REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Progress on competitiveness of clean energy technologies
Date: 2023-10-24
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, 24.10.2023  COM(2023) 652 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Progress on competitiveness of clean energy technologies   
 
 
2023 PROGRESS REPORT ON COMPETITIVENESS OF CLEAN ENERGY 
TECHNOLOGIES 

EXECUTIVE SUMMARY .................................................................................................................................. 2 

1. 

INTRODUCTION ....................................................................................................................................... 5 

2.  ASSESSMENT OF THE COMPETITIVENESS OF THE EU’s CLEAN ENERGY SECTOR .......... 7 

2.1 

2.2 

2.3 

2.4 

2.5 

The impact of high energy and raw materials prices on the EU’s clean energy sector ................ 7 

From resources to assembly: strengthening the EU as an industrial powerhouse ...................... 10 

Human capital and skills: bridging skill gaps and shortages to avoid bottlenecks ..................... 14 

From research and innovation to market uptake: charting a successful path for the EU ............ 16 

The venture capital landscape: attracting capital to the EU  ....................................................... 18 

3.  ASSESSING THE COMPETITIVENESS OF STRATEGIC NET-ZERO TECHNOLOGIES ........ 20 

3.1 

3.2 

3.3 

3.4 

3.5 

3.6 

3.7 

3.8 

3.9 

3.10 

3.11 

Solar photovoltaics ..................................................................................................................... 20 

Solar thermal .............................................................................................................................. 22 

Onshore and offshore wind energy ............................................................................................. 23 

Ocean energy .............................................................................................................................. 25 

Batteries ...................................................................................................................................... 26 

Heat pumps ................................................................................................................................. 28 

Geothermal energy ..................................................................................................................... 30 

Water electrolysis to produce renewable hydrogen .................................................................... 31 

Sustainable biogas and biomethane technologies ....................................................................... 33 

Carbon capture and storage (CCS) ............................................................................................. 35 

Grid technologies: the example of high voltage direct current systems ..................................... 37 

4.  CONCLUSION .......................................................................................................................................... 41 

 
 
 
 
 
 
 
EXECUTIVE SUMMARY 

In  response  to  the  unprecedented  disruption  of  the  world’s  energy  system  -  caused  by  the 
COVID-19  pandemic  and  exacerbated  by  Russia’s  unprovoked  and  unjustified  military 
aggression against Ukraine - the EU has decided to accelerate its clean energy transition. 

Despite  rising  prices  due  to  the  peak  in  energy  and  material  costs  in  2022,  clean  energy 
technologies  remain  highly  cost  competitive.  The  roll-out  rate  of  clean  energy 
technologies is increasing in the EU. In 2022, the roll-out rate of wind and solar increased 
around 50% compared to 2021. However, this trend should not obscure the challenges that the 
EU’s clean energy manufacturing industry faces. Even in sectors such as wind energy or heat 
pumps, where the EU has a strong manufacturing base, EU market shares are falling.  

Overall,  from  raw  materials  to  key  intermediate  components  and  final  clean  energy 
technologies, the EU is increasingly dependent on imports from third countries. Over 60% 
of the global  manufacturing  capacity for key value chain  segments of batteries and solar is 
located in China. Over 90% of capacity for the wafers and ingots required for solar PV is in 
China.  

The  Green  Deal  Industrial  Plan,  the  Net-Zero  Industry  Act  and  the  Critical  Raw 
Materials Act are amongst the EU’s key actions to lower the dependence on the imports 
of net-zero technologies, strengthen value chain resilience, and build a strong domestic 
manufacturing base. They seek to tackle the most pressing challenges. One such challenge is 
to improve skills, ensure quality jobs and to turn innovation into industrial production. 
Despite  the  positive  trend  in  employment,  the  latest  data  show  that  the  skills  gaps  and 
shortages seen since 2021 may curb growth in the clean energy sector. In 2023, nearly 4 in 5 
small and medium-sized companies report it is generally difficult for them to find workers with 
the right skills.  

Designing a successful R&I pathway is also key for a competitive clean energy industry. 
The  EU  remains  at  the  forefront  of  clean  energy  research,  maintains  a  strong  position  in 
internationally  protected  patents,  and  is  leading  on  renewables  and  energy  efficiency.  Still, 
stepping up efforts in  the synergistic use of the EU and national  programmes, and defining 
clear national R&I 2030 and 2050 targets are crucial elements to design this successful R&I 
pathway.  

The EU also needs to remain an attractive place to invest in, manufacture and deploy 
clean energy technologies. In 2022, venture capital (VC) investments in clean energy in the 
EU rose by 42% compared to 2021 and accounted for a growing share of global VC investment 
in  clean  energy  technology  firms,  ranking  third  behind  the  US  and  China.  However,  when 
looking at strategic net-zero technologies as defined in the Net-Zero Industry Act, except for 
batteries, the EU has still not fully unlocked its capacity to attract higher growth deals as the 
US and China have done. To boost the EU’s competitiveness, resilience and leadership, the 
EU’s regulatory and financial frameworks are evolving to ensure investments and that capital 
keeps flowing to EU companies at the required scale. 

2 

 
 
 
 
 
 
 
 
In addition to these cross-cutting issues, net-zero technologies also face specific challenges and 
present different opportunities.  

2022  was  a  record  year  for  solar  PV  installed  capacity  in  the  EU.  From  a  value  chain 
perspective, however, the EU is strongly dependent on Chinese imports. For the EU to bridge 
the cost gap compared to its competitors, building on planned measures, it needs to scale up its 
manufacturing  plants  and  focus  on  innovative  products  and  advanced  and  more  sustainable 
manufacturing processes.  

The EU holds technology leadership on solar thermal but faces growing competition from 
Asian players. Innovative solutions and continuous technological advances are key to boost 
competitiveness. High EU demand for industrial process heat in the range of 150 – 400 °C is 
also a good opportunity to roll out solar thermal.  

The EU wind sector remains one of the strongest players in the world, with EU manufacturers 
accounting for 30 % of the global  market  share in 2022, but  down from 42% in  2019. The 
sector is facing specific challenges, including uncertain demand, auction design issues and slow 
permitting  procedures.  To  tackle  these  issues,  the  Commission  adopted  the  Wind  Power 
Action Plan which will help accelerate permitting even more, improve auction systems across 
the EU, facilitate access to finance and strengthen supply chains. 

The  EU’s  ocean  energy  technology  industry  is  a  strong  innovator.  To  boost  the 
competitiveness  of  this  sector,  investors  need  reassurance.  Running  technology-specific 
auctions or developing multiple uses (e.g. with other renewable installations or for multiple 
activities) would also support the industry.  

The EU is on track to meet the forecasted demand for batteries for 2025 and 2030. The 
number of announced lithium-ion gigafactories increased in 2022 from 26 to 30 and continues 
to rise. While Europe’s share in global investment announcements in lithium-ion production 
capacity fell from 41% in 2021 to 2% in 2022, battery factories are being built with increasing 
speed  across  Europe  and  are  projected  to  meet  most  of  EU  demand  by  2030.  The  biggest 
relative increase needed to meet the 2030 target is in recycling.  

The  EU  market  for  individual  heat  pumps  is  growing.  Estimates  indicate  that  sales  of 
individual  heat  pumps  increased  by  41%  in  2022.  However,  this  growth  has  been  partially 
captured by imports, with the trade balance deficit doubling in 2022 since 2021. EU production 
capacity was estimated to have covered 75% of EU demand for individual hydronic heat pumps 
in 2021 but EU manufactures are dependent on imports for components such as compressors 
and synthetic refrigerants. The Commission is preparing an EU action plan to accelerate the 
deployment of heat pumps. 

Although the EU geothermal sector has limited installed capacity, it has the potential to 
contribute to REPowerEU targets and to the secure supply of raw materials. The sector 
needs more available underground data to increase the success rate and predictability of new 
geothermal projects as well as technology improvements. The sector would also benefit from 
action to  simplify the  licensing process, de-risking  schemes, higher public awareness  and  a 
more skilled work force. 

3 

 
 
 
 
  
 
 
 
Investments in the EU in generating renewable hydrogen through water electrolysis have 
opened up the possibility for several manufacturers to build new electrolyser factories in 
Europe. At the same time, the EU faces the challenges to increase renewable and cost-efficient 
energy to power these electrolysers and avoid any negative impacts on freshwater availability 
to deploy this technology. Further action is needed to increase recycling capability in Europe 
including of the critical raw materials needed for electrolyser manufacturing.  

In 2022, the EU was the largest producer of biogas, accounting for over 67% of global 
production. The EU is also  an R&I  leader in sustainable biogas. Decreasing  production 
costs, notably through innovation, replication and a stable regulatory framework, could help 
boost the EU’s competitiveness in the sector.  

On carbon capture and storage (CCS), this range of technologies is mature in the EU, 
proven and readily available. However, CCS needs to be deployed at scale if the EU is to 
reach  climate  neutrality  by  2050.  The  EU  is  relatively  well  positioned  on  CO2  capture 
technologies and in terms of R&I, but has not yet developed full industrial carbon management 
value chains and facilities are still not operational on a commercial basis. Public funding – both 
at  EU and  national  level  – will be needed to  attract  private  capital.  Furthermore, proposing 
business models for this emerging market  will also be essential. The EU has several policy 
tools in place supporting CCS development. The Commission is now working on an Industrial 
Carbon Management Strategy which is planned for the first quarter of 2024. 

The emergence of sizeable offshore wind farms and regional interconnectors have made the 
European market very attractive for High Voltage Direct Current (HVDC) system developers 
and technology providers. However, the sector will need to overcome challenges such as higher 
global demand for components and the risk of supply chain disruptions. Closer cooperation 
between stakeholders is key, as is support for harmonisation and standardisation, in particular 
to  stimulate  investment  in  production  capacity  by  EU  suppliers.  Bringing  in  streamlined 
procurement procedures and voluntary demand pooling for EU buyers could help tackle the 
main supply chain issues.  

The competitiveness of the clean energy sector has been a topic of increased attention over the 
past year. The EU has reacted swiftly to support its industry in meeting the current challenges 
and  will  pursue  coordinated  action  to  this  end.  This  2023  edition  of  the  Competitiveness 
Progress  Report  is  particularly  topical  as  it  provides  insights  into  the  main  drivers, 
opportunities and barriers to competitiveness in the EU’s clean energy sector. 

4 

 
 
 
 
 
 
 
 
1.  INTRODUCTION 

The COVID-19 pandemic and Russia’s unprovoked and unjustified military aggression against 
Ukraine have massively disrupted the world’s energy system. The all-time high energy prices 
and the disruption of global supply chains have challenged the EU’s energy system as never 
before and required actions to give people both secure and affordable energy. In response, the 
EU has taken decisive actions to diversify its energy supply and fast-track the transition 
to clean energy. 

Since 2020, the EU’s economic recovery policies adopted in response to the pandemic, such 
as the Recovery and Resilience Facility, have substantially increased investments  in  clean 
energy solutions. The reforms and investments proposed by Member States in their Recovery 
and Resilience Plans alone represent some EUR 203 billion in climate-related expenditure1. In 
addition,  cohesion  policy  funds  provide  further  EUR  46  billion  of  clean  energy  related 
investments. 

In 2022, the EU adopted the REPowerEU plan,2 setting out the course of action to phase out 
the  EU’s  dependency  on  Russian  energy  imports  as  soon  as  possible.  The  plan  sets  out 
measures to save energy, diversify energy supplies and to accelerate the roll-out of renewable 
energy.  

These actions have produced substantial results. The share of Russian pipeline gas out of 
total EU gas imports has fallen from around  45-50% pre-pandemic to around 10% between 
January and June 2023. The roll-out rate of wind and solar in the EU increased by around 50% 
compared  to  2021.  Wind  and  solar  energy  accounted  for  22%  of  the  EU’s  electricity 
production,  overtaking  natural  gas  for  the  first  time.  In  addition,  the  EU  adopted  more 
ambitious energy efficiency and renewable energy targets for 2030.  

This large-scale, accelerated energy transition must be underpinned by measures to secure the 
resilient supply of clean energy technologies. These measures include scaling up domestic 
manufacturing capacity, diversifying supply chains, and applying circular economy measures. 
This is crucial to reinforce the EU's open strategic autonomy. Not only are such measures 
important to increase energy supply security: they can also create jobs and growth. The global 
market for key mass-manufactured net-zero technologies is set to triple by 2030 from today’s 
level, with an annual value of around EUR 600 billion3. 

Today,  the  clean  energy  manufacturing  industry  in  the  EU  faces  headwinds.  Even  in 
sectors such as wind energy or heat pumps, where the EU has a strong manufacturing base, 
market shares are falling. Other regions in the world have taken large-scale initiatives to boost 
their net-zero industry and competition is growing fierce and fast. 

This is why, in February 2023 the European Commission presented the European Green Deal 
Industrial Plan4. The plan aims to boost the competitiveness of the EU’s net-zero industry by 
improving the regulatory framework, accelerating access to funding, investing in skills, and 
supporting  trade.  The  plan  was  followed  in  March  2023  by  the  proposals  for  a  Net-Zero 

1   As of 1 June 2023. Following the climate tracking methodology, using Annex VI of the RRF Regulation.  
2   COM(2022) 230 final. 
3  
4   COM(2023) 62 final. 

International Energy Agency (IEA), Energy Technology Perspectives, 2023. 

5 

 
 
 
Industry Act5 and a Critical Raw Materials Act6. The aim of these initiatives is to simplify 
the regulatory framework, consolidate the EU’s industrial leadership in net-zero technology 
manufacturing,  ensure  sustainability  of  supply  for  critical  raw  materials,  reduce  the  EU’s 
reliance  on  highly  concentrated  imports,  and  increase  the  recycling  rate  of  strategic  raw 
materials. These actions build on other existing initiatives such as the Circular Economy Action 
Plan and the new Rules on Batteries.  

Other initiatives, including the communications entitled The Single Market at 307 and the 
Long-term view on competitiveness of the EU8 complement the Green Deal Industrial Plan 
by  setting  out  a  long-term  sustainable  and  comprehensive  approach  to  boosting  the  EU’s 
competitiveness. The European Economic Security Strategy9 aims to minimise risks arising 
from certain economic flows, while maintaining maximum levels of economic openness and 
dynamism.  Finally,  the  Strategic  Technologies  for  Europe  Platform  (STEP)  boosts  the 
investment capacity for critical technologies, including clean energy technologies. 

To track progress on these initiatives, these measures must be underpinned by data, requiring 
continuous  monitoring  of  the  competitiveness  of  the  EU’s  clean  energy  sector.  This 
Competitiveness Progress Report on clean energy technologies10 is part of this monitoring 
process  in  several  ways.  First,  it  provides  insights  into  the  main  drivers,  opportunities  and 
barriers  of  the  competitiveness  of  the  EU  clean  energy  sector  as  whole.  It  looks  at  both 
technological  and  non-technological  challenges  related  to  the  high  prices  of  energy  and 
materials, the risk of value chain disruptions, skills and labour shortages, and the innovation 
landscape.  Second,  it  assesses  the  competitiveness  of  the  strategic  energy  technologies 
identified in the Net Zero Industry Act proposal, highlighting segments of the value chains that 
require attention. 

The Commission has published this report every year since 2020, in accordance with Article 
35(1)(m) of the Regulation on the Governance of the Energy Union and Climate Action. This 
report accompanies the State of the Energy Union reports and is underpinned by data from the 
Clean Energy Technology Observatory (CETO) 11. 

5   COM(2023) 161 final, SWD(2023) 68 final. 
6   COM(2023) 160 final. 
7   COM(2023) 162. 
8   COM(2023) 168 final. 
9   JOIN/2023/20 final.  
10   For  more  information:  Clean  Energy  Competitiveness  (europa.eu),  and  2022  edition  of  the  Progress  Report  on 

Competitiveness of Clean Energy Technologies (CPR): COM(2022) 643 final. 

11   For more information: Clean Energy Technology Observatory. 

6 

 
 
 
 
 
2.  ASSESSMENT OF THE COMPETITIVENESS OF THE EU’S CLEAN ENERGY 

SECTOR 

2.1  The impact of high energy  and raw materials  prices on the  EU’s  clean energy 

sector 

In 2022, Russia’s unprovoked and unjustified military aggression against Ukraine and attempts 
to manipulate the energy market led to all-time high energy prices in the EU and the rest of the 
world. Wholesale gas prices in the EU hit a historic high in August 2022 (EUR 294 /MWh12) 
and remained very high until the end of 2022. Despite most electricity being produced from 
lower-cost sources (41% renewable and 23% nuclear), electricity prices still largely reflect the 
price  of  natural  gas13.  As  a  result,  electricity  prices  reached  record  highs  on  the  wholesale 
markets in 2022 (EUR 474/MWh14), thus challenging the EU’s competitiveness.  

The EU has been taking decisive action starting already in 202115. Thanks to a strategy based 
on  supply  diversification,  mandatory  storage  levels,  a  concerted  effort  to  improve  energy 
efficiency, energy demand reduction and a faster roll-out of renewables, natural gas prices fell 
significantly from the record highs seen last year. Assisted by a mild winter, European gas and 
electricity markets stabilised by the end of 2022 and prices started a sustained downward trend. 
From their historic peak, the wholesale gas prices dropped to EUR 130-140/MWh by the end 
of 2022 and steadily decreased in the first half of 2023, reaching EUR 30-40/MWh by August 
2023. Mirroring the fall in gas prices, electricity prices also gradually fell from record highs, 
thanks  to  reduced  demand,  higher  renewable  generation,  and  recovering  hydro  stocks. 
Electricity prices on the wholesale market fell to EUR 74/MWh in the first week of August 
2023.  

