Energy
Technology
Perspectives

2023

INTERNATIONAL ENERGYAGENCYThe IEA examines thefull spectrumof energy issues
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Energy Technology Perspectives 2023

Abstract

Abstract
The Covid-19 pandemic and Russia’s invasion of Ukraine have led to major
disruptions to global energy and technology supply chains. Soaring prices forenergy and materials, and shortages of critical minerals, semiconductors andother components are posing potential roadblocks for the energy transition.
Against this backdrop, the Energy Technology Perspectives 2023 (ETP-2023)
provides analysis on the risks and opportunities surrounding the development andscale-up of clean energy and technology supply chains in the years ahead, viewed
through the lenses of energy security, resilience and sustainability.
Building on the latest energy, commodity and technology data, as well as recent
energy, climate and industrial policy announcements, ETP-2023 explores criticalquestions around clean energy and technology supply chains: Where are the key
bottlenecks to sustainably scale up those supply chains at the pace needed? How
might governments shape their industrial policy in response to new energy security
concerns for clean energy transitions? Which clean technology areas are at
greatest risk of failing to develop secure and resilient supply chains? And what
can governments do to mitigate such risks while meeting broader development
goals?

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The Energy Technology Perspectives series is the IEA’s flagship technology
publication, which has been key source of insights on all matters relating to energy
technology since 2006. ETP-2023 will be an indispensable guidebook for decisionmakers in governments and industry seeking to tap into the opportunities offeredby the emerging new energy economy, while navigating uncertainties andsafeguarding energy security.

Energy Technology Perspectives 2023

Foreword

Foreword
The global energy sector is in the midst of profound changes that are set totransform it in the coming decades from one based overwhelmingly on fossil fuels
to one increasingly dominated by renewables and other clean energy
technologies. A new global energy economy is emerging ever more clearly, withthe rapid growth of solar, wind, electric vehicles and a range of other technologies
such as electrolysers for hydrogen. This transition is in turn changing the industries
that supply the materials and products underpinning the energy system, heralding
the dawn of a new industrial age – the age of clean energy technology
manufacturing.
At the International Energy Agency (IEA), we are dedicated to improving thesecurity, resilience and sustainability of the global energy system. Thoseinterlinked priorities are at the heart of this edition of Energy Technology
Perspectives 2023 (ETP-2023), the latest in the IEA’s technology flagship series
that began in 2006. As decision-makers seek to understand and adapt to thechanges underway, ETP-2023 serves as the world’s first comprehensive global
guidebook on the clean energy technology industries of today and tomorrow. It
provides a detailed analysis of clean energy technology manufacturing and its
supply chains around the world – and how they are likely to evolve as the clean
energy transition advances in the years ahead.
Major economies around the world – from Asia to Europe to North America – arestepping up efforts to expand their clean energy technology manufacturing withthe overlapping aims of advancing net zero transitions, strengthening energy
security and competing in the new energy economy. And the current global energy
crisis has only accelerated these efforts.
These trends have massive implications for governments, businesses, investors
and citizens around the world. Every country needs to identify how it can benefit
from the opportunities and navigate the challenges of this new energy economy.
This report shows that the rapid growth of clean technology manufacturing is set
to create new markets worth hundreds of billions of dollars as well as millions of
new jobs in the coming years, assuming countries make good on the energy andclimate pledges they have announced.

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At the same time, the industrial strategies that countries develop to secure theirplaces in this new energy economy will need to take into account the emerging
challenges that these changes bring. Today, we already see potentially risky levelsof concentration in clean energy supply chains globally – both in the manufacturingof the technologies and in the critical minerals on which they rely.

Energy Technology Perspectives 2023

Foreword

These challenges are what make ETP-2023 such a vital and timely contribution
as policy makers are working to devise the industrial strategies to benefit theireconomies – and project developers and investors are weighing key decisions on
future manufacturing operations. Our analysis shows that the global projectpipeline is very large – enough to move the world much closer to reachinginternational energy and climate goals if it all comes to fruition. But the majority of
those announced projects are not yet under construction or set to begin
construction imminently. Governments have a role here in providing the supportive
policies and broader industrial strategies that can provide developers andinvestors with the visibility and confidence they need to go ahead.
However, this report also shows issues of which governments need to be mindful,such as the importance of ensuring fair and open international trade in clean
energy technologies, which will be essential for achieving rapid and affordable
energy transitions. ETP-2023 also makes clear that for most countries, it is notrealistic to try to compete across all parts of clean energy technology supply
chains. Countries will need to play to their strengths, whether that comes in theform of mineral resources, low-cost clean energy supplies, a workforce with
relevant skills, or synergies with existing industries. And since no country will bein a position to cover every part of the supply chain at once, international
collaboration will be an essential element in industrial strategies. This can include
strategic partnerships and foreign direct investment, for example.
These are just some of the key issues on which ETP-2023 provides extremely
valuable insights. I’m confident decision-makers around the world will greatly
appreciate these and the many others contained in these pages. And for this, I
would like to thank the excellent team at the IEA’s Energy Technology Policy
Division, under the outstanding leadership of my colleague Timur Gül, for all thework that went into producing this report, which will serve as a reference for years
to come.
Dr. Fatih Birol
Executive Director

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International Energy Agency

Energy Technology Perspectives 2023

Acknowledgements

Acknowledgements
This study was prepared by the Energy Technology Policy (ETP) Division of the
Directorate of Sustainability, Technology and Outlooks (STO), with input fromother divisions of the International Energy Agency (IEA). The study was
designed and directed by Timur Gül, Head of the Energy Technology Policy
Division.
The modelling and analytical teams of Energy Technology Perspectives 2023
(ETP-2023) were coordinated by Araceli Fernandez (Head of the Technology
Innovation Unit) and Uwe Remme (Head of the Hydrogen and Alternative Fuels
Unit). Peter Levi (industrial competitiveness) and Leonardo Paoli (investment
needs) were responsible for the analysis of cross-cutting topics throughout thereport.
The principal authors and contributors from the ETP division were (inalphabetical order):Praveen Bains (synthetic hydrocarbon fuels), Jose Miguel Bermudez(hydrogen production including electrolysers), Amar Bhardwaj (electrolysers),
Sara Budinis (direct air capture, technology manufacturing), Elizabeth
Connelly (fuel cell trucks, technology manufacturing), Chiara Delmastro (heatpumps, technology manufacturing), Mathilde Fajardy (bioenergy with carbon
capture, risk assessment), Stavroula Evangelopoulou (electricity
infrastructure), Breanna Gasson (risk assessment), Alexandre Gouy (criticalminerals, materials), Carl Greenfield (policy), Will Hall (sustainability,
materials), Mathilde Huismans (wind, data management), Megumi Kotani(policy), Jean-Baptiste Le Marois (status of clean technology supply chains,innovation), Rafael Martínez Gordón (heat pumps, wind), Shane McDonagh(fuel cell trucks), Rachael Moore (CO2 management infrastructure), Faidon
Papadimoulis (trade, data management), Francesco Pavan (electrolysers,
hydrogen infrastructure), Amalia Pizarro Alonso (hydrogen infrastructure),
Richard Simon (resilience, innovation), Jacob Teter (policy), Tiffany Vass(materials, policy) and Biqing Yang (China industrial policy).
The IEA’s Energy Modelling Office led by Chief Energy Modeller Laura Cozzi
coordinated the employment analysis, in particular Daniel Wetzel, CaleighAndrews and Olivia Chen; and the analysis on electricity infrastructure, inparticular Michael Drtil.

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Other key contributors from across the IEA were Julien Armijo, Piotr Bojek,
Leonardo Collina, Shobhan Dhir, Conor Gask, Pablo Gonzalez, Ilkka Hannula,

Energy Technology Perspectives 2023

Acknowledgements

George Kamiya, Samantha McCulloch, Yannick Monschauer, Takashi Nomura,
Nasim Pour, Vida Rozite and Fabian Voswinkel.
Valuable comments and feedback were provided by other senior management
and numerous other colleagues within the IEA, in particular Keisuke Sadamori,
Laura Cozzi, Dan Dorner, Tim Gould, Brian Motherway, Paolo Frankl, Heymi
Bahar, Simon Bennett, Thomas Spencer and Brent Wanner.
Caroline Abettan, Liselott Fredriksson, Reka Koczka and Per-Anders Widell
provided essential support throughout the process.
Thanks also to the IEA Communications and Digital Office for their help in
producing the report, particularly to Jad Mouawad, Curtis Brainard, Jon Custer,
Hortense De Roffignac, Tanya Dyhin, Merve Erdem, Grace Gordon, Barbara
Moure, Jethro Mullen, Isabelle Nonain‐Semelin, Julie Puech, Clara Vallois,
Gregory Viscusi, Therese Walsh and Wonjik Yang. Trevor Morgan provided
writing support to the report and holds editorial responsibility. Erin Crum andKristine Douaud were the copy-editors.
The work could not have been achieved without the financial support provided
by the Governments of Australia and Japan.
Several senior government official and experts provided essential input andfeedback to improve the quality of the report. They include:

Harmeet Bawa
Adam Baylin-Stern
Marlen Bertram
Fabrizio Bezzo
Souvik Bhattacharjya
Chris Bolesta
Javier Bonaplata
Antoine Boubault
Keith Burnard
Wang Can
Diego Carvajal
Roland Chavasse
Xavier Chen
Jianhong Cheng

Department of Energy, United States
DECHEMA
Department for Business, Energy and Industrial
Strategy, United Kingdom
Hitachi Energy
Carbon Engineering
International Aluminium Institute
Università di Padova
TERI, the Energy and Resources Institute, India
Directorate-General for Energy, European
Commission
ArcelorMittal
Bureau de Recherches Géologiques et Minières,FranceTechnology Collaboration Programme on
Greenhouse Gas R&D
Tsinghua University
European Copper AllianceInternational Lithium Association
Beijing Energy Club
China National Institute of Standardization

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Matt Antes
Florian Ausfelder
Matthew Aylott

Energy Technology Perspectives 2023

Russell Conklin
Jasmin Cooper
James Craig
Colin Cunliff
Ilka von Dalwigk
Ganesh Das
Charis Demoulias
Alberto DiLullo
Tim Dixon
Sayanta Dutta
Åsa Ekdahl
Sara Evangelisti
Pharoah Le Feuvre
Alan Finkel
Fridtjof Fossum Unander
Hiroyuki Fukui
Jan Fredrik Garvik
Sara Giarola
James Glynn
Stefan Gossens
Astha Gupta
Emmanuel Hache
Martin HaighChen Haisheng
Neville Hargreaves
Clare Harris
Yuya Hasegawa
Nikolaos Hatziargyriou
Roland Hequet
Vincent D’Herbemont
Chris Heron
Ludo van Hijfte
Neil Hirst
Geoff Holmes
Noé van Hulst
Marie Ishikawa
Rishabh Jain
Ayaka Jones
Birte Holst Jørgensen
Robert Kennedy Smith

CINEA, the European Climate, Infrastructure andEnvironment Executive Agency, European
Commission
Department of Energy, United States
Imperial College London
Technology Collaboration Programme on
Greenhouse Gas R&D
Department of Energy, United States
EIT InnoEnergy
Tata Power
Aristotle University of Thessaloniki
Eni
Technology Collaboration Programme on
Greenhouse Gas R&D
Hyzon Motors
World Steel Association
Gas and Heat SpA
EnagasGovernment of Australia
Aker Horizons
ToyotaHydrogen Pro
Politecnico di Milano
Columbia University
Schaeffler AG
Independent consultant
IFP Energies nouvelles
Shell
China Energy Storage Alliance
Velocys
Shell
Ministry of Economy, Trade and Industry, Japan
National Technical University of Athens
John Cockerill
IFP Energies nouvelles
Eurometaux
Carbon Collectors
Imperial College London
Carbon Engineering
International Partnership for Hydrogen and Fuel
Cells in the Economy
ToyotaCouncil on Energy, Environment and Water, India
Department of Energy, United States
Technical University of Denmark
Department of Energy, United States

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Beatrice Coda

Acknowledgements

Energy Technology Perspectives 2023

Sebastian Ljungwaldh
Claude Lorea
Patricia Loria
Giuseppe Lorubio
Richard Lowes
Louis Marie Malbec
Foivos Marias

Mercedes Maroto-Valer
Rick Mason
Marc Melaina
Dennis Mesina
Roberto Millini
Diane Millis
Vincent MinierMark Mistry
Daniel Monfort
Victoria Monsma
Nirvasen Moonsamy
Simone Mori
Hidenori Moriya
Poul Georg Moses
Ramin MoslemianVivek Murthi
Jane Nakano
Hidetaka Nishi
Motohiko Nishimura
Takashi Nomura
Olga Noskova
Thomas Nowak
Koichi Numata
Shaun Onorato
Stavros Papathanasiou
Claudia Pavarini
Inga Petersen

Shirdi Sai Electricals Ltd
Thyssenkrupp Nucera
ToyotaNaftogaz
Oxford Institute for Energy Studies
Iberdrola
Technology Collaboration Programme on Hybrid
and Electric Vehicles
Northvolt
Global Cement and Concrete Association
Carbon Capture Inc.
AristonRegulatory Assistance Project
IFP Energies nouvelles
CINEA, the European Climate, Infrastructure andEnvironment Executive Agency, European
Commission
Heriot-Watt University
Plug Power
Department of Energy, United States
Department of Energy, United States
Eni
Carbon Clean
Schneider Electric
Nickel InstituteBureau de Recherches Géologiques et Minières,FranceDNV
Oil and Gas Climate Initiative
Enel
ToyotaTopsoeDNV
NikolaCenter for Strategic and International Studies
Ministry of Economy, Trade and Industry, Japan
Kawasaki Heavy Industries
ToyotaTopsoeEuropean Heat Pump Association
ToyotaUnited States National Renewable Energy
Laboratory
National Technical University of Athens
Snam
Global Battery Alliance

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Balachander Krishnan
Leif Christian Kröger
Oji Kuno
Oleksandr Laktionov
Martin Lambert
Francisco Laverón
Xiao Lin

Acknowledgements

Energy Technology Perspectives 2023

Mark Richards
Grégoire Rigout
Pablo Riesgo Abeledo
Agustín Rodríguez Riccio
Antonio Ruiz
Toshiyuki Sakamoto
Gerhard Salge
María Sicilia SalvadoresBariş Sanli
Abhishek Saxena
Hannah Schindler
Olaf Schilgen
Thore Sekkenes
Cory Shumaker
Jim Skea
Guillaume de Smedt
Robert Spicer
Vivek Srinivasan
Martin Stuermer
Bert Stuij
Peter Taylor
Wim Thomas
Dietmar Tourbier
Lyle Trytten
Yusuke Tsukahara
Inés Tunga
Cornelius Veith
Rahul Walawalkar
Michael Wang
Amanda Wilson
Markus Wråke
Akira Yabumoto

IFRI, l’Institut français des relations internationales
Plug Power
Université Fédérale de Rio de Janeiro
World Steel Association
University of California, Davis
Breakthrough Energy
Technology Collaboration Programme on Heat
Pumping Technologies
Rio Tinto
Air Liquide
Directorate-General for Energy, European
Commission
TopsoeNikolaInstitute of Energy Economics, Japan
Hitachi Energy
EnagasPermanent Delegation of Türkiye to the OECDNITI Aayog, National Institution for Transforming
India
Federal Ministry for Economic Affairs and Climate
Action, Germany
Volkswagen
EIT InnoEnergy
Hyzon Motors
Imperial College London
Air LiquideBP
Commonwealth Scientific and Industrial Research
Organisation, Australia
International Monetary Fund
Netherlands Enterprise Agency
University of Leeds
Independent consultant
Commonwealth Scientific and Industrial Research
Organisation, Australia
Independent consultant
Asahi Kasei
Energy Systems Catapult
Federal Ministry for Economic Affairs and Climate
Action, Germany
India Energy Storage Alliance
Argonne National Laboratory
Natural Resources Canada
Swedish Energy Research Centre
J-Power

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Cédric Philibert
Larry Pitts
Joana Portugal
Andrew Purvis
Aditya Ramji
Julia Reinaud
Stephan Renz

Acknowledgements

Energy Technology Perspectives 2023

ChiyodaToyotaMinistry of Economy, Trade and Industry, Japan
Cummins

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Makoto Yasui
Nozomi Yokoo
Shiho Yoshizawa
Alan Zhao

Acknowledgements

Energy Technology Perspectives 2023

Table of contents

Table of contents
Executive summary ................................................................................................................ 20
Introduction ............................................................................................................................. 26
Purpose of this report............................................................................................................ 26
Clean energy and technology supply chains ........................................................................ 27
Scope and analytical approach............................................................................................. 29
Report structure .................................................................................................................... 34
References ............................................................................................................................ 35
Chapter 1. Energy supply chains in transition.................................................................... 36
Highlights............................................................................................................................... 36
The clean energy transition................................................................................................... 37
Implications of net zero for supply chains............................................................................. 51
References ............................................................................................................................ 76
Chapter 2. Mapping out clean energy supply chains ......................................................... 82
Highlights............................................................................................................................... 82
Assessing vulnerabilities in supply chains ............................................................................ 83
Geographic diversity and energy security ............................................................................ 86
Resilience of supply chains................................................................................................. 119
Supply chain sustainability .................................................................................................. 132
References .......................................................................................................................... 139
Chapter 3. Mining and material production ....................................................................... 146
Highlights............................................................................................................................. 146
Material needs for net zero emissions ................................................................................ 147
Mineral extraction ................................................................................................................ 160
Materials production ............................................................................................................ 173
References .......................................................................................................................... 203
Chapter 4. Technology manufacturing and installation................................................... 210
Highlights............................................................................................................................. 210
Overview ............................................................................................................................. 211
Mass manufacturing of clean technologies and components ............................................ 216
Installation of large-scale, site-tailored technologies .......................................................... 252
References .......................................................................................................................... 271
Chapter 5. Enabling infrastructure ..................................................................................... 280
Highlights............................................................................................................................. 280

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The role of enabling infrastructure ...................................................................................... 281

Energy Technology Perspectives 2023

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Electricity grids .................................................................................................................... 283
Hydrogen transport and storage ......................................................................................... 305
CO2 management infrastructure ......................................................................................... 335
Focus on repurposing existing infrastructure...................................................................... 348
References .......................................................................................................................... 354
Chapter 6. Policy priorities to address supply chain risks ............................................. 361
Highlights............................................................................................................................. 361
Designing policies for supply chains ................................................................................... 362
Prioritising policy action ...................................................................................................... 369
References .......................................................................................................................... 436
Annex ..................................................................................................................................... 444
Glossary .............................................................................................................................. 444
Clean supply chain characteristics ..................................................................................... 449
Regional definitions ............................................................................................................. 458
Acronyms and abbreviations............................................................................................... 459
Units of measure ................................................................................................................. 460
Currency conversions ......................................................................................................... 461
References .......................................................................................................................... 462

List of figures
Steps and interdependencies of technology and energy supply chains .................. 28
Key elements for each step in selected clean energy and technology supply chains 31
Global mass-based resource flows into the energy system, 2021........................... 39
Global total primary energy supply in the NZE Scenario ......................................... 42
Global energy flows in the NZE Scenario ................................................................ 43
Total primary energy supply, electrification rates and energy intensity in 2030
in the APS and NZE Scenario .................................................................................. 45
Global cumulative energy sector CO2 emissions reductions by decarbonisation
pillar and clean energy and technology supply chains studied in
ETP-2023, 2021-2050 .............................................................................................. 46
Global deployment of selected clean energy technologies in the NZE Scenario .... 48
Heat pumps and heating distribution system market price and installation
time for a typical household by type of equipment, 2021 ......................................... 49
Time frame for prototype to market introduction and early adoption for selected
clean energy technologies in the past and the NZE Scenario ................................. 50
Global average raw material requirements for selected energy
technologies, 2021 ................................................................................................... 53
Global supply gap with the NZE Scenario and geographic concentration
by stage and technology based on expansion announcements, 2030 .................... 56
Global investment in selected clean energy supply chains needed to bring
online enough capacity in 2030 in the NZE Scenario, by supply chain step ........... 57
Cost of capital for bulk material production industries by country/regionalgrouping, 2020 ......................................................................................................... 58

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Figure I.1
Figure I.2

Energy Technology Perspectives 2023

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Indicative levelised cost of production for selected bulk materials........................... 60
Increase in the global average prices of selected clean energy products fromswitching to low-emission bulk material production ................................................. 61
Lead times for mining of selected minerals .............................................................. 62
Range of (top) and average (bottom) global lead times for selected clean energy
technology supply chains ......................................................................................... 65
Global scaling-up of selected energy and other supply chains by lead time in thepast (solid) and the NZE Scenario (dashed) ............................................................ 67
Typical operating lifetime of selected energy technologies...................................... 68
Global energy sector employment by technology .................................................... 69
Energy employment by region and supply chain step, 2019 ................................... 70
Energy employment in selected sectors by region, 2019 ........................................ 71
Global energy sector employment by technology in the NZE Scenario ................... 73
Global employment by skill level, 2019 .................................................................... 74
Interconnections between selected energy and technology supply chains ............. 85
Regional shares of global fossil fuel and uranium production andresources, 2021 ........................................................................................................ 86
Global reserves and extraction of selected resources by region, 2021 ................... 87
Regional shares of global production of selected critical materials, 2021 ............... 90
Estimated end-use shares of global consumption of selected bulk
materials, 2021 ......................................................................................................... 91
Regional shares in global production of bulk materials and intermediatecommodities, 2021 ................................................................................................... 92
Regional shares of manufacturing capacity for selected mass-manufactured
clean energy technologies and components, 2021 .................................................. 96
Regional shares in global installed operating capacity of selectedlarge-scale site-tailored clean energy technologies, 2021 ..................................... 102
Share of inter-regional trade in global production for selected minerals,
materials and technologies, 2021 .......................................................................... 106
Trade balance along supply chains in selected countries/regions, 2021 ............... 107
Global trade flows of lithium-ion batteries and electric vehicles, 2021 .................. 109
EV imports to Europe by country of production and manufacturer, 2021 .............. 110
Global trade flows along the solar PV supply chain, 2021 ..................................... 113
Global trade flows of wind energy components in USD, 2021 ............................... 115
Global inter-regional trade flows of heat pumps, 2021 .......................................... 117
Heat pump manufacturing capacity by company headquarters and plant
location, and installations by region/country, 2021 ................................................ 119
International prices of selected critical and bulk materials and energy .................. 120
Energy intensity of extracting and producing selected critical and bulk
materials, and of manufacturing selected energy technologies, 2021 ................... 122
Average manufacturing cost breakdown of selected energy technologies andcomponents by commodity, 2019-2021 ................................................................. 123
Average ammonia production costs by technology and component in selected
regions/countries, 2022 .......................................................................................... 125
Return on assets of companies in selected upstream, bulk materials andmanufacturing sectors ............................................................................................ 127
Global inventories as a share of annual consumption for selected bulk
materials, minerals and fuels ................................................................................. 128
Semiconductor manufacturing capacity and market share revenue, 2021 ............ 131
Supply chain step shares in total CO2 emissions from the production ofsolar PV, wind turbines, EVs and heat pumps, 2021 ............................................. 133
Global average life-cycle greenhouse gas emissions intensity of selectedenergy technologies, 2021 ..................................................................................... 134

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Global average primary energy and CO2 emissions intensity of mining andprocessing of selected critical and bulk materials, 2021 ........................................ 135
Global mass-based resource flows into the energy systemin the NZE Scenario, 2050 ..................................................................................... 148
Total global material demand by type in the NZE Scenario ................................... 151
Global critical material demand by end use in the NZE Scenario .......................... 153
Estimated global bulk material demand by end use in the NZE Scenario ............. 155
Share of secondary production in the global supply of selected materials
in the NZE Scenario ............................................................................................... 158
Change in global demand for selected minerals in the NZE Scenario,
2021-2030 .............................................................................................................. 161
Primary production of selected minerals by country/region in the NZE Scenario
and based on currently anticipated supply ............................................................. 163
Anticipated investment in mining of critical minerals by region/country and that
required to meet mineral demand over 2022-2030 in the NZE Scenario .............. 165
Shares of the leading regions in global mining of selected critical minerals
in 2021 and 2030 based on currently anticipated investments .............................. 167
Global energy intensity and average grade of ore production for
selected metals ...................................................................................................... 170
Theoretical global energy consumption and CO2 emissions in mining of
selected minerals for meeting NZE Scenario demand levels at current
carbon intensity ...................................................................................................... 171
Decomposition of change in global direct CO2 emissions from mining of
selected minerals between 2021 and 2050 in the NZE Scenario .......................... 173
Production of selected critical materials by country/region in the NZE Scenario
and based on currently anticipated supply ............................................................. 175
Anticipated investment in critical material production by region/country and that
required to meet demand over 2022-2030 in the NZE Scenario ........................... 176
Shares of the leading regions in global processing of selected critical minerals in
2021 and 2030 based on currently anticipated investments .................................. 177
Emissions intensity of different lithium hydroxide production routes by fuelused and process temperature, 2021 .................................................................... 180
Production of bulk materials by country/region and type of technology
in the NZE Scenario ............................................................................................... 183
Estimates of near zero emission material production based on project
announcements and the NZE Scenario in 2030 .................................................... 186
Shares of the leading regions in global production of selected bulk materials
in 2021 and 2030 in the NZE Scenario .................................................................. 188
Current global manufacturing capacity, announced capacity additions, capacity
shortfall in 2030 relative to the NZE Scenario, and lead times for selected massmanufactured clean energy technologies and components................................... 212
Current global capacity, announced capacity additions, capacity shortfall
in 2030 relative to the NZE Scenario, and installation lead times forselected large-scale, site-tailored clean energy technologies................................ 213
Global employment in manufacturing and installing selected mass-manufactured
clean energy technologies in the NZE Scenario, 2019 and 2030 .......................... 214
Announced global cumulative investment in mass manufacturing of
selected clean energy technologies by region/country and that required to meetdemand in 2030 in the NZE Scenario, 2022-2030 ................................................. 218
Solar PV manufacturing capacity by country/region according toannounced projects and in the NZE Scenario ....................................................... 220
Wind power manufacturing capacity by component and country/region
according to announced projects and in the NZE Scenario ................................... 224
Financial indicators for non-Chinese wind turbine manufacturers ......................... 226

Energy Technology Perspectives 2023

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Battery and component manufacturing capacity by country/region according toannounced projects and in the NZE Scenario ....................................................... 229
Heavy-duty fuel cell truck and mobile fuel cell manufacturing capacity bycountry/region according to announced projects and in the NZE Scenario ........... 233
Heat pump manufacturing capacity by country/region according to announced
projects and in the NZE Scenario .......................................................................... 239
Global annual sales of heat pump technologies for buildings in the
NZE Scenario ......................................................................................................... 244
Electrolyser manufacturing capacity by country/region according to announced
projects and in the NZE Scenario .......................................................................... 246
Announced global cumulative investment in large-scale, site-tailored clean
energy technologies by region/country and that required to meet demandin 2030 in the NZE Scenario, 2022-2030 ............................................................... 254
Capacity of hydrogen production from natural gas with CCS by country/region
according to announced projects and in the NZE Scenario ................................... 256
Direct air capture capacity by country/region for use and storage according toannounced projects and in the NZE Scenario ....................................................... 260
Capacity of bioenergy with CO2 captured for use and storage by country/region
according to announced projects and in the NZE Scenario ................................... 263
Low-emission synthetic hydrocarbon fuel production capacity by country/region
according to announced projects and in the NZE Scenario ................................... 266
Global historic deployment and investments in electricity and natural gas
infrastructure .......................................................................................................... 281
Key technology components of electricity grids ..................................................... 284
Global high-voltage direct current (HVDC) transmission lines by country/region
and line type ........................................................................................................... 285
Gross electricity grid additions in advanced and emerging economies
in the NZE Scenario ............................................................................................... 288
Average annual transformer and stationary-battery capacity additionsin the NZE Scenario ............................................................................................... 289
Average annual material needs for selected grid technologies
in the NZE Scenario ............................................................................................... 291
Typical material composition of overhead lines and cables by weight, 2021 ........ 292
Typical material composition of transformers and stationary batteries byweight and value, 2021 .......................................................................................... 293
Global trade flows of grain-oriented steel by weight, 2020 .................................... 297
Global trade flows of transformers above 10 MW in monetary terms, 2020 .......... 299
Average lead times to build new electricity grid assets in Europe and theUnited States, 2010-2021....................................................................................... 301
Hydrogen pipeline network configuration ............................................................... 306
Technological pathways for long-distance transport for the supply of hydrogenand ammonia by tanker .......................................................................................... 307
Global natural gas and hydrogen supplies in the NZE Scenario ........................... 309
Average annual global investment in hydrogen and natural gas infrastructurein the NZE Scenario ............................................................................................... 309
Global hydrogen transmission pipeline length in the NZE Scenario ...................... 310
Global production of low-emission merchant hydrogen and interregional tradein the NZE Scenario ............................................................................................... 313
Interregional trade and infrastructure for shipping low-emission hydrogenin the NZE Scenario compared with historical LNG trade...................................... 314
Tanker capacity in energy and volume terms by energy carrier type in the NZE
Scenario, 2030 ....................................................................................................... 314
Global LNG trade and largest LNG and LH2 tanker sizes ...................................... 317
International ammonia trade flows via shipping, 2019 ........................................... 318

Energy Technology Perspectives 2023

Figure 6.1
Figure 6.2
Figure 6.3
Figure 6.4
Figure 6.5
Figure 6.6
Figure 6.7
Figure 6.8
Figure 6.9
Figure 6.10
Figure 6.11
Figure 6.12
Figure 6.13
Figure 6.14
Figure 6.15

Table of contents

Indicative levelised cost of delivering hydrogen, by transport option anddistance in the NZE Scenario, 2030 ....................................................................... 320
Indicative levelised cost of delivering hydrogen, by shipping-option step anddistance in the NZE Scenario, 2030 ....................................................................... 321
Global underground geological storage capacity for hydrogen in the NZE
Scenario and historical growth in natural gas storage by region ........................... 323
Global liquefied gas tanker deliveries by country and typein the NZE Scenario ............................................................................................... 328
Lead times of selected natural gas infrastructure projects..................................... 331
Global energy consumption for hydrogen transportation in the NZE Scenario...... 333
Energy consumption and overall efficiency of hydrogen transport and distancein the NZE Scenario, 2030 ..................................................................................... 334
CO2 flows through the CO2 management value chain ........................................... 336
CO2 pipeline network .............................................................................................. 337
Criteria for CO2 source-sink matching .................................................................... 340
Indicative CO2 shipping and offshore pipeline transportation costs ....................... 343
Existing and planned annual global CO2 storage injection capacity, comparedwith projected NZE Scenario needs in 2030 .......................................................... 344
Lead times for the CO2 storage component of selected CCUS projects withdedicated storage ................................................................................................... 346
Lead times of selected recent natural gas and CO2 pipeline projects ................... 347
Risks threatening acceleration of the global clean energy transition ..................... 371
Annual energy sector investments by regional grouping in the NZE Scenario ...... 375
Public energy R&D by region and corporate energy R&D by technology .............. 378
Risks to the energy security of global clean energy supply chains ........................ 391
Geographic concentration for key critical minerals, material production andmanufacturing operations for clean energy technologies ...................................... 393
Announced project throughput and deployment for key clean energy
technologies in the APS and the NZE Scenario .................................................... 394
Market size for key clean energy technologies and net fossil fuel tradein the APS .............................................................................................................. 396
Employment in clean energy technology manufacturing by region ....................... 398
Concentrations of the largest enterprises in global manufacturing capacity andmaterial production, 2021 ....................................................................................... 400
Risk to resilience of global selected clean energy and technology
supply chains .......................................................................................................... 409
Industry end-user prices for natural gas and electricity in selected countries ....... 411
Indicative production costs for hydrogen and hydrogen-based commodities
produced via electrolysis ........................................................................................ 413
Global cathode production for passenger light-duty BEVs by chemistry in the NZE
Scenario ................................................................................................................. 415
Risk of failing to reduce CO2 emissions in the most intensive steps of
selected clean energy and technology supply chains ............................................ 421
Number of companies committed to purchasing low-emission steel by end-use
sector, and global market size for selected bulk materials in the NZE Scenario ... 424

List of boxes
Clean energy supply chains interdependencies ...................................................... 85
The different steps of metal production .................................................................... 88
Resilience and vulnerabilities in the ammonia supply chain .................................. 124
Stockpiles of critical minerals and energy security ................................................ 127

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Box 2.1
Box 2.2
Box 2.3
Box 2.4

Energy Technology Perspectives 2023

Box 2.5
Box 2.6
Box 3.1
Box 3.2
Box 3.3
Box 3.4
Box 4.1
Box 4.2
Box 4.3
Box 4.4
Box 5.1
Box 5.2
Box 6.1
Box 6.2
Box 6.3
Box 6.4
Box 6.5
Box 6.6
Box 6.7
Box 6.8
Box 6.9
Box 6.10
Box 6.11
Box 6.12
Box 6.13
Box 6.14
Box 6.15
Box 6.16
Box 6.17

Table of contents

The chip shortage is holding back the deployment of EVs .................................... 130
Mining waste stored behind tailings dams ............................................................. 137
Clarifying materials-related terminology ................................................................. 149
Behavioural change to reduce the supply chain challenge .................................... 157
Increasing recyclability of clean energy technologies ............................................ 159
Plans for near zero emission material production .................................................. 184
Potential installation bottlenecks in the wind sector ............................................... 215
Carbon intensity of technology manufacturing ....................................................... 218
The heat pump market: Synergies between end uses and subsectors ................. 244
Strategies to decarbonise road transport: Potential role for low-emission
synthetic hydrocarbon fuels ................................................................................... 268
Why do energy infrastructure projects take so long? ............................................. 302
Environmental impacts of liquefied gas shipping.................................................... 335
Case study: The solar PV supply chain in China ................................................... 366
Case study: Strategic partnerships in clean energy supply chains ........................ 368
Case study: Policy responses to the semiconductor shortage .............................. 372
Case study: Strategies for clean energy supply chains in the United Statesand Europe ............................................................................................................. 379
Case study: Identifying strategic projects in the European Union ......................... 381
Case study: A one-stop shop for EV charging support in the United States ......... 383
Case study: Enhancing transferable skills in Alberta ............................................. 385
Case study: Financing innovation in the European Union ..................................... 388
Case studies: Support for new mines and manufacturing plants ........................... 406
Case study: EU right-to-repair rules ....................................................................... 417
Case study: Repurposing fossil energy infrastructure in the United Kingdom
and United States ................................................................................................... 419
Case study: Standards for concrete and asphalt in the United States .................. 425
Lifecycle-based low-carbon fuel standards ............................................................ 426
Case study: Incentivising the circular economy of battery supply chains in theEuropean Union ..................................................................................................... 428
Case study: Supporting sustainable battery value chains by 2030 and thebattery passport ...................................................................................................... 430
Case study: The shifting focus of EU climate policy on supply chains .................. 433
Case study: Incentivising clean construction materials in the United States ......... 435

Characteristics of secure, resilient and sustainable clean energy technology
supply chains ............................................................................................................ 84
Examples of digital technology use across clean energy supply chains ............... 129
Use of semiconductors in clean energy technologies ............................................ 130
Environmental impact of mining for selected minerals ........................................... 137
Leading minerals and materials for clean energy supply chains by type ............... 150
Examples of government supply-side support for low-emission material
production ............................................................................................................... 189
Examples of government demand-side policies for low-emission material
production and private- and public-sector commitments ....................................... 190
Top steel producers and leading existing or planned projects making progress
towards near zero emission steel production ......................................................... 192
Top cement producers and leading existing or planned projects making
progress towards near zero emission cement production ..................................... 196

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List of tables

Energy Technology Perspectives 2023

Table 5.2
Table 5.3
Table 5.4
Table 5.5
Table 5.6
Table 5.7
Table 5.8
Table 5.9
Table 6.1
Table 6.2
Table 6.3
Table 6.4
Table 6.5

Top plastics producers and leading existing or planned projects making
progress towards near zero emission plastics production ..................................... 199
Top aluminium producers and leading existing or planned projects making
progress towards near zero emission aluminium production ................................. 201
Selected announced expansion projects for manufacturing solar PV supply
chain components .................................................................................................. 221
Announced expansion projects of selected battery makers and automakers........ 230
Expansion plans of selected heavy-duty fuel cell truck and fuel cellmanufacturers ........................................................................................................ 234
Announced heat pump manufacturer expansion projects by country and typeof investment .......................................................................................................... 241
Announced expansion plans of key electrolyser manufacturers ............................ 248
Planned capacity expansions of selected companies to produce hydrogen fromnatural gas with CCS.............................................................................................. 256
Direct air capture expansion projects of selected companies ................................ 261
Announced BECC expansion projects of selected companies .............................. 264
Announced low-emission synthetic hydrocarbon fuel capacity by company ......... 267
Global grain-oriented steel manufacturing capacity by country andmanufacturer, 2020 ................................................................................................ 296
Characteristics of existing hydrogen pipelines and desired features of
new ones ................................................................................................................ 312
Announced designs for liquefied hydrogen tankers expected to be commercial
before 2030 ............................................................................................................ 316
Characteristics of types of underground geological storage for hydrogen ............. 322
Selected companies commercialising or planning to commercialise compressors
suitable for hydrogen transmission and storage .................................................... 329
CO2 pipeline deployment for CO2 capture in the NZE Scenario, 2050 .................. 342
Fossil fuel infrastructure with potential for repurposing for transporting or storinghydrogen and CO2 .................................................................................................. 349
Technical aspects of repurposing oil and gas pipelines for hydrogen and CO2transport ................................................................................................................. 350
Existing and planned projects to repurpose natural gas pipelines to carry CO2 .... 351
Supply chain risk assessment framework .............................................................. 363
Policy recommendations for secure, resilient and sustainable supply chains ....... 369
Accreditation requirements for clean energy sector workers by technology inselected countries, 2022 ........................................................................................ 377
Components of supply chain concentration ........................................................... 390
Traceability standards, protocols and initiatives .................................................... 431

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Table 5.1

Table of contents

Energy Technology Perspectives 2023

Executive summary

Executive summary
The energy world is in the early phase of a new industrial age – the age ofclean energy technology manufacturing. Industries that were in their infancy inthe early 2000s, such as solar PV and wind, and the 2010s, such as EVs andbatteries, have mushroomed into vast manufacturing operations today. The scaleand 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 zerotransitions, 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, resilientand sustainable supply chains for clean energy is vital.
Every country needs to identify how it can benefit from the opportunities of
the new energy economy, defining its industrial strategy according to its
strengths and weaknesses. This 2023 edition of Energy Technology
Perspectives (ETP-2023) provides a comprehensive inventory of the current stateof global clean energy supply chains, covering the areas of mining; production ofmaterials like lithium, copper, nickel, steel, cement, aluminium and plastics; andthe manufacturing and installation of key technologies. The report maps out how
these sectors may evolve in the coming decades as countries pursue their energy,
climate and industrial goals. And it assesses the opportunities and the needs forbuilding up secure, resilient and sustainable supply chains for clean energy
technologies – and examines the implications for policy makers.

The new energy economy brings opportunities and risks
Clean energy transitions offer major opportunities for growth andemployment in new and expanding industries. There is a global market
opportunity for key mass-manufactured clean energy technologies worth around
USD 650 billion a year by 2030 – more than three times today’s level – if countries
worldwide fully implement their announced energy and climate pledges. Related
clean energy manufacturing jobs would more than double from 6 million today tonearly 14 million by 2030, with over half of these jobs tied to electric vehicles, solar
PV, wind and heat pumps. As clean energy transitions advance beyond 2030, thiswould lead to further rapid industrial and employment growth.

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But there are potentially risky levels of concentration in clean energy supply
chains – both for the manufacturing of technologies and the materials onEnergy Technology Perspectives 2023

Executive summary

which they rely. China currently dominates the manufacturing and trade ofmost clean energy technologies. China’s investment in clean energy supply
chains has been instrumental in bringing down costs worldwide for key
technologies, with multiple benefits for clean energy transitions. At the same time,
the level of geographical concentration in global supply chains also creates
potential challenges that governments need to address. For mass-manufactured
technologies like wind, batteries, electrolysers, solar panels and heat pumps, thethree largest producer countries account for at least 70% of manufacturing
capacity for each technology – with China dominant in all of them. The
geographical distribution of critical mineral extraction is closely linked to resource
endowments, and much of it is very concentrated. For example, Democratic
Republic of Congo alone produces 70% of the world’s cobalt, and just three
countries account for more than 90% of global lithium production. Concentration
at any point along a supply chain makes the entire supply chain vulnerable toincidents, be they related to an individual country’s policy choices, natural
disasters, technical failures or company decisions.
The world is already seeing the risks of tight supply chains, which havepushed up clean energy technology prices in recent years, making
countries’ clean energy transitions more difficult and costly. Increasing
prices for cobalt, lithium and nickel led to the first ever rise in battery prices, which
jumped by nearly 10% globally in 2022. The cost of wind turbines outside China
has also been rising after years of decline, with the prices of inputs such as steel
and copper about doubling between the first half of 2020 and the same period in
2022. Similar trends can be seen in solar PV supply chains.

Governments are racing to shape the future of clean
energy technology manufacturing
Countries are trying to increase the resilience and diversity of clean energy
supply chains while also competing for the huge economic opportunities.
Major economies are acting to combine their climate, energy security andindustrial policies. The Inflation Reduction Act in the United States is a clear
articulation of this, but there is also the Fit for 55 package and REPowerEU planin the European Union, Japan’s Green Transformation programme, the Production
Linked Incentive scheme in India that encourages manufacturing of solar PV andbatteries, and China is working to meet and even exceed the goals of its latest
Five-Year-Plan.

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There are big dividends for countries that get their clean energy industrial
strategies right. Project developers and investors are watching closely for thepolicies that can give them a competitive edge in different markets, and will
respond to supportive policies. Only 25% of the announced manufacturing
projects globally for solar PV are under construction or beginning construction

Energy Technology Perspectives 2023

Executive summary

imminently – the number is around 35% for EV batteries and less than 10% forelectrolysers. The share is highest in China, where 25% of total solar PV and 45%
of battery manufacturing is already at such an advanced stage of implementation.
In the United States and Europe, less than 20% of announced battery andelectrolyser factories are under construction. The relatively short lead times ofaround 1-3 years on average to bring manufacturing facilities online mean that the
project pipeline can expand rapidly in countries with an environment that is
conducive to investment. Manufacturing projects announced, but not firmly
committed, in one country today could end up actually being developed elsewhere
in response to shifts in policies and market developments.
Greater efforts are needed to diversify and strengthen clean energy supply
chains. China accounts for most of the current announced manufacturing capacity
expansion plans to 2030 for solar PV components (around 85% for cells andmodules, and 90% for wafers); for onshore wind components (around 85% forblades, and around 90% for nacelles and towers); and for EV battery components(98% for anode and 93% for cathode material). Hydrogen electrolysers are themain exception, with around one-quarter of manufacturing capacity
announcements for 2030 being in China and the European Union, respectively,
and another 10% in the United States.

Clean energy supply chains benefit from international
trade
International trade is vital for rapid and affordable clean energy transitions,but countries need to increase diversity of suppliers. For solar PV, many
components are traded today, in particular wafers and modules. The share ofinternational trade in global demand is nearly 60% for solar PV modules, witharound half of the solar modules manufactured in China being exported –predominantly to Europe and the Asia Pacific region. The situation is similar for
EVs, for which most of the trade in components flows from Asia into Europe, which
imports around 25% of its EV batteries from China. Wind turbine components areheavy and bulky, but the international trade of towers, blades and nacelles is quite
common. China is a major player in wind turbine component manufacturing,accounting for 60% of global capacity and half of total exports, most of which goto other Asian countries and Europe. In the United States, one of the largest wind
power markets, the domestic content of blades and hubs is lower than 25%. For
heat pumps, the share of international trade in global manufacturing is below 10%,with most of it from China to Europe.

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The announced manufacturing pipeline to 2030 is very large for many clean
energy technologies. If all announced projects to expand manufacturing
capacities were to materialise and all countries implement their announced climate
pledges, China alone would be able to supply the entire global market for solar PV

Energy Technology Perspectives 2023

Executive summary

modules in 2030, one-third of the global market for electrolysers, and 90% of theworld’s EV batteries. Announced projects in the European Union would be
sufficient to supply all of the bloc’s domestic needs for electrolysers and EV
batteries, but would continue to be highly dependent on imports for solar PV andwind, an area where it currently has a technological edge. The situation issomewhat similar in the United States, although further capacity additions arehighly likely as a result of the Inflation Reduction Act. The current global pipelineof announced projects would exceed demand for some technologies (solar PV,
batteries and electrolysers) and fall significantly short for others (windcomponents, heat pumps and fuel cells). This highlights the importance of clear
and credible deployment targets from governments to limit demand uncertainty
and guide investment decisions.

Critical minerals bring their own set of challenges
The mining of critical minerals is the only step in clean energy technology
supply chains that depends on resource endowment alone. The long leadtimes for new mines, which can be well over ten years from the start of project
development to first production, increase the risk that critical minerals supply
becomes a major bottleneck in clean technology manufacturing. Moreover, thehigh geographical concentration of today’s production creates security of supply
risks, making international collaboration and strategic partnerships crucial. Clear
policy signals about future deployment are particularly important to de-risk
investments in this sector, as companies developing new mining capacity need tobe confident that clean energy technologies further down the supply chain will be
successfully scaled up in time.
The majority of announced projects for the processing and refining of key
critical minerals are set to be located in China. These midstream processes
tend to be energy-intensive. China accounts for 80% of the announced additional
production capacity to 2030 for copper and dominates announced refining
capacity of key metals used in batteries (95% for cobalt, and around 60% forlithium and nickel). Currently planned expansions of mineral processing capacity
worldwide fall well short of the volumes that will be needed for rapid deploymentof clean energy technologies. Polysilicon for solar PV supply chains is the only
area in which a surplus of capacity by 2030 can currently be expected.

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Mitigating risks in critical mineral supplies requires a new, more diversified
network of diverse international producer-consumer relationships. These
will be based not only on mineral resources, but also on the environmental, socialand governance standards for their production and processing. These newpartnerships need to be balanced in ways that offer resource-rich producers,
especially in developing economies, the opportunity to move beyond primary
production. Stockpiling options can also provide safeguards against disruption, butEnergy Technology Perspectives 2023

Executive summary

a comprehensive suite of policies in support of minerals security needs to include
attention on the demand side, notably via recycling programmes and support fortechnology innovation.

Countries’ clean energy industrial strategies need toreflect their strengths and weaknesses
For most countries, it is not realistic to compete effectively across all partsof the relevant clean energy technology supply chains. They need not to do
so. Competitive specialisms often arise from inherent geographic advantages,
such as access to low-cost renewable energy or the presence of a mineral
resource, which can lead to lower production costs for energy and material
commodities. But they can also arise from other attributes, like a large domestic
market, a high-skilled workforce or synergies and spillovers stemming fromexisting industries. Holistically assessing and nurturing these competitive
advantages should form a central pillar of governments’ industrial strategies,
designed in accordance with international rules and complemented by strategic
partnerships.
Energy costs will continue to be a major differentiator in thecompetitiveness of countries’ energy-intensive industry sectors. Industrial
competitiveness today is closely linked to energy costs, especially natural gas andelectricity, which vary greatly between regions. This remains the case in the clean
energy transition. For example, production costs of hydrogen from renewableelectricity could be much lower in China and the United States (USD 3-4/kg) thanin Japan and Western Europe (USD 5-7/kg) using the best resources in thosecountries today, translating into similar differences in production costs forderivative commodities, such as ammonia and steel. As countries make progress
towards their climate pledges, with renewable electricity costs continuing theirdecline and electrolyser costs falling rapidly, the cost difference between regions
is likely to shrink somewhat, but competitiveness gaps will remain. Carefully
considering where in the supply chain to specialise domestically, and where it
might be better to establish strategic partnerships or make direct investments inthird countries, should form key considerations of countries’ industrial strategies.

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New infrastructure will form the backbone of the new energy economy in all
countries. This covers areas such as the transportation, transmission, distribution
or storage of electricity, hydrogen and CO2. Building clean energy infrastructure
can take 10 years or more, typically involving large civil engineering projects thathave to adhere to extensive local planning and environmental regulations. Whileconstruction is in most cases a relatively efficient process, taking 2-4 years on
average, planning and permitting can cause delays and create bottlenecks, with

Energy Technology Perspectives 2023

Executive summary

the process taking 2-7 years, depending on the jurisdiction and type of
infrastructure. Lead times for infrastructure projects are usually much longer thanfor the power plants and industrial facilities that connect to them.

The story of the new energy economy is still being
written – supply chains are central to the narrative

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Industrial strategies for clean energy technology manufacturing require an
all-of-government approach, closely coordinating climate and energy
security imperatives with economic opportunities. This will mean identifying
and fostering domestic competitive advantages; carrying out comprehensive risk
assessments of supply chains; reducing permitting times, including for large
infrastructure projects; mobilising investment and financing for key supply chain
elements; developing workforce skills in anticipation of future needs; andaccelerating innovation in early-stage technologies. Every country has a different
starting point and different strengths, so every country will need to develop its own
specific strategy. And no country can go it alone. Even as countries build theirdomestic capabilities and strengthen their places in the new global energy
economy, there remain huge gains to be had from international co-operation aspart of efforts to build a resilient foundation for the industries of tomorrow.

Energy Technology Perspectives 2023

Introduction

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 andenvironmental policy making must be based on a clear understanding of thepotential for deploying these technologies. ETP seeks to help achieve this goal byassessing the opportunities and challenges associated with existing, new andemerging energy technologies, and identifying how governments and otherstakeholders can accelerate the global transition to a clean and sustainableenergy system.
The Covid-19 pandemic and the Russian Federation’s (hereafter, “Russia”)
invasion of Ukraine have critically disrupted global energy and technology supply
chains, leading to soaring gas, oil and coal prices, as well as shortages of criticalminerals, semiconductors and other materials and components needed to
manufacture clean energy technologies. The current global energy crisis poses athreat to near-term economic prospects and is threatening to slow the rollout ofsome clean energy technologies, but it also strengthens the economic case foraccelerating the shift away from fossil fuels by massively raising investments inrenewables, energy efficiency and other clean energy technologies. The recent
spate of extreme weather events across the planet reminds us of the urgent needfor radical action to rein in emissions of greenhouse gases. As the IEA has
repeatedly stressed, the world does not need to choose between tackling theenergy crisis and the climate crisis. The social and economic benefits ofaccelerating clean energy transitions are as huge as the costs of inaction.

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Secure, resilient and sustainable supply chains for manufacturing clean energy
technologies and producing low-emission energy commodities are central to theglobal energy transition. These supply chains depend largely on minerals and on
an array of materials and components derived from them, rather than on fossil fuelsupplies. As a result, energy security considerations will increasingly be about
access to those resources and goods. Important lessons can be drawn fromestablished markets and technologies such as solar photovoltaics (PV) in shaping
emerging markets for batteries, low-emission hydrogen and other technologies
that are poised to play key roles in the clean energy transition.

Energy Technology Perspectives 2023

Introduction

The primary purpose of this edition of ETP is to help government and industry
decision makers overcome hurdles in developing and expanding the clean energy
technology 1 supply chains the world needs to reach net zero emissions by midcentury. Through the lenses of energy security, resiliency and sustainability,
ETP-2023 focuses throughout on the opportunities and risks involved in scaling
up clean energy and technology supply chains in the years ahead. It sets out
where key clean energy and technology supply chains stand today and assesses
how quickly they need to expand for the world to be on track for net zero
emissions, and it identifies vulnerabilities and risks in adapting them to a net zeroworld as well as emerging opportunities to establish the new global energy
economy. It also examines how governments can design more effective policies
and strategies to encourage greater supply chain security, resiliency andsustainability.
ETP-2023 builds on the 2020 revamp of this series, aimed at improving its
usefulness and relevance for policy makers and other stakeholders. It draws on
and updates the IEA’s ongoing analysis of critical minerals and recent detailed
assessments of technology supply chains for electric vehicle (EV) batteries andsolar PV, as well as the IEA’s extensive clean energy technology tracking andanalytical activities. ETP analysis also benefits from IEA Technology Collaboration
Programme expertise and research provided by experts around the world who
support this work with technology data and analytical insights.

Clean energy and technology supply chains
Energy and technology supply chains refer to the sequences of steps, or stages,
required to deliver a technology or an energy service to the market. They include
extracting natural resources (such as minerals), producing materials and fuels,
manufacturing components and assembling them into a technology or system,
installing and operating that technology, and managing wastes generated during
its operating lifetime and when it is being dismantled at the end of its lifespan. An
energy technology comprises a combination of hardware, techniques, skills,
methods and processes used to produce energy and provide energy services, i.e.
energy production, transformation, storage, transportation and use.
In this report we distinguish between technology supply chains and energy supply
chains, based on the final service delivered:

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1
Clean energy technology comprises those technologies that result in minimal or zero emissions of carbon dioxide (CO2) andpollutants. For the purposes of this report, clean energy technology refers to low or near zero emissions technologies that do
not involve the production or transformation of fossil fuels – coal, oil and natural gas – unless they are accompanied bycarbon capture, utilisation and storage (CCUS) and other anti-pollution measures.

Energy Technology Perspectives 2023

Introduction•

Technology supply chains refer to the different steps needed to install atechnology, with inputs of materials, components and services involved at eachstage. In the case of clean energy technologies, the main steps include theextraction of minerals; the processing of those minerals into usable materials; themanufacturing of components; their assembly into finished equipment; theinstallation of that equipment; its operation; and its decommissioning and reuse or
recycling of certain components. These technologies include supply-side
equipment, such as solar PV systems (ranging from household systems to large
utility-scale plants) and electrolysers to produce hydrogen, as well as end-use
equipment such as EVs, heat pumps and hydrogen-powered fuel cell vehicles.

•

Energy supply chains refer to the different steps needed to supply a fuel or final
energy service to end users, usually involving trade of that energy commodity along
and across technology supply chains. Steps include power generation or fueltransformation, as well as their transportation, transmission, distribution andstorage. Examples include the supply of renewable electricity (such as solar PV
and wind power) and low-emission hydrogen and synthetic hydrocarbon fuels, suchas synthetic kerosene.

Technology supply chains and energy supply chains are interrelated. Producing,
generating, transporting and storing any form of energy requires technologies,
which need to be manufactured and brought into service. In parallel, all thedifferent steps along the technology supply chain consume energy and thus
depend on energy supply chains.
Figure I.1 Steps and interdependencies of technology and energy supply chains

IEA. CC BY 4.0.

Energy and technology supply chains are interdependent, as one is unable to operate
without the other.

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Recent trends in technology costs and energy prices illustrate the interlinkages
between the two types of supply chains. The prices of many minerals and metals
that are essential for some leading clean energy technologies have soared in thelast few years, due to a combination of rising demand, disrupted supply chains,

Energy Technology Perspectives 2023

Introduction

concerns about future supply and rising energy prices. For example, the price oflithium has nearly doubled since the beginning of 2022 (see Chapter 2). Cathodematerials such as lithium, nickel, cobalt and manganese, which are essential formaking lithium-ion batteries, accounted for less than 5% of battery pack costs inthe middle of the last decade when there were only a handful of battery
gigafactories; that share has risen to over 20% today.

Scope and analytical approach
Risk assessment framework for supply chains
Disruptions to clean energy technology supply chains could have a major impact
on the world’s ability to achieve climate and energy goals. Understanding the risk
profile of each element of the supply chain is a key step in determining where tofocus efforts to enhance security, resilience and sustainability, and in developing
policies to address potential vulnerabilities. These profiles can look very different
depending on the country, region and technology and will change over time as
new technologies and materials emerge and mature, and as markets develop.
Making supply chains secure, resilient and sustainable can only be achieved
through a comprehensive and co-ordinated approach. This means taking action
to develop supply chains that can meet the needs of a net zero pathway and that
can absorb, accommodate and recover from short-term shocks and adjust to longterm changes in supply, including periodic material shortages, the effects ofclimate change and natural disasters, and other potential market disruptions. The
need to reduce the emissions intensity and environmental impact of clean energy
technology supply chains themselves is particularly urgent.
The IEA has developed a risk assessment framework that both government andbusinesses can use to capture the risks and vulnerabilities of supply chains. It was
first presented in Securing Clean Energy Technology Supply Chains, published inJuly 2022 (IEA, 2022a). For the purposes of ETP-2023, the analysis has beensignificantly expanded to provide a comprehensive risk-assessment framework fortechnology and energy supply chains based on the combined assessment oflikelihood and impact metrics relevant to four identified potential risks: insufficientscaleup pace, and supply insecurity, inflexibility and unsustainability.

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The framework is designed to be applied to current supply chain structures toassess how well they can adapt and respond in the short to medium term. This
report uses it to provide a global perspective, but it can be applied at the nationalor regional level.

Energy Technology Perspectives 2023

Introduction

Scenario analysis
Analysis in this report is underpinned by global projections of clean energy
technologies derived from the IEA’s Global Energy and Climate (GEC) model (IEA,
2022b), a detailed bottom-up modelling framework composed of several
interlinked models covering energy supply and transformation, and energy use in
the buildings, industry and transport sectors. The modelling framework includes
26 regions or countries covering the whole world (see Annex). The ETP-2023
projection period is 2021 to 2050. The most recent year of complete historical data
is 2020, though preliminary data are available for some countries and sectors forparts of 2021 and have been used to adjust the projections.
We employ two scenarios to describe possible energy technology pathways:•

The Net Zero Emissions by 2050 (NZE) Scenario – the central scenario in thisreport – is a normative scenario that sets out a pathway to stabilise global averagetemperatures at 1.5°C above pre-industrial levels. The NZE Scenario achieves
global net zero energy sector CO2 emissions by 2050 without relying on emissions
reductions from outside the energy sector. In doing so, advanced economies reachnet zero emissions before developing economies do. The NZE Scenario also
meets the key energy-related UN Sustainable Development Goals, achieving
universal access to energy by 2030 and securing major improvements in air quality.

•

The Announced Pledges Scenario (APS) assumes that governments will meet,in full and on time, all the climate-related commitments they have announced,
including longer-term net zero emissions targets and Nationally Determined
Contributions (NDCs), as well as commitments in related areas such as energy
access. It does so irrespective of whether these commitments are underpinned by
specific policies to secure their implementation. Pledges made in international fora
and initiatives on the part of businesses and other non-governmental organisations
are also taken into account wherever they add to the ambition of governments.

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Neither scenario should be considered a prediction or forecast. Rather, they areintended to offer insights into the impacts and trade-offs of different technology
choices and policy targets, and to provide a quantitative framework to support
decision making in the energy sector and strategic guidance on technology
choices for governments and other stakeholders. The focus of the analysis in ETP2023 is on the technology requirements of the NZE Scenario; the APS is employedwith a view to understanding geographical concentration and regional needs. The
scenarios and results are consistent with those presented in the 2022 World
Energy Outlook (IEA, 2022c).

Energy Technology Perspectives 2023

Introduction

Selected energy and technology supply chains
This report analyses six clean energy and technology supply chains in detail(Figure I.2). 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 theirrespective technology supply chains); low-emission hydrogen (including technology
supply chains for electrolysers and natural gas-based plants with carbon capture andstorage [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 threeothers 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 forbuildings.
Key elements for each step in selected clean energy and technology supply chains
LOW-EMISSION ELECTRICITY

LOW-EMISSION HYDROGEN

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Figure I.2

Energy Technology Perspectives 2023

Introduction

LOW-EMISSION SYNTHETIC HYDROCARBON FUELSBATTERY ELECTRIC VEHICLESPAGE | 32

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HEAT PUMPSEnergy Technology Perspectives 2023

Introduction

FUEL CELL TRUCKS

IEA. CC BY 4.0.
Notes: BECC = bioenergy with carbon capture. DAC = direct air capture. FT = Fischer-Tropsch.

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ETP-2023 studies six selected clean energy and technology supply chains in detail.

Energy Technology Perspectives 2023

Introduction

Report structure
Chapter 1 reviews the current status of the global clean energy transition andoutlines the extent of the changes required to clean energy and technology supply
chain to put the world on the NZE Scenario’s net zero pathway, as well as somepotential risks that could arise.
Chapter 2 assesses in detail how the key clean energy and technology supply
chains function today and their vulnerabilities as clean energy transitions advance,
focusing on the link between geographic concentration and security, resilience tomarket shocks and environmental performance.
Chapter 3 quantifies global mineral and material needs for the transition to net
zero emissions and analyses the extent to which current expansion plans arecompatible with that trajectory. It also discusses the policy and market factors
driving investments in key regions and the main corporate strategies in this stepof the supply chain.
Chapter 4 assess prospects for the supply of mass-manufactured and large-scale
site-tailored clean energy technologies, focusing on the expansion of
manufacturing and installation capacity based on current and announced
construction activity. Like Chapter 3, Chapter 4 also discusses the policy andmarket factors driving investments in key regions and the main corporate
strategies in this step of the supply chain.
Chapter 5 analyses how and at what pace energy and CO2 infrastructure needs
to be transformed to cost-effectively sustain the clean energy supply chains thatwill be needed for net zero emissions, focusing on electricity, hydrogen and CO2transportation, transmission, distribution and storage.

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Chapters 6 sets out how policy makers can support the development andexpansion of secure, resilient and sustainable supply chains, the tools at theirdisposal and how best to use them, drawing on recent experience around theworld.

Energy Technology Perspectives 2023

Introduction

References
IEA (International Energy Agency) (2022a), Securing Clean Energy Technology Supply
Chains, https://www.iea.org/reports/securing-clean-energy-technology-supply-chains
IEA (2022b), Global Energy and Climate Model, https://www.iea.org/reports/global-energyand-climate-model

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IEA (2022c), World Energy Outlook, https://www.iea.org/reports/world-energy-outlook-2022

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Chapter 1. Energy supply chains intransition
Highlights• Momentum for clean energy transitions is accelerating, driven by increasingly
ambitious energy and climate policies, technological progress and renewedenergy security concerns following Russia’s invasion of Ukraine. Clean energy
investment reached USD 1.4 trillion in 2022, up 10% relative to 2021 andrepresenting 70% of the growth in total energy sector investment. Despite thisimportant progress, fossil fuels still account for 80% of the primary energy mix.
• Clean energy technology deployment must accelerate rapidly to meet climate
goals. In the Net Zero Emissions by 2050 (NZE) Scenario, global production ofelectric cars increases six-fold by 2030; renewables account for over 60% of
power generation (up from 30% today); and electricity demand increases by 25%,
accounting for nearly 30% of total final consumption (up from 20% today). If
delivered in full, announced projects to expand clean technology manufacturing
capacity would meet the needs for 2030 in the NZE Scenario for solar PV
modules and approach that required for EV batteries, but would fall short in otherareas, leaving gaps of 40% for electrolysers and 60% for heat pumps.
• The transition to clean energy hinges on clean energy technology supply chains.
USD 1.2 trillion of cumulative investment would be required to bring enoughcapacity online for the supply chains studied in ETP-2023 to be on track with the
NZE Scenario’s 2030 targets. Announced investments cover around60% of thistotal. Given project lead times, most investments are required during 2023-2025,
at an average of USD 270 billion per year during that period, which is nearlyseven times the average rate of investment over 2016-2021.
• Critical materials like copper, lithium, cobalt and nickel are changing the energy
security paradigm. Manufacturing a typical-size electric car requires five times asmuch of these materials as a regular car. Anticipated supply expansion suggeststhat production could fall well short of NZE Scenario requirements for 2030, with
deficits of up to 35% for lithium mining and 60% for nickel sulfate production.
• Lead times to establish new supply chains and expand existing ones can be long,requiring policy interventions today. Opening mines or deploying clean energy
infrastructure can take more than a decade. Building a factory or ramping up
operations for mass-manufactured technologies requires only around 1-3 years.

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• Clean energy sector jobs in the NZE Scenario soar from 33 to 70 million over
2021-2030, offsetting the loss of 8.5 million in fossil fuel-related sectors. Buildinga large, skilled workforce is key to meeting net zero targets, but labour and skills
shortages in expanding clean energy industries are already creating bottlenecks.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

The clean energy transition
Recent trends in energy technologies
The move to clean energy is accelerating
The global clean energy transition is accelerating, driven by a combination ofpolicy, technological change and economics. The need to reduce greenhouse gas
emissions drastically and urgently in the face of ever more startling evidence of
global climate change is now widely accepted, reflected in increasingly ambitious
national goals. The global energy crisis following the Russian Federation’s(hereafter, “Russia”) invasion of Ukraine has bolstered energy security concerns
about supply of conventional fuels such as oil and gas, providing further impetus
to the need and policy support for clean energy technologies. As of the end of
November 2022, 87 countries and the European Union had announced pledges
to reduce emissions to net zero this century, covering over 85% of the world’s
emissions and 85% of its gross domestic product. Notable announcements since2021 include the People’s Republic of China’s (hereafter, “China”) target of carbon
neutrality by 2060 (IEA, 2021a), India’s net zero emissions by 2070 goal
(Government of India, 2022) and Indonesia’s net zero emissions by 2060 target(IEA, 2022a). If all announcements and targets are met in full and on time, they
will be enough to hold the rise in global temperatures to around 1.7°C in 2100
(IEA, 2022b; IEA, 2022c).
Over the last decade, the uptake of clean energy technologies and the supply ofenergy from non-fossil sources, notably renewables, has accelerated rapidly. In
2022, renewables accounted for 30% of global power generation, up from below
20% in 2010, with notable increases in solar PV, wind, hydropower and bioenergy
output (IEA, 2022d). Electrification is accelerating across all end-use sectors. In
transport, sales of electric cars exceeded 10 million in 2022, or 13% of the global
car market, bringing their total number on the world’s roads to over 25 million, up
from practically zero in 2010 (IEA, 2022e). There were more than 1 000 gigawatts
thermal (GWth) of heat pump capacity operating worldwide in 2021, up fromaround 500 GWth in 2010, with sales growing 13% relative to 2020. 2
Investment in clean energy technology is increasing quickly and exceeded
USD 3 1.4 trillion in 2022, accounting for nearly 70% of year-on-year growth inoverall energy investment, and up from about USD 1 trillion in 2015 (IEA, 2022f).

Heat pumps included in this analysis are electric, and are those used primarily for heating (space and/or water) in buildings
and the ones for which heating function is just as important as its cooling function, aiming to exclude to the extent possible
air-air reversible heat pumps units bought primarily for space cooling. They include both centralised and decentralised units
in buildings.
3
All USD values in this report are expressed in real terms based 2021 prices.

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2

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

In the case of electric cars, global spending by governments and consumers
doubled to about USD 280 billion in 2021, about ten times more than in 2015. This
increase took place despite difficult market conditions and manufacturing
constraints: the combined revenues of the world’s 25 largest car manufacturers
stagnated between 2015 and 2021, before rebounding in 2022. Renewables,
power grids and energy storage in 2022 accounted for more than 80% of thenearly USD 1 trillion of total power sector investment, led by solar PV, up from
75% of the USD 800 billion invested in 2015, while the share of fossil fuel power
fell from about 20% to 10% over the same period. Aggregate investment in oil, gas
and coal supply amounted to just above USD 800 billion in 2022, down from over
USD 1 trillion in 2015. Capital spending by oil and gas companies 4 on clean
energy technologies has risen in recent years, expected to reach just over 5% of
their total upstream investment in 2022, up from 0.5% in 2015.

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 (Figure 1.1). In fact, growth inclean energy supply since 2000 has been dwarfed by that of oil, gas and coal,especially in the emerging and developing economies. In those countries, theshare 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 totalenergy supply in 2021 (down from 37% in 2000), followed by coal at 26% (up from23%) 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 usedin unsustainable and polluting ways. Nuclear power makes up 5% of supply,hydropower around 2%, and solar and wind together a mere 2%. Whileelectrification 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.

Includes the majors BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Shell and TotalEnergies, as well as ADNOC (Abu Dhabi
National Oil Company), CNPC (China National Petroleum Corporation), CNOOC (China National Offshore Oil Corporation),
Equinor, Gazprom, Kuwait Petroleum Corporation, Lukoil, Petrobras, Repsol, Rosneft, Saudi Aramco, Sinopec andSonatrach.

