The current global project pipeline for solar energy is capable of accommodating the deployment needs by 2030 if the utilization rates increase to 85% on average, under the Net Zero Emissions (NZE) scenario, according to a recent analysis by the International Energy Agency (IEA).

In the report, IEA dissected the manufacturing capacities around clean technology with a focus on solar photovoltaic (PV) modules, wind turbines, batteries, electrolyzers, and heat pumps.

The IEA said that while new manufacturing project announcements increased in late 2022, the installed manufacturing capacity for batteries, solar PV, electrolyzers, and heat pumps also improved to 72%, 39%, 26%, and 13%, respectively. Wind manufacturing capacity grew around 2% year-over-year (YoY).

The report, Energy Technology Perspectives 2023, projects that if all the announced projects from 2022 were to be executed, the solar manufacturing capacity would comfortably exceed the deployment needs under IEA’s NZE scenario.

Financially, the projected output of the announced manufacturing capacity for the five key technologies would be $640 billion in 2030 with timely implementation of announced climate pledges under the announced pledges scenario (APS) of IEA.

Source: IEA

The cumulative global manufacturing capacity of PV increased by 40% to about 640 GW in 2022, with 90% of the growth observed in China alone.

Analyzing the announced projects for PV, the report said manufacturers were on track to meet the projected demand in 2030 under the NZE scenario, with around 670 GW of throughput by that year resulting from announcements for additional manufacturing capacity.

By the end of the first quarter (Q1) of 2023, manufacturers announced about 480 GW of additional manufacturing capacity, increasing the total volume of planned capacity by 60%.

A few major project announcements by the end of the quarter included the manufacturing units for the world’s top three producers — LONGi, Jinko Solar, and Trina.

Other significant players include China-based REC Group and Hoshine. These announcements accounted for 45% of the total global additional solar capacity by the end of Q1. If all announced projects come to fruition, concentration among the top three producers would remain similar to the current level (90%).

The report said that the share of today’s second-largest country by installed manufacturing capacity — Vietnam — would give way to India, today’s third largest, as well as to the U.S., which would move to third. China’s share would remain virtually unchanged at around 80%.

The additional manufacturing announcements in 2022 resulted in close to 1.1 TW of projected throughput from the announced manufacturing capacity for modules, which is 65% higher than the levels required to meet deployment needs under the NZE scenario when compared with the current installed capacity.

However, only around 25% of the announced module manufacturing capacity is committed, i.e., under construction or having reached a final investment decision, but still enough to address the deployment requirements. If all announced projects for solar PV modules are realized, they could deliver $160 billion per year worth of output globally, relative to a market size of around $55 billion in 2030 under IEA’s APS scenario.

According to countries’ net zero pledges, this would result in over $100 billion in manufacturing surplus compared to deployment.

If all announced projects for batteries and electrolyzers were to be realized, they would result in surpluses of around $170 billion and just under $10 billion, respectively.

However, the manufacturing projects announced for wind and heat pumps fall short of the projected global market size under APS by $140 billion combined. IEA states that for these latter two technologies, there is a clear demand gap that could be filled by new manufacturing projects and sizeable associated markets.

The report suggests access to local customers and the size of the domestic market can be an important pull factor for new manufacturing development, as can opportunities to exploit synergies with existing industries or to leverage the skills of an existing workforce.

Battery manufacturing

IEA found that announced projects for battery manufacturing capacity last year could cover all the 2030 global deployments for the first time. Combined, China, the EU, and the U.S. accounted for over 90% of global installed manufacturing capacity, wherein China alone accounted for 75%.

The EU accounted for 8%, and the U.S. 7%. Beyond the top three, Korea also has a sizeable share of installed manufacturing capacity, at 5% of the global total.

IEA predicts that if all announced manufacturing projects for batteries came to fruition, such level of supply concentration would remain relatively flat, with China, the U.S., and the EU still accounting for around 95% combined.

China’s share would decrease moderately to around two-thirds of global manufacturing capacity, while that of America would jump to 15%, and the same would reach 11% in the EU’s case.

The IEA stated that 580 GWh of battery manufacturing capacity was added in 2022, up 85% from 2021. Of this, nearly 80% was in China, just over 10% in Europe, and under 10% in the U.S.

Four countries and the EU account for around 80-90% of global manufacturing capacity for the five clean technologies examined in IEA’s analysis.

