estimated  at  USD  2.1  billion  in  2021 
(EUR  2.5  billion235),  and  could  grow  to  USD  6  billion  (EUR  7  billion236)  by  2027  (with  a 
CAGR  of  16.5%  during  2022-2027)237.  At  this  stage,  however,  it  remains  unclear  whether 

Package  and  Research  Trends 
https://doi.org/10.3390/en15072340. 

in 

the  European  Green  Deal,  Energies,  Vol.  15,  p.  2340,  2022, 

229    Examples include smart thermostats, smart plugs, smart lighting, as well as distributed energy appliances like solar PV, 

EVs. 

230   Support  on  the  development  of  policy  proposals  for  energy  smart  appliances  |  JRC  Smart  Electricity  Systems  and 

Interoperability (europa.eu) 

231   e.g. Fortum (FI), ENEL X (IT), Bosch (DE), NIBE (SE) and Schneider Electric (FR). HEMS vendors were presented in 

detail in the Commission’s 2021 competitiveness report (SWD(2021) 307 final, Staff Working Document). 

232   Google’s Home, Apple’s Siri, and Cisco’s energy management service are examples of HEM services. 
233  An  average  exchange  rate  of  EUR  1.1827  for  USD  1  over  the  year  2021  is  used  in  this  paragraph. 
https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/eurofxref-graph-
usd.en.html. 

234   Delta-EE, https://www.delta-ee.com/research-services/home-energy-management/. 
235   An  average  exchange  rate  of  EUR  1.1827  for  USD  1  over  the  year  2021  is  used  in  this  paragraph. 
https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/eurofxref-graph-
usd.en.html. 

236   An  average  exchange  rate  of  EUR  1.1827  for  USD  1  over  the  year  2021  is  used  in  this  paragraph. 
https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/eurofxref-graph-
usd.en.html. 

237   IMARC 

group:  Home 

Energy  Management 

System  Market 

Size 

and 

Share 

2022-2027, 

https://www.imarcgroup.com/home-energy-management-systems-
market?msclkid=5440b237b02f11ecae445030f049ab37.   

34 

 
 
 
                                                           
HEMS will only help consumers in optimising their consumption and comfort or whether they 
will also enable demand response and flexibility at scale. 

iii) 

Smart EV charging 

Smart  EV  charging  will  be  key  to  maximising  synergies  between  EVs,  renewable  energy 
generation and grid services. The pace of EV roll-out means that EVs are not expected to create 
a power-demand crisis in the short to medium-term238, but they could reshape the load curve239. 
The impact of smart EV charging can be bigger in regions and local areas where a high EV 
concentration  meets  less  robust  grid  infrastructure.  Smart  EV  charging  techniques  can 
potentially  provide  balancing  services  for  the  grid  and  reduce  renewable  curtailment,  thus 
reducing the need for grid upgrades.  

Smart charging includes a range of pricing and technical charging options, and comes in three 
forms:  unidirectional  vehicles-to-grid  (V1G),  bidirectional  vehicles-to-grid  (V2G),  and 
vehicle-to-home or building (V2H-B). Key players in the smart EV charging market include 
ABB (Sweden/Switzerland), Bosch Automotive Service Solutions Inc. (Germany), Schneider 
Electric (France), GreenFlux and Alfen N.V. (Netherlands), Virta (Finland), Driivz and Tesla 
(US). 

The global smart EV charging market is clearly taking off, with an estimated value of USD 
1.52  billion  (EUR  1.77  billion240)  in  2020  and  a  compound  annual  growth  rate  (CAGR)  of 
32.42% between 2021 and 2031241. However, unlike more mature V1G solutions, V2G and 
V2H-B have not yet reached the broad market deployment stage, although the number of pilots 
and demonstrations is growing.  

Rolling  out  smart  charging  infrastructure  at  scale  will  bring  two  challenges:  firstly, 
standardisation of communication interfaces among charging points, EVs and the distribution 
grid will need to be consolidated; secondly, an increasing demand for raw materials will need 
to be met242.   