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4Energy Technology Perspectives 2023
Chapter 1. Energy supply chains in transition

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

IEA. CC BY 4.0.
Notes: Physical mass flows of fuels and materials in the energy system, in million tonnes. The “energy system” includes: devices that directly produce or consume energy (e.g. solar panels andmotors); equipment and structures that house energy-consuming devices and in turn can passively have an impact on energy consumption (e.g. building envelopes and car bodies);
infrastructure that directly transports energy or CO2 (e.g. electricity grids and CO2 pipelines); and infrastructure whose build-out could be directly affected by shifts in technology due to clean
energy transitions (e.g. rail infrastructure and roads). Industry material demand includes that from equipment but not the plant shell. Region of production refers to region of extraction for fuels
and minerals, and production for bulk materials (steel, cement, aluminium). For critical minerals (copper, lithium, nickel, cobalt and neodymium), volumes refer to the materials (metals) derived
from them. A similar graph for the Net Zero Emissions by 2050 (NZE) Scenario for 2050 is in Chapter 3.
Sources: IEA analysis based on IEA data; USGS (2022).

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Despite the rapid recent growth in clean energy technologies and demand for metals critical to them, the world still relies primarily on coal, oiland gas to meet its energy needs.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

In addition to the direct use of energy, end-use sectors consume large amounts ofenergy embedded in materials, such as cement for infrastructure and buildings,
steel for vehicles and manufacturing goods, and chemicals for fertilisers andconsumer 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 ofthat used to make cement, while about 70% of chemicals production was basedon 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% ofthat of coal today. The extraction and processing of critical minerals typically relies
on fossil fuels at present.
Much of the momentum for clean energy is recent and has thus yet to translate
into major change in global energy supply (IEA, 2022g). Most countries have beenstrengthening policy support for clean energy since the Paris Agreement in 2015,
and even more so since 2020 as part of Covid-19 economic recovery packages.
For example, the United States passed the Inflation Reduction Act in 2022,
authorising USD 370 billion in spending on energy and climate change(US Congress, 2022). In the wake of Russia’s invasion of Ukraine, theEuropean Union adopted the REPowerEU plan, which is expected to mobilise anadditional EUR 210 billion in clean energy technology investment over five years
and support the Fit for 55 package – a set of proposals to revise and update
EU legislation and to put in place new initiatives with the aim of reducing EU
emissions by at least 55% by 2030 (EC, 2022; European Council, 2022). At the
Global Clean Energy Action Forum co-organised by Mission Innovation and the
Clean Energy Ministerial, 16 countries collectively announced USD 94 billion in
spending for clean technology demonstration projects by 2026, following IEA
analysis of global needs for net zero (US Department of Energy, 2022; IEA,
2022h). Japan has established a roadmap to reach net zero by 2050 with support
for developing emerging technologies through the JPY 2 trillion Green Innovation
Fund (Japan, METI, 2021; NEDO, 2021). China’s 14th Five-Year Plan contains
action plans for technology development aimed at achieving a peak in
CO2 emissions by 2030 (China, NEA, 2022; China, NDRC, 2021). India isincreasing supply chain investments to boost domestic manufacturing in strategic
industries including batteries (over USD 2 billion), cars (over USD 3 billion), solar
PV (nearly USD 600 million) and steel (USD 800 million) through the Production
Linked Incentive scheme over the 2022-2027 period (India, MCI, 2021a and

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5
In this report, five main critical minerals are analysed: copper, lithium, cobalt, nickel and neodymium. They were selectedbased on their use in key clean energy technologies, potential constraints in their supply and risks relative to the geographicalconcentration of their production.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

2021b; India, MHI, 2022a and 2022b; India, MNRE, 2022; India, Union Cabinet,2020).

Clean energy technology needs for net zero
Net zero calls for a deep transformation of the energy sector
Achieving global net zero emissions of CO2 by 2050 requires curbing the growthin energy demand alongside a radical change in the energy mix, involving awholesale shift to renewable and other clean energy sources and technologies(Figure 1.2). In the NZE Scenario, behavioural changes, improvements in energy
efficiency, and switching to renewables enable a fall in total primary energy supply
by 10% between 2021 and 2030, despite the global economy growing by nearly athird. Total final consumption falls by 9% over the same period. The annual rateof energy intensity improvement nearly triples to more than 4% per year comparedwith the previous decade. Between 2030 and 2050, global demand falls more
slowly, by just 15% in total, as the scope for further energy conservation efforts
and efficiency improvements diminishes, and growing population and economic
activity continue to drive up underlying demand for energy services.
Renewables – led by solar PV and wind – see the biggest increase in supply to2050 in the NZE Scenario, complemented by significant increases in nuclear.
Solar output jumps 23-fold and that of wind 13-fold, while nuclear power doubles
between 2021 and 2050. By 2050, solar and wind together make up about 40% of
total primary energy supply and nuclear 12%. Total capacity additions ofrenewables quadruple from 300 GW in 2021 to nearly 1 200 GW in 2030, theirshare of total power generation reaching over 60%; additions slow to about
1 100 GW by 2050 as the need to replace existing fossil fuel-based capacity
diminishes, with renewables accounting for about 90% of generation by then.

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Unabated fossil fuels provided around 65% of total final consumption in 2021,
excluding fossil fuel use for non-energy purposes such as chemical feedstock. In
the NZE Scenario, this share falls to around 55% in 2030 and to 15% by 2050. In
absolute terms, the consumption of bioenergy in end-use sectors rises modestly
over 2021-2050, but this masks a shift in its composition: the use of modern
bioenergy rises sharply while its traditional use is phased out completely by 2030
as full access to modern energy is achieved in all countries.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

EJ

Global total primary energy supply in the NZE Scenario
700

Historical

Other
sources

Scenario

600

Renewables

500

Nuclear

400
300

Natural gas

200
Oil

100
0
2010

Coal
2020

2030

2040

2050

IEA. CC BY 4.0.

Renewables and nuclear displace most fossil fuel use in the NZE Scenario, with the shareof fossil fuels plunging from almost 80% in 2021 to less than 20% in 2050.

Electricity becomes the largest energy vector, with demand more than doubling
between 2021 and 2050, by which time it meets more than half of total final
consumption (Figure 1.3). Total electricity generation grows by 3.5% per year to2050 to meet that demand. Hydrogen and hydrogen-based fuels emerge assignificant end-use forms of energy, especially after 2030, being deployed mainly
in heavy industry and long-distance transport; their share of total final consumption
reaches nearly 10% in 2050. The share of bioenergy reaches around 15% in 2050.
Carbon capture, utilisation and storage (CCUS) plays an increasingly importantrole: CO2 capture grows from around 0.04 Gt in 2021 to 1.2 Gt in 2030 and 6.2 Gt
in 2050, with industry and fuel transformation sectors accounting for more than
40%, direct air capture (DAC) for around 5%, and power and heat generation for
the rest by then.

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The transformation of the global energy system described in the NZE Scenario
results in a rapid decline in energy sector CO2 emissions (energy‐related and fromindustrial processes), falling by about 30% by 2030 and by 95% by 2050 relative
to 2021. Residual emissions in 2050 from sectors where reducing them istechnically difficult and costly, such as aviation, shipping, road freight and heavy
industry, are entirely compensated by carbon removal from bioenergy with carbon
capture and storage, which removes CO2 from the atmosphere indirectly, anddirect air capture with storage, resulting in overall net zero emissions.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Global energy flows in the NZE Scenario

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2021

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

2050

IEA. CC BY 4.0.
Notes: Some electricity is used to generate hydrogen from water electrolysis, while some hydrogen (and hydrogen-based fuels such as ammonia) is in turn used for power generation in 2050.
Losses include fuel, heat and power distribution losses, as well as transformation process conversion losses and own use.

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Electricity becomes the largest energy vector in the NZE Scenario, with demand more than doubling between 2021 and 2050.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Announced pledges fall short of net zero, but still require major
shifts in the energy sector
Despite strong progress, current pledges by governments and companies asreflected in the Announced Pledges Scenario (APS) are not enough to put theworld on track to achieve net zero emissions by 2050. In 2050, energy-related CO2
emissions in the APS amount to about 11 Gt CO2. Nevertheless, achieving thosepledges will still require quick decarbonisation this decade. Emissions fall by about
15% over 2021-2030 in the APS (40% in the NZE Scenario), which calls for major
shifts in the energy sector.
In the APS, renewables overtake coal and account for over a fifth of total primaryenergy supply in 2030, while the share of fossil fuels drops from 80% today to 70%(Figure 1.4). Electrification accelerates – 25% of total final consumption in 2030 –and the carbon intensity of power simultaneously drops by about 40%. Growthdecorrelates from emissions, and the energy intensity of the global economy falls
by a quarter over 2021-2030. Clean energy technologies are deployed quickly: in
2030, sales of electric cars exceed 40 million (up from 10 million today), 320 GWthof heat pumps are installed (up from 100 GWth), and 30 Mt of low-emissionhydrogen are produced (up from less than one).
Total primary energy supply, electrification rates and energy intensity in
2030 in the APS and NZE Scenario

600
500
400

5%
12%
29%

6%

31%

100

23%

400
-39%

26%
21%

-64%

10%

200

20%
26%

0

21%

16%

APS
2021

Coal
Oil
Nuclear

20%

28%

300
200

​

8%

22%

600

NZE
2030

Natural gas
Renewables
Other

0%

APS
2021

NZE

0

2030

Electricity share of TFC (left)
Carbon intensity (right)

GJ per thousand USD (2021, PPP)

30%

700

Energy intensity

Electrificationg CO2/kWh

EJ

Total primary energy supply

3
​

-24%
-33%

2

1

0

APS
2021

NZE

2030

Energy intensity
IEA. CC BY 4.0.

Note: TFC = total final consumption; PPP = purchasing power parity. NZE = Net Zero Emissions by 2050 Scenario. APS =Announced Pledges Scenario. In the middle graph on electrification, carbon intensity labels (%) refer to the decrease inelectricity carbon intensity in APS and NZE in 2030 relative to 2021. In the right-hand side graph on energy intensity, labels(%) refer to the decrease in energy intensity in APS and NZE in 2030 relative to 2021.

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While current pledges as reflected in the APS fall short of net zero pathways, they stillrequire major transformation of the energy sector.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Massive deployment of clean energy technologies is needed
The decarbonisation of the energy system envisioned in the NZE Scenario restson eight main pillars: behavioural change and avoided demand, energy efficiency,hydrogen, electrification, bioenergy, wind and solar, CCUS, and other fuel shifts(e.g. switching from coal and oil to natural gas, nuclear, hydropower, geothermal,
concentrating solar power and marine energy). Behavioural change and energy
efficiency gains do not require fundamental changes to existing energy systems,
but the other pillars, which account for over 70% of total cumulative emissions
reductions over 2021-2050, require the massive deployment of new types ofequipment and infrastructure.
For the purpose of ETP-2023, we select key energy technologies and enabling
infrastructure across the major decarbonisation pillars from the NZE Scenario toassess and illustrate the implications for supply chains of the clean energy
transition (Figure 1.5). Taken together, they account for nearly 50% of total
cumulative emissions reductions over 2021-50. Some selected energy andtechnology supply chains are specific to a particular pillar, such as electric carsand heat pumps for electrification, fuel cell trucks for hydrogen, or solar PV andwind. Some are more cross-cutting in nature, such as low-emission hydrogen andlow-emission synthetic hydrocarbon fuels.
Global cumulative energy sector CO2 emissions reductions bydecarbonisation pillar and clean energy and technology supply chainsstudied in ETP-2023, 2021-2050

100%

80%

7%
4%
5%

Hydrogen

10%
10%

60%

Other fuel shifts

16%

Behaviour
CCUS

Supply chains
Decarbonisation pillars

Emissions reductions (%)

Cumulative emissions reductions
CCUS
Hydrogen

Lowemission
synthetic
hydrocarbon
fuels

Lowemissionhydrogen

Fuel cell
trucksBioenergy
Solar PVand windLow-emission electricity

Bioenergy
40%

17%Electrification

Heat pumps

Electric cars

Efficiency
20%

31%

Electrification
Solar PV and wind0%2021-2050

Efficiency
Behaviour
Other
fuel shifts

Technology supply chains
Energy supply chains

IEA. CC BY 4.0.
Notes: “Other fuel shifts” include other renewables, nuclear, and switching from coal and oil to natural gas. “Behaviour”
includes energy service demand changes from user decisions (e.g. changing heating temperature), as well as avoided
demand, which refers to energy service demand changes from technology developments (e.g. digitalisation). The
technologies featured in the right-hand side diagram are those selected for study in ETP-2023.

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Six clean energy and technology supply chains hold the potential to unlock around 50% of
cumulative emissions reductions to 2050 in the NZE Scenario.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

The scale and speed of the required deployment of clean energy technologies
needs to increase dramatically to meet the needs of the NZE Scenario(Figure 1.6). Global production of electric vehicles (EVs) (excluding two- andthree-wheelers) increases 15-fold to 2050, while the deployment of renewables
nearly quadruples. Low-emission synthetic hydrocarbon fuels (primarily jet
kerosene), production of which is minimal today as most technologies are still
under development, reach 2.4 billion litres in 2030 (more than the oil consumptionof domestic aviation in Japan in 2021) and over 105 billion litres by 2050
(equivalent to the total oil consumption of domestic and international aviation in
the United States and the European Union combined in 2021). Production of lowemission hydrogen from electrolysis or natural gas-based hydrogen with carbon
capture and storage (CCS) jumps from around 0.5 Mt in 2021 to 450 Mt in 2050 –equal in energy equivalent terms to about half of the world’s energy consumption
in the transport sector in 2021.
In many cases, available clean energy technologies on the market today are notyet competitive with existing fossil fuel-based ones, despite recent cost reductions.
The former are generally more capital-intensive, i.e. the upfront cost of purchasing
or installing them is higher per unit of capacity as they tend to involve more
extensive and costly inputs, though their running and maintenance costs are
typically lower. For some technologies, higher upfront costs are outweighed bysavings during use, though this varies by region. In general, costs in real terms
are expected to continue to decline over time as deployment increases and with
innovation.
EVs are a case in point. The price gap between electric and internal combustion
engine (ICE) cars has been shrinking, thanks mainly to major reductions in thecost of making batteries, helping to stimulate EV demand. Improvements inperformance and recent fuel price hikes are also boosting their attractiveness. Yet
electric cars remain more expensive and offer shorter driving ranges in mostcases. For a medium-sized car, a battery EV typically costs around USD 10 000(or roughly 40%) more than a conventional alternative (before taxes andsubsidies). The price premium is generally smaller in China, averaging about 10%,due to smaller vehicle size and greater competition among carmakers, while it has
been rising recently in Europe following large investments aimed at improving
vehicle performance.

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Heat pumps – a technology that efficiently provides heating and cooling tobuildings and industry – also have an upfront price premium when compared withfossil fuel heating equipment, though heat pumps pay back over their lifetime inmany regions today. The total cost of purchasing and installing a heat pumpranges from USD 1 500 to USD 10 000 for most homes, but varies substantiallydepending on the region and the type of unit installed (Figure 1.7). Installation can
add substantially to total cost; especially if the energy distribution system needs

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

to be upgraded to accommodate heat pumps (i.e. enlarging radiators or underfloor
exchangers), this can add cost. This matters substantially for more efficientground-source heat pumps, where installation can take up to several weeks andrequires drilling and underground piping, making their total cost much higher thanother options. Installation time and costs could decline as heat pumps become
more common, and offer greater opportunities than in manufacturing. The mostexpensive components in heat pumps (e.g. heat exchangers, compressors) havealready been mass manufactured for a long time, making further manufacturing
cost reductions more limited than for other clean energy technologies.
Global deployment of selected clean energy technologies in the NZE
Scenario

IEA. CC BY 4.0.
Notes: HF = hydrocarbon fuels

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The scale and speed of deployment of clean energy technologies and their associatedsupply chains accelerate dramatically in the NZE Scenario.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

60

6

40

4

20

2

0

Air-air split
HP

Air-air ducted
HP installation

Air-water

HybridDistribution system

Total

Ground-source

Weeks

Thousand USD (2021)

Heat pumps and heating distribution system market price and installation
time for a typical household by type of equipment, 2021

0

Installation time

IEA. CC BY 4.0.
Notes: HP = heat pumps. For ground-source heat pumps, the installation costs include drilling costs and undergroundpipes. HP installation cost includes labour and balance of plant. Distribution system costs include labour and materials. The
uncertainty line refers to installation time.

The market price of heat pumps significantly depends on installation costs, where thebiggest potential for lowering costs lies.

Many supply-side clean energy technologies also involve higher capital costs thantheir fossil fuel equivalents. The main exception is solar PV, which is alreadycheaper in most locations, not accounting for the additional costs associated with
its intermittency and variability. The capital cost of solar PV currently ranges from
USD 600 per kilowatt to USD 1 000/kW depending on the region, and up to
USD 1 800/kW including battery storage. By comparison, the cost of aconventional coal-fired power plant varies between USD 600/kW and
USD 2 100/kW depending on the efficiency of the plant and flue gas treatment aswell as the region. Equipping the plant with CCUS can push the cost up to between
USD 1 800/kW and USD 6 600/kW.

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Hydrogen capital costs are also very high. The cost of a conventional natural gas
reformer plant sits at USD 780 per kW of hydrogen output (USD 1 470 per kW ofhydrogen output if equipped with CCUS), while the capital cost for an installed
electrolyser ranges from USD 1 400 per kilowatt electrical (kWe) to
USE 1 770/kWe (USD 2 150-2 720 per kW of hydrogen output). Capital cost is an
important cost component for hydrogen production cost, especially in the case ofelectrolysers. Natural gas prices affect the economics of producing hydrogen fromnatural gas reforming, with or without CCUS, making the electrolysis a cheaper
production route when gas prices are high (see Chapter 2). At the prices of
USD 25 per million British thermal units to USD 45/MBtu that prevailed in Europe
during 2022, hydrogen production costs were USD 4.8/kg to USD 8.6/kg, almost
80% of which was due to the fuel cost. In the same region, hydrogen producedwith renewables can cost as low as USD 4/kg (IEA, 2022i).

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Getting to net zero is not possible without more innovation
Many of the clean energy technologies required to get to net zero by mid-century
are not available at scale today. While the emissions reductions to 2030 in the
NZE Scenario can be achieved with existing technologies, about half of theemissions reductions in 2050 come from technologies at prototype ordemonstration stages today. This includes key technologies, such as cement,
steel and aluminium production with CCUS; hydrogen-based steel making; andDAC.
Bringing new technologies and solutions to market takes time. Experience showsthat the innovation process usually takes 20 to 70 years from prototype tocommercialisation, with large-scale process technologies taking typically longer
than small modular technologies (Figure 1.8). The NZE Scenario requires ashortening of innovation cycles, which can be partially achieved by improving thecommercial advantage of clean energy technologies. There are several promisingprojects seeking to address pressing innovation gaps in a broad range oftechnology areas, but they need to progress quickly to play a major role in the next
three decades. Global co-operation and international knowledge transfer, as wellas tracking progress, such as in the ETP Clean Energy Technology Guide and the
IEA Clean Energy Demonstration Projects Database, will be vital in this regard(IEA, 2022h; IEA, 2022j).

Site tailored
Mass
mfg.

Historicalexamples Emerging technologies

Time frame for prototype to market introduction and early adoption for
selected clean energy technologies in the past and the NZE Scenario
CCUS in cement production
H₂ direct reduced iron
Iron ore electrolysis
Aluminium – inert anodeDirect air capture
Solid-state battery
Heavy-duty FC trucks
Iron – natural gas DRI
Wind power
Solar PV
Li-ion battery for EV

1940
Pre-2022
Historical – to market introduction

Prototype: 1909

1960

1980

Remaining time to market introduction
Historical – initial commercial uptake

2000

2020

2040

Initial commercial uptake

IEA. CC BY 4.0.
Notes: mfg. = manufacturing; DRI = direct reduced iron; H2 = hydrogen; FC = fuel cell; Li-ion = lithium-ion. Initialcommercial uptake is defined as the time until take-up in 1% of the market and market introduction as when the firstcommercial model is available on the market. Direct air capture is assumed to reach initial commercial scale at 1 Mt of CO2
per year and market introduction at 1% of the market. Historical figures are calculated for selected market-leading countries(Norway for Li-ion batteries; Germany for solar PV; Denmark for wind power; and the United States for natural gas DRI).
Sources: IEA analysis based on Gross et al. (2018); Worldsteel Association (2020); Comin & Hohjin (2004). Also see IEA(2020a).

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The time to bring emerging clean technologies to market is generally shorter in the NZE
Scenario than was the case for existing technologies.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Implications of net zero for supply chains
Expanding existing chains and setting up new ones
The transition to clean energy hinges on supply chains
Achieving net zero would have far-reaching implications for the supply chains ofboth clean energy and fossil fuels, with profound changes to the current energy
system. Existing supply chains would need to be expanded and modified, while
new ones for emerging technologies would need to be created. The clean energy
transition is already triggering shifts in global supply chains delivering energy
technologies, including mining, material production, technology manufacturing,energy transmission and distribution systems, and other enabling infrastructure. It
is helping to cut reliance on fossil fuels and the need to invest in their associatedsupply chains, but it is increasing the need to put in place new supply chains for
manufacturing clean energy technology equipment; produce and deliver clean
fuels; and expand, upgrade and develop new electricity transmission anddistribution systems that can handle flexibly changing loads and sources ofgeneration.
The energy transition is taking place in a context of globally interconnected supply
chains. Most existing technologies are produced and traded around the world.
Today, 70% of global trade is in intermediate parts, components and services, therest being finished goods and services (OECD, 2022a). Manufacturing is spread
across many countries, often based on where skills and materials are available atthe lowest cost. In many countries, a large share of domestic employment issustained by trade, ranging from about 10% in the United States to 20% in France
and 30% in Germany (OECD, 2022b).
In many emerging and developing economies that are less integrated into today’s
global energy supply chains, there is considerable potential for establishing newones that leapfrog fossil-based options. In those with a more established presence
in energy supply chains, opportunities are emerging for them to move quickly todevelop clean energy alternatives, on the condition that the market power ofincumbent suppliers does not constitute a barrier to investment and that incentives
for clean energy are high enough.

Critical minerals are changing the energy security paradigm

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Until recently, discussions about energy security were largely focused on the
supply of fossil fuels, particularly oil. The IEA itself was created in the wake of the
1973-1974 oil crisis. Half a century later, fossil fuels are once again at the heart ofan energy crisis, providing a stark reminder of the continuing importance of theEnergy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

security of supply of traditional fuels on the road to net zero. But energy security
in the future will be concerned increasingly with the reliability of clean energy
supply chains.
The raw materials, equipment and components involved in clean energy supply
chains differ markedly from those needed for fossil fuels. In particular, there is amuch greater reliance on a wide variety of critical minerals (Figure 1.9). They
include the rare earth elements (REEs) and other metals such as copper, nickel,
lithium, cobalt, manganese, graphite, silicon and platinum group elements. The
types of mineral resources needed vary by technology. Batteries make use oflithium, cobalt, manganese and nickel. The magnets in some wind turbines andelectric engines require REEs. Electricity networks and electric appliances,equipment and EVs require copper. Electrolysers and fuel cells require nickel orplatinum group metals, depending on the technology type.
The quantities of critical minerals and other raw materials needed for clean energy
technologies can be large. For example, making a 55 kWh battery and associatedsystems for a small electric car typically requires over 200 kg of critical minerals,
including copper, lithium, nickel, manganese, cobalt and graphite, compared withjust 35 kg of copper for the powertrain of a comparable ICE. Solar and wind also
generally require more steel, aluminium and, in some cases, cement per unit ofcapacity than fossil fuel-based generating technologies. For example, an onshore
wind plant requires nine times more mineral resources than a gas-fired plant withthe same capacity.
The deployment of clean energy technologies is already pushing up overall
demand for critical minerals. In aggregate, the use of critical minerals solely for
those technologies increased by around 20% between 2016 and 2021. In volume
terms, copper is the leading critical mineral, accounting for 70% of the total
consumption of critical minerals for clean energy in 2021, though the use of lithiumand cobalt has increased more in percentage terms since 2016. Demand forminerals in other industrial sectors has also increased in recent years (e.g. lithiumand cobalt for batteries in electronics, copper in cars and buildings, nickel inalloys), but it is growing much more quickly in the clean energy sector. While there
may be scope to reduce the amount of such minerals and other materials needed
through innovation, global demand for them is set to soar as clean energy
transitions accelerate.

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The increasing reliance on critical minerals is changing the traditional energy
security paradigm, which focused on fossil fuel supply, and particularly oil. Setting
up secure – that is, reliable and affordable – global supply chains for criticalminerals is crucial, not only to accelerate deployment of clean energy technologies
to meet net zero, but also to ensure that the future energy system in a net zeroworld is secure (also see Chapters 2 and 3).

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Global average raw material requirements for selected energy
technologies, 2021

IEA. CC BY 4.0.
Notes: PEM = polymer electrolyte membrane; gas-CCS H2 = natural gas-based hydrogen production with CCS; HV-DC =high-voltage direct current; AC = alternating current. “Other critical” includes zinc, tin, silver, lead, graphite, boron,
chromium and molybdenum. For infrastructure, only copper, steel and aluminium components are taken into account. The
steel in overhead transmissions includes the material needs for the conductor and the towers. For EV batteries, the current
mix of battery chemistry is used (see IEA [2022e] for more details). The mass of fuel such as oil, coal or uranium is notincluded.
Sources: IEA analysis based on IEA (2021b); IEA (2022e); IEA (2022k); Greening & Azapagic (2012); Saoud, Harajli, &Manneh (2021); Violante et al. (2022).

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The raw materials and equipment involved in clean energy supply chains differ markedly
from those for fossil fuels, with much greater reliance on a variety of “critical minerals”.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Near-term prospects
The world is not yet on track for secure, resilient andsustainable supply chains
It is far from certain that the global supply chains needed to support the
deployment of clean energy technologies projected in the NZE Scenario will beable to expand at the required rates. Moving quickly this decade is vital: any delaymeans that achieving net zero by mid-century will be out of reach or achievable
only at greater cost. This calls for an immediate acceleration in the pace of clean
energy deployment and the requisite expansion of their supply chains.
For the purposes of ETP-2023, we examine the current status and expansion
plans for a number of clean energy and technology supply chains, based on publicannouncements and industry data, to assess whether they are in line with the
trajectories of the NZE Scenario, in terms of the pace of scale-up required, andtheir level of security, resilience and sustainability. Three metrics are used:
Production capacity gap: We assess whether specific technologies or elements
in energy supply chains are on track to reach the required levels of deployment by
2030 in the NZE Scenario. For minerals extraction/mining and material production,
we rely primarily on third-party estimates of likely supply availability in the coming
years, which are based on projects that are under development/construction or at
the late planning stage and are expected to be online before the end of the decade.
For technology manufacturing, we rely on both third-party and in-houseassessments of announced future production capacity plans. 6 The supply gap –defined as the difference between what is required in the NZE Scenario by 2030
and what is currently announced, as a share of the former – is used as a proxy forthe additional efforts needed. We also calculate the investment needed to fill eachof these gaps.

•

Geographical and corporate concentration (see also Chapter 2 for further
analysis): The energy supply chains required in the NZE Scenario need to be
secure and resilient to ensure a smooth transition and functioning of global energy
systems. If a given step of the supply chain is heavily concentrated in one region
or among a small number of companies, the risk of a supply disruption is likely to
be greater. We assessed, therefore, whether announced investment plans imply amore concentrated or a more diverse supply chain for each of the maintechnologies.

•

Energy needs and CO2 emissions (see also Chapter 2): Not all steps of the
supply chains of clean energy technologies are compatible with net zero at present.
Mining extraction and processing, material production and technology

Based on announcements up to November 2022.

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6•

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

manufacturing currently give rise to large CO2 emissions. The expansion of these
supply chains would need to be accompanied by a drastic reduction in their CO2
footprint. We assess for each step the impact of scaling up production on global
energy demand and CO2 emissions.

The rest of this section provides an overview of the prospects to 2030 for eachstep of clean energy and technology supply chains based on the three metrics
described above. Chapters 3-5 delve more deeply into their implications andprovide more details for each step across different regions (Chapter 3 for mineral
extraction and material production; Chapter 4 for manufacturing and installation;
and Chapter 5 for infrastructure).

Supply gaps vary by technology and supply chain step
For the extraction of critical minerals, the gap between projected needs in the
NZE Scenario and expected supply in 2030 is above 25% for lithium and nickel,
and nearly 20% for copper (Figure 1.10). The gap, at 35%, is largest in percentage
terms for lithium, while the shortfall in supply in absolute terms, at 6 Mt, is largest
for copper. Overall, the extraction of critical minerals remains heavily concentrated
in resource-rich countries in 2030, with cobalt remaining the most concentrated.
For critical material production, the supply gap in 2030 is generally similar tothat for mining, with some exceptions. At 60%, the gap for nickel sulfate production
is much higher than for nickel mining, and the gap for cobalt processing as well,at 40%. In the case of bulk materials, demand does not increase significantly in
the NZE Scenario, in part thanks to measures to enhance material efficiency, andthe supply gap is close to zero as a result. The expected geographic concentrationof the production of critical materials by 2030 is just as high as for minerals mining,with China remaining the dominant producer. In the NZE Scenario, geographic
concentration of bulk material production decreases gradually, primarily due todecreasing volumes in China and increased output in India, Southeast Asia andAfrica. See Chapter 3 for further details on minerals and materials supply gaps
and how to overcome them.

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The picture for technology manufacturing is much more diverse. For a few clean
energy technologies, especially those related to solar PV, current announcements
concerning manufacturing capacity point to an increase in global capacity that ismore than sufficient to meet projected demand in 2030 in the NZE Scenario. For
EV battery manufacturing, the supply gap is relatively small. For both technology
groups, manufacturing remains highly concentrated in China. The supply gap issignificantly higher for electrolysers at about 50%, and up to over 60% for heatpumps and bioenergy with carbon capture (BECC). Expected production capacity
is more evenly distributed geographically for electrolysers and heat pumps, buthighly concentrated for BECC. See Chapter 4 for further details on technology
manufacturing supply gaps and how to overcome them.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Global supply gap with the NZE Scenario and geographic concentration
by stage and technology based on expansion announcements, 2030

IEA. CC BY 4.0.
Notes: The gap is defined as the difference between required production in the NZE Scenario and projected production
taking into account current production and announced expansion plans, expressed as a share of the former. The
regions/countries included in this analysis are Africa, Other Asia Pacific, China, Europe, Eurasia, North America, Central
and South America, and the Middle East. Gas-CCS H2 = natural gas-based hydrogen production with carbon capture andstorage. Synthetic HC fuels = low-emission synthetic hydrocarbon fuels.
Sources: IEA analysis based on company announcement. IEA (2021b); USGS (2022); S&P Global (2022a); S&P Global(2022b); S&P Global (2022c); S&P Global (2022d); EC (2020); Fraser et al. (2021); InfoLink (2022); BNEF (2022); BNEF
(2020). Also see the Annexes to this report.

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Current expansion announcements point to large production gaps for some clean energy
supply elements, notably lithium and nickel mining and processing.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

More investments are needed urgently to avoid bottlenecks
Bridging the production gaps described above would require enormous additional
investments in the coming years. The total cumulative investment in mining, criticalmaterial production and manufacturing of the clean energy technologies selectedin this report required to bring the necessary capacity online by 2030 amounts toaround USD 1.2 trillion, 7 in 2021 dollars (Figure 1.11). Investments associatedwith projects already announced reach around60% of this, with large gaps incritical mineral mining and for some technology manufacturing.
While mobilising such levels of investment is achievable, the timeline is extremely
tight, especially given the long lead times to bring production to market. Most of
the investment (including for projects already announced) needs to occur over2023-2025, implying an average of more than USD 270 billion per year over theperiod. To compare, this is about two-thirds of current annual capital spending of
the oil and gas industry, and nearly seven times higher than the average annual
investment seen in clean energy supply chains over 2016-2021.
Global investment in selected clean energy supply chains needed to bring
online enough capacity in 2030 in the NZE Scenario, by supply chain step
Average yearly CAPEX
Billion USD

Billion USD

150

Time available for final investment decision

Cumulative CAPEX

200

1 500

1 000

100
500

50

0

2016-2021

2023-2030

Copper mining

02023-2030

2023

Other Critical mineral mining

2024

2025

Critical mineral processing

2026

2027 2028 2029 2030
Final investment decision year
Clean technology manufacuring

IEA. CC BY 4.0.
Notes: CAPEX = capital expenditures. Only refers to the investments needed to bring online enough capacity in 2030 – notcounting what would be needed to further scale up in subsequent years – for the subset of clean energy technologies
selected in ETP-2023. Assuming construction times of five years for mining, three for processing plants and two fortechnology manufacturing. Investments are assumed uniform over the available period. Excludes site-tailored technology
installation.
Sources: IEA analysis based on company announcement; Bartholomeusz (2022); S&P Capital (2022).

Most of the supply chain investments needed to meet NZE Scenario targets in 2030 are
made over 2023-2025, at an annual average seven times higher than over 2016-2021.

This refers only to the investments needed to bring enough capacity online in 2030 for the technologies selected in
ETP-2023, excluding the investments that would also be needed by 2030 to further scale up deployment in subsequent years.

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7

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

For the mining of copper, lithium, nickel and cobalt alone, investment of around
USD 130 billion per year over 2023-2025 is required, which would be directed toany mining project already in the permitting pipeline. This is equivalent to the entire
metal mining industry investments of 2021 (S&P Global, 2022e), implying a doublingof overall investments in the sector in 2023. The copper mining market, which
accounts for over half of the required mining investments, may be in part balanced
through demand reduction in other sectors and recycling. For the refining of thoseminerals, announced projects cover about 80% of investment needs for copper, but
only over 40% for other metals. In terms of clean technology manufacturing
capacity, announced projects cover two-thirds of investment needs to 2030.
The overall investment needed in clean energy supply chains is much higher than
the investment required to develop those under study in ETP-2023 and bringsufficient capacity online by 2030. In total, investment in clean energy technologies
and infrastructure reaches over USD 4.5 trillion in 2030 in the NZE Scenario (IEA,
2022f). This scale of investment is unprecedented. Mobilising it across all regions,
technologies and supply chains is an enormous task. Bottlenecks can occur as aresult of policy and regulatory risks, a lack of confidence in demonstration and firstof-a-kind projects, uncertainty about project pipelines, wider macroeconomic factors
such as currency stability, and geopolitical events.
The risk of underinvestment in clean energy and supply bottlenecks is particularly
acute in the emerging economies. One hurdle to investment in those countries istheir higher cost of capital, which has a significant impact on the financial viability ofclean energy projects. For example, financing costs for material production projects
can be more than twice that in the advanced economies, due a greater perceptionof risk (Figure 1.12). Costs in China tend to be lower due to the importance of stateowned enterprises and their ability to raise cheap public finance.
Cost of capital for bulk material production industries by country/regionalgrouping, 2020
Iron & steel

Other emerging market anddeveloping economies
China

Chemicals

Advanced economies
Cement
0%

2%

4%

6%

8%

10%
IEA. CC BY 4.0.

Source: Adapted from IEA (2021c).

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Financing costs for bulk material production in the emerging economies can be more than
twice those in advanced economies, driven by a greater perception of risk.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Each step of the supply chain must be decarbonised
Each step of the supply chain of all types of clean energy and technology isdecarbonised in the NZE Scenario, their total associated CO2 emissions falling by
95% between 2021 and 2050. Manufacturing is almost completely decarbonisedby 2050, while there are some residual emissions in bulk material production andmineral processing (offset by negative emissions elsewhere in the energy
system). The decarbonisation pathways vary across sectors and supply chain
steps. They involve mainly electrification in mining and manufacturing, and the useof low-emission hydrogen and CCUS in material production.
Important progress is made in decarbonising the mining of critical minerals over
the rest of the current decade in the NZE Scenario. The current energy and CO2
emissions intensities of mining operations for critical minerals are higher than for
more commonly used minerals due to the lower concentration of the minerals in
the ores. With rising demand and declining ore grades, global CO2 emissions frommining critical minerals could double over 2021-2030 to 30 Mt (see Chapter 3).
Emissions from material production, which are currently the largest of all supply
chain steps, decrease quickly in the NZE Scenario, down 40% for cement and
25% for iron and steel over 2021-2030. Emissions from technology
manufacturing are typically smaller than other steps, and fall steadily mainly
thanks to electrification (see Chapter 2).

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Decarbonising supply chains would come at a cost, although the impact on final
consumers would, in most cases, be marginal. Producing low-emission bulk
materials, notably steel, cement and aluminium, results in significant additionalcosts compared with conventional production routes (Figure 1.13). Cost premiums
for low-emission alternatives today vary based on different technology options,with some claiming near cost equivalence (e.g. smelting reduction with CCUS),
while others are likely to command a significant premium (e.g. hydrogen direct
reduction). Cost estimates warrant further analysis as the first set of plants arebuilt over the 2020s.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Indicative levelised cost of production for selected bulk materials
USD per tonne

100%

1 000

150

2 500

800

120

2 000

Raw
materials

80%

Fuel

60%

600

90

1 500

40%

400

60

1 000

20%

200

30

500

Fixed
OPEX
CAPEX

0%

Conventional
steel

0

Conventional

Lowemission

Steel

0

Conventional

Lowemission

Cement0

Conventional

Lowemission

Aluminium

IEA. CC BY 4.0.
Notes: OPEX = operational expenditures. Levelised cost is a proxy for production costs, calculated as the average netpresent financial cost of producing a good, accounting for total costs and output over the lifetime of the factory or plant.
Estimated costs in a range of typical price contexts since 2019. On the left-hand side for steel, the cost breakdown is for aconventional blast furnace-basic oxygen furnace. The ranges on the right hand side represent different production routes.
Low-emission estimates are based on plants that have reached commercial scale.
Sources: IEA analysis based on IEA (2020b); MPP (2022).

Cost premiums of low-emission alternative routes for producing bulk materials varysignificantly by material and technology.

Although the cost of producing bulk materials using low-emission technologies isgenerally significantly higher than using conventional ones, the estimated impact
on final prices for clean energy products is typically small, as bulk material costs
represent a relatively small share of their total production cost. For example, a
50% increase in the cost of steel at 2021 prices would result in an increase of onlyaround 0.5% in the final average cost of an electric car, 0.2% for a residential heatpump, 1% for an offshore wind farm and 1.5% for utility-scale solar PV. Based on
2021 costs, fully decarbonising production for these bulk materials would push up
the cost of making an electric car by 0.7%, a heat pump less than 0.3%, an
offshore wind farm by 0.6%, utility-scale solar PV over 2% and a typical house by
1.4% (Figure 1.14).

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Manufacturers’ ability to pass on cost increases to consumers depends on themagnitude of the increase and on competition with conventional products. For
example, vehicle and home heating system markets are particularly competitive,
potentially making it more difficult for EV and heat pump manufacturers to pass on
cost increases. Producers of wind turbines and solar PV modules are currently
better placed to pass on higher costs thanks to surging wholesale power prices inmost regions. Nonetheless, some companies or consumers may be willing to pay
a premium for clean products. For example, at least ten companies in theautomotive sector have committed themselves to using “green steel” from 2025
(H2 Green Steel, 2022; SteelZero, 2022; First Movers Coalition, 2022).

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Increase in the global average prices of selected clean energy products
from switching to low-emission bulk material production
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Electric car
SteelHeat pump
CementAluminium

Offshorewind farm
Steel sensitivity

Cement sensitivity

Solar PV
Aluminium sensitivity

Typical house
Combined sensitivity

IEA. CC BY 4.0.
Notes: Based on 2021 costs of typical products: USD 36 000 for an electric car; USD 11 000 for a heat pump,
USD 2 860/kW for an offshore wind farm, USD 880/kW for solar PV and USD 300 000 for a single-family home. The
assumed cost premiums for low-emission materials are 10-50% for steel; 60-110% for cement and 10-50% for aluminium,
with these cost ranges informing the sensitivities for each material.
Sources: IEA analysis based on IEA (2020b); MPP (2022).

Decarbonising clean energy supply chains would come at a cost, although the impact onbuyers would, in most cases, be marginal.

Supply chain lead times and product durability
Building mines and factories and ramping up output takes time
The time needed to put in place and expand supply chains is a major constraint on
how quickly the clean energy transition can be achieved. The industries andinfrastructure that underpin the world’s existing energy supply chains took decades
to develop – fossil and clean technologies alike. Building a new factory, mine, roador pipeline takes time, as does expanding production from existing factories andfacilities. In addition to lead times – defined as the time that passes from when aproject is announced (i.e. a company states the intent to build a given facility) towhen the project begins commercial operation – there are production ramp-up
times: once a new production facility is established, some time is needed before themachinery is able to produce at its full nominal capacity.

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Lead times are important as they have an impact on the speed at which supply canreact to demand. The inability to expand supply quickly, especially when spare
production capacity is tight, can hinder the ability to meet a rapid increase indemand, such as that of solar PV and EVs. The result is bottlenecks in supply andhigher prices, as has been the case with semiconductors and EV supply chainssince 2020 (see Chapter 2) (IEA, 2022l). A failure to anticipate future demand
alongside barriers to investment could hinder global decarbonisation efforts andhold back progress towards a clean energy future.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

The longer the lead time for a given supply chain component, the greater the risk ofunderinvestment, co-ordination and sequencing issues with other steps of the
supply chain, and future bottlenecks in supply. If projects at a given step of the
supply chain are undertaken sequentially, long lead times increase the time
between the first and second generations of plants. If projects are carried out inparallel, long lead times may reduce the opportunity to learn from each other. Long
lead times also increase investment risk and, therefore, the cost of capital,
components and final products: investing in a project that is due to start generating
revenues within a year is inherently less risky and easier to finance than one startingto pay back in several years. Long lead times also imply greater exposure to
regulatory, political and market changes.
Some of the longest lead times in clean energy supply chains are in the upstream,i.e. mining of raw minerals (Figure 1.15). In some cases, the entire process can takemore than two decades. This comprises the time needed for exploration (to identify
an economically extractable resource) and construction (building the mine andstarting commercial operation). Exploration often takes a long time (usually morethan a decade) and does not always result in a development project. The fastest
mining operations have a lead time of under five years, but ramping up production
to full capacity typically takes almost as much time. For established mining
techniques, ramping up production can take up to three to four years. In cases
where more complex operations are involved, ramp-up times can be much longer.
For example, most high-pressure acid leaching nickel production projects inIndonesia have required five years to reach nominal production (IEA, 2021b).
Lead times for mining of selected minerals
Global average, 2010-2019
Discovery, exploration to feasibility

12.5

3

6

Ramp-up time

Feasibility to production

4.4

9

12

4.0

15

18

21 Years

Average observed lead time for selected minerals (from feasibility to production)

Lithium
NickelCopper2

4

6

8

10 Years

IEA. CC BY 4.0.
Note: Lead time averages are based on the top 35 mining projects that came online between 2010 and 2019.
Sources: IEA analysis based on S&P Global (2020); S&P Global (2019); Fraser et al. (2021); Heijlen et al. (2021).

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Exploration takes the most time in bringing new mines into operation, while construction
and ramping up production to full capacity typically take almost a decade.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

There are several reasons for these long lead times. Exploration and resource
appraisal carry substantial risk, making it difficult for mining companies to obtainfinancing from lenders. As a result, they often use their own cash flows to pay forinvestment. Financing mining operations can also be difficult, largely because of
uncertainty about future market demand and commodity prices – especially if supply
chains are nascent. The financial structure of mining projects is usually a highly
leveraged mix of debt and equity, with the goal of generating as much cash and as
little balance sheet profit as possible.
Mine engineering and construction also take time due to their large scale andcomplexity, as well as the need to make use of other infrastructure such as ports,
roads and power plants before operations can start. Large amounts of earth androck need to be displaced before reaching the ore-containing layers. Permitting is
also a very time-consuming step, primarily because of the importance of carryingout rigorous impact and environmental assessments and legal procedures, andensuring local community acceptance and equity. This is particularly true of heavily
contested projects such as those in areas with indigenous populations or ofsignificant environmental concern.
Material production projects generally take less time to complete than mining
projects, but can still take several years. Like other heavy industrial projects, time isneeded to procure the necessary machinery and to obtain the required
environmental permits to build and operate plants.
Commissioning manufacturing facilities for components used in making clean
energy products can take up to five years (Figure 1.16). In addition to theconstruction work, additional time is needed to hone the manufacturing process,which can take up to a year depending on the complexity of the process and thecompany’s experience. For example, building a completely new polysilicon factory
can take 12 to 42 months and ramping up production another 6 months, whilebuilding new production lines for wafers, cells and modules at existing factories cantake as little as 4 months, once the go-ahead has been given.

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Factories to assemble final clean energy technologies can generally be built
relatively quickly. For EVs, the excess production capacity of existing automotive
factories means that it is often sufficient to retool an existing factory to be able toramp up production in the near term. Vehicle assembly technology is mature andthere are a lot of machinery suppliers available, so raising capacity can be very
quick. Similarly, for PV module assembly, standard machinery is often used,
resulting in relatively short lead times. For both component manufacturing and final
assembly, ramp-up times can be similar to construction times. For example,
construction of Tesla’s first gigafactory in Nevada in the United States started in2014 and came online in 2017, but reached its nominal capacity of 35 GWh only in2021.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Building and expanding enabling infrastructure such as pipelines, CO2 storage
facilities and electricity grids also involve long lead times, in some cases over a
decade (Figure 1.16). These projects have similar characteristics to mining projects,
including their large scale, high capital requirements and vast land coverage,
sometimes across different jurisdictions. As a result, they face similar obstacles,
including permitting and approval processes, financing, and public acceptance.
Limited availability of specialist equipment and skills can also cause bottlenecks,
particularly for offshore projects.
Developing supply chains for emerging clean energy technologies as they become
available are unsurprisingly likely to take much longer than for existing ones. Manyof the technologies needed in the NZE Scenario, including DAC, low-emission
synthetic hydrocarbon fuels and some low-emission technologies in heavy industry,
are still at the prototype or demonstration stages today and are not yet commerciallyavailable at scale. They first need to be demonstrated in real operating conditions,probably requiring several “first-of-a-kind” facilities at different sizes or in different
regions, before they can be deployed successfully on a commercial scale. In
parallel, fully fledged supply chains would need to be established and expanded
progressively. Permitting is likely to take more time for plants that make use of novel
technologies.

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For small, modular or standardised technologies such as solar PV, batteries, heatpumps and fuel cells, lead times are generally much shorter than for large, more
complex or specialised technologies such as those used in biorefineries, BECC and
CCUS facilities, advanced nuclear reactors, and mines. This is especially true whentechnology designs depend on the specific use to which it is put and when it is linked
to existing facilities, such as retrofitting CCUS to an existing power plant, which canincrease the time needed for testing to make sure the impact on the operations of
the existing plant is minimised. For complex and novel technologies, shortages ofskilled labour can lengthen lead times and require extra planning. For example,
biorefinery shutdowns for upgrades can be planned together with other refineries in
the region to optimise the use of scarce labour.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Range of (top) and average (bottom) global lead times for selected clean
energy technology supply chains
Range of lead times for selected supply chain components
Material
production

Bulk materials
Critical materials

Fuel
cell
trucksElectricity
H2
H2
Synthetic
HC fuels

Installation - Commissioning(low-emission)

Solar PV cells and modules
Solar PV wafers
Wind
Heat pumps

EVbatteries

Manufacturing

Lowemission
electricity

Polysilicon

Mobile fuel cell
Truck
Anode and cathode
Electric car
Battery
Utility solar PV
Onshore wind
Offshore windElectrolyser
Natural gas-based hydrogen with CCS
Synthesis
BECC
DAC
0

2

4

6

8

10

Years

12

Site-tailoredtechnologies

Average lead times for selected supply chain components
Natural gas-based hydrogen with capture
Synthesis
BECC
DAC

InfrastructureHigh-voltage cables
High-voltage overhead line
LNG regasification terminal
CO₂ storage
Underground gas storage
Pipelines
2
Feasibility, engineering and permitting

4
6Construction

8
Total

10

12

IEA. CC BY 4.0.
Notes: Construction for CO2 storage often occurs during detailed engineering and ahead of permitting since wells areusually drilled during site characterisation to acquire the data needed for permitting. As a result, construction time has beencombined with feasibility, detailed engineering, and permitting. LNG = Liquefied natural gas.
Sources: IEA analysis based on company announcements; IEA (2021b); IEA (2022m); United Kingdom, Department for
Business, Energy & Industrial Strategy (2020); IEA (2022e).

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Some of the longest lead times in clean energy supply chains are in material productionand enabling infrastructure, such as power transmission or CO2 management.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Accelerating deployment calls for shorter lead times
Shorter lead times would help facilitate an acceleration in the deployment of clean
energy technologies. For minerals extraction, lead times to open new mines andexpand existing ones are reduced substantially in the NZE Scenario, including a
cut in permitting times to just one year – the minimum time required to prepare athorough environmental assessment and ensure adequate safeguards. In
addition, policy support, the prospect of long-term demand growth and highmineral prices can give more confidence to investors, shortening the period
needed to secure financing for mining projects.
There are several historical examples of the rapid deployment of newtechnologies, notably modular and mass-manufactured technologies, being
achieved by compressing lead times, which suggest that the rapid rates of
deployment of clean energy technologies in the NZE Scenario are achievable in asimilar way. For example, the urgent production of aircraft during World War II andthe recent launch of Covid-19 vaccine manufacturing involved compressing leadtimes drastically, in both cases to less than one year compared with several years
previously (Figure 1.17). Their success was due in part to relatively matureprocesses for developing the products and building factories, as well as the criticalcircumstances, which ensured massive demand directly from governments andenabled them to appropriate swathes of existing industrial capacity for emergency
retrofitting and reuse. For certain mass manufactured clean energy technologies
such as EVs, global deployment is still growing rapidly, approaching the rates
required in the NZE Scenario, implying that lead times should not be a cause of
supply bottlenecks.

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For technologies and projects with inherently longer lead times, such as mining
projects and nuclear power plants, there are also historic examples suggesting
industry could sustain fast growth rates. In the 2000s, iron ore mining grew at a
10% annual rate, an expansion which was mainly driven by surging demand in
China and a tenfold increase in iron ore prices between 2000 and 2010 (IMF,2022). In the NZE Scenario, lithium mining expands much more quickly at anannual rate of 25% over 2021-2030, after which growth slows down and peak
production is reached in 2040. Basic oxygen furnaces were deployed very quickly
in the 1960s at an average annual growth rate of over 35%. Once the technology
reaches commercial scale by the 2030s in the NZE Scenario, hydrogen-based
steel production grows on average by only 17% per year; however, getting the firstcommercial-scale plants in the late 2020s is the main challenge. For this tohappen, producers need a fundamental cost advantage and clear financial
incentive to lower lead times and encourage investment and innovation ascommercial deployment begins.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Progress to peak deployment (%)

Global scaling-up of selected energy and other supply chains by lead timein the past (solid) and the NZE Scenario (dashed)
Shorter lead times

100

Longer lead times

80

60

40

20

0

40

30

20

10

0

70

60

50

40

30

20

10

0

Time to peak deployment (years)

Time to peak deployment (years)
Covid vaccine production (2020-2021)

Lithium mining (2017-2040, dashed in NZE)
Iron ore production (1973-2011)
Steel - BOF capacity (1952-2024)
Steel - H2 DRI capacity (2023-2060, dashed in NZE)
French nuclear capacity (1970-2005)
US nuclear capacity (1970-2005)

US military aircraft production (1939-1944)
Solar PV manufacturing capacity (2000-2039, dashed in
NZE)

IEA. CC BY 4.0.
Notes: BOF = basic oxygen furnace steel making; H2 DRI = hydrogen direct reduction based steel making; NZE = Net Zero
Emissions by 2050 Scenario. Historic solar PV manufacturing capacity uses additions to world’s grids as a proxy for
manufacturing capacity. Data are global averages except for US military aircraft production and French and US nuclear
capacity. US nuclear capacity is plotted for the same time period as French nuclear capacity, though the historic peak was
in 2019, as US nuclear capacity saw little variation between 2005 and 2019.
Sources: IEA analysis based on USGS (2022); Comin & Hohjin (2004); Richter (2022).

Historic examples suggest that rapid deployment of clean energy by compressing leadtimes is technically possible, especially modular and mass-manufactured technologies.

Shortening lead times should not be taken for granted: there are several examplesof lead times for energy projects increasing, which serve as a cautionary tale. The
rapid slowdown in the rate of growth in nuclear power generation in France, fromaround 85 TWh per year over 1978-1986 to around 15 TWh per year over
1990-2005, was in part due to a substantial increase in lead times from about five
years in 1980 to ten years in 2000 (Berthélemy & Rangel, 2013).

Clean energy technologies need to be made more durable

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Differences in the durability of clean energy technologies relative to conventional
fossil fuel ones have important implications for both their competitiveness andsustainability. For example, the operational performance of renewables such as
solar PV and wind can drop after a decade, with most having a lifetime of around25-years. In contrast, coal- and gas-fired power plants can operate for 30 to
40 years or more, though intermittent large-scale refurbishment may be needed(Figure 1.18). Some ICE cars can be used for several decades, especially secondhand ones that are sold to emerging economies at low prices, while EV batteries

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

tend to degrade by up to 30% after 8 years and are typically retired within 15 years(UNECE, 2022). Technological advances are likely to improve battery durability,
such that EVs could ultimately match the durability of ICE vehicles as they arebased on simpler transmissions and powertrains. Regular maintenance and endof-life management play a considerable role in ensuring the sustainability of clean
technologies.
In some cases, clean energy technologies can already be more durable than theirmore carbon-intensive alternatives. One example is LED technologies for lighting,which last much longer than tungsten-filament light sources and compact
fluorescent lamps. Recycling and refurbishing obsolete equipment can greatly
reduce the energy and emissions intensity of clean technology supply chains.

Power production

Heating

Typical operating lifetime of selected energy technologies
Gas boiler
Biomass boiler
Heat substation
Solar thermal
Heat pumpGas
Coal
NuclearBiomass
Geothermal
Hydropower
CSP
Solar PV
Wind offshore
Wind onshore
0

10

20
Lifetime

30

40

50

Construction time

60
Year

IEA. CC BY 4.0.
Notes: CSP = concentrating solar power. Biomass in power production refers to dedicated biomass; biomass in heatingrefers to modern biomass. Heat pumps in this example are air-to-water units. Heat substation refers to heat exchangers(district heating).
Source: IEA analysis based on Schlömer et al. (2014).

Some clean energy technologies are less durable than existing fossil fuel ones, increasing
the need for recycling and refurbishing obsolete equipment to limit environmental effects.

Employment along clean energy supply chains
Clean energy employment today

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Labour markets worldwide have experienced major upheavals since the start of
the Covid-19 pandemic, due to the economic disruption caused by restrictions on
the movement of people and commercial activity. Energy sector employment has
not been immune from these shocks and has also been affected by the recent
energy crisis in the wake of Russia’s invasion of Ukraine. While higher energy

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

prices have, in many cases, boosted the demand for workers in the oil, gas andcoal industries, the growing attractiveness of clean energy technologies and theirincreasing deployment is pushing up demand for workers in those sectors as well.
Stronger policy responses to the climate and energy crises are expected tocontinue to drive a shift in employment away from the fossil energy industries toclean energy sectors in the coming years and decades. Overall energy sector
employment is set to grow steadily through 2030 as demand for energy services
continues to expand and supply shifts to more labour-intensive activities(Figure 1.19).

Million employees

Global energy sector employment by technology
80

100%

60

75%

40

50%

20

25%

0

2019

2020E

2021E

2022E

Fossil fuels

Clean energy

Share of energy
employment related toclean energy0%

IEA. CC BY 4.0.
Note: Clean energy employment includes workers in bioenergy supply (including farmers), nuclear and renewables for
power generation, grids and storage, EV manufacturing, and energy efficiency (such as building retrofits, heat pump
manufacturing, and ventilation and air-conditioning installations). Labour market disruptions associated with the Covid-19
pandemic made 2020 employment difficult to assess, so 2020 estimates are indicative. Estimates for 2020-2022 aremodelled based on latest IEA energy balances and investment data, under the assumption that labour intensity and the job
creation potential of new investment remain constant across years; for more details please refer to the World Energy
Employment report methodology.
Sources: IEA analysis based on IEA (2022n).

The total number of jobs in clean energy supply and use, and their share of total energy
employment, has grown in recent years despite the Covid-19 pandemic.

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Over 65 million people are employed worldwide in the energy sector, including
direct jobs in energy supply industries as well as indirect jobs in manufacturing
essential components of energy technologies such as the manufacturing ofvehicles or heat pumps (Figure 1.19). Around two-thirds of energy workers areengaged in the development of new projects or equipment, while the other third
are involved in operating or maintaining existing assets. Energy workers are
spread across economic sectors: over 14 million employees work at utilities andfirms providing professional services, approximately 22 million in manufacturing ofequipment, 16 million in construction of energy facilities, 9 million in the raw
materials sector, and 9 million in related activities such as wholesale trade andenergy transport.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Overall energy employment is concentrated in countries with major manufacturinghubs 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 (Figure 1.20). 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 (Figure 1.21). There are roughly thesame 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.

Million employees

Energy employment by region and supply chain step, 201925

Rest of world

25

Wholesaleand transport

Other Asia Pacific
India

20

Professional
and utilities

20

China

Construction

Africa15

15

EuropeManufacturing

C and S America
North America

10

5

0

Raw materials

10

5

0

Fuel supply Power sector End uses

Fuel supply Power sector End uses

IEA. CC BY 4.0.
Notes: C and S America = Central and South America. Value chain steps and economic sectors for employment arealigned with International Standard Industrial Classification (ISIC) rev.4 (a standard classification of economic activities).
“Raw materials” includes agriculture (ISIC code A) for bioenergy production, as well as mining and quarrying (ISIC code B)
for fossil fuels (excludes critical minerals mining). “Manufacturing” (ISIC code C) includes both traditional manufacturingand material processing such as the manufacture of refined petroleum products. “Construction” (ISIC code F) indicatesinstallation, while “Professionals and utilities” encompasses the supply of electricity, gas, steam and air conditioning (ISIC
code D), as well as professional, scientific and technical activities (ISIC code M). "Wholesale and transport” refers towholesale and retail trade (ISIC code G), and transportation and storage (ISIC code H). End uses refers to jobs in vehicles
manufacturing (including related batteries), energy efficiency for industry, and buildings (retrofits and efficient heating andcooling).
Sources: IEA analysis based on IEA (2022n).

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The manufacturing and construction of new projects dominates energy employment today.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Energy employment in selected sectors by region, 2019
3.4

Solar PV

3.0

Wind

1.2

ICEs

12.3

EVs

1.3

Heat pumps

0.4

0%North America
China

20%

40%

C and S America
India

60%
EuropeOther Asia Pacific

80%

Million employees

Fossil fuel PG

100%
AfricaRest of world
IEA. CC BY 4.0.

Notes: Fossil fuel PG = fossil fuel power generation. EV employment includes manufacturing of EV batteries and otherrelated components.
Sources: IEA analysis based on IEA (2022n).

Low-emission energy technology sectors already employ large numbers of workers,
though their share of total energy employment varies markedly across regions.

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 andextent 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 bywhite-collar jobs (Nulimaimaiti, 2022). The Ministry of Education has estimatedthat there will be a shortage of almost 30 million workers in China’s manufacturingsector by 2025, including talent gaps of over 9 million in power equipment, over1 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 andconstruction workers, is already restricting the pace of installations of clean energy
technologies in Europe and the United States, including solar PV, wind turbinesand heat pumps (McGrath, 2021; SEIA, 2021b; Weise, 2022; Hovnanian, Luby &Peloquin, 2022).

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Some fast-growing clean energy sectors are also facing a shortage of the requisite
skills needed to scale up output. In the wind sector, insufficient training capacityand differences in certification requirements across countries are contributing toEnergy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

bottlenecks in new installations. The Global Wind Organisation and the Global
Wind Energy Council estimate that 480 000 trained workers will be needed tobuild, install and operate the wind capacity that is planned to come online between
2021 and 2025, but only 150 000 workers had been able to be trained by the endof 2021 (GWO and GWEC, 2021). Offshore wind projects require better trained
workers and more labour input per megawatt than onshore projects over their
lifetime. There are growing concerns that shortages of trained personnel in theoffshore wind sector could delay installations in the coming years (GWEC, 2021).
In the EV sector, skills shortages are already emerging in both production andmaintenance. Battery producers are struggling to hire enough research andengineering specialists (Heekyong Yang, 2021), while vehicle technicians andmechanics are unprepared for the impending expansion of EV fleets as ICE bans
and EV target deadlines approach (Automotive Management, 2021). Several
countries with major hydrogen ambitions, including Canada and the Netherlands,
are facing difficulties in finding qualified personnel (Hufnagel-Smith, 2022; CE
Delft, 2021). In addition, heat pump manufacturers have flagged a lack of trainedlabour to install new units as a potential bottleneck for wider deployment.

Millions of jobs will need filling to realise energy transitions
The clean energy transition will involve a massive change in energy sector
employment, with many jobs set to be lost in traditional activities in producing andsupplying fossil fuels, but many more created in clean energy sectors, including intheir supply chains. Filling those new jobs will be key to avoiding bottlenecks andspeeding up transitions around the world.

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Global energy sector employment grows from around 65 million today to almost
90 million in 2030 in the NZE Scenario. Nearly all of the new jobs are in clean
energy sectors. Employment in oil, gas and coal fuel supply and at power plantsthat are not equipped with carbon capture facilities declines by around 8.5 million
to 13 million over the same period (Figure 1.22). The deployment of clean
technologies in the NZE Scenario implies a need to recruit a large number ofworkers in those sectors. For example, jobs in wind and solar PV increase byalmost 10% per year on average over 2021-2030 as capacity additions continue
to grow. With the share of EVs in total car sales reaching over 60% in 2030, more
people work in manufacturing EVs, including their batteries, than in making ICE
vehicles.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Million employees

Global energy sector employment by technology in the NZE Scenario
40

End-use efficiency
Vehicles: EVs and batteries
Vehicles: ICEs

30

Power grids and storage
Other power generation
Wind

20

Solar PV
Fossil fuel power: unabated
Low-emission fuels

10

Oil and gas
Coal
Critical minerals mining
2019

2030

Fuel supply

2019

2030

Power sector

2019

2030

End uses
IEA. CC BY 4.0.

Note: End-use efficiency employment refers to employment in efficiency improvements for buildings and industry; for moredetails please refer to the World Energy Employment report methodology.
Sources: IEA analysis based on IEA (2022n).

Clean energy sector employment soars in the NZE, from 32 million in 2019 to 70 million in
2030, more than offsetting the loss of 8.5 million jobs in fossil fuel and related industries.

More skilled workers are needed in the clean energy sector

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Overall, the energy sector employs more highly skilled workers than otherindustries, with 45% of the workforce requiring some degree of tertiary education,from university degrees to vocational certifications, compared with the economywide average of 24% (Figure 1.23). Many energy firms are already facing a very
competitive environment for hiring candidates with the needed skill sets,
particularly for positions in the field of science, technology, engineering andmathematics (STEM), followed by project managers and other technical roles(IEA, 2022n). The biggest hiring gaps globally at present are in project
management and information technology (IT) (Global Energy Talent Index, 2022).
The continuing shift in employment to clean energy jobs could exacerbate theseskill shortages.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

Global employment by skill level, 2019
Economy-wide employment

24%

Energy employment

​ 5%

16%
Low
Medium
High

​ 45%
​ 50%

60%

IEA. CC BY 4.0.
Note: High skill level refers to ISCO-08 skill levels 3 and 4, medium to ISCO-08 skill level 2 and low to ISCO-08 skill level 1.
Sources: IEA analysis based on IEA (2022n); International Labour Organization (2022).

The energy sector demands more highly skilled workers than other industries, with 45% of
the workforce having some form of tertiary education.

The specific skills required in the supply of clean energy and the current labour
shortages vary considerably according to the type of technology. In the power
sector, safety experts, construction managers, cybersecurity professionals andsoftware developers, as well as skilled middle-management project engineers, arealready difficult to recruit (Naschert, 2022). The broader dearth of construction
workers and tradespeople is starting to limit solar and wind power capacity
additions in some locations. There is also a widespread shortage of electricians
who require multi-year training (SEIA, 2021a). In the case of renewables, around
two-thirds of solar PV and onshore wind jobs require minimal formal training,whereas 30% of jobs require STEM degrees and 5% of jobs are for highly qualified
non-STEM professionals such as lawyers and regulation experts (IRENA, 2021).
In power grids, increased digitalisation of networks is boosting the need for IT
skills. The biggest skills shortages today in renewables are in construction andengineering; followed by planning, organising and scheduling; project
development; and on-site construction and fabrication (Global Energy TalentIndex, 2022). In hydrogen production, there is strong demand for engineeringskills, as well as those in designing, operating and maintaining hydrogen
infrastructure and vehicles.

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Skills shortages are less of a constraint to expanding capacity in some other areas.
In the case of EVs, many manufacturing-related skills can generally be transferredfrom ICEs. In addition, EVs tend to have fewer components than ICEs, simplifying
the assembly process. However, for the maintenance and repair of EVs, more

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

mechanics will need to receive electrical training to handle high-voltage batteries(Institute of the Motor Industry, 2021). EV battery producers have also been facing
shortages in research and development (Heekyong Yang, 2021).
Some fossil fuel workers have skills that can be transferred to clean energy
sectors, which will help alleviate shortages and provide them with newopportunities. For example, coal miners have skills that can be used in mining
critical minerals. Based on new geospatial analysis carried out by the IEA, anestimated 40% of coal workers worldwide are employed within 200 km of a criticalmineral reserve. Nonetheless, opportunities for shifting mining and related jobs
will be limited, especially as the volumes of critical minerals needing to be minedis small when compared with the volume of coal mined today.

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It may also be possible to transfer some marine-based technical skills from theoffshore oil and gas industry to the offshore wind sector, including hydrodynamics,
shipping operations and the application of health and safety rules (C&S Partners,2021). Oil and gas engineering skills are highly applicable to CCUS andgeothermal including seismic interpretation, drilling and well completions,reservoir mapping, and flow assurance. The Integrated People and Skills Strategyof the United Kingdom’s North Sea Transition Deal estimates that 90% of theexisting UK oil and gas workforce have medium to high skills transferability, withover half of the existing oil and gas workforce open to considering a move into
offshore wind or renewables generally (Energy Skills Alliance, 2022). Chemicalengineers in refineries have skills that are useful in the production of biofuels andhydrogen and raw materials extraction.

Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

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Chapter 1. Energy supply chains in transition

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Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

India, MCI (2021b), Status of Production-Linked Incentive Schemes,
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Energy Technology Perspectives 2023

Chapter 1. Energy supply chains in transition

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Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Chapter 2. Mapping out clean
energy supply chains
Highlights• The production of critical minerals is highly concentrated geographically, raisingconcerns about security of supplies. The Democratic Republic of Congo supplies
70% of cobalt today; China 60% of rare earth elements (REEs); and Indonesia
40% of nickel. Australia accounts for 55% of lithium mining and Chile for 25%.
Processing of these minerals is also highly concentrated, with China being
responsible for the refining of 90% of REEs and 60-70% of lithium and cobalt.
China also dominates bulk material supply, accounting for around half of global
crude steel, cement and aluminium output, though most is used domestically.
• China is the leading global supplier of clean energy technologies today and a net
exporter for many of them. China holds at least 60% of the world’s manufacturing
capacity for most mass-manufactured technologies (e.g. solar PV, wind systems
and batteries), and 40% of electrolyser manufacturing. Europe is generally a net
importer, with the exception of wind turbine components; about one-quarter ofelectric cars and batteries, and nearly all solar PV modules and fuel cells areimported, mostly from China. For solar PV, China supplies equipment directly to
all markets except North America. The United States imports two-thirds of its PV
modules, primarily from Southeast Asia, where Chinese companies have been
actively investing.
• Recent supply chain disruptions resulting from the Covid-19 pandemic andRussia’s invasion of Ukraine, combined with rapidly growing demand, havedramatically increased the cost of materials and energy. The average price oflithium was nearly four times higher in 2022 than in 2019, and twice for cobalt
and nickel. Batterymetal price hikes in early 2022 led to increasing battery prices– up nearly 10% globally relative to 2021 – after years of continuous decline. The
price of solar PV-grade polysilicon, copper and steel all roughly doubled between
the first half of 2020 and that of 2022. These increases contributed to pushing up
the price of PV modules rising by 25% and that of wind turbines outside China
rising by up to 20%.

