The state of EU renewables – Solar cell plans encouraging but heat pump market could go the same way as European PV did

The European Commission has published its second annual assessment of the competitiveness of the EU’s renewable energy technology industries, and it had a warning for policymakers about the trade balance trend being experienced by heat pump makers.

November 10, 2021

With the European Commission planning to draft legislation to simplify permitting for clean energy projects next year – and issue a ‘communication on solar energy – a recent paper examining the state of play in European renewables technology deemed a revival in EU solar manufacturing “looks not too unrealistic, given the current number of potential projects.”

The commission has drafted its second annual summary of the state of competitiveness of various European renewables technologies, to advise EU counterparts the European Parliament and the European Council of high ranking member states ministers.

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The document, published on the EU’s law website on October 26, highlighted the bloc’s global leader status in terms of solar R&D, polysilicon production, PV project operations and maintenance, and the manufacturing of balance-of-system components such as inverters and trackers.

The commission warned, however, the bloc has fallen to third in the list of markets for “high-value innovation” in solar, supplanted by South Korea in the last year or so, and is due to “soon” fall behind China too, with Japan set to maintain its global lead.

The glaring imbalances in solar production were highlighted by the estimate the 12.8% of the market held by Europe – and worth €7.4 billion, in 2019 – was almost entirely down to poly production. With Europe’s solar module exports having been stagnant for years, the volume of imported modules, from China and other Asian countries, had risen to represent a trade deficit of €5.7 billion in 2019.

Green panels

With a rising number of European cell manufacturing operations being announced, the commission document noted EU producers lead their U.S. and Chinese rivals when it comes to the volume of energy their panels will generate during their lifetime versus the energy required to create them; by lowest energy intensity; and by energy return on carbon input, with the latter reflecting the nature of the electricity used to power production processes.

While no-one in European solar will need reminding of how the industry lost its global manufacturing leadership to China, the commission warned the same process could occur in the global market for those heat pumps which are mainly aimed at heating homes and offices.

While Europe has a strong R&D base when it comes to heat pumps in general, the €249 million trade surplus ‘mainly-heating’ devices brought to the bloc in 2015 had become a €40 million deficit last year.

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In terms of heat-pump roll-out, the document pointed out a typical seasonal coefficient of three for the devices signifies a kilowatt-hour of electricity is required for each kWh of heat they produce, ensuring heat pumps will only be cost-competitive in markets where the price of electricity is no more than three times more expensive than gas. The commission pointed out electricity prices range between 1.5 and 5.5 times more expensive than the fossil fuel across EU member states, an issue the executive aimed to address in July with its proposed amendment to the EU Energy Tax Directive, and by extending emissions trading into the buildings sector.

The big push the EU has made to foster lithium-ion battery manufacturing is set to see the bloc become the world’s second biggest battery cell manufacturer in 2025, behind China, although that is likely to worsen dependence on critical raw materials such as cobalt, lithium, graphite, silicon, titanium, and niobium, as well as nickel, an input material which is more abundant but for which the EU still relies on around 56% of imports to meet demand. In solar manufacturing terms, the EU is already concerned about boron, gallium, germanium, and indium, particularly if its grand cell and module manufacturing plans are realized. The bloc is also dependent on Asian companies for its battery cell production line equipment.

EVs

The electric vehicle (EV) battery raw materials needs will only tighten if an expected fleet of more than 50 million EVs is on European roads at the end of the decade. That would at least offer a significant energy storage reserve for power grids, with the commission estimating the more than 2 million EVs in Europe last year already added up to more than 60 GWh of storage capacity.

On batteries, cost is still the chief concern, with grid scale stationary devices costing around €300-400/kWh and household systems – for which Germany has two-thirds of Europe’s 2.3 GWh market – costing twice that. Halving those numbers will be critical for mass deployment of lithium-ion storage, the document stated.

Supply chains

Raw materials, again, were the main concern cited in relation to the EU’s global standing in the green hydrogen market, with South African iridium and platinum and China’s rare earth metals in the spotlight. With the EU having a strong research base when it comes to electrolyzer technology, the report said, the only limit on green hydrogen growth will be clean energy generation capacity, given each unit of the gas produced requires 1.5 units of green electricity.

That need for cheap solar and wind power could mean a focus on the Middle East and North Africa when it comes to synthetic transport fuels for uses in heavy goods vehicles, aviation and maritime, the commission observed, although the EU also has extensive legacy fossil fuel infrastructure in place which could be leveraged for more sustainable options.

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