REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Progress on competitiveness of clean energy technologies
Date: 2025-02-26
Institutions: Directorate-General for Energy, European Commission
Subjects: EU industrial policy, carbon neutrality, clean technology, competitiveness, energy transition, innovation, production policy, renewable energy, renewable resources, research and development

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2025  COM(2025) 74 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Progress on competitiveness of clean energy technologies  
 
 
2025 PROGRESS REPORT ON COMPETITIVENESS OF CLEAN ENERGY 
TECHNOLOGIES 

Table of Contents 

2.3. 

2.2. 

2.1. 

Executive Summary .............................................................................................................................. 2 
1. 
Introduction .................................................................................................................................. 5 
2.  Assessment of the competitiveness of the EU clean energy sector ........................................... 6 
The global economic context and the competitiveness of the EU net-zero technology sector ............ 6 
2.1.1.  Energy prices and costs trends ........................................................................................................ 6 
2.1.2.  Support for net-zero technologies on global markets ..................................................................... 9 
Net-zero technology value chains in the EU: opportunities and challenges for a clean industry ...... 11 
2.2.1.  Manufacturing supply chains ........................................................................................................ 11 
2.2.2.  Decarbonisation of energy-intensive industries ............................................................................ 13 
2.2.3.  Human capital and skills ............................................................................................................... 14 
The clean energy sector innovation landscape ................................................................................... 15 
2.3.1.  R&I trends .................................................................................................................................... 15 
2.3.2.  Venture capital investment trends ................................................................................................. 19 
3.  Assessment of the competitiveness of the EU on net-zero technologies ................................. 21 
Solar photovoltaics ............................................................................................................................ 21 
3.1. 
Solar thermal ..................................................................................................................................... 23 
3.2. 
Onshore and offshore wind energy .................................................................................................... 24 
3.3. 
Ocean energy ..................................................................................................................................... 25 
3.4. 
Battery and energy storage ................................................................................................................ 26 
3.5. 
Heat pump technologies .................................................................................................................... 27 
3.6. 
Geothermal energy ............................................................................................................................ 28 
3.7. 
Hydrogen technologies: electrolysers & fuel cells ............................................................................ 29 
3.8. 
Sustainable biogas and biomethane technologies .............................................................................. 31 
3.9. 
Carbon capture and storage (CCS) technologies ............................................................................... 32 
3.10. 
3.11. 
Electricity grid technologies: power lines and transformers .............................................................. 33 
3.12.  Nuclear fission energy technologies .................................................................................................. 35 
3.13.  Hydropower ....................................................................................................................................... 36 
Sustainable alternative fuels .............................................................................................................. 37 
3.14. 
Industrial excess heat recovery technologies ..................................................................................... 38 
3.15. 
4.  Conclusions ................................................................................................................................. 39 

 
 
 
 
 
 
 
 
EXECUTIVE SUMMARY 

The 2025 Competitiveness Progress Report (CPR) on clean energy technologies provides 
a snapshot of the trends and challenges of net-zero technologies and their manufacturing in the 
EU. It encompasses first a horizontal part on the competitiveness of the EU clean energy 
sector, followed by a sectoral analysis for 15 technologies. The report builds on the Draghi 
report  and  the  Competitiveness  Compass  and  supports  the  implementation  of  the  Net-Zero 
Industry Act, as the act’s monitoring report. Adopted alongside the Clean Industrial Deal and 
the Action  Plan  for  Affordable  Energy,  the  report  underpins  both  initiatives  by  providing 
insights  into  the  technologies  required  to  decarbonise  EU  industry  while  strengthening  its 
competitiveness and bringing down energy costs.  

Competitiveness of the EU clean energy sector 

Clean energy technologies continue to be highly cost competitive in the EU, thanks to low 
operational costs. In 2024, renewables generated a new all-time high of 48% of electricity in 
the EU, increasing from 45% in 2023 and 41% in 2022. 

While the roll-out rate of clean energy technologies is increasing dynamically, the EU’s 
net-zero industry faces a challenging business environment and fierce competition. As the 
Draghi report emphasises, as an innovation leader in clean technologies, the EU needs to seize 
the economic opportunities the global deployment of these technologies represents. At the same 
time, industrial policies and emerging import restrictions, such as in the US and China, have 
an increasing impact on the business environment, trade relations and investment decisions.  

The  EU  is  home  to  a  diversified  net-zero  technology  manufacturing  industry,  but 
struggles  to  maintain  market  shares  globally,  with  China  having  come  to  dominate 
production in key sectors. Across net-zero technologies, the EU remains dependent on specific 
technology components or key raw materials within the supply chain, which poses challenges 
to its overall economic resilience and strategic autonomy. This is interlinked with challenges 
the EU faces in energy-intensive industries, which are supplying metals and chemical products 
to net-zero technology manufacturers.  

Clean  energy  technologies  provide  high  quality  jobs,  but  challenges  such  as  the 
availability of skilled workers and an ageing workforce persist. Employment continued to 
grow in 2023 with renewable energy jobs in the EU reaching 1.8 million. In the broader clean 
energy  sector,  around  a  third  of  the  jobs  is  in  the  manufacturing  of  net-zero  technologies, 
confirming the social and economic importance of these value chains.  

The  EU  remains  well  placed  in  research  in  clean  energy  technologies  but,  faced  with 
strong global competition, its competitive advantage in innovation has been eroding in 
recent years. Most recent data indicates that half of the reporting Member States increased 
their research and innovation (R&I) spending in energy technologies in 2023. If this partial 
reporting proves to be representative, it would result in a 9% increase of support for the Energy 
Union R&I priorities. Overall, the EU leads globally in public R&I spending in clean energy 
technologies. However, private R&I investment, which continues to provide over three quarters 
of R&I funding for clean energy technologies across major economies, remains significantly 
higher in major Asian economies. As underlined by the Draghi report and recognised in the 
Competitiveness  Compass,  further  efforts  are  needed  to  ensure  the  EU  remains  among  the 
leaders in clean tech R&I and improves its lacklustre performance in bringing this innovation 
to the market.  

2 

 
Access to risk capital remains a key challenge for starting and scaling up EU firms in the 
clean  energy  technologies  sector.  For  2024,  initial  data  indicates  that  a  difficult 
macroeconomic  environment  contributed  to  a  significant  decline  of  the  venture  capital 
investments in clean energy technologies in the EU, by -34% compared to 2023. This drop is 
linked to a decrease in venture capital activity and a lower number of large-scale investments, 
compared  to  2023  which  saw  large-scale  deals  in  battery  and  hydrogen-based  steel 
manufacturing  facilities.  Those  deals  played  a  major  role  in  driving  EU  venture  capital 
investment in the sector to EUR 9.2 billion in 2023 (+20% compared to 2022). At the same 
time, provisional data indicates that the EU share of global venture capital investment in clean 
energy  technologies  remained  relatively  stable  in  2024.  The  EU  ranked  second  globally  in 
2023, with a share of 28%, in between the US (30%) and China (24%). 

EU competitiveness in net-zero technologies 

In 2024, the EU ranked second after China in newly installed  solar photovoltaics (PV) 
capacity. EU manufacturers operate in a highly challenging environment and are struggling to 
compete globally. The EU is heavily dependent on PV imports from China, where more than 
90% of global manufacturing facilities are situated. At the same time, the EU still has a strong 
role in R&I for specific PV applications.  

The  EU  retains  a  strong  manufacturing  capacity  for  solar  thermal  technologies.  Solar 
thermal is a mature technology, yet it continued to face challenges in 2023/2024 to keep up 
with other renewable solutions. While the solar thermal heat market contracted in 2023, the 
industrial  process  heat  segment  showed  some  promising  development,  growing  three-fold 
year-on-year globally.  

The EU remains highly competitive in wind power technology. However, EU players are 
under  increasing  pressure,  notably  as  Chinese  companies  offer  increasingly  competitive 
products at lower prices. In 2024, the EU accounted for close to 13% of global manufacturing 
capacity in blades and nacelle assembly and about 22% of tower manufacturing. EU companies 
had a market share of close to 90% of the European market and 23% of the global market in 
2023, marking a decline by around 7% in the global market compared to 2022. 

There  was  unprecedented  funding  and  interest  in  ocean  energy  technologies  in  2024. 
Around 1230 kW of new ocean energy capacities were installed in Europe in 2024. However, 
China is leading on high-value inventions in this sector, ahead of the EU. Further actions is 
needed to increase the economic viability of ocean energy as well as to bring innovative ocean 
energy technology to the market. 

EU  battery  manufacturers  are  facing  strong  headwinds  as  they  aim  to  increase 
manufacturing  capacity  and  market  shares.  China  is  leading  in  battery  technology  and 
represents  more  than  85%  of  the  global  commissioned  manufacturing  capacity  in  2024, 
followed  by  the  EU  at  about  7%  and  the  US  at  around  5%.  EU  manufacturers  are  highly 
dependent on China for cathodes and anodes. If announced projects are realised, the EU seems 
on track to meet its production goals for 2030 with a share of 10% (1 510 GWh) of forecasted 
global operational battery production capacities for 2030. Observers predict an oversupply of 
battery cells in the coming years, likely to result in fierce global competition. 

EU  heat  pump  manufacturers  are  global  leaders  in  high-end  innovative  solutions  for 
domestic use as well as industrial heat pumps. Final assembly capacity in the EU is on track 
to meet the EU’s deployment needs for 2030. However, EU industry remains highly dependent 
on imports for certain components, such as compressors. While the EU trade balance deficit in 
the supply chain was reduced by one third in 2023, heat pump sales in the EU decreased by 

3 

 
7.2% in 2023, after a decade of growth. This trend worsened in 2024, with sales in Europe 
falling by 31%. This highlights the need for efforts for the sector to regain momentum.  

EU  companies  play  a  strong  role  in  the  installation  and  final  assembly  of  geothermal 
energy technologies deployed in the EU. However, the global market for key components is 
dominated  by  non-EU  companies.  Tackling  sectoral  challenges,  such  as  the  availability  of 
subsurface data, can help EU industry.  

European firms continue to play a relevant role in electrolyser manufacturing and are 
estimated to have provided for around a third to a quarter of the global manufacturing 
capacity in 2024. While hydrogen electrolysis capacity continues to expand dynamically in 
the  EU,  challenges  remain  in  developing  a  large-scale  hydrogen  sector,  ensuring  the 
availability of large quantities of cost competitive hydrogen. Furthermore, the EU has fallen 
behind in fuel cell manufacturing.  

The EU is home to world leading companies in biogas and biomethane production and 
component manufacturing. Europe presents a mature biogas and biomethane industry mainly 
for  electricity  generation,  with  growing  markets  in  heat  and  transport.  Almost  50%  of 
production is in Europe, with Germany alone meeting 20% of global demand. 

The  EU  is  well  positioned  on  CO2  capture  technologies,  but  lags  behind  the  US  and 
Canada  in  CO2  transport  and  storage.  The  number  of  CCS  projects  has  been  growing 
rapidly globally and in Europe. EU actions to provide predictability for investors and increase 
the visibility of demand for and supply of storage are key in this regard.  

The EU has some long-standing market and technology leaders for both power lines and 
transformers. European companies are expected to face increasing pressure from international 
competitors  in  the  short  to  mid-term.  Manufacturing  of  grid  equipment  depends  greatly  on 
access to raw materials such as copper, aluminium and grain-oriented electrical steel, where 
EU manufacturers are exposed to import dependencies. 

In nuclear power, the EU retains one active reactor vendor, with a global market share 
of 5.3% of reactors under construction at the beginning of 2024. As the EU nuclear plant 
fleet and its workforce are ageing, efforts are needed to rejuvenate the sector. The European 
Industrial Alliance on Small Modular Reactors (SMRs) was launched in 2024 to facilitate the 
deployment of SMRs and to support a competitive EU ecosystem in this emerging technology. 

While the EU hydropower industry continues to play a leading role globally, it has lost 
market share in manufactured turbines and in other parts in recent years. From a peak of 
EUR 466 million in 2015, the EU trade surplus  shrank substantially to EUR 213 million in 
2023. To maintain a strong manufacturing industry of components in the EU, the home market 
would  need  to  be  supported  with  new  investments.  There  is  also  untapped  potential  in 
expanding pumped storage hydropower to contribute to grid flexibility.   

The  EU  is  among  the  innovation  leaders  in  the  emerging  market  for  sustainable 
alternative fuels for aviation and maritime transport. Production capacity remains limited 
and needs to be scaled-up while at the same time reducing prices for such fuels.  

Excess energy from industrial processes in the EU could be converted into 150 TWh of 
electricity annually using organic Rankine cycle (ORC) power plants. EU manufacturers 
are among the leading players in the global market, but there are barriers, such as long payback 
periods, to increasing deployment in the EU.  

4 

 
 
1. 

INTRODUCTION 

Clean energy technologies are key enablers  for the EU to  become climate neutral  by 2050, 
strengthen its energy supply security, and boost its competitiveness. Over the last decades, 
the EU has played a central role in deploying clean technologies, such as solar and wind 
energy.  In  2024,  renewable  energy  sources  reached  48%  in  the  EU  electricity  mix.  This 
underlines  the  increasing  competitiveness  and  economic  relevance  of  clean  energy 
technologies  compared  to  fossil  energy  sources.  To  reach  its  greenhouse  gas  emissions 
reduction objectives for 2030 and beyond, Europe will need to continue in that direction and 
step up its efforts. 

At the same time, EU industry is facing increasing pressure on its competitiveness in net-
zero technologies. Leadership in and manufacturing of technologies that have been developed 
in the EU is increasingly shifting to other major economies, such as China and the US, which 
are expanding their production capacities.  

Competitiveness has become a focus for EU policy, also in regard to net-zero technologies. 
The  conclusions  from  the  European  Council  of April  2024  urged  the  EU  to  become  more 
competitive1. The new Competitiveness Compass sets out a set of measures to strengthen the 
EU’s  competitiveness  in  the  coming  years,  building  on  the  findings  of  the Annual  Single 
Market and Competitiveness Report and the in-depth analysis in the Draghi report2. The Draghi 
report emphasises the economic opportunities clean technologies represent for the EU, as an 
innovation  leader  in  clean  technologies3.  It  lists  the  main  barriers  holding  back  the  EU’s 
competitiveness and calls for an aligned and targeted strategy, taking into account differences 
between  industries.  Both  the  Draghi  and  Letta  report  also  refer  to  the  importance  of 
strengthening,  at  the  same  time  the  Single  Market  for  energy  and  related  infrastructures,  to 
realise  the  EU’s  potential  in  renewable  energy,  with  the  objective  of  ensuring  secure  and 
affordable energy for its industries4.  

To support the EU’s strategic autonomy, to secure its industrial base and maintain innovation 
potential, manufacturing the net-zero technologies of today and tomorrow in Europe is 
essential.  The  Clean  Industrial  Deal  is  a  new  blueprint  for  the  EU’s  prosperity  and 
competitiveness5. With the Clean Industrial Deals, the Commission will improve the access of 
EU industry to funding, material streams and skilled labour, while creating new lead markets 
and increasing the resilience of value chains. At the same time, the Commission will take on 
an unprecedented simplification effort, reducing the burden on businesses. This will pave the 
way for more competitive industries and quality jobs, with a special focus on clean and strategic 
technologies. 

Access  to  affordable  energy  is  a  key  factor  for  the  competitiveness  of  the  EU  and  the 
central  objective  of  the  new  Action  Plan  for  Affordable  Energy6.  The  Action  Plan 
complements the Clean Industrial Deal, proposing measures to lower energy costs for industry, 
businesses and households, while speeding up necessary structural reforms. It is centred around 
the objective to accelerate the transition to affordable, clean, domestically generated energy, 
building  on  the  technologies  covered  in  this  report.  The Action  Plan  aims  to  complete  the 

1 

2  
3 
4 
5 
6  

European  Council  (2024),  Conclusions  from  the  special  meeting  of  the  European  Council  (17  and  18  April  2024); 
European Council (2024), Budapest Declaration on the New European Competitiveness Deal (7-8 November 2024).  
COM(2025) 30 final and COM(2025) 26 final. 
Mario Draghi, The future of European competitiveness, 2024. 
Enrico Letta, Much more than a market, 2024. 
[PLACEHOLDER FOR REFERENCE TO CLEAN INDUSTRIAL DEAL]. 
[PLACEHOLDER FOR REFERENCE TO ACTION PLAN FOR AFFORDABLE ENERGY]. 

5 

 
 
Energy Union and ensure a fully integrated internal energy market with the required physical 
interconnections. 

This report brings evidence-based monitoring and advice regarding the competitiveness 
of clean energy technologies and their manufacturers in Europe. Having entered into force 
in  2024,  the  Net-Zero  Industry  Act  (NZIA)  further  strengthens  the  role  of  the  report,  by 
designating  it  as  the  main  monitoring  tool  on  the  progress  of  the  EU  with  regard  to  the 
production objectives set out in the act. With NZIA, the EU aims to strengthen its domestic 
manufacturing  capacity  of  key  clean  technologies  and  to  increase  the  competitiveness  and 
resilience of its industry. The objective is to reduce dependencies on external actors by reaching 
a  manufacturing  capacity  of  at  least  40%  of  the  EU’s  annual  deployment  needs  for  the 
technologies necessary to achieve its 2030 climate and energy targets, as well as reaching a 
15% share of world production by 20407.  

Part I of the report provides general insights on key issues for the competitiveness of the EU 
net-zero technology sector as a whole, covering aspects such as energy costs, manufacturing, 
industrial decarbonisation, skills, trends in investments, research and innovation as well as the 
global context. Part II of the report maps the state of play on the competitiveness of EU industry 
in  15  net-zero  technologies,  highlighting  strengths  and  weaknesses  in  the  respective  value 
chains. 

This  is  the  fifth  edition  of  this  competitiveness  progress  report,  published  since  2020  in 
accordance with Article 35(1)(m) of the Regulation on the Governance of the Energy Union 
and Climate Action. This  report is  underpinned  by data from the Clean  Energy Technology 
Observatory (CETO)8. 