AMI  systems,  HEMS  and  EV  smart  charging  are  expected  to  make  further  progress.  The 
deployment of AMI systems has been slower than initially envisaged. Further integration with 
HEMS and smart appliances is required to fully exploit the opportunities of AMI systems. The 
increasing presence of smart appliances should result in a significant increase in demand for 
HEMS. The global market for smart EV charging should also take off, but challenges will need 
to be overcome.  

238   Distribution grid simulations in Germany show that grid upgrade requirements are rather low until EVs reach around 20% 
of all vehicle stock (Vertgewall, C.M. et al., Modelling Of Location And Time Dependent Charging Profiles Of Electric 
Vehicles  Based  On  Historical  User  Behaviour,  CIRED  2021  -  The  26th  International  Conference  and  Exhibition  on 
Electricity Distribution, 2021). 

239   McKinsey&Company, McKinsey Center for future mobility, The potential impact of electric vehicles on global energy 

systems, 2018 

240   An average exchange rate of EUR 1.1827 for USD 1 over the year 2021 is used in this paragraph. 

https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/eurofxref-graph-
usd.en.html. 

241    Transparency market research, Smart EV Charger Market: 2021 – 2031, 2021 
242    Raw materials such as stainless steel, copper, aluminium, polycarbonates, elastomers, and thermoplastics polyurethanes 
are used for manufacturing critical components of EV charging stations (enclosures, cables, connectors, cable insulation 
and jacketing, and flexible conduits). Silicon and germanium are crucial raw materials for the manufacture of electronic 
circuits and boards. 

35 

 
 
                                                           
3.8. Main findings on other clean energy technologies 

The above sections focus on those clean energy technologies and solutions analysed in 2021243. 
The  other  main  clean  energy  solutions  presented  in  this  section  are  covered  in  the 
accompanying CETO reports244. These technologies are at different development stages and 
are  evolving  in  diverse  contexts.  This  means  that  they  each  have  their  own  sets  of 
competitiveness challenges and opportunities.   

Hydropower245, for example, has been substantially deployed across the EU. Installed capacity 
was 151 GW in 2021, a +6 GW increase compared to 2011, corresponding to about 12% of the 
EU’s net electricity generation. The EU’s 44 GW of pumped hydropower represents nearly all 
the  EU’s  electricity  storage  capacity  and  ensures  flexibility  to  the  electric  grid  and  water 
storage  capacity.  With  an  aging  fleet,  sustainable  refurbishment  of  existing  hydropower 
capacity steadily  gains importance, as well as  an opportunity to  make the hydropower fleet 
more resilient to climate and market changes. The EU is a leader in R&I, holding 33% of all 
high-value inventions globally (2017-2019) and hosting 28% of all innovative companies. In a 
globally expanding market, it also held 50% of all global exports in hydropower, to a value of 
EUR  1  billion  in  2019-2021.  However,  fully  exploiting  its  potential  will  require  the  EU  to 
overcome  challenges  linked  to  social  acceptance  and  environmental  impacts  of  new 
installations and reservoirs. The effects of climate change also impact hydropower in Europe 
in various ways and hydropower reservoirs may play a role mitigating some of these effects. It 
is essential to recognise the additional benefits (beyond energy generation) of multi-purpose 
hydropower  reservoirs  and  to  incentivise  more  sustainable  (i.e.  less  impacting)  hydropower 
technologies and measures.  

A  growing  number  of  deployments  of  ocean  energy246  are  taking  place.  In  the  long  term, 
considering the resource potential, ocean energy can contribute up to 10% of the EU energy 
needs. The 2020 EU offshore renewable energy strategy247 proposed specific capacity targets 
for ocean energy with the long-term objective of at least 40 GW by 2050. EU companies are 
leading the ocean energy sector with most companies hosted in EU countries. Deployments 
inside and outside the EU are increasing in terms of installed capacity. Individual devices are 
already  contributing  to  the  grid  for  longer  periods  of  time248. However,  continuing  cost 
reductions and ensured sustainability are needed for wave and tidal energy technologies to be 
established in the electricity market and to be competitive with other renewable energy sources. 
Further funding dedicated to testing and market uptake is also necessary to allow their large-
scale deployment.  

