If countries worldwide fully implement their announced energy and climate pledges, the global market for key mass-manufactured clean energy technologies will more than triple to $650 billion a year by 2030, according to International Energy Agency (IEA) estimates.
- Momentum in the energy transition is fuelling the market for mass-manufactured clean energy technologies.
- With a supportive regulatory environment, it is expected to continue growing, creating millions of jobs and business opportunities.
- The IEA stressed the importance of diversifying supply chains as most critical minerals and manufacturing capacity are currently concentrated in a small number of countries.
The IEA has published Energy Technology Perspectives 2023, which it sees as “the world’s first global guidebook for the clean technology industries of the future”. It analysed global manufacturing and supply chains of clean energy technologies, such as solar panels and EV batteries, as well as mapping out how they are likely to evolve as the energy transition advances.
A booming market
It found that their market will more than triple to $650 billion per year by 2030 if countries worldwide fully implement their announced energy and climate pledges. Jobs would more than double from six million today to nearly 14 million, with further growth expected in the following decades.
Supply chains, however, are at risk because critical minerals and technology manufacturing are concentrated in certain areas of the world. The three largest producer countries account for at least 70% of manufacturing capacity, with China dominating the market.
Meanwhile, a great deal of the mining for metals is concentrated in a small number of countries. For example, the Democratic Republic of Congo produces over 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 pushed up clean energy technology prices in recent years, hampering countries’ transition plans. Higher prices for cobalt, lithium and nickel led to the first-ever rise in EV battery prices, which jumped by nearly 10% globally in 2022. The cost of wind turbines outside China has also been rising after years of decline, and similar trends can be seen in solar PV.
Supportive regulatory environment to help transition
Major economies are acting to combine their climate, energy security and industrial policies into broader strategies. The Inflation Reduction Act in the US is a clear example of this, the IEA said, alongside the Fit for 55 package and REPowerEU plan in the EU, Japan’s Green Transformation programme, and the Production Linked Incentive scheme in India that encourages manufacturing of solar PV and batteries. China is also working to meet and even exceed the goals of its latest Five-Year Plan.
Clean energy project developers and investors are watching closely for the policies that can give them a competitive edge, the IEA said. The project pipeline can expand rapidly in an environment that is conducive to investment, thanks to a lead time of just one to three years on average across the sector.
Only a quarter of the announced manufacturing projects globally for solar PV are under construction or beginning construction imminently, 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 where the rest of these projects end up, the IEA noted.
International trade will play a key role in clean energy technology supply chains. For example, nearly 60% of solar PV modules produced worldwide are traded across borders. Trade is also important for EV batteries and wind turbine components, despite their bulkiness, with China being the main net exporter today. Given the uneven geographic distribution of critical mineral resources, international collaboration and strategic partnerships will be crucial for ensuring the security of supply.
Bright outlook for clean energy technology
The IEA said in 2021 that the new global energy economy was emerging rapidly, while it has already become a focus for the economic strategies of governments worldwide.
“As we have seen with Europe’s reliance on Russian gas, when you depend too much on one company, one country or one trade route – you risk paying a heavy price if there is 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 clean technology manufacturing in the race to net zero.” said IEA executive director Fatih Birol. “It’s important, though, that this competition is fair – and that there is a healthy degree of international collaboration, since no country is an energy island and energy transitions will be more costly and slow if countries do not work together.”