2.  ASSESSMENT OF THE COMPETITIVENESS OF THE EU CLEAN ENERGY SECTOR  

2.1.  The  global  economic  context  and  the  competitiveness  of  the  EU  net-zero 

technology sector 

2.1.1.  Energy prices and costs trends 

The  energy  market  situation  in  the  EU  improved  in  2023  and  2024.  Energy  prices  were 
significantly lower than in 2022, yet they remained above pre-crisis levels and significantly 
higher than in competing regions. Increasing import diversification of gas and higher renewable 
energy generation capacities, combined with lower consumption, helped reduce wholesale gas 
and electricity prices.  

Wholesale gas prices in 2024 were lower than in 2023, and much lower than the prices seen in 
the first months after the Russian invasion of Ukraine in 2022. However, they remained higher 
than pre-crisis levels. For 2024, the average price for gas wholesale stabilised at 34 EUR/MWh. 
While prices decreased to levels closer to 30 EUR/MWh in the first half of the year, they rose 
steadily to a range of 35-45 EUR/MWh by the end of 2024 and increased again at the beginning 
of 2025. 

For electricity, 2024 was also marked by a continuation of positive market fundamentals that 
resulted in lower wholesale electricity prices. Lower gas prices, subdued demand, and higher 
renewable and nuclear generation all helped to depress wholesale electricity prices across all 

7  
8  

OJ L, 2024/1735, 28.6.2024, Article 5. 
For more information and CETO reports: Clean Energy Technology Observatory. 

6 

 
 
 
EU markets. The European Power Benchmark averaged 95 EUR/MWh in 2023, 57% lower 
than in 2022. In the first three quarters of 2024 the average fell to 70 EUR/MWh, but prices 
rose  in  the  last  quarter.  Overall,  the  2024  average  stood  at  76  EUR/MWh.  Electricity 
consumption  in  the  EU  in  2024  grew  slightly  (+2%),  with  industrial  demand  recovering 
slightly.  

Due to the energy crisis, significant increases in wholesale electricity prices were passed on to 
final consumers, in some cases with a time delay. As a result, household retail electricity prices 
increased in 2022 and partially in 20239. In line with EU efforts, Member States put in place 
temporary measures to mitigate the impact of high prices on consumers. However, high prices 
remained  an  issue,  in  particular  for  vulnerable  consumers.  Retail  household  prices 
developments  in  2024  indicate  that  prices  across  the  EU  have  fallen  slightly  or  remain 
comparable to 2023 prices.  

Electricity prices for industrial users decreased significantly in the first half of 2024, compared 
to the same period in 2023. The decrease ranged from 13% to 27% (excluding taxes) and from 
6%  to  27%  (including  non-recoverable  taxes)10  across  different  consumption  bands, 
intensifying  the downward trend that began in  2023. However, EU industry presently faces 
electricity prices that are about two times higher than in the US or China, at an average of EUR 
0.16 per kWh in 202411. 

The share of renewables in the electricity mix of the EU increased to a new all-time high of 
48% in 2024 (compared to 45% in 2023 and 41% in 202212), while the share of fossil fuels fell 
significantly  to  24%  (from  28%  in  2023).  Solar  and  offshore  wind  output  registered  a 
significant  increase  in  2024:  offshore  wind  rose  by  17%  (+9 TWh),  while  solar  generation 
surged by 19% (+37 TWh). Hydropower improved its output by 7% (+22 TWh), onshore wind 
generation remained roughly stable (-1 TWh) and nuclear output rose by 5% (+29 TWh) during 
the same period13. At the same time, electrification has not picked up in speed, with electricity 
as a share of the energy mix remaining stable at around 20% since 200014. 

Figure 1 presents an overview of levelised costs of electricity (LCOE) in the EU15, estimated 
based on the specific characteristics of the electricity systems in each Member State for 2023. 
Investment  costs,  as  well  as  operation  and  maintenance  costs,  increased  in  2023  due  to 
inflation,  higher  material  costs,  and  increased  labour  costs.  The  elevated  inflation  and  high 
interest rates played a major role in impacting or delaying investment decisions in 2023, both 
for project developers and manufacturers.  

2022 data based on Eurostat. 

9  
Eurostat (nrg_pc_204), accessed on 12/02/2025. 
10    Eurostat (nrg_pc_205), accessed on 12/02/2025. 
11    Eurostat, Electricity price statistics. Note: Prices refer to the ID consumption band, with recoverable levies deducted. 
12  
13   Data for 2023 and 2024 in this paragraph is based on the ENTSO-E Transparency Platform. 
14   COM(2025) 26 final. 
15 

The levelised costs of electricity (LCOE) is a method for comparing the average cost of generating one unit of electricity 
(commonly measured in megawatt-hours, MWh) over the entire lifespan of a power-generating asset or project, taking 
into  account  all  costs  associated  with  building  and  operating  the  power  plant  (capital  expenditures,  operating  and 
maintenance costs, fuel costs (if applicable), financing costs, and decommissioning costs (if applicable)). 

7 

 
 
Figure 1: Snapshot of technology-fleet specific levelised costs of electricity (LCOE) for 2023. 
The solid blue lines denote the median and the light blue bars display a ±25% range across 
the EU, highlighting differences among Member States. 

Source: JRC METIS model simulation16 

Despite  these  rising  costs,  technology  fleets  with  low  variable  costs  (including  operational 
costs, e.g. maintenance and fuel costs), such as renewable energy sources like onshore wind 
and  solar  remain  more  cost-competitive  compared  to  generation  technologies  with  high 
variable costs, such as fossil energy sources like gas and coal impacted by fuel costs. Overall, 
renewables continue to be highly cost competitive in the EU. 

The LCOE value of a given technology is influenced, amongst others, by the ratio between the 
annual  generation  volume  of  the  technology  and  its  installed  capacity.  The  less  utilised  a 
technology is, the larger its LCOE value will be. For this reason, conventional technologies, 
such as lignite, open cycle gas turbines (OCGT), and coal, which have had lower generation in 
some Member States, are seeing larger upward spreads in their LCOE values. In contrast, the 
LCOE  spread  for  a  technology  like  combined  cycle  for  natural  gas  (CCGT)  remains  very 
narrow as the usage rate of CCGT power plants is high in most Member States. 

Renewable energy sources continue to be the most cost competitive technologies, while CCGT 
became the most competitive thermal technology on cost. This trend is partly explained by the 
large drop in natural gas prices compared to the previous year. Additionally, while 2022 saw 
significant fuel switching between gas and coal  due to fluctuating prices,  in 2023 the focus 
shifted more towards the impacts of higher fixed costs across all technologies.  

Over the past decade, the LCOE for various generating technologies in Europe has evolved 
significantly  due  to  several  key  factors. Technological  advancements  have  led  to  increased 
efficiency  and  capacity,  particularly  in  solar  PV  and  wind  energy,  driving  down  costs 

16   According to: 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. Computation based on annualised costs for the 
year  2023.  Capex  and  Opex  based  on  the  2040  climate  target  PRIMES  reference  scenario,  annualised  by  technical 
lifetimes and weighted average cost of capital. Annualised costs are levelised using capacity factors derived from the 
METIS  model.  Variable  costs  are  based  on  2023  commodity  prices,  variable  Opex  and  the  dispatch  in  the  METIS 
simulation. 

8 

 
 
 
substantially. Economies of scale, especially with larger projects and mass production, have 
further reduced costs for renewables. Policy support, including subsidies, tax incentives, and 
carbon pricing,  has encouraged the adoption of cleaner energy sources while increasing  the 
costs  associated  with  fossil  fuels  like  coal  and  natural  gas.  Improved  supply  chains  and 
the  overall  competitiveness  of  renewable 
manufacturing  processes  have 
technologies.  These  combined  influences  have  shifted  the  energy  landscape,  making 
renewables more cost-effective and reducing reliance on traditional energy sources. 

increased 

The  Draghi  report  has  underlined  energy  as  a  key  driver  for  the  EU’s  competitiveness  and 
proposed a mix of measures to address causes of high energy prices in the EU, aiming to enable 
the benefits of decarbonisation in energy to reach end users17. Energy features centrally in the 
new Clean Industrial Deal and, with the Action Plan for Affordable Energy, the Commission is 
putting forward concrete measures to reduce energy costs for households and industry.  

2.1.2.  Support for net-zero technologies on global markets   

New geopolitical dynamics and a phase marked by both high interest rates and inflation, have 
changed the business environment for net-zero technologies over the course of the last years. 
The global market for key, mass-manufactured, net-zero technologies is set to nearly triple by 
2035  and  attain  an  annual  worth  of  around  EUR  1.9 trillion  18.  In  the  race  to  build  up  the 
manufacturing  to  satisfy  the  expected  demand,  it  remains  crucial  to  ensure  EU  industry  is 
competitive and able to play its part in supplying the technologies for the energy transition in 
Europe and globally. At the same time, uncertainties are a challenge for long-term investment, 
including  in  manufacturing  or  production  facilities. To  place  the  EU  and  its  industries  in  a 
position to compete for market shares in 2030 and beyond, decisions taken and implemented 
at this moment will be decisive. Delays in the build-up of net-zero manufacturing capacities 
risk  impacting  the  EU’s  competitiveness  in  the  decades  to  come.  While  accelerated 
electrification will bring down import dependencies on fossil fuels, resilient value chains for 
net-zero  technologies,  such  as  wind  power  or  batteries,  will  be  required  to  avoid  new 
dependencies19.     

In  reaction  to  recent  crises  and  as  strategies  to  support  companies  in  the  energy  transition, 
industrial  policies  to  increase  the  manufacturing  of  clean  energy  technologies  have  been 
introduced around the world, including in countries such as Canada, China, India, Japan, South 
Korea  and  the  US. With  the  adoption  of  the  Inflation  Reduction Act  (IRA),  the  US  offered 
grants  to  support  the  installation  of  advanced  technologies  and  offered  tax  credits  for 
investment in manufacturing facilities for the production of clean energy equipment (with an 
estimated total of EUR 461 billion20, of which 60% is targeted at the energy sector). At the 
same time, China has become a predominant producer of many net-zero technologies and is 
leading on support for clean technologies through an investment-centred economy21. Looking 
specifically  at  the  solar  sector,  more  than  90%  of  manufacturing  facilities  are  situated  in 
China22.  

17   Mario Draghi, The future of European competitiveness, 2024. 
18  

IEA, Energy Technology Perspectives, 2024.  Global market estimates for solar  PV, wind, electric vehicles, batteries, 
electrolysers and heat pumps. Report refers to USD 2 trillion, converted into EUR at the end of 2024.  

19   European Commission, 2025 Annual Single Market and Competitiveness Report, see KPI 18 on electrification. 
20 
21 
22 

Using the average exchange rate of EUR 0.9239 for USD 1 over the year 2024, based on ECB. 
Strategic perspectives, Competing in the new zero-carbon industrial era, 2023. 
For further information, see subsequent section on solar photovoltaics. 

9 

 
 
 
Moreover,  import  restrictions  in  the  US  and  other  countries  are  increasing  the  pressure  on 
manufacturers  from  the  EU  in  their  home  markets.  In  addition,  a  growth  in  manufacturing 
capacities globally, which for certain technologies is currently expected to potentially exceed 
deployment capabilities, brings the danger of overcapacity. Such a development might cause 
serious damage to segments of EU manufacturing, including net-zero technologies. Forecasts 
for 2025 indicate that  global overcapacities  will persist in  major clean energy technologies, 
notably for the entire battery and solar value chains, and nacelles for wind turbines23. 

Estimates suggest that China's overall subsidies range between three to nine times that of other 
OECD  countries  such  as  the  US  or  Germany24.  The  EU  has  concluded  an  anti-subsidy 
investigation on battery electric vehicle (BEV) imports from China, resulting in the imposition 
of countervailing duties on such imports25. To assess the scale and scope of subsidies and the 
conformity with international trade rules, further channels of government support have to be 
considered. The EU  will also  engage with  international  trading  partners as well as  seek the 
assistance of international institutions such as the Organisation for Economic Cooperation and 
Development (OECD) and the International Energy Agency (IEA) for the monitoring of the 
situation.  

For the global energy transition to succeed, economic opportunities and gains will need to be 
shared along the value chain. In this regard, global partnerships and a level playing field will 
be  essential  for  achieving  resilience  and  strategic  autonomy  for  the  EU.  The  current  EU 
initiative Global Gateway is promoting investment in non-EU countries in areas key for the EU 
and its green and digital transitions. Global Gateway aims to mobilise up to EUR 300 billion 
in investment26. Negotiating, concluding and implementing ambitious trade agreements will 
help to expand market access and foster economic resilience27. In addition, Clean Trade and 
Investment  Partnerships 
trade  agreements  and  support 
decarbonisation efforts in the EU and abroad, tailored to the business interests of the EU and 
its trade partners in the clean energy sector.  

(CTIPs)  can  complement 

In the EU, accelerating the decarbonisation and clean energy transition has been at the centre 
of the European Green Deal and subsequent policy measures, including the Fit for 55 package 
and  the  Green  Deal  Industrial  Plan.  The  EU  has  a  solid  framework  fostering  net-zero 
technologies, combining R&I support, economic incentives such as carbon pricing in the EU 
Emissions Trading System (ETS) and regulatory instruments such as the Renewables Energy 
Directive and the Net-Zero Industry Act. The Recovery and Resilience Facility (RRF) provided 
a budget of EUR 650 billion to support reforms and investment undertaken by Member States, 
with a share of at least 37% of green measures in the national recovery and resilience plans. 
Additionally,  EU  cohesion  policy  funds  from  the  European  Regional  Development  Fund, 
Cohesion Fund, the Just Transition Fund and the Interreg provide nearly EUR 120 billion of 
investment in green measures (with total investment cost reaching more that EUR 166 billion). 
This represents an average 40% contribution to climate action for these funds, which goes well 
beyond the minimum regulatory commitments28. Furthermore, REPowerEU played a key role 
in rapidly reducing dependence on Russian fossil fuels and fast forwarding the green transition. 

The  Strategic  Technologies  for  Europe  Platform  (STEP)  was  set  up  by  the  EU  to  support 
European  industry  and  boost  investment  in  critical  technologies  in  Europe,  including  clean 

23   BloombergNEF, Trade & Supply Chains: 10 Things to Watch in 2025, 2025. 
24 
25 
26  
27 
28  

Kiel Institute for the World Economy, Foul Play? On the Scale and Scope of Industrial Subsidies in China, 2024. 
OJ L, 2024/2754, 29.10.2024. 
For more information: https://international-partnerships.ec.europa.eu/policies/global-gateway_en.   
COM (2025) 30 final. 
For more information: Exploring investments 2021-2027 – Cohesion policy support to climate action. 

10 

 
 
energy  technologies.  Through  a  mix  of  financial  incentives  and  measures  to  facilitate  the 
financing  of  projects,  STEP  is  leveraging  funding  in  support  of  critical  technologies  under 
existing  EU  programmes  and  funds,  including  cohesion  policy  funds,  InvestEU,  Horizon 
Europe,  the  European  Defence  Fund,  the  EU  ETS  Innovation  Fund  and  the  Recovery  and 
Resilience Facility. Moreover, until 2024 the Horizon Europe programme cluster 5 ‘Climate, 
Energy and Mobility’ provided more than EUR 3 billion to support clean energy technologies 
research and innovation. 

2.2.  Net-zero technology value chains in the EU: opportunities and challenges for 

a clean industry 

2.2.1.  Manufacturing supply chains  

In  recent  years,  the  EU  has  taken  steps  to  increase  its  manufacturing  capacity  for  net-zero 
technologies, aiming to reduce strategic dependencies and to increase the EU’s resilience while 
contributing to EU climate and energy targets.  

While the EU is increasing its efforts, it faces strong headwinds from global competitors. In 
recent  years,  its  position  in  net-zero  technologies  manufacturing  has  been  globally 
deteriorating,  despite  the  EU’s  strengths  in  aspects  such  as  research  and  innovation,  skilled 
labour and regulatory standards. The EU maintains a strong manufacturing basis in certain net-
zero  technologies,  like  wind  power  and  electrolysers,  while  other  parts  of  the  world  are 
increasingly dominating certain value chains, like in solar PV and batteries. Challenges consist 
not  only  in  the  dependency  on  certain  net-zero  technologies  per  se,  but  also  on  specific 
technology  components  in  the  supply  chain.  For  example,  the  EU  is  well  positioned  in 
manufacturing and remains the main producer of hydronic heat pumps, but China supplies most 
4-way valves and compressors29. Furthermore, the EU remains highly dependent on a range of 
critical raw materials essential to the manufacturing of a range of net-zero technologies. 

Global  clean  technology  manufacturing  investment  surged  rapidly  until  2023.  In  2024 
investment  remained  at  a  similar  level,  with  EUR  129  billion  (EUR  133  billion in  2023)30. 
According to the International Energy Agency (IEA), the EU and the US were able to increase 
their combined  share of  global clean technology  manufacturing investment  to  16% in  2023 
(from  11%  in  2022)31.  At  the  same  time,  China  continues  to  hold  a  significant  lead  in 
manufacturing investment. For 2024, it is estimated that China accounted for 81% of global 
clean tech supply chain investment32.    

Manufacturing costs in the EU and the US remain structurally higher than in China. Solar PV 
module manufacturing costs are 35-65% lower in China compared to the EU and the US33. 
Onshore wind turbine components cost around EUR 355/kW in China, while in the EU and the 

See section on heat pump technologies in chapter 3 of this report.  

29 
30   BloombergNEF,  Energy  Transition  Investment  Trends  2025,  2025.  Data  covers  manufacturing  for  key  parts  of  the 
batteries  (incl.  mines  and  refineries),  solar  PV,  wind  and  the  hydrogen  supply  chain.  Conversion  using  the  average 
exchange rate of EUR 0.9239 for USD 1 over the year 2024, based on ECB. 
International Energy Agency (IEA), Advancing Clean Technology Manufacturing, 2024. 

31 
32   BloombergNEF,  Energy  Transition  Investment  Trends  2025,  2025.  Data  covers  manufacturing  for  key  parts  of  the 

batteries (incl. mines and refineries), solar PV, wind and the hydrogen supply chain. 
IEA, Advancing Clean Technology Manufacturing, 2024. 

