Investment in manufacturing of clean energy technologies reaches $200 bn: IEA

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Investment in manufacturing of the five clean energy technologies has reached $200 billion in 2023 from $115 billion in 2022, showing growth of more than 70 percent, says IEA (International Energy Agency).

IEA Executive Director Fatih Birol said: “Record output from solar PV and battery plants is propelling clean energy transitions – and the strong investment pipeline in new facilities and factory expansions is set to add further momentum in the years ahead.”

Investments in solar PV and battery manufacturing installations have dominated, accounting for 95 percent of the total in 2023, IEA report said.

China accounted for 75 percent of the clean energy technology investment in 2023, down from 85 percent in 2022.

Share of investment in clean energy technology in both the United States and the European Union has reached 16 percent in 2023 from 11 percent in 2022. India, Japan, Korea and Southeast Asia made up most of the remaining share. There was no manufacturing investment in either Africa or Central and South America.

Investment in clean technology manufacturing accounted for around 0.7 percent of global investment across all sectors of the economy, driving more spending than established industries like steel (0.5 percent). In 2023, clean technology manufacturing alone accounted for around 4 percent of global GDP growth and nearly 10 percent of global investment growth.

Investment in solar PV manufacturing more than doubled to around $80 billion in 2023.

Investment in battery manufacturing grew by around 60 percent to $110 billion. China accounted for three-quarters of global investments in clean technology manufacturing in 2023, down from 85 percent in 2022, as investment in the United States and Europe grew strongly – particularly for battery manufacturing, for which investments more than tripled in these regions.

For solar PV manufacturing, investments in China more than doubled between 2022 and 2023. Outside these three major manufacturing hubs, India, Japan, Korea and countries in Southeast Asia made important contributions in specific areas, while investment in regions such as Africa, Central America and South America was negligible.

Near-term momentum for clean manufacturing looks strong. Around 40 percent of investments in 2023 were in facilities that are due to come online in 2024; for battery manufacturing facilities, this share is nearly 70 percent.
Green technology manufacturing IEA reportCommitted projects – those that are under construction or have reached final investment decisions – through 2025, together with existing capacity, would exceed by 50 percent the global solar PV deployment needs in 2030 based on the IEA’s Net Zero Emissions by 2050 Scenario (NZE Scenario) and meet 55 percent of battery cell requirements.

This momentum is also spreading to adjacent sectors – nearly half of committed battery manufacturing announcements in the United States will be via joint ventures with automakers. The project pipeline is expanding rapidly, if unevenly Existing manufacturing capacity for solar PV modules and cells could today achieve what is necessary to meet demand under the NZE Scenario in 2030 – six years ahead of schedule, with only modest gaps remaining for the upstream steps of wafer and polysilicon manufacturing. However, facilities making cells and modules are currently seeing relatively low average utilisation rates of around 50 percent globally.

Key factors that explain this are a solar PV module supply glut, together with the rapid expansion of manufacturing capacity. While the sharp increase in supply has driven down module prices, supporting wider consumer uptake, stockpiles of solar PV modules are growing and there are signs of downscaling and postponements of planned capacity expansions, particularly in China.

Battery manufacturing also had a record year in 2023. Production totalled more than 800 gigawatt-hours (GWh), rising 45 percent from 2022. Capacity additions also surged, with almost 780 GWh of cell manufacturing capacity added – around a quarter more than in 2022. This raised total installed capacity to around 2.5 terawatt-hours (TWh), or almost three times current demand.

Globally, battery manufacturing capacity could exceed 9 TWh by 2030 if all announcements are realised. Battery manufacturing deployment needs in 2030 under the NZE Scenario are within reach: more than 90 percent could be met by announced expansions that have reached final investment decisions.

New manufacturing capacity for wind and electrolysers grew faster in 2023, although the gains were not as dramatic. Existing capacity for wind could deliver nearly 50 percent of NZE Scenario needs in 2030, while announced projects could meet a further 12 percent.

Meanwhile, capacity additions for heat pump manufacturing slowed due to stagnation in the majority of leading markets. Existing capacity could deliver only around one-third of 2030 needs in the NZE Scenario – though this could change quickly given the short lead times typical of capacity expansions in this industry.

Geographic concentration in manufacturing looks set to remain high for most clean energy technologies China, the United States and the European Union together account for around 80 percent to 90 percent of manufacturing capacity for solar PV, wind, battery, electrolyser and heat pump manufacturing. Little change to this overall concentration is foreseen to 2030, even if all announced projects come to fruition.

China alone accounts for more than 80 percent of global solar PV module manufacturing capacity and 95 percent for wafers. This looks unlikely to change significantly this decade, with the country set to match or exceed the capacity additions planned in other countries like the United States and India.

For battery cell manufacturing, the situation is different: Planned capacity additions in Europe and the United States look set to reduce China’s present share of global capacity, with both regions reaching around a 15 percent share by 2030 if all announced projects are realised.

In Europe and the United States, announced battery cell manufacturing capacity is sufficient to meet the 2030 domestic deployment needs associated with their own climate goals. The geographic concentration of manufacturing for wind, electrolysers and heat pumps also shows little change through 2030.

Outside of the main producer countries, Central and South America account for a small share of global production of the main wind turbine components (4 percent to 6 percent for nacelles, blades and towers). However, virtually no clean technology manufacturing takes place in Africa today.

Production cost gaps are significant, but not immutable New data and analysis, including plant-level assessments of more than 750 facilities, provide insight into key drivers of manufacturing costs and the differences between regions.

IEA’s analysis shows that China is the lowest-cost producer for all the technologies highlighted in this report, before accounting for explicit supportive policy measures, though it also points to opportunities for reducing cost gaps. The main upfront cost that contributes to overall production costs is the capital expenditure to set up a clean energy manufacturing plant, and the associated financing costs.

Facilities in the United States and Europe are typically 70 percent to 130 percent more expensive per unit of output capacity than those in China for solar PV, wind and battery manufacturing, before accounting for the difference in the cost of capital between regions.

India’s capital costs are around 20 percent to 30 percent higher than China’s, but significantly lower than those of the United States and Europe. However, upfront costs make only a modest contribution to the overall levelised cost of manufacturing.

Annualised capital expenditure amounts to just 15 percent to 25 percent of the total cost of producing solar PV modules, with a cost of capital of 8 percent. The proportions are similar for batteries (10-20 percent), wind turbines and heat pumps (2- 10 percent) and somewhat higher for alkaline electrolyser stacks (15-30 percent).

Revenue from the top five solar PV2 manufacturing companies surged from just USD 10 billion on an annualised basis in Q1 2017 to over USD 100 billion in Q4 2022, before falling slightly during the first three-quarters of 2023. Battery manufacturing revenue, measured on the same basis for the top five firms,3 experienced a similar rate of growth, increasing from around USD 26 billion in Q1 2017 to almost USD 200 billion by the third quarter of 2023.

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