The EU has taken its most direct step yet to cut Chinese clean energy hardware out of publicly funded projects, banning Chinese inverters from all EU-funded schemes in a move Brussels described as the first in a series of actions targeting high-risk suppliers.
“We decided we will take concrete action right now ... that has included developing guidance on restricting the use of EU funds for projects involving inverters from high-risk suppliers,” European Commission spokeswoman Siobhan McGarry said on Monday, confirming an exclusive report by the South China Morning Post last month.
A European Union official said Brussels had identified four countries as high-risk – China, Russia, North Korea and Iran – but only China, which controlled 80 per cent of global supply, had a dominant presence in the European inverter market.
Chinese brands Huawei Technologies and Sungrow ranked as the world’s top two solar-inverter manufacturers in the first half of last year, ahead of Germany’s SMA and Austria’s Fronius, according to a report published by natural resources consultancy Wood Mackenzie in January.
The EU official said Brussels had identified cybersecurity and dependency risks in inverters – devices that convert renewable power into grid-ready electricity.
Financial institutions had until May 15 to notify the European Commission of ongoing projects – in or outside the EU – using Chinese inverters connected to the EU grid. Brussels would then decide on a case-by-case basis by November 1 whether to grant exemptions for projects that were too far along to switch suppliers without disrupting deployment, the official said.
The European Commission did not spell out what Chinese companies could do to get off the blacklist.
The official said Brussels believed there were more than enough non-Chinese suppliers for the sector to absorb the switch, with the additional cost estimated at less than 2 per cent.
“We have strong signals from industry that they will be able to ramp up capacity fast,” the official said.
Five of the top 10 inverter manufacturers tracked by Wood Mackenzie are non-Chinese, spanning Germany, Austria, Japan, the United States and Israel.
The EU ban is sweeping in its financial, technological and geographical reach.
The official said it covered all EU financial institutions, including the European Investment Bank (EIB) and the European Bank for Reconstruction and Development, as well as “a rather long list” of implementing partners working on energy issues, such as Germany’s KfW Development Bank.
EIB funding covered, directly or indirectly, 20 per cent of installed solar capacity, 30 per cent of onshore wind and the vast majority of offshore wind in the EU last year, the official said.
In terms of technology, the ban extends across all renewable sectors – solar, wind and storage batteries – with batteries “explicitly included”, according to an internal memo seen by the SCMP.
Geographically, it applies to all EU-financed clean energy projects worldwide, with tighter compliance deadlines for those connected to the European grid, including those in the Balkans and North Africa, the memo said.
The EU official said it was just the first step in a possible series of actions that could culminate with revisions to the Cybersecurity Act that would give the EU the power to bar high-risk suppliers from the market entirely.
The measures’ ever-increasing scope and their potential spillover effects have alarmed Chinese companies in the clean energy sector, with many expressing concern about whether the ban will extend to member states’ commercial banks and private funding.
The fear could be justified. EU officials said the bloc was reaching out to member states to encourage similar approaches and would oppose projects involving high-risk suppliers at “certain financial institutions” where the European Commission had representations. The commission was also assessing other areas of risk and could take similar decisions for other sectors, they said.
The China Chamber of Commerce to the EU (CCCEU) said: “We are concerned that this will undoubtedly have a profoundly negative spillover effect on Chinese companies operating in the relevant sectors – affecting not only their commercial reputation and brand influence, but also leaving their European clients facing difficult choices under domestic political pressure.”
It accused Brussels of launching a “witch hunt” against Chinese companies across the green transition market.
Huawei, in a statement, accused the EU of “origin-based discrimination” that violates fair trade principles, urging Brussels to open its decision to independent scrutiny and apply uniform cybersecurity standards to all suppliers rather than singling out companies by national origin.
The chamber also pushed back against what it called the “unlimited generalisation of the security concept”, criticising Brussels for jumping the gun by using the inverter ban to exclude Chinese firms on national-origin grounds before the proposed revisions to the Cybersecurity Act – which would formalise such powers – had been adopted.
A second EU official said Brussels was not in contact with Beijing over the measures but would explain them to Beijing if it reached out to the European Commission.
The CCCEU warned that such policies risked triggering countermeasures from Beijing and pushing trade ties between the two economies into a downward spiral. -- SOUTH CHINA MORNING POST