Despite  the  improvement  in  market  fundamentals  -  as  EU  policy  action  and  market  forces 
brought  supply  and  demand  for  energy  into  balance  -  and  having  secured  new  gas  supply 
sources16, industrial electricity and gas prices remain higher than the pre-crisis average17. The 
spread  with  other  global  economies  has  also  increased18.  This  is  both  an  opportunity  and  a 
challenge for the competitiveness of the clean energy sector.  

12   Weekly average price on the Title Transfer Facility (TTF). 
13   Gasparella, A., Koolen, D. and Zucker, A., The Merit Order and Price-Setting Dynamics in European Electricity Markets, 

European Commission, Petten, 2023, JRC134300. 

14   Wholesale (EU5): weighted average of prices of main EU electricity markets (DE, ES, FR, NL) and  Nordpool market 

(NO, DK, FI, SE, EE, LT, LV). 

15  Measures include the Toolbox for action and support Communication (COM(2021) 660 final), the Security of supply and 
affordable energy prices  communication (COM(2022) 473 final), the Gas Storage Regulation (COM(2022) 135 final  - 
Regulation (EU) 2017/1938), the Gas Demand Reduction Regulation (COM(2022) 361 final - Council Regulation (EU) 
2022/1369), the Regulation to address high energy prices (COM(2022) 473 final - Council Regulation (EU) 2022/1854), 
the  Solidarity  Regulation  (COM(2022) 549  final  -  Council  Regulation  (EU)  2022/2576),  the  Market  Correction 
Mechanism (COM(2022) 668 final - Council Regulation (EU) 2022/2578), the Permitting Regulation (COM(2022) 591 
final - Council Regulation (EU) 2022/2577). 

16   In particular, the EU increased LNG imports from the United States and pipeline supply from Norway, Azerbaijan and the 

United Kingdom. 

17   Wholesale gas prices are still double the average of the 15 years preceding the aggression of Russia against Ukraine. Pre-
crisis electricity prices were at EUR 40-60/MWh. See also: EU fossil generation hits record low as demand falls | Ember 
(ember-climate.org). 

18   Since the energy crisis and the war in Ukraine, the EU’s gas prices have been among the highest in the world. Although 
the market stabilised, EU gas prices have been four to five times higher than prices in the US in the period from January 
2023 to July 2023, although comparable to prices in the UK and other gas-importing countries such as China and Japan. 

7 

 
 
 
On the one hand, high energy prices make clean energy solutions even more competitive 
than  fossil  fuel  options  and  stimulate  higher  rates  of  adoption.  High  energy  prices  and 
Russia’s  unprovoked  and  unjustified  military  aggression  against  Ukraine  have  led  to  a 
significant increase in EU public and private investments in energy efficiency and renewable 
energy sources. This includes an increase in public funding for energy infrastructure, notably 
through the contribution of the Recovery and Resilience Facility (RRF) to the REPowerEU 
Plan19.  

High fuel and carbon prices have led to a fall in the share of fossil fuel generation in the EU 
electricity mix (from 34% in 2021 to 32% in 2023), while the share of renewables has risen 
from  37%  in  2021  to  42%  in  2023.  The  EU  policy  measures  have  played  a  major  role  in 
accelerating  the  roll-out  of  clean  energy  technologies:  in  2022,  the  installation  of  solar  and 
wind capacities increased  respectively  by  60%  and 45%  and for the first time,  the share of 
electricity generated by wind and solar exceeded the share of gas and coal-generated power.  

On  the  other  hand,  high  energy  prices  combined  with  high  interest  rates  also  have  a 
negative  impact  on  the  EU  clean  energy  technology  value  chains,  both  directly  and 
indirectly. Since 2020, the economic and geopolitical turmoil has put a significant strain on 
clean energy supply chains and temporarily stalled the downward trend in the roll-out costs. 
This combination of factors drove up manufacturing and installation costs for wind and, to a 
lesser extent, solar projects. According to industry estimates20, the cost of building offshore 
wind farms has increased by 40% in 2023 in the EU.  

Rising  interest  rates  have  also  had  a  negative  effect  on  the  financing  of  renewable  energy 
projects, as upfront capital costs represent most of project costs. This is particularly acute for 
offshore wind power due to the high upfront investment needed. A 3.2% increase in interest 
rates  is  estimated  to  raise  the  cost  of  offshore  projects  by  25%21.  As  a  result,  no  new  final 
investment decisions were made in offshore wind farms. Orders of new wind turbines fell by 
47% in 2022 compared to 2021 in Europe22. However, this trend reversed in 2023. In the first 
six months of 2023, almost EUR 9.3 billion were raised for the construction of four wind farms 
in the EU with the generation capacity of 2.7 GW. 

Raw  materials  supplies  and  their  price  evolution  are  another  challenge  to  the 
competitiveness of the EU’s clean energy sector, as they affect the costs of clean energy 
technologies. Between 2021 and early 2022, the price of several critical materials (lithium and 
nickel in particular) rose, and volatility increased sharply23. Although prices began to moderate 
in the second half of 2022 and the beginning of 2023, they remained well above the historic 
average.  

Prices for lithium carbonate continued to rise throughout 2022 too, nearly doubling between 
January 2022 and January 2023. At the beginning of 2023, lithium prices were six times above 
their  average  over  the  2015-2020  period.  Between  January  and  March  2023,  lithium  prices 
dropped 20%, returning to their late 2022 level. Cobalt prices, after peaking at USD 80 000 

19    Regulation (EU) 2023/435.  
20   WindEurope, press release: Investments in wind energy are down – Europe must get market design and green industrial 

policy right, 31 January 2023. 

21   M. Đukan, A. Gumber, F. Egli, B. Steffen, The role of policies in reducing the cost of capital for offshore wind, 2023. 
22   Based on Enerdata, Daily Energy and Climate News, 01 March 2023. 
23   International Energy Agency (IEA), Critical Minerals Market Review, 2023. 

8 

 
 
 
(EUR 72 60024) per tonne in March 2022, then fell consistently and remained around USD 50 
000  (EUR  47  48525)  per  tonne  throughout  the  rest  of  the  year.  In  2023,  cobalt  prices  are 
expected to  remain  low  due to  oversupply. Lithium  and cobalt are  both  key components of 
batteries and essential for the clean energy transition. 

High energy and raw material prices had an impact on the decade-long trend of falling costs 
of clean energy technology due to innovation and economies of scale26. For example, the price 
of  wind  turbines  and  solar  PV  modules  rose  between  2020  and  2022.  However,  prices  are 
falling again in 2023. Despite these price dynamics, the prices of all clean energy technologies 
are still significantly lower today than they were a decade ago. Although high energy and raw 
materials prices have impacted the clean energy sector, the energy produced by clean energy 
technologies remains highly cost competitive in the EU27.  

Figure 1 provides a snapshot of levelised costs of electricity (LCOE) calculations for 2022 for 
a  range  of  representative  conditions28  across  the  EU.  The  results  indicate  that  in  2022 
technology fleets with low variable costs (including variable operational costs and fuel costs) 
such as renewable energy generation, had lower levelised costs than generation technologies 
with high variable costs, such as fossil fuel-fired generation.  

Figure 1: Snapshot of technology-fleet specific levelised costs of electricity (LCOE) for 2022. (The light blue bars display a 
range across the EU and the solid blue lines denote the median)29. 

Source: JRC METIS model simulation, 202330 

24   Using 

the 

average 

exchange 

rate 

of  EUR 

0.9075 

for  USD 

1 

over  March 

2022.  See: 

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

rate  of  EUR  0.9497 

for  USD  1  over 

exchange 

average 

the  year  2022.  See: 

25   Using 

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

26   International Energy Agency (IEA), Clean energy equipment price index, 2014-2022, 2023. 
27   This section focuses on cost analysis. More information on market value: The development of renewable energy in the   

electricity Market, June 2023. 

28   Data points shown for the first to third inter-quartile range to filter for outliers. 
29   In the Figure, CCGT means combined cycle for natural gas. 
30   Gasparella, A., Koolen, D. and Zucker, A., The Merit Order and Price Setting Dynamics in European Electricity Markets, 

Publications Office of the European Union, 2023, JRC134300. 

      Computation based on annualised costs for the year 2022. Capex and Opex based on the 2022 PRIMES scenario, annualised 
by  technical  lifetimes  and  the  weighted  average  cost  of  capital.  Annualised  costs  are  levelised  using  capacity  factors 
derived from the METIS model. Variable costs are based on 2022 commodity prices, variable OPEX and the dispatch in 
the METIS simulation. 

9 

 
 
 
 
2.2  From resources to assembly: strengthening the EU as an industrial powerhouse 

The current geopolitical context has also had an impact on the global clean energy competitive 
landscape as it has triggered new policy dynamics and market trends.  

Globally, the sector of net-zero technologies is growing fast. The global market for key mass-
manufactured net-zero technologies is set to  triple by 2030 with an annual worth of around 
EUR 600 billion31. Higher demand goes hand in hand with a higher demand for resources and 
materials.  Estimates  indicate that global demand  for some raw materials  that are key in  the 
clean energy technology value chains will increase substantially over the coming decades. In 
2050, global demand for terbium, gallium or lithium32 is projected to be around 100% of current 
supply, even in a low demand scenario33. These projections emphasise the risks that could arise 
for economies that are highly dependent on the supply of these critical raw materials. 

From raw materials to key intermediate components and final clean energy technologies, the 
EU  is  increasingly  dependent  on  imports  from  third  countries.  The  situation  varies 
depending on the technology, but for most technologies the EU depends on China for at least 
one stage of the value chain. China plays a key role in the supply of critical raw materials, a 
sector where the EU is heavily dependent on imports from a few countries. For example, the 
EU gets 98% of its rare earth supply and 97% of its magnesium from China34, about 80% of its 
lithium from Chile, and more than 60% of its cobalt from the Democratic Republic of Congo35. 
For  the  manufacturing  of  clean  energy  technologies,  China  is  also  in  a  dominant  position 
across different technologies. Over 60% of global manufacturing capacity for key value chain 
segments of batteries and solar PV is located in China. Over 90% of global manufacturing for 
the wafer and ingots required for solar PV is in China36. 

For wind turbine manufacturing, China’s share in  global production increased from  23% in 
2017 to 50% in 202237. Over the same timeframe, the EU’s share fell from 58% in 2017 to 
30%38,39. For chips, a key component in the manufacturing of clean energy technologies, in the 
2021 update of the EU Industrial Strategy40, the Commission confirmed that the EU is strongly 
dependent on the US for general design tools and on Asia for advanced chip fabrication.  

31   International Energy Agency (IEA), Energy Technology Perspectives, 2023. 
32   Terbium is part of the rare-earth elements which are fundamental materials for the magnets in wind turbines. Gallium is 
used in some PV panels as well as electronics, data networks, robotics and satellites. Lithium is crucial for the production 
of batteries. 

33   Carrara, S., et al., Supply chain analysis and material demand forecast in strategic technologies and sectors in the EU – A 

foresight study, Publications Office of the European Union, Luxembourg, 2023, doi:10.2760/386650, JRC132889. 

34   RMIS - Raw Materials Information System (europa.eu), 2023 
35   European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, Grohol, M., Veeh, 
C., Study on the critical raw materials for the EU 2023 – Final report, Publications Office of the European Union, 2023, 
https://data.europa.eu/doi/10.2873/725585. 

36   BloombergNEF, Localizing clean energy supply chains comes at a cost, 2022. 
37   Carrara, S., et al., Supply chain analysis and material demand forecast in strategic technologies and sectors in the EU – A 

foresight study, Publications Office of the European Union, Luxembourg, 2023, doi:10.2760/386650, JRC132889. 

38   Estimates indicate that in 2022 onshore installations outside the EU and China were 51% by EU companies, 34% by US 
and 9% by China. For offshore the split was 94% EU companies and 6% Chinese. Source: JRC based on Wood Mackenzie 
and 4C Offshore.  

39   Tapoglou, E., Tattini, J., Schmitz, A., Georgakaki, A., Długosz, M., Letout, S., Kuokkanen, A., Mountraki, A., Ince, E., 
Shtjefni, D., Joanny Ordonez, G., Eulaerts, O.D. and Grabowska, M., Clean Energy Technology Observatory: Wind energy 
in the European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, Publications 
Office of the European Union, Luxembourg, 2023, doi:10.2760/618644 (online), JRC135020.  

40   COM/2021/350 final. 

10 

 
 
 
 
For semiconductors, Taiwan Semiconductor Manufacturing Co (TSMC) accounted in 2022 for 
92%  of  the  most  advanced  semiconductor  fabrication  across  the  world,  making  Taiwan 
responsible for about half of the world's semiconductor fabrication41. The EU has a significant 
share  of  in  the  global  production  of  digital  components,  but  it  produces  only  9%  of 
semiconductors and microprocessors42.  

The global supply chain disruptions triggered by the COVID-19 pandemic and exacerbated by 
Russia’s unprovoked and unjustified military aggression against Ukraine have shown that it is 
crucial  to  boost  the  EU’  capacity  and  competitiveness  to  produce  the  technologies  and 
components needed to make the transition to climate neutrality. Designing new materials with 
properties  optimising  the  performance  of  net  zero  technologies  should  also  unlock  new 
possibilities for industries43. 

Looking  at  the  major  economies,  the  2022  US  Inflation  Reduction  Act  (IRA)44  aims  to 
catalyse investments in domestic manufacturing capacity by providing an estimated USD 400 
billion (EUR 380 billion45) in federal funding for clean energy, mostly via subsidies and tax 
incentives.  In  2021,  the  US  also  adopted  the  Bipartisan  Infrastructure  Deal  (Infrastructure 
Investment and Jobs Act) including USD 1.5 billion (EUR 1.27 billion46) to support hydrogen 
electrolysis and USD 8 billion (EUR 6.7 billion) to fund a broad Regional Clean Hydrogen 
Hubs program. These hubs will create networks of co-located ecosystems for clean hydrogen 
production,  distribution,  storage,  and  end-use.  The  US  also  issued  a  U.S.  National  Clean 
Hydrogen  Strategy  and  Roadmap. More  recently,  in  July  2023, the  US  issued  an  executive 
order Invent it here, make it here, stating that federal agencies will have to prioritise domestic 
manufacturing when US-funded innovative technologies are brought to market.  

The 10-year technology policy initiative Made in China 202547, published in 2015, aims to 
modernise  China’s  industrial  capacity,  including  replacing  its  dependence  on  imports  of 
foreign technology with domestic innovations. In July 2023, China announced restrictions on 
the export of raw materials used in the manufacturing of a wide range of technical applications, 
including semiconductors and other advanced technologies (gallium and germanium).  

In early 2023, Japan presented the Japanese Basic Plan for the Gx: Green Transformation 
. This is a JPY 150 trillion (EUR 0.95 trillion49), 10-year decarbonisation strategy to 
Policy48

41   Netherlands Enterprise Agency, Research on the Next Generation Semiconductor Industry in Taiwan, 2022. 
42   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 – Final report, Publications Office of the European Union, 2021, https://data.europa.eu/doi/10.2833/946002. 
43    For more information: announced initiative “Advanced materials for industry leadership” during the 2023 State of the 

Union address. 

44   The White House, Inflation Reduction Act Guidebook | Clean Energy, 2022. 
45   Using 

rate  of  EUR  0.9497 

exchange 

average 

the 

for  USD  1  over 

the  year  2022.  See: 

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

rate  of  EUR  0.8455 

for  USD  1  over 

exchange 

average 

the  year  2021.  See: 

46   Using 

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

47   Institute for Security & Development Policy, Made in China 2025, June 2018. 
48   The Japanese Cabinet confirms the Basic Plan for the GX: Green Transformation Policy, March 2023. 
49  Using 

rate  of  EUR  0.006341 

exchange 

JPY  1 

average 

for  2 

the 

for 

January  2023.  See: 

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

11 

 
 
 
promote the development of innovative technologies and achieve “beyond-zero” CO2 reduction 
by 2050.  

Around the same period India earmarked INR 350 billion50 (EUR 4 billion51) to invest in the 
nation’s energy security and green transition (with a focus on solar power and green hydrogen 
production), with the aim of reaching net zero emissions by 2070. 

In addition to increasing the circular use of materials and diversifying supplies, the EU aims to 
massively scale-up the manufacturing and accelerate the roll-out of clean energy technologies. 
This  will support the EU in  securing its industrial leadership in  fast-growing  sectors and to 
move from a net importer of net-zero technologies to have a strong domestic manufacturing 
base. 

The Commission outlined its plans for this purpose in the Green Deal Industrial Plan. The 
plan  aims  to  boost  the  EU’s  clean  energy  competitiveness  by  simplifying  the  regulatory 
framework, accelerating access to funding, boosting skills, and supporting trade. It followed 
up  by  issuing  the  Net-Zero  Industry  Act  (NZIA)  and  the  Critical  Raw  Materials  Act 
(CRMA). The proposed NZIA aims to overcome barriers to scaling-up the manufacturing of 
net-zero technologies. It would provide a regulatory framework that simplifies and speeds up 
permitting, improves net-zero technology access to markets and promotes a range of tools. The 
proposed CRMA would enable the EU to boost the energy sector by securing access to the 
critical raw materials needed for renewables and clean energy technologies, along with other 
strategic  sectors.  It  also  focuses  on  diversifying  supply  chains  to  build  resilience  and 
preparedness in times of crisis and to boost the circular economy. 

In February 2022, the Commission also presented a proposal for a European Chips Act52 to 
tackle semiconductor shortages and boost Europe’s technological leadership. The Act, which 
entered  into  force  on  21  September  2023,  will  mobilise  over  EUR  43  billion  in  public  and 
private investments and contains measures to prepare, anticipate and swiftly respond to any 
future  supply  chain  disruptions,  together  with  Member  States  and  the  EU’s  international 
partners. The aim is to double the EU’s share of global chip production to 20% by 2030.  