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• Clean energy technologies have far lower life-cycle CO2 intensities than theirfossil counterparts, but their supply chains are still an important source of CO2
emissions and other pollutants. Material production and technology
manufacturing typically account for over 90% of the emissions for the clean
energy technology supply chains analysed. Reducing emissions from these steps
is challenging, given the current lack of commercially available low-emission
technologies in many cases, but an important undertaking in the transition to net
zero emissions.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Assessing vulnerabilities in supply chains
Understanding the functioning of clean energy supply chains today and theirvulnerabilities is crucial to lay the foundations for expanding them as the clean
energy transition advances (Table 2.1). The goal must be to ensure that both
energy and technology supply chains are secure, resilient and sustainable. This
chapter assesses those vulnerabilities in detail for selected clean energy supply
chains, focusing on the link between geographic concentration and security,
resilience to market shocks, and environmental performance.
The clean energy transition is affecting the nature of energy security, which
depends on adequate and timely investments to ensure supply stays in line withdemand. The move to clean energy is shifting the focus from fossil fuels to criticalminerals, though the former will remain important to energy security during thetransition, especially at its early stages. Compared with fossil fuel supply, thesupply chains for clean energy technologies today are generally moregeographically concentrated. Global supply chains are not always more
vulnerable than domestic ones and may be necessary due to a lack of
economically viable domestic resources for individual steps of supply chains.
However, some external sources of key materials and components may beconsidered insecure. This is a particular concern if a large share of supply comesfrom countries subject to acute geopolitical risks due to conflict, social instability,
unfair trade practices or human rights issues. The global energy crisis has
reinforced this concern. In the longer term, as countries approach net zero
emissions, demand for primary inputs to clean energy supply chains should start
to decline, as new capacity is required mainly to meet new energy demand rather
than also replace existing fossil fuel incumbent technologies.
Building resilience to disruptions along supply chains is vital to mitigating
emerging problems for energy systems. Most low-emission technologies rely on
domestic energy resources, such as sunshine and wind, but the equipment, criticalminerals, materials and components needed to exploit those and produce enduse equipment often rely on global supply chains. An oil supply crisis, when it
happens, has broad repercussions across the economy. The supply of electricity,which is set to play an increasingly important role in meeting energy needs, lowemission hydrogen and derivative fuels (including ammonia), andbioenergy/biofuels will face similar threats in the future. A shortage or spike in theprice of a raw material or component required for producing key clean energy
technologies such as batteries, solar panels or electrolysers will affect theiravailability, which could lead to delays in decarbonising the energy system andincreasing the overall costs of the energy transition.

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The goal of sustainability concerns energy technology supply chains as well as
the supply of energy itself. The use of clean energy technologies may involve

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Chapter 2. Mapping out clean energy supply chains

fewer emissions, but their supply chains may result in significant emissions andother environmental impacts. Today, emissions from clean energy supply chainscome mainly from bulk materials production. Reducing them will be tough, since
many of the technologies required to do so are not yet commercially available.
Mining and technology manufacturing are also responsible for a significant shareof emissions, but reducing them should be easier since there is greater scope forswitching to electricity. In any case, the emissions from supply chains and otherenvironmental impacts should not be a reason to stall the rapid roll-out of clean
technologies in the near term, since in most cases supply chain emissions are
dwarfed by those that are saved as a result of their use.
Supply chains need to meet the needs of a net zero energy system whilethemselves being compatible with it, and be able to absorb, accommodate andrecover from both short-term shocks and long-term changes, including material
shortages, climate change, natural disasters and other potential supply
disruptions. The goal should be to achieve this while maintaining a commitment to
the principles of open and transparent markets. Self-sufficiency is not always an
option – particularly for some elements of the supply chain that are bound to theavailability of certain natural resources that are geographically concentrated – nornecessarily an economically optimal approach. A combination of open markets
within the rules of the World Trade Organization, strategic partnerships anddiversity of supply sources will, in many cases, be a better approach (seeChapter 6).
Characteristics of secure, resilient and sustainable clean energy
technology supply chains
Objective
SecureCharacteristics
Adequate, reliable and uninterrupted supply of inputs.
Diversity in market, suppliers and technologies.
Able to respond and quickly adjust to sudden market shocks on prices ordemand.

Resilient

Stable and affordable prices.
Effective interconnection with other supply chains that can deliver anequivalent technology or service.
Greenhouse gas emissions as low as possible and consistent with climate
objectives.

Efficient and responsible use of natural resources, including throughpromotion of material efficiency and end-of-life stewardship.

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Sustainable

True supply chain transparency and impact assessments (e.g. air and waterpollution, biosphere protection) with strengthening environmental, social andgovernance measures (ESG) along the entire supply chain.

Energy Technology Perspectives 2023

Box 2.1

Chapter 2. Mapping out clean energy supply chains

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. withoutthem, 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 (Figure 2.1).
Interconnections between selected energy and technology supply
chainsIEA. CC BY 4.0.
Notes: DAC = direct air capture. BECC = bioenergy with carbon capture.

The use of cross-cutting technologies can also expose the clean energy system andsupply chains to new vulnerabilities. These technologies are typically deployed indifferent sectors and supply chain steps, hence have broad impacts in case of
disruption. For example, carbon capture, utilisation and storage (CCUS) cancontribute 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 CO2transport and storage infrastructure could have an impact on clean energy supply
across several sectors.

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It is crucial that industry and policy makers assess these vulnerabilities at the systemlevel 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.

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Chapter 2. Mapping out clean energy supply chains

Geographic diversity and energy security
Extraction of critical minerals
The shift from fossil energy to less emissions-intensive technologies and fuels will
fundamentally change global energy supply chains, including the types of natural
resources needed. In particular, clean technologies depend much more on criticalminerals. While the world’s resources of these minerals are very large and unlikely
to constrain supply in the long term, production and processing operations formany of them are highly concentrated in a small number of countries at present,
making supplies vulnerable to political instability, geopolitical risks and export
restrictions. In general, the supply of critical minerals is more geographicallyconcentrated than that of oil, gas and coal.
Regional shares of global fossil fuel and uranium production andresources, 2021

IEA. CC BY 4.0.
Notes: CSA = Central and South America. Uranium resources are identified uranium resources assuming an international
market price of USD 130/kg. Fossil fuel resources consider the remaining technically recoverable resources.
Sources: IEA analysis based on IEA data; WISE Uranium Project (2020).

Fossil fuel production today is concentrated in North America, the Middle East and China.

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The countries that dominate minerals production today are generally very different
to the leading producers of fossil fuels (Figure 2.2, Figure 2.3). The United States
is currently the world’s biggest producer of both oil and gas, but features
prominently only in silver, copper and rare earth elements (REEs) mining.
Although the People’s Republic of China (hereafter, “China”) is the world’s leading
producer of coal, it has relatively small resources of oil and gas. Yet it dominates
production of REEs, accounting for 60% of global output, and is also a big

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainsproducer of iron ore, lithium and copper. While several countries in the Middle East
are major oil and gas producers, they produce very few critical minerals. The
mining of those minerals is concentrated in Africa, South America, Australia andIndonesia, while their processing is concentrated in China.

Cobalt Nickel Copper Lithium

REE

Silver

PGM

Mn

Steel

Al

Global reserves and extraction of selected resources by region, 2021
Reserves

32 Gt

Mining390 MtReserves

85 Gt

Mining

1 600 Mt

Reserves

1 500 Mt

Mining20 Mt

Reserves

70 Mt

Mining380 tReserves

530 ktMining24 kt

Reserves

120 GtMining

280 ktReserves

22 Mt

Mining100 ktReserves

880 MtMining21 Mt

Reserves

95 Mt

Mining3 Mt

Reserves

7 600 kt

Mining

153 kt

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Other Asia Pacific

Europe

CSA

North America

Eurasia

Middle East

AfricaChina

Unspecified

Share largest region

IEA. CC BY 4.0.
Notes: Al = aluminium; Mn = manganese; PGM = platinum group metals; REE = rare earth elements; CSA = Central andSouth America. PGM mining includes only platinum and iridium. Reserves data are uncertain as companies and countries
do not always disclose their full reserves.
Sources: IEA analysis based on USGS (2022); S&P Global (2022a).

Leading countries in minerals extraction today are very different from fossil fuel producers,
with mining concentrated in Africa, South America and Asia Pacific.

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The degree of geographic concentration of critical minerals today varies
significantly. For lithium, cobalt and REEs, the top three producing nations control
three-quarters or more of global output. South Africa supplies more than 70% of
the world’s platinum needs for all uses – one of the highest concentrations of any
mineral. Mining of ores of cobalt, which is a vital component of lithium-ion (Li-ion)batteries and superalloys used in turbines, nuclear reactors and sensors, is also
highly concentrated, with the Democratic Republic of Congo holding 70% of global

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainsproduction, although the majority of those mines are owned by Chinese firms.
Mining companies pay back the government with royalties at rates that are 4-8%
of mining revenues. There are serious claims that corruption and other factors
deprive communities of such benefits (Eurometaux, 2022). For lithium, Australia
accounts for 55% of mining and Chile over 25%. Output of copper ores is the least
concentrated of all the main critical minerals, with the three leading producers –Chile, Peru and China – accounting for less than half of global supply. Market
concentration is also high. For instance, the top five lithium producing companies
controlled almost 80% of global mining capacity in 2021 (BNEF, 2021a).
Proven reserves for most critical minerals are more geographically widespreadthan current production. 8 This suggests that there is considerable scope forincreasing the diversity of the sources of these minerals and reducing
over-reliance on a small number of major producers. For REEs, the distribution ofreserves is very different to that of current mining, implying that many countries
have considerable potential to boost output. Political, economic and environmental
factors affect the extent to which each region may be willing to exploit its
resources. For example, while Chinese reserves of REEs account for less than
40% of global reserves, about 60% of global REE extraction takes place in China,
illustrating the government’s strong support for critical mineral production.

Box 2.2

The different steps of metal production

Producing metals involves many steps and processes that cut across different
elements of supply chains to convert the raw material, such as a metallic ore (acompound containing the metal), to a final form in which the metal can be used as
an input to manufacturing. The principal steps are as follows:

Exploration and mining of the ore, including the removal of soil and rock togain access to it. Most ores are extracted form open-cast or undergroundmines, but a few metals, such as magnesium, are partly extracted fromseawater using electrolysis (passing an electric current through a water
solution of the compound). The energy intensity of this step is affected by the
stripping ratio (of waste rock to ore) and the grade of ore. In this report, thisstep is simply referred to as mining.

Transportation of the ore after crushing to a mill or processing plant, usually inbulk or in large bags.



Purification of the ore, involving the separation of the metal from various
impurities contained in the ore (usually through a combination of sieving andReserves are defined as known resources and quantified deposits that can be economically extracted. Reserves are smaller
than resources, which are the amount of both discovered and suspected undiscovered deposits. Geological discoveries andchanges in technology and market prices can affect what are considered reserves.

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8

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

flotation methods using water and chemicals). Low ore grade minerals require
more purification steps, resulting in higher energy and emissions intensities.


Storage of tailings – leftover materials from the processing of mined ore –usually in the form of slurry in water-filled pools known as tailings dams toprevent tailing powder from blowing away and polluting the area surrounding
the mine (see Box 2.6).

Reduction of the ore (the conversion of the ore from its oxidised state to its
pure form) through smelting to produce metals that can be used in
manufacturing. For example, iron is currently mostly reduced by reacting ironoxide with carbon and carbon monoxide in a blast furnace. In this report,
refining and reduction steps are simply referred to as materials production.

Critical and bulk materials production
Processing of critical minerals is more concentrated thanreserves
After minerals are extracted from the ground, they first need to be processed andrefined to reach the required level of purity for use. For example, EV battery
manufacturing requires nickel sulfate, which can be produced from nickel sulfides
and hydroxides or can be derived from refined nickel, which itself is produced
through a purification of raw nickel ore (Le Gleuher, 2022). These steps involve
advanced physical and chemical treatment techniques, which can be highly
energy-, capital- and skills-intensive.

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The degree of geographical concentration of critical materials production is evengreater than that of minerals extraction (Figure 2.4). China dominates processingof several of them: it holds a share of around 30% of global processing for nickel(the figure is higher if the involvement of Chinese companies in Indonesian
operations is included), 60-70% for lithium and cobalt, and as high as 90% for
REEs (to convert them into oxides, metals and magnets). No other country
controls more than a fifth of critical materials production, with the exception ofChile, which processes almost one-third of the world’s lithium, and Indonesia,
which does the same for nickel. China has built integrated supply chains frommining and processing of some critical minerals to manufacturing. This is the casefor permanent magnets, which are used in wind turbines and EVs and arecomposed to a large extent of neodymium, an REE. In other cases, China imports
ores and concentrates produced elsewhere for local processing and integration
into domestic supply chains. For example, lithium is typically imported from
Australia, refined and subsequently integrated into EV batteries for vehicles madedomestically.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Some countries have increased their processing of critical minerals in line withextraction. This is the case with nickel in Indonesia, the mining and processing of
which has increased significantly over the last decade in line with rising EV battery
demand. The country was the world’s largest nickel miner in 2021 at nearly 40%
of global output, having boosted extraction capacity twofold since 2012, andaccounted for about 30% of global refined nickel production, up from just 1% in
2012. In contrast, the Democratic Republic of Congo produced less than 1% ofrefined cobalt although it accounted for over 70% of mining output.
In general, other steps along clean energy supply chains are more likely toexperience bottlenecks than processing (see Chapter 1). However, there are
exceptions. In the case of polysilicon production, bottlenecks are more likely at theprocessing stage, due to its complexity. Raw minerals must be of very high quality
to yield metallurgical-grade silicon of above 98% purity, which then needs toundergo multiple refining steps to produce polycrystalline silicon with 99.9999%
purity for solar PV applications. China currently controls about 70% of
metallurgical-grade silicon production and 80% of the polysilicon production(USGS, 2022).
Regional shares of global production of selected critical materials, 2021

IEA. CC BY 4.0.
Sources: IEA analysis based on BNEF (2020); S&P Global (2022a); WBMS (2022); Adamas Intelligence (2020).

The concentration of the processing and refining of minerals is greater than that ofextraction, with China dominating the processing of several of them.

Bulk materials production is highly concentrated as well

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Clean energy technologies and infrastructure are made from large amounts of bulk
materials, notably steel, cement, aluminium and plastics. Solar PV plants and windfarms generally require more bulk materials per unit of capacity than fossil fuelbased power plants, with some exceptions (also see Chapter 1). The raw materials

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainsand fuels required for the production of bulk materials, including iron ore,limestone, bauxite, oil and natural gas, are widely available and there are few
bottlenecks at present to increasing capacity in most parts of the world. Indeed,
there is global overcapacity in the production of some bulk materials.
Bulk material needs vary enormously across energy end-use sectors. Steel andcement are vital for buildings and infrastructure, with demand generally highest in
the emerging economies where economic development is fastest, notably China
and Asia Pacific. Other end-use sectors, such as the manufacturing of consumer
products, packaging, industrial and electrical equipment, and vehicles, also makeuse of large amounts of a wider range of bulk materials, including aluminium andplastics (Figure 2.5).
Estimated end-use shares of global consumption of selected bulk
materials, 2021

IEA. CC BY 4.0.
Notes: Energy infrastructure includes electricity grids and oil and gas pipelines. Industrial equipment does not include
material demand from the plant shell. Transport includes vehicles and estimated material demand from road and rail
infrastructure. Other includes non-energy infrastructure and miscellaneous uses.
Sources: IEA analysis based on Worldsteel (2022a); USGS (2022); IAI (2022); Platts (2022); Geyer, Jambeck & Law(2017).

Bulk materials are used in a diverse range of end uses, with the main drivers varying
substantially by material.

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Bulk materials production is relatively highly concentrated geographically,
although not to the same extent as critical materials (Figure 2.6). China accounts
for more than half of the world’s production of crude steel, cement and alumina,
and more than a quarter of primary chemical production. While some of thisproduction is exported, China’s development path has been especially materialintensive, with demand for cement and steel in particular being higher relative tothe country’s economic activity than in other major countries. Bulk materials areEnergy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

generally less globally traded than critical materials, as a result of their wider global
availability and higher costs of transportation relative to their value, encouraging
production close to demand centres.
Regional shares in global production of bulk materials and intermediatecommodities, 2021

IEA. CC BY 4.0.
Notes: Plastics includes resin identifier codes 01-07, which excludes fibres. Iron includes pig iron and direct reduced iron.
High-value chemicals include ethylene, propylene, benzene, toluene and mixed xylenes.
Sources: IEA analysis based on Worldsteel (2022a); USGS (2022); IAI (2022); Platts (2022); Geyer, Jambeck, & Law(2017).

China produces more than half of the world’s crude steel and cement, and a large share ofaluminium and primary chemicals, mostly for the domestic market.

Crude steel and iron
Steel is used in a wide range of end uses, with about half of demand coming fromthe buildings and transport sectors. Crude steel can be produced from scrap oriron, or more commonly a mixture of the two. Iron – made from iron ore – is virtuallyunlimited in its supply, whereas scrap availability is a function of past steel
production and use. Countries with mature infrastructure and vehicle stocks tend
to have ample domestic supplies of scrap, whereas emerging economies often
need to produce more iron in order to increase their output of crude steel. Iron
accounts for over 65% of the metallic inputs to crude steel production, with scrap
accounting for the remainder. Globally, around 85% of available scrap is collected
for recycling.

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Around one-quarter of all the steel produced worldwide is traded internationally asintermediate steel products (finished and semi-finished), with the remainder being
used by next-tier manufacturers in the country in which it was produced. The
resulting products containing steel are also traded. Figures for the trade involumes of steel contained in goods are much more uncertain; estimates from2019 suggest that around 20% of this steel is exported, with almost 75% of theEnergy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainssteel contained in goods used in the countries where the goods are produced(Worldsteel, 2022a). Though China uses around 95% of its production
domestically, it is the largest net exporter of steel at 43 Mt in 2021 – or a third ofglobal net exports. The other leading net exporters are the Russian Federation(hereafter, “Russia”), Japan, Korea and India, while the leading net importers are
the United States, the European Union, Southeast Asia and the Middle East.

Cement and clinker
Cement, the primary ingredient for making concrete, is generally produced close
to the point of use due to the high cost of transport as a heavy material and thewidespread availability of limestone as an input. About half of global cement
production is used for constructing buildings and the remainder for making a wide
variety of other types of infrastructure, including for clean energy. China is boththe biggest consumer and producer of cement, producing around 2.4 Gt in 2021
and accounting for around 55% of global production, followed by India (8%), theEuropean Union (4%) and the United States (2%). The expectation of risingdemand for cement to meet new construction needs generally leads to investment
in local production, reducing the need for costly imports.

Aluminium and alumina
The use of aluminium is relatively evenly distributed around the world and acrosseconomic sectors, with the transport sector accounting for about 25% of global
demand, and construction and packaging each for about 15%. Aluminium is an
important input to the clean energy transition, with the production of several clean
technologies, including solar PV installations and EVs, requiring significant
amounts. Electricity networks alone account for about 8% of aluminium demand
today.
Like steel, aluminium can be produced from virgin mineral inputs (bauxite) or from
scrap. Bauxite is first transformed into alumina (aluminium oxide), which
undergoes electrolysis in a smelter to produce aluminium. Around one-third ofaluminium was produced from scrap (excluding that generated during aluminium
production) in 2021, of which 60% was end-of-life scrap, with the remainder being
sourced from the manufacturing of aluminium products.

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China is the largest producer of aluminium, accounting for over 40% of global
production. The United States accounts for around 5% and Canada for around 6%of global production, mostly using scrap and imported alumina. Approximately
40% of aluminium is traded internationally, with exports led by Russia (net exports
accounting for 11% of total exports), Canada and the United Arab Emirates (9%each), and India (8%). China produces 55% of the world’s alumina – an evenlarger share than aluminium, reflecting in part lower domestic scrap availability
than that in many industrialised economies. Australia and Brazil are the world’s

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

largest alumina exporters, owing in part to their abundant bauxite reserves;
together, they account for more than 20% of the world’s alumina production, butjust 4% of aluminium production.

Plastics and high value chemicals
The main thermoplastics – polyethylene, polypropylene, polyvinyl chloride,
polyethylene terephthalate and polystyrene – are used primarily for packaging,which absorbs 36% of global supply, construction (16%), textiles (15%),
automotive (7%) and consumer product (10%) applications. Some clean energy
technologies make extensive use of plastics. For example, most wind turbine
manufacturers use lightweight plastic composites to make blades, while solar
panels often use various plastics to protect or connect some of the panels’ parts.
Plastics are produced primarily from high-value chemicals – ethylene, propylene,
benzene, toluene and mixed xylenes – which are in turn produced from oil
products. Less than a fifth of plastic waste is currently collected for recycling, andless than a tenth of plastic production is based on post-consumer scrap material,reflecting the practical difficulties and cost of the recycling processes involved.
The geographic distribution of primary chemicals production reflects both regional
demand and cost factors, especially the local availability and cost of oil feedstocks.
Consequently, regions well-endowed with oil and gas resources, such as theMiddle East and United States, are big producers. China is the world’s leading
producer of both high-value chemicals and key thermoplastics, accounting foraround 25% of world output. The United States and Europe also hold strong
positions in the global chemical and plastics industries, with the United Statesaccounting for nearly 20% of combined production in these sectors and Europe
for 10%. High-value chemical production and plastics production are generally
located together. While plastic resins and derivative products are traded
extensively, high-value chemicals are often gaseous (e.g. ethylene) and highly
toxic (e.g. benzene), making transport cumbersome and expensive.

Technology manufacturing and installation
Technology manufacturing refers to the production of technologies using labour,
tools and energy to transform materials into finished goods. In the case of theclean energy technologies covered in this report, these goods are categorised asfollows:
Mass-manufactured technologies, which are assembled in specialised
factories in large volumes using several components and sub-assemblies, withthe ready-to-use end product exiting the factory floor. Examples include solar PV
modules, wind turbines components, EV batteries, fuel cells and fuel cell trucks,
heat pumps, and electrolysers.

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•

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Chapter 2. Mapping out clean energy supply chains

Large-scale site-tailored technologies, which are usually individuallydesigned and sized to fit specific local conditions. Examples include most CCUS
applications, synthetic hydrocarbon production and bioenergy-related
technologies. These are effectively systems formed by components, some ofwhich can be mass manufactured.

China dominates mass-manufactured clean technologies
China dominates the production of mass-manufactured technologies andcomponents thanks to low manufacturing costs, a strong base in materials
production and sustained policy support on these industry segments. It controls atleast half of the output of most of the main such technologies, notably solar PV
and EV batteries (Figure 2.7). The rest of the Asia Pacific region continues tomanufacture technologies in which they hold strong intellectual property, such asbatteries and fuel cells. As the markets for these technologies expand, capacity to
produce these technologies can often exceed short-term production needs.
Currently, manufacturing capacity exceeds production for most technologies in all
regions, particularly electrolysers, EV batteries and fuel cell trucks (see respective
sections below).

Solar PV and wind power
Solar PV and wind are the leading low-emission electricity generation
technologies being deployed worldwide today. Over the last decade, China’s
dominance of manufacturing of solar PV equipment has grown, reducing theshares of Europe, Japan and the United States. Today, China’s share in the
manufacturing of silica-based solar PV modules exceeds 70% – almost double
the country’s share of global demand. The country is home to the world’s top ten
suppliers of solar PV manufacturing equipment. Asia Pacific (excluding China)
hosts around one-fifth of module manufacturing, and the remaining capacity is
located mostly in Europe and North America.

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Manufacturing of wind turbines is also heavily concentrated geographically. The
top 15 manufacturers accounted for almost 90% of the total capacity deployed in
2021. Among those, Chinese companies were the leaders, with more than 55% of
the total, followed by European companies, with around 35%, and American ones,
with less than 10%. The marketing strategies of these enterprises varyconsiderably across regions. In China, most of the wind farms that have been
installed were built by Chinese manufacturers, accounting for more than 95% of
the total capacity deployed domestically. European manufacturers have a much
more international business, installing around 65% of their output in other regions,where they have built local manufacturing facilities.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Regional shares of manufacturing capacity for selected massmanufactured clean energy technologies and components, 2021

IEA. CC BY 4.0.
Notes: FC = fuel cell. Heat pumps capacity refers to thermal output.
Sources: IEA analysis based on InfoLink (2022); BNEF (2022); BNEF (2021b); Benchmark Mineral Intelligence (2022);
GRV (2022); UN (2022a); Wood Mackenzie (2022).

Around 90% of mass-manufacturing capacity for several key clean energy technologies isconcentrated in China and the Asia Pacific region.

EV batteries
The market for EVs is booming. Sales of EVs nearly doubled to 6.6 million in 2021
and exceeded 10 million sales in 2022. Of these, most were full battery EVs,
accounting for over 70% of EVs sold, with the rest being plug-in hybrids.

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EV manufacturing has certain synergies with other sectors, most obviously withthe conventional internal combustion engine (ICE) vehicle industry. Though the
production of EVs involves the manufacturing of specialty components not used
for making ICE vehicles, with the battery being the most critical component. The
rapid increase in EV sales and, more recently, Russia’s invasion of Ukraine, haveEnergy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainstested the resilience of battery supply chains, though output has to date managed
to keep pace with demand. Global demand for automotive Li-ion batteries doubled
to 340 GWh in 2021.
China dominates production at every stage of the EV battery supply chain, withthe exception of the mining of metals needed to make cathode materials. Twothirds of global battery cell production, as well as around 80% of the production ofcathode and over 90% of anode material, is in China. Europe is responsible forover a quarter of EV production, but holds very little of the rest of the supply chain
apart from cobalt processing, in which it has a share of around 16% (mostly in
Belgium and Finland). The United States has a smaller stake in the global EV
battery supply chain, with only around 10% of EV and battery production capacity.
Both Korea and Japan have considerable shares of the supply chain downstreamof raw material processing, particularly in cathode and anode material production.
Korea holds 13% of global cathode and 3% of anode material production capacity
while Japan accounts for 14% (cathode) and 10% (anode).
Both EVs and their batteries tend to be produced close to where they are sold.
Only China exports significant amounts of both EVs and batteries over long
distances. The top five battery manufacturers, headquartered in Korea, China orJapan, hold over 50% of global manufacturing capacity, with China’s CATL –Contemporary Amperex Technology Co. Limited, the market leader – alone
holding around 15%. EV battery production capacity currently exceeds demand,
as factories have generally been deliberately oversized in anticipation ofcontinuing strong growth in demand. In addition, some factories are still ramping
up production to reach nameplate capacity, a process that can take from three to
six years (Fleischmann et al., 2021). Overcapacity is nonetheless starting to fall:
the global average utilisation rate for all types of battery factories was 43% ofcapacity in 2021, up from 33% in 2020.

Fuel cell trucks
Almost 900 heavy-duty fuel cell trucks 9 were sold worldwide in 2021, 90% of themin China. Switzerland was the second-largest market, with around 8% of sales.
The production of fuel cell trucks involves the manufacturing of some specialty
components not used for making conventional diesel-based ICE trucks. They
include the hydrogen tanks for on-board storage and the fuel cell system.
Currently, global fuel cell truck manufacturers’ claimed nameplate capacity
aggregates to over 13 000 trucks/year, implying significant idle capacity and

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9
Heavy-duty refers to trucks with a gross vehicle weight over 15 tonnes. We focus on this specific vehicle segment as it isthe vehicle category that is projected to have the largest share of fuel cell vehicles in the Net Zero Emissions by 2050
Scenario. The global fleet of battery electric heavy-duty trucks was more than an order of magnitude bigger than that of fuelcell trucks in 2021. The former is projected to remain the dominant zero-emission powertrain in that scenario.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainsenormous potential to increase near-term deployment with existing facilities
concentrated in China, Korea, the United States and Europe.
The leading manufacturers of trucks are China’s SAIC Hongyan, which canmanufacture around 3 000 trucks/year, Korea’s Hyundai (2 000 trucks/year), and
the American companies Hyzon Motors (1 000 trucks/year in the Netherlands) andNikola (2 500 trucks/year in the United States and 2 000 trucks/year in Germany).
Many other established manufacturers are also well positioned to begin productionof fuel cell trucks in the near future given the short lead times involved in retoolingexisting assembly plants and the large share of components common to fuel cell,battery electric and ICE trucks. Several fuel cell suppliers are collaborating withtruck manufacturers, for example, Cummins with Daimler in the United States andScania in Europe; Kenworth with Toyota in the United States under a longstanding deal; and Weichai Power and Sinotruck in China. All these manufacturers
could quickly ramp-up production by leveraging their substantial existing capacity
and supply chains.
Fuel cell trucks typically rely on proton-exchange membrane (PEM) technologythat converts hydrogen to electricity, which is used to power the electric motor andcharge the vehicle’s battery. PEM fuel cell manufacturing capacity for all vehicles,
including cars, vans, trucks and forklifts, totalled over 290 000 systems/year in
2021 and is thought to have reached over 330 000 systems/year in 2022. Around
65% of capacity in 2021 was in China, where the leading producers are Refire,
SinoSynergy, Weichai and Wuhan HydraV Fuel Cell Technologies. Korea hasover 15% of capacity, with Hyundai the largest manufacturer.
There is substantial existing manufacturing capacity for high-pressure on-board
vehicle hydrogen storage tanks. The leading manufacturers have taken advantageof the knowledge and experience gained with other compressed gas storage, inparticular natural gas. Many also supply equipment for hydrogen distribution via
tube trailers and for stationary hydrogen storage such as at refuelling stations.
High-pressure storage vessel manufacturing is already well-established in
North America, Europe and Asia. A number of manufacturers of this type ofequipment have either already entered the market for on-board hydrogen storage
for heavy-duty vehicles or plan to do so. Luxfer, which has factories in Canada,
China, the United Kingdom and the United States, provided tanks for the Hyundai
heavy-duty trucks sold recently in Switzerland. Hexagon Purus, which has
manufacturing facilities in Canada, Germany and the United States, has a contract
to provide on-board storage tanks to Nikola. Toyota currently manufactures its
own tanks and is also positioning itself as a supplier to other manufacturers.

Heat pumps

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More than 1 000 gigawatts thermal (GWth) of heat pump capacity was in operationin buildings worldwide at the end of 2021, meeting around 10% of the total buildingEnergy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

heating needs. Global heat pump sales increased by about 13% in 2021. The
market grew quickest in the European Union, where sales rose 35%, theUnited States (15%), Japan (13%) and China (13% for air-source heat pumps).
Air-source heat pumps (air-air and air-water) account for the majority of heat pumpsales worldwide, making up over 80% of the market in 2021.
Global heat pump manufacturing capacity (excluding air conditioners) amounted
to around 120 GWth at the end of 2021. Manufacturing is dominated by China, withalmost 40% of total capacity, North America (30%), Europe (15%) and otherAsia Pacific (over 10%). While China and other Asia Pacific dominate the global
heat pump market, in particular for split systems (with both indoor and outdoor
units connected by a set of pipes), Europe is the leader in the market for hydronicsystems (whereby heat is conveyed via hot water) and large-scale applications.
The top four global manufacturers accounted for around 40% of total capacity in
2021.
Heat pump manufacturers mostly serve the local market, with only China exporting
significant numbers of heat pumps. Several heat pump components such as fans,pumps, tanks, expansion valves, heat exchangers and compressors are also
common to other heating equipment or other industries. In particular, spaceheating and water heating heat pumps share the same type of components with
air-conditioning units and refrigerators, which makes the total demand forcomponents of the refrigeration cycle much larger than the one from heat pumps
alone. Nonetheless, these components are not always interchangeable acrossequipment. Their production is currently dominated by a small number ofcompanies.
Some of the main heat pump manufacturers also make heat pump components
such as heat pump compressors, which currently make up about one-quarter ofthe cost of a heat pump, and fans. Mitsubishi, Carrier and Daikin, which together
accounted for over 30% of all the heat pumps produced in 2021, already produce
their own compressors. While compressors are needed in many industries, thedesign and manufacturing of such a component is a specialised industry and someheat pump compressors might require specific designs for certain temperature
ranges and refrigerants. The market is currently dominated by a few suppliers.
Europe imports a large share of the compressors it needs to make air-air heatpumps, whereas the compressors it needs for air-water and ground-source heatpumps are typically manufactured within the region by companies such as
Danfoss, Bitzer and Emerson Copeland (Lyons et al., 2022).

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The global heat pump industry is facing some bottlenecks amid rapid growth, inpart due to limited supplies of semiconductors, which are used in control panels,
electric pumps and fans. However, some manufacturers in the heat pump industry
are confident that current shortages can be overcome within the next 12-18

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainsmonths. If components become available, there may be potential to increase
output at existing facilities by roughly 20%. 10 In some cases, there is also potential
for assembly lines to switch between producing air conditioners and heat pumps,
which use similar technology (reversible heat pumps can produce both heat andprovide cooling). The scope for raising production at short notice varies among
manufacturers. Some, particularly in Europe, are already operating at rates close
to maximum capacity.
The manufacture of refrigerants used in heat pumps is concentrated in China andNorth America, with the former being the largest exporter (CEMAC, 2020; United
Kingdom, Department for Business, Energy & Industrial Strategy, 2020). The
location of manufacturing sites is driven primarily by the proximity of chemical
feedstock and the availability of a cheap and specialised labour force. Key
refrigerant manufacturers include Honeywell International and Chemours
Company in the United States, Dongyue Group and Sinochem Group in China,
and Daikin in Japan. Heat pumping technologies predominantly rely onhydrofluorocarbon refrigerants such as R410A, but the share of others with lower
global warming potentials (GWPs), such as R32, and natural refrigerants (such as
propane) is rapidly increasing (BSRIA, 2020).

Electrolysers
Technologies to produce low-emission hydrogen today include water electrolysis
and fossil-based hydrogen with carbon capture and storage (CCS), generallyusing natural gas as the feedstock (see below). Water electrolysers, which can bemass produced, are currently based on a small number of technologies, including
alkaline, polymer electrolyte membrane, solid oxide electrolyser cell (SOEC) andanion exchange membrane (AEM). Alkaline technologies dominate the market
today, though polymer electrolyte membrane ones are also commerciallyavailable. SOEC and AEM electrolysers are under demonstration, with the former
at a large scale, and are expected to be commercialised soon.
Alkaline electrolysers are extensively deployed in the chlor-alkali industry, which
accounts for the majority of the current global installed electrolyser capacity ofmore than 20 GW. However, this capacity is dedicated to the production ofchlorine, with hydrogen being a by-product of the process. Only around 500 MWof electrolysers had been deployed globally for the dedicated production ofhydrogen as of the end of 2021, producing around 35 kt that year. There is a
growing number of projects under development though and, if all were realised,global installed electrolyser capacity could reach 134 GW in 2030, 11 with Europe,

IEA analysis based on research, industry consultation and data from Global Research View.
This would increase to 240 GW if projects at very early stages of development (i.e. where only a co-operation agreement
among stakeholders has been announced) are included.

10

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Chapter 2. Mapping out clean energy supply chains

Australia and Latin America accounting for nearly three-quarters of this capacity.
Alkaline electrolysers are technologically less sophisticated and do not require
expensive catalysts, though their operation is less flexible than polymer electrolyte
membrane or AEM ones and are less efficient than SOEC ones. They can,nonetheless, provide enough flexibility to deal with intermittent renewables andprovide primary grid services (Thyssenkrupp, 2020).
Electrolyser manufacturing capacity worldwide today amounts to around 10 GW
per year, which is much larger than current annual deployment (IEA, 2022a). This
spare capacity would be more than sufficient to meet relatively small increases indemand in the near term. Larger increases in line with government climate targets
and announced industrial plans for electrolysis-based production of hydrogen
would require new manufacturing capacity. Electrolyser components can beproduced on a large scale and easily distributed globally to facilities where
electrolyser systems are assembled and sold locally. Transporting the whole
electrolyser over long distances is costly and difficult, as they are bulky.
Electrolysers are currently manufactured mostly in China, which holds over 40%
of global capacity, and in Europe, at 25%. The rest are made in North America,
Japan and India. There are a number of companies active in the sector, including
Thyssenkrupp Nucera, PERIC, John Cockerill and Nel Hydrogen. Chinese
manufacturers have, on average, larger manufacturing capacities per plant thanthose in Europe. China is currently the leader in alkaline electrolysers thanks tocheaper materials and labour than in Europe.

Large-scale site-tailored technologies could exploit synergies

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Large-scale site-tailored technologies are set to benefit from extensive synergies
with other industries, especially oil and gas, that have well-established supply
chains. For now, their deployment has been concentrated in a few regions only,
so supply chains are relatively under-developed, in contrast to massmanufactured technologies (Figure 2.8). In Europe, a number of policies havebeen put in place to encourage the take-up of clean energy technologies,
favouring deployment of emerging technologies with limited international trading,such as electrolysers and DAC plants. The United States is well-placed to build
large-scale facilities thanks to a favourable policy environment and extensive
infrastructure. This should support the deployment of emerging clean energy
supply chains, including for the production of low-emission hydrogen and lowemission synthetic hydrocarbon fuels.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Regional shares in global installed operating capacity of selected largescale site-tailored clean energy technologies, 2021

IEA. CC BY 4.0.
Notes: DAC = direct air capture; BECC = bioenergy with carbon capture; Gas-CCS H2 = natural gas-based hydrogenproduction with CCS; hc = hydrocarbon; bbl = barrel. Shares are based on nominal capacity. Synthesis refers to lowemission synthetic hydrocarbon fuels production.
Sources: IEA analysis based on company announcements.

The capacity of large-scale site-tailored clean energy technologies is almost entirely
concentrated in Europe and North America.

Low-emission hydrogen: Natural gas-based hydrogen with CCS
Low-emission hydrogen can be produced using natural gas or biomass as thefeedstock in conjunction with CCS, in addition to water electrolysis. Steammethane reforming (SMR) is currently the dominant technology for gas-based
production of hydrogen, though autothermal reforming, which leads to higher
efficiencies and, when combined with CCUS, higher capture rates, is expected togain market share in the future. 12 Partial electrification of the SMR process could
also help cut combustion emissions, leaving only the concentrated process flux of
CO2 to capture. Around 0.1% of the dedicated global hydrogen production ofnearly 94 Mt in 2021 came from water electrolysis, but its market share could
increase in the future with lower renewable electricity and electrolyser costs.
Although only a few SMR with CCUS plants are in operation today, there isconsiderable experience in building and operating them, and strong synergies withthe oil and gas sector, characterised by well-established supply chains forcomponents and a skilled labour force. At present, there are six such plants
operating around the world, with a total installed production capacity of around
0.3 Mt of hydrogen, all of them in North America (in refineries and fertiliser

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12
In an SMR process, natural gas is transformed into syngas in a reformer, which is then converted into a hydrogen-richmixture in a water-gas shift (WGS) reactor, from which high-purity hydrogen can be obtained. Roughly 60% of the process
CO2 comes from natural gas oxidation in the reformer and WGS reactor in a high concentration stream, which can be captured
relatively easily, while the rest is emitted from the reformer furnace, in a lower concentration flue gas stream.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainsfactories equipped with CCUS as early as the 1980s). 13 While over 95% of theCO2 emitted during hydrogen production can be captured, most capture units were
installed to capture only process emissions, which make up roughly 60% of total
plant emissions.

Low-emission synthetic hydrocarbon fuels
Low-emission synthetic hydrocarbon fuels can displace fossil-based fuels forapplications where alternative carbon mitigation options are not technically orcommercially available. Synthetic hydrocarbon fuels are made from synthesis gas(primarily a mixture of hydrogen, carbon monoxide and CO2) using catalysts.
Suitable feedstocks include electrolytic hydrogen and atmospheric CO2, captured
directly through DAC or indirectly through BECC. Depending on the choice of
catalyst and process conditions, various fuels can be produced from synthesisgas.
The production capacity for low-emission synthetic hydrocarbon fuels is extremely
limited today, with only three pilot projects in Europe. Although CO2 can also be
captured from concentrated sources such as industrial and power plants, using
such CO2 for synthetic hydrocarbon fuels production would eventually increase
the total amount of CO2 in the atmosphere. In a net zero energy system, CO2 willneed to come from DAC or BECC plants.
DAC and BECC plants are currently assembled and built by just a few companies
based in Europe and North America. These companies either build and operate
their own plants, or licence their intellectual property to project developers who arein charge of manufacturing, assembling, building and commissioning the plant.
Given the small number of players, there is no established trade route but rather
partnerships between suppliers and project developers. Some components ofboth DAC and BECC plants such as separation columns, CO2 compressors andheat exchangers, which are used in oil refining and other industrial sectors, arecurrently mass manufactured and widely traded at the international level.
Around 2.5 Mt of biogenic CO2 per year is currently being captured annuallyaround the world, more than 90% of it from bioethanol plants. Around half of thecaptured gas is used, mainly in the food and beverage industry and for enhanced
oil recovery, while the other half is stored underground in dedicated facilities.
BECC plants are concentrated in the United States, though some smaller-scale
plants operate in Europe and Japan. Most of the 17 DAC plants in operation areyoung – around five years old on average – and very small: the largest operating

The Al Reyadah steel mill in Abu Dhabi, which features CO2 capture from gas reforming and direct iron reduction, is also
considered (inherent) low-emissions hydrogen production under IEA definitions, but is excluded here as not strictly SMR with
CCUS.

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Chapter 2. Mapping out clean energy supply chains

plant has a nominal capture capacity of just 4 000 tonnes of CO2/year. Global DAC
capture capacity amounts to around 8 000 tonnes of CO2/year.
Synthetic hydrocarbon fuel production currently relies on the methanol-to-gasoline
or Fischer-Tropsch (FT) process, both of which are well-established technologies.
While up to 800 PJ/year of fossil-based FT synthesis has been deployed to date,
only around 0.02 PJ/year (11 bbl/day) of this is low emissions. This includes threepilot projects in Europe – two in Germany (Atmosfair and Kopernikus projects) and
one in France (Methycentre project) – that use CO2 sourced from biogas
upgrading or DAC.
Only one company – Germany’s INERATEC GmbH – is currently manufacturing
the reactors needed for those pilot FT plants. Large-scale, fossil-based FT plants
and their manufacturing are currently concentrated in the Middle East, China andSouth Africa. These plants have been commissioned and operated by a few large
engineering and oil and gas companies, including Sasol, Shell and Synfuels
China. Some of the components and competences could be easily transferredfrom fossil-based applications to low-emission ones.
Low-emission FT plants would make use of the same catalysts – a key component
in the synthesis process – that are used today in fossil-based applications. They
are heavily reliant on critical materials, including cobalt, rhodium, ruthenium,
platinum and palladium. They have been produced on a large scale for decades,
so the needs of new low-emission plants could take advantage of existing supply
chains. A few of the top catalyst producers, including Clariant, Axens and Velocys,
are actively involved in low-emission FT projects. The geographical distribution ofthese and other top catalyst manufacturers mirror that of the small-scale FT
manufacturers, with activity concentrated in Europe and the United States.

International trade in minerals, materials and energy
technologies
Shifting from a fossil fuel-based energy economy to one that provides the raw
materials needed to make clean energy technologies and related infrastructure
involves a major change in trade flows among the different steps of their supply
chains. The leading producing countries of materials, and manufacturers ofequipment and components for clean energy technologies, generally differ
markedly from the main fossil fuel producers.

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Vulnerabilities associated with the geographical concentration of production andmanufacturing facilities will undoubtedly persist for many commodities andtechnologies, especially for those with long lead times, and despite efforts todevelop domestic capacity and diversify sources of supply. This could lead tobottlenecks, disruptions in supply and delays in deploying some clean energy

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

technologies. The way international trade policy and tariffs play out will be a crucial
factor in determining the pace at which clean energy transitions advance.

Critical minerals are heavily traded regionally
Critical minerals are currently the most heavily traded inputs to clean energy
supply chains, driven by trade in lithium and cobalt. For these minerals, the shareof inter-regional trade in total production 14 is around 40% higher than that of bulk
materials and 150% higher than that of fossil energy (Figure 2.9). The degree towhich critical minerals are traded varies according to their geographicaldistribution. For example, about four-fifths of cobalt production and just under halfof that of lithium are traded across regions, as ores are often refined in China,
even if extracted elsewhere. The share of output that is traded is lower for nickel
ore and copper ore, around 40%, as a bigger share of these minerals is refined in
the region where it is extracted. The share of trade in the production of criticalmaterials (e.g. lithium carbonate, refined copper) is generally lower. Polysilicon is
also relatively less traded across regions, notably due to China’s dominant positionin polysilicon production and use.
The share of inter-regional trade is less pronounced for bulk materials required inclean energy supply chains and infrastructure, typically averaging 25-40%.
Aluminium and plastics are at the higher end of this range, as the location ofaluminium production is usually determined by access to cheap electricity and thatof plastics to cheap oil and gas. Further down the supply chain, final clean energy
technologies and products – with the notable exception of solar PV modules – areless heavily traded.

The share of trade is calculated as the sum of trade (the average of total exports and total imports) divided by global
production.

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Chapter 2. Mapping out clean energy supply chains

Bulkmaterials

Refinedcriticalminerals

Raw critical minerals Fossil fuels

Share of inter-regional trade in global production for selected minerals,
materials and technologies, 2021
Coal
Crude oil
Natural gas
Cobalt ore
Copper ore
Lithium ore
Nickel ore
Bauxite ore
Copper refined products
Nickel refined products
Polysilicon
Aluminium
Iron and steel
Plastics

Clean energy
technologies

Electric cars
Li-ion batteries
Fuel cells
Solar PV
Wind turbines
Heat pumps
0%

20%

40%

60%

80%

IEA. CC BY 4.0.
Note: Data are for 2020 for coal, oil, gas. The share is calculated as the sum of trade to and from Africa, Asia Pacific,
Central and South America, China, Eurasia, Europe, Japan, Korea, the Middle East, and North America divided by global
production.
Sources: IEA analysis based on WBMS (2022); S&P Global (2022a); USGS (2022); Worldsteel (2022b); IEA (2021a); IEA(2022b); IEA (2022c); UN (2022a); BNEF (2021c); E4tech (2022).

Critical minerals are generally traded across regions more than critical and bulk materials,
clean energy technology equipment and products, and fossil energy.

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For mature and established supply chains of all types, governments and industry
typically handle the risks associated with geographical concentration by
establishing dedicated mechanisms to minimise the impacts of potential
disruptions and increase diversity of supplies. Many clean energy technology
supply chains are new and evolving rapidly, so can be more vulnerable to highgeographical concentration. For instance, for three (batteries, wind, solar PV) outof the ten clean energy technologies analysed in this report, over 70% of the
manufacturing capacity is located in China, and over 35% for another threetechnologies. In addition to the energy security benefits of greater diversity, there
is a huge economic opportunity to be grasped by countries and industry by
investing in the supply chains of new and emerging clean energy technologies.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

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

AveragesBulkmaterials

FossilenergyCritical minerals

Energy technology

China

EuropeUnitedStates

Japan

Korea

Li-ion batteries

13%

-30%

-7%

27%

-14%

Electric cars

8%

-27%

3%

76%

58%

Fuel cells – mobility

5%

-92%

-4%

61%

8%

Electrolysers

0%

0%

0%

0%

0%

Solar PV – modules

52%

-100%

-65%

-92%

45%

Wind turbines

14%

6%

-38%

-46%

80%

Heat pumps

14%

-25%

2%

17%

8%

Lithium ore

-75%

0%

-100%

0%

0%

Cobalt ore

-98%

-100%

100%

-100%

0%

Nickel ore

-88%

-66%

100%

-100%

-100%

Copper ore

-80%

-40%

30%

-100%

-100%

Nickel refined products

-51%

-22%

-100%

23%

-58%

Copper refined products

-25%

-11%

-45%

41%

-1%

Solar PV – polysilicon

-54%

37%

17%

40%

64%

Coal

-8%

-43%

15%

-100%

-99%

Oil

-78%

-72%

-18%

-97%

-100%

Natural gas

-41%

-57%

9%

-98%

-98%

Iron and steel

5%

2%

-24%

31%

17%

Plastics

-21%

-10%

21%

6%

44%

Aluminium

-7%

-53%

-80%

-100%

-100%

Energy technology average

15%

-38%

-16%

6%

26%

Critical minerals average

-85%

-52%

33%

-75%

-50%

Refined critical minerals average

-43%

1%

-43%

35%

2%

Energy (fossil) average

-42%

-57%

2%

-98%

-99%

Bulk materials average

-8%

-20%

-28%

-21%

-13%
IEA. CC BY 4.0.

Notes: Trade balance is the volume of net exports divided by production in each region for the net exporters (positive) or
imports divided by consumption in each region for the net importers (negative). Dark red indicates a higher share of imports
in total consumption, while light red indicates a smaller share. Blue is for exports with darker shades indicating a higher
share of exports over total production. The analysis is based on physical units, not monetary trade flows. Due to data
availability, monetary flows are used for heat pumps and wind turbines.
Sources: IEA analysis based on WBMS (2022); IEA (2021a); IEA (2022b); IEA (2022c); IEA (2022d); USGS (2022);
Worldsteel (2022b); UN (2022a); BNEF (2021c); E4tech (2022); Thomson Reuters (2022); OICA (2022).

China, Japan and Korea are major net exporters of most clean energy technologies but
importers of critical mineral ore to meet their needs.

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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 ofmany clean energy technologies, notably solar PV modules, exporting over half of
its output (Figure 2.10). 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 asignificant share of steel. However, China is a large importer of other materials

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainsand products such as some critical minerals, fossil fuels, polysilicon and criticalmaterials such as nickel (mainly from Indonesia).
Europe is a big importer of clean energy technologies such as EVs, batteries, fuelcells and solar PV (it imports nearly all its solar panels), but is a net exporter ofwind turbine components (accounting for a quarter of inter-regional exports). It
imports large volumes of materials such as aluminium and, to a lesser extent,
plastic, while it exports polysilicon (accounting for nearly half of exports). It imports
most of its minerals and fossil fuels, except those for which it has no processing
capacity at present, such as lithium.
The United States is a small net importer of most clean energy technologies. The
share of imports in meeting domestic demand are highest for solar PV, at around
two-thirds of domestic demand. Thanks mainly to Tesla, the United States is a net
exporter of EVs, and accounts for nearly 20% of total inter-regional exports. The
United States is a major net importer of refined critical minerals and aluminium,
but imports almost no raw critical mineral as it has very little refining capacity. By
contrast, it is a net exporter of fossil fuels with the exception of crude oil, 15 as well
as plastics (US EIA, 2022).
Japan exports more than half of its production of EVs (although overall volumes
are small). It accounts for 80% of total exports of fuel cells, mainly passenger cars.
By contrast, it relies mainly on imports for solar PV modules. Korea is a net
importer of EV batteries, entirely from China, but is a net exporter of EVs and solar
PV panels. Together, Japan and Korea represent over a quarter of the global tradeof EVs (China makes up for another quarter) and dominate the nascent export
market in fuel cell vehicles. Both countries import the vast majority of the minerals
and fossil fuels they consume.

Policy has been key to the boom in EV trade
The position of countries and industries in the supply chains of new and emerging
technologies depends on a variety of factors, ranging from the access to resources
to the cost of production and the skills available in the domestic workforce.
Industrial policy and planning is another key driver. The recent evolution of global
trade in Li-ion batteries and EVs (Figure 2.11) provides a useful case study of how
industrial, climate and energy policies can work together to spur the developmentof new industries along clean technology supply chains.

In terms of total petroleum, the United States is a net exporter since 2020 for the first time since 1949.

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Chapter 2. Mapping out clean energy supply chains

Global trade flows of lithium-ion batteries and electric vehicles, 2021

IEA. CC BY 4.0.
Notes: Unit: GWh. Flows represent battery packs produced and sold as EVs.
Sources: IEA analysis based on EV Volumes from Benchmark Mineral Intelligence and company announcements.

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China is the leading exporter of both EVs and their batteries, sold primarily to Europe, while the United States is largely self-sufficient in both.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

China has a towering presence in global EV and battery markets, supplying both
domestic and international markets. Europe is the main trade partner: nearly 25%of the batteries used in EV production in Europe come from China, and more than
15% of the batteries embedded in EVs sold in Europe as well. China’s EV industry
has developed quickly in the last decade thanks to sustained policy support suchas domestic EV purchase incentives in place since 2009. These schemes officiallyopened up nationwide in 2013 and were expanded in 2014 with the introductionof tax exemptions for EV consumers (Government of China, 2013; 2014). In
response to weaker than expected demand, both measures were extended
several times. Domestic electric car sales grew from around 15 000 in 2013 toaround 220 000 in 2015, making China the largest EV market in the world eversince. Sales reached around 6.4 million in 2022.
The focus of China’s EV policy on domestic sales has attracted international car
manufacturers to produce models there. Around 20% of all the electric cars soldin China in 2021 were made by foreign carmakers. Because EV production costsin China are relatively low, those carmakers, as well as domestic ones, also export
part of their Chinese output. For example, around 60% of the EVs sold in Europe
and imported from China were manufactured by international carmakers such as
Tesla (Figure 2.12).

Thousand vehicles

EV imports to Europe by country of production and manufacturer, 2021
300

Carmaker headquarters
based in:

250

China

200
Japan
150
Korea

100

US

50
0

China

Korea

US

Japan

Other

EuropeLocation of EVs produced for export to Europe

IEA. CC BY 4.0.
Source: IEA analysis based on EV Volumes (2022).

Europe imports 40% of its EVs from China. Overall, most imports are manufactured bycarmakers headquartered in the United States (30%), Europe and Korea (20% each).

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The expansion of battery manufacturing capacity to supply the EV industry has
also been a strategic priority in China. In 2015, China’s Ministry of Industry andInformation Technology (MIIT) released the Automotive Power Battery Industry
Normative Conditions, aiming to encourage EV battery development and regulate
the industry (China, MIIT, 2015). From 2015 to 2016, MIIT released four lists ofcompanies that met these conditions, the last one with 57 companies, all of which

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainswere Chinese. Since EVs on sale in China need to be equipped with batteries fromthe listed companies in order to receive government subsidies, this policy favoured
the growth of domestic companies. This helped to create global giants such as
CATL, which is now the world’s largest battery maker. In 2019, MIIT officiallyannounced the abolition of the company lists, which has brought back competition
from foreign companies (China MIIT, 2019). In 2021, China held 75% of global EV
battery manufacturing capacity, which, at 685 GWh, was significantly higher thanannual battery demand of 210 GWh.
China also has high trade tariffs, of 40%, for battery-related goods imported in the
country, which encourages domestic production. Before 2013, China already held
large shares of the global refining of battery metals, notably lithium and cobalt, as
well as manufacturing of anodes and cathodes, thanks to its large battery industry
to supply consumer electronics. These industries have boomed with the rising EV
demand, leading many traditional foreign battery makers from Korea and Japan
to invest in China. LG built its first battery factory in China in 2014, while Panasonic
opened one in 2017. Existing supply chains and China’s strong manufacturingbase facilitated the rapid expansion of these production facilities.
In the European Union, strategic industrial policy on batteries began much later.
In 2017, the European Commission set up the European Union Battery Alliance –a public-private organisation tasked with co-ordinating European industrial players
to spur investments in the battery industry – which resulted in the 2018 Strategic
Action Plan for batteries. This work was followed by the implementation ofImportant Projects of Common European Interest (IPCEI), through which
European countries could provide public subsidies to co-finance the developmentof a domestic battery industry. The first IPCEI, worth EUR 3.2 billion(USD 3.8 billion), was announced in 2019 and a second one worth EUR 2.9 billion(USD 3.4 billion) was announced in 2021, financing a range of projects from raw
material extraction to battery recycling.
The new EU industrial strategy for domestic battery production, alongside clear
policies on cutting CO2 emissions from road transport and an increasingly
supportive investment environment, has led to large investments in the battery
industry in Europe, though no large plant has yet come online. Nonetheless,battery production capacity in the European Union could reach nearly 500 GWh
by 2026, compared with around 35 GWh in 2020 (Beermand and Vorholt, 2022).
Unlike for battery manufacturing, battery component factories have not received
as much investment, meaning that Europe is likely to continue importing thosecomponents for a longer time. In response to an absence of domestic production,
the European Union decided in 2020 to reduce tariffs on batteries and battery
components to increase the availability of EVs on the market, as the domestic
supply chain would have not been able to satisfy the rapid growth needed to meetclimate targets (EU, 2020).

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The United States began prioritising battery manufacturing with the post-financial
crisis American Recovery and Reinvestment Act of 2009 (US DOE, 2009), which

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

made available USD 2 billion (nominal value) in grants for battery and component
manufacturing. This led to the construction of some of the large battery factories
in operation today, such as LG’s factory in Michigan and AESC’s factory in
Tennessee. It also provided a low-interest loan to Tesla, which resulted in theconstruction of the country’s largest battery factory in Nevada, commissioned in2016. During the Trump administration, the United States increased tariffs on alist of goods made in China, including batteries and most other components, to
7.5-25%.
The Inflation Reduction Act (IRA), adopted in 2022, redefined the US clean energy
industrial strategy. It includes provisions for production subsidies for battery andbattery component manufacturing and, importantly, limits EV purchase incentives
to domestically produced models. It is expected to stimulate major new
investments in the coming months and years. However, the IRA also discourages
importing components manufactured in countries that do not have a trade
agreement with the United States, which could slow the expansion of EV
production and sales in the near term given the relative limited possibilities forquickly boosting domestic production of some components.

Policy support has boosted trade in other clean energy supply
chains

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Developing a supply chain for clean energy technologies is a lengthy process.
More than a decade of policy support was needed to develop China’s dominant
place in the current global EV battery industry, which benefited from a strong basein the form of a well-established consumer electronics battery industry and astrong policy push. The process was similar for China’s solar PV industry, with
policy support dating back to the 10th Five-Year Plan in 2001. Today, China is by
far the largest global supplier at each step of the global solar PV supply chain; ataround 340 GW/year, its manufacturing capacity for PV modules alone is morethan twice the global PV module installations, with manufacturing capacity
utilisation rates for solar components ranging from 40-50% in 2021 (Figure 2.13).
China directly supplies all markets except North America, where the United States
has imposed import tariffs on solar PV elements from China. Chinese companies,
however, have been actively investing in production capacity in Southeast Asia for
supplying the region and exporting to the United States, as these countries are
not subject to the same import tariffs regime.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Global trade flows along the solar PV supply chain, 2021

IEA. CC BY 4.0.
Note: Normalised values based on gigawatts equivalent of capacity.
Source: IEA analysis based on IEA (2022b).

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China accounts for the vast majority of manufacturing and exports globally except to North America. The Asia Pacific region, especially
Southeast Asia, is also a key exporter.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Even though wind turbine components are heavy and bulky, the international tradeof towers, blades and nacelles is quite common. For example, in the
United States, one of the largest wind markets, the domestic content of blades
and hubs is lower than 25% (US DOE, 2022a). Therefore, regions with competitive
labour markets and good availability of resources – such as steel, which accounts
on average for almost 30% of the costs of an onshore wind turbine – may have acompetitive advantage.

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China is also a major player in wind turbine component production, accounting for
60% of global manufacturing capacity and half of total exports, most of which goto other Asian countries and Europe (Figure 2.14). North America was the biggest
net importer in 2021, with one-quarter of imports (calculated on a regional basis)
coming from a diverse set of countries. Due to the high costs of shipping turbine
components, such as blades, nacelles, platforms, towers and vessels, only lessthan a fifth of their global output is traded inter-regionally. In addition, regulatory
and trade policies are increasingly pushing manufacturers to build their supply
chains in the countries in which they are installed. The most common policies
include local manufacturing requirements, subsidies or incentives for building local
manufacturing capacity, and import tariffs. More than 20 countries, including
7 advanced economies, have implemented local content requirements for windenergy, as well as solar PV (PIIE, 2021). For instance, in Brazil, developers are
ineligible for low-cost financing from the country’s development bank unless they
use local equipment (Bazilian, Cuming & Kenyon, 2020). In the United States, the
IRA provides tax credits for domestic production of offshore wind components,
while anti-dumping duties are imposed on several countries, including Canada,
Indonesia, Spain and Viet Nam. The European Union imposes a levy on some
imports of steel towers for wind turbines from China (EU, 2021).

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Global trade flows of wind energy components in USD, 2021

IEA. CC BY 4.0.
Note: Data for wind-powered generating sets were used as a basis to estimate trade for wind nacelles and blades.
Sources: IEA analysis based on Eurostat (for generating sets, wind-powered, DS-645593) Eurostat (2022); US Department of Energy (for wind-powered generating sets, towers, generators,
blades, hubs and nacelles) US DOE (2022a); the US International Trade Commission (for wind-powered generating sets and parts, blades and hubs) USITC (2021); USITC (2022); and analysis
based on IEA investments data IEA (2022e).

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I EA. CC BY 4.0.

China accounts for more than 60% of global wind turbine manufacturing and half of exports, and Europe is the second-largest exporter of windturbines.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Heat pumps are not widely traded
Establishing a domestic manufacturing industry does not always involve exports.
For example, heat pumps within the boundaries of this analysis are traded muchless than solar PV modules, though some individual components are widely
traded. The share of inter-regional trade in global manufacturing is less than 10%
for heat pumps, compared with nearly 60% for solar PV. Heat pumps are relatively
bulky, making them costly to transport. Heat pumps are also adapted to regional
conditions and often not suitable for a market other than the one they were
produced for. For example, the Ecocute water heaters have been developed
specifically for the Japanese market (HPTCJ, 2022). Heat pumps also need tomeet legal requirements in local markets concerning recyclability, efficiency,
voltage, safety and refrigerants. In 2021, Europe and North America were net
importers of mainly heating heat pumps 16, while China, Japan and Korea were net
exporters (Figure 2.15). The market of air-to-air reversible heat pumps, which insome cases have a heating function just as important as the cooling function, ismore dynamic and led by Asian countries which are exporting worldwide.

Associated in this instance to HS product code: 841861, which refer to the narrower definition of heat pumps “Heat pumps;
other than air conditioning machines of heading no. 8415”.

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16

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Global inter-regional trade flows of heat pumps, 2021

IEA. CC BY 4.0.
Notes: HP = heat pumps. Normalised values based on gigawatts of thermal output. heat pump sales and production are based on market data and IEA modelling estimates. trade flows are
based on the UN Comtrade database (harmonised system product code: 841861). Code 841861 refers to “heat pumps other than air conditioning machines of heading no. 8415” (i.e. it
exclusively refers to heating equipment), and it is therefore used as a proxy for “mainly heating heat pumps”. Several additional UN Comtrade codes are associated with heat pump technology:
code 8415 for air conditioners, code 841581 for reversible air-to-air heat pumps, and code 841869 for “refrigerating or freezing equipment, heat pumps other than compression type units whose
condensers are heat exchangers”. However, those groupings include both cooling and heating-oriented equipment.
Sources: IEA analysis based on UN (2022a) and company announcements.

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The heat pump market is regionally compartmentalised. China and North America import very few units, while Chinese imports account foraround 20% of European sales.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Most of the largest heat pump manufacturers are headquartered in the
Asia Pacific region (including China), manufacturing about 75% of the heatpumps sold globally in 2021 (Figure 2.16). Companies with headquarters in Japanaccounted for almost 40% of the global market, and those in China about 30%.
The five largest global manufacturers have their headquarters in Asia Pacific.
However, about half of the production capacity of manufacturers headquartered in
Asia Pacific is located outside of the region.
Manufacturing of heat pumps by companies with headquarters in China is largely
for the domestic market. China hosts about 40% of global heat pump
manufacturing capacity, of which about two-third is from local companies. Most of
the manufacturing capacity in the country is located in just four provinces:
Shandong, Anhui, Zhejiang and Guangdong. Driven by growing domestic andexternal demand, manufacturing capacity in China continues to expand, benefitingfrom complementarities with the air-conditioner industry, with several new Chinese
players emerging each year (AskCI, 2022). To encourage the uptake of more
efficient models and facilitate exports, China is developing more stringent energy
efficiency standards and testing practices to align them with international
standards (ECECP, 2022; Cheng, 2022). China’s heat pump exports almost
doubled in 2021 compared with 2020, driven mainly by demand in Europe, which
has been the main destination of air-source heat pump equipment for several
years.
In Europe, intra-regional trade is common, but the sudden surge in demand forheat pumps in 2021, combined with an open trade policy, led to a sharp increasein imports from outside the continent, almost exclusively from Asian countries.
With about 170 heat pump factories, Europe accounts for about 15% of global
manufacturing capacity (Lyons et al., 2022). Companies with headquarters in
Europe account for about 10% of global heat pump capacity. Europe is a leader
in manufacturing hydronic systems and many companies have markets also
outside Europe, while about half of manufacturing capacity within the region is
owned by companies with headquarters elsewhere. The current energy crisis andpolicy support for heat pumps is attracting investment. Announced expansion
plans in the region suggest that manufacturing capacity in Europe will keep pacewith the expected medium-term growth in demand (see Chapter 4).

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As in other regions, the market for heat pumps in North America is growing
rapidly. In 2021, it accounted for about 30% of global heat pump manufacturing
capacity, mostly in the United States, and enough to cover domestic demand.
Imports to the United States were limited, and foreign companies accounted forabout 70% of domestic production.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

GW thHeat pump manufacturing capacity by company headquarters and plant
location, and installations by region/country, 2021
50
40
30
20
10
0

EuropeNorth America

China

Total manufacturing capacity of companies with HQ in the region

Japan

Korea

ROW

Total manufacturing capacity in the region

Installations

IEA. CC BY 4.0.
Notes: ROW = rest of the world; HQ = headquarters. Blue columns refer to the global manufacturing capacity of firms
headquartered in the country/region, not only their manufacturing capacity in the country/region. Green columns refer to thetotal manufacturing capacity in the country/region, regardless of where manufacturers are headquartered.
Sources: IEA analysis based on company strategy announcements; EHPA (2022); AHRI (2022); Chinabaogao (2022);
JRAIA (2022).

More than half of the heat pumps sold in Europe and North America are manufactured bycompanies headquartered abroad.

