The IEA report Energy Technology Perspectives 2023 (ETP-2023) analysed the risks and opportunities surrounding the development of clean energy technology supply chains, exploring all the major steps throughout the supply chain. This briefing examines the manufacturing steps in more detail, with a specific focus on five key technologies for the clean energy transition: solar PV modules,1 wind turbines,2 batteries,3 electrolysers4 and heat pumps.5

Manufacturing capacity expansions for these technologies tend to have shorter lead times than other steps in the supply chain, such as mining. This means that progress from announcement to operation can be especially dynamic in a supportive environment. These supply chain steps have also been strongly emphasised in recent policy announcements. The manufacturing data compiled for this briefing aims to capture these latest developments and provide a snapshot of the current outlook for capacity additions through to 2030. Of particular interest is whether recent project announcements have changed the picture with respect to the significant degree of regional concentration in clean technology manufacturing revealed in ETP-2023, and which countries and regions appear best-positioned to capture shares of the markets for key clean technologies in the coming years.

A review of the latest project announcements for clean technology manufacturing shows that some manufacturing sectors look set to meet – and even to exceed – the capacity required by 2030 to get on track with the deployment needs of the NZE Scenario. Others are lagging behind, with substantial increases in ambition required to meet emissions reduction goals, but progress has been made in the past few months. Given the short lead times required to bring manufacturing capacity online, reaching the 2030 deployment levels in the NZE Scenario, though a significant challenge, is not an insurmountable one for these technologies. 

Solar PV manufacturing – which increased at a compound annual growth rate of 25% during the period 2010-2021 – shows no sign of slowing down. In 2021, manufacturing throughput stood just over 190 GW globally, compared with around 160 GW of solar PV deployed in the same year. In 2022, global manufacturing capacity rose by nearly 40% to about 640 GW, with 90% of the growth relative to 2021 taking place in People’s Republic of China (hereafter, “China”). Manufacturing throughput in 2022 was around 260 GW, significantly below the 640 GW of installed manufacturing capacity – indicating a global average utilisation rate of around 40%.

As of late 2022, our analysis of announced projects for solar PV suggested that manufacturers were already on track to meet projected demand in 2030 in the NZE Scenario, with about 670 GW of throughput by that year resulting from announcements for additional manufacturing capacity. As of end-Q1 2023, the project pipeline has expanded even further. Around 480 GW of additional module manufacturing capacity has been announced (570 GW of cells, 250 GW of wafers, 570 GW of polysilicon), increasing the total volume of planned capacity by 60%. The result is nearly 1.1 TW of projected throughput from this announced manufacturing capacity for modules, which, when combined with current installed capacity, is 65% higher than the level required to satisfy deployment needs under the NZE Scenario in 2030. When examining the projected output for other major PV components – albeit with a shorter time horizon for announced projects up to and including 2027 – the figures are 80%, 37% and 96% for cells, wafers and polysilicon respectively. However, only around 25% of the announced module manufacturing capacity is committed, i.e. under construction or having reached final investment decision. Even considering just these projects – alongside existing capacity of 640 GW – the project pipeline appears capable of accommodating the NZE Scenario deployment needs by 2030, if utilisation rates increase to 85% on average globally by then.

Major project6 announcements made in Q1 2023 include new manufacturing facilities for the world’s top three producers – LONGi, Jinko Solar and Trina – as well as for other larger (e.g. Tongwei, Suntech) and smaller or emerging players (e.g. Solar Grids, REC Group, Hoshine, Royal), mostly based in China. These major projects account for 45% of the total additional capacity announced as of Q1 2023.

Battery manufacturing capacity is also booming, owing to rapid increases in electric vehicle (EV) sales. In 2021, battery manufacturing throughput stood at 340 GWh, with this figure nearly doubling to reach 660 GWh in 2022. 580 GWh of manufacturing capacity was added in 2022, up 85% from the capacity added in 2021. About 80% of the 2022 manufacturing capacity additions were in China, just over 10% in Europe and just under 10% in the United States. Around 90% of these batteries are currently destined for automotive applications. Global electric car sales rose by 55% year-on-year in 2022, with the share of electric cars in total car sales reaching 14%, up from 9% in 2021. In major markets such as China and Europe this share reached 29% and 21%, respectively. Sales also rose to a nearly 8% share in the United States, representing 55% year-on-year growth.

