IEA (2023), Energy Technology Perspectives 2023, IEA, Paris https://www.iea.org/reports/energy-technology-perspectives-2023, License: CC BY 4.0
Energy supply chains between transition and disruption
Momentum for clean energy transitions is accelerating, driven by increasingly ambitious energy and climate policies, technological progress and renewed energy security concerns following the Russian Federation’s (hereafter “Russia”) invasion of Ukraine. Clean energy investment reached USD 1.4 trillion in 2022, up 10% relative to 2021 and representing 70% of the growth in total energy sector investment. Despite this important progress, fossil fuels still account for 80% of the primary energy mix.
Clean energy technology deployment must accelerate rapidly to meet climate goals. In the Net Zero Emissions by 2050 (NZE) Scenario, global production of electric cars increases six-fold by 2030; renewables account for over 60% of power generation (up from 30% today); and electricity demand increases by 25%, accounting for nearly 30% of total final consumption (up from 20% today). If delivered in full, announced projects to expand clean technology manufacturing capacity would meet the needs for 2030 in the NZE Scenario for solar photovoltaic (PV) modules and approach that required for EV batteries, but would fall short in other areas, leaving gaps of 40% for electrolysers and 60% for heat pumps.
The transition to clean energy hinges on clean energy technology supply chains. USD 1.2 trillion of cumulative investment would be required to bring enough capacity online for the supply chains studied in ETP-2023 to be on track with the NZE Scenario’s 2030 targets. Announced investments cover around 60% of this total. Given project lead times, most investments are required during 2023-2025, at an average of USD 270 billion per year during that period, which is nearly seven times the average rate of investment over 2016-2021.
Selected clean energy and technology supply chains
Critical materials like copper, lithium, cobalt and nickel are changing the energy security paradigm. Manufacturing a typical-size electric car requires five times as much of these materials as a regular car. Anticipated supply expansion suggests that production could fall well short of NZE Scenario requirements for 2030, with deficits of up to 35% for lithium mining and 60% for nickel sulphate production.
Lead times to establish new supply chains and expand existing ones can be long, requiring policy interventions today. Opening mines or deploying clean energy infrastructure can take more than a decade. Building a factory or ramping up operations for mass-manufactured technologies requires only around 1-3 years.
Clean energy sector jobs in the NZE Scenario soar from 33 to 70 million over 2021-2030, offsetting the loss of 8.5 million in fossil fuel-related sectors. Building a large, skilled workforce is key to meeting net zero targets, but labour and skills shortages in expanding clean energy industries are already creating bottlenecks