Green Deal Industrial Plan to Save European Battery Industry

On January 17, 2023, European Commission (EC) President Ursula von der Leyen announced the Green Deal Industrial Plan, widely interpreted as the European Union (EU) response to the Inflation Reduction Act (IRA) in the US. The IRA was heralded as a landmark piece of legislation for the US energy sector when it was passed in August 2022, directing a package of more than $369 billion in funding toward clean energy technologies including renewable generation and energy storage.

Concerns have been raised about the way in which US incentives for standalone energy storage projects and domestic critical-material supply chains will impact the European battery industry. A joint statement released by the European Battery Alliance (EBA) and the EC in December 2022 noted that “the growth of the European battery industry is currently at risk” from IRA incentives. Due to rising energy prices, operating expenses for European battery storage system manufacturers are increasing. They may no longer be able to compete with US-based battery manufacturers subsidized under the IRA.

Von der Leyen addressed these concerns while speaking at the World Economic Forum, introducing a new industrial policy plan focused on four key pillars: regulatory environment, financing, skills, and trade.

• Regulatory Environment: Key net-zero projects will be fast-tracked under the Net-Zero Industry Act. Additionally, a Critical Raw Materials Act will be introduced to increase the processing, recycling, and refinement of rare minerals in the EU.

• Financing: The EU will add a European Sovereignty Fund to help finance these efforts. Until then, existing financial support will be targeted toward the most important cleantech projects, which will enjoy streamlined financing procedures.

• Skills: As part of the European Year of Skills 2023, the EC will mandate and fund the training of skilled workers needed to develop and operate new battery storage technologies and other cleantech.

• Trade: The EU is planning to work closely with the US so that European technologies can also benefit from the IRA. For instance, the EC may push for the clean vehicle credits currently offered for US-made EVs to be extended to models that include European batteries and components.

What Are the Implications?

If translated into effective policy, the Green Deal Industrial Plan may prevent Europe’s battery market from lagging behind the US’s. Streamlining financing and approval for net-zero projects will not only increase the competitiveness of European market players but also likely result in more investments inside the EU.

It is still unclear how funds allocated under the Net-Zero Industry Act will compare to IRA subsidies. At the moment, the EU’s plans are aspirational, highlighting priorities that should be addressed in the future. However, von der Leyen’s comments addressed most of the concerns put forward by the EBA in December, suggesting that the Green Deal Industrial Plan should be seen as a positive policy development for the EU energy storage market.