33  

11 

 
 
 
US, costs range from EUR 448-485/kW34. Heat pump final assembly in the EU and the US 
costs about twice as much as in China35.  

Several factors contribute to these cost disparities, including high energy prices, supply chain 
disruptions,  currency  inflation,  increased  interest  rates,  intense  market  competition,  various 
subsidy  programmes,  and  uncertain  future  demand.  Recent  analysis  by  the  IEA  shows  that 
China  remains  the  most  cost-effective  location  for  capital  investment  in  manufacturing 
facilities, with costs in the EU and the US being 70-195% higher per unit of output capacity36. 
While the challenges to strengthening EU manufacturing are substantial, the EU, as one of the 
key markets for net zero technologies development and deployment, retains a great potential 
to harness the economic opportunities presented by the global energy transition. 

Net-zero  manufacturing  is  spread  across  many  regions  in  the  EU,  each  with  different 
specialisations. While the EU share in global solar PV manufacturing has been decreasing in 
recent years, Germany, Italy, Spain, France and Austria retain production sites. As regards wind 
energy, while production of components is spread across the EU, main turbine manufacturers 
are concentrated in Denmark and Germany, complemented by relevant tower manufacturing 
capacity  in  Spain.  The  EU's  battery  manufacturing  is  in  development,  with  production  in 
Poland, Germany, Hungary, France, Sweden and further Member States. In hydrogen, more 
than half of the EU electrolyser manufacturing  is  concentrated in  Germany, with  additional 
capacities in Denmark, Spain, Portugal, Italy, and France. As regards heat pumps, Germany, 
Sweden,  Finland  and  Denmark  are  among  the  countries  with  relevant  manufacturing.  In 
geothermal energy, Italy is leading in manufacturing, with relevant production also in Germany 
and  France.  Italy  equally  plays  a  leading  role  in  cable  production  in  the  EU,  followed  by 
Sweden, Germany, France, Poland, and Denmark. The EU is also a leading producer of biogas 
and biomethane, with relevant manufacturing in particular in Germany and Italy as well as in 
Czechia, Spain and Poland for relevant components37. 

The  EU  adopted  the  Net-Zero  Industry Act  to  reduce  its  dependence  on  imported  net-zero 
technologies, strengthen value chain resilience and build a strong domestic manufacturing base. 
The objective is to establish a regulatory framework to ensure the EU’s access to a secure and 
sustainable supply of net-zero technologies including by scaling up manufacturing capacity for 
net-zero technologies and their supply chains. 

In  addition,  Member  States  are  increasingly  adopting  dedicated  policies  that  promote  the 
production of net-zero technologies. These national policy and legal frameworks for net-zero 
technologies  include  a  mix  of  incentive  schemes,  taxation,  fiscal  policies,  and  skills  and 
education policies. Many of these national strategies focus on specific technologies rather than 
net-zero technologies in general. A recent study concludes that a majority of identified policies 
in  Member  States  focus  on  electrolysers  and  fuel  cells,  followed  by  batteries  and  storage 
technologies,  wind  energy,  and  solar  PV.  For  example,  Germany  and  Spain  have  dedicated 
strategies for hydrogen technologies in place, while Ireland and Poland have sectoral strategies 
for wind energy technology38.  

One of the challenges to the widespread production of net-zero technologies is permitting for 
manufacturing sites, which is addressed extensively in the Net-Zero Industry Act. The rules 

Using an average exchange rate of EUR 0.9239 for USD 1 over the year 2024, based on ECB. 
IEA, Advancing Clean Technology Manufacturing, 2024. 
IEA, Advancing Clean Technology Manufacturing, 2024. 

34 
35  
36  
37   Ecorys, The Net-Zero manufacturing industry landscape across Member States - Final Report, 2025. Non-exhaustive 

list of examples.  
Ibid. 

38  

12 

 
 
vary  between  countries,  potentially  affecting  the  implementation  timeline  for  these 
technologies.  However,  Member  States  are  moving  towards  solutions  like  digitalisation, 
establishing  one-stop  shops  and  prioritising  green  projects.  Examples  include  Italy's 
development  of  one-stop  shops  for  business  activities,  Finland's  temporary  prioritisation  of 
green  transition  projects,  and  Hungary's  classification  of  certain  projects  as  priority 
investments. France's Green Industry Law also aims to reduce permitting times with parallel 
processing and fast-track procedures for strategic projects39. 

The Draghi report stresses the need to maintain and strengthen clean tech manufacturing in the 
EU to be able to realise the growth opportunities offered by a growing market in and outside 
the  EU,  building  on  the  EU’s  strong  fundamentals  in  innovation  and  manufacturing. 
Furthermore,  the  report  identifies  several  challenges  faced  by  EU  manufacturers  in  these 
technologies  to  scale-up  and  compete,  and  it  proposes  several  measures  to  support  EU 
competitiveness in this area. Among its proposals, the report stresses the crucial role of a full 
and speedy implementation of the Net-Zero Industry Act to support manufacturing40.     

The  Clean  Industrial  Deal  sets  out  a  competitiveness-driven  approach  to  decarbonisation, 
aimed  at  securing  the  EU  as  an  attractive  location  for  manufacturing,  including  for  energy 
intensive industries and clean technologies. Moreover, the future European Competitiveness 
Fund will help ensure that strategic technologies, including clean technologies, will be both 
developed and manufactured in the EU41. 

2.2.2.  Decarbonisation of energy-intensive industries  

From metals  like steel,  aluminium  to  chemical  products,  the materials  produced by  energy-
intensive industries are strategic for the EU economy, including as the basis for both designing 
and manufacturing net-zero technologies. Constructing a wind turbine tower requires steel for 
the  tower  and  its  foundation,  aluminium  for  the  nacelle  and  blades,  as  well  as  specialised 
chemical coatings for them. At the same time, net-zero technologies, from renewable energy 
sources to hydrogen production, energy efficiency and carbon-capture and storage technologies 
are enabling the decarbonisation of energy-intensive industries. This illustrates how essential 
energy-intensive industrial products are to net-zero value chains and vice versa. 

Therefore, increasing the EU’s strategic autonomy requires a value chain approach, considering 
all  essential  components  and  materials  of  net-zero  technologies. The  Net-Zero  Industry Act 
recognises  the  importance  of  transformative  industrial  technologies  for  decarbonising  the 
production  of  basic  materials,  such  as  steel,  aluminium,  non-ferrous  metals,  chemicals  and 
cement. It includes support for energy-intensive industry decarbonisation projects, which are 
part of the supply chain of a net-zero technology42. These projects benefit in particular from 
accelerated  permitting.  In  addition,  the  EU  is  supporting  the  switch  from  fossil  fuel  to 
renewable  and  low-carbon  energy  sources,  notably  via  energy  efficient  electrification,  for 
example using heat pumps to recover heat from exhaust and reuse it.  

Energy-intensive  industries  account  for  more  than  half  of  the  energy  consumption  of  EU 
industry43, and are the most impacted by structurally higher energy prices in the EU compared 
to other major economies. Notwithstanding efforts under REPowerEU, production by the EU’s 

Ibid. 

39  
40  Mario Draghi, The future of European competitiveness, 2024. 
41 
42   OJ L, 2024/1735, 28.6.2024, Article 2(3).  
43  

Political Guidelines for the next European Commission 2024-2029. 

See: https://single-market-economy.ec.europa.eu/industry/strategy/energy-intensive-industries_en.  

13 

 
  
 
energy-intensive industries has fallen 10-15% since 202144. At the same time, energy-intensive 
industries  account  for  a  significant  share  of  EU  greenhouse  gas  emissions.  Their 
decarbonisation  is  essential  to  achieving  climate  neutrality,  but  requires  major  investment, 
putting  further  pressure  on  EU  companies.  Overall,  this  places  a  strong  pressure  on  the 
competitiveness of energy-intensive industries in the EU, compared with countries that enjoy 
lower energy prices and  a less ambitious decarbonisation agenda. Losing  production in  key 
industrial  products  due  to  this  pressure,  would  weaken  EU  supply  chains  in  net-zero 
technologies, increase import dependencies and reduce prosperity.   

The Draghi report highlights the importance of energy-intensive industries for the EU economy 
and the immense challenge they face in needing to invest in decarbonisation while confronted 
with increasing prices for carbon emission and competing on global markets. In this regard, the 
report points to the lack of a level-playing field, notably with regard to companies benefiting 
from high subsidies in countries like China, which is rapidly expanding its production. Building 
on  this  analysis,  the  Draghi  report  suggests  providing  coordinated  support  to  EU  energy-
intensive  industries  in  their  transition,  from  permitting  to  financial  support,  including  by 
creating demand for green products to provide a clear business case for investments in clean 
production. At the same time, the report advises to level the playing field with international 
competition,  building  for  example  on  the  EU's  Carbon  Border  Adjustment  Mechanism 
(CBAM)45. 

The  Clean  Industrial  Deal  puts  a  strong  emphasis  on  supporting  EU  industry  and  its 
competitiveness on the path to decarbonisation. In particular, the Commission will propose an 
Industrial  Decarbonisation  Accelerator  Act  to  support  industries  that  are  transitioning,  by 
creating lead markets for clean products, and speeding up planning, tendering and permitting 
processes for building or transforming manufacturing plants, with a particular focus on energy-
intensive  industries.  The  new  Competitiveness  Compass  plans  tailor-made  action  plans  for 
energy intensive sectors, such as steel, metals, and chemicals, sectors which are the backbone 
of the European manufacturing system. In addition, the Competitiveness Compass proposes 
actions  on  horizontal  enablers  for  competitiveness,  including  on  simplifying  the  regulatory 
environment and reducing the regulatory burden for EU industry.    

2.2.3.  Human capital and skills 

A  skilled  workforce  is  at  the  base  of  the  EU’s  capacity  to  design,  manufacture,  construct, 
connect  and  maintain  clean  energy  technologies  and  infrastructure. According  to  the  latest 
IRENA report, employment in the renewable energy sector reached about 1.8 million in the EU 
in 202346. Data from industry associations show that around 826 000 people were employed in 
the EU solar sector at the end of 2023 (with 362 000 direct jobs), marking a 27% growth in the 
number of solar jobs since 2022, with 5% of jobs coming from manufacturing47. In the heat 
pump sector, the number of direct jobs came close to 170 000 in the same year, with 39% in 
manufacturing48. However, negative trends in 2024 and beyond could impact the job market in 
the  sector.  In  this  regard,  it  is  worth  noting  the  role  clean  energy  technologies  play  in  the 
manufacturing segment, which accounts approximately for a third of the jobs in the broader 

44   Mario Draghi, The future of European competitiveness, 2024. 
45  
46   
47  
48    European Heat Pump Association, European Heat Pump Market and Statistics Report 2024, 2024. 

Ibid. 
IRENA and ILO, Renewable energy and jobs: Annual review 2024, 2024. 
Solar Power Europe: EU Solar Jobs Report 2024 – a solar workforce ready for stronger growth, 2024. 

14 

 
 
 
clean  energy  sector.  This  underlines  the  important  role  of  net-zero  technologies  and  their 
manufacturing also as regards employment. 

While the situation improved slightly in 2024, labour shortages remain a concern. In the third 
quarter of 2024, the job vacancy rate in the energy supply sector was 1.6%, while the overall 
rate in the EU economy was 2.3%49. The rate of companies reporting labour shortages in the 
electric equipment manufacturing sector decreased from 20% in the last quarter of 2023 to 15% 
in the last quarter of 202450. In this regard, a key factor that may exacerbate structural labour 
shortages in the years to come is the ageing workforce in many Member States51. 

Several  policies  and  initiatives  at  different  levels  are  already  helping  to  address  labour  and 
skills shortages, but efforts need to continue. Member States place high value on reskilling and 
reallocating workers across occupations, sectors and regions. To the extent possible, objectives 
and measures on skills are part of the research, innovation and competitiveness policy in the 
National Energy and Climate Plans52. At EU level, following the European Year of Skills in 
2023, the skills agenda has remained a priority area. The 2024 Action Plan on labour and skills 
shortages in EU sets out new actions for the EU, Member States and social partners to support 
upskilling and reskilling, especially in sectors impacted by the green and digital transition53. 
Three  Large  Scale  Partnerships  under  the  Pact  for  Skills  (on  offshore  renewables,  onshore 
renewables  and  digitalisation  of  energy)  and  three  Net-Zero  Skills  Academies  (a  Battery 
Academy in 2022, a Solar Academy in June 2024 and a Raw Materials Academy in December 
2024) have been established to address specific skills shortages in key clean energy technology 
sectors. In addition, further academies are planned on wind and hydrogen technology.  

A  competitive  clean  energy  industry  and  the  energy  transition  therefore  require  significant, 
reinforced  and  targeted  public  and  private  coordination  efforts  to  attract,  reskill  and  upskill 
workers in order to have a sufficient workforce available. Continued effort will be required to 
increase the share of women working in the development, manufacturing and deployment of 
clean energy technologies, attract  young  people to energy professions  and develop  pools of 
clean energy talent. In the Competitiveness Compass, the Commission underlines the need for 
and  outlines  further  measures  to  tackle  skills  and  labour  gaps  to  support  the  industries 
addressed by the Compass. This will include setting up a Union of Skills as well as a renewed 
focus on skills funding in the EU budget, focusing on sectors involved in the green and digital 
transition. These measures will be of particular relevance for clean energy technologies and the 
success of the energy transition. 

2.3.  The clean energy sector innovation landscape 

2.3.1.  R&I trends  

Historically,  the  EU  has  pursued  and  achieved  scientific  and  technical  excellence  in  clean 
energy  technologies,  which  also  translated  into  market  success  through  a  first-mover 
advantage. However, this competitive advantage has been slipping in recent years. Whether by 
advancing in R&I, using captive markets for technology transfer or learning-by-doing, other 

49   Eurostat (jvs_q_nace2), accessed on 13/02/2025. 
50   European Commission, DG ECFIN, Business and consumer survey database, subsector data. ‘NACE 27: Manufacture 
of electrical equipment’ used as a proxy for renewable energy manufacturing industry as many clean energy technologies 
fall under this category.  
IEA, World Energy Employment, 2024; Cedefop, Electroengineering workers: skills opportunities and challenges, 2023. 

51   
52   National Energy and Climate Plan Reports of Member States, where information was provided. 
53    COM(2024) 131 final. 

15 

 
 
 
economies are catching up or overtaking the EU in the capacity to innovate, with concomitant 
effects on competitiveness. This is why closing the innovation gap is one of the three strands 
of the Competitiveness Compass, which sets out measures to strengthen the EU’s innovation 
performance.  

At the same time, the EU still has a strong base in clean energy technologies, where in many 
sectors it remains well placed. However, the EU is falling behind the US and China in digital 
domains,  both  overall  and  when  they  are  related  to  clean  technologies54.  Considering  the 
horizontal relevance of digitalisation across technologies, this has also repercussions  for the 
EU’s competitiveness. 

Looking  at  spending  on  R&I  in  clean  energy  technologies  as  a  share  of  GDP  across  major 
economies, the EU shows a high level of public R&I, but this is contrasted by comparatively 
lower levels of spending in private R&I. The most recent data available show that half of the 
Member States that have already reported figures for 202355, have increased their public R&I 
spending. If this partial reporting was representative, it would result - all other things being 
equal - in an additional EUR 0.7 billion (9% increase) in support for the Energy Union R&I 
priorities56.  

Public  investment  in  research  and  innovation  in  the  Energy  Union  R&I  priorities  has  been 
steadily increasing, with the figures reported by Member States in 2022 being 23% higher than 
202157. About half of the Member States that have provided data58 increased their public R&I 
investment  in  the Energy Union priorities in  2022, compared with  2021. Topped up by  EU 
funds,  the  public  investment  declared  in  2022  exceeded  EUR 9 billion. According  to  these 
figures  and  estimates  for  China  and  the  US,  the  EU  leads  in  public  R&I  spending  in  clean 
energy technologies among major economies, both in absolute terms and as a share of GDP 
(0.057%, followed by Japan 0.055%).  

54   European Commission, Directorate-General for Research and Innovation, Science, research and innovation performance 

of the EU 2024, 2024,  

55   Timely, robust and comparable information on R&I trends on clean energy technologies is not readily available. This is, 
in part, because of the inherent time-lag in certain statistics, but also because there is not always a clear definition of the 
technology fields concerned, and these are often spread across broader  subject areas, such as energy, transport or the 
built environment. The fragmentation in reporting makes it difficult to have a coherent picture and is one of the areas 
that need attention, to improve monitoring and coordination in R&I. See also SWD/2023/646 final. 

56   COM(2015) 80 final.  
57   A significant share of the increase in 2021 and 2022 was due to a change in reporting by Spain, and revisions by 

France. These two Member States accounted for an additional EUR 1 billion of R&D investment in 2022 France also 
accounts for much of the 2023 increase. Source: International Energy Agency (IEA), Energy Technology RD&D 
Budgets - Database documentation, 2024.  
22 Member States are 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, IT still missing). For 2022, BE, DE, EE, ES, FR, LT, IE, PL, PT, FI reported an increase to 
the IEA for 2022. This far AT, BE, FR, LT, IE, SK have reported an increase for 2023. 

58  

16 

 
 
Figure 2: Public / private R&I investments in Energy Union R&I priorities in major 
economies as share of GDP 

Source: JRC based on IEA59, Mission Innovation60, own analysis61. 

The latest increases mean that Member State investment, from 2021 onwards, has surpassed 
the peak observed a decade ago – before the effects of the economic downturn – both in nominal 
terms and when accounting for inflation. Over the same period there has been a notable shift 
in the share of public R&I investment on the Energy Union R&I priorities. Nuclear safety used 
to be the most prominent area, attracting nearly a third of public R&I investment; in recent 
years, sustainable transport has attracted a similar share, with a focus on battery and hydrogen 
technologies. 

Public investments from Member States are complemented by EU funds. The EU Framework 
Programme for R&I, Horizon Europe, continues to support clean energy technologies and their 
competitiveness. For instance, the Horizon Europe Cluster 5 ‘Climate Energy and Mobility’ 
invested around EUR 320 million for R&I in solar PV, EUR 70 million in geothermal energy 
and  more  than  EUR  230  million  on  progressing  advanced  technologies  in  the  field  of 
sustainable alternative fuels for aviation and maritime from 2021 to 2024. Horizon Europe also 
includes efforts to leverage private investments through European partnerships, like the Clean 
Hydrogen Partnership, BATT4EU and the Solar PV Partnership. 

