(fra Kommisjonens rapport 27.2.2025)

The 2025 Competitiveness Progress Report (CPR) on clean energy technologies provides a snapshot of the trends and challenges of net-zero technologies and their manufacturing in the EU. It encompasses first a horizontal part on the competitiveness of the EU clean energy sector, followed by a sectoral analysis for 15 technologies. The report builds on the Draghi report and the Competitiveness Compass and supports the implementation of the Net-Zero Industry Act, as the act’s monitoring report. Adopted alongside the Clean Industrial Deal and the Action Plan for Affordable Energy, the report underpins both initiatives by providing insights into the technologies required to decarbonise EU industry while strengthening its competitiveness and bringing down energy costs.

Competitiveness of the EU clean energy sector

Clean energy technologies continue to be highly cost competitive in the EU, thanks to low operational costs. In 2024, renewables generated a new all-time high of 48% of electricity in the EU, increasing from 45% in 2023 and 41% in 2022.

While the roll-out rate of clean energy technologies is increasing dynamically, the EU’s net-zero industry faces a challenging business environment and fierce competition. As the Draghi report emphasises, as an innovation leader in clean technologies, the EU needs to seize the economic opportunities the global deployment of these technologies represents. At the same time, industrial policies and emerging import restrictions, such as in the US and China, have an increasing impact on the business environment, trade relations and investment decisions.

The EU is home to a diversified net-zero technology manufacturing industry, but struggles to maintain market shares globally, with China having come to dominate production in key sectors. Across net-zero technologies, the EU remains dependent on specific technology components or key raw materials within the supply chain, which poses challenges to its overall economic resilience and strategic autonomy. This is interlinked with challenges the EU faces in energy-intensive industries, which are supplying metals and chemical products to net-zero technology manufacturers.

Clean energy technologies provide high quality jobs, but challenges such as the availability of skilled workers and an ageing workforce persist. Employment continued to grow in 2023 with renewable energy jobs in the EU reaching 1.8 million. In the broader clean energy sector, around a third of the jobs is in the manufacturing of net-zero technologies, confirming the social and economic importance of these value chains.

The EU remains well placed in research in clean energy technologies but, faced with strong global competition, its competitive advantage in innovation has been eroding in recent years. Most recent data indicates that half of the reporting Member States increased their research and innovation (R&I) spending in energy technologies in 2023. If this partial reporting proves to be representative, it would result in a 9% increase of support for the Energy Union R&I priorities. Overall, the EU leads globally in public R&I spending in clean energy technologies. However, private R&I investment, which continues to provide over three quarters of R&I funding for clean energy technologies across major economies, remains significantly higher in major Asian economies. As underlined by the Draghi report and recognised in the Competitiveness Compass, further efforts are needed to ensure the EU remains among the leaders in clean tech R&I and improves its lacklustre performance in bringing this innovation to the market.

Access to risk capital remains a key challenge for starting and scaling up EU firms in the clean energy technologies sector. For 2024, initial data indicates that a difficult macroeconomic environment contributed to a significant decline of the venture capital investments in clean energy technologies in the EU, by -34% compared to 2023. This drop is linked to a decrease in venture capital activity and a lower number of large-scale investments, compared to 2023 which saw large-scale deals in battery and hydrogen-based steel manufacturing facilities. Those deals played a major role in driving EU venture capital investment in the sector to EUR 9.2 billion in 2023 (+20% compared to 2022). At the same time, provisional data indicates that the EU share of global venture capital investment in clean energy technologies remained relatively stable in 2024. The EU ranked second globally in 2023, with a share of 28%, in between the US (30%) and China (24%).

EU competitiveness in net-zero technologies

In 2024, the EU ranked second after China in newly installed solar photovoltaics (PV) capacity. EU manufacturers operate in a highly challenging environment and are struggling to compete globally. The EU is heavily dependent on PV imports from China, where more than 90% of global manufacturing facilities are situated. At the same time, the EU still has a strong role in R&I for specific PV applications.

The EU retains a strong manufacturing capacity for solar thermal technologies. Solar thermal is a mature technology, yet it continued to face challenges in 2023/2024 to keep up with other renewable solutions. While the solar thermal heat market contracted in 2023, the industrial process heat segment showed some promising development, growing three-fold year-on-year globally.