Resilience of supply chains
Recent commodity supply disruptions and price rises

Disruptions to supply chains in the last few years alongside rising material andmineral costs have already started to drive up the cost of key clean energy
technologies, which could delay efforts to accelerate the transition. For example,
the average cost of solar PV modules worldwide rebounded by 25% between thefirst half of 2020 and that of 2022, having declined for many years, primarily due
to price increases of material inputs (IEA, 2022e). In particular, the price of PVgrade polysilicon doubled over that period, before dropping again at the end of2022 (Bloomberg, 2023). The cost of wind turbines outside China has also been
rising after years falling, due to supply problems, rising demand, and more

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Global commodity prices have been surging across the board in the last few years
in the wake of supply disruptions resulting from the Covid-19 pandemic, risingdemand as the global economy started to recover, and Russia’s invasion of
Ukraine in February 2022. Electricity shortages in China and the geopoliticalrepercussions of the war in Ukraine, including economic sanctions on Russia andlower gas exports to Europe, have further disrupted supply chains and driven up
the prices of a wide range of commodities. Europe has been hit particularly hardby higher gas prices, which have driven up electricity prices. Clean energy
technology supply chains have been affected by sanctions on Russia, such as
those of EV batteries, since Russia is a leading producer of Class 1 nickel.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

expensive inputs: copper and steel prices doubled between the first half of 2020
and that of 2022. While Chinese wind turbine prices continued to fall by around
40% over this period, they rose elsewhere by up to 20% (BNN Bloomberg, 2022).
Spiking prices of cobalt, lithium and nickel in the beginning of 2022 led to higher
battery pack prices, which rose by 7% in real terms on average in 2022 relative to2021, with significant regional disparities: up 24% in the United States and 33% in
Europe while remaining cheapest in China (BNEF, 2022b). Even low-cost cathodechemistry battery packs such as lithium iron phosphate increased – by 27% – dueto their exposure to lithium carbonate prices. Leading EV carmakers, including
Tesla and Ford, have raised prices and lowered profit forecasts as a result ofhigher battery prices and the rising cost of other raw materials and components(Reuters, 2022; Lambert, 2022).
Recent high energy prices have also contributed to higher production costs forenergy-intensive bulk materials such as cement, steel, ammonia and other metals.
As the base inputs to many other supply chains, the effects have been farreaching. The EU steel industry has been particularly affected, with production
from August to October about 15% lower in 2022 than in 2021 due to record gas
and electricity prices (Worldsteel, 2022b). Chinese steel production dropped byover 6% year-on-year in the first half of 2022, due to coal and electricity shortages
and reduced construction demand, partly caused by the impact of measures tocurb the spread of Covid-19 (China, MIIT, 2022). Electricity shortages wereexacerbated by a reduced hydropower supply due to drought and surging demandfor cooling due to a heatwave, resulting in lower industrial output. For example, alarge proportion of industrial manufacturing in 19 cities in Sichuan was shut down
for six days in August 2022 (Sohu, 2022).
International prices of selected critical and bulk materials and energy
Critical materials
1 000
Index

EnergyBulk materials
400

1 000

750

300

750

500

200

500

250

100

250

0

2015

2017

2019

2021

2023

0

2015

2017

CobaltLithium

NickelAluminium

Platinum

CopperSilicon

Steel

2019

2021

Concrete2023

02017 2018 2019 2020 2021 2022 2023
Asian spot LNG

Brent

EU imported coal

German power

TTF MA

IEA. CC BY 4.0.
Notes: LNG = liquefied natural gas; TTF MA = Title Transfer Facility. Prices are quarterly values indexed to the beginningof 2015 for critical and bulk materials, and to the beginning of 2017 for energy prices. German power values are monthly
averages.
Sources: IEA analysis based on S&P Global (2022b) and Bloomberg (2022a).

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Global commodity prices have surged due to increasing demand and supply disruptions
caused by the Covid-19 pandemic, China’s energy crisis and Russia’s invasion of Ukraine.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

The Covid-19 pandemic has also had an adverse impact on industrial supply chains,
contributing to the jump in commodity prices in 2021 (Figure 2.17). For example,
during the first wave in India in early 2020, industrial output dropped by over 60%
between February and April as the country experienced a strict lockdown with some
sectors ceasing activity entirely; it took about five months for output to recover fully.
In the second wave in early 2021, no mandatory lockdown and better supply chain
preparedness limited the speed and severity of the fall in Indian industrial output toabout 20% between March and May, with a similar recovery time. The steel andcement industries were hit particularly hard by the initial restrictions on economic
activity, with production falling by approximately 75% for steel and 85% for cementin the first wave, while declines were limited to 10-20% in the second wave
(Government of India, 2022).

Impact of higher costs on clean energy technologies
Increases in energy and other commodity prices can affect specific clean energy
technologies in different ways and to varying degrees, mainly according to the extent towhich they depend on different types of commodities, including energy (Figure 2.18).
Industry prices of energy, especially gas and electricity, vary greatly across regions, andso do price trends in case of disruption. In contrast, prices of non-energy commodities
tend to be more homogeneous globally, with some exceptions.
Some technologies are heavily dependent on bulk and critical materials, with
manufacturing accounting for a smaller share of their total cost. For example, bulk andcritical materials make up a large share of the total cost of supplying EV batteries andmanufacturing electric cars, fuel cell trucks, heat pumps, solar PV panels and windturbines (Figure 2.19).
In the case of cars, the cost of critical materials for EVs – and that of bulk materials forboth EVs and conventional vehicles – is much higher than the energy costs associatedwith manufacturing and assembly. While the cost of parts and vehicle manufacturing
and assembly can also be exposed to energy price disruptions such as that of naturalgas, they are much more exposed to disruptions in the costs of bulk and criticalmaterials. Depending on the country of production, the aggregate cost of criticalmaterials to produce an EV may be three to six times higher than the cost of the energy
needed for manufacturing – and it is seven times higher than the cost of the criticalmaterials needed for an ICE vehicle. Overall, the energy costs in manufacturing an EV
can be 10% higher than those for an ICE vehicle.

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Higher energy costs have driven up the cost of producing critical minerals, the extraction
and processing of which are particularly energy-intensive. In most cases, mining andrefining such minerals are more energy-intensive per tonne than for aluminium andsteel, although the volumes used in clean energy technologies are much smaller. For
certain critical materials, a large share of the energy currently used for these steps,
much of it for refining, is in the form of natural gas: 35% for cobalt and nickel, and 50%
for manganese. Higher gas prices have also driven up the price of electricity, whichmakes up much of the rest of the energy used in mining and processing for many ofthem. The extent to which gas and electricity prices have risen varies enormously acrossregions, resulting in big shifts in the relative competitiveness of manufacturers, with
European mineral refiners being disadvantaged the most.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Bulk materials

Energy intensity of extracting and producing selected critical and bulk
materials, and of manufacturing selected energy technologies, 2021
CementAluminium
Steel
Neodymium oxide

Critical materials

CobaltManganese
Nickel (Class I)
Lithium carbonate
Copper020
kWh/kg

1030

FC truckTransport

Electric truck
ICE truck
Electric car
ICE car
0

10

20

30

40

50

60

Buildings

MWh/vehicle
Boilers
Heat pumps
0

20

40

60

80

100

120

Power

MWh/MW
Wind
Solar PV
0

50

100

150

200

250

300

350

MWh/MW
Electricity

Coal

Natural gas

Oil

IEA. CC BY 4.0.
Notes: FC = fuel cell. Critical and bulk materials include energy intensity from mining and processing raw ores. Primary
production only. The estimate for wind power assumes a permanent magnet of 650 kg with an energy intensity of
119.0 megajoules/kg.
Sources: IEA analysis based on Hongyue Jin et al. (2018); Siemens Gamesa (2021); Goldwind (2021); Vestas (2021).

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The extraction and processing of critical materials and the manufacturing of clean energy
technologies are highly energy-intensive, relying mainly on fossil fuels.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

ICE carElectric car

Average manufacturing cost breakdown of selected energy technologies
and components by commodity, 2019-2021
Critical materials
Bulk materials
Energy (CHN)
Energy (EUR)
Energy (US)Critical materials
Bulk materials
Energy (CHN)
Energy (EUR)
Energy (US)ICE truck

FC truck

0200

Heat pump

600

800

1 000

1 200

1 400
1 600
USD/vehicle

Critical materials
Bulk materials
Energy (CHN)
Energy (EUR)
Energy (US)Critical materials
Bulk materials
Energy (CHN)
Energy (EUR)
Energy (US)0

Gas boiler

400

2 000

4 000

8 000

6 000

10 000

12 000USD/vehicle

Critical materials
Bulk materials
Energy (CHN)
Energy (EUR)
Energy (US)Critical materials
Bulk materials
Energy (CHN)
Energy (EUR)
Energy (US)

0

5

10

15

20

Solar PV

Exc. Poly-Si Poly-Si

Wind

USD/kW
Critical materials
Bulk materials
Energy (CHN)
Energy (EUR)
Energy (US)Energy (CHN)
Energy (EUR)
Energy (US)Critical materials
Bulk materials
Energy (CHN)
Energy (EUR)
Energy (US)0Electricity
Nickel

20

Coal
Zinc

40

Natural gas
Aluminium

60

Oil
Cement80

Cobalt
Steel

100

CopperSilicon120
USD/kW
Lithium

IEA. CC BY 4.0.
Notes: CHN = China; EUR = Europe (France, Germany, Italy, the Netherlands and Poland). Average prices over
2019-2021 are used, with the exception of electricity in China (average over the first half of 2022). Energy costs refer to thecost of energy used to manufacture vehicle parts and assemble the vehicle, including material transformation steps and EV
battery assembly, but excluding mining and production of materials. For oil, prices of liquid petroleum gas are used, or thatof light fuel oil, gasoline or diesel, depending on data availability. Global average prices are used for critical and bulk
materials.
Sources: IEA analysis based on S&P Global (2022b); USGS (2022); Saoud, Harajli & Manneh (2021).

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Materials generally account for a greater share of total manufacturing costs than energy. It
can be more expensive to produce clean energy technologies than incumbent ones.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Higher energy costs have also depressed the production of ammonia, especiallyin Europe, where the price of natural gas – the leading feedstock – has increased
most (Box 2.3). The cost of producing ammonia depends heavily on the price ofenergy. Around 70% of European ammonia production capacity had been taken
offline in August 2022, with an estimated 40% remaining offline in October despite
reductions in gas prices (IFA, 2022). Ammonia production had already been
disrupted in 2021 by various gas supply disruptions, including in the United States,
where the availability of natural gas was hit by cold weather and the effects of
Hurricane Ida (American Farm Bureau Federation, 2022). As a result, US
ammonia prices increased sixfold between the first quarter of 2020 and that of2022 (Bloomberg, 2022b). Higher ammonia prices worldwide have pushed up thecost of ammonia-based fertilisers and, therefore, contributed to food priceincreases: the Food and Agriculture Organization index of food prices jumped bya third over the year to March 2022 to an all-time high (UN FAO, 2022). Global
demand for ammonia is relatively price inelastic as 70% of ammonia is used formaking fertiliser. As a result, reduced supply has a significant impact on foodprices with catastrophic consequences for food supply, especially in emerging
economies (IEA, 2022f).
The effects of higher energy prices on industries and products further down the
supply chain are often less obvious, but no less important. For example, AdBlue– a fuel additive used to reduce emissions from diesel cars and trucks – is a crucialcomponent in the trucking industry. It is derived from urea, which is also a key
ingredient in fertiliser production, produced using natural gas. High natural gas
prices in China in 2021 led to restrictions on the export of urea to support thedomestic fertiliser industry. This led to a critical shortage of AdBlue in Korea andAustralia in December 2021, with prices in Australia quadrupling. More recently,
reduced urea production in Germany has led to a sharp fall in inventories of
AdBlue and much higher prices across Europe.

Box 2.3

Resilience and vulnerabilities in the ammonia supply chain

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Ammonia offers a good example of how supply chains can be resilient orvulnerable to disruption. Global ammonia production held up well compared withother industrial sectors at the start of the Covid-19 pandemic and rebounded in
2021. Producing alternatives to ammonia-based products is particularly difficult,and the near-term potential for demand-side substitution is limited. Demand forammonia-based fertiliser is relatively price-inelastic, i.e. demand responds little tochanges in price, so that modest reductions in supply result in much bigger
increases in price. Despite this, production fell back in 2022 with higher natural
gas prices, which have driven up costs significantly and made production in someparts of the world, notably Europe, uneconomic.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Ammonia production is widely distributed around the world, with trade
representing around 10% of world output (30% for urea – the main derivative ofammonia) (IEA, 2021b). There is an extensive network of port, pipeline andstorage facilities, generally specifically dedicated to ammonia or derivatives.
Demand is highly seasonal, so storage capacity is large. For example, capacity in
the United States amounts to about half of its annual production, spread acrossmore than 10 000 facilities (Royal Society, 2020). Trade provides a degree of
flexibility in ammonia supply, helping to limit fluctuations in ammonia prices in theevent of short-term changes in production or demand, though changes in shipping
patterns can still take months or even years. Building new infrastructure can takeseveral years, which is longer than for other materials that do not require
specialised facilities and can use existing flexible infrastructure that can be quickly
refitted. The development of new markets for ammonia, such as use as a marinetransport fuel, would add to the need for additional storage and production
capacity.

USD/tonne

Average ammonia production costs by technology and component
in selected regions/countries, 2022
1 800
1 600
1 400
1 200
1 000
800
600
400

Australia

Chile, Colombia

Capital expenditures

China

Natural gas

EuropeIndia

Operational expenditures

Middle East

Electricity

Electrolysis
Solar PV

SMR

Electrolysis
Solar PV

SMR

Electrolysis
Solar PV

SMR

Electrolysis
Solar PV

SMR

Electrolysis
Solar PV

SMR

Electrolysis
Solar PV

SMR

Electrolysis
Solar PV

0

SMR

200

United States

TTF

IEA. CC BY 4.0.
Notes: TTF = Title Transfer Facility. For natural gas, average industrial prices from January to October 2022 havebeen used; the dashed area for Europe represents the additional cost of using the TTF natural gas price. Capital
expenditures include the costs of the installed plant, assuming a cost of capital of 5%. Natural gas costs are in therange of USD 7/MWh to USD 80/MWh (USD 140/MWh in the case of TTF), electricity costs are in the range
USD 20/MWh to USD 30/MWh. Costs related to carbon pricing, where applicable, are included in the operational
expenditures.

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The heavy dependence of ammonia production on fossil energy is a key supply
chain vulnerability for fertilisers and other ammonia-based products (Figure 2.20).
About 70% of all the ammonia produced worldwide in 2021 was based on naturalgas, with coal supplying the bulk of the rest. Being both feedstock and raw
material, gas and coal make up a greater proportion of the total cost of producing
ammonia than for many other commodities such as steel. Gas and coal markets

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

can be very volatile, making ammonia production highly vulnerable to geopoliticaland other factors that affect supply in the near term. As a highly tradeablecommodity, ammonia producers in regions where gas prices are highest may beforced to idle capacity at times when production is uneconomic.
Diversifying sources of gas as a way of lowering prices – the approach being
adopted by Europe in the face of a shortfall in Russian gas – can take years. In
the longer term, switching to renewable hydrogen from electrolysis would makeammonia supply chains more resilient, but that production path generally remains
more expensive for now despite higher gas prices.

Impact of mineral price rises on mining company profits
The recent surge in commodity prices has led to a sharp increase in the profits offirms involved in the extraction of raw materials, including fossil energy andminerals, and the production of bulk materials such as cement, steel andaluminium (Figure 2.21). Companies involved in extracting critical minerals,
notably lithium, nickel and copper have enjoyed the biggest gains in profits, with
the increase in the prices of those metals more than offsetting the effect of higher
energy costs. This is boosting the attractiveness of new investment in mining
projects, though the lead times are generally very long. Firms in the middle of the
supply chain that produce bulk materials have seen more modest improvementsin their profitability as energy accounts for a large share of production costs. Metal
refiners and smelters have generally profited less from higher commodity prices
as they have been harder hit by higher energy costs, especially in Europe, wheresome have been forced to halt operations.

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By contrast, the profit margins of several manufacturing industries have beensqueezed by the increase in the costs of bulk materials and energy. In the case ofwind equipment manufacturing, steel and concrete account for a large share ofcosts, which cannot always be passed quickly on to buyers with higher prices,
thereby reducing their margins. In the long term, however, higher fossil energy
and electricity prices should boost the competitiveness of wind power and otherrenewable generating technologies, increasing demand for turbines, despite
higher installation costs.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Return on assets of companies in selected upstream, bulk materials andmanufacturing sectors
Return on assets

Upstream

Bulk materials

Manufacturing

20%

20%

20%

15%

15%

15%

10%

10%

10%

5%

5%

5%

0%

2016 2018 2020 2022

Metal mining
Coal mining

Oil and gas
Mineral mining

0%0%2016 2018 2020 2022
Steel
Aluminium

Cement2016 2018 2020 2022
Automotive
Wind

HVAC
Solar PV

IEA. CC BY 4.0.
Notes: Mineral = critical minerals; HVAC = heating, ventilation and air conditioning; Wind = wind power equipment.
Source: IEA analysis based on Bloomberg data.

Higher commodity prices have boosted the profits of firms involved in the extraction offossil energy and minerals, and – to a lesser extent – producers of bulk materials.

Box 2.4

Stockpiles of critical minerals and energy security

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Maintaining adequate stockpiles of vital material and components is essential forcompanies to handle any temporary disruptions or dislocations in supply. Strategicreserves to handle more severe disruptions are the responsibility of governments.
The practicalities and costs involved in maintaining commercial inventories vary
greatly, according to the type of material, the quantities consumed and theseasonality of demand for the final product. For example, solids are generally
easiest to store, followed by liquids and then gases. Commodities for which
demand is seasonal, such as ammonia used for making fertiliser, generally requirelarger inventories.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Global inventories as a share of annual consumption for selectedbulk materials, minerals and fuels
20%

10%

0%

Aluminium

Cadmium

CopperLead

NickelTin

Zinc

Crude oil

Natural gas

Fossil fuels

MetalsIEA. CC BY 4.0.
Note: Metals represent average inventory 2016-2021 and its annual variability over the time period.
Source: IEA data; WBMS (2022).

Current commercial stockpiles are generally much larger for bulk commodities, oiland gas than for critical minerals, reflecting mainly the greater seasonality ofdemand and, in the case of oil, the heightened risks of disruptions and the large
costs associated with them (Figure 2.22). In addition, a disruption to mineral
supplies would be less immediate than a disruption to oil supplies, as it would
influence production of new equipment and products only rather than the use ofexisting equipment. However, critical mineral supplies are currently moregeographically concentrated than that of oil. Lack of data and storage at different
stages of products make assessing total global inventories for bulk materials suchas cement, steel and ammonia difficult, with only limited data points available. For
example, Chinese steel inventories were estimated to be around 37 Mt (4% ofnational production) before the Covid-19 pandemic, and new estimates suggest
they ballooned since to approximately 100 Mt due to weak demand (S&P Global,2020). Companies need to balance the cost of maintaining inventories with theflexibility they provide as critical minerals become a more important part of the
global energy system.

Digitalisation of supply chains
Digital technologies can speed up the energy transition

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Digital technologies can improve efficiency, reduce costs and accelerate innovation
across clean energy supply chains, but they need to be made resilient to a numberof threats. There are many ways in which they could contribute to speeding up theclean energy transition (Table 2.2). They can help optimise the operations ofelectricity systems (Wind Europe, 2021; ETIP Wind, 2016; GE, 2015). MachineEnergy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainslearning (ML) can accelerate the development and discovery of novel battery
materials to reduce the use of critical materials in EV batteries, as well as improve
supply and demand forecasting and real-time analysis of grid conditions (DeepMind,2019). Satellite imaging and machine learning can help identify locations of higher
solar and wind output. Blockchain technology can enhance transparency andtracking of critical materials and enhance the environmental, social and corporate
governance of minerals extraction. Product passports can facilitate recycling by
providing information on material composition.
The resilience of digital hardware and components is becoming increasingly
important as energy and other systems become more reliant on digital technologies.
For example, semiconductor chips are essential for nearly every electronic device,including EVs, solar panels and electricity grids (Table 2.3). The average EV
contains 2 000 to 3 000 chips – two to three times more than in a conventional car(Yoon, 2021).
Examples of digital technology use across clean energy supply chains
Clean energy
supply chains

Materials extraction
and processing

Manufacturing
and installation

EVs
Solar PVWindElectrolysers
CCUS

Smart and connectedmining to improvesafety, boost
throughput and reduce
emissions.
Blockchain to enhancetransparency andtracking of criticalmaterials andincentivise high ESG
performance.
ML to accelerate
development of novel
battery materials andscreen alternative
processes forhydrogen production
and potential catalysts
for CCUS.

ML and digital
twins to optimise
EV battery design
and performance.
3D printing ofsolar PV and fuelcells to reducematerial use,
boost performanceand improve
durability.

Operation

Digitally enabledshared andautomated mobility to
reduce mineraldemand.
ML-optimised EV fast
charging protocols to
reduce battery
degradation.
Predictive
maintenance through
IoT, ML and drones
to increase efficiency
and extend lifetimes
of solar PV, wind andgrids.

End of life andrecycling
Product passports tofacilitate recycling.
ML and robotics to
improve waste
recovery.
Digital platforms tohost secondary
materials markets.
Digitally connecteddismantling andprocessing plants toaggregate waste
volumes.

PAGE | 129

I EA. CC BY 4.0.

Note: IoT = Internet of Things.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Use of semiconductors in clean energy technologies
Semiconductor materials

Applications in clean energy technologies

Photovoltaic semiconductors

Solar cells in conventional, thin film and perovskite PVs

Wide bandgap semiconductors(SiC, GaN)Power electronics in solar PV, other renewables and grids, EVs,and electrified industry

Conventional semiconductors

Electronics and communication in solar PV, other renewables,
grids, EVs, efficient computing, and electrified and efficientindustry

Note: SiC = silicon carbide; GaN = gallium nitride.
Source: Adapted from US DOE (2022b).

Box 2.5

The chip shortage is holding back the deployment of EVs

The ongoing global chip shortage has had a severe impact on several clean energy
technologies, notably EV manufacturing. The shortage took hold in 2020, driven
by surging demand for computers and other consumer electronics during the earlydays of the Covid-19 pandemic and shortages caused by the temporary closure offactories and supply chain disruptions during lockdowns. The supply shortage has
been exacerbated by fires in semiconductors plants in Japan and Germany, power
outages affecting factories in Texas, and severe droughts in Taiwan.
Global supply, nonetheless, rebounded in 2021 to 1.15 trillion units, worth a record
USD 550 billion in 2021 – an increase of 26% (SIA, 2022a). Computing andcommunications each accounted for around 30% of the market, while end uses forenergy – automotive and industrial – each accounted for 12% (SIA, 2022b). Withstrong growth in EVs and automated driving, the automotive industry could
represent nearly 15% of semiconductor demand by 2030, up from 8% today(McKinsey, 2022). McKinsey projects that the global semiconductor market could
exceed USD 1 trillion by 2030, with automotive and industrial electronics demand
growing on average by 11% per year – twice as fast as computing,communications and consumer electronics.
The United States accounted for nearly half of the global market by revenue in
2021 but only 12% of manufacturing capacity, down from 37% in 1990
(Figure 2.23) (SIA, 2022c). Asia accounted for nearly three-quarters of global
manufacturing capacity, led by Taiwan (22%) and Korea (21%) (Varas et al.,2020). China is expected to add about 40% of the new capacity that is expected
to come online by 2030, becoming the largest semiconductor producer. It is
unclear how legislation introduced in the European Union and the United States toboost domestic semiconductor innovation and manufacturing will affect the market.

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The energy cost crisis is also having an impact on chip manufacturing, which ishighly energy- and water-intensive, with energy costs accounting for a significant

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainsshare 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 inelectricity prices in Taiwan could cause knock-on effects on chip cost and supply(Bloomberg, 2022a).
Semiconductor manufacturing capacity and market share revenue,
2021
By country

By sector

100%

100%
Other

80%

China
Taiwan60%

Europe
Japan

40%

Korea
US

20%
0%

Manufacturing
capacity*80%
Government

60%

Industrial
Consumer

40%

Automotive
Communications

20%
0%

Market share

ComputingMarket share

IEA. CC BY 4.0.
* Manufacturing capacity figures are for 2020.
Note: Market shares are based on 2021 revenues.
Sources: Varas et al. (2020); SIA (2022c).

Cybersecurity risks are growing
As the energy system becomes more digitalised, connected and automated,cybersecurity risks are increasing. Hackers are becoming increasingly
sophisticated, with successful attacks triggering the loss of operating control overdevices and processes, in turn causing physical damage or service disruption.
There are many ways in which cyberattacks could affect energy systems, such asa virus infiltrating an industrial control system through USB flash drives, themanipulation of a large number of high-wattage connected devices orcompromised equipment from supply chain vulnerabilities (IEA, 2021c).

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The supply chains of power systems are particularly vulnerable to cyberattacks.
For example, malicious code can be inserted into software at an early
development phase, with back doors built into hardware to enable remote accessafter installation, thereby allowing attackers to steal data or disable systems. Thishighlights how the resilience of the system also depends on the level of cyber
resilience of each stakeholder along the supply chain.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Supply chain sustainability
Reducing emissions from the mining, processing, manufacturing and transport ofmaterials and final clean energy products is essential as their deployment
increases. The upstream steps of clean energy technology supply chains today
are generally more emissions-intensive than downstream ones, mainly because
the required temperature of thermal processing is higher and because lowemission alternatives to fossil fuels, including electricity, are not yet widely
available. The task of reducing supply chain emissions is made harder by thesheer rate of growth of supply expected in the coming years, as well as theprospect of a decline in the quality of critical mineral resources, which means moreenergy is needed to produce a tonne of those minerals.

Carbon intensity
Clean energy technologies are, by definition, capable of providing services without
directly emitting a significant amount of CO2, but their supply chains may do,depending on the type of energy used in the production processes andtransportation. The earlier steps of clean energy technology supply chains today
are generally more emissions-intensive than later ones, mainly because thetemperature of thermal processing is higher and because practical low-emission
alternatives to fossil fuels, including electricity, are not yet available. Material
production is typically the most energy-intensive step and, consequently,
generates the most CO2 emissions. Globally, steel, aluminium, cement, paper andchemicals production together emit three times more than all other industries
combined. In the case of EV batteries, mining and material production currently
account for more than 50% of the total emissions associated with its production(Figure 2.24). Achieving net zero would require that these emissions are
eliminated or balanced by emission removal in other sectors (see Chapter 1).
The mining, material production and manufacturing segments of clean energy
technology supply chains tend to be more energy- and emissions-intensive thanthose of conventional fossil energy. However, those emissions are often balancedby much lower direct emissions from operation (Figure 2.25). While the
manufacturing of an EV today emits on average around 50% more CO2 than anequivalent ICE car, this difference is more than offset by the much higher
emissions from the oil used in driving an ICE vehicle over its lifetime comparedwith those from generating the electricity used for driving the EV. Calculated on awell-to-wheels (or life-cycle) basis, an EV currently emits on average 50% less
CO2 than an ICE car worldwide. This advantage will continue to grow as electricity
systems decarbonise.

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The emissions savings from switching to clean energy technologies are
considerably larger when the life-cycle emissions associated with the supply ofEnergy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

fossil fuels, including the construction of upstream, transportation and refining
facilities and their operations, are taken into consideration (Scope 1-3). 17 For
example, drilling oil and gas wells and building refineries require large quantities
of cement and steel, while operating those facilities calls for significant amountsof energy, usually in the form of natural gas, fuel gases obtained on-site andelectricity (generated on-site or supplied from the grid). We estimate that those
supply chain emissions amount to around 19 kg of CO2 equivalent per GJ of oil,representing about 20% of its average life-cycle emissions, 16 kg per GJ of gas(20%) and 12 kg per GJ of coal (10%).
Supply chain step shares in total CO2 emissions from the production ofsolar PV, wind turbines, EVs and heat pumps, 2021
100%
Technology
manufacturing

75%

Material production
50%
Mining25%

0%

Share indirectemissionsPV

Onshore wind

EV battery

Heat pump
IEA. CC BY 4.0.

Notes: Includes direct and indirect emissions, with indirect emissions comprised of emissions for electricity generation andthe production of chemicals used for mining and material production. Onshore wind and solar PV technology manufacturing
does not include transport and installation. EV battery values refer to NMC 333 battery type. “Manufacturing” in EV
batteries includes the emissions related to the production of components such as the cathode, as well as the assembly of
the battery pack. An emission factor of 458 g CO2/kWh is used to calculate electricity-related emissions.
Sources: IEA analysis based on Emilsson & Dahllöf (2019); Naumann, Schropp & Gaderer (2022); IEA (2022b); Argonne
National Laboratory (2022); Siemens Gamesa (2021); Vestas (2021); Goldwind (2021).

Material production and technology manufacturing account for most of the CO2 emissionsof the selected clean technology supply chains.

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17
Direct emissions, also called Scope 1 emissions, include emissions from fuel used during operations and process
emissions. Indirect emissions are either associated with the generation of purchased electricity, steam and heat (Scope 2)
or any other emissions related to the purchase of goods and services used in manufacturing (Scope 3).

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Global average life-cycle greenhouse gas emissions intensity of selectedenergy technologies, 2021
Power generation (kg CO₂-eq/MWh)Gas
Coal
NuclearHydropower
Solar PV utility
Wind onshore
0

200

400

800

600

1 000

1 200

Heating (t CO₂-eq/kW)
Gas boiler
Heat pump
0

2

4

6

8

10

12

14

16

60

70

Light-duty vehicle (t CO₂-eq/vehicle)
ICE
EV
0

10

20

30

50

40

Trucks (t CO₂-eq/vehicles)
ICE
H₂
0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Hydrogen (t CO₂-eq/t H₂)
SMRElectrolysis
0
Materials & manufacturing
Operation – Direct emissions
Other emissions

2

4

6

Materials
Operation – Power supply emissions

8

10

12

Manufacturing
Operation – Other supply emissions

IEA. CC BY 4.0.
Notes: FC = fuel cell (powered by hydrogen); CO2-eq = carbon dioxide equivalent. Stacked bars represent an average casewhile error bars represent low and high cases. Materials include resource extraction and processing. Manufacturing
includes manufacturing of components and of the final product. Direct emissions are emissions from fossil fuel consumed
during operation. Power supply emissions are those associated with the electricity consumed during operation. Other
supply emissions include indirect emissions from fossil fuel and hydrogen production and refining. Other emissions include
methane and refrigerant emissions. Power generation emissions are over the average lifetime of a power plant. For
vehicles, disposal and recycling are not included. The average distance travelled assumed is 200 000 km for a car and1.6 million km for a truck. Fuel cell trucks emissions’ higher bound use SMR-based hydrogen while the average and lower
bound use electrolysis-based hydrogen. It is assumed that EVs have a battery capacity of 55 kWh. For heat pumps, it isassumed that 50% of the refrigerant is vented to the atmosphere in the average case (20% for low and 80% for high). The
coefficient of performance (which measures the efficiency of input to output of energy) is assumed to be 3/4/5(low/medium/high) for heat pumps and 0.85/0.90/0.98 for gas boilers. For EVs and heat pumps, the emissions intensity ofelectricity is considered at 27/458/602 g CO2/kWh (low/medium/high). For electrolysis, we assume power provided by lowemission energy sources: 5/37/82 g CO2/kWh. For natural gas, 8 kg CO2-eq/GJ of upstream emissions and
8 kg CO2-eq/GJ for methane emissions are assumed. For oil products, those values are 12 and 7 kg CO2-eq/GJ
respectively. For more information on those technologies, please refer to other IEA publications such as the Global EV
Outlook 2022 or the Global Hydrogen Review 2022.
Sources: IEA analysis based on Schlömer et al. (2014); Naumann, Schropp & Gaderer (2022); IEA (2021a); Argonne
National Laboratory (2022); UNECE (2021).

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The upstream steps of clean energy technology supply chains tend to be more energy- andemissions-intensive than those for fossil energy, but clean energy technologies emit far
less in operation.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Heat pumps contain refrigerants with damaging climate potential if released in theatmosphere. In the case of the widely used R-134a refrigerant, emissions areequivalent to 1 430 kg CO2 per kilogramme. Despite the ongoing shift towards
lower GWP refrigerants, it is vital that leakages are avoided during the operationand decommissioning of heat pumps. Their use is being phased out under the
Kigali Amendment to the Montreal Protocol, which was signed in 2016 andbecame effective in 2019 for 145 countries covering 80% of global greenhousegas emissions (UN, 2022b; IEA, 2022g).
Carbon intensity today varies widely across the minerals and materials needed forclean energy supply chains (Figure 2.26). For some, intensity also varies acrosscompanies and regions according to site-specific factors, operational practices,
the source of power, the fuels used and production pathways. In general, cobalt
is much more energy- and carbon-intensive than steel, though much smaller
amounts are usually needed to make specific products. For example, an EV
typically requires around 7 kg of cobalt compared with 920 kg of steel and 220 kgof aluminium (Argonne National Laboratory, 2022). In addition, emerging sourcesof lithium and nickel are likely to be more energy-intensive than current ones,
which could lead to higher emissions unless mining and processing companies
switch to lower-emissions fuels (see Chapter 3). Indirect emissions associatedwith the supply of electricity or chemicals further increases the carbon footprint.
For instance, Class 1 nickel emissions intensity jump from 3.4 tonnes of CO2 per
tonne to 8.9 tCO2/t when indirect emissions are included.

200

20

150

15

100

10

50

5

0

kg CO2 / kg

MJ / kg

Global average primary energy and CO2 emissions intensity of mining andprocessing of selected critical and bulk materials, 2021

CopperLC frombrine

LC from Manganese
spodumene

Mining energy

CobaltClass 1nickel

Processing energy

Nickel Neodymiumhydroxide
oxide

Steel

Aluminum0

Emissions intensity (right axis)

IEA. CC BY 4.0.
Notes: LC = lithium carbonate; MJ/Kg = megajoules of energy used to produce a kg of material; kg CO2/kg = kilogrammesof CO2 emitted in producing a kilogramme of material. Only direct emissions are considered. Neodymium oxide values arefor production from bastnäsite ore.
Sources: IEA analysis based on Argonne National Laboratory (2022); IEA (2021a).

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Carbon intensity varies widely across minerals and materials, according to operational
practices, ore grade, power sources, fuels and production pathways.

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Other environmental impacts of critical minerals
Exploiting mineral wealth can, in principle, create economic value, improve
livelihoods and generate tax revenue. However, it can entail harmfulenvironmental consequences other than emissions, including biodiversity loss andsocial disruption due to land-use change, water depletion and pollution, waste,
and air pollution. While mining, by the very nature of the activity, will always havean impact on the local environment, it should be carried out in a way that minimises
damage and avoids perpetuation of environmental injustice through effective
regulation and responsible corporate practices. The public and investors are
increasingly demanding that companies address environmental concerns, andfailure to do so can undermine their reputation, question their social licence tooperate, hinder their ability to raise capital, and even expose them to legal action.
Water needs for mining and processing critical minerals are often very high,leading to concerns about water stress and wastewater treatment. For example,
producing just 1 tonne of lithium requires on average 330 m3 of water. Water
needs for copper or cobalt are lower at 30 m3/tonne to 60 m3/tonne (Table 2.4).
Critical minerals generally require more water than other types of heavy industry.
The impact is further increased by the fact than the production of certain minerals
is concentrated within already water-stressed regions, such as lithium near the
Atacama Desert region.
Mining and processing of those minerals also generate large amounts of
non-water waste, compared with other materials, such as iron and steel andaluminium (Nassar et al., 2022). The rock-to-metal ratio – the quantity of rockextracted and treated to produce 1 kg of metal – averages 250 kg of rock per kg
of nickel, 860 for cobalt and 830 000 for platinum, compared with just 9 for ironand 7 for aluminium. This means that an Olympic swimming pool’s worth of waste
rock is produced for 6 kg of platinum, which is needed to produce the fuel cellcomponents of about 50 fuel cell trucks. The rock-to-metal ratios of criticalminerals are higher because their concentration in the ground is much lower.
Treating and disposal of mining waste, including water, is a massive undertaking(Box 2.5).

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The impact of mining operations, including cuts, tailing dams and plants, on theland is far from negligible, covering an estimated 100 000 km² of the planet’s
surface – an area comparable to the size of Iceland (Maus et al., 2022). There arearound 1 600 mining operations in key biodiversity areas and a further 2 000 in
protected areas, including 33 in world heritage sites (UNEP, 2020).

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

Environmental impact of mining for selected minerals
Water use
(m3/tonne)

Share in water
scarce areas (%)

Rock-to-metal
ratio(tonnes/tonne)

Share inAcidic wastebiodiversity risk
(tonnes/tonne)
areas (%)

Coal

0.2

20%

N.A.

N.A.

25%

Iron

0.6

50%

9

N.A.

20%

Bauxite

0.4

35%

7

N.A.

17%

Nickel

53

9%

250

18

54%

Cobalt

57

6%

860

4

80%

Lithium

330

75%

1 600

2

2%

Copper

32

39%

510

67

20%

Neodymium

630

13%

N.A.

2 400

1%

Gold

N.A.

25%

3 000 000

N.A.

15%

Platinum

N.A.

80%

8 300 000

N.A.

N.A.

Notes: Ratios are for pure elements. The water use for neodymium is for REE production as a whole. The rock-to-metal
ratio of lithium refers only to production from hard rock while the water use value refers to brine. Coal biodiversity risk uses
thermal coal values. Share in water scarce areas represents the share of production located in countries with moderate tovery high water scarcity risks according to the WWF, while share in biodiversity risk areas is based on Verisk Maplecroft
data.
Sources: IEA (2021a); Nassar, et al. (2022); Eurometaux (2022); Argonne National Laboratory (2022); USGS (2009);
Verisk Maplecroft (2021); WWF (2021); BP (2021).

Box 2.6

Mining waste stored behind tailings dams

Mining of minerals inevitably results in residues called tailings, including groundrock, unrecoverable and uneconomic metals, chemicals, organic matter, andeffluent, which are often stored in reservoirs created by tailings dams, in the form ofa slurry of fine particles. Tailings contain hazardous substances that can be highly
toxic and even radioactive. Solid tailings are often used as part of the structure of
the dam itself. These reservoirs are needed to prevent fine particles that result fromthe grinding of the rock from being released into the air and water and harming theenvironment.

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Tailings dams, of which there are thought to be around 3 500 throughout the world,
are among the largest engineered structures on earth. They are usually intended
for long-term or permanent storage. Poor construction and maintenance, combinedwith extreme climatic events, can lead to catastrophic dam failure, such as the 2019
Brumadinho Dam disaster in Brazil, which killed more than 260 people. The failure
rate of tailings dams is estimated to be two orders of magnitude higher than that ofEnergy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chainsconventional water dams (Azam & Li, 2010). Leakages are also a major risk for theenvironment and local populations.
More environmentally acceptable means of disposing of tailings will need to befound. Alternative solutions under development include reprocessing some of thewaste or fixing it using plant life or bacteria. Dry stacking, which involves extracting
water from mine waste so that it can be stored safely as dry dirt, is anotherpossibility, though it is likely to be expensive and only practical for smaller mines inarid climates. It is also possible to recover metal from tailings which could not be
extracted in the past thanks to more advanced methods.

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The International Council on Mining and Metals (ICMM) established a standard on
responsible tailing management with an emphasis on the respect of local
communities, close monitoring of tailing facilities, transparency and preparedness
in case of failure (ICMM, 2020).

Energy Technology Perspectives 2023

Chapter 2. Mapping out clean energy supply chains

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Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Chapter 3. Mining and material
production
Highlights• Clean energy transitions require substantial material inputs. Critical minerals(notably lithium, cobalt, nickel, copper and neodymium) and bulk materials (steel,cement, plastics and aluminium) are required for a range of technologies andinfrastructure, from wind turbines and EV batteries to electricity grids. Demandfor each of the five key critical minerals increases 1.5 to 7 times by 2030 in the
Net Zero Emissions by 2050 (NZE) Scenario as clean technology deploymentsoars. Greater material efficiency across all demand segments can more thanoffset increased steel and cement demand for clean energy technologies andinfrastructure.
• Mining capacity for critical minerals needs to expand swiftly to get on track withnet zero goals. While current anticipated investments will lead to substantial
gains, capacity would still fall well short of global NZE Scenario needs in 2030.
The largest gap is for lithium, with anticipated expansions covering just two-thirdsof 2030 requirements. Lead times for new mines are long and uncertain, meaningthat investment of around USD 360-450 billion would be needed mostly over the
next three years to bridge this gap.
• Capacity to process these minerals into usable materials must also expand
considerably. Currently anticipated projects point to large supply gaps for somecritical materials unless new plans are announced soon, regardless of whether
mining capacity is sufficient. The current announcements imply shortfalls of 60%
for nickel sulphate and 35% for lithium, relative to what is needed in the NZE
Scenario by 2030. Geographic diversification could reduce the risk of supply
disruptions, but current expansion plans point to continued dominance by China.

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• Conventional bulk material production capacity is emissions-intensive and very
difficult to decarbonise. Most near zero emission production routes are not yet
commercially available, but must expand from minimal quantities of output today
to around 130 million tonnes (Mt) of primary steel and 370 Mt of cement
production by 2030 in the NZE Scenario. Among announced projects, those we
assess as likely to achieve near zero emission production immediately yield just
10% of NZE Scenario needs for primary steel in 2030 and 3% for cement. These
projects are mainly in Europe and North America, but demand grows most in
emerging markets and developing economies, pointing to the need for increased
international co-operation.

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Material needs for net zero emissions
The new clean energy economy depicted in the Net Zero Emissions by 2050
(NZE) Scenario requires a massive expansion of the supply chains needed to
manufacture the equipment for clean energy technologies on a large scale and tobuild supporting infrastructure. The task is complicated by the fact that many clean
energy technologies and infrastructure rely on critical materials, the supply ofwhich may be challenging to scale up quickly. On balance, the transition to clean
energy technologies will reduce the total mass of resources – including both
energy and materials – entering the energy system, despite a large increase indemand for some critical materials 18 (Figure 3.1). This will be driven largely by achange in the form of much of the energy inputs, as primary energy flows
increasingly originate directly from the energy in solar radiation and wind, insteadof the chemical bonds in mass-based solid, liquid or gaseous fossil fuels.
In the NZE Scenario, the mass of resources entering the energy system in 2050
is about half that of today. Biomass accounts for about 45% of the mass inputs in
2050, materials needed to build and sustain clean energy assets for about 35%,
and fossil fuels for the rest (of which about half is consumed in facilities equippedwith carbon capture, utilisation and storage [CCUS] and around 20% is used forfeedstock). Most of the mass reductions relative to today come from reduced fossil
fuel use. For example, six times more coal than steel (in mass terms) enters theenergy system at present; by 2050, steel inputs are roughly double that of coal.
The material needs of clean energy technology supply chains, and of the economy
more broadly, face two crucial challenges in the NZE Scenario: supply andemissions. Meeting the growth in demand for critical materials, which requires amassive expansion of mines to extract raw minerals and plants to processminerals into final materials, is a massive undertaking. Given the long lead times
involved, especially in developing new mines, early planning would be needed.
Production of both critical and bulk materials is very energy- and carbon-intensive
today. Those supply chains are rapidly decarbonised in that scenario to becompatible with the global net zero trajectory.

In this chapter, the “energy system” includes devices that directly produce or consume energy (e.g. solar panels andmotors), equipment and structures that house energy-consuming devices and in turn can passively impact energy
consumption (e.g. building envelopes and car bodies), infrastructure that directly transports energy or CO2 (e.g. electricity
grids and CO2 pipelines), and infrastructure whose build-out could be directly affected by shifts in technology due to clean
energy transitions (e.g. rail infrastructure and roads).

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18

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Chapter 3. Mining and material production

Global mass-based resource flows into the energy system in the NZE Scenario, 2050

IEA. CC BY 4.0.
Notes: Physical mass flows of fuels and materials in the energy system, in million tonnes. See footnote 1 above for a detailed definition of the energy system. Critical materials include copper,
lithium, nickel, cobalt and neodymium. Industry material demand includes that from industrial equipment but not the plant shell. The equivalent graph for 2021 is in Chapter 1.

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The mass of resources used in the energy system in 2050 in the NZE Scenario is about half that of today. Materials account for about one-thirdof the inputs in 2050.

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Chapter 3. Mining and material production

The remainder of this section goes into more detail about demand for materials in
the NZE Scenario, as well as the material efficiency measures that reduce total
demand for materials and optimise material use to minimise supply chainpressures. The subsequent sections assess mineral extraction and material
production in more depth, looking into how the expansion of supply and reductions
in CO2 emissions can be achieved at each of these steps in clean energy supply
chains.

Box 3.1

Clarifying materials-related terminology

We distinguish between two main steps in the supply chain related to materials:
mineral extraction/mining and material production. Minerals are extracted fromthe earth in the form of mineral ores – naturally occurring rocks or sediments that
contain the relevant mineral in sufficient concentrations for economical extraction(ores are often composed of several different minerals). Ores are usually upgradedat the mine to liberate and concentrate the minerals of interest. The material
production step involves the further processing of these minerals in industrial
plants to achieve the chemical composition required for use. This may involve
extracting a pure metal in elemental form, or processing into a desired alloy ormineral compound. Given the division into these two main steps, we use “minerals”
to refer to what is extracted at mines, measured in terms of the target element
contained within mineral ores, and “materials” for what is produced at industrial
plants for later use.
We also distinguish between two main groups of materials (and the minerals they
are derived from them):Critical: These are materials that are important for clean energy technologies
and infrastructure and that could face supply gaps if sufficient efforts are nottaken to scale up supply. The volumes of critical materials tend to be small
relative to other materials (current global production of each type of criticalmaterial is well under 100 Mt per year). Demand from clean energy transitions
could drive a very rapid increase in total demand.



Bulk: These are large-volume materials produced in quantities approaching or
exceeding 100 Mt per year globally. They differ from critical materials in thatclean energy transitions are not anticipated to pose a risk of supply gaps, as
the raw minerals needed to make them are comparatively widespread andabundant. They are already widely used in energy and other sectors so clean
energy transitions are not expected to lead to a large overall increase in total
demand.

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While various materials could technically fit under each category, in this chapter
we focus on those critical materials that are particularly important for making clean
energy technologies, and the bulk materials that are currently most energy- andEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

emissions-intensive and that are needed for clean energy technologies andinfrastructure (Table 3.1).
Leading minerals and materials for clean energy supply chains bytype
Minerals

Critical• copper contained in ores
• lithium contain in ores (or brine)• nickel contained in ores
• cobalt contained in ores
• neodymium contained in ores

Bulk

• iron contained in ores (to produce steel)• aluminium contained in ores

Materials• copper• lithium (and its compounds)• nickel (and its compounds)• cobalt (and its compounds)• neodymium• polysilicon• steel• cement• aluminium• plastics

Notes: Minerals and raw resources that are used to produce some of the materials shown in the table and that are
extracted but not mined are excluded from this analysis, due to their much lower emissions intensity in the case ofquarrying, or the very different nature of extraction in the case of energy raw materials. This includes limestone that isquarried for cement production and oil from which plastics are derived (see Chapter 1). Quartz and other minerals fromwhich polysilicon is derived are excluded due to a lack of reliable data on energy intensity and the low risk of supply
gaps.

Material demand
The evolution of the demand for materials that go into making clean energy
technologies and infrastructure in the NZE Scenario is driven by a range of factorsthat fall into two main categories: those that affect total activity and those that
affect the material intensity of activity. The primary determinants of activity are theoverall demand for particular energy services in end use sectors and the mix oftechnologies used to meet that demand. For example, total passenger vehicle
sales are curbed in that scenario by switching to other modes of transport, while
the share of EVs in total vehicle sales increases rapidly. The result is that total
electricity demand grows considerably due to increasing electrification of roadvehicles as well as other sectors, while the share of wind and solar PV energy inpower generation expands.

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With regard to material intensity, innovation progressively reduces the overallmaterial intensity of clean energy technologies and infrastructure in the NZE
Scenario. For example, the amount of metal required per unit of stored energy inbatteries declines steadily as their energy density increases, thanks to technicaladvances in chemistry. Innovation also reduces the relative amounts of criticalmaterials – which can be expensive and are more at risk of supply disruptions –needed for a range of clean energy technologies. For instance, innovative
catalysts are already reducing the need for platinum group metals in electrolysers,
while the future use of innovative perovskite solar PV technologies could reducedemand for energy-intensive polysilicon – one of the main material inputs to PV

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cell production today. Material efficiency measures also reduce the overallmaterial intensity of economic activity, including that of clean technologies, whileproviding the same service. In many cases, this involves reduced overall demand
for materials, though in some cases it can increase reliance on certain materials
that reduce the life-cycle emissions of a given technology (for example, lightermaterials used in vehicles improve fuel economy).
In terms of material demand, the impact of clean energy transitions is mostpronounced for critical materials. Gains in material efficiency are more than offset
by the rapid pace of deployment of clean energy technologies and infrastructurein the NZE Scenario. Already by 2030, global clean energy technology andinfrastructure 19 demand for each of five main critical materials – copper, lithium,cobalt, nickel and neodymium – is between 3 and 14 times higher than in 2021,
depending on the material, such that combined demand for these materials grows
from 6 Mt to 20 Mt. This pushes up total demand from all uses for each of thesematerials by between 1.5 and 8 times, such that combined demand grows from
26 Mt to 43 Mt (Figure 3.2).
Total global material demand by type in the NZE Scenario
Bulk materials
Mt/yearMt/yearCritical materials
60
50
40

8 000
7 000
6 000
5 000

30

4 000
3 000

20

2 000

10

1 000

0

2021
CopperLithium

2030
Nickel02050
Cobalt & neodymium

2021

2030

2050

Steel

CementAluminium

IEA. CC BY 4.0.
Source: IEA analysis based on USGS (2022).

In the NZE Scenario, deployment of clean energy technologies rapidly increases demandfor critical materials, while material efficiency curbs growth in demand for bulk materials.

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19
In the context of this chapter, estimates of material demand from “clean energy technologies and infrastructure” are basedon a selection of technologies and infrastructure that account for much of the additional demand for critical and bulk materials
due to clean energy transitions. The technologies and infrastructure included are as follows: renewable and nuclear power
generation, electricity grids, EV batteries and motors, hydrogen production and fuel cells in fuel cell electric vehicles, andinfrastructure for hydrogen distribution and CO2 transport and storage. Other components of the “energy system” (as definedin footnote 1) – such as car bodies, building envelopes and rail infrastructure – are not included in this category.

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After 2030, growth in demand for most critical minerals is much more modest,even as the in-use stocks of these materials continue to grow rapidly. In the NZE
Scenario, technology deployment rates must accelerate quickly this decade. In
some cases, deployment rates reach sufficiently high levels already by around2030, and then those rates are maintained at similar levels throughout the rest of
the scenario. For example, combined wind and solar PV capacity additions
quadruple from about 250 GW per year today to 1 000 GW in 2030, as fossilbased power capacity is rapidly replaced. The annual rate of additions is thensustained at around 1 000 GW through to 2050, in order to meet increasing
demand for electricity from decarbonising end-use sectors – as such, the total
installed capacity of wind and solar increases by three times from 2030 to 2050.
Material substitution and improved efficiency also play a role in limiting theincrease in material demand. This is the case for EVs, where the rate of
deployment continues to grow even after 2030 – sales of passenger electric cars
are nearly 70% higher in 2050 than 2030. However, through innovation to increase
battery density and switching to battery chemistries reliant on materials with lower
supply risks, demand for cobalt and nickel grows at a considerably slower pacethan for lithium over that period.
In the Announced Pledges Scenario (APS), which reflects current government
ambitions, clean technologies are deployed more slowly than in the NZE Scenario.
This leads to a slower increase in demand for critical materials. Between 2021 and
2030, combined demand for critical materials grows at around 3.3% annually in
the APS, only a moderate increase compared with the 2.7% annual growthobserved over the last decade, and considerably lower than the 4.8% annual
increase required to 2030 in the NZE Scenario. Between 2030 and 2050, demand
for most critical minerals grows only modestly in the NZE Scenario. In contrast, in
the APS demand growth continues more strongly after 2030 and eventually meets
similar levels as in the NZE. Actual future demand will be determined by the extent
to which public- and private-sector actors are able to meet their current emissions
reduction ambitions through deploying clean energy technologies, or even exceed
such ambitions in an effort to keep global warming to 1.5°C.

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Clean energy technologies and infrastructure – in particular EV batteries,
electricity generation and grids, and low-emission hydrogen production – are themain drivers of increasing demand for critical materials in the NZE Scenario overthe period to 2050 (Figure 3.3). While the specific technology driver varies bymaterial, clean technologies account for a growing share of total demand for all
critical materials. The share of EV and grid storage batteries in total global lithium
demand rises from 45% in 2021 to almost 90% in 2030. For copper, the sharegoing to renewable power generation, EVs and power networks rises from about
25% to 45%. For nickel, demand growth from EVs, power generation andEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

electrolysers outpaces that from most other nickel end uses, such that their shareof demand reaches close to 60% in 2030, compared with only 10% today and lessthan 5% just a decade ago.
Total demand for lithium increases most rapidly, sevenfold between 2021 and2030. This is largely driven by its important role in EV batteries, for which there
are few alternatives, since demand for EVs soars over that period. Demand forcopper, the leading metal in volume terms among all the critical minerals,
increases 45% – the smallest increase in percentage terms among the five metals,
but the biggest in absolute terms (just over 1 Mt per year on average to 2030),
90% of which is directly driven by clean energy technologies, essentially electricity
networks, EVs, solar PV and wind turbines.

Index (100 = 2021)

Global critical material demand by end use in the NZE Scenario
1 400

350

1 200

300

1 000

250

800

200

600

150

400

100

200

50

0

0
2021

2030

2050

2021

Lithium
Solar PV

Wind

Other low-carbon generation

2030

2050

2021

CopperEV battery

2030

2050

2021

Nickel
EV motor

Grid storage battery

2030

2050

2021

2030

CobaltNeodymium

Electricity networks

Hydrogen

2050

Other

IEA. CC BY 4.0.

Demand for critical materials increases rapidly in the NZE Scenario, driven mainly by clean
energy technologies and infrastructure.

Clean energy technologies and infrastructure are expected to lead to growing
demand for some bulk materials in specific segments – for example, aluminium
for solar panel frames and steel for wind turbines. However, total global demandfor bulk materials does not jump rapidly in the NZE Scenario in the way it does forcritical materials (Figure 3.4). Demand for cement and steel largely stagnates,
while demand for aluminium and plastics continues to grow although at much
lower rates than critical materials.

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For cement and steel, clean energy technologies and infrastructure account for
only a relatively small portion of total demand. For example, electricity generation– including for fossil, nuclear and renewable technologies – today accounts for
only about 2-3% of cement and steel demand. In the NZE Scenario, demand fromelectricity generation for steel nearly triples and for cement doubles by 2030, butEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

this still equates to only about 5% of total demand for each. Meanwhile, demandfor both cement and steel from energy infrastructure – that is, combined demand
from electricity grids, oil and gas pipelines, hydrogen pipelines, and CO2 transportand storage – roughly doubles between now and 2050 in the NZE Scenario, evenas demand from oil and gas pipelines in particular declines sharply. Yet in 2050
this segment still accounts for only about 7% of total steel and less than 2% of
total cement demand.
Instead, the main drivers of overall demand for cement and steel come from otherdemand segments, including construction for both materials and manufacturing ofvehicles and consumer goods for steel. Per capita demand for bulk materials tends
to level off and even decrease as economies reach maturity, as demand comesmainly from replacing and repairing existing stocks of goods and products, rather
than building or making new ones. Much of growth in demand for these materials
in the emerging market and developing economies is offset by a gradual decline
in demand in the advanced economies and even some emerging market
economies, leading to relatively flat global demand to 2050 in the NZE Scenario.
Material efficiency measures also play a key role in curbing overall global demand(see below).

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The story for aluminium is somewhat different. Electricity generation and grids
today account for about 10% of aluminium demand. This demand more thandoubles by 2050 in the NZE Scenario, and is one of the central drivers ofincreasing total aluminium demand. The transport sector also has a major impact,
as vehicles account for about a quarter of today’s aluminium demand. This
demand segment grows by about 60% by 2050 in the NZE Scenario, due to a
combination of vehicle lightweighting to improve fuel economy and facilitate
smaller batteries in EVs, and increasing penetration of EVs that rely more on
aluminium than conventional vehicles. Even after material efficiency measures
reduce demand from other segments, these changes together result in about a
35% increase in total aluminium demand by 2050. Similarly, the demand drivers
for plastics – including a large role from packaging and consumer goods – lead tomoderately increasing demand to 2050 despite material efficiency measures. Still,
the increases seen for aluminium and plastics are considerably lower than that ofcritical materials.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Estimated global bulk material demand by end use in the NZE Scenario

IEA. CC BY 4.0.
Notes: Energy infrastructure includes electricity grids, oil and gas pipelines, hydrogen transport, and CO2 transport andstorage. Industry includes material demand from industrial equipment but not from the plant shell. Transport includes
vehicles and estimated material demand from road and rail infrastructure. Other includes non-energy infrastructure,
consumer goods, packaging, textiles and miscellaneous uses.

Global demand for cement and steel is relatively flat as it is less driven by clean energy
technologies and infrastructure, while demand for aluminium increases more substantially
due to its role in electricity generation and distribution and low-emission vehicles.

Material efficiency
Using materials more efficiently plays a central role in curbing overall demand in
the NZE Scenario. It directly reduces the need for emissions-intensive productionin the near term and reduces the need to deploy costly near zero emission
production technologies in the long term, thus avoiding the need to invest trillionsof dollars in material production (see Chapter 6). It also helps alleviate the risk of
supply shortages, particularly in the case of critical materials. Material efficiency
encompasses a portfolio of measures at all stages of supply chains. Many of thesestrategies can already be adopted today, although innovation can help expand theoverall potential. Some of these changes involve actions by businesses and otherbehavioural changes on the part of consumers (Box 3.2).

Design, manufacturing and material substitution
Better design of final products and reduced waste in manufacturing significantly
reduce use of materials along clean energy supply chains in the NZE Scenario.
For example, improvements in design and manufacturing reduce steel demand by
about 10% in 2050 in the NZE Scenario relative to a baseline with limited material
efficiency.

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The opportunities for efficiency in design and manufacturing are diverse.
Lightweight car designs reduce material needed for both car bodies andpowertrains, while buildings system optimisation reduces material needs inEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

construction. In mining and manufacturing, adoption of best practices, upskillingof workers and innovative techniques can reduce material wastage. For example,
improving sorting of mining waste can limit the amount of useful minerals that end
up in tailings dams, additive manufacturing can reduce scrap generation in vehicle
manufacturing, best practices on construction sites can optimise the amount of
cement used in concrete, and new techniques such as ultrasonic coating could
reduce the use of some critical materials in electrolysers by up to half (Sono-tek,
2022).
Material substitution also plays an important role. This can involve substituting
lower-emission materials, lighter materials or alternative materials to lower the
dependence on critical minerals that are vulnerable to disruptions or are in short
supply (see Chapter 6). Examples include alternative chemistries for making EV
batteries, switching to different electrolyser designs, and using innovative
superconducting magnets that don’t rely on rare earth elements (REEs) for windturbines and EV motors.

Reuse and lifetime extensions
Reusing final products and extending their lifetimes also majorly reduces material
requirements in the NZE Scenario. For example, longer building lifetimes reduce
cement demand by 13% in 2050 in the NZE Scenario relative to a baseline withlimited material efficiency.
Potential for longer lifetimes can be maximised by considering durability andreusability when designing products. For example, heat pumps can be designedwith inverters to reduce cycling of motors and increase system lifetime, whilebuildings can be built to last longer through factoring modularity and repurposeability into the design. Encouraging reparability and better maintenance ofequipment, vehicles and appliances can also extend lifetimes. This can be aided
by predictive maintenance using novel digital technologies that remotely monitor,
detect and pre-emptively address potential problems – including sensors, digital
twins and machine learning. Partial component replacement is another option. For
example, Ballard, a Canadian power systems company, is offering refurbishmentof their fuel cells to replace the membrane while retaining the longer-lived existing
hardware and plates, extending the useful service of their systems (Ballard, 2018).
Lifetimes can also be extended through repurposing. Repurposing EV batteries
for secondary use in stationary energy storage could help reduce demand for
critical materials. Repurposing existing oil and gas pipelines to transport CO2 orhydrogen can reduce material needs and lowers costs (see Chapter 5).

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Reusing or extending the lifetimes of products should generally be pursued only
in instances where it leads to overall life-cycle emissions reductions. In cases
where it would slow the roll-out of substantially lower-emission technologies,

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

recycling may be a better option. For example, recycling the materials from internal
combustion engine vehicles may be preferable to extending lifetimes, in order tonot slow the roll-out of zero emissions vehicles.

Box 3.2

Behavioural change to reduce the supply chain challenge

Changes in consumer behaviour that result in lower demand for energy products
and services is an important lever in reducing the scale of the clean energy andtechnology supply chains required to get to net zero. The scope of such changes
and the potential for cutting energy needs are both considerable. For example,
switching to public transport cuts the need for fuel to run cars and to make thematerials needed to make the car itself. Consumer behaviour is affected by manyfactors, including price, social norms and fashions, and public awarenesscampaigns.
EVs are an example of how materials demand can be cut through behaviouralchange. Minimising the size of the EV battery, which depends on driving patterns
and reducing range anxiety, would greatly reduce demand for critical materials.
Maintaining rather than increasing the current average range of electric cars would
enable batteries to be 20-25% smaller than in the NZE Scenario in 2030 and 2050,
resulting in a 20% reduction in critical material needs for making EV batteries (IEA,
2022a). Encouraging more efficient utilisation of each EV (e.g. through car or ridesharing) could also help alleviate strains on material supply in the near term whileachieving the same (or larger) emissions reductions.
The current energy crisis has prompted several public initiatives to conserve energy,
particularly in Europe, showcasing the scale of the effort that can be mobilised in
the right political and economic conditions. The European Commission has set out
a range of demand-side measures to save energy in the REPowerEU package (seeChapter 1), which could save around 13 bcm per year of gas imports throughbehavioural changes (European Commission, 2022a). Recent related work includes
the IEA’s 10-Point Plan to Reduce the European Union's Reliance on Russian
Natural Gas and 10-Point Plan to Cut Oil Use, and the inclusion of a new chapter
on demand, services and social aspects of mitigation in Working Group III’scontribution to the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change (IPCC) (IEA, 2022b; IEA, 2022c; IPCC, 2022).

Recycling and secondary production

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In the NZE Scenario, opportunities to increase recycling and secondary production
are maximised, bringing several benefits. The need for mineral extraction is
reduced, along with the environmental damage it involves. Production-phaseemissions are reduced, since recycled production is generally considerably lessenergy- and emissions-intensive than primary production. For instance, recycled

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

nickel requires only about 25% of the energy requirements of primary Class I
nickel (Argonne Laboratory, 2022), while secondary aluminium production emits
96% less CO2 than primary production (Eurometaux, 2022). Recycling can also
reduce the vulnerability of supply chains to disruptions if recycling is carried out
close to demand centres.
Share of secondary production in the global supply of selected materials
in the NZE Scenario

IEA. CC BY 4.0.
Note: For steel, the share of scrap in total metal inputs is used, including internal and manufacturing scrap. For aluminium,
internal scrap is excluded in line with the reporting convention of the industry. Values for nickel and cobalt do not include
their eventual recycling as part of metal alloys such as stainless steel. For plastic, the combined production of all plastic
types is used.
Sources: IEA analysis based on USGS (2022); IEA (2021); Aluminium Association (2021).

The share of secondary production increases strongly in the NZE Scenario, particularly forcritical materials after 2030 as the first wave of clean energy technologies reaches the endof their life.

For bulk metals such as steel and aluminium, increasing recycling and secondary
production involves improving collection rates, implementing advanced sorting
technologies and expanding the capacity of well-established secondary
production routes such as electric arc furnaces for steel. The potential forincreased recycling rates is relatively modest for steel and aluminium since
recycling routes are already well-established and end-of-life collection rates are
already high (about 85% for steel and 70% for aluminium), as there is a strong
economic incentive – secondary production tends to be less costly than primary.
Increased secondary production for steel and aluminium in the NZE Scenario
comes largely from increased scrap availability as products reach end of life,
rather than due to drastically higher collection rates.

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For other bulk materials, the potential for improvement is much greater. Less than
20% of plastic waste is collected for recycling today and less than 10% of total
plastic production uses recycled material as an input. Innovative chemical andEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

feedstock recycling methods are being developed to overcome the limited yieldrate achievable with current mechanical recycling techniques and expand therange of plastics which can be easily recycled. In the NZE Scenario, collection
rates reach over 50% by 2050 thanks to technology development, behaviouralchange and infrastructure expansion driven by policy interventions. For cement,
recycling is overall much more complicated, but innovation is under way to recover
portions of cement, such as through concrete fines recycling.
For the critical materials that are widely used today, such as copper and nickel,
recycling processes are already well established. For example, copper from wires,
electronics and larger products is relatively easy to separate out for recycling. For
some precious metals, the collection rates for recycling are high, such as gold at
86% and nickel at 60%, while there is still considerable potential to increase therate for other metals, such as copper at 46% and cobalt at 32% (IEA, 2021). By
contrast, recycling rates are very low for those critical materials that have only
recently begun to be used widely and that have low concentration in final products.
For example, lithium and REEs have recycling rates below 1%, as the recycling
sector has had little time to develop recycling processes and infrastructure, andtheir low concentration makes recovery more expensive.
The secondary production of critical minerals as a share of total supply remains
lower than for steel and aluminium throughout the projection period of the NZE
Scenario. The rapid growth in demand for critical materials is very recent
compared with the lifetimes of products they are used in. As a result, the share ofsecondary production increases significantly only after 2030, as the criticalmaterials used to produce vehicles, equipment and appliances in the 2020s
become available for recycling. For example, secondary production of lithium
grows from negligible amounts today to almost 35% of global supply in 2050
(Figure 3.5).

Box 3.3

Increasing recyclability of clean energy technologies

Improving recyclability is a key part of improving the sustainability of clean energy
technology supply chains. Innovation will be important here, both to design
technologies to be more recyclable and to improve the efficiency of recycling
methods. The hurdles vary by technology – here we take a closer look at EVbatteries and wind turbine blades as illustrative examples.
EV batteries

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EV batteries are difficult to recycle due to their complex composition. The simplest
method to recycle them is through pyrometallurgy, where the whole battery issmelted to separate its metals; however, this process is not adapted to recoverEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

lithium, and the metals recovered need additional energy to be remanufactured into
battery components. An alternative method is direct recycling, known as cathodehealing, where battery components are physically unpackaged, separated andrecycled or reused. This allows recovery of entire components, though doing so
cost-effectively on a large scale would require large volumes of well-designed
batteries (Sloop, et al., 2020; Harper, et al., 2019).
A big expansion of recycling capacity – driven largely by increasing volumes ofbatteries reaching the end of their life – slows the rate of growth in critical mineralmining needed for making EV batteries after 2030 in the NZE Scenario. For
example, increasing recycling rates of lithium enables mining capacity to be
expanded eightfold from 2021 to 2050, rather than 13-fold were recycling rates toremain constant, reducing required investment in lithium mining by USD 12 billion.
Recycling and reuse of EV batteries contributes most to cutting the need for lithium
mining and processing, with grid batteries and other batteries from outside of clean
energy technologies contributing to less than 10% of the total recycled or reusedlithium in 2050 in that scenario.
Wind turbine bladesWind turbines are another technology where further development is needed to
expand recycling. While most parts of a wind turbine can be recycled, wind turbine
blades can be difficult because of the composite materials used in their construction.
Wind power is expected to produce approximately 5% of total composite waste
worldwide in 2025, with that number likely to grow significantly in the future as moreturbines are decommissioned (WindEurope, 2020). Current technologies forcomposite recycling generally use large amounts of energy and can be costly, but
new techniques for recycling are under development, including solvolysis andpyrolysis (Goldwind, 2022). Designing blades to enhance recyclability without
sacrificing performance can play a role in reducing end-of-life waste, while emerging
additive manufacturing techniques could reduce waste from the manufacturing
stage (Siemens Gamesa, 2022).

Mineral extraction

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Some of the markets for the minerals that are needed in large quantities to
produce materials needed for clean energy technologies are already mature. For
example, iron ore for making steel, and bauxite for making aluminium and copperores have been mined extensively for a very long time. The extraction of others,
notably critical minerals such as lithium and cobalt, is relatively small today.
Demand for all of the main critical minerals grows massively in the coming decade
as demand from clean energy technologies expands in the NZE Scenario(Figure 3.6). By contrast, the transformation of the energy sector has little impact

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

on total demand for iron ore and bauxite, given that material efficiency
improvements largely outweigh the modest increase in material demand fromclean energy technologies (see section on material demand above) andincreasing availability of scrap leads to reductions in the need for primary
production and thus mineral ores.
Change in global demand for selected minerals in the NZE Scenario,
2021-2030
600%

400%

200%

0%

-200%

CopperLithium

NickelCobaltCritical minerals

Neodymium

Iron

Aluminium

Other minerals

IEA. CC BY 4.0.
Note: Based on the mass of the mineral in the ore.

Demand for critical minerals grows very rapidly in the NZE Scenario, while demand forminerals to produce bulk metals declines marginally, albeit from a much higher starting
point.