Looking at the pipeline of announced projects, from late 2022 to end-Q1 2023, planned manufacturing capacity has risen from around 5.5 TWh to 6.8 TWh per year – an increase of 25%. As of late 2022, the total potential output from these announced projects stood at around 80% of what was needed by 2030 to be on track with the NZE Scenario. The updated assessment performed for this briefing now puts the total projected output from these projects just below the levels required (5.9 TWh annually), demonstrating strong investment in – and strong policy support and demand for – battery manufacturing. We estimate that around 30% of these projects can be considered committed globally, with the proportion being slightly higher in the United States (just under 40%) but much lower in the European Union (around 10%). If only committed projects materialised, there would be a gap to global NZE Scenario deployment levels of around 50% in 2030.

Electrolyser manufacturing for use in the production of hydrogen is still a nascent industry and is the least mature technology examined in this briefing. In 2021, electrolyser manufacturing capacity stood at around 8 GW, increasing to 11 GW in 2022. Looking forward, announced projects as of end-Q1 2023 suggest nearly 125 GW of additional installed manufacturing capacity could be expected by 2030. The resulting throughput projected from these announced projects – together with that from existing installations – would achieve more than 60% of the levels needed in the NZE Scenario in 2030. Counting only the projects that are committed, that figure drops to under 10%. The project pipeline is expected to continue to grow in the coming years, but announced projects need early support to ensure that they reach final investment decisions. If all planned projects were realised, costs for electrolysers could fall by more than 60% by 2030.

Data for manufacturing capacity of wind and heat pumps is more limited, and so it is too early to tell whether there have been significant changes in the first months of this year. We estimate that manufacturing throughput for wind was around 100 GW in 2022, and just under 120 GW for heat pumps. A large gap between expected output from announced projects and 2030 NZE Scenario needs exists for both technologies: a gap of over 70% for wind and nearly 60% for heat pumps. However, lead times for constructing these facilities can be relatively short in many cases, around 1-3 years.

Virtually all of the project announcements for heat pumps are situated in Europe, although this may be because capacity additions in other regions are often not as prominently or explicitly announced as for other technologies, partly because heat pumps often represent a small proportion of a manufacturer’s total production. Heat pump manufacturing capacity expansions typically follow near-term demand trends without explicit announcements. As such, the gaps to the NZE Scenario deployment levels may appear larger than they really are. If we assume that a similar share of already installed capacity to that in Europe is forthcoming in other regions, the existing gap to the 2030 NZE Scenario deployment levels, which is currently at around 60% globally, would fall to around 20%.

A complete set of updated quantitative data on the most recent announcements for wind components – nacelles, towers and blades – is not available at the time of preparing this briefing. However, preliminary analysis of component-level project announcements suggests that for onshore wind components, manufacturing capacity could reach 100-110 GW by 2025, of which 60% would be located in China, 15% in Europe and about 10% in North America. For offshore installations, project announcements suggest a manufacturing capacity of around 30 GW, of which around 70-80% is in China and much of the rest in Europe. 

For the clean energy technologies considered in this briefing – solar PV, wind, batteries, electrolysers and heat pumps – four countries and the European Union account for 80-90% of manufacturing capacity, with China in the lead for all. For clean technology supply chains more broadly, there are important levels of concentration at each of the major steps, and not just in manufacturing. For example, the Democratic Republic of Congo alone produces 70% of the world’s cobalt, and just three countries account for more than 90% of global lithium production. Concentration at any point along a supply chain makes the entire system vulnerable to unforeseen changes, such as an individual country’s policy choices, natural hazards, technical failures or company decisions.