The EU remains highly competitive in wind power technology. However, EU players are under increasing pressure, notably as Chinese companies offer increasingly competitive products at lower prices. In 2024, the EU accounted for close to 13% of global manufacturing capacity in blades and nacelle assembly and about 22% of tower manufacturing. EU companies had a market share of close to 90% of the European market and 23% of the global market in 2023, marking a decline by around 7% in the global market compared to 2022.

There was unprecedented funding and interest in ocean energy technologies in 2024. Around 1230 kW of new ocean energy capacities were installed in Europe in 2024. However, China is leading on high-value inventions in this sector, ahead of the EU. Further actions is needed to increase the economic viability of ocean energy as well as to bring innovative ocean energy technology to the market.

EU battery manufacturers are facing strong headwinds as they aim to increase manufacturing capacity and market shares. China is leading in battery technology and represents more than 85% of the global commissioned manufacturing capacity in 2024, followed by the EU at about 7% and the US at around 5%. EU manufacturers are highly dependent on China for cathodes and anodes. If announced projects are realised, the EU seems on track to meet its production goals for 2030 with a share of 10% (1 510 GWh) of forecasted global operational battery production capacities for 2030. Observers predict an oversupply of battery cells in the coming years, likely to result in fierce global competition.

EU heat pump manufacturers are global leaders in high-end innovative solutions for domestic use as well as industrial heat pumps. Final assembly capacity in the EU is on track to meet the EU’s deployment needs for 2030. However, EU industry remains highly dependent on imports for certain components, such as compressors. While the EU trade balance deficit in the supply chain was reduced by one third in 2023, heat pump sales in the EU decreased by 7.2% in 2023, after a decade of growth. This trend worsened in 2024, with sales in Europe falling by 31%. This highlights the need for efforts for the sector to regain momentum.

EU companies play a strong role in the installation and final assembly of geothermal energy technologies deployed in the EU. However, the global market for key components is dominated by non-EU companies. Tackling sectoral challenges, such as the availability of subsurface data, can help EU industry.

European firms continue to play a relevant role in electrolyser manufacturing and are estimated to have provided for around a third to a quarter of the global manufacturing capacity in 2024. While hydrogen electrolysis capacity continues to expand dynamically in the EU, challenges remain in developing a large-scale hydrogen sector, ensuring the availability of large quantities of cost competitive hydrogen. Furthermore, the EU has fallen behind in fuel cell manufacturing.

The EU is home to world leading companies in biogas and biomethane production and component manufacturing. Europe presents a mature biogas and biomethane industry mainly for electricity generation, with growing markets in heat and transport. Almost 50% of production is in Europe, with Germany alone meeting 20% of global demand.

The EU is well positioned on CO2 capture technologies, but lags behind the US and Canada in CO2 transport and storage. The number of CCS projects has been growing rapidly globally and in Europe. EU actions to provide predictability for investors and increase the visibility of demand for and supply of storage are key in this regard.

The EU has some long-standing market and technology leaders for both power lines and transformers. European companies are expected to face increasing pressure from international competitors in the short to mid-term. Manufacturing of grid equipment depends greatly on access to raw materials such as copper, aluminium and grain-oriented electrical steel, where EU manufacturers are exposed to import dependencies.

In nuclear power, the EU retains one active reactor vendor, with a global market share of 5.3% of reactors under construction at the beginning of 2024. As the EU nuclear plant fleet and its workforce are ageing, efforts are needed to rejuvenate the sector. The European Industrial Alliance on Small Modular Reactors (SMRs) was launched in 2024 to facilitate the deployment of SMRs and to support a competitive EU ecosystem in this emerging technology.

While the EU hydropower industry continues to play a leading role globally, it has lost market share in manufactured turbines and in other parts in recent years. From a peak of EUR 466 million in 2015, the EU trade surplus shrank substantially to EUR 213 million in 2023. To maintain a strong manufacturing industry of components in the EU, the home market would need to be supported with new investments. There is also untapped potential in expanding pumped storage hydropower to contribute to grid flexibility.

The EU is among the innovation leaders in the emerging market for sustainable alternative fuels for aviation and maritime transport. Production capacity remains limited and needs to be scaled-up while at the same time reducing prices for such fuels.

Excess energy from industrial processes in the EU could be converted into 150 TWh of electricity annually using organic Rankine cycle (ORC) power plants. EU manufacturers are among the leading players in the global market, but there are barriers, such as long payback periods, to increasing deployment in the EU.