IEA report: Supply chain risks cloud energy transition

High geographic concentrations of key materials and manufacturing threaten the global transition to green energy technologies, a new report from the International Energy Agency (IEA) warns.

According to Energy Technology Perspective 2023, for technologies like solar panels, wind, EV batteries, electrolysers and heat pumps, the three largest producer countries account for at least 70% of manufacturing capacity for each technology – with China dominant in all of them.

The 2023 edition of Energy Technology Perspectives (ETP-2023) offers an inventory of the current state of global clean energy supply chains, covering the areas of mining; production of materials like lithium, copper, nickel, steel, cement, aluminium and plastics; and the manufacturing and installation of key technologies.

The report noted that mining for critical minerals is concentrated in a small number of countries—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.

(Source: IEA)

The world is already seeing the risks of tight supply chains, which have pushed up clean energy technology prices in recent years, making countries’ clean energy transitions more difficult and costly. Increasing 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 declines, and similar trends can be seen in solar PV.

“The IEA highlighted almost two years ago that a new global energy economy was emerging rapidly. Today, it has become a central pillar of economic strategy and every country needs to identify how it can benefit from the opportunities and navigate the challenges. We’re talking about new clean energy technology markets worth hundreds of billions of dollars as well as millions of new jobs,” said IEA Executive Director Fatih Birol. “The encouraging news is the global project pipeline for clean energy technology manufacturing is large and growing. If everything announced as of today gets built, the investment flowing into manufacturing clean energy technologies would provide two-thirds of what is needed in a pathway to net zero emissions. The current momentum is moving us closer to meeting our international energy and climate goals – and there is almost certainly more to come.”

The report notes that major economies are acting to combine their climate, energy security and industrial policies into broader strategies for their economies. The Inflation Reduction Act in the United States is a clear example of this, but there is also the Fit for 55 package and REPowerEU plan in the European Union, Japan’s Green Transformation program, and the Production Linked Incentive scheme in India that encourages manufacturing of solar PV and batteries – and China is working to meet and even exceed the goals of its latest Five-Year Plan.

The analysis shows the global market for key mass-manufactured clean energy technologies will be worth around USD 650 billion a year by 2030 – more than three times today’s level – if countries worldwide fully implement their announced energy and climate pledges. The related clean energy manufacturing jobs would more than double from 6 million today to nearly 14 million by 2030 – and further rapid industrial and employment growth is expected in the following decades as transitions progress.

The analysis shows the global market for key mass-manufactured clean energy technologies will be worth around US$650 billion a year by 2030 – more than three times today’s level – if countries worldwide fully implement their announced energy and climate pledges. The related clean energy manufacturing jobs would more than double from 6 million today to nearly 14 million by 2030 – and further rapid industrial and employment growth is expected in the following decades as transitions progress.