Private investment continues to provide the majority (over three quarters) of R&I funding for 
clean energy technologies both in the EU and across all major economies, with investment as 
a share of GDP remaining significantly higher in major Asian economies than in the EU and 
the US. Most of the private R&I investment in clean energy technologies in the EU goes to 
sustainable  transport  technologies. The  automotive  sector  has  the  largest  share  of  industrial 
R&D  investment  in  the  EU.  It  leads  in  automotive  industrial  R&D  investment  globally, 
investing  8  times  more  than  the  energy  industry  (clean  and  other  technologies)62.  Nearly  a 
quarter of the sector’s innovative activities are directed towards more sustainable technologies, 
out of which, for example, over a third addressed electromobility (including batteries)63.  

59   Adapted from: International Energy Agency (IEA) IEA energy technology RD&D budgets database, 2024. Public R&I 
data estimates for US, based on IEA and Myslikova, Z., Gallagher, K. S., Zhang, F., Narassimhan, E., Oh S., & Chi, K., 
Global Public Energy RD&D Expenditures Database, 2024. 

60   Mission Innovation, Country Highlights, 2020. Public R&I estimated for China, based on submissions for previous years 

and additional sources.  

61   European Commission, Joint Research Centre, SET Plan information system Research and Innovation Data; private R&I 

is a 5-year trend estimate.  

62   European Commission, Joint Research Centre, 2024 EU industrial R&D investment scoreboard, 2024.   
63   European Commission, Joint Research Centre, 2023 EU Industrial R&D Investment Scoreboard, 2023.  

17 

 
 
 
The  Draghi  report  emphasised  the  key  role  of  innovation  in  increasing  productivity,  while 
stressing the need for collective effort to take down barriers to innovation and close the gap 
with China and the US in key technologies. In this regard, the report stresses that the EU’s 
advantage in green technologies is increasingly under pressure64. At the same time, analysis of 
leading  EU  R&D  investors  shows  diminishing  returns  on  R&D  investment,  suggesting  that 
pushing for more investment alone may be an insufficient measure, without addressing other 
factors such as  retaining talent65. In 2024, the independent  expert group chaired by Manuel 
Heitor identified a number of measures the EU can take to ensure R&I leadership and support 
to  competitiveness  in  a fast-changing  technological  landscape. These range from increasing 
funding  and  redefining  collaboration,  to  restructuring  R&I  policies  and  instruments66. 
Continuous monitoring of our R&I performance and competitive positioning will help put the 
changes into practice and assess the effect as needed. 

While the EU continues to perform well, China is increasingly leading in research outputs on 
clean technologies. In terms of scientific publications, the EU is more specialised than the US 
but  stagnating  behind  China  on  smart,  green  and  integrated  transport  and  secure,  clean  and 
efficient  energy.  Nonetheless,  it  is  still  leading  in  specialisation,  when  scientific  output  is 
grouped  under  the  headline  of  the  Sustainable  Development  Goal  for  affordable  and  clean 
energy67.  

The share of patent filings for the protection of climate change mitigation technologies in all 
inventions peaked in 2011. In parallel to the slow-down in ‘green’ patenting activity since then, 
applications  for  related  trademarks  have  grown,  indicating  a  shift  of  emphasis  to 
implementation and deployment rather than research and innovation68. The EU still maintains 
a lead in the global output of high-value patent filings69 in the Energy Union R&I priorities for 
renewables (29%) and energy efficiency (23%). It is placed second behind Japan in sustainable 
transport  and  behind  the  US  in  carbon  capture,  utilisation  and  storage  (CCUS)  and  nuclear 
safety, but has not recovered any ground in smart systems. China, after spending a number of 
years  tailoring  filings  for  its  domestic  market,  has  increasingly  been  targeting  international 
protection for clean energy innovations. It is already leading in high-value patent filings for 
smart systems (33%) and is improving in all other areas. Nonetheless, the EU has consistently 
maintained specialisation above the global  average in  renewables, sustainable transport and 
CCUS. The EU also retains a specialisation advantage in several technologies such as wind 
energy, hydrogen for transport and bioenergy.  

With the Strategic Energy Technology Plan (SET Plan), the main instrument for implementing 
the research, innovation and competitiveness strand of the Energy Union, the Member States 
and the Commission are working together and in close partnership with industry and research 
institutions  to  establish  joint  research  and  innovation  agendas  in  net-zero  technologies. 
Following  the  revision  of  the  SET  Plan  in  202370,  the  Net-Zero  Industry  Act  further 

64   Mario Draghi, The future of European competitiveness, 2024. 
65   European Commission, Joint Research Centre, 2024 EU industrial R&D investment scoreboard, 2024.    
66   European Commission: Directorate-General for Research and Innovation, Align, act, accelerate – Research, technology 

67  
68 

69  

and innovation to boost European competitiveness, 2024.    
Ibid. 
Cervantes, M. et al., Driving low-carbon innovations for climate neutrality, OECD Science, Technology and Industry 
Policy Papers, No. 143, 2023. 
JRC based on all filings included in the EPO Patstat 2024 spring edition. Findings reported for the three most recent 
years with complete statistics (2018-2020) to avoid distortion of trends due to data lag. For more information: Patent-
Based Indicators: Main Concepts and Data Availability. 

70    COM(2023) 634 final. 

18 

 
 
 
strengthened the role of the SET Plan and its steering group to help support the development 
of  clean,  efficient  and  cost-competitive  energy  technologies  through  coordination  and 
collaboration71. 

In 2023 and 2024, work under the SET Plan showed steady progress.  Reflecting the strong 
subject-based links among SET Plan working groups, collaborative work under the SET Plan 
has  intensified,  with  2024  seeing  the  greatest  number  of  collaborations  between  working 
groups since the SET Plan’s inception. For example, strong collaboration has been established 
between  the  group  on  energy  systems  and  that  on  sustainable  and  efficient  energy  use  in 
industry.  SET  Plan  working  groups  continue  to  update  and  revise  their  technology-specific 
implementation plans. For example, in the field of direct current (DC) technologies, a new low-
voltage  DC  (LVDC)  implementation  plan  was  released  in  2024,  aiming  to  develop  and 
demonstrate LVDC microgrids in buildings and industrial plants. The 2024 SET Plan Progress 
Report72  highlights  recent  developments  in  greater  detail,  including  for  example  the  vision 
developed under the plan for the geothermal sector by 2050.  

In  its  new  Competitiveness  Compass,  the  Commission  has  emphasised  the  need  to  place 
research and innovation, as a key driver for competitiveness, at the heart of the EU economy. 
Among  the  measures  to  close  the  innovation  gap,  the  Commission  will  present  a  European 
Research Area Act  to  strengthen  R&D  investment  and  bring  it  up  to  the  3%  GDP  target. 
Moreover,  the  European  Research  Council  and  the  European  Innovation  Council  will  be 
expanded73.       

2.3.2.  Venture capital investment trends   

The  financing  of  clean  energy  companies  is  key  to  foster  the  EU’s  energy  resilience  and 
technological sovereignty. Venture capital, which sits at the heart of the ecosystem that finances 
innovative start-ups and scale-ups, has an essential role to play in ensuring that the EU seizes 
the industrial opportunities offered by emerging clean energy technologies. 

The development of venture capital investment in the EU’s clean energy sector attests to the 
work undertaken by the EU to develop its venture capital industry, mobilise public investors to 
close large financing gaps and crowd-in other financiers, such as corporate and institutional 
investors.  The  EU  has  the  highest  relative  share  of  government-provided  venture  capital 
(compared  to  total  venture  capital)74,  illustrating  the  strong  role  of  public  investments 
compared with private ones. 

A mixed picture emerges for 2023 and 2024, showing both opportunities and challenges for 
the EU. In 2023, amid a global contraction of venture capital funding, the EU demonstrated its 
capacity  to  attract  strategic  growth  deals  for  large-scale  battery  and  hydrogen-based  steel 
manufacturing  facilities.  These  exceptional  deals  drove  the  growth  of  venture  capital 

71    OJ L, 2024/1735, 28.6.2024. 
72   European Commission, Joint Research Centre, Kuzov, T., Letout, S., Georgakaki, A., Volt, S., Tumara, D., Martinez 
Castilla, G., Lauritzen, A., Sobczak, A., Paunescu, G., Fromentin, M., Degiorgis, E., Volkanovski, A., Tzimas, E., SET 
Plan Progress Report, 2024. 
Political Guidelines for the next European Commission 2024-2029; COM(2025) 30 final. 

73  
74   European  Commission,  Science,  research  and  innovation  performance  of  the  EU  –  A  competitive  Europe  for  a 

sustainable future, 2024.  

19 

 
 
 
investment in clean energy technologies in the EU, which reached EUR 9.2 billion in 2023 
(+20% compared to 2022)75. 

In 2024, a persistently adverse macroeconomic environment led to lower deal activity and to 
the  significant  decline  of  the  EU's  venture  capital  investment  total.  This  sharp  drop  (-34% 
compared to 2023) revealed a substantial reliance on very few large-scale deals (above EUR 1 
billion in venture funding). In 2023, three companies raised such amounts, which accounted 
together for 43% of the venture capital investment total in clean energy technologies in the EU. 
Among  them,  the  case  of  the  Swedish  battery  manufacturer  Northvolt,  which  filed  for 
bankruptcy  protection  in  November  2024,  highlights  the  challenge  involved  in  scaling  up 
manufacturing rapidly. This dependence on large deals was even more acute in 2024 with only 
one deal of this kind, amounting to EUR 2.4 billion and accounting by itself for 39% of the 
venture capital investment in clean energy technologies in the EU76. 

Due to these major deals, 2023 marked the narrowest investment gap between the EU, where 
the share of clean energy technologies in the EU’s total venture capital investment increased, 
and the US and China, where venture capital investment dropped. Thus, the EU accounted for 
28% - a growing share - of global venture capital investment in clean energy technologies in 
2023 and ranked between the US (30%) and China (24%). This share remained relatively stable 
in 2024. 

Overall,  access  to  finance  remains  a  key  barrier  for  most  EU  firms  developing  and 
manufacturing clean energy technologies. Success stories will need to be replicated, including 
across further technologies where the EU is currently still being outpaced.  

In  parallel,  venture  capital  investment  in  solar  photovoltaic  technologies  grew  in  the  EU, 
capturing  20%  of  the  total  worldwide  investment  between  2021  and  2023.  However,  this 
investment mostly benefited solar solution integrators and did not contribute to developing a 
domestic  solar  module  production.  Chinese  firms  raised  2.7  times  more  venture  capital 
investment  than  their  EU  counterparts,  most  of  which  benefited  scale-ups  developing  and 
manufacturing new types of solar cells and modules.  

The EU also accounted for 15% of global venture capital investment in hydrogen technologies 
between  2021  and  2023.  However,  its  position  has  been  weakened  by  decreasing  venture 
capital  investment  in  2023,  and  by  series  of  larger  deals  involving  Chinese  fuel  cell 
manufacturers in 2021 and 2022, and US electrolyser manufacturers in 2023. In 2023, US start-
ups developing electrolyser technologies forged ahead, raising 8 times more venture capital 
funding than their EU competitors, with the aim of scaling up their manufacturing capacities, 
reducing production costs and addressing overseas markets. 

North  American  start-ups  traditionally  prevail  in  all  other  net-zero  technologies  and  have 
attracted most of related venture capital investment. This is the case for CCUS, concentrated 
solar power, geothermal, hydropower, nuclear, renewable fuels from non-biological origin and 
sustainable alternative fuels technologies, with the EU consistently accounting for low shares 
of the total venture capital investment realised worldwide in these fields.  

75  

JRC selection based on PitchBook verticals and deep dives  carried out for CETO and the European Climate Neutral 
Industry Competitiveness Scoreboard. For further details, see European Commission: JRC, Georgakaki, A., Taylor, N., 
Ince,  E.,  Koukoufikis,  G.,  Kuokkanen,  A.,  Kuzov,  T.,  Letout,  S.,  Mountraki,  A.,  Murauskaite-Bull,  I.,  Mancini,  L., 
Miletic, M., Pennington, D., Ozdemir, E. and Terça, G., CETO, Overall Strategic Analysis of Clean Energy Technology 
in the European Union, 2024. 

76   Based on PitchBook, partial 2024 data extracted in 01/2025, based on JRC selection for CETO.  

20 

 
 
However, the EU has developed a relevant base of ventures in bioenergy, electric vehicle (EV) 
charging,  heat  pumps,  novel  energy  storage,  ocean,  solar  thermal,  and  wind  technologies. 
Together, these account for 18.5% (with EV charging accounting for half of it) of the venture 
capital investment in net-zero technologies in the EU between 2021 and 2023. In 2023, the EU 
accounted for the largest share of the total investments worldwide in each of those technologies, 
on a par with the US. Despite increased investment levels since 2021, EU firms developing 
such  technologies  and  components  still  lack  the  larger  deals  that  enable  them  to  gain  a 
competitive advantage and support the rolling-out of these technologies at scale.  

There are several EU funding instruments which foster innovative clean tech investment, such 
as the Innovation Fund, InvestEU and the venture investment arm of the European Innovation 
Council (EIC), the EIC Fund. Having entered into force in 2024, the Strategic Technology for 
Europe  Platform  (STEP)  supports  investments  in  EU  start-ups,  SMEs  and  small  mid-caps 
developing and manufacturing critical clean energy technologies77.  

Unlocking  the  full  potential  of  the  EU’s  clean  energy  entrepreneurial  ecosystem  requires 
removing investment barriers and achieving targeted public intervention78. The Draghi report 
identifies an underdeveloped venture capital market as one of the barriers to clean technologies 
in the EU and calls for the stimulation of private investments79. As the report suggests, scaling 
up clean energy technology investment entails boosting and streamlining EU level budget and 
putting in place funding schemes to support private and higher-risk investments in innovative 
companies, so that EU strategic companies or long-term transition projects can be scaled up.  

The  Commission's  political  guidelines  recognise  the  need  for  further  action  on  public 
investment  and  the  de-risking  of  private  capital.  It  is  particularly  important  to  facilitate  the 
financing  of fast-growing companies  by banks, investors, and venture capital.  Based on the 
Letta  report80,  the  Commission  will  propose  a  European  Savings  and  Investments  Union, 
including banking and capital markets81. Deepening the EU’s banking and capital markets is 
an  essential  pre-requisite  to  unlocking  additional  sources  of  funding,  fostering  cross-border 
investment and making scale-ups more attractive to investors by improving their exit options. 

To ensure that finance flows at the required scale to address the EU’s investment gap, clean 
energy  technologies  will  need  to  be  considered  a  strategic  priority.  In  this  regard,  the 
Commission  has  announced  a  European  Competitiveness  Fund  within  the  next  multiannual 
financial framework, aimed at unlocking investments in clean and strategic technologies. A 
dedicated EU start-up and scale-up strategy will address obstacles preventing new companies 
from emerging and scaling up82. 

3.  ASSESSMENT OF THE COMPETITIVENESS OF THE EU ON NET-ZERO TECHNOLOGIES 

3.1. 

Solar photovoltaics 

Solar  photovoltaics  (PV)  is  the  fastest-growing  electricity  production  technology  from 
renewable  sources.  In  2024,  the  EU  was  on  track  to  achieve  the  EU  Solar  Energy  Strategy 
target of 600 GWac (~720 GWp) installed PV capacity by 203083. Based on preliminary data 

77   OJ L, 2024/795, 29.2.2024. For more information: https://strategic-technologies.europa.eu.  
78   European Investment Bank, The scale-up gap, 2024. 
79   Mario Draghi, The future of European competitiveness, 2024. 
80   Enrico Letta, Much more than a market, 2024. 
81  
82   COM(2025) 30 final. 
83   COM/2022/221 final.  

For more information: Call for evidence on the European Savings and Investments Union. 

21 

 
 
 
for 2024, annual growth has slowed down, but installations have still grown substantially from 
more than 56 GWp in 2023 to 63 GWp in 2024. In both years, the EU ranked second behind 
China  (374  GWp  in  2024)  in  deployment,  followed  by  the  US  (45  GWp  in  2024)84.  PV 
electricity  generation  costs  are  now  lower  than  fossil  fuel-based  alternatives  in  most 
countries85.    

The Net-Zero Industry Act refers to the European Solar Photovoltaic Industry Alliance’s goal 
of  reaching  30  GWp  of  annual  solar  PV  manufacturing  capacity  across  the  value  chain  by 
202586. This objective has already been surpassed for inverters (82 GWp in 202387) and is close 
to being achieved for polysilicon (29 GWp in 2024). However, the situation is different for 
other parts of the value chain. The current EU photovoltaic manufacturing capacity for ingots 
and wafers is below 1 GWp, while for cells and for modules the figure is below 3 GWp88, with 
indications that actual production in 2023 was around 2 GWp for the latter89. Overall, the EU 
is heavily dependent on PV imports from China, where 91% of commissioned manufacturing 
facilities are situated. In contrast, the EU, US and India each count for a respective share of 
1%90.  

The cost of producing a photovoltaic module is estimated to be about 60% higher in the EU 
than in China91. These differences result from higher investment, labour and energy costs, as 
well as lower scales of production and a lack of vertical integration. Additional challenges for 
European manufacturers are high inventory levels and oversupply from China driving a sharp 
decline  in  spot  market  module  prices,  which  decreased  over  25%  year-on-year  to  EUR 
0.105/Wp  in  January  202592.  While  this  pushes  deployment,  it  puts  high  pressure  on 
manufacturers. Facilities producing cells and modules are seeing low average utilisation rates 
of around 50% globally93. 

Overall,  EU  photovoltaic  manufacturers  are  struggling  to  compete  globally,  particularly  on 
price. The  concentration  of  photovoltaic  manufacturing  capacity  in  a  single  country,  China, 
creates risks for the resilience of the value chain and price stability94. The EU still has a strong 
role  in  research  and  innovation  on  solar  photovoltaics  especially  with  regard  to  specific 
applications  such  as  photovoltaics  integrated  in  buildings,  agriculture,  infrastructure  or 
vehicles95.  

