The EU intends to address the supply of raw materials – pv International magazine

From pv magazine 24/06

At the beginning of May 2024, the EU Critical Raw Materials Act (CRMA) entered into force. Striving to diversify supplies of strategic raw materials, CRMA sets standards for domestic production capacity of these materials.

The regulation states that EU national mining capacity should be able to extract the ores, minerals or concentrates needed to produce at least 10% of the annual consumption of strategic raw materials “to the extent that the Union’s reserves allow it”. It also stipulates that national processing capacity, covering all intermediate stages of processing, should be able to produce at least 40% of the EU’s annual consumption of strategic raw materials. Moreover, according to the regulation, the EU’s recycling capacity, covering all intermediate recycling steps, should cover at least 25% of annual national consumption.

Importantly, the CRMA also states that by 2030, no more than 65% of the EU’s annual consumption of any strategic raw material at any relevant stage of processing may come from a single third country. It is worth noting that the above targets are not legally binding, meaning member states cannot be taken to court for failing to comply with them.

Raw materials considered strategic include aluminum, cobalt, copper, gallium, lithium, graphite, nickel, silicon metal and rare earth elements for magnets.

Faster permitting is also key. Under the CRMA, mining projects will receive permits within a maximum of 27 months, while recycling and processing projects should receive permits within 15 months.

The entry into force of CRMA takes place in an unstable geopolitical situation. Following the adoption of CRMA in a plenary vote in December 2023, the European Parliament noted in a statement that “since Russia’s war with Ukraine and China’s increasingly aggressive trade and industrial policies, cobalt, lithium and other raw materials have also become a geopolitical factor.”

Critical raw materials mainly come from outside the European Union, and for some of them the European Union is solely dependent on one country. According to the European Commission, China provides 100% of the EU’s supply of heavy rare earth elements, Türkiye provides 98% of the EU’s boron supply and South Africa provides 71% of the EU’s platinum.

The Commission plans to decide by December 2024 on a list of strategic projects that significantly contribute to security of supply. Under the plans, these projects will benefit from faster permitting and easier access to financing.

As some EU politicians have noted, access to financing for mining projects remains difficult. Greek MEP Anna-Michelle Asimakopoulou described CRMA as an “important first step”, but added that the private sector needed more incentives to invest. Kerstin Jorna, Director-General of the European Commission for the Internal Market, Industry, Entrepreneurship and Small and Medium-sized Enterprises, highlighted what she called “massive manipulation” in the current nickel market.

Jorna added that CRMA opens the door to joint demand aggregation and joint purchases of raw materials, similar to the already existing system of joint purchases of natural gas. The regulation also imposes on enterprises the obligation to ensure the security of supplies of raw materials.

“And if you look at the Net Zero Industry Act (NZIA), it actually tells member states when you auction… or you have an order or you give a subsidy, you can impose certain non-price criteria, such as green nickel in the battery that you buy for your system energy storage,” Jorna added.

NZIA center stage

The NZIA, which is closely linked to the CRMA, was adopted by the European Parliament in its plenary session in April 2024. Formal approval by the Council of the European Union is expected in summer 2024.

NZIA sets a target for Europe to meet 40% of its annual deployment demand with net zero technologies by 2030 based on National Energy and Climate Plans (NECPs) and capture 15% of the global market value of these technologies. As with the CRMA, these targets are not binding on Member States.

Technologies supported include renewable energy systems such as solar, hydrogen, onshore and offshore wind, and energy storage. This also includes carbon capture and nuclear energy.

The regulation aims to simplify the permitting process by setting maximum deadlines for issuing permits for projects. In the case of Strategic Net Zero Projects, the length of the permit issuance process should not exceed 12 months for facilities with an annual production capacity of 1 GW and above and 9 months for facilities with an annual production capacity below 1 GW.

Specifically for solar, NZIA sets a target of achieving at least 30 GW of operational solar production capacity by 2030 across the solar PV value chain, in line with targets set by the European Photovoltaic Industries Alliance. According to the European Commission, currently 97% of solar panels imported into the European Union come from China. Member States should also establish national programs to support the mass use of rooftop solar energy, in line with the NZIA Regulation.

Funding gap

In terms of financing, NZIA states that several EU funding programs are available – such as the Recovery and Resilience Facility, InvestEU, Cohesion Policy programs and the Innovation Fund – to finance investment in net zero technology manufacturing projects.

The Innovation Fund has so far awarded €400 million ($434.8 million) over two years to support new investments in solar energy projects. For example, in January 2024, Enel Green Power’s “3Sun” heterojunction cell and module manufacturing plant secured a financial package worth €560 million to support the expansion of its production capacity. Located in Catania, Sicily, 3Sun’s existing production capacity of around 200 MW per year is expected to grow to 3 GW by the end of 2024, becoming the largest solar factory in Europe.

The financing is made possible thanks to the support of a consortium of Italian banks, whose involvement is supported by the Italian export credit agency SACE, and direct financing from the European Investment Bank (EIB) supported by the InvestEU program. The amount of the EIB loan is EUR 47.5 million. However, the EIB financing also includes indirect loans to commercial lenders for an amount of €118 million, which may be increased to €342 million in 2024, bringing total EIB support to 3Sun to €389.5 million.

However, the funds made available so far are a drop in the ocean compared to the huge investments needed to scale up the production of mining and green technologies in Europe. Industry observers say the NZIA and CRMA are failing to respond to the Inflation Reduction Act (IRA), which offers tax incentives, among other benefits.

“(The) NZIA is less effective than the IRA because the EU cannot use taxes as a cost-recovery instrument and the EU is to some extent dependent on green industrial subsidies provided by member states from their own budgets,” said Louise van Schaik, head of the unit and senior researcher at the Clingendael Institute in The Hague.

In any case, the targets set out in CRMA and NZIA are seen as ambitious and difficult to achieve. “For critical raw materials, it will still be difficult to open mines in Europe because it is unpopular with voters, and when EU industry moves abroad there is a risk of being accused of neo-imperialism or climate colonialism, on top of the fact that its private sector does not have the expertise in mining and processing,” said Van Schaik. “But commodity partnerships with Kazakhstan, Canada, Chile and other countries are a good start.”

External opinion

In a speech delivered to the College of Europe in Bruges in April 2024, Fatih Birol, executive director of the International Energy Agency (IEA), said that if coal is king, “photovoltaic energy is queen because solar energy wins.” However, he raised the issue of over-reliance on Chinese solar panels.

“It was Germany, Spain and Italy that started their adventure with the sun around the world about 25 years ago,” said Birol. “Solar started in Europe. We were leaders, producers. But after a few years, the governments gave up and China took control. And China is now dominating the game around the world, in a big way. Therefore, in my opinion, it was a serious mistake that we did not have a coherent solar policy, and now we have missed a big opportunity.”

Asked for his views on NZIA, Birol said it was a step in the right direction, but added that policy needed to be much stronger, with clear incentives and a much greater role for public sources. “We cannot leave everything to the markets here,” Birol said, repeating calls for an industrial strategy.