Executive summary The energy world is in the early phase of a new industrial age – the age of clean energy technology manufacturing. Industries that were in their infancy in the early 2000s, such as solar PV and wind, and the 2010s, such as EVs and batteries, have mushroomed into vast manufacturing operations today. The scale and significance of these and other key clean energy industries are set for further rapid growth. Countries around the world are stepping up efforts to expand clean energy technology manufacturing with the overlapping aims of advancing net zero transitions, strengthening energy security and competing in the new global energy economy. The current global energy crisis is a pivotal moment for clean energy transitions worldwide, driving a wave of investment that is set to flow into a range of industries over the coming years. In this context, developing secure, resilient and sustainable supply chains for clean energy is vital.

Introduction Purpose of this report The International Energy Agency (IEA) Energy Technology Perspectives (ETP) technology flagship series of reports has been providing critical insights into key technological aspects of the energy sector since 2006. Clean energy technologies and innovation are vital to meet the policy goals of energy security, economic development and environmental sustainability. Cost-effective energy and environmental policy making must be based on a clear understanding of the potential for deploying these technologies. ETP seeks to help achieve this goal by assessing the opportunities and challenges associated with existing, new and emerging energy technologies, and identifying how governments and other stakeholders can accelerate the global transition to a clean and sustainable energy system.

Selected energy and technology supply chains This report analyses six clean energy and technology supply chains in detai. They were selected based on their critical importance to the clean energy transition described in the NZE Scenario. Together, they contribute around half of the cumulative emissions reductions to 2050 in that scenario. Three are clean energy supply chains – for low-emission electricity (including solar PV and wind with their respective technology supply chains); low-emission hydrogen (including technology supply chains for electrolysers and natural gas-based plants with carbon capture and storage [CCS]); and low-emission synthetic hydrocarbon fuels (including technology supply chains for direct air capture [DAC] and bioenergy with carbon capture [BECC] to provide CO2, connected to the low-emission hydrogen supply chain). The three others are clean technology supply chains – for electric cars (including the battery supply chain); fuel cell trucks (including the fuel cell supply chain); and heat pumps for buildings.

Key elements for each step in selected clean energy and technology supply chains

The world still relies heavily on fossil fuels Despite the rapid recent growth in clean energy technologies, the world still relies predominantly on fossil fuels for its energy supply. In fact, growth in clean energy supply since 2000 has been dwarfed by that of oil, gas and coal, especially in the emerging and developing economies. In those countries, the share of fossil fuels in total primary energy supply increased from 77% in 2000 to 80% in 2021, mainly due to a jump in coal, from 27% to 35%. In the advanced economies, the share dropped from 82% to 77% over the same period. As a result, the overall share of fossil energy in the global energy mix has remained almost constant at about 80%. Oil remains the single largest source of primary energy, making up 29% of total energy supply in 2021 (down from 37% in 2000), followed by coal at 26% (up from 23%) and natural gas at 23% (up from 21%). Bioenergy is still the single largest source of non-fossil energy, accounting for around 10% of total primary energy use in 2021, though over one-third is in the form of traditional biomass, often used in unsustainable and polluting ways. Nuclear power makes up 5% of supply, hydropower around 2%, and solar and wind together a mere 2%. While electrification has accelerated over the last two decades, fossil fuels still dominate energy end use, accounting for around 35% of total energy use in buildings and 95% in transport.

Global mass-based resource flows into the energy system, 2021

In addition to the direct use of energy, end-use sectors consume large amounts of energy embedded in materials, such as cement for infrastructure and buildings, steel for vehicles and manufacturing goods, and chemicals for fertilisers and consumer goods. The production of these bulk materials today also relies mainly on fossil fuels, either for combustion or as feedstock. In 2021, coal made up around 75% of the energy used in global steel production and more than half of that used to make cement, while about 70% of chemicals production was based on oil or natural gas. The demand for so-called “critical minerals”, 5 from which metals such as copper, nickel and cobalt are produced, has been increasing briskly in recent years, driven by the deployment of clean energy technologies such as batteries, yet their combined production by mass represents just 0.3% of that of coal today. The extraction and processing of critical minerals typically relies on fossil fuels at present.

Overall energy employment is concentrated in countries with major manufacturing hubs and large energy production industries, especially where new energy facilities are being built. As a result, almost three-fifths of all energy employment is in the Asia Pacific region, with China alone accounting for almost 30% of the global energy workforce with nearly 20 million energy workers. Clean energy employment now accounts for just over half of the global energy workforce. This is in large part due to the continued growth in new projects, which generate the most jobs (construction and installation activities are highly labour-intensive). Most new energy projects today involve clean energy supply or end-use activities. Eurasia and the Middle East are now the only regions where the share of clean energy employment does not exceed half. Low-emission power generation currently employs an estimated 7.8 million workers worldwide, with over 4.2 million in solar and wind alone. Fossil fuel-based power generation employs just 3.4 million. There are roughly the same number of workers in low-emission power generation as in the oil supply industry, which employs the most people among the three fossil fuel supply sectors. In vehicle manufacturing, 10% of the almost 14 million workers worldwide are already involved in making EVs, their batteries and related components.

