EUROPEAN COMMISSION

Brussels, 26.10.2021

SWD(2021) 307 final

COMMISSION STAFF WORKING DOCUMENT

Accompanying the document

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Progress on competitiveness of clean energy technologies



1 - Macroeconomic

{COM(2021) 950 final} - {COM(2021) 952 final}

Contents

Progress on competitiveness of clean energy technologies

1.Introduction

1.1.An EU climate neutral pathway for the clean energy system

1.2.Context of the Report

2.Overall competitiveness of the EU clean energy sector

2.1.Energy and resource trends

2.2.Human Capital

2.3.Research and innovation trends

2.4.The clean technologies funding landscape

2.5.Covid-19 impact and recovery

2.6.Innovative and cooperative business models

OFFSHORE WIND41

Introduction41

3.Technology Analysis – Current situation and Outlook41

4.Value chain analysis of the energy technology sector59

5.Global market analysis72

6.SWOT and conclusions80

WIND ONSHORE82

7.Technology Analysis – Current situation and Outlook82

8.Value chain analysis of the energy technology sector87

9.GLOBAL MARKET ANALYSIS92

10.SWOT and conclusions94

SOLAR PHOTOVOLTAICS95

Introduction95

11.Technology Analysis – Current situation and Outlook95

12.Value chain analysis of the energy technology sector110

13.Global market analysis118

14.Conclusions125

HEAT PUMPS FOR BUILDINGS127

Introduction127

15.Technology Analysis – Current situation and Outlook128

16.Value chain analysis of the energy technology sector139

17.Global market analysis143

18.SWOT and conclusions155

BATTERIES156

Introduction156

19.Technology Analysis – Current situation and Outlook156

20.Value chain analysis of the energy technology sector168

21.Global market analysis175

22.SWOT and conclusions181

HYDROGEN ELECTROLYSERS185

Introduction185

23.Technology Analysis – Current situation and Outlook186

24.Value chain analysis of the energy technology sector199

25.Global market analysis202

26.Conclusions203

SMART GRIDS (Distribution Automation, Smart Metering, Home Energy Management Systems And Smart Ev Charging)205

Introduction205

27.Distribution automation208

28.Smart meters212

29.Home energy management systems (HEMS)219

30.Smart charging226

31.conclusions237

RENEWABLE FUELS IN AVIATION AND SHIPPING239

Introduction239

32.Technology Analysis – Current situation and Outlook240

33.Value chain analysis of the energy technology sector256

34.Global market analysis260

35.SWOT and conclusions266

Progress on competitiveness of clean energy technologies

1.Introduction

1.1.An EU climate neutral pathway for the clean energy system

Since 2019, the European Green Deal is the overarching framework for EU clean energy policy. It sets the objective for the EU to have no net emissions of greenhouse gases (GHG) in 2050 and to decouple economic growth from resource use. To operationalise the European Green Deal, the EU Climate Law 1 has enshrined into law the political priority of becoming climate neutral by 2050 and of reducing greenhouse gas emissions by 55% by 2030, compared to 1990 levels. This has been followed by the Fit-for-55 package to deliver on the European Green Deal, adopted by the Commission in July 2021, which proposes to revise existing instruments as well as propose new ones 2 in order to achieve the 2030 target in a fair, cost-effective, and competitive way. This package constitutes the most comprehensive set of proposals the Commission has ever presented on climate and energy. These initiatives will notably contribute to the development of the clean energy sector in the next decades, in particular by spurring innovation and creating new market demand in the EU, cementing EU global leadership by action and by example in the fight against the climate crisis.

The policy context is complemented by a new EU budget (the Multiannual Financial Framework) covering the period 2021-2027. The EUR 1 074 billion 3 envelope sets a clear sustainable direction for the EU, with a target of spending at least 30% of these funds on actions fighting climate change. The clean energy sector is addressed by several EU programmes, notably: the cohesion policy funds, the Horizon Europe framework programme for research and innovation (e.g. through its European Innovation Council and its Cluster on Climate, Energy and Mobility), the Connecting Europe Facility (CEF), and the LIFE programme for environment and climate action. In addition, the revision of the European Emission Trading Scheme (ETS) will increase the allocation of allowances and therefore resources for the Innovation Fund, the Modernisation Fund and the newly created Social Climate Fund. The Innovation Fund, depending on the EU ETS price, could bring an estimated EUR 47 billion, to be invested over 10 years to support the deployment in the market of breakthrough low carbon technologies. The Modernisation Fund, intended to support low income Member States in the modernisation and decarbonisation of their energy systems, would be increased by an additional 2.5% of total allowances. The Social Climate Fund would provide EUR 72.2 billion in financing over seven years, or the equivalent of 25% of expected revenues under the new emissions trading system covering buildings and road transport. It would fund Member States’ programmes designed to support investment in increased energy efficiency of buildings, the decarbonisation of heating and cooling and zero- and low-emission mobility and transport, specifically directed at vulnerable households. Finally, the Recovery and Resilience Facility (RRF), created as part of NextGenerationEU and its EUR 750 billion 4 , is detailed in section 2.5.

The clear direction described above, which sets targets, regulation, and funding – notably in energy efficiency, renewable energy, and emissions reductions – enables the clean energy sector to have visibility over future market prospects and opportunities, thus increasing investors’ certainty. The foundation on which the framework is built is the EU internal market, which these policies aim to continuously strengthen by removing internal and external investment and trade barriers. Most recently, the European Commission presented its new Industrial Strategy 5 – updating it following the COVID-19 crisis 6 – to provide a roadmap for the EU industry to become more competitive globally. Some highly relevant initiatives to the clean energy sector include the creation of industrial alliances to accelerate activities that would not develop otherwise. To date, relevant alliances in place are the European Batteries Alliance, the Clean Hydrogen Alliance, and the European Raw Materials Alliance. Future alliances will include Zero Emission aviation and renewable and low-carbon fuels alliances.

The dependence on key raw materials, which is relevant for certain technologies covered in this report (e.g. batteries, PV), is also a centrepiece of the new industrial policy, as the EU aims to enhance its strategic autonomy. In addition to policies ensuring the sustainability of raw material production, the EU is also firmly attached to ensuring strong life-cycle and circularity considerations within its internal market, including recyclability, reusability or waste management of its products. Relevant examples include the proposal for a Batteries Regulation and the Circular Economy Action Plan, both presented by the European Commission in 2020. The Clean Energy Industrial Forum (CEIF), set up in 2018 by the European Commission, brings together industrial actors from the renewables, batteries and construction sectors, in order to identify and take advantage of growth opportunities.

Common rules and standards for access to finance are also important for fair and competitive market access. The EU aims to ensure this for example through the revision of state-aid guidelines for research, development and innovation, for energy and environment, and for important projects of common European interest (IPCEI). They will allow Member States to address market failures in very specific situations. At the same time, initiatives such as the EU Taxonomy Regulation and its delegated acts for sustainable finance will aim to steer market uptake of a wide range of technologies, including in the clean energy sector.

Another crucial point affecting the competitiveness of the clean energy industries, are the complex and lengthy administrative and permitting procedures. Permitting delays constitute a major barrier for the transition to a decarbonised energy system, delaying deployment and investments into clean energy infrastructures and technologies by many years. A significant acceleration of deployment is needed to achieve the current 2030 renewable energy target of 32%, and an even greater acceleration will be needed to meet the newly proposed 40% target of the ‘Fit for 55’ package.

Urgent simplification and streamlining of permitting procedures is needed to create a common market for renewables that facilitates efficient and cost-effective deployment as well as investor certainty, also in view of the massive investments needed. To this end, the Commission plans in 2022 to present guidance on the permitting provisions of the renewable energy directive, to facilitate best practices exchanges and strongly encourages Member States to continue streamlining and simplifying procedures to this end.

Finally, trade policy has a key role to play in driving Europe’s economic prosperity and competitiveness, supporting a vibrant internal market and assertive external action. Political and geo-economic tensions are leading to growing unilateralism and distortions of trade and investments. This is also impacting the energy sector, where increasingly EU companies are faced with third country governments putting in place market access barriers, local content requirements or other discriminatory or otherwise trade restrictive measures aimed at promoting their domestic industry. In line with the Trade Policy Review, the European Commission is taking an active role in securing access to third country markets for our renewable energy industry through its bilateral trade agreements and its reinforced enforcement approach, while ensuring undistorted trade and investment in the raw materials and energy goods required for the transition to climate neutral economies.

1.2.Context of the Report

This is the second competitiveness progress report published in the context of the State of the Energy Union report. As competitiveness in the clean energy sector is a broad concept, the first report defined it through a range list of indicators that this report uses to assess competitiveness.

Table 1 List of indicators for the Competitiveness Progress Report

2.Overall competitiveness of the EU clean energy sector 

2.1.Energy and resource trends 

Over the period 2005-2019, both primary energy intensity and final energy intensity in industry have continued to decrease at an average annual rate of around 2% 9 . In the more recent period (2015-2019) the majority of Member States achieved reductions in energy intensity, with the exception of Belgium 10 , Hungary and Poland 11 . In absolute terms, over the same recent period, total primary and final energy consumption increased slightly for the majority of Member States. However, big consumers such as Germany, France and Italy managed to achieve reductions in primary energy consumption (along with Denmark and the Netherlands), leading to a small overall reduction at EU level 12 . The reduced energy intensities demonstrate the decoupling of energy demand from economic growth. However, increased effort will be needed to achieve the new energy efficiency targets proposed by the Commission for 2030.

Table 2 shows the change in these indicators over the recent 5-year period per Member State. The majority of Member States achieved reductions, albeit some at a lower rate than the EU average. Over the same period the GHG intensity has also been decreasing consistently, enabled – among others – by the increasing share of renewable energy in energy consumption.

Table 2: Trends per Member State on primary energy intensity, final energy intensity in industry, renewable energy share and targets, and net import dependency (fossil fuels).

Source: Energy Union indicators, based on Eurostat data 13

In 2019, the renewable energy share in the EU gross final energy consumption reached 19.7% (Figure below), very close to the 2020 target of 20%, with a renewable share of 34% in electricity generation. Bioenergy accounted for 59% of the total renewable energy supplied, followed by wind (14%), hydro (12%), geothermal (8%) and solar (7%) 14 . While more than half of the Member States have already exceeded them, and a few more are very close, there are several countries further away from achieving their targets. The penetration of renewable energy needs to be significantly accelerated in order to achieve the new binding target proposed by the Commission of at least 40% renewable share in final energy consumption by 2030.

Figure 1 EU primary energy intensity and final energy intensity in industry, renewable energy share, and net import dependency (fossil fuels)

Source: Energy Union indicators, based on Eurostat data 15

Despite a short-term reduction between 2008 and 2013, the EU energy import dependency 16  has since experienced an increase. In 2019, net import dependency reached 60.6%, the highest it has been during the last 30-year period. This is due to reduced domestic production of fossil fuels 17 .

Under the package to deliver on the European Green Deal, the Commission has proposed to strengthen the EU Emissions Trading System (ETS) by tightening the cap and increasing the linear reduction factor from 2.2% per year to 4.2%. Furthermore, the EU ETS would be extended to maritime transport. The use of carbon pricing and carbon prices in economies with emissions trading systems and similar carbon pricing systems are increasing as parties put in place measures to meet Greenhouse Gas Emissions reduction targets. 2021 saw the launch of China’s national emissions trading system, covering the power sector and due to expand to cover other heavy emitting sectors. Trading began in July 2021 at a price of RMB 50 (6.5 Euros) per tonne CO2. Since 2019, Canada has a federal carbon pricing system, with a benchmark/ minimum price across all provinces, which will reach 50 CAD (around 34 Euros) per tonne in 2022 and will rise by 15 CAD (10 Euros) per year from 2023 to 2030. Other jurisdictions are also revising their ETS legislation, for example, South Korea and New Zealand where the ETS price rose to 48 NZD (28 Euros) per tonne in July 2021. The EU Emissions Trading System (ETS) prices have risen from about 25 Euros per tonne of CO2 in 2020 to around 50 Euros per tonne of CO2 in mid-2021.

The Commission has also reviewed the functioning Market Stability Reserve (MSR) and proposed adjustments to prevent excessive surpluses and deficits in the market. The Commission also proposes a new, separate ETS to cover emissions from fuels used in the road transport and buildings sectors, to provide incentives for decarbonisation. Social impacts on vulnerable households, micro-enterprises and transport users that arise from the new system would be addressed by a new Social Climate Fund. Direct income support would also be made available to vulnerable households, in order for them to absorb the immediate price impact of the new emissions trading system.

Comparing EU 18 to the world’s biggest economies in terms of carbon pricing 19 , 20 (based on OECD data from 2018 on pricing carbon emissions of energy use 21 ), only South Korea had higher level of pricing, in which over 65% of emissions were priced above 5 EUR/tCO2, mainly via taxes on fuel use . In the EU, on average, over 41% of emissions were priced above 5 EUR/tCO2. Also, over 27% was priced above 120 EUR/tCO2. As mentioned above, since 2018, the EU ETS price has increased significantly. In the US and China, 65% and 91% of emissions respectively were not priced at all or priced at less than 5 EUR/tCO2. Taking view on industry and electricity sectors shows that emissions were priced generally at lower level. In the industry, over 90% of emissions in South Korea were priced above 5 EUR/tCO2. In the EU this share was on average about 56%. In contrast in the US and China, 97% and 98% of emissions were not priced at all or priced below 5 EUR/tCO2. In the electricity sector, South Korea had again the highest pricing, where 72% of emissions were priced at 5-30 EUR/tCO2 and 25% of emissions priced at 30-60 EUR/tCO2. In the EU, on average 77% of emissions were priced at 5-30 EUR/tCO2. In the US and China, 93% and 100% of emissions respectively, were not priced at all or priced below EUR 5 per tCO2.

Figure 2: Emissions priced at different levels – all sectors 22 , industry and electricity (2018)

Source: JRC elaboration based on OECD 23

Literature is inconclusive when it comes to the effects of carbon pricing on different elements of competitiveness. Calel and Dechezlepretre (2016) 24 find that EU ETS has increased low-carbon innovation 25 among regulated firms by as much as 10%, while not crowding out patenting for other technologies. Results imply that the EU ETS accounts for nearly a 1% increase in European low-carbon patenting compared to a counterfactual scenario. In another study Ley et al. (2016) 26 investigated patent data and industry specific energy prices for 18 OECD countries over 30 years. They found that 10% increase of the average energy prices 27 over the previous five years results in a 3.4% and 4.8% increase of the number of green innovations and the ratio of green innovations to non-green innovations, respectively. In the meta-analysis of Venmans et al. (2020) 28 on the impact of carbon pricing on a range of economic indicators 29 , positive effect is found on innovation and productivity, while effect on net exports, turnover, and employment remain inconclusive. Carbon prices levied on industry have been low to date, either because of exemptions to carbon taxes, or generous levels of free allowances, which in part explains these findings.

2.2.Human Capital 

2.2.1.Employment in clean energy

Looking more closely at direct and indirect jobs 30 31 per renewable energy technologies over the period 2015-2018, shows that overall employment in EU has grown by an average 1% annual growth 32 . However, there are vast differences across different technologies and Member States. In terms of renewable energy technologies at EU aggregate level, the biggest decline has been in the wind sector. Decline of jobs has been biggest in Germany, Lithuania, Poland and Finland. Especially in Germany, the biggest market, decline has been due to the wind installation market slowing down, from annual installed capacity of 5.4 GW in 2016 to 1.7 GW in 2019 33 (see Offshore and Onshore wind sections). In contrast, the biggest overall increase in EU has been in the biofuels and solar PV. Biofuel jobs grew most in the Greece, Poland and Romania. Solar PV jobs grew the most in France, Hungary and the Netherlands.

Figure 3 Total change in employment by technology and by MS over 2015-2018 period

Source: JRC based on EurObserv’ER

Figure 4 (below) shows the average annual growth rate over the period 2015-2018 across Member States and across different technologies. Jobs have grown fastest in solar PV (12%), biofuels (11%), and waste to energy sector (9%), and declined fastest in geothermal (-8%), solar thermal (-6%), in wind (-5%) and biogas (-5%). Jobs have grown overall fastest in Bulgaria (25%), Belgium (20%), Greece (20%), Ireland (16%) and Netherlands (15%). Jobs have declined fastest in Italy (-14%), in Lithuania (-13%) and in Germany (-6%). EU-average is used as a benchmark for ranking the growth rate of Member State in each technology i.e. green – growing faster than EU average, yellow – growing but at lower level than EU average, and red – declining or declining faster than EU average. Benchmarks per each technology are indicated in Figure 4 .

Figure 4 Average growth rate per year in jobs (2015-2018) by technology and by Member State

Source: JRC based on EurObserv’ER

2.2.1.1.Global comparison

Overall global renewable energy employment increased by 4% from 2018 to 2019, reaching 11.5 million jobs. Solar PV remains the biggest globally with 33% share, followed by bioenergy 34 with 31% share of total jobs. The biggest increase since 2018 has occurred in India (growth of 16%), where jobs, especially in solar energy increased by 68%. In China, the biggest market, jobs in solar energy grew only by 1%, with the biggest growth occurring in hydropower with 82% growth. Also in Brazil growth of jobs was driven by increase in solar energy employment, whereas jobs in wind sector decreased. In the US and Japan overall level of jobs declined.

Figure 5 Renewable energy employment in the biggest economies

Source: JRC based on IRENA

2.2.1.2.Skills and training aspects

The clean energy system is entering a new era, where new innovations have been emerging at an accelerated pace. Such acceleration requires re-skilling and up-skilling across all skills levels to deploy and further develop clean energy technologies and solutions across different sectors. Demand for a wide range of occupational categories relevant to the greening economy is expected to increase until 2030. These include blue collar jobs like labourers in mining (covering also the mining of critical materials for clean technologies), construction, manufacturing and transport, building and related trades, as well as white collar jobs like science and engineering professionals 35 .

To support the uptake of next-generation skills essential for the EU green transition, the EU launched in 2020 the Pact for Skills 36 where partnerships with industrial ecosystems such as construction and energy intensive industries are being set up through roundtables. There are over 336 signatories to the Pact, with 130 also making commitments for upskilling and reskilling 37 . Signatories can be a rage of different actors: individual companies, regional and local partnerships, industrial ecosystems and cross-sector partnerships. Key principles include the promotion of lifelong learning, monitoring and anticipation of required skills, as well as working for equal opportunity. High-level roundtables with industrial ecosystems in the construction and energy intensive industries sectors have already taken place. These pave the way for partnerships established under the pact to benefit from platforms for networking, expertise, guidance and financial resources.

The composition of training offered in clean energy reflects the need for balance between technical, soft, and transversal skills. EU’s BUILD UP Skills initiative aims to equip construction professionals, ranging from manual labourers to design professionals and senior management, with skills for sustainable and energy efficient construction 38 . Various efforts at EU level (DigiPLACE project 39 , set up of Digital Innovation Hubs and others) aim at supporting the digital transformation of the construction ecosystem. Digital technologies in construction, buildings and infrastructure can improve sustainability, resource efficiency and the overall management of the assets.

2.2.1.3.Gender aspects

While women accounted for an average of 32% of the workforce in the renewables sector in 2019 40 , in wind sector specifically, women represent an estimated 21% of the industry’s workforce globally. In Europe and North America, the best performing region, the share is 26% 41 . This is principally due to a heavy representation of women in administration, see Figure 6 . The role with the lowest share of female employment (8%) was senior management (e.g. owners or members of the board of directors of an organisation). Women being comparatively less represented in non-administrative functions might attest to the existence of a variety of gender-specific barriers. Conventional energy sectors, including extractive fossil fuel industries are even more male dominated 42 .

Figure 6 Shares of women by role in the wind energy sector in Europe and North America and globally

Source: JRC elaboration based on IRENA (2020) 43

The energy sector also faces stark gender gaps in innovation and entrepreneurship. In the patent classes closely associated to the energy sector – combustion apparatus, engines, pumps and power – women are listed in less than 11% of applications, and over 15% for climate change mitigation technologies (CCMT), which is comparable to all technologies, including information and communication technologies (ICT) 44 . Highest share (about 25%) of women in patent applications is in chemistry and health sectors.

Gender imbalances both in the energy sector workforce as well as in energy related research and innovation activity, are closely connected to the underrepresentation of women in higher education in some STEM sub-fields. In the EU, women are overrepresented in tertiary education as a whole (54 % across all tertiary education levels and all fields). Within STEM, there is gender balance in the Natural sciences, mathematics and statistics sub-field. However, the sub-fields highly relevant for the energy sector remain strongly male dominated: in 2019 less than a third of Engineering, manufacturing and construction and less than a fifth of ICT higher education students was female.

Figure 7 Distribution of tertiary education students in STEM fields by sex, %, EU-27, 2019

Source: JRC based on Eurostat [EDUC_UOE_ENRT03]

2.2.2.Gross value added in clean energy

The gross value added of clean energy systems overtook the rest of the economy with an average annual growth of 5% compared to the 3% in the whole economy since 2010. Clean energy (EUR 133 billion) represented 1% of the total value added in the EU in 2018. Within the clean energy systems, gross value added in ‘Renewable energy’ (EUR 60 billion) has grown with an average annual growth of 2%, while ‘Energy efficiency and management systems’ (EUR 67 billion) has grown on average by 9% in the same period. Gross value added in the ‘Electric mobility’ at EUR 7 billion has grown at less than 1% annually.

Figure 8 Clean energy systems gross value added vs total economy - growth in EU27 2010-2018 and clean energy systems gross value added - change by Member State over 2014-2018

Source: JRC based on Eurostat ‘env_ac_egss2’ 45

2.2.3.Labour productivity 

‘Renewable energy’ jobs created on average EUR 104 000 of gross value added per employee in 2018 with an average annual growth 46 of 5% since 2010. This is nearly twice as much as in the rest of the economy (EUR 64 000 of gross value added per employee). Figure 9 below displays the higher growth in gross value added per employee of multiple components of the clean energy system compared to total economy as well as a break down by Member State.

