(Bloomberg) -- Denmark suspended all new applications for offshore wind farms over concerns it may be breaching European Union law, highlighting an issue that many say is holding the bloc back from spurring green industry.

The EU pledged to simplify and speed up permitting process for clean technologies like windmills and hydrogen production in reaction to a broader energy crisis and a massive US green subsidy package, but the Danish move is a reminder of the significant obstacles that remain. 

The suspension comes just days before EU leaders are due to meet in Brussels to discuss how best to compete with the US on green technology, and highlights the imperative for the bloc to come forward with a clear regulatory framework to stop similar situations occurring in the future. There is growing concern that the EU is falling behind its rivals on spurring its clean technology industries.

Denmark’s government made no attempt to conceal its exasperation.

“I’m deeply frustrated that, at a time when we need more green energy so much, we’re now in this situation,” Lars Aagaard, Denmark’s minister for climate and energy, said in a separate statement. “This is a serious situation for the green transition and especially for the market players who are ready to invest.” 

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EU leaders this week will discuss the response to the US Inflation Reduction Act, which has cleared the way for billions of dollars of green subsidies. The bloc fears the incentives could push key industries to invest in the US instead of Europe.

A spokesperson from the European Commission, the bloc’s executive branch, said that the institution was in contact with Danish authorities over the matter, but declined to comment further on the content of those conversations. It is up to member states to determine if they wish to grant state aid and make sure it is in line with the bloc’s rules, they added. 

Loosening state aid rules is seen as one option, but EU competition chief Margrethe Vestager — a Dane — has warned that it could unfairly benefit those countries with more fiscal space, like Germany.

The bloc has also emphasized the need to remove red tape for renewable projects as it seeks to rapidly accelerate the energy transition and wean itself off Russian fossil fuels following the war in Ukraine. It passed emergency measures last year to speed up permitting for projects like wind farms, with the commission putting forward an increased 2030 target for renewables at 45%.

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Denmark, which plans a fivefold increase to its wind-power capacity by 2030, grants permits for turbine parks under public tenders as well as under the open-door program, where private investors can pitch projects at locations of their choice. The authorities are currently handling 33 applications from investors, according to the Borsen newspaper.

WindEurope, an industry group, said that the pause to new projects would put Denmark at risk of missing its clean energy targets that were outlined alongside commission President Ursula von der Leyen last year.

“It will create uncertainty for around 20 gigawatts of wind energy projects currently under development,” said Giles Dickson, WindEurope’s chief executive officer in an emailed statement to Bloomberg. “That’s completely absurd — especially at a time when the EU is easing its state aid rules to allow for more flexible investments in renewables.” 

--With assistance from Ewa Krukowska and Stephanie Bodoni.

(Updates with commission response in seventh paragraph, industry response from penultimate paragraph.)

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