The International Energy Agency (IEA) has released a report revealing a remarkable surge of over 70% in investment in manufacturing capacity for key clean energy technologies in 2023. This surge, as detailed in the report, marks a significant step forward in the global transition towards sustainable energy solutions.
According to the IEA report, investment in manufacturing plants for solar PV, wind turbines, batteries, electrolysers and heat pumps soared to an impressive $200 billion worldwide in 2023.
Particularly noteworthy is the exponential growth in spending on solar PV manufacturing, which more than doubled year-on-year, and the substantial increase in investment in battery manufacturing, rising by approximately 60%.
China’s Continued Dominance and Emerging Competition
China, long established as a powerhouse in global clean-tech manufacturing, continued to dominate by serving as the lowest-cost producer for all five key clean energy technologies. China is home to a staggering 80% of global solar PV module manufacturing capacity.
However, the IEA forecasts a potential shift in this dynamic, projecting that Europe and the US combined could reach 15% of global clean tech manufacturing capacity by 2030, pending some key planned battery manufacturing projects. The US is injecting billions of dollars into carbon emission management, with a strong focus on low-carbon construction.
Fatih Birol, the Executive Director of the IEA, hailed these developments and the accelerating momentum behind the clean energy transition. Birol stressed the urgent need for governments to push through policies that would further drive progress in this direction.
“Record output from solar PV and battery plants is propelling clean energy transitions,” remarked Birol. “The strong investment pipeline in new facilities and factory expansions is set to add further momentum in the years ahead.”
The report also underscores the critical role of policy interventions, such as those discussed at COP28, in narrowing production cost disparities between countries. With production costs of clean energy technologies closely tied to energy and material costs, supportive policies could significantly alleviate these expenses.
Challenges and Opportunities in Clean Energy Manufacturing
The report offers promising insights into the alignment of current manufacturing capacities with future demand. Solar PV manufacturing capacity already meets the requirements projected for 2030 under the IEA’s net-zero emissions scenario.
Similarly, battery cell manufacturing capacity stands at 90% of the projected demand by the end of the decade under the same scenario.
Anticipation is mounting as numerous clean tech manufacturing plants are poised to become operational soon, with approximately 40% of investments in clean energy manufacturing capacity allocated to facilities scheduled to come online this year. This development fuels optimism that recent inflationary pressures in the clean tech sector might be temporary, with cost reductions expected to resume over the next decade.
However, amidst these positive strides, concerns linger over manufacturing capacity in the electrolyser and heat pump sectors, which fall short of the requirements for transitioning the hydrogen and heating industries towards net-zero emissions.
Fortunately the report offers valuable guidance for policymakers to devise industrial strategies aimed at further investment growth in clean technology manufacturing to support climate goals.
