Complex interplay between energy, industrial and trade policies as countries seek to secure supply chains and economic opportunities

The rapid uptake of clean energy technologies offers major opportunities for countries looking to manufacture and trade them but also presents challenging decisions for governments, which face tensions and trade-offs based on the industrial and trade policies they opt to pursue, according to a new IEA report out today.

Energy Technology Perspectives 2024 (ETP-2024) – the latest instalment of the IEA’s flagship technology publication – focuses on the outlook for the top six mass-manufactured clean energy technologies: solar PV, wind turbines, electric cars, batteries, electrolysers and heat pumps. Based on today’s policy settings, the global market for these technologies is set to rise from $700 billion in 2023 to more than $2 trillion by 2035 – close to the value of the world’s crude oil market in recent years. Trade in clean technologies is also expected to rise sharply. In a decade’s time, it more than triples to reach $575 billion, more than 50% larger than the global trade in natural gas today.

The report, which also looks at key materials like steel and aluminium, provides a first-of-its-kind analytical framework for policymakers as they navigate the dynamic and complex landscape of clean energy manufacturing and trade. Built on a newly assembled bottom-up dataset and quantitative modelling based on countries’ policies, ETP-2024 maps out the current state of clean energy manufacturing and trade and how they are set to evolve. In doing so, 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.

The report finds that beyond the mining and processing of critical minerals, emerging and developing economies could draw on their competitive advantages to move up the value chain. For example, Southeast Asia could become one of the cheapest places to produce polysilicon and wafers for solar panels within the next 10 years, while Latin America – particularly Brazil – has the potential to scale up its wind turbine manufacturing for export to other markets in the Americas. 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.

The report also digs into the important global implications as trade in clean energy technology expands. For one, the shift from importing fossil fuels to importing clean technologies could increase the resilience of energy supplies. While fossil fuel supplies need to be replenished as soon as they are consumed, importing clean technologies provides a durable stock of energy equipment. 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.

However, there are also new energy security dimensions to consider. 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. More details on how the trade of clean energy technologies could evolve can be found in the interactive trade explorer tool, which is part of the online version of the report.

Link to the full report here: Energy Technology Perspectives 2024

Author: Bryan Groenendaal