Energy employment by region and supply chain step, 2019

Energy employment in selected sectors by region, 2019

Labour shortages and skills gaps An adequately skilled and sufficiently large workforce will be central to the energy transition. But shortages of skilled labour in emerging clean energy sectors, coupled with broader labour market difficulties, are already limiting the pace and extent of new projects in several key regions, raising doubts about the speed of the transition in the near to medium term. In China, for example, manufacturers are struggling to fill positions in factories in the face of a declining working population, with young people and college graduates generally more attracted by white-collar jobs (Nulimaimaiti, 2022). The Ministry of Education has estimated that there will be a shortage of almost 30 million workers in China’s manufacturing sector by 2025, including talent gaps of over 9 million in power equipment, over 1 million in new energy vehicles and over a quarter of a million in offshore engineering equipment (Government of China, 2017). Meanwhile, a dearth of tradesmen, such as plumbers, pipefitters, electricians, heating technicians and construction workers, is already restricting the pace of installations of clean energy technologies in Europe and the United States, including solar PV, wind turbines and heat pumps (McGrath, 2021; SEIA, 2021b; Weise, 2022; Hovnanian, Luby & Peloquin, 2022).

Clean energy supply chains interdependencies Supply chains link suppliers of inputs to consumers of outputs, often spanning multiple sectors and countries to form complex networks. These interdependencies are also vulnerabilities in terms of resilience. In the case of clean energy, certain technologies and technology or energy supply chains are “foundational”, i.e. without them, the superstructure of supply chains would not be able to function properly. For example, any disruption to low-emission electricity supply would directly affect lowemission hydrogen production, and in turn low-emission synthetic hydrocarbon fuels production.

Interconnections between selected energy and technology supply chains

The use of cross-cutting technologies can also expose the clean energy system and supply chains to new vulnerabilities. These technologies are typically deployed in different sectors and supply chain steps, hence have broad impacts in case of disruption. For example, carbon capture, utilisation and storage (CCUS) can contribute to decarbonising industry, power and fossil-based hydrogen production, as well as provide carbon dioxide removal and CO2 for synthetic fuel production. As a result, disruptions in the supply of CO2 capture components or along the CO2 transport and storage infrastructure could have an impact on clean energy supply across several sectors. It is crucial that industry and policy makers assess these vulnerabilities at the system level and reduce them through targeted measures, such as by deliberately building redundancy into the system in the form of overcapacity or alternative supply or production routes.

Trade balance along supply chains in selected countries/regions, 2021

China’s dominance in supply chains today is not a coincidence. Its clean energy technology industry has been over a decade in the making, driven by industrial policy focused on several key technologies. China is a key net global exporter of many clean energy technologies, notably solar PV modules, exporting over half of its output. China accounts for 25% of the inter-regional exports of EVs and over 80% of Li-ion batteries, mostly going to Europe and other Asian countries, though most of the country’s output of these goods goes to the domestic market. China is close to being self-sufficient in bulk materials and exports a significant share of steel. However, China is a large importer of other materials and products such as some critical minerals, fossil fuels, polysilicon and critical materials such as nickel (mainly from Indonesia).

share of operating expenses. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, consumed 18 TWh of electricity in 2021 – one-third higher than in 2019 (TSMC, 2021). Recent increases in electricity prices in Taiwan could cause knock-on effects on chip cost and supply (Bloomberg, 2022a).

Semiconductor manufacturing capacity and market share revenue, 2021

USD 360 billion to USD 450 billion (in real 2021 dollars)22 would be needed cumulatively over 2022-2030 in critical mineral mining to reach the projected level of production in that scenario. Two-thirds of the total is for copper mining and most of the rest is for nickel. Cobalt requires relatively little extra investment as it is often a co-product of nickel and copper operations. The cumulative investment required to bring online the anticipated supply is around USD 180 billion to USD 220 billion, implying a shortfall of USD 180 billion to USD 230 billion worth of additional projects to meet the needs of the NZE Scenario. Most currently anticipated investments are in Africa, Central and South America, and Asia Pacific. Additional investments would have to start flowing at the latest by 2025 to allow time for construction and commissioning by 2030.

Anticipated investment in mining of critical minerals by region/country and that required to meet mineral demand over 2022-2030 in the NZE Scenario

Electricity grids Types of grids and technology components Electricity grids and networks are already a central part of the global energy system and will become even more important as the clean energy transition advances. There are around 80 million km of power lines in the world. Each grid can be differentiated by voltage level. Low-voltage lines of less than 1 kilovolt (kV) supply electricity to residential and commercial users, while medium-voltage lines (1-35 kV) are used to supply villages and small and medium-sized industrial sites.37 Together, these lines form the distribution network. The distribution networks of cities and large industrial consumers are connected to the highvoltage network, which – together with extra-high voltage (more than 245 kV)38 and ultra-high voltage (more than 800 kV) lines – forms the transmission grid used to transport electricity over longer distances.