China’s prominent role in technology manufacturing is the result of a long-term industrial strategy, resulting in huge investment in clean energy supply chains, driven in part by consistent policy signals for domestic clean technology deployment in its successive Five-Year Plans. This investment has helped to reduce the costs of clean energy technologies in China, and in the rest of the world, while at the same time making China the leading exporter of several clean energy technologies.

In the following section, we examine how the outlook for geographical concentration of manufacturing operations may change based on the updated pipeline of announced projects developed for this briefing.

Solar PV

In 2022, three countries accounted for nearly 90% of installed capacity for manufacturing solar PV modules, with China alone accounting for 80%. Some individual plants in China are country-sized with respect to their rated production capacity. The largest operating plant in China – the LONGi plant in Taizhou – is large enough to supply half of the capacity additions of solar PV modules in the European Union in 2022, which totalled 38 GW. The next two largest countries with respect to installed manufacturing capacity are Viet Nam and India, accounting for 5% and 3% of all capacity, respectively. The largest plants in these countries tend to be much smaller than those in China, at around 7-8 GW of annual production capacity.

If all announced projects come to fruition, concentration among the top three producers would remain very similar to the current level (90%). The share of today’s second largest country by installed capacity, Viet Nam, would give way to India, today’s third largest, as well as to the United States, which would move to third, just ahead of Viet Nam. China’s share would remain virtually unchanged at around 80%.

These high levels of concentration reflect, in part, the fact that solar PV is already a mature technology, with large-scale deployment taking place in nearly all regions of the world. Solar PV accounted for nearly 40% of global electricity generation capacity additions in 2022, and now accounts for 4% of global electricity generation. The concentration of capacity levels in mature industries is inherently more stable than in nascent industries, as annual capacity additions account for smaller shares of the cumulative capacity installed. 

Batteries

In 2022, China, the European Union and the United States accounted for over 90% of global installed manufacturing capacity. China alone accounted for 75%. The European Union accounted for 8% and the United States 7%. Beyond the top three, Korea also has a sizeable share of installed manufacturing capacity, at 5% of the global total.

If all announced manufacturing projects for batteries came to fruition, this level of supply concentration would remain relatively flat, with China, the United States and the European Union still accounting for around 95% combined. China’s share would decrease moderately to around two-thirds of global manufacturing capacity, while that of the United States would jump to 15%, and the European Union’s to 11%. This is because – unlike solar PV – the largest so-called “gigafactory” project announcements are not solely located in China. The largest project planned is part of a Tesla facility in the United States. At 200 GWh of annual production capacity, this project announcement is equivalent to around 13% of global battery manufacturing capacity installed today.

Electric vehicle markets – the primary driver of battery manufacturing capacity additions – are maturing rapidly, but sales of EVs are still outweighed by sales of internal combustion engine vehicles globally. While solar PV has been the largest single source of capacity additions in the power sector since 2017, electric cars accounted for 14% of total car sales in 2022. However, sales are increasing rapidly: electric cars accounted for just 2.6% of car sales in 2019, and are projected to reach 18% in 2023. There have also been important battery technology developments and breakthroughs in recent years to cut costs and decrease critical mineral requirements. As EV penetration increases in more countries and innovative battery concepts mature, the landscape for global battery manufacturing and regional concentration could change. 

Wind, electrolysers and heat pumps

Manufacturing of onshore wind nacelles was also highly concentrated in 2022. China accounted for over 60% of global manufacturing capacity, followed by the European Union (just under 15%) and the United States (10%). If all announced projects for additional capacity were to come to fruition, these shares would not change significantly by 2030. Regional concentration also varies for different pieces of equipment such as towers and blades, and offshore-specific components. We estimate that for onshore equipment overall, announced projects would lead China to account for 55-65% of global manufacturing capacity by 2030, and up to 70-80% for offshore equipment.