Expansion plans and gap with the net zero trajectory
Recent increases in climate policy ambition and specific government measures toaccelerate the energy transition around the world are driving up expectations ofincreased global demand for critical minerals and stimulating investments in themining sector. A number of new projects have been announced recently, thoughmany of these projects will only increase supply several years ahead due to thelong lead times (see Chapter 1).

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The clean energy expansion in the NZE Scenario requires the extraction of criticalminerals to increase rapidly, at rates that are much higher than in the past. Mine
expansion needs are particularly high in the current decade. For example, the rateof growth in output of copper and lithium needs to double over 2021-2030
compared with the previous decade. Expansion requirements are more modest
over 2030-2050, since the electricity and road transport sectors – the main
sources of critical mineral demand – have already largely switched to clean
technologies in the 2030s in the NZE Scenario. In contrast to critical minerals,
mining of iron ore and bauxite falls over the current decade, thanks mainly toEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

increased availability of scrap that enables increased secondary production andmaterial efficiency that substantially curbs growth in total demand.
To meet rising demand for critical minerals in the NZE Scenario, both extraction
from known resources and extensive exploration are needed to increase resource
availability. The mining industry has already started responding to policy andmarket signals pointing to a rapid increase in demand for critical minerals bystepping up investment in new capacity. As a result, mining capacity for all five
key minerals, taking account of already-announced expansion projects, isprojected to be significantly higher in 2030 than today. However, this anticipatedincrease in capacity still falls short of that required to meet the projected levels of
demand in that year in the NZE Scenario for all minerals (Figure 3.7).
The size of the gap between the primary production that is anticipated 20 to result
from currently anticipated investments in expanding capacity and that projected in
the NZE Scenario in 2030 varies across the leading critical minerals. The biggest
gap is in lithium supply, amounting to 35% of what is needed to be on track withthat scenario. This means that much more investment would be needed in the next
three years in lithium mining to meet the NZE Scenario demand by 2030.
Exploration drill counts suggest that this upturn may be forthcoming: four times
more drilling was carried out in 2022 than the previous year, though how quickly
the results lead to new capacity is very uncertain (S&P Global, 2022a).
The number of projects and resulting anticipated capacity for nickel mining havegrown rapidly over the past year, in large part due to a focus by the Indonesian
government on this sector. This country has about a fifth of the known global nickel
reserves and is attracting international investment from both mining companies
and battery companies such as LG, which has invested in a USD 300 million
Indonesian mine project (Christina & Suroyo, 2022). Indonesia might be able toramp up output rapidly, without the risks and long lead time associated with
exploration, especially as permitting and administrative procedures have been
accelerated. The shorter lead times in this country are already helping encourage
development of nickel mining operations, with output nearly doubling between
2020 and 2022 (S&P Global, 2022b). This suggests that it may be possible to fill
the global nickel supply gap by 2030.
For cobalt, the supply gap is one of the lowest of all critical minerals at 10%, thanks
to innovations in battery chemistry over the last five years that have reduced thecobalt content of batteries. This is a good example of how innovation can help
reduce mineral demand in the face of rising costs and concerns about
environmental, social and governance considerations.

Anticipated supply refers to expected future production based on expert judgement from third party data providers.
Expectations in commodity prices can have a large impact on the expected supply – a higher price might lead to more supply
coming online. At the same time, unexpected delays in financing, permitting, or construction could delay projects, yielding alower supply. The value is therefore lower than a sum of all announced projects.

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Chapter 3. Mining and material production

kt/yearPrimary production of selected minerals by country/region in the NZE
Scenario and based on currently anticipated supply
6 000

40 0005 000
30 0004 000
3 000

20 000

2 000
10 000
1 000
0

2021

Anticipatedsupply2030 - NZE

0

2021

kt/year

350

700

300

600

250

500

200

400

150

300

100

200

50

100
2021

Anticipatedsupply02030 - NZE

2021

Anticipatedsupply2030 - NZE

CobaltLithium
kt/year2030 - NZE

NickelCopper8000Anticipatedsupply

100

3 000

80

2 500
2 000

60

1 500
40

1 000

20
0

500
2021

Anticipatedsupply2030 - NZE

0

2021

China

Neodymium oxide
Other Asia Pacific

EuropeNorth America

Eurasia

Middle East

CSA

ROW

Anticipatedsupply2030 - NZEIron ore
AfricaNZE demand

IEA. CC BY 4.0.
Notes: NZE = Net Zero Emissions by 2050 Scenario; ROW = rest of the world; CSA = Central and South America. Other
Asia Pacific excludes China. Anticipated supply includes existing production. Anticipated supply relates to 2026 for copperand iron ore and to 2030 for lithium, cobalt, nickel and neodymium (see note 3). For neodymium, the share of producing
regions is assumed to be proportional to REE production and is constant over time due to a lack of precise data. Minerals
are shown in terms of their mass in the ore, except for iron ore.
Sources: IEA analysis based on USGS (2022); S&P Global (2022c); S&P Global (2022d); S&P Global (2022e); European
Commission (2020); Eurometaux (2022).

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Anticipated supply falls short of that required to meet projected demand in 2030 in the NZE
Scenario for all minerals except iron.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Scaling up mining capacity for closing the gap to NZE Scenario comes with aninvestment risk, as it relies on the scale-up of clean energy technologies further
down the value chain, including in areas such as PV and batteries in particular. The
outlook appears bright there given that these are areas of clean energy with record
installations today, and manufacturing capacity is rapidly expanding (see Chapter4). However, just how large the gap might be by 2030 remains uncertain: forexample, demand levels in line with current government ambitions, as depicted in
the APS, are 10% to 40% lower than in the NZE Scenario for critical minerals.
Therefore, in the APS there is a significantly smaller gap compared with anticipatedinvestments than the equivalent gap in the NZE Scenario: nickel and copper are theonly two commodities for which there is a gap between APS demand levels andanticipated supply, at 10% for nickel and 5% for copper. Private-sector plans for
production capacity expansion at a global level seem therefore to be well alignedwith current government plans, but current plans are not sufficient to limit global
warming to 1.5°C.
The extraction of minerals needed for clean energy technologies and infrastructure
can be increased by either developing greenfield mining projects or expanding
output at existing mines. Opening a new mine takes a long time from discovery to
production, on average 17 years (see Chapter 1). This process requires engineering
works, including installing infrastructure, stripping overburden (rock and soil
overlying the mineral-bearing seams) in the case of surface mines or digging shafts
and tunnels in the case of underground mines, and designing and installing mining
equipment, as well as administrative procedures related to environmental
assessments, permitting, and negotiation with local communities. Once reserves
have been proven and the decision to invest has been taken, a new mine can inprinciple be built in under five years, depending on project specifications and in theabsence of legal complications. Due to the heavy investments required and thelong-term nature of such projects, confidence in persistent demand is required toencourage investment in mining.
Expanding the production capacity of existing mines generally takes much less time,
because much of the infrastructure and equipment is already in place andadministrative procedures are more straightforward and less at risk of being stalledby public opposition. But the scope for expanding output at existing mines in mostcases is relatively limited, so that most of the increase in output needed over theperiod to 2030 would have to come from new mining projects. For lithium and nickel,
over 70 new average-sized mines 21 are required to reach the output volume needed
to meet the needs of the NZE Scenario in that year. For cobalt, 30 mines are needed
and, for copper, a staggering 80 new mines would be required – a huge task.
These capacity additions are feasible, but time is short. Investment would need toflow into new projects within the next three years to bring the project pipeline up to
speed with the NZE Scenario trajectory by 2030, assuming no major delays inpermitting and construction. We estimate that total investment of around

The quadratic average of the size of all existing mines for a given mineral is used here.

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Chapter 3. Mining and material production

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 levelof production in that scenario. Two-thirds of the total is for copper mining and mostof 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 (Figure 3.8). Most currently anticipatedinvestments 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 forconstruction 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
Required investment

Anticipated investment
100%

ROW

80%

CSA

60%

AfricaCobalt 1%

Nickel 33%

Europe40%20%0%Copper 62%

North
America

Anticipatedinvestment

Other Asia
Pacific
China

Lithium 4%

Investment
gap

USD 360 - 450 billion

USD 180 - 220 billion

IEA. All rights reserved
Notes: CSA = Central and South America; ROW = rest of the world. Other Asia Pacific excludes China. Anticipatedinvestments cover four critical minerals (lithium, nickel, copper and cobalt) (see note 3). Neodymium not included becauseof a lack of data. Cobalt production being mainly a co-product of copper and nickel, the additional capital investment
needed to open a copper-cobalt mine compared with a pure copper mine is considered. A range is quoted for anticipatedand required investments, considering the range of available cost estimates for diverse feasibility studies of mining
projects.
Sources: IEA analysis based on company feasibility studies; Bartholomeusz (2022); S&P Capital (2022); USGS (2022);
S&P Global (2022c); S&P Global (2022d); S&P Global (2022e); European Commission (2020); Eurometaux (2022); Jervois(2020).

Around a third of anticipated mining investments are concentrated in Africa and Central
and South America, but additional investments are required to meet the needs of the NZE
Scenario.

Investment requirements for mining activities are highly uncertain as they vary considerably according to ore grade, minetype and deposit composition. For these reasons the reported investment values are provided as a range.

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Energy Technology Perspectives 2023

Chapter 3. Mining and material production

While demand for critical minerals in 2040 in the NZE Scenario is larger than in
2030, the rate of increase slows significantly after 2030 as clean energy
technologies saturate the market and recycling grows. This would make it easier
to mobilise sufficient investment in mineral extraction to meet the needs of the
NZE Scenario. Nonetheless, exploration activities and the firming up of resources
into proven reserves would still need to accelerate, in parallel with capacity
expansions at existing mines, to avoid bottlenecks further into the future.
A major driver for investment in mining exploration and operation is the expected
price of commodities. Higher prices would make projects more profitable andexpand potential supply by increasing the number of resources that can beextracted profitably. In the NZE Scenario, the very rapid scale-up of demand islikely to be so fast that commodity prices might remain at levels close to recent
historical peaks up to 2040, helping to stimulate investment (Boer, Pescatori &Stuermer, 2021).
For both critical and bulk materials, increased secondary production using
recycled inputs reduces demand for raw minerals and, therefore, the need for newmines in the NZE Scenario. In the case of iron ore, there is no investment gap to2030. This hinges on developing additional recycling infrastructure, which should
not be particularly hard given the maturity of such infrastructure.

Geographical distribution
Anticipated investments in the mining of critical minerals point to an overall modest
improvement in the geographical diversity of production in the coming years. The
production of most of the leading minerals is currently highly concentrated in asmall number of countries and regions (see Chapter 2). The decline inconcentration by 2030 implied by the anticipated supply varies by mineral. That ofnickel production is poised to increase substantially, with the share held byIndonesia – the leading producer – due to increase by over 10 percentage points
to almost half of world production once current projects are completed(Figure 3.9).
In the case of lithium mining, anticipated capacity additions would lead supply in
2030 to be only slightly more diverse than it is now, mostly thanks to the start-up
of mining in Canada. Australia and Chile will still account for around 70% of allmining once all those additions are fully operational. Ongoing investments in themining of cobalt, which has the highest concentration among the five criticalminerals assessed, are not expected to significantly affect the geographic
distribution, with the Democratic Republic of Congo remaining far and away thedominant producer.

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Copper, iron ore and bauxite extraction is much more diverse today than for theother metals, and is due to remain diverse once currently anticipated investments

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

are completed. Nonetheless, some key producing countries will continue todominate global supply. Chile will still account for around a quarter of world copper
production when current projects are completed in 2026, while Australia willremain the leading iron ore producer with 38% of global market share.
Shares of the leading regions in global mining of selected critical minerals
in 2021 and 2030 based on currently anticipated investments
80%

60%

40%

20%

0%

DRC

Australia

Cobalt

CSA

AfricaNorth
America

Copper2021 level:

Australia

CSA

China

Indonesia Philippines Australia

Lithium
Increasing

Decreasing

StableNickelChina

Australia
REE

2030 level

IEA. CC BY 4.0.
Notes: DRC = Democratic Republic of Congo; CSA = Central and South America. Stable is defined as a change of lessthan 4%. Dots represent 2021 value and the arrow the change to 2030.
Sources: IEA analysis based on USGS (2022); S&P Global (2022c); S&P Global (2022d); S&P Global (2022e); European
Commission (2020); Eurometaux (2022).

Anticipated investments in mining of critical minerals point to an overall modest
improvement in the geographical diversity of production in the coming years, except for
nickel.

Regional policy and market developments
Policies being adopted in various countries may help with the scale-up of mineral
extraction and/or the reduction in raw mineral needs through recycling, particularly
for critical minerals. According to the IEA’s Critical Minerals Policy Tracker,
released in November 2022, nearly 200 such policies and regulations are now inplace around the world, of which over 100 new ones have been enacted in thepast two years alone, with a growing attention to the adoption and implementationof sustainable and responsible practices in critical mineral supply chains (IEA,
2022d).

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In the United States, as part of the Infrastructure Investment and Jobs Act signed
in 2021, the Department of Energy is implementing a USD 6 billion grant
programme including USD 3 billion for battery manufacturing and recycling. This
includes financing demonstration projects and commercial-scale facilities forbattery recycling (BGR Group, 2022). Some major projects funded through thisEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

grant have already been announced: Lilac Solutions is investing in lithiumproduction from low concentration brine, and Cirba Solutions is developing afacility to recycle lithium-ion (Li-ion) batteries (White House, 2022; US DOE, 2022).
In addition, the Inflation Reduction Act (IRA), signed in 2022, requires the use ofcritical minerals that are extracted, processed or recycled in the United States orcome from countries with which the United States has free trade agreements, for
EVs to qualify for federal tax credits (Loan Programs Office, 2022). This is
expected to incentivise investments in mining operations within the 20 countries
the United States has free trade agreements with, including Chile and Australia.
In addition, the Defense Production Act of 1950, which gives the president
authority to mobilise industry for national defence reasons, was invoked overcritical minerals and batteries supply in 2022. This gives the government thepossibility of strengthening the US domestic industrial base for large-capacity
batteries and their component minerals, using loans and purchase commitments
to incentivise companies to expand domestic mining (Biden, 2022).
Australia is aiming to encourage expansion of its critical mineral extraction
capacity, notably cobalt, vanadium and REEs (Australia, Department of Industry,
Science, Energy and Resources 2022). The country is already the world’s largest
supplier of iron ore, bauxite and lithium. To support this goal, the government plans
to introduce measures to de-risk new mining projects, create an enabling
environment and strengthen international partnerships by offering financial
support to projects at diverse levels of development, including enabling
infrastructure and research, development and demonstration. In 2021, theAustralian government established the AUD 2 billion (Australian dollars) Critical
Minerals Facility to support critical mineral projects with loans, loan guarantees,
bonds and working capital support as a complement to commercial financing(Australian Government, 2021).
The European Union is currently highly dependent on imports of critical minerals.
For instance, EU countries supply 4% of copper ore but represent 12% of refinedcopper demand (WBMS, 2022). Free trade agreements have been negotiated withmineral exporters, such as with Korea in 2015 (which produces 20% of the world’s
indium 23), and the association agreement with Chile, a large lithium producer, isbeing modernised (EPRS, 2021). Demand for locally sourced raw minerals is
encouraging new lithium mining projects in Europe, including one led by Vulcan inGermany in geothermal brines (Vulcan, 2022), a Baroso lithium mine project inPortugal (Savannah, 2019) and the Echassières mine from Imerys in France (Vif,2022). Investments are also being made in research programmes such as
RawMatCop, which relies on earth observation data from the Copernicus satellite

Indium has diverse applications in semiconductors, solar PV and the control rods of nuclear power reactors.

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Chapter 3. Mining and material production

system to assist in exploration or monitoring of mining sites, and the EIT
RawMaterials programme supports start-ups and innovative projects around raw
materials (Kasmaeeyazdi, et al., 2021; EIT, 2022).
Some oil and gas companies and institutions are also investing in critical mineral
supply. In Argentina, the national oil company, YPF, has started lithium
exploration (Bianchi & Morland, 2022).

CO2 emissions
Extracting minerals is a highly energy-intensive process. Most of the energy
currently used in mining operations is of fossil origin (either direct use of fossil
fuels or electricity generated using them) and so mineral extraction activities resultin significant CO2 emissions. For example, in Australia, the mining and quarrying
sector meets between 60% and 70% of its energy needs with fossil fuels, the rest
being mainly electricity. This energy is required to power the various machinery
used for digging and extracting earth and rocks, as well as on-site trucks,
ventilation, crushing and separating the ore. In addition to CO2 and othergreenhouse gas emissions, mining also has considerable impacts on ecosystems,
air, water and local populations (see Chapter 2).
The energy intensity of mining varies considerably by mineral type, the quality ofthe ore (primarily the concentration of the ore in the mined rock) and the nature of
the mining process involved. For instance, the average ore grade of mined nickel
is 30 times lower than that of bauxite, which largely explains why the energy
intensity of nickel mining is 30 times higher than bauxite (Figure 3.10). Different
mining processes can also result in very different energy intensities for the samemineral. Carbon intensities also vary according to the type of energy used.

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An expected deterioration in the quality of ore (as measured by ore concentration)
may increase the energy intensity of mining operations. Due to a combination ofhigher demand, international market prices and better technologies, lower
concentration reserves have become more economically viable than in the past,pushing the global average ore grade down. Copper ore grade could decline by
between 1.5% and 3.7% per year of the next decades (Northey et al., 2014;
Cochilco, 2021), and nickel by around 1.2% per year on average (Olafsdottir &Sverdrup, 2021). This rate of ore quality decline could lead to a 25-30% increasein energy intensity of mining operations by 2050 for these minerals. Bulk mineralore grade is also decreasing. For example, average iron ore grade has dropped
from above 55% in 1980s to around 45% at present (Mudd, 2013). Large deposits,
such as the sedimentary metamorphic type in the People’s Republic of China(hereafter, “China”), have ore grades below 35% (Li et al., 2014). Were theaverage ore grade to drop to such a level by 2050, iron ore mining energy intensity
would rise by about 25%, all other things being equal.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

MJ/kg

Global energy intensity and average grade of ore production for selected
metals
1 000 000
100 000
10 000Lithium

NickelGold

1 000
Silver100
Cobalt10
Copper10.0000001

0.000001

0.00001

0.0001
2021

0.001
2050

Aluminium
0.01

Iron
0.1

1
Ore grade

IEA. CC BY 4.0.
Notes: Logarithmic scale. Energy intensity is based on the primary production of metals, including mining and processing.
Metals presented in this figure are, in decreasing ore grade order: iron, chromium, aluminium, magnesium, zinc, titanium,
nickel, copper, lithium, zirconium, vanadium, cobalt, tantalum, tin, molybdenum, gallium, silver, palladium, platinum, gold
and rhodium. Lithium ore grade values are for hard rock deposits and not brine. Potential energy efficiency improvements
are excluded.
Sources: IEA analysis based on Argonne Laboratory (2022); UNEP (2013); Nassar et al. (2022).

Ore quality is set to fall as the best resources are depleted at existing mines and higher
prices and better technologies make lower-quality ores more economic at new mines.

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Assuming energy intensities (the amount of energy needed to extract a tonne ofmineral) evolve in line with the degrading ore grade, total global energy use inmining critical minerals would double between 2021 and 2030 to meet the risingdemand levels depicted in the NZE Scenario (Figure 3.11). Copper would remain
the largest contributor to energy needs for mining of critical minerals (larger thaniron ore and bauxite combined), accounting for around 70% of their total energy
use in 2030. Cobalt, despite being more energy-intensive to extract than copper,
would still make up 2% of total energy use for critical mineral mining due to the far
smaller volumes extracted. The increases from critical minerals would more thanoffset small declines in energy use in mining bulk minerals. In particular, energy
use for mining iron ore would drop by around 5%, as a result of stagnant steel
demand and increased recycling, while that used to extract bauxite would increaseslightly.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

500

25

400

20

300

15

200

10

100

5

0

2021

2030

Critical minerals
Copper2021
Lithium

2030
Iron ore
Cobalt2021

2030

Emissions (Mt)

Energy consumption (PJ)

Theoretical global energy consumption and CO2 emissions in mining of
selected minerals for meeting NZE Scenario demand levels at current
carbon intensity

0

BauxiteNickelEmissions

IEA. CC BY 4.0.
Notes: The energy and emissions intensities of mining are assumed to evolve following ore grade depletion and ignoring
potential efficiency gains. For lithium, the weighted average of production from brine and spodumene is used. Neodymium
not included because of a lack of data.
Sources: IEA analysis based on Argonne Laboratory (2022); IEA (2021); Warren Centre (2020).

At constant intensities, global energy use and emissions from mining critical minerals
double between 2021 and 2030 with rising output in the NZE Scenario.

Assuming carbon intensities evolve in line with the degrading ore grade, global
CO2 emissions from mining critical minerals double over 2021-2030 in the NZE
Scenario. The increase in emissions would be largest for lithium, at 700%, due tothe big increase in output. Emissions from iron ore mining would fall by 5% andthose from bauxite mines would increase slightly. As a result, total emissions fromcritical minerals would be five times greater than those from iron ore mining in
2030, compared with two times today. Nonetheless, total mining emissions would
still be small compared with other industrial sectors, including critical mineralprocessing and bulk material production. Emissions from mining the six mineralsconsidered here combined in 2030 would be equal to just 1% of those from steel
production emissions today or 0.1% of global energy sector emissions. Overall
emissions from mining of all types of minerals fall sharply in the NZE Scenario
thanks to increased electrification, the deployment of innovative technologies andfuel switching.

Decarbonising mining operations

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The principal way in which CO2 emissions from mining operations can be reduced
is by switching to decarbonised electricity as the primary form of energy. Drilling,digging, loading, hauling, crushing and separation, as well as mine ventilation, allrequire lots of energy. For most of these processes, electrification is already aEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

practical option. For example, the Borden gold mine in Canada became one of thefirst all-electric underground mining operations in 2019 (Mining Technology,2020). In addition to emissions savings, using electrical equipment can bring otherbenefits, such as savings in cooling and ventilation from switching from internal
combustion engines, which give off a lot of heat.
Electrifying mining trucks, which are an important source of on-site emissions aswell as local air pollutants, is more difficult using current technologies. Thosetrucks are designed to carry very large payloads, so switching to EVs would mean
they would need large batteries that would need to be recharged regularly, though
this would be facilitated by their operation within confined areas with predictable,
usually short, routes. A consortium led by Shell is designing a system allowing theelectrification of trucks with a 220 tonne payload and charging points at loading
and unloading points (Gleeson, 2022). Hydrogen or hydrogen-derived fuels could
prove to be a viable alternative for powering mining trucks (Chen, 2022). Other
electrification alternatives exist such as through catenary lines or the use of
conveyor belts.
A major problem for mining operations is that they are often isolated from theelectricity grid and so currently rely on fossil fuels to meet on-site energy needs.
But the recent declines in the cost of renewables have made them more attractive
as an alternative, distributed through microgrids, transformed on-site intohydrogen or paired with other energy storage options. Worldwide, mining
companies invested in 3.4 GW of renewable energy capacity both on-site and offsite in 2019, up from 0.3 GW in 2015 (BNEF, 2020b). Nevertheless, the rate of
deployment would need to increase at a much faster rate to decarbonise mostmining operations before 2050. An example of the impact of clean electricity on
mining emissions is the Swedish company Boliden, which is able to produce
primary copper with a carbon footprint of less than 1.5 kg of CO2 per kg of output,
compared with an average of 4 kg of CO2 for the industry (including all direct andindirect emissions) thanks to heavy reliance on hydroelectricity (Onstad & Harvey,2021).

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In the NZE Scenario, electrification and, to a lesser extent, recycling and efficiency
gains eliminate almost all mining emissions by 2050, despite the impact ofincreased demand and falling ore quality (Figure 3.12). Innovation could even leadthe sector to achieve net negative emissions, as the mining industry could store
some CO2 through the mineral carbonation of certain tailing waste. Companies
such as Canada Nickel and De Beers are experimenting with this method (Canada
Nickel, 2022; De Beers, 2022).

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Mt CO₂

Decomposition of change in global direct CO2 emissions from mining of
selected minerals between 2021 and 2050 in the NZE Scenario
50
40
30
20
10
0

2021 emissions

ActivityOre grade

Recycling

Efficiency gains Electrification 2050 emissions
and other fuelshift

IEA. CC BY 4.0.
Notes: Emissions from mining of iron ore, bauxite, copper, cobalt, nickel and lithium are included. Other fuel shifts includehydrogen, bioenergy and other direct renewable energy use. Copper ore grade is assumed to fall from 0.60% to 0.39% in
2050, nickel from 0.81% to 0.56% and iron ore from 44% to 30%. Lithium and cobalt ore grades follow the same trends asthat of copper while bauxite follows that of iron ore.
Sources: IEA analysis based on IEA (2021); Argonne Laboratory (2022); McKinsey (2020).

Electrification, as well as recycling and efficiency gains, eliminates almost all mining
emissions by 2050 in the NZE Scenario, despite rising demand and falling ore quality.

Materials production
The production of critical and bulk materials is an important step within supply
chains for clean energy technologies and infrastructure. Mineral ores need toundergo processing and refining before they are useful for clean energy
technology manufacturing. For critical materials, the rapid build-out of processing
facilities and decarbonisation of production processes is needed to meet demandin the NZE Scenario. Near zero emission production processes for bulk materials
have the largest potential to reduce total emissions from material production, given
the large volumes of production.

Critical materials production
Expansion plans and gaps with the net zero trajectory

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For critical materials, mineral refining and processing capacity – referred to here
as production capacity – does not necessarily follow mining capacity, as
processing plants are not always linked to the output of a single mine. As a result,gaps can emerge between the supply of raw critical minerals and the capacity torefine them in the event of a mismatch between expansion projects, potentiallyleading to bottlenecks – especially as the lead times in building processing

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

facilities generally amount to several years (though they are shorter than formining projects – see Chapter 1). Thus, to meet projected demand for all criticalmaterials in the NZE Scenario in 2030, capacity would need to increase sufficiently
in both mining and processing facilities. Furthermore, producing the specificchemicals required for technology manufacturing, for instance for cathodes usedin Li-ion batteries, requires multiple refining steps to go from ore to concentrate to
the final chemical, thus multiplying the potential bottlenecks.
Currently anticipated expansions of production capacity point to a significant gap
emerging in the supply of some refined critical materials, notably nickel andlithium, regardless of whether mining capacity is sufficient. In the case of nickel
sulfate, capacity additions would quadruple total capacity but would still cover only
40% of demand in the NZE Scenario by 2030 (Figure 3.13). By contrast,
anticipated expansion in mining would satisfy 75% of demand. For lithiumhydroxide and carbonate, the projected gap in production capacity in 2030 isaround 35%, which is around that of mining. This implies that, unless new
expansion projects in processing as well as mining are launched soon, therequired expansion of EV fleets worldwide to remain on track for net zero by 2050
will be severely hindered. For cobalt sulfate, there is a looming 25% gap in
production capacity, even though anticipated mining capacity is close to demand.
For copper, the production capacity gap is only 15% (compared with 20% inmining).
In the past few years, polysilicon supply has been a bottleneck in solar PV supply
chains, as it has grown less rapidly than that of cells, wafers and modules. The
supply-demand balance was particularly tight in 2021. However, during 2022
many key large-scale manufacturers announced expansion plans to securesufficient supply of polysilicon in the coming years. For example, Zhonghuan
Semiconductors recently announced an investment of USD 3.3 billion in newpolysilicon manufacturing capacity, Xinte Energy USD 2.8 billion and Hoshine
Silicon USD 2.7 billion (Shaw & Hall, 2022a; Shaw & Hall, 2022b; Shaw, 2022).

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In the APS, a scenario in line with current government ambitions, supply gaps formaterial processing do exist but at a smaller scale than in the NZE Scenario, sincedemand for critical minerals is lower. In 2030, about 5% of copper, 40% of nickel
sulfate and 5% of neodymium oxide needs in the APS are not met by anticipatedmaterial supply. Meanwhile, anticipated supply could meet APS demand in 2030
for lithium chemicals, cobalt sulfate and polysilicon.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

kt/year

Production of selected critical materials by country/region in the NZE
Scenario and based on currently anticipated supply
3 000

40 00035 0002 500

30 0002 000

25 000
20 000

1 500

15 000

1 000

10 000
500

5 000
0

2021

Anticipated supply

02030 – NZE

2021

Anticipated supply

kt/yearCopper
700

300

600

250

500

200

400

150

300

100

200

50

100
0

2021

Anticipated supply

02030 – NZE

2021

Anticipated supply

120

GW/yearkt/year2030 – NZE

Cobalt sulfate

Lithium hydroxide and carbonate

100

900
800
700
600

80

500

60

400
300

40

200

20
0

2030 – NZE

Nickel sulfate

100
2021

Anticipated supply

2030 – NZE

0

2021

Anticipated supply

2030 – NZEPolysilicon

Neodymium oxide
China

Other Asia Pacific

EuropeNorth America

AfricaEurasia

Middle East

CSA

Unspecified

NZE demand

IEA. CC BY 4.0.
Notes: NZE = Net Zero Emissions by 2050 Scenario; CSA = Central and South America. Other Asia Pacific excludes
China. Anticipated supply includes existing production. Anticipated supply refers to 2026 for copper and 2030 for cobalt
sulfate, nickel sulfate, lithium, neodymium and polysilicon (see note 3). For neodymium, the share of producing regions is
assumed to be proportional to rare earth production and constant over time. Accessed data for polysilicon production
capacity was converted to production considering an 85% utilisation rate.
Sources: IEA analysis based on IEA (2021); USGS (2022); BNEF (2022); BNEF (2020a); S&P Global (2022d); S&P Global(2022e); European Commission (2020); Frasel et al. (2021); InfoLink (2022); Eurometaux (2022), Adamas Intelligence(2020).

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Anticipated supply points to a gap in the supply of some critical materials relative to the
NZE Scenario, notably nickel and lithium, regardless of whether mining capacity is
sufficient.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

In contrast to mining, nickel is the metal requiring the largest additional
investments in production plants to satisfy increased demand in the NZE Scenario.
Polysilicon is the only critical material for which anticipated supply is sufficient tosatisfy projected demand. China is investing the most in new critical material
production capacity, accounting for about 70% of global anticipated investments,
followed by the rest of the Asia Pacific region and North America. In total, between
USD 90 billion and USD 210 billion 24 would need to be invested cumulatively over2022-2030 in installing critical mineral processing capacity to meet projecteddemand (Figure 3.14). Currently anticipated investments account for around twothirds of that.
Anticipated investment in critical material production by region/country
and that required to meet demand over 2022-2030 in the NZE Scenario
Required investment

Anticipated investment
100%
80%
60%
40%
20%

ROW
MiddleEast

Copper 19%
Polysilicon
41%
Lithium 22%

North
America
Other
Asia
Pacific
China

Cobalt 4%
Anticipatedinvestment0%
Nickel 55%

USD 70 - 160 billion

Investment
gap

USD 90 - 210 billion
IEA. CC BY 4.0.

Notes: ROW = rest of the world. Other Asia Pacific excludes China. Anticipated investments cover lithium, nickel, copper,
cobalt and polysilicon (see note 3). Neodymium is not included because of a lack of data. Cobalt production, being mainly aco-product of copper and nickel, it is assumed that the capital expenditure for cobalt is at the same level as nickel. A range
is quoted for the anticipated and required investments, considering the range of available cost estimates for diverse
feasibility studies of material production projects.
Sources: IEA analysis based on company feasibility studies; Bartholomeusz (2022); IEA (2021); USGS (2022); BNEF
(2022); BNEF (2020a); S&P Global (2022d); S&P Global (2022e); European Commission (2020); Frasel et al. (2021);
InfoLink (2022); Eurometaux (2022).

Anticipated investments in critical material production, concentrated in China, fall wellshort of that required in the NZE Scenario, especially in nickel processing.

Investment requirements for critical material production activities are highly uncertain as they vary considerably according
to factors such as the grade of the mineral ore being processed, the specific processing technology and the location. For
these reasons the reported investment values are provided as a range.

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24

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Geographical distribution of production plants
Anticipated investments in the production capacity of most critical materials points
to a continuation of the geographical concentration of supply in China in the
coming years. The country is already the leading producer of all refined critical
metals, and its share of global output is set to rise to 2030 (Figure 3.15).
Processing of copper ores, of which almost 40% is mined in Chile and Peru, andcobalt, more than two-thirds of which comes from Democratic Republic of Congo,
is set to become increasingly concentrated in China; its share of total refined
output is rising from 35% to 45% for copper and remains above 70% for cobalt
sulfate.
Shares of the leading regions in global processing of selected criticalminerals in 2021 and 2030 based on currently anticipated investments
100%
80%
60%
40%
20%
0%

China

EuropeCobalt sulfate

China

Chile

Copper2021 level:

China

Chile

LiOH & Li2CO3
Increasing

Decreasing

Japan

China

Nickel sulfate

REE

China

StableChina

EuropePolysilicon2030 level

IEA. CC BY 4.0.
Note: LiOH = lithium hydroxide; Li2CO3 = lithium carbonate; REE = rare earth element. Stable is defined as a change ofless than 3%. 2030 values based on anticipated capacity as seen in Figure 3.13.
Sources: IEA analysis based on IEA (2021); USGS (2022); BNEF (2022); BNEF (2020a); S&P Global (2022d); S&P Global(2022e); European Commission (2020); Frasel et al. (2021); InfoLink (2022); Eurometaux (2022).

Anticipated investments in critical material production capacity point to the continuing
domination of China in global supply.

Regional policy and market developments

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Policies to support investment in expanding critical material production haverecently been introduced in several countries. Indonesia has been a leader inmining nickel ore for years, but most was exported to be processed elsewhere. To
encourage local refining of nickel, the government introduced an export ban on
nickel ore between 2014 and 2017 (Huber, 2021) and launched a policy in 2019
to increase the value added realised in the territory. As a result, its share of global
refined nickel output rose from 1% in 2013 to 30% in 2021 (WBMS, 2022). The
government wants to go even further in developing domestic supply chains byEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

prioritising the development of an EV industry, with a USD 1.1 billion battery plant,
the first in the country, already in construction (BKMP, 2021). To further accelerate
the transition to battery manufacturing, the Indonesian government intends tointroduce a moratorium on the construction of new rotary kiln-electric furnaces,
which are used to produce nickel pig iron (a low-value product, mostly used in thesteel industry), in the hope of redirecting investment to nickel sulfate production
for batteries (Setiawan, 2022).
Australia has an important role in the global mining industry but exports large
shares of its extracted ore to other countries for processing. The Australian
government strategy aims to move the economy towards downstream processing(Australia, Department of Industry, Science, Energy and Resources, 2022).
Concrete results of this strategy include the Modern Manufacturing Initiative,
which is providing funding of AUD 119.6 million for the development of nickel andcobalt battery material refineries; AUD 14.8 million has been allocated for REE
processing and AUD 6 million for lithium hydroxide production (Nabanidham &Cook-Revell, 2022).
In the United States, the Infrastructure Investment and Jobs Act includes a
USD 6 billion grant programme including USD 3 billion aimed to fund the domestic
production of materials needed for the EV supply chain, including the refining of
nickel, lithium and cobalt, as well as REEs (BGR Group, 2022). The Departmentof Defense awarded MP Material USD 35 million for the development of rare earth
alloys and permanent magnet production capacity (White House, 2022).
In the European Union, two Important Projects of Common European Interest on
batteries are directing public funding for the development of innovative projects forthe processing of battery metals (IPCEI, 2022). The Commission is working on a
Critical Raw Materials Act aimed at reducing the dependency on external supplierswith a focus on local production and recycling capacity (European Commission,
2022b).

CO2 emissions
The energy intensity of processing critical minerals – the amount of energy needed
to produce a tonne of material output – varies significantly by type of material,
mineral quality and the process technology used (see Chapter 2). Energy intensity
is a primary determinant of the emissions intensity of material production – theamount of CO2 emitted per tonne of material output – the other factor being thetypes of energy used. Critical materials generally require more energy to produce
than bulk materials, ranging from 20 GJ/tonne for copper to around 70 GJ/tonne
for nickel.

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Although emissions from critical material production are modest today in absoluteterms, accounting for just 0.04% of global energy sector emissions, they would

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

grow rapidly if they were to continue to operate as they do today while supplying
the levels of demand required in the NZE Scenario. Assuming constant energy
intensities and fuel shares, 25 global CO2 emissions from producing the five leading
critical materials – copper, lithium, cobalt, nickel and neodymium – would morethan triple to 55 Mt in 2030, lithium being the largest contributor of the increase.
The increased use of these metals would contribute, however, to a significant net
reduction in life-cycle emissions by enabling the deployment of clean energy
technologies and infrastructure, even at today’s emissions intensity.
There are opportunities to reduce emissions from the processing of criticalminerals through best available technologies, increased electrification and fuelswitching (from coal to natural gas for instance) in the near term. However, deeper
decarbonisation of these processes, which require high-temperature heat, would
require technology developments geared towards adapting existing processes toalternative fuels such as hydrogen and different types of biofuels, integrating
CCUS more easily and viable direct electrification options. While alternatives arebeing developed for Li-ion batteries, innovation in net zero compatible production
routes needs to accelerate to provide viable alternatives for all the other criticalmaterials.
Copper production goes through two main routes today: pyrometallurgy, whichuses smelting and accounts for around 80% of primary copper production today,and hydrometallurgy, which relies on acids and accounts for the remainder (Rötzer
& Schmidt, 2020). Pyrometallurgy involves much higher temperatures and relies
more on fossil fuels, while hydrometallurgy requires more chemical inputs. Those
two routes are not exclusive to copper; other metals such as nickel can beproduced using similar processes.
Fossil fuels are mainly used to process copper today, but alternatives are possible.
Low-emission hydrogen or hydrogen-based fuels could be possible energy
sources for the high-temperature smelting process. The company Aurubis is
testing the use of low-emission ammonia to replace 20% of the natural gas usedin its copper rod production plants (Evans, 2022). Other alternatives include CCUS
or even renewable energy sources in tandem with high temperature heat storage.
Technologies on the market today cannot easily accommodate these alternatives:
the use of pure hydrogen requires adaptation of the equipment. Innovation andinvestments are needed.
Lithium is usually produced from either brine or spodumene, the latter being far
more energy- and carbon-intensive (Figure 3.16). Most brine production is inSouth America. Mineral-rich brine is pumped from the ground and left in

See footnote in previous section.

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25

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

evaporation ponds for up to two years to concentrate the lithium chloride saltpresent in the brine. Multiple phases remove boron and magnesium from thisbrine. Soda ash is added for a precipitation reaction that yields lithium carbonate
as a solid. This chemical can then be further treated with calcium hydroxide to
produce lithium hydroxide. This process is not very energy-intensive as the sun
powers much of the evaporation step and does not require high temperature, butdoes use a lot of chemicals with their own indirect emissions. In the case of lithium
extracted from spodumene, the rock must be heated in a kiln for one hour at
1 100°C and then roasted at 250°C for ten minutes with sulfuric acid to produce
lithium sulfate, from which lithium hydroxide is produced. These heating steps
usually use coal to power the high-temperature kilns and steam production.

t CO₂/tEmissions intensity of different lithium hydroxide production routes byfuel used and process temperature, 2021
10

Fuels used8

Diesel6

Natural gas

4Medium temperature

Coal
Temperature level
High temperature

20

Fuel use

Heat

Fuel use

Brine

Heat

Spodumene
IEA. CC BY 4.0.

Notes: Only direct emissions for the processing steps are included, not mining. Medium temperature includes steam supply
and high temperature covers spodumene kilns.
Source: Kelly et al. (2021).

Lithium hydroxide produced from hard rock is five times more emissions-intensive thanfrom brine, half those emissions coming from hard-to-decarbonise high-temperature heat.

Considerable efforts are under way to develop cost-effective technologies todecarbonise those production routes. For the spodumene route, the Outotec
process produces lithium hydroxide using soda ash instead of acid, leading tobetter yields, though high-temperature treatment of spodumene is still required(Metso Outotec, 2019). It may be possible to replace fossil fuels with renewableelectricity or low-emission hydrogen or use carbon capture in this process, but little
research exists so far.

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Completely new production routes such as direct lithium extraction methods,
which aim to extract lithium from brine without relying on large evaporation pools,

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

are also being developed. For instance, electrodialysis enables extracting highpurity lithium hydroxide directly from brine, requiring only electricity. However, thistechnology is still at the laboratory scale (Grageda et al., 2020; Zavahir et al.,2021). One of the most ambitious projects is being led by Vulcan Energy inGermany. Their geothermal plant will produce electricity for sale to the grid anduse the heat derived to extract lithium from the geothermal brine (Vulcan, 2022).
Nickel sulfate production can take a number of routes. Traditionally, the mostcommon route involved the use of high-purity nickel (Class 1) coming from highergrade sulfide deposits. This route has the lowest CO2 intensity of production, butthere is relatively little scope to expand production. The recent increase in theavailability of laterite ores (mostly from Indonesia) has increased the popularity of
the route involving mixed hydroxide precipitate (MHP) as an intermediate step.
First, laterite ore must go through a process called high-pressure acid leaching
resulting in MHP containing a mix of nickel, cobalt and other elements. This
precipitate is then refined to extract nickel sulfate. These production steps require
a lot of electricity and chemicals, making this route more energy- and CO2intensive than the traditional route from Class 1 nickel (Dry, Vaughan & Hawker,2019). Alternative routes for nickel sulfate include production from matte (yielding
nickel that is around 75% pure), crude nickel sulfate derived from copper or
platinum group metal production, and recycling (Le Gleuher, 2021).
Much of the nickel coming from Indonesia, which will account for a large portionof the growth in nickel mining capacity in the next few years, is likely to be very
energy- and emissions-intensive, given that it has laterite ores rather than sulfide
deposits. Thus, innovation to reduce the environmental impact of nickel production
processes from laterite deposits are of utmost importance. Examples includehydrometallurgical techniques, which have been demonstrated only at laboratoryor pilot scale, such as the direct nickel process (Total Materia, 2017). Direct useof renewables at production sites could also help reduce emissions. Somecompanies are already investing heavily in renewable power to satisfy theirelectricity needs such as the nickel producer Prony Resources in New Caledonia,
which aims to have two-thirds of its electricity supplied by a combination of solar
power and battery storage in 2025 (Prony Resources, 2021).

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The production of critical materials is part of the non-ferrous metal sector which, if
aluminium is excluded, was responsible for emitting 65 Mt of CO2 globally in 2021.
This is the equivalent of only 2% of the 2.8 Gt of CO2 emissions from the iron andsteel sector. It is important to note that even if critical material extraction andproduction are relatively carbon-intensive today, the clean energy technologies
such as EVs they support still bring major reductions in life-cycle CO2 emissions(see Chapter 2). Emissions from critical material production are, in any case, muchsmaller than those from bulk material production (see below).

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Bulk material production
Expansion plans and gaps compared with the NZE Scenario
Demand for steel and cement grows modestly in the short term and is relatively stable
over the longer term in the NZE Scenario, as reductions from material efficiency morethan outweigh modest increases in demand from clean energy technologies andinfrastructure (see material demand and efficiency sections above). While demand
growth is stronger for aluminium and plastics relative to steel and cement, it is much
more modest than the growth for critical materials. Given this modest growth, as well as
the widespread availability of raw materials, there would not be a major risk of supply
bottlenecks for bulk materials in this scenario. Production capacities in most cases are
already sufficient to meet projected demand, and capacity could most likely be
increased sufficiently for those materials for which demand increases.
However, current conventional capacity is emissions-intensive, due to a combination ofheavy reliance on fossil fuels and process emissions that result from chemical reactions
in conventional production methods. In the NZE Scenario, conventional capacity is
rapidly replaced by near zero emission technologies, through either retrofits or new
capacity additions, far outpacing the total growth in bulk material demand. 26 Total
primary steel production actually falls by about 30 Mt between 2021 and 2030, whilenear zero emissions primary output increases by about 130 Mt (Figure 3.17). For
cement, near zero emission production rises more than twice as much as total demand
over the same period.
The global average direct emissions intensity of bulk material production falls between
20 and 30% from 2021 to 2030 in the NZE Scenario, depending on the material. Indirectemissions from electricity production fall even more rapidly. By 2050, direct emissions
from all bulk materials fall in absolute terms by nearly 95%, and indirect emissions are
fully decarbonised.
A considerable portion of the emissions reductions in bulk material production to 2030
in the NZE Scenario come from incremental improvements to existing conventional
production routes, such as improved energy efficiency, partial blending of alternative
fuels such as bioenergy and reductions in indirect emissions through use of zero
emission electricity. In some cases, these improvements are a step on the way to nearzero emissions production in the longer term. For example, the steel sector is blending
increasing portions of electrolytic hydrogen into direct reduced iron (DRI) units that could
eventually be capable of using 100% electrolytic hydrogen.
The material efficiency improvements discussed earlier in this chapter play a significant
role too, both by reducing the overall demand for bulk materials and by providing morerecycled materials for secondary production. However, primary production cannot be

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26
The IEA has proposed definitions for low and or near zero emission steel and cement production in the report Achieving
Net Zero Heavy Industry Sectors in G7 Members (IEA, 2022e). They are designed to be stable, absolute and ambitious, andthey are compatible with a trajectory that reaches net zero emissions from the global energy system by mid-century. A
complementary set of definitions for low-emission production was also proposed, to recognise the important interim steps
taken towards lower emissions intensity and in particular towards achieving near zero emission production.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

fully replaced. Some materials remain locked “in use” for decades for some major end
uses such as buildings and infrastructure, and total demand is higher than it wasdecades ago, so the availability of recycled material inputs will be insufficient to fully
replace the need for primary production, at least over the next multiple decades. In thecase of cement, full recycling is not technically possible, though innovation is under way
to recover some portions of cement for recycling.

10% 200

10%

2 000

8%

160

8%

1 500

6%

120

6%

1 000

4%

80

4%

500

2%

40

2%

0%

0

0

2021

2030 – NZE

Mt/year

Steel

2021

2030 – NZE

Share of innovative technology

2 500

0%

Aluminium

5 000

10% 600

10%

4 000

8%

480

8%

3 000

6%

360

6%

2 000

4%

240

4%

1 000

2%

120

2%

0%

0

0

2021

2030 – NZECementChina
Other Asia Pacific
EuropeNorth America

2021

2030 – NZE

Share of innovative technology

Mt/year

Production of bulk materials by country/region and type of technology in
the NZE Scenario0%

HVC
Conventional
Innovative
Share innovative technologies (right axis)

IEA. CC BY 4.0.
Notes: NZE = Net Zero Emissions by 2050 Scenario; Innovative = near zero emissions primary production routes; HVC =high-value chemicals (ethylene, propylene and aromatics), which are mainly used to produce plastic. Other Asia Pacificexcludes China.

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Global production of bulk materials grows modestly to 2030 in the NZE Scenario, butmaterial production with innovative near zero emission technologies increase rapidly.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

The development and deployment of near zero emission primary production
methods for bulk materials is needed urgently for the world to get on track for net
zero emissions by 2050. While research, development and demonstration (RD&D)
efforts are under way on various technologies, efforts will need to be stepped up
to bring these technologies to the commercialisation stage within the next few
years. In the NZE Scenario, early commercial deployment occurs from the mid2020s, such that innovative near zero emission process routes account for about
4-8% of total production by 2030. This early deployment is crucial not only toachieve emissions cuts, but also to achieve the technology learning, cost
reductions and supporting infrastructure scale-up needed for their rapid largescale deployment from 2030.
Near zero emission technologies for bulk materials centre largely aroundhydrogen, direct electrification, CCUS and alternative raw materials. The options
vary by material. For steel, electrolytic hydrogen plays a leading role in the NZE
Scenario, particularly in the DRI route, as does CCUS-equipped production. Directelectrification through iron ore electrolysis is also possible. For cement, CCUS is
the main path to near zero emission production, given that two-thirds of emissions
come from the process itself rather than the combustion of the fuels used toprovide heat. Use of alternative raw materials that do not produce process
emissions is another option, along with potential to electrify thermal energy needsin the kiln. For plastics production, CCUS and direct electrification play animportant role. For aluminium production, there are two main sources of directemissions to tackle: high-temperature heating for alumina refining and process
emissions from the decomposition of anodes in aluminium smelting. Use of
bioenergy, hydrogen, solar thermal and electricity are options to tackle alumina
refining. Anodes made from alternative inert materials are the most advanced
solution for aluminium smelting, while CCUS is also being explored.

Box 3.4

Plans for near zero emission material production

Industrial producers around the world are undertaking projects to reduce emissions
from producing bulk materials. To evaluate how current announcements stack up
against what is required in the NZE Scenario, we consider two categories ofprojects, based around the production definitions of near zero emission material
production proposed in the report Achieving Net Zero Heavy Industry Sectors in G7
Members (IEA, 2022e):
Near zero emission: projects that, once operational, will be near zero emission
from the start, e.g. a cement plant capturing nearly all CO2 emissions; a DRIbased steel plant operating fully on hydrogen produced from renewableelectricity.

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Energy Technology Perspectives 2023



Chapter 3. Mining and material production

Near zero emission capable: projects that will achieve substantial emissions
reductions from the start – but fall short of near zero emissions initially – withplans to continue reducing emissions over time such that they could later
achieve near zero emission production without substantial additional capital
investments in core process equipment, e.g. a CCUS-equipped cement plant
capturing only process emissions initially, with plans to transition to zero
emission fuels to eliminate combustion emissions; a DRI-based steel plant
gradually blending increasing shares of electrolytic hydrogen, displacing its
initial use of natural gas.

Projects that will achieve substantial emission reductions but do not have plans tocontinue reducing towards near zero emissions (e.g., a cement plant with an electrickiln but no plans to capture process emissions, a blast furnace-based steel plantwith partial blending of electrolytic hydrogen) are not included in either of these twocategories.
Based on our assessment, announced projects today have the potential to deliver
13 Mt per year of near zero emission primary steel production by 2030, or around
10% of the level reached in the NZE Scenario. These figures exclude scrap-based
production, for which near zero emission production can be achieved with only
minor alterations to existing process technology, together with the use of low carbon
electricity.
For projects that do not achieve near zero emission production initially, but plan to
do so over time – without substantial additional capital investments in core processequipment – it is not always clear if, and by when the transition will take place. Thisis particularly the case in the iron and steel sector for natural gas-based DRI plants,
for which project announcements increasingly mention the use of hydrogen, but
often do not specify key details, such as the share of low-emission hydrogen that istargeted, the timeframe for achieving it or the source of the hydrogen.

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Based on our assessment of announced projects with plans to transition over time,
we identify a further 55 Mt per year of near zero emission capable primary steel
production that could materialise by 2030. If the transition of all these projects were
fully complete by 2030, the total announced near zero emission primary steel
production would equate to just under half of that required in the NZE Scenario bythat time. Nearly all of the announced projects are for hydrogen-based DRI plants,
alongside a smaller number of CCUS-equipped projects. More than 60% of theannounced capacity is in Europe.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Estimates of near zero emission material production based on
project announcements and the NZE Scenario in 2030
Cement production

Mt

Primary steel production
150

100

400
300
Estimates based on
project announcements

200

50

0

100

Near zero
emission

Near zero
emission
capableEuropeGap with NZE
Scenario
North America

0

Asia

Estimates based on
project announcements

Near zero
emission

Near zero
emission
capableRest of worldGap with NZE
Scenario

Total
IEA. CC BY 4.0.

Notes: NZE = Net Zero Emissions by 2050 Scenario. “Near zero emission” and “Near zero emission capable”
production, as defined in the text above, are assessed based on project announcements, many of which contain
incomplete information, and are subject to change.
Sources: Company announcements; Agora Energiewende (2021).

For cement, announced projects we assess are likely to achieve near zero emission
production from the start – and are scheduled to be operational by 2030 – amountto about 12 Mt per year of cement production. All of these projects involve the useof CCUS, and their combined output equates to around 3% of the near zero
emission cement production in 2030 in the NZE Scenario. An additional 5 Mt per
year of production from announced projects that are assessed to be near zero
emission capable are also forthcoming (Figure 3.18). These are either projects that
initially plan to capture only a portion of the plant’s emissions, or where carbon
capture is planned but it is unclear if the CO2 is intended to be permanently
sequestered. If all of these projects did achieve near zero emission production, thetotal output would amount to 5% of the levels in the NZE Scenario in 2030. Of theseprojects, most are still in the concept or feasibility stages and only one is underconstruction. About two-thirds of planned capacity is in Europe and the rest in
North America.

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Increased transparency in announced project plans – such as details on target
capacity and production levels, intended start-up dates, and key operationalparameters (e.g., target levels and source of any hydrogen used; the intended use
or fate of captured CO2) – would have several advantages. It would make possible
more robust tracking of progress towards net zero goals. It would help more easily

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

connect producers with potential buyers, who are increasingly making commitments
to purchase near zero emission steel and cement (see Chapter 6). It would also
facilitate more open dialogue and in turn help accelerate progress on the gaps toachieve near zero emission material production, such as coordination of, andinvestment in, low emission hydrogen supply and CO2 transport and storage
infrastructure. Once projects are operational, transparent data on realised
production volumes, emissions etc. would further support these objectives.

Geographical distribution
The geographical concentration of bulk material production, which is alreadyconsiderably lower than that of critical material production, would not change muchbefore the end of the current decade based on current investment plans. China is
by far the largest producer of bulk materials, accounting for 25-55% of global
production today, depending on the material. Much of the rest of production isrelatively dispersed among multiple producing countries. In many countries, muchof the output of bulk materials goes to the domestic market, but international tradeis important in some cases. Around 20% of steel production and 40% of aluminium
are traded as semi-finished products. Additional trade occurs through materials
embedded in end-use products. Those trade networks are well established andcarry volumes much higher than for critical materials, which implies lower risk
when there is some degree of geographical concentration. In the case of cement,
most production is carried out close to centres of demand due to high transport
costs, so geographical concentration is inherently less of a concern.

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There is no major regional redistribution of bulk material production during thecurrent decade in the NZE Scenario (Figure 3.19). The main exception is China,
which sees marginal falls in its shares of steel output (by 3 percentage points),
cement (7 percentage points) and aluminium (by 4 percentage points), between
2021 and 2030 due to declining domestic needs as its economy matures. It
nonetheless continues to dominate global supply. By contrast, strong economic
growth in some other emerging economies, notably India, results in an increase in
their shares of global production of these materials.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Shares of the leading regions in global production of selected bulk
materials in 2021 and 2030 in the NZE Scenario
60%

40%

20%

0%

China

Other
Asia
Pacific

Europe

China

Steel

Other
North
Asia America
Pacific

China

Aluminium
2021 level:

Other
Asia
Pacific

EuropeOther
Asia
Pacific

Decreasing

StableNorth
America

HVC

CementIncreasing

China

2030 level

IEA. CC BY 4.0.
Notes: CSA = Central and South America; HVC = High value chemicals, the main input for making plastics. Other
Asia Pacific excludes China. Stable is defined as a change of less than 2%.
Source: IEA analysis based on USGS (2022); World Steel Association (2022); IAI (2022).

Bulk material production continues to be dominated by China, though its market share is
set to decline slightly for steel, cement and aluminium.

Policy and market developments towards near zero emissions
Government policies are increasingly pushing companies involved in bulk material
production to re-evaluate their portfolios and plan for the clean energy transition.
This includes net zero emission targets, broader emissions reductions plans andindustry-focused roadmaps. Carbon pricing systems applied to industry, such as
the EU’s Emissions Trading System (ETS), Canada’s output-based carbon priceand Korea’s ETS, are starting to improve the economics of lower-emission
production. EU plans to introduce a carbon border adjustment mechanism may be
starting to put pressure on companies that export to the Union.

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Many technologies for near zero emission production are not yet market-ready
and will have considerably higher costs at least initially. As a result, broader plans
and carbon pricing at moderate levels are likely insufficient to drive initial roll-out,and so policies targeting near zero emission production are needed. This includes
supply “push” policies that help with large upfront capital investments and demand“pull” policies that provide confidence that there will be a buyer despite the higher
cost of production. They are complementary and thus both are critical. Technology
readiness is currently a key bottleneck, in that even material users willing to pay a
premium to decarbonise their supply chains are finding there is a relative scarcityof near zero emission materials expected to be available in the coming years. Thissuggests that current commitments for purchasing near zero emission materials –Energy Technology Perspectives 2023

Chapter 3. Mining and material production

while important to help address the “pull” side – are insufficient on their own toovercome the risks of investing in innovation to bring these technologies to market.
Conversely, even with substantial investment support to develop and build nearzero emission plants (the “push” side), the business case for doing so is missing
without confidence that there will be a buyer willing to pay a premium for thematerials produced.
Examples of government supply-side support for low-emission material
production
EuropeSteel•

EU innovation fund andSwedish Energy Agency:
Hybrit•Spain’s Recovery and
Resilience Plan, French
and Belgian government
investments: ArcelorMittal
(DRI)

•

Cement••
Plastics

Aluminium•

North America•

Canada’s Net Zero
Accelerator: ArcelorMittal (DRI)•US 45Q/48C CCUS and
45V/48C hydrogen deployment
tax credits•

Canada CCUS Investment Tax
credit•US 45Q/48C CCUS tax credits•

Canada CCUS Investment Tax
credit•US Infrastructure Investment
and Jobs Act: funding for
CCUS•

US Department of Energy’s
National Energy Technology
Laboratory: Holcim (CCS)

Norweigan Longshipprogramme: Heidelberg
Materials member
company Norcem (CCS:
Brevik)•National Research Council of
Canada Industrial Research
Assistance Program: Holcim(CCUS)•

Emissions Reduction Alberta:
Heidelberg Materials member
company Lehigh (CCS)EU Innovation fund: Neste(recycling), Metsä Group(bio-based plastics), BASF
(CCS)

•

US 45Q/48C CCUS tax credits•

Canada CCUS Investment Tax
creditEU Innovation fund:
EQIOM (CCS: K6
programme), Holcim(CCS: GO4ECOPLANET,
Carbon2Business),
Heidelberg Materials
member company Devnya(CCS: ANRAV-CCUS)

North-Rhine Westphaliastate funding: Arctus and
TRIMET (inert anodes)•

Canadian and Quebec
government funding: Elysis(inert anodes)

Asia and Oceania•

Japan Green
Innovation Fund(hydrogen-based
steel making)•Japan National
Budget (recycling)•

Australian
Renewable
Energy Agency:
Aloca, Rio Tinto(zero emission
fuels for alumina
refining)

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Sources: HYBRIT (n.d.); ArcelorMittal (2022a, b); ArcelorMittal (2021a, b); Brevik (2022); European Commission (2022c);
Holcim (2020); Lafarge (2019); Emissions Reduction Alberta (2020); International Energy Agency (2022f); Elysis (n.d.);
Trimet (n.d.).

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Several governments have recently introduced measures to speed up the
adoption of low-emission technologies in bulk material production. For example,
on the supply side, the US Infrastructure Investment and Jobs Act enacted in
November 2021 and the IRA of August 2022 allocated funding for suchtechnologies, particularly CCUS and hydrogen, while the RePowerEU plan
launched on 18 May 2022 increased funding to renewables and hydrogen. On the
demand side, Japan’s GX League policy, launched in February 2022, isencouraging private-sector actors to reduce their supply chain emissions, while
the Federal Buy Clean Initiative by the US, announced as part of an executive
order in December 2021, will provide support through public procurement of loweremission materials. Multiple other public- and private-sector efforts are driving
increased momentum for near zero emission materials.
Examples of government demand-side policies for low-emission material
production and private- and public-sector commitments
Steel

Cement

Plastics

Aluminium• FirstMovers
Coalition• First Movers
Coalition

Direct privatesector purchaseagreements• Vehicle manufacturers(e.g. Volvo, General
Motors, MercedesBenz)• Power companies(e.g. Ørsted)• Equipment
manufacturers(e.g. Miele, Lindab)

Private-sector
demand creation
initiatives• SteelZero• First Movers Coalition• ConcreteZero• First Movers
Coalition

Private-sector
targets to reduce
life-cycle
emissions• Vehicle manufacturers:
Daimler, Volvo Cars,
Hyundai, Toyota, Ford,
Nissan, BMW,
Renault, GM, BMW• Construction:
Lendlease, Balfour
Beatty, Skanska,
Bouygues
Construction• Construction:
Lendlease,
Balfour Beatty,
Skanska,Bouygues
Construction• Vehicle
manufacturers:
Daimler, Volvo
Cars, Hyundai,
Toyota, Ford,
Nissan, BMW,
Renault, GM,BMW

Publicprocurement• CEM IDDI
• US IRA provisions• CEM IDDI
• US IRA
provisions• US IRA
provisions

Other public
policies withdemand creation
potential• Germany’s CCFD
• France’s RE 2020
regulation• Germany’s
CCFD• France’s RE
2020
regulation• Germany’s
CCFD• Germany’s
CCFD• France’s RE
2020 regulation

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Sources: Company, government and non-governmental organisation announcements.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Steel
The global steel industry has a large number of players, with 113 steel companies
each producing more than 2 Mt in 2021 (World Steel Association, 2022). The top
ten producers account for about a quarter of global production. Most areheadquartered in Asia, mainly China, Japan, Korea and India; only one is in theEuropean Union. Many are multi-nationals with operations around the world. Mostof the leading producers are in China, which accounts for 53% of global production
today, compared with 8% in the European Union and 6% in North America.
Near zero emission steel can be produced using innovative primary production
routes with sufficient emissions reductions and also scrap-based electric arc
furnace (EAF) production if using zero emission electricity to eliminate indirectemissions and also minimising residual on-site direct emissions. Given limitationsin scrap availability, it will be important to develop near zero emission primaryroutes in parallel to achieving near zero emissions in scrap-based production.
Today, to our knowledge, only one project in the world operating at commercial
scale could qualify as near zero emission primary production: a natural gas DRIEAF plant with CCS in the United Arab Emirates operated by Emirates Steel
Industries, capturing 0.8 Mt CO2 per year. Additionally, about 150 Mt of natural
gas or coal DRI-EAF is produced annually, most of which would have thetechnological capability to relatively easily transition to near zero emissions by
converting to run on zero- or low-emission hydrogen – a number of furnace models
may require some low-risk equipment modifications to enable this, while some of
the more advanced furnaces would require no equipment changes (Astoria,
Hughes & Mizutani, 2022). Meanwhile, there is about 310 Mt of scrap-based EAF
production annually, which could approach near zero emissions levels through fulluse of zero emission electricity and efforts to minimise residual on-site emissions.

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As of mid-2022, 124 Mt/year of steel capacity additions have been announced thathave the potential to achieve near zero emissions if converted over time to run
from zero or low-emission electricity and hydrogen (Agora Energiewende, 2021).
About half of these are scrap-based EAF and the other half natural gas- and orhydrogen-based DRI-EAF. Most of these announced projects, however, are notyet backed by final investment decisions. In the case of DRI-EAF plants, many
announcements discuss plans to gradually transition from natural gas to lowemission hydrogen as inputs, although the specific plans are not fully clear in manycases for the portion of hydrogen that will be eventually used and by when. Only
one known CCUS project with potential to qualify as near zero emissions – if thecaptured CO2 were transported to a permanent storage site – is expected to beonline by 2030 – the 3D project by ArcelorMittal applying carbon capture to a blast
furnace in France, which would be able to capture about 1 Mt of CO2 per year.
While there are also several carbon capture and utilisation (CCU) projects alreadyoperating or under development that make use of carbon-rich blast furnace off-

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

gases, these would not be considered near zero emission given that the produced
fuels or chemicals would later release the CO2 to the atmosphere.
For comparison to current and announced capacity additions, in the NZE
Scenario, there is about 130 Mt near zero emission primary production by 2030
globally. Given the over 200 Mt of total DRI-EAF capacity that would be online ifannounced plans were realised (including announced and existing capacity), thereis good potential for sufficient near zero emission-ready steel capacity to be inplace. A major caveat however is that these plants would need to run fully on lowemission hydrogen to reach near zero emissions levels – announced planssuggest there will be a major shortfall in this regard.
Top steel producers and leading existing or planned projects making
progress towards near zero emission steel production
EuropeTop producers(location of
headquarters)•

North America

ArcelorMittal

Rest of
world

Asia
•
•
•
•
•
•
•
•
•

China Baowu
AnsteelShagang
HBIS
Jianlong
Shougang
Nippon SteelPOSCO
Tata Steel

•
•
•
•

HBIS
BaosteelSinosteel
POSCO

Producers undertaking projects towards near zero emission production:
•
•
•
•
•
•
•
•
•

DRI*

CCUS
Electrification•

H2 Green Steel*
SSAB (Hybrit project)*
ArcelorMittal
TataSteelThyssenkrupp
Saarstahl
Liberty
Salzgitter
ArcelorMittal (3Dproject)
ArcelorMittal (Siderwin
project)

•
•

Nucor
ArcelorMittal
North America•••

Boston Metal
Electra Steel

Emirates
Steel* For DRI, producers marked with an asterisk are working towards projects that will be fully fuelled by electrolytic hydrogenfrom the start; other projects are DRI plants that could transition to full electrolytic hydrogen in future (some producers havestated explicit plans for this, others have not stated additional details).
Note: A number of producers are included in this list that are undertaking projects that could develop technologies to aid
near zero emission production, but no clear plans have yet been announced for fully near zero emission capacity additions.
This explains the contrast between the list here and announced projects in Figure 3.18.
Sources: Company, government and non-governmental organisation announcements; World Steel Association (2022).

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Much of the momentum around hydrogen-based DRI is in the EU (IEA, 2022e).
The first commercial-scale fully electrolytic hydrogen-based DRI plants are
expected to come online already in the 2024-2026 period in EU – these may
include plants by start-up H2 Green Steel (2.5 Mt in Sweden) and the Hybrit

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

project involving SSAB (1.2 Mt in Sweden). Other projects planned in Europe, as
well as a smaller number of projects in North America and China, will initially be
fuelled fully or partially with natural gas or other fossil fuel-derived gases. Somehave explicitly stated plans to transition to electrolytic hydrogen as it becomes
available. While additional scale-up efforts are needed to demonstrate 100% useof hydrogen at commercial scale, Tenova’s Energiron DRI technology was used
to successfully prove fully hydrogen-based ironmaking at pilot scale in the Hybrit
project. This technology is being used for several of the planned DRI projects,
including those in China, which provides a positive indication for potential totransition to near zero emission production.
There is also growing momentum around iron ore electrolysis, which although stillat the pilot stage could have considerable growth potential. Much of the activity is
led by venture capital-backed US-based start-ups, with the earliest Boston Metalaiming for commercial deployment from 2026 and Electra Steel in the late 2020s.
ArcelorMittal is also developing iron ore electrolysis through the Siderwin projectin France, also aiming for commercial scale in the late 2020s.
Meanwhile, recent progress on applying CCS to the steel industry has beenmodest. Besides the already mentioned Emirates Steel Industries plant in the
United Arab Emirates and the 3D project in France, the Course50 project in Japan
continues to work towards applying carbon capture to the blast furnace, although
it is not expected to be rolled out this decade (commercial-scale demonstration
only is targeted by 2030). Plans are uncertain regarding the future of the HISarna
innovative smelting reduction with CCUS technology. Following a successful pilot
project in IJmuiden, Netherlands, Tata Steel announced that it would instead
pursue hydrogen DRI at the IJmuiden plant. Plans are still under way to develop
a second large-scale pilot plant (0.5 Mt) employing the HIsarna smelting reduction
technology in India, but there are no announced plans to include CO2 storage inthat demo plant. It is to be seen whether recent policy and market developments,
such as CCUS-related incentives in the US IRA and higher natural gas prices,
could give a boost to plans to apply CCS to the steel industry, including on coalbased blast furnaces.

