IV: Making Europe’s green transition a success story for industry

KPI 32

KPI 33

Wind & Solar
installed power capacity, GW

Final energy consumption in 2005 and 2022
Share by source, %

KPI 32

KPI 33

Observations

China is world leader in both wind and solar power capacity, showing unrivaled capacity growth over the last 10 years. For both wind and solar capacity, Europe comes second before the US, but the US have achieved faster growth in solar capacity.
And yet, in the EU the share of renewables in the energy consumption mix is substantially higher and has been growing faster than in China and the US. This reflects also Europe’s success in lowering energy intensity as compared to its peers.
Cost of solar energy generation differs globally as well as across Europe.
According to industry experience, renewable energy generation is cost-competitive compared to non-renewable sources. Aligning electricity infrastructure investments with renewable energy deployment will impact on electricity cost in the short term and ultimately allow the reduction of the total energy bill.

Recommendations

The EU and Member States should promote a faster build-up of green energy generation, allowing for greater economies of scale for equipment producers and therefore lower costs per unit.
EU action also should include:
- Facilitating access to input materials (including Critical Raw Materials) at better conditions.
- Supporting innovation to increase the yield of wind turbines and solar panels made in Europe.
Energy from renewable sources needs to be managed efficiently. Europe needs to think of energy production and grid flexibility together to drive down all-in costs. Action points include:
- Investing in digitalised and integrated electricity grids across borders;
- Building a Single Market for Energy.
Addressing system needs will lead to lower consumer prices and to socio-economic welfare gains.

KPI 35

Electricity network investment
Investment spending in USD bn, 2022

KPI 35

Observations

Already today digitalisation and interconnected, smart grids across Member States are an important part of the answer to Europe’s high electricity prices and the challenge to secure steady ‘green’ electricity supply.
Looking forward – with electrification as the key for Europe’s green transition – electricity grids are set to become an important bottleneck. And yet:
Investment in Europe is far below levels in the US and China.

Recommendations

It is time to answer the remaining questions on the desired outcome of Europe’s energy transition: What future do nuclear energy and CCS have in Europe? How will public and private sector pull together to build infrastructure for electrified transport?
To prevent bottlenecks for an electrified economy, the EU and Member States need to enable interconnected and digitalised grids across Europe:
- streamline coordination, planning processes and permitting across the EU;
- set regulatory incentives to foster anticipatory investments in electricity networks

KPI 38

Critical Raw Materials
sourcing and refining locations, %, 2021

KPI 38

Observations

Competition for critical minerals will accelerate as countries transition globally towards Net Zero by 2050.
As of now critical raw materials are neither sourced nor refined on EU soil. I.e. EU industry must import CRMs to nearly 100% and has no guaranteed access to critical raw materials that will soon be in high demand globally.
China has built a very strong position by sourcing rare earth elements (REEs) and zinc domestically and by establishing refining dominance for most CRMs (including CRMs sourced elsewhere) on its own soil.
Rising geopolitical tensions increase the risk of CRMs being weaponised.
The Critical Raw Materials Act is a first step for Europe towards securing a sustainable supply of critical raw materials. However, it is uncertain whether it will be sufficient to the reach ambitious domestic production and processing benchmarks.

Recommendations

Diversifying the supply of raw and processed materials from around the world through trade agreements and CRM-focused partnerships is key. To achieve this, EU negotiators need to set realistic expectations for FTAs with raw-material-rich third countries.
The EU must become much more ambitious for its circular economy and provide incentives as well as a true Single Market for secondary raw materials to enable economies of scale.