This is Dana Perkins and you're listening to Switched on the BNAF podcast. BNF hosts a series of summits and forums around the world, and some of these events take on distinct themes within the energy transition. Our summit in Munich was a great example where the conversations on stage focused on industrial decarbonization. On today's show, we're bringing you the opening panel from the BNF Summit in Munich, which
took place earlier in June. The panel was titled the Next Decade of Clean Industry Manufacturing Does Europe need to become more protectionist? The panelists were open about their views. They discussed policy from import tariffs to domestic content targets and whether these policies recently are showing a sign of a more protectionist stance coming out of the EU when it comes to manufacturing. They get into how these could
impact clean energy and electric vehicles. On this panel, we were joined by Herbert Diese, Chairman of Infinion and the Mobility House, alongside Yasek Trucinsky, Deputy head of Unit net zero Industries Sustainable in Circular Products at the European Commission, along with Jan Vincent, Chief Executive officer of Automotive Sales Company, and Hawkan Voldaal, chief executive officer at Nell Hydrogen. The conversation was moderated by John Moore, chief executive officer at
Bloomberg and EF. To find out more about BNF's events and to see some of the videos coming out of this and other events, head to BNEF dot com Forward Slash Summit. But now let's listen to this panel and hear what they think about the future of clean industry manufacturing.
So the energy transition, it's a two hundred trillion dollar opportunity, it's multidecade. Also, you know, three four decades, the question of how will regions change, how will they be transformed is on everyone's lips. The IRA sort of eighteen months or so ago really changed the game and really raise the focus on manufacturing and what should be built in what region. So that's really what we're talking about here is how does Europe now position itself to be a
winner and a leader in the new clean economy. And we're really going to talk about this in terms of two questions. One is what should be made in Europe? How do we decide what gets made? And then we're going to talk about trade and then how should things be bought and sold and traded from Europe with other parts of the world. So first off, I am going to talk to as Yes from European Commission about the net Zero Industry Act. So it's popularly described as the
response to IRA. Maybe you could say a little bit about the act, the goal of the act and the key features.
Thanks a lot.
Indeed, it's part of the response, I would say. So the Nazer Industry Act, it's all about scaling up the production in the EU of nazero technologies solar, pv heat pumps, wind turbines and so on. It enters into force next month. This objective of scaling up production is quantified. We want to ensure that by twenty thirty at least forty percent of those technologies that we deploy in Europe are made here.
This is the kind of a minimum that takes into account that some of these technologies like solar we are very low today, or some of the components like magnets for wind turbines.
Two.
Now, for other technologies where we already have a big market share, like heat pumps or wind turbines, we want to maintain that market share as the deployment grows. And that means that in absolute terms, since this deployment will have to grow, also the manufacturing by twenty thirty will
have to be scaled up significantly. Very concretely, that means that for wind turbines we want to have an increase of factor three by twenty thirty, for batteries factor seven, for solar factor twenty And of course this is a big challenge, but we are setting in place the right rules to support that. The Nazer Industry Act is the central piece of that. And I don't have the time here, of course to present the datayls, just to mention two things. One thing permitting we have to make sure that the
ease of doing business is really top notch. We heard in Europe in the past that some of those giga factories we're waiting for five years to get the right permits. Now public authorities will have from nine to eighteen months to deliver the permits. Second element, access to markets. By access to markets, we mean auctions for green power, public procurement.
Subsidies to households.
For all of those schemes, public authorities will have to make sure that through eligibility criteria or award criteria. They favor a diversified supply chain, so not everything from China, but diversified. These are not local content requirements. This can be US or other entities, but also so very specifically for procurement, authorities will have to ensure that not more than fifty percent of the contract value, including for solar PV, would come from a single source of supply on which
we depend in this case China. Last point I would like to make in terms of the IRA comparison. A lot has been said about the lack of funding, but here this is not the Nager Industry Act, but other elements.
We have relaxed state aged rules specifically for.
That objective of manufacturing nazero technologies. As much as fourteen billion euros have been approved so far by the Commission for those schemes and we have to make sure that they are now deployed.
Also for private capital.
I have looked at the numbers venture capital this year three billion euros invested in or committed in those projects compared to four in the US. This is narrowest gap since the IRA was put in place. So things are going in the right direction, although of course there are major challenges that.
Had right and those sort of relaxing state aid et cetera. The're sort of and some of the investment versus the sort of tax credit approach that the IRA is put in place.
