EU countries want to continue using green tech from China

Concerned that excluding Chinese manufacturers of solar panels and other green technologies could slow down the energy transition and raise costs, EU countries on Thursday (7 December) agreed to continue allowing Chinese products for most subsidy programmes for renewable energy.

EU ministers in charge of industrial policy met in Brussels on Thursday to agree on a joint position on the “Net-Zero Industry Act” (NZIA), a law that aims to boost European production of green technologies such as solar modules, heat pumps and wind turbines.

The law also aims to reduce dependence on China, which in some of the key technologies for the green transition, such as the production of solar PV modules, dominates large parts of the market.

While the European Parliament had called for a broad exclusion of Chinese products from subsidy programmes for renewable energy in its position on the law, national ministers decided on a much more cautious approach.

“What does the Net-Zero Industry Act do? It facilitates and accompanies the business case of the [green] transition,” Kerstin Jorna, Director General for the internal market and industry at the European Commission, told journalists.

It would also aim to “use, in a more strategic way, our public procurement and public funds, also through auctions, when procuring clean tech,” she added.

When supporting renewable energy projects with subsidies, EU member states use auctions for most projects, meaning that support is normally granted to the cheapest projects. With the NZIA being implemented, however, member states would be obliged to use criteria other than the price in certain cases, such as where the products used originate.

In practice, the Council’s position would see “at least” 20% of auctions for renewable energy be covered by so-called “resilience criteria”, which means that subsidies could be granted to more expensive projects, given that they use products that a produced in a country other than China.

Unlike in the Parliament’s position, however, there would not be a limit to the use of Chinese products in most cases, as member states do not have to make it a precondition not to use Chinese products when organising auctions.

Using such criteria for only 20% of auctions, instead of all of them, as initially proposed by the European Commission, pleased Germany, which feared that excluding Chinese products could endanger the roll-out of renewable energy.

“We need access to renewable technologies, which are, at the moment, mostly produced in China, in particular when it comes to PV,” German state secretary Sven Giegold told journalists ahead of the meeting.

“So we cannot close and do not want to close the European market,” he added.

France, on the other hand, had hoped for much stronger, so-called “Buy European” criteria, that would limit public support to products made in Europe.

As a concession to France, the share of auctions covered by the resilience criteria will increase over time, with the specific share however being subject to an “implementing act” by the European Commission.

“France has expressed its support for the Net-Zero Industry Act, and has proposed a recital which will be incorporated into the final agreement to progressively increase the ambition to apply non-price criteria to energy auctions,” Spanish industry minster Jordi Hereu Boher, who chaired the meeting, told journalists.

Solar sector relieved

For the European solar sector, which is heavily dependent on Chinese PV modules, the position agreed between member states comes as a relief. 

“The Council is adding much needed realism and proportionality to the proposals on public auctions and procurement,” Dries Acke, head of policy at SolarPower Europe, said in a statement.

“This is a better approach compared to the Commission’s original proposal, which suggested immediate application of non-price criteria to all public auctions, and the European Parliament, that even went a step further suggesting resilience-based pre-qualification,” he added.

During the session, many ministers praised the “balance” struck in the position between on the one hand boosting European production of green tech and reducing dependencies, while on the other hand not increasing the costs of the energy transition by excluding cheap Chinese products.

How much should ‘resilience’ cost?

The agreement allows member states to ignore the proposed “resilience” criteria if those would lead to price increase of more than 15%, which is considered “disproportionate”.

For solar PV modules, this makes it unlikely that Chinese products will be excluded, as production costs in China are 35% lower than in Europe, and 20% lower than in the US, according to a report by the Commission’s Joint Research Centre.

Ministers have also agreed on a carve-out from the rules for renewable energy projects smaller than 10 MW. 

“It’s particularly important to ensure that member states look at the sustainability and resilience criteria, but can disregard them if the costs are disproportionately high,” Polish state secretary Kamila Król said during the meeting.

Poland would support the “lowest possible levels” of auctions being subject to the new criteria, as it would “not [be] accepting significantly higher prices, for example, for photovoltaic panels,” she added.

Council and Parliament will still have to agree on the final position of the text in so-called trilogue negotiations, which will start in Strasbourg next week.

“Hopefully we have a deal as soon as possible, because we have no time to wait,” Commission director general Jorna said.

[Edited by János Allenbach-Ammann/Nathalie Weatherald]

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