• Clean energy technology manufacturing is expanding rapidly, driven by supportive policies, ambitious corporate strategies and consumer demand. The global energy crisis has instilled further impetus to develop manufacturing capacity that can strengthen energy security and diversify the supply chain. This Energy Technology Perspectives (ETP) Special Briefing is designed to provide policy makers with strategic insights in this area, focusing on five critical technologies: solar photovoltaic (PV), wind, batteries, electrolysers and heat pumps.
• New manufacturing projects are being announced by the day. In the short time since the last IEA analysis of clean technology manufacturing in Energy Technology Perspectives 2023 (covering announcements through to late 2022), the projected output in 2030 from announced projects for solar PV has increased by 60%, for batteries it has increased by around one-quarter, and for electrolysers by around 20%.
• It is not just announcements that are posting strong growth rates. The latest data available for year-end 2022 show installed manufacturing capacity posted strong year-on-year growth for batteries (72%), solar PV (39%), electrolysers (26%) and heat pumps (13%). Wind manufacturing capacity grew much more modestly at around 2%.
• 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 to be utilised – the global average utilisation rate of solar PV manufacturing capacity in 2022 was slightly over 40% – throughput would still be sufficient to reach demand levels in the NZE Scenario (around 650 GW per year in 2030).
• For the first time, announced projects for battery manufacturing capacity could cover virtually all of the 2030 global deployment needs of the NZE Scenario. Significant gaps remain for wind, where projected throughput from existing capacity and announced projects equates to just under 30% of NZE Scenario deployment levels, electrolysers (just over 60%) and heat pumps (just over 40%). But relatively short lead times – for both announcements and construction – for the factories that supply these technologies imply a more positive outlook than these gaps initially suggest.
• While the pipelines of announced projects for solar PV and batteries appear well-stocked, many of the projects they comprise have not yet started construction or reached a final investment decision. Globally, only around 25% of the announced projects for solar PV manufacturing capacity can be considered committed, with the equivalent figure for batteries being around 30%.
• 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 in this briefing. China alone accounts for 40-80% across these technologies. If all announced projects were to be realised, these shares would shift to 70-95% and 30-80% respectively.
• Major policy announcements of the past year are already starting to diversify supply chains, as evidenced by the scale-up in planned battery manufacturing capacity in the United States following adoption of the Inflation Reduction Act. In the United States, just 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. The full impacts of the Net Zero Industry Act in the European Union are still too early to gauge.
• In monetary terms, the projected output of the announced manufacturing capacity for the five key clean technologies (USD 790 billion per year) now exceeds that of the market size for their demand (USD 640 billion) in 2030, in a scenario in which governments implement their announced climate pledges on time and in full – the Announced Pledges Scenario (APS). The aggregate supply surplus at the global level is mirrored for individual technologies (solar PV, batteries and electrolysers), but masks deficits for others (wind and heat pumps). In aggregate, this suggests that for several technologies, the deployment levels needed to meet governments’ climate pledges in the APS are highly achievable.
• 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. Unless China's domestic deployment of key clean technologies exceeds the levels projected in the APS, more than two-thirds of this output would be surplus to domestic requirements and need to find export markets.
• If all announced projects are realised, the European Union now appears able to fulfil all of its domestic needs for batteries, electrolysers and heat pumps in the APS in 2030. The United States could also be virtually self-sufficient with respect to its battery needs by 2030 in the APS, based on these latest project announcements.
• This briefing concludes with a set of policy recommendations targeted at G7 members, but applicable to all interested governments. They reflect the fact that no country – nor any supply chain segment – can exist in a vacuum. From strategic supply chain assessments to strategic partnerships, governments will need to formulate industrial strategies that balance climate and energy security imperatives with economic opportunities.

The manufacturing facilities for the key clean energy technologies examined in this briefing can be developed relatively quickly, which – combined with recent policies to boost manufacturing – has created great dynamism in these sectors. For countries looking to establish a competitive position in the new clean energy economy, the industrial strategy decisions taken today will shape deployment and trade of clean technologies through to 2030 and beyond.

G7 members have already recognised the importance of building resilient, secure and sustainable supply chains to accelerate the clean energy transition and reduce vulnerabilities associated with undue dependencies. There is much countries can do domestically to proactively address the risks posed to supply chains – including developing industrial strategies that leverage their competitive advantages – but international co-operation will be crucial to ease, hasten and extend any progress that is to be made. The IEA stands ready to support G7 members and other governments in this endeavour.

With this in mind, this briefing concludes with recommendations for G7 members (also applicable to other interested countries), focussed on actions that require international co-operation:

1. Co‑ordinate efforts across supply chains to determine risks posed to different elements that could delay or disrupt deployment and resilience in the face of potential market shocks. Much attention is now paid – quite rightly – to the security of supply of critical minerals, but supply chains are only as strong as their weakest link. G7 members should co-ordinate the work they are doing at each stage in the supply chain, examining remaining gaps that may lead to bottlenecks.
2. Identify and build strategic partnerships, both within the G7 and beyond. For most countries, it is not realistic to effectively compete in all supply chain steps, nor in all supply chains. Understanding relative strengths and competitiveness, and the potential to build complementary strategic partnerships, should be key considerations of industrial strategies, particularly for clean technology manufacturing.
3. Facilitate investment in emerging market and developing economies with pooled investments, knowledge-sharing and other strategies to reduce risks – and consequently, the costs of financing – for capital-intensive components of supply chains. Foreign direct investment should find an appropriate balance between export opportunities and support for in-country clean energy transitions and socio-economic development.
4. Develop a platform to inform the process of identifying strategic partnerships for manufacturing. Such a platform could provide analytical information on current and projected future market sizes, production costs for different countries and regions and future expansion plans – among other insights – helping to reveal mutually beneficial relationships between countries.
5. Share best practice and domestic experience on measures relevant to accelerating progress in clean technology manufacturing, such as creating favourable investment conditions, accelerating permitting and stockpiling of input materials and components. 'How-to-guides’ for developing industrial strategies could be a vehicle for disseminating such efforts among countries.
6. Promote manufacturing technologies and strategies to enhance resource efficiency, thereby increasing the resilience of clean technology supply chains. Manufacturing processes that minimise material use, and technology designs that incorporate substitute materials when the security of supply of a given input is in question, should be incentivised through innovation policy, along with product designs that facilitate re-use, repairability and recyclability. Designing and adopting standards for clean technologies, such as common taxonomies and definitions for low- and zero emission products and materials, can support traceability of products and components and facilitate trade of components/scrap. Standards that determine which materials and practices are acceptable in clean technology supply chains can also promote transparency.