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There is a notable absence of near zero emission-capable projects in several
major emerging market and developing economies, where much of the future
growth is expected. For example, India steel production is expected to nearly triple(to reach nearly 350 Mt) between now and 2050 in the NZE Scenario, yet virtually
all planned primary capacity additions are for conventional blast furnace-based
production without CCUS. International finance mechanisms – targeted towards
near zero emission production routes and designed to mobilise private capital –could help to close this gap through support for capital investments. While there
are some emerging efforts in this area, for example the recently developed Climate
Investment Funds Industry Transition programme, much more is needed. OtherEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

complementary policies, such as demand creation mechanisms or domestic
carbon pricing, would also likely be needed to make the business case for suchprojects given higher operating costs.
Many of the projects announced to date are receiving some form of directgovernment support for RD&D and deployment. A smaller number of projects are
instead relying mostly or solely on private capital. This includes the already-noted
US start-ups working on iron ore electrolysis, and also H2 Green Steel, which has
raised funds through equity financing rounds (H2 Green Steel, 2022). Funding
available via recently enacted policies, such as the US IRA, could serve to catalyst
additional projects in the coming years.
On the demand-pull side, the most direct support has come from direct privatesector purchase agreements. Various end-user companies have madecommitments to purchase near zero emission steel from companies such as
SSAB, Salzgitter, Nucor and H2 Green Steel. Although not providing as strong ademand-pull signal as a direct purchase commitment, several other private-sector
initiatives and public policies are signalling to steel producers a likely growing
market for near zero emission steel. Key initiatives to create demand from theprivate sector include SteelZero (an initiative of Climate Group andResponsibleSteel) and the First Movers Coalition (launched by the US
government), which collectively cover over 40 companies. In terms of public
procurement, the Clean Energy Ministerial’s Industrial Deep Decarbonisation
Initiative (CEM IDDI) has developed a Green Public Procurement Pledge, throughwhich member countries are expected to announce commitments to low and nearzero emission steel procurement over the course of 2023. Other demand-pullpolicies at the national level include German’s exploratory call for proposals thispast May for carbon contracts for difference (CCfD) in energy-intensive industries,
including steel (by helping bridge the cost gap between conventional and nearzero emission production, a CCfD would help steel producers sell near zero
emission production at current market rates and thus reduce the challenge offinding a buyer); France’s RE2020 buildings regulation that set embodied carbon
targets for buildings construction; and the US IRA provisions (sections 60503 and60506) that together allocated over USD 4 billion for the purchase of low-carbon
construction materials for government buildings and government-funded
highways.

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The global cement industry likewise has a large number of players. The top ten
producers account for just under 30% of global production, and are relatively
distributed geographically (BizVibe, 2020a). The top four producers alone accountfor 20% of production: two European-based multinationals with affiliate companies
and production widespread globally (Holcim and Heidelberg Materials) and twoEnergy Technology Perspectives 2023

Chapter 3. Mining and material production

Chinese companies (Anhui Conch and China National Building Materials). The
other producers in the top ten are headquartered also in Europe and Asia, as well
as Latin America and Eurasia. The wider dispersion of major countries is
explained by the fact that cement is often produced relatively close to where it isconsumed and is not widely traded internationally (see Chapter 2).
The largest challenge for producing cement with near zero emissions is to address
the process CO2 emissions from calcination, which account for about two-thirds ofemissions. CCS is currently the most advanced solution overall, with multiple
different capture technologies at different stages of technology readiness. It is
important to consider where the CO2 will end up to determine whether it is truly
near zero emissions – unless CO2 use results in permanent storage (e.g. inbuilding materials), the CO2 would need to be stored in dedicated permanentstorage facilities. While CCU applications without permanent storage have value
in the near term in providing a business case to advance carbon capture
technologies and may continue to play a modest role in some specific applicationsin the longer term in a world transiting to net zero, scale-up of supporting CO2transport and storage infrastructure will be critical to enable widespread truly nearzero emission cement production.
Reducing the clinker to cement ratio through increasing the use of supplementary
cementitious materials (SCMs) will also be important to reduce emissions. Here,calcined clay and lime are expected to play an increasing role, as availability of
conventional SCMs – particularly fly ash from coal plants and ground granulated
blast furnace slag from steel production – considerably declines due to clean
energy transitions. However, SCMs are unlikely to be able to achieve near zero
emissions production alone, given that the current known technical minimum
clinker requirement in cement for most applications is 50%.

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With regard to carbon capture, the first full-scale project for cement is expected tocome online in 2024 – the Brevik plant in Norway, operated by Norcem (a memberof Heidelberg Materials Group) that will capture 0.4 Mt CO2/year, or half of theplant’s emissions, using chemical absorption. In total, there are projects at cement
plants in the pipeline that are expected to capture about 10 Mt CO2/year by 2030
if including only projects with announced planned start dates, or 15 Mt CO2/year if
assuming all announced projects as of today will have sufficient time to start by2030 (values exclude projects that have stated plans to use the CO2 in ways thatwill not lead to permanent storage). This is only about 6 to 9% of the approximately
175 Mt captured and stored in 2030 in the NZE Scenario, signalling a large gap
between planned capacity additions and that needed to get on track for net zeroby 2050. Of the planned capacity additions, most are in Europe andNorth America; a handful of pilot or demonstration projects are also taking placein Asia. It is worth also noting the important role of other companies within the
CCUS value chain in enabling cement CCUS projects, including CO2 capture

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

technologies providers (e.g. Svante, Mitsubishi Heavy Industries Group, Aker
Carbon Capture, Carbon Clean) and companies involved in CO2 transport andstorage (e.g. Oxy Low Carbon Ventures, Equinor, Enbridge, Carbon Collectors).
Top cement producers and leading existing or planned projects making
progress towards near zero emission cement production
North
America

EuropeTop producers(location of
headquarters)

•
•

Asia
•
•

HolcimHeidelberg
Materials (including
member company
Italcementi)••

Anhui Conch
China National
Building Materials
China Resources
CementTaiwan Cement

Rest of world

•
•
•

Cemex
Votorantim
Eurocement

•

Boral

Producers undertaking projects towards near zero emission production:
•

•
•

CCUS

•
•
•
•
•
•
•
•
•

Alternative raw
materials••

Heidelberg Materials
Group (including
member companies
Norcem, Hanson
UK, Cementa,
Italcementi, Devnya)
Holcim
Buzzi Unicem(including member
company
Dyckerhoff)
Cemex
Schwenk
Vicat
Lhoist
CRH (including
member companies
EQIOM, Tarmac)
FLSmidth
Titan
Aalborg Portland
CIMPOR - Indústriade Cimentos
CEMEX
Materrup•••

Heidelberg
Materials
Group(including
membercompany
Lehigh)Holcim
Cemex

•
•
•
•

Brimstone
Solidia
Terra CO2
Fortera

•
•
•
•
•
•

Taiwan Cement
Dalmia Cement
Taiheiyo Cement
Anhui Conch
BBMG Corporation
China Resources
CementNote: A number of producers are included in this list that are undertaking projects that could develop technologies to aid
near zero emission production, but no clear plans have yet been announced for fully near zero emission capacity additions.
This explains the contrast between the list here and announced projects in Figure 3.18.
Sources: Company, government and non-governmental organisation announcements; BizVibe (2020a).

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Aside from CCUS, another technology category that could substantially reduce oreven eliminate process emissions are clinkers or alternative binding materials
based on raw materials other than limestone. While multiple technologies areunder development, there are various challenges related to suitability for adiversity of applications and raw material availability, or some lead to only partial
emissions reductions. Some alternatives are already being produced atcommercial scale but have only been used in certain large non-structural

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

applications (e.g. Solidia Cement). Other technologies are in earlier stages ofdevelopment but could be very promising if commercialised. For example, USbased start-up Brimstone has successfully produced at lab scale a zero-emission
cement with a chemical composition identical to ordinary Portland cement clinker(thus overcoming challenges related to limitations to the applications for which
they can be used and regulatory barriers to adoption) that can achieve zero oreven negative emissions and is aiming for demonstration by 2024. Electric kilns
could also help eliminate fuel combustion emissions – several projects are working
towards developing this technology, including successful pilot-scale trials by VTT
in Finland.
As with steel, the concentration of activity to deploy near zero emission cement
production is largely in advanced economies, despite the expectation thatemerging market and developing economies will continue to account for much of
future production (about 85% in 2050 in the NZE Scenario). This signals the needfor greater international finance support, as well as collaboration throughtechnology co-development, capacity building and knowledge sharing. Likewise,
much of currently planned CO2 transport and storage infrastructure is in North
America and Europe, which indicates a need for expanded scale-up in other partsof the world.
Government financial support is an important enabler of many of the ongoing andplanned projects. In addition to government funding through grants, tax incentives
can be helpful in driving increased investments in emissions-reducing projects. In
the United States, the 45Q tax credit for CCUS was expanded and extended
through the IRA, legislated in August 2022: the credit for CO2 captured from power
and industrial plants has been nearly doubled, and the deadline to qualify for thecredit is extended by seven years to 2033. In Canada, the 2022 federal budget
announced details of a refundable Investment Tax Credit for CCUS projects from2022 and 2040, at credit rates ranging from 37.5-60% depending on the project
segment (these rates will be halved starting in 2031 to encourage industry to movequickly).

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Demand-pull measures can also help drive deployment of near zero emission
cement. Many of the government policies noted above for steel are also relevant
for cement, including the CEM IDDI Green Public Procurement pledge, Germany’s
call for proposals for a CCfD, France’s RE2020 building regulation embodied
carbon targets, and the US IRA low-carbon construction material procurement
provisions. On the private-sector side, the First Mover’s Coalition is launching an
initiative for concrete and the Climate Group's ConcreteZero initiative launched inJuly 2022 with 17 member firms committing to procure 30% low-emission concreteby 2025 and 50% by 2030. Direct private-sector purchase agreements to nearzero emission cement are not observed as in the steel sector.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Plastics
Leading producers of plastics include a combination of dedicated chemical
producers and oil and gas producers that also produce chemical products. Top
producers are headquartered largely in the United States, the Middle East, theEuropean Union and Asia, with a larger diversity of companies involved in
producing recycled plastics. Regions with significant oil and gas resources areadvantageous for production, as the main determinant of the choice of route toproduce a particular chemical product is the availability and, therefore, cost offeedstocks such as naphtha and ethane.
Moving towards near zero emissions plastics involves two aspects. First isincreasing recycling and recycled production. Plastics recycling is an area where
major efforts are needed to improve collection rates, improve sorting and expand
the range of plastics that can be recycled through technology innovation. This
contrasts to metals such a steel and aluminium, where although there is certainlysome room to expand recycling, recycling rates are already much higher andrecycling technologies well-established, resulting in lower potential to increasesecondary production. Second is to develop near zero emission methods to
produce plastics from virgin materials. Here, CCUS is one of the leading options,as well as direct electrification.

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There are considerable efforts ongoing to develop new methods to recycle a
broader range of plastics and to reduce downcycling, which occurs when plastics
are recycled into a lower grade of plastic. There is a general concentration ofefforts in this area in Europe and North America, although producers aredeveloping projects in other regions such as Asia and the Middle East. Companies
involved include both the major chemical producers, but also smaller companies
and start-ups. There are fewer developments under way to achieve near zero
emissions from virgin production, although still some potentially promising efforts.
A couple of known small-scale CCUS projects on high-value chemicals plants
have been developed in China. Several projects in Europe and the United States
are looking into electrifying steam crackers, one of the key units for producing
high-value chemicals. The current projects are all at relatively low technology
readiness levels, from concept to small pilot, although plants are under way toquickly scale up to demonstration as early as 2023 and commercialisation as earlyas 2024. Innovation is also continuing on alternative bio-based materials to
produce plastics, although concerns about poor biodegradation and the availability
and management of bio-resources have slowed the uptake of these technologies.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Top plastics producers and leading existing or planned projects making
progress towards near zero emission plastics production
EuropeTop producers(location of
headquarters)

•
•
•
•
•

BASF
ENI
LyondellBasell
Industries
INEOS
Lanxess

North America
•
•
•
•

Dow
ExxonMobil
ChevronPhillips
DuPont

Asia
•
•
•
•

Sinopec
Formosa
Plastics
Mitsubishi
Chemical
LG Chemical

Rest of World

•

SABIC

•

LicellaProducers undertaking projects towards near zero emission production:•

Improved recycling
techniques

•
•
•
•
•
•
•
•
•
•

ENI (member
company
Versalis)
Neste
LyondellBasell
OMV
Borealis
Plastic Energy
QuantafuelFuenix Ecogy
Group
Carbios
Mura
Worn Again
Technologies

•
•
•
•
•
•

AgilyxCorporation
INEOS
Styrolution
PureCycle
Loop Industries
BP
Eastman• Yangchang
Petroleum• Sinopec

CCUS

Electrification

•
•
•
•
•
•
•

• SABIC

BASF
BorealisBP
LyondellBasell
SABIC
Total
Coolbrook

Sources: BizVibe (2020b); Polymer Database (2022); Plastic Ranger (2021).

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Government innovation funding has again been important for the research anddevelopment projects that are under way. Compared with other bulk materials,
creating demand-pull for near zero emission plastics may be more challenging,
given that there is a less clear “chunky” category of demand to target such as
construction or vehicles, even though plastics are indeed used for somecomponents within those demand segments. Nevertheless, demand creation will
be important, and several policies already mentioned could be applicable. For
example, Germany’s CCfD proposal could apply to plastics production.
Additionally, the First Mover’s Coalition is scheduled to launch its Chemicals
commitment at the 27th Conference of the Parties.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Aluminium
The global aluminium industry is somewhat more concentrated than othermaterials, at least for primary production: the output of the top ten aluminium
producers accounts for about half of global primary aluminium production(BizVibe, 2020c; Rusal, 2019). Half of the top producers are in China, while therest have globally dispersed headquarters, in Eurasia, Australia, North America,
the Middle East and Europe. The major role of China in primary aluminium
production (nearly 60% of global total) explains the dominance of major producers
there. With regard to recycled production, there is quite a large number of smaller,
geographically dispersed producers.
Moving towards near zero emissions aluminium production involves three key
aspects: 1) improving scrap collection and sorting in order to maximise recycled
production; 2) decarbonising direct emissions from aluminium production – ofwhich process emissions from aluminium smelting and fossil fuel combustion
emissions from alumina refining are the two largest sources; and 3) decarbonisingindirect emissions from electricity used in aluminium smelting. The industry often
places considerable emphasis on the last component – decarbonising power
inputs – since these emissions account for a large portion of emissions – about
70% of total (direct and indirect) aluminium production emissions globally. Zeroemission electricity generation technologies are already commercially available,
often at competitive costs, although technical, economic and logistical challenges
remain related to operating aluminium smelting with variable renewable electricity,
given that conventional smelters cannot easily adapt to fluctuating power inputs.
Addressing direct emissions will be even more challenging, given thattechnologies for full decarbonisation are not yet market ready. Thus, a greater
emphasis on also tackling direct emissions is needed.

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Inert anodes are currently the technology at a more advanced stage ofdevelopment within those that could eliminate process emissions from aluminium
smelting. Yet efforts in this area are relatively concentrated in a few key
demonstration and pilot projects: Elysis in Canada (a collaboration between Alcoa
and Rio Tinto), Rusal’s developments in the Russian Federation, and acollaboration between TRIMET and Arctus Aluminium in Europe. The first two aretargeting commercialisation by 2024. Other technologies to reduce aluminium
smelting process emissions are at much earlier stages of development, including
CCUS (concept state) and chloride electrolysis (lab-scale testing). Besides theinert anode pilot and demonstration projects and their plans for technology
commercialisation, there are no major concrete announcements on plans fortechnology deployment. This compares with about 7 Mt of aluminium production
from innovative routes by 2030 in the NZE Scenario.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Top aluminium producers and leading existing or planned projects making
progress towards near zero emission aluminium production
North
America

EuropeTop producers(location of
headquarters)•

Norsk Hydro

•

Alcoa

Asia
•
•
•
•
•

ChalcoHongqiao
Xinfa
East Hope Group
Company
China PowerInvestment Corp

Rest of world
•
•
•

Rusal
Rio Tinto Alcan
Emirates
GlobalAluminium

•

Rusal

•

Alba

•
•
•
•

Alcoa
Rio Tinto
South32
Hydro

Producers undertaking projects towards near zero emission production:

CCUS

•
•

TRIMET
Arctus
Aluminium
Alvance
Norsk Hydro

Chlorideelectrolysis•

Norsk Hydro

Inert anodes

•
•

•
•

Alcoa
RioTinto

Zero-emission
fuels for alumina
refining

Sources: Company, government and non-governmental organisation announcements; BizVibe (2020c).

Decarbonising alumina refining centres largely around switching to low-emission
fuels, including bioenergy, solar thermal, electricity and hydrogen. Initial steps are
already being taken in this regard. In 2022, an electric boiler was installed at theHydro Alunorte alumina plant in Brazil to provide a portion of the plant’s steam
demand; two additional electric boilers are planned by 2024. Several otherprojects are taking place at small pilot stage in Australia, the second-largest
alumina-producing country (China is the largest) with about 15% of global
production.
Developments are also under way to increase the flexibility of aluminium smelting
so that it can more easily support integration of variable renewable electricity
sources. EnPot successfully tested the first full industrial-scale installation of its“virtual battery” flexible heat management technology for aluminium smelters inGermany in 2019, and is now working towards commercial roll-out.

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As with steel and cement, the geographical dispersion of efforts to develop nearzero emission technologies for aluminium production is stark. Despite the current
concentration of production in China, and expected future growth in Asia more
broadly, there are no known R&D projects under way in Asia to address directemissions. While efforts there have been more focused on addressing indirectemissions from electricity generation, given the region’s high reliance on fossil

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

fuel-based electricity for aluminium production, it will also be important to address
direct emissions in order to reach net zero emissions.
As with the other materials, government funding has been critical to most of theongoing projects to develop technologies to reduce aluminium’s direct emissions.
Private-sector investment has also played a role in some cases. For example,
Apple has invested in the Elysis, and has also agreed to provide the project withtechnical support.

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While there are several government policies in specific countries that could help
create demand pull for near zero emission aluminium, at the moment there isgreater momentum in the private sector towards creating demand. Aluminium ispart of the First Mover’s Coalition, with aluminium purchasers setting a target of atleast 10% of their annual primary aluminium procurement volumes being low-CO2
primary aluminium. Additionally, multiple vehicle manufacturers have set targets
to reduce their life-cycle or Scope 3 emissions. Given that a substantial portion ofaluminium is used in vehicles, and use is expected to continue increasing in future
due to lightweighting, such targets could help drive demand for low-emission
aluminium. The private sector is already developing markets and product lines tooffer low-emission aluminium at a premium. For example, multiple aluminium
companies have launched new, lower-emission product lines (e.g. Alcoa’s
Sustana line and Rio Tinto’s RenewAl products), while the market intelligenceagency HARBOR Aluminium launched a “green” primary aluminium sportpremium in 2019. While these efforts are likely at the moment to mostly offer thepremium for aluminium produced with renewable electricity, over time they could
evolve to more stringent requirements and thus help drive demand for aluminium
also with near zero direct emissions.

Energy Technology Perspectives 2023

Chapter 3. Mining and material production

References
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Energy Technology Perspectives 2023

Chapter 3. Mining and material production

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Energy Technology Perspectives 2023

Chapter 3. Mining and material production

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Energy Technology Perspectives 2023

Chapter 3. Mining and material production

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Energy Technology Perspectives 2023

Chapter 3. Mining and material production

Kelly, J.C. et al. (2021), Energy, greenhouse gas, and water life cycle analysis of lithium
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Energy Technology Perspectives 2023

Chapter 3. Mining and material production

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Energy Technology Perspectives 2023

Chapter 3. Mining and material production

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Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Chapter 4. Technology
manufacturing and installation
Highlights• Today’s announced plans to manufacture solar photovoltaic (PV) modules, if fully
realised, would be sufficient to meet 2030 demand levels in the Net Zero by 2050
(NZE) Scenario. These expansion plans fall short for other clean energy
technologies, but short project lead times of one to three years – combined withfurther recently announced policy incentives – suggest that the gaps are notinsurmountable. Investment of USD 640 billion by 2030 is needed to expand
global production of mass-manufactured technologies in line with the NZE
Scenario; announced projects would be equivalent to around two-thirds of thisinvestment.
• Announced EV battery manufacturing projects, mostly in China, could boost
production capacity sixfold by 2030 and meet over 80% of the needs in the NZE
Scenario. Project announcements suggest that manufacturing of windcomponents would only grow by 5-10% (onshore) and 20-55% (offshore) by
2030, compared with a quadrupling of wind turbine deployment in the NZE
Scenario. Electrolyser manufacturing capacity would rise almost tenfold fromtoday’s level to more than 100 gigawatt (GW) by 2030, around half of NZE
Scenario requirements. Announced heat pump manufacturing projects could
meet a third of NZE Scenario needs for 2030, with an equivalent figure of half forfuel cell trucks.
• The timely rollout of large-scale, site-tailored technologies is uncertain. For
example, current deployment plans are equivalent to only about 15% of NZE
Scenario needs in 2030 for low-emission synthetic hydrocarbon fuels, and 20%
of demand for bioenergy with carbon capture. These technologies are at earlystage of development and typically involve long project lead times.
• The workforce to install and manufacture clean energy technologies needs togrow substantially. Today, around 33 million people are working in clean energy.
By 2030, in the NZE Scenario, an additional 8 million workers will be needed to
manufacture electric vehicles and their batteries, though there is a possibility forworkers currently involved in manufacturing internal combustion engine (ICE)vehicles to work in the majority of these roles. An additional 4 million workers will
be needed to install (75%) and manufacture (25%) solar PV, wind and heat pumpsystems.

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• Supportive industrial policies, access to low-cost energy and materials,
availability of workers and trade policies largely explain China’s globally dominant
manufacturing base. Other countries are working to expand their clean energy
manufacturing capacity: notable recent policy efforts include the US Inflation
Reduction Act, the REPowerEU plan, Japan’s Green Transformation initiativeand India’s Production Linked Incentive scheme. However, on the basis of current
expansion plants, today’s level of geographical concentration appears set toremain high throughout the present decade.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Overview
The Net Zero Emissions by 2050 (NZE) Scenario’s clean energy trajectory
involves massive clean energy technology deployment, which hinges on theparallel expansion of manufacturing and installation capacity. We therefore assess
prospects for these clean technology supply chain stages in this chapter, focusing
on the expansion of manufacturing and installation capacity based on current andannounced construction activity 27. We distinguish between two broad technology
categories:
Mass-manufactured technologies, which are assembled in specialised factories inlarge volumes using several manufactured components and sub-assemblies, withthe ready-to-use end product exiting the factory floor. Of the selected supply
chains analysed in this report, solar PV modules, wind turbines, electric cars, fuelcell trucks, heat pumps and electrolysers are key technologies that fall into thiscategory.
Large-scale, site-tailored technologies, which are usually individually designed
and manufactured to fit specific local conditions. They may consist of a number ofcomponents that themselves are mass manufactured, but their engineering,assembly and installation are site-specific. Of the supply chains analysed in thisreport, natural gas-based hydrogen with carbon capture and storage (CCS), direct
air capture (DAC), bioenergy with carbon capture (BECC), and low-emission
synthetic hydrocarbon fuels are included in this category.
This chapter assesses the lead times involved in technology manufacturing andinstallation and identifies gaps in meeting NZE Scenario demand in 2030,
according to current capacity expansion plans for the specific supply chainsreviewed in this report. Lead times are based on historical values, though they
may decrease in upcoming years as supply chains mature and local permitting
procedures improve. The scope for reducing lead times is particularly important
for the installation of site-tailored technologies, some of which are at a very earlystage of deployment, with future projects almost certainly taking much less time tocomplete as industry experience grows.
Announced projects for expanding capacity or building new facilities include
projects that are at different stages of development, with some already underconstruction and others not yet at the final investment decision stage. However,they should not be taken as a production forecast. While capacity additions could
turn out to be higher than current public announcements (this is especially thecase for mass-manufactured technologies, which tend to be announced justBased on announcements up to November 2022.

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27

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

before construction begins), not all announced projects will materialise. How thesefactors play out will vary by technology. Nevertheless, our assessment provides
an indication of which technologies are most likely to be subject to supply
shortfalls.
Our analysis suggests that component and technology manufacturing is not likely
to represent a major bottleneck in clean energy supply chains in the short tomedium term (Figure 4.1). Prospects for installing systems are less certain,
particularly for large-scale, site-tailored technologies, which typically involve
longer lead times and for which investment announcements point to substantial
financing shortfalls. Those shortfalls are most significant for low-emission
synthetic hydrocarbon fuel production and BECC (Figure 4.2). Announcements forsite-tailored technologies are often made prior to or during front-end engineeringand design (FEED) work or at the final investment decision stage, so major
expansion plans would need to be formalised in the next few years for deployment
to accelerate as quickly as projected in the NZE Scenario.
Current global manufacturing capacity, announced capacity additions,capacity shortfall in 2030 relative to the NZE Scenario, and lead times forselected mass-manufactured clean energy technologies and components

2021
2030 - gap between planned capacity and NZEElectrolyser

Heat pump

years

0

Fuel cell stack0%

Fuel cell truck2
EV - cathode20%
EV - anode4

EV - battery

40%

Offshore wind6

Onshore wind

60%

Solar PV - wafer

8

Solar PV - cell80%

Solar PV - module

10

Share of supply in 2030
in the NZE Scenario

100%2030 - planned capacity additions
Average lead time and typical range (right axis)
IEA. CC BY 4.0.

Notes: NZE = Net Zero Emissions by 2050 Scenario; PV = photovoltaics; EV = electric vehicle. Announced capacity
additions take account of projects to expand or build new facilities that have already reached the final investment decision
stage and that are under construction or about to begin construction, as well as those awaiting such a decision. Lead timerefers to bringing online new manufacturing capacity.

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Announced manufacturing expansions and lead times imply that for mass-manufactured
technologies there is still time to address shortfalls in manufacturing capacity.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

8

60%

6

40%

4

20%

2

0%

0

BECC

2021
2030 - gap between planned capacity and NZE

years

80%

Synthesis

10

DAC

100%

Gas-CCS H₂

Share of supply in 2030
in the NZE Scenario

Current global capacity, announced capacity additions, capacity shortfall in
2030 relative to the NZE Scenario, and installation lead times for selectedlarge-scale, site-tailored clean energy technologies

2030 - planned capacity additions
Average lead time and typical range (right axis)
IEA. CC BY 4.0.

Notes: NZE = Net Zero Emissions by 2050 Scenario; DAC = direct air capture; BECC = bioenergy with carbon capture;
Gas-CCS H2 = natural gas-based hydrogen with carbon capture and storage. “Synthesis” refers to low-emission synthetichydrocarbon fuels. Announced capacity additions take account of projects to expand or build new facilities that havealready reached the final investment decision stage and that are under construction or about to begin construction, as wellas those awaiting such a decision but that are expected to proceed.

For large-scale, site-tailored technologies, the average lead time between the first feasibility
studies and plant commissioning is up to five years.

A major workforce expansion will be needed in upcoming years to manufacture
and install these clean energy technologies. Over 8 million jobs manufacturing
EVs and their batteries will need to be filled globally by 2030 in the NZE Scenario,
though 7 million of those can probably be met through a shift in the workforce fromICE vehicle manufacturing. For solar PV, wind and heat pump systems, thenumber of additional workers needed to install the technologies will outnumber
those required to manufacture them around two-to-one. Thus, the installer
workforce grows substantially for each of these segments in the NZE Scenario by2030: one million additional workers are needed globally to install solar PV panels,
another million to install wind turbines and around 800 000 to install heat pumps(Figure 4.3).

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The number of solar PV installers expands the most, as the share of labour-related
project costs remains much larger than for the other technologies. The need forheat pump installers rises most sharply – nearly fivefold by 2030 – but much ofthis demand could be met by construction workers who today install other heating
and air conditioning equipment. Increasing the number of wind system installers
will be more challenging, as many of the new positions require higher-level skills

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installationand more stringent credentials to handle specialised transport and construction
equipment as well as additional safety considerations, especially in the offshore
context.

Million employees

Global employment in manufacturing and installing selected massmanufactured clean energy technologies in the NZE Scenario, 2019 and
2030
9

6

3

0

2019

2030
Solar PV

Likely shift from other HVAC installation

2019

2030
Wind

2030
2019
Heat pumps

Likely shift from ICE vehicle manufacturing

2019
2030
EVs and EV batteries

Installation

Manufacturing

IEA. CC BY 4.0.
Notes: PV = photovoltaics; EV = electric vehicle; ICE = internal combustion engine; HVAC = heating, ventilation and air
conditioning.
Source: IEA (2022a).

The NZE Scenario requires a major workforce expansion to manufacture and install clean
energy technologies, particularly to install solar PV and wind systems.

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A lack of skilled workers may hinder the deployment of clean energy technologies
in upcoming years. A shortage of wind turbine and heat pump installers has
already emerged in major markets such as Europe, the United States andAustralia, with over 98% of US employers in wind turbine construction reporting
hiring difficulties in 2022 (United States, DOE, 2022e) (IEA, 2022b). Within theEuropean Union, 19 member countries and regions are reporting shortages in key
occupations most relevant to heat pump installation. China is struggling to recruit
workers in manufacturing, with labour shortages expected to swell to nearly
30 million employees by 2025 (see Chapter 1). In addition, technology installation
can require specialised equipment as well as labour, which could pose potential
bottlenecks (see Box 4.1).

Energy Technology Perspectives 2023

Box 4.1

Chapter 4. Technology manufacturing and installation

Potential installation bottlenecks in the wind sector

Installing a wind turbine requires fewer workers per unit of capacity than solar PV,
but more material inputs, notably cement and cabling, as well as specialisedmachinery to transport and position the turbine. In the case of offshore wind farms,
specialised vessels are required, which increasingly need to be capable ofhandling taller and larger wind turbines. There are concerns that a shortage of such
vessels could lead to delays in completing new projects.
Outside of China, there are currently around ten vessels that can be used to build
offshore wind farms, each with an ability to install roughly 0.5-0.7 GW of capacity
per year (Wind Europe, 2022). New vessels are under construction and others areplanned, which should boost the fleet to at least 25 vessels by 2026. It is expectedthat the new vessels will be designed to handle larger turbines, reaching roughly
1.3 GW per vessel per year by 2030, making the construction process more
efficient. As a result, current plans point to installation capacity increasing fivefoldby the end of the decade to well over 30 GW per year. But in the NZE Scenario,
installations of offshore wind, excluding China, exceed 65 GW in 2030, requiring a
total of over 50 vessels. To avoid bottlenecks, the current rate of wind turbine
installation vessel construction would need to be maintained through to 2030.

Building up a trained workforce to install a new technology takes time, so proactive
and strategic labour planning is needed to prevent shortages. Establishedexperience with similar technologies already in use can be leveraged to reduce
the time and effort needed to training clean energy manufacturers and installers.
For example, vehicle assembly line workers can be shifted to production lines forelectric vehicles and boiler installers could be redeployed to install heat pumps.
Although shifting these workers does require additional training, much of it can bedone on the job or through short training courses. For example, while it could takeup to four years for someone without previous experience in heating and coolinginstallation to become a certified heat pump installer (depending on the level ofqualification), workers with previous experience installing heating systems could
be trained in just a few weeks.

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Workforce requirements also depend on the length of the installation process,which varies by technology type and size. For instance, installing an offshore windfarm takes six or more years. For large-scale solar PV farms, installers can spend
8-14 months on a project, while distributed rooftop PV systems can typically be
installed in just a few days. Meanwhile, installing or replacing a boiler with a heatpump in a building also normally takes only a few days, though this is still longer
than the time needed to simply replace a fossil fuel-fired boiler with another one.
Small-scale, short-duration projects typically rely on a less specialised workforce,Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

which may work only part-time on clean energy projects such as rooftop solar PV
and heat pumps. Standardised credentials or accreditations can help ensure thatworkers have the requisite training for such projects, whereas long-duration
projects can rely more on on-the-job training.
Site-tailored systems such as gas-based hydrogen production with CCS, BECC,
DAC and synfuel production also require a trained workforce to manufacture
equipment and build and operate the plant. The workforce requirement is highest
during the construction phase. For example, it is estimated that the 8 Mt CO2/year
BECCS project at Drax power plant in the United Kingdom could require as manyas 4 000 full-time equivalents per year during the four-year construction phase.
Like most energy assets, operating the facility will require far fewer workers: onlyaround 375 people will be needed to operate the plant and its transport andstorage infrastructure (Drax, 2021a). Retrofitting existing plants with carbon
capture is also a way to retain employment in a region, and announced operationaljobs are often a combination of both new and retained jobs.
The total workforce requirement for site-specific clean energy installations is much
lower than for mass-manufactured technologies. The additional workforce
requirement for both the construction and operation of gas-based hydrogenproduction with CCS, DAC, BECC, and low-emission synthetic hydrocarbon fuelproduction plants could reach 150 000 to 300 000 by 2030 in the NZE Scenario,
depending on plant scale and whether projects are retrofits or new builds. Manyof these installations will rely on construction and processing equipment usedalready in the thermal power generation, natural gas processing and chemical
production sectors, and could draw upon the existing pool of skilled workers inthese areas. However, this would not safeguard these projects from the broader
construction and manufacturing labour shortages present in many economies.

Mass manufacturing of clean technologies
and components

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For mass-manufactured clean energy technologies, bottlenecks resulting fromgaps between announced manufacturing capacity expansion and projected
production in 2030 in the NZE Scenario are less of a concern than for steps higher
in the supply chain. The main reason is that lead times for bringing new
manufacturing capacity on line are relatively short, averaging one to four years(see Chapter 1), so there is still time to fill any current shortfalls in manufacturing
capacity. However, it remains uncertain just how many current plans will actuallyproceed, as investment decisions can change with fluctuations in demand, policy
support and costs. These uncertainties are typically more acute in emerging
economies due to higher financing costs.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

For some technologies, manufacturers are currently operating well below full
capacity, as many investments were made in anticipation of higher demand, toallow plants to operate flexibly and respond quickly to short-term demandvariations. For example, battery factories were operating at just under 40% of their
nameplate capacity on average worldwide in 2021, and the capacity utilisation rate
for solar PV modules was around 40%. Utilisation rates are generally lower in
China. In the short term, there is a lower risk of bottlenecks in manufacturing thanfor other stages of the supply chain. However, this is not the case for alltechnologies. For example, the utilisation rate at most heat pump factories iscloser to 80%, which is broadly in line with standard manufacturing industry
practice of allowing enough spare capacity to deal with unplanned maintenanceor logistical problems – although significant differences exist across facilities (seeChapter 2).
Under the NZE Scenario, expanding the global manufacturing capacity of the six
selected clean energy technologies reviewed in this report – wind, solar PV, EV
batteries, electrolysers, heat pumps and fuel cell trucks – will require cumulative
investment of around USD 640 billion (in real 2021 US dollars) over 2022-2030(Figure 4.4). Around two-thirds is needed to scale up EV battery (including anodeand cathode) manufacturing and around 15% would be dedicated to wind power.
About USD 470 billion already claimed by projects in the pipeline, most of which
are in China, Europe and North America. This represents about two-thirds of the
cumulative investment required. Shortfalls in investment to 2030 amount to around
USD 90 billion for EV batteries, USD 45 billion for fuel cells and fuel cell trucks,
and around USD 15 billion for heat pumps.

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Scaling up clean energy technology manufacturing capacity is crucial not only tomeet higher demand in 2030, but to establish the foundation needed to achieve
net zero emissions by 2050. Deployment of most of the mass-manufactured
technologies continues to increase after 2030, though more slowly than during thecurrent decade as markets reach saturation. For example, global EV battery sales
grow on average by more than 15% per year over 2022-2030, slowing to around
5% during the 2030s and just 1% in the 2040s, when EVs account for almost all
car sales. In the case of both electrolysers and solar PV systems, meeting the
manufacturing capacity scaleup required during the current decade in the NZE
Scenario would be sufficient to also meet demand after 2030, as no additional
capacity investment is needed.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Announced global cumulative investment in mass manufacturing of
selected clean energy technologies by region/country and that required tomeet demand in 2030 in the NZE Scenario, 2022-2030
Required investment

Announced investment
100%

Other

80%

Undefined

60%

Asia
Pacific

Annouced investment

Fuel cells and fuelcell trucks 9%
Solar PV 4%
Electrolysers 2%

Investment gap

Heat pumps 3%

40%
20%

China

Wind 13%

EV battery
69%

North
America
Europe0%

USD (2021) 640 billion

USD (2021) 470 billion

IEA. CC BY 4.0.
Notes: Required investment is that associated with projected deployment to 2030 in the NZE Scenario. EV batteries include
anode and cathode manufacturing; solar PV includes module and cell manufacturing.

Expanding mass-manufacturing capacity for clean energy technologies to the NZE
Scenario level will require around USD 640 billion of investment over 2022-2030, with 80%
allocated to wind systems and EV batteries.

Box 4.2

Carbon intensity of technology manufacturing

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Manufacturing, assembling, installing and constructing clean energy technologies
tend not to be energy-intensive or carbon-intensive processes. This is because they
do not generally involve high temperatures but rather mechanical operations, which
use much less energy. The global manufacturing sector falls within the “light industry”
category of energy use, which accounts for around 5% of global CO2 emissions
today. For most technologies, electricity is currently the main energy input,
accounting for around 35% of total energy consumption in the manufacturing sector
in 2021, followed by natural gas at 20%. Given its heavy reliance on electricity, theentire sector halves its emissions from today’s level by 2035 in the NZE Scenario,
thanks to the parallel increase in the electrification of manufacturing and thedecarbonisation of power generation.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Solar PV
Global solar PV deployment over the last decade or so has been nothing short ofspectacular, with installed generation capacity rising to over 1 000 GW by 2022,
compared with just 40 GW in 2010. Solar PV generation accounted for 4% of
global electricity generation and 14% of total renewable generation in 2022. This
momentum is expected to continue for the foreseeable future as policy goals
become increasingly ambitious and competitiveness with fossil-based generating
technologies improves.

Expansion plans and the gap with the net zero trajectory
The announced expansion plans of solar PV manufacturers are well on track tosatisfy projected demand by 2030 in the NZE Scenario. Module manufacturing
capacity is already far in excess of current demand with a global average utilisation
rate of less than 50% in 2021. Announced expansion plans would raise capacity
to around 790 GW by 2027, enough to cover all demand projected for 2030 in the
NZE Scenario. The situation for cell manufacturing is almost identical, withannounced expansion plans boosting global manufacturing capacity to around
810 GW by 2027 – easily enough to satisfy projected demand in 2030. Wafers arealso on track, with a margin similar to that of cells and modules: if all projects arecompleted on time, manufacturing capacity would reach more than 790 GW by
2027.
Although announced expansions would cover projected NZE Scenario demand to2030, manufacturing capacity still needs to exceed demand, as it is unrealistic to
expect manufacturers to operate continuously at maximum capacity. Even so,
assuming an average utilisation rate of 85% in all three manufacturing stages,
announced module, cell and wafer capacity expansions would still cover NZE
Scenario requirements, with surpluses of 14 GW for modules, 36 GW for cells,and 22 GW for wafers (Figure 4.5).

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Most of the major manufacturers of all solar PV supply chain components are in
China, which currently supplies more than 70% of the world’s modules and an
even larger share of subcomponents (see Chapter 2). In the case of wafers,
LONGi and Zhonghuan Solar are the largest manufacturers worldwide, covering
around 50% of global manufacturing capacity. For solar cells, Tongwei, Aiko,
LONGi and Trina combined represent around 40% of global manufacturing
capacity. The same trend applies to module manufacturing, with the main
manufacturers (LONGi, Trina, Jinko Solar and JA Solar) together constituting
approximately 40% of global capacity. According to current expansion plans, thehigh concentration of manufacturing in China is not expected to decrease inupcoming years, with its share of global manufacturing capacity reaching 78% formodules, 85% for cells and 94% for wafers in 2027.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

GW

Solar PV manufacturing capacity by country/region according toannounced projects and in the NZE Scenario
900
800
700
600
500
400
300
200
100
0

2021

Announced 2030 NZESolar PV - modules
China
Middle East

2021

Announced 2030 NZESolar PV - cells

Other Asia Pacific
RoW

EuropeNZE demand

2021

Announced 2030 NZESolar PV - wafers
North America
NZE residual capacity

IEA. CC BY 4.0.
Notes: GW = gigawatts; RoW = rest of world; NZE = Net Zero Emissions by 2050 Scenario. Announced capacity includes
existing capacity. The manufacturing capacity needed to meet projected demand in the NZE Scenario (NZE demand) is
estimated assuming a utilisation rate of 85%. NZE residual capacity, thus, represents the manufacturing capacity thatwould remain unused, on average, which provides some flexibility to accommodate demand fluctuations.

Announced expansion projects for module, cell and wafer manufacturing, mostly in China,
are sufficient to cover the capacity needed by 2030 in the NZE Scenario.

The same companies will also continue to dominate the market in the next few
years, as the top five manufacturers globally have plans to at least double their
manufacturing capacity of the three key components in the next four years.
Together, they account for 42% of global capacity additions for modules, 48% forcells and 57% for wafers to 2026. Module manufacturing is expected to remain
the least concentrated step in the supply chain, with the Asia-Pacific region
covering around 15% of global manufacturing capacity (117 GW) in 2027.

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There have been many expansion announcements in the solar PV supply chain
industry in recent years, particularly in 2022, with several multi-billion-dollar
investments announced across different steps of the supply chain (Table 4.1). For
example, LONGi recently announced investment of USD 2.4 billion to increase its
manufacturing capacity for silicon wafers by 20 GW, monocrystalline cells by
30 GW and solar modules by 5 GW in Inner Mongolia (PVTIME, 2022). Canadian
Solar announced a record-high investment of USD 9.8 billion in a production basein Qinhai, China, aiming to annually produce 200 000 tonnes of polysilicon,
250 000 tonnes of silicon metal, 50 GW of silicon ingot casting, 10 GW of wafers,
10 GW of cells and 10 GW of modules (Shaw, 2022). Although most of the
expansion plans are in China, some major investments have been announced inother regions. One example is Enel’s decision to build a 3-GW-per-year module
factory in Sicily, due to come on line by 2024, supported by a grant from theEuropean Union (Enel, 2022).

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Selected announced expansion projects for manufacturing solar PV supply
chain components
Manufacturer

Canadian Solar
LONGi

Component
Modules, cells,
silicon, crucibles
Wafers, cells andmodules

Region ofannounced
expansion

Expected
completion

Billion USD

Qinghai, China

2027

9.8

Inner Mongolia,
China

2024

2.4

Shangji

WafersJiangsu, China

2024-2025

2

Tongwei

Cells

Sichuan, China

First phase 2023

1.9

Q Cells

ModulesSouth Carolina, US

2024

1.8

Jiangxi, China

2023-2025

1.5

Qinghai, China

2023-2024

1.4

Jiangxi Jinko
Jiangxi Jinko

Modules andaluminium frames
Monocrystalline
silicon pull rods

Solar Space

Cells

Anhui, China

2023

1.4

Eging PV

Modules, cells andwafersAnhui, China

N/A

1.4

First Solar

Modules

Alabama, UnitedStates2025

1.2

JA SolarCells and modules

Jiangsu, China

2023

1

Notes: N/A = not available. Only selected expansion plans announced during 2022 with an investment of over USD 1 billion
are listed in the table.

Regional policy and market developments
China’s dominance in most of the solar PV supply chain steps is in large part theconsequence of strong policy support over the last couple of decades. Since 2001,
all the Five-Year Plans (the 10th, 11th, 12th, 13th and 14th) have promoted
national solar supply chains through various mechanisms and incentives,
considering the solar PV industry an emerging strategic sector. Low labour costs
and ample land availability also helped. The 14th Five-Year Plan, released in June
2022, set a target of 33% of electricity generation coming from renewables by2025, including an 18% target mainly for wind and solar technologies (SinoGerman Cooperation on Climate Change, 2022). Considering the short lead timesof China’s solar PV industry and the announced expansion plans in place, thesepolicies to stimulate demand are essentially supporting domestic solar PV
manufacturing, as Chinese manufacturers have already shown that they can ramp
up their production to match growing demand.

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In the United States, the Inflation Reduction Act (IRA) enacted in August 2022
aims to – among other goals – lower energy costs, increase energy security,
enhance domestic manufacturing of clean technologies and decarbonise allEnergy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

sectors of the economy. It is expected to mobilise USD 370 billion in energy andclimate investments (Everett and Levine, 2022), of which a sizeable amount is
expected to flow to the solar PV industry, stimulating demand and securing andstrengthening local supply chains (Maryland Clean Energy Center, 2022). The IRA
aims to provide ten years of consumer tax credits to make homes more energyefficient, including through the installation of rooftop solar systems, as well as overUSD 60 billion for clean energy manufacturing, including tax credits to acceleratedomestic manufacturing of solar panels and up to USD 10 billion to build clean
technology manufacturing facilities.
In the European Union, the REPowerEU plan released in May 2022 proposes atarget of 320 GW of solar PV by 2025 and almost 600 GW by 2030 (European
Commission, 2022a). Within this plan, the EU Solar Energy Strategy sets out
different initiatives to strengthen the European solar PV supply chain, including
the European Solar PV Industry Alliance, which aims to facilitate innovation-led
expansion of a solid and resilient solar PV value chain, with particular focus on the
manufacturing stage. The strategy seeks to diversify the supply of criticalmaterials, in particular polysilicon, improve resource efficiency and circularity, andachieve manufacturing capacity equivalent to 30 GW of solar PV at each step of
the value chain by 2025 (European Commission, 2022c).
In India, the Production Linked Incentive (PLI) Scheme under the National
Programme on High Efficiency Solar PV Modules was approved in 2022, with theaim of reducing the country’s dependence on imports of solar energy technologies
and strengthening the domestic solar PV manufacturing ecosystem. The scheme
estimates that manufacturing capacity could be increased by around 65 GW in
different steps of the solar PV supply chain (India, PM India, 2022). In October
2022, the Ministry of New and Renewable Energy and the Solar Energy
Corporation of India launched the second phase of the PLI, with an incentive
package of around USD 3 billion to encourage the creation of a complete local
ecosystem of integrated solar PV manufacturing from polysilicon, ingot, wafer, celland module facilities.

Wind power

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Like solar PV, wind power deployment has been a great success story. Led chiefly
by the construction of onshore wind farms, global deployment of wind turbines
worldwide has grown almost twentyfold since 2000, when developers installed
only around 5 GW of generation capacity and European companies supplied 90%of the market. Global installed wind generation capacity reached around 830 GW
in 2021, providing almost one-quarter of global renewable electricity, surpassed
only by hydropower. Thanks to the realisation of economies of scale, technologicalinnovation and strong policy support for clean energy technologies, wind is now

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

among the most affordable options for new generation capacity all over the world.
Chinese manufacturers have provided up to 40% of the equipment used incapacity deployed to date.
Many countries, especially China and most advanced economies, have set
ambitious renewables targets for 2030, yet the wind industry is facing several
difficulties in expanding manufacturing and installation capacity to exploit theseopportunities. Worsening inflationary pressure, fierce competition, high financing
costs and long permitting processes are shrinking margins for manufacturers ofwind turbines, nacelles (which house the generator, gearbox, drivetrain and brakeassembly) and towers. In addition, costs are being pushed up by the need to
upgrade manufacturing lines in response to constant technological advances.

Expansion plans and the gap with the net zero trajectory
At present, onshore and offshore wind component manufacturers are expanding
capacity more slowly than that required in the NZE Scenario, which calls for global
deployment of wind turbines to quadruple between 2021 and 2030, with capacity
reaching around 315 GW onshore and around 85 GW offshore. Announced
expansion plans would increase onshore blade manufacturing capacity by only
11% to around 110 GW by 2030. In the case of onshore nacelles, manufacturing
capacity would grow by around 8% to 108 GW, while that of onshore towers
expands by just 5% to 92 GW. The picture is similar for offshore wind components.
Manufacturers have announced capacity expansions of 55% for offshore towers,
31% for blades and 21% for nacelles, but these increases are still far below whatis needed by 2030 in the NZE Scenario (Figure 4.6).

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There is still time to fill this gap: lead times to build new manufacturing capacity
range from 15 months to 2 years, and the industry has shown in the past that it
can quickly ramp up capacity at times of strong demand. For example, installations
surged by around 70% between 2015 and 2020. In addition, current high fossil
fuel prices, which are setting high wholesale electricity prices, are providing astrong incentive to invest in many parts of the world, notably Europe. Nonetheless,the considerable gap between current expansion plans and that needed to be on
track for the net zero trajectory means that a significant near-term boost in
manufacturing investment is needed.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

GW

Wind power manufacturing capacity by component and country/region
according to announced projects and in the NZE Scenario
400
350
300
250
200
150
100
50
0

2021

Announced 2030 NZEBlade onshore

GW

China

Other Asia Pacific

Europe2021

Announced 2030 NZE

2021

Nacelle onshore
North America

Middle East

Announced 2030 NZE
Tower onshore

RoW

NZE demand

NZE residual capacity

120
100
80
60
40
20
0

2021

Announced 2030 NZEBlade offshore

2021

Announced 2030 NZENacelle offshore

2021

Announced 2030 NZE
Tower offshore

IEA. CC BY 4.0.
Notes: GW = gigawatts; RoW = rest of world; NZE = Net Zero Emissions by 2050 Scenario. Announced capacity includes
existing capacity. Minimum facility capacity of 500 MW/year is assumed when capacity data is unavailable. The
manufacturing capacity needed to meet projected demand in the NZE Scenario (NZE demand) is estimated assuming autilisation rate of 85%. NZE residual capacity, thus, represents the manufacturing capacity that would remain unused, on
average, which provides some flexibility to accommodate demand fluctuations.
Sources: IEA analysis based on BloombergNEF (2021) and Wood Mackenzie (2022).

Announced expansion projects for both offshore and onshore component manufacturing
are far from sufficient to cover the capacity needed by 2030 in the NZE Scenario.

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Announced capacity expansion plans show that the manufacturing of key windcomponents will remain concentrated in China. In the case of onshore components,
China is expected to hold shares of 64% for global manufacturing capacity ofnacelles, 63% for blades and 56% for towers once expansions are completed.
Likewise, for offshore components China’s share of global offshore blade
manufacturing capacity is due to rise to 80%, that of offshore nacelles to 70% andthat of offshore towers to 60%. Surprisingly, although most component
manufacturing capacity expansion plans are in China, most of the commissioned

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

onshore and offshore wind projects are taking place primarily in Europe and North
America. In the case of onshore wind turbines, China accounts for 80-90% of
announced manufacturing capacity additions of onshore nacelles, blades andtowers, and for offshore turbines it is responsible for 35% of announced
manufacturing capacity additions for nacelles, 75% for towers and 60% for blades.
North America and Asia Pacific combined cover around 50% of announced
expansions for offshore nacelles, while Europe accounts for 25% of all announced
manufacturing additions for offshore blades.
While wind turbine and equipment manufacturers do not usually release details
about planned component manufacturing capacity increases, some majorannouncements have been made recently. In April 2022, Envision announced its
intention to build a new plant to produce blades with an aggregate capacity ofaround 2 GW per year (Lee, 2022), while Sinoma Science and Technology are
investing USD 28.8 million to build a blade factory in Bahia, Brazil. Flenderannounced in September 2021 a plan to expand manufacturing capacity for winddrive systems in Tianjin (China) (Flender, 2021). MingYang Smart Energy is setting
up a manufacturing facility capable of supplying 1 GW per year of turbines inGermany (Richard, 2021). In 2021, Al-Yamamah Wind Energy Systems announced
an investment of around USD 80 million to open a tower factory in Saudi Arabia(Arab News, 2021).
Offshore wind manufacturing investment announcements have been more common
recently, owing to increasing demand driven by policy incentives and capacity
targets. This reflects to a large extent the greater attention given to offshore industry
developments, partly due to their novelty and larger scale. Recent announcements
include Goldwind’s plans to invest around RMB 19 billion in 2022 to develop a wind
power industry base, including wind turbine manufacturing, in China (Xiaomei,2022). In 2021, the UK government announced an investment of around
GBP 270 million to boost the offshore wind manufacturing industry in the Humber
region, securing over 1 340 jobs (United Kingdom, UK Government, 2021).
Siemens Gamesa announced in 2022 an expansion of its offshore nacellemanufacturing activities in Taiwan, tripling the capacity of the plants (Siemens
Gamesa, 2022). In 2021, GE announced an expansion of its offshore wind nacellefactory in Montori de Bretagne (Buljan, 2021). In the United States, where the Biden
administration has announced a goal of deploying 30 GW of offshore wind by 2030,
recent investments in the offshore wind supply chain, including blades, nacelles,
towers and substations, total over USD 1.5 billion (NREL, 2022).

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Despite policy incentives and strong market signals in many countries, some wind
manufacturers are struggling to increase output due to supply chain disruptions andhigher costs resulting from the effects of the Covid-19 pandemic and Russia’s
invasion of Ukraine. Costs had been falling steadily before 2020, encouraging wind
power developers to bid aggressively for new capacity in auctions and bilateralcontracts, driving down prices to under USD 50/MWh in many regions. Technology
innovation led to more efficient turbines, larger rotors and higher towers, while windEnergy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

farms were growing in size to exploit economies of scale. Manufacturers
accommodated their supply chains to incorporate these upgrades. For instance, GE
Renewable Energy expanded several times its Gaspé blade facility in Canada andVestas invested in transforming its offshore nacelle factory at Lindø Port of Odense
in Denmark to produce 15 MW offshore turbines. These innovation leaps led to amindset in which manufacturers believed in infinite cost drops. Developers andmanufacturers also took advantage of low interest rates and expansionary monetary
policies. This expansionary cycle has since reversed. Vestas, Siemens Gamesa,
General Electric and Nordex, which supplied more than 90% of the market outside
China in 2021, all reported double-digit negative profit margins and negative cash
flows for the first half of 2022 (Figure 4.7). Chinese manufacturers such as Goldwind
are faring better, but also reported stagnant revenues and margins for the first halfof 2022.

USD million

Financial indicators for non-Chinese wind turbine manufacturers
16 000
14 000
12 000

Revenue

10 000
8 000
6 000
4 000
2 000

EBIT

0
-2 000-4 000

Q1

Q2

Q3

Q4

Q1

2021

Q2
2022

IEA. CC BY 4.0.
Notes: Q = quarter; EBIT = earnings before interest and tax. Companies surveyed include Vestas, Siemens Gamesa, GE
Renewable Energy and Nordex.

The four leading non-Chinese wind turbine manufacturers have reported lower revenues
and worsening losses since 2021, due to supply chain disruptions and cost pressures.

Regional policy and market developments

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A number of countries around the world have focused on stimulating investment inwind energy through various measures, including mandated minimum shares in the
power generation mix (renewable portfolio standards), feed-in tariffs, competitive
tenders to procure wind projects, fiscal incentives such as tax credits or rebates andcarbon pricing. Private companies have responded by targeting clean energy goals
in their energy consumption mixes and, in the case of utilities, by offering long-term
power purchase agreements to wind developers to guarantee stable cash flows. In
response to recent supply chain problems, policy makers are now starting to pay
more attention to the security of supply of wind equipment and components.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

China’s 14th Five-Year Plan provides for the continued expansion of wind
deployment and manufacturing, setting more aggressive targets than the previous
plan. Within its fundamental strategies, this plan puts wind and solar development
as the top priority to enhance domestic energy supply and advancedecarbonisation. Although it lacks specific targets for wind capacity additions, theplan aims to reach 1.2 TW of wind and solar capacity by 2030. To support this goal,
the plan requires changes in regulations on grid connections to favour renewables
and energy storage.
One of the main ways these goals are to be achieved is through the creation of socalled “clean energy bases” – unprecedentedly large-scale concentrations of windand solar power. The bases are areas designated for the simultaneous constructionof numerous large wind and solar parks, combined with long-distance transmission
lines to demand centres. More than 500 GW of wind and solar projects have been
identified under a central government scheme and are expected to be installed by
2030, with offshore wind bases accounting for 60 GW. Provincial targets andinitiatives are also driving wind developments, especially offshore. Coastal
provinces, including Guangdong, Fujian, Zhejiang, Jiangsu and Shandong, have set
goals for building more than 60 GW of offshore wind plants in total by 2025.
Chinese wind turbine manufacturers profited from federal feed-in tariffs to scale up
their businesses and achieve considerable cost reductions in the 2000s. However,this regime expired in 2020 for onshore wind and in 2021 for offshore wind,prompting developers to rush to commit to 70 GW of onshore wind capacity in 2020
and 17 GW of offshore in 2021 (compared with average annual deployment of
19 GW of onshore wind and less than 1 GW of offshore wind over the previous
decade). This demonstrated the ability of wind turbine manufacturers to rapidly
adjust their supply chains and accelerate production.
Most recent Chinese policy action has focused on setting deployment targets andstimulating investment in capacity, rather than reinforcing and strengthening supply
chains. However, these incentives are attracting investment in increased domestic
manufacturing capacity at all steps of the wind supply chain, as the country has
access to cheap labour and raw material inputs (mostly steel) and has imposed highimport tariffs on wind power-related goods.

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In the United States, the IRA is currently the most influential piece of legislation
affecting the wind turbine manufacturing industry in North America. It extends
production tax credits and investment tax credits to wind projects that begin
construction before the end of 2024 (they were due to end by 2022). However, these
extensions are subject to conditions concerning wages and apprenticeships. The
production tax credits should result in a levelised cost of new solar PV and windcapacity that is competitive with most other generating options, which Rystad
Energy (2022) has estimated will drive a doubling of US onshore wind capacity by2030.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

The IRA supports wind turbine manufacturers indirectly by boosting developer
demand for new turbines, nacelles and towers. It also grants additional tax credits
for projects that meet certain domestic-content requirements. To claim the additional
credit, developers must certify that any steel, iron or manufactured product that is acomponent of a facility upon completion of construction was produced in the UnitedStates. To protect its national manufacturing market, in 2021 the United States
imposed anti-dumping duties and countervailing duties of as much as 73% onimported wind towers from Spain upon entry into the United States.
In Europe, REPowerEU aims to boost clean energy production, with the goal forrenewable energy sources to make up 45% of the EU primary energy mix in 2030.
The plan provides for EUR 86 billion of spending on renewables to 2027, as well as
new legislation to speed permitting procedures for wind farms. Under this regulation,wind energy capacity is expected to more than double by 2030. The European
Commission also imposed anti-dumping duties on imports of steel wind towers from
China in 2021, ranging from 7.2% to 19.2%, after an investigation revealed that
Chinese towers valued at around EUR 300 million were being imported at dumped
prices (European Commission, 2021a).

EV batteries
Strong battery supply chains are crucial for realising EV deployment prospects,
for both light-duty and heavy-duty vehicles. EV sales and production haveaccelerated tremendously over the past five years in response to policy incentives
and strategic investments by carmakers, with the technology now seen as theprimary means of decarbonising road transport. Strong policies have been
introduced in all major car markets. If all current targets were achieved, 35% ofcars sold globally in 2030 would be electric, with major markets such as the UnitedStates, China and Europe reaching over 50% by that year. Every major automobile
manufacturer has responded by adopting ambitious multi-billion-dollar plans forelectrifying their vehicle line-ups. Assembling EVs instead of conventional vehicles
requires only minor retooling of existing factories. The principal change is the
procurement of batteries, which account for 25-40% of the total cost of an EV andwhich have their own, completely different, supply chain.
Batteries are also used for grid-storage applications. In many instances, thetechnology (at the cell level) used for grid applications is very similar to that used
for automotive applications. Their role is to enable the integration of more
renewables into electricity systems by compensating for their intermittency andvariability, though they still contribute to less than 10% of total battery demand in
2030 in the NZE Scenario.

Expansion plans and the gap with the net zero trajectory

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Current EV battery industry expansion plans suggest that global manufacturing isbroadly on track to meet the trajectory of demand required to attain net zeroEnergy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

emissions. Announcements by battery makers point to total manufacturing
capacity of around 5 500 GWh per year by 2030 – over six times more than thatavailable today and 80% of that required in the NZE Scenario (Figure 4.8). Of
these announced projects, around one-third are already under construction.
Announced plans for anode and cathode manufacturing indicate a more thantenfold increase in capacity for both products, exceeding the needs of the NZE
Scenario. There was a surge in investment announcements in component
manufacturing facilities in 2022, driven by China, of which roughly one-third are
already under construction. Chemistry developments for batteries in the coming
years mean that demand for specific types of cathodes is uncertain, though thisinvestment surge could lead to oversupply by the end of the decade.
The time needed to build a battery factory is shrinking as more players gain theexperience needed to set up operations rapidly. Lead times involved in advancing
from announcing a new project to bringing production on line can be around four
years for new companies, as was the case for Northvolt’s first plant in Sweden(2017-2022), but can be as short as six months when conditions are very good,as with CATL’s Shanghai plant in the second half of 2021 (they only had to installmachinery, as the building was already available).

7
6

16
14

12

12

10

5

10

8

4

8

6

3

6

4

2

4

2

1
0

14

Mt/yr

8

Mt/yr

TWh

Battery and component manufacturing capacity by country/region
according to announced projects and in the NZE Scenario

2021

Announced 2030 NZE

0EV - batteries
China

Other Asia Pacific22021

Announced 2030 NZE

0EV - anodes
EuropeNorth America

RoW

2021

Announced 2030 NZE
EV - cathodes

NZE demand

NZE residual capacity

IEA. CC BY 4.0.
Notes: RoW = rest of world; NZE = Net Zero Emissions by 2050 Scenario. Announced capacity includes existing capacity.
The manufacturing capacity needed to meet projected demand in the NZE Scenario (NZE demand) is estimated assuming
a utilisation rate of 85%. NZE residual capacity, thus, represents the manufacturing capacity that would remain unused, on
average, which provides some flexibility to accommodate demand fluctuations. Batteries for EV and grid storage
applications are included in demand, with the latter accounting for 9% of the total in the NZE Scenario in 2030. Announced
projects include battery factories from Tier 1 and Tier 2 battery makers, as per the Benchmark Mineral Intelligenceclassification.
Source: IEA analysis based on Benchmark Mineral Intelligence (2022).

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Current expansion projects, mostly in China, are expected to boost EV battery production
more than fivefold by 2030, meeting 80% of projected demand in 2030 in the NZE Scenario.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

The battery industry is undergoing rapid change, with various new players entering
the business in all major regions and existing manufacturers expanding theirinternational operations and entering joint ventures with established automakers.
The current pipeline of new projects is dominated by incumbents, led by China’s
CATL and BYD, the US company Tesla and Korea’s LG Energy Solutions (LGES),
which together account for 40% of global announced expansions (Table 4.2).
Announced expansion projects of selected battery makers and automakers
Manufacturer

Company HQ

Manufacturing capacity
2021

2030

Battery maker (GWh/year)
CATL

China

148

890

BYD

China

84

510

LGES

Korea

108

600

Tesla

United States

10

370

850

5 500

All companies

Automaker (million electric cars/year)
Volkswagen

Germany

0.4

1.4

Tesla

United States

1.0

20

Toyota

Japan

0.1

3.5

All companies

6.6

Note: HQ = headquarters.
Sources: Benchmark Mineral Intelligence (2022) and company announcements.

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The geographical distribution of planned EV battery manufacturing expansions ismore diverse than that of current capacity, so concentration is set to fall. The
combined share of Europe and North America in global EV assembly capacity is
expected to rise from 14% in 2021 to 24% once all expansions have all beenbrought on line, probably by 2025 according to current plans, though that of Japanand Korea would drop from 8% to 3% unless new projects are launched. China is
nonetheless set to remain the dominant producer, its global market share holding
firm at around 70% with planned capacity of 3 700 GWh. By contrast, planned
investments in battery component manufacturing are much more heavily
concentrated in China, with its share of global installed capacity set to exceed 90%
for cathodes and 95% for anodes if all announced projects are brought to fruition.
The only other region that is expected to increase its market share of cathodes
and anodes is Europe thanks to investments made by chemical companies suchas Umicore, with the region’s share of global manufacturing capacity reachingaround 3% for cathodes and 1% for anodes. Market shares decline in all otherregions except China.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Regional policy and market developments
In North America, the IRA in the United States provides significant incentives to
produce EVs and their components, by offering grants to build new capacity andrestricting EV purchase incentives to vehicles manufactured domestically. Even
before the IRA was enacted, important investments had been announced in the
United States, as well as in Canada and Mexico. Since North America is a major
automotive market, with sales of over 16 million carss per year, the shift to EVs isinevitably spurring interest in producing batteries and their components locally forlogistical and cost reasons, a trend that will be reinforced by the IRA.
There has been strong co-operation through joint ventures with Japanese andKorean battery manufacturers, following the model that brought Tesla success in
its relationship with Japan’s Panasonic, which began in 2009 (Tesla, 2011). From
Korea’s LGES partnership with General Motors, which started in 2019, one battery
factory in the United States is already operational and three more have beenannounced (Shepardson, 2022), while Stellantis announced plans to partner withLGES to build a factory in Canada in 2021 (Stellantis, 2022). Tesla plans tosignificantly increase its battery manufacturing capacity in the United States by
tripling capacity at its Gigafactory 1 facility, as well as opening a new factory in
Texas. Based on these investments, battery manufacturing capacity in North
America is expected to increase to around 840 GWh. This would meet about 80%
of targeted regional demand in 2030 under announced pledges. However, moreplans to expand capacity are expected to be announced in upcoming months andyears owing to IRA incentives.
North America depends heavily on imports for its battery component supplies. In
aggregate, the region has manufacturing capacity of less than 15 kt of cathodematerial and under 5 kt of anode material, importing around 85% of all its domestic
battery component needs on a net basis in 2021. Once all announced capacity
expansions for anode and cathode manufacturing have been completed, as muchas 55 kt of these components – equivalent to that needed to produce 35 GWh of
batteries – could be produced in the region, though this is equal to just 5% of whatis needed to supply all planned battery capacity. It is likely that the IRA willencourage battery component manufacturers to invest even more in the region.

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In Europe, battery capacity expansions are being triggered by surging demand
from automakers as they gear up to expand electric car production to keep up with
EV demand, which is being driven by new EU CO2 emissions standards and the
mandatory phaseout of internal combustion engine vehicles. The share of EVs inthe region’s total passenger car sales would reach over 50% in 2030 assuming
current targets are met. Battery supply is also being boosted by two EU Important
Projects of Common European Interest (IPCEI), which provide for EUR 6.1 billion
to be invested directly by the European Union and member state governments toleverage private capital to build up domestic battery supply chains. Volkswagen

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

alone aims for manufacturing capacity of 240 GWh in Europe by 2030
(Volkswagen, 2021), while several other automakers have joined forces with local
and foreign battery makers to increase production. For example, Stellantis, Saftand Mercedes Benz have created a joint venture – ACC – which aims to install
manufacturing capacity of nearly 120 GWh by 2030 (ACC, 2022). Together, theseprojects would boost European manufacturing capacity to over 740 GWh, whichis equivalent to projected demand in the region in 2030 if announced policy targets
are met.
Production of upstream battery components is also expanding, with incumbent
European chemical companies such as Umicore and BASF leading investment.
Total manufacturing capacity for cathodes in the region is expected to reach 340 kt(equivalent to 225 GWh of battery production) based on current plans, accounting
for about one-third of targeted European demand in 2030 under current
government announcements.
After a decade of strong growth resulting from a clear EV policy combined with astrategic policy on EV battery value chains, China is at the centre of the global
battery supply chain. The main driver of growth in battery and component
production in coming years will be domestic demand for EVs. The world’s largest
battery maker, CATL, has a global market share of one-third (Bloomberg, 2022).
Planned and ongoing investments by the company could boost manufacturing
capacity to nearly 890 GWh – six times the 2021 level. Component manufacturing
is also growing rapidly as established companies continue to exploit theircompetitive advantage resulting from access to cheap materials and a large
domestic demand market. China accounts for 95% of growth in cathode andanode manufacturing capacity worldwide under current plans.

Fuel cell trucks
Fuel cell electric vehicles (FCEVs) powered by hydrogen have been underdevelopment for decades, but commercialisation of cars and buses began only inthe last 10-15 years. More recently, attention has shifted to the development ofheavy-duty trucks, for which fuel cell technologies can offer advantages overstandard battery EV technologies in terms of range, refuelling time 28 and energy
density (which allows for heavier payloads). However, competition with battery
electric trucks is fierce because battery costs are falling rapidly and deployment
plans are growing quickly. As a result, future fuel cell truck deployment is highly
uncertain.