China alone accounts for 40-80% across these technologies. If all announced projects were realized, these shares would shift to 70-95% and 30-80%, respectively.

The pipeline of projects for battery manufacturing capacity rose by 25% YoY to 6.8 TWh in Q1 2023, resulting in an 80% potential output compared to what is needed by 2030 and on track with the NZE scenario.

Further, IEA highlights that the supply chain also becomes vulnerable to increased concentrations of minerals in specific countries.

Congo alone produces 70% of the world’s cobalt, and just three countries account for over 90% of global lithium production.

IEA recommends diversifying the origin of supplies among several trade partners – for either finished goods, technology components, equipment, or materials can help increase resilience in the case of supply chain disruptions.

Wind Energy, Heat Pumps & Electrolyzers

IEA also projects that manufacturing throughput for the wind was around 100 GW in 2022 and just under 120 GW for heat pumps. The installed capacity of heat pumps in buildings worldwide is currently over 1,000 GW; per IEA, the installed capacity of heat pumps will hit 2,600 GW by 2030.

IEA found that electrolyzer manufacturing throughput in 2021 stood at around 7 GW, increasing to 9 GW in 2022.

Moving ahead, announced projects as of end-Q1 2023 suggest nearly 115 GW of additional installed manufacturing capacity could be expected by 2030.

The resulting throughput projected from these announced projects and existing installations would achieve over 60% of the levels needed under IEA’s NZE scenario in 2030.

Source: IEA

United States

Most announced manufacturing projects across most key clean energy technologies do not have committed investments.

For instance, In the United States, almost 40% of the announced battery factories are under construction, whereas the figure is just 2% for electrolyzers.

But the pipeline of announced projects for electrolyzers implies a compound annual growth rate of over 30% through to 2030, by which point domestic installed capacity would be able to satisfy 90% of domestic demand.

Announced projects in the U.S. put the country on a trajectory to capture $100 billion of the supply-side market in 2030, while the combined domestic market is projected to grow to nearly $150 billion in the APS. This implies potential net import needs of nearly $50 billion if no additional capacity is forthcoming, per the report.

The Inflation Reduction Act, adopted in August 2022, set a new course for clean energy industrial strategy in the U.S. to support decarbonization goals, with around $370 billion allocated to energy and climate investments.

Europe

European Union’s Net Zero Industry Act (NZIA), announced in March 2023, proposes measures to strengthen clean technology manufacturing in Europe.

There was strong growth in EU battery manufacturing in 2022, with 110 GWh of output compared to 70 GWh in 2021, driven by the increase in sales of electric vehicles. Manufacturing capacity increased 90% YoY to 130 GWh per year in 2022.

Electric car sales increased by 55% in 2022, with China and Europe observing 29% and 21% growth, respectively, and the United States 8%.

Such a rise in demand for EVs fuelled the battery manufacturing capacity throughput, which nearly doubled to reach 660 GWh compared to 340 GWh in 2021.

The global energy crisis sparked by Russia’s invasion of Ukraine and subsequent high gas prices has given additional impetus to deploying solar PV in the EU, reaching a record level of 38 GW in 2022.

Despite this, domestic manufacturing capacity remained virtually flat, and domestic production was just 7.5 GW.

The IEA report said existing manufacturing capacity, together with announced projects, looks set to fall well short of the 30 GW deployment needs under the Announced Pledges Scenario in 2030, meaning the EU looks set to remain an importer of PV modules for the foreseeable future.

The report states that if all announced projects are realized, the European Union can now fulfill all its domestic needs for batteries, electrolyzers, and heat pumps in the APS in 2030.

China

In China, manufacturing output in the country was still growing last year, with solar PV reaching 190 GW and wind reaching 62 GW.

The combined output of existing and announced projects is estimated to reach nearly 860 GW for solar PV and around 70 GW for wind in China by 2030, relative to deployment needs of 108 GW and 41 GW annually for solar PV and wind, respectively.

The report said China appears well positioned to capture $500 billion, or around 65% of the projected output, from global clean technology manufacturing capacity in 2030, including existing and announced projects.

India

India also has accelerated efforts to boost clean technology manufacturing with the announcement of the Production Linked Incentive program for high-efficiency solar PV modules, which entered its second phase.

The program extends incentives of nearly $2.4 billion, up from around $600 million in its first phase, to encourage integrated domestic manufacturing facilities for polysilicon, ingots, wafers, cells, and modules.