But agency warns global economy risks becoming over-reliant on a handful of green manufacturing hubs, while heat pump, wind turbine, and green hydrogen capacity needs to accelerate
The world is on the brink of an unprecedented clean tech manufacturing boom, but key sectors are still struggling to keep pace with the level of demand required to deliver on global net zero emission goals.
That is the headline conclusion of a major new report from the International Energy Agency (IEA) published at this weekend's G7 Summit in Hiroshima, which analysed the pipeline for new factories across the solar PV, wind, battery, electrolyser, and heat pump sectors.
Titled The State of Clean Technology Manufacturing, the report found that the solar and battery manufacturing sectors in particular have experienced a massive expansion in the pipeline of new factories over the past six months. Since late 2022 the estimated output by 2030 for the solar PV sector has climbed by 60 per cent, while the battery sector has seen its estimated output grow by 25 per cent.
The surge in planned solar and battery factories mean that if the full pipeline is built out global manufacturing capacity for solar PV would comfortably exceed the level needed under the IEA's Net Zero Emissions by 2050 Scenario. Similarly, the current battery manufacturing capacity pipeline is on track to meet the level of production capacity required under the Net Zero Scenario.
Overall, the report calculates that if all clean tech manufacturing projects announced to date are built, the anticipated output of manufacturing capacity for the five clean technologies analysed would reach $790bn a year by 2030.
However, the pipeline for electrolysers, heat pumps, and wind turbine production capacity remains well short of the level the IEA argues is needed to put the world on track to meet net zero goals.
For example, the electrolyser sector, which serves to fledgling green hydrogen market, has seen its estimated output climb by 20 per cent since late 2022 on the back of growing policy support. But projected levels of production by the end of the decade are still at only 60 per cent of the level thought necessary under the IEA's Net Zero Scenario.
The outlook for wind and heat pump production is even worse, with the report estimating that projected throughput from existing wind manufacturing capacity and announced projects equates to just under 30 per cent of Net Zero Scenario deployment levels, while heat pump manufacturers are projected to deliver just over 40 per cent of the required deployment levels.
Installed manufacturing capacity for batteries and solar PV rose by 72 per cent and 39 per cent, respectively, in 2022. But for heat pumps capacity rose by just 13 per cent and for wind turbines it grew by only two per cent over the same period.
The report also stresses that across all five sectors there are no guarantees the full pipeline of current new factory projects will be delivered, with many proposed projects yet to secure planning permission and reach a final investment decision.
However, it notes that the policy support has enabled the boom in solar and battery manufacturing capacity provides a template for rapidly expanding clean tech manufacturing capacity across the clean tech sector as a whole. "Relatively short lead-times for new manufacturing projects - from announcement to construction - mean that there is still scope for the project pipelines for 2030 to evolve significantly in the coming years," the report states.
In addition, the IEA warned the current project pipeline remains highly geographically concentrated and as such there is an urgent need for countries to maintain good trading relations and invest in more diversified supply chains.
China continues to dominate the market and the top three markets collectively account for between 80 per cent to 90 per cent of global manufacturing capacity, depending on the technology. If all announced projects worldwide are completed, the share of manufacturing clustered in these markets would shift to between 70 per cent and 95 per cent by 2030 for different technologies, the IEA said.
"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 IEA Executive Director Fatih Birol. "There is a need for effective international cooperation 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."
The report stresses how governments are seeking to diversify clean tech supply chains, noting how the expansion in the factory pipeline in recent months has been driven in large part by the passage of the US Inflation Reduction Act, the EU's Net Zero Industry Act, and Japan's Green Transformation programme. "Together with China's current Five-Year-Plan (2021-2025) and India's Production Linked Incentive scheme, these policies are transforming industrial policy geared toward clean energy technology," the IEA said.
However, the report also called on the G7 to redouble efforts to fast track the development of the factories and supply chains that will be critical if net zero targets are to be met.
Specifically, it urged G7 leaders to strengthen co-operation within the group and beyond, share best practices, increase investment in emerging and developing economies, and ramp up efforts to secure supplies of critical minerals.
The report came as the G7 angered environmental campaigners by signing off on a final communique that rejected calls for a firm target date for phasing out the use of unabated coal and gas and specifically declared that "publicly supported investment in the gas sector can be appropriate".
The final text again signalled the group's support for mobilising more investment in the net zero transition and making more climate finance available for developing nations, but NGOs warned it failed to go far enough on either front.
"G7 leaders acknowledge we are facing a climate crisis and call on other countries to do more to fight it, but they weaken this message by not walking the talk at home," said Alden Meyer, senior associate at think tank E3G. "In particular, Japan's resistance to phasing out coal power generation and Germany's insistence on more public investment in gas undercut the G7's leadership at a time when it is desperately needed.
"It is welcome that G7 leaders support international trade reforms and scaled-up public and private sector investment to help developing countries build resilient and sustainable clean energy supply chains, but they need to provide more specifics about how they intend to live into these objectives or risk seeing this initiative dismissed as nice-sounding rhetoric without sufficient substance to back it up."
His comments were echoed by Tracy Carty, global climate politics expert at Greenpeace International, who said: "G7 leaders have ignored warnings of the Intergovernmental Panel on Climate Change: act now or it will be too late for 1.5C. Faced with the urgent need to phase out fossil fuels, what leaders have brought to the table represents an endorsement of new fossil gas. The gap between G7 ambition and what climate science demands is stark and widening. When G7 leaders refuse to shift gear, they doom current and future generations to sink deeper in a climate crisis. Time is running out."
