Tech talk | Focus on the manufacture of clean technologies
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The manufacture and supply of clean energy technologies is increasingly coming under the spotlight as demand intensifies.
On the one hand, there is the potential for concentrations of activities and shortages of supply for acquirers but on the other there are considerable economic opportunities requiring the securing of supply chains for developers.
And there is both a lot at stake and a lot to play for, with the global market, currently estimated around $700 billion, projected to triple to more than $2 trillion over the coming decade as energy transitions advance, according to the IEA.
This then forms the focus of the IEA’s Energy technologies perspectives report for 2024, which concentrates on the top six mass-manufactured clean energy technologies, i.e. solar PV, wind turbines, electric vehicles, batteries, electrolysers and heat pumps.
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Similarly to the increase in market value, the global trade in these technologies is expected to more than triple to reach $575 billion over the next decade – more than 50% larger than the global trade in natural gas today.
Currently, EVs are the biggest trade element, having doubled since 2020, followed by solar PV.
Investments in clean tech
Not surprisingly in response to this rapidly growing demand, investments in manufacturing of clean energy technologies are surging with many new factories being built across the world, the IEA indicates.
In 2023 global investment in clean technology manufacturing rose by 50%, reaching
$235 billion. Solar PV and battery manufacturing accounted for the majority, around 80%, with EV plants accounting for a further 15%.
Fortuitously, the amount of manufacturing capacity being added has been comfortably outpacing current deployment levels. Despite some recent cancellations and postponements of solar PV and battery manufacturing projects, investment has still remained high and is expected to close at around $200 billion in 2024.
The IEA states that cost competitiveness is an important driver of manufacturing investment, with China currently the cheapest location for manufacturing all the major clean energy technologies.
China also accounts for almost three-quarters of the global manufacturing of the six clean technologies.
This is achieved through greater economies of scale, a larger domestic market and highly integrated firms and facilities along the supply chain for these technologies.
Compared with China, it costs up to 40% more on average to produce solar PV modules, wind turbines and battery technologies in the US, up to 45% more in the EU and up to 25% more in India.
Industrial strategies
However, this may change as the respective industrial strategies in Europe and the US pan out – the Net Zero Industry Act in the EU and the Inflation Reduction Act and Bipartisan Infrastructure Law in the US.
India also is on the point of likely pivoting from being a net importer of clean technologies to a net exporter around 2035 and emerging and developing economies in Latin America, Africa and southeast Asia, currently accounting for less than 5% of the value of clean technology production, also offer many opportunities.
For example, southeast Asia could be among the cheapest places to produce polysilicon and wafers for solar PV modules by 2035 and could produce over 8 million EVs, of which up to half could be exported.
Latin America, and Brazil in particular, are considered to have favourable starting conditions for wind turbine manufacturing, but significant investments in infrastructure and logistics are required to capitalise on this.
Likewise North Africa, in countries such as Morocco where investment is under way, could become an EV manufacturing hub.
In conclusion, the IEA points to the need for well-designed industrial strategies with appropriate trade policies supporting cost competitiveness and innovation for clean energy transitions to continue gathering pace.
However, there is no single recipe to follow for these policies.
Commenting on the findings, IEA Executive Director Fatih Birol, said that as countries seek to define their role in the new energy economy, three vital policy areas – energy, industry and trade – are becoming more and more interlinked.
“Clean energy transitions present a major economic opportunity, as we have shown, and countries are rightly seeking to capitalise on that. However, governments should strive to develop measures that also foster continued competition, innovation and cost reductions, as well as progress towards their energy and climate goals.”
Jonathan Spencer Jones
Specialist writer
Smart Energy International
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