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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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EU's Renewables Surge Faces China Supply Chain Dilemma

  • The EU's Renewable Energy Directive aims for 42.5% renewable energy consumption by 2030, potentially heightening reliance on Chinese supplies.
  • Concerns arise over Europe's demand for Chinese critical materials, batteries, solar panels, and wind turbines amidst competitive market challenges.
  • Industry associations like WindEurope and SolarPower Europe warn of potential risks to European manufacturing and the dominance of cheaper Chinese products.
Renewables

The European Union could move from one heavy energy dependence to another as the achievement of its green energy targets could depend on China as much as the EU's gas deliveries depended on Russia until two years ago.  

The EU is sticking to its net-zero targets, and the European Parliament has just endorsed much higher binding renewable energy targets by 2030 by passing the Renewable Energy Directive, a key part of the European Green Deal for the EU to become a carbon-neutral bloc by 2050.  

The directive, which needs EU member states approval to become law, raises the targeted share of renewable energy in the EU's energy consumption to 42.5% by 2030, up from a current target of 32%.

To compare, renewable energy represented 21.8% of the energy consumed in the EU in 2021, down from 22.1% in 2020, according to Eurostat

As Europe now pushes to slash emissions and accelerate the rollout of renewable energy and electric vehicles, a new threat has emerged in its supply chain—too much dependence on Chinese critical materials, lithium-ion batteries, solar panels, and wind turbines. 

The EU is looking to keep domestic manufacturing in the green energy supply chain but is currently failing as low-cost Chinese products and the U.S. Inflation Reduction Act could take away Europe's competitiveness if the bloc doesn't adopt measures to bolster it. 

"Without implementing strong measures, the European energy ecosystem could have a dependency on China by 2030 of a different nature, but with a similar severity, from the one it had on Russia before the invasion of Ukraine," says a paper drafted by the rotating Spanish presidency for an EU summit in early October, as quoted by Reuters.  

The paper obtained by Reuters expresses concern that with the green energy and net-zero targets, the EU's demand for lithium-ion batteries, electrolyzers for green hydrogen, and fuel cells would surge 10 to 30 times in the coming years, and China could play a major role in these supply chains. 

Last week, European Commission President Ursula von der Leyen called out China for its unfair trade practices in the supply chain of solar panels. 

"We have not forgotten how China's unfair trade practices affected our solar industry. Many young businesses were pushed out by heavily subsidised Chinese competitors. Pioneering companies had to file for bankruptcy. Promising talents went searching for fortune abroad," von der Leyen said in the EU State of the Union address. 

In the EV sector, global markets are now flooded with cheaper Chinese electric cars, distorting competition, she noted, adding that the Commission is launching an anti-subsidy investigation into EVs from China. 

"Europe is open for competition. Not for a race to the bottom," the Commission's president said. 

European industry associations are also calling for support and welcoming the EU's efforts to strengthen domestic manufacturing supply chains. 

The WindEurope association, for example, said last week that unless the EU changes its policies, it could lose European manufacturing.  

"And the struggles of the European wind supply chain mean Chinese turbine manufacturers are now starting to win orders here. They offer cheaper turbines, looser standards and unconventional financial terms," WindEurope said, commenting on von der Leyen's address.  

"There is a very real risk that the expansion of wind energy will be made in China, not in Europe."  

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Days before the state of the union speech, the SolarPower Europe association warned that record-low prices of solar imports to Europe risk undermining the EU's strategic autonomy goals and driving more European manufacturers into bankruptcy.  

"Right now, we risk losing a key strategic industry in Europe, precisely at the moment when energy transition geo-politics require supply chain diversification, and a revival of the European solar manufacturing sector," SolarPower Europe wrote in a letter to the EU's top institutions.  

By Tsvetana Paraskova for Oilprice.com

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