Figure 9 Gross value added per employee – Clean energy systems vs Total economy (2010-2018), and gross value added per employee per MS in 2018 and compound average growth rate over 2015-2018 period

Source: JRC based on Eurostat ‘ env_ac_egss1 ’ and ‘env_ac_egss2’ 47

Labour productivity in 'Renewable energy' is about three times higher in Spain and Belgium than the EU average, though declining. In Spain and Belgium a large share of gross value added in renewable energy, 85% and 64% respectively, comes from generation of renewable electricity. By contrast, more than half of the value added of the renewable energy sector in Denmark, Croatia and Austria is generated by the manufacturing of clean energy technologies. Labour productivity in ’Energy efficiency and management‘ is highest and growing in Denmark and Austria, and in both over half of the value added is generated by the manufacturing sector. The factors behind high variation of productivity levels among Member States include income, energy prices, subsidies for renewable energy, composition of the renewable energy mix, and the scope of activities covered 48 .

While employment in the wind sector has decreased in the EU in the past years, the labour productivity 49 is highest, at EUR 145 000 per employee, and has grown by 4% a year on average. Second highest labour productivity is in the solar PV sector at EUR 125 000 per employee (with 2% average annual growth) and hydropower at EUR 120 000 per employee (with 6% average annual growth). Interestingly, while employment in biofuels has grown, its labour productivity is by far the lowest, at EUR 57 000 per employee and it has been decreasing by 4% a year on average. This is due to a large portion of jobs related to the feedstock procurement component of the value chain. Biomass production in agriculture and forestry sectors is more labour intensive but yields less value than i.e. biomass conversion. While there are differences among Member States and technologies ( Figure 10 ), overall at aggregate EU level there has been no growth in turnover per employee.

Figure 10 Turnover per employee in 2018 and compound average growth rate over 2015-2018 period

Source: JRC based on EurObserv’ER

2.3.Research and innovation trends 

After the last economic crisis, public investments in R&I prioritised by the Energy Union 50 , 51 went into a decline for half a decade, only showing signs of recovery after 2016. Since then, the EU MS have invested an average EUR 3.5 billion per year, but spending is still lower than that observed a decade ago. The trend from 2016 is consistent with increased investments in energy in general – and clean energy in particular - globally 52 , however these do not seem to keep pace with increases in GDP or R&I spending in other sectors.

Today, at 0.027%, the EU has the lowest R&D investment intensity in the clean energy sector (measured as a share of GDP) of all major global economies, just below the US, though levels seem to be decreasing or stable for all. In 2019 the R&I budget allocated to the socioeconomic objective of energy in the EU was EUR 4.1 billion, representing 4.4% of total spending on R&I 53 , having decreased slightly compared to the two previous years. This shows that, while increasing in absolute terms, investments in the technologies needed for decarbonisation are not keeping pace with the growth of the economies themselves, or prioritised as much as other sectors.

EU research funds have been contributing an increasing share of public funding and have been essential in maintaining research and innovation investment levels over recent years, contributing on average an additional EUR 1.5 billion per year. Combined with an estimated average EUR 20 billion of private spending 54 , the average annual total investment in the Energy Union R&I priorities over recent years (2014-2018) is in the order of EUR 25 billion 55 .

In 2019, total public investment from all EU MS was still 5% lower than 2010, but had increased by 2% compared to 2015. Table 3  shows that there is a mixed picture at Member State level. About a quarter have consistently increased spending overall throughout the 10-year period, with an equivalent number showing a decrease. For the remaining, the trend coincides with the total for all EU MS, or information on R&I spending is not available. While there is a clear need to improve monitoring of R&I investment, there is also increased momentum and engagement from the Member States in view of the reporting foreseen in the Energy Union Governance Regulation. This goes beyond public R&I investment, to also stepping up efforts at national level to monitor R&I investments from the private sector.

Table 3 Overview of public R&I investment and patenting per Member State .

Source: JRC 56 based on IEA 57 , own work.

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

Following a peak in 2012, overall patenting activity in clean energy technologies 58 decreased 59 . This trend seems to be reversing from 2016, with annual filing levels in the EU ( Figure 11 ), and globally, returning to those observed in 2012. The EU has a greater share of ‘green’ inventions in Climate Change Mitigation Technologies, compared to other major economies (and the world average) indicating greater focus and specialisation of inventive activity in clean energy technologies. This specialisation is not equally shared at Member State level. Larger economies, with traditionally strong innovation ecosystems may have high outputs in terms of patents per capita as part of a large portfolio of innovation; others may not be as strong in terms of output, but show higher specialisation for these technologies within their patenting activity. 

Overall, in terms of high-value inventions 60 , the EU is second only to Japan, mainly due to Japan’s advantage in transport technologies; however, the EU leads when it comes to renewables and energy efficiency. The EU also continues to host a quarter of the top 100 companies in high-value patents in clean energy over the last 5-years. Nonetheless, there is increasing (global) unease about the impact of state- or subsidy- backed technology domination, closed markets and different intellectual protection rules and policies on innovation and competitiveness in the sector, especially as manifested by China. Despite those concerns, over a quarter of the clean energy inventions protected internationally over the last 5 years by EU applicants have also targeted the Chinese market.

Figure 11: EU patenting trends in the Energy Union R&I priorities, and positioning in high-value patents and share of ‘green’ technologies in patenting activity versus major economies 61

Source: JRC 62  based on EPO Patstat

In terms of collaborations in green innovation, beyond the alliances built within Europe due to geographical proximity, EU firms tend to collaborate most with US counterparts 63 . EU Member States generate 33% of co-inventions in green technologies through Intra-EU connections, 29% with the USA and only 6% with China. France and Germany are the two Member States with the highest number of international partners and co-inventions. The US has the highest number of co-inventions in clean energy technologies, nearly 40% of which are with the EU. East-Asia countries, namely China, Japan, South Korea and Taiwan have strong mutual collaborations.

According to the recent UNESCO Science Report 64 , the volume of scientific publications from the EU 65 on nine SDG7 66 renewable energy topics has increased from nearly 60k in the period 2012-2015 to over 70.5k in the period 2016-2019 (18% increase). However, the report also notes that high-income economies are no longer dominating topics related to clean energy and innovation, and some of the strongest growth is instead taking place in lower middle-income countries. For example, the respective publications from East & Southeast Asia increased by 45% and those from South Asia more than doubled.

2.4.The clean technologies funding landscape 

2.4.1.Introduction

The Climate Tech domain encompasses a broad set of sectors which tackle the challenge of decarbonising the global economy 67 . It also includes novel technologies e.g. long-duration energy storage, green hydrogen production, storage, and use of hydrogen in heavy industry, carbon management) that, together with more mature generation technologies (e.g. solar and wind) under deployment, will be crucial to achieve carbon neutrality by 2050, if properly developed and scaled-up.

Climate Tech is an emerging and challenging domain for Venture Capital (VC) investors. These novel technologies usually involve high investments in R&I, long lead times to reach maturity and typically require a significant amount of capital in pilot plants 68 . This calls for substantial public support along the start-up lifecycle to de-risk and stimulate further private investments for their development and implementation at scale.

2.4.2.VC investment trends in Climate Tech companies (Global and EU)

Worldwide VC investments 69 in climate tech start-ups and scale-ups reached EUR 14 billion in 2020 70 , increasing more than 1250% since 2010 (EUR 1 035 million). Within this, VC investments in EU-based climate tech companies have been 11 times higher over the past 5 years than they were between 2009 and 2014, reaching more than EUR 2.2 billion in 2020 71 .

EU firms received 16% of global VC funding in the climate tech domain compared to only 8% of overall VC funding (all domains) 72 . Figure 12 highlights the attractiveness of EU climate tech start-ups but also the investment gap in EU start-ups as VC investments range far behind levels in the US and China.

Figure 12: VC funding in Climate Tech vs Total (2020) 73

Source: JRC elaboration based on PitchBook data.

At the same time, for the first year in 2020, early stage investments in EU climate tech start-ups were higher than those in the US and China.

EU-based climate tech start-ups still trail their counterparts in ability to scale. Over the past 5 years, they only benefited from 7% of all later stage investments in climate tech start-ups, far behind the US (44%) and China (41%) 74 . Furthermore, out of the total number of climate tech Unicorns 75 , those based in the EU account for only 6%, compared to US (56%) and China (26%) 76 .

2.4.2.1.Climate Tech investments in the Energy Sector

Worldwide, the Energy domain 77 accounted for 8.2% of total VC Climate Tech investment between 2013 and 2019, far below the Mobility and Transport domain (63%) and Food, Agriculture and Land use (13.6%) 78 . Global investment in Energy start-ups has grown at a moderate pace, recording a Compound Annual Growth Rate (CAGR) of 41%, which is substantially lower than the overall growth rate of climate tech investment). This reflects the relative maturity of two of the major sources of renewable energy – wind and solar – which are now being deployed globally at scale, and are increasingly financed through traditional project, debt and other finance rather than venture capital.

Europe (EU and UK) is investing a higher share of VC in Energy domain (23.5%) compared to the US (9.4%) and China (less than 1%). Most investment is taking place in developing the core technologies for renewable energy generation (predominantly PV cells) and the energy storage (batteries) to support their proliferation78.

Figure 13 Area-specific VC funding as % share of the overall Climate Tech VC investments in the US, China and Europe

Source: PwC analysis on Dealroom data

2.4.2.2.The Digitalisation of Energy and VC funding dynamics

As the digitalisation of energy is a crucial enabler of the energy transition, understanding the trend of VC investments in digital start-ups entering the energy sector is key to support the development of a more integrated, interconnected, secure, transparent and competitive energy system, where not only energy but also data need to flow freely in the system.

Figure 14 shows that, despite considerable decrease in number of VC-backed energy start-ups worldwide at the beginning of the last economic crisis, the share of digital start-ups in the Energy sector has increased and reached its maximum in 2015.

Figure 14: Total number of Energy start-ups and the percentage of digital start-ups 79 in the Energy sector that received VC funding between 2000 and 2017

Source: JRC analysis based on Venture Source, Dow Jones data

2.4.3.The Clean Tech funding landscape in EU

Both the overall Climate Tech VC funding dynamics in the EU and the attraction of VC investors for EU-based Climate Tech are strongly related to the number of overarching policy goals in the climate and energy sector established at EU and Member States level (see section 1.1), together with tools supporting Climate Tech (e.g. fund of funds, grants, equity and debt co-investment, R&D tax credit), and the overall EU support for a R&I green innovation ecosystems.

The EU public funding institutions have shown they can lead green innovation excellence. The Horizon Europe pillar III on “Innovative Europe” aims at supporting the development of disruptive and market-creating innovations through three distinctive and complementary instruments:

The European Innovation Council (EIC) 80 , with a budget of EUR 10.1 billion, is a one stop shop for scaling up the next European’s unicorns, providing financial support, investment opportunities and coaching to breakthrough and disruptive innovation projects 81 . So far, the EIC pilot has achieved 90% of innovations addressing Sustainable Development Goals (SDG), in particular in the field of Green Deal, Digital and Health.

The European Institute of Innovation & Technology (EIT), with a budget of EUR 2.965 billion, aims at strengthening Europe’s innovation ability by powering solutions to pressing global challenges and by nurturing entrepreneurial talent. Supporting the development of EIT Knowledge and Innovation Communities (KICs), EIT has the scope to increase the collaboration between business, education and research organisations, public authorities and civil society.

The European Innovation Ecosystems initiative, with a budget of EUR 527 million, focuses on building an interconnected, inclusive, innovation ecosystem, complementing the actions carried out by the EIC and the EIT, as well as activities managed under other pillars of Horizon Europe and initiatives developed by Member States and Associated Countries.

Furthermore, the InvestEU programme and cohesion policy aims at supporting access to and availability of finance primarily for SMEs, including innovative ones and those operating in the cultural and creative sectors, as well as for small mid-cap and other companies. In addition, the European Investment Fund (EIF) invests in European VC funds, providing venture debt directly to start-ups and connects investors with start-ups, and the European Investment Bank (EIB), beyond loans, provides venture debts, invests in private equity funds, provides guarantees to improve the costs of financing for strategic projects or sectors.

While some of their offerings overlap, these institutions are designed to complement each other across the start-up’s life-cycle 82 . As an example, the EIB played a role in attracting private investments in Northvolt - the Swedish green battery company founded in 2016 - which is building the first European commercial-scale battery plant in Sweden and raised EUR 1.4 billion in financing in June 2020 . EIT InnoEnergy supported the company to put together a consortium of investors and access EIB funding: the EUR 350 million loan from EIB is accompanied by EUR 886 million from private investors 83 . After the first plant in Sweden, Northvolt plans a joint venture with Volkswagen to build a battery plant in Germany.

Moreover, additional funding programmes exist to convey revenues from climate-related policies in support of the energy transition. The Innovation Fund supports the deployment in the market of breakthrough low carbon technologies. The Modernisation Fund intends to help low income Member States in the modernisation and decarbonisation of their energy systems. The Social Climate Fund would fund Member States’ programmes designed to support investment in increased energy efficiency of buildings, the decarbonisation of heating and cooling and zero- and low-emission mobility and transport.

Despite these innovation ecosystem support instruments, EU-based climate tech start-ups still trail their counterparts in ability to scale, thus hindering the EU from reaping the climate and competitiveness benefits of EU innovation as well as preventing movement of promising ventures to the US or Asia to reach scale. For example, while Northvolt is a success, it dwarves the rest of EU investments, thus illustrating the need of public funding for the development of commercial scale pilot plants.

Overall, the significant difference in regional VC funding, including climate tech, across geography is partially due the different VC funding culture. As an example, the US institutional investors have traditionally been more willing to engage in VC, and the US has a stronger history of start-ups and scale-up success, thus creating a more favourable start-ups ecosystem.

In addition, key structural barriers are holding back the EU-based climate tech scale-ups compared to US and China, such as:

·Innovation performance barriers: difficulty in translating a strong EU research performance into innovation; lack of breakthrough/disruptive innovations creating new markets.

·Innovation funding barriers: i) transition from lab to enterprise, ii) scaling up for high risk innovative start-ups. The more difficult access to finance reported by EU scale-ups is consistent with a higher reliance on internal funds among these firms, as well as a relatively under-developed venture capital market in EU compared to US 84 .

·Innovation ecosystem barriers: despite many national and local ecosystems exist, the EU’s market and regulatory fragmentation hinders growth and leads to different maturity of VC ecosystems; there is a pressing need to include all regions and all talent. Within this, the lack of labour force with the right skills can represent an obstacle to growth among scale-ups.

2.4.4.New generation of financial mechanisms to support Climate Tech scale up in EU and EU supporting initiatives

Filling the gap in scale-up between EU and other major economies requires mobilising private investors to participate more actively in the European VC market and in the funding of climate tech and Deep Climate Tech start-ups 85 . This is still a poor fit for the business model of “traditional” VC funds.

As an example, blended finance 86 structures could address the mismatch of the VC model and deep-tech investment and scaling up EU’s industrial transformation, by mobilising private investments or incentivising patient capital from the private sector. While blended finance is rare in the EU, successful examples exist (Estonian EIC-funded start-up Skeleton 87 and the German “Future Fund” 88 ) 89 . The future success of SPACs faces uncertainty.

The recent lackluster aftermarket performance for SPACs could intensify the downward pressure on new SPAC IPO issuance and general enthusiasm for the product. A related decline of investor sentiment around SPACs is to be expected if returning capital due to failure to find a target becomes a regular occurrence. Regulation and litigation risks are also looming, which may discourage new SPAC activity. 90

In view of the Green Deal’s objectives and recognising the role of technological innovation as key enabler for climate neutrality, the EU has put a number of relevant support mechanisms in place. For example, the 2020 European Industrial Strategy package sets key actions to improve access to finance for Small and Medium Sized Enterprises (SMEs), including a mechanism to boost the scale of VC funds, increase private investment and facilitate the cross-border expansion and scale-up of SMEs. Furthermore, the joint fund between EIB, EC and Breakthrough Energy Ventures Europe (BEV-E) allows for the blending of institutional (risk-averse) with a VC (less risk-averse) investment approaches 91 . Next Generation EU financing and the EU Sustainable Finance Regulation may further accelerate clean energy VC support.

Further scaling up can be achieved by streamlining existing mechanisms, making use of synergies across instruments at EU and MS level, further exploring new funding solutions (creation of funds directing private savings towards VC-funded firms, blended instruments) and introducing further funding incentives (e.g. government financing/co-financing for start-ups). The European Scale-up Action for Risk capital (ESCALAR), a pilot programme launched by the European Commission and managed by the EIF, is a good example for a new investment approach. 92  It is also crucial that policy initiatives, EU programmes and related instruments maintain and increase the attractiveness of EU Climate Tech firms for VCs. Furthermore, public and corporate procurement opportunities could foster long-term growth in strategic sectors or even kick-start emerging markets, while involvement of investment management firms could improve perspectives for VC firms. Finally, involving universities could attract highly skilled workers and encourage entrepreneurship.

2.5.Covid-19 impact and recovery 

2.5.1.Impact

2.5.1.1.Impact on clean energy generation, investments and R&I

The renewable energy sector generally proved to be resilient during the pandemic 93 . As displayed in Figure 15 , while electricity generation from coal, gas and nuclear decreased, renewables overtook fossil fuels for the first time as the EU’s main power source for the year 2020 (renewables 38% of EU electricity, versus 37% fossil fuels and 25% nuclear) 94 . Wind (14%) and solar (5%) generated one fifth of EU’s electricity in 2020, the remaining 19% came mainly from hydropower and bioenergy which have stagnated the past few years 95 . In all IEA global post-pandemic scenarios, renewables grow rapidly – mainly solar due to its high-cost reductions (followed by onshore and offshore wind).

Figure 15 Growth of renewables share in electricity production compared to fossil fuels

Source: Agora Energiewende and Ember, 2021

2020 was also a year of unprecedented global spending on the deployment (excluding investments in companies, R&D and manufacturing) of low-carbon technologies, reaching USD 501.3 billion, a growth of 9% compared to 2019 96 . Falling capital costs enabled a record number of solar and wind to be installed globally, while investment in heat pump installation increased 12%, energy storage (esp. batteries) remained level with respect to 2019, despite falling prices, and CCS investments tripled. Hydrogen investments dropped 20% but 2020 was still the second highest annual investment ever 97 .

Europe and China are currently vying for top position among markets active in energy transition investment 98 . Europe accounted for the biggest part of the global investment in 2020, with USD 166.2 billion (up 67%), China at USD 134.8 billion (down 12%) and the US as USD 85.3 billion (down 11%). Europe’s performance was driven by a i) record year for electric vehicle sales, and ii) the best year in renewable energy investment since 2012. 99 .

Early trends indicate general resilience in global R&I spending for renewable energy as well. Growth in global public spending on energy R&D slowed from 7-10% in 2017 and 2018 down to 2% in 2020, but the renewable component grew more quickly, achieving 83% of total energy R&D spending. Similarly, while overall corporate R&D energy spending dropped in 2020, the renewable component continued to grow 100 . Worldwide, in spite of an overall downward investment dynamic and despite the fact that significant VC funding was redirected to pandemic-related industries such as pharmaceuticals and healthcare, Climate Tech domain is proving to be resilient to the COVID-19 outbreak and remained attractive to the VC funding. Examples include Amazon’s USD 2 billion “Climate pledge” venture fund, Microsoft’s USD 1 billion Climate Innovation Fund.

2.5.1.2. Impact on supply chains and installed capacity

EU energy technology supply chains have generally been resilient to the impacts of the pandemic. Covid-induced restrictions temporarily disrupted supply chains and delayed construction of renewable energy installations in key markets (especially onshore wind and solar PV). Yet, since mid-May 2020, renewables-based construction projects, equipment supplies, policy implementation (permitting, licensing, auctions) and financing have returned to near normal levels in many countries because project developers and manufacturers have modified their operations to adapt to ongoing social‑distancing rules 101 .

In addition to bottlenecks due to disruptions in production, logistics and transportation sectors, operating costs of some energy technology supply chains increased due to price increases in products and services such as transportation. Yet these impacts were common to all economic sectors 102 . While important EU suppliers in China and other Asian countries generally were able to limit impacts, supply chains faced greater impacts from intra-EU measures such as border closures and lockdowns. Intra-EU difficulties were therefore often more important than manufacturing and logistics challenges in non-EU countries. Supplier concentration exacerbated these impacts, while global supply chains provided advantages such as supply diversification and access to global markets 103 .

2.5.2.Recovery 

The analysis of the 22 104 RRPs approved by the Commission by 5 October 2021 105 shows that EUR 177 billion have been allocated to climate-related investments, representing 40% of the total of EUR 445 billion of RRF funds allocated to these Member States. Nearly all Member States are using RRF funds for investments in building renovation and clean transport (around 62 billion is dedicated to sustainable mobility), and many are using it to invest in renewable energy. In this context, Member States 106 have significantly built on the ‘flagship initiatives’ put forward by the Commission in relation to the green transition, in particular the ‘Power up’, ‘Renovate’ and ‘Recharge and refuel’ flagship initiatives. About 43% of climate-related investments (EUR 76 billion) is dedicated to energy efficiency (27.9%) and renewable energy and network (14.8%).

Research and innovation also represented an important share within the climate-related investments , as Members States allocated nearly EUR 12.3 billion to investment in R&I in climate change mitigation and adaptation and the circular economy in their Recovery and Resilience Plans. The timely implementation of the RRPs can help Member States achieve the more ambitious targets for 2030 in line with the European Green Deal Package 107 .

2.6.Innovative and cooperative business models

The energy transition changes the way the energy system operates. Distributed renewables, proactive consumers, the opportunity to track and trace energy sources, monitor energy consumption and energy efficiency in real time and provide flexibility services to the system create new innovations, actors, and type of business. The section below explores three key business models that help creating markets for new technologies, services and innovations, in a decentralised energy system: energy communities, one stop shops for building renovation, and energy service companies (ESCOs). Many of these new business models are enabled by smart grid technologies analysed in the next section.