Following  the  REPowerEU  plan  and  the  Green  Deal  Industrial  Plan,  the  Commission  has 
simplified its state aid rules allowing the Member States to grant state aid to facilitate the rapid 
deployment of renewable energy generation projects and implement industrial decarbonisation 
measures to achieve a net zero economy. The Temporary Crisis and Transition Framework 
(TCTF)53, adopted in March 2023, permits aid to all renewable technologies and to renewable 
hydrogen and biofuel storage and eliminates the need for open tendering procedures for less 
mature technologies. It also expands the possibilities of aid for the decarbonisation of industrial 
production processes through electrification and/or the use of renewable and electricity-based 
hydrogen. The TCTF also permits investment support schemes for production of strategic net-
zero technologies, including the possibility for granting higher aid to match the aid received 
for  similar  projects  by  competitors  located  outside  of  the  EU.  This  action  was  further 

50   Bloomberg, India plans $4.3 billion spending for energy transition, 1 February 2023.  
51  Using 
INR  1 

rate  of  EUR  0.011351 

exchange 

average 

the 

for 

for  2 

January  2023.  See: 

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

52   COM(2022) 46 final. 
53    OJ C 101, 17.3.2023, p. 3. 

12 

 
 
 
complemented by the adoption, in June 2023, of a revision of the General Block Exemption 
Regulation (GBER)54. 

Through these proposals, the EU is stepping up action to attract more capital into the EU to 
invest in and manufacture clean energy technologies. To underpin these initiatives, it provides 
support  from  several  funds  and  instruments.  For  example,  in  May  2023,  the  Commission 
presented  the  2024  Flagship  for  Support  to  the  Green  Deal  Industrial  Plan  under  the 
Technical Support Instrument55 to help Member States implement the Green Deal Industrial 
Plan.  

As additional support for and boost to investment in critical and clean energy technologies, in 
June  2023,  the  Commission  put  forward  the  Strategic  Technologies  for  Europe  Platform 
(STEP)56. It provides funding under the EU Innovation Fund, a key investment instrument to 
support the manufacturing of clean energy technologies. The results of the third call for large-
scale projects57 already show that projects pre-selected for grant funding under this call of the 
ETS Innovation Fund, together with the previously awarded projects, will cover 17% of the 
NZIA 2030 solar manufacturing objectives, 11% of the electrolysers manufacturing objectives 
and 7% of the battery manufacturing objectives, if all projects are realised. Furthermore, along 
with other investments, the Recovery and Resilience Facility will also support the construction 
of manufacturing plants of electrolysers, solar PV panels and batteries.  

The  EU  is  not  starting  from  scratch,  as  a  number  of  projects  are  already  underway  across 
multiple  technologies.  In  recent  months,  the  EU  has  witnessed  major  developments  on  the 
market in terms of new project and investment announcements for key net-zero technology 
manufacturing in the EU. These include solar PV, wind, batteries, heat pumps, electrolysers 
and fuel cells. Project pipelines have continued to evolve too. For these key net-zero technology 
value chains, as of August 2023, there are over 100 projects planned for building or expanding 
existing  production  capacity58.  The  consistently  strong  results  of  the  ETS  Innovation  Fund, 
including in the latest heavily oversubscribed large-scale call, shows there is a strong pipeline 
of innovative and competitive European projects.  

In the batteries value chain, the number of announced lithium-ion gigafactories rose in 2022 
from 26 to 30. In the solar PV value chain, despite major challenges that the manufacturing 
sector  faces,  several  existing  production  facilities  consider  expanding  to  become  giga-scale 
factories and have secured Innovation Fund funding in the last call, and some new giga-scale 
manufacturing  projects  have  been  announced.  In  the  wind  industry,  several  projects  are 
considered, encompassing new facilities, expanding existing facilities and creating new port 
infrastructure.  It  should  be  noted  that  it  is  possible  not  all  announced  investments  will  be 
realised in the end.  

In 2022 alone, nearly 800 MW of power purchase agreements were signed with heavy industry 
in the EU (4.5 GW when considering all sectors) without public support. For heat pumps, the 
total investment to build new production capacity across the value chain announced over the 
last 5 months and due to be made over the next 3 years adds up to nearly EUR 5 billion.  

54    OJ L 167, 30.6.2023, p. 1. 
55   For more information: Technical Support Project (europa.eu), 2023. 
56   For more information: Strategic Technologies for Europe Platform (europa.eu), 2023. 
57   For more information: Third call for large-scale projects (europa.eu), 2023. 
58   Based on feedback from industrial alliances and relevant stakeholder organisations. 

13 

 
 
 
For electrolysers, no company yet manufactures at GW-scale in the EU and the technology is 
still in development. Several manufacturing plants have emerged in Europe, including thanks 
to the state aid support of the Important Projects of Common European Interest and several 
companies have announced plans for major expansions to their manufacturing capabilities in 
Europe. 

Higher demand for clean energy technologies together with fast-evolving geopolitical events 
have  highlighted  the  strategic  dimension  of  the  clean  energy  technology  value  chains.  The 
EU’s dependency on third countries makes it crucial to strengthen the competitiveness of 
its clean  energy sector  by  increasing its domestic manufacturing capacity, diversifying 
supply chains and reinforcing circularity measures. Building on projects already underway, 
the EU has put forward a comprehensive suite of initiatives and instruments to develop and 
strengthen EU clean energy technology value chains. Achieving this will be instrumental to 
strengthen  the  EU’s  strategic  autonomy  while  supporting  the  transition  to  a  carbon  neutral 
continent. It will require coordinated action from different angles. For example, it is essential 
to ensure the sector has access to a sufficient supply of skilled workers.  

2.3  Human capital and skills: bridging skill gaps and shortages to avoid bottlenecks  

The latest data on employment and skills worldwide show that, despite the positive trend in the 
employment rate, the skill gaps and shortages seen since 2021 may curb the growth of the 
clean energy sector. 

In the EU, employment in the renewable energy sector reached 1.5 million in 2021, up 12% 
compared to 202059, outpacing employment growth in the overall economy by a considerable 
margin (0.6%) and representing a notable increase after employment stalled between 2015 and 
2020.  

The growth registered in employment in the EU’s renewable energy sector in 2021 was mainly 
driven  by  heat  pumps  and  solid  biofuels.  Since  2020,  the  heat  pump  industry  has  been  the 
largest employer (26% of jobs in 2021), followed by solid biofuels60. In 2021, jobs in solar PV 
grew 35% on 2020 values and became the third biggest sector, ahead of the wind industry.  

This positive trend is expected to continue, supported by EU policy priorities on clean energy 
deployment  and  manufacturing.  To  meet  the  REPowerEU  targets  for  2030,  additional 
workers  will be needed  to roll out clean  energy technologies, with  wind and solar  alone 
potentially leading to 100 000 additional jobs in the EU61. Accounting for all renewable energy 
sectors, achieving the REPowerEU targets will require the creation of over 3.5 million jobs by 
203062. On the manufacturing side, the NZIA scenarios estimate between 198 000 and 468 000 
in new jobs and from EUR 1.7 billion to EUR 4.1 billion in investment needs for retraining, 
re-skilling and upskilling63. Finally, it is estimated that 3 to 4 million construction workers in 
the EU would need to develop their energy efficiency related skills in the building sector64.  

59   EurObserv’ER,  The  state  of  the  renewable  energies  in  Europe  –  Edition  2022  21st  annual  overview  barometer 

EurObserv’ER Report, 2023. 

60   COM(2022) 643 final. 
61    For more information: Employment and Social Developments in Europe (ESDE) Report 2023 (europa.eu). Estimate to 

deliver on policy goals (EGD-fit for 55, REPowerEU). 

62   For more information: Pact for Skills, Launch of large-scale renewable energy skills partnership (europa.eu).  
63   Under the NZIA+ scenario (100% demand met by EU manufacturing), SWD(2023) 68 final. 
64   European Construction Sector Observatory, Improving the human capital basis, March 2020.  

14 

 
 
 
However, the EU industry as a whole and clean energy manufacturing in particular, have seen 
a rise in labour shortages since 2021. This is mainly due to demand increasing faster than the 
supply of skilled workers, evidenced by the job vacancy rate doubling in 2019-2023.  

In the third quarter of 2023, labour shortages in the manufacturing segments of the renewable 
energy sector remained high as reported in the 2022 edition of the Competitiveness Progress 
Report, with 25% of EU businesses involved in electrical equipment manufacturing65 facing 
shortages. The energy sector is one of the sectors with persistent 10-year long labour shortages 
in some occupations, such as electrical equipment installers and repairers, and it is also one of 
the sectors most affected by an ageing workforce66, exacerbating structural labour shortages. 

Both skill and labour needs can be a bottleneck to growth, particularly in sectors where there 
is a high degree of specialisation67. Energy and manufacturing are among the sectors with the 
highest re-skilling and upskilling needs in terms of technical and job-specific skills, with over 
half  of  the  workforce  in  need  of  upskilling68.  Three  quarters  of  businesses  in  EU  industry 
already struggled to find workers with the skills they needed in 201969. In 2023, nearly 4 in 5 
small and medium-sized companies report it is generally difficult for them to find workers with 
the right skills70. 

Skills policies, working conditions and mobility and migration policies, together with actions 
to help people join the job market71, are key to tackling these shortages. 2023 was the European 
year  of  skills.  The  EU  budget72  plays  a  pivotal  role  in  fostering  the  development  of  skills, 
including up-skilling and re-skilling. In addition to cross-sectoral policy initiatives73, the EU 
has put forward a number of specific measures to accelerate skills development in the green 
transition, and in the clean energy sector in particular. These initiatives include support to the 
Large-Scale Skills Partnership for the renewable energy industrial ecosystem74, launched in 
March  2023,  and  the  Net-Zero  Industry  Act,  which  proposes  boosting  skills  for  net-zero 
technologies by setting up dedicated training programmes for the green transition (e.g. on raw 
materials, hydrogen, heat pumps and solar technologies). The Commission is also looking into 
advancing skills under the upcoming Heat Pump Action Plan. 

As mentioned above, activation policies can also help address skills and labour shortages 
in the sector, including the under-representation of women. The gender imbalance in the 

65   ‘NACE 27: Manufacture of electrical equipment’ used as a proxy for renewable energy manufacturing industry as many 
renewable energy technologies fall under this category. It is also used as a proxy for renewables industrial ecosystem in 
the EU Industrial Strategy [COM(2020) 108 final and its recent update COM(2021) 350 final]. 

66   For more information: Employment and Social Developments in Europe 2023 (europa.eu). 
67   SWD(2023) 68 final. 
68   Georgakaki, A.,Kuokkanen, A.,Letout, S., Koolen, D., Koukoufikis, G., Murauskaite-Bull, I., Mountraki, A., Kuzov, T., 
Dlugosz, M., Ince, E., Shtjefni, D.,  Taylor, N., Christou, M., Pennington, D., Clean Energy Technology Observatory: 
Overall  Strategic  Analysis  of  Clean  Energy  Technology  in  the  European  Union:  2023  Status  Report,  European 
Commission, 2023,  JRC135404  

69   Eurofond, European Company Survey 2019 (europa.eu), 2019. 
70   For more information: 2023 Flash Eurobarometer on skills shortages, recruitment and retention strategies in small and 

medium-sized enterprises. 

71   Active  support  to  quality  employment,  including  of  under-represented  groups,  such  as  women,  is  among  the 
comprehensive  policy  packages  under  the  Council  Recommendation  on  ensuring  a  fair  transition  towards  climate 
neutrality. 

72   Cohesion policy, through the European Social Fund + (ESF+), is the main EU instrument to fund investment in skills, 
making EUR 5.8 billion available for green skills and green jobs. The European Regional Development Fund (ERDF) 
complements  this  Fund  by  investing  in  skills,  education  and  training,  including  infrastructure.  The  Just  Transition 
Mechanism (JTM) provides EUR 3 billion in support for training and skills development of workers to adapt to the green 
transition. Other measures are set out in the 2022 Competitiveness Progress Report. 

73   E.g. Council Recommendations on individual learning accounts, micro-credentials, and vocational education and training. 
74   For more information: Pact for Skills: Launch of large-scale renewable energy skills partnership (europa.eu). 

15 

 
 
 
EU  energy  sector’s  workforce  is  considerable.  Only  26.6%  of  women  are  employed  in  the 
electricity,  gas,  steam,  and  air  conditioning  supply  sector  in  2022,  though  it  varies  across 
Member States (34% in Portugal, 14.5% in Croatia). Solar PV manufacturing has the highest 
share of women employees in the renewable sector with a 47% share, while only 21% of the 
workforce in the global wind industry are women. Policies, including skills policies, aimed at 
encouraging the participation of women in these jobs can help increase the pool of talent that 
is essential to its future growth and competitiveness.  

2.4  From research and innovation to market uptake: charting a successful path for 

the EU 

Research and innovation (R&I) is key to developing clean energy solutions that perform even 
better and are cheaper.  

In 2021, public-sector R&I spending in the Energy Union priorities75 was – in current prices 
- higher than it was a decade ago. However, as a share of GDP, public-sector R&I spending on 
the Energy Union priorities, both at national and EU level, remained below the levels spent 
before 2016. The other major economies also saw the same trend (Figure 2).  

Over half of the EU Member States that provide data76 increased their public R&I investment 
in the Energy Union priorities in 2021 in comparison to 2020, with EUR 5.4 billion reported 
so far77. 

Since 2020, Horizon 2020 and its successor, Horizon Europe, have added over EUR 2 billion 
a  year  to  the  Member  States’  national  programme  funding,  providing  a  vital  boost  to  R&I 
investment. Although the level of national  funding is low compared with major economies, 
when factoring in EU funds, the EU topped the ranking of major economies in 2021 on public-
sector R&I investment in the Energy Union priorities in absolute spending (EUR 8.2 billion78, 
ahead of the US with EUR 7.7 billion), an improvement up compared to 202079. The EU also 
ranked second as a share of GDP (0.056%, with Japan leading with 0.057%80).  

Regarding private-sector R&I investment, it is estimated that 2020 spending in technologies 
related  to  the  Energy  Union  R&I  priorities  also  increased  across  all  major  economies. 
Consistent with the findings of the 2022 CPR81, in 2020 the private sector in the EU continued 
to invest comparable  amounts  – in  absolute terms  –  with  the US  and  Japan, accounting for 
around 80% of all R&I funding. In terms of private R&I investment per GDP, this still positions 
the EU ahead of the US but behind the major Asian economies (Figure 2). 

75   COM(2015) 80 final.  
76   IEA Members: AT, BE, CZ, DE, DK, EL, ES, FI, FR, HU, IE, IT, LT, LU, NL, PL, PT, SE, SK (EL and LU do not 
report).11 of the above Member States reported an increase to the IEA: AT, CZ, DK, DE, ES, FR, HU, IE, NL, PT, SE 
77   A significant share of the increase was due to a change in reporting by Spain, coupled with a significant increase in a 
number of Member States. In Spain, coverage has been expanded, including data from state and regional governments, 
increasing the EU Member States total by over EUR 0.5 million. The changes have not been applied to previous years 
resulting in a break in the time series between 2020 and 2021. IEA, 2023. Energy Technology RD&D Budgets, May 2023 
Edition, Database documentation. 11 out of 17 Member States reported an increase to the IEA: AT, CZ, DK, DE, ES, FR, 
HU, IE, NL, PT, SE. International Energy Agency (IEA), Energy Technology RD&D Budgets - Database documentation, 
2023.  

78   This figure includes an estimate for Italy, which has yet to report for 2020 and 2021. 
79   COM(2022) 643 final. 
80   These figures include national and EU-level Framework Programme funds. National funds alone remain below other major 

economies as a share of GDP. 

81   See Section 2.2 page 12, COM(2022) 643 final. 

16 

 
 
 
Figure 2: Public and private-sector R&I investments in major economies as a share of GDP82. 

Source 1: JRC based on IEA83 , MI84 , own work85. 

Since 2014, EU patent filings in the Energy Union R&I priorities increased by an average of 
5% per year86. While there are notable differences in patenting trends both between Member 
States  and  for  specific  technologies,  overall,  the  EU  maintains  a  strong  position  in 
internationally protected patents. Overall, between 2014 and 2020, the EU ranked second to 
Japan  on  international  patent  fillings  and  led  on  renewables  (29%)  and  energy  efficiency 
(24%),  losing  some  ground  on  smart  systems  (17%  and  ranking  fourth  among  major 
economies). 

As highlighted in the 2022 CPR and in the Guidance to Member States for the update of the 
2021-2030  national  energy  and  climate  plans87,  plotting  a  successful  R&I  path  requires 
sufficient  experts  and  entrepreneurs,  supported  by  the  coordinated  use  of  EU,  national  and 
regional programmes. It also requires clear national R&I targets and objectives to 2030 and to 
2050, increased cooperation between Member States, and a continuous monitoring of national 
R&I activities. The joint and coordinated efforts across the Member States, notably through 
the  revised  Strategic  Energy  Technology  Plan  (SET  Plan),  and  the  National  Energy  and 
Climate Plans88 are also a unique opportunity to deepen the dialogue on clean energy R&I and 
competitiveness between the EU and its Member States. 

Lastly, it is crucial to keep accelerating the transfer of EU clean energy innovations into 
the market. This aim is set out in the New European Innovation Agenda, with support from 
EU funding sources such as InvestEU, the European Innovation Council, the LIFE programme 
and the Innovation Fund. Member States are also invited to foster experimentation, following 
the recent guidance89 on regulatory sandboxes, test beds and living labs. Further action is also 
needed to attract private capital. 

