Policy priorities to address supply chain risks


Clean energy and technology supply chains are at the nexus of climate, energy and industrial policy, and so establishing them requires an all-of-government approach. As a supply chain is only as strong as its weakest link, we present a comprehensive risk assessment framework to assist policymakers. The focus is on key bottlenecks impeding the rollout of clean energy supply chains, as well as priority actions to enhance their security, resilience and sustainability. 

Any supply chain faces the risk of bottlenecks; for new clean technology supply chains, time is a critical factor. Project lead times are particularly long for enabling infrastructure for electricity, hydrogen, and CO2 management, as well as for mines. It is therefore essential to reduce permitting times; mobilise investment and financing for key supply chain elements; develop skills in anticipation of future needs; and accelerate innovation in early-stage technologies.

High geographical and market concentrations threaten clean energy technology supply security: today, the top three producing countries hold around 80% of global manufacturing of mass-manufactured technologies like solar PV modules, wind and batteries. The combined output from announced manufacturing projects for key clean energy technologies in China could potentially supply 60% of the global total in monetary terms, implying considerable net export potential. Together, the output from projects announced in the United States and the European Union is equivalent to two-thirds of combined market size implied by their announced climate pledges by 2030, with the US Inflation Reduction Act expected to prompt more project announcements.

Net trade in fossil fuels in the Announced Pledges Scenario, 2021-2030


Market sizes for key clean technologies in the Announced Pledges Scenario, 2030


Boosting supply chain resilience is important, as market disruptions and input price fluctuations can have profound cost implications. Reducing and diversifying material inputs and designs are key primary measures to reduce exposure, along with building repairability into new production capacity concepts and strategic oversizing. Designing industrial strategies that foster domestic competitive advantages will also be important, as the relevance of energy costs does not diminish with the transition to clean energy. For example, some regional differences in renewable hydrogen production costs will persist, producing knock-on effects for the cost of derived products such as steel and ammonia.

Environmental and social risks must be addressed to build sustainable supply chains. The most emission-intensive steps of clean technology supply chains are bulk and critical material production, followed by technology manufacturing. Policies need to focus on expanding lead markets for near zero emission materials and on scaling up minimum recycled content requirements; traceability standards; and environmental, social and governance regulations.