Renewable energy projects for a low-carbon future and how to support them?

Electrification often necessitates significant investments in retrofitting or replacing existing industrial infrastructure and production equipment. This renewal process can be costly and time-consuming, particularly for heavy industries such as steelmaking, cement or glass production, chemical manufacturing, and other applications where high temperatures are standard.

In addition to the need for investment, a significant barrier to electrification is the operational costs of electricity compared to fossil fuels. In Europe, electricity prices are more than double that of natural gas, the preferred energy source for industries due to its cost-effectiveness. The higher cost of electricity can raise concerns about the economic feasibility of electrifying industrial processes, especially in energy-intensive sectors.

To prevent a stall in the energy transition within the industry, it is essential to provide access to large volumes of renewable or low-carbon electricity at competitive prices. In essence, what is needed is an industry power pricing that enables companies to electrify their processes while remaining competitive. In its electricity market reform, the European Commission has introduced some interesting instruments that Luxembourg could use to design an attractive power price.

Today, the decarbonization of Europe is accelerating, unfortunately, mostly due to deindustrialization. However, European and Luxembourgish deindustrialization is neither economically sustainable nor climate-friendly, as some industries are relocating to countries with less stringent climate regulations to ship the same products back to the EU over longer distances, potentially increasing their carbon footprint.

At a time when Europe is faced with the question of whether it will still have access to semiconductors, batteries, solar cells, raw materials, and the energy it needs to maintain its economic growth and achieve its ambitious environmental goals tomorrow, strengthening its own manufacturing and industrial capacities has become essential.

Do we want to limit ourselves to being merely a "consumer country" or do we also aspire to be a "producer country"? This debate raises strategic questions about industrial and economic autonomy. Excessive dependence on imports, especially for critical products and technologies, can make economies vulnerable to external disruptions, such as political, economic, or pandemic crises.

Therefore, strengthening manufacturing and industrial capacities in Europe has become a strategic imperative to ensure economic prosperity, social cohesion, and security. By developing local production capacities, Luxembourg can reduce its dependence on external suppliers, stimulate innovation, and create jobs, thus contributing to a more resilient and sustainable European economy.

Throughout its history, the industry has been a crucial cornerstone of the Luxembourgish economy, fostering prosperity and growth. Today, the looming specter of deindustrialization poses a tangible threat domestically and within the broader European context. To address this challenge, decisive action is imperative from the European Union and national policymakers, necessitating a robust industrial policy. Such a policy must facilitate the necessary transition of the industry in response to the climate crisis while safeguarding our enterprises' competitiveness.

As a small yet dynamic economic force, Luxembourg must actively cultivate an environment conducive to attracting innovative investments and skilled labor. Key factors such as the availability and affordability of energy, robust infrastructure, availability and access to industrial land, efficient permitting issuance, mobility, affordable housing, flexibility of work organization, and new talent development, among others, serve as critical mechanisms for preserving this allure and fostering the rejuvenation and diversification of the industrial landscape.