EU push for 'Made in Europe' green tech splits member states

Europe is mulling new rules to localise battery manufacturing, in a move that brings risks and opportunities for startups.

A draft European Commission proposal seen by Reuters would set minimum requirements for public procurement to buy EU-assembled batteries, solar and wind components, and electric vehicles.

The draft sets out a phased plan. Within a year of the law taking effect, battery systems bought by public bodies must be assembled inside the EU, with core components sourced locally. After two years, the rules tighten, requiring even more of each system to be made in Europe.

Member states divided

The Commission calls this a "strategic warning signal," as EU manufacturing’s global value share has fallen from 20.8% to 14.3% in the past two decades, writes Reuters.

However, member states are divided. France is all-in, while Sweden and the Czech Republic warn the move could hike prices and hurt Europe’s global competitiveness.

"'European preference' criteria should be used only when other instruments have been carefully analysed and proved insufficient," another document from nine EU countries including Czechia, Estonia, Finland, Ireland, Latvia, Malta, Portugal, Sweden, and Slovakia, seen by Euronews, stated in December.

The final proposal is due next week, with negotiations likely to get heated.

What it might mean for Europe's battery players

The proposed rules could mean a rare boost of demand certainty for European clean tech makers and the VCs funding their scale-up plans. On the other hand, a tighter ‘buy European’ regime could just as easily turn into a cost burden that blunts their global edge.

Currently, China's has a stranglehold over production of batteries, solar panels and other components.

Competing with China on cost is practically impossible, however, if Europe wants to cut reliance on foreign powers, it may have to absorb these costs in a what some investors are calling a 'sovereignty premium'.

"European society needs to make a fundamental decision to either pay up for energy/materials independence in the form of a sovereignty premium or remain dependent, with all that attached risk,” Torben Schreiter, partner at Extantia Capital, said last year.