243   COM(2021)952 final (’Progress on competitiveness of clean energy technologies‘).   
244   https://setis.ec.europa.eu/publications/clean-energy-technology-observatory-ceto_en. 
245   Quaranta,  E.  et  al,,  Clean  Energy  Technology  Observatory,  Hydropower  and  Pumped  Hydropower  Storage  in  the 
European  Union  -  2022  Status  Report  on  Technology  Development,  Trends,  Value  Chains  and  Markets,  European 
Commission, 2022, JRC130587. 

246   Including wave, tidal salinity gradient and ocean thermal energy conversion technologies.  
247    COM(2020)  741  final  (’An  EU  Strategy  to  harness  the  potential  of  offshore  renewable  energy  for  a  climate  neutral 

future’).  

248   Meygen 1A tidal energy (UK) has been running since April 2018, Mutriku wave energy (ES) since July 2011 and Shetland 

tidal since 2016.  

36 

 
 
 
 
                                                           
Geothermal249 energy has experienced growth both for power plants, and for district heating 
and cooling, although at a slow rate compared to other clean energy technologies. In 2021, two 
additional geothermal power plants were commissioned in Germany, with a capacity of 1 MWe 
and  5  MWe250    -  thus,  bringing  the  EU’s  total  capacity  to  0.877  GWe  –  while  total  global 
installed capacity was around 14.4 GWe. In 2021, total installed geothermal district heating 
and cooling capacity reached 2.2 GWth in the EU, with over 262 systems. The largest growth 
is happening in France, the Netherlands and Poland. Enhanced geothermal systems (EGS) still 
face several innovation challenges that will require further R&I. Lowering the risk of investing 
in  geothermal  energy  projects  is  crucial  for  tapping  into  the  huge  potential  of  geothermal 
energy.  In  the  EU,  the  main  challenges  concern  cost-efficiency  and  environmental 
performance.  

Concentrated  solar  power  and  heat251  (CSP)  can  substantially  contribute  to  electricity 
generation in locations with high direct insolation, but only a fraction of its potential has been 
harnessed so far. In 2021, worldwide installed capacity was approximately 6.5 GW, with 2.4 
GW installed in the EU.  There is also a large EU market for industrial process heat, which can 
be partly exploited by concentrated solar heat systems. Exploring this potential for power and 
process  heat  with  financial  and  other  support  measures  would  allow  the  EU  to  better  face 
international competition. This is particularly important as Chinese organisations are emerging 
as international CSP project developers, a field where EU companies have traditionally been 
leaders. CSP has shown considerable progress in terms of cost reduction and in establishing 
itself  as  a  reliable  option.  European  organisations  play  a  leading  role  in  research  and 
technological development. EU researchers are top publishers of scientific papers and authors 
of  high-value  patents  increasing  efficiency  and  reducing  cost,  as  set  out  in  the  CSP 
implementation plan of the Strategic Energy Technology Plan (SET Plan)252. R&I will play a 
key role here and concrete support will continue to be provided at EU level as announced in 
the EU’s new solar energy strategy.  

Carbon Capture Utilisation and Storage (CCUS) progress has sped up over the past years 
but still only a small number of installations are operating in the EU. France, Germany and the 
Netherlands  are  the  leaders  in  public  and  private  R&I  investment  and  in  top  patenting 
companies.  There  are  some  continuing  barriers  to  the  development  of  CCUS,  mostly  as 
regards  regulatory  implementation253,  economics,  risk  and  uncertainties,  and  public 
acceptance. 11 large-scale CCS and CCU projects have been selected for EU support from the 
Innovation Fund. 

