“Made in Europe” semiconductor revolution needs reliable renewable energy supply

“Made in Europe” semiconductor revolution needs reliable renewable energy supply

In his first foreign trip since Sweden took the reins of the EU Council, Prime Minister Ulf Kristersson met with French President Emmanuel Macron in Paris. Given shared challenges in fields including energy, climate and economic competition, the pair set their sights on securing strategic supply chains by bolstering green-related domestic industries, signalling key agenda items for the six-month Swedish Presidency.

Although not always aligned on economic issues, Macron and Kristersson agree on the need to develop certain “Made in Europe” industries to accelerate the green energy transition and reduce strategic trade dependencies while keeping pace with industrial competitors—notably the US and China—with the nuclear energy and semiconductor sectors both priorities. 

While known for powering digital devices like smartphones and laptops, semiconductor chips play an equally critical role in the green transition by enabling the operation of electric cars, charging points and renewable energy infrastructure. But given semiconductors’ energy-intensive manufacturing process, the semiconductor revolution being planned in Brussels will need a large, reliable supply of renewable energy generated both within the EU and in allied neighbouring countries to avoid a dangerous backslide on climate objectives.

Semiconductors thrust into spotlight  

In recent years, global developments have elucidated the critical importance of securing domestic European semiconductor supplies. Disruption from the Covid-19 pandemic triggered worldwide shortages, harshly exposing existing supply chain vulnerabilities and dependencies in the supply chain. Meanwhile, rising geopolitical tensions between China and Taiwan – one of the world’s leading chip manufacturers – and aggressive industrial subsidies in China have added significant impetus to boost domestic semiconductor production within the EU.

Brussels’ response has come in the form of the European Chips Act, which aims to double the bloc’s global semiconductor market share from 10% to 20% by 2030 via €43 billion in public and private investment. Initially proposed by the Commission last February, the Chips Act is likely to be adopted in 2023, although investment has already started pouring in, with companies including Intel Corp, Global Foundries Inc and STMicroelectronics NV deciding to launch new manufacturing sites in the EU due to the Act’s generous state subsidies.

While this expansion of its semiconductor industry will bolster the EU’s strategic autonomy and competitiveness and even eventually provide the building blocks for its green transition, it risks hampering climate goals if sufficient supplies of renewable energy are not available to slash the heavy carbon footprint of the manufacturing process.

Ukraine’s promise for EU renewables demand

The EU has made significant strides in domestic green energy capacity over the past year, but it will still need to boost energy ties with neighbouring countries to meet its ambitious renewable energy targets. The bloc’s newest candidate country, Ukraine, has particular potential in this regard—with the knock-on benefit that investing in Ukraine’s renewable energy sector can help the embattled country rebuild its economy after the war. 

In terms of physical assets, Ukraine offers a vast territory on the EU’s doorstep for the installation of land-intensive renewable energy infrastructure, as well as a conducive climate for abundant solar and wind generation. Before the war, the Ukrainian government was doubling down on this potential, introducing crucial market reforms and financial incentives to entice private investment in renewable energy production.

This improved regulatory climate had successfully attracted a number of important foreign investors. Canadian renewable energy firm TIU Canada, for example, became the first investor in Ukraine under the 2017 Canada-Ukraine Free Trade Agreement. Since then, TIU Canada has invested $65 million in developing Ukraine’s solar capacities. Operating three solar farms in the country generating 56 MW of clean energy, TIU Canada has helped boost Ukraine’s renewable energy share by building its plants near power grid connections and working constructively with local authorities to rapidly deploy its plants, one of which was delivered within roughly a year according to founder and CEO Michael Yurkovich, who has emphasised that “energy security can be achieved through the diversification of energy supply” offered by Ukrainian solar.

Future green hydrogen hub?

With its abundance of solar and wind potential, Ukraine also has the key inputs needed to generate green hydrogen, an essential fuel for decarbonising EU transport and industry—and one which the bloc will not be able to generate in sufficient quantities, at least in the early stages of its energy transition. Through the Central European Hydrogen Corridor initiative, Ukraine is collaborating with EU countries to explore the possibility of routing green hydrogen from major supply areas in Ukraine through the Czech Republic, Slovakia and Germany to help meet EU demand. 

Ukrainian companies like Hydrogen Ukraine could be at the forefront of this green hydrogen revolution, with the firm planning the construction of a renewable hydrogen plant in the city of Reni—just 700 metres from the Romanian border—capitalising on the region’s large solar and wind supply and strong infrastructure connections. CEO Iaroslav Kryl has recognised his company’s role in meeting Brussels’s “ambitions regarding hydrogen production,” claiming that when “the EU or Germany…decide to be ready to finance hydrogen projects, Ukraine will be the obvious choice.”  

EU semiconductor future looking bright

With a secure, long-term supply of renewable energy from Ukraine, the EU will be enabled to decarbonise semiconductor manufacturing and maximise this technology’s contribution to the green transition. Notably, semiconductors harness, convert and store renewable energy as electricity, for example in solar panels or wind turbines, before efficiently transferring this electricity onto power grids to limit wasted energy, in addition to powering electric cars and charging stations at the heart of Brussels’ green agenda.

Given the EU Commission’s intention to relax the bloc’s state aid rules to boost homegrown industries in the early part of this year, particularly those that contribute to the green transition, the bloc’s semiconductor investment climate seems set for a bright future. Germany is primed to build on its leading semiconductor position within the EU, with the highest concentration of planned semiconductor plants for 2023 and 2024, while France, Poland, Spain, Italy and Ireland have also been tapped for new private investment. 

With Prime Minister Kristersson signaling his government’s ambition to progress the homegrown semiconductor industry, the Swedish EU Council Presidency has arrived at the right moment. Working closely with President Macron and the other leading “Made in Europe” advocates, Sweden should be able to set the stage for a widespread, sustainable expansion of the EU semiconductor industry to the benefit of the bloc’s long-term sustainability, competitiveness and security.

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