See Chapter 5 for a discussion of hydrogen refuelling technologies for heavy-duty fuel cell trucks.

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28

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Governments and industry are showing a growing commitment to decarbonisingheavy-duty trucking, exemplified by the Memorandum of Understanding on ZeroEmission Medium- and Heavy-Duty Vehicles signed by 16 countries in 2021 andanother 11 countries in 2022, which sets a goal of 100% zero-emission truck andbus sales by 2040 (with an interim target of 30% by 2030). Were current
government targets to be achieved, about 7% of heavy-duty truck sales globallyin 2030 would be low emissions, of which we project about 10% (over 20 000)
would be fuel cell trucks, mainly serving the long-haul trucking sector.

Expansion plans and the gap with the net zero trajectory
Manufacturer announcements suggest that global heavy-duty fuel cell truck
manufacturing capacity will reach over 90 000 trucks per year by 2030. This isabout seven times existing manufacturing capacity and would account for about
50% of that required in the NZE Scenario. There is plenty of time to make up theshortfall. Ground-breaking of a manufacturing site to the start of fuel cell truck
manufacturing can take as little as six months for relatively small facilities
manufacturing around 3 000 trucks per year (for example, the SAIC Hongyan plantcommissioned in 2021 [Electrive, 2022]). Expanding a factory of this size to acapacity of about 20 000 trucks per year can take another year or two.
Heavy-duty fuel cell truck and mobile fuel cell manufacturing capacity bycountry/region according to announced projects and in the NZE Scenario
Mobile fuel cell systems
GW/yearThousand/year

Heavy-duty fuel cell trucks
200
160

500
400

120

300

80

200

40

100

0

2021
China

Announced

Other Asia Pacific

Europe02030 NZE
North America

Middle East

2021
RoW

Announced
NZE demand

2030 NZENZE residual capacity

IEA. CC BY 4.0.
Notes: RoW = rest of world; NZE = Net Zero Emissions by 2050 Scenario. Announced capacity includes existing capacity.
The manufacturing capacity needed to meet projected demand in the NZE Scenario (NZE demand) is estimated assuming
a utilisation rate of 85%. NZE residual capacity, thus, represents the manufacturing capacity that would remain unused, on
average, which provides some flexibility to accommodate demand fluctuations. Capacities in 2021 and announced
capacities include material handling equipment and other transport applications; NZE demand for fuel cells is based on fuelcell vehicles only.
Sources: IEA analysis based on Samsun et al. (2022), E4tech (2022) and company announcements.

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Expansion projects indicate a sevenfold increase in global fuel cell truck manufacturing
capacity to 90 000 trucks per year by 2030 – 50% of that required in the NZE Scenario.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Fuel cell manufacturing announcements indicate that automotive fuel cellmanufacturing capacity will increase fivefold to 90 GW/year by 2030. Based on
projected fuel cell truck sales in 2030 in the NZE Scenario, only an estimated onethird of announced fuel cell manufacturing capacity would need to be used fortruck manufacturing. Fuel cell manufacturing is expected to be able to keep pacewith growth in demand, since new factories can take as little as a year or two tobring on line. In addition, fuel cell truck manufacturers tend to either make theirfuel cells in-house or set up partnerships with fuel cell manufacturers. For
example, Daimler and Volvo have set up a joint venture, Cellcentric, to supply fuelcell systems for heavy-duty trucks, while Toyota is planning to open a
manufacturing facility in the United States to produce fuel cell powertrain modules
for heavy-duty trucks.
Expansion plans of selected heavy-duty fuel cell truck and fuel cellmanufacturers
Manufacturer

Company HQ

Manufacturing capacity
2021

2030

Heavy-duty fuel cell truck manufacturers (trucks/year)
Hyzon

United States

1 000

40 000

NikolaUnited States

4 500

30 000Hyundai

Korea

2 000

11 000Fuel cell manufacturers (systems/year)
Hyundai

Korea

40 000500 000

SymbioHydraV

France--200 000

China

25 000100 000

Source: Fuel cell manufacturing capacity data from E4tech (2022).

Several expansions of manufacturing capacity for fuel cell components (including
membrane electrode assemblies [MEAs] and bipolar plates) as well as for hydrogenstorage tanks for FCEVs have also been announced. Hyzon, a fuel cell truck
manufacturer, announced in 2021 the construction of an MEA manufacturing facility
in the United States, which at full capacity will make enough MEAs to support the
production of 12 000 fuel cell trucks per year (Hyzon, 2021). Dana, which produces
bipolar plates for Bosch, which in turn supplies fuel cell systems to Nikola,announced plans to expand its German facility from 350 000 to 4 million plates per
year in the next year or two (Innovationsregion Ulm, 2022). With respect to storage
tanks, Faurecia (a Hyundai partner) recently announced its plans to expand afactory in France from 10 000 to 100 000 tanks per year by 2025 (Surfeo, 2022).
Nikola and Hyzon, 29 both American-headquartered companies founded in the lastten years to supply zero-emission heavy-duty trucks, account for the bulk of

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29
Although Hyzon itself was founded in 2020, it began as a subsidiary of Singapore-based Horizon Fuel Cell Technologies
with almost 20 years of experience developing fuel cells.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

announced fuel cell truck manufacturing capacity expansions. Nikola can increase
its manufacturing capacity almost sevenfold just by expanding existing plants.
Hyzon plans for manufacturing lines to reach a capacity of 40 000 fuel cell vehicles(including heavy-duty trucks and buses) per year by 2025. Together, these twocompanies could supply almost half of projected NZE Scenario demand in 2030 if
their plans come to fruition.
Toyota and Hyundai, which have a long history of developing fuel cell vehicles, havealso begun producing heavy-duty fuel cell trucks, while other truck makers (e.g.
Daimler, MAN, Scania, Volvo and DAF) have announced their intention to do so.
Announcements about future manufacturing capacity, however, have been fairly
limited, including for Chinese companies, which have made the largest number ofheavy-duty fuel cell trucks to date. Hyundai is opening a fuel cell truck manufacturing
plant in China with an initial capacity of 6 500 trucks per year, but otherwise sales
targets are the only indication of manufacturing capacity expansions. In general,
incumbent truck makers should be able to modify current production lines tomanufacture fuel cell trucks to meet potential future demand. For these reasons, thelack of announcements should not be seen as a hurdle to producing the 150 000
heavy-duty fuel cell trucks needed in 2030 in the NZE Scenario. To put this into
perspective, Hyundai’s Jeonju plant in Korea currently has a capacity of over
100 000 commercial vehicles per year.
The geographical distribution of heavy-duty fuel cell truck manufacturing capacity is
set to become more diverse based on announced expansions. China’s share inglobal capacity would drop from 45% in 2021 to 20% in 2030 if all current plans are
fulfilled and no other expansions are undertaken. Manufacturing capacity in the
United States would grow ten times to 25 000 trucks per year over the same period
based on announcements from Hyzon and Nikola, though its share of global
manufacturing capacity would only reach about 25%. Manufacturing capacity inEurope could rise to around 12 000 trucks per year in 2030 based on Nikola’s andDaimler’s announcements (it is assumed that Hyundai will continue manufacturing
fuel cell trucks for the European market in Korea). Based on announced sales
targets for Europe and the United States, Korean manufacturing capacity would
increase from 2 000 trucks per year today to 4 500 per year in 2030. Based on
Hyzon’s announced target capacity globally, and specified capacity in the UnitedStates and Europe, capacity in other regions could reach almost 35 000 trucks per
year, including new manufacturing capacity of 10 000 per year in Saudi Arabia.

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Korea is set to become even more important in the manufacturing of mobile fuelcells, many of them destined for trucks, with its global market share jumping from
20% in 2021 to over 50% in 2030. Such is the scale of Hyundai’s announcementthat China’s share would plunge from 50% to 25%. Because Toyota has not madeany announcements about expanding capacity, Japan’s share would drop fromalmost 20% today to less than 5% in 2030, though Toyota is known to be capableof expanding manufacturing capacity rapidly as demand grows.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Regional policy and market developments
Fuel cell truck deployment is at a very early stage, so industry professionals acrossand along the supply chain, including fuel cell suppliers, truck manufacturers,
hydrogen producers and refuelling station developers, have formed partnerships,
collaborations and joint ventures to support market expansion. Industry activity andinvestment is, unsurprisingly, focused on countries with supportive policy
frameworks.
In Europe, government support and private sector commitments to climate
neutrality suggest an environment that is potentially conducive to fuel cell trucks.
Recently, the European Commission launched the Alternative Fuels Infrastructure
Facility to support the building of infrastructure for low-emission vehicles, includinghydrogen refuelling stations. In addition, the proposed Alternative Fuelling
Infrastructure Regulation would set requirements on the availability of hydrogen
refuelling stations. In Switzerland, federal taxes on heavy vehicles have encouraged
deployment of heavy-duty fuel cell trucks, as electric drivetrains benefit from a tax
exemption.
The European Union has also provided funding for a number of projects to support
fuel cell truck deployment. For example, the H2Haul project is under way to deploy
them, certifying them as safe for European roads, and to install hydrogen refuelling
infrastructure. In addition, the European Union’s PRHYDE project aims to develop
recommendations for a non-proprietary heavy-duty refuelling protocol to be used for
future standardisation activities for trucks and other heavy-duty transport systems
using hydrogen technologies.
In 2020, a coalition statement including industry stakeholders such as Toyota,
Hyundai, Hyzon and Ballard described a joint ambition to deploy 100 000 heavyduty fuel cell and hydrogen trucks in Europe from 2030 (Fuel Cells and Hydrogen
Joint Undertaking & Hydrogen Europe, 2020). In addition, the collaborative
H2Accelerate initiative, involving Daimler Truck AG, IVECO, OMV, Shell,
TotalEnergies and Volvo Group, is assessing the technical and commercial viabilityof hydrogen-fuelled trucking.
In the United States, the Department of Energy has set ambitious targets for heavyduty fuel cell trucks to make them competitive with conventional diesel trucks. To
support this goal, the Hydrogen and Fuel Cell Technologies Office has co-funded,with industry, first-of-a-kind research and modelling capabilities to support mediumand heavy-duty hydrogen fuelling protocols and hardware development at the
National Renewable Energy Laboratory.

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Although there is no federal regulation requiring the transition to zero-emissions
trucks, California’s Advanced Clean Trucks Rule requires that 40-75% of heavyduty truck sales, depending on truck type, be zero-emissions by 2035. Following
this ruling, another 16 states plus the District of Columbia, as well as Canada’s
province of Quebec, signed a memorandum of understanding (MOU) establishingEnergy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

goals to make at least 30% of new medium- and heavy-duty vehicle sales zeroemissions by 2030 and 100% by no later than 2050. Canada is also part of a Global
MOU on Zero-Emission Medium- and Heavy-Duty Vehicles, which aims for 100%zero-emissions truck and bus sales by 2040 (with an interim target of 30% by 2030).
At present, the only public hydrogen refuelling stations operating in the UnitedStates are in California. Nikola aims to extend the network by forming partnerships
with infrastructure and fuel providers to support fleets of heavy-duty fuel cell trucks.
In Korea, the government’s Hydrogen Economy Roadmap lays out targets for fuelcell vehicle production, exports and domestic deployment. It includes a target of
30 000 fuel cell trucks on the road by 2040. The KOHYGEN consortium, formed in
2021, aims to build 300 heavy-duty hydrogen stations by 2040 to support fuel cell
truck deployment. Korea’s Hyundai Motors has a long history of fuel cell
development, beginning in 1998. In its recent FCEV Vision 2030, Hyundai Motor
Group announced a goal to produce 700 000 fuel cell systems annually, including
500 000 for FCEVs. To support this, it is opening a second fuel cell manufacturing
facility in Korea.
Since the early 2000s, Japan’s New Energy and Industrial Technology
Development Organization (NEDO) has been releasing technology roadmaps toexpand fuel cell technologies and providing grants to support expansion. The
leading Japanese automakers, Toyota and Honda, have been among the leaders
in commercialising FCEVs. In 2019, Japan’s third Strategic Roadmap for Hydrogenand Fuel Cells set the goal of 800 000 fuel cell vehicles by 2030. In March 2022,
NEDO released the Fuel Cell Heavy Duty Vehicle Technology Roadmap, which set
targets for 2030 and 2040 for the domestic deployment of fuel cell trucks. Recently,
Hino, a Toyota subsidiary that makes commercial vehicles, received a grant fromNEDO to test such a truck at Californian ports.

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In China, in 2022 the government launched its first national-level hydrogendevelopment plan with the goal of having 50 000 fuel cell vehicles in operation by2025. In its 14th Five-Year Plan, hydrogen was one of six areas of focus.
Historically, China has prioritised the development and deployment of heavy-duty
FCEVs, including trucks and buses, making it the leader in deployment of both.
Many manufacturers have leveraged their experience, or the experience of parent
and sister companies, in fuel cell bus manufacturing to expand to heavy-duty trucks.
Chinese success in the early deployment of FCEVs can be credited, to some extent,
to partnerships and joint ventures with non-Chinese fuel cell providers. While fuelcell manufacturers such as Ballard, Hyundai and Toyota are still involved in the
Chinese market, domestic companies are playing a growing role.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Heat pumps
Heat pumps 30 are rapidly penetrating major heating markets, particularly North
America, Europe and northern and eastern Asia. Heat pump technologies can be
deployed in a broad range of climates and tailored to provide both heating andcooling (reversible units) or heating only (space and/or water). Air-to-air, air-towater and water or ground-source heat pumps have been available for many
years, with uptake driven primarily by growing demand for space cooling services(using air-air units) and by policies to replace fossil fuel-based alternatives. Only
recently have electric heat pumps been recognised more widely as one of thecritical technologies to decarbonise low- and medium-temperature heatproduction, due to their higher efficiency compared with conventional options andthe ongoing decarbonisation of power generation. They covered less than 10% of
global heating needs in 2021, but sales grew 13% to a record level in 2021 despite
Covid-19-related supply chain disruptions (shortages and longer delivery times forheat pump components and materials) and continued to rise strongly in 2022 (IEA,
2022c).
Part of the reason for growing heat pump demand is increased policy support inseveral countries with large heating markets, as well as record-high natural gas
prices since Russia’s invasion of Ukraine, particularly in Europe. Financial
incentives are currently available in over 30 countries, which together cover morethan 70% of today’s heating demand (IEA, 2022d). As a result, part of the boilerindustry is horizontally diversifying towards heat pumps: around half of heat pumps
today are made by manufacturers that also make boilers, exploiting synergies inhydronic systems. Most air conditioner (AC) manufacturers also produce airsource heat pumps and are also expanding to cover the hydronic segment or viceversa: in 2021, around 75% of heat pump manufacturing capacity was in the handsof AC manufacturers, often in the same facility to exploit the synergies of air-to-air
systems (Box 4.3).

Expansion plans and the gap with the net zero trajectory
Manufacturing capacity is set to grow in the next few years, but how quickly is very
uncertain, as few expansion projects are ever widely announced or publicised.
Global heat pump manufacturing capacity would need to almost quadruple toaround 460 GWth in 2030 to meet projected demand in the NZE Scenario(Figure 4.10). Unsurprisingly, capacity expansion that would result from publicly
announced projects under way or planned falls far short of this goal and of the

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30
Heat pumps included in this analysis are those primarily used for heating (space and/or water) in buildings and those forwhich the heating function is just as important as the cooling capability, aiming to exclude as much as possible air-air
reversible heat pump units used primarily for space cooling. They include both centralised and decentralised units inbuildings.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installationcollective targets set by governments around the world, although in reality,
expansion is likely to be much greater by 2030. Lead times for manufacturing
expansions or for construction of new factories are relatively short, ranging from one
to three years.
By fully exploiting existing facilities, current global manufacturing capacity could
already increase production by an average 20% compared with 2021, 31 providing
flexibility to meet demand growth over the next 12-18 months, assuming
components are available (see Chapter 2). Greater standardisation of devices andautomation of production lines, including improved testing facilities, are critical tofurther boost manufacturing capacity on existing lines while new manufacturing sites
are being constructed. Meeting NZE Scenario requirements in 2030 would requirea total of roughly USD 15 billion in cumulative investment to expand manufacturing
capacity, beyond what has already been announced.

GW

Heat pump manufacturing capacity by country/region according toannounced projects and in the NZE Scenario
500

400

300

200

100

0

2021
China

Other Asia PacificAnnounced
EuropeNorth America

2030 NZERoW

NZE demand

NZE residual capacity
IEA. CC BY 4.0.

Notes: RoW = rest of world; NZE = Net Zero Emissions by 2050 Scenario. Announced capacity includes existing capacity.
The manufacturing capacity needed to meet projected demand in the NZE Scenario (NZE demand) is estimated assuming
a utilisation rate of 85%. NZE residual capacity, thus, represents the manufacturing capacity that would remain unused, on
average, which provides some flexibility to accommodate demand fluctuations. Heat pump capacity (in GW) is expressedas thermal output capacity. By and large, Europe is the main region to have concrete public expansion plans frommanufacturers in place.

Announced heat pump manufacturing capacity covers only one-third of NZE Scenario
requirements for 2030, but short lead times mean that capacity could expand quickly.

As with other mass-manufactured technologies, for which capacity expansions
typically follow near-term demand trends, few heat pump manufacturers have

Based on research, industry consultation and data from Global Research View.

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31

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

announced expansion plans, partly because heat pumps often represent a small
proportion of their total production. Europe is something of an exception, with 13
manufacturers in Germany, Poland, Belgium, Republic of Türkiye, the United
Kingdom, France, Sweden, Slovakia and the Czech Republic having made theirconcrete expansion plans public (Table 4.4). About 25% of these announcements
are from Japanese companies, 2% are from Midea, a Chinese manufacturer, andthe rest are from companies headquartered in Europe. About half of the total
investments involves the expansion of existing factories. In November 2022, a
Chinese manufacturer announced investments of about USD 45 million for a newfactory in the country, perhaps an early sign that expansion plans may also
become public in regions outside of Europe. The realisation of announced
investments over this decade would triple European manufacturing capacity, while
global capacity would increase by roughly 35%, though capacity would remain
50% below collective targets for 2030 under current announced government
ambitions.

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Like heat pump producers, component manufacturers rarely publicise their
expansion plans. Nonetheless, most of the heat pump industry appears confident
that it will be able to ramp up output quickly enough to meet a 15-20%-per-year
demand increase. Demand will largely depend on the policy landscape.
Bottlenecks in components, notably semiconductors and compressors, could
emerge, especially if rapid changes to heat pump and refrigerant standards disrupt
supply chains. Some manufacturers, responsible for producing over 30% of heatpumps worldwide in 2021, already produce their own compressors. While
compressors are needed in many industries, some heat pump compressors might
require specific designs for certain temperatures ranges and refrigerants. Thus,
harmonisation of international standards will be essential to ensure thatcompressor suppliers can meet demand in a timely way. Policies to support thedomestic manufacturing of such components could offer broader benefits such as
lower transportation costs, which currently constitute 6-14% of total heat pumpcosts, and faster heat pump production (United Kingdom, BEIS, 2020).

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Announced heat pump manufacturer expansion projects by country andtype of investment
Heat pump
manufacturer

Daikin*

HQ location,
2021

Japan

Region ofannounced
expansion

Project
periodMillion
USD

Type ofinvestment

Poland2022-25

300

New factory

Belgium

2022-23

10

ExpansionGermany2022-25

N/A

Expansion

Czech Republic

2022-25

50

Expansion

Türkiye2022-24

115

Expansion

United Kingdom

2021-22

15

Expansion

Mitsubishi

Japan

PanasonicJapan

Czech Republic

2022-26

145

Expansion

Stiebel Eltron

Germany

Germany2022-25

600

Expansion

Bosch Group

Germany

N/A2022-25

350

N/A

Portugal

2022-23

10

Expansion

Viessmann

Germany

Poland2022-23200

Expansion

Vaillant

Germany

Slovakia

N/A

120

Expansion

United Kingdom

2022

3

Expansion

Saunier Duval

Germany

France2020-23

10

Expansion

Hoval

Liechtenstein

Slovakia

-2024

40

Expansion,
New factory

Clade

United Kingdom

United Kingdom

N/A

N/A

Expansion

Midea Group

China

Italy

2022-24

60

New factory

NIBE

SwedenSweden2023-26445

N/A

Ideal Heating

United Kingdom

United Kingdom

2021-23

20

Expansion

Guangdong
Ruixing

China

China

N/A

45

New factory*Daikin also announced a target annual growth rate of 20% to 2030, in Europe.
Notes: HQ = headquarters; N/A = not available. As not explicitly linked to expansion plans, this table excludes an additional
investment of EUR 1 billion announced by Viessmann to expand its climate solution portfolio, including heat pumps, and a
USD 115 million loan received by Vaillant to finance heat pump R&D.
Source: IEA research based on company announcements.

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Today, China, Japan and Korea are net exporters of heat pumps, while North
America and Europe are net importers (see Chapter 2). Several countries are
implementing polices to scale up domestic manufacturing, and several newenterprises are entering the heat pump market to meet growing demand. Overall,heat pump manufacturing capacity is evenly distributed geographically and themarket is less concentrated than for most other mass-manufactured clean energy

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

technologies. This is not expected to change much before 2030 according tocurrent trends and investment plans. Companies based in northern and eastern
Asia are expected to remain the largest producers, but significant capacity growthis expected in both Europe and North America.

Regional policy and market developments
Various policies are in place to support the heat pump market and overcome
current deployment barriers. Building codes and standards, financial
instruments, targeted energy pricing, mandatory performance-based labels,
renewable/energy efficiency targets and measures to ban fossil fuel installations
have been and will continue to be instrumental, not only to drive uptake of thistechnology, but also to spur innovation. Policies to reinforce supply chains are
generally less common, but they are emerging in several countries.
In Europe several policies are in place to both drive technology deployment andreinforce supply chains to maintain and expand European heat pump industry
capacity and competitiveness, attracting investments from manufacturers(Table 4.4). Bans on new fossil fuel-fired boiler installations are also part ofpolicy packages in various countries, and financial support schemes to reduce
the relatively high upfront capital costs of residential heat pumps are also present
in more than 25 countries (IEA, 2022d). While building energy codes are
becoming more stringent all over Europe, heat pumps have also been promoted
for many years as part of the Passivhaus standard (Passive House Institute,2022). Such policies have been critical to attract investment in the region.
REPowerEU aims to double the current heat pump deployment rate, which would
lead to the installation of 30 million new heat pump units between 2022 and2030. A number of European countries have set heat pump targets: for example,
6 million in Germany by 2030 (AGORA Energiewende, 2021), which would
require a threefold increase in annual installations compared with 2021, and
600 000 installations per year in the United Kingdom by 2028 (United Kingdom,
HM Government, 2020) – a 14-fold increase. Other European countries withtargets are Belgium, France, Hungary, Italy, Poland and Spain (IEA, 2022d).
Measures to reinforce heat pump supply chains are also emerging: for example,
the United Kingdom has set aside GBP 30 million for a Heat Pump Investment
Accelerator Competition as part of its Energy Security Strategy 2022 (United
Kingdom, HM Government, 2022).

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In the United States, policy actions to scale up domestic demand andmanufacturing capacity in the last few years have strengthened the heat pumpmarket and aim to fully cover rising demand with domestic production. The mostrecent example is the IRA, which plans to promote heat pump installation
through tax credits, purchase incentives and rebates. Policy action is also

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

happening at the regional level: for example, New York City will ban natural gas
use in new buildings of up to seven storeys by 2023, and for those over sevenstoreys by 2027. In California, in 2021 the California Energy Commission
approved the first building code in the nation to include heat pumps as a baseline
technology. To accelerate the deployment of cold-climate heat pumps, the US
Department of Energy launched the Residential Cold Climate Heat Pump
Technology Challenge to commercialise this technology by 2024 (United States,
DOE, 2022a).
The United States recently affirmed the importance of heat pump technologies
in a presidential determination to invoke the Defense Production Act (DPA) for
five key energy technologies important for energy security. The inclusion of heatpumps will allow the federal government to use a variety of tools to expand
domestic heat pump manufacturing. Through the IRA, Congress appropriated
USD 250 million in investments for domestic heat pump manufacturing (UnitedStates, DOE, 2022b). The non-profit organisation Rewiring America also
proposed a policy plan to boost heat pump and component manufacturing
through measures such as public-private cost sharing (Rewiring America, 2022).
In China, the government has introduced several measures over the last few
years to boost heat pump supplies and usage. Since 2016, heat pumps havegained momentum in northern China in particular, being a key component of the
Coal to Electricity Programme, the Air Pollution Prevention and Control Law and
the Clean Winter Heating Plan for Northern China to retrofit coal-fired household
heating, especially in rural areas. In 2022, the Chinese government released theCarbon Peaking Action Plan for Urban Rural Construction, which highlights heatpump use to decarbonise space and water heating. In 2022, a new building
regulation introduced requirements for installed heating, ventilation and air
conditioning (HVAC) systems, including heat pumps. These policies to boost
demand for heat pumps, coupled with growing demand for space coolingequipment, are at the core of the growth in Chinese manufacturing capacity, withhundreds of newly registered factories established every year (AskCI, 2022)
because China does not import heat pumps, largely due to high import tariffs.
China is currently the world’s largest producer of heat pumps, accounting forabout 40% of global manufacturing capacity. 32 In November 2022 China’s
National Development and Reform Commission (NDRC) released a new policy
to stimulate the manufacture of more efficient products, covering 20 producttypes including low-temperature air-source heat pumps, multi-connected air
conditioners, and heat pump water heaters (China, NDRC, 2022).

Excluding air conditioners.

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32

Energy Technology Perspectives 2023

Box 4.3

Chapter 4. Technology manufacturing and installation

The heat pump market: Synergies between end uses andsubsectors

An important feature of heat pumps used for heating in buildings is that thethermodynamic cycle at the heart of the technology – and thus most of the key
components – is common to air conditioning and refrigeration and can be used inmany other sectors such as road vehicles, industry and district heating. With the useof heat pumps in all these applications expected to grow, synergies among sharedcomponents and raw materials can be exploited, as well as shared skills (e.g.
aluminium casting is required for manufacturing both automotive parts and heatpumps).
There are particularly several potential synergies between heat pumps and air
conditioning, demand for which is growing strongly (Figure 4.11). For example, thereis flexibility to shift assembly lines between air conditioners and heat pumps, which
could provide an important capacity buffer to scale up heat pump manufacturing,
especially during this decade. In addition, manufacturers can invest in R&D themesthat could simultaneously benefit both the heating and cooling markets, withpotential to also reduce equipment costs 10-15% by 2050 (IEA, 2020). There arealso opportunities to develop more efficient combined solutions (e.g. exploiting
waste heat from air conditioning to produce hot water during the summer).

GWthGlobal annual sales of heat pump technologies for buildings in the
NZE Scenario
1 200
1 000
800
600
400
200
0

2017-212026-30

2046-50

Space heating market
Heating only

2017-212026-30

2046-50

Space cooling market

Heating and space coolingSpace cooling (and heating if reversible)

Note: Systems categorised as "heating and space cooling" are reversible units intended for both space heating andcooling. Systems categorised as "space cooling" may also include reversible units that can provide heat, but the primaryfunction is cooling. The allocation applied here avoids double counting.

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IEA. CC BY 4.0.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Electrolysers
Interest in low-emission hydrogen and derivative fuels has been growing in recent
years in recognition of their potential to replace fossil fuels in end uses that are
difficult to decarbonise, such as heavy industry, shipping, aviation and heavy-dutyroad transport. The sharp fall in renewable electricity costs along with continued
innovation and scaleup in electrolysis technologies have brought renewablehydrogen closer to cost competitiveness with unabated fossil fuel-basedhydrogen.

Expansion plans and the gap with the net zero trajectory
In general, information about manufacturing capacity for electrolyser components,
including bipolar plates, gas diffusion layers and membranes (the need for which
varies significantly among different designs), is very scarce. This creates
uncertainty about potential supply chain bottlenecks and the challenges involvedin electrolyser expansion. According to company announcements, electrolyser
manufacturing capacity is set to grow tenfold to more than 100 GW per year by
2030, accompanied by a similar expansion of component manufacturing capacity(Figure 4.12). Yet this impressive growth, even if fully realised, is still insufficient
to meet projected near-term electrolyser demand growth in the NZE Scenario,
covering only about half of the 200-GW-per-year manufacturing capacity requiredin 2030. Moreover, only around 8% of announced electrolyser manufacturing
capacity expansion has reached final investment decision. Both government
targets and industry plans to invest in installing electrolysers also fall short ofprojected deployment in the NZE Scenario, in which more than 700 GW ofelectrolysis capacity is installed by 2030 (IEA, 2022e). Government targets inaggregate call for capacity of just 145-190 GW, while projects currently underdevelopment, if completed in full and on time, would result in 240 GW of capacity
by then.

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Making good the shortfall in manufacturing capacity is complicated by the fact thatelectrolysis has to grow from the lowest base of all the main clean energy
technologies discussed in this report: current capacity is only 5% of that requiredin 2030 in the NZE Scenario. Nonetheless, the relatively short lead times involvedin building electrolyser factories mean that new projects could allow the NZE levelof output to be achieved. Typically, developing an electrolyser facility takes two to
three years, as was the case with ITM Power (2019-2021) (ITM Power, 2021) andPlug Power (2019-2021) (Plug Power, 2021a). Expanding existing facilities, assome manufacturers are planning to do, could be much quicker, especially when
the potential for future expansion is integrated into the design of a new facility.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

GW/yearElectrolyser manufacturing capacity by country/region according toannounced projects and in the NZE Scenario
250
200
150
100
50
0

2021

Announced

China
North America
NZE demand

Other Asia PacificMiddle EastNZE residual capacity

2030 NZE
EuropeRoW
IEA. CC BY 4.0.

Notes: RoW = rest of world; NZE = Net Zero Emissions by 2050 Scenario. Announced capacity includes existing capacity.
The manufacturing capacity needed to meet projected demand in the NZE Scenario (NZE demand) is estimated assuming
a utilisation rate of 85%. NZE residual capacity, thus, represents the manufacturing capacity that would remain unused, on
average, which provides some flexibility to accommodate demand fluctuations.

Electrolyser manufacturing capacity is set to expand almost tenfold to more than 100 GW
by 2030, but this would still cover only half of NZE Scenario requirements.

Electrolysers have been manufactured at industrial scale since the early 20th
century for their use in the chlor-alkali industry. This application still accounts forthe majority of electrolyser demand, whereas their use for dedicated hydrogenproduction is still in the early stages of commercialisation (IEA, 2022e).
However, this is expected to change in the very short term and electrolyser
manufacturers are preparing for a massive scaleup in demand for dedicatedhydrogen production.

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Announcements of plans to develop electrolyser manufacturing capacities arecoming from a wide variety of companies (Table 4.5). Incumbent manufacturers
such as Nel Hydrogen, John Cockerill, thyssenkrup nucera, PERIC and ITM
Power are announcing expansions of their existing capacities, which in manycases are further expansions of recently built facilities. In addition, traditional fuelcell manufacturers such as Plug Power and Bloom Energy have also recently
entered the electrolyser business, making use of their expertise in the
manufacturing of several common components of polymer electrolyte membrane(PEM) fuel cells (Plug Power) and solid oxide fuel cells (Bloom Energy) (Bloom
Energy, 2021; Plug Power, 2021a). Part of these expansions are expected tohappen through joint ventures with new partners. This is the case for John
Cockerill, which has established a joint venture with Jingli to develop its firstmanufacturing site in China (John Cockerill, 2019) and announced a partnership

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

with Greenko Group to expand its manufacturing in India (John Cockerill, 2022).
Similarly, Plug Power has joined forces with Fortescue Future Industries to build
a 2-GW manufacturing site in Australia (Plug Power, 2021b). These
manufacturers account for more than 60% of the global project pipeline to 2030.
Companies from other sectors have also announced plans to manufacture
electrolysers. This is the case for some of the top global manufacturers of solar
PV panels, such as LONGi and Sungrow (which entered the electrolyser
business in 2021); the State Power Investment Corporation in China, whichplans to build 10 GW of electrolyser manufacturing capacity by 2027; andTopsoe, a Danish catalysis and process technology developer that recently
reached a final investment decision to build a solid oxide electrolyser
manufacturing site (Bloomberg, 2021; Topsoe, 2022).

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Electrolyser manufacturing today is highly concentrated in China and Europe,
which together account for two-thirds of global manufacturing capacity. Whilethese two regions are expected to maintain a prominent role in the manufacturingof electrolysers, their shares are anticipated to fall to around 25% each by 2030
(although this drop may be less pronounced, as one-fifth of announced
expansions have not yet been assigned specific locations and part of thiscapacity could be deployed in Europe and China). Regions that do not currently
have manufacturing capacity in operation and expect to deploy new capacity
include the Middle East, with more than 1% of global manufacturing capacity
expected to be installed there in 2030, and Australia, where a factory underconstruction is expected to give the country a 2% share. As electrolyser
manufacturing is expected to be located close to demand centres and asignificant number of global announcements are not linked yet to a specificlocation, the adoption of policies to boost renewable hydrogen production could
modify this picture as we approach 2030.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Announced expansion plans of key electrolyser manufacturers
Manufacturer

Company
HQ

Manufacturing capacity
Manufacturinglocation

Type ofelectrolyser

Today
(GW)

2030*
(GW)

Traditional and new electrolyser manufacturers
thyssenkrupp
nuceraNel Hydrogen

John Cockerill

Germany

NorwayBelgium

Globally

Alkaline

1

5

NorwayAlkaline

0.5

2

United States

PEM

<0.1

<0.1

Other/unspecified

Alkaline

-

8

China

Alkaline

0.5

2

India

Alkaline-

2

EuropeAlkaline-

2

Other/unspecified

Alkaline-

2

ITM Power

UnitedKingdom

United Kingdom

PEM

0.2

1.5

Other/Unspecified

PEM

-

3.5

McPhy

FranceEuropeAlkaline

0.3

1.3

HydrogenPro

NorwayChina

Alkaline

0.3

0.3

Other/Unspecified

Alkaline-

5

OhmiumUnited States

India

PEM

0.5

2

SunfireGermany

EuropeAlkaline

0.04

1

Traditional fuel cell manufacturers

Plug Power

United States

Siemens Energy

Germany

Bloom Energy

United States

United States

PEM

0.5

1.5

Australia

PEM

-

2

Other/Unspecified

PEM

-

1

Germany

PEM

0.25

0.25

EuropePEM-

3

United States

SOEC

1.5

2

New market entrants
LONGi

China

China

Alkaline

0.55Sungrow

China

China

Alkaline

0.5

1

TopsoeDenmark

Denmark

SOEC

-

5

4

>40

Remaining current capacity and other announced expansions

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*Values represent total expansions announced to 2030, although in most cases the expansions have been announced foran earlier year than 2030.
Notes: HQ = headquarters; PEM = proton exchange membrane; SOEC = solid oxide electrolyser cell.
Source: IEA analysis based on manufacturer announcements and personal communications.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Regional policy and market developments
In Europe, the main drivers of electrolysis industry expansion are policy targets
for deployment and the ambition of companies there to achieve commercial
leadership in the sector. The targets for electrolysis deployment in 2030 in Europe
are 49-90 GW, or 30-50% of aggregate global targets, even though the region
accounts for less than 10% of global hydrogen demand today (IEA, 2022e).
REPowerEU includes a target of producing 10 Mt of hydrogen using electrolysis
within EU member states and importing another 10 Mt of renewable hydrogen by
2030. This would equate to 65-80 GW of electrolysis capacity, significantly
boosting the 44-GW target of the Fit for 55 package that was announced in July
2021 (European Commission, 2022a). To support this objective, the European
Commission signed a joint declaration in May 2022 with electrolyser
manufacturers to increase EU manufacturing capacity tenfold to 25 GW per yearby 2025. The declaration outlines a series of actions for the European
Commission, including establishing a supportive regulatory framework, facilitating
access to financing and promoting efficient supply chains (European Commission,
2022d). In April 2022, the United Kingdom launched its Energy Security Strategy,
which targets low-emission hydrogen production of 10 GW by 2030 (doubling theaim of its earlier National Hydrogen Strategy), with at least half being electrolytichydrogen (United Kingdom, HM Government, 2022).

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Most of the world’s largest electrolyser manufacturers are based in Europe,
including thyssenkrupp nucera, Nel Hydrogen, ITM Power, McPhy and Siemens,
and have a long history of technological leadership that governments in the region
hope to leverage to facilitate deployment across the globe. European
governments are also adopting policies to support the creation of electrolyser
manufacturing capacity. The European Commission agreed to include hydrogenin the IPCEI scheme, which allows projects validated by both EU member states
and the Commission to receive public support beyond the usual boundaries ofstate aid rules, and in 2022, 15 member states received approval to provide up to
EUR 5.4 billion (around USD 6 billion) in public funding for 41 hydrogentechnology value chain projects, 21 of which involve electrolysis technologies(European Commission, 2022e) The German government has been particularly
active with the H2Giga flagship project (Germany, BMBF, 2021), which aims tomass produce electrolysers to scale up hydrogen production, and in 2021 it
launched a programme to provide financial support for international renewablehydrogen projects and promote the use of German technology abroad (Germany,
BMWK, 2021). It is unlikely that this strategy will allow electrolyser manufacturers
in Europe to focus on exports, as trading large electrolyser systems is difficult andcostly. However, it could result in the European deployment of manufacturing
capacity for subcomponents (such as stacks), which can be more easily traded to
globally distributed assembly sites. The first priority of the French National
Strategy for Decarbonised Hydrogen is to develop an electrolyser manufacturing

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installationindustry in the country, and the French government has announced its intention toallocate EUR 1.5 billion to an IPCEI involving electrolyser manufacturing (France,
Ministère de la Transition énergétique, 2020).
China is the world leader in electrolyser manufacturing, with almost its entire
production being alkaline electrolysers. Its electrolysers cost significantly less thanthose of the United States or Europe thanks to lower labour costs and a generally
more mature material and component supply chain, most of which is locally based.
This cost advantage is attracting international manufacturers, which have begun
to buy Chinese manufacturing companies and have announced plans to deploy
larger manufacturing capacities in China. The joint venture between John Cockerill
and Jingli now has 500 MW per year of manufacturing capacity, with plans toreach 2 GW per year of manufacturing capacity in China (John Cockerill, 2019).
In 2021, Cummins Enze (a joint venture between Cummins and SINOPEC) started
construction of a manufacturing site in Guangdong Province with an expected
capacity of 500 MW per year (scalable to 1 GW) (Cummins, 2021).
Access to cheap renewable electricity is also attracting interest in low-emissionhydrogen production using electrolysers in China, particularly to deal withcurtailment and bottlenecks in the electricity grid since hydrogen provides a meansof storing and transporting renewable energy from regions with abundantresources (such as Inner Mongolia, Xinjiang or the coastal regions of Fujian andGuangdong) over thousands of kilometres to inland regions with less renewableenergy potential and high demand for hydrogen in industrial clusters (Shaanxi,
Chongqing) (IEA, 2021). This interest began to grow later than in other regions,but the number of projects is increasing rapidly, partly in response to policy action,with most of the announcements occurring in the last couple of years. The
government’s Hydrogen Industry Development Plan includes a target to produce
100 000-200 000 tonnes of renewable hydrogen by 2025 (Energy Iceberg, 2022),
a level that is likely to be surpassed since projects in operation, in construction
and under development already amount to almost 250 000 tonnes per year (IEA,
2022e). Some provinces also have targets for renewable hydrogen production,and occasionally they even surpass the national target, such as Inner Mongolia’s
goal of 500 000 tonnes per year by 2025 (Argus, 2021). This growing interest in
renewable hydrogen production, along with the low manufacturing costs ofChinese electrolyser manufacturers, is expected to trigger a considerable
expansion in electrolyser manufacturing capacity in the country.

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The United States has the second-largest electrolyser manufacturing capacity
after China, with the major companies being Plug Power, Bloom Energy and Nel
Hydrogen. Apart from recently announced expansions that will boost Plug Power’s
capacity to 1.5 GW per year and Bloom Energy’s to 2.5 GW per year, activity has
been very limited. However, the situation is beginning to change thanks to recent
federal government policies, primarily the IRA, that include several financial

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

incentives for low-emission hydrogen deployment, including the Clean Hydrogen
Production Tax Credit (United States, Congress, 2022). This tax credit provides
an incentive relative to the carbon intensity of hydrogen production; it can reachas much as USD 3/kg of hydrogen, which is expected to ensure the financial
feasibility of a significant number of projects. This would boost electrolyser
demand in the United States, which will most likely attract investment inelectrolyser manufacturing. Just two months after the bill was signed, Cumminsannounced plans to build a new electrolyser manufacturing site in Minnesota witha capacity of 500 MW per year, scalable to 1 GW (Cummins, 2022).
The other main government measure to encourage low-emission hydrogen uptake
is a USD 7-billion call launched in September 2022 (as part of a larger
USD 8-billion programme) for the deployment of six to ten hydrogen hubs – which
will be selected in spring 2023 – to be implemented by the US Department ofEnergy’s Office of Clean Energy Demonstrations (United States, DOE, 2022c). In
addition, the US government announced funding of USD 1 billion for a Clean
Hydrogen Electrolysis Program to reduce production costs, and USD 500 million
for Clean Hydrogen Manufacturing and Recycling Initiatives to support equipment
manufacturing and domestic supply chains (The White House, 2022). Funding forboth programmes (a total of USD 9.5 billion) will come from the Infrastructure
Investments and Jobs Act (IIJA). The Defence Production Act of June 2022
granted the government authority to invest in companies that can manufacture
and install key energy technologies, including electrolysers (United States, DOE,
2022d).

Cross-cutting equipment
In addition to the specialised clean energy technologies of the selected supply
chains discussed above, some equipment is also mass-manufactured and iscommon to several of them. Such equipment includes compressors, pumps, fans,heat exchangers, separation columns and storage tanks, and is required for the
production, distribution and storage of fluids and gases. This cross-cutting
equipment is needed mainly for large-scale, site-tailored clean energy
technologies. The manufacturing of these devices can benefit from synergies withother industries in which this equipment has been used for decades, notably oil
and gas, chemicals and power generation, leveraging access to a large anddiverse pool of suppliers located in different regions with well-establishedmanufacturing facilities and supply chains.

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Compressors and pumps, which are widely used in the oil and gas industry, will
be required along CO2 and hydrogen supply chains. As demand for natural gas
compression falls towards 2030, existing gas compressor manufacturers could
adjust their manufacturing facilities and operating workforce to CO2 and hydrogencompressor manufacturing. Equally, chemical absorption columns, which are part

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installationof state-of-the-art CO2 capture systems, are used across a wide range ofapplications today, such as acid gas removal, chemicals synthesis, ethanol
dehydration and flue gas desulfurisation. A leading manufacturer, Sulzer, has
100 000 distillation and absorption columns currently in operation. Chemical
absorption columns to meet overall CO2 capture needs across all CCUS
applications in 2030 would only incur a few percentage points’ increase relative tothis particular fleet today, while use in other applications such as flue gas
desulfurisation is expected to contract as coal-based power is phased out.
Recognising the potential for these sectoral technology spillovers, some coreequipment will need to be adapted, either to a new working fluid (e.g. CO2) or to adifferent scale. For DAC, large fans will be needed to move air in very large
facilities, and the manufacturing of new air contactors and collectors, in the caseof solid-DAC technology design (IEA, 2022f), will need to be scaled up. The supply
chain for large-scale centrifugal CO2 compressors is not yet established and someexisting CCUS facilities have experienced procurement times of three to fourmonths. Nonetheless, this is significantly shorter than lead times typicallyassociated with permitting, financing and installing these systems.

Installation of large-scale, site-tailoredtechnologies
Large-scale, site-tailored technologies are usually individually designed andmanufactured to fit specific processes and local conditions. These technologies
require site-specific engineering and installation to a greater degree than the
mass-manufactured technologies discussed above, as they cannot be directly
manufactured, though their components can be. Of the supply chains analysed inthis report, natural gas-based hydrogen production with CCS (part of the lowemission hydrogen supply chain), DAC, BECC and low-emission synthetichydrocarbon fuel synthesis (part of the low-emission synthetic hydrocarbon fuelsupply chain) are technologies categorised as site-tailored.
These technologies are not fully commercial yet; many of the facilities currently
operating or under construction are first- or second-of-a-kind projects, often
backed by public funding. They require wide-ranging expertise and large upfront
investments, so are often developed by industrial consortia. The installation stepfor these technologies is particularly critical, with lead times typically much longer
than for mass-manufactured technologies, mainly due to the time it takes to secure
funding and permits, and then to assemble the technologies on a large scale.

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Lead times from the first feasibility studies to plant commissioning are typicallyaround five years, of which around three are just to reach the final investment
decision (FID). For large-scale, site-tailored technologies, plant elaboration needs
to be aligned with infrastructure development (for fuel or CO2 transport). ThisEnergy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

cross-chain sequencing can cause project lead times to increase: for example,
Canada’s Alberta Carbon Trunk Line, a 240-km CO2 pipeline with a capacity of up
to 15 Mt of CO2 per year finally came on line in 2020, a full ten years after the
project was announced, due to differences in the timing of specific project
segments. Large-scale facilities can also take years to reach nominal operating
capacity, with little flexibility to adjust output without additional investment in theevent of higher demand. Efforts to shorten lead times (for instance by reducing
permitting times) will be needed to make sure these technologies scale up to thelevel required by the end of the decade.
The planned deployment of large-scale, site-tailored technologies currently falls
short of that projected in 2030 in the NZE Scenario, despite a surge in project
announcements in the past two years. While over 230 CCUS projects involving
various hydrogen, DAC and BECC applications have been announced since thestart of 2021, 33 planned capture capacity by 2030 would meet only one-third of
projected needs for hydrogen production using gas with CCS, 15% for lowemission synthetic hydrocarbon fuels and 20% for BECC. This is in large part
related to uncertainty about future climate policies and their impact on demand forCO2 management services and low-emission fuels, which is impeding financing
and investment. Smooth permitting and financing also dependent strongly on thedevelopment of CO2 transport and storage infrastructure (see Chapter 5), withprojects targeting CO2 storage taking on average twice as long to complete thanprojects that involve CO2 utilisation. DAC is currently on track for required
deployment in 2030 under the NZE Scenario, though many announced DAC
projects are at very early stages of development (without an assigned location,
which will be finalised depending on how regional climate policy environments
evolve) and still need policy support to achieve a positive FID.
Boosting production capacity for large-scale, site-tailored technologies to thedegree envisioned in the NZE Scenario would require a 60% increase ininvestments compared with what has already been announced. Cumulative global
investment would need to rise by around USD 150 billion (in 2021 US dollars) by
2030, in addition to the roughly USD 260 billion associated with alreadyannounced projects, 34 with DAC accounting for around three-quarters of thisspending (Figure 4.13). In percentage terms, the investment gap is widest for lowemission synthetic hydrocarbon fuel production. The regional breakdown ofannounced investments is relatively diverse, with North America and Europe
accounting for around half of the total.

This includes 1PointFive and Carbon Engineering’s announcement to deploy 100 large-scale DAC facilities by 2035 (Oxy,2022a).
34
Only a few announced projects had reached FID as of December 2022.

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33

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Announced global cumulative investment in large-scale, site-tailored clean
energy technologies by region/country and that required to meet demand in
2030 in the NZE Scenario, 2022-2030
Required investment

Announced investment
100%

Undefinedlocation

80%

Other
countries

60%

Other Asia
Pacific40%
20%

Eurasia

Synthesis <1%
BECCS 10%

Announced investment
Investment gap

Gas-CCS H₂
43%

DAC 47%

North
America
Europe0%

USD (2021) 260 billion

USD (2021) 410 billion
IEA. CC BY 4.0.

Notes: Gas-CCS H2 = natural gas-based hydrogen production with CCS; DAC = direct air capture; BECC = bioenergy with
CCUS. “Synthesis” refers to production of low-emission synthetic hydrocarbon fuels. “Required investment” is for projected
deployment to 2030 in the NZE Scenario.

Boosting capacity to manufacture large-scale, site-tailored technologies to the degree
projected in the NZE Scenario would require a 60% increase in planned investment over2022-2030.

The pace of growth in large-scale, site-tailored technologies required to be on
track for the NZE Scenario peaks this decade even though deployment by 2030
remains modest, reflecting the current very low levels of deployment. However,
the rate of capacity expansion must be sustained beyond 2030, averaging around
25% per year for DAC and around 35% for low-emission synthetic hydrocarbon
fuels in the 2030s (natural gas-based hydrogen with CCS and BECC growth rates
are closer to 10%).

Natural gas-based hydrogen with CCS

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Reforming of natural gas in conjunction with CCS is an important source of lowemission hydrogen production in the NZE Scenario, meeting around 20% of globalhydrogen needs in 2030 and 25% in 2050. Only around 0.4 Mt per year is currently
produced in this manner, with another 0.3 Mt coming from coal- and oil-based
CCS routes, and less than 100 kt from electrolysis. Steam methane reforming(SMR) with CO2 capture for hydrogen production has so far been deployed mostly
as a retrofit solution in refineries and fertiliser plants in North America, the first CO2
capture unit retrofit dating back to the 1980s.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Hydrogen production is the main source of CO2 capture after natural gas
processing, as the production process emits a high-concentration CO2 stream,
which keeps the cost down. Today, around 11 Mt CO2, or 25% of total CO2 capture
capacity, is captured from hydrogen production and 4 Mt CO2 comes from SMR
plants. For hydrogen production to deliver emissions reductions, captured CO2
must be permanently stored; upstream CO2, methane and nitrous oxide emissions
from natural gas extraction and supply must be minimised; and capture rates mustbe high. Today, only the three SMR units of the Quest project in Canada capture
CO2 for permanent storage (Alberta, Department of Energy, 2020), while otherprojects use captured CO2 for enhanced oil recovery (EOR). 35

Expansion plans and the gap with the net zero trajectoryLow-emission hydrogen and ammonia production are continuing to incite new
CCS developments. Close to one-third of CO2 capture projects under construction
or in planning involve hydrogen or ammonia production across a range ofapplications, including dedicated production, refineries, fertiliser and iron andsteel. If all announced projects were realised, hydrogen production capacity fromgas reforming with CCS would increase more than twentyfold from around 0.5 Mt
per year in 2021 to 11 Mt per year by 2030, through both SMR and autothermal
reforming (ATR) processes. This is still 22 Mt per year short of the nearly 33 Mt of
production capacity needed in 2030 in the NZE Scenario (Figure 4.14). Moreover,some projects (Table 4.6) under development will need further policy and financial
support to come to fruition. To date, very few projects have reached FID, and therecent surge in gas prices, especially in Europe, could lead to delays orcancellations of planned projects.
Since most operating plants are capital-intensive first-of-a-kind facilities, project
lead times have historically been long, ranging from 1.5 to 9 years, with anaverage of around 4 years. Permitting and financing often constitute an important
hurdle, taking on average almost as long as construction. Projects that require theconstruction of new CO2 management infrastructure for CO2 transport and storage
tend to have longer lead times. New hydrogen facilities are increasingly being sited
close to industrial clusters. These clusters can be a source of hydrogen demandand can create opportunities to share construction costs for CO2 transport andstorage infrastructure with other emitters, which could cut overall low-emissionhydrogen project lead times once this infrastructure is in place. About half of gasbased hydrogen production with CCS facilities are being developed as part of CO2transport and storage hubs catering for multiple industrial sources.

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35
Most CO2 injected for EOR is retained in the reservoir over a project’s lifetime, but additional monitoring and verification
are essential to confirm that the CO2 has been permanently stored (IEA, 2015).

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Million tonnes

Capacity of hydrogen production from natural gas with CCS bycountry/region according to announced projects and in the NZE Scenario
35

NZE demand

30

RoW

25

Middle East

20

North America

15

Europe10

Other Asia Pacific

5
0

China
2021

Announced

2030 NZE

IEA. CC BY 4.0.
Notes: RoW = rest of world; NZE = Net Zero Emissions by 2050 Scenario. Announced capacity includes existing capacity.
Covers projects for which a start year for operation has been disclosed (those at very early stages of development, such as
those in which only a co-operation agreement among stakeholders has been announced, are not included).

Announced gas-based hydrogen production with CCS meets only one-third of NZE
Scenario requirements in 2030.

Planned capacity expansions of selected companies to produce hydrogenfrom natural gas with CCS
Company

Company HQ

2021

2030

Shell

Netherlands

98

135

Air Products

United States

88

870

Koch Nitrogen Company, Chaparral Energy

United States

68

68

Nutrien

United States

29

29

PCS Nitrogen, Denbury (EOR)

Canada24

24

Air Liquide

France10108Vertex Hydrogen (Essar Oil, Progressive Energy)

United Kingdom

0770

Equinor

Norway0333

Bakken Energy

United States

0279

Equinor, SSE Thermal
H-vision consortium (Deltaqinqs, Air Liquide, BP,
Gasunie, Port of Rotterdam, Onyx Power, Shell,
Uniper, Royal Vopak, ExxonMobil, EBN, Equinor)
Kellas Midestream

Norway0270

Various0264

United Kingdom

0225

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kt per year

Energy Technology Perspectives 2023

Company

Chapter 4. Technology manufacturing and installation

Company HQ

2021

2030

kt per year
Suncor Energy, Atco

Canada

0

195

ADNOC

UAE

0

162

Uniper, Shell

Netherlands/Germany

0

162

Aker Carbon Capture, Equinor

Norway049

Notes: Include only low-emission hydrogen capacity of projects with an announced timeline.

Regional policy and market developments
North America is responsible for almost all hydrogen production capacity from gas
reforming with CCUS today, as well as almost one-third of the project pipeline to2030, as new project development is being propelled by growing demand for lowemission hydrogen and hydrogen-based fuels. Historically, however, strong CO2
demand for EOR – especially in the United States – was the primary driver forthe development of CO2 capture technology, dating back to the 1980s (the firstfertiliser plant was retrofitted with CCUS in 1982). In 2021, the United Statesaccounted for more than half of global gas-based hydrogen production capacitywith CCUS.
The 45Q tax scheme, introduced in the United States in 2008 (at that time
providing USD 10 per tonne [t] of CO2 utilised for EOR, and USD 20/t CO2 stored),has been the main policy support for CCUS, prompting the retrofitting of two SMR
facilities with CCUS in 2013 (a PCS Nitrogen fertiliser plant and an Air Products
plant) (United States, DOE, 2018; Nutrien, 2020). The 45Q tax credit amount has
risen progressively; most recently, the Inflation Reduction Act (IRA) boosted it to
USD 60/t CO2 used and USD 85/t CO2 stored and also extended construction
deadlines to 2033 (United States, Congress, 2022).This policy continues tosupport project development, with more than 20 new SMR and ATR facilities
targeting CO2 capture in upcoming years, including new ammonia plants
developed by established companies such as Air Products and by new market
entrants such as Bakken Energy.

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In Canada, a well-established CCUS legal and regulatory framework, as well as
government funding for CCUS in Alberta and in the rest of Canada, led tocommissioning of the flagship Shell-operated Quest project in 2015 (Alberta,
Department of Energy, 2020) and the ACTL shared transport and storage
infrastructure project in 2020 (Alberta, Department of Energy, 2019). Both projects
involve hydrogen production. In Alberta, the sector is benefiting from both a carbon
storage hub strategy to reduce CO2 transport and storage costs and a provincial
Hydrogen Roadmap, which targets low-emission hydrogen, ammonia andmethanol production to decarbonise local industry and provide supplies for export
to the rest of North America, Asia Pacific and Europe (Alberta, Government ofAlberta, 2021).

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

In Europe, only one large-scale gas-based hydrogen plant with CO2 capture iscurrently in operation: France’s Air Liquide demonstration plant at Port-Jérôme.
Government-funded industrial decarbonisation programmes, such as the United
Kingdom’s industrial cluster competition and targeted funding for projects throughthe European Innovation fund, are driving gas-CCUS hydrogen project
development, and Europe could account for nearly 40% of total capacity by 2030.
These projects are often led by large industrial consortia including oil companies
that have expanded their activities to CCUS (e.g. Equinor, Shell, BP and ADNOC),
as well as by new capture- or storage-as-a-service companies (e.g. Aker Carbon
Capture, Carbon Clean and Storegga), existing hydrogen companies (such as Air
Liquide) and new market entrants in hydrogen production (e.g. Vertex Hydrogenand Uniper). But very few of these projects had reached FID as of October 2022.
It remains unclear whether recent natural gas price hikes might delay FIDs
planned for 2023, including for the Botlek refinery at Rotterdam, the Barents Blue
ammonia project in Norway, Project Cavendish, Hynet and Saltend in the United
Kingdom, and the Exxonmobil refinery at Antwerp.
In the United Arab Emirates, government and corporate-level net zero
objectives, and the opportunity to create a low-emission hydrogen and ammonia
hub are spurring deployment of gas-based hydrogen production with CCUS. The
Abu Dhabi National Oil Company plans to expand low-emission fuel production in
the area, with a new ammonia facility planned for 2025 (ADNOC, 2021). A recent
MOU signed with Mitsui and ENEOS, to establish clean-hydrogen supply chains
between the United Arab Emirates and Japan, could also pave the way to newinvestment (Mitsui, 2022).

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Development is also gaining speed in the Asia Pacific region, with hydrogenprojects announced in Australia, Japan, Indonesia, India and Korea. In Australia,
funding has been made available to develop eight hydrogen hubs (CSIRO, 2022).
This stimulus, coupled with strong policy support for CCUS (such as the LongTerm Emissions Reduction Plan and the Emissions Reduction fund, which allows
CCUS projects to trade carbon credits) and well-established CCUS legal andregulatory frameworks, has led to the announcement of six gas-based hydrogenor ammonia plants with CCUS, one of which could be operational as early as 2025.
In February 2022, Indonesia released a legal and regulatory draft framework for
CCUS, the first one in southeast Asia. The country is also collaborating with Japanon low-emission ammonia, as part of an MOU signed in January 2022 (Japan,
METI, 2022). In China, a medium-term plan for establishing a low-emissionhydrogen industry was released in March 2022. However, most hydrogen with
CCUS developments are likely to be coal-based given the limited availability ofnatural gas in the country.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Direct Air Capture
Expansion plans and the gap with the net zero trajectory
DAC technologies capture CO2 directly from the atmosphere. Current DAC
deployment is extremely limited, with only 17 plants operating worldwide (inEurope, the United States and Canada), capturing less than 10 kt CO2 per year
(IEA, 2022f). Only a few commercial agreements are in place to sell or store thecaptured CO2. All the operating plants are small-scale, with the largest one
capturing 4 000 t CO2/year in Iceland (Climeworks, 2022). Most of the plants
commissioned to date are being operated for testing and demonstration purposes
only, with only two plants storing the captured CO2 permanently in geologicalformations. Three DAC projects are currently under construction, with the largest
expected to come online in 2024 in Iceland (nominal capture capacity of
36 kt CO2/year) and in the United States (initial nominal capture capacity of
500 kt CO2/year, with plans to scale up to as much as 1 000 kt CO2/year).
With some of these projects, developers are offering commercial services toindividuals and companies willing to pay a recurring subscription fee to have CO2
removed from the atmosphere and stored underground on their behalf. These
carbon removal services, which are proving extremely popular, are offeredexclusively through the voluntary carbon market and are being purchased mostly
by companies to meet their own climate targets. Their popularity stems mainly
from their very high removal potential (IPCC, 2022) when associated withgeological storage. Most are oversubscribed due to the very limited installed
operating capacity available at present.
Fast-growing demand for air-captured CO2, for both carbon removal and lowemission synthetic hydrocarbon fuel production, is translating into several
announcements for new, larger plants. Some of the largest projects underdevelopment are in the United States and the United Kingdom (with nominal
capture capacity in each case of between 0.5 and 5 Mt CO2/year) (Storegga,
2021; Carbon Capture, 2022; Carbon Engineering, 2021a). Plans for more than
110 DAC facilities are now at various stages of development. 36 If all were toadvance, DAC deployment would reach NZE Scenario requirements for 2030
(Figure 4.15). Lead times for DAC plants range from two to six years dependingon the technology, suggesting that NZE Scenario deployment could be achieved
with adequate policy support.
Based on announced projects in advanced development, North America is
expected to deploy substantial DAC capacity by the end of this decade. Almost
40% of global announced capacity to be operational in 2030 is in the United States

Including 1PointFive and Carbon Engineering’s announcement to deploy 100 DAC facilities by 2035, each with a capture
capacity of up to 1 Mt CO2 per year.

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36

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation(including the DAC-1 project and the Matagorda County eFuels project, both inTexas). A number of projects have also been announced in Europe, but they only
amount to less than 5% of global planned capacity for 2030. The United Kingdom
is leading the way with two sizeable DAC developments – the North-East Scotland
DAC project and the AtmosFUEL project (Carbon Engineering, 2021c; 2021d).
Other major undertakings include the Norsk e-fuel project and the Kollsnes DAC
project in Norway and the Mammoth project in Iceland (Norsk e-fuel, 2022;
Climeworks, 2022).
Over half of announced DAC capacity for 2030 (currently in early development
stages) has not yet been linked to a specific location, with project developers
awaiting favourable regulations before finalising their expansion plans. In
November 2022, 1PointFive and Carbon Engineering announced plans to deploy
100 large-scale DAC facilities (each with a capture capacity of up to 1 Mt per year)by 2035 (Oxy, 2022a), 30 of which will be in the United States owing to the IRA’s
recent increase to the 45Q tax credit. Remaining projects are expected to be
deployed mostly in China and Southeast Asia (Oxy, 2022b), with some likely tomaterialise in Europe and the Middle East (which has recently shown interest in
DAC testing [Climeworks, 2021]). Multiple criteria will be considered for the
finalisation of locations, including demand growth for carbon removal credits or
low-carbon fuels, public policies and incentives, and technoeconomic conditions
such as the availability of geological storage and low-carbon energy sources.

5

Mt CO2/yr

Mt CO2/yr

Direct air capture capacity by country/region for use and storage
according to announced projects and in the NZE Scenario

4
3

70
60
50
40
30

2

20
1
0

10
2021

Announced

02030 NZE

2021

CO₂ utilisation
China

Other Asia PacificAnnounced

2030 NZE

CO₂ storage
EuropeNorth America

Middle East

Unspecified

NZE demand
IEA. CC BY 4.0.

Notes: NZE = Net Zero Emissions by 2050 Scenario. Dedicated storage only. Announced capacity includes existing
capacity. “Unspecified” refers to 69 of 100 facilities recently announced by 1PointFive and Carbon Engineering, for which
locations have not yet been finalised. The fate of the captured CO2 (storage or use) has not been disclosed.

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Announced DAC technology deployment is roughly in line with NZE Scenario projectionsfor 2030, though stronger policy support is needed to ensure projects proceed.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

A growing number of companies are entering the DAC business, all trying to reachthe demonstration phase with their proprietary technologies, with some close to
pre-commercial demonstration (Table 4.7). While DAC technology manufacturers
initially developed their intellectual property independently, they are now
beginning to collaborate with synthetic fuel producers to test and operate theirtechnologies at larger scales. Examples include the Norsk e-fuel project, theMerritt Electrofuels Project and the Haru Oni demonstration project, all of which
aim to produce synthetic hydrocarbon fuels from electrolytic hydrogen and CO2
captured from multiple sources including bioenergy production, industrial
applications and the air (Norsk e-fuel, 2022; Carbon Engineering, 2021b; Haru
Oni, 2022).
Direct air capture expansion projects of selected companies
Company

Company HQ

2021

2030
kt CO2/year

Climeworks

Switzerland

5.0

1 100

Global Thermostat

United States

1.5

1 500

Carbon Engineering

Canada0.4

59 000CarbonCapture

United States

-

5 000

Note: HQ=headquarters. 2021 and 2030 values refer respectively to estimated operating capacity and planned operating
capacity.

Regional policy and market developments
Countries and regions that have taken an early lead in supporting DAC research,development, demonstration and deployment include the United States, theEuropean Union, the United Kingdom, Canada and Japan. The United States has
established a number of policies and programmes to support DAC, including the
45Q tax credit (recently increased to USD 180/t CO2 under the IRA of 2022, witha capture threshold of as little as 1 kt CO2/year) and the California Low Carbon
Fuels Standard credit (traded at an average of around USD 180/t CO2 in late2021). Meanwhile, the Infrastructure Investment and Jobs Act (signed into law inNovember 2021) includes funding (USD 3.5 billion) to establish four large-scale
DAC hubs and related transport and storage infrastructure. In Canada the 2022
federal budget proposed an investment tax credit for CCUS projects between 2022
and 2030, valued at around 60% for DAC projects when CO2 is stored at an eligible
permanent sequestration site (IEA, 2022g).

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The European Commission has been supporting DAC through various researchand innovation programmes, including the Horizon Europe programme and its

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installationpredecessors (i.e. the Seventh Framework programme and Horizon 2020), as wellas through the Innovation Fund (launched in 2020 for the 2020-2030 decade withan initial budget of around USD 11.8 billion). Moreover, in December 2021 theEuropean Commission released its first Communication on Sustainable Carbon
Cycles, suggesting that by 2030 5 Mt of CO2 should be removed annually from theatmosphere and permanently stored through solutions such as DAC (European
Commission, 2021c). In the United Kingdom, in October 2021 the government
set out a Net Zero Strategy aimed at achieving net zero emissions by 2050. It
identifies the need for around 80 Mt of CO2 removal by 2050 using DAC and BECC
technologies (United Kingdom, BEIS, 2021).

Bioenergy with carbon capture
BECC involves the capture of CO2 from a biogenic source, such as from plants
producing biofuels, bio-based heat and power or biohydrogen, or from industrial
facilities that use biomass as a fuel or feedstock. CO2 can be either stored toprovide removal or used as a carbon-neutral feedstock for low-emission synthetic
fuel production. Around 2.5 Mt CO2 per year are currently captured from biogenic
sources, over 90% in bioethanol facilities – currently the lowest-cost BECC
application due to the high concentration of CO2 in the process gas stream. Aroundhalf is stored in dedicated storage, while the other half is sold, for example togreenhouses for yield enhancement or for EOR.

Expansion plans and the gap with the net zero trajectory

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Bolstered by country-level net zero announcements and low-emission fuelstrategies, the BECC project pipeline has grown in recent years. Close to
40 Mt CO2/year could be captured in 2030, with around 65% from bioethanol andbiodiesel plants and 35% from heat and power plants, according to publicly
announced plans. While this represents a 15-fold increase from today’s levels, it
still falls far short of the 180 Mt CO2/year required in 2030 in the NZE Scenario(Figure 4.16). Most of the captured CO2 included under current plans is associatedwith dedicated storage, while less than 1 Mt CO2/year is to be used for lowemission synthetic fuel production – only one-third the level projected in the NZE
Scenario.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

4

Mt CO2/yr

Mt CO2/yr

Capacity of bioenergy with CO2 captured for use and storage by
country/region according to announced projects and in the NZE Scenario

3

200

150

2

100

1

50

0

2021

Announced

02030 NZE

China

Other Asia PacificAnnounced

2021

2030 NZE

CO₂ storage

CO₂ utilisation
EuropeNorth America

Middle EastRoW

NZE demand

IEA. CC BY 4.0.
Notes: NZE = Net Zero Emissions by 2050 Scenario. Announced capacity includes existing capacity. Includes only largescale projects (>0.1 Mt CO2 per year) with an announced timeline, targeting CO2 capture from biofuel production, heat andpower plants, industrial facilities, or hydrogen production relying partly or fully on biomass. Some projects (e.g. cement or
waste-to-energy facilities) also include capture of non-biogenic emissions in communicated capture capacities. When thefraction of biogenic emissions of total captured CO2 is unknown, it is assumed that the share of biogenic emissions is 10%
in cement facilities and 50% in waste-to-energy plants. CO2 utilisation includes projects targeting low-emission synthetic
fuel production. CO2 storage includes projects targeting dedicated storage.

Announced BECC capacity amounts to only one-third of NZE Scenario requirements in
2030.

