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Speech by Vice-President Šefčovič at the European Investment Bank (EIB) Board of Directors' meeting

Met dank overgenomen van M. (Maroš) Sefčovič, gepubliceerd op woensdag 12 juni 2019.

Dear President Hoyer, dear Vice-President McDowell,

Dear Board members, dear working group participants,

It is a pleasure to be able to address you today.This, as I understand, is a first-of-a-kind meeting and I very much welcome this initiative.

I take this as a recognition that our partnership in the field of batteries - and, more generally, the Energy Union - is bearing fruit.

The time is indeed ripe to discuss what lessons can be drawn to ensure sustainable industrial value creation in Europe, by supporting the shift to a climate-neutral - and circular - economy.

Europe is facing unprecedented challenges that require a renewed alignment of our policies - that of the Commission, the Member States and the European Investment Bank.

These challenges are not new, but time is accelerating:

  • Climate change - to achieve a net-zero greenhouse gas economy by 2050, public and private investors will need to invest massively into innovation. The scale - and speed - of investment needed mean “business as usual” is no longer an option (we need a multilevel and joined-up approach with the private actors).
  • Global competitiveness - we are living in turbulent times. Our post-war multilateral system is at risk; there are threats of trade wars and an ever-competitive China looking to challenge Europe in our areas of leadership, such as the automotive sector. We need to prioritise sectors that are strategic for Europe and their value chains.
  • Last but not least, access to critical raw materials - Europe has mainly relied on the market to resolve the access problem. However, we are witnessing China is using its abundant financial resources to capture third market sourcing: It is thereby locking users into new dependencies, and from there aggressively moving up in the value chain.

So, resource security - in our case “vulnerability” - is becoming a rising political, economic, industrial / technological and environmental issue. We therefore need to be more pro-active in defending European interests here, and on the global stage.

We are thus witnessing changes impacted by new geopolitics, technological shifts and sustainability requirements that call for strategic approach to industrial policy. We in the Commission will propose an industrial blueprint to the leaders by the autumn.

In this context, the European Battery Alliance (EBA) has been considered as the perfect testbed for our new industrial approach. And the co-operation with the Bank has been an essential pre-requisite for its success.

The EBA was set up a year a half ago, and made operational at lightning-speed as a collaborative platform with and for the EU industry.

It has acted as a real catalyst ; our industry has taken an indisputable lead, it has announced massive investment throughout the value chain (Innoenergy estimates 100 billion euros), and agreed on ambitious industrial targets :

  • to reap the benefits of an annual market of 250 bn euros a year by 2025 (according to Innoenergy),
  • to capture a great part of the 400 GWh forecast demand in Europe by 2025,
  • to ramp up production and build 15-25 gigafactories (lithium-ion cells manufacturing) on our territory, so as to catch up with - and even supersede - our Asian competitors.
  • To support the industry, we have deployed a comprehensive framework (you can refer to COM Strategic Action Plan) - with:
  • robust policies (climate, energy, mobility targets and packages),
  • enhanced support for research and development (Horizon 2020),
  • a project to identify skills needed by the sector,
  • mobilise all available EU funding and financing,
  • and developing a regulatory framework to establish high-level performance and sustainability criteria for placing batteries on our market - together with provisional standards (with the EU standardisation bodies).

By sustainable battery production I mean: extraction with the highest environmental and ethical standards, production with the lowest carbon footprint possible, bidirectional electricity flow (vehicle to grid), battery re-use and recyclability of materials.

Equally importantly has been the partnership with Member States and regions.

When it comes to IPCEI (Important project of common European interest), I have worked very closely with France and Germany. Both are leading the way with transnational innovative projects. The recent announcement by both countries of their willingness to support a joint EUR 5-6 billion project to develop battery cells manufacturing is a strong signal of national commitment to the Alliance objectives.

This is only the start, as you are most probably aware. This commitment is being shared by other Member States with participation from Poland, Belgium, Sweden, Finland, Italy and others.

More projects are coming. With European OEMs now on board.

It looks very likely that this will lead to notifications of some Important Projects of Common European Interest (IPCEIs) in the forthcoming weeks.

We have also set up a smart specialisation partnership with 26 regions (from around 10 countries, still expanding), to develop joint projects in sustainable battery production and recycling. Important grants are being utilised (through ERDF).

In the EU Battery Alliance, the cooperation with your Bank has been exemplary. And I must really thank Vice President McDowell for driving this agenda.

We want to continue. It is crucial that the Union's budgetary instruments and the Bank's lending activities both pull in the same direction.

In this context, I welcome our cooperation in the framework of the European Fund for Strategic Investments (EFSI).

The recent progress of the InnovFin - Energy Demonstration Programme (EDP) is very good. This instrument has definitely served as a breeding ground for innovative energy projects, including battery pilot lines.

As you know, InnovFin EDP has played a particularly important role in the Alliance, by financing the first Northvolt lithium-ion battery demonstration plant in Sweden.

Northvolt is a first-mover. This first support has allowed it to move towards their goal of building the first battery cell gigafactory in Europe.

