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The EU is pushing forward to protect its clean energy manufacturing from Chinese competition by adopting measures to help its EV, solar, and wind industries.
The bloc has been looking for months to address its dependence on imported technologies, especially cheaper products from China, which undermine the market shares of European manufacturers.
However, the new wave of clean energy protectionism could hurt supply chains and global trade and actually further drive up the prices of materials and equipment necessary to accelerate the energy transition, analysts and industry say.
EU Anti-Subsidy Probe into EV Imports from China
The EU launched in October anti-subsidy investigations into EU imports of battery electric vehicles (BEVs) from China to determine whether BEV value chains in China benefit from illegal subsidization and “whether this subsidisation causes or threatens to cause economic injury to EU BEV producers.”
The findings of the investigation, which is expected to be completed by the autumn of 2024, will “establish whether it is in the EU’s interest to remedy the effects of the unfair trade practices found by imposing anti-subsidy duties on imports of battery electric vehicles from China,” the European Commission said.
European Commission President Ursula von der Leyen said in her State of the Union Address in September that “global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies.”
“This is distorting our market,” von der Leyen added.
EU Wind Power Action Plan
The EU is also seeking to protect its wind and solar equipment manufacturers from Chinese competition.
At the end of October, the European Commission unveiled its European Wind Power Action Plan, which aims to “ensure that the clean energy transition goes hand-in-hand with industrial competitiveness and that wind power continues to be a European success story.”
“Dependencies are intensifying,” Kadri Simson, European Commissioner for Energy, commented.
“Europe does not have the intention of scaling down its decarbonisation ambitions, so it must also act to reduce its dependency on imported technologies, which will come with both economic and security risks,” the EU energy commissioner added.
The wind power package notes that low Chinese prices and shorter supply chains due to China’s dominance in steel production and raw materials “severely undermines EU companies’ ability to compete on a level playing field.”
Europe’s wind industry, which accounts for around 16% of the EU’s electricity consumption, has been struggling in the past two years amid slow permitting processes, supply chain disruptions, rising costs, and interest rates.
The WindEurope association warned earlier this year that unless measures to support the industry are taken, “There is a very real risk that the expansion of wind energy will be made in China, not in Europe.”
China also plays an outsized role in the global supply chain of clean energy technology, which presents another set of energy security concerns due to the highly geographically concentrated supply chains for both technology and critical minerals, as the International Energy Agency (IEA) acknowledges.
According to the agency’s forecast in the World Energy Outlook, China will have a 79% share of the solar PV supply chain in 2030, 64% in wind power, 68% in batteries, 54% in lithium chemicals, and 72% in refined cobalt.
The EU is concerned that it has become increasingly dependent on Chinese manufacturing despite a 50% jump in the rate of wind and solar installations last year compared to 2021, even amid rising prices.
The EU’s Competitiveness Progress Report found in October that “From raw materials to key intermediate components and final clean energy technologies, the EU is increasingly dependent on imports from third countries.”
“The situation varies depending on the technology, but for most technologies the EU depends on China for at least one stage of the value chain,” the report says.
In the solar manufacturing industry, the EU has the experience of slapping anti-dumping duties on China a decade ago, but a month after the tariffs were imposed, the EU and China reached a compromise and settled the dispute in 2013. By 2018, the EU had removed all restrictions on the sale of Chinese solar panels.
Now, talks of new trade measures are unnerving the industry.
EU Protectionism Could Slow Down the Energy Transition
In a joint statement, 433 European solar companies and associations, led by SolarPower Europe, warned at the end of November that “trade measures would injure the EU solar sector to the detriment of the EU’s green energy transition at a critical moment in time.”
“Right now, Europe produces less than 3% of the solar panels needed to meet the annual average target to hit our 2030 solar deployment goals. Considering trade investigations threatens Europe’s most promising path to rapid decarbonisation of energy,” SolarPower Europe said.
The association calls on EU leaders to consider supporting domestic manufacturing with state guarantees, adjusting state aid rules, and creating an EU-level financial tool for solar manufacturing, like a Solar Manufacturing Bank, instead of potentially slapping duties and tariffs on imports.
Norwegian company Statkraft, Europe’s largest generator of renewable energy, warned in October in its report on the global energy trends and scenarios that “Emergence of new societal challenges and increased geopolitical tension could, however, lead to more protectionism that may affect the global energy transition more than previously anticipated.”
“The negative impacts of bickering and delays are high,” Statkraft CEO Christian Rynning-Tønnesen said.
“Global collaboration and trade are key elements in a cost-effective and successful energy transition.”