Yes, well, indeed, I mean we also I think one conclusion that we drove from the IRA is that we have to really simplify the way we channel investment supporting the EU, and so we have to move towards more like contracts. For difference, if you look at what France is doing for supporting manufacturing of batteries or solar pvs also through tax credits. So we are, you know, joining conclusions from the way the US is doing and trying to accelerate things here as well.
Okay, thank you and Herbert.
You've been involved in many different parts of this, as you mentioned, you've been involved in solar for a very long time and now you know also industry batteries, et cetera. What's your view in terms of Europe and sort of where it can be really competitive and so what should be done to make that realized?
I think, first of all, and it is probably something very prerogative. I think we should be very very happy that China did that. They started very early. They probably invested more in renewables than the rest of the world together. They took over from Germany solar twenty twelve, and Germany was giving it up, and I think there was would be no other nation being able to scale it up so fast and to make it so cheap. And that's that's the same for solar. For batteries, EBIs let's wait
and see. But wind for sure on sure wind off, sure wind may be And I think that's very good news for the energy transition because only China made it possible that now we have a basically a ban on coal fired plants in India, not because the Indians want to save the world, but solar is so much cheaper, and I think in hindsight, and there's.
Probably also a bit provocative here.
In handsight, we might say that China basically stopped climate change in handsight in ten or fifteen years. So now on the other side, yes, there's a lot of value add in China technology, in China scale and those industries are growing fast, and we are losing out on our participation in that value now because solar is said to become more important than our automotive industry by twenty thirty or thirty five. So this is a really big chunk of industrial meat which is to be newly reparted.
So it's a concern I understand.
That's why I'm still filing to bring solar back to Europe, which I think would make a lot of sense. But first of all, I think a great job by China, and don't let's say compromise it now with input duties, because that will make solar more expensive. Heb is more expensive, better is more expensive, and that will then slow down the energy energy transition.
So that's that's the wrong way the.
So what'should Europe do you?
I'm I think you know we should.
We should And if you look in those industry and SOLA have deep insights because I know most of the of the suppliers. Yes, China did a great job, but they're living poorly from it.
Half of the solar.
Energy manufacturers aren't aren't earning any money. The others are borderline when it comes to cash flows, and the same applies to batteries. There are two very profitable ones, which is COETL, but the rest of the battery manufacturers are making huge losses.
Uh.
And if you look then in the value chain, then in the value chain of solar, the solar cell and the module are not profitable. But then downstream selling, reselling, installing, running the solar manners is usually profitable. And this business normally is in Western hands in Europe. So I think it's a situation where which we can we can live on. Surely what we should do is encouraged to Chinese to come here and build up plants here in.
Europe, okay, and then you'd have Europe focus on the downstream applications and integration and those kinds.
And the other thing is but I just have been telling China is very strong in if it's not too complex to max all ourselves, which is a technology now fifty years or basically to refine.
That and make it even better day by day.
It's very difficult to compete against China with sixty percent of the world market now, with really extreme competition from entrepreneurs. When it becomes more complex, for instance, no software which makes use which combines the cars with the renewable energy flexible energy market they don't have.
So the more sophisticated, the more complex the.
Solutions become, the more Europe and the US have a chance to compete and probably have an advantage to compete. So we should do what we can do best, and we should have China making what they can do cheapest than inco quality.
Okay, so I'm going to ask two people who are definitely involved in the manufacturing side and not just downstream. So, yeah, what's your thoughts in terms of what should Europe be doing to be to have a sort of strong, healthy, clean green industry in the future.
Well, the first point is I would agree with your point of view. I don't know if we have to be happy with the Chinese supremacy, but it's a fact. It's a fact that on that way side, China is leading. China is leading the pack. I didn't say that, and that's the reason why a SEC what's created three four years ago. We have to acknowledge that for the immobility E affordable mobility, we can't rely on the supply which would be one hundred percent an Asian one, not to
say you're Chinese one. So there's a need for there's a need for Europe to to build a strong battery uh industry, and that's what Norswall starts a few years ago. That's what we are doing nowadays with the with the ramp up or for first the first Giga factory.
And that's for resilience. You're saying, sorry, that's for resilience. So you're not reliant on just sort of point sources.
Yeah, yeah, yeah.