82   EU FP refers to the EU Framework Programmes (Horizon 2020 and Horizon Europe).  
83   Adapted from the 2023 spring edition of the International Energy Agency (IEA) energy technology R&D budgets database. 
84   Mission Innovation, Report: Country Highlights, 6th MI Ministerial, June 2021. 
85   For more information: JRC SETIS (europa.eu). 
86   For more information: JRC SETIS (europa.eu). 
87   OJ C 495, 29.12.2022. 
88   For more information: National energy and climate plans (europa.eu), 2023. 
89   SWD 2023 277/2 final. 

17 

 
 
 
 
2.5  The venture capital landscape: attracting capital to the EU90  

Over the years, the EU’s innovation policy has expanded, and the institutional landscape 
has evolved in parallel. The aim is to narrow the equity gap in EU and reduce fragmentation 
in  venture  capital  (VC)  markets  and  innovation  ecosystems.  This  includes  complementary 
initiatives to foster equity investment and boost the funding of innovative start-ups and scale-
up companies. To name a few, the European Innovation Council (EIC) Fund is the EU’s own 
venture  capital  arm  that  aims  to  fund  breakthrough  innovation  under  the  Horizon  Europe’s 
pillar III on ‘Innovative Europe’. The New European Innovation Agenda91 includes additional 
initiatives to accelerate the growth of deep-tech start-ups in the EU. The InvestEU Fund, using 
guarantees  from  the  EU  budget,  mobilises  public  and  private-sector  investments,  including 
funds that provide equity financing. 

As  VC  investment  is  at  the  forefront  of  innovation,  it  is  key  to  boosting  the  EU’s 
competitiveness and to strengthening the EU’s open strategic autonomy in the clean energy 
sector. In 2022, macroeconomic factors - such as rising inflation and interest rates - led to a fall 
in global VC funding. Total VC investment92 in EU firms fell by 18% in 2022 compared to 
2021. A similar trend is observed in the US (-20%), China (-36%) and worldwide in the first 
half of 2023.  

Global VC investment in clean energy technologies performed better than other segments93 
such as biotechnology or digital. In 2022, the global clean energy sector attracted an increasing 
share  of  VC  investment94  up  4.4%  in  2022  as  compared  to  2021,  to  EUR  39.5  billion, 
accounting for 6.2% of all VC investment. Despite this continuing positive trend observed since 
2015, it has slowed since the growth seen between 2019 and 2020 (+37%), and the record in 
2021 (+109%). 

In the EU, VC investment in the clean energy sector reached EUR 7.4 billion in 2022, a 42% 
increase  compared  to  2021.  The  EU  accounted  for  19%  -  a  growing  share  -  of  global  VC 
investment in clean energy technology firms, ranking third behind the US (38%) and China 
(28%)95. VC investment in the clean energy sector also proved to be more resilient in the EU 
– where both early and later stage investments increased in 2022 – than in the rest of the world. 
Nonetheless,  it  remains  largely  concentrated  in  a  few  technologies  (mainly  battery 
manufacturing, recycling and electric vehicles). 

Global VC investment in strategic net-zero technologies, as defined as in the NZIA proposal, 
accounted  for  EUR  20.8  billion  in  2022  (compared  to  EUR  19.5  billion  in  2021).  In  2022, 
however, VC investment in strategic net-zero technologies in the EU increased at a slower rate 
(+2.3% from 2021 to 2022) compared to the overall rate of growth in the clean energy sector. 
The  US  outpaced  the  EU,  recording  a  41%  increase  in  2022  compared  to  2021,  as  VC 

90   The  analysis  presented  in  this  section  focuses  on  clean  energy  technologies.  It  differs  from  Section  2.4  of  the  2022 
Competitiveness Progress Report by excluding activities previously considered in PitchBook’s climate tech vertical and 
related to food systems, land use, micro-mobility, shared mobility and autonomous vehicles. 

91   COM(2022) 332 final. 
92   Based on PitchBook data, 01 June 2023 
93   International Energy Agency (IEA), World Energy Investment 2023, 2023. 
94   Georgakaki, A.,Kuokkanen, A.,Letout, S., Koolen, D., Koukoufikis, G., Murauskaite-Bull, I., Mountraki, A., Kuzov, T., 
Dlugosz, M., Ince, E.,  Shtjefni, D.,  Taylor, N., Christou, M., Pennington, D., Clean Energy Technology Observatory: 
Overall  Strategic  Analysis  of  Clean  Energy  Technology  in  the  European  Union:  2023  Status  Report,  European 
Commission, 2023,  JRC135404.  

95   Ibid. 

18 

 
 
 
investments in renewable hydrogen and fuel cells, sustainable biogas/ biomethane, heat pumps 
and geothermal rose sharply. In the EU, foreign later-stage investments in those technology 
areas  grew  much  faster  in  2022  than  intra-EU  investments,  accounting  for  over  half  of  all 
funding  of  EU  firms  in  2022  (against  15%  overall  in  2021).  In  general,  except  for  battery 
technologies, the EU has still not fully unlocked its potential to attract higher growth deals as 
the US and China have done in strategic net-zero technologies.  

To  boost  the  EU’s  competitiveness,  resilience  and  leadership,  it  is  crucial  to  ensure  that 
capital  keeps  flowing  to  EU  companies  at  the  scale  needed  to  accelerate  the  roll-out  of 
strategic  net-zero  technologies.  Deep  and  integrated  capital  markets  and  an  effective 
sustainable finance framework are essential pre-requisites to mobilising private investments at 
scale  towards  clean  energy  technologies.  Following  up  on  the  2020  Capital  Markets  Union 
Action  Plan,  the  Commission  has  tabled  all  the  planned  legislative  proposals.  The  swift 
adoption by the co-legislators of the pending proposals would help improve access to finance, 
diversify  sources  of  funding  for  companies  and  tackle  structural  obstacles  in  cross-border 
financial services. While developing the sustainable finance framework, the Commission has 
remained responsive to the needs of the users and adopted a series of measures and initiatives 
to  reduce  complexity,  enhance  the  usability  of  the  rules  and  support  stakeholders  in  their 
implementation. It also took steps to streamline reporting obligations in view of reducing the 
administrative burden for companies. 

In  June  2023,  the  Commission  proposed  to  set  up  the  European  Strategic  Technologies  for 
Europe Platform (STEP) to bolster and leverage the EU’s current instruments (in particular, 
the  EIC  Fund,  InvestEU,  and  the  Innovation  Fund)  to  allocate  (e.g.,  by  earmarking  public 
funding)  and  disburse  financial  support  to  clean  tech  investments.  This  can  help  de-risk 
innovation  investments,  bridge  the  gap  between  project  developers  and  corporate  and 
institutional investors, and ultimately to channel further private-sector investment. 

19 

 
 
 
 
3.  ASSESSING  THE  COMPETITIVENESS  OF  STRATEGIC  NET-ZERO 

TECHNOLOGIES 

This section assesses the competitiveness of the strategic net-zero technologies specified in 
the Net-Zero Industry Act (NZIA). It provides insights into how the technology and the market 
are  evolving  to  meet  the  European  Green  Deal  and  REPowerEU  objectives.  The  proposed 
NZIA specifies eight strategic net-zero technologies to achieve the 2030 Fit-for-55 target of 
reducing net greenhouse gas emissions by at least 55% relative to 1990 levels. They are solar 
(PV and solar thermal), onshore wind and offshore renewable technologies, electrolysers and 
fuel  cells,  batteries  and  storage,  sustainable  biogas  and  biomethane,  carbon  capture 
technologies and storage, heat pumps and geothermal, and grid technologies. In the proposed 
NZIA,  the  EU  sets  an  overall  headline  benchmark  for  each  of  these  strategic  net-zero 
technologies to ensure that by 2030, the EU’s manufacturing capacity of the strategic net-zero 
technologies approaches or reaches at least 40% of the EU’s annual deployment needs. 

The evidence-based analysis on which this section is built was carried out in the framework of 
the Commission’s in-house Clean Energy Technology Observatory (CETO)96.  

3.1  Solar photovoltaics  

Solar  photovoltaics  (PV)  is  the  fastest  growing  power  generation  technology.  It  provides 
cheaper electricity than fossil-fuel power plants in most countries. It plays a pivotal role in all 
scenarios to reach a climate neutral energy system97. In the EU, solar PV already generated 
7% of electricity production in 2022 from a cumulative installed capacity of 212 GWp98. The 
EU Solar Energy Strategy99 aims to reach 600 GWac (720 GWp) installed by 2030, a four-fold 
increase on 2021 levels.  The PV value chain  is dominated by Asian countries, in  particular 
China.  Nonetheless,  the  European  Solar  Photovoltaic  Industry  Alliance  launched  on  9 
December 2022 aims to expand the EU’s manufacturing capacity to  reach at  least  30 GWp 
across the full supply chain by 2025. However, there is stiff international competition to attract 
manufacturing investments.  

PV  installations  rely  to  a  very  large  extent  on  crystalline  silicon  wafer  technology,  which 
continues  to  improve  energy  conversion  efficiency  and  reduce  material  usage.  In  2022, 
commercial  modules  offered  an  average  efficiency  of  21.1%,  and  a  maximum  of  24.7%100. 
Innovative materials, such as perovskites, offer scope for further gains in energy conversion 
efficiency: a perovskite/ silicon tandem device set a new record efficiency of 33.7% in May 

96    Chatzipanagi, A., Jaeger-Waldau, A., Cleret De Langavant, C., Gea Bermudez, J., Letout, S., Mountraki, A., Schmitz, A., 
Georgakaki, A., Ince, E., Kuokkanen, A. and Shtjefni, D., Clean Energy Technology Observatory: Photovoltaics in the 
European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, Publications Office 
of the European Union, Luxembourg, 2023, JRC135034. 

97   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. 

98   Chatzipanagi, A., Jaeger-Waldau, A., Cleret De Langavant, C., Gea Bermudez, J., Letout, S., Mountraki, A., Schmitz, A., 
Georgakaki, A., Ince, E., Kuokkanen, A. and Shtjefni, D., Clean Energy Technology Observatory: Photovoltaics in the 
European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, Publications Office 
of the European Union, Luxembourg, 2023, JRC135034. 

99   COM(2022) 221 final EU Solar Energy Strategy. 
100  Chatzipanagi, A., Jaeger-Waldau, A., Cleret De Langavant, C., Gea Bermudez, J., Letout, S., Mountraki, A., Schmitz, A., 
Georgakaki, A., Ince, E., Kuokkanen, A. and Shtjefni, D., Clean Energy Technology Observatory: Photovoltaics in the 
European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, Publications Office 
of the European Union, Luxembourg, 2023, JRC135034. 

20 

 
 
 
2023101.  Pilot  lines  for  these  tandems  are  in  development,  also  in  the  EU,  but  commercial 
products are not yet available.  

In  2022,  EU  companies  were  active  in  silicon,  ingot/wafer,  cell,  module  and  inverter 
manufacturing  and  offering  commercial  products.  Inverter  production  remains  by  far  the 
largest EU solar manufacturing segment, with a production capacity reaching almost 70 GW, 
about  5  GW  more  than  in  2021.  The  EU  also  has  a  major  producer  of  polysilicon,  which 
primarily exports to China. In the EU, at the start of 2023, nominal module production capacity 
reached  8.28  GWp/a,  cells  0.86  GWp/a,  and  ingots  and  wafers  1.4  GWp/a102.  EU 
Manufacturers  are  estimated  to  have  assembled  approximately  4  GW  of  modules  in  2022, 
mostly from imported cells. This represents a 10% share of the EU market103. 

In 2022, Chinese companies provided at least three quarters of global capacity in all steps 
in the PV supply chain 104 and were the predominant exporters of wafers, cells and modules105. 
In addition, Chinese companies produce more than 80% of global polysilicon, material used in 
wafer production.  China’s Uyghur region  alone  supplies approximately  35% of the world’s 
polysilicon (albeit down from 45% in 2020), but has been linked to strong concerns over forced 
labour use106. 

Solar PV prices were broadly stable in 2022 with mainstream modules at EUR 0.35 /W, but 
started falling again during the first half of 2023 due to intense competition and oversupply of 
components across the whole value chain. The price reached a record low in September 2023 
at almost EUR 0.22/Wp107 making it more difficult for EU manufacturers to produce profitably.  

The PV market continued to grow significantly in 2022, with global installed capacity reaching 
1  185  GWp  (230  GWp  year-on-year  growth).  China  was  the  single  largest  market  with 
approximately 90 GWp. It was a record year for the EU with 41 GWp installed (18% share). 
This growth was led by Spain (8.1 GWp), Germany (7.5 GWp), Poland (4.9 GWp) and the 
Netherlands (3.9 GWp)108. The residential segment was particularly strong, accounting for over 
50%. High electricity prices have boosted the competitiveness of solar PV electricity (which at 
utility scale has the lowest levelised cost of any technology in almost all markets109). 

With  solar  PV  set  to  continue  expanding  rapidly  worldwide,  the  last  12  months  have  seen 
policy initiatives from different geographical areas (e.g. USA, India and the EU) to develop 
more local manufacturing of solar photovoltaic systems and components. On this front, the EU 
should capitalise on its position as one of the largest markets for PV systems, its world-

101  Green et al, Solar cell efficiency tables (62), Progress in Photovoltaics, 31, 7 (2023), https://doi.org/10.1002/pip.3726 
102  Chatzipanagi, A., Jaeger-Waldau, A., Cleret De Langavant, C., Gea Bermudez, J., Letout, S., Mountraki, A., Schmitz, A., 
Georgakaki, A., Ince, E., Kuokkanen, A. and Shtjefni, D., Clean Energy Technology Observatory: Photovoltaics in the 
European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, Publications Office 
of the European Union, Luxembourg, 2023, JRC135034. 

103  JRC own calculation based on available data.  
104  IEA Special Report on Solar PV Global Supply Chains, 2022 
105  Wood Mackenzie, press release:  China’s solar export booming, 23 May 2023. Modules represented the lion’s share of 
these exports, followed by wafers and cells. In 2022, China exported 86GWp of modules to Europe (representing 56% of 
its modules exports). 

106  Sheffield forced labour report Crawford, A. and Murphy, L. T, “Over-Exposed: Uyghur Region Exposure Assessment for 
Solar Industry Sourcing,” Sheffield, UK: Sheffield Hallam University Helena Kennedy Centre for International Justice 
(2023) 

107  PVXchange, reading the PV price index, accessed 7 October 2023 
108  EA, 2023 Snapshot of Global PV Markets, 2023 
109  IEA WEO 2022 

21 

 
 
 
leading research and development and a society that places a high value on minimising 
environmental impact, protecting biodiversity and ethical supply chains.  

Nonetheless, EU producers still face higher costs compared to their competitors110. This 
can be mitigated with measures such as those proposed in the NZIA, REPowerEU or the reform 
of  the  Electricity  Market  Design  to  reduce  energy  and  financing  costs  and  to  accelerate 
permitting procedures for production facilities. It will also require an increase in the scale of 
manufacturing  plants  and  a  focus  on  innovative,  high-efficiency,  low-carbon  products  and 
advanced  and  more  sustainable  manufacturing  processes.  On  the  importance  of  minimising 
environmental impact for the sector, the proposed Ecodesign and Energy Labelling legislation 
for PV panels and inverters can be an important driver. An immediate concern is the current 
global production over-capacity111. Although it is keeping prices on local markets low (at least 
in the EU), it is a disincentive to making full use of current capacity. 

To  develop  the  EU  market,  it  is  essential  to  continue  action  to  improve  permitting 
procedures  and  to  build  public  acceptance.  The  PV  residential  market  has  considerable 
scope for further growth, but this will depend on the cost of battery systems continuing to fall. 
Specialty applications such as various forms of integrated PV and other innovative deployment 
options also have scope for significant market growth, especially for EU manufacturers.  

3.2  Solar thermal  

Solar thermal energy112 has the potential to contribute significantly to the decarbonisation of 
the energy system, as recognised in the EU Solar Energy Strategy. Solar thermal technologies 
make little or no use of critical raw materials and can offer high rates of recycling113. 

A  new  generation  of  highly  concentrated  solar  power  plants  in  operation,  typically  using 
molten  salts  for  heat  transfer  and  with  eight-plus  hours  of  thermal  storage,  is  building 
confidence  in  these  types  of  systems  that  help  improve  power  grid  reliability  with  cost-
competitive electricity. The EU has traditionally led the field in this technology, but is facing 
strong competition from China, which, for instance, took top place for high-value patents in 
2020. EU companies remain involved in international projects in the UAE and South Africa, 
and in several on-going tenders. Here also Chinese companies are taking a leading role based 
on expertise developed in the construction of over 1 GW of systems  in their home market. 
Worldwide there are 6.4 GW of concentrated solar power (CSP) plants operational. Of the 2.4 
GW in the EU, almost all is in Spain. New plants are under construction in the United Arab 
Emirates, China and South Africa that can add 1.8 GW by 2025. In the EU, no new plants have 
started operating since 2014, but Spain has plans to build at least another 2 GW by 2030114.  

Solar heating and cooling technology offers a range of options for buildings, for district heat 
networks and for industrial processes. The current levelised cost of heating/cooling (EUR 20 

110  The actual cost gap is very dependent on project specifics; “McKinsey (2022): Building a competitive solar-PV supply 

chain in Europe” estimates 20-25% compared to low-cost competitors. 

111  IEA Special Report on Solar PV Global Supply Chains, 2022 "At the end of 2021, global capacity for manufacturing 

wafers and cells and for assembling modules exceeded demand by at least 100%".  

112  Data  reported  in  this  section  are  from  Taylor,  N.,  Georgakaki,  A.,  Mountraki,  A.,  Letout,  S.,  Ince,  E.,  Shtjefni,  D., 
Kuokkanen, A., Tattini, J. and Diaz Rincon, A., Clean Energy Technology Observatory: Concentrated Solar Power and 
Solar  Heating  and  Cooling  in  the  European  Union  -  2023  Status  Report  on  Technology  Development,  Trends,  Value 
Chains and Markets, Publications Office of the European Union, Luxembourg, 2023, JRC135004. 

