Investment in clean technology manufacturing stood at around $200 billion in 2023, an increase of 70 percent from last year, according to a report by International Energy Agency (IEA). The investments were led by solar PV and battery manufacturing plants.
The IEA report noted that solar PV and battery manufacturing accounted for more than 90 percent of the total investments in both 2023 and 2022. Investment in solar PV manufacturing more than doubled to around $80 billion in 2023, while investment in battery manufacturing grew by around 60 percent to $110 billion.
“Countries are racing to capitalise on benefits that clean technology manufacturing can bring to economic security, employment and the resilience of clean energy transitions,” the report said.
IEA said investment in clean technology manufacturing accounted for around 0.7 percent of global investment across all sectors of the economy in 2023, driving more spending than established industries like steel- which contributed 0.5 percent. In growth terms, clean technology manufacturing accounted for around 4 percent of global GDP growth and nearly 10 percent of global investment growth in 2023.
Global leaders
According to the IEA report, China, the United States and the European Union together account for around 80% to 90% of manufacturing capacity for solar PV, wind, battery, electrolyser and heat pump manufacturing. IEA expects little change to this overall concentration till 2030, even if all announced projects come to fruition.
The report said China accounted for three-quarters of global investments in clean technology manufacturing in 2023, down from 85 percent in 2022, as investment in the United States and Europe grew strongly – particularly for battery manufacturing, for which investments more than tripled in these regions.
“For solar PV manufacturing, investments in China more than doubled between 2022 and 2023. Outside these three major manufacturing hubs, India, Japan, Korea and countries in Southeast Asia made important contributions in specific areas, while investment in regions such as Africa, Central America and South America was negligible,” the report added.
Production costs
IEA noted that China is the lowest-cost producer for all the technologies, before accounting for explicit supportive policy measures. The main upfront cost that contributes to overall production costs is the capital expenditure to set up a clean energy manufacturing plant, and the associated financing costs, said IEA.
The report added that facilities in the United States and Europe are typically 70 percent to 130 percent more expensive per unit of output capacity than those in China for solar PV, wind and battery manufacturing, before accounting for the difference in the cost of capital between regions. India’s capital costs are around 20 percent to 30 percent higher than China’s, but significantly lower than those of the United States and Europe.
IEA also pointed out that many factors besides the cost of manufacturing shape the decisions of firms to invest such as the size of the domestic market, the availability of workers with the necessary skills, infrastructure readiness, permitting processes and other regulatory regimes.
“Policy interventions can therefore raise the attractiveness of investing in a given region without directly subsidising the costs of manufacturing,” it added.
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