2.6.1.Energy communities

Under the Clean Energy Package, extensive provisions were introduced in the Electricity Directive (‘citizen energy communities’) and the Renewable Energy Directive 108 (‘renewable energy communities’) to promote energy communities and prosumers, thereby allowing consumers to take an active role in the energy market and strengthening energy production from renewable sources. In particular, energy communities in EU legal framework have been conceptualised in Article 2 (11) Electricity Market Directive (‘citizen energy communities’) and in Article 2 (16) Renewable Energy Directive (‘renewable energy communities’), and linked to an enabling framework to facilitate their participation on the relevant energy markets (Article 16 Electricity Market Directive; and Article 22 Renewable Energy Directive). Both legal concepts share a common core: they need to be organised through a legal entity, are effectively controlled by non-professional actors, have an open and voluntary participation structure and have as a purpose to provide social, economic and environmental benefits rather than financial profits. However, there are also some fundamental difference in terms of energy source, ownership and participation:

·‘renewable energy communities’ (REC) are about all sources of renewable energy. ‘Citizen energy communities’ (CEC) are about all sources of electricity, but not other forms of energy. Note that both concepts overlap when an energy community is active in 100% renewable electricity, in which ‘renewable energy communities’ become a subset of ‘citizen energy communities’;

·members or shareholders that effectively control the ‘renewable energy community’ need to be located in proximity of the renewable energy projects that are owned and developed by that community. As such, renewable energy communities are ‘local’ energy communities. This is not the case for ‘citizen energy communities’, allowing for more flexibility and thus both local communities and communities-of-purpose;

·all types of actors can participate in ‘citizen energy communities’, whilst for ‘renewable energy communities’ this is limited to citizens, SMEs and local authorities.

Note that energy communities are in essence not about technology, smart grids, etc. Developments in this field can be useful for energy communities, but this is not a technological concept.

In border regions, there can be a significant added value of a cross-border approach, allowing to benefit from local complementarities across borders in areas such as renewable energy production or storage solutions, taking into account the ‘energy efficiency first’ principle. However, energy markets do not yet function across borders as seamlessly as they do within a country. For example, cross-border electricity transactions are frequently limited because legal frameworks do not allow for low-voltage exchanges of electricity across the border. Energy communities can play a significant role in charting the way ahead. Both the Electricity Market Directive and the Renewable Energy Directive set the conditions for Member States to include options for cross-border implementation of energy communities in their national transpositions 109 .

In terms of enabling framework, both ‘citizen energy communities’ and ‘renewable energy communities’ benefit from set of rights and responsibilities to facilitate their market integration, most notably related to enabling activities (generate, store, sell, share, aggregate or other energy services), and ensuring non-discriminatory treatment in terms of charges and procedures (e.g. supply licensing; grid access procedures). For ‘renewable energy communities’ there are some additional set of privileges. In this regard, it is important to understand that the criteria of the legal concept of ‘renewable energy communities’ are more narrow than for ‘citizen energy communities’, so harder to fulfil. The latter forms the basis to justify the privileges included in the enabling framework of Article 22 Renewable Energy Directive, including but not limited to the requirement for Member States to consider the characteristics of ‘renewable energy communities’ when designing support schemes.

Whilst only recently conceptualised in EU legislation, Energy communities are not a new phenomenon. Nowadays, there are thousands of these initiatives scattered across Europe, each with different scales and use of technology, ownership structures and actors involved.

Currently, at least two million European citizens collectively engage in more than 8400 energy communities, having realized a minimum of 13000 projects since 2000 110 . They support the energy transition and contribute to the competitiveness of renewable energy technologies in various ways. Energy communities raise technology awareness and acceptance, promote energy efficiency, produce and distribute renewable-based electricity, provide services around e-mobility, and run energy consulting services. They experiment innovatively with business models and self-sufficiency concepts for the benefit of local communities.

Figure 16 details the number of initiatives and projects per country. Differences across countries can be explained by varying strength of governmental support and incentives schemes, historic path dependencies of the energy system, and social and technological preferences. Current total renewable capacities installed by energy communities in Europe can be estimated at least as high as 6.3 GW, contributing up to 7% to the nationally installed capacities. The lion’s share is taken by solar PV (~50%), followed by onshore wind (~10%). A conservative estimate of the total invested finances amounts to at least 2.6 billion EUR 111 . The continuation and extension of energy communities in Europe depend on favorable legislation and financial incentives as well as on the competitiveness of technologies that are accessible to citizens (i.e., granular technologies, such as roof-top solar, small- to medium-size wind and solar parks, heat pumps, micro hydro, biomass furnaces, and biogas installations).

Figure 16 Collective action initiatives in Europe

Source Schwanitz, V. J., Wierling, A., Zeiss, J. P., von Beck, C., Koren, I. K., Marcroft, T., … Dufner, S. (2021, August 22). The contribution of collective prosumers to the energy transition in Europe - Preliminary estimates at European and country-level from the COMETS inventory.

Many of the above-identified energy communities are member of REScoop.eu 112 the European federation for energy cooperatives.

Whilst the legal organizational form of cooperative is by far the most prominent for energy communities across the EU, there are various types of legal entities (partnerships, limited liability companies, associations etc.), as well as organizational and social arrangements that have developed in the different Member States of the EU. Indeed, various member states will have different experiences with energy communities. For example, in the Netherlands community actors are usually individuals or small businesses, whilst in Germany and Greece municipalities have played a crucial role.

Until today, less than half of Member States have notified the full transposition of the Electricity Market Directive rendering it difficult to establish a causal relation between the surge in energy communities and the EU legal frameworks for ‘citizen energy communities’. So far, no Member State has notified full transposition of the Renewable Energy Directive (REDII). Whilst the EU frameworks provide a good basis to trigger the development of energy communities across the EU, 113 much will depend on how Member States will implement the enabling framework for these types of energy communities, notably how Member States translate the right to non-discriminatory, proportionate, fair and transparent procedures. For ‘renewable energy communities’ the implementation of Article 22 (7) RED II will be of particular importance as energy communities today struggle to build their business case without financial support. Partly due to the phase-out of feed-in-tariffs and transition to premium price auctions, the development of energy communities in Germany have stagnated as they experience difficulties competing for subsidies with large undertakings. 114 In response, energy communities are exploring new activities and services such as electro-mobility sharing, optimizing collective self-consumption, interacting with dynamic pricing and providing flexibility services to the public network. Especially the latter is a promising activity to create an additional source of revenue for energy communities, provided existing barriers are removed (complexity of ITC services, lack of local flexibility markets at DSO level, difficulties with aggregating different devices due to lack of data interoperability, lack of standardization etc.). Some of these barriers are already addressed through the Electricity Market Directive. 115

The NECP framework already has a requirement for Member States to report on renewable energy communities, however only a few Member States included (voluntarily) quantitative targets or concrete measures for the development of energy communities in their NECPs (most demonstrate awareness but no planning). Member States with early legal frameworks in place for energy communities, including the Netherlands, Denmark and Germany today have the highest number of energy communities (see graph above). 116 Outdated regulatory frameworks and administrative procedures adjusted to large vertically integrated undertakings have also been identified as one of the major barriers for the development of energy communities. 117

In order to boost the development of energy communities in the sense of the EU Directive, the Commission is in the process of setting up an Energy Community Repository. The Energy Community Repository will contribute to the dissemination of best practices and provide technical assistance for the development of concrete energy community initiatives across the EU. The aim of this project is to assist local actors and citizens willing to set up REC and CEC in rural and urban areas, through technical and administrative advice and encourage their development. The data collected through this project would constitute a very important source of information for European institutions and national, regional and local authorities. It will contribute to the identification and dissemination of best practices and know-how for communities that wish to set up a sustainable energy project, in particular in Member States that do not have so far strong tradition of energy community initiatives. The projects that will receive targeted technical assistance under this repository will serve as examples of positive local actions that should inspire widespread efforts for citizen-driven initiatives through the development of energy communities. . Energy community initiatives could also be supported by cohesion policy funding, including through the Community Led Local Development (CLLD) instrument. In addition, the Commission is in the process of setting up an Advisory Hub for rural energy communities, i.e. ‘citizen energy communities’ and ‘renewable energy communities’ in rural areas in order to remedy the disproportionate impact of the energy transition on communities in rural areas by supporting the development of sustainable energy action that can be conducive to the local economy and increase security of energy supply. Special emphasis will be put on the involvement to local authorities, linked to the Covenant of Mayors.

2.6.2.Renovation of buildings - One stop shop

The market-based model of one-stop shops (OSSs) is among the most prominent recent approaches aimed at supporting building renovation decisions. OSSs work as a market place, offering integrated renovation solutions, encouraging action, guiding building owners through the entire renovation journey, providing technical and administrative assistance and helping secure the right financial solutions. While all energy efficiency projects could be good candidates, OSSs are particularly well equipped in addressing the renovation market fragmentation barriers on both demand and supply sides, overcoming some of the sociotechnical barriers surrounding the decision to renovate in a holistic way. For these reasons, OSSs are especially well suited to support small-scale renovation projects (e.g. individual buildings or apartments).

OSSs are only recently appearing in Europe. From a recent analysis of the current OSSs present in Europe conducted by the JRC 118 , 62 OSSs have been identified across the EU in 2020, located in 22 countries, 57 were found to be operating or planned to be launched soon across the EU and Norway, and 6 have been closed. Around two third of the Member States have at least one OSS on the national renovation market. Regionally, Western Europe has the most abundant OSS markets, centred in France, the Netherlands, the UK, Belgium, Spain and Denmark. 

Overall, OSSs have been found to be a promising approach to bring together homeowners and actors from the construction supply side and increase demand in energy renovations because they i) are locally embedded; ii) establish a trust-based relationship with the clients; iii) simplify the renovation decision process, informing, motivating, and providing support from the start to the end; iv) boost the interest of not yet committed energy users through awareness raising; facilitate access to financing and occasionally offer better rates; v) follow-up on finished projects; vi) and reach out to vulnerable populations, contributing to tackle energy poverty.

2.6.3.    ESCOs 

Energy Service Companies (ESCOs) are another business model that plays an important role in energy efficiency and functioning of energy services markets by providing turnkey services, addressing several market barriers on the ground and unlocking the energy savings potential 119 . Their distinct feature is associated with their incentive/remuneration structure; ESCOs assume performance risks by linking their compensation to the performance of their implemented projects, thus incentivising themselves to deliver savings-oriented solutions.

The EU’s legislative framework contributes to fostering the energy services market. The Energy Efficiency Directive (EED) 120  provides the key requirements for promoting energy services and energy performance contracting in the Member States. The revised EED 121 strengthens the role of energy services and notably use of Energy Performance Contracts (EnPC) in contributing to the renovation wave with specific focus given to the public sector to lead by example.

The average ESCO market of the European Union has been on a steady rise for the last decades, and the growth and maturity has continued or even increased slightly between 2015 and 2018. However, important barriers still remain: lack of technical knowledge and experience in procurement, lack of financing and low level of awareness of energy performance contracting which have contributed to the low level of trust to energy services providers. The drivers and barriers determining ESCO markets are distinctly local and specific to the legal, policy, fiscal, financial and cultural context in each Member State. With the recent revision of the EED, it is expected that persisting barriers can be better overcome to ensure necessary conditions and incentives for the uptake of the EnPC and energy services markets.

Figure 17 The speed and direction of development between 2015 and 2018 in national ESCO markets

Source: The assessment is purely based on own research data (JRC survey 2018)

It is therefore important that Member States continue promoting the uptake of energy services and energy performance contracting through clear and transparent rules including certification of energy services providers, and also capacity building. Dissemination of experience of implemented projects and best practices are necessary to increase trust and ensure better understanding of energy performance contracting and ESCO’s role in contributing to the renovation wave and bringing multiple benefits including new and innovative business models.

Table 4. Size of the ESCO and EnPC markets of the EU in JRC reports. 122

Country values are calculated using average values of estimates reported in a specific year (i.e. 2016, 2018 or 2020). For Total EU values, the most recent values reported were selected.

(1)      Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021.

(2)      The legislative files include proposals to review the Renewable Energy Directive (RED), the Energy Efficiency Directive (EED), the Energy Tax Directive (ETD), the EU Emissions Trading System (EU ETS), the Effort Sharing Regulation (ESR), the Alternative Fuels Infrastructure Directive (AFID), the Regulation on Land Use, Forestry and Agriculture, the CO2 emission standards for cars and vans, but also proposals to create a Carbon Border Adjustment Mechanism (CBAM), and the ReFuelEU Aviation and FuelEU Maritime initiatives. An EU Forest Strategy and a proposal to create a Social Climate Fund complete the package.

(3)      2018 prices.

(4)      2018 prices. EUR 806.9 billion in current prices.

(5)      COM(2020) 102 final.

(6)      COM(2021) 350 final.

(7)      And –if available- Levelised Cost of Storage (LCoS).

(8)      Segments of the value chain that depend on critical raw materials.

(9)       Energy Union indicators EE1-A1: Primary energy intensity EE3: Final energy intensity in industry, DE5: Share of renewable energy in percentage of gross final energy consumption, SoS1: Net import dependency – sources Eurostat: Complete energy balances [nrg_bal_c], Gross value added [nama_10_a10]; GDP: AMECO database

(10)      Where there was a small increase in primary energy intensity.

(11)      Where the final energy intensity in industry increased.

(12)      Even though reductions achieved in recent years have been small, overall, in the period 2005-2019 EU primary energy consumption decreased by 10% and final energy consumption decreased by 5%.

(13)       Energy Union indicators  EE1-primary energy consumption, EE2-Final energy consumption, EE3: Final energy intensity in industry, SoS1: Net import dependency – sources Eurostat: [nrg_bal_c], [nrg_bal_s], Gross value added [nama_10_a10]; GDP: AMECO database.

(14)      Eurostat Complete energy balances [nrg_bal_c]

(15)       Energy Union indicators EE1-primary energy consumption, EE2-Final energy consumption, EE3: Final energy intensity in industry, SoS1: Net import dependency – sources Eurostat: [nrg_bal_c], [nrg_bal_s], Gross value added [nama_10_a10]; GDP: AMECO database.

(16)      In the context of this report, net import dependency measures the level of total net imports as a proportion of total gross inland consumption and the energy consumption of maritime bunkers (i.e. what is consumed in a country or region over a year). The indicator is based on Eurostat energy statistics.

(17)      Eurostat (sdg_07_10), (sdg_07_11), (nrg_bal_c).

(18)      This is based on OECD data which includes the following EU countries: AT, BE, CZ, DK, EE, FI, FR, DE, EL, HU, IE, IT, LT, LV, LU, NL, PL, PT, SK, SI, ES, SE.

(19)      Effective carbon rates reported by OECD is the most detailed and comprehensive account of how 44 OECD and G20 countries – responsible for around 80% of global emissions – price carbon emissions from energy use. Effective carbon rates consider emission permit prices (e.g. EU ETS), carbon tax and fuel excise tax.

(20)      EU was calculated as simple average of EU countries, as there was no data to do weighted average calculation.

(21)      OECD (2021), Effective Carbon Rates 2021: Pricing Carbon Emissions through Taxes and Emissions Trading, OECD Publishing, Paris, https://doi.org/10.1787/0e8e24f5-en.

(22) All sectors include road, off-road, industry, agriculture and fisheries, residential and commercial, and electricity. Emissions include also emissions from the combustion of biomass.

(23) OECD. Effective Carbon Rates: Share of emissions priced - Dataset. Availablet at: https://stats.oecd.org/?datasetcode=ecr .

(24)      Calel, R & Dechezlepretre, A (2016) Environmental policy and directed technological change: evidence from the European carbon market. The Review of Economics and Statistics 98:1, 173-191, DOI: https://doi.org/10.1162/REST_a_00470 .

(25)      Patents classified as ‘Technologies and applications for mitigation or adaption against climate change’ (Y02 class) are used as a proxy for low-carbon innovation.

(26)      Ley, M, Stucki, T, Woerter, M (2016) The impact of energy prices on green innovation. The Energy Journal, International Association for Energy Economics 37:1.

(27)      Energy prices here refer to end-use prices (per tonne of oil equivalent including taxes) for the manufacturing sector for different energy products, such as electricity, light fuel oil, natural gas and different coal products.

(28)      Venmans F., Ellis J. & Nachtigall D. (2020) Carbon pricing and competitiveness: are they at odds?, Climate Policy, 20:9, 1070-1091, DOI:  10.1080/14693062.2020.1805291 .

(29)      Net imports, foreign direct investments, turnover, value added, employment, profits, productivity, and innovation

(30)      It is important to note that two different data sources are used for employment figures in this report, namely Eurostat Environmental Goods and Services Sector accounts and EurObserv’ER. The figures are not directly comparable as there are methodological differences in approaches. The Annual Single Market Report 2021 estimated the employment and gross value added of Renewables Ecosystem using national accounts and NACE classification.

(31)  EurObserv/ER definition – direct employment includes renewable equipment manufacturing, renewable plant construction, engineering and management, operation and maintenance, biomass supply and exploitation. Indirect employment refers to secondary activities such as transport and other services.

(32)      EurObserv’ER tracks direct and indirect jobs in renewable energy technologies per Member State. The methodology and scopes in Eurostat EGSS accounts and EurObserv’ER are different, hence the figures should not be compared directly.

(33)      Based on EurObserv’ER Wind Energy Barometer.

(34)      Bioenergy includes liquid biofuels, solid biomass and biogas.

(35)       https://www.cedefop.europa.eu/en/publications-and-resources/publications/3077  

(36)      European Commission, The Pact for Skills – mobilising all partners to invest in skills, 2020.

(37)       https://ec.europa.eu/social/main.jsp?catId=1517&langId=en  

(38)      CORDIS, New skills for the construction sector to achieve European energy targets, Results Pack, 2020.

(39)       Home (digiplaceproject.eu)  

(40)      IRENA (2019): https://www.irena.org/publications/2019/Jan/Renewable-Energy-A-Gender-Perspective  

(41)      IRENA (2020), Wind Energy: A Gender Perspective. IRENA, Abu Dhabi. https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Jan/IRENA_Wind_gender_2020.pdf  

(42)      https://publications.jrc.ec.europa.eu/repository/handle/JRC120302.

(43)      IRENA (2020), Wind Energy: A Gender Perspective. IRENA, Abu Dhabi. https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Jan/IRENA_Wind_gender_2020.pdf

(44) IEA (2020), Gender diversity in energy: what we know and what we don’t know, IEA, Paris https://www.iea.org/commentaries/gender-diversity-in-energy-what-we-know-and-what-we-dont-know .  

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

(46)      Compound average growth rate.

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

(48) Eurostat. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Environmental_economy_%E2%80%93_statistics_by_Member_State#Employment.

(49)      This is based on turnover per employee figures from EurObserv’ER, hence these should not be compared to labour productivity measured as gross value added per employee above.

(50)      COM(2015)80; renewables, smart system, efficient systems, sustainable transport, CCUS and nuclear safety.

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

(52)       https://www.iea.org/reports/world-energy-investment-2020/rd-and-technology-innovation .  

(53)      Eurostat, Total GBAORD by NABS 2007 socio-economic objectives [gba_nabsfin07]. The energy socioeconomic objective includes R&I in the field of conventional energy. The Energy Union R&I priorities would also fall under other socioeconomic objectives.

(54)      Private investment estimates have been revised upwards, due to changes in classification and the underlying data.

(55)      The increased total compared to last year’s reporting is due to the revision of the private investment estimates (see above).

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

(57) Adapted from the 2021 edition of the IEA energy technology RD&D budgets database.

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

(59)      With the exception of China, where local applications keep increasing, without seeking international protection. (See also: Are Patents Indicative of Chinese Innovation? https://chinapower.csis.org/patents /).

(60)      High-value patent families (inventions) are those containing applications to more than one office i.e. those seeking protection in more than one country / market.

(61)      Cumulative number of high-value patents in Energy Union R&I priorities over 2005-2018; average share of ‘green’ patents in Climate Change Mitigation Technologies for 2017-2018; data for 2018 is provisional.

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

(63)      JRC118983 Grassano, N., Hernández, H., Tübke, A., Amoroso, S., Dosso, M., Georgakaki, A. and Pasimeni, F.: The 2020 EU Industrial R&D Investment Scoreboard.

(64)      UNESCO (2021) UNESCO Science Report: the Race Against Time for Smarter Development. S. Schneegans, T. Straza and J. Lewis (eds). UNESCO Publishing: Paris.

(65)      The study refers to EU28 (including the UK).

(66)      "Ensure access to affordable, reliable, sustainable and modern energy for all."

(67)      Climate Tech encompasses a broad set of sectors which tackle the challenge of decarbonising the global economy, with the aim of reaching net zero emissions before 2050. This includes low-to-negative carbon approaches to cut key sectoral sources of emissions across energy, built environment, mobility, heavy industry, and food and land use; plus cross-cutting areas, such as carbon capture and storage, or enabling better carbon management, such as through transparency and accounting.

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

(69)      Investments include Early stages (Accelerator/Incubator, Angel, Seed and early stage VC) and later stages (later stage VC and Private Equity Growth).

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

(71)

     JRC elaboration based on Pitchbook data 2021.

(72)      JRC elaboration based on Pitchbook data 2021.

(73)

Where Climate Tech is expressed as % of global Climate Tech investments and total is expressed as % of all global VC investments.

(74)      JRC elaboration based on PitchBook data.

(75)      The standard definition of unicorn is a privately held start-up valued at more than USD 1 billion.

(76)

     JRC elaboration based on PitchBook data.

(77)      Identified by the PwC report as one of the key sectors contributing to the majority of global GHG emissions – together with Mobility & Transport, Food, Agriculture and Land Use, Heavy Industry, Built environment (vertical areas), GHG Capture and Storage, and Climate and Earth Data generation (horizontal areas).

(78)      PwC, The State of Climate Tech 2020. The next frontier for venture capital, 2020.

(79)      Digital start-ups in the Energy sector: this set includes start-ups in the Energy sector whose description of activity includes any digital-related keyword.

(80)       European Innovation Council (europa.eu)

(81)      Through the EIC Pathfinder, Transition activities, Accelerator, and Business acceleration services. So far, the EIC pilot has achieved 90% of innovations addressing Sustainable Development Goals (SDG), in particular in the field of Green Deal, Digital and Health.