Bioenergy254 currently represents almost 60%255 of the renewable energy supply in the EU. 
Bioenergy  remains  important  for  the  transition  of  several  Member  States’  energy  sectors, 
because it helps decarbonise the economy while increasing energy security and diversification. 
The projected increase of biomass means it is important for the EU to ensure that bioenergy is 

249   Bruhn, D. et al, Clean Energy Technology Observatory: Deep Geothermal Energy in the European Union- 2022 Status 
Report on Technology Development, Trends, Value Chains and Markets, European Commission. 2022, JRC130585 

250   European Geothermal Energy Council, 2021 EGEC Geothermal Market Report. 
251   Taylor, N. et al, Clean Energy Technology Observatory: Concentrated Solar Power and Heat in the European Union - 
2022 Status Report on Technology Development, Trends, Value Chains and Markets, European Commission, doi. , 2022, 
doi: 10.2760/080204, JRC130811. 

252  https://setis.ec.europa.eu/implementing-actions/csp-ste_en 
253   For example the ratification of the London protocol.  
254    Motola,  V.  et  al,  Clean  Energy  Technology  Observatory:  Bioenergy  in  the  European  Union  -  2022  Status  Report on 

Technology Development, Trends, Value Chains and Markets,  European Commission, 2022, JRC130730. 

255   This figure includes biofuels, accounting for about 7%. 

37 

 
 
                                                           
 
sourced and used sustainably, and to avoid negative impacts on biodiversity and carbon sink 
and  stocks.  The  revision  proposal  of  the  Renewable  Energy  Directive  includes  stronger 
sustainability criteria for bioenergy and introduces a requirement for Member States to apply 
the cascading principle in their financial support schemes. Sustainably produced biomethane, 
based on organic waste and residues, in particular, can contribute to the REPowerEU goal of 
reducing EU dependency on imported fossil fuels. The obligation to separately collect organic 
waste  by  2024  represents  a  major  opportunity  for  the  sustainable  biogas  production  in  the 
coming years. Bioenergy provides flexible power generation, balancing the electricity grid and 
plays a key role in enabling high shares of variable renewable energies, such as wind and solar, 
in the electricity grids.  

Nuclear energy, with 103 power reactors (101 GWe) in the EU in 2022, generates about a 
quarter of the EU’s electricity, and provides about 40% of the EU’s low-carbon electricity256. 
Alongside  renewables,  nuclear  power  is  included  in  the  EU  strategic  long-term  plan  for  a 
climate neutral economy by 2050. The REPowerEU plan further recognises the role of nuclear-
based  hydrogen  in  substituting  natural  gas  in  the  production  of  fossil-free  hydrogen.  The 
potential contribution of nuclear to the future low carbon energy mix relies on research and 
innovation,  aiming  at  ever  safer  and  cleaner  nuclear  technologies  (both  conventional  and 
advanced ones). Several utilities and research organisations from at least seven EU Member 
States have shown interest  in  new Smaller and Modular nuclear Reactors257 (SMRs) linking 
them  to  decarbonised  electricity  and  non-electric  energy  production  such  as  industrial  and 
district heating and hydrogen production.  Interested EU industrial and state actors are driving 
a process towards a European industrial model for SMR deployment in the early 2030s.  

4.    CONCLUSION 

The rapid development and deployment of home-grown clean energy technologies in the EU 
is key to a cost-effective, climate friendly and socially fair response to the current energy crisis. 

In  response to  unprecedentedly  high  energy prices, the EU has  swiftly  put  forward  a set  of 
measures that will protect consumers and businesses, including vulnerable households and 
clean energy technology industry players, while ensuring the achievement of the 2030 and 2050 
climate and energy targets.   

In parallel, the EU should continue its efforts to reduce its dependency on, and effectively 
diversify  its  sourcing  of,  raw  materials,  as  their  surging  prices  severely  affect  the 
competitiveness  of  clean  energy  technologies.  The  announced  European  Critical  Raw 
Materials Act258 aims at contributing to achieve these ambitions. The EU also needs to deepen 
international  cooperation,  and  overcome  the  shortage  of  skilled  labour  in  various  clean 
energy technology segments, while also ensuring a gender- balanced and equal environment. 
The proposal to make 2023 the European Year of Skills represents a step towards the increase 
of skilled workers. 

256   World Nuclear Association, Nuclear Power in the European Union, table "EU nuclear power", website accessed on 14 

October 2022. 

