The State of Clean Technology Manufacturing

The State of Clean Technology Manufacturing: An ETP Special Briefing

Key Findings

• Rapid Expansion: Clean energy technology manufacturing is expanding rapidly, driven by supportive policies, ambitious corporate strategies, and consumer demand. The global energy crisis has further accelerated the development of manufacturing capacity to enhance energy security and diversify supply chains.
• Projected Growth: Since the last IEA analysis in 2023, the projected output from announced projects for solar PV has increased by 60%, for batteries by around one-quarter, and for electrolysers by around 20%.
• Installed Capacity: As of year-end 2022, installed manufacturing capacity showed strong year-on-year growth for batteries (72%), solar PV (39%), electrolysers (26%), and heat pumps (13%). Wind manufacturing capacity grew modestly at around 2%.
• Meeting Demand: If all announced projects were to come to fruition, solar PV manufacturing capacity would comfortably exceed the deployment needs of the IEA’s Net Zero Emissions by 2050 (NZE) Scenario in 2030. Even if only half of this new capacity were utilized, throughput would still be sufficient to reach demand levels in the NZE Scenario (around 650 GW per year in 2030).
• Battery Manufacturing: Announced projects for battery manufacturing capacity could cover virtually all of the 2030 global deployment needs of the NZE Scenario. However, significant gaps remain for wind (30%), electrolysers (60%), and heat pumps (40%). Short lead times imply a more positive outlook.
• Geographical Concentration: Manufacturing operations are highly geographically concentrated. Currently, four countries and the European Union account for around 80-90% of global manufacturing capacity for the five clean technologies examined. China alone accounts for 40-80% across these technologies. If all announced projects were realized, these shares would shift to 70-95% and 30-80%, respectively.
• Supply Chain Diversification: Major policy announcements, such as the Inflation Reduction Act in the US, are diversifying supply chains. For instance, the announcements in the second half of 2022 and the first quarter of 2023 account for nearly half of the total project pipeline for battery manufacturing to 2030.
• Monetary Surplus: The projected output of announced manufacturing capacity for the five key clean technologies (USD 790 billion per year) now exceeds the market size for their demand (USD 640 billion) in 2030, under the Announced Pledges Scenario (APS). This indicates that for several technologies, deployment levels needed to meet government climate pledges are highly achievable.
• China's Dominance: China appears well positioned to capture USD 500 billion, or around 65% of the projected output from global clean technology manufacturing capacity in 2030, including both existing and announced projects. More than two-thirds of this output would be surplus to domestic requirements and need to find export markets.
• Regional Self-Sufficiency: If all announced projects are realized, the European Union now appears able to fulfill all of its domestic needs for batteries, electrolysers, and heat pumps in the APS in 2030. The US could also be virtually self-sufficient with respect to its battery needs by 2030.

Recommendations for the G7

• Governments should formulate industrial strategies that balance climate and energy security imperatives with economic opportunities.
• Strategic supply chain assessments and partnerships are essential.
• No country or supply chain segment can exist in isolation.