For the EU to gain competitiveness in photovoltaic manufacturing, it would need to scale-up 
innovative technologies in large gigawatt-scale factories integrated across the value chain. With 
the European Solar Charter96, signed in April 2024, the Commission, 23 Member States and 
industry representatives committed themselves to a series of voluntary actions in support of the 
EU PV manufacturing sector.  

Jaeger-Waldau, A.,  Snapshot of Photovoltaics, 2025 (forthcoming). 
IEA, Advancing Clean Technology Manufacturing, 2024. 

84  
85  
86   OJ L, 2024/1735, 28.6.2024, Recital 16. 
87  
88   European  Commission,  JRC,  Chatzipanagi,  A.,  Jaeger-Waldau,  A.,  Letout,  S.,  Mountraki,  A.,  Gea  Bermudez,  J., 

Solar Power Europe, Inverter Explained 2.0, June 2024. 

Georgakaki, A., Ince, E. and Schmitz, A., CETO, Photovoltaics in the European Union, 2024. 

IEA, Renewables 2023 - Analysis and forecast to 2028, 2024. 
PV Exchange, Solar Market Analysis January 2025 - PV module prices at crossroads, 2025. 
IEA, Advancing Clean Technology Manufacturing, 2024. 

89   ESMC, Letter to the European Commission, January 2024. 
90   CETO, Photovoltaics in the European Union, 2024.  
91  
92  
93  
94   European Solar Charter, 2024.  
95   CETO, Photovoltaics in the European Union, 2024. 
96   European Solar Charter, 2024.   

22 

 
 
 
3.2. 

Solar thermal 

The EU Solar Energy Strategy97 set a goal of tripling solar heat demand from 2022 to 2030. 
However, the sector has made limited progress to date and faced several challenges in 2023 
and 2024. Investments slowed due to competition from  photovoltaics and heat pumps as an 
alternative  renewable  solution  and  effect  of  cheaper  gas  and  changes  in  deployment 
incentives98.  The  EU  added  1.3  GWth  in  solar  thermal  heat  capacity  in  2023,  down  24% 
compared to 2022. The resulting net 1.3% increase in capacity (including the decommissioning 
of older systems) is far below the rate required to triple capacity by 203099.  

The global market also saw a downturn, with 21 GWth of new installations in 2023, compared 
to 23 GWth in 2022100. More encouragingly, the industrial process heat segment grew globally 
three-fold year-on-year to reach a total capacity of 0.95 GWth in 2023. This included the EU’s 
new  largest  concentrated  solar  heat  plant  (30  MWth  with  68  MWh  storage)  in  Spain.  On 
concentrated solar power (CSP), there has been no increase in EU generation capacity, which 
remains  almost  unchanged  since  2013  (2.30  GW,  almost  all  in  Spain)101.  In  the  meantime, 
China  has  emerged  as  the  leading  CSP  developer  globally,  with  1  GW  of  new  capacity  in 
operation and a further 2 GW in development102.   

The EU has a strong manufacturing sector for solar thermal water heaters and previously was 
estimated to  cover up to 90% of domestic demand, well above the  Net-Zero Industry Act’s 
manufacturing benchmark. Despite the sector experiencing consolidation over the last decade, 
particularly in Germany and Spain, it still features a diverse range of players offering various 
products. Greek manufacturers of thermosiphon systems have been able to take advantage of 
strong market growth, also with significant exports103. Several EU companies are entering the 
market for large-scale plants for district heating and for industrial solar thermal heat, which is 
expected to grow significantly in the coming decade. Trade data for solar and non-electric water 
heaters show a significant growth in imports, although the EU kept an overall positive trade 
balance of EUR 27 million in 2023104. 

Solar thermal technology is a mature decarbonisation option, but it remains to be seen whether 
it can establish a significant market share. Currently solar thermal covers just 0.9% of global 
heat energy consumption demand105. The levelised cost of solar heat can be competitive with 
conventional sources, particularly in areas with good solar resources. However, solar thermal 
technology is often installed in a system with another heat source, whereas heat pumps can 
offer standalone solutions for many applications. Solar thermal would benefit from coordinated 
efforts and clear roadmaps to put growth on track to reach the 2030 goal.  

EU companies are in a good position as technology suppliers, but continued efforts are needed 
on standardisation and on developing a network of installers with expertise in cost-effective 
solutions, including hybridisation with other renewable technologies. For concentrated solar 
power, any renaissance of the EU market will rely heavily on Spain’s proposal to add 2.5 GW 

Ibid. 

97   COM(2022) 221.  
98   EurObserv’ER, Solar thermal and concentrated solar power barometer, 2024. 
99  
100   Weiss, W., Spörk-Dür, M., Solar Heat Worldwide, 2024.  
101   Eurostat  (nrg_inf_epcrw)  ,  accessed  on  12/02/2025  and  European  Commission,  JRC,  Carlsson,  J.,  Taylor,  N., 
Georgakaki, A., Letout, S., Mountraki, A., Ince, E., Schmitz, A. and Gea Bermudez, J., CETO, Solar Thermal Energy 
in the European Union, 2024.  

102   REN21, Renewables 2024 Global Status Report Collection: Energy Supply, 2024. 
103   EurObserv’RE Concentrated Solar Power and Solar Thermal Barometer 2023. 
104   CETO, Solar Thermal Energy in the European Union, 2024. 
105  

IEA, Renewables 2023, 2024. 

23 

 
 
by  2030106.  Here  also,  standardisation  in  design  and  manufacturing  would  be  essential  to 
achieving competitive cost levels.  

3.3.  Onshore and offshore wind energy  

The EU is at the forefront of the global wind industry and has so far held a strong position. 
However, its competitiveness is increasingly under pressure from China. Wind plays a pivotal 
role in the EU energy transition, with 219 GW of total wind power capacity installed by 2023, 
91% onshore and 9% offshore107. In 2023, 16.8 GW of new capacity was installed, of which 
83% in onshore wind installations and 17% offshore108. These developments mark a faster pace 
of installation (combined installation for 2022 was 15.5 GW) and make 2023 a record year, in 
terms of annual installation. Preliminary figures for 2024 show that the EU has installed an 
additional  13.6  GW  of  wind  power  capacity,  comprising  10.7  GW  onshore  and  2.9  GW 
offshore109. 

With the Net-Zero Industry Act, the EU targets a manufacturing capacity for wind of at least 
36  GW  by  2030110.  In  2024,  the  EU  accounted  for  12.6%  of  global  blade  manufacturing 
(~25 GW),  12.5%  of  the  global  nacelle  assembly  (~35  GW)  and  21.8%  of  the  tower 
manufacturing (~38 GW)111. In 2023, EU companies supplied globally more than 27 GW of 
wind turbines112. However, the global market share of EU manufacturers declined in 2023 to 
23% from 30% in the previous year, while Chinese manufacturers increased their share from 
46% to 55%. In the European market, EU companies continue to dominate with a market share 
of 89% in 2023. EU manufacturing capacity will need to be increased to match future demand 
based  on  the  expected  increased  rate  of  installations.  This  is  crucial  to  decrease  capital 
expenditure for new installations, ensure that supply meets demand at competitive prices and 
to avoid supply bottlenecks or increases in costs. 

The main challenges for EU companies relate in particular to intense competition from China. 
Chinese manufacturers  are able to offer much  lower prices than their European rivals, with 
exported turbines from China about 32% cheaper than their competitors113, in a context where 
the price of wind turbines and their components increased by around 26% globally compared 
to  pre-pandemic levels114. This  could create an uneven playing field  for EU companies and 
hinder their future competitiveness in the global market. 

As  the  macroeconomic  environment  improved,  investments  in  wind  power  have  started  to 
rebound115, with a record investment of EUR 48 billion in 2023 in the EU (compared to an 
investment  of  less  than  EUR  20  billion  in  2022).  In  2023,  onshore  wind  remained  at  an 
investment  level  comparable  to  the  one  of  2022  at  around  EUR  18  billion,  while  offshore 
increased from EUR 0.4 billion invested in 2022 to EUR 30 billion in 2023.  

106   Government of Spain, Integrated National Energy and Climate Plan, Update 2023-2030, 2024. 
107      Eurostat (nrg_inf_epcrw), accessed on 12/02/2025. 
108   Eurostat (nrg_inf_epc), accessed on 12/02/2025. 
109  
JRC based on GWEC and Rystad, 2025. 
110   OJ L, 2024/1735, 28.6.2024, Recital 16. 
111  
112   European Commission, JRC, Mc Govern, L., Tapoglou, E., Georgakaki, A., Mountraki, A., Letout, S., Ince, E., Gea 

JRC based on BloombergNEF and Rystad. 

Bermudez, J., Schmitz, A. and Grabowska, M., CETO, Wind Energy in the European Union, 2024. 

113   BloombergNEF, Wind Turbine Price Index 2H 2024, 27 December 2024. 
114   BloombergNEF, Rising costs dampen the outlook for offshore wind, 3 July 2024. 
115   Rystad  and  WindEurope,  Report:  Rebound  in  wind  energy  financing  in  2023  shows  that  the  right  policies  attract 

investors, 21 March 2024.  

24 

 
 
 
The global wind industry relies heavily on complex supply chains, which can be vulnerable to 
disruptions, trade tensions, and shortages of critical raw materials. The need for materials like 
copper  and  steel  is  significant,  as  these  are  used  in  various  turbine  components  such  as 
generators, towers, blades, and gearboxes. Of particular concern is the strong dependency on 
Chinese rare earth elements116, which are crucial for producing permanent magnets for wind 
turbines.  Vulnerabilities  also  exist  in  components  and  subcomponents,  such  as  generators, 
increasing the risk of supply chain disruptions. The sourcing of both materials and components 
can be concentrated in a few countries, which can create supply chain risks due to geopolitical 
dependencies, underscoring the need for diversified and resilient supply chains to support the 
wind industry’s growth. 

With  the  European  Wind  Power  Action  Plan,  the  Commission  has  proposed  measures  to 
support  the  competitiveness  of  the  EU  wind  manufacturing  industry117.  One  of  the  linked 
initiatives, the European Wind Charter118, was signed in December 2023. The Charter brings 
together  26  Member  States  which  have  committed  to  supporting  the  EU  wind  sector  by, 
amongst others, scaling up manufacturing capabilities in the EU and improving and simplifying 
the  auction  and  permitting  process.  Existing  efforts  to  support  deployment,  including  faster 
permitting, project pipeline visibility and grid investments will need to be continued to ensure 
that investments in future wind farms remain attractive and that the EU wind industry is able 
to profit from the opportunities offered by the global expansion in wind energy. 

3.4.  Ocean energy 

Ocean energy includes several technologies, with the most advanced being tidal stream and 
wave energy. Although some of these technologies have reached high technology readiness 
levels, ocean energy technologies are not yet deployed at an industrial scale. 

The EU is a leader in the development of ocean energy technologies, particularly in tidal and 
wave energy. However, it faces growing competition from other major economies, such as the 
US and China. The US invested EUR 546 million119 in ocean energy over the last five years. 
In 2023 and  2024, the  market  saw unprecedented funding and interest.  Provisional data for 
2024 shows that at least 1230 kW of new ocean energy capacities were installed in Europe in 
2024120. In the EU, 878 kW were installed in 2022 and 250KW in 2023121. National revenue 
support (e.g. contracts for difference or feed in tariffs) and EU and national funding were the 
main drivers over 2023/2024 for attracting private investments and boosting the development 
of these projects in Europe. Industry representatives expect a pipeline accounting for 165 MW 
across 15 pilot and pre-commercial farms122. Among Member States, France, Denmark and the 
Netherlands have the majority of cumulative installed capacity in terms of tidal stream energy, 
while Portugal, and Spain are leading the deployment of wave energy devices.     

116   European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs,  Study on the 

Critical Raw Materials for the EU 2023: Final Report, 2023. 

117   COM/2023/669 final. 
118   European Wind Charter, 2023. 
119   Using the average exchange rate of EUR 0.9239 for USD 1 over the year 2024, based on ECB. 
120   Preliminary data by Ocean Energy Europe. 
121   Eurostat (nrg_inf_epc), accessed on 12/02/2025. 
122   ETIP Ocean, Strategic Research and Innovation Agenda for Ocean Energy, 2024. 

25 

 
 
 
EU  industry  is  playing  a  leading  role  in  developing  the  sector  with  41%  of  tidal  stream 
developers  and  52%  of  wave  energy  developers  based  in  the  EU123.  Manufacturing  of 
gearboxes, generators, and control systems is predominantly European, with projects estimated 
to provide at least 415 Full Time Equivalent posts in the EU. Globally, the EU holds 20% of 
high-value inventions, second only to China (32%)124.  

The main challenge remains the high cost of capital which slows investment and deployment, 
with a knock-on effect on industrialisation. The Strategic Energy Technology Plan (SET Plan) 
provides goals in this regard, aiming to bring down production costs to EUR 0.10/kWh by 2030 
for tidal stream and to EUR 0.15/kWh by 2030 for wave energy125. This is to be achieved in 
particular through technology-specific auctions for pilot and pre-commercial farms, which are 
still  lacking  in  some  Member  States.  Delivering  the  pipeline  of  projects  and  achieving  this 
target requires instruments to lower the risk of investments. Such de-risking instruments could 
include loan guarantees for the first pre-commercial farms to lower the cost of capital, attract 
investors and accelerate deployments. This will unlock economies of scale and further reduce 
costs, as has already been experienced with established renewables. 

3.5.  Battery and energy storage 

Europe's ambition to lead the global transition towards clean energy relies on its capacity to 
develop, produce, and integrate advanced battery technologies fast and at scale. The Net-Zero 
Industry Act refers to the objective of reaching an EU battery manufacturing capacity of at least 
550 GWh by 2030126. 

At the beginning of 2024, the EU seemed on track to meet its goals for 2030. In the meantime, 
however,  Swedish  company  Northvolt  filed  for  bankruptcy  protection  in  November  2024. 
Estimates suggest that about 616 GWh of planned manufacturing capacity in Europe is reported 
as cancelled, delayed or downsized, which could put 2030 targets at risk127. As a result, the 
EU’s  share  of  global  operational  battery  production  of  7%  in  2024  is  lower  than  previous 
estimates. At the same time, the overall global production is expected to increase almost five-
fold in the coming five years and the projected 10% share of global production in the EU would 
fully cover the projected EU needs in 2030, if it were to be realised128.  

Cell production in the EU faces critical supply chain risks, particularly due to high dependency 
on China for cathodes and anodes, and higher production costs - typically 70% to 130% more 
per  unit  of  output  capacity  than  in  China129.  Increasing  global  over-production  of  cells  and 
slumping electric vehicle demand led to European production sites running below capacity or 
halting/postponing production lines,  such as  the Volkswagen  Salzgitter plant  (only 20 GWh 
instead  of  40 GWh)130.  For  2030,  forecasts  predict  a  global  oversupply  of  battery  cells.  In 
addition, protective trade measures are on the rise, including for example US tariffs on Chinese 
electric vehicles. A further escalation of trade tensions could potentially inflate costs and impact 

123   European Commission, JRC, Tapoglou, E., Mc Govern, L., Georgakaki, A., Mountraki, A., Letout, S., Ince, E., Gea 

Bermudez, J., Schmitz, A. and Grabowska, M., CETO, Ocean Energy in the European Union, 2024. 

124   CETO, Ocean Energy in the European Union, 2024. 
125   SET Plan, Ocean energy implementation plan, 2021; CETO, Ocean Energy in the European Union, 2024. 
126   OJ L, 2024/1735, 28.6.2024, Recital 16. 
127   BloombergNEF, Northvolt Collapse Underscores Importance of Supply Chains, 2024.  
128   237 GWh of production capacity in the EU compared to a global production capacity of 3 347 GWh in 2024 and an 
estimated 1 510 GWh of production capacity in the EU compared to a global production capacity of 14 903 GWh in 
2030, based on BloombergNEF, accessed on 20/02/2025.  
IEA, Advancing Clean Technology Manufacturing Report, 2024. 

129  
130   Reuters, Volkswagen's German battery plant to stay at half capacity amid cost pressures, 2024. 

26 

 
 
 
battery supply chain procurement decisions131. In the EU, the Commission concluded an anti-
subsidy investigation into the imports of battery electric vehicles from China in 2024, resulting 
in countervailing duties on imported vehicles132. 

Global grid-scale battery energy storage system (BESS) capacity reached 168 GWh in 2024, a 
substantial increase from 96.1 GWh deployed in 2023133. China accounted for 67% of BESS 
deployments globally, followed by the US and Canada, with Europe currently trailing in BESS 
deployment. ‘Behind the meter’ (BTM) energy storage reached 40 GWh globally in 2024. By 
2035, stationary applications are expected to account for 16% of batteries deployed globally, 
up from 6% in 2020134. Most leading BESS battery suppliers are headquartered in Asia. 

To  keep  up  with  its  competitors,  the  EU  must  deploy  production  capacity  faster  and  build 
reliable value chains, invest more in R&D for new battery technologies and address critical 
gaps in its value chain through alternative solutions.  

3.6.  Heat pump technologies 

Heat pump final assembly manufacturers located in the EU are among the global  leaders in 
high-end hydronic solutions for residential use, while Chinese companies are dominating the 
market  for  reversible  air-to-air  conditioners135.  EU  manufacturers  have  announced  over 
30 GWth of final assembly capacity expansions during this decade, compared to an existing 
capacity of about 24 GWth in 2023. With these planned expansions, EU industry is close to 
meeting  the  2030  EU  deployment  needs  of  about  60  GWth  identified  by  the  International 
Energy Agency136. While the EU is on track to meet the Net-Zero Industry Act target of at least 
31 GWth manufacturing capacity for final heat pump assembly, EU companies are currently 
not as strongly positioned in the manufacturing of certain components. 

