Manufacturing surge to support renewable energy transition, IEA says

Growth in capacity driven by policy support and investor interest

Photovoltaic solar panels in the village of Hjolderup, Denmark. AFP

A surge in new manufacturing projects for key technologies including solar photovoltaic, batteries and electrolysers is driving global momentum in the world’s clean energy transition, according to a report by the International Energy Agency.

This growth is being driven by policy support and increased investor interest, the IEA said in its State of Clean Technology Manufacturing report on Sunday.

The estimated output by 2030 for renewable energy technologies has risen since late last year, led by 60 per cent for solar PV, 25 per cent for batteries and 20 per cent for electrolysers, it added.

“If we look at the projects that are currently under construction or planned worldwide, China is set to strengthen its leading position in key clean energy technologies,” said Fatih Birol, the IEA’s executive director.

“There is a need for effective international co-operation and further diversification to ensure secure and resilient technology supply chains, meet the world’s climate goals and enable all countries to enjoy the economic benefits of the new global energy economy.”

If all announced projects are built, the manufacturing capacity for the five clean technologies – solar PV, wind, batteries, electrolysers and heat pumps – is projected to reach $790 billion per year by the end of this decade, the IEA said.

This would mean global manufacturing capacity for solar PV would surpass the requirements of the IEA's net-zero emissions by 2050 scenario, while battery manufacturing capacity would meet the 2030 target, the agency said.

Investment in renewable energy needs to double to more than $4 trillion by the end of the decade to meet net-zero emissions targets by 2050, the IEA said in its World Energy Outlook last year.

The IEA expects clean energy investment to rise to slightly more than $2 trillion by 2030.

Announcements for wind, heat pumps, and electrolysers are currently below the levels needed, the agency said.

While not all announced projects may proceed, the short lead times mean there is still scope for 2030 pipelines to “evolve significantly” in the coming years, it said.

Currently, clean energy technology manufacturing capacity is concentrated in a few key markets, comprising 80 per cent to 90 per cent of global capacity.

If all announced projects are realised, the manufacturing share in these markets would change to 70 per cent to 95 per cent by the end of the decade.

“The increased efforts to diversify manufacturing thus far have been supported by major policy announcements in many countries over the last year that are beginning to expand supply chains in different regions,” the IEA said.

The US Inflation Reduction Act, enacted last year, led to a surge in battery manufacturing announcements in late 2022 and early this year, representing almost half of the total project pipeline for the sector in the country, the agency said.

The IRA offers a series of tax incentives on wind, solar, hydropower and other renewables, as well as a push towards electric vehicle ownership.

The IRA will spur about $3 trillion of investment in renewable energy technology, according to Goldman Sachs.

It could double the amount of energy produced by the US shale revolution more than a decade ago, the investment bank said in a report last month.