So it's not to say that we are immediately competitive. There is there is a There is clearly an issue. All strong believe is that we shouldn't rely on tariffs. We shouldn't rely on tariffs because tariffs will will create an illusion in in the European market, an illusion to be protected. The customers will see higher prices. So we believe that we have to work hard. We have to
work hard in order to catch up. And when we look at the the EV market for today, we've seen and it has been previously mentioned, we've seen a slow down of the growth. It's not stopping, it's not declining, but it's slowing down. And it's slowing down because the affordability of the e cars is not sufficient.
So we need to we need to increase.
We need to decrease the cost of the of the of the of the batteries. We need to decrease the cost of the E cars. And for that one, I strongly believe on partnerships within Europe, partnerships between labs, universities, in thus world companies. That's what we that's what we are doing in order to be able to catch up.
And the last point, when we when we consider the let's say low cost solution for batteries, UH, we're not that far from a technological point of view at the time, being from A from A from Chinese companies, So it's we're not We're not ten years, tenures behind, one or two years behind, so it's possible to catch up.
And the EV slow down is that causing you to to to sort of change the speed with which you're moving. Sorry, the sort of slow down in ev uptake is that is that having an impact on well.
I mean.
Investing in a in a giga factory is a huge cost. I mean it's a fifteen gig out hour does cost you one billion euros. So ans we need to be we need to be cautious under timing of of investment.
Uh.
And second point, which are the reasons for the slowdown of the market, They are very simple. The EV car is too expensive, very simple. I mean, if you look at the the thousand market in Europe, Spain, Italy, Greece, even France, I mean the market share of TV it is not that high. It's not that high. Italy two percent, Spain four percent, France hopefully a bit higher. But that's because fares on the infrastructure. But more important the fact that the cost of the EV is too too, too expensive.
So we consider that to to to to improve the situation of the market, to to go back to a steep increase of this market, we need to bring affordable solutions and that's why we're take in some time.
Okay, thank you and then hack on from a from your your electroizer. So hydrogen is a much more early stage industry, so we call it phase two technology. What are your thoughts on you know, you're at the beginning of the game.
If you like, in many ways. What are your thoughts on what Europe should be focused on?
Well, according to a lot of experts, I'm picking a suicide mission here and it's hard to fight against China. But as a European and probably also as an engineer, I have higher aspirations for Europe than you know, making food and cutting here you know, obviously I'm not a good customer, but I think in Europe we need to have the goal of doing more than just services. And I agree on the high value work, but that will not create enough jobs. I think we need to also,
for resilience reasons, have certain core industries in Europe. And if there's one thing, you know, the past cop all of years have told us is that, you know, creating these dependencies on regimes that you cannot fully trust due to difficult geopolitical situations, we need to have some local production and content in Europe. So I'm not against important things from China, but I do think we need to try, at least in Europe to be involved in key industries
going forward. We're not as disciplined, we're not as you know, strategic about it as the Chinese. They picked certain industries that they said, we've got to dominate these industries. Europe hasn't done the same, but we we still have a chance on the more difficult things. And I believe that hydrogen is much more difficult than solar. It's not only kapex, it's also efficiency. So the energy efficiency is much more important than just you know, the cost of steel and
that's why we try to do it in Europe. And I think, you know, what we're asking for is sort of a level playing field where the Chinese are held to the same standards as I am as a European. So I think it's a bit fascinating that they are allowed to do things and sell it to Europe and if I did the same things, I will go to prison or see the big fine. And that's what I don't like about it, other than that's pro global trade and pro competition.
Great so, and that level playing field is that? Yes, how you say it's sort of the goal of the European Commission.
Yeah, absolutely, I think you know, speaking about the title of the session, should we be more protectionist? I think we all agree we shouldn't be protectionists, and I think this is not what the Commission aims at. It's all about indeed, resilience, it's all about level playing field. I heard the criticism of tariffs, but you know, tariffs they can play a role in those cases where there are unfair practices by third countries. We apply them to steal
and it works rather well. We tried with solar there it didn't work. So tariffs have their advantages and droplets. We are complementing them with other tools to ensure that level playing field. We have, for example, the Foreign Subsidiest Regulation. We have the International Procurement instruments. So if EU companies do not have access to procurement in third countries, companies from those countries should not have access to procurement here. This is as simple as that, and so we will
be applying that. And finally we have other instruments that try to ensure that we have a level playing field. Also across other dimensions such as climate protection or forced labor. We have the SEABUM, we have the Forced Labor regulation, and all of these tools will be increasingly applied in the coming years.
Yeah, just to CLI, I think you alluded to this in terms of ownership of facilities, so sort of you know, Chinese ownership, Chinese companies setting up within Europe, so still skills, etc.