The EU trade balance deficit in hydronic heat pumps was reduced by one third in 2023, due to 
a 13% decrease in imports and a 14% increase in exports137. At the same time, heat pump sales 
in the EU fell by 7.2% in 2023 compared to 2022 after a decade of steady growth138. This trend 
continued in 2024 as sales in Europe dropped 31% compared to 2023139. This resulted in short-
time work and job cuts in the sector and uncertainties for manufacturing investment decisions. 
EU manufacturing capacity growth also slowed in 2023140. To reverse this trend, the industry 

131   BloombergNEF, Energy Storage:10 Things to Watch in 2025, 2025. 
132   OJ L, 2024/2754, 29.10.2024. 
133   Energy Storage News, Global BESS deployments soared 53% in 2024, 2025. 
134     Based on BloombergNEF, January 2025. 
135   COMEXT/COMTRADE data for HS code 841861 - heat pumps; other than air conditioning machines: EU export to 
world: EUR 3837m of which EUR 603m ExtraEU; China export to world EUR 971m. And COMEXT/COMTRADE 
data for HS code 841581 - air conditioning machines: EU export to world: EUR 782m of which EUR 177m ExtraEU; 
China export to world EUR 549m. 
IEA, Advancing Clean Technology Manufacturing, 2024. Net zero emissions scenario by 2050; scope: heat pumps for 
space and hot water heating in residential and commercial buildings, reversible air conditioners included where used as 
primary heating equipment. 

136  

137   HS 841861– Heat pumps (excl. air conditioners). More details in: European Commission, JRC, Toleikyte, A., Lecomte, 
E., Volt, J., Lyons, L., Roca Reina, J.C., Georgakaki, A., Letout, S., Mountraki, A., Wegener, M., Schmitz, A., CETO, 
Heat Pumps in the European Union, 2024. 

138   European Heat Pump Association (EHPA), Market Report, 2024, limited to AT, BE, CZ, DE, DK, EE, ES, FI, FR, HU, 

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

139    BloombergNEF, Europe’s Heat Pump Market Collapse Triggers Spending Dip, 2025. 
140  

IEA, Advancing Clean Technology Manufacturing, 2024. 

27 

 
 
 
is calling for ambitious EU targets for space heating decarbonisation, stable long-term national 
policy frameworks and a favourable electricity-to-gas price ratio141. 

The heat pump final assembly step is estimated to cost around EUR 184-230/KW142 in Europe 
and the US today, around twice the cost estimated for China. As components represent 75% of 
the final cost, vertically integrated manufacturers are more competitive143. EU industry remains 
largely dependent on imports for components, such as compressors, heat  exchanger, valves, 
and  refrigerant.  To  strengthen  competitiveness  and  resilience  on  residential  heat  pump 
manufacturing, more diversification of supply and stronger EU value chains would be needed 
to reduce these dependencies.  

As regards industrial heat pumps (IHPs), EU manufacturers have taken a globally leading 
role and are covering the entire supply chain144. According to the International Energy Agency, 
approximately 30% of the industrial heat demand up to 400°C should be covered by industrial 
heat pumps until 2050, and already half of it by 2030145. Industrial heat pumps also have the 
potential to cover heat needs below 200°C, which represent 37% of industrial heat needs146, 
with existing applications in the food & drink and pulp & paper sectors. 

To  further  develop  industrial  heat  pumps,  R&D projects  are  needed  to  expand  the  range  of 
applications and to bring technologies as fast as possible into application and standardisation147. 
In addition, investments in the EU supply chain are needed, to expand production capacities 
and  lower  product  costs. The  industry  sees  in  industrial  heat  pumps  having  the  potential  to 
become a European success story.   

3.7.  Geothermal energy 

In 2024, geothermal energy gained in public attention and political momentum. This political 
momentum  included  the  European  Parliament  Resolution  on  geothermal  energy148  and  the 
Council Conclusions on geothermal energy149. In 2023, installed net geothermal power capacity 
in  the EU was  around 0.9  GWe150 (globally 14.8 GWe151). Geothermal direct  heat  use grew 
steadily with 298 district heating and cooling systems in place in 2023152.   

EU  companies  play  a  strong  role  in  the  Single  Market  from  site  investigation  to 
decommissioning, as deployment value chains are usually entirely domestic153. As regards final 
products  manufacturing,  the  sector  is  estimated  to  be  meeting  the  target  in  the  Net-Zero 
Industry  Act  for  40%  of  deployment  needs  to  be  covered  by  domestic  production154.  By 
contrast, the global market for components such as turbines, turboexpanders, pumps, valves 

141   EHPA, EU Heat Pump Accelerator, 2023. 
142   Using the average exchange rate of EUR 0.9239 for USD 1 over the year 2024, based on ECB. 
143  
144  

IEA, Advancing Clean Technology Manufacturing, 2024. 
IEA HPT TCP, Annex 58 High-Temperature Heat Pumps, 2023. 20 in EU and 7 in Norway; 24 in Japan, of which 9 
Mechanical Vapour Recompression (MVR) technology; as well as MVR installations in China. 
IEA, Net Zero by 2050, 2021. 

145  
146   TNO, Strengthening Industrial Heat Pump Innovation, 2020.  
147  

IEA Technology Collaboration Programme on Heat Pumping Technologies (HPT TCP), Annex 58 High-Temperature 
Heat Pumps, 2023. 

148   European Parliament, Resolution of 18 January 2024 on geothermal energy (2023/2111(INI)). 
149   Council of the European Union, Conclusions on the promotion of geothermal energy, 16 December 2024. 
150    Eurostat (nrg_inf_epcrw), accessed on 12/02/2025. 
151   Renewable Energy Policy Network for the 21st Century (REN21), Renewables Global Status Report, 2024. 
152   European Geothermal Energy Council (EGEC), Geothermal Market Report 2023, 2024. 
153   EGEC, Geothermal Market Report 2023, 2024. 
154   European Commission, JRC, Taylor, N., Georgakaki, A., Ince, E., Letout, S. Mountraki, Gea Bermudez, J. and Schmitz, 

A., CETO, Geothermal Energy in the European Union, 2024. 

28 

 
 
 
and control systems is dominated by non-EU companies. Japan produces 82% of flash cycle 
steam  turbines  and  Israel  74%  of  binary  cycle  expanders.  European  manufacturers  of  these 
technologies are mainly based in Italy and to a smaller extent in Germany and France155. In 
research and innovation, the EU used to be the global leader for high-value inventions before 
being overtaken by China in 2019156.  

The co-production of lithium and other raw materials can increase the economic sustainability 
of geothermal plants. In terms of material dependencies, the technology itself heavily relies on 
steel, much of which is  imported from Asia. To a smaller extent, the geothermal sector also 
requires critical raw materials such as aluminium157, copper and titanium158.The recent own-
initiative report from the European Parliament159 and the Council conclusions160 recommend, 
amongst  others:  (i)  increasing  political  visibility  and  overall  awareness  on  the  potential  and 
challenges  of  geothermal;  (ii)  tackling  the  issue  of  data  availability;  (iii)  reducing  the 
investment  risks  by  implementing  guarantee  schemes;  (iv)  streamlining  and  accelerating 
permitting  procedures;  (v)  promoting  best  practices;  (vi)  tackling  the  shortage  of  skilled 
workforce; and (vi) improving public acceptance.  

3.8.  Hydrogen technologies: electrolysers & fuel cells 

Water electrolysis is a process whereby hydrogen is produced from water using electricity. If 
the electricity comes from renewable and low-carbon sources, this technology has the potential 
to play a key role in decarbonising hard-to-abate industrial sectors, in particular the production 
of  energy-intensive  materials  (e.g.  steel,  cement),  fertilisers  and  the  maritime  and  aviation 
sectors. The manufacturing capacity of electrolysers is on the increase in Europe, supported by 
regulatory and funding frameworks161. The first auction of the European Hydrogen Bank  in 
2024 provided EUR 720 million for seven projects. While this allows more projects to reach 
final  investment  decisions,  European  companies  continue  to  face  financing  and  operational 
hurdles. 

Installed electrolyser capacity in Europe grew from 228 MWe in 2023 to 663 Mwe in 2024 
(projects  in  operation  or  with  an  investment  decision  in  place),  with  517  MWe  in  EU 
countries162. Worldwide installed capacity grew from 1.4-1.7 GWe in 2023 to up to 5 GWe in 
2024163. Of this, 2.7 GWe is in China and about 300 MWe in the US.  

155   EGEC, Geothermal Market Report 2023, 2024. 
156   CETO, Geothermal Energy in the European Union, 2024. 
157   EGEC, Geothermal Market Report 2023, 2024. 
158   European Commission, Directorate-General for Research and Innovation, Schleker, T., Hicks, M., Cressida Howard, I., 
Ohrvik-Stott,  J.  et  al.,  Study  on  clean  energy  R&I  opportunities  to  ensure  European  energy  security  by  targeting 
challenges of distinct energy value chains for 2030 and beyond, 2024. 

159   European Parliament, Resolution of 18 January 2024 on geothermal energy (2023/2111(INI)). 
160   Council of the European Union, Conclusions on the promotion of geothermal energy, 16 December 2024. 
161  

Including  consumption  targets  in  the  Renewable  Energy  Directive  (EU)  2023/2413,  the  goal  of  the  Electrolyser 
Partnership  to  reach  25  GWe  per  year  by  2025,  and  4  IPCEIs  on  hydrogen  and  fuel  cells,  see:  https://competition-
policy.ec.europa.eu/state-aid/ipcei/approved-ipceis_en. 

162   Based on the IEA hydrogen projects dataset, accessed in January 2025 for the EU, NO, UK and CH. 
163   European Commission, JRC, Bolard, J., Dolci, F., Gryc, K., Eynard, U., Georgakaki, A., Letout, S., Mountraki, A., Ince, 
E., Shtjefni, D., Rózsai, M. and Wegener, M., CETO, Water Electrolysis and Hydrogen in the European Union, 2024; 
IEA, Global Hydrogen Review, 2024. The IEA reports in 2024 significantly lower installed capacity for the US, than in 
projects database in 2023, which amounted to 717 MWe. 

29 

 
 
 
European electrolyser stacks’ manufacturing capacity is estimated at 10-15.7 GWe annually in 
2024164, while worldwide capacity projected at 40-54 GWe annually165. China has the highest 
manufacturing capacity, projected at around 20 GWe in 2024166. 

Despite  expanded  manufacturing  capacity  and  increases  in  system  size,  the  expected  cost 
reductions have not yet been achieved. This is due to inflation and other costs such as auxiliary 
components,  power  connection  and  indirect  costs.  Most  recent  studies  indicate  capital 
expenditure related costs for 100 MW alkaline systems of EUR 3 050 per kW and EUR 2 630 
per  kW  for  200  MW  systems167,  at  least  four  times  more  than  in  Asia.  Some  European 
manufacturers indicate that they lack sufficient buyers for their production, which affects their 
ability to decrease capital costs per kW and the viability for many business cases for renewable 
and low-carbon hydrogen.  

The  growth  of  supply  in  Europe  is  slowing  down.  This  is  due  to  upstream  supply  chain 
shortages, lack of suitable demand volumes and dependencies on critical raw materials (e.g. 
platinum  group  metals)168  and  components169. These  factors  are  also  contributing  to  higher 
manufacturing  costs. The  competitiveness  of  European  electrolysers  companies  is  therefore 
moderate. On the one hand, there are commercially available products for the main groups of 
electrolysers170, and EU players are well placed as regards high value patents171. On the other 
hand, there are long lead times for stack assembly, upstream weaknesses in the value chain, 
and  more  costly  systems  that  impact  the  competitiveness  of  European  manufacturers.  The 
business case may also  be affected by other aspects, such as post-manufacturing guarantees 
and high operating costs to produce renewable hydrogen. 

Electricity costs play an important role in the Levelized Cost of Hydrogen (LCOH). This is 
because electricity represents a significant share of the total costs, with its relative share varying 
across locations and specifications of electrolysers172. As an example, in the recent projects in 
the  Netherlands  the  LCOH173  was  12-14  EUR/kg  hydrogen  for  offshore  electricity  for 
electrolyser  systems  of  100-200  MWe.  The  LCOH  will  significantly  depend  on  design, 
operation and localisation of projects. 

Remaining research and innovation challenges are the substitution of ‘forever chemicals’ used 
in membranes, decreasing system costs, improving their performance and lifetime, reducing 
freshwater consumption and the uptake in the end use sectors at competitive prices.  

Fuel cells (FC) are systems to produce electricity from clean hydrogen efficiently. They have 
value added when providing decarbonised solutions for transport, heating or off-grid power. 
They are used primarily in fuel cell electric vehicles, buses, regional trains and to a lesser extent 
in heating, machinery and stationary off-grid power. In the EU, emission standards and carbon 

164  

165  

IEA, Global Hydrogen Review, 2024; CETO, Water Electrolysis and Hydrogen in the European Union, 2024. The upper 
range refers to Rystadt Energy and includes manufacturing capacity under construction (October 2024). 
IEA, Global Hydrogen Review, 2024. Higher range data projected in BloombergNEF, Electrolysers, too many fish in 
the Pond, 2024. 
IEA, Global Hydrogen Review, 2024. The upper range refers to OEM’s headquarter locations in China. 

166  
167   Based on BloombergNEF, Electrolyser Price Survey, 2024; TNO, Evaluation of the levelised cost of hydrogen based on 

proposed electrolyser projects in the Netherlands, 2024. 

168   Based on JRC, Supply chain analysis and material demand forecast in strategic technologies and sectors in the EU, 2023. 

1-5% of CRM for electrolysers are sourced in Europe. 
169   Based on BloombergNEF, Electrolyser Overcapacity, 2024. 
170   The  four  main  commercialised  technologies  are:  alkaline,  proton  exchange  membrane,  solid  oxide,  anion  exchange 

membrane. Proton conducting ceramic electrolysis are a further technology in development. 

171   European Climate-neutral industry competitiveness scoreboard (CIndECS). 31% of high value inventions in the EU. 
172   CETO, Water Electrolysis and Hydrogen in the European Union, 2024.  
173   TNO, Evaluation of the levelised cost of hydrogen based on proposed electrolyser projects in the Netherlands, 2024. 

30 

 
 
prices create additional incentives for investments. In 2023, the estimated installed capacity 
was 7.8 GW worldwide, led by Asia (72%), the US and Canada (18%) and Europe with 0.6 GW 
(8%)174, with most of the market in mobility175.  

European manufacturers offer fuel cells buses but the fuel cells are, in most cases, purchased 
from other suppliers, notably from Canada and Japan. Fuel cell prototypes are developed in the 
EU for heavy-duty vehicles as the interest in clean transport grows and total cost of ownership 
may come to cost parity with diesel trucks after 2035. It is estimated that fuel cell heavy-duty 
vehicles will remain more expensive than battery electric ones. Fuel cells in heating will likely 
only play a niche role in the EU. 

The resilience of value chains  for both  electrolysers and fuel  cells  need to  be strengthened, 
from the sourcing of raw materials to the manufacturing and supply of components to shorten 
delivery times of full systems in Europe at competitive costs. Availability of large quantities of 
cost competitive renewable and low-carbon hydrogen remains a policy priority. 

3.9. 

Sustainable biogas and biomethane technologies  

Europe has a mature industry mainly for electricity generation by biogas, with growing markets 
in heat and transport driven by grid injection with biomethane. Almost 50% of production is in 
Europe, with Germany alone meeting 20% of global demand176. Anaerobic digestion remains 
the main commercial technology used to produce biogas which is then upgraded to biomethane. 
The EU is a leading producer of biogas and biomethane, with a combined production of around 
22.1 billion cubic metres in 2023177. It is also a leader in equipment manufacturing. The EU 
biomethane  production  capacity  from  anaerobic  digestion  was  3.8  billion  m³  in  2023  with 
actual  annual  production  estimated  at  3.5  billion  m3,  but  production  capacity  growth  is 
projected to increase by a factor of 5 by 2030178. The current biomethane growth rate in the EU 
follows closely the 2030 targets in the National Energy and Climate Plans, aligning with the 
REPowerEU target. 

The  EU  is  home  to  world  leading  companies  in  the  biogas  and  biomethane  production  and 
manufacturing  components  (e.g.  digesters,  biogas  cleaning  equipment,  gasifiers)179.  Novel 
pathways are under development, with the EU in the lead180. The EU’s Horizon programme 
has invested more than EUR 120 million in 20 innovative projects, progressing technology in 
the  field.  Innovative  technologies  to  produce  directly  biomethane,  such  as  gasification  of 
biomass residues and wastes, is not widely demonstrated yet in the EU (2 000 t/y of installed 
and operational production capacity in 2023, although biomethane production is expected to 
grow to 0.7 billion m3 in 2030181). Bio-LNG production plants present a valuable option in the 
EU, with a capacity of around 7.3 TWh in 2023 expected to rise to 15.4 TWh by 2025182. 

174   Based on Rystad Energy, Fuel Cell Installed Capacity Dataset, 2024.  
175   European Hydrogen Observatory, Fuel Cell Market Dataset, 2021.  
176  
IEA, Renewables 2023, Special section: Biogas and biomethane, 2024.  
177   Based on European Biogas Association (EBA), Statistical report, 2024.  
178   European  Commission,  Directorate  General  for  Research  and  Innovation,  Development  of  outlook  for  the  necessary 

means to build industrial capacity for drop-in advanced biofuels, (Annex 3), 2024.  

179   European Commission, Directorate General for Research and Innovation, Study on energy technology dependence, 2020.  
180   European Commission, JRC, Motola, V., Scarlat, N, Buffi, M., Hurtig, O., Rejtharova, J., Georgakaki, A., Mountraki, 

A., Letout, S., Salvucci, R., Rózsai, M. and Schade, B., CETO, Bioenergy in the European Union, 2024.   

181   European  Commission,  Directorate  General  for  Research  and  Innovation,  Development  of  outlook  for  the  necessary 

means to build industrial capacity for drop-in advanced biofuels, (Annex 3), 2024. 

182   CETO, Bioenergy in the European Union, 2024. 

31 

 
 
 
The EU accounts for a significant portion of biogas investments and is the leader in high-value 
patents183. Biogas technologies (anaerobic digestion and gas upgrading) do not show critical 
dependencies for materials, components or suppliers and there is no reliance on equipment, 
materials,  or  suppliers  of  technologies  specific  to  a  gasifier184. The  EU  also  has  no  import 
dependencies for biological feedstocks185. However, dependencies on non-EU suppliers exist 
for gas engines and turbines for electricity generation as in all gaseous fuels.  

