Clean Energy Technologies 2023: Opportunities and Risks of the New Energy Economy

Clean energy technologies are advancing every day. Renewable energy sources are becoming more affordable, energy efficient and widespread worldwide. Paired with the fact that they are the go-to solution for bringing emissions down and energy efficiency, renewables will provide around 95% of the world’s new power capacity. While this growth will present challenges, it will also open up various opportunities. With the right measures, Asian countries can make the most out of these renewable energy technologies in 2023.

IEA: The Dynamics of Clean Energy Technology in 2023 and Beyond

The IEA’s Energy Technology Perspectives 2023 report identifies a USD 650 billion/year global market opportunity for key mass-manufactured future clean energy technologies by 2030 if countries fulfil their energy and climate pledges. This is three times today’s level.

The clean energy manufacturing jobs would jump from 6 million today to 14 million by 2030 in the energy sector. This would lead to further rapid industrial, employment growth and energy security.

China will remain the leading manufacturer and supplier of global clean energy technology. While other Asian countries will also expand their markets, the growth will be slow. The region will need to catch up to China, Europe and North America in terms of production capacity of green energy.

4 Types of Renewable Energy Technologies in 2023 and Beyond

1. Solar PV

According to the IEA, the recently announced expansion plans for solar PV manufacturers are sufficient to satisfy the demands of a net-zero (NZE) scenario by 2030. This is the only clean energy technology where the growth is in line with the needs of the IEA’s NZE.

2. Wind Energy

Based on existing announcements, the growth in wind component manufacturing will be insufficient to meet the needs of a global net-zero scenario by which wind turbine deployment should quadruple by 2030. However, according to the IEA’s estimates, onshore wind components will see a 5-10% growth by the decade’s end. The growth figures for offshore will be between 20 and 55%.

3. EV Batteries

If the announced projects materialise, global EV battery production will increase sixfold by 2030. According to the IEA, this would meet over 80% of the needs to achieve a global net-zero scenario.

4. Electrolysers and Heat Pumps

The manufacturing capacity for electrolysers would top 100 GW by 2030, or a tenfold increase compared to today’s figures. However, this growth would only account for around half the capacity needed in a net-zero scenario.

By 2030, heat pump manufacturing will meet a third of the net-zero scenario’s needs.

Risks and Challenges of New Clean Energy Technologies

The IEA’s Renewables 2022 report concludes that global clean energy capacity growth will almost double by 2027. Between 2022 and 2027, it will grow by 2,400 GW, equal to China’s total power capacity today. 

However, this process won’t be seamless. Just the opposite: It will be accompanied by various risks and challenges.

Concentration Risk

The main risk that the IEA identifies in the Energy Technology Perspectives 2023 report is related to the concentration of clean energy supply chains in single markets. Today, the manufacturing and the raw materials used in the process are highly concentrated in several key markets.

For example, 70% of the manufacturing capacity for clean energy technologies like wind, batteries, electrolysers, solar panels and heat pumps is in three markets, with China being the undisputed leader.

At the same time, the IEA acknowledges that China’s mass dominance in the manufacturing and concentration of clean energy technologies has helped bring the country’s costs down.

This concentration risk is also glaring for critical mineral extraction. The Democratic Republic of Congo is responsible for 70% of the world’s cobalt. Meanwhile, three countries account for over 90% of all lithium production.

According to the IEA, concentration risk has made renewable energy resources and clean energy technology supply chains fragile. As a result, raw materials and technology prices have increased, slowing the clean energy transitions across developed markets. For example, in 2022, battery prices increased by 10% due to the rising costs of lithium, cobalt and nickel. Wind and solar PV also see similar issues, but to a lower degree.

Prolonged Lead Times for Energy Infrastructure Projects

According to the IEA, the construction process of renewable power generation and energy storage projects can take two to four years. However, planning and getting permission can cause delays of two to seven years. As a result, there is a risk of bottlenecks, causing a project to take up to a decade to launch.

Workforce Scarcity

While the clean energy transition will open millions of new jobs, it will struggle to find skilled workers.

According to the IEA, this problem mostly affects the wind energy sector. It could hinder new capacity deployment in the upcoming years.

Policy Support

For local and global net-zero goals to remain realistic, countries need to shape more ambitious policies, encouraging the demand for clean energy technologies and stimulating their development. Furthermore, they should incentivise the workforce to pursue the skills needed for the new energy economy.

Without support on the policy front, clean energy investments won’t be able to grow as needed, creating bottlenecks and supply and demand disparity. As a result, closing the existing investment gap could prove challenging.

How Can Governments Make the Most Out of the New Energy Economy

The IEA finds that even if all announced projects materialise and all countries implement their climate targets, China alone will struggle to satisfy the demand for clean energy technologies.

This opens an array of opportunities for Asian countries to exploit. However, to make the most of them, markets should define industrial strategies aligned with their individual strengths and weaknesses. Furthermore, targets should be well-adjusted to the anticipated market dynamics, as different segments will experience specific supply and demand disparities. For example, the supply of solar PV, electrolysers and batteries will exceed demand, while demand for wind power, heat pump and fuel cell technologies will fall short.

According to the IEA, countries should refrain from competing across all fronts of the clean energy technology supply chain. Instead, they should focus on where they might be best positioned to excel.
Furthermore, crafting a well-planned industrial strategy, alongside supportive clean energy policies and energy storage systems can unleash substantial economic benefits.

Investors and project developers are increasingly looking for markets with flexible and welcoming policies to channel their investments. Moreover, the IEA notes that they aren’t afraid to switch from one market to another if the business environment changes.

Considering that just 25% of the globally announced solar PV manufacturing projects are currently under or just beginning construction, there is a gap that developing markets can fulfil. EV batteries and electrolysers are other fields where the construction is behind.

Moreover, the construction phase of clean energy technology projects is a relatively straightforward process, taking between one to three years on average. Asian countries that create a favourable environment can take advantage of this and attract investments. Such a move will ensure economic growth, sustainable development and quicker and easier decarbonisation. More importantly, the new energy economy is a sustainable job market that will continue growing in the future.