According to a major new IEA report, the manufacturing of clean energy technologies is ushering in a new industrial age in the energy sector that is creating massive new markets and millions of jobs while also posing new risks. As a result, nations around the world are developing industrial strategies to ensure their place in the new global energy economy.
Perspectives on Energy Technologies The newest edition of one of the IEA’s premier series, 2023, serves as the first worldwide handbook for the emerging clean tech manufacturing sectors.
It provides a thorough analysis of clean energy technology currently manufactured globally, including solar panels, wind turbines, electric vehicle batteries, hydrogen electrolysers, and heat pumps. It also maps out how these supply chains are likely to change as the clean energy transition advances in the coming years.
According to the estimate, assuming nations throughout the world completely implement their announced energy and climate pledges, the global market for essential mass-produced clean energy technology will be worth around USD 650 billion annually by 2030 – more than three times today’s level.
Jobs in the manufacture of related clean energy technologies would more than double from 6 million now to roughly 14 million by 2030, and as transitions move forward, additional fast industrial and employment growth is anticipated in the ensuing decades.
A significant regional concentration of resource mining, processing, and technology production in the current supply chains of clean energy technologies poses concerns. The three main producing nations, with China dominating all of them, account for at least 70% of the manufacturing capacity for technologies including solar panels, wind, EV batteries, electrolysers, and heat pumps.
In the meantime, the majority of the mining for essential minerals is centred in a limited number of nations. For instance, just three nations—Australia, Chile, and China—produce more than 90% of the world’s lithium, while the Democratic Republic of the Congo produces more than 70% of the world’s cobalt.
The implications of constrained supply chains are already becoming apparent as a result of recent price increases in clean energy technology that have complicated and increased the cost of countries’ transitions to clean energy. Prices for EV batteries increased for the first time ever in 2022 as a result of rising cobalt, lithium, and nickel prices; they increased by about 10% globally.
After years of decreases, the cost of wind turbines outside of China has also been increasing. Similar trends can be seen in solar PV.
“Nearly two years ago, the IEA made note of the quickly developing new global energy economy. Today, it is a key component of economic strategy, and each nation must determine how to take advantage of the potential and overcome the obstacles. According to IEA Executive Director Fatih Birol, “we’re talking about new clean energy technology marketplaces worth hundreds of billions of dollars as well as millions of new employment.”
“The good news is that there is a sizable and expanding worldwide project pipeline for the production of renewable energy technology. The investment coming into the production of renewable energy technology would supply two-thirds of what is required on a pathway to net zero emissions, assuming everything announced as of today is produced. We are getting closer to achieving our global energy and climate targets thanks to the current momentum, and there will almost probably be more to come.
Dr. Birol continued, “At the same time, the globe would benefit from more diverse clean technology supply chains.” “As we have seen with Europe’s reliance on Russian gas, you run the danger of paying a steep price if there is a disruption when you rely too heavily on one industry, one nation, or one trade route. I’m happy to see that many economies are now striving to lead the new energy economy and spur an increase in the production of clean technologies as we head toward net zero. No country is an energy island, so it’s crucial that there be fair competition and a healthy level of international cooperation. Without cooperation, energy transitions will be more expensive and difficult.
The paper points out that major economies are taking steps to incorporate their industrial, energy security, and climate policies into larger economic objectives.
A good example of this is the Inflation Reduction Act in the United States. Other examples include the Fit for 55 package and RE Power EU plan in the European Union, Japan’s Green Transformation programme, and the Production Linked Incentive scheme in India that promotes the production of solar PV and batteries. China is also working to meet and even exceed the objectives of its most recent Five-Year Plan.
The policies that could provide them a competitive edge are being keenly monitored by investors and developers of sustainable energy projects. The project pipeline can increase quickly in an environment that is favourable to investment due to the manufacturing facilities’ typically short lead times, which range from one to three years. Only 25% of the solar PV manufacturing projects that have been announced globally are currently being built or will soon be starting.
For EV batteries, the percentage is around 35%, whereas for electrolysers, it is around 10%. Where the remaining projects are implemented can be significantly influenced by market trends and governmental policies.
ETP-2023 emphasises the crucial importance of global trade in clean energy technology supply chains amid the regional aspirations for ramping up manufacturing. It demonstrates that around 60% of solar PV modules manufactured worldwide are traded internationally.
Despite their mass, trade is crucial for EV batteries and wind turbine parts, with China currently being the largest net exporter.
The research also emphasises the unique difficulties associated with the essential minerals required for many clean energy technologies, pointing out the lengthy lead times for establishing new mines and the requirement for stringent environmental, social, and governance criteria.