In Brief
The EU has unveiled a €4 billion grant opportunity for clean energy projects, including energy storage, funded by the bloc’s Emissions Trading System. This initiative follows the approval of the Net Zero Industry Act, aiming for 40% of clean energy to be domestically manufactured.
The funding will support various projects, from decarbonization efforts to cleantech manufacturing and pilot programs for deep decarbonization.
The Innovation Fund can cover up to 60% of project costs, with applications due by April 9, 2024. Additionally, a separate €800 million auction aims to boost renewable hydrogen production. This announcement coincides with challenges facing Europe’s battery manufacturing industry, prompting a pause in investment by some firms. To address supply chain concerns, the EU also signed a political agreement on the Critical Raw Materials Act.
Details
The European Union has introduced a significant funding opportunity of €4 billion (approximately US$4.4 billion) for clean energy initiatives, encompassing both upstream and downstream projects, with a special emphasis on energy storage. This funding, drawn from the EU’s Innovation Fund, is derived from revenues generated by the bloc’s Emissions Trading System (ETS), designed to hold polluters accountable for their greenhouse gas emissions.
This announcement follows closely on the heels of the European Parliament’s endorsement of the Net Zero Industry Act (NZIA). The NZIA aims to ensure that Europe can fulfill 40% of its clean energy deployment needs through products manufactured domestically. The EU’s grant initiative spans five distinct categories. The largest portion, €2.4 billion, is allocated to projects categorized under “general decarbonization.” These projects may vary in scale, with capex thresholds ranging from over €100 million for large-scale endeavors to €2.5-20 million for small-scale initiatives.
A further €1.4 billion has been earmarked for cleantech manufacturing projects, focusing on the production of components for renewable energy, energy storage, heat pumps, and hydrogen generation, with a minimum capex requirement of €2.5 million. An additional €200 million has been allocated to “pilot” projects, requiring a minimum capex of €2.5 million and centered on achieving “deep decarbonization.”
The Innovation Fund offers coverage for up to 60% of a project’s relevant costs, with information sessions scheduled for November 30 and December 7, ahead of the April 9, 2024 application deadline. In tandem with this grant opportunity, a separate €800 million initiative, conducted via auction, aims to scale up renewable hydrogen production, with a deadline set for early February.
However, this announcement comes amidst challenges facing Europe’s battery manufacturing ecosystem. The industry has witnessed investment outflows, triggered by generous tax credit subsidies for clean energy manufacturing in the United States. Notably, Freyr Battery, a Norway-based lithium-ion gigafactory firm, announced a halt in further investment in its European projects to focus on scaling in the US.
This decision underscores concerns about Europe’s policy response to the US’ Inflation Reduction Act. Despite these challenges, the EU remains committed to fostering a robust clean energy sector, as evidenced by recent initiatives such as the Critical Raw Materials Act, aimed at ensuring a secure and sustainable supply chain for critical resources.