(82)      World Economic Forum in collaboration with KPMG, Bridging the gap in European scale-ups funding: the green imperative in an unprecedented time, 2020.

(83)      VW, BMW, Goldman Sachs, AMF, Folksam Group and IMAS Foundation.

(84)   EIB, Investment report 2019/2020: accelerating Europe’s transformation 

(85)

     Deep Tech start-ups build on scientific knowledge and are characterised by long R&D cycles and untested business models. Deep Climate tech start-ups are companies using cutting edge technology to address environmental challenges. As they rely on large capex investments in pilot plants for new technologies to be able to scale their revenues, they require even a higher levels of investments – compared to Climate Tech.

(86)

     Blended finance is a structuring approach which uses public funding to de-risk private investments and, by doing so, acclimatize private investors with a new technology, sector, region or asset class. It leverages a combination of grant with equity, debt investments or insurance-like products from either the public or private sectors and mobilizes consortium of investors to meet the funding needs of deep tech start-ups.

(87)      One of the largest European manufacturers ultracapacitor-based energy storage. The products are used to power and save energy in various applications in the automotive, transportation, grid, and renewable energy industries. the Clean Tech solutions have caught the attention of new industrial investors and top European entrepreneurs, and the company raised EUR 41.3 million in equity round, bringing its total capital raised to over EUR 93 million. The investment is in the top five funding rounds of the cleantech sector in the EU in 2020 and will further accelerate Skeleton's growth.( https://community-smei.easme-web.eu/articles/green-innovations-eic-funded-company-skeleton-technologies-raised-eu413-million-equity).

(88)      The German federal government is providing EUR 10 billion for an equity fund for technologies of the future (Zukunftsfonds or “future fund”). The fund will primarily benefit start-ups in the growth phase with high capital requirements. Together with further private and public partners, the fund projects to mobilise at least EUR 30 billion in venture capital for start-ups in Germany, and combined with existing financial instruments, over EUR 50 billion in venture capital are expected to be mobilised for start-ups in the next few years, together with private investors. (Federal Ministry of Finance, 2021).

(89)      World Economic Forum, Bridging the gap in European scale-up funding: the Green Imperative in an unprecedented time, 2020.

(90)  PitchBook SPAC market update Q3 2021, Uncertainty Clouds Future for SPACs

(91)       The European Commission, European Investment Bank and Breakthrough Energy Ventures establish a new EUR 100 million fund to support clean energy investments (eib.org)

(92)  https://ec.europa.eu/growth/content/escalar-%E2%82%AC12-billion-help-high-potential-companies-grow-and-expand-europe_en

(93)      IEA, World Energy Outlook, 2020.

(94)      Agora Energiewende and Ember (2021), The European Power Sector in 2020: Up-to-Date Analysis on the Electricity Transition, https://ember-climate.org/wp-content/uploads/2021/01/Report-European-Power-Sector-in-2020.pdf.

(95)      Ibid.  

(96)      BloombergNEF, Energy Transition Investment Hit $500 Billion in 2020 – For First Time, 2021.

(97)      Ibid.

(98)      BloombergNEF, Energy Transition Investment Trends – Tracking global investment in the low-carbon energy transition, 2021.

(99)      BloombergNEF, Energy Transition Investment Hit $500 Billion in 2020 – For First Time, 2021.

(100)      IEA, World Energy Investment, 2021.

(101)      IEA, Renewables 2020 – Analysis and forecast to 2025, 2020.

(102)

     Study on Resilience of the critical supply chains for energy security and the clean energy transition during and after the COVID-19 crisis (2021).

(103)

     Ibid.

(104) AT, BE, CY, CZ, DE, DK, EE, EL, ES, FI, FR, HR, IE, IT, LT, LU, LV, MT, PT, RO, SI, SK.

(105) The expenditures reported for the RRF are estimates processed by the Commission based on the information on climate tracking published as part of the Commission’s analyses of the recovery and resilience plans. The data reported cover the 22 national recovery and resilience plans assessed and approved by the Commission by 05 October 2021 and the amount will evolve as more plans are assessed.

(106) Annual Sustainable Growth Strategy 2021, COM(2020) 575 final, 17 September 2020, section IV.

(107)      The Commission has already disbursed EUR 52.4 billion in pre-financing from the RRF to Austria, Belgium, Croatia, Cyprus, Czechia, Denmark, France, Greece, Italy, Latvia, Lithuania, Luxembourg, Portugal, Slovenia, Slovakia and Spain, equivalent to 13 % of the grant and (where applicable) loan component of those Member State's financial allocation, except for Germany where it corresponds to 9%.

(108)      In RED II, introduction of enabling frameworks by Member States to facilitate their development, to ensure inter alia that unjustified barriers to renewable energy communities (RECs) are removed and relevant distribution system operators cooperate with the RECs, but also that RECs are regulated according to the activities they engage in. Member States also have to take the characteristics of RECs into consideration when they design their support schemes.

(109) “EU Border Regions: Living labs of European integration”, COM(2021) 393 final, 14.7.2021.

(110) Schwanitz, V. J., Wierling, A., Zeiss, J. P., von Beck, C., Koren, I. K., Marcroft, T., … Dufner, S. (2021, August 22). The contribution of collective prosumers to the energy transition in Europe - Preliminary estimates at European and country-level from the COMETS inventory.

(111)  ibid

(112)      www. REScoop .eu.

(113)       Energy Communities under the Clean Energy Package - REScoop .

(114)       Entwicklung und Umsetzung eines Monitoringsystems zur Analyse der Akteursstruktur bei Freiflächen-Photovoltaik und der Windenergie an Land (umweltbundesamt.de) .

(115)    Article 32 on local flexibility markets; Article 23 juncto 24 on data management and interoperability.

(116)      One of the drivers for the heterogeneous picture of energy communities across Member States have been the varying national legislative frameworks in place for energy communities. See Frontiers, ‘Assessment of policies for gas distribution networks, gas DSOs and the participation of consumer’, pp. 8-9; Ronne, A., and F.G. Nielsen, ‘Consumer (Co-)Ownership in Denmark’, Energy Transition - Financing Consumer Co-Ownership in Renewables, Palgrave Macmillan, Cham, 2019.

(117)      Benjamin Huybrechts and Sybille Mertens, ‘The relevance of the cooperative model in the field of renewable energy [2014] Annals of Public and Cooperative Economics, pp. 199-201; Binod Prasad Koirala, ‘integrated community energy systems’ (DPhilthesis, Delf University of Technology 2017, p.1; Stakeholder interview with Cormac Walsh from Energy Cooperatives Ireland, 12th of June 2021; Frontier et al’s report (2019), ‘Potentials of sector coupling for decarbonisation – Assessing regulatory barriers in linking the gas and electricity sectors in the EU - Final report’, p. 49.

(118)

Boza-Kiss, B., Bertoldi, P., Della Valle, N. and Economidou, M., One-stop shops for residential building energy renovation in the EU, EUR 30762 EN, Publications Office of the European Union, Luxembourg, 2021, ISBN 978-92-76-40100-1, doi:10.2760/245015, JRC125380.

(119) Boza-Kiss, et al. 2017, 2019; Moles-Grueso, et al. 2021.    

(120)  Directive (EU) 2018/2002 of the European Parliament and of the Council of 11 December 2018.

(121) Proposal for Directive (EU) 2021/0218 of the European Parliament and of the Council of 14 July 2021.

(122)      Boza-Kiss Benigna, Zangheri Paolo, Bertoldi Paolo, Economidou Marina, Practices and opportunities for Energy Performance Contracting in the public sector in EU Member States, EUR 28602 EN, Publications Office of the European Union, Luxembourg, 2017, ISBN 978-92-79-68832-4, doi:10.2760/49317, JRC106625.

(123)      When not stated the contrary, data is about 2018. Main source: Boza-Kiss, B., Toleikyté, A., Bertoldi, P. 2019. Energy Service Market in the EU - Status review and recommendations 2019. Scientific and Technical Report. European ESCO Market Reports series. EUR 29979 EN, European Commission, Luxembourg, 2019, ISBN 978-92-76-13093-2, doi:10.2760/768, JRC118815.

(124)      When not stated the contrary, data is about 2016. Main source: Boza-Kiss et al. (2017).

(125)      Source: Moles-Grueso, S., Bertoldi, P., Boza-Kiss, B. Energy Performance Contracting in the Public Sector of the EU – 2020, EUR 30614 EN, Publications Office of the European Union, Luxembourg, 2021, ISBN 978-92-76-30877-5, doi:10.2760/171970, JRC123985.

(126)      Source: Boza-Kiss et al. (2017).

(127)      Source: Moles-Grueso, et al. (2021).

(128)      When not stated the contrary, data is about 2020. Main source: Moles-Grueso, et al. (2021).

(129)      Value for 2018, in Boza-Kiss et al. (2019).

(130)      Value for 2018, in Boza-Kiss et al. (2019,

(131)  Value for 2020, in Moles-Grueso et al. (2021). 

(132)      Value for 2018, in Boza-Kiss et al. (2019).

(133)      Value for 2018, in Boza-Kiss et al. (2019).

(134)      Value for 2018, in Boza-Kiss et al. (2019).

(135)      Value for 2018, in Boza-Kiss et al. (2019).

(136)      Value for 2018, in Boza-Kiss et al. (2019).

(137)      Value for 2018, in Boza-Kiss et al. (2019).

(138)      Value for 2018, in Boza-Kiss et al. (2019).

(139)      Value for 2018, in Boza-Kiss et al. (2019).

EUROPEAN COMMISSION

Brussels, 26.10.2021

SWD(2021) 307 final

COMMISSION STAFF WORKING DOCUMENT

Accompanying the document

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Progress on competitiveness of clean energy technologies

2 & 3 - Windpower

{COM(2021) 950 final} - {COM(2021) 952 final}

OFFSHORE WIND

Introduction

Today, offshore wind produces clean electricity that competes with, and is sometimes cheaper than existing fossil fuel-based technology. It is a story of European technological and industrial leadership.

With the European Climate Law now in force, the EU’s new and significantly more ambitious 2030 climate target – of a net domestic reduction of at least 55% in greenhouse gas emissions compared to 1990 levels – is now a legal obligation, which must be implemented through binding legislation applicable across all Member States and sectors of the economy. This will require a scale up of the offshore wind industry. In the offshore renewable energy strategy, it is foreseen that 60 GW offshore wind capacity will be installed by 2030 and 300 GW by 2050, which is estimated to require less than 3% of the European maritime space and can therefore be compatible with the goals of the EU Biodiversity Strategy 1 .

3.Technology Analysis – Current situation and Outlook

3.1.Introduction/technology maturity status (TRL)

The world’s first offshore wind farm was installed in Vindeby, off the southern coast of Denmark, in 1991. At the time, few believed this could be more than a demonstration project 2 . 30 years later, offshore wind energy is a mature, large-scale technology providing energy for millions of people. New installations have high capacity factors up to 65% and the costs have steadily fallen over the last 10 years.

The Communication on the “EU strategy to harness the potential of offshore renewable for a climate neutral future” 3 proposes a strategy to make offshore renewable energy a core component of Europe’s energy system by 2050. The strategy presents a general enabling framework, addressing barriers and challenges common to all offshore technologies and different sea basins but also sets out specific policy solutions adapted to the different state of development of technologies and regional contexts.

3.2.Capacity installed, generation/production

The cumulative installed capacity of the entire wind energy sector (both onshore and offshore wind) in the EU increased by 123% from 80 GW in 2010 to 178.7 GW in 2020. On a global level, the EU ranks second, only superseded by China (288 GW) since 2015 4 .

The increase in deployment was even more pronounced for the offshore wind sector, surging form 1.6 GW in 2010 to 14.6 GW in 2020.

The European Commission estimates wind producing half of Europe’s electricity by 2050, with wind energy capacity rising from 178.7 GW today to up to 1 300 GW (EU in 2050, CTP-MIX: 1 253GW). That entails a 25x increase in offshore wind in the EU between 2020 and 2050. The committed capacity of offshore wind installations in Member States’ National Energy Climate Plans (NECPs) until 2030 amounts to (at least) 62.5 GW, while the expected offshore wind projects in EU sea basins based on latest announcements/industry is 84.2 GW.

Figure 1: Annual capacity additions (left) and cumulative installed capacity (right) of wind energy (both onshore and offshore) in the EU.

Source: JRC based on GWEC (2021)

In 2020, the entire European offshore wind market represented 71% (24.8 GW) of the global market in terms of cumulative installed capacity. The global installed capacity of the EU MSs accounts for about 42% (or 14.6 GW). Stimulated by the ending of its Feed-in-Tariff by end of 2021, China saw another record year in capacity additions (3.1 GW) resulting in a cumulative offshore wind capacity of about 9.9 GW, ranking second behind the United Kingdom (10.2 GW). EU Member States installed 2.5 GW in 2020, making it the second best year in deployment in the last decade. In 2020 the Netherlands (1.5 GW), Belgium (0.7 GW), the UK (0.5 GW) and Germany (0.22 GW) were the leading countries in terms of the capacity deployed in European waters. The remaining capacity (0.017 GW) was deployed in Portugal, when two of the three floating offshore wind turbines of the Windfloat Atlantic demonstration project were connected to the grid in the beginning of 2020. 5

Figure 2: Annual capacity additions (left) and cumulative installed capacity (right) of offshore wind energy in the EU.

Source: JRC based on GWEC (2021)

Projected capacities in onshore wind and offshore wind according to CTP-MIX scenario: Onshore: 366 GW in 2030, 963 GW in 2050; OFFSHORE: 73 GW in 2030, 290 GW in 2050.

Figure 3: Installed wind capacities and wind capacity targets in the EC CTP-MIX scenario

Source: JRC based on 2030 Climate Target Plan Impact Assessment 6

Projected electricity generation in onshore wind and offshore wind according to CTP-MIX scenario: Onshore: 847 TWh in 2030 (share of total electricity generation: 27.3%), 2 259 TWh in 2050 (share: 32.9%); Offshore: 229 TWh in 2030 (share: 7.4%), 1 154 TWh in 2050 (share: 16.8%). Current share of total electricity generation (2020): Onshore wind 13.7%; Offshore wind (1.7%) 7   8   9

Figure 4: Current and future electricity generation from onshore and offshore wind and its share in total electricity generation of the EU

Source: JRC based on 2030 Climate Target Plan, BEIS and WindEurope 10 , 11 , 12

The EU Strategy on Offshore Renewable Energy (ORES) proposes to increase Europe's offshore wind capacity from its current level (14.6 GW in 2020) to at least 60 GW by 2030 (and to 300 GW by 2050) 13 . Following current national targets as expressed in the MSs National Energy Climate Plans (NECPs) suggest that the ORES target for 2030 can be achieved. Multiple NECPs do not differentiate between onshore and offshore wind, however limiting to those countries that formulated a specific offshore wind target for 2030 would lead to a cumulated offshore wind capacity of 62.5 GW. With 20 GW in 2030, Germany is the country with the highest NECP offshore wind target followed by the Netherlands, Denmark, France, Ireland, Belgium and Poland. Offshore wind targets at limited scale were formulated by Portugal, Lithuania and Italy. Even though not explicitly mentioned in their NECPs, a set of MSs is expected to deploy substantial offshore wind capacities until 2030. If all MSs targets and expected offshore wind projects are commissioned until 2030 a total of about 84.2GW could go online in EU Member States.

Following this path EU countries would still see most of the offshore wind installations deployed until 2030 in the North Sea (47 GW), yet substantial capacities can be expected in other sea basins particularly in the Baltic Sea (21.6 GW) and in the Atlantic Ocean (11.1 GW). Moreover, first offshore wind capacities are expected in the Mediterranean Sea (2.7 GW) and the Black Sea (0.3 GW). The move to new sea basins is expected to bring an uptake of floating offshore wind projects. About 3 to 4.4 GW of floating offshore wind capacity is expected in EU MSs (France, Greece, Ireland, Italy, Portugal and Spain) by 2030.

Figure 5: Offshore wind capacities as committed in EU MSs National Energy Climate Plans (NECPs) until 2030 versus expected offshore wind projects in EU MSs based on latest announcements/industry

Sources: JRC analysis of NECPs and future expected offshore wind projects (2021)

Figure 6: Expected offshore wind projects in EU sea basins until 2030 based on latest announcements/industry

Sources: JRC analysis of NECPs and future expected offshore wind projects (2021)

3.3.Cost / Levelised Cost of Electricity (LCoE)

Offshore LCoE (bottom fixed): Bottom-fixed offshore wind LCoE declined rapidly to today’s values ranging from EUR 67 per MWh to EUR 140 per MWh ( Figure 7 ). Particularly since 2014 an upscaling in project and turbine size can be observed in order to capitalise on the decrease of the unit costs (economies of size). Following current projections on the future costs of bottom-fixed offshore wind expects LCoE levels in the range of EUR 30 EUR per MWh to EUR 60 EUR per MWh by 2050. The cost of offshore wind installations is therewith reaching similar levels as the one of onshore installations.

As for all other capital intensive RES technologies the cost of finance (weighted average cost of capital (WACC)) impacts LCoE considerably. The WACC is mainly influenced by country risks and interest rates (see also section 1.3 of onshore wind chapter). Although there is not much data on offshore wind WACC, a recent study finds generally higher values for offshore wind (ranging from 3.5% to 9%) than for onshore wind as the technology is at an earlier stage of development thus having a higher risk profile. Evidence suggests that a further decrease (and convergence among countries) in WACC could be achieved by focusing on de-risking debt financing of wind energy projects by policies that implement support schemes decreasing the volatility of a projects cash flow (e.g. a sliding feed-in premium scheme (Contract for Difference)) 14   15 .

Figure 7: Range of historical and projected offshore wind LCoE estimates

Source: Chart reproduced from Beiter et al. 2021 16

Operation & maintenance costs 17 (O&M) are decreasing. Global average annual O&M costs for offshore wind were about USD 90 18 /kW in 2018, and are projected to go down by one-third by 2030 and further decline towards USD 50 19 /kW in 2040 (a decrease of 40% compared to 2018). These reductions will mainly be due to economies of scale, industry synergies, along with digitalisation and technology development, including optimised maintenance concepts  20 .

CAPEX for offshore wind projects are declining rapidly and depend on the rated turbine capacity, depth of the site (and the foundation technology pursued) and the size of a project and range in the established European markets between EUR 2 500 per kW and EUR 3 900 per kW 21 . IEA estimates CAPEX in 2018 of EU projects averaging around EUR 3 400 per kW 22 , 23 .

Globally, investment in offshore wind would need to grow substantially over the next three decades, with overall cumulative investment of over USD 2 750 billion 24 from now until 2050. Annually, average investment would need to increase more than three-fold from now until 2030 and five-fold until 2050. Major investments are required for rapid installation of new OW power capacities 25 .

More recent studies calculate with an offshore wind deployment ranging between 177 GW and 346 GW in European waters by 2050 and estimate offshore and wind investments at EUR 360 billion to EUR 750 billion (of which EUR 200-500 billion are the grid part transmission and interconnection; and EUR 160-250 billion are the generation assets) being in line with the EU Offshore 26 Strategy estimating EUR 800 billion.

The clean energy transition and 2050 climate target will require a total EU investment in wind energy of up to EUR 1 360 billion in the period 2020-2050 under current policy projections.  27 , 28 , 29 .

Figure 8: Investment needs until 2050 for both onshore and offshore wind in the EC CTP-MIX scenario

Source: JRC analysis based on the EC CTP—MIX scenario

3.4.Public R&I funding

At the EU level, the R&I priorities include all aspects aimed to provide secure, cost-effective, clean and competitive energy supply, such as new turbine materials and components, resource assessment, grid integration, offshore technology, floating offshore wind, logistics, assembly, testing and installation, maintenance and condition-monitoring systems and airborne wind energy systems.

Offshore wind energy received the largest part of funding awarded to the wind energy related projects. Within the offshore wind funded projects, one area that is still in the early stages of development globally but carries significant environmental and economic upsides, floating offshore wind, was mostly targeted.  30   31 .

Figure 9: EC funding on wind energy R&I priorities in the period 2009 -2020 under FP7 and H2020.

Source: JRC

Apart from EC-funded projects, the EC-funded SET plan Implementation Working Group (IWG) for Offshore Wind reported a significant number of nationally funded projects (17 out of 24, with single project budgets up to EUR 35 million) with a main focus on the R&I priorities ‘Wind Energy Offshore Balance of Plant’, ‘Floating Offshore Wind’ and ‘Wind Turbine Technology’ 32 , 33 . Other joint industry programmes related to the SET-Plan include projects from the Dutch GROW programme, and DNV GL’s Joint Industry Projects (JIP) on Wind Energy.

Cost reduction through increased performance and reliability, development of floating substructures for deeper waters and the added value of offshore wind energy (system value of wind) were pivotal elements of the SET plan Implementation Plan (IP). In order to achieve these targets, the IP proposes to focus R&I activities on system integration, offshore wind energy – Balance of Plant, floating offshore wind, wind energy O&M, wind energy industrialisation, wind turbine technology, basic wind energy sciences, ecosystem and social impact and the human capital agenda. The IWG estimated that projects addressing these priorities need a combined investment of EUR 1090 million until 2030 with a split in contributions of Member States 34%, EU 25% and Industry 41%.

In 2020 the IWG Offshore Wind updated the targets in its second SET-Plan Implementation Plan for Offshore Wind. Based on current developments in industry, policy and research, the IWG Offshore Wind foresees the main challenges to be addressed by offshore wind energy R&I in the areas of cost reduction, the increase of the system value of wind, the need to fully integrate sustainability (both from an environmental and social perspective) and the adaptability to regional conditions and regional cooperation (e.g. the North Seas Energy Cooperation, the Baltic Sea Offshore Wind, the Atlantic Action Plan, the Blue-Med). This is in line with the scientific challenges for R&I in the wind energy domain which aim for a) an improved understanding of atmospheric and wind power plant flow physics, b) the interaction between aerodynamics, structural dynamics and hydrodynamics of enlarged floating wind turbines and c) research on systems science for integration of wind power plants into the future electricity grid 34 .

