IEA presents report on investments in clean tech manufacturing

The recent meeting of Climate, Energy, and Environment Ministers from the G7 advanced economies in Turin echoed with urgency as they deliberated on strategies to uphold the commitment of limiting global warming to 1.5°C, following up on the discussions initiated at COP28 in Dubai. Against the backdrop of escalating concerns over decarbonization, the ministerial gathering assumed paramount significance. With G7 nations bearing considerable historical responsibility as major contributors to climate change, they also hold the key to driving the transition towards clean energy owing to their substantial resources.

Expectations were high as stakeholders looked to the G7 countries for decisive action, particularly in setting ambitious climate targets in their Nationally Determined Contributions (NDCs). The Joint Declaration issued at the conclusion of the meeting, albeit couched in somewhat vague language, underlined the commitment to elevating climate ambitions with the aim of achieving economy-wide, absolute reduction targets aligned with the 1.5°C goal. Specific pledges included a tripling of global renewable energy capacity and bolstering energy security through various measures such as demand response, grid reinforcement, and smart grid deployment, along with a concerted effort towards achieving a global energy storage goal.

To achieve these ambitious goals, G7 will have to step up their clean technology manufacturing. In order to navigate a context marked by high competitiveness where countries are racing to capitalise on benefits that clean technology manufacturing can bring to economic security, employment and the resilience of clean energy transitions, the International Energy Agency (IEA) was tasked by G7 leaders to produce a comprehensive report providing guidance. Released in May 2023, the report, titled “Advancing Clean Technology Manufacturing,” offers policymakers valuable insights and guiding principles tailored to inform industrial strategies with a strong emphasis on clean energy manufacturing. Drawing from a high-level dialogue held at the IEA’s headquarters in Paris and leveraging analysis from flagship publications, the report underscores the critical role of clean technology manufacturing in shaping energy, climate, and economic policies. 

Hitting the target

Generally speaking, an investment surge has been observed across all the cleantech sector. Looking into global investments in the manufacturing of five key clean energy technologies – solar PV, wind, batteries, electrolysers and heat pumps – the report finds out that they rose to USD 200 billion in 2023, an increase of more than 70% from 2022 that accounted for around 4% of global GDP growth.

Solar PV and battery technologies emerge as frontrunners, with substantial investments flowing into these sectors, indicative of the growing significance of clean energy manufacturing in driving economic growth and development. Indeed, spending on solar PV manufacturing more than doubled last year, while investment in battery manufacturing rose by around 60%. 

This brings these technologies close to hitting the target of manufacturing capacity in 2030 based on the IEA’s net zero emissions scenario, if announced projects will be duly implemented. In particular, solar PV module manufacturing capacity is already today in line with what is needed in 2030, while manufacturing of battery cells is 90% of the way towards meeting net zero demand at the end of this decade.

A undisputed leader 

The report also sheds light on the geographical distribution of investments, highlighting the dominance of a few regions, notably China, the United States, and the European Union, in clean energy manufacturing. Other regions in which important investments in clean tech manufacturing are being made there are India, Japan, Korea and countries in Southeast Asia.

While its share of global investments in clean technology manufacturing slightly fell with respect to 2022, China still accounted for three-quarters of those investments in 2023. Solar PV and batteries are the spearhead of its production. In particular, investments for solar PV manufacturing in China more than doubled between 2022 and 2023. And for solar PV, this is unlikely to change in the coming years, according to the report, as China alone accounts for more than 80% of global solar PV module manufacturing capacity and 95% for wafers.

However, there are indications that the manufacturing landscape could witness a shift at list in the battery sector, with Europe and the United States poised to increase their share of global manufacturing capacity by the end of the decade if all project announced are realized. Indeed, Europe and the United States are expected to each reach around 15% of global installed capacity by 2030.

The way forward

Key recommendations outlined in the report offer a roadmap for policymakers to navigate the complex terrain of clean technology manufacturing, while emphasizing always the need for tailored approaches. The IEA’s recipe includes prioritizing strengths, fostering innovation, and strategically addressing cost differentials. Collaboration at the international level, particularly in data collection and in supply chain management, is also underscored as essential for maximizing opportunities for investment and fostering global progress.

As the world grapples with the dual challenge of energy transition and climate change, the insights gleaned from the IEA report and the deliberations at the G7 ministerial meeting serve as valuable signposts in charting a course towards a sustainable and resilient future. By harnessing the transformative potential of clean technology manufacturing, policymakers can not only secure energy security but also mitigate the adverse impacts of climate change, setting the stage for a more prosperous and sustainable tomorrow.