High costs currently hinder further biomethane deployment, as the capital cost for an anaerobic 
digestion biogas plant is about 1500-2000 EUR/KW186 and the total cost of biogas production 
and upgrading is estimated at about 100 EUR/MWh187. Similarly, for a gasification biomethane 
plant  the  capital  cost  is  2000-3600 EUR/KW  and  the  production  cost  is  around  89-112 
EUR/MWh188.  

To maintain the EU’s competitiveness in this sector, innovation in technologies for sustainable 
biomethane production from gasification and from upgrading anaerobic digestion biogas needs 
to be further supported to increase production capacity and reduce production costs. In addition, 
grid access for biogas and biomethane plants should be facilitated. 

3.10.  Carbon capture and storage (CCS) technologies 

With its Industrial Carbon Management Strategy189 adopted in February 2024, the EU sets out 
a  vision  for  a  robust  regulatory  and  investment  framework  for  technologies  to  capture, 
transport,  use  and  store  carbon  and  for  technologies  that  remove  atmospheric  carbon. 
Supported by the Net-Zero Industry Act, which sets an annual injection capacity target of at 
least  50  million  tonnes  in  storage  sites  in  the  EU  by  2030190,  the  strategy  sets  out  concrete 
actions to support CCS technologies.   

The EU is well positioned in CO2 capture technologies, with five of the 16 major technology 
providers of CO2 capture listed being EU companies191. However, for CO2 transport, storage 
and  the  full  value  chain,  Europe  lags  behind  the  US  and  Canada  with  very  few  companies 
providing  these  technologies192.  The  EU  has  caught  up  in  recent  years  on  public  R&D 
spending.  In 2022,  the  EU accounted  for around  22% of global spending, slightly ahead of 
Canada and Japan193, with the majority of investments going into CO2 storage. 

In 2023, the number of CCS projects in various stages of developments doubled compared to 
the previous year and reached 392 facilities globally (with 119 projects in Europe), amounting 

183   CETO, Bioenergy in the European Union, 2024.  
184   European Commission, Directorate General for Research and Innovation, Study on energy technology dependence, 2020. 
185   CETO, Bioenergy in the European Union, 2024. 
186   European  Commission,  Directorate  General  for  Research  and  Innovation,  Development  of  outlook  for  the  necessary 

187  

means to build industrial capacity for drop-in advanced biofuels, 2023. 
IEA,  Outlook  for  Biogas  and  Biomethane,  2020;  European  Commission,  Directorate  General  for  Research  and 
Innovation, Development of outlook for the necessary means to build industrial capacity for drop-in advanced biofuels, 
(Annex 3), 2024.  

188   European  Commission,  Directorate  General  for  Research  and  Innovation,  Development  of  outlook  for  the  necessary 

means to build industrial capacity for drop-in advanced biofuels, (Annex 3), 2024. 

189   COM/2024/62. 
190   OJ L, 2024/1735, 28.6.2024, Recital 36. 
191   European Commission, JRC, Martinez Castilla, G., Tumara, D., Mountraki, A., Letout, S., Jaxa-Rozen, M., Schmitz, A., 

Ince, E. and Georgakaki, A., CETO, Carbon Capture, Utilisation and Storage in the European Union, 2024. 

192   CETO, Carbon Capture, Utilisation and Storage in the European Union, 2024. 
193  

Ibid. 

32 

 
 
 
to  361  Mtpa  CO2194.  In  Europe,  CCS  projects  at  different  stages  of  development,  support 
industries like hydrogen, ammonia and fertiliser production (20 facilities), power generation 
and heat (19 facilities), cement (17 facilities), and biomass to power/heat (15 facilities)195. 

In Europe, out of 35 CO2 transport and networks projects under development, several are key 
Projects  of  Common  Interest  (PCI)  underpinning  an  EU  cross-border  carbon  dioxide 
network196. Whilst identified storage capacities continue to be concentrated in the North Sea, 
new locations for onshore and offshore CCS projects have been mapped in Member States such 
as Bulgaria, Croatia, Greece and Italy. 2024 saw the granting of the first exploration licenses 
for land-based storage of CO2 in Denmark, doubling the total amount of exploration licenses 
for CO2 storage197. In January 2025, the Commission awarded funding worth EUR 250 million 
under the Connecting Europe Facility for Energy to support the construction of three projects 
and  the  financing  of  nine  preparatory  studies  for  CO2  infrastructure  Projects  of  Common 
Interest198.   

The  EU  is  well  positioned  in  key  CCS  component  manufacturing  sectors  for  capture 
technologies,  such  as  amine  solvents  used  for  absorption  (the  most  mature  technology). 
However, it does not operate at scale nor have specialised value chains yet. After a period of 
stagnation in the past decade, the EU production of amine solvents reached EUR 260 million 
in  2023,  an  increased  by  8%  on  the  previous  year.  The  EU  is  well  positioned  to  develop 
innovative  methods,  including  on  membranes  (polymeric,  ceramic)  and  adsorbents,  while 
China leads globally in terms of peer-reviewed articles. Projects under the EU’s Horizon 2020 
programme  are  expected  to  strongly  improve  processes  and  push  these  methods  to  the 
commercial stage199. 

Despite momentum building up for CCS in the EU in the past year, the pace of deployment of 
CO2 storage will need to grow exponentially to achieve the significant CO2 capture volumes 
necessary for meeting the 2030, 2040 and 2050 targets. The EU is putting in place measures to 
enhance the visibility of demand and supply of storage and lay down the necessary framework 
for a non-discriminatory, open access and a multi-modal CO2 infrastructure. These measures 
will address the main challenges in the deployment of industrial carbon management solutions, 
increase  predictability  for  investors  and  de-risk  investments. The  Commission  will  propose 
further  measures  to  incentivise  and  increase  the  uptake  of  carbon  capture,  utilisation,  and 
storage (CCUS) technologies200. 

3.11.  Electricity grid technologies: power lines and transformers 

The EU Action Plan for Grids201 identifies global trends (e.g. growing electricity consumption, 
digitalisation,  and  the  integration  of  renewables),  which  are  contributing  to  increase  global 

194   Facilities  in  the  deployment pipeline,  in  construction or  operational;  not including  capacity  of  CO2  transport  and/or 
storage projects (to avoid double counting) other than those CO2 transport and/or storage facilities that do not have their 
own CO2 capture source.  

195   Global CCS Institute, Global Status of CCS 2023, Scaling up through 2030.  
196   Such as the PORTHOS and ARAMIS projects in the Netherlands and Antwerp@C in Belgium. The  new list of EU 

energy Projects of Common and Mutual Interest (europa.eu) includes 14 CO2 network projects.  

197   Danish  Ministry  of  Climate,  Energy  and  Utilities,  The  first  exploration  licenses  for  land-based  storage  of  CO2  in 

Denmark have been granted, 20 June 2024. 

198   See https://ec.europa.eu/commission/presscorner/detail/en/ip_25_377. 
199   CETO, Carbon Capture, Utilisation and Storage in the European Union, 2024. 
200   Mission Letter to Dan Jørgensen, Commissioner for Energy and Housing, 17 September 2024. 
201   COM(2023) 757 final. 

33 

 
 
 
demand  for  grid  components,  including  power  lines  and  transformers202.  Europacable’s 
analysis of the 2024 Ten-year Network Development Plans203 suggests that almost 100 000 km 
of new transmission lines and cables will be laid in Europe between 2024 and 2033 (a 10% 
upward revision of the 2022 figure).  Turning to the distribution system, Eurelectric expects 
that an annual average of 262 000 km of conductors will need to be installed between 2025 and 
2050, including new lines and replacements204. In addition, the development of the distribution 
grid in  the EU and Norway alone, could require as much as 172 000 units  of transformers, 
added every year between 2025 and 2050, doubling their number from 4.5 million to 9 million 
by  mid-century205.  Overall,  upgrading  the  European  power  transmission  and  distribution 
infrastructure could require as much as EUR 730 billion of investments until 2040206.  

The  EU  has  some  long-standing  market  and  technology  leaders  for  both  power  lines  and 
transformers.  The  EU  wires  and  cable  market  is  mostly  supplied  by  European  companies, 
although competitive pressure from international players could increase in the short to medium-
term. As for the European transformers market, the picture is somewhat different: while a few 
big multinational companies dominate the large transmission transformer segment, the medium 
size transformer segment  and distribution transformer manufacturers include both  historical 
national  manufacturers  and  family-run  companies  from  Europe,  as  well  as  international 
competitors.   

Copper and aluminium supply chains are critical for manufacturing. While these are expected 
to keep up with steadily growing demand in the short term, high demand and the concentration 
of refined copper production constitutes risk for disruptions in the long term207. The main high-
value component for transformers, the core, is manufactured from grain oriented electrical steel 
(GOES). The value of the global GOES market is estimated to almost double in size by 2032208, 
driven  by  demand  from  transformer  manufacturing.  Although  the  EU  is  a  major  producer, 
many EU transformer manufacturers rely on imports of core steel209.  

reportedly 

Rising demand for grid components such as power lines and transformers have led to delayed 
deliveries, long lead times and further price surges. In response, several leading European cable 
investment  decisions  worth 
manufacturers  have 
EUR 4 billion, contributing to the doubling of high and extra-high voltage cable production 
capacities in Europe210. A survey of EU and non-EU transformer manufacturers suggests that 
a 10% production capacity expansion can be expected in the short term (until 2026), with up 
to  30%  until  2030,  if  the  upward  demand  trend  is  confirmed211.  Nevertheless,  demand  is 
expected to continue growing faster than supply in the coming years and in the 2030s. 

implementing 

started 

One of the biggest challenges facing the industry is a shortage in skilled labour. Almost half of 
the  surveyed  transformer  manufactures  reported  underutilised  capacities  due  to  a  lack  of 
qualified workers212. In its Action Plan for Grids, the Commission has identified measures to 

202   While  this  edition  focuses  on  power  lines  and  transformers,  the  last  edition  focused  on  high  voltage  direct  current 

(HVDC) systems and converter stations, see COM(2023) 652 final.   

203   Entsog and Entsoe, Ten-Year Network Development Plans (TYNDP), May 2024.  
204   This is expected to lead to a net extension of the EU and Norway network from 10 to 16,8 million km from 2025 to 

2050. 

205   Eurelectric, Grids for speed, 2024. 
206   European Commission, Directorate-General for Energy, Finesso, A., Kralli, A., Bene, C., Goodall, F. et al., Investment 

needs of European energy infrastructure to enable a decarbonised economy, 2025. 
IEA, Critical Minerals Market Review, 2023. 

207  
208   Fortune Business Insights, Grain Oriented Electrical Steel Market Size, Share & Industry Analysis, 2024.  
209   T&D Europe, Transformer Commodities Indices, April 2024. 
210   Europacable, Letter to European Commission Executive Vice-President Maroš Šefčovič, 5 March 2024.    
211   Transformers Magazine’s Industry Navigator, Investments 2024 – Outlook to 2033, 2024. 
212  

Ibid. 

34 

 
 
ensure that EU electricity grids will operate more efficiently and be rolled out faster213. Closer 
cooperation among public authorities, grid operators and technology providers will be key to 
develop  common  technology  specifications,  improve  visibility  of  grid  project  pipelines, 
facilitate investments in manufacturing capacity and secure supply chains. During the current 
term of office, the Commission will consider the legal framework for European grids to support 
electrification  and  speed  up  permitting214.  The  Commission  will  present  an  Electrification 
Action Plan to support electrification across all end-use sectors and propose a European Grid 
Package  to  modernise  and  expand  its  network  of  energy  transmission  and  distribution 
infrastructure. 

3.12.  Nuclear fission energy technologies 

Nuclear power plants (NPPs) are one of the technologies providing dispatchable low-carbon 
electricity215. The unit cost of electricity from NPPs is typically between that of renewables 
and fossil technologies. NPPs generated 22.8% of electricity in the EU in 2023,  slightly up 
from 21.9% in 2022216, with three levers to achieve this: lifetime extensions, building new large 
NPPs, and deploying small modular reactors (SMRs).  

Most new reactors under construction are located in Asia. At the beginning of 2024, there was 
around 61 GW of reactor capacity under construction globally, of which more than half was 
located in China and India. The EU retains one active reactor vendor217, who is building 5.3% 
of  the  aforementioned  capacity218.  This  illustrates  the  need  for  EU  industry  to  improve  its 
competitiveness in line with the objectives of the Net-Zero Industry Act. 

In 2024, the Commission launched the European Industrial Alliance on SMRs to facilitate their 
deployment  by the early 2030s and to support a competitive European ecosystem219. SMRs 
feature innovative designs and are built around modular components that could potentially be 
produced  in  series. They  have  not  been  deployed  in  the  EU  yet,  though  the  first  SMRs  are 
already operating in China and Russia220.  

Delivering  the  projected  capacity  in  the  EU  necessitates  expanding  manufacturing 
capacities221. Furthermore, the ageing workforce in the sector needs to be addressed by bringing 
in people entering the workforce and reskilling professionals from other industries. Nuclear-
specific skills development programmes need to be fostered. The diversification of the supply 
chain  for  nuclear  fuel,  fuel  cycle  services,  and  for  spare  parts  needs  to  continue  to  address 

213   COM(2023) 757 final. 
214   Mission Letter to Dan Jørgensen, Commissioner for Energy and Housing, 17 September 2024. 
215   Member States have the freedom to choose their energy mix in line with the Treaties. 
216  Commission analysis based on Eurostat,  Net electricity generation by type of fuel  - monthly data, Online data code: 
nrg_cb_pem, last updated 28/01/2025; ENTSO-E, Statistical Factsheet 2023, 2024; European Parliamentary Research 
Service, Strategic autonomy and the future of nuclear energy in the EU, 2024; SWD(2024) 63 final, Part 1/5. 
In  the  1980s,  there  were  four  European  reactor  manufacturers:  ABB  (Sweden/Switzerland),  Framatome  (France), 
Kraftwerk  Union/Siemens  (Germany),  and  National  Nuclear  Corp.  (UK).  Only  Framatome  is  active  today.  Nuclear 
Energy Agency, Nuclear New build: Insights into Financing and Project Management, 2015.   

217 

218  Commission analysis based on IAEA PRIS data (31 December 2023). Framatome completed construction of Olkiluoto 

3 (Finland), which started commercial operation in May 2023.  

219  European Industrial Alliance on SMRs, 2024. 
220  
IAEA PRIS data (31 December 2023).  
221 
In addition, according to analyses of the Euratom Supply Agency (ESA), there is a missing enrichment capacity in the 
global  West of  up  to 2500  tSWU  by  2030,  with  the  Western  reactors  missing,  in  the  stable  demand  scenario,  about 
6000 tU of conversion capacity per year. ESA, Euratom Supply Agency Annual Report, 2022.  

35 

 
 
 
dependencies  on  any  single  unreliable  partners,  particularly  on  Russia222.  There  must  be  a 
continued  focus  on  maintaining  nuclear  safety,  securing  diversified  supplies,  safe  waste 
management,  and  advancing  new  technologies223.  Any  future  use  of  nuclear  must  be 
conditional on adherence to the strictest nuclear safety standards, as well as safe disposal of all 
types of nuclear waste and spent fuel. 

3.13.  Hydropower  

Global hydropower capacity was 1 416 GW in 2023224, with an additional capacity of around 
160  GW  (of  which  ca.  15-16  GW  in  Europe)  expected  around  2030225.  Pumped  storage 
hydropower is still the most common energy storage technology with more than 90% of all 
grid-scale  storage  globally  and  46  GW  installed  pumping  capacity  in  the  EU226. While  EU 
companies are active on novel hydropower projects worldwide, a significant focus in the EU 
is  on  upgrading  and  refurbishing  of  existing  installations,  representing  around  153  GW  of 
installed capacity227.  

The EU manufacturing industry of hydropower components remains strong in 2024, indicating 
a positive outlook in terms of progress towards the benchmarks of the Net-Zero Industry Act. 
While the EU supply chain is well developed, there is a risk of future dependency for permanent 
magnets  as  a  component228.  The  value  of  EU-manufactured  parts  and  turbines  stood  at 
EUR 605 million in 2023, but the trade surplus has shrunk substantially in the last few years to 
EUR  213  million  in  2023,  compared  to  the  peak  at  EUR  466  million  in  2015. This  is  also 
reflected in the EU share in global exports, which, however, remained high at 44% in 2021-
2023229. The loss in production value over the last few years highlights that, while EU industry 
remains  competitive,  it  faces  increased  global  competition,  as  notably  China  has  been 
developing its position in hydropower technology230. 

While  the  EU  hydropower  industry  continues  to  play  a  leading  role  globally,  this  can  be 
expected to be further challenged in the medium and long term. In this regard a particular issue 
for  EU  industry  is  the  lower  potential  for  new  hydropower  projects  in  Europe,  where 
identifying  new  sites  for  sustainable  hydropower  remains  a  major  challenge.  A  further 
challenge for EU hydropower manufacturing is to maintain skills in the sector. 

The EU needs to retain a globally leading position in hydropower by investing more in research 
and  innovation  than  global  competitors  and  by  maintaining  its  home  market  with  new 
investments.  In  particular,  there  is  untapped  potential  in  expanding  pumped  storage 

222 

Five  Member  States  operate  VVER-type  reactors.  Historically,  there  has  been  only  a  single,  Russian  fuel  services 
supplier for these reactors, which represents a vulnerability in the security of supply. In 2022, the Commission launched 
consultations with Member States operating VVER reactors to accelerate the process of diversifying fuel supplies in line 
with REPowerEU objectives. 

223  Mission Letter to Dan Jørgensen, Commissioner for Energy and Housing, 17 September 2024. 
224   European Commission, JRC, Quaranta, E., Georgakaki, A., Letout, S., Mountraki, A., Ince, E. and Gea Bermudez, J., 

225  

CETO, Hydropower and Pumped Storage Hydropower in the European Union, 2024. 
IRENA,  The  changing  role  of  hydropower:  Challenges  and  opportunities,  2023;  IEA,  Hydropower  Special  Market 
Report Analysis and forecast to 2030, 2021. 

