Archived

• China is systematically embedding itself in global renewable energy supply chains, connected devices and European energy system operators. In an unstable geo-political environment characterised by weaponised dependencies, this risk has become unacceptable.
• The EU must reconcile its renewable energy ambitions with the risks of over-dependence on China. This requires targeted public procurement for defence-related needs, notably in solar PV, alongside selective trade restrictions in wind power and safeguards for emerging green hydrogen and synthetic fuel industries.
• There is a growing cyber threat linked to Chinese-made solar inverters, underscoring the need for a ‘Made in Europe’ requirement for critical infrastructure. The EU should phase out and exclude Chinese components from Connecting Europe Facility for Energy (CEF-E) funded cross-border projects.

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[China] controlls a large part of the global renewable energy supply chain [while] Chinese state companies have also been investing in European utilities and grid operators, which carries similar risks – especially for transmission system operators (TSOs).

Chinese state-linked companies now own significant stakes in the system operators REN (Portugal), Terna through CDP Reti (Italy), Creos (Luxembourg), Enermalta (Malta) and IPTO/ADMIE (Greece). Broader efforts to acquire stakes in system operators in Spain, Germany and the UK have been blocked by national governments, often on national security grounds.

While there has been a considerable drop-off in investments by Chinese energy companies since the late 2010s, as well as greater scrutiny of Chinese foreign direct investment (FDI) in general, the legacy of Chinese involvement in the energy system persists.

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Controlling the on-off switch

The risks posed by Chinese inverters to Europe’s energy system echo earlier concerns about Huawei’s role in 5G telecoms networks. There do appear to be legitimate grounds for concern about Chinese components this time in the energy system. Solar Power Europe has noted that cybersecurity protocols within the EU, notably the NIS 2 directive, are sufficient for utilities, but do not apply to smaller generators such as rooftop solar panels. In effect, this means a cybersecurity risk in an increasingly relevant but vulnerable sector. For example, in the Netherlands, rooftop solar accounts for 15-16% of total electricity generation capacity.

Considering that the EU also has its own substantial inverter industry, and that some services such as ‘scrubbing’ of inverters are available (and are already utilised by several European utilities), there appears little reason to maintain this risk. This is especially problematic for solar installations with military relevance, where Chinese technology is commonly used.

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Equally, some of the risks associated with Chinese inverters, such as internet connectivity and their reliance on cloud servers, also apply to European-made inverters, underscoring that cybersecurity, rather than country of origin alone, is the central issue. Such concerns are also relevant to other connected devices that increasingly underpin the energy system, from smart meters to smart heating. Nevertheless, additional risks persist, as Chinese producers are legally obliged, under article 7 of China’s 2017 National Intelligence Law, to share product information with the state.

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Recommendations for Europe

Public procurement tools should be employed to ensure a minimum level of production within the EU to service high-risk sectors. Public procurement tools would also be most effective if paired with targeted investment in R&D, such as in perovskite solar cells, focusing on specialised production and future technologies rather than directly competing with Chinese industrial dominance […] The EU has considerable strengths at its disposal in the size of its market, which it should be much more active in employing against China. In areas where Europe remains competitive and where its market weight is vital to Chinese exporters, restrictive trade measures should be enforced at both national and EU level.

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A consistent security premium should be applied to wind turbines, as is already the case in some Member States. With China already built into the supply chain through its dominance of permanent magnets, efforts to ensure the competitiveness of the European wind industry will have to move in parallel with measures to ensure supply of critical minerals in Europe. This dependency can be managed, especially by building on Europe’s strong recycling capacity for magnets and batteries.

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For hydrogen and SAF, the EU is already a major market and will become a more important one in the future. Given their significant military relevance, supply chains in these sectors must not become dependent on China. In these areas, the Commission should deploy robust protective trade measures to shield Europe’s nascent industries.

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Regarding inverters […] there are clear risks both for the supply chain and also from potential cybersecurity infiltration. However, both risks are manageable. There is a strong argument for a ‘made in Europe’ strategy for inverters, an area where the EU already has a strong market share spread over several Member States. For high-risk sectors, including grid-scale projects and military applications, such inverters should be employed as a matter of policy, even at higher cost. By contrast, some parts of the solar sector present lower levels of risk, allowing greater discretion over whether to use Chinese-made – and potentially vulnerable – inverters. For example, where generation is kept separate from the grid and risk is borne entirely by the user, who can make a choice between short-term cost and long-term disruption. For installations connected to the grid, such as rooftop solar, grid operators should be responsible for assessing the potential risk to the system and for setting clear eligibility criteria for solar installations linked to the grid via inverters.

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The EU should adopt a coordinated approach to define a single EU-wide strategy for future Chinese investment in TSOs. Individual Member States should also outline clear procurement guidelines for Chinese energy technologies, particularly in military-relevant energy infrastructure. Given the scale of current grid expansion, the risks of infiltration and influence over decisions on future planning are simply too high. The Commission should therefore incorporate security criteria into future Connecting Europe Facility for Energy (CEF-E) funding to limit the involvement of Chinese actors.