257   European Commission, Small Modular Reactors and Medical Applications of Nuclear technologies, Publications Office 

of the EU, Luxembourg, 2022. 

258   As announced by the President of the European Commission in her State of the Union address on 14 September 2022. 

https://ec.europa.eu/commission/presscorner/detail/ov/SPEECH_22_5493. 

38 

 
 
                                                           
More public and private investments in clean energy research and innovation, scale-up 
and  affordable  deployment  are  of  pivotal  importance.  The  EU’s  regulatory  and  financial 
frameworks have  a  crucial  role  to  play here. Together with  the implementation  of the  New 
European  Innovation  Agenda,  EU  funding  programmes,  enhanced  cooperation  between 
Member States, and a continuous monitoring of national R&I activities, are crucial to design 
an impactful EU R&I ecosystem, and to bridge the gap between research and innovation and 
market uptake, thus reinforcing EU competitiveness. 

This report confirms259 that the EU has remained at the forefront of clean energy research, 
and that R&I investment is steadily growing (albeit below pre-financial crisis levels). At global 
level,  the  EU  remains  a  leader  in  ‘green’  inventions  and  high-value  patents,  being  the  top 
worldwide patent applicant in the fields of climate & environment (23%), energy (22%) and 
transport (28%). The EU’s global share of scientific publications has fallen, but EU scientists 
collaborate and publish internationally in clean energy topics at a rate that is well above the 
global average. Additionally, the EU exhibits a higher level of public-private collaboration.  

Turnover and gross value added of the EU renewable energy sector have continued to increase 
since 2019, and the EU’s production of most clean energy technologies and solutions showed 
the same trend in 2021. Although the EU has maintained a positive trade balance in a number 
of technologies, such as wind, its trade deficit has increased for others, such as heat pumps, 
biofuels and solar PV. This overall trend is partly due to the EU’s increasing demand for such 
technologies.  

On specific clean energy technologies, the report shows that the EU’s wind sector remains a 
world leader in R&I and high value patents in 2022, and maintains a positive trade balance. 
Competition remains fierce, however, and the wind industry will need to overcome the current 
unfavourable  context  also  due  to  the  increasing  global  demand  for  rare  earth  materials  and 
supply chain disruptions. The sector will need to double its current annual installation capacity 
in order to achieve the REPowerEU targets. The EU has also confirmed its position in 2022 as 
one of the largest  markets  for PV  as  well as  a strong innovator, especially  in  emerging PV 
technologies.  From  the  value  chain  perspective,  the  EU  is  still  lagging  behind  Asia,  with  a 
strong  dependence  on  several  crucial  components.  Innovative  solutions  and  continuous 
technological advances offer additional opportunities for deployment in the EU. 

The EU is at a crossroads for several technologies. Several challenges still need to be overcome 
to fully exploit them. The heat pumps sector will have to accelerate its already fast-growing 
deployment  and  ensure  systems  affordability  (especially  for  low-income  households  and 
SMEs), and EU suppliers will have to ramp up production in order to maintain their market 
share by comparison with third countries. With regards to battery production, the EU is on 
track  to  almost  achieving  self-sufficiency  by  2030,  but  a  lack  of  domestically  sourced  raw 
materials  and  advanced  materials  production  capacity  continue  to  pose  challenges.  Further 
attention  is  needed  to  increase  recycling  capacity  and  establish  technological  capability  in 
cheaper storage/longer-term storage.  On hydrogen production through electrolysis, the EU 
benefits from its strong comprehensive approach to pull demand and supply. The EU’s value 
chain position varies (e.g. it leads in Solid Oxide electrolysis, but does not compete in alkaline 
technology). Surges in electricity prices and reliance on critical raw materials are some of the 

259   As  in  the  previous  edition:  COM  (2021) 952  final  and  SWD(2021)  307  final  (’Progress  on  competitiveness  of  clean 

energy technologies’).  