EU public investment has remained roughly constant, between 2012 and 2016 around EUR 120-145 million with an increasing trend since then, reaching EUR 179 million by 2019 ( Figure 10 ). Preliminary numbers for 2020 on selected EU MSs indicate that this increase of public investments continues  35 .

Figure 10: Public R&I investments in wind energy in the EU

Source: JRC

Japan led the public RD&D investments in wind energy, for the period 2017-2019, followed by Germany. The Netherlands, Denmark, Spain and France were also amongst the top ten countries investing in wind energy  36 .

Figure 11: R&I investments in wind energy of the top EU countries compared to global competitors in the period 2017-2019 37

Source: JRC

3.5.Private R&I funding

In Europe around 90% of the R&I funding in (onshore and offshore) wind energy comes from the private sector 38 . R&I investments in Europe are highly concentrated in Germany, Denmark and Spain, accounting for 77% and 69% of EU corporate and total R&D funding respectively 39 .

Private investment into wind rotors is responsible for 1% of total investment in wind in RoW markets but ~ 20% in European markets over a 5-year period 40 .

Private investment in wind energy in the EU follow closely the one of China and are much higher compared to the other major economies.

Over the last decade private R&D spending held a relatively constant level between EUR 1.6 billion and EUR 1.9 billion. Moreover, private R&D investments topped public R&D investments by a factor of 10 during this period. 41

Patenting trends - including high value patents

With its annual growth rate of 50% in 2000-2016, China ranks first in wind energy inventions after overtaking from the EU in 2009, which had been world leader since 2006. However, Chinese patenting activity is aimed for protection in its national market. Of the more than 70% of patenting inventions filed on wind energy technologies, about 5% were high value inventions 42 (vs around 71% of high value inventions for Europe).

Europe has the highest specialisation index (indicating the patenting intensity) in wind energy compared to the rest of the world 43 . The EU wind rotors accounted for most of the high value patent application between 2015 and 2017 44 .

Figure 12: Number of inventions and number/share of high-value inventions and international activity 45 in the period 2015 - 2017

Source: JRC

In the period 2015 – 2017, Denmark and Germany are the leading countries in terms of high-value inventions followed by the United States, Japan and China. 71% of all EU’s inventions are high value inventions, a value only matched by Japan (83%) which however shows significantly lower invention counts in absolute terms. In this period the EU share in high-value inventions accounts for 57% followed by the US (18%), Japan (11%), China (5%) and Korea (1%). However, the EU’s leadership position in high-value patents (with the major EU OEMs filing most of the inventions) is experiencing a decrease since 2012, due to strong performance in high-value patents by major companies from the US (e.g. General Electric) and Japan (e.g. Mitsubishi Heavy Industries, Hitachi). 

Figure 13: Number of high value inventions in wind energy by country

Source: JRC

Figure 14 shows the flow of high value inventions from the major economies to the main patent offices in the period 2015-2017. EU applicants show the highest share of inventions protected in United States and China, whereas the United States and Japan protect a substantial share of their inventions in Europe 46 .

Figure 14: International protection of high-value inventions (2015-2017)

Source: JRC

3.6.Level of scientific publications 

Publications in the wind sector are based on data from Scopus in the period 2015 to 2019 47 , 48 .

The overall number of wind energy publications grew from 3 526 publications in 2015 to 4 299 publications in 2019 (+22%).

Although publication counts seem to indicate a stronger activity outside the EU countries on country level, the EU as a whole ranks first (5 406 publications, 27%). Moreover, publications from the EU countries leading in wind energy deployment and research show high citation impacts indicating a higher recognition of their scholarly outputs than those from their global competitors. Exemplarily the field weighted citation impact (FWCI) 49 , 50 of wind energy publications in Germany, Denmark, France, Italy, Spain and the Netherlands ranges between 1.1 and 1.75, whereas only the United States (1.36), Norway (1.8) and the United Kingdom (1.3) show comparable values. Notably research from major other global wind markets such as China (0.66), India (0.78), South Korea (0.82) and Japan (0.8) perform significantly below the average FWCI ( Figure 15 ). 

Among EU countries, Germany (1 002) ranks first in terms of publication counts, followed by Denmark (828) and France (599). Moreover multiple Member States are recognised as having a high impact with their publication activity, with 12 Member States scoring above the average FWCI ( Figure 16 ).

Figure 15: Global wind energy research outputs and their respective recognition (based on FWCI) in the period 2015 to 2019

Source: JRC/Elsevier 2020

Figure 16: Wind energy research outputs in EU countries and their respective recognition (based on FWCI) in the period 2015 to 2019

Source: JRC/Elsevier 2020 51

Research of EU organisations active in wind energy are among the most recognised in the field. In terms of citation impact 9 organisations within the Top20 stem from the EU countries. The Norwegian SINTEF (2.89) ranks first in terms of FWCI followed by KU Leuven (2.71) from Belgium and the US National Renewable Energy Laboratory (NREL) (2.6).

Figure 17: Recognition of scientific output (based on FWCI) of the leading wind energy research organisations in the period 2015 to 2019

Source: JRC/Elsevier 2020 52

Within the wind sector, offshore wind related research is the most published in the period 2015 to 2019. Topics containing offshore wind related key-phrases (e.g. combinations of ’offshore wind farm’, ’offshore wind turbine’, ’condition monitoring, ‘semisubmersible’, tension leg platform’) see an increased publication activity (about 2 200 scholarly outputs) and have a relatively high citation impact as compared to the average world citation impact.

As an example, the number of publications which include the three key-phrases ’offshore wind turbine’ ‘semisubmersible’, tension leg platform’ are depicted in Figure 22 and Figure 23. Similar as in the entire wind energy topic the leading countries can be found outside the EU, with China, the United States, the United Kingdom and Norway publishing significantly more than single EU countries. Again the EU as a whole outnumbers its competitors with about 420 publications in the period 2015 -2019. Moreover 8 out of 10 MSs are recognised as high impact publishers which can only be matched by competitors from the United States, the United Kingdom and Norway ( Figure 18 ).

Figure 18: Global offshore wind energy research outputs (in the area of WT and support structures) and their respective recognition (based on FWCI) in the period 2015 to 2019 53

Source: JRC/Elsevier 2020 54

This trend can be also be observed when analysing the leading organisations publishing scientific output in offshore wind in the period 2015 to 2019. The Norwegian University of Science and Technology (NO) leads with 93 publications followed by Shanghai Jiao Tong University (CN, 87) and University of Strathclyde (UK, 43). With SINTEF (NO) a Norwegian organisation is also leading in terms of citation impact (3.86), followed by National Renewable Energy Laboratory (NREL) (2.76) and the Technical University of Denmark (DK) (2.51). 

3.7.Final Considerations

In 2020, the EU installed 10.5 GW of wind power capacity (both onshore and offshore), bringing its cumulative wind power capacity to 178.7 GW.

The increase in deployment was even more pronounced for the offshore wind sector surging from 1.6 GW cumulative capacity in 2010 to 14.6 GW in 2020. Projected capacity in offshore wind according to CTP-MIX scenario is of 73 GW in 2030, 290 GW in 2050. Following current national targets as expressed in the MSs National Energy Climate Plans (NECPs) suggest that the ORES targets for 2030 (at least 60 GW) can be achieved. Most of the offshore wind installations deployed until 2030 will be located in the North Sea (47 GW), yet substantial capacities can be expected in other sea basins particularly in the Baltic Sea (21.6 GW) and in the Atlantic Ocean (11.1 GW) and to some extent in the Mediterranean Sea (2.7 GW) and the Black Sea (0.3 GW). The move to new sea basins will require further developments of floating technology and the development of port infrastructure.

4.Value chain analysis of the energy technology sector

4.1.Introduction/summary

This section includes the EU subsidiaries of non EU multinationals (as they also create employment and value added here); this section excludes non-EU subsidiaries of the EU multinationals; for companies manufacturing a large portfolio of products, it includes only the part of their activities related to the segment.

Since the value chains of offshore and onshore wind largely overlap, this section addresses both of them. For the onshore-specific part of the value chain, please refer to Value chain analysis in the chapter on onshore wind.

Europe is a recognized market leader in the wind energy: 48% of active companies in the wind sector are headquartered in the EU compared to the RoW 55 . European manufacturers capture around 35% to 40% of the global wind turbine value chain (China almost 50%). The European OEMs in the wind energy sector have held a leading position in the last few years although their market share has decreased in 2018 mainly in favour of the Chinese OEMs. Within the next decade, Europe will maintain its leadership position in annual growth, yet China, Asia Pacific and North America are expected to develop a significant market size (i.e. installed capacity) of more than 50% 56 . Among the top 10 OEMs in 2018, European OEMs led with 43 % of market share, followed by the Chinese (32 %) and North American (10 %) companies. EU offshore wind turbine OEMs held a leading market share (in terms of WT deployed) in the last decade, however in 2020 China overtook EU for the first time securing a market share of 47% compared to EU OEMs with 39%.

A recent study estimates the annual market size (in terms of revenues) of the EU in offshore wind to almost double from about EUR 31.3 billion in 2020 to about EUR 59.2 billion in 2030. In 2020 this represents about 31.2% of the global market. Across the different value chain segments the global share of the EU market ranges from 23% (Logistics & Installation) to 34.6% (Support Structures) ( Figure 19 ) 57 .

Figure 19: Share of EU Market Size to Global Market, Value Chain Segment: 2020

Source: ASSET Study commissioned by DG ENERGY - Gathering data on EU competitiveness on selected clean energy technologies (Draft, 2020)

4.2.Turnover

In 2018, the EU turnover amounted to EUR 36 billion, a 2% drop since 2015.

Figure 20: Turnover of the wind energy value chain in the Top15 EU countries in 2018

Source: JRC 58

4.3.Gross value added growth

Most European manufacturing facilities are located in the country of the company’s headquarter or countries with increased wind energy deployment. 48% of active companies in the wind sector are headquartered in the EU. Specifically for wind rotors, the share of EU companies is 58%, with most headquartered in Germany, Denmark and France. Europe is leading in all parts of the value chain for sensing and monitoring systems for onshore wind turbines, including research and production 59 .

OEMs also locate their manufacturing facilities in countries where they supply wind turbine components and services, except for Gamesa (ES) and Senvion SE (DE), whose manufacturing facilities are only placed in their country of origin. Smaller OEMs tend to locate their facilities around their headquarters 60   61 .    

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

Figure 21: Gross Value Added of the European wind energy industry

Source: WindEurope

4.4.Number of EU companies 

In the last years the EU offshore market further consolidated following Senvion’s insolvency at the end of 2019 and Vestas buying out Mitsubishi Heavy Industries (MHI) from their offshore wind joint venture in 2020 62   63 . With SiemensGamesa RE, Vestas and General Electric RE there are currently three offshore original equipment manufacturers (OEMs) with manufacturing capabilities in EU waters. So far, offshore wind OEMs located their factories mainly around the North Sea and Baltic Sea; however, suppliers of subcomponents can be found all over Europe, even in landlocked countries ( Figure 24 ). In January 2021, Chinese offshore wind manufacturer MingYang entered the EU offshore wind market by securing a deal to supply 10 offshore wind turbines to the 30MW Port of Taranto (Beleolico) offshore wind project (replacing the previously planned Senvion turbines) which will be the first commercial EU offshore wind farm in the Mediterranean Sea (end of 2021). MingYang will execute the project from its EU HQ in Germany while turbines seem to be shipped from China. Moreover, monopiles will be provided by a Spanish manufacturer (Haizea Wind Group) 64   65 .

In total, 155 facilities are dedicated to onshore wind and a further 66 supply to both onshore and offshore wind. 66 , 67 , 68 .

Figure 22: Operational manufacturing facilities of wind energy components in 2019

Source: WindEurope

Figure 23: Number of European facilities split by value chain segment in 2019

Source: WindEurope

Figure 24: Location of manufacturing facilities of onshore and offshore wind energy components in Europe in 2020

Source: JRC

The increase in rated capacity and blade size of offshore wind turbines further amplifies the need to upsize the infrastructure in existing and future ports hosting manufacturing facilities of large subcomponents (blades and nacelles) or final nacelle assembly. Today the three main offshore OEMs have an estimated 6.5 to 8 GW of nacelle assembly capacity at European ports 69 .

This means that European offshore manufacturing at ports will need to grow substantially to serve annual capacity additions up to an estimated 16 GW to satisfy the demand in the period 2030-2050.

Table 1: Location and production capacity of the leading offshore wind manufacturers (nacelles and blades).

Sources: JRC Wind manufacturer database (2021) and WindEurope (2020)

Critical raw material dependence

A potential risk of offshore wind energy concerns the supply of raw materials. This paragraph considers the critical raw material dependence of both offshore and onshore wind energy since their raw material usage is similar to a large extent. EU companies are ahead of their competitors in providing offshore generators of all power ranges, due to a well-established European offshore market and the increasing size of newly installed turbines 70 . Wind turbine blades are often made up of composite materials, which are difficult to recycle/re-manufacture. 2.5 million tonnes of composite material are in use in the wind sector globally. 14 000 wind turbine blades will be decommissioned in Europe the next five years. This is a major challenge, both environmentally and economically. Because there is a need to reduce polluting extraction of raw materials and to decrease dependency of the European economy may on raw materials produced in third countries. Applying circular economy approaches, along the life-cycle of installations, is of key importance.

Currently, there is no European production of the four main materials used for the production of wind rotors (i.e. boron, molybdenum, niobium and Rare Earth Elements (REEs)). For other raw materials, the EU share of global production is below 1% 71 . China is the largest global supplier for about half of the raw materials needed for wind generators. The EU import reliance for processed REEs (especially neodymium, dysprosium, and praseodymium) used for permanent magnets, is 100%, with 98% being supplied by China ( Figure 25 ). Future materials shortage or supply disruptions could prove to be a risk, given the low substitutability for many raw materials, especially those in high-tech applications 72 . The European Commission proposes an action plan in its communication on critical raw materials 73 to address the issues of overdependence on single supplier countries. Likewise, circularity, recycling and substitution are key R&I technological priorities. In 2022, a call for projects is expected under the Horizon Europe programme, particularly dealing with the R&I challenges of the wind community on large-scale recycling and innovative substitution approaches towards full circularity.

Figure 25: Market statistics of raw materials contained in wind turbines

Source: JRC 74

4.5.Employment in the selected value chain segment(s) 

Wind is a strategic industry for Europe. It is estimated the sectors offers between 240 000 and 300 000 quality jobs 75 , 77 000 of which related to offshore wind, contributing EUR 37 billion to EU GDP. Each new turbine generates on average EUR 10 million economic activity. Its 248 factories are all over Europe including in economically-deprived regions. Wind is a major European exporter: half the world’s wind power comes from turbines made by European companies. A growth of 2% was observed between 2015 and 2017 76 .

Figure 26: Direct and indirect jobs in the EU wind energy value chain in 2018

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

Figure 27: Jobs in the European onshore and offshore wind energy industry (in full-time equivalents)

Source: WindEurope

4.6.Energy intensity considerations, and labour productivity considerations

Labour productivity

Figures on labour productivity in the offshore wind sector measured in direct full term equivalents (FTE) per MW installed are declining over the latest years as the learning effect improves with more capacity installed in the sector. Yet the scope and boundary conditions of these studies differ significantly ranging from case studies on project level to econometric models and scenario based projections estimating the employment factor on country or sector level ( Figure 28 ). Direct job estimates on single projects (given in full time equivalent years) range from 16.3 – 15.8 FTE/MWproject for projects in the period 2013-2016 77   78 . Due to productivity improvements some studies estimate a further decrease in specific direct labour requirements to 9.5 FTE/MWproject by 2022 79 . Although these numbers show the expected learning effect they cannot directly be used to estimate the number of total jobs in the entire industry as the extrapolation from project-level capacity to installed capacity in the market would lead to double counting and thus an overestimation.

Current econometric models estimating the number of jobs using employment factors, trade data and/or contribution to the GDP of the sectors involved show direct employment figures declining from about 4 FTE/MWInstalled in 2010 to a range of 1.8 to 2.9 FTE/MWInstalled in 2020. When including indirect employment effects range between 2.2 to 5.1 FTE/MWInstalled seems plausible 80   81   82   83   84 . Scenario-based analyses estimate a further decline in direct labour productivity to about 1.2 FTE/MWInstalled by 2050.

Figure 28: Estimated direct person years (FTE/MW) for offshore wind based on different case studies and modelling approaches

* Includes direct jobs from wind turbine component manufacturers where a split between onshore& offshore is not possible

** Direct jobs estimated based on contribution to the GDP of the sectors involved in the industry and annual reports

Source: JRC

Energy intensity

The energy intensity is analysed based on the cumulated energy demand (CED) along the lifecycle of offshore wind. The majority of life cycle analyses finds the cumulated energy demand between 0.1 and 0.19 MJinput/kWhel, a comparable order of magnitude when compared with the cumulated energy demand of current onshore wind turbines (see grey dots in Figure 29 ). Notably data points on floating offshore show higher values than bottom fixed offshore wind in terms of cumulated energy demand. However, a decisive factors influencing the CED, besides the life cycle inventory data used, is the chosen system boundary and assumed geographical reference (e.g. countries electricity mix and wind resource, which becomes apparent in the outlier value of Wagner et al (2011) which includes also the connection of the Alpha Ventus wind farm to the electricity grid). Given the small amount of available LCA data in offshore wind no clear trend in the CED can be observed, neither in terms of evolution in time nor in respect to the growth in turbine size ( Figure 29 ).

Source: JRC

4.7.Community Production (Annual production values)

The total production value of the wind energy value chain in the EU is shown in Figure 30. It remains at a relatively high level in the order of EUR 8 billion per year, since 2014 85 .

Figure 30 Total Production Value of the wind energy value chain in the EU

Source: JRC 86

4.8.Final Considerations

Wind is a strategic industry for Europe. It is estimated the sectors offers between 240 000 and 300 000 jobs. Most European manufacturing facilities are located in the country of the company’s headquarter or countries with increased wind energy deployment. 48% of active companies in the wind sector are headquartered in the EU. There are 248 operational manufacturing facilities in Europe (30% of all facilities). 155 facilities are dedicated to onshore wind and a further 66 supply to both onshore and offshore wind.

In 2018 the wind energy value chain in the EU produced a turnover of EUR 36 billion.

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

IWG Offshore Wind foresees the main challenges to be addressed by offshore wind energy R&I in the areas of cost reduction, the increase of the system value of wind, the need to fully integrate sustainability (both from environmental and social perspective) and adaptability to regional conditions and regional cooperation (e.g. the North Seas Energy Cooperation, the Baltic Sea Offshore Wind, the Atlantic Action Plan, the Blue-Med).

5.Global market analysis 

5.1.Trade (imports, exports) 

The EU has had a positive trade balance in wind energy related equipment in the last 20 years. Yet there is some stagnation in the growth of this indicator ( Figure   31 ). This is partially explained by third countries catching up on the EU’s first mover advantage, but also by third country policies aimed at protecting their domestic market or forcing EU companies to localise production capacity (e.g. through local content requirements). To illustrate, exports of wind generating sets to China have fallen drastically since 2007 after local content requirements were introduced, and have not recovered. On the opposite, 21% of Chinese wind-related exports in 2018 were destined for the EU market.

Figure 31: Import, export and trade balance in wind energy related equipment (850231, Electric generating sets; wind-powered) of the EU

Source: JRC based on Eurostat (Comext)

Imports of wind related goods is mainly done among EU countries (intra trade). In 2019 only 11% of wind related goods came from countries outside the EU, with the majority stemming from China (87%) and India (12%). Imports from the US ranging in the last decade from 3% to 9% dropped in 2019 to 0.2%.

Exports of wind related goods to countries outside the EU (extra trade) show a positive development since 2000. However in the last decade some stagnation can be witnessed ( Figure 32 ). Since 2010 most EU exports are shipped to the UK (25%) followed by the United States (13%), Turkey (9%) and Canada (9%). Only 0.6% of all EU exports on wind related goods are exported to China in the period 2010-2019.

Figure 32: Export of wind energy related equipment (850231, Electric generating sets; wind-powered) among EU countries (intra-trade) and export to countries outside the EU (extra-trade)

Source: JRC based on Eurostat (Comext)

On a single country level the United Kingdom, Mexico and Norway rank among the top importers of wind related goods in the period 2017 – 2019. On the contrary six EU countries can be found among the Top10 global exporters of wind related goods during that period ( Figure 33 ) 87 .

Figure 33: Top10 global importers (left) and Top10 global exporters of wind energy related equipment (850231, Electric generating sets; wind-powered) in the period 2017 - 2019

Source: JRC

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

The European Original Equipment Manufacturers (OEMs) in the wind energy sector have held a leading position in the last few years. In 2020 they lost for the first time their first rank to the Chinese OEMs when analysing the Top10 OEMs in terms of market share. Among the top 10 OEMs in 2020, Chinese OEMs led with 42 % of market share, followed by the European (28 %) and North American (12 %) companies.  88

Danish Vestas remained in first place, yet a strong increase in new deployments using turbines from both Chinese OEMs and GE Renewable Energy from the US can be witnessed. This can be explained by a surge in new installations in the Chinese and US wind market.

This latest surge in Chinese wind deployment can, to some extent, be explained through a set of new policies targeting renewable energy integration and a shift from Feed-in-Tariffs towards a tender-based support scheme. This necessitates projects approved before 2018 to be grid-connected latest by the end of 2020 in order to receive the expiring Feed-in-Tariff.

Figure 34: Market share (%) of the top 10 OEMs in wind energy (top) over the period 2010 – 2020 and their respective origin (bottom)

Source: JRC

Similarly as in the onshore case, offshore wind projects approved before 2018 and grid connected by end of 2021 still receive a Feed-in-Tariff whereas auctions in the following two years will implement a price cap. Thus an increased deployment activity in China (more than 3GW) led to a strong increase in the market share of Chinese OEMs (47%) leading ahead of the European manufacturers (39%) when assessing their cumulative market share 89 .

Yet the European Original Equipment Manufacturers in offshore wind rank among the Top 3. SiemensGamesa RE is leading in first place (24%), closely followed by Goldwind (23%) from China while the second European manufacturer Vestas ranks in third position (14%).