For electrolysers and heat pumps, while the United States, China and the European Union combined accounted for nearly 80% of global manufacturing capacity in 2022, capacity is more evenly distributed between them. China accounted for about 40% of electrolyser manufacturing capacity, and the European Union and the United States 20% each. For heat pumps, about 35% of manufacturing capacity was located in China, 25% in the United States and a little under 20% in the European Union.

If all announced projects came to fruition, regional concentration for electrolyser manufacturing would decrease slightly by 2030 and the distribution among the top producers would further improve: China and the European Union would each account for a quarter of global manufacturing capacity, and the United States 20%. For heat pumps, the combined share of global capacity held by this group – the United States, the European Union and China – would remain at 80%, if no further capacity announcements were made. The European Union would hold the largest share (just around 35%), ahead of China (just under 30%) and the United States (just under 20%), but project announcements for this technology tend to be more frequent and prominent in Europe than in other regions. 

The combined global market for key clean technologies – solar PV, batteries, wind, electrolysers and heat pumps – reaches USD 640 billion per year by 2030 in the APS. Domestic demand in China, the European Union, the United States and India combined accounts for nearly three-quarters of the global market for key clean technologies by 2030 in this scenario. The regions of Southeast Asia and Central and South America account for a further 10% and 3% respectively.

Since our last estimates in late 2022 – published in ETP-2023 – there have been numerous additional project announcements, thereby increasing the total market value of their combined projected outputs. As of end-Q1 2023, the projected output from existing and announced manufacturing capacity in 2030 would lead to a global market size on the supply side of nearly USD 790 billion, which is a significant increase relative to our previous estimate of around USD 625 billion.7 However, this overall figure hides significant disparities for individual technologies and regions.

Announced projects for solar PV modules – if all realised – could deliver USD 160 billion per year worth of output globally, relative to a market size of around USD 55 billion in 2030 in the APS. This would result in a more than USD 100 billion manufacturing surplus compared to deployment according to countries’ net zero pledges. Manufacturers cannot operate continuously at maximum capacity, and so some extra capacity is necessary, but more climate ambition could be beneficial for the commercial viability of these projects.

Similarly, if all announced projects for batteries and electrolysers were to be realised, they would result in surpluses of around USD 170 billion and just under USD 10 billion respectively. However, manufacturing projects announced for wind and heat pumps fall short of the projected global market size in the APS by USD 140 billion combined. For these latter two technologies, there is a clear demand gap that could be filled by new manufacturing projects, and sizeable associated markets.

Similar imbalances between the market sizes associated with APS deployment levels (demand) and projected output from existing and announced manufacturing facilities (supply) exist within countries and regions. Assuming that domestic production is first used to meet domestic demand, and focusing on the final manufactured product as opposed to individual supply chain components, the resulting imbalance can provide some indication as to the direction and magnitude of future trade. 

China appears well positioned to capture USD 500 billion in 2030, or around 65% of the outputs of announced manufacturing capacity in monetary terms in the same year. Unless China’s domestic deployment of key clean technologies exceeds the levels projected in the APS, around two-thirds of this output on a net basis (USD 340 billion per year) would be surplus to domestic requirements, and would need to find export markets. For solar PV, batteries and electrolysers, global climate ambition would need to be raised in order to do so, given that these technologies see projected manufacturing output in excess of global APS deployment requirements in 2030.

Announced projects in the United States put the country on a trajectory to capture USD 100 billion of the supply-side market in 2030, while the combined domestic market is projected to grow to nearly USD 150 billion in the APS. This implies potential net import needs of nearly USD 50 billion if no additional capacity is forthcoming. Heat pumps account for 40% of this market imbalance, with wind turbines and solar PV accounting for most of the rest. The European Union’s domestic market imbalance balance looks set to reach USD 20 billion in imports for these technologies, if no more manufacturing capacity is forthcoming. However, the Net Zero Industry Act and Green Deal Industrial Plan can be expected to change projections. India’s net trade balance is expected to reach USD 25 billion in imports for these technologies, with batteries accounting for around USD 15 billion of this, in the absence of additional manufacturing capacity.