39 

 
 
                                                           
main  challenges.  The  EU  is  the  clear  market  leader  in  operational  commercial  plants  of 
renewable  fuels  and  high-value  innovations.  Although  with  limited  installed  and  planned 
production for 2030, renewable fuels can contribute to all Fit for 55 emission saving targets, if 
certain  technical  and  economic  risks  are  addressed.  Innovation  in  the  EU’s  digital  energy 
infrastructure  will  be  key  to  ensuring  that  the  electricity  grid  is  fit  for  the  future  energy 
system. Demand for HEMS and smart EV charging is taking off and expected to grow and the 
roll-out of an intelligent metering system is progressing in the EU (albeit at a slower pace than 
envisaged). 

Overall, despite the promising positive trends observed in the EU innovation ecosystem, further 
efforts are needed to address structural barriers and societal challenges holding back the EU-
based climate-tech start-ups and scale-ups more than in other major economies. To exploit its 
potential to become a global leader in the climate-tech and deep-tech domains, the EU needs 
to leverage its diverse talents, intellectual assets and industrial capabilities, and to get private 
investors  to  participate  more  actively  in  the  funding  of  climate-tech  and  deep-climate-tech 
start-ups. 

The Commission will continue to monitor the clean energy sector’s progress and will further 
develop  its  methodology  and  data  collection  in  cooperation  with  the  Member  States  and 
stakeholders. Within this context, the Commission will update its evidence-based methodology 
for future editions of the Competitiveness Progress Report. This will inform policy decisions 
and  help  make  the  EU  competitive,  resource  efficient,  resilient,  independent,  and  climate-
neutral by 2050.  

40 

 
 
 
 
ANNEX  I:  METHODOLOGICAL  FRAMEWORK  FOR  THE  ASSESSMENT  OF  THE  EU’S 
COMPETITIVENESS260 

Part 1: Overall Competitiveness of the EU 
clean energy sector 

Part 2: Clean energy technologies and solutions 

Macro-economic analysis 
(aggregated, per MS and per clean 
technology) 

1. Technology analysis 
Current situation and 
outlook 

2. Value chain analysis 
of the energy 
technology sector 

3. Global market 
analysis 

Recent developments 

energy prices and costs: recent trends 
sustainability  and  circularity  challenges 
of  clean  energy  technologies;  (critical) 
raw material dependency of the EU clean 
energy  sector  and  impacts  on  the  EU 
competitiveness. 
impact of the Covid-19 and Recovery 
human Capital and Skills 

Research and innovation trends 

public and Private R&I investments 
patenting  and  High-Value  patents    EU 
and per MS 

- 
- 

- 
- 

- 
- 

Capacity installed, 
generation/production 
(today and in 2050) 

Turnover 

Trade (imports, 
exports) 

Cost / Levelised Cost 
of Electricity 
(LCoE)261 
(today and in 2050) 

Gross value added 
growth 
Annual, % change 

Global market 
leaders vs. EU 
market leaders 
(market share) 

The global clean energy competitive 
landscape 

Public R&I funding 
(MS and EU) 

Number of companies 
in the supply chain, 
incl. EU market 
leaders 

Resource efficiency 
and dependence262 

The innovation funding landscape in the 
EU 
(versus major economies) 

Private R&I funding 

Employment in value 
chain segment 

The role of systemic change on the clean 
energy sector (e.g. digitalisation, buildings, 
energy communities and sub-national 
cooperation) 

Patenting trends 
(incl high value patents) 

Energy intensity / 
labour productivity 

Level of scientific 
publications 

Community 
production 
Annual production 
values 

260   The  assessment  was  made  in  close  collaboration  with  the  European  Commission’s  Clean  Energy  Technology 
Observatory:    Details  for Part  1 are  reported  in  Georgakaki,  A.  et  al,  Clean  Energy  Technology  Observatory  Overall 
Strategic Analysis of Clean Energy Technology in the European Union – 2022 Status Report, European Commission, 
at 
individual 
2022, 
https://setis.ec.europa.eu/publications/clean-energy-technology-observatory-ceto_en  

JRC131001. 

technology 

available 

reports 

Part 

For 

the 

are 

2 

261   And –if available- Levelised Cost of Storage (LCoS). 
262   Segments of the value chain that depend on critical raw materials. 

41