113  Energy Transition Expertise Centre (EnTEC), Report: Supply chain risks in the EU’s clean energy technologies, 2023, doi 

10.2833/413910. 

114  Spain’s 2019 NECP foresees reaching 7.4 GW by 2030. However, the draft of the first update revises this 4.8 GW by 

2030. For more information: https://commission.europa.eu/publications/spain-draft-updated-necp-2021-2030_en. 

22 

 
 
 
to 110 /MWh in Europe115) can be competitive with gas heating, particularly in areas with good 
solar resources. The overall EU market share is still small at 0.678 TWh (0.1%), compared to 
a total derived heat demand of 651 TWh in 2021116. The EU’s glazed collector sector is reported 
to  have  grown  by  10%  in  2022,  an  encouraging  rate,  albeit  below  the  rate  needed  to  triple 
capacity from 2021 to 2030, as proposed in the Solar Energy Strategy. Solar thermal systems 
supply district heating systems in 264 cities and towns in Europe (corresponding to less than 
5% of the 6 000117 in operation). High EU demand for industrial process heat in the range 150 
–  400  °C is  also  a  good  opportunity  for  solar  thermal.  For  instance,  the  DECARBOMALT 
project in Croatia (supported by the EU’s Innovation Fund) will use solar heat for malting. EU 
companies supply a large share of the EU solar water heater market as well as exporting. They 
faced significant supply chain disruptions in 2022118. 

Continued action is needed to boost the competitiveness of the EU solar thermal sector (both 
concentrated and non-concentrated solar), both at component level with standardisation and 
scale-up,  and  at  system  level  with  cost-effective  integrated  solutions,  in  particular  for 
industrial needs. For CSP solar power generation, getting the right auction design and market 
access conditions can improve the technology’s capacity to meet demand peaks outside day-
light hours. 

3.3  Onshore and offshore wind energy  

Wind  energy  plays  a  significant  role  in  the  EU’s  transition  to  carbon  neutrality.  The 
REPowerEU plan calls for faster installation of wind energy capacity, with the aim to reach 
510 GW of wind capacity by 2030119.Wind energy is projected to have a 31% share of installed 
electricity capacity in 2030 in the EU. At the same time, the EU wind sector is facing several 
challenges. To address  them and to  enhance the  EU competitiveness  in  the wind sector the 
Commission adopted the Wind Power Action Plan. 

In 2022, the EU had a total cumulative installed capacity of 204 GW (189 GW onshore; 16 
GW offshore). 16.2 GW were installed in 2022 (15 GW onshore; 1.2 GW offshore)120 , which 
is nearly a 50% increase compared to 2021. In 2022, new capacity was installed onshore mainly 
in Germany, Sweden and Finland, and offshore capacity mainly in France and the Netherlands. 
The industry121 expects to instal 20 GW of wind energy capacity a year in the EU over the next 
5 years, below the 30 GW/year needed to achieve 2030 targets122. Overall, China remains in 
the lead in terms of wind capacity with a cumulative capacity of 334 GW (31GW offshore), 
and 37.6 GW added in 2022, including 5 GW in offshore. The EU ranks second, and the US 
third with 144 GW of total capacity. The global total of new wind energy capacity installed in 

115  Solar Heat Europe, Solar Heat Markets in Europe, Trends and Market Statistics 2021, Summary, December 2022. 
116  Solar Heat Europe, Preliminary Report 2022, Solar Heat Markets in EU27, Switzerland and UK, 7 July 2023. 
117  Cited in the IEA SHC Task 68 presentation to the Webinar ‘The Rise of Solar district Heating’, 28 March 2023, Euroheat 

and Power and Solar Heat Europe. 

118  Energy Transition Expertise Centre (EnTEC), Report: Supply chain risks in the EU’s clean energy technologies, 2023, doi 

10.2833/413910. 

119  SWD (2022) 230 final.  
120  Tapoglou, E., Tattini, J., Schmitz, A., Georgakaki, A., Długosz, M., Letout, S., Kuokkanen, A., Mountraki, A., Ince, E., 
Shtjefni, D., Joanny Ordonez, G., Eulaerts, O.D. and Grabowska, M., Clean Energy Technology Observatory: Wind energy 
in the European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, Publications 
Office of the European Union, Luxembourg, 2023, doi:10.2760/618644 (online), JRC135020. 

121  WindEurope, Report: Wind energy in Europe: 2022 Statistics and the outlook for 2023-2027, 28 February 2023. 
122  The figure reported by Wind Europe of 30 GW/year is lower than the one  that would result from REPowerEU: 38.25 

GW/year. The difference is explained by using different capacity factors in the calculations. 

23 

 
 
 
2022 was 68 GW onshore and 9 GW offshore 123. The EU Member States have concluded in 
January  2023  non-binding  agreements  on  offshore  renewable  goals  per  sea  basin,  giving  a 
cumulative result for the EU of 109-112 GW by 2030, 215-248 GW by 2040 and 281-354 GW 
by 2050124. 

The  EU  wind  sector  remains  one  of  the  strongest  players  on  the  world  market.  EU 
manufacturers accounted for 85% of the EU wind energy market and for 30% of the global 
market  share  in  2022,  down  from  42%  in  2019125.  Specifically  for  the  offshore  sector,  the 
market share of EU companies for installations in the EU in 2022 reached 94%. To meet the 
REPowerEU objectives, it will be crucial to massively speed-up the roll-out of wind energy. 
However,  increasing  costs  along  the  value  chain  undermine  the  economic  viability  of 
several  projects.  EU  wind  manufacturers  face  other  challenges  due  to  low  installation 
volumes, high inflation and commodity prices, high interest rates, limited access to capital and 
slow, complex permitting that does not reflect specific market conditions: all factors that have 
negatively affected the sector.  

According to the industry, inflation in commodity prices and other input costs have led to a 
40% increase in the price of wind turbines over the last two years126. More importantly, there 
are persistent bottlenecks in the permitting process - which have been already addressed at EU 
level,  but  issues  like  insufficient  staffing  levels  compared  to  the  large  number  of  permit 
applications in public administrations persist- and a lack of visibility of the upcoming project 
pipeline. These factors have led the EU wind turbine industry to report losses and issue repeated 
profit warnings. 

Given the strategic importance of wind energy for the EU, action must be taken to boost 
the competitiveness of the wind industry. To stimulate the growth of the wind energy supply 
chain in the EU, it is necessary to diversify imports of raw materials, further implement circular 
economy approaches and increase manufacturing capacity. Τhe proposed Net Zero Industry 
Act and the Critical Raw Materials Act were designed to ensure the resilience of the EU supply 
chain  across  all  segments.  Support  is  also  needed  to  make  substantial  investments  in  grids, 
ports and installation and maintenance vessels. Installation volumes must increase to generate 
economies of scale, stability and the predictability needed to support investment and to make 
the  business  case  for  profitable  wind  manufacturing.  Faster  permitting  and  simplified 
procedures should be further enhanced along with higher transparency and planning visibility 
of  future  auctions  and  project  pipelines  by  Member  States.  Continued  support  from 
governments, especially providing sufficient and skilled staff to deal with permitting files, 
and  a  favourable  business  environment  will  be  crucial  to  maintaining  the  EU’s 
competitive  position  in  the  wind  energy  sector.  EU  and  national-level  funding  should  be 
used  to  promote  innovation  scale  up,  in  accordance  with  EU  state  aid  rules.  To  tackle  the 
challenges that the EU wind industry is currently facing, the Commission adopted a Wind 

123  Tapoglou, E., Tattini, J., Schmitz, A., Georgakaki, A., Długosz, M., Letout, S., Kuokkanen, A., Mountraki, A., Ince, E., 
Shtjefni, D., Joanny Ordonez, G., Eulaerts, O.D. and Grabowska, M., Clean Energy Technology Observatory: Wind energy 
in the European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, Publications 
Office of the European Union, Luxembourg, 2023, doi:10.2760/618644 (online), JRC135020. 

124  For  more 

information: 

https://energy.ec.europa.eu/news/member-states-agree-new-ambition-expanding-offshore-

renewable-energy-2023-01-19_en.   

125  JRC analysis based on Orbis, Pitchbook, 2023 
126  Wind Europe, Press release: Investments in wind energy are down – Europe must get market design and green industrial 

policy right, 2023. 

24 

 
 
 
Power Action Plan which will help accelerate permitting even more, improve auction systems 
across the EU, facilitate access to finance and strengthen supply chains.  

3.4  Ocean energy  

The 2020 EU strategy on offshore renewable energy127 calls for action to install 1 GW of 
ocean energy commercial capacity by 2030 and 40 GW by 2050.  

Ocean energy includes five distinct technologies: tidal stream energy, tidal range energy, wave 
energy,  ocean  energy  thermal  conversion  and  salinity  gradient  power  generation.  Tidal  and 
wave  technologies  are  the  most  advanced.  Globally,  over  98%  of  all128  combined  capacity 
currently operational is tidal range technology (521.5 MW), including the 240 MW tidal power 
station of La Rance (France), built in 1963129. In 2022, there were limited new installations of 
ocean  energy  devices  both  globally  and  in  the  EU130.  Currently,  only  a  few  devices  have 
reached a commercial stage, but several devices are at higher technology readiness levels, with 
tidal having converged on specific types of devices. The barriers to developing this sector 
stem mainly from its lack of maturity. Devices and procedures are not yet optimised, and 
this leads to high costs (with average LCOE for wave energy devices EUR 0.27/kWh and for 
tidal  energy  devices  EUR  0.2/kWh),  long  permitting  processes,  scarcity  of  financing,  non-
proven concepts and the absence of dominant designs. Still, multiple pilot projects are expected 
to be operational by 2025131. 
According to industry132, over the past 10 years the EU has invested over EUR 375 million in 
ocean  energy  research,  development  and  innovation  via  multiple  funding  programmes.  The 
2023-2024 Horizon Europe work programme provides an additional indicative amount of EUR 
94  million  in  support.  Since  2018,  the  European  Innovation  Council  has  funded  10  ocean 
energy-related  projects  with  a  total  budget  (for  ocean  energy)  of  approximately  EUR  25 
million.  According  to  the  European  Technology  and  Innovation  Platform  (ETIP)  on  ocean 
energy, the EU leadership in wave and tidal energy could generate economic activity worth 
EUR 140 billion and 500000 jobs with a 293 GW global market by 2050133 . 

Specialist  manufacturing  products  such  as  gearboxes,  generators,  control  systems  and 
drivetrains are most likely to be sourced in Europe. Particularly rare earth elements used in the 
permanent magnets of the turbine generators are identified as critical raw materials in the ocean 
energy sector. Dysprosium, neodymium, praseodymium, terbium and borate are subject to a 
high supply risk. 

The EU industry is leading the development of the ocean energy sector with 41% of tidal 
stream developers with technology readiness level higher than 5 in the EU134 leading with the 

127  COM/2020/741 final.  
128  Tapoglou, E., Tattini, J., Schmitz, A., Georgakaki, A., Długosz, M., Letout, S., Kuokkanen, A., Mountraki, A., Ince, E., 
Shtjefni, D., Joanny Ordonez, G., Eulaerts, O. and Grabowska, M., Clean Energy Technology Observatory: Ocean Energy 
in the European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, Publications 
Office of the European Union, Luxembourg, 2023, doi:10.2760/82978 (online), JRC135021. 

129  This  plant, very  innovative  when  it  was  built, had  a  significant  environmental  impact  that nowadays  would  be hardly 
acceptable. SONNIC Ewan, « La Rance, 50 ans de turbinage. Et après ? Le statu quo est-il la seule option pertinente ? », 
L'Information géographique, 2017/4 (Vol. 81), p. 103-128. DOI : 10.3917/lig.814.0103  

130  In EU waters 62 kW of new tidal energy capacity and 33.5 kW of wave energy capacity was installed in 2022.  
131  International Renewable Energy Agency (IRENA), World Energy Transitions Outlook 2023: 1.5°C Pathway, Volume 1, 

Abu Dhabi, 2023. 

132  Ocean Energy Europe (OEE), Policy Topics: Research and Innovation. 
133  ETIP Ocean, Industrial Roadmap for Ocean Energy, 1 July 2022. 
134  Tapoglou, E., Tattini, J., Schmitz, A., Georgakaki, A., Długosz, M., Letout, S., Kuokkanen, A., Mountraki, A., Ince, E., 
Shtjefni, D., Joanny Ordonez, G., Eulaerts, O. and Grabowska, M., Clean Energy Technology Observatory: Ocean Energy 

25 

 
 
 
 
Netherlands, France and Ireland. Non-EU players are predominantly based in the UK, Canada, 
US and China. Similarly, 52% of companies developing wave energy devices are located in the 
EU135. Denmark has the highest number of developers, followed by Italy and Sweden. Outside 
the EU, the UK, US, Australia and Norway have a large number of wave energy developers.  

In 2022, China overtook the EU in the number of scientific publications and now leads in both 
the  wave  and  the  tidal  sector.  The  EU  ranks  second  in  both  ocean  energy  categories136.  A 
combination of technological innovation, flanking policies, lower costs and the systematic 
integration of more long-term reliable technologies, processes or devices are needed to 
provide  the  necessary  reassurance  and  confidence  to  investors  to  boost  the  EU’s 
competitiveness in the ocean energy sector. Creating technology-specific auctions can enable 
the roll-out of commercial devices that will, in turn, help reduce the LCOE and highlight the 
advantages  of  ocean  energy  to  the  system.  Sharing  infrastructure  with  other  renewable 
installations (e.g. offshore wind) and developing common platforms for multiple activities (e.g. 
aquaculture) can also be helpful to boost ocean energy development. 

3.5  Batteries 

Batteries  play  a  crucial  role  in  the  clean  energy  transition,  both  for  transport  and 
stationary applications. As the EU transitions  to exclusively  zero-emission new light-duty 
vehicles  by  2035137,  it  is  substantially  increasing  its  domestic  battery  production  to  be 
competitive on a global scale, meet its political goals and prevent new fossil fuel dependencies 
from arising. 

Battery production in the EU is set to reach 458 GWh by 2025 and 1083 GWh by 2030138, 
on track to meet the forecast EU demand139,140. The European Battery Alliance is playing a 
key role in this context, and in 2022, Europe’s battery industrial network under the Alliance 
grew from 750 to 800 members spread along the entire value chain. Europe’s battery ecosystem 
accounts for around EUR 180 billion, mostly private, investment commitments so far141.  

Despite the overall decline of the EU car market in 2022, sales of the EU’s fully battery electric 
vehicles (BEV) increased by 28% compared to 2021, accounting for 12.1%142 (1.12 million) 
of the 9.1 million vehicles sold on EU markets. Altogether, BEV, plug-in EV and hybrid EV, 
accounted for 44.1% of EU car sales in 2022  143. The rising trend continues and in October 
2023 81 9000 for BEV only, or 1.288 million for total plug-in EV 144 were sold in the EU27. 
Worldwide, the trend indicates 14 million by the end of 2023 (+35% over 2022), resulting in a 
possible 18% of total car sales in 2023145. 

in the European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, Publications 
Office of the European Union, Luxembourg, 2023, doi:10.2760/82978 (online), JRC135021. 

135  Ibid. 
136  Ibid.  
137  Member States’ final approval 28 March 2023 to regulation banning the sale of carbon-emitting cars and vans after 2035. 
138 The European Battery Alliance (June 2023); but e.g. Fraunhofer institute data indicates wide range for 2030 EC battery 

production capacity from min 677 GWh to mean 1770 GWh to max 2050 GWh. 

139  European  Court  of  Auditors,  Special  Report:  The  EU’s  industrial  policy  on  batteries,  2023.  Range:  700GWh  to 

1200GWh/a. 

140  For more information: Transport & Environment, as of 6 March 2023. Range: up to 50 Gigafactories with 1800GWh. 
141  For more information: the European Battery Alliance (Europa.eu). 
142  As compared to 9.1% in 2021 and of just 1.9% as recently as 2019. 
143  European Automobile Manufacturers’ Association (ACEA), Press Release: Fuel types of new cars: battery electric 12.1%, 

hybrid 22.6% and petrol 36.4% market share full-year 2022, 1 February 2023. 

144 See: European Alternative Fuels Observatory (europa.eu).  
145  International Energy Agency (IEA), Global EV Outlook 2023 Executive Summary, 2023. 

26 

 
 
 
 
While  most  batteries  will  go  into  the  automotive  sector,  stationary  storage  is  also 
increasing  exponentially.  Battery  storage  of  154  GWh  Battery  Energy  Storage  Systems  is 
forecast  to  be  installed  globally  by  the  end  of  2023,  102%  more  than  in  2022146,  of  which 
roughly 10% is to be installed in the EU147. 

,

Despite global production increasing by 180% compared to 2017, once again very high global 
demand for lithium in 2022 exceeded supply. In 2022, about 60% of lithium, 30% of cobalt 
and 10% of nickel demand was for EV batteries ( agains t15%, 10% and 2%, respectively in 2017)148. 
After  a  decade  in  which  prices  mainly  fell,  and  despite  increasing  shares  of  lower  cost 
chemistries such as lithium iron phosphate (LFP)149,150
 average prices for lithium-ion battery 
(LIB) packs reached EUR 136/kWh151 in 2022, up 7% increase compared to 2021. In Europe, 
due to higher production costs, average prices were EUR 152/kWh in 2022, 24% higher than 
in the US, and 33% higher than in China152. The Inflation Reduction Act (IRA) pledges of USD 
134  billion153  (EUR  113  billion154)  to  support  the  US  battery  industry.  According  to 
BloombergNEF155,  Europe’s  share  in  global  investment  announcements  in  LIB  production 
capacity  fell  from  41%  in  2021  to  2%  in  2022.  It  should  be  borne  in  mind  that  such 
announcements of major investments are typically ‘lumpy’ and do not follow a linear pattern. 
Since mid-2023 forecasts see the US overtaking the 2031 EU battery capacity pipeline. While 
the US added 436 GWh (57.9% increase) to their project pipeline since the start of IRA, the 
EU only added 25 GWh (3%)156. When factoring in IRA support and lower US energy prices, 
the effective price for EU batteries would be 40% higher than the US, up to EUR 4 000 higher 
battery  cost  for  a  European  BEV157,  a  price  gap  that  risk  at  having  negative  impact  on 
production capacity roll out in the EU158.  