Figure 35: Market share (%) of the top 5 OEMs in offshore wind energy (top) over the period 2010 – 2020 and their respective origin (bottom)

Source: JRC

5.3.Resource efficiency and dependence

A key component of a wind turbine is the generator, which converts the mechanical energy to electrical energy. There are three main types of wind turbine generators: direct current, alternative current synchronous and asynchronous. Considering the fluctuating nature of wind, it is advantageous to operate the generators at variable speed to reduce the mechanical stress on the turbine blades and drive train. Permanent magnet (PM) generators have been introduced in the recent decades in wind turbines applications due to their high power density and low mass. In particular, the Direct Drive PMSG offers certain advantages in terms of efficiency, weight, dimension and maintenance. However, this type of turbine is associated with a high demand for Rare Earth Elements (REEs).

The REEs, i.e. neodymium, praseodymium and dysprosium, are key ingredients in the most powerful magnet material, namely neodymium-iron-boron (NdFeB). This magnet is used to manufacture permanent magnet synchronous generators (PMSG), which are used in the major wind turbine configurations. The most relevant materials required in wind power generation are listed in Figure 36.

Figure 36: Critical raw materials used in wind turbines

Source: European Commission, Critical Raw Materials in strategic technologies and sectors – a foresight study, 2020

Figure 37: Supply risks, bottleneck along the supply chain of wind turbines

Source: European Commission, Critical Raw Materials in strategic technologies and sectors – a foresight study, 2020

A bottleneck assessment performed in EC (2020) 90 for wind turbines shows that the risk to the supply of raw materials is the highest along the supply chain. This risk diminishes downstream through a medium risk for the supply of processed materials and component, until an undetectable risk for assemblies. Indeed, the European share increases from 1% for the raw materials, to 12% for processed materials, 18% for components, until 58% for assemblies.

The blade is another key component of a wind turbine. Its performance requirements lead to a selection of materials that combine high strength-to-weight with high stiffness and fatigue resistance (Reinforced composites such as glass-fibre composites or carbon fibres) 91 . It is estimated that about 4 700 turbines (or 14 000 blades) could be decommissioned by 2023 and would need to be sustainably disposed. Although several recycling routes for glass fibre and carbon fibres exist (e.g. fluidised bed, solvolysis, high voltage pulse fragmentation, pyrolysis, mechanical grinding) and are at a high TRL, competitiveness as compared to new material sourcing has not been reached yet. The current preferred route for composites recycling is co-processing in the cement industry to produce clinker cement, thus not a recovery of the initial material. Future innovation in composite blade recycling might necessitate large scale demonstration plants, synergies with other sectors (e.g. use of recycled blades in manufacturing processes) among others  92   93 . Moreover new 100% recyclable materials replacing composites gain more attention (e.g. blade manufacturer LM Wind Power and chemical company Arkema using a thermoplastic resin to produce 60 to 80 meter fully recyclable blade prototype). 94 Lately a Vestas led consortium announced a novel chemical recycling process which would allow to fully recycle thermoset composites 95 .

5.4.Final Considerations

For offshore wind fixed-bottom and floating installations, the challenge is to create the optimum environment to maintain and accelerate the momentum created in the North Sea, extending best practice and experience to other sea basins, starting from the Baltic Sea, and supporting global expansion.

Making a success of offshore wind energy can yield great benefits for Europe, it can ensure the EU delivers a sustainable energy transition, and bring the Member States on a realistic path to zero pollution and climate neutrality by 2050. It can also make a major contribution to the post COVID-19 recovery, as a sector where Europe’s industry has world leadership and which is forecast to grow exponentially in the coming decades.

6.SWOT and conclusions 

Strengths:

Wind energy is one of the most promising, clean energy source, a reliable, cost effective, large-scale technology with a steadily increasing installation rate, and with the potential of substantial contribution to the European energy mix and to and the achievements of the EU climate and energy targets.

Weaknesses:

In order to be viable, wind energy installations should be placed in high wind potential sites, therefore there are geographical limitations which should be taken into account. In addition, important wind potential is often observed in sites where the grid is not strong enough or is not existent, necessitating important investment in grid infrastructure. Concerns of environmental, visual and noise impact of wind installations still exist, and in some cases, like offshore installations, are not well known. The intermittent and variable nature of wind is also a concern when wind reaches high grid penetration levels, nevertheless this can be managed through grid interconnection, wind forecast and transmission planning. For offshore wind, the multiple uses of the ocean (e.g. fisheries, biodiversity, energy production) is a matter of concern, which requires Maritime Spatial Planning and collaboration between Member States.

Opportunities:

With the world markets shifting to green energy and away from conventional energy sources there will be an increasing market for wind turbines in the coming years. The growth of smart grids infrastructure and interconnections will permit higher penetration levels of wind energy. Floating offshore structures offer the potential of economic sustainability and improved public acceptance. With 48% of the active companies in the wind sector headquartered in the EU, holding a leading market position, the above present a unique opportunity for further expansion and competitiveness. The age structure of the EU onshore and offshore wind fleet indicates that repowering will also play a crucial rule in the coming years.

Threats:

Despite the numerous examples showcasing that wind can be competitive compared to conventional energy sources, the technology is still perceived as being expensive. It also requires a high initial investment. There is intensive competition from manufacturers based in China and the US. Differing and changing rules, regulations and support schemes in different countries also poses a threat to the expansion of wind energy. In addition, EU companies are increasingly faced with third country governments putting in place market access barriers, local content requirements or other discriminatory or otherwise trade & investment restrictive measures aimed at promoting their domestic industry. A further risk for wind energy is the supply of raw materials which are mainly imported from China. Circularity of wind installations is still to be further developed. Wind blades, for instance, are often made in composite materials hard to re-use or recycle. Circularity requires R&I and deployment, but the industry is already very committed for circularity.

WIND ONSHORE

7.Technology Analysis – Current situation and Outlook

7.1.Introduction/technology maturity status (TRL)

Onshore wind is a crucial part of the energy mix, as it is a highly cost-effective renewable technology, set to grow further as more sites are under development. It is expected to deliver the main part of EUs renewable electricity by 2030 96 . EU onshore wind deployment in deep decarbonisation scenarios until 2050 range from about 370 GW to 950 GW 97 Deploying and integrating this amount of wind energy will bring about both environmental benefits and economic opportunities; stimulating research and innovation is key in this regard.

7.2.Capacity installed, generation/production

Cumulative installed onshore wind capacity in the EU increased by 109% from 78.4 GW in 2010 to 164.1 GW in 2020. Since 2018 reduced annual onshore wind additions can be observed mainly originating from moderate deployments in Germany due to complex permitting rules and potential exposure to legal challenges (regional siting plans are not robust). Moreover Germany’s Renewables Law aims for a relatively modest increase in onshore wind (to 71 GW as compared to today’s 55 GW) until 2030.

The cumulative installed capacity of wind energy globally grew from 198 GW in 2010 to about 743 GW in 2020. Since 2015, the majority of global installed capacity is located in China (39% in 2020), followed by the EU (24%) and the US (16%) 98   99 . The global wind power industry is expected to install more than 600 GW of new capacity over the next ten years, becoming a market worth EUR 77 billion in 2019 to EUR 1 trillion over the next decade 100 .

In 2020, the EU installed 10.5 GW of wind power capacity, bringing its cumulative wind power capacity to 178.7 GW 101 . Based on the ambitions set in European Member States’ National Energy and Climate Plans (NECPs), in 2030 the installed capacity of EU should be 295 GW.

The age structure of the EU onshore wind fleet indicates that repowering will play a crucial rule in the coming years. About 18% of the EU onshore fleet is older than 15 years, approaching quickly their design lifetime (20-25 years). This trend is even more pronounced for the leading MS in terms of installed capacity (e.g. Germany, Spain) and first-mover countries (Denmark) ( Table 2 )  102 . Repowering of onshore wind plays a crucial role in reaching the countries NECP targets and offers the possibility to optimise the resource potential of onshore wind sites with the best wind resource while using more powerful but fewer turbines.

Table 2: Onshore wind fleet age structure and the EU, China and the United States

Source JRC

Figure 38: Annual capacity additions (left) and cumulative installed capacity (right) of wind energy (both onshore and offshore) in the EU.

Source JRC based on GWEC (2021)

Figure 39: Annual capacity additions (left) and cumulative installed capacity (right) of onshore wind energy in the EU.

Source JRC based on GWEC (2021)

Projected electricity generation in onshore wind and offshore wind according to CTP-MIX scenario: Onshore: 847 TWh in 2030 (share of total electricity generation: 27.3%), 2 259 TWh in 2050 (share: 32.9%).

The current share of onshore wind in total electricity generation (2020) is 13.7%.

7.3.Cost / Levelised Cost of Electricity (LCoE)

Figure 40: Range of historical and projected onshore wind LCoE estimates

Source Chart reproduced from Beiter et al. 2021 103

Based on the main cost estimates and projections on onshore wind, Figure 40  identifies a LCoE range spanning from EUR 34 per MWh to EUR 74 per MWh in 2019 which is expected to further decline to values between EUR 19 per MWh to EUR 33 per MWh in 2050.

According to WindEurope data, the LCOE of onshore wind will decrease from EUR 40 per MWh in 2019, to EUR 26 per MWh in 2030, to EUR 19 per MWh in 2050. BNEF estimates the LCOE of onshore wind in EU countries between EUR 24 and 55 per MWh, depending on for example location and financing conditions 104 .

Although a decrease in the cost of finance (weighted average cost of capital (WACC)) of onshore wind projects can be observed in the last years this indicator varies considerably among EU countries. Whereas many central EU countries benefit from low WACC (1.3%-4.3%), less developed markets such as Greece, Romania and the Baltic States show a WACC range of about 7% to 10%. This spread can to some extent be explained by diverging interest rates and country risks faced by investors. Evidence suggests that a further decrease (and convergence among countries) in WACC could be achieved by focussing on de-risking debt financing of wind energy projects by policies that implement support schemes decreasing the volatility of a projects cash flow (e.g. Contracts for Difference) 105 .

Cost assumptions on onshore wind within the PRIMES model see investment costs dropping to about EUR 850 per kW until 2050. According to WindEurope data, investment costs are expected to decrease from EUR 1300 per kW in 2019, to EUR 1 000 per kW in 2030, to EUR 850 per kW in 2050 106 .

7.4.Public R&I funding

According to the JRC-TIMES ‘Zero Carbon’ scenario, investment in wind energy clearly dominates among the different low carbon energy technologies with about EUR 2 640 billion until 2050 (of which EUR 1851 billion are deployed onshore).

EU public investment has remained roughly constant, between 2012 and 2016 around EUR 120-145 million with an increasing trend since then, reaching EUR 179 million by 2019 ( Figure 41 ). Preliminary numbers for 2020 on selected EU MSs indicate that this increase of public investments continues.

Although most of the EU R&I funds was spent of offshore or floating offshore wind in 2020, about 37% of the EU R&I funding was also awarded to projects addressing the broader wind categories which also facilitate innovations in the onshore wind sector. Since 2009 about 52% of the EU R&I funding was granted through FP7 and H2020 to these projects addressing R&I priorities apart from the offshore dimension (see Figure 9 in offshore chapter).

Japan is by far the largest investor, followed by Germany the US, and Norway. Total investment of EU countries over the past 3 years totalled EUR 496 million. Five out of the ten top countries where these investments occurred are in the EU.

Figure 41: Evolution of EU R&I funding categorised by R&I priorities for wind energy under FP7 (2009-2013) and H2020 (2014-2020) programmes and the number of projects funded in the period 2009-2020

Source: JRC 107

7.5.Private R&I funding

This section is common with the offshore wind chapter.

7.6.Patenting trends - including high value patents

The patenting trends indicators are for the entire wind sector and cannot be split between onshore and offshore wind. Please see the offshore chapter.

7.7.Level of scientific publications 

The indicators are for the entire wind sector and cannot be split between onshore and offshore wind. Please see the offshore chapter.

7.8.Final Considerations

Over the last decade private R&D spending held a relatively constant level between EUR 1.6 billion and EUR 1.9 billion. Moreover, private R&D investments topped public R&D investments by a factor of 10 during this period.

The EU is leading in high value patents (with the major EU OEMs filing most of the inventions), yet experiencing a decrease since 2012, due to strong performance in high-value patents by major companies from the US (e.g. General Electric) and Japan (e.g. Mitsubishi Heavy Industries, Hitachi).

Although publication counts seem to indicate a stronger activity outside the EU countries on country level, the EU as a whole ranks first (5 406 publications, 27%). Moreover, publications from the EU countries leading in wind energy deployment and research show high citation impacts indicating a higher recognition of their scholarly outputs than those from their global competitors.

8.Value chain analysis of the energy technology sector

8.1.Introduction/summary

Europe is a recognized market leader in the wind energy: 48% of active companies in the wind sector are headquartered in the EU compared to the RoW 108 . The European OEMs in the wind energy sector have held a leading position in the last few years although their market share has decreased in 2018 mainly in favour of the Chinese OEMs. Within the next decade, Europe will maintain its leadership position in annual growth, yet China, Asia Pacific and North America are expected to develop a significant market size (i.e. installed capacity) of more than 50% 109 . Among the top 10 OEMs in 2018, European OEMs led with 43 % of market share, followed by the Chinese (32 %) and North American (10 %) companies. In 2020 Chinese OEMs (42%) overtook for the first time their competitors from EU-27 (28%) and the US (12%), following the ongoing transition in China from a Feed-In Tariff towards a tender based support system.

A recent study estimates the annual market size (in terms of revenues) of the EU in onshore wind to grow from about 25.3 BEUR in 2020 to about 35.4 BEUR in 2030. In 2020 this represents about 15.2% of the global market. Across the different value chain segments the global share of the EU market ranges from 9.6% (Logistics & Installation) to 18.7% (Turbine) ( Figure 42 ) 110 .

Figure 42: Share of EU Market Size to Global Market, Onshore Wind Value Chain Segment: 2020

Source ASSET Study commissioned by DG ENERGY - Gathering data on EU competitiveness on selected clean energy technologies (2020)

8.2.Turnover

The turnover indicators are for the entire wind sector. Please see the offshore chapter.

8.3.Gross value added growth 

The gross value added growth trends indicators are for the entire wind sector and are not split between onshore and offshore wind. Please see the offshore chapter.

8.4.Number of EU companies 

There are 248 operational manufacturing facilities in Europe (30% of all facilities, 214 (26 %) in EU countries). 155 facilities are dedicated to onshore wind and a further 66 supply to both onshore and offshore wind. 111  Onshore wind projects necessitate large investments with strong pricing competition, which drives down margins. As a consequence, economies of scale provide a competitive advantage, meaning that the incumbents of the established industry create an adverse environment for newcomers throughout the value chain: in 2019, only 15 start-ups received private funding. 40% of these companies were headquartered in the EU 112 .

8.5.Employment in the selected value chain segment(s) 

This section concerns the entire wind sector and is not split between onshore and offshore wind. Please see the offshore chapter.

8.6.Energy intensity considerations, and labour productivity considerations

Labour productivity:

As compared to offshore wind, the onshore wind sector shows a lower specific labour productivity when referring to latest case studies and econometric models ( Figure 43 ). Direct job estimates on single onshore wind projects (given in full time equivalent years) range from 1.7 – 3.0 FTE/MWproject for projects in the period 2015-2019. Differences in this spread seem to originate from project size and geographical scope 113   114 .

Econometric models on regional and national level estimate the number of direct jobs between 0.5 to 2.3 FTE/MWInstalled with European estimates declining to about 0.7 FTE/MWInstalled in 2019 115   116   117   118 . Long term scenario models estimate future labour productivity for onshore wind at a similar scale with values ranging from 0.35 to 0.9 FTE/MWInstalled 119 .

Figure 43: Estimated direct person years (FTE/MW) for onshore wind based on different case studies and modelling approaches

** Direct jobs estimated based on contribution to the GDP of the sectors involved in the industry and annual reports

Source JRC

Energy intensity considerations:

The energy intensity is analysed based on the cumulated energy demand (CED) along the lifecycle of onshore wind. Life cycle analyses from both, specific case studies and OEM data (SiemensGamesa, Vestas, NordexAcciona) indicate a decrease in the CED from 0.12 - 0.17 MJinput/kWhel in 2011 to current levels a range of about 0.08 - 0.12 MJinput/kWhel. Figure 44 shows that this decrease is driven by the continuous development of more powerful turbines up to the 5MW scale which allow to generate more electricity per input of primary energy than their predecessors.

Source JRC

8.7.Community Production (Annual production values)

The community production indicators are for the entire wind sector and are be split between onshore and offshore wind. Please see the offshore chapter.

8.8.Final Considerations

Europe is a recognized market leader in the wind energy. As onshore wind projects necessitate large investments with strong pricing competition, driving down margins, economies of scale provide a competitive advantage. It is estimated that the sector offers between 240 000 and 300 000 jobs. With the annual market size (in terms of revenues) of the EU in onshore wind expected to grow from about 25.3 BEUR in 2020 to about 35.4 BEUR in 2050 wind energy can make a substantial contribution, not only in the energy mix but can also contribute to the new challenge of the European industry in its transition towards climate neutrality and digital leadership. The trade indicators are for the entire wind sector are not split between onshore and offshore wind. Please see the offshore chapter.

9.GLOBAL MARKET ANALYSIS

9.1.Trade (imports, exports)

The trade indicators are for the entire wind sector are not split between onshore and offshore wind. Please see the offshore chapter.

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

This section is common for the entire wind sector and cannot be split between onshore and offshore wind. Please see the offshore chapter.

Since 2016 EBIT margins of EU OEMs are declining due to high competition in turbine orders particularly in the period 2017-2018 and increased material costs for main turbine components. In 2020 these factors were further intensified through the impact of Covid-19 which created logistic challenges for all manufacturers. As a result only Vestas could present a positive EBIT margin (+5.1%), whereas NordexAcciona (-1.3%) and SiemensGamesa RE (-2.5%) reported negative figures.

Figure 45: EBIT margin (Operating profit/Revenues) of the leading listed EU OEMs

Source JRC 120

9.3.Resource efficiency and dependence

The resource efficiency and dependence indicators are for the entire wind sector and cannot be split between onshore and offshore wind. Please see the offshore chapter.

9.4.Final Considerations

According to WindEurope, European wind turbine manufacturers have a 42% share of the global market for wind turbines. Of the 10 biggest wind turbine manufacturers in the world, 5 are EU-based. Among the top 10 Original Equipment Manufacturers (OEMs) in 2018, European OEMs led with 43 % of market share, followed by the Chinese (32 %) and North American (10 %) companies. The European OEMs in the wind energy sector held a leading position in the last few years. In 2020 they lost for the first time their first rank to the Chinese OEMs when analysing the Top10 OEMs in terms of market share (EU: 28%; China: 42%). This can mainly be explained by a surge in new installations in the Chinese wind market following China’s shift from Feed-in-Tariffs towards a tender-based support scheme necessitating projects approved before 2018 to be grid-connected latest by the end of 2020 in order to receive the expiring Feed-in-Tariff. 

The EU has had a positive trade balance in wind energy related eqipment in the last 20 years. Yet there is some stagnation in the growth of this indicator. This can be connected to the Chinas trade policy. Following a set of policies protecting China’s domestic market (e.g. local content requirements, import tariffs and local VAT exemption), since 2007 imports of wind generating sets to China fell drastically, and did not recover until today. 21% of Chinese wind-related exports in 2018 were destined for the EU market. 

Since 2016, EBIT margins of EU OEMs are declining due to high competition in turbine orders particularly in the period 2017-2018 and increased material costs for main turbine components. Despite the record year in installations in 2020 121 , these factors were further intensified through the impact of Covid-19 which created logistic challenges for all manufacturers. 

Supply of critical raw materials for wind generators are mainly imported from China. Material shortages and disruptions pose a potential risk to EU wind energy production industry. Circularity, recycling and substitution are therefore priority areas of innovation to abate these risks, while improving the overall sustainability of the sector and are included in the 2021-2022 Work Programme of Horizon Europe. 

Within the next decade, it is expected that Europe will maintain its leadership position in annual growth of offshore wind, yet China, Asia Pacific and North America are expected to develop a significant market size (i.e. installed capacity) of more than 50% (average market shares in the period 2025 – 2030: China 21%, Asia Pacific 19%, North America 13%). With respect to onshore wind China will remain the largest market (average annual market share of about 50% in the period 2020-2025) followed by the Europe (18%), North America (14%) and Asia (excluding China) (8%). 

The committed capacity of wind energy installations (268.4 GW) in the EU Member States National Energy and Climate Plans (NECP) until 2030 will form a good basis streamlining investments to the wind sector while on the same time contributing to the clean energy transition and 2050 climate targets. The committed capacity of wind energy installations (268.4 GW) in the EU Member States National Energy and Climate Plans (NECP) until 2030 will form a good basis streamlining investments to the wind sector.

10.SWOT and conclusions 

The SWOT analysis presented in the offshore wind chapter applies to the onshore wind as well. An additional threat for onshore wind turbines are in the build environment and there is more resistance to the build of new wind farms. Considering that the overall capacity is expected to be 5-6 times higher in 2050, land use and public acceptance will become potential threats. Continuous effort to reduce environmental and social impact will be needed.

(1)  EU Biodiversity Strategy for 2030. Bringing nature back into our lives. COM/2020/380 final.

(2)      The farm generated 5MW and covered the annual energy consumption of 2 200 households during 25 years.

(3)      COM(2020) 741 final.

(4)      GWEC (2021), Global Wind Statistics 2020.

(5)      JRC, Telsnig T: Wind Energy - Technology Development Report 2020, JRC123138. EUR 30503 EN. Luxembourg. URL: https://ec.europa.eu/jrc/en/publication/wind-energy-technology-development-report-2020 (updated 2020 data)

(6)      SWD(2020) 176 final, PART 2/2

(7)      WindEurope ,Wind energy in Europe – 2020 Statistics and the outlook for 2021 – 2025, 2021

(8)      BEIS (2021), National Statistics Energy Trends: UK renewables, https://www.gov.uk/government/statistics/energy-trends-section-6-renewables

(9)      UK shares in onshore and offshore electricity generation were deducted from figures given in WindEurope (2021) based on reported data in BEIS (2021)

(10)      SWD(2020) 176 final, PART 2/2

(11)       WindEurope (2021), Wind energy in Europe - 2020 Statistics and the outlook for 2021-2025.

