China to tighten grip on $2 trillion global clean-tech market: IEA

The rapid uptake of key clean energy technologies presents new opportunities for countries looking to manufacture and trade them, although China will continue to dominate a global market that is likely to triple in size to a value of more than $2tn by 2035, according to a new report published by the International Energy Agency today (Wednesday).

“Based on today’s policy settings, the global market for these technologies is set to rise from $700bn in 2023 to more than $2trn by 2035 – close to the value of the world’s crude oil market in recent years,” the IEA states.

"Trade in clean technologies currently is also expected to rise sharply. In a decade's time, it more than triples to reach $570bn, more than 50% larger than the global trade in natural gas today.”

Development levers

The report, which also looks at key inputs like steel and aluminium, was presented as a new analytical framework for policymakers.

It explores how countries at different stages of development can capture the benefits of the emerging energy economy while seeking to ensure secure and cost-effective clean energy transitions of their own.

“As countries seek to define their role in the new energy economy, three vital policy areas – energy, industry and trade – are becoming more and more interlinked. While this leaves governments with tough and complicated decisions ahead, this groundbreaking new IEA report provides a strong, data-driven foundation for their decisions,” commented IEA executive director Fatih Birol.

“Clean energy transitions present a major economic opportunity, as we have shown, and countries are rightly seeking to capitalise on that. However, governments should strive to develop measures that also foster continued competition, innovation and cost reductions, as well as progress towards their energy and climate goals.”

The IEA report notes that the increase in the global clean technology market has been accompanied by a record wave of investment in the manufacturing of clean technologies.

Global investment in clean technology manufacturing rose by 50% in 2023, reaching $235bn.

Four-fifths of the clean technology manufacturing investment in 2023 went to solar PV and battery manufacturing, with EV plants accounting for a further 15%.

Chinese powerhouse

Most of this spending is concentrated in the countries and regions that already have established a clear foothold in the sector and are looking to build on their positions: China, the European Union the United States and increasingly India.

The IEA predicts that China will consolidate its lead as the world’s manufacturing powerhouse in clean technology, “despite the strong impact of the Inflation Reduction Act and Bipartisan 2 Infrastructure Law in the United States, the EU’s Net-Zero Industry Act and India’s Production Linked Incentive Scheme”.

China’s share of global manufacturing for all six key clean technologies in value terms is estimated at 70% today.

"China’s currently accounts for between 40% and 98% of global manufacturing capacity for the key clean technologies and components we examine, depending on the case," the IEA report states.

Leaving aside the question of government support, the report stated: "It costs up to 40% more on average to produce solar PV modules, wind turbines and battery technologies in the United States, up to 45% more in the European Union, and up to 25% more in India.

Relative to other countries, China has greater economies of scale, a larger domestic market and highly integrated firms and facilities along the supply chain for these technologies, the IEA states.

Under today’s policy settings, the IEA says China’s clean technology exports are on track to exceed $340bn in 2035, which is described as “roughly equivalent to the projected oil export revenue this year of Saudi Arabia and the United Arab Emirates combined”.

Beyond raw materials

Today, countries in Southeast Asia, Latin America and Africa account for less than 5% of the value generated from producing clean technologies, the IEA observes.

The report argues that “the door of the new clean energy economy remains open to countries at different stages of development” and argues that, rather than restricting themselves to the mining and processing of critical minerals, emerging and developing economies could draw on their competitive advantages to move up the value chain.

The IEA tries to identify opportunities for emerging and developing economies based on a country-by-country assessment of more than 60 indicators such as business environment, infrastructure for energy and transport, resource availability and domestic market size.

This analysis led to the conclusion that "the door remains open for emerging and developing economies to play to their strengths and move up the value chain in manufacturing as the clean energy transition gathers speed."

By example, the IEA report describes Southeast Asia as offering potential to become one of the cheapest places to produce polysilicon and wafers for solar panels within the next 10 years.

Latin America – particularly Brazil – has the potential to scale up its wind turbine manufacturing for export to other markets in the Americas. Brazil produces over 5% of wind turbine blades globally, but exports of such components could increase sixfold from current levels by 2035, assuming long-lead-time investments in port infrastructure bear fruit, the report suggests.

The IEA adds: “North Africa has the ingredients to become an EV manufacturing hub within the next decade, while various countries in sub-Saharan Africa could produce iron with low-emissions hydrogen.”

To realise such potential, the report underlines the importance of sound strategic partnerships, increased investment and efforts to bring down high financing costs for developing and emerging economies.

“Growth in the manufacturing and trade of clean energy technologies should be for the benefit of many economies, not just a few,” Birol said. “This report shows that countries in Southeast Asia, Latin America, Africa and beyond and have strong potential to play important roles in the new energy economy".

The report also examines the global implications of an expanding trade in clean energy technology comparing, for example, durable clean energy equipment, such as solar panels, with shipping liquefied natural gas for power generation.

“This results in greater efficiency: a single journey by a large container ship filled with solar PV modules can provide the means to generate the same amount of electricity as the natural gas from more than 50 large LNG tankers or the coal from more than 100 large bulk ships," the report notes.

The IEA warns that the competition to enjoy the economic growth, jobs and prosperity that clean tech industry can offer means there were will be "tensions and trade-offs".

It also sounds a warning on the energy security dimensions of the transition that is currently gathering pace.

“Today, around half of all maritime trade in clean energy technologies passes through the Strait of Malacca, which connects the Indian and Pacific Oceans. While the implications for energy security differ, it is worth noting that this is significantly more than the roughly 20% of fossil fuel trade that passes through the Strait of Hormuz,” it notes.