For Northvolt production stage, 350 million euros of additional financing from the European Investment Bank via EFSI (guarantees) has recently been secured by your Board.

This is a remarkable achievement - for which I commend you - and the outcome of excellent EIB-Commission teamwork.

I can testify that this has served as “stamp of approval” to crowd in private investment into the project.

And this approval is also starting to act as spill-over on other segments of the value chain (several sustainable lithium projects are now being developed thanks to Northvolt secured financing).

I would also like to mention the establishment of the Breakthrough Energy Ventures Europe (BEV-E) Fund under InnovFin.

For this new vehicle, the European Commission and the European Investment Bank have worked together - against the clock - to accelerate the cutting edge (i.e. high-risk) innovation in clean energy technologies here, in Europe.

Finally, our partners, through EIT InnoEnergy, again with the support of the European Investment Bank and the Commission, have designed a Business investment platform for Batteries.

The aim of this Platform is to accelerate financial transactions (“deal flows”) between industrial projects and investors (public, private).

The Platform will support projects of different sizes and needs (grants, loans, blended finance etc.) depending on their maturity and nature: innovative products, demonstration, industrial deployment, Important Projects of Common European Interest, etc. It should be launched on 25 June.

But the work is far from complete. We still have a major gap in the battery value chain: I would like to address the critical issue of access to raw materials.

Without undertaking its own exploration, the EU will have no mining projects. This, in turn, means no refineries and, without refining capacity, the EU will continue to be in great part dependent on foreign supplies of high quality materials.

In a nutshell: we cannot sit idle while China is taking control of all the supply.

Our companies have the world most innovative processes and apply the highest environmental and social standards - they can make a real difference on the ground in resource-rich countries.

But they also need more de-risking from public investors.

Concerning battery raw materials, current EU mining production represents a very small portion of global levels: 14% for nickel, 8% for cobalt, 1% for natural graphite and lithium.

And refining is completely missing in Europe for the latter - which means that even if we were to ramp up production for batteries - as planned - for 2023/25 and invest in extraction activities, we would still need to ship lithium to China and back for refining !

Unless we develop our own capacity.

  • We have identified with the Member States that there are 10 potential mining projects for lithium that, if developed, could allow the EU to move from 1 to 30% of the world production by 2030.
  • In the case of battery raw materials, we can see commercially viable projects not securing financing even when fast track permitting process, high sustainability standards and the public acceptance are all secured (e.g. lithium projects in in Portugal and Finland).

The US, Canada, Australia are investing massively in this segment of the value chain. And China is acquiring companies single-handedly around the globe.

We therefore need our European Investment Bank to become more fully engaged in raw material projects in exploration, mining and refining - and linking it up with the circular economy (with secondary raw materials), where our competitive advantage lies.

Things are moving: the European Bank for Reconstruction and Development (EBRD) is preparing a EUR 60 million Exploration Investment Facility. Similarly, the World Bank has launched a Climate- Smart Mining Facility.

The idea is to develop a portfolio of projects, which, by their nature, are risky - and have longer return on investment (mining project can take up to 10-15 years from planning to production).

There are three remaining challenges that I would flag for discussion:

  • Completing the value chain
  • I would like the European Investment Bank, as the Bank of the EU and a leading world finance organisation, to look constructively at ways it can engage in this upstream segment of the value chain.
  • This might be worth discussing with our services and other international organisations.
  • We must look together at “how” to pay attention to both our carbon and material footprint.
  • Identifying other key strategic areas / value chains for this joined-up approach
  • Our joint work is strategic and proving instrumental in accelerating the take-off of these innovative European sustainable, innovative and competitive projects.
  • I understand that more battery and energy storage projects are currently in the pipeline and I very much hope to see them materialise in the near future.
  • I would not want to give the impression that batteries - however important they will be - are the silver bullet in the clean energy transition. For areas where electrification will remain difficult and/or costly, hydrogen is for instance, also a strategic supply chain. I hope to take this political work into the next Commission.
  • Other key areas / technologies (beyond energy storage) should benefit from this collaborative approach: cleantech, the circular economy, 5G, IoT, supercomputing, 3D (metal) printing, to name but a few.
  • Focusing on scaling up support for high-risk projects within the next MFF
  • We are looking forward to continuing our work with the EIB as our strategic partner to roll out our investment programme through: InvestEU and other instruments such as the Innovation Fund and the European Innovation Council.
  • It is of utmost importance that we not only cover a strategic range of sectors but also the entire innovation cycle, from research and development to demonstration operations, the transfer and scale-up of innovation results to the market.
  • We have started with pilot projects; with Northvolt financing we are showing that we can - and should - scale up project finance. To incentivise, leverage and de-risk private investment at the right scale and speed.
  • As we move up to the commercialisation stage, we need to develop further our risk-sharing instruments. Investment platforms could help in that regard - we should make them as lean and agile as possible.

To sum up, the European Battery Alliance has been at the forefront of our new industrial policy : by linking up EU's climate ambition with our joined-up investment and innovation agenda.

At the core of it lies our two institutions' strategic partnership.

I am keen to hear your views as to how to take it from here.

Thank you.



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