(12)      UK share was deducted based on: BEIS Energy Trends - Statistical Release 25 March 2021, https://www.gov.uk/government/collections/renewables-statistics#digest-of-uk-energy-statistics-(dukes):-annual-data

(13)      COM(2020) 741 final

(14)      AURES II (2021), Renewable energy financing conditions in Europe: survey and impact analysis, D5.2, March 2021, H2020 project: No 817619

(15)      JRC, Low Carbon Energy Observatory, Wind Energy Technology Market Report, European Commission, 2019, JRC118314.

(16)      Beiter P., Cooperman A., Lantz E., Stehly T., Shields M., Wiser R., Telsnig T., Kitzing L., Berkhout V., Kikuchi Y. (2021) Wind power costs driven by innovation and experience with further reductions on the horizon, WIREs Energy Environ. 2021;e398. https://doi.org/10.1002/wene.398.

(17)      These usually represent about 25 to 30% of total lifecycle costs for offshore wind farms (source: Röckmann C., Lagerveld S., Stavenuiter J. (2017) Operation and Maintenance Costs of Offshore Wind Farms and Potential Multi-use Platforms in the Dutch North Sea. In: Buck B., Langan R. (eds) Aquaculture Perspective of Multi-Use Sites in the Open Ocean. Springer, Cham).

(18)      EUR 75.83 (1 USD = 0.84 EUR).

(19)      EUR 42.13 (1 USD = 0.84 EUR).

(20)      IEA, Offshore Wind Outlook 2019 - World Energy Outlook Special Report, 2019.

(21)      BNEF 2020 Interactive Datasets.

(22)      IEA, Offshore Wind Outlook 2019 - World Energy Outlook Special Report, 2019.

(23)      Excluding transmission costs.

(24)      EUR 2310 billion (1 USD = 0.84 EUR).

(25)      IRENA, Future of wind: Deployment, investment, technology, grid integration and socio-economic aspects (A Global Energy Transformation paper), International Renewable Energy Agency, Abu Dhabi, 2019.

(26)      Guidehouse/Sweco (2020), R Recommendations for an integrated framework for the financing of joint (hybrid) offshore wind projects Final report Prepared for the European Commission, Reference No.: 212597.

(27)      These figures are based on the capacity deployment of the CTP-MIX scenario and the average of the investment expenditure assumptions for onshore and offshore wind towards 2050 as reported in the EU Reference Scenario 2020.

(28)      COM(2021) 557 final, Amendment to the Renewable Energy Directive to implement the ambition of the new 2030 climate target, July 2021.

(29)      DG ENER, EU Reference Scenario 2020, Energy, transport and GHG emissions - Trends to 2050, Accompanying excel file on technology assumptions, https://ec.europa.eu/energy/data-analysis/energy-modelling/eu-reference-scenario-2020_en .

(30)      JRC, Telsnig T: Wind Energy - Technology Development Report 2020, JRC123138. EUR 30503 EN. Luxembourg. URLt: https://ec.europa.eu/jrc/en/publication/wind-energy-technology-development-report-2020 (updated 2020 data).

(31)      https://setis.ec.europa.eu/system/files/setplan_wind_implementationplan_0.pdf.

(32)      JRC, Implementing the SET Plan - Progress from the Implementation working groups, 2020, JRC118272.

(33)      Veers P. et al, 2019, Grand challenges in the science of wind energy, Science, doi: 10.1126/science.aau2027.

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

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

(36)      IEA reporting countries. IEA data on wind energy public R&I investments does not include China.

(37)      JRC, Low Carbon Energy Observatory, Wind Energy Technology Market Report, European Commission, 2019, JRC118314.

(38)      JRC, Low Carbon Energy Observatory, Wind Energy Technology Market Report, European Commission, 2019, JRC118314.

(39)      ICF, commissioned by DG GROW - Climate neutral market opportunities and EU competitiveness study (Draft, 2020).

(40)      WindEurope, Local Impact Global Leadership (2017, 2020 data update).

(41)      This means that the patents are protected in other patent offices outside of issuing country and refer to patent families that include patent applications in more than one patent office.

(42)      JRC, Low Carbon Energy Observatory, Wind Energy Technology Market Report, European Commission, 2019, JRC118314.

(43)      ICF, commissioned by DG GROW - Climate neutral market opportunities and EU competitiveness study (Draft, 2020).

(44)      An invention is considered of high-value when it contains patent applications to more than one patent office. Patent applications protected in a country different to the residence of the applicant are considered as international.

(45)      JRC, commissioned by DG GROW -European climate-neutral industry competitiveness scoreboard (CIndECS) (Draft, 2021).

(46)      Data from Scopus, the world’s largest abstract and citation database for peer reviewed publications. 2019 is the latest complete year for Scopus. Based on a citation network-based approach the research performance in the wind energy sector is measured by three main metrics: the prominence of a topic cluster, its scholarly output and the relative citation impact (FWCI) to identify relevant topic clusters to define the field of energy research.

(47)      JRC/Elsevier 2020, Energy research - A bibliometric analysis of topic clusters A report commissioned by the Knowledge for the Energy Union Unit (C.7) of the European Commission Joint Research Centre, Invitation to tender - JRC/PTT/2020/VLVP/1016.

(48)      Field-Weighted Citation Impact is the ratio of the total citations actually received by the denominator’s output, and the total citations that would be expected based on the average of the subject field.

(49)      Field Weighted Citation Impact (FWCI) is an indicator of the citation impact of a publication. It is calculated by comparing the number of citations actually received by a publication with the number of citations expected for a publication of the same document type, publication year, and subject. The indicator is always defined with a world average baseline of 1.0. An FWCI of 1.0 indicates that the publications have been cited the same amount, on average, as the world average for similar publications.

(50)      JRC/Elsevier 2020, Energy research - A bibliometric analysis of topic clusters A report commissioned by the Knowledge for the Energy Union Unit (C.7) of the European Commission Joint Research Centre, Invitation to tender - JRC/PTT/2020/VLVP/1016.

(51) JRC/Elsevier 2020, Energy research - A bibliometric analysis of topic clusters A report commissioned by the Knowledge for the Energy Union Unit (C.7) of the European Commission Joint Research Centre, Invitation to tender - JRC/PTT/2020/VLVP/1016 Publications which include the three keyphrases ’offshore wind turbine’ ‘semisubmersible’, tension leg platform’.

(52) Publications which include the three keyphrases ’offshore wind turbine’ ‘semisubmersible’, tension leg platform’.

(53) JRC/Elsevier 2020, Energy research - A bibliometric analysis of topic clusters A report commissioned by the Knowledge for the Energy Union Unit (C.7) of the European Commission Joint Research Centre, Invitation to tender - JRC/PTT/2020/VLVP/1016

(54)      ICF, commissioned by DG GROW - Climate neutral market opportunities and EU competitiveness study (Draft, 2020).

(55)      GWEC, Global Offshore Wind Report 2020, 2020.

(56)      EC/Guidehouse 2020, ASSET Study on Gathering data on EU Competitiveness on selected Clean Energy technologies, ISBN 978-92-76-27325-7 doi: 10.2833/94919 MJ-03-20-496-EN-N.

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

(58)      ASSET Study commissioned by DG ENERGY - Gathering data on EU competitiveness on selected clean energy technologies (Draft, 2020).

(59)      WindEurope.

(60)      WindEurope, Local Impact Global Leadership (2017, 2020 data update).

(61)      WPM 2020a, Windpower Monthly review of 2019 -- part 2 https://www.windpowermonthly.com/article/1669604/windpower-monthly-review-2019-part-2#Senvion , (accessed on 04/01/2021)

(62)      WPM 2020b, Vestas closes deal to buy out MHI from offshore wind venture https://www.windpowermonthly.com/article/1698632/vestas-buys-mhi-offshore-wind-joint-venture , (accessed on 04/01/2021)

(63)      https://www.offshore-energy.biz/first-mediterranean-sea-offshore-wind-project-switches-turbine-supplier/ (accessed on 28/01/2021).

(64)      https://www.windpowermonthly.com/article/1705391/mingyang-enters-european-offshore-wind-market (accessed on 28/01/2021).

(65)      WindEurope/Wood Mackenzie (2020), Wind energy and economic recovery in Europe - How wind energy will put communities at the heart of the green recovery, October 2020.

(66)      WindEurope, Local Impact Global Leadership (2017, 2020 data update).

(67)      JRC, Low Carbon Energy Observatory, Wind Energy Technology Market Report, European Commission, 2019, JRC118314 (data update July 2020).

(68)      WindEurope/Wood Mackenzie (2020), Wind energy and economic recovery in Europe - How wind energy will put communities at the heart of the green recovery, October 2020.

(69)      JRC, Low Carbon Energy Observatory, Wind Energy Technology Market Report, European Commission, 2019, JRC118314.

(70)      JRC, China – Challenges and Prospects from an Industrial and Innovation Powerhouse, 2018, JRC116516.

(71)      JRC, interactive tool: Materials that are critical to our green future.

(72)      COM(2020) 474 final.

(73)      JRC, China – Challenges and Prospects from an Industrial and Innovation Powerhouse, 2018, JRC116516.

(74) These are estimates using different methods WindEurope estimates the figure to be 300 000 ( https://windeurope.org/about-wind/wind-energy-today/ ) while Eurobarometer estimates the figure to be 243 000 jobs.

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

(76)      QBIS (2020) Socio-economic impact study of offshore wind.

(77)      IRENA (2018), Renewable Energy Benefits: Leveraging Local Capacity for Offshore Wind, IRENA, Abu Dhabi. 

(78)      QBIS (2020), Socio-economic impact study of offshore wind.

(79)      Deloitte/WindEurope (2017), Local impact, global leadership – The impact of wind energy on jobs and the EU economy.

(80)      WindEurope (2020), The EU Offshore Renewable Energy strategy, June 2020. Updated figures on employment using the Deloitte/WindEurope model.

(81)      Ortega et al. (2020), Analysing the influence of trade, technology learning and policy on the employment prospects of wind and solar energy deployment: The EU case. Renewable and Sustainable Energy Reviews 122 (2020) 109657, Available https://doi.org/10.1016/j.rser.2019.109657.

(82)      JRC 2020, Facts and figures on Offshore Renewable Energy Sources in Europe, JRC121366.

(83)      GWO (2020), Powering the Future – Global Offshore Wind Workforce Outlook 2020-2024.

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

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

(86)      JRC, commissioned by DG GROW -European climate-neutral industry competitiveness scoreboard (CIndECS) (Draft, 2021).

(87)      JRC, Low Carbon Energy Observatory, Wind Energy Technology Market Report, European Commission, 2019, JRC118314 (data update May 2021).

(88)      JRC, Low Carbon Energy Observatory, Wind Energy Technology Market Report, European Commission, 2019, JRC118314 (data update May 2021).

(89)      European Commission, Critical materials for strategic technologies and sectors in the EU - a foresight study, 2020.

(90)      European Commission, Critical materials for strategic technologies and sectors in the EU – a foresight study, 2020.

(91)      WindEurope, Cefic and EuCIA, Accelerating Wind Turbine Blade Circularity May 2020, https://windeurope.org/wp-content/uploads/files/about-wind/reports/WindEurope-Accelerating-wind-turbine-blade-circularity.pdf  

(92)      ETIPWind (2019), How wind is going circular blade recycling, https://etipwind.eu/files/reports/ETIPWind-How-wind-is-going-circular-blade-recycling.pdf

(93)      LMWind Power (2020) https://www.lmwindpower.com/en/stories-and-press/stories/news-from-lm-places/zebra-project-launched.

(94)      Vestas (2021), New coalition of industry and academia to commercialise solution for full recyclability of wind turbine blades, https://www.vestas.com/en/media/company-news?l=22&n=3974601#!NewsView  

(95)      Wind Europe.

(96) BNEF NEO.

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EUROPEAN COMMISSION

Brussels, 26.10.2021

SWD(2021) 307 final

COMMISSION STAFF WORKING DOCUMENT

Accompanying the document

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Progress on competitiveness of clean energy technologies

4 & 5 - Solar PV and Heat pumps

{COM(2021) 950 final} - {COM(2021) 952 final}

SOLAR PHOTOVOLTAICS

Introduction

Renewables grow rapidly in all scenarios bringing to carbon neutrality in 2050. Solar photovoltaic is central to this emerging new configuration of electricity generation technologies. More than 3.1 TW of photovoltaic power are projected - globally - in 2030 and about 5.9 TW in 2040 (from about 0.8 TW installed worldwide in 2020) 1 . The IRENA 1.5°C Scenario projects a global solar photovoltaics power of about 14 TW in 2050 2 . The investment required in the period 2020-2050 for the new solar power capacity is estimated at about USD 4.2 trillion 3 , 4 .

Considering that about 1 TW of solar photovoltaics (PV) is projected, in the EU, by 2050 (currently it is 0.1 TW and projected to be 0.4 TW in 2030), it is of strategic importance to establish the full PV value chain in Europe and not create a new type of energy dependency, by importing the necessary components for the installations. The European Commission in its communication "Updating the 2020 New Industrial Strategy: Building a stronger Single Market for Europe’s recovery” recognises that it is a key opportunity, as greater scale should bring lower energy costs for industry as well as society at large to scale up manufacturing of PV technologies in the EU, and welcomed the industry-led European Solar Initiative 5 . PV manufacturing would not only empower a fast and sustainable energy transition, including the European renovation wave, but also lead Europe’s economy to generate added value in terms of economic growth, industrial jobs, and revenues, and capitalise on R&I developments in Europe. These opportunities exist in parts of the value chain and market segments where innovation/differentiation plays a relatively large role to respond to the specific needs of the final sectors of use. Furthermore, the strong knowledge position of the EU research institutions, the skilled labour force and the existing and emerging industry players are the basis to relaunch a strong European photovoltaic supply chain. Emerging approaches to solar photovoltaics promise higher performances and lower cost together with a reduced or optimised use of materials (resource efficiency) and lower environmental impact (CO2 footprint) embedding the notion of circularity by design. European Institutes and companies are championing some of these new routes.

The description of the status of the PV technology, the analysis of the different segments of the value chain, the evidence to position the EU photovoltaic sector on the world map vis-à-vis the global competitors are analysed in the following to support a better-informed policy decision. Several emerging applications in the final energy sectors are defined in the first part of the document. Given the exceptional circumstances of the COVID-19 pandemic, a short analysis of the pandemic impact on the deployment of the PV installations is also presented.

11.Technology Analysis – Current situation and Outlook

11.1.Introduction/technology maturity status (TRL)

Solar photovoltaics (PV) is a mature technology central to accomplish the energy transition and win the decarbonisation challenge. Solar photovoltaics has become the world’s fastest-growing energy technology, with demand spreading and expanding as it becomes the most competitive option for electricity generation in a growing number of markets and applications. The global compound annual growth rate of PV installations was about 37% in the period 2010-2019. This growth is due to the decreasing cost of the PV modules and systems (EUR/W), and increasingly competing cost of the electricity generated (EUR/MWh). Analysing the global evolution of module price vs cumulative production, a price decrease of 25% for each doubling of cumulative production is inferred. In the period between 2011 and 2020, an 85% price decrease has been recorded 6 .

Globally, silicon solar cells comprise more than 95% of PV capacity installed in 2019. The record efficiency for silicon solar cells is 26,7% and was attained by using amorphous silicon-crystalline silicon heterojunction (a Heterojunction with Intrinsic Thin-Layer - HIT - solar cell structure) and interdigitated back contacts (IBCs). Average HIT module efficiency is at 21% and it is expected to reach 24% in 2030.

The Chinese PV industry plans to phase out Aluminum Back-surface Field (Al-BSF) solar cells by 2022 so that Passivated Emitter and Rear Contact (PERC) solar cells will remain the workhorse for the industry 7 . The currently announced solar cell manufacturing expansion projects in China, which should be realised between 2020 and 2023, amount to 320 GW of new PERC and PERC+ capacity. Depending on the actual market growth and economic conditions between 70 and 90% of this capacity could be realised. The total investment needed for such an expansion would be between RMB 47 billion 8 and RMB 76 billion 9 . In addition, heterojunction and tunnel oxide passivated contact (TOPCon) solar cells are gaining market share and are responsible for additional investments of RMB 18 billion 10 in solar cell manufacturing lines and could add reach 35 GW manufacturing capacity by 2023.

PV modules based on thin film technologies are also commercially available, especially copper indium/gallium disulfide/diselenide (CIGS) and cadmium telluride (CdTe), although their market share is limited.

More recently, an efficiency higher than 29% has been reported for a perovskite solar cell combined with silicon in a double-junction configuration. In the tandem configuration, the perovskite solar cell absorber can be adjusted and optimised by modifying its composition to take better advantage of the solar spectrum. Perovskite photovoltaic solar technology has been proved in pilot manufacturing by Oxford PV  11 . The rapid learning of perovskite solar cells enriches the number of approaches, at different readiness and maturity levels, which are available for the direct conversion of light into electricity. Finally, multi-junction solar cells based on III-V semiconductors are the PV devices attaining the highest efficiency. Multi-junction solar cells are used in space applications and can be combined with concentrating systems to generate electricity in terrestrial configurations if significant cost reduction is achieved for such systems.

Emerging innovative PV deployment applications

Besides the classical PV installations on rooftops and free standing, the dual use of infrastructures for the installation of PV capacity offers additional potential and is often close to the place of electricity use, as well as to avoid the use of open land. However, the analysis of these potentials as well their exploitation is still in its infancy.

A summary of meaningful emerging applications is provided below 12 .

·Agricultural photovoltaics (Agri-PV): Agri-PV offers the possibility to optimise the use of agricultural land, increase agricultural yields and generate electricity, which can either be used locally or sold for extra revenue.

·Closed landfill sites: First, landfills are brownfields, and their use for PV plants will not alter sensitive ecosystems. Second, closed landfills are often connected to the electricity grid, and in the case of landfill gas use, the PV system can improve the load factor of the plant.

·Building envelopes: PV installed on façades and roofs on buildings can act simultaneously as a power source and as a shading device, thereby reducing the heat load in the building and demand for cooling.

·Hydro dams: In the case of earthen dams, the PV installation can protect the surface and minimise erosion caused by rain.

·Irrigation channels and floating PV: Both applications can help reduce water evaporation, which, especially in arid regions, is of substantial importance;

·Parking lots: Covering parking lots with PV canopies enables sustainable electricity generation to charge electric vehicles and provides shading for the automobiles.

·Sound barriers: Sound barriers along motorways and train lines can be used to generate electricity not only when they are south facing; thanks to bifacial PV technology, east- and west-facing barriers can also be utilised. The electricity generated along train lines could be used directly to power trains. In contrast, sound barriers on motorways could provide sustainable electricity either to the municipalities they are shielding the noise from or to electric vehicle charging stations in service areas.

·Vehicle integrated PV: In the emerging domain of vehicle integrated PV (VIPV), new products to provide on-board electricity to trucks have been developed, as a key element in sustainable mobility.

11.2.Capacity installed, generation/production 

Very recently, the IEA developed a Roadmap to achieve net zero emission by 2050. The global electricity generation from solar photovoltaic is projected to grow from 821 TWh in 2020, to 6 970 TWh in 2030, 17 031 TWh in 2040, 23 460 TWh in 2050. This would require the installation of a photovoltaic power capacity of 737 GW in 2020, 4 956 GW in 2030, 10 980 GW in 2040 and 14 458 GW in 2050. According to the BNEF NEO 2020, the global investment required in the period 2020-2050 to install the new solar power capacity is about USD 4.2 trillion, with utility scale projects absorbing a share of 62% of the total amount 13 .

Figure 1: Historical and projected solar photovoltaics capacity in the EU

Source IEA, World Energy Outlook, 2020 (SDS analysis)

The European Commission’s Long-Term Strategy scenarios (EC LTS) are technology-oriented decarbonisation scenarios, which leads to carbon-neutrality by 2050 14 . The Climate Target Plan analysis shows wind and solar power providing over 60% of the EU electricity in 2050, up from about 13% in 2015. At that time horizon, the EU solar generation capacity values achieves approximately 1 200 GW 15 . The IEA projects instead the expansion of the photovoltaic capacity in the EU until the time horizon 2040 ( Figure 1 ). The IEA SDS scenario projects about 500 GW of PV capacity installed in 2040 16 . Alternative scenarios project larger penetration of photovoltaics in the EU.

The photovoltaic power capacity installed worldwide from the year 2011 to the year 2021 is reported in the figure below.

Figure 2: Cumulated photovoltaic capacity installed worldwide, years 2011-2021 (GW)

Source: AJW PV Snapshot 2021 17

At the beginning of the period considered, the cumulated photovoltaic capacity installed worldwide was about 71 GW. It is estimated to reach more than 940 GW by 2021. In terms of compound annual growth rate (CAGR) 18 , this growth corresponds to a CAGR close to 30%, in the indicated ten-year period. A second consideration is that the bulk of installations are now outside of Europe and USA. China is the largest single PV market, with numerous other markets of significant scale. 

A more detailed view of the progress reported in the EU in the period 2011-2021 is presented in the figure below. From 52 GW of photovoltaic systems installed in 2011, the EU is reaching almost 160 GW by 2021. The EU CAGR in the period approaches 12%, considerably lower than the 30% recorded globally. Germany, Italy, Spain, and France account for 69% of the cumulated EU installations in 2021.

Figure 3: Photovoltaic installations in the EU, years 2011-2021 (GW)

Source: AJW PV Snapshot 2021

The annual capacity added in the EU, between 2016 and 2020, broken down by segments is given in . The cumulative capacity in the same years 2016-2020 is given in the figure below.

