New dawn: The new circular net-zero age
In November this year, the European Union (EU) will celebrate its 30th anniversary amid a series of complexly intertwined challenges. The fundamental principle upon which the EU was founded was to build an economic and political body that would provide solutions to the ever-evolving global landscape following the collapse of the Soviet Union.
The EU has always enjoyed convenient energy supplies from its eastern and southern neighbors (in addition to its own, of course, notably from the North Sea). The Russian war on Ukraine created circumstances under which European leadership found itself compelled to react -through the Temporary Crisis Framework, which is now being amended as Temporary Crisis and Transition Framework- to minimize the region’s energy dependencies.
In my view, the EU has always recognized that its energy dependencies and deteriorating manufacturing capabilities have taken a toll on its political influence in the global arena. That said, the EU has argued that ensuring competitiveness against other global economic powerhouses is the best long-term strategy.
Long before the Russian war on Ukraine, the EU had designed plans and regulations to capitalize on its green and digital transformations by supporting renewable energy production, net-zero innovations, sustainable alternative fuels technologies and later, industrial decarbonization though electrification and digitalization. The European Green Deal was approved in 2020 with the overarching goal of making the EU climate neutral by 2050. However, the EU was forced to speed up and intensify its actions due to the following seismic changes:
- The aftermath of the COVID-19 pandemic resulting in higher inflation and serious disruptions in the global supply chains
- The Russian war on Ukraine and consequential exposure of Europe’s energy dependencies
- The United States’ Inflation Reduction Act and fears that its USD$370 billion climate action incentive would lure private investments into the US at a concerning scale
- The United Kingdom’s Green Day plans aspiring to propel domestic economy through subsidies and government-managed competitions in innovative free and low-carbon technologies (e.g., advanced nuclear reactors and carbon capture and storage)
The EU responded to these by revamping its Green Deal, reinforcing broader macroeconomic values and objectives as outlined in NextGenerationEU, REPowerEU and, as of February 2023, the Green Deal Industrial Plan. Equal to the demand side, the EU realizes that a strong net-zero ecosystem can only be sustained when it is backed by strong net-zero manufacturing on the supply side within its borders.
The Net-Zero Industry Act (NZIA), as proposed by the European Commission, once passed provides answers to the supply side pertaining to specific net-zero technologies. Before we discuss these technologies, it’s important to lay down the key objectives of the NZIA Act:
- More rapid deployment of investments in net-zero technologies
- Reducing CO2 emissions in hard-to-abate industries
- Reinforcing Europe’s Single Market in response to the Brexit aftermath
- Investing in reskilling and upskilling the European workforce to assist in the green and digital transitions
- Supporting and facilitating innovations in new and emerging net-zero and digital technologies
- Simplified governance and cohesion among its member states
- Monitoring implementation and measuring progress against the European Fit-for-55 (55% emission reduction against 1990 levels by 2030).
Due to the demands created by the various other provisions in the European Green Deal, it’s critical to concentrate efforts on setting up and sustaining upstream supply chains in certain targeted technologies, i.e., strategic net-zero technologies like the ones discussed below.
Solar photovoltaic (PV) and solar thermal technologies
Currently, almost all solar PV modules are imported into Europe, mainly from China. Some upstream segments of the supply chain are at 90% net import (such as ingots and wafers). The EU hopes to be in a position to fulfill up to 40% of its solar PV needs by 2030, a market share that translates into 30GW per year.
Onshore wind and offshore renewable technologies
Though the EU is a world leader in offshore wind turbine blade manufacturing, its trade balance is deteriorating due to higher energy costs and competing global markets (e.g., UK, China, US, and India). The NZIA calls on European wind manufacturers to consolidate and work together to expand their market share to a total manufacturing capacity of at least 36GW per year by 2030.
Battery/storage technologies
Consistent with the European Battery Alliance, the NZIA seeks to satisfy at least 90% of the total batteries manufacturing demand within the EU. This translates into an EU manufacturing capacity of at least 550GWh per year by 2030.
Heat pumps and geothermal energy technologies
The EU estimates that demand on heat pumps will increase by more than six times by 2050. Ground source heat pumps are seen as an integral technology in decarbonizing and innovating the energy needs of buildings and urban communities of the future.
Electrolyzers and fuel cells
The EU aspires to achieve production of 10 million tons of domestic renewable hydrogen by 2030. However, to achieve climate neutrality by 2050 the EU estimates that 450 million tons of hydrogen will have to be produced from renewable energies and natural gas, underpinning the need for accessible and adequate permanent CO2 storage in geological formations within its borders. To increase the share of renewable hydrogen molecules, the EU plans to launch a hydrogen funding bank in which it awards premiums per kilogram of hydrogen produced (as opposed to production tax credits in the US Inflation Reduction Act).
Sustainable biogas/biomethane technologies
The European Biomethane Industrial Partnership was formed to help achieve the REPowerEU biomethane production target of 35 billion cubic meters by 2030. The NZIA calls for substantial increase in current biogas production and subsidies toward the cleanup of biogas to produce biomethane as a sustainable substitute to natural gas.
Carbon capture and storage (CCS) technologies
The EU estimates that at least 50 million tons of CO2 will have to be injected in permanent geological storage facilities within the European region by 2030. NZIA calls on major oil and gas companies to share data of their depleting resources, and to invest and facilitate investments in these authorizations to meet the EU’s targets. The Act seems to suggest that a significant part of sequestered CO2 will come from hydrogen production from natural gas (through conventional steam methane reforming technologies). The future carbon network and storage will be a critical infrastructure to decarbonizing industries in Europe.
Grid technologies
The transformation of electricity grids, both on the transmission and distribution sides, plays a critical role in enabling reliable integration of smart solutions. High-voltage direct current (HVDC), onshore and subsea cable manufacturing, and transformers and offshore substations, will play a large part in the ambitious 2030 wind power manufacturing targets. Similarly, on the distribution side, the introduction of electric vehicles smart charging (EVSC), smart energy management systems for buildings, and industrial electrification will require all-encompassing digital data acquisition and management to institute flexible, efficient, and reliable electricity grids that can meaningfully interact with the many parties and devices enabling demand-side responses from consumers and the uptake in renewables over the next decade.
My Take
The EU is responding to the global shifts in trade and green and digital transitions. As it focuses on manufacturing up to 40% of its total deployment in net-zero strategic projects by 2030, it will be interesting to see how the 27 member nations will work together to develop cohesive permitting and regulatory frameworks to expedite implementing net-zero strategic projects without prejudice to their own national frameworks.
Given the urgent nature of the Green Deal plan and ensuing regulations, little work has been done to assess the economic, environmental, and social impacts of these projects.
The EU has achieved a lot over the last 30 years and hopes the next decade sets out foundations for swift and sustainable transformation in the areas of climate change and net-zero innovations. Our expert engineers, scientists, technologists, and advisors at Hatch share that vision and are passionately committed to the development of innovative technologies for non-carbon-based energy production, delivery, and storage that will help usher in a new global net-zero age.
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