What's your views on that.
I mean, I think it's a classical yes, but you know, because I think for investments into existing companies, we heard that in Europe we are very good at innovative solutions and we have to be careful with Chinese companies coming here. Just to simply take over ips and shift production to China. And we actually have seen we have the so called foreign Investment Screening instrument, we had cases where such investments
have been blocked. Of course, with this tool, we have to be very selective and careful because it's not always good for the companies. In terms of greenfield investments, indeed, again as we heard today, already China is the innovator currently, so we have to allow for those investments in the EU. But again we have to apply certain conditions. All of those battery manufacturing sites, for example in Hungary that are simple simply assembling cells from existing supplies located in China.
This does not improve our resilience. Also, in terms of sharing intellectual property, I think we have to draw conclusions from what China was doing to our companies, so encourage Chinese companies to have joint ventures with local partners, share knowledge, share R and D and so on.
So it's it's sort of leveling the pailfin I don't ownership level as well, thinking about that, okay, thank you and Herbert. In terms of there's been some discussion about what should we be done a country level versus at the European commission level. How do you how do you think about that?
That's probably I'm not sure. I'm probably not the right one to answer the question. Europe is not the state.
Now and and we have those aspirations that we would speak with one voice. But then we have all Chinese investing in Hungary because they are received more friendly there.
So he said good, I said bad.
I'm not sure because you know, at the end, I'm convinced that we need this Chinese investment with source conditions. Yeah, joint venturing, sharing technology, bring the technology over. Then we have a chance to restart like China basically try it now for thirty five years to get hold on the automotive industry. Yeah, inviting external Western investors like Volkswagen to joint venture voyks Wargen still is a minority investments in China, bringing the technology and then growing together.
And we should do the same. And this is why I.
Think it's positive what Hungary does, inviting China, subsidizing China, bringing the technology.
And I agree at the first stage this is assembly.
But it was at the first stage also assembly when we brought the cars to China. Yeah, we started this assembly, then we integrated. But I think to dream of building up a solar industry from Europe out of the most important market, which is China. Sixty percent of this is a cluster in itself. And I'm not sure whether this defense line of this is forced labor and this is not green energy we'll hold for long.
I've seen most of the plants.
The plants are excellent, they're highly automized. Most of the plants are running on green energy already now on solar and wind. And so this is something you just you have to be able to compete against the cluster where the smallest producer in viable conditions would produce twenty gigawards per year, and the European player would produce one, and the startups we are financing would produce one and then another one in a few years. That's not working, so
it never be big competitive. You only can do it. Invite the Chinese to come here joint venturing, build up something serious twenty ten twenty gig others. We have the conditions, we can absolutely match the cospontition. You don't have energy much cheaper in China around four cent you need for solar production.
We have it in Spain, we have it in Norway.
Labor cost in Hungary is not so different from from China, so and the and the conditions regarding environment are very similar, so it can be done. Don't try to compete against a world power with a few.
Startups, right right, and that you're you're sort of happy for that to be a sort of country by country decision.
You know.
I think to accept it, I have to. We have to accept it that Europe is not one block. And it's probably good that it's not one block.
Okay, great, we have about ten minutes left. Gonna move a little bit onto sort of trade and supply chains and Hacker. I'm going to ask you in terms of again sort of hydrogen is sort of newer industry. People talking about importing, exporting, how do you think Europe should think about the supply chains for finish new industry.
Well, China controls ninety percent of rare earth minerals, so im I do agree that China has certain competitive advantages where it doesn't make sense to compete against them. But I think we leave too much in the hands of China. I think we left too much in the hands of Russia, you know, especially Germany on the on the energy politics are we're going to do the same with China on
everything else. I think that's dangerous. We need we need, we need a plan for how to get access to critical raw materials also in Europe, and we need to probably prioritize the technologies where we don't rely so much on these rare earth minerals. You know, ninety percent control by by China, and that's that is possible. But you know, supply chains for all energy transition technologies are franchile and difficult,
whether it's batteries or electoralizers or other things. You know, there are certain special ingredients that you need, and I think that's where probably we can try to coordinate things on the European level, and I know there are initiatives to do that, but Europe needs a plan for how to access some of these metals and minerals over time. Otherwise, you know, we're not going to be able to produce anything out of Europe. Then it will all be imports.
Okay, So you would definitely include that in scope in terms of industrial strategy.
Yeah, and would you would you agree?