The  stationary  EU  battery  market  is  also  growing  steadily.  In  the  first  quarter  of  2023,  the 
installed  base  for  energy  grid  storage  (except  pumped  hydro  storage)  in  the  EU  was  about 
11GW/ 14.7GWh of storage assets, of which ~5.3 GW/ 5.6 GWh were front-of-meter (FoM) 
installations. At least ~19GW/ 42.3 GWh FoM are currently under development159. Behind-
the-meter home battery storage is also rapidly increasing. In Germany, for example, it increased 
from 2.0 GW in mid-2022 to 4.1 GW (+105%) in mid-2023160. However, to achieve the EU’s 

146  For more information: the European Battery Alliance - EBA250 
147  EMMES 7.0, LCP-Delta, 20232023 status quo first quarter: 11GW / 14.7GWh; Fraunhofer extrapolation go even up to 20 

GWh. 
Industry data. EMMES 7.0 - March 2023 | EASE: Why Energy Storage? | EASE (ease-storage.eu) 2023 status quo first 
quarter: 11GW / 14.7GWh; Fraunhofer institute extrapolated estimates go even up to 20 GWh.  

148  International Energy Agency (IEA), Global EV Outlook 2023, 2023. 
149  BloombergNEF,  press  release:  Lithium-ion  Battery  Pack  Prices  Rise  for  First  Time  to  an  Average  of  $151/kWh, 

6 December 2022. 

150  Which were 20% cheaper than lithium nickel manganese cobalt oxide (NMC) cells in 2022.  
151  Exchange rate €0.9 = $1 used in whole document for currency conversion when sources gave $ values. 
152  InsideEVs, Press Release: Europe: Plug-In Car Sales Accelerated In March 2023, 10 May 2023. 
153  The White House, Investing in America, 2023. 
154   Using 

rate  of  EUR  0.8455 

for  USD  1  over 

exchange 

average 

the 

the  year  2021.  See: 

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

155  Bloomberg NEF, 2023 Q1 -Energy Transition Investment Trends report. 
156  BenchmarkSource, article: IRA supercharges USA’s gigafactory capacity pipeline as it overtakes Europe for first time, 2 

June 2023. 

157  EBA, Discussion Paper for the 7th High-Level Meeting of the European Battery Alliance 
158  Transport & Environment, Report: How not to lose it all, March 2023. 
159  Industry data. EMMES 7.0 - March 2023 | EASE: Why Energy Storage? | EASE (ease-storage.eu) 2023 status quo first 

quarter: 11GW / 14.7GWh; Fraunhofer institute extrapolated estimates go even up to 20 GWh. 

160  RWTH Aachen University, Battery Charts, 2023 

27 

 
 
 
Fit-for-55 and REPowerEU objectives, the roll-out of stationary energy storage must accelerate 
rapidly to achieve the forecast demand of 200 GW by 2030161.  

The  EU’s  projected  lithium  battery  demand  is  currently  estimated  to  be  around  1  TWh  by 
2030162. Although China still covers most of the EU’s excess demand, EU private investments 
in local battery production will prompt companies to build plants near EV production lines to 
cut transport costs. Despite the potentially negative effects of the IRA on the expansion of EU 
battery value chains, battery factories are being built with increasing speed across Europe 
and are projected to meet most of EU demand by 2030. For example, Stellantis163 continued 
as planned, and in 2023 inaugurated in France the first (final capacity 40 GWh/a) of three large 
ACC164 EU-based battery gigafactories. Altogether the three factories are expected to account 
for  25%  of  the  total  projected  EU  2030  demand165,  corresponding  to  a  total  of  250  GWh 
capacity by 2030.  

The biggest relative increase needed to meet 2030 targets is in the area of recycling166. In 
2023 only some 50 kilotons of waste were recycled in Europe, against the forecast demand for 
200-800 kilotons by 2030167. Strongly ramping up recycling would allow the EU to increase 
its presence in the early stages of the value chain und thus security of supply. The Horizon 
Europe partnership on batteries, with a budget almost EUR 1 billion, supports research and 
innovation  in  this  area.  Subsidies  should  be  allocated  wisely  to  avoid  distorting  the  single 
market, which is vital for both competitiveness and innovation.  

3.6  Heat pumps  

The  revised  Renewable  Energy  Directive168  includes  new  targets  for  renewables  in 
heating and cooling, in industry and in buildings and calls for better integration of heating 
with  the  power  grid.  Further  support  to  replace  fossil  fuel  boilers  is  provided  by  the 
Ecodesign169 and Energy Labelling  legislation170. The Commission  is  also  preparing an EU 
action plan to accelerate the deployment of heat pumps171. 

In the eighteen EU Member States covered by European Heat Pump Association (EHPA), 17.4 
million individual heat pumps mainly intended for heating were in operation at the end of 2022. 
Their sales grew by 41% in 2022 to 2.75 million units172. In the first half of 2023, heat pump 
sales  continued  to  increase  in  the  EU,  while  in  some  countries,  like  Italy,  sales  decreased 
compared to the first half of 2022, due to changing national support schemes, and unfavourable 
electricity-gas price ratios173. Model-based decarbonisation scenarios have identified a high 
growth potential. According to  the JRC’s POTENCIA model,  for  example, the number of 

161  Energy Storage Coalition, Press Release: Energy Storage Coalition calls for more targeted support for energy storage in 

key EU legislation, March 2023. 

162  McKinsey & Company, Article: Battery 2030: Resilient, sustainable and circular, 16 January 2023. 
163  Stellantis is a constellation of 14 automotive brands.  
164  Cells Company’s (ACC) battery gigafactory in Billy-Berclau Douvrin, France 
165  Green Car Congress, Press Release: First ACC gigafactory inaugurated in France; initial 13 GWh capacity, 31 May 2023.  
166  For more information: the European Battery Alliance: Short brief European Battery production - June 2023 
167  Based on calculations by Fraunhofer ISI.  
168  OJ L 328, 21.12.2018.  
169  OJ L 239, 6.9.2013.  
170  OJ L 198, 28.7.2017.  
171  For more information: Heat pumps – action plan to accelerate roll-out across the EU (europa.eu) 
172  European Heat Pump Association (EHPA), Market Report 2023, limited to AT, BE, CZ, DE, DK, EE, ES, FI, FR, HU, 

IE, IT, LT, NL, PL, PT, SE, SK, 29 June 2023. Including mainly space heating and sanitary hot water heat pumps. 

173  Lyons, L., Clean Energy Technology Observatory: Heat pumps in the European Union - 2023 Status Report on Technology 
Development  Trends,  Value  Chains  and  Markets,  Publications  Office  of  the  European  Union,  Luxembourg,  2023, 
JRC134991. 

28 

 
 
 
individual heat pumps used mainly for heating in the EU (13 million in 2020) is projected to 
grow 2.5-fold by 2030 and almost 10-fold by 2050. Unit capacity is expected to fall by half by 
2050, thanks to better building insulation; this fits the ambition of REPowerEU plan to install 
30 million or more heat pumps by 2030. 

District heating may be the preferred heating option in densely populated urban areas, where 
large heat pumps can harvest energy from solar, geothermal or excess heat from industrial or 
urban processes. The Heat Roadmap Europe project174 estimates a potential 50% market share 
for district heating by 2050 in Europe, with  approximately 25-30% capacity based on large 
electric heat pumps. This could coverup to 38% of all district heating production175. 

The  technical  potential  for  industrial  heat  pumps176  varies  by  sector  from  around  65%  of 
process heat in the paper industry, 40% in the food industry to 25% in the chemical industry. 
In Europe alone, heat pumps with a combined capacity of 15 GW could be implemented in 
almost 3 000 installations177. 

EU  production  capacity  was  estimated  to  have  covered  75%  of  EU  demand  for  individual 
hydronic heat pumps in 2021.178 However, the EU manufacturers are dependent on imports 
for components (such as expansion valves and 4-way valves coming mainly from China), and 
for  compressors,  inverters  and  synthetic  refrigerants,  largely  imported  from  China  and 
South-East  Asian  countries179  and  the  US.  Their  production  does  not  require  critical  raw 
materials but is affected by the current long lead times for chips, heat exchangers, pumps, wires 
and tanks180. 

Focusing on individual heat pumps, growth on the domestic market has been partially captured 
by imports. The trade balance deficit more than doubled to EUR 856 million in 2022 compared 
to 2021, against a surplus of EUR 186 million five years before. Imports from China doubled 
in 2021 to reach EUR 533 million and nearly doubled again to EUR 898 million in 2022181. 

The  manufacturing  base  in  Europe  is  relatively  fragmented  with  175  manufacturing 
facilities,  including  multinationals  and  SMEs182.  By  comparison,  the  large  Asian  and  US 
companies can benefit from economies of scale. Manufacturers of hydronic heat pumps are 
investing at unprecedented scale and speed in European-based manufacturing capacity, with 
investment reaching nearly EUR 5 billion183 over the period 2023-2026, and a new the Heat 
Pump Accelerator platform set up to speed up the roll-out. For large heat pumps for commercial 
and network applications, the European industry has a dominant market position. For industrial 
heat  pumps  too,  there  are  17  EU  manufacturers,  8  in  Norway,  and  only  3  non-European 
manufacturers  (all  based  in  Japan).  Their  major  components  (e.g.,  compressors)  are  locally 
manufactured184. 

174  For more information: Heat Roadmap Europe, https://heatroadmap.eu/. 
175  Euroheat & Power, Large heat pumps in district heating & cooling systems, 2022. 
176  Industrial heat pumps are commonly used for processes below 100 °C, commercial products exist up to 160 °C still to be 

demonstrated in more industrial sectors. Ongoing developments for temperatures up to 280 °C. 

177  International Energy Agency (IEA), Future of heat pumps, 2023. 
178  Eunomia, EU Hydronic Heat Pump Manufacturing Market Assessment, 2023. 
179  Japan, Thailand.  
180  Eunomia, 2023, ibid.  
181  COMEXT, Goods Trade EU, 841861.  
182  Eunomia, EU Hydronic Heat Pump Manufacturing Market Assessment, 2023. 
183  European Heat Pump Association (EHPA), press release: Manufacturer investments, June 2023. 
184  International Energy Agency (IEA) Technology Collaboration Programme, Heat Pumping Technologies, Annex 58 Final 

report, August 2023. 

29 

 
 
 
R&I into individual heat pumps would give a further boost to EU competitiveness by designing 
more efficient, compact, silent and aesthetic EU products, as well as more digitised and flexible 
to  minimize  power  grid  reinforcements.  The  competitiveness  of  heat  pumps  using  natural 
refrigerants will benefit from the inclusion of relevant international standards185 in installers’ 
certification schemes to ensure the safe use of flammable refrigerants inside buildings. Tools 
are  needed  to  assess  the  heat  pump  readiness  of  individual  or  multi-family  buildings  and 
propose  solutions.  Together  with  R&I  to  improve  automation  in  manufacturing, 
modularisation  and  rationalisation  of  heat  pump  installation,  consolidating  the 
manufacturing base in the EU would help drive down the upfront costs of heat pumps 
and boost EU global competitiveness186.  

For industrial heat pumps, cooperation between end-user sectors and the heat pump sector 
to optimise and standardise products would also lower the costs and risks linked to their 
roll-out. Energy service companies can lower the risk for end users by proposing a leasing 
model. 

3.7  Geothermal energy  

The  revised  Renewable  Energy  Directive  sets  binding  targets  for  renewable  heating  and 
cooling and promotes the roll-out of direct geothermal heat use. The Critical Raw Materials 
Act is expected to increase the scope for exploiting the geothermal resources  needed to co-
produce critical raw materials, especially lithium. 

Deep geothermal energy has the highest capacity factor of all renewable energy sources 
(which can exceed 80%187), low operating costs and an extensive manufacturing base. In 
2022, deep geothermal power capacity reached 16.1 GWe globally188, with 877 MWe in the 
EU189. No new plant was commissioned in 2022 in Europe, and the global increase of 286.4 
MWe, mainly in Kenya, Indonesia and the US, was below the pre-pandemic annual trend of 
3%190. More promisingly, geothermal direct heat use has had a steady growth rate of 9% since 
2010 in the EU191, especially for district heating and cooling. There are now 261 systems that 
use geothermal direct heat, with 12 new systems added in 2022 (5 in France alone). 

The EU has  a strong position on R&I investments, patents and scientific publications. 
R&I funding from the European Commission and the Member States puts the EU in the lead 
worldwide in terms of public support for the sector between 2010 and 2020, followed by the 

185 For more information: IEC 60335-2-40:2022: Household and similar electrical appliances – Safety – Part 2-40:   Particular 

requirements for electrical heat pumps, air-conditioners and dehumidifiers, 2022. 

186  Eunomia, EU Hydronic Heat Pump Manufacturing Market Assessment, 2023. 
187  IRENA  and  IGA  Global  geothermal  market  and  technology  assessment,  International  Renewable  Energy  Agency, 

International Geothermal Association, 2023. 

188  European Geothermal Energy Council (EGEC), Report: Geothermal Market Report 2022 – Key Findings, July 2023. 
189  Taylor, N., Ince, E., Mountraki, A., Georgakaki, A., Shtjefni, D., Tattini, J. and Diaz Rincon, A., Clean Energy Technology 
Observatory: Deep Geothermal Energy in the European Union - 2023 Status Report on Technology Development, Trends, 
Value Chains and Markets, Publications Office of the European Union, Luxembourg, 2023, JRC135206. 

190  European Geothermal Energy Council (EGEC), Report: Geothermal Market Report 2022 – Key Findings, July 2023. 
191  Taylor, N., Ince, E., Mountraki, A., Georgakaki, A., Shtjefni, D., Tattini, J. and Diaz Rincon, A., Clean Energy Technology 
Observatory: Deep Geothermal Energy in the European Union - 2023 Status Report on Technology Development, Trends, 
Value Chains and Markets, Publications Office of the European Union, Luxembourg, 2023, JRC135206. 

30 

 
 
  
 
US. Over the same period the EU also led on the number of new high value patents, before 
China overtook the EU in 2019192. 

Although enhanced geothermal system (EGS) technology has not yet reached maturity, R&I 
has brought new developments in subsurface heat and cold storage, resource assessment and 
exploration, Closed-Loop Geothermal Systems and stored CO2 use for power production.  

Turbines for geothermal power production are mainly manufactured by a few large industrial 
corporations, such as Toshiba (JP), Fuji Electric (JP), Mitsubishi Heavy Industries (JP), Ormat 
Technologies  (US/IL)  and  Ansaldo  Energia  (IT),  mostly  non-European  with  some  notable 
exceptions  in  Italy.  The  market  for  building  geothermal  facilities  is  spread  across  multiple 
public  and  private-sector  companies193.  In  district  heating,  the  suppliers  of  geothermal 
equipment for the underground part of the installations are mostly in the oil and gas industry. 
Pumps, valves and control systems are usually imported from the US and Canada. Exploration 
and  drilling  operations,  which  account  for  the  major  costs  of  deep  geothermal  projects,  are 
dominated by a few specialised non-European companies194.  

In 2022, the sector faced the shortages in their workforce, equipment and materials, such 
as drilling rigs or steel for casing. Geothermal energy makes a very limited use of critical raw 
materials, but the extraction of lithium from lithium-rich geothermal brines, as in the current 
commercial development in  southern Germany195, can help  mitigate the EU dependency on 
imports.  

The  sector  needs  more  available  subsurface  data  to  reduce  resource  development  risks, 
cheaper, more reliable exploration techniques and innovative production processes to increase 
the range of exploitable geological settings, such as EGS or Closed Loop Geothermal Systems. 
Simplifying  the  licensing  process,  de-risking  schemes,  raising  public  awareness  and 
developing the skills of the workforce would also be beneficial for the sector. 

3.8  Water electrolysis to produce renewable hydrogen 

Water  electrolysis  is  currently  the  only  key  technology  able  to  produce  renewable 
hydrogen at scale. It can contribute to the decarbonisation of hard-to abate sectors in industry, 
heavy duty, maritime and aviation transport, or to other uses such as energy storage (especially 
seasonal).  

In  the  EU,  the  revised  Renewable  Energy  Directive  sets  specific  sub-targets  for  the  use  of 
renewable fuels of non-biological origin (RFNBO) for renewable hydrogen in industry (42%) 
and transport (1% RFNBO and 5.5% combined with  advanced biofuels) by 2030. The new 
delegated  regulation  on  the  definition  of  RFNBOs196  outlines  requirements  to  produce 
RFNBOs, including renewable hydrogen, such as temporal and geographical correlation and 
the  additionally  principle.  The  European  Hydrogen  Bank197  is  expected  to  launch  its  pilot 

192  Taylor, N., Ince, E., Mountraki, A., Georgakaki, A., Shtjefni, D., Tattini, J. and Diaz Rincon, A., Clean Energy Technology 
Observatory: Deep Geothermal Energy in the European Union - 2023 Status Report on Technology Development, Trends, 
Value Chains and Markets, Publications Office of the European Union, Luxembourg, 2023, JRC135206. 

193  Ibid.  
194  Ibid.  
195  Ibid.  
196  OJ L 157, 20.6.2023. 
197  COM(2023) 156 final.  

31 

 
 
 
auction  in  November  2023,  which  aims  to  secure  long-term  ‘offtake  agreements’  between 
producers and buyers and the contracting authority will award up to EUR 800 million.  

