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The world is entering a new era of cleantech manufacturing, and countries' industrial strategies will be key to success - News

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The energy world is at the dawn of a new industrial era – the era of clean energy technology manufacturing – which is creating huge new markets and millions of jobs, but also raising new risks, prompting countries around the world to develop industrial strategies. to secure their place in the new global energy economy, according to a landmark new report from the IEA.

Energy Technology Perspectives 2023, the latest edition in one of the IEA’s flagship series, serves as the world’s first global guide to the cleantech industries of the future. It provides a comprehensive analysis of global manufacturing of clean energy technologies today – such as solar panels, wind turbines, EV batteries, electrolysers for heat and hydrogen pumps – and their supply chains around the world, as well as mapping how they are likely to evolve. as the transition to clean energy progresses in the coming years.

The analysis shows that the global market for mass-manufactured key clean energy technologies will be worth an estimated $650 billion a year by 2030 – more than three times the current level – if countries around the world fully implement their announced promises of energy and climate. Related clean energy manufacturing jobs would more than double from 6 million today to nearly 14 million by 2030 – and even faster industrial and employment growth is expected in the coming decades as transitions progress.

At the same time, current supply chains for clean energy technologies pose risks in the form of high geographic concentrations of resource mining and processing, as well as technology manufacturing. For technologies such as solar panels, wind, EV batteries, electrolysers and heat pumps, the top three producing countries account for at least 70% of each technology’s manufacturing capacity – with China dominating them all. Meanwhile, much of the mining of critical minerals is concentrated in a small number of countries. For example, the Democratic Republic of Congo produces more than 70% of the world’s cobalt, and just three countries – Australia, Chile and China – account for more than 90% of global lithium production.

The world is already seeing the risks of tight supply chains, which have driven up prices for clean energy technology in recent years, making countries’ clean energy transitions more difficult and costly. Rising cobalt, lithium and nickel prices led to the first rise in EV battery prices, which jumped nearly 10% globally in 2022. The cost of wind turbines outside China has also risen after years of decline, and similar trends can be seen in photovoltaic solar energy.

“The IEA highlighted nearly two years ago that a new global energy economy was rapidly emerging. Today, it has become a central pillar of economic strategy and each country needs to identify how it can benefit from opportunities and face challenges. We are talking about new clean energy technology markets worth hundreds of billions of dollars, as well as millions of new jobs,” said IEA Executive Director Fatih Birol. “The encouraging news is that the global pipeline of projects to manufacture clean energy technology is large and growing. If everything announced to date is built, the investment flowing into manufacturing clean energy technologies would provide two-thirds of what is needed on a path to net zero emissions. The current momentum is bringing us closer to meeting our international energy and climate targets – and there is almost certainly more to come.”

“At the same time, the world would benefit from more diversified cleantech supply chains,” added Dr. Birol. “As we’ve seen with Europe’s reliance on Russian gas, when you’re too dependent on one company, one country or one trade route – you risk paying a high price if there’s disruption. So I’m pleased to see many economies around the world competing today to be leaders in the new energy economy and drive an expansion of cleantech manufacturing in the race to net zero. It is important, however, that this competition is fair – and that there is a healthy degree of international collaboration, as no country is an energy island and energy transitions will be more costly and slower if countries do not work together.”

The report notes that major economies are acting to combine their climate, energy security and industrial policies into broader strategies for their economies. The Reduction of Inflation Act in the United States is a clear example of this, but there is also the Fit for 55 package and the REPowerEU plan in the European Union, the Green Transformation program in Japan and the Production Linked Incentive scheme in India that encourages the manufacture of solar PV and batteries – and China is working to meet and even exceed the targets of its latest Five Year Plan.

Meanwhile, clean energy project developers and investors are looking closely at policies that can give them a competitive advantage. Relatively short lead times of around 1-3 years on average to bring manufacturing facilities online means that the project pipeline can expand rapidly in an environment conducive to investment. Only 25% of announced manufacturing projects globally for solar PV are under construction or beginning construction soon, according to the report. The number is around 35% for EV batteries and less than 10% for electrolysers. Government policies and market developments can have a significant effect on the fate of the remainder of these projects.

Amid regional ambitions for manufacturing expansion, ETP-2023 highlights the important role of international trade in clean energy technology supply chains. This shows that almost 60% of the photovoltaic solar modules produced worldwide are sold across borders. Trade is also important for EV batteries and wind turbine components, despite their volume, with China currently the top net exporter.

The report also highlights specific challenges related to the critical minerals needed for many clean energy technologies, noting the long lead times for developing new mines and the need for strong environmental, social and governance standards. Given the uneven geographic distribution of critical mineral resources, international collaboration and strategic partnerships will be crucial to ensuring security of supply.

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