Key technology components of electricity grids

High-voltage direct current (HVDC) point-to-point transmission, which involves fewer power losses, is becoming more common, mainly for long distances but also over medium and short distances. The technology was first used in the 1930s employing mercury-arc valves, but after 1970s the introduction of high-power semiconductors led to the use of thyristors in HVDC converter stations, which makes smaller HVDC systems more economical. The latest generation (insulatedgate bipolar transistors) offers several further benefits, such as independent and flexible control of active and reactive power (which flows back and forth within the system), flexible AC voltage control, and the ability to stabilise the system in the event of network faults and to black-start networks (restore part of a grid without relying on the external transmission network in the event of a total or partial shutdown). Most HVDC links today have voltages of between 300 kV and 800 kV, but there are projects that operate at 1 100 kV, such as one in the People’s Republic of China (hereafter, “China”), which has a transmission capacity of up to 12 gigawatt (GW). Besides being an efficient way to transmit power onshore, HVDC systems can also connect offshore wind farms, particularly in remote locations where underwater AC cabling is not economical or technically feasible. Today, HVDC transmission losses over 1 000 km are around 3% compared with more than 7% using AC lines.

Hydrogen pipelines As low-emission hydrogen production volumes increase and transport distances expand, a network of hydrogen pipelines will need to be developed to connect areas with good resources for production to storage sites and demand centres. As with natural gas, pipeline networks with large transmission trunklines can efficiently transport large volumes of hydrogen over hundreds of kilometres. Experience gained over the last century in building and operating natural gas pipelines will be of great benefit to develop hydrogen lines. More than 1.2 million km of natural gas transmission pipelines have been installed worldwide (IEA, 2022b), and approximately another 200 000 km are under construction or in pre-construction development (Langenbrunner, Joly and Aitken, 2022). There is also enormous potential to repurpose existing gas pipelines, which could avoid decommissioning them before the end of their technical lifetime and reduce new material needs, lowering costs significantly and benefitting the environment (see Focus on Repurposing Existing Infrastructure below). Blending hydrogen into natural gas streams could be an interim strategy to kick-start hydrogen production before demand is high enough to justify investing in dedicated hydrogen pipelines.

Hydrogen pipeline network configuration

CO2 management infrastructure Types of CO2 transport and storage infrastructure Infrastructure for CO2 management includes CO2 transport and storage facilities. Once captured, CO2 can be used on site or transported, in most cases by pipeline or ship, either to a point of use or to a permanent underground storage site. For the purposes of this report, CO2 shipping refers to vessel-based oceangoing transport, including ocean barges.

CO2 flows through the CO2 management value chain

CO2 pipelines Pipelines can be an efficient and cheap method to transport CO2 over long distances. They offer substantial economies of scale, with transport costs decreasing logarithmically with volume. To capitalise on this benefit, pipelines are often oversized relative to near-term transport demand, but this can increase risk for developers and make financing more difficult. Today, there are around 9 500 km of pipelines of all sizes transporting CO2. Around 90% of them are in the United States and were built to transport CO2 from natural reservoirs and industrial sources to oilfields for CO2-enhanced oil recovery (CO2-EOR). A number of projects in Europe and the United States have recently been announced to build multi-user CO2 pipelines to transport CO2 to dedicated storage sites.

Accelerating the clean energy transition Achieving net zero emissions will require an unprecedented acceleration of global deployment of clean energy technologies and the facilities to support their supply chains. Rapid deployment of these technologies in the next decade is crucial: any delays will mean that reaching net zero by mid-century will become increasingly difficult. Ambitious government policies are needed to encourage both demand for clean energy and supply of the technologies and skills needed to produce it. Policies need to consider current and future bottlenecks involved in expanding clean energy and technology supply chains. Our assessment of selected global supply chain risks shows that, among the different supply chains steps, infrastructure deployment to enable hydrogen production and CO2 management is most at risk of falling short of the rate required in the NZE Scenario, owing to long lead times and large investment gaps. This is important because infrastructure affects the deployment of multiple supply chains, including, within the group studied in this report, electrolytic and natural gas-based hydrogen with CCS, fuel cell trucks, and low-emission synthetic hydrocarbon fuel production. Mining also presents a risk for supply chains that rely heavily on critical minerals (fuel cell trucks, electric cars, solar PV, wind and electrolytic hydrogen), while risks associated with manufacturing and installation mainly concern some large-scale, site-tailored technologies (natural gas-based hydrogen production with CCS, BECC, and synfuels) that require substantial investments and involve long installation lead times.

Risks threatening acceleration of the global clean energy transition

Source:http://IEA