Figure 4: Annual photovoltaic installations in the EU, by segments, years 2016-2020 (GW)

Source: SPE 2021 19

Figure 5: Cumulative photovoltaic installations in the EU, by segments, years 2016-2020 (GW) 

Source: SPE 2021 20

In the year 2020, the utility scale segment represents a share of 32% of the cumulative installations, the commercial applications have a share of 28% and industrial and residential applications are both at 20%.

COVID-19 pandemic and photovoltaics

Globally, PV installations have never experienced a down year, even during the global financial crisis or during Covid-19 pandemic. Preliminary data shows that the global PV installations grew in 2020 and are expected to grow in 2021, as well (Jaeger-Waldau, PV snapshots 2021). In the EU, about 18 GW of photovoltaic capacity was added in 2020, more than in the year 2019 (Jaeger-Waldau, PV snapshots 2021). The largest European market in 2020, in terms of installations, was Germany. This evidence suggests no direct negative effect of the pandemic on PV deployment.

11.3.Cost / Levelised Cost of Electricity (LCoE)

The cost of solar PV electricity (EUR/MWh) depends on several factors. It is a function of the capital investment for the system, its location and its design and the related available solar resource. Furthermore, the solar electricity cost depends upon the permitting, installation and the operational costs, the useful operation lifetime, the end-of-life management costs and, finally, the financing costs. The following focusses mainly on the investment needed for the PV modules and the system.

PV modules are the largest single cost component of a system, currently accounting for approximately 40% of the total capital investment needed for utility systems, and somewhat less for residential systems where economies of scale for installation are lower and soft costs are higher. The cost of PV modules has decreased dramatically in recent years. Analysing the global evolution of module price vs cumulative production, a price decrease of 25% is inferred for each doubling of cumulative production. In the period from 2011 to 2020, an 85% price decrease has been recorded. This is due to both economies of scale and technological improvements. With PV modules spot market prices as low as 0.20 EUR/W, the total installation cost of solar PV will continue to decline in the future, making solar PV highly competitive in most markets and locations with adequate solar resource. The power generation technology costs used by the IEA SDS scenario, decrease from 840 USD/kW in 2019 to 490 USD/kW in 2040 21 for the EU.

Rooftop systems for residential or small commercial buildings have traditionally been an important market segment, particularly in Europe. Prices have seen a significant decline and are now approximately 1 000 EUR/kW (approximately 200 EUR/m2) in the well-developed and competitive German market. However, across Europe prices vary considerably and can be more than double these values. Building integrated roofing systems range from 200 to 500 EUR/m2 for standardised products and increase to 500 to 800 EUR/m2 for customised solutions 22 . Costs for PV facades are in the upper part of this range.

An analysis of the results of a recent bidding process for the installation of commercial-scale photovoltaic systems on the roofs of buildings gives further insight. The total power of 2 428 kW is divided, for bidding purposes, in five different batches. The average cost resulting from the process, included inverters and installation (excluding storage) is 1 064 EUR/kW. The modules are all based on monocrystalline silicon solar cells. However, they differ in power, size, efficiency, and warranty provided. Minimum and maximum cost differ in a significant way from the average.

In terms of cost per MWh, PV emerges as highly competitive for utility scale PV in favourable locations. In the first half of 2020 the global LCOE benchmarks for PV are reported with 39 to 50 USD/MWh 23 . For rooftop systems there is still a wide spread in LCOE (61.9 to 321.5 EUR/MWh) across the EU 24 . Useful also to report the LCOE values indicated for the EU by ETIP-PV for 2020, ranging from 16 EUR / MWh (Spain, 2% nominal WACC) to 50 EUR / MWh (Finland, 10% nominal WACC)  25 .

The LCOE spread is due in part to the location and significantly to local regulations and market conditions. Depending on the actual retail prices, electricity generated from PV rooftop systems can be cheaper for a large part of the European population. Even in less sunny locations, the electricity cost is only bettered by onshore wind, again providing the location has a favourable wind resource. Auctions for PV power supply provide a further indicator of cost level. Over the last few years, the number of EU Member States conducting such auctions has continuously increased. Prices have reduced to the current average range between EUR 35 and 70/MWh. A Portuguese auction in August 2020 reached EUR 11.14/MWh, although this price is considered to reflect more the value of the grid connection to the bidder than the cost of PV electricity.

A Commission study published in June 2020 shows that both solar PV and wind power can be cost-competitive in almost all EU markets by 203028. It underlines the importance of flexibility in power systems, e.g., grid interconnections, storage and demand management, to mitigate negative price trends at peak production times, which could occur when variable renewables reach a high market share.

11.4.Public R&I funding 

Figure 6 shows estimate of the public spending on research development and demonstration on solar energy technologies from 2010 to 2019, based on the data reported to the IEA. The broader “solar” reporting category is preferred here because it is completed by 16 Member States (Germany, France, Italy, Netherlands, Spain, Austria, Poland, Sweden, Denmark, Belgium, Finland, Slovakia, Czechia, Ireland, Portugal and Lithuania, in order of decreasing budget). Instead, the disaggregated value for the “solar PV” reporting category is filled on regular basis, by 6 Member States only (Germany, France, Austria, Belgium, Sweden and Denmark).

After the peak reached in 2011, a constant funding decline is observed. Since 2016 it is at an average yearly level of about EUR 230 million. A part of the decline in the 2011-2015 period may be due to a reduction in funding for solar thermal. Further factors may be a reluctance to invest in a sector without a local manufacturing base and a trend towards shifting research funds to other sectors. Nevertheless, if the EU is to keep its role as technology leader, this level will need to be increased in the future.

Figure 6: EU MSs Annual spending on solar RD&D as reported to the IEA (EUR million)

Source: JRC 2021, based on IEA data

The “Top 10” countries in terms of investments in PV RD&D, at global level, in the three years period 2017-2019 are reported in Figure 7 . Germany leads by far the list with more than EUR 266 million invested in the period, followed by France, which invested, in the same period, EUR 138 million.

Figure 7: Public RD&D Investments, Top 10 (years 2017-2019, EUR million)

Source: JRC 2021, based on IEA data

Photovoltaic activities supported by Horizon 2020

A total EU financial contribution of about EUR 259.5 million has been invested, under Horizon 2020, on activities related to photovoltaics, in the time period 2014-2020. This contribution is mostly spent for innovation actions (43%), research and innovation actions (30%), and grants to researchers provided by the European Research Council (8%). Fellowships, awarded by the Marie Skłodowska-Curie programme, absorb 6%. The same share of 6% of the overall investment is for actions for SMEs. Coordination actions, like ERA-NETs, represent 7% of the budget.

In Figure 8a the distribution amongst applications is displayed. The category "general” accounts for the bulk of funding, followed by buildings. The EU has also made significant grants for recycling technology. Figure 8b provides the distribution between materials technologies. Here tandem concepts counted as 50% for the top and 50% for the bottom cell material. A significant development is the emergence of perovskites as a major research sector.

Figure 8: EU funding to PV R&I activities under H2020, given per application and technology (years 2014-2019)

Source: JRC 2021, analysis of COMPASS data  26

11.5.Private R&I funding

The latest private R&I spending in solar energy has been estimated by JRC from the numbers of patents.

Figure 9: Private R&D Investments in Photovoltaics (EUR million)

Source: JRC 2021 27  

According to this analysis, the EU private R&D spending on PV, which was about EUR 2 000 million in 2010, declined to EUR 1 400 million in 2018 ( Figure 9 ). In the same graph, the decrease of the private spending in Japan is remarkable, which dropped from about EUR 4 900 million in 2010 to EUR 740 million in 2018. In stark contrast, China records an increase during the same 2010-2018 period from EUR 2 000 million to about EUR 3 300 million.

The rather low flows of private investments into R&D appears counterbalanced by high flows of investments in project development. Solar photovoltaics attracted more private investment in deployment in 2019 than in any year since 2012, the tail-end of the booms in Germany and Italy driven by government-set feed-in tariffs. The sector in 2019 benefitted from the spread of low-cost projects in Spain and elsewhere, relying on tariffs set in auctions or via private sector power purchase agreements. In 2019, about USD 31 billion (or about EUR 26 billion) were invested in the EU for new renewable energy capacity projects 28 .

Assuming a share of 45% for the solar photovoltaic sector, it is estimated that about EUR 13 billion were invested in 2019 in the EU for new solar photovoltaic capacity. The size of these investments and their trend provide a direction of the private sector interest which should also impact R&D.

For an international comparison, it is also useful to compare the investment costs in utility-size photovoltaic power plants in terms of the average investment expenditures per MW of capacity ( Table 1 ).

 Table 1: International investments (EUR million/MW)

Source: EurObserv'ER, online-database

11.6.Patenting trends - including high value patents

The categories considered are all patent families and the so-called "high-value" patent families 29 i.e., applications made to two or more patent offices. 

The number of total inventions in photovoltaics in the three years period 2015-2017 is reported in Figure 10 . In the given period, China has the largest patent family applications with more than 10.000 inventions, followed by Korea and Japan.

If the "high-value" patent families are considered, in the same three years period, a different picture emerges. Japan leads, followed by Korea and with the EU in the third positon ( Figure 11 ). The “high value” inventions domain is highly dynamic. In just one year, since the CPR 2020 analysis, the EU declined from the second, after Japan, to the third position, after Japan and Korea. In the same period, an increase of the Chinese “high value” inventions can be observed, which will soon surpass the EU. 

Figure 10: Total number of inventions in photovoltaics in the three years 2015-2017

Source: JRC 2021, based on EPO Patstat

Figure 11: Number of high value inventions in photovoltaics in the period (2015-2017)

Source: JRC 2021, based on EPO Patstat

11.7.Level of scientific publications 

The annual scientific output on photovoltaics is approximately 18 000 peer-reviewed articles and appears to have stabilised at this level after a decade of rapid growth. Over the last decade, China emerged as the leading single country for research output on PV in terms of number of author affiliations, but the growth has now stopped. The EU, and Europe in general, remain the 2nd largest contributors, again at stable level of output and underlining its continued high-level scientific excellence in photovoltaics.

Figure 13 shows how PV research is increasingly global, with universities and institutes from many countries now featured in addition to the traditional centres of excellence in the USA, Japan, Europe, South Korea and Australia.

The trends in highly cited 30 articles are shown in Figure 14 . The European share is approximately 30%, in line with its share of the overall number of publications per year and like that of the USA. China has seen distinct rise in its share of highly cited publications.

Figure 12: Peer-reviewed articles on photovoltaics and solar cells, with a breakdown for China, EU, Europe and USA based on author affiliations (years 2000-2020).

Source: JRC 2021

Figure 13: Top 25 countries/regions for author affiliations in PV journal articles in 2020.

Source: JRC 2021

Figure 14: Trends in highly cited article on photovoltaics with a breakdown for selected countries and regions based on author affiliation (years 2012-2020).

Source: JRC 2021

11.8.Final Considerations

The photovoltaic capacity installed is growing, with a decreasing cost of the installations. The residential systems predominant five years ago, as a share of the annual installations, are now second (25.4%), after the utility scale segment (30.5%). After the peak of the year 2013, the EU total public investment on photovoltaic research development and demonstration declined and is now below the level it was at the beginning of the decade. In terms of “high value” inventions, in one year time, the EU passed from the second, after Japan, to the third position, after Japan and Korea. If the current trend continues, Chinese “high value” inventions will soon surpass the EU ones.

12.Value chain analysis of the energy technology sector

12.1.Introduction/summary

The photovoltaic industry is characterized by a long and complex value chain, which starts from raw materials, to reach the systems installation and their maintenance, and continues until the end-of-life management and post-service operations, including dismantling and recycling. In addition to the solar cell and module manufacturers, there are the upstream and downstream industrial sectors. The former includes materials, polysilicon production, ingot production, wafer production and equipment manufacturing, glass, laminate and contact material manufacturers, while the latter encompasses inverters, balance of system (BOS) components, system development, project development, financing, installations and integration into existing or future electricity infrastructure, plant operators, operation and maintenance. Soon, it will be necessary to add (super)-capacitor and battery manufacturers as well as power electronics and IT providers to manage supply and demand and meteorological forecasts.

There are different possible ways of breaking down the value chain. Considering only the value chain manufacturing components, five main segments are generally identified: polysilicon, ingots, wafers, cells and modules. The production of each of these components requires very different processes and competencies, with a variety of specialized materials and equipment used in each of them. Currently most of the manufacturing industry is concentrated in China. Some key aspects of the global solar PV manufacturing supply chain are qualitatively described in Table 2 .

Table 2: Qualitative aspects of the photovoltaic manufacturing supply chain

Source: Adapted from: BNEF, Solar PV Trade and Manufacturing, A Deep Dive, February 2021

The top ten polysilicon and wafer firms supplied 83% and 95% of the global market in 2019, respectively. This high market concentration is because polysilicon and wafers have higher technical hurdles and factories are more expensive and require longer lead time to build. Instead, solar cells factories and, especially, module factories can be built relatively quickly and can respond faster to market trends and policy moves. This is reflected in the medium market concentration of the relevant industries. The top ten cells and modules manufacturers supplied 59% and 60% of the global market in 2019, respectively 31 .

In addition to polysilicon, ingots, wafers, cells and modules production, the value chain could also include other upstream segments (e.g., basic and applied R&D, design) and downstream parts (e.g. EPC, implementation).

The added value is distributed along the segments. The highest value added is generally located in both the far upstream (basic and applied R&D, and design) and far downstream (marketing, distribution, and brand management) parts, while the lowest value-added activities occur in the middle of the value chain (manufacturing and assembly). However, an increasing number of installations are realized in harsh climates, e.g. high UV, high temperature differences between day and night, high humidity, floating configurations. Therefore, companies are interested to control the manufacturing process to reduce risks and lower financing costs. Moreover, a high concentration of the manufacturing reduces the power of negotiations of the EU downstream industry, which is also more sensitive to potential manufacturing disruptions in the dominating region. Finally, evidence suggest that the dominance of cell and module manufacturing, allows companies to move upstream in the value chain, towards more profitable segments. Therefore, looking at the added value of a single segment of the value chain might not be sufficient to have the full insight of the industry and inform policy decision.

12.2.Turnover

According to the Global Trends in Renewable Energy Investment 2020 32 , global annual investments in solar PV were USD 126.5 billion in 2019 (EUR 106.3 billion), of which USD 52.1 billion (EUR 43.8 billion) were investments in small distributed solar capacity.

Solar capacity investment in Europe was USD 24.6 billion (EUR 20.7 billion). The EU (plus UK) share of new PV installations was 14% in 2019 with an estimated annual investment level at about USD 18 billion (EUR 15 billion).

Recently, an analysis published in 2020 puts the market size of the global PV industry at about EUR 132 billion 33 , with the segments of value chain related to polysilicon production, ingot production, and cells and module manufacturing capturing the lion share (44%). According to this analysis, the EU market size is about EUR 17.1 billion corresponding to about 13% of the global value.

More recently, the relevant industry association provided an estimate of the turnover of the photovoltaic manufacturing value chain, in the five identified segments, for the year 2020 ( Table 3 ).

Table 3: Estimated turnover in the photovoltaic manufacturing value chain (year 2020)

Source: BNEF

12.3.Gross value added 

The gross value added (GVA) in general is like the market sizes for the respective value chain segment and region, when adjusted for a trade surplus/deficit and the value of input material. The available trade data on sector level had been disaggregated proportionally, according to market size of the different segments, in

Figure 15 . Therein a potential source for inaccuracies in the GVA calculation may be found because it is likely that an export surplus exists in some segments (equipment for PV manufacturing) whilst a negative trade balance is likely for PV panels. For the solar PV sector, metal products and wafers are considered as input material, which are used mainly for cells and modules manufacturing.

Figure 15: Breakdown of GVA throughout solar PV value chain

Source: Guidehouse Insights, 2020

12.4.Number of EU companies 

The EU performs differently across the segments of the PV value chain ( Figure 16 ). Europe, along with the USA and Japan, jump started the large-scale solar PV market in the mid-2000s. This early start positioned EU companies – mostly German, Spanish and Italian - as the leaders in the industry. Since then, the market has moved to other regions and with that, some of the leaders in the industry.

Figure 16: Competitive Intensity across Each Value Chain Segment, Global, 2020

Source: Guidehouse Insights, 2020

European companies still maintain a relevant presence in the industry value chain in which the key European market players are represented ( Figure   17 ) 34 .

Figure 17: Key European market players, along the segment of the solar photovoltaic modules value chain 35 .

Source: “Climate neutral market opportunities and EU competitiveness”, report written by ICF and Cleantech Group December 2020

12.5.Employment in the selected value chain segment(s) 

PV installations creates jobs across the value chain, from the installation phase to operation and maintenance and in the up-stream sector. The photovoltaic sector employs a highly educated and skilled work force for the areas of R&D, polysilicon and wafer production and cells and module manufacturing. System designs, EPC, O&M, decommissioning and recycling are also demanding activities in terms of skills required. Other important employment relevant factors include the ensuing need for high quality education, training and certification programmes for PV technology and products.

Figure 18: Direct and indirect jobs in Solar PV (top 10 EU countries, year 2018)

Source: JRC 2021, based on EurObserv'ER data

The preliminary results of a more recent study indicates about 123 000 direct and 164 000 indirect full-time jobs in the EU PV industry in 2020. The indirect jobs figure is calculated by using the Input/Output Tables (Leontief Tables) approach. The direct jobs, instead, are determined using two different methods, for jobs in deployment and O&M segments and jobs in manufacturing, decommissioning, and recycling segments 36 .

12.6.Energy intensity considerations, and labour productivity considerations

The direct and indirect energy necessary for different photovoltaic solar cells technologies, during the whole lifetime, in China, EU and USA is compared in a recent study published in 2020 37 . Electricity, fossil fuels and energy used for transportation represent the direct energy input in the life cycle. Labour and material represent indirect energy inputs. Differences in energy consumption among photovoltaic technologies are related to the solar cells manufacturing. Mono-crystalline silicon solar cells requires more energy than solar cells based on multi-crystalline silicon. Even less energy is necessary for the manufacturing of solar cells based on thin-film semiconductors. The EU shows the best performance in terms of the EROI (energy return on energy invested) indicator, followed by China. The worst EROI is recorded by the USA, caused by its high amount of energy use by labour and electricity ( Figure 19 ).

In addition, the authors compare carbon dioxide emissions over the life cycle of the solar power installations and note how the differences of carbon dioxide emissions among technologies are mostly due to the use of electricity. As a result, for the same region more carbon dioxide emissions are embodied in mono-crystalline than multi-crystalline silicon solar cells.

Due to significant differences in carbon intensity of the production cycle, the EROC (energy return on carbon invested) indicator among regions differs from that of EROI. The EU has the highest EROC, while China has the worst performance ( Figure 20 ).

Figure 19: Direct and indirect energy investment of PV technologies in China, EU and USA.

Source: F. Liu and J.C.J.M. van den Berg, Energy Policy 138 (2020) 111234

Figure 20: Direct and indirect CO2 emissions for PV technologies in China, EU and USA

Source: F. Liu and J.C.J.M. van den Berg, Energy Policy 138 (2020) 111234

12.7.Community Production (Annual production values)

The EUROSTAT statistics on production of manufactured goods PRODCOM (PRODuction COMmunautaire) includes data on national production and EU aggregates. The EU total production value and top producer countries are reported in Figure 21 . There is a remarkable decline observed in the 10 years period 2010-2019. The EU photovoltaic total production value decreased from EUR 7.713 million in 2010 to EUR 1.364 million in 2019. 

Figure 21: EU Total Production Value and Top Producer Countries (EUR million)

Source: JRC2021, based on PRODCOM data

12.8.Final Considerations

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

On the other hand, EU has lost its market share in ingots and wafers production and solar cells and module manufacturing.

A recent investigation shows that the EU records the best performance in terms of the EROI (energy return on energy invested) indicator, followed by China and USA. The EU has also the highest EROC (energy return on carbon invested) indicator value, while China has the worst performance and USA is in the middle.

In 2018, 109 000 direct and indirect jobs in photovoltaics are reported in the EU, with a 42% increase between 2015 and 2018. According to preliminary figures, about 123 000 direct and 164 000 indirect full-time jobs are reported in the EU PV industry in 2020, for a total of 287 000 jobs 38 .

13.Global market analysis 

13.1.Introduction/summary

The EU trade balance in the solar photovoltaic sector, measured as the difference among the extra-EU import and export, is negative ( Figure 22 ). The EU solar PV imports are strongly dependent on imports from Chinese and Asian companies. 39

13.2.Trade (imports, exports) 

After years of fast reduction, the trade deficit started increasing again in the years 2016-2017. This imbalance reflects substantially the value of the imports, as the exports do not change dramatically over the years.

Figure 22: Extra-EU Import and Export (EUR million)

Source: JRC 2021, based on COMEXT data

Figure 23 show a similar behavior, recording minima and maxima at about the same years. This suggests a relationship of cause (annual installations of photovoltaic systems) and effect (import of solar photovoltaics from extra EU countries).

Figure 23: Annual photovoltaic installations in the EU (GW)

Source: AJW PV Snapshot 2021

Figure 24: Top 5 EU Importers (2017-2019) (EUR million)

Source: JRC 2021, based on COMEXT data

Figure 25: Top 5 EU Exporters (2017-2019) (EUR million)

Source: JRC 2021, based on COMEXT data

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

A representation of the solar photovoltaic value chain, which includes the main EU and global actors for the different segments is provided in Figure 26 .

Figure 26: Solar photovoltaics value chain segments, their market size, and market growth outlook. Key EU and global players per each market segment are also reported.

Source: Guidehouse Insights (2020)

EU companies are most competitive in the downstream part of the value chain and have maintained key roles in i) the monitoring and control (with companies like GreenPower Monitoring, Meteo&Control and Solar-log), ii) balance of system (BOS) segments, hosting some of the leaders in inverter manufacturing (like SMA, FIMER, Siemens, Gamesa Electric, Ingeteam and Power Electronics), and iii) solar trackers (like Soltec). European companies have also maintained a leading position in the deployment segment, where established players like Enerparc, Engie, Enel Green Power or BayWa.re have been able to move into new solar markets and gain new market share worldwide 40 .

Table 4: Polysilicon production capacity of the six largest manufacturers (year 2020)