At a glance
Energy Technology Perspectives 2024. International Energy Agency, Oct. 30, 2024.
This report from the International Energy Agency (IEA) explores the economic potential of manufacturing clean energy technologies. The market for six major clean technologies — solar PV, wind, electric vehicles (EVs), batteries, electrolysers, and heat pumps — has expanded nearly fourfold since 2015, exceeding US$700 billion in 2023, equal to around half the value of all natural gas produced globally that year. With today’s policy settings, this market could triple by 2035 to over $2 trillion, nearing the average value of the global crude oil market.
The IEA examines the impact of energy, industry and policies on clean technology development, highlighting lucrative economic opportunities in manufacturing. It points to the importance of resilient supply chains and a competitive landscape led by economies like China, India, the United States and the European Union. Its findings emphasize that targeted trade and industrial policies are crucial for scaling up these technologies and achieving net-zero emissions. It calls for global collaboration to foster inclusivity and equitable access to clean energy manufacturing across emerging markets. Ultimately, it serves as a useful resource for policymakers aiming to navigate the complexities of transitioning to a sustainable energy future while fostering economic resilience and environmental sustainability.
Organizations
Key findings
- Projected market growth: The market for six key clean energy technologies — solar PV, wind, electric vehicles, batteries, electrolysers, and heat pumps — is expected to triple from $700 billion in 2023 to over $2 trillion by 2035.
- China’s dominance in clean energy manufacturing: China is projected to retain its leading position. China, the European Union, and the U.S. will collectively account for over 80 per cent of global clean energy technology manufacturing capacity by 2030.
- Surge in manufacturing investment: Investment in clean energy manufacturing, mostly solar PV and batteries, reached $235 billion in 2023. It marks a 50 per cent increase on the $160 billion invested in 2022. Annual investments are expected to average $180 billion through 2030.
- Rapid growth in clean technology trade: Global trade in clean energy technologies has surged, with solar PV module exports increasing tenfold and EV exports nearly twentyfold since 2015, reflecting rising demand for manufactured clean technology over fossil fuels.
- Importance of domestic markets for investment: A survey by the IEA indicates that the size of the domestic market is a critical factor influencing manufacturing investment decisions; for example, China’s clean technology market expanded from $25 billion in 2010 to over $400 billion in 2023.
- Trade volumes decrease with renewables: Fossil fuels provide recurring flows of energy trade; clean technology trade creates long-lived stocks of energy generation. A single container ship of solar panels can provide as much electricity as more than 50 large LNG tankers of gas or 100 large coal ships.
Bigger picture
This IEA report provides critical insights into the manufacturing and trade dynamics that underpin the global energy transition. Clean technology is experiencing rapid growth, with global investment in clean technology manufacturing increasing by 50 per cent in 2023 to reach $235 billion — around 10 per cent of global economic growth. The report notes that 80 per cent of this investment went to solar PV and battery production, which aligns with their rising deployment rates. However, risks to secure and resilient supply chains such as supply concentration, shipping route bottlenecks and policies affecting trade must be overcome.
China dominates clean energy manufacturing, holding about 70 per cent of the global production share. It is projected to generate more than $340 billion from clean tech exports by 2035. China enjoys greater economies of scale, larger domestic market and highly integrated firms and facilities along the supply chains for these technologies. Manufacturing costs in China are significantly lower than those in other regions, with the U.S. facing up to 40 per cent higher production costs, the EU up to 45 per cent, and India around 25 per cent higher. Still, competitive costs are only part of the equation, as market access, skilled labour, and robust infrastructure also influence investment.
The report highlights policies reshaping clean technology manufacturing and reducing reliance on imported technologies. The EU’s Net Zero Industry Act aims to fulfill 40 per cent of EU deployment needs through domestic manufacturing by 2030. Likewise, the U.S. Inflation Reduction Act (IRA) has already attracted $230 billion in investment. Thanks to this, the U.S. could almost meet its demand for solar PV modules and polysilicon through domestic production by 2035. However, the IRA’s progress is now jeopardized by President Trump’s re-election.