Global electrolyser deployed capacity is expected to reach about 2 GW by the end of 2023198 
up from the 600-700 MW range at the end of 2022199, and 500 MW at the end of 2021200. The 
majority of this capacity estimated in the range of 50%-75% is alkaline201, with the rest almost 
completely made up of proton exchange membrane (PEM) electrolysers202. In terms of installed 
capacity, China leads with about 1 GW of expected installed capacity by the end of 2023 with 
world’s largest project of 260 MW operationalised in 2023, up from 204 MW already installed 
in 2022. It is followed by Europe (EU 27, EFTA, UK) with an expected capacity of 500 MW 
by  the  end  of  2023  (a  quarter  of  the  global  one),  up  from  162  MW  in  operation  (August 
2022203).  For  the  US  there  is  not  enough  detailed  data  and  installed  capacity  in  2022  was 
estimated at 19 MW. This growth is largely driven by support schemes. However, the market 
studies  highlight  that  the  US  support  schemes  are  expected  to  trigger  rapid  market  uptake. 
Deployment is growing globally and is expected to reach gigawatt scale by the end of 2023, in 
part driven by such support schemes. 

By the end of 2022, the global manufacturing capacity of electrolysers was estimated at some 
13-14 GW/year, with around 3.3 GW/year in Europe204. 

Industry-led  initiatives  such  as  the  European  Clean  Hydrogen  Alliance205  under  policy 
umbrella  of  the  European  Commission  to  promote  the  industrial  leadership  in  the  field  of 
renewable and low carbon hydrogen, and the Electrolyser Partnership206 aim to reach 25 GW 
of annual electrolysers manufacturing capacity by 2025. China has the highest manufacturing 
capacity, covering at least half of global volumes and focussing almost exclusively on alkaline. 
North  America’s  manufacturing  capacity  is  similar  to  the  European  one,  focusing  currently 
more on PEM electrolysis. In terms of cost competitiveness, the price of electricity is one of 
the main factors contributing to the final cost of hydrogen produced via water electrolysis and 
its weight grows together with electrolyser full load hours. US sources estimate that electricity 
prices of around USD 30/MWh (EUR 28.4/MWh) would give a hydrogen price in the order of 
USD 2/kgH2 or around EUR 1.9/kgH2

207.  

In  Europe,  the  Clean  Hydrogen  Joint  Undertaking  invests  EUR  2.4  billion  in  the  entire 
hydrogen value chain208. Investments spurred on by hydrogen Important Projects of Common 
European  Interest  have  opened  up  the  possibility  for  several  manufacturers  to  build  new 
electrolyser factories in Europe, increasing EU technology autonomy, industrial know-how and 
creating jobs209. Examples are the factories of Accelera-Cummins (BE, ES), Topsoe (DK), by 
John  Cockerill  (BE,  FR),  by  Hydrogen  Pro  (DE),  and  announcements  of  ventures  between 

198  IEA, Global Hydrogen Review, 2023, an update of the database is expected in October 2023, 
199  International Energy Agency (IEA), Global Hydrogen Review, 2022. 
200  International Energy Agency (IEA), 2022, ibid. 
201  International  Energy  Agency  (IEA),  Global  Hydrogen  Review,  2023,  the  range  is  large  due  to  the  o  “unknown”  type 

reported by IEA. 

202  Bloomberg NEF, 1H 2023 Hydrogen Market Outlook, March 2022. 
203  Hydrogen Europe, Clean Hydrogen Monitor, 2022. 
204  International Energy Agency (IEA), The State of Clean Technologies, May 2023 and Clean Hydrogen Monitor, 2022. 
205  For more information: European Clean Hydrogen Alliance (europa.eu).  
206  Hydrogen Europe, Press Release: New Electrolyser Partnership, 16 June 2022. 
207  U.S. Department of Energy, the U.S. National Clean Hydrogen Strategy and Roadmap, June 2023. Estimates are based on 

the available data. 

208  Funding comes from the EU budget amounting at 1.2 BN EUR (including the additional appropriations from REPower 

EU of 200 M EUR) and an equivalent amount from the private stakeholders in the period 2021-27.  

209  European Hydrogen Alliance, 2nd European Electrolyser Summit State of play on the Joint Declaration, 22 June 2023. 

32 

 
 
 
Siemens  and  AirLiquide,  Enapter  (IT)  to  produce  for  the  first  time  a  megawatt  anion 
electrolyser. 

Renewable  hydrogen  production  faces  some  challenges.  There  is  the  issue  of  energy 
efficiency  loss,  which  means  production  must  be  coupled  with  a  significant  generation  of 
renewable electricity. In addition, access to freshwater resources - which could exacerbate local 
water stress in the EU and in third countries – should be taken into consideration when starting 
new water electrolysis projects to avoid the scarcity of another vital element for human life.  

Renewable hydrogen and its derivatives are not yet traded globally, despite the increase in 
the  number  of  projects  that  aim  to  ship  hydrogen  across  the  world,  from  regions  rich  in 
renewables but relatively low demand to regions with high demand, such as Europe and Japan. 
There  is  not  yet  a  specific  trade  code  available  for  renewable  hydrogen.  Some  voluntary 
certification schemes have been notified to the Commission. 

Development of safety standards including for the handling of hydrogen derivatives, some of 
which are toxic, is also an important aspect. Manufacturing full electrolyser systems is possibly 
to take place in proximity to deployment due to the difficulties in shipping such large systems. 
However, raw materials, processed materials and components can be traded globally210.  

Deployment  projects  are  experiencing  delays  due  to  the  nascent  nature  of  the  market, 
unprecedented  electrolysers’  volumes  and  projects’  economic  and  technical  complexity,  as 
well  as  the  fact  that  key  industrial  off-takers  delay  investments  due  to  current  economic 
situation. The deployment of large-scale projects that benefit from EU or state aid support 
due to high risks involved, should be monitored closely by the implementing parties to 
identify bottlenecks and address these with proportionate policy responses. These projects 
should benefit from enhanced dissemination efforts, which will also guarantee efficient sharing 
of valuable knowledge and best industrial practices, leading to steeper learning curves in this 
still emerging industry. In this context, the IPCEI Forum is expected to be launched soon. 

European manufacturing capacity building needs to be matched with proper recycling 
infrastructure. Additional research and investments will be needed in recycling including of 
the critical raw materials necessary for electrolysers manufacturing. A new challenge will be 
to develop of substitute materials for membranes that have comparable levels of durability 
and performance to the current state of art, usually based on per fluoroalkyl and polyfluoroalkyl 
substances. Research is needed to find satisfactory substitution solutions. 

3.9  Sustainable biogas and biomethane technologies  

Sustainable  biogas  and  biomethane  are  important  contributors  for  the  EU  to  achieve 
energy  autonomy  and  climate  neutrality  quickly  and  cost-effectively.  The  Commission 
proposed  a  biomethane  action  plan211,  under  REPowerEU  supported  by  the  Bio-methane 
Industrial  Partnership,  with  the  aim  to  replace  about  10%  of  natural  gas  a  year  with  the 
sustainable production of biomethane by 2030. The renewable and natural gases markets and 
EU’s Hydrogen Regulation212 will facilitate action to integrate biomethane into the EU’s gas 
network. 

210  Carrara, S., et al, Supply chain analysis and material demand forecast in strategic technologies and sectors in the EU – A 
foresight  study,  Publications  Office  of  the  European  Union,  Luxembourg,  2023,  doi:10.2760/386650,  JRC132889., 
document of the Joint Research Center, 132889. 

211  SWD(2022) 230 final. 
212  COM(2021) 804 final. 

33 

 
 
 
 
The commercial technology to produce biogas or biomethane is anaerobic digestion, but 
efficiency  to  biomethane  is  low.  Innovative  technologies  to  produce  biomethane  as 
gasification of biomass residues and wastes, and biological methanation of biogas, are close to 
market readiness. Novel pathways based on both thermochemical and biological processes are 
currently under development too.  The current trend to increase biomethane production is to 
build new plants and to convert the existing biogas plants producing combined heat and power 
to biomethane production plants.  

The EU public R&I funding to biomethane production technologies in 2014-2021 totalled EUR 
77 million213, putting the EU in the lead on high value inventions globally. In 2010-2022, 
the EU led by far on scientific publications, with China ranking third in 2022.  

In 2022, the EU was the largest producer of biogas214, accounting for over 67% of global 
biogas production. Of this, 53% was produced in Germany, followed by North America with 
about  15%,  while  China  is  providing  biogas  incentives  to  increase  its  biogas  production215. 
Many  European  companies  are  major  market  players  in  the  manufacturing  of  biogas  plant 
equipment and overall plant design and construction. The turnover of the EU biogas sector was 
EUR 5 530 million in 2021 with 60% in Germany and 12% in Italy, and 47 100 direct and 
indirect jobs216. 

Biogas  feedstock  is  varied  and  locally  sourced  in  Europe  with  no  risk  of  imports 
dependency217. Recent policies shifted feedstock supply from an unsustainable mono-cropping 
system  (e.g.,  maize)  to  biowastes  and  sustainable  biomass  sources.  For  instance,  organic 
municipal solid waste will need to be collected separately by 2024,218 which unlocks a huge 
potential. The EU is leading in the technological development of the sector but will face 
challenges to upscale due to high capital and operational costs, cost-competitiveness with 
natural gas, and access to the gas grid. Today, biomethane production costs219 are EUR 40-
120  per  MWh;  however,  technology  innovation,  replication  of  first-of-a-kind  innovative 
biomethane  technologies  and  market  incentives  with  EU  support  by  stable  regulation  and 
investment framework, could help drive down production costs by 25-50%. This could boost 
the  EU’s  competitiveness  in  the  sector.  Moving  to  residue  and  waste  feedstock  limits 
availability but also reduces input costs. Current facilities are small to medium scale due to 
feedstock availability, logistics and cost. Biomethane upgrading of existing biogas installations 
requires a high investment cost of EUR 1-2 million220 for small operators (farmers or SMEs), 

213   H2020 Energy Societal Challenge and Horizon Europe Cluster 5 Energy. https://cordis.europa.eu/projects/en (europa.eu). 
Based on H2020 Energy Societal Challenge and Horizon Europe Cluster 5 Energy EC CORDIS data. Projects & results | 
CORDIS | European Commission (europa.eu).  

214   European Biogas Association, Statistical Report, 2022.  
215  Motola, V., Scarlat, N., Hurtig, O., Buffi, M., Georgakaki, A., Letout, S., Mountraki, A., Salvucci, R. and Schmitz, A., 
Clean  Energy  Technology  Observatory:  Bioenergy  in  the  European  Union  -  2023  Status  Report  on  Technology 
Development  Trends,  Value  Chains  and  Markets,  Publications  Office  of  the  European  Union,  Luxembourg,  2023, 
JRC135079.  

216  Based on EurObserv-ER, Employment & Turnover, April 2023. 
217  Based on Eurostat data. Bioenergy Europe, Statistical report, 2022, Bioenergy Landscape. Only 4% of solid biomass is 

imported in the EU for bioenergy.  

218   OJ L 150, 14.6.2018.  
219 European Commission, Directorate-General for Mobility and Transport, Maniatis, K., Landälv, I., Heuvel, E. et al., 

Building up the future, cost of biofuel, 2018, https://data.europa.eu/doi/10.2832/163774. 

220  Based on International Energy Agency (IEA) data. European Energy Innovation, A new policy context for assessing biogas 

and biomethane (europeanenergyinnovation.eu), Autumn 2022 

34 

 
 
 
 
which means that business incentives are needed. Grid injection is not always possible as plants 
are built where feedstock is available and the gas grid is not well developed in all regions of 
the EU, necessitating supporting access to gas grid. Today, about half of all biomethane plants 
are connected to the natural gas grid221. 

The volume of combined biogas and biomethane production from anaerobic digestion in the 
EU in 2021 made up 4.4% of natural gas consumed i.e. 18.4 billion cubic metres (bcm)222. Of 
this volume, 3.5 bcm biomethane was produced in 1067 industrial plants from upgraded biogas 
and 14.9 bcm biogas was produced in 18843 anaerobic digestion industrial plants223. The EU 
is the largest producer of biomethane worldwide. At the end of 2020, there were 1 161 biogas 
upgrading facilities operating worldwide, with a production capacity of 6.7 billion cubic metres 
per year224. Reaching the 35 bcm REPowerEU target in 2030 would require both building new 
installations and upgrading electricity producing biogas plants to biomethane or around 5 000 
smaller additional biomethane plants225. Potential production by 2050 could reach 165 bcm226. 
The production of bio-LNG for transport is growing rapidly in the EU with 15 plants in 2021 
and 1.24 TWh/year capacity (0.12 bcm/year). The potential capacity by 2025 could reach 12.4 
TWh/year in 104 plants227. 

Innovation in sustainable biomethane production and biogas upgrading technologies and 
components can increase production capacity, cost competitiveness and gas grid access. 
Assembling  resilient biomethane value  chains  entails  adapting an EU strategy of deploying 
decentralised and centralised production to local conditions of feedstock availability, resources, 
technology, costs, and social acceptance. Strategic planning, uptake of the measures set out 
in EU policies (such as infrastructures for separate collection and organic waste management) 
and  price  signals  resulting  from  potential  binding  biomethane  production  targets  can 
facilitate deployment. Continuous research and innovation support will also be important to 
secure domestic supply and increase domestic production over the longer term. 

3.10  Carbon capture and storage (CCS)  

The Commission scenarios towards climate neutrality by 2050 indicate that the EU will require 
. Cement  production,  solid  biomass  and  waste 
capturing  up  to  477  million  tonnes  of  CO2
incineration plants will deliver the highest capacities for CO2 capture.  

228

221  European Biogas Association, Biomethane Map, 2021.  
222  Motola, V., Scarlat, N., Hurtig, O., Buffi, M., Georgakaki, A., Letout, S., Mountraki, A., Salvucci, R. and Schmitz, A., 
Clean  Energy  Technology  Observatory:  Bioenergy  in  the  European  Union  -  2023  Status  Report  on  Technology 
Development  Trends,  Value  Chains  and  Markets,  Publications  Office  of  the  European  Union,  Luxembourg,  2023, 
JRC135079. 

223  European Biogas Association, Statistical report, 2022.  
224  Motola, V., Scarlat, N., Hurtig, O., Buffi, M., Georgakaki, A., Letout, S., Mountraki, A., Salvucci, R. and Schmitz, A., 
Clean  Energy  Technology  Observatory:  Bioenergy  in  the  European  Union  -  2023  Status  Report  on  Technology 
Development  Trends,  Value  Chains  and  Markets,  Publications  Office  of  the  European  Union,  Luxembourg,  2023, 
JRC135079. 

225  European Biogas Association, Breaking Free of the Energy Dependency Trap–Delivering 35 bcm of biomethane by 2030, 

2022. 

226  European Biogas Association, Statistical report, 2022. 
227  European Biogas Association, Statistical report, 2022. 
228  Itul, A., Diaz Rincon, A., Eulaerts, O.D., Georgakaki, A., Grabowska, M., Kapetaki, Z., Ince, E., Letout, S., Kuokkanen, 
A., Mountraki, A., Shtjefni, D. and Jaxa-Rozen, M., Clean Energy Technology Observatory: Carbon capture storage and 
utilisation in the European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, 
Publications Office of the European Union, Luxembourg, 2023, JRC134999.  

35 

 
 
 
 
 
The  Commission  already  supports  and  regulates  the  deployment  of  CCS  through  an 
enabling legislative framework including the CCS Directive229 and the ETS Directive230. The 
Commission also provides direct funding for projects, mainly through the Innovation Fund and 
Connecting Europe Facility. The Commission’s proposal for a Net Zero Industry Act defines 
an EU objective of at least 50 million tonnes of CO2 injection capacity per year by 2030 and 
would  impose  an  obligation  on  EU  oil  and  gas  producers  to  contribute  to  achieving  this 
objective. To support the emerging CO2 value chain with a comprehensive long-term policy 
framework,  the  Commission  published  in  2021  a  Communication  on  Sustainable  Carbon 
Cycles231, and in 2022 a proposal for a Regulation for a Union Certification Framework for 
carbon  removals232.  The  Commission  will  also  publish,  in  the  first  quarter  of  2024,  a 
Communication on an Industrial Carbon Management (ICM) Strategy, covering CCS, Carbon 
Capture and Use (CCU), and industrial carbon removals, which will be launched. 

The CCS Directive implementation reports233 submitted in 2023 show an increasing interest 
for CCS from market players across the EU. However, at this time, there is no homogeneous 
application of the Directive across all EU Member States, nor harmonized regulations for CO2 
transport and storage infrastructure. One of the goals of the ICM Strategy is to address this. 
The EU is relatively well positioned on CO2 capture technologies, with a number of companies 
supplying  different  capture  technologies  (pre-  and  post-combustion  and  oxy-fuel)  on 
commercial terms. However, there is currently no deployment at scale. The cost of CCS varies 
significantly depending on site-specific factors, technology developments, access to finance, 
economies  of  scale  through  shared  infrastructure,  and  varies  by  the  sector  and  technology. 
Overall, the costs of the technology are still considerable. Indicative unit costs in EUR/ton 
CO2 range between 28-55 for capture, 4-11 for transport, and 8-30 for storage234.  

From  a  research  perspective,  the  EU  is  well  positioned  on  the  global  market.  In  2021, 
public R&I investments  in  CCS and CCU reached around EUR 170 million, once again  an 
increase on the previous year. 

