In a groundbreaking analysis released by the International Energy Agency (IEA), the surge in investment in solar and battery manufacturing emerges as a formidable force propelling the global economy forward.
According to the IEA's report titled “Advancing Clean Technology Manufacturing,” investment in the manufacturing of key clean energy technologies, including solar, wind, batteries, electrolyzers, and heat pumps, soared to $200 billion in 2023. This marked a staggering increase of over 70% from the previous year and contributed to approximately 4% of global GDP growth and nearly 10% of global investment growth.
The report highlights a remarkable doubling of spending on solar PV manufacturing and a substantial 60% rise in investment in battery manufacturing in the same period.
IEA's Executive Director, Fatih Birol, underscored the significance of this trend, stating, “While greater investment is still needed for some technologies – and clean energy manufacturing could be spread more widely around the globe – the direction of travel is clear. Policy makers have a huge opportunity to design industrial strategies with clean energy transitions at their core.”
One of the striking revelations from the analysis is that current manufacturing capacity for solar PV modules already aligns with the requirements projected for 2030 in the IEA's net-zero emissions scenario. Similarly, battery cell manufacturing capacity, when considering announced projects, stands at 90% of the anticipated demand by the end of the decade.
China continues to dominate clean energy manufacturing, housing over 80% of global solar PV module manufacturing capacity. However, the report suggests a potential shift in the geographical concentration of battery cell manufacturing by 2030, with Europe and the US poised to reach around 15% of global installed capacity each if announced projects materialize.
Despite China's cost advantage in manufacturing, with facilities typically 70-130% cheaper to build compared to the US and Europe, operational costs, including energy, labor, and materials, comprise the bulk (70-98%) of total production costs. This underscores the potential for policy interventions to influence production cost differentials.
With approximately 40% of investments in clean energy manufacturing expected to translate into operational facilities in 2024, and a significant share of battery projects set to come online, the report serves as a crucial guide for policymakers as they craft industrial strategies with a strong emphasis on clean energy manufacturing, responding to the request from G7 Leaders in 2023.
