The IEA summarises its special briefing, “The State of Clean Technology Manufacturing.” It’s a global update on recent progress in key regions, focussing on five technologies – solar PV, wind, batteries, electrolysers and heat pumps – critical to the energy transition. It should be read to keep decision makers informed of investment trends and the impact of industrial strategies. Overall, manufacturing capacity for these technologies is expanding rapidly, with solar PV on track to meet its 2030 targets for a net-zero world and batteries not far behind. The short lead times in ramping up production mean wind, electrolysers and heat pumps can close their gaps quickly, provided they are given all the right support. The briefing covers announced projects, actual manufacturing capacity growth, geographical concentration, regional supply and demand, supply chains, and more. This summary ends by pointing at the policy recommendations in the full report.
The State of Clean Technology Manufacturing: An Energy Technology Perspectives Special Briefing
Technology manufacturing plays a pivotal role in the energy transition required to meet climate, energy security and economic development goals. Deploying clean energy technologies at the pace required to put the world on a trajectory consistent with net zero emissions by mid-century will demand rapid expansion in manufacturing capacity, underpinned by secure, resilient and sustainable supply chains for their components and materials.
This Energy Technology Perspectives Special Briefing, The State of Clean Technology Manufacturing, provides an update on recent progress in clean energy technology manufacturing in key regions. It focuses on five technologies – solar PV, wind, batteries, electrolysers and heat pumps – that will be critical to the energy transition.
Manufacturing capacity for these technologies is expanding rapidly, driven by supportive policies, ambitious corporate strategies and consumer demand. The aim is to keep decision makers informed of investment trends and the impact that recent industrial strategies are having in these highly dynamic sectors.
This special briefing was produced to support deliberations at the 2023 G7 Leaders’ Summit in Hiroshima, Japan, from 19-21 May 2023. It builds on analysis in the latest edition of the IEA’s flagship technology publication, Energy Technology Perspectives 2023 (ETP-2023), published in January 2023, to take into account the latest announced expansions in manufacturing capacity.
Five critical technologies: solar PV, wind, batteries, electrolysers, heat pumps
- Clean energy technology manufacturing is expanding rapidly, driven by supportive policies, ambitious corporate strategies and consumer demand. The global energy crisis has instilled further impetus to develop manufacturing capacity that can strengthen energy security and diversify the supply chain. This Energy Technology Perspectives (ETP) Special Briefing is designed to provide policy makers with strategic insights in this area, focusing on five critical technologies: solar photovoltaic (PV), wind, batteries, electrolysers and heat pumps.
Announced projects are up
- New manufacturing projects are being announced by the day. In the short time since the last IEA analysis of clean technology manufacturing in Energy Technology Perspectives 2023 (covering announcements through to late 2022), the projected output in 2030 from announced projects for solar PV has increased by 60%, for batteries it has increased by around one-quarter, and for electrolysers by around 20%.
Manufacturing capacity growth up
- It is not just announcements that are posting strong growth rates. The latest data available for year-end 2022 show installed manufacturing capacity posted strong year-on-year growth for batteries (72%), solar PV (39%), electrolysers (26%) and heat pumps (13%). Wind manufacturing capacity grew much more modestly at around 2%.
Solar pipeline on track
- If all announced projects were to come to fruition, solar PV manufacturing capacity would comfortably exceed the deployment needs of the IEA’s Net Zero Emissions by 2050 (NZE) Scenario in 2030. Even if only half of this new capacity were to be utilised – the global average utilisation rate of solar PV manufacturing capacity in 2022 was slightly over 40% – throughput would still be sufficient to reach demand levels in the NZE Scenario (around 650 GW per year in 2030).
Battery pipeline getting on track
- For the first time, announced projects for battery manufacturing capacity could cover virtually all of the 2030 global deployment needs of the NZE Scenario. Significant gaps remain for wind, where projected throughput from existing capacity and announced projects equates to just under 30% of NZE Scenario deployment levels, electrolysers (just over 60%) and heat pumps (just over 40%). But relatively short lead times – for both announcements and construction – for the factories that supply these technologies imply a more positive outlook than these gaps initially suggest.
Construction starts, investment?
- While the pipelines of announced projects for solar PV and batteries appear well-stocked, many of the projects they comprise have not yet started construction or reached a final investment decision. Globally, only around 25% of the announced projects for solar PV manufacturing capacity can be considered committed, with the equivalent figure for batteries being around 30%.
- Manufacturing operations are highly geographically concentrated: currently, four countries and the European Union account for around 80-90% of global manufacturing capacity for the five clean technologies examined in this briefing. China alone accounts for 40-80% across these technologies. If all announced projects were to be realised, these shares would shift to 70-95% and 30-80% respectively.
Diversifying supply chains
- Major policy announcements of the past year are already starting to diversify supply chains, as evidenced by the scale-up in planned battery manufacturing capacity in the United States following adoption of the Inflation Reduction Act. In the United States, just the announcements in the second half of 2022 and the first quarter of 2023 account for nearly half of the total project pipeline for battery manufacturing to 2030. The full impacts of the Net Zero Industry Act in the European Union are still too early to gauge.
Supply and demand
- In monetary terms, the projected output of the announced manufacturing capacity for the five key clean technologies (USD 790 billion per year) now exceeds that of the market size for their demand (USD 640 billion) in 2030, in a scenario in which governments implement their announced climate pledges on time and in full – the Announced Pledges Scenario (APS). The aggregate supply surplus at the global level is mirrored for individual technologies (solar PV, batteries and electrolysers), but masks deficits for others (wind and heat pumps). In aggregate, this suggests that for several technologies, the deployment levels needed to meet governments’ climate pledges in the APS are highly achievable.
- China appears well positioned to capture USD 500 billion, or around 65% of the projected output from global clean technology manufacturing capacity in 2030, including both existing and announced projects. Unless China’s domestic deployment of key clean technologies exceeds the levels projected in the APS, more than two-thirds of this output would be surplus to domestic requirements and need to find export markets.
EU, U.S. self-sufficiency
- If all announced projects are realised, the European Union now appears able to fulfil all of its domestic needs for batteries, electrolysers and heat pumps in the APS in 2030. The United States could also be virtually self-sufficient with respect to its battery needs by 2030 in the APS, based on these latest project announcements.
- This briefing concludes with a set of policy recommendations targeted at G7 members, but applicable to all interested governments. They reflect the fact that no country – nor any supply chain segment – can exist in a vacuum. From strategic supply chain assessments to strategic partnerships, governments will need to formulate industrial strategies that balance climate and energy security imperatives with economic opportunities.
This report is part of the IEA’s support of the first global stocktake of the Paris Agreement, which will be finalised in the run up to COP28, the next UN Climate Change Conference, at the end of 2023. Find other reports in this series on the IEA’s Global Energy Transitions Stocktake page.