All we are acknowledging the fact that for time being, most of the equipment are supplied by China Korea one hundred percent. Actually, most of the refining capabilities for a fight for lysium are based in China, and indeed I consider it as a as a threat. So from that perspective, we're trying to get as much as possible partnership between Chinese companies European ones in order to set up facilities
in Europe. A good example of that is a supplier of castile active material, which going to be a joint venture between a Chinese company and Oranol, a French company. So setting up facilities in North or France. I think that's that the way to that the way to move forward. We have other other projects, other similar projects in Europe or close to Europe. It's the way to progressively move out of the of the Chinese hands. But it will
take time. It will take time. It's not for tomorrow, it's not it's not happening all the night.
Right, But that's sort of in scope supply chains, totally in scope.
In terms of strategy.
Yeah, and just one question actually on recycling and circularity, because I know that's part of your role. How do you factor that into the sort of supply chain thinking, Yeah.
It's a key element. I think we will be working more and more on that. We have recently also greed the sorry I'm mentioning regulations a lot of the time.
Yeah, yeah, my world.
We have the battery regulation which sets certain requirements in terms of recycled content for batteries. We will be doing the same for other products in the future. For example, steel, we want to set eco design requirements, so called eco design requirements for steel in terms of recycled content, in terms of carbon content, in terms of you know.
Maybe equality as well.
And that will also allow creating so called lead markets in Europe, providing consumers with the clear reference they can use when they buy a car, and they in that way they can choice also on the base of the of those environmental dimensions of the steel.
Okay, great.
And in terms of SEABAM, you mentioned SEABAM earlier. How important do you see that? Really?
I mean, that's that was nicely put in the introductory presentation by Bloomberg, that it's really a key thing, to key element to allow energy intensive industries in Europe to have a level playing field. It will start applying soon only to a limited number of products. So it's an important element of the puzzle. But as I said, I think we have to also think more about downstream products.
You know, wind turbines, batteries, sprill do as well, but there's scope to do much more than those upstream products covered by SEBAM.
Okay, So SEABAM does seem to be one of those level in the playing field type roles, and we actually saw my country. It seems to create different anxiety and depending on where you are in the world, they sort of they believe in SEABAM or they're more stressed about it actually some of the developing world, certainly as we saw with the prices going on. And then so could you characterize it in your view the trading relationship with China and US, how do you think we should think about that?
That's a bit concern, That's a big concern. Now. I fully understand that.
US have to and are willing and committed to contain China.
There have been.
Put under huge stress because of the growth in China and also techno knowledgy and military advancement, so they have to do something. I think they have really a tough grip on China because China is not growing because of the American sunctions.
There are a lot of lots of growth in there.
I mentioned stock markets are really down, a labor market is complicated. It so China is really suffering under the under the sanction scheme. I think we have to be careful because you know, if we, if we overs let's say, if we if this conflict gets out of control and
too far, the whole world will suffer a lot. And what we what we currently say, and we have been and I was really concerned about the poll there that sixty percent would ask for higher input taxes now here in this room, which is educated people, and this is very concerning because then the energy transition will take much longer.
Everything will become more expensive. We will have a continuous inflation if we really and I'm in a semiconductor industry and we're now trying to get all those companies out of.
Taiwan here to Europe and to the US.
That will double the prices of semiconductors. And if we, if we, if we get further into this conflict, and we had about three thousand constraints in text, constraints when it comes to free trade only the last two years built up mostly because of this tariff. And this for me is the biggest concern for the energy transition. I'm an optimist. I think we can stop climate change, and probably not at one point five, but probably one point seven or something like that, because we have very positive
science as well. But if we have this conflict and we have continuous and we will have then continuous inflation because a lot of the zero inflation over the past years we had because of China, because China has become solar now two euros to ten cent in ten years, and batteries the same no cost degrees of twenty percent area. So if we take that away from the world and we have two or three ecosystems, everything will become more expensive.
We will have continued inflation, and then we will have high.
Cost of capital. And the high cost of capital is for me.
We discussed it yesterday, the biggest concern in the energy transition, because we need so much capital for doing all those renewables, all those huge investments, even in hydrogen and other things. The biggest concern for me is continuous inflation because of trade barriers, because of the conflict between China and the US.
My view, yeah, yeah, you trade as freely as possible, so I would wait, but.
I would recommend no, we take them very seriously. We get tough with China, but we make.
Use of China.
Please can join me in thanking my panelist for discussing. Thank you.
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