When developing full industrial carbon management value chains, the EU lags behind 
other economies such as the US and Canada235. According to the Global CCS Institute, as 
of September 2022, there are 196 CCS facilities in the pipeline worldwide, of which 73 are in 
Europe236. As of the end of July 2023, there are not yet any operating CO2 storage projects in 
the EU, and business models are still in their infancy. There are a number of projects capturing 
CO2 and using it in industry and agriculture, but the volume of CO2 is limited.  

229  OJ L 140, 5.6.2009.  
230  OJ L 275, 25.10.2003.  
231  COM(2021) 800 final. 
232  COM(2022)672. 
233  Every 4 years, Member States report to the Commission on the implementation of the CCS Directive 2009/31/EC. Three 
such reports have been published until now by the Commission, with the publication of the 4th Implementation Report 
being planned for the end of 2023. 

234  EnTEC  (Trinomics,  TNO  and  Fraunhofer  Institute  ISI),  Bolscher,  H.  et  al.,  EU  regulation  for  the  development  of  the 
market  for  CO2  transport  and  storage,  European  Union,  2023.  https://energy.ec.europa.eu/publications/eu-regulation-
development-market-co2-transport-and-storage_en 

235  Itul, A., Diaz Rincon, A., Eulaerts, O.D., Georgakaki, A., Grabowska, M., Kapetaki, Z., Ince, E., Letout, S., Kuokkanen, 
A., Mountraki, A., Shtjefni, D. and Jaxa-Rozen, M., Clean Energy Technology Observatory: Carbon capture storage and 
utilisation in the European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, 
Publications Office of the European Union, Luxembourg, 2023, JRC134999. 
236  Global CCS Institute, Global Status of Carbon Capture and storage, 2022, 2022. 

36 

 
 
 
Demand and supply of materials required in the CCS and CCU value chains is a field in need 
of further study. However, overall, CCS is less exposed to critical raw material risks than other 
technologies. In 2022, the global CCS market was worth USD 6.4 billion (EUR 6 billion237). 
The US had the highest revenue in this value chain, reaching EUR 1 945 billion in 2021, in 
large part due to the use of CO2 injections underground for enhanced hydrocarbon recovery. 
By comparison, Europe had a total revenue of EUR 92 million238. 

Market research identified 186 key companies worldwide with CCS operations239. Of these, 
24% of the key players are European or are active in this sector through European subsidiaries. 
The  EU  has  several  players  in  the  oil  and  gas  sector  with  long  histories  of  building 
pipelines, drilling wells and having significant geological competence, which will be useful 
when  developing  infrastructure  projects  for  CCS.  Information  collected  from  CCS 
Directive  implementation  reports  shows  increasing  interest  from  potential  infrastructure 
providers, especially for storage: in total, seven exploration permits and two storage permits 
have been issued, with  more than 10 storage permit applications being announced by 2028. 
Alongside oil and gas companies, new players are emerging, specialising in different parts of 
the CCS value chain. For instance, shipping companies are expanding into CO2-shipping, and 
suppliers within engineering are developing capture solutions for third-party emitters. 

CCS is a range of mature, proven and readily available technologies. However, CCS is still 
very costly and many uncertainties still exist. CCS needs to be deployed at scale to help reach 
climate neutrality by 2050. Continued research and innovation is still needed to improve the 
available technologies or develop new innovative solutions. The key barriers that have been 
hindering the rollout of CCS are the high up-front investment and operating costs, the 
fragmented regulatory framework, the complexity of full chain infrastructure projects, 
as well as public awareness. With the Innovation Fund, the Commission already supports the 
annual  capture  of  more  than  10  million  tonnes  of  CO2  from  2026  onwards,  with  financial 
support for selected projects totalling more than EUR 2.5bn. This shows that public funding 
– both at EU and national level – will be needed to attract private capital. Furthermore, 
proposing business models for this emerging market will also be essential.  

3.11 Grid technologies: the example of high voltage direct current systems 

Developing energy infrastructure is crucial to integrate renewable electricity generation in the 
power  grid,  to  enhance  the  security  of  supply  through  cross-border  interconnections,  to 
improve access to affordable energy, and to electrify industry and end uses, such as heating 
and  cooling,  and  mobility.  The  EU’s  offshore  renewable  energy  strategy  and  the  TEN-E 

237  Using 

the 

average 

exchange 

rate  of  EUR  0.9497 

for  USD  1  over 

the  year  2022.  See: 

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

238  Itul, A., Diaz Rincon, A., Eulaerts, O.D., Georgakaki, A., Grabowska, M., Kapetaki, Z., Ince, E., Letout, S., Kuokkanen, 
A., Mountraki, A., Shtjefni, D. and Jaxa-Rozen, M., Clean Energy Technology Observatory: Carbon capture storage and 
utilisation in the European Union - 2023 Status Report on Technology Development Trends, Value Chains and Markets, 
Publications Office of the European Union, Luxembourg, 2023, JRC134999. 

239  There is limited available data on the number of companies involved in the CCUS supply chain in Europe. In addition, the 
majority of the companies have not announced the value of the projects they are involved in. Along with this, the companies 
are involved in a wide range of stages across the overall value chain, so it is challenging to derive a market share at this 
instance. Depending on the boundaries set for the value chain, other research suggests about 17 000 companies involved 
in all aspects of the CCUS supply chain including technology providers, services, legal aspects. European Commission, 
Kapetaki, Z. et al, Carbon Capture Utilisation and Storage in the European Union. 2022 Status Report on Technology 
Development Trends, Value Chains and Markets. 2022.  
https://publications.jrc.ec.europa.eu/repository/handle/JRC13066 

37 

 
 
 
 
Regulation240 call for action to coordinate long-term planning and development of offshore and 
onshore electricity grids to meet the complex requirements of engineering efficiency, economic 
viability and environmental sustainability.  

A specific challenge for transmission grid development arises from the need to transport 
electricity over long distances with minimal losses. For example, to link distant renewable 
power generation hubs (e.g. offshore wind farms) with consumers (e.g. cities and industries), 
to  develop  interconnections  between  neighbouring  countries  or  to  so  both  (e.g.  via  hybrid 
interconnections). High voltage direct current (HVDC) systems are becoming a fundamental 
enabling technology to meet this challenge241.  

HVDC systems (today, mainly composed of converter stations and point-to-point cables) have 
been proven at industrial scale in operational environments. There is, however, a growing need 
to move away from vendor-specific technology design and operation concept to multi-terminal, 
multi-vendor technology with  grid forming capabilities242. This  should allow for better grid 
observability and control, data accessibility and new energy services. Achieving this requires 
multi-vendor cooperation frameworks, such as the EU-funded InterOpera project, which seeks 
to develop a modular and interoperable HVDC control and protection system243. HVDC cable 
technology also continues to evolve, as 525 kV voltage levels are now available for land and 
offshore applications and higher voltage levels should become available in the future. 

Worldwide installed HVDC capacity has tripled since 2010, reaching a total 100 000 km in 
length and 350  GW in  total capacity at  the end  of 2021244. As of 2022,  HVDC capacity in 
Europe amounted to around 43 GW, with an additional 63 GW coming from 51 new projects 
(mostly at the planning and permitting stage)245. Europacable estimates that over the next ten 
years somewhere between 10 000 and 14 000 km of new HVDC land cables would be laid in 
Europe246,  significantly  more  than  for  new  AC  assets.  New  HVDC  submarine  installations 
could be even more substantial (between 39 000 and 58 000 km). 

The  energy  transition  in  Europe  and  globally  is  expected  to  continue  driving  HVDC 
deployment  and  markets.  The  value  of  the  global  HVDC  market  was  estimated  at  between 
USD 9 billion and USD 17 billion in 2021 (between EUR 7.6 billion and EUR 14 billion247), 

240   OJ L 152, 3.6.2022.  
241  Thanks to higher capacity and lower losses over long distances compared with their alternate current (AC) equivalents, 
they can efficiently strengthen the interconnectivity of the energy system by linking distant power networks with different 
frequencies or facilitating the interconnection of large offshore wind plants. 

242  WindEurope Intelligence Platform, Workstream for the development of multi-vendor HVDC systems (ENTSO-E, T&D 

Europe, WindEurope), 21 June 2021.  

243  The  ‘Enabling  interoperability  of  multi-vendor  HVDC  grids’  (InterOPERA)  project  brings  together  European  TSOs, 
manufacturers, sector associations and universities to define compatibility and interoperability standards for HVDC. For 
more information: https://interopera.eu. 

244  International Energy Agency (IEA), Energy Technology Perspectives, 2023.  
245  Power Technology Research (2023, March). IoT innovation: Leading companies in HVDC transmission systems for the 
power  industry.  Retrieved  from Power  Technology:  https://www.power-technology.com/data-insights/innovators-hvdc-
transmission-systems-power/  

246  A conservative estimate based on the analysis of the ENTSO-E’s 2022 Ten-Year Network Development Plan and EU 
Member States National Development Plans (but without considering latest EU Member State pledges for offshore wind 
generation).  
the 

rate  of  EUR  0.8455 

the  year  2021.  See: 

for  USD  1  over 

247  Using 

exchange 

average 

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

38 

 
 
 
with potential to grow at a compound annual growth rate of 7.1% to 10.6% over the next 10 
years.248 

The global HVDC converter station market is dominated by six major vendors: Hitachi Energy 
(formerly ABB) in Switzerland/ Sweden (the market leader), followed by Siemens (Germany) 
and  General  Electric  (United  States),  Mitsubishi  Electric  (Japan),  NR  Electric  &  C-EPRI 
Electric Power Engineering (China) and Bharat Heavy Electricals Limited (India). Except for 
Hitachi Energy, most convertor station manufacturers procure high-power semiconductors (a 
key  component  of  converter  valves)  from  external  suppliers.  This  currently  represents  a 
relevant risk factor, since production is concentrated in Taiwan Semiconductor Manufacturing 
(TSMC) 249. As for HVDC cable manufacturing, the EU is home to some of the world’s leading 
cable makers, including NKT in Denmark, Nexans in France, Südkabel in Germany, Prysmian 
Group in Italy, Hellenic Cables in Greece, Tele-Fonika/ JDR in Poland and the UK. The main 
international competitors include Sumitomo in Japan, NBO and ZTT in China and LS Cable in 
the Republic of Korea. 

According to the IEA250, procurement lead times for converter stations are typically around 
two to three years. However, the complete delivery of HVDC transmission projects (including 
planning, permitting,  procurement  and transportation, installation, final  commissioning, and 
energisation) needs significantly more time, and can take as long as ten years251). Strong growth 
in  global demand can stretch these lead times even longer, as  developers in  all parts of the 
world compete to secure supply from a limited number of vendors. Project size and smooth 
permitting  are  major  factors  when  securing  deals  (which  can  become  a  tough  challenge  to 
overcome for relatively small European TSOs). 

Upgrading the electricity grid is a major enabling factor for the clean energy transition. 
Europe has been an attractive market for HVDC project developers and technology providers, 
mostly  thanks  to  its  first-mover  status  in  offshore  wind  deployment  and  integration  of 
renewable  generation.  However,  with  growing  global  demand  for  HVDC  converters  and 
cables, there is an increasing risk that the European market gets undersupplied, ultimately 
leading to delays on the decarbonisation timeline. Fragmentation in the EU market (with 
different national standards and many subnational system operators) could make European 
demand lose out in international competition for contracts. Some European TSOs already 
claim to have difficulties winning contracts at favourable terms and timeframes. By contrast, 
technology and equipment manufacturers may be hesitant to increase capacity in the absence 
of  clear  long-term  (aggregate)  demand  signals,  due  to  substantial  investment  requirements. 
Closer  cooperation  is  needed  among  policy  makers,  network  planners  and  system 
operators, as well as industry, at all EU levels, to build robust supply chains able to meet 
the development needs of the network. To this end, it is important to support and accelerate 
the  harmonisation  and  standardisation  of  HVDC  components  to  encourage  EU  suppliers  to 
invest  in  production  capacity.  Bringing  streamlined  procurement  procedures  and  voluntary 
demand  pooling  for  EU  buyers  could  tackle  the  main  supply  chain  issues  and  facilitate  the 
acquisition  of  manufacturer  production  slots.  Lastly,  to  maintain  and  extend  the  EU’s 

248  Power Technology Research. 
249  U.S. Department of Energy, Semiconductors - Supply Chain Deep Dive Assessment, 2022.  
250  International Energy Agency (IEA), Energy Technology Perspectives, 2023.  
251  Europacable, Electricity transmission of tomorrow, 2021. Estimates suggest than an average transmission project takes 15 

years from planning to competition. 

39 

 
 
 
technological lead in this sector, it is important to invest in innovation (e.g. in HVDC grid-
forming capabilities), to run ‘regulatory sandboxes’ and to ease access to EU funding for 
demonstrators and innovative projects. 

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4.  CONCLUSION 

In response to the disruption of the world’s energy system - caused by the COVID-19 pandemic 
first and exacerbated by the Russia’s unprovoked and unjustified military aggression against 
Ukraine  –  the  EU  has  accelerated  its  clean  energy  transition  and  swiftly  put  forward  a 
package of measures to protect citizens and businesses. Boosting the use of renewable energies, 
reducing energy use, and diversifying energy supply chains are at the core of the EU’s response. 

As a result, and given the record energy prices,  net-zero technologies have never been so 
competitive compared to fossil fuel and their market share has shot up. In 2022, new wind 
and solar energy capacity installed in the EU substantially increased compared to 2021. This 
trend  is  expected  to  continue  as  Member  States  have  increased  their  renewable  energy  and 
energy  efficiency  targets  for  2030  and  supported  by  the  Fit-for-55  package.  Other  major 
economies  are  following  suit.  The  IEA  estimates  that  the  global  market  for  key  mass-
manufactured net-zero technologies is set to triple by 2030, with related energy manufacturing 
jobs expected to double in the same time period. 

However, in the global race to net-zero, EU manufacturers are falling behind, and this could 
undermine  our  economic  security.  All-time  high  energy  prices,  high  interest  rates,  skill 
shortages, supply chain disruptions, and strong competition from other regions have challenged 
the EU industry like never before, including  in  sectors where the EU used to  hold  a strong 
position. The EU wind energy sector’s market share fell from 58% in 2017 to 30% in 2022, 
in particular due to the rapid growth of wind deployment in China. The EU’s trade balance 
deficit for individual heat pumps more than doubled between 2021 and 2022. Furthermore, 
solar  PV  prices  reached  a  record  low  in  September  2023  due  to  intense  competition  and 
oversupply  of  components  across  the  whole  value  chain,  making  it  more  difficult  for  EU 
manufacturers  to  produce  profitably.  While  Europe’s  share  in  global  investment  in  lithium 
battery production capacity fell from 41% in 2021 to 2% in 2022, battery factories are being 
built with increasing speed across Europe and are projected to meet most of EU demand by 
2030.  

Therefore,  while maintaining its efforts to bring energy prices down, the EU must also 
simplify its regulatory framework to make it easier and faster to expand its manufacturing 
base of net-zero technologies and to attract more investment into the EU.  

In  parallel,  the  EU  should  continue  action  to  reduce  its  dependency  on  imports  and 
effectively  diversify  its  sourcing  of  components  and  raw  materials.  For  most  net-zero 
technologies, the EU depends on China in at least one stage of the value chains.  

The  EU  also  needs  to  raise  the  skills  of  its  workforce.  Despite  the  positive  trend  in  the 
employment rate of the EU’s clean energy sector, the skills gaps and shortages seen since 2021 
are curbing the growth in the clean energy sector growth and may be further protracted due to 
demographic  trends.  The  EU  budget as  well  as  cross-sectoral  policy  initiatives  and  several 
specific measures put forward by the EU are instrumental to accelerate skills development in 
the green transition, and in the clean energy sector in particular. 

In terms of R&I investments, Horizon 2020 and Horizon Europe have provided a vital 
boost  to  national  public  sector  investments  since  2020.  While  the  EU  maintains  its  strong 
position in internationally protected patents, increased efforts in the coordinated use of the EU 

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and national programmes and clear definition of national R&I targets for both 2023 and 2050 
are instrumental to chart a successful R&I path. 

Ensuring  access  to  finance  to  develop  the  domestic  clean  energy  technology 
manufacturing capacity is key to developing value chains in the EU. This includes funding 
to  turn  innovation  into  industrial  production.  In  particular,  the  EU  must  ensure  that  capital 
keeps flowing to EU innovative start-ups. This requires further efforts to deepen the Union’s 
capital markets. 

The EU must also foster clean technology cooperation with its partners abroad, in an open 
but assertive way. Trade openness and international partnerships will not only help strengthen 
the  competitiveness  of  the  EU  by  securing  more  diversified  supply  chains  for  the  green 
transition but also open new market opportunities and help all economies meet the aims of the 
Paris Agreement.  

In  addition,  the  EU  must  keep  pulling  demand  for  net-zero  technologies  that  are  both 
sustainable  and  resilient  in  order  to  meet  its  decarbonisation  goal  while  boosting 
competitiveness and the security of energy supply.  

Lastly, measures to tackle the specific issues faced by certain sectors, like the wind industry 
are  needed.  Looking  at  the  broader  economy,  the  EU  needs  to  maintain  support  for  its 
industry throughout the clean energy transition. This also requires a targeted approach for 
each industrial ecosystem. To this end, the President of the European Commission announced 
in her State of the Union address on 13 September 2023 a series of Clean Transition Dialogues 
to be held with industry. The EU competitiveness is essential for the EU strategic autonomy, 
and it is crucial to assess how to remain competitive while undertaking the clean transition. 
This is why the President of the European Commission asked Mario Draghi to prepare a report 
on the future of European competitiveness. 

The future of our clean tech industry must be made in Europe. Therefore, the Commission 
calls on the Council and the European  Parliament to take note of this competitiveness 
progress report and to accelerate the adoption of the legislative files that will support the 
net-zero industry, notably the Net-Zero Industry Act and the Critical Raw Materials Act.  

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