226   CETO, Hydropower and Pumped Storage Hydropower in the European Union, 2024. 
227   Eurostat (nrg_inf_epc), accessed on 12/02/2025. 
228   European Commission, Directorate-General for Research and Innovation, Schleker, T., Hicks, M., Cressida Howard, I., 
Ohrvik-Stott,  J.  et  al., Study  on  clean  energy  R&I  opportunities  to  ensure  European  energy  security  by  targeting 
challenges of distinct energy value chains for 2030 and beyond, 2024.  

229   CETO, Hydropower and Pumped Storage Hydropower in the European Union, 2024. 
230  
IEA, Hydropower Special Market Report Analysis and forecast to 2030, 2021. 

36 

 
 
 
hydropower  to  help  increase  grid  flexibility,  including  by  retrofitting  existing  hydropower 
facilities.  

3.14.  Sustainable alternative fuels 

Sustainable alternative fuels, as defined in the Net-Zero Industry Act, are sustainable and low-
carbon fuels that are intended to reduce greenhouse gas emissions in the aviation and maritime 
sectors231. The EU is well positioned in these technologies, but further efforts will be needed 
to build up competitive mass-scale production in the EU. Overall, the EU currently holds a 
technological  advantage  in  production:  it has most  of the world’s  commercial  facilities and 
plays a strong role in developing novel and innovative technologies. 

Hydroprocessed  esters  and  fatty  acids  (HEFA)  fuel  is  presently  the  only  fully  commercial 
technology for aviation fuels. While there is currently no essential production of sustainable 
aviation fuels in the EU, existing hydrotreated vegetable oil (HVO) plants could be upgraded 
to produce about 1.07 Mtoe of advanced HEFA fuels per year. This would be more than twice 
the total production of sustainable aviation fuels in the world in 2023232 and less than half the 
EU  policy-driven  demand.  EU  production  from  eligible  biomass  feedstocks  is  projected  to 
expand to 1.5 Mtoe per year by 2030. For maritime use, the EU currently produces 0.1 Mtoe 
per  year  from  waste-based  feedstocks.  An  expansion  to  2.1  Mtoe  per  year  is  projected  for 
2030233,  which  is  about  half  the  EU  policy-generated  demand.  Announced  industry  plans 
estimate that e-kerosene production will reach 1 129 Mtoe per year by 2023, while e-methanol 
and e-ammonia production will reach 1 464 Mtoe per year234. This is about 3% and 4% of the 
projected EU demand, respectively.  

Of the 28 commercial facilities (TRL 9) producing sustainable aviation fuels globally, 15 are 
in the EU (of which 14 are HEFA facilities) and 6 in the US. There are also 6 pre-commercial 
plants (TRL 8) for HEFA and advanced technologies in the EU, compared to 4 in the US. For 
maritime use, only 3 operational innovative biomethane plants (TRL 8) exist (1 in the EU)235. 
This  illustrates  the  EU’s  current  competitiveness  in  the  emerging  sector  and  the  need  to 
accelerate the commercialisation of advanced technologies to maintain it. 

There are no critical dependencies for technologies as many of the technology developers and 
equipment manufacturers are in the EU, and the risk of reliance on critical materials is low236. 
For advanced biofuel technologies there is  no critical dependency on feedstock imports. By 
contrast,  for  renewable  fuels  of  non-biological  origins  (RFNBOs),  there  is  a  critical 
dependency on non-EU countries producing catalyst materials (cobalt, chromium, vanadium 
and  tungsten),  and  on  the  availability  of  renewable  electricity,  renewable  hydrogen  (see 
section 3.8 on hydrogen technologies), and CO2 feedstock.  

Production costs vary by technology and remain a challenge as these technologies still need to 
be scaled up to commercial levels. The cost for HEFA from advanced feedstock ranges between 
EUR 15  and  EUR 32 per  MWh,  and  for  biomethanol  via  gasification  between  EUR 89  and 

231   OJ L, 2024/1735, 28.6.2024, Article 3, in line with the definitions in the ReFuelEU Aviation Regulation and the FuelEU 
Maritime Regulation. This section only covers biofuels and synthetic renewable fuels of non-biological origin.   
IATA, Annual Review, 2024.  

232  
233   European  Commission,  Directorate  General  for  Research  and  Innovation,  Development  of  outlook  for  the  necessary 

means to build industrial capacity for drop-in advanced biofuels (Annex 3), 2024. 

234   European  Commission,  Directorate  General  for  Research  and  Innovation,  Development  of  outlook  for  the  necessary 

means to build industrial capacity for drop-in advanced biofuels (Annex 4), 2024. 

235   See database on Task 39, Biofuels to decarbonize transport.  
236   European Commission, Directorate General for Research and Innovation, Study on energy technology dependence, 2020. 

37 

 
 
 
EUR 112  per  MWh237.  The  cost  of  RFNBOs  depends  largely  on  the  cost  of  renewable 
hydrogen, electricity and CO2 and is between EUR 90 and EUR 180 per MWh for maritime 
use, but much higher for e-kerosene produced from e-methanol238.  

SAF prices are currently 3 to 10 times more expensive than conventional fuel, although they 
are expected to reduce substantially as production technologies scale up. Further research and 
innovation  could  bring  down  costs  significantly.  Combined  with  the  implementation  of 
demonstration  and  early  commercial  plants  to  reduce  capital  and  operating  costs,  a  5-27% 
reduction in overall production costs could be achieved239. In addition, markets and production 
facilities for renewable road, aviation, and shipping fuels could be developed alongside each 
other to create synergies across all transport sectors. For example, the production of aviation 
fuels through many advanced biofuel pathways creates a by-product market for green diesel 
(for trucks) and naphtha (for ships). Exploitation of the economic value of by-products can lead 
to reduction of the cost of the primary fuel. Synergies between advanced biofuels and RFNBOs 
are also crucial for the use of green hydrogen, biogenic CO2, and related technologies.  

3.15.  Industrial excess heat recovery technologies 

Technologies to recover excess heat from industrial processes are crucial to increasing energy 
efficiency in industry240. Several techniques exist. In general, the heat is first extracted (e.g. 
from  the  exhaust  gases)  by  means  of  heat  exchangers.  It  can  then  be  transferred  locally  to 
another process (e.g. raw material preheating), either directly or via a fluid, or exported to a 
district heating network. The recovered heat can be upgraded (e.g. by heat pumps, see Section 
3.6) to be used at a higher temperature or converted for refrigeration. Alternatively, the heat 
can be converted to mechanical or electrical power.  

This section focuses on the recovery of heat and conversion to electrical power via Rankine 
cycle  technology,  which  uses  heat  to  expand  a  fluid  to  drive  a  turbine  and  an  electrical 
generator. Both organic (ORC) and steam (SRC) Rankine cycles are commercially available, 
with  research  and  innovation  continuing  to  improve  ORC.  Supercritical  CO2  (sCO2)  cycle 
technology has the potential to be more efficient and compact but is not yet mature. 

In  the  EU,  the  theoretical  industrial  excess  heat  potential  has  been  estimated  at  920 TWh 
annually, corresponding to a Carnot potential of 279 TWh241. It is estimated that excess energy 
from industrial processes in the EU could be converted by ORC power plants into 150 TWh of 
electricity annually242. 

The global ORC market was estimated at EUR 750 million in 2023 and is projected to grow243. 
The technology is applied mainly in geothermal energy (77%), industrial excess heat recovery 

237   European  Commission,  Directorate  General  for  Research  and  Innovation,  Development  of  outlook  for  the  necessary 

means to build industrial capacity for drop-in advanced biofuels, (Annex 3), 2024. 

238   European  Commission,  Directorate  General  for  Research  and  Innovation,  Development  of  outlook  for  the  necessary 

means to build industrial capacity for drop-in advanced biofuels (Annex 4), 2024. 
239  
IEA Bioenergy Technology Cooperation Programme, Advanced Biofuels - Potential for Cost Reduction, 2020.  
240   While the literature traditionally referred to industrial ‘waste heat’ recovery, the term ‘excess heat’ is now preferred as, 

when the heat is recovered, it is no longer wasted. 

241   Bianchi,  G., Panayiotou,  G.P., Aresti,  L.  et  al.,  Estimating  the  waste  heat  recovery  in  the  European  Union  Industry. 

Energy, Ecology and Environment, 2019.  
242   KCORC, Thermal Energy Harvesting, 2025 . 
243   Grand View Research, Organic Rankine Cycle Market Size & Trends, 2024. Using the average exchange rate of EUR 

0.9239 for USD 1 over the year 2024, based on ECB. 

38 

 
 
 
(11%)  and  biomass  (10%)244.  The  main  components  of  ORC  and  SRC  systems  are  heat 
exchangers, condensers, feed pumps, and turbines with generators. The materials used are steel, 
aluminium  and (organic) fluids,  as well as copper and magnets  for the generator,  and other 
components for control electronics.  

Europe is home to a large number of ORC system manufacturers and innovation in the field. 
One US and two EU companies are leading the global ORC market and capture a majority of 
the market (78% in 2016-2020)245. Europe is a leader in related R&D activities in ORC246, but 
interest has increased globally and the number of scientific documents on the topic of ORC has 
more  than  doubled  compared  to  2014-2018,  reaching  3 329  in  2019-2023.  Of  these 
publications, 523 were issued in the EU, behind China (860) and ahead of Iran (368), the UK 
(176) and the US (165)247.  

There  continue  to  be  certain  barriers  to  the  deployment  of  Rankine  cycle  and  other  heat 
recovery  technologies,  hampering  the  further  development  of  the  industry. The  upfront  and 
maintenance costs of heat recovery, as well as the price of the electricity produced, can be very 
different, resulting in different payback periods248, while the future availability of heat supply 
can  be  uncertain  due  to  potential  changes  in  the  respective  industrial  process  (e.g. 
electrification).  

Process-specific and site-specific  conditions  increase the effort  required  to plan, design  and 
install heat recovery systems. The deployment and the supply chain of excess heat recovery 
would benefit from more standardised components, that are designed to meet the needs of most 
plants  in  a  given  industrial  subsector. At  EU  level,  further  exchanges  between  technology 
providers and end user sectors, potentially under the Strategic Energy Technology Plan, could 
help speed up deployment and strengthen EU competitiveness. 

4.  CONCLUSIONS 

The net-zero technologies sector represents a major economic opportunity for the EU and 
is essential for the energy transition. The global market for key clean energy technologies 
could nearly triple and attain around EUR 1.9 trillion by 2035249. The EU’s industry has the 
potential to play a key role in providing these technologies, based on a still strong industrial 
basis and research and innovation (R&I) performance. There may be no other technology field 
growing at such a high speed in which the EU is as well placed. 

The EU remains one of the largest global markets for net-zero technologies. Renewable 
energy sources are highly cost competitive in the EU and have reached record deployment, 
providing  48% of electricity in  the EU in  2024. At the same time, energy prices in  the EU 
remains  substantially  higher  than  in  many  other  major  economies,  in  particular  the  US  and 
China. This is a structural disadvantage for EU industry, and particularly its energy-intensive 
industries, but as well for the competitiveness of many manufacturers in the EU’s net-zero tech 
sector.  As  the  EU  continues  its  energy  transition,  increases  electrification  and  moves  away 

244   Wieland,  C.,  Schifflechner,  C.,  Dawo,  F.,  Astolfi,  M.,  The  organic  Rankine  cycle  power  systems  market:  Recent 

developments and future perspectives, Applied Thermal Engineering, 2023. 
Ibid. 

245  
246   KCORC, Thermal Energy Harvesting, 2025. 
247   Elsevier, Scopus database, using the search string ’Organic AND Rankine AND Cycle AND Power’, on 31.01.2025. 
248     CE-Delft, ORC Plants for Thermal Energy Harvesting, 2023.  
249  

IEA, Energy Technology Perspectives, 2024. Global market estimates for solar PV, wind, electric vehicles, batteries, 
electrolysers and heat pumps. Report refers to USD 2 trillion, converted into EUR at the end of 2024. 

39 

 
 
 
from its dependency on fossil fuels, net-zero technologies will become even more relevant. The 
competitiveness of EU manufacturers will decide whether an essential part of this transition 
will be made in the EU or will be imported. This is a matter not only of security of supply, but 
also of prosperity and employment. 

The EU remains well placed in research in clean energy technologies but continues to lag 
behind  in  private  R&I  investments.  Horizon  Europe  continues  to  support  R&I  in  clean 
energy  technologies  and  their  competitiveness,  including  efforts  to  leverage  private 
investments through European partnerships. At the same time, long-known challenges related 
to private investments in R&I and the scaling-up of companies continue to hold the EU back. 
In  2023,  the  EU  performed  better  in  terms  of  attracting  venture  capital  to  the  clean  energy 
technology sector, but this was driven by a limited number of large deals. This is a key factor 
explaining the drop in venture capital in the sector, as preliminary data show for 2024. This 
also underlines the need to continue EU efforts to mobilise private finance allowing companies 
to scale up.  

Faced with increasingly cost-competitive competition, the EU is at risk of further losing 
ground in terms of competitiveness and manufacturing. China is already dominating the 
global  manufacturing  of  solar  photovoltaics  and  batteries  and  is  expected  to  significantly 
expand its manufacturing capacities in further clean energy technologies in the years to come. 
The current  issues  of the emerging  EU  battery industry in  ramping  up production  show the 
immense  challenges  of  building  up  large-scale  manufacturing  capacity  for  technologies  of 
which  the  centre  of  gravity  and  manufacturing  know-how  is  no  longer  in  Europe, 
notwithstanding substantial public and private investment. The coming years will be crucial to 
see whether the EU’s existing R&I expertise on solar and batteries can help revive these sectors 
in the EU, for example by exploring solutions requiring less critical raw materials. 

The EU still holds a strong position in the manufacturing of several net-zero technologies, 
including wind energy and heat pumps. Both technologies will continue to increase in global 
relevance,  and  estimates  indicate  potential  manufacturing  undercapacity  compared  to  the 
expected  global  demand.  While  the  EU  wind  industry  is  still  well  positioned,  Chinese 
competitors  have  started  to  make  inroads  into  global  markets,  where  EU  companies  have 
already lost market shares in the last few years. Heat pump solutions will play a key role in 
addressing both domestic and industrial heating needs in the future. The EU still holds a strong 
position, but the sector needs new momentum. Further support to these strategic industries will 
be required to strengthen EU value chains. 

There  are  further  established  technologies  in  which  competitive  EU  industries  show 
growth potential. The EU has a mature biogas and biomethane industry. EU-based companies 
also have a strong position in the supply of electricity grid components, which are in increasing 
global demand as electrification increases. However, the sector is likely to experience further 
competitive  pressure  in  the  future.  As  many  other  net-zero  technologies,  grid  component 
manufacturing displays strong dependencies on materials, such as copper and special steel. EU 
industry has a long tradition in hydropower but has been losing global market share over the 
last few years. There is untapped potential in hydropower also in the EU. Expanding pumped 
storage  hydropower,  including  by  retrofitting  existing  facilities,  could  help  increase  grid 
flexibility. 

In  addition,  there  are  several  technologies  that  are  still  emerging  and  need  further 
support  to  demonstrate  their  commercial  potential.  This  concerns  technologies  such  as 
ocean energy technologies, small modular reactors, sustainable alternative fuels, and carbon 

40 

 
capture and storage. These technologies require targeted support to increase their commercial 
viability and deploy them at larger scale.  

Innovation has a central role to play in boosting EU competitiveness, both to bring new 
technologies  to  the  market  and  to  improve  existing  solutions.  R&I  is  needed  to  boost 
efficiency and could limit dependencies on critical raw materials, such as lithium in battery 
technology.  Further  efforts  are  also  needed  to  increase  circularity  and  sustainability,  for 
example, by addressing the use of PFAS chemicals in electrolysers. As global investments in 
net-zero technologies grow, further efforts will be needed for the EU to keep up in R&I. This 
is reflected in the focus of the recent Competitiveness Compass on closing the innovation gap. 
The  recently  strengthened  Strategic  Energy  Technology  Plan  has  a  key  role  to  play  to 
coordinate and align research priorities, bringing together public and private stakeholders, and 
to  increase efficiency of R&I spending  among Member States, including  through the Clean 
Energy Transition Partnership250.  

To fully reap the economic benefits of the global energy transition, it is essential for the 
EU to increase its manufacturing capacity. A value chain approach remains crucial, taking 
into account the entire chain from raw materials, via energy-intensive industries for materials, 
to  manufacturing  and  final  installation.  Skills  shortages  will  remain  another  significant 
challenge in the years to come that must be addressed to ensure the sector can thrive.  

The implementation of the Net-Zero Industry Act (NZIA) can play a key role in providing 
coordinated support for EU net-zero technology manufacturing. This will require making 
use  of  all  tools  it  provides,  from  permitting  to  the  use  of  non-price  criteria  in  public 
procurement procedures and auctions. The Net-Zero Europe Platform has an important role to 
play to coordinate policy in the EU and to collaborate with industry. With the entry into force 
of the NZIA, this Competitiveness Progress Report has been designated as its main monitoring 
tool. In the years to come, the report will continue to follow closely developments linked to the 
EU’s  competitiveness  in  net-zero  technologies  and  to  look  into  issues  regarding  the 
implementation of the NZIA.  

With the Competitiveness Compass, the Clean Industrial Deal and the Action Plan for 
Affordable Energy, the Commission has placed the strengthening of EU competitiveness 
at the centre of its plans for the years to come. Jointly these three documents outline key 
actions both building on and strengthening the net-zero technology sector. This includes the 
joint roadmap for decarbonisation and competitiveness of EU industry provided by the Clean 
Industrial Deal, and the actions to improve access to affordable energy outlined in the Action 
Plan for Affordable Energy.  

In this context, the Commission will continue to support net-zero technologies, both as an 
important industrial sector and as enabling technologies for the decarbonisation of the wider 
economy. This will require continued coordinated efforts at EU and national level. 

250 For more information: Clean Energy Technology Partnership. 

41