The IEA also discusses how emerging and developing countries can take advantage. These nations currently account for less than five per cent of the value generated from clean technology production. Political and currency risks, a lack of skilled workers and poor infrastructure hold them back. But by fostering favorable investment climates and partnerships they also have the potential to leverage their competitive advantages and reap the economic benefits from growing supply chains for clean energy technologies. For example, India could become a net exporter of these technologies valued at $30 billion by 2035, if the energy transition accelerates domestically and globally.
Challenges and opportunities
Key barriers to energy technology progress:
- High variable costs in clean technology manufacturing: Manufacturing clean technologies, particularly solar PV, batteries, and electrolysers, incurs high variable costs from energy and material inputs.
- Supply chain dependence and concentration: With China producing over 70 per cent of essential clean technology components, global supply chains are vulnerable to trade disruptions, raising concerns about energy security.
- Regional policy inconsistencies: Diverse policies across countries create investment uncertainty, as manufacturers navigate varying incentives, tariffs, and regulations. This lack of harmonization can deter investors and slow growth in emerging clean technology markets.
- Limited access to green financing: Developing countries often struggle to secure green financing, hindering their ability to invest in advanced clean technologies and necessary manufacturing infrastructure.
- Workforce and skills gaps: The transition requires a specialized workforce. However, regions with emerging clean energy markets frequently lack the skilled labour needed for rapid manufacturing scale-up and technology maintenance.
- Environmental impact of clean technology manufacturing: Production of materials-intensive technologies like EV batteries can have significant environmental impacts unless powered by renewable energy.
To address these challenges, the report recommends:
- Develop more sustainable supply chains: Building diversified supply chains reduces dependence and enhances resilience. Policymakers should incentivize local production and establish clear standards for traceability and sustainability in the clean energy sector.
- Enhance cross-border policy harmonization: Aligning policies across regions could attract more investors and facilitate faster technology transfer. International collaboration on tariffs, carbon pricing, and trade agreements can reduce uncertainty for companies entering new markets.
- Scale-up green financing and investment: Expanding access to green financing in emerging economies would enable broader participation in clean energy manufacturing. Governments and financial institutions should offer low-interest loans and public-private partnerships to stimulate investment.
- Promote workforce training and skill development: Investing in workforce development is essential for regions aspiring to become clean technology hubs. Industries should collaborate with governments to establish training programs that align with local manufacturing needs.
- Advance low-carbon manufacturing processes: Research into energy-efficient and low-emission production methods is critical for reducing the carbon footprint of clean technology. Policymakers should support R&D grants for industries adopting renewable-powered manufacturing practices.
- Support innovation in clean energy storage and efficiency: As demand for clean technologies grows, innovations in energy storage, efficiency, and recycling can enhance affordability and sustainability. Joint support from governments and industries for R&D in advanced battery storage and circular economy approaches is essential.
In their own words
…a single journey by a large container ship filled with solar PV modules can provide the means to generate electricity equivalent to the amount generated from the natural gas onboard more than 50 large LNG tankers, or the coal onboard 100 large ships
Energy Technology Perspectives 2024, International Energy Agency, Oct., 2024.
Final thoughts
This report underscores the critical role of diversified clean technology manufacturing and resilient supply chains. Analyzing policies and trade across six core technologies, it emphasizes the need for harmonized regional incentives, financing, and workforce development to effectively scale production. It also notes the importance of reliable data collection and data-driven approaches to long-term goal decision-making by firms and governments.
However, the report could enhance its insights by exploring how other sectors, like digital technology, have navigated global supply chain risks and skill shortages. This could provide valuable lessons for the energy transition.
Moreover, in the struggle to establish competitive advantages in clean technology, there is a pressing need for international cooperation to ensure that emerging economies are not sidelined. This collaboration is important for a just and inclusive energy transition that does not deepen wealth inequalities. Overall, the IEA’s findings highlight the importance of coordinated approaches to manufacturing, innovation, and policy for an equitable and efficient energy transition to global net zero emissions.
Download the full report originally published by the International Energy Agency on Oct. 30, 2024.
