RIYADH: Booming investment in clean energy technologies is strengthening the global economy by creating new industrial opportunities and jobs, a report says.
According to the International Energy Agency (IEA), global investment in the manufacturing of five clean energy technologies – photovoltaic solar panels, wind turbines, batteries, electrolysers and heat pumps – soared 70% in year-on-year in 2023, reaching $200 billion (1 dollar = 0.93 euros).
The IEA adds that investments in clean technology manufacturing are increasing and starting to be factored into broader macroeconomic data.
According to the report, these investments represented around 0.7% of global investments across all sectors of the economy in 2023.
“Regarding growth, the contribution is even more marked: in 2023, clean technology manufacturing alone represented around 4% of growth in global gross domestic product (GDP) and almost 10% of investment growth worldwide,” specifies the IEA.
The solar photovoltaic energy sector achieves its objectives for 2030
Analysis finds investment in solar PV manufacturing more than doubled last year to $80 billion, while funding for battery production increased by about 60% to $100 billion dollars.
Due to the explosion of investments, the production capacity of solar PV modules today is already in line with what will be needed in 2030 according to the IEA’s “net zero emissions” scenario.
Likewise, for battery cells, if we take into account the announced projects, the production capacity is 90% able to meet the “zero net emissions” objective by the end of the decade, underlines the report.
“Record production of photovoltaic solar panels and batteries is driving the transition to clean energy. Furthermore, significant investments in new facilities and factory expansions should give new impetus to this transition in the years to come,” said Fatih Birol, executive director of the AIE.
“Although greater investments are still needed for some technologies, and clean energy production could be more widely distributed around the world, the direction forward is clear,” he adds.
“Policymakers have the opportunity to design industrial strategies focused on the transition to clean energy.”
The IEA also indicates that around 40% of investments in clean energy production in 2023 were in installations that are expected to come into operation in 2024. For batteries, this proportion rises to 70%.
Battery manufacturing booming
Battery manufacturing had a record year in 2023, with total production of more than 800 gigawatt hours (GWh), an increase of 45% compared to 2022.
The report finds that battery production capacity has also increased, with almost 780 GWh of cell production capacity added in 2023, about a quarter more than the previous year.
“Globally, battery manufacturing capacity could exceed 9 terawatt hours by 2030 if all projects come to fruition,” adds the IEA report.
Likewise, new production capacities of wind turbines and electrolyzers experienced faster growth in 2023.
According to the agency, existing wind capacity could cover almost 50% of needs in 2030, while announced projects could cover an additional 12%.
In contrast, heat pump production capacity has slowed due to stagnation in most major markets. The report adds that existing capacity could only meet about a third of needs in 2030.
China dominates clean energy
Clean energy production is still dominated by a few regions, notably China which is home to 80% of the world’s photovoltaic solar module production capacity.
According to the report, battery cell manufacturing could be less geographically concentrated by the end of the decade if all announced projects come to fruition.
After evaluating more than 750 factories, the IEA found that China remains the cheapest producer of clean energy technologies.
“Building battery, wind turbine, and photovoltaic solar panel manufacturing plants is typically 20 to 30 percent more expensive in India than in China, and 70 to 130 percent more expensive in the United States and Europe,” mentions the IEA.
“However, it is estimated that the vast majority of the total production costs of these technologies (70 to 98%) comes from operational costs, which include inputs such as energy, labor and materials, which “implies that the differences in production costs observed today are not immutable and can be influenced by policy,” the report adds.
In addition to China, the United States and the European Union, India, Japan and South Korea have invested heavily in clean energy technologies in recent years.
The report notes, however, that similar investments in Africa, Central and South America are negligible.
Investments influenced by many factors
According to the IEA, cost is not the only factor attracting investment in the clean energy technology sector.
According to the agency, several other factors, including the size of the domestic market, availability of skilled workers and infrastructure readiness, are crucial elements that influence companies’ decisions to invest in the sector.
“Policy interventions can therefore increase the attractiveness of investment in a given region without directly subsidizing manufacturing costs,” explains the IEA.
“Worker training and certification programs, reducing project delivery times while maintaining environmental standards, expanding domestic markets and reducing uncertainty through strong and stable climate policies are among the main “almost no regrets” measures that can increase incentives to invest, independently of the role of direct incentives in industrial strategies,” she continues.
Additionally, the report discusses the vitality of research and development to increase the growth of clean energy production globally.
“While research and development in the private sector can be boosted by policies that encourage investment and experience in manufacturing, direct support for innovation is also needed,” says the IEA.
Finally, the agency notes that government initiatives, including grants or loans for research and development, project financing, support for rapid prototyping and the promotion of start-ups will accelerate progress in energy production clean.
This text is the translation of an article published on Arabnews.com
