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The deepening connection between energy, trade, manufacturing and climate are coming into focus
As major economies introduce new industrial strategies to stake out their place in the growing clean energy economy, the manufacturing of clean technologies has boomed.
The emergence of a new global energy economy means a surge of adoption of clean energy technologies. This is leading to countries starting to focus beyond energy security, economic development and greenhouse gas emissions mitigation to look to institute new industrial strategies that bolster the security of clean energy supply chains and help them gain an economic edge as demand grows.
This means “manufacturing and trade are emerging as crucial variables that will determine how our energy system develops and how quickly emission from it will decline,” said the International Energy Agency (IEA) Executive Director Dr Fatih Biron in his introduction of the latest edition of their Energy Technology Perspectives 2024 report.
The report focuses on six major technologies: solar PV, wind, electric vehicles, batteries, electrolysers, and heat pumps. The IEA sees their market size and trade value soaring over the next decade.
It also examines key components of these technologies and the industries that provide them with important building blocks such as steel, aluminium, and ammonia.
Major economies dominate clean energy technologies manufacturing
The IEA says they see intense competition among major economies to gain an advantage in this new energy economy. Still, they question the broader implications as countries race to reap the maximum economic benefit.
The report lays out the state of play and outlook for the key economies that are already major manufacturers of clean energy technologies.
But it also finds, on the basis of 60 indicators, 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 picks up speed.
“While the top fossil fuel producers are countries with ample natural resources, many more countries could build up strong clean energy manufacturing bases if they can ensure the right enabling conditions,” say the IEA.
Emerging and developing economies do stand a chance if they can get their policies right
Emerging and developing economies in Latin America, Africa and Southeast Asia account for less than 5% of the value generated from producing clean technologies today.
A fair and just energy transition requires enabling more regions to reap the economic benefit from rowing supply chains for clean and modern energy technologies.
Broader participation is required to speed up the clean energy transition and the market for the technologies required to make it happen.
Factors that presently deter investment in emerging markets need to be overcome. These include political and currency risks, a lack of skilled workers and poor infrastructure.
Opportunities do exist, though. Beyond mining and processing critical minerals, countries in Africa, Latin America, and Southeast Asia all have prospects to boost their competitive advantage and move up the value chain.
in Africa, countries have the potential to leverage iron ore and renewable energy resources, for example, to move up the value chain
Moving up the manufacturing value chain
The IEA believes that Southeast Asia is already an important player in the clean technology supply chain and several of its countries could take a step up the value chain. It sees the region producing more than 8 million electric vehicles (EVs) by 2035 (up from its current 40,000). They think almost half of that would be for export.
The Agency also believes that Latin America, Brazil, in particular, has favourable starting conditions for wind turbine manufacturing. However, significant investments in infrastructure and logistics are necessary to capitalise on this potential.
It also thinks that North Africa could become an EV manufacturing hub. If the region is able to achieve its potential in line with achieving net-zero emission by 2050 globally, North Africa by 2035 will export almost half of the 3.7 million EVs it is projected to produce by then, mostly to the European Union.
“This would build on the existing project pipeline in countries such as Morocco.
“Elsewhere in Africa, countries have the potential to leverage iron ore and renewable energy resources, for example, to move up the value chain and produce iron with electrolytic hydrogen.
“Such exports to Europe and Japan could be worth more than four times the value of the same tonnage of iron ore exports at today’s prices, if the world pursues climate targets compatible with reaching net zero emissions by 2050, and the barriers to investment in African countries are overcome,” say the IEA. |
