ICF International July 2014 Study on the competitiveness of the EU Renewable Energy Industry(both products and services) Final Report to DG Enterprise & Industry 31 July 2014 EUROPEAN COMMISSION Directorate-General for Enterprise and Industry Directorate B Sustainable Growth and EU 2020 Unit B1 - Sustainable Industrial Policy and Construction Contact: Cesar Santos, Policy Officer E-mail:Cesar.Santos@ec.europa.euEuropean Commission B-1049 Brussels EUROPEAN COMMISSION Directorate-General for Enterprise and Industry Directorate B Sustainable Growth and EU 2020 2014 Study on the competitiveness of the EU Renewable Energy Industry (both products and services) Final Report to DG Enterprise & Industry 31 July 2014 LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet (http://www.europa.eu). Luxembourg: Publications Office of the European Union, 2014 ISBN 978-92-79-39410-2 doi: 10.2769/33503 European Union, 2014 Reproduction is authorised provided the source is acknowledged. Printed in Belgium Europe Direct is a service to help you find answersto your questions about the European Union. Freephone number (*): 00 800 6 7 8 9 10 11 (*)The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). Study on the competitiveness of the EU Renewable Energy Industry - Final Report i TABLE OF CONTENTS LIST OF ACRONYMS AND ABBREVIATIONS .................................... ii EXECUTIVE SUMMARY .................................................................. iv 1Introduction ........................................................................ 1 1.1The study has sought to provide a snapshot of competitiveness across the EU renewable energy industry whilst identifying key areas for improvement ........................................................................... 1 1.2Various information channels were used to maximise the quality of insights................................................................................................... 1 2Development of the EU renewable energy market has been assisted by strong and consistent EC policies ............. 4 3Competitive strengths of the EU REI .................................... 8 4Insights into the EU offshore wind value chain .................. 14 4.1Competitive strengths across the value chain ...................................... 14 4.2Current and emerging threats to the industry ...................................... 15 4.3Strategies for success being pursued within the EU offshore wind industry ................................................................................................ 18 4.4Market outlook for the EU offshore wind industry ................................ 20 4.5Policy needs for the EU offshore wind sector ........................................ 22 5Insights into the EU solar PV value chain .......................... 24 5.1Competitive strengths across the value chain ...................................... 24 5.2Current and emerging threats to the industry ...................................... 26 5.3Strategies for success being pursued within the EU solar PV industry ................................................................................................ 28 5.4Market outlook for the EU solar PV industry ......................................... 30 5.5Policy needs for the EU solar PV sector ................................................ 32 6Impact of intermittent renewables on utility business models and EU energy market integration ......................... 35 7Conclusions and policy suggestions ................................... 37 Study on the competitiveness of the EU Renewable Energy Industry - Final Report ii LIST OF ACRONYMS AND ABBREVIATIONS BOTBuild-Operate-Transfer CENEuropean Committee for Standardization CfDContracts for Difference CSPConcentrating Solar Power CZKCzech Koruna ECEuropean Commission ECNEnergy Research Centre Of The Netherlands EGSEnhanced Geothermal Systems EPICEngineering, Procurement, Installation and Commissioning Companies ETSEmission Trading System ERANETEuropean Research Area NetworksEUEuropean Union GHGGreenhouse Gas GSHPGround Source Heat Pump GWGigawatt FIPFeed-In Premium FITFeed-In Tariff FTEFull Time Employment IEAInternational Energy Agency IPPIndependent Power Producer IRENAInternational Renewable Energy Agency KPIKey Performance Indicator kWhKilowatt Hour LCOELevelised Cost of Energy LCRLocal Content Requirements MSMember States MWMegawatts NREAPNational Renewable Energy Action Plan O&MOperation & Maintenance OECDOrganisation for Economic Co-Operation and Development OWCOffshore Wind Company PVPhotovoltaic R&DResearch & Development RD&DResearch Development & Demonstration RDIResearch & Development Initiative RERenewable Energy REDRenewable Energy Directive Study on the competitiveness of the EU Renewable Energy Industry - Final Report iii REIRenewable Energy Industry RETRenewable Energy Technology SCSupply Chain SMESmall or Medium Enterprise USDUnited States Dollar WECWorld Energy Council Study on the competitiveness of the EU Renewable Energy Industry - Final Report iv EXECUTIVE SUMMARY Introduction This is the Executive Summary of the final report from a study conducted by ICF International, supported by CE Delft, on behalf of the European Commission Directorate-General Enterprise and Industry (DG ENTR).It provides a consolidated summary of the key conclusions from an analysis of competitiveness of the European renewable energy industry (REI), including a detailed analysis of the challenges and opportunities for companies operating in the offshore wind and solar photovoltaic (PV) sectors. It also provides a set of suggested policy recommendations for DG ENTR to consider. The key objectives of the study were to: Provide an assessment of the competitiveness aspects related to EU REI sectors and associated sub-sectors, namely biomass energy, hydropower, geothermal energy, ocean energy, solar energy and wind energy; Assess the impact of EU legislation across these six sectors; Assess and define the future potential for renewable energy products and services for different companies sizes in the EU and provide an in-depth strategic outlook about future developments; and, Identify ways and means for increasing the competitiveness of the sector. Approach The work was carried out between November 2013 and July 2014 and is based on a number of information channels. The main research approach was a detailed literature review. This included analysis of various published databases to examine R&D investment, turnover, employment, production and trade data for EU REI sectors. This research was supported by consultations with European renewable energy industry trade associations who provided invaluable insights on current market dynamics, challenges and policy needs.A subsequent piece of research was designed to elicit feedback on market opportunities, operational and market challenges as well as specific policy needs from 35 companies operating in the offshore wind and solar PV sectors.The rationale for this choice of sectors was based on the very different market outlooks for these areas: offshore wind offers enormous growth prospects to 2020 and beyond; whilst solar PV (which is currently the second most installed renewable energy technology in the EU on an annual basis, after ten years of market expansion and cost reduction), must now exist in an environment where incentive structures offer reduced benefits.In each sector, both large firms and SMEs1, were selected to represent different points in the value chain. Competitive strengths of the EU REI The study has identified several notable strengths of the EU REI, which allow it to stay competitive in the global market: The EU renewable energy supply side has been developing for over 100 years. The industry has capitalised on this comparative advantage and demonstrable track record of successful EU projects to open up new markets globally, especially in onshore wind and solar PV. EU companies have helped to set technology and operational standards that have been adopted in emerging markets. 1 SMEs are defined as employing