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Project experience in bioethanol and biopower plants equipped with CCUS
suggests that project lead times on the capture side can range from 1.5 to 6.5
years, averaging 3.5 years. However, lead times depend strongly on theapplication and destination of the CO2. The only two plants involving storage thatare in operation today – both bioethanol plants in the United States – took aroundseven years to complete (including the construction of transport and storage
infrastructure). In contrast, projects involving the use of captured CO2 werecompleted in less than four years. Bioethanol plants tend to involve shorter leadtimes than bio-based power applications. Lead times are as short as one to two
years for bioethanol plants, as they only require the installation of CO2 drying andcompression units, which are less capital-intensive than full capture units. Given
that current facilities are first- or second-of-a-kind, lead times will most likely
shorten as deployment increases. In the United States, the lead time for retrofitting
the second bioethanol facility with CCS was one year shorter than for the first.
Nonetheless, investment decisions are needed in the near term for the technology
to mature sufficiently to be on track for NZE Scenario deployment in 2030.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Announced BECC expansion projects of selected companies
Operator/project
developer

Company HQTechnology provider

2030(Mt CO2/yr)

Summit Carbon Solutions

United States

Xebec Adsorption (compression)

8

Drax

United Kingdom

Mitsubishi (capture)

8

Illinois clean fuels

United States

Poet

United States

Cory

United Kingdom

6.3
Navigator CO2 Ventures (CCUS)5
1.5

ZEROs Inc

United States

ViridorUnited Kingdom

Aker Carbon Capture (capture)

0.95

1.5

Stockolm Exergi

SwedenCO2 Capsol (capture)

0.7White Energy

United States

Oxy Low Carbon Ventures (storage)

0.7

Amager-Bakke

Denmark

Babcock & Wilcox (capture, solvent)

0.5

Velocys

United States

Oxy Low Carbon Ventures (storage)

0.5

Vestforbrænding

Denmark

AemetisUnited States

RedCar Energy

United Kingdom

0.45
Koch (capture)

0.4
0.4

Hafslund Oslo Celsio

NorwayClean Energy Systems

United States

Midwest AgEnergy Group

United States

Shell (capture), Equinor (storage),Technip Energies (EPC)
Clean Energy Systems (capture),
Schlumberger New Energy (storage)
Carbon America Developments

Växjö Energi

SwedenMidroc Group

0.4
0.3
0.2
0.18

Regional policy and market developments
The vast majority of BECC capacity will still be based in North America and Europe
by the end of this decade according to current plans (Table 4.8). In the UnitedStates, the sector has benefitted from supportive policies covering bioenergy, lowemission fuels and CCUS. For example, the 2018 Farm Bill established a varietyof new programmes to help develop and deploy a wide range of carbon removal
technologies (United States, Congress, 2018), while the Energy Act of 2020
contains several provisions to promote them (United States, Congress, 2020). In
addition, the IRA provides several BECC incentives, including the expansion andextension of the 45Q tax credit, the Second-Generation Biofuel tax credit, and the
Clean Fuels Production tax credit (United States, Congress, 2022). As firstgeneration bioethanol plants do not currently meet low-emission criteria to qualify
for the IRA tax credits, the IRA may serve to promote CCUS deployment at theseplants.

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The policy landscape has resulted in the United States having the largest
operating BECC project to date, the Illinois Industrial CCS Project, which has been
capturing 1 Mt CO2 per year for permanent storage in a deep geological formation
since 2017 (ADM, 2020). The Red Trail Energy bioethanol CCS project also
recently came on line in North Dakota (Upstream, 2021). The 45Q credit continues

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

to drive deployment, with around 40 bioethanol facilities planned to start capturing
CO2 before 2025, totalling around 15 Mt of biogenic CO2 capture capacity. This
includes roughly 30 facilities that are part of the Midwest Carbon Express project,
led by a new CCUS project developer, Summit Carbon Solutions (Summit Carbon
Solutions, 2021).
In Europe, interest in BECC has been spurred mostly by corporate and countrylevel net zero announcements and carbon removal policies. In total, there areplans to capture around 10 Mt of biogenic CO2 from heat and power plants, witharound 80% from dedicated bioenergy heat and power plants and 20% fromwaste-to-energy plants. In the European Union, while carbon removal is notcredited under the EU Emissions Trading System, the first Communication on
Sustainable Carbon Cycles, released by the Commission in December 2021,
suggests that 5 Mt of CO2 should be removed annually by 2030 from theatmosphere and permanently stored using technologies such as BECC (European
Commission, 2021b).
In January 2021, the Swedish government tasked the Swedish Energy Agency
with designing a support scheme for BECC, to be implemented in 2023 as areverse auction (Sweden, Swedish Energy Agency, 2022). In the United Kingdom,
the Net Zero Strategy set out a 5 Mt CO2 per year target for engineered carbon
removal through BECC and DAC by 2030, with the aim of achieving 80 Mt by 2050
(United Kingdom, BEIS, 2021). A public consultation on business models forremovals was also launched in July 2022, with a focus on first-of-a-kind BECC
power plants (United Kingdom, BEIS, 2022). The UK power station Drax, inpartnership with Mitsubishi Heavy Industries (capture) and the Northern
Endurance Partnership (storage), currently leads BECC deployment in Europe(Drax, 2021b). Low-emission fuel support is also partly driving BECC uptake. In
Denmark, sourcing CO2 from a bio-fired power plant for use in fuel production is
being explored as part of the Green Fuels for Denmark project (Orsted, 2022), andCO2 use is also being considered at waste-to-energy facilities in Denmark(Vestforbrænding, 2019) and Portugal (Veolia, 2022).
The first retrofitting of a large-scale biomass-fired power plant with CO2 capture
was in Japan in 2020 (Toshiba, 2020), although no storage site for the CO2 has
yet been identified. More recently, Pertamina announced plans to retrofit a pulp
and paper mill in Indonesia (Marubeni, 2022).

Low-emission synthetic hydrocarbon fuels
Expansion plans and the gap with the net zero trajectory

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Low-emission synthetic hydrocarbon fuels are expected to play a small but
important role in decarbonising transport modes in the NZE Scenario (see Box

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

4.4), mainly in aviation because alternative solutions pose significant technicalchallenges and synthetic fuels meet one-quarter of the sector’s final energy
consumption in 2050. Low-emission Fischer–Tropsch (FT) synthetic hydrocarbon
fuel production is currently limited to a few pilot plants in Europe, with total
production capacity of around ten barrels per day in 2021, using 1 800 t CO2.
Much larger fossil-based FT plants have been operated by large engineering andoil and gas companies such as Sasol, Shell and Synfuels China for decades.
Some components and competences are easily transferrable from fossil-based
applications to non-fossil ones. The focus at present is on the large-scaledemonstration of new components of low-emission FT synthesis, such as thereverse water-gas shift process.
Based on current announcements, planned capacity additions fall well short ofNZE Scenario needs for 2030 (Figure 4.17). Around 15 projects have beenannounced worldwide for synthetic hydrocarbon fuel production, which would
result in total capacity of over 35 000 barrels/day in 2030 (using 6 MtCO2/year) if
they are completed on time. Of these projects, roughly ten focus on FT synthesis
using at least some CO2 from BECC or DAC, accounting for around 15% ofplanned capacity (Table 4.9). Given that construction lead times for synthesis
plants range from two to four years, NZE Scenario deployment can be achieved
only with a substantial strengthening of policy support in the next few years.

barrels/d

Low-emission synthetic hydrocarbon fuel production capacity bycountry/region according to announced projects and in the NZE Scenario
50 000NZE demand
40 000RoW
Middle East

30 000

North America
20 000EuropeOther Asia Pacific10 000

China
0

2021

Announced

2030 NZE
IEA. CC BY 4.0.

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Notes: RoW = rest of world; NZE = Net Zero Emissions by 2050 Scenario. Announced capacity includes existing capacity.
Announced capacity and 2030 NZE values include FT synthesis using atmospheric or biogenic CO2 sources.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Announced low-emission synthetic hydrocarbon fuel production falls well short of NZE
Scenario requirements for 2030.

Announced low-emission synthetic hydrocarbon fuel capacity by company
Company

Company HQ

2021

2030

Capacity (barrels/d)
INERATEC GmbHGermany

11

11

HIF*

Multiple locations

0

23 400Infinium

United States

0

3 050

SunfireGermany0

2 400

LanzaTech*Multiple locations

0

2 900

Carbon Engineering

Canada0

1 450

EDL Anlagenbau

Germany0

1 100

Synkero

Netherlands

0

1 100

Topsoe*Denmark

0

400

ENEOS*

Japan

0

300

Emerging Fuels Technology

United States

0170

BP - Johnson Matthey

United Kingdom

050*Companies focusing on non-FT synthesis.
Note: The Infinium project plans to use non-biogenic process CO2 and is therefore excluded from Figure 4.17 above.

According to announced expansions to 2030, the geographic diversity of lowemission synthetic hydrocarbon fuel production is expected to increase between
2021 and 2030, with around 40% of the planned operating capacity to be basedin North America, the vast majority in the United States (HIF Global, 2022) andless than 5% of global capacity in Canada (Carbon Engineering, 2021b).

Regional policy and market developments
The International Civil Aviation Organisation (ICAO) is set to approve a 2050 net
zero goal for the aviation sector (ICAO, 2022). While the ICAO's updated
emissions reduction goal still relies strongly on out-of-sector offsets, it also
envisages achieving emissions reductions through sustainable aviation fuels(SAFs) and low-carbon aviation fuels. If the ICAO focus continues to shift to insector emission reduction opportunities, it could substantially increase demand forsynthetic hydrocarbon fuels from low-emission hydrogen and non-fossil CO2
sources.

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In the United States, the IRA introduced fuel production subsidies for sustainableaviation fuels that meet certain GHG reduction thresholds or CO2 emissions
factors, depending on the subsidy. This could provide financial support forsynthetic kerosene projects utilising biogenic and atmospheric CO2. In California,

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

the Low Carbon Fuel Standard provides credits for fuels with a lower carbon
intensity than the transportation fuel baseline, with credits trading at around
USD 80/tonne of CO2 avoided in December 2022, and as high as USD 200/tonneof CO2 avoided during 2019-2021. This measure can be combined with the US
45Q tax credit (which has recently been increased under the IRA to USD 60/tonneof CO2 used, provided emissions reductions are verified) (United States,
Congress, 2022).
Around 30% of planned capacity for synfuel production in 2030 is in Europe,
where new plants will be located in Norway (Norsk e-fuel, 2022), the United
Kingdom (Carbon Engineering, 2021c) and Sweden (Liquid Wind, 2022) as well
as a few other countries. In the European Union, the Renewable Energy Directive
promotes the use of “recycled carbon fuels” as long as they generate emissions
savings of at least 70% relative to their fossil counterparts. The REFuelEU aviation
policy proposal that is currently under consideration in Europe includes a provision
to mandate 0.7% synthetic aviation fuel in the total aviation fuel mix by 2030,
increasing to 28% by 2050. If this policy proposal becomes law, regional demand
for synthetic hydrocarbon fuels would rise. Government mandates already require
low-carbon aviation fuel blends of 0.5% in Norway, 1% in Sweden and 1% in
France; the United Kingdom is currently consulting on a similar mandate. In 2021,
the UK government announced a GBP 180-million funding package to support thedesign and construction of sustainable aviation fuel plants in the country. In the
Netherlands, the sustainable energy transition subsidy scheme SDE++ is being
used to finance an advanced methanol plant at Amsterdam.

Box 4.4

Strategies to decarbonise road transport: Potential role for lowemission synthetic hydrocarbon fuels

Improving the efficiency of internal combustion engine (ICE) vehicles has been apowerful means to moderate growth in oil use and CO2 emissions in passenger
transport. Following the first oil shock, stringent fuel economy standards in the
United States drove rapid improvements in vehicle efficiency, which increased fromroughly 18 litres per 100 km (l/100 km) in 1975 to 11 l/100km in 1985. Fuel economy
standards are now commonplace in most advanced economies, and also in many
emerging ones. We estimate that the specific fuel consumption of the global lightduty vehicle fleet has decreased roughly 25% since 2000 and has yielded over
6.5 Gt of CO2 emissions savings, despite diminishing returns in recent years.

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Hybrid powertrains additionally helped cut oil use and CO2 emissions. This
technology, pioneered by Japanese original equipment manufacturers (OEMs),
allows a 35% reduction in fuel consumption on average compared with an equivalentEnergy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

ICE vehicle. Sales of hybrid vehicles began to rise in 2000; they now account for justunder 5% of new car sales globally, even though the market share is higher incountries such as Japan (>30%). Hybrids have proven effective to reduce emissions
from cars, delivering total savings of around 250 Mt CO2 since 2000.
Zero-emission vehicles (ZEVs), including battery, plug-in, and fuel cell electricvehicles, are the next technology frontier in passenger cars. They are expected toaccount for roughly 13% of all new light-duty vehicle sales in 2022, particularly
thanks to rapid market adoption of electric cars in China and Europe. Given that theirfuels can be produced without emissions or the use of oil, ZEVs can effectively help
mitigate climate change and reduce oil use at the same time. As countries transition
to renewables and other low-emission electricity generation technologies, thegreenhouse gas emissions reduction potential of ZEVs will continue to grow.
However, as cars can have a useful lifetime of more than 20 years, it is crucial toscale up ZEV deployment quickly. In the NZE Scenario, no new ICE cars are soldas of 2035 and ZEVs, predominantly electric cars, account for 100% of new carssales globally.
The rapid scaleup of EV sales in the NZE Scenario does, however, put pressure on
supply chains for batteries and the metals required to produce them, with lithium
supplies through 2030 being particularly tight (see Chapter 3). Battery innovation is
one way to overcome such bottlenecks. Another option is to use advanced biofuelsin ICE vehicles or hybrids, but limitations on the availability of sustainable bioenergy
is a key bottleneck. A third option under public discussion in some countries issynthetic hydrocarbon (HC) fuels, which are predominantly used in aviation in the
NZE Scenario but could, in principle, also be used in other modes of transport.
An advantage of synthetic HC fuels is that their production generally relies on the
Fischer-Tropsch (FT) process, which can be optimised to produce synthetic
kerosene but currently does not allow for perfect selectivity – that is, not all inputs
can be turned into the exact chemical composition required for aviation fuel.
Research is currently under way on the use of different catalysts and refinery
designs, through which the output slate could vary from roughly equal parts ofgasoline, diesel and jet kerosene to mostly jet kerosene and a small share of byproduct naphtha.
In one relatively technologically mature option, roughly one-quarter of the output ofa jet kerosene-maximised FT process could be standard motor gasoline. This offers
the potential to produce low-emission gasoline as a by-product of low-emission
kerosene, for use in ICE, hybrid or plug-in hybrid vehicles.

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In the NZE Scenario, projected volumes of synthetic HC fuel for aviation imply thepossibility to produce over 450 million litres of synthetic gasoline by 2030, and morethan 35 billion litres by 2050 when assuming a 1-to-3 ratio in production. This would
be sufficient to fuel around 650 000 cars by 2030, and 130 million by 2050. In otherEnergy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

words, in 2050 in the NZE, all ICE and hybrid cars remaining after the phaseout of
their sales in 2035 could be fuelled by carbon-neutral gasoline.
Of course, further upscaling of production is possible, and an important upside isthat existing refuelling infrastructure could continue to be used and the derived fuelcould be traded globally, much like oil products today. Carbon-neutral gasoline is,however, an expensive fuel, even in the long run; IEA analysis using favourable cost
expectations for low-emission hydrogen production and for capturing biogenic or
atmospheric carbon suggests an oil-equivalent price of between USD 115 and170 per barrel by 2050. The relative efficiency of the two options also bears
consideration: powering a mid-size car for one year with synthetic HC fuels requires
over six times more low-emission electricity than if the same car were electric – inother words, fuelling the 400 million ICE and hybrid cars projected to be on the roadin advanced economies in the NZE Scenario by 2030 would require at least an
additional 5 700 TWh (a 20% increase) of low-emission electricity, more than all theelectricity generated by North America today.

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Another important consideration is aviation sector low-emission fuel demand, which
is likely to outstrip supply for a long time. If jet kerosene could command a sufficiently
high price, it might become more profitable for fuel producers to “force” a higher
selectivity of the FT process to produce more jet kerosene at the expense of energy
efficiency and gasoline production. Even if the costs of forcing higher selectivity
remain high, the opportunity to produce a mix of automotive-grade gasoline anddistillates (including diesel and fuel oil) points to advantages beyond cars, namely inthe heavy-duty road, rail and shipping subsectors.

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

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e+Extra&utm_campaign=5cabbf6b8fEMAIL_CAMPAIGN_2021_10_18_09_22_COPY_01&utm_medium=email&utm_term=0_126c4c3fe3-5cabbf6b8f-408123614
IEA (International Energy Agency) (2022a), World Energy Employment Report,
https://www.iea.org/reports/world-energy-employment
IEA (2022b), Special Report on Solar PV Global Supply Chains,https://www.iea.org/reports/solar-pv-global-supply-chains
IEA (2022c), Heat Pumps, https://www.iea.org/reports/heat-pumps
IEA (2022d), The Future of Heat Pumps, https://www.iea.org/reports/the-future-of-heat-pumps
IEA (2022e), Global Hydrogen Review 2022, https://www.iea.org/reports/global-hydrogenreview-2022
IEA (2022f), Direct Air Capture 2022, https://www.iea.org/reports/direct-air-capture-2022
IEA (2022g), Investment tax credit for carbon capture, utilisation and storage (CCUS),
https://www.iea.org/policies/13346-investment-tax-credit-for-carbon-capture-utilisationand-storage-ccus

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IEA (2021), An Energy Sector Roadmap to Carbon Neutrality in China,
https://www.iea.org/reports/an-energy-sector-roadmap-to-carbon-neutrality-in-china

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

IEA (2020), Is cooling the future of heating?, https://www.iea.org/commentaries/is-cooling-thefuture-of-heating
IEA (2015), Storing CO2 through Enhanced Oil Recovery, https://www.iea.org/reports/storingco2-through-enhanced-oil-recovery
India, PM India (Prime Minister’s Office) (2022), Cabinet approves Production Linked
Incentive Scheme on “National programme on High Efficiency Solar PV Modules” forachieving manufacturing capacity of Giga Watt (GW) scale in High Efficiency Solar PV
Modules, https://www.pmindia.gov.in/en/news_updates/cabinet-approves-productionlinked-incentive-scheme-on-national-programme-on-high-efficiency-solar-pv-modulesfor-achieving-manufacturing-capacity-of-giga-watt-gw-scale-in-high-eff/
Innovationsregion Ulm (2022), Dana Neu-Ulm invests high double-digit million amount inbipolar plate production, https://innovationsregion-ulm.de/2022/05/27/dana-neu-ulminvests-high-double-digit-million-amount-in-bipolar-plate-production/?lang=en
IPCC (Intergovernmental Panel on Climate Change) (2022), Climate Change 2022: Mitigationof Climate Change, https://www.ipcc.ch/report/sixth-assessment-report-working-group3/
ITM Power (2021), Manufacturing Commences at the ITM Power Gigafactory, https://itmpower.com/news/manufacturing-commences-at-the-itm-power-gigafactory
Japan, METI (Ministry of Economy, Trade and Industry) (2022), Memorandum of cooperation
between the Ministry of economy, trade and industry of Japan, and the ministry ofEnergy and mineral resources of the Republic of Indonesia on the realization of energy
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John Cockerill (2022), Greenko and John Cockerill partner in hydrogen to contribute to Indian
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John Cockerill. (2019), Cockerill Jingli Hydrogen, world leader in hydrogen, inaugurates its
new production center at Suzhou, https://johncockerill.com/en/press-andnews/news/cockerill-jingli-hydrogen-world-leader-in-hydrogen-inaugurates-its-newproduction-center-at-suzhou-china/
Lee, A. (2022), China's Envision unveils big India factory plans after multi-gigawatt turbine
deal, Recharge, 27 April, https://www.rechargenews.com/wind/chinas-envision-unveilsbig-india-factory-plans-after-multi-gigawatt-turbine-deal/2-1-1207961
Liquid Wind (2022), Flagships, https://www.liquidwind.se/flagships
Marubeni (2022), Memorandum of Understanding has been signed with PT Pertamina(Persero) for Development of Decarbonization Projects in Indonesia,
https://www.marubeni.com/en/news/2022/release/00016.html
Maryland Clean Energy Center (2022), Inflation Reduction Act Sets Stage for Massive
Investment in Clean Energy, https://www.mdcleanenergy.org/inflation-reduction-actsets-stage-for-massive-investment-in-clean-energy/
Mitsui (2022), Joint Study Agreement formed to evaluate development of clean hydrogen
supply chain between UAE and Japan,
https://www.mitsui.com/jp/en/topics/2022/1243577_13410.html

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Norsk e-fuel (2022), About us, https://www.norsk-e-fuel.com/about-us

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

NREL (National Renewable Energy Laboratory) (2022), Supply Chain Road Map for Offshore
Wind Energy, https://www.nrel.gov/wind/offshore-supply-chain-road-map.html
Nutrien (2020), AEA Conference 2020 – Low Carbon Ammonia Certification,
https://www.ammoniaenergy.org/wp-content/uploads/2020/12/Blake-Adair.pdf
Orsted (2022), Partnership behind “Green Fuels for Denmark” accelerates project andinvestigates production of green jet fuel by 2025,
https://orsted.com/en/media/newsroom/news/2022/02/20220204476711
Oxy (2022a), Third Quarter Earnings Conference Call,
https://www.oxy.com/globalassets/documents/investors/quarterlyearnings/oxy3q22conferencecallslides.pdf
Oxy (2022b), LCV Investor Update, https://www.oxy.com/investors/stockholder-resources/lcvinvestor-update
Passive House Institute (2022), Passive House Institute, https://passivehouse.com/
Plug Power (2021a), Plug Power hosts grand opening of hydrogen and fuel cell innovation
center gigafactory in Monroe County, https://www.ir.plugpower.com/pressreleases/news-details/2021/Plug-Power-Hosts-Grand-Opening-of-Hydrogen-and-FuelCell-Innovation-Center-Gigafactory-in-Monroe-County-2021-11-12/default.aspx
Plug Power (2021b), Plug Power to Partner with Fortescue Future Industries to Manufacture
Electrolyzer Technology in Australia, https://www.ir.plugpower.com/pressreleases/news-details/2021/Plug-Power-to-Partner-with-Fortescue-Future-Industries-toManufacture-Electrolyzer-Technology-in-Australia-2021-10-14/default.aspx
PVTIME (2022), 14.55 Billion Yuan! LONGi Adds Production Capacity of Silicon Material to
46GW in Inner Mongolia Base, https://www.pvtime.org/14-55-billion-yuan-longi-addsproduction-capacity-of-silicon-material-to-46gw-in-inner-mongolia-base/
Shepardson, D. (2022), GM, LG Energy joint venture Ohio battery plant begins production,
Reuters, 1 September, https://www.reuters.com/business/autos-transportation/gm-lgenergy-joint-venture-ohio-battery-plant-begins-production-2022-08-31/
Rewiring America (2022), Electrify for Peace Policy Plan,
https://www.rewiringamerica.org/policy/electrify-for-peace-policy-plan
Richard, C. (2021), Chinese OEM MingYang “plans wind turbine plant” in southern Germany,
Wind Power Monthly, 24 September,
https://www.windpowermonthly.com/article/1728531/chinese-oem-mingyang-planswind-turbine-plant-southern-germany
Rystad Energy (2022), Inflation Reduction Act will attract an extra $270 billion in US wind andsolar investments by 2030, https://www.rystadenergy.com/news/inflation-reduction-actwill-attract-an-extra-270-billion-in-us-wind-and-solar-in
Samsun, R.C. et al. (2022), Deployment of Fuel Cell Vehicles and Hydrogen Refueling
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4975, https://www.mdpi.com/1996-1073/15/14/4975/htm

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Shaw, V. (2022), Chinese PV Industry Brief: Canadian Solar to build new Qinghai production
base, PV Magazine, 9 August, https://www.pv-magazine.com/2022/08/09/chinese-pvindustry-brief-canadian-solar-to-build-new-qinghai-production-base/Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Siemens Gamesa (2022), Tripling in Taiwan: Siemens Gamesa to massively expand offshore
nacelle manufacturing activities,
https://www.siemensgamesa.com/newsroom/2022/09/092122-siemens-gamesa-pressrelease-taiwan-offshore-nacelle-manufacture
Sino German Cooperation on Climate Change (2022), China released its 14th five-year plan
for renewable energy with quantitative targets for 2025,
https://climatecooperation.cn/climate/china-released-its-14th-five-year-plan-forrenewable-energy-with-quantitative-targets-for-2025/
Stellantis (2022), Stellantis and LG Energy Solution to Invest Over $5 Billion CAD in Joint
Venture for First Large Scale Lithium-Ion Battery Production Plant in Canada,
https://www.stellantis.com/en/news/press-releases/2022/march/stellantis-and-lgenergy-solution-to-invest-over-5-billion-cad-in-joint-venture-for-first-large-scale-lithiumIon-battery-production-plant-in-canada?adobe_mc_ref=Storegga (2021), Engineering begins on UK's first large-scale facility that captures carbon
dioxide out of the atmosphere,
https://www.storegga.earth/news/2021/news/engineering-begins-on-uk-s-first-largescale-facility-that-captures-carbon-dioxide-out-of-the-atmosphere/
Summit Carbon Solutions (2021), Summit Agricultural Group Announces Creation of Summit
Carbon Solutions, https://summitcarbonsolutions.com/summit-agricultural-groupannounces-creation-of-summit-carbon-solutions-and-worlds-largest-carbon-captureand-storage-project/
Surfeo (2022), Faurecia’s strategy to conquer Asia and Europe, https://surfeo.eu/hydrogenautomotive-industry-faurecias-strategy-to-conquer-asia-and-europe/
Sweden, Swedish Energy Agency (2022), National Centre for CCS,
http://www.energimyndigheten.se/en/sustainability/carbon-capture-and-storage/stateaid-for-beccs/
Tesla (2011), Panasonic Enters into Supply Agreement with Tesla Motors to Supply
Automotive-Grade Battery Cells, https://www.tesla.com/blog/panasonic-enters-supplyagreement-tesla-motors-supply-automotivegrade-battery-c
The White House (2022), Fact Sheet: Biden-⁠Harris Administration Advances Cleaner
Industrial Sector to Reduce Emissions and Reinvigorate American Manufacturing,https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/15/fact-sheetbiden-harris-administration-advances-cleaner-industrial-sector-to-reduce-emissionsand-reinvigorate-american-manufacturing/
Topsoe (2022), Topsoe Confirms Final Investment Decision For Construction of World's
Largest SOEC Electrolyzer Plant, https://blog.topsoe.com/topsoe-confirms-finalinvestment-decision-for-construction-of-worlds-largest-electrolyzer-plant
Toshiba (2020), Toshiba Starts Operation of Large-Scale Carbon Capture Facility,
https://www.global.toshiba/ww/news/energy/2020/10/news-20201031-01.html
United Kingdom, BEIS (Department for Business, Energy & Industrial Strategy) (2022),
Business model for power bioenergy with carbon capture and storage (Power BECCS),
https://www.gov.uk/government/consultations/business-model-for-power-bioenergywith-carbon-capture-and-storage-power-beccs

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United Kingdom, BEIS (2021), Net Zero Strategy: Build Back Greener,
https://www.gov.uk/government/publications/net-zero-strategy

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

United Kingdom, BEIS (2020), Heat Pump Manufacturing Supply Chain Research Project,https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachmen
t_data/file/943712/heat-pump-manufacturing-supply-chain-research-project-report.pdf
United Kingdom, HM Government (2022), British Energy Security Strategy, Policy paper,https://www.gov.uk/government/publications/british-energy-security-strategy/britishenergy-security-strategy
United Kingdom, HM Government (2020), The Ten Point Plan for a Green Industrial
Revolution,
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachmen
t_data/file/936567/10_POINT_PLAN_BOOKLET.pdf
United Kingdom, UK Government (2021), Wind of change for the Humber region,
https://www.gov.uk/government/news/wind-of-change-for-the-humber-region
United States, Congress (2022), H.R.5376 – Inflation Reduction Act of 2022,
https://www.congress.gov/bill/117th-congress/house-bill/5376
United States, Congress (2020), H.R.7516 - Clean Energy Innovation and Deployment Act of
2020, https://www.congress.gov/bill/116th-congress/house-bill/7516/text
United States, Congress (2018), H.R.2 - Agriculture Improvement Act of 2018,https://www.congress.gov/bill/115th-congress/house-bill/2
United States, DOE (Department of Energy) (2022a), Residential Cold Climate Heat Pump
Challenge, https://www.energy.gov/eere/buildings/residential-cold-climate-heat-pumpchallenge
United States, DOE (2022b), Biden-Harris Administration Announces $250 Million Investment
From Inflation Reduction Act For Domestic Heat Pump Manufacturing,https://www.energy.gov/articles/biden-harris-administration-announces-250-millioninvestment-inflation-reduction-act
United States, DOE (2022c), Biden-Harris Administration Announces Historic $7 Billion
Funding Opportunity to Jump-Start America's Clean Hydrogen Economy,
https://www.energy.gov/articles/biden-harris-administration-announces-historic-7-billionfunding-opportunity-jump-start
United States, DOE (2022d), President Biden Invokes Defense Production Act to Accelerate
Domestic Manufacturing of Clean Energy, https://www.energy.gov/articles/presidentbiden-invokes-defense-production-act-accelerate-domestic-manufacturing-clean
United States, DOE (2022e), United States Energy & Employment Report 2022,
United States, DOE (2018), Demonstration of Carbon Capture and Sequestration of Steam
Methane Reforming Process Gas Used for Large-Scale Hydrogen Production,
https://www.osti.gov/biblio/1437618
Upstream (2021), North Dakota approves landmark CCS project,https://www.upstreamonline.com/energy-transition/north-dakota-approves-landmarkccs-project/2-1-1085735

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Veolia (2022), Cutting-edge Power-to-Liquid project transforms municipal waste-derived CO2
into sustainable aviation fuels (SAF) in Portugal, https://www.veolia.com/en/ourmedia/newsroom/press-releases/power-liquid-project-transforms-municipal-wastewaste-derived-CO2-portugal

Energy Technology Perspectives 2023

Chapter 4. Technology manufacturing and installation

Vestforbrænding (2019), Vestforbrænding will capture CO2 in the future,https://www.vestfor.dk/nyheder-og-presse/nyheder/vestforbraending-vil-indfange-co2-ifremtiden/
Volkswagen (2021), Volkswagen Group creates European company for its battery business,
https://www.volkswagenag.com/en/news/2021/12/volkswagen-group-creates-europeancompany-for-its-battery-busine.html
Wind Europe (2022), Offshore wind vessel availability until 2030: Baltic Sea and Polishperspective, Wind Europe.
Wood Mackenzie (2022), Global Wind Turbine OEMs Market Share Forecasts 2022, Wood
Mackenzie.

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Xiaomei, S. (2022), 18.8 billion! Goldwind Deploys Wenzhou Offshore Wind Power Industry
Base, Saatao, 14 April, https://www.seetao.com/details/151202.html

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Chapter 5. Enabling infrastructure
Highlights• Infrastructure to transport and store electricity, hydrogen and CO2 is an oftenoverlooked – but critical – enabler of clean energy transitions. The Net Zero
Emissions by 2050 (NZE) Scenario is a useful indicator of the potential needs: inthe NZE Scenario, the global length of power transmission lines increases byaround 185% and distribution lines by almost 165% over 2021-2050, with 85% of
the additions occurring in emerging economies. Trade in low-emission hydrogen,which is almost non-existent today, covers more than 20% of global merchanthydrogen demand by 2030. Annual CO2 storage injection capacity jumps fromaround 42 million tonnes (Mt) of CO2 today to around 1.2 gigatonnes (Gt) by 2030,
requiring a huge expansion of CO2 transport and storage infrastructure.
• Such rapid growth would place considerable demands on supply chains. Annual
Metal use for power transmission lines, distribution grids and transformers grows
by around 50% in 2022-2030in the NZE Scenario, compared to today. Copper
used for grids and transformers in 2022-2030 corresponds to almost 20% of
global copper production in 2030. Manufacturing power transformers requires
grain-oriented electrical steel (GOES), with five countries – China, Japan, Korea,
Russia and United States – today accounting for almost 85% of global production
capacity of 3.8 Mt per year. Demand for GOES alone doubles to 6 Mt per year
over 2022-2030 in the NZE Scenario.
• Global annual investments in low-emission hydrogen and hydrogen-derived fueltransport, including in pipelines, storage facilities, terminals and refuelling
stations reach more than USD 50 billion over the latter half of this decade in the
NZE Scenario – equal to almost 40% of current annual spending on natural gas
pipelines and shipping infrastructure. With increasing demand for hydrogen andhydrogen-derived fuels over time, infrastructure investments reach more than
USD 80 billion in 2041-2050.
• CO2 infrastructure deployment also accelerates in the NZE Scenario, but it isconstrained by the required lead times for developing CO2 storage capacity.
Unlike for critical minerals, fewer assessments have been done to identify CO2
storage reserves. Confidence in CO2 storage availability is necessary to assure
investment in capture facilities and transport infrastructure, so resources must be
assessed as soon as possible.

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• Building energy infrastructure today can take more than a decade. Whileconstruction is in most cases a relatively efficient process, taking two tofour years, planning and permitting can often cause delays and create
bottlenecks, with the process taking two to seven years, depending on thejurisdiction and infrastructure type. Lead times for infrastructure projects areusually much longer than for the facilities that connect to them.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

The role of enabling infrastructure
Transportation, transmission, distribution and storage infrastructure is a criticalelement of the supply chains for low-emission electricity and hydrogen production,
and CO2 management. The uneven geographic distribution of fossil-based andrenewable energy resources requires infrastructure to link regions where energy
can be produced at lower cost with demand centres, while energy storage isneeded to balance fluctuations in production and demand. Similarly, CO2 needs
to be transported from where it is generated to geological storage sites where it
can be injected and permanently removed from the atmosphere. Infrastructurethat moves or stores energy or CO2 plays a central role in enabling
decarbonisation of the energy system while improving energy security by
diversifying supply routes for energy imports and ensuring energy sector resilience
to supply disruptions. Long-term planning, taking account of interdependencies
among different carriers and sector coupling, is vital to ensure that this enabling
infrastructure expands and adapts in a timely manner.
Infrastructure is already an important element of energy supply chains today. The
global length of the electricity transmission and distribution grid grew by more than
one-quarter over the last decade, reaching roughly 80 million kilometres (km)today (Figure 5.1).
Global historic deployment and investments in electricity and natural gas
infrastructure

IEA. CC BY 4.0.
Notes: km = kilometre. Electricity grid lengths include transmission and distribution. Investments in electricity infrastructure
include transmission and distribution grids as well as stationary storage. Investments in natural gas infrastructure include
natural gas pipelines, liquefied natural gas (LNG) terminals and LNG tankers.

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Infrastructure is an important element of energy supply chains today, accounting for 36%
of investments in the electricity sector and 51% in the natural gas sector.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Annual investments in electricity grids and stationary storage totalled on average
USD 313 billion in the period 2016-2021, making up more than one-third of allelectricity sector investments. For natural gas production, transport and storage,
infrastructure investments accounted for more than 50% of investments in this
sector in 2016-2021. Overall, electricity and natural gas infrastructure claimed
around 20% of energy sector investments in this period.
The purpose of this chapter is to assess the role of infrastructure in clean energy
technology supply chains and identify potential bottlenecks in infrastructuredevelopment, focusing on electricity, hydrogen and CCUS – key decarbonisation
pillars for which infrastructure is an essential step in the energy supply chain. The
requirements and potential barriers to scaling up infrastructure for electricity,hydrogen and CO2 are very different:Electricity transmission and distribution networks have existed for more than acentury. Increasing electrification of the energy system and boosting electricity
generation from variable utility-owned and distributed renewable sources will
require major network changes to ensure that supply and demand are always inbalance, given that electricity is more difficult and expensive to store than solid,
liquid or gaseous fuels. Digitalisation, smart systems and new high-power
semiconductor technologies are becoming increasingly important to gain better
control over electricity flows and maintain network stability.
Hydrogen infrastructure is at a very nascent stage today, though some regionalhydrogen pipeline networks and storage sites already exist in Europe, the UnitedStates and the Asia Pacific region. Due to its low volumetric energy density andliquefaction point, as well as its detrimental effect on steel, hydrogen is moredifficult and costly to transport and store than natural gas, as it involves moreenergy intensive compression and liquefaction, or conversion to higher-density
carriers.
CO2 management infrastructure (transport networks and geological storage sites)
will need to be developed in parallel with (if not earlier than) CO2 capture facilities.
Confidence in the availability of suitable storage resources that can support
sustained CO2 injection will be vital to the development of capture facilities, as willassurances that pathways exist to transport CO2 from its point of capture to thepoint of storage. For this to happen, storage resources around the world will need
to be more thoroughly assessed and jurisdictions will have to work together todevelop legal and regulatory frameworks that facilitate the transport andgeological storage of CO2.

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Progress in deploying infrastructure for clean energy and CO2 management iscurrently very uneven. Electricity grids exist in all countries today but are notalways adapted to handle increasing variable renewable energy generation or to
support demand-side flexibility measures. Infrastructure for hydrogen and CO2 isEnergy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

at a very early stage of development. Getting to net zero by mid-century will
therefore require a rapid scaleup of energy infrastructure. In some cases, majorinnovations are needed to reduce costs and improve performance to makeinfrastructure commercially viable.

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 gridcan 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 industrialsites. 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 (Figure 5.2).
Most electricity grids today carry alternating current (AC), historically produced byrotating generators in thermal or hydroelectric power plants. Renewablegenerating technologies such as solar photovoltaic (PV) and wind systems, as wellas batteries and fuel cells, are connected to the power grid by power-electronic
converters. 39 A major advantage of AC over DC for networks is that the voltage
can be modified relatively easily using power transformers to up-transform theelectricity for transport over long distances to minimise losses and down-transform
it for industrial, commercial and residential uses in regional or local distribution
grids. Transformers have a wide range of rated power. Distribution transformers
have a capacity of 0.15-15 megavolt amperes or MVA (which measures apparent
power), depending on the country. In the transmission grid, ratings for small powertransformers are up to 50 MVA and for medium ones are up to 100 MVA, whilelarge transformers have higher power ratings.

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37
Medium voltage levels according to the International Electrochemical Commission IEC 60038: 1 kV-35 kV; European Norm
EN 50160: 1 kV-36 kV; American National Standards Institute ANSI C84.1: 2.4 kV-69 kV.
38
High voltage levels according to the International Electrochemical Commission IEC 60038: above 245 kV; European Norm
EN 50160: 36 kV-150 kV; American National Standards Institute ANSI C84.1: above 345 kV.
39
Solar PV systems, batteries and fuel cells generate direct current (DC) that cannot be connected directly to an AC grid, so
output must be converted to AC. Wind power systems usually generate AC, but they are also connected to the grid by aninverter with a direct voltage intermediate circuit (AC/DC/AC) to be able to operate the wind turbine irrespective of the gridfrequency at the most efficient speed according to wind conditions.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Key technology components of electricity grids

IEA. CC BY 4.0.
Note: HVAC = high-voltage alternating current; HVDC = high-voltage direct current.

Power grids comprise transmission and distribution networks, with overhead, undergroundand subsea AC and DC cables, each with different technology and material needs.

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, whichmakes smaller HVDC systems more economical. The latest generation (insulatedgate bipolar transistors) offers several further benefits, such as independent andflexible control of active and reactive power (which flows back and forth within thesystem), flexible AC voltage control, and the ability to stabilise the system in theevent 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 remotelocations where underwater AC cabling is not economical or technically feasible.
Today, HVDC transmission losses over 1 000 km are around 3% compared withmore than 7% using AC lines.

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The total length of HVDC lines around the world has almost tripled since 2010,
reaching more than 100 000 km (with total transmission capacity of more than
350 GW) at the end of 2021, though this still represents just 2% of totaltransmission length (Figure 5.3). Long-distance overhead lines in China andEnergy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Brazil, and underground and submarine cables in Europe make up most of thisgrowth. Almost 50% of all HVDC lines were in China in 2021, while Europe
accounted for 10% of global HVDC line length.
Global high-voltage direct current (HVDC) transmission lines bycountry/region and line type

IEA. CC BY 4.0.
Notes: UG = underground cable; SC = subsea cable; OH = overhead transmission line; km = kilometre; GW = gigawatt.
Data are for year-end. “Capacity” refers to global HVDC transmission capacity, but excludes the capacity of HVDC back-toback systems, which are used to link two AC networks. Data for 2023-2030 are based on announced projects.
Sources: IEA research; RTE International (2022).

The global length of HVDC lines has almost tripled since 2010 to today with additions ofoverhead lines in China, North America and India, and offshore cables in Europe.

Both high-voltage AC (HVAC) and HVDC transmission lines can involve overhead,
underground or subsea cables. Overhead lines usually consist of uninsulated
wires and are suspended by towers or poles made of steel, aluminium, concreteor reinforced plastics. As the surrounding air provides insulation, overhead powerlines are generally the cheapest transmission option. Underground cables consistof conductors encased in insulating material and often a protective jacket. They
cost up to five times more than overhead lines, due to higher material needs andconstruction/installation costs, but they are increasingly being used in advanced
economies because they are less visible and vulnerable to extreme weather
events.

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The way electricity grids are operated is changing with the emergence of newvariable sources of generation and types of demand. Most operational decisions
today are based on load flow analysis in local monitoring systems, which works
well when the power flows from centralised generation capacity to consumers arelargely predictable within a local or national system. The increasing integration ofenergy flows over longer distances and the rise of variable renewable power

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

generation is reducing the predictability of electricity flows through the system,
making it harder to prevent local line overloads. New monitoring and control
devices that use digital technologies can provide system information in real timeand help deal with these problems. Dynamic line sensors can increase thetransmission capacity rating of lines based on environmental and weather
conditions,
The deployment of smart meters in the distribution network is an essential step indeveloping smart grids. Around 1.1 billion smart meters had been installed globallyat the end of 2021 – almost 40% of all residential meters. Smart meters canincrease service quality and enable the introduction of innovative demand-side
response measures by allowing customers to manage their consumption, e.g.
based on variable electricity tariffs. Another step is remote control and advanced
protection devices capable of managing bidirectional energy flows and identifying
grid faults quickly. Other digital solutions include advanced voltage regulation at
the distribution-grid level that can increase the hosting capacity of the grid andenable the integration of the increasing number of decentralised sources ofrenewable electricity. In 2021, digital infrastructure accounted for 19% of global
investment in electricity grids, with 75% of it in the distribution grid.
The ability to operate a network covering a large area depends on power electronic
technologies such as synchronous condensers, static synchronous compensatorsand thyristor-controlled series compensation, which are part of the family offlexible AC transmission devices. These devices allow control over power flows,
voltage levels and other stability characteristics almost in real time while
generating reactive power, which increases power transmission capacity andstabilises the grid. These capabilities become increasingly important as thecontribution of solar PV and wind power generation grows, as these inverter-basedsources provide limited amounts of inertia (the energy stored in large rotating
generators), which is necessary to keep the network stabilised, especially in theevent of an unplanned power outage. Historically, inertia has been largely
provided by large conventional power plants.

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Energy storage is set to be an increasingly important part of electricity grids asrenewables-based generation increases. Energy storage systems, such asbatteries or pumped-storage hydro plants, can also support the integration of
growing shares of variable renewable electricity generation and effectively
balance increasing electrified demand on different time scales, from milliseconds
to seasons. Battery systems are becoming more common thanks to technologicaladvances and lower costs. Global installed capacity reached 27 GW (108 gigawatt
hours [GWh]) at the end of 2021. As batteries are modular and scalable, they canbe deployed quickly anywhere to balance variable renewable generation andprovide various grid services on a short time scale by responding instantaneously
to sudden supply-demand imbalances and by maintaining frequency stability.

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Chapter 5. Enabling infrastructure

Battery systems equipped with virtual synchronous machine control algorithms
can deliver an inertial response similar to the mechanical inertia provided byrotating machines.
With over 160 GW of installed capacity worldwide, pumped-storage power plants
are the largest source of electricity storage today. Pumped-storage hydro facilities
equipped with variable-speed pumps supplied by static frequency converters canregulate their speed and power consumption in pumping mode and increasesystem flexibility and stability. Pumped-storage hydro reservoirs can store large
amounts of energy longer than batteries and can perform a substantial number ofcharge-discharge cycles over a very long period.
Other storage options include compressed air storage, with three large-scale
plants in operation in Germany, the United States and China (Borri et al., 2022).
Storing electricity in the form of hydrogen in underground storage sites such as
salt caverns and reconverting it back to electricity is another long-term, large-scalestorage option (see Bulk Hydrogen Storage below). Gravity storage could be acost-effective way to compensate for short-term losses of power availability. Other
short-term storage options such as high-power capacitators or flywheels could be
used to stabilise the grid. Storing electricity in the form of high-temperature heatand converting the heat back into electricity is another storage option underinvestigation.

Grid expansion in the NZE Scenario

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Electricity grids undergo rapid expansion in the Net Zero Emissions by 2050 (NZE)
Scenario. By 2030, the global length of transmission lines increases by almost
2.5 million km (compared with 1 million km over 2013-2021), while distribution
networks grow by more than 16 million km (12 million km in 2013-2021). Most of
the additions occur after 2030, with the global length of transmission lines
increasing by more than 9.5 million km (+186%) by 2050, and distribution lines by
115 million km (almost 165%) over 2022-2050. Gross additions are even more
impressive, totalling more than 170 million km, as many existing lines will need tobe replaced by 2050 (Figure 5.4). Around 80% of global gross grid additions occur
in the emerging market and developing economies. In advanced economies, themajority of new lines replace existing ones. HVAC remains the dominant
technology for transmission lines in the NZE Scenario.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Gross electricity grid additions in advanced and emerging economies in
the NZE Scenario

IEA. CC BY 4.0.

Around 80% of global gross grid additions to 2050 are in emerging economies in the NZE
Scenario, with the bulk of new lines in advanced economies replacing existing ones.

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The rapid growth in electricity use in the NZE Scenario, which jumps by almost
50% between 2021 and 2030, drives up demand for all types of electrical supply
equipment. Global transformer additions double from an average of 2.4 GW/year
over 2012-2021 to 4.9 GW/year in 2022-2030, with three-quarters occurring inemerging economies (Figure 5.5). Additions fall again after 2040 as demand
growth begins to slow. Stationary battery storage also grows rapidly, with capacity
rising from 108 GWh today to 3 100 GWh by 2030 mainly owing to the increasingneed for system flexibility. Nonetheless, stationary-battery deployment is still
dwarfed by that of electric vehicle (EV) batteries, which register global capacity of
5.5 terawatt-hours (TWh) in 2030. By 2050, with higher power system flexibility
needs prompting greater deployment of stationary batteries, their capacity rises to15.5 TWh. Average annual grid investments of USD 520 billion (in real 2021 US
dollars) are needed during 2022-2030 in the NZE Scenario – almost twice the
USD 308 billion spent in 2021 – and USD 1 034 billion per year is required over2031-2050. Electricity grids represent 30% of power sector investments by 2030
and 45% by 2050.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Average annual transformer and stationary-battery capacity additions in
the NZE Scenario

IEA. CC BY 4.0.
Note: EMDE = emerging markets and developing economies.

Driven by increasing electricity demand, capacity additions for transformers and battery
storage grow rapidly in the NZE Scenario, especially in emerging economies.

Charging stations for EVs
Suitable access to EV charging equipment is essential to enable widespreadelectric vehicle deployment. There are two broad categories of chargers:•

Private chargers. These are chargers located at residences, workplaces anddepots, with power ratings that typically range from 3 kilowatt (kW) to 22 kW.
Electricity pricing through these chargers is often similar to residential orcommercial tariffs, making them the least costly charging option in most cases.
This is currently the primary EV charging method, with an estimated 15 million
private charging points worldwide at end-2021.

•

Publicly accessible chargers. These are street-accessible chargers, locatedmostly in urban areas such shopping centres and parking garages and along
highways. Their power ranges from 11 kW to 350 kW for electric cars. Electricity
pricing for public chargers tends to be higher than for private chargers sinceequipment and grid connection costs have to be recovered. Public charging
networks are necessary for EV owners who wish to undertake long-distancejourneys or who do not have access to a home charger (such as those living in
multifamily residences). There were about 1.8 million public EV charging points
worldwide at the end of 2021.

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The number of charging points increases rapidly in the NZE Scenario, in line with
EV fleet expansion. Lead times to install charging infrastructure vary: homechargers can be installed without any permission if below a given power threshold,while more powerful chargers can usually be approved within weeks in mostEnergy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

countries. For public charging infrastructure, construction time is usually around
six months when major grid upgrades are not required but can be as much as
1.5 years if high-voltage infrastructure needs to be built. Permitting time can triple
the length of these lead times.
Rising EV charging loads will put growing pressure on power grids. In advanced
economies, EV penetration of up to 40% of the fleet can be managed without any
major work to the grid, with most modifications involving transformer upgrades toensure they are voltage-regulated because EV charging loads are generally
evenly spread over time (including within the day). As the EV share expands,
stress on the grid can become problematic if charging patterns are not wellmanaged. In the NZE Scenario, smart charging technologies and broader grid
digitalisation are rolled out rapidly to maintain grid resilience as charging loads
increase.
The number of EVs worldwide jumps from 60 million in 2021 to over 700 million in
2030 in the NZE Scenario, requiring average annual investments of USD 30 billion(in 2021 US dollars) in charging facilities over 2022-2030. As the number of EVs
on the road increases, each public charger will be used by more vehicles, reducing
investment needs. However, the average power rating of public chargers is
expected to increase as demand for fast-chargers grows.

Material needs and supply chains
Raw material needs

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Demand for materials to make equipment for electricity grids, especially copperand aluminium, soars in the NZE Scenario. The use of copper for transmission
lines, distribution grids and transformers increases from an average of 5 million
tonnes per year (Mt/year) in 2012-2021 to 6 Mt/year over 2022-2030, levelling off
at 12 Mt/year in 2041-2050, while annual aluminium demand grows from
12 Mt/year to 16 Mt/year and 26 Mt/year over the same periods (Figure 5.6).
Distribution grids account for around 80% of the copper demand and more thanhalf of the aluminium demand in 2050. The copper used for grids and transformers
in 2022-2030 corresponds to almost 20% of global copper production in 2021; theshare for aluminium is almost 25%. Aggregate demand for materials to maketransformers, including steel, copper, aluminium, transformer oil and insulationmaterials rises from 9 Mt/year in 2012-2021 to 17 Mt/year in 2022-2030 and morethan 23 Mt/year in 2031-2040, before falling back to 17 Mt/year in 2041-2050.
Demand for materials to make grid batteries, mostly copper, graphite andvanadium, escalates from just 0.01 Mt/year in 2012-2021 to 0.45 Mt/year in 20212030 and more than 2 Mt/year in 2041-2050.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Average annual material needs for selected grid technologies in the NZE
Scenario

IEA. CC BY 4.0.
Notes: Mt = million tonnes. Material demands for transmission and distribution lines include conductor cables and wires, but
not steel for towers and poles. For transmission and distribution lines, aluminium is used for overhead lines and copper forcables.

The demand for materials to make equipment for electricity grids, especially copper andaluminium, soars over the next two decades in the NZE Scenario.

Copper and aluminium are the main materials for making electricity cables andlines. Due to its good electrical conductivity, copper has long been the preferredchoice, though it is three times heavier and much more expensive than aluminium.
Aluminium has only about 60% of the conductivity of copper, which means muchthicker wires are needed. As the conductivity-to-weight ratio of aluminium is better
than that of copper, it is usually preferred for overhead power lines, while copper
is most often used for underground and subsea cables.

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The amount of these materials needed for transmission and distribution lines
depends on voltage. Transmission capacity is the product of current and voltage:if voltage is increased with the same current, transmission capacity increases.
Current determines the thickness of the conductor as well as the losses, while
voltage determines how much insulation is needed – either air for an overheadline or insulating material such as cross-linked polyethylene in the case of a cable.
Conductor material and losses can therefore be reduced by increasing thetransmission voltage. An overhead transmission line requires around11 kilogrammes of aluminium per megawatt and per kilometre (kg/MW/km),
compared with 65 kg/MW/km for an overhead distribution line with much lower
voltage. Underground cables require 101 kg/MW/km of copper for transmission
and 438 kg/MW/km for distribution. An HVDC line requires even less metal –around 5 kg/MW/km of aluminium for an overhead line and 29 kg/MW/km ofcopper for an underground cable (Figure 5.7). HVDC lines require less material

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

because fewer lines (only one or two) are needed than for a three-phase AC
system. In addition, HVDC systems usually run at higher voltages, further reducing
material needs relative to AC for the same capacity.
Typical material composition of overhead lines and cables by weight, 2021

IEA. CC BY 4.0.
Notes: HVAC = high-voltage AC transmission; HVDC = high-voltage DC transmission. Materials in overhead lines include
conductors, towers and poles.

Overhead line conductors are made of mainly aluminium (~70%) and some steel (~30%),
while the majority of steel used in overhead line systems is for the towers and poles.

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By weight, half of the material needed to make a power transformer is steel: twothirds of which is grain-oriented electrical steel (GOES) with specific magnetic
properties and high permeability, and the rest construction steel (Figure 5.8). In
the NZE Scenario, demand for GOES for making transformers doubles from nearly
3.0 Mt in 2020 to almost 6 Mt/year in 2020-2030, exceeding today’s manufacturing
capacity of 3.8 Mt/year.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Typical material composition of transformers and stationary batteries byweight and value, 2021

IEA. CC BY 4.0.
Notes: LFP = lithium iron phosphate; VFB = vanadium flow batteries. “Other” includes pressboard, paper, plastics,
porcelain and rubber for transformers.

Electrical steel and copper account for around half of the material costs for transformers,
while copper alone makes up around 40% of the material cost of an LFP stationary battery.

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Other materials needed to make transformers include copper, aluminium,transformer oil for insulation, insulation material, pressboard, paper, plastics,
porcelain and rubber. Aluminium is mainly used in low-voltage distribution
transformers. Thanks to its good electrical and cooling properties, mineral oil isthe main type of oil used in transformers to insulate and cool the transformer
windings (copper coils) and core. Accidental fires caused by mineral oil-basedtransformers and the non-biodegradable nature of such oil have led to thedevelopment of bio-based transformer oils, which are non-combustible and nontoxic (GE Grid Solutions, 2017).

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Materials are the main cost component for transformers, accounting for 60-75%
of the cost of a large power transformer. Copper accounts for around one-quarterof total material costs and GOES for between one-fifth and one-quarter. GOES
comes in different quality grades, with highly permeable grades allowing thetransformer to be smaller, requiring less oil and reducing electrical losses.
Minimum efficiency standards for transformers, such as the Energy Efficiency
Program for Certain Commercial and Industrial Equipment in the United States(United States, DOE, 2021; 2022a), and the Ecodesign Directive in the European
Union (European Commission, 2019), are pushing the use of higher-quality GOES
types, though European manufacturers have warned of shortages. For distribution
transformers, the use of amorphous steel instead of GOES can be an alternative
to achieve higher transformer efficiencies, but results in larger and heavier
transformers compared to transformers using GOES and requires a more labourintensive manufacturing process.
Lithium-ion (Li-ion) batteries, developed primarily for EVs, currently account forthe majority of installed battery capacity in stationary applications, though lithium
iron phosphate (LFP) batteries are now the dominant technology for new
additions. New battery technologies for stationary applications are underdevelopment, notably vanadium flow batteries (VFBs). VFB performance does notdegrade for at least 25 years and they can endure a higher number of charging
and discharging cycles than Li-ion batteries, though they are too bulky and heavy
for EVs. VFBs require fewer raw materials such as nickel and cobalt, but they needvanadium. Today, that metal is largely used in the steel sector, accounting for 92%
of the global vanadium demand of 110 kilotonnes (kt) in 2021 (60% in China).
Three major raw material sources support vanadium production globally: coproduction from steel slag (73%), and extraction from primary resources (17%)
and secondary sources (10%) (Bushveld Minerals, 2022). Growth in VFB use forstorage applications in the NZE Scenario corresponds to average annual demandof 300 kt of vanadium during 2031-2040 – three times the current level – which
could be covered by known reserves of 22-24 Mt (Simandl and Paradis, 2022).
Manufacturers of stationary batteries are also carrying out research anddevelopment on sodium-ion batteries, which rely on sodium – a relatively
abundant element. Cell design and related component material processing are
similar for Li-ion batteries, enabling the use of existing battery manufacturing
equipment and techniques. They are expected to become commercially available
after 2025.

Equipment manufacturing

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There are several suppliers of high-voltage AC and DC cables and overhead lines
internationally, including NKT in Denmark, Nexans in France, Südkabel inGermany, Prysmian in Italy, Sumitomo in Japan, General Cable in the UnitedEnergy Technology Perspectives 2023

Chapter 5. Enabling infrastructureStates, NBO and ZTT in China and LS Cable in Korea. Data on manufacturing
capacity for cables and overhead lines are difficult to obtain for some regions.
Europe had annual manufacturing capacity of around 11 280 km for HVAC andHVDC cables in 2016, of which 6 550 km are for land and 4 730 km subsea(ENTSO-E and Europacable, 2018).
Most cable manufacturers have plants around the world. Plants are generally
located close to demand centres to avoid costly long-distance transport of heavy
cables: shipping a 200-km-long cable weighing 10 000 tonnes from Europe to Asia
can take approximately one month. Procurement lead times for large HVAC or
HVDC cables are around two to four years, since the manufacturing of cables is atime-consuming process and involves a number of sequential operations. For
example, making subsea cables involves conductor stranding, insulation extrusion
or lapping, sheathing, the jointing of separate cables to a longer one, armouring
and testing (ENTSO-E and Europacable, 2018; SKM and ETI, 2010; Worzyk,2009).
The leading manufacturers of large power transformers are Hitachi Energy(Switzerland), Siemens Energy (Germany), Mitsubishi and Toshiba (Japan),
General Electric and Westinghouse (United States), Hyundai Heavy Industries(Korea), Chint and China XD Electric (China) and Compton Greaves (India),
together accounting for more than 40% of the global market. The production of
medium-voltage and distribution transformers is spread over a much larger
number of companies. The steps to manufacture a power transformer involve thebuilding of the core, production of the windings, assembly of the core and windings
and production of the tank for the oil, as well as final assembly of the transformer
and testing. Large power transformers are extremely heavy, weighing
100-400 tonnes, so transporting them from the factory to the final destination,
usually in parts, is a considerable undertaking, accounting for up to one-fifth of thetotal cost.

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GOES is a key material for power transformers. Global manufacturing capacity for
GOES was around 3.8 Mt in 2020, though production was only 2.8 Mt due toeffects of the Covid-19 pandemic. Manufacturing is limited to a few producers in
China, Japan, France, Germany, India, Poland, the Czech Republic, the RussianFederation (hereafter, “Russia”), Brazil, Korea and the United States (Table 5.1).
China is the largest market, with estimated annual domestic consumption of
1.33 Mt in 2020, followed by the European Union with 0.23 Mt and the UnitedStates with 0.15 Mt (China, Ministry of Commerce, 2021).

Energy Technology Perspectives 2023

Table 5.1

Chapter 5. Enabling infrastructure

Global grain-oriented steel manufacturing capacity by country andmanufacturer, 2020

Country

Capacity (kt/year)

Companies

China

1 780

Baowu, Anshan, Hebei Shougang, TISCO

European Union

400

ThyssenKrupp Electrical Steel, StalProdukt, GO Steel Frydek
MistekJapan

480

JFE Steel, Nippon Steel & Sumitomo Metal

Korea

300

POSCO

Russia330

NLMK

United States

300

AK Steel

Other countries

190

Aperam (Brazil), ThyssenKrupp (India)

World

3 780

Note: kt = kilotonne.
Sources: China, Ministry of Commerce (2021); European Commission (2022a).

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Almost 40% of global GOES production was traded internationally in 2020. Fivecountries – Japan, Russia, China, Korea and Germany – accounted for more than
90% of all GOES exports, reflecting the relatively small number of producing
countries. The leading importers were India, Mexico, Türkiye, Italy and Canada,
which together were responsible for almost 60% of all GOES imports (Figure 5.9).
Several countries have imposed tariffs on GOES imports in response toaccusations of dumping. The transformer industry is, however, facing shortages,
which are driving up prices: the average international price in September 2022
was 70% above the average for 2020. Sanctions on exports from Russia, which
accounted for almost 10% of global production capacity in 2020, is a major reason.
Growing demand for non-oriented electrical steel (NOES) for making EV motors,
which has led some steel producers to switch part of their production from GOES,
is another contributing factor.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Global trade flows of grain-oriented steel by weight, 2020

IEA. CC BY 4.0.
Note: Only trade flows of 4 kilotonnes or larger are shown.
Source: IEA analysis based on CEPII (2022).

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Five producers – Japan, Russia, China, Korea and Germany – account for more than 90% of all GOES export s, with India and Mexico being thelargest importers.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Around 450 000 transformers with a capacity above 10 megawatt (MW), i.e.
including small, medium and large power transformers, were traded globally in
2020, with a total value of USD 3 billion. In monetary terms, China accounted formore than one-quarter of total exports, followed by Korea, Mexico, Germany, Italy
and Türkiye (Figure 5.10), with these six countries together making up almost 75%of the total. In monetary terms, the United States was the primary importer oftransformers in 2020, receiving more than one-third of all such imports. Mexico
was the leading exporter to the United States, with a significant share of Mexican
imports of GOES being used to manufacture transformers. Imports of transformers
are unsurprisingly concentrated in regions with rapidly growing electricity demand,
notably the Middle East and Southeast Asia 40, which each account for around 10%of all imports.

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40Southeast Asia refers here to Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Viet Nam.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Global trade flows of transformers above 10 MW in monetary terms, 2020

IEA. CC BY 4.0.
Note: Only trade flows with values of more than USD 15 million are shown.
Source: IEA analysis based on CEPII (2022).

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China is the leading exporter of transformers, particularly to other emerging economies, while the United States is the main importer,
principally from Mexico and Europe.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

HVDC transmission systems are usually supplied in two parts, the point-to-point
lines and the convertor stations, often by different companies. The leading
producer of converter stations is Hitachi Energy (formerly ABB) in Switzerland,followed by Siemens (Germany) and General Electric (United States), Mitsubishi
Electric (Japan), NR Electric and C-EPRI Electric Power Engineering (China) andBharat Heavy Electricals Limited (India). The main components are converter
valves made from high-power semiconductors (insulated-gate bipolar transistors
or thyristors), conversion power transformers, measuring instruments andvoltage/current transformers, harmonic filters and shunt capacitors, and control
systems. Hitachi Energy has its own factory for making power semiconductors,
whereas the other suppliers have to source these key components externally fromsemiconductor manufacturers. Procurement lead times for converter stations areusually around two to three years.

Lead times
Lead times for planning and building the major assets that make up electricity grids
can be very long. Average lead times for new overhead transmission lines in
Europe and the United States today are around ten years, of which seven are
required for planning and permitting, and around three for construction (Figure5.11). However, some recent projects have taken much longer (up to 13 years). It
is usually much quicker to build new generating plants: utility-scale solar PV andonshore wind projects take three to five years and offshore wind farms up toseven. Long lead times to connect new plants to the grid can slow deployment. In
the United States, the average grid connection time for power plants increased
from 2.5 years in 2000-2010 to 3.9 years in 2011-2020 (Rand et al., 2022).
Planning and building low-voltage distribution lines is faster, varying from six
months to two years, depending on the region (Netbeheer Nederland, 2019).

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Various factors can reduce the pace of infrastructure project deployment (Box 5.1).
Obtaining right-of-way permits and environmental impact assessments andpermits contribute to long lead times for transmission projects. Based oncompleted transmission projects in the United States over 2016-2022, obtaining
right-of-way authorisations took 3-11 years and environmental impact
assessments 2-9 years (US Permitting Council, 2022). In Europe, permitting times
for onshore wind projects vary from three to nine years between countries, and for
utility-scale PV the range is one to four years (European Commission, 2021).
Public opposition often slows this process. In Germany, the decision to prioritise
underground cables over overhead lines for the Südlink transmission project from
northern to southern Germany helped increase public acceptance, but it requiredchanges to the planned route, further delaying the permitting process(Energiechronik, 2020).

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Although construction of new transmission lines is normally much quicker, supply
chain constraints can cause delays. Subsea cables, for example, require cablelaying vessels. The 45 cable-laying vessels in operation worldwide today can lay
a total of 4 200-7 000 km of cable per year (depending on the type of project). The
current fleet of vessels is sufficient to cover the cable-laying needs for offshore
wind deployment up to 2030 in the NZE Scenario, but additional vessels would beneeded for any subsea interconnector cables. Procurement times for key
equipment must also be taken into account in the planning process fortransmission lines. Shortages of materials, particularly GOES, are likely toincrease procurement times for power transformers in the near future. In October
2022, utilities in the United States reported that procurement times for distribution
transformers had increased from 2-3 months in 2021 to up to about 12 months in
2022, with some utilities reporting lead times of more than three years (APPA,
2022).
Average lead times to build new electricity grid assets in Europe and theUnited States, 2010-2021

IEA. CC BY 4.0.
Notes: Bars represents average lead times and lines reflect typical ranges based on selected recent projects. The lead time
to connect power plants to the grid in the United States is the average for 2011-2020, while lead times for overhead andunderground transmission lines as well as subsea cables cover 2010-2021. The construction time for large powertransformers is based on industry sources.
Sources: IEA research; US Permitting Council (2022); Rand et al. (2022).

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Planning and permitting of new transmission lines in Europe and the United States typicallytakes six to seven years, while the construction itself requires only two to three.

Energy Technology Perspectives 2023

Box 5.1

Chapter 5. Enabling infrastructure

Why do energy infrastructure projects take so long?

Lead times associated with infrastructure projects can be very long, ranging from 8
to 13 years for transmission grids, potentially up to 3-12 years for hydrogen
infrastructure, and up to 10 years for CO2. Reducing these times will be critical to
speed up deployment. Four main factors determine how long it takes to deploy a
project: project economics, the complexity of permitting procedures, socio-politicalsupport and technical constraints.
Depending on the business model they rely on, infrastructure projects of all types(transport, transmission, distribution and storage) can face financing difficulties. In
the case of electricity transmission and distribution, projects are often operated
following a regulated-asset-base business model, which limits revenue and returns
on investment. Many advanced economies have put in place arrangements to
support the financing of these projects, but the high cost of capital and difficulties
attracting private investment are often a problem in emerging economies. Financing
the development of newer infrastructure types, such as CO2 or hydrogen pipelines
and storage, can be especially difficult because markets for the services they
provide are nascent and it is unclear under which regulations and business models
they will operate. Governments can reduce investment risks for these capitalintensive projects through measures such as low-interest loans or loan guarantees.
Developing business models for hydrogen or CO2 infrastructure can reduceinvestment risks and attract private investments (IEA, 2022a).
The time needed to obtain permits and approvals to build clean energy
infrastructure varies by infrastructure type, but it is on average up to six years forpipelines (using natural gas pipelines as a proxy) and transmission grids. The
complexity of these projects, which can involve lines crossing several jurisdictions,explains why they take so long. A large number of studies, plans and reports often
have to be provided to respect various regulations. For new infrastructure types,
including pipelines and storage sites for hydrogen or CO2 as well as port facilities
for CO2 or hydrogen, it is not always clear which regulator should be in charge of
permitting, and globally only a limited number of regulators have experience withthese projects. As a result, first-of-a-kind projects usually involve longer permitting
times. They can be reduced by various measures, such as improving co-ordination
among the government agencies involved, providing clear responsibilities andtimelines as well as adequate staff, and ensuring that regulations are fit for purpose
and applicable to new energy infrastructure types.

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Efforts to improve permitting processes for infrastructure and renewable energy
technologies are currently under way in several countries. While revisions to the EU
Renewable Energy Directive are still in the legal process, the EU Council has
agreed on a temporary framework to set deadlines for granting permits for rooftop
solar PV, heat pumps and the repowering of existing renewable power plants aswell as to provide the possibility for simplified assessment of renewable energy
projects (European Council, 2022). The US government recently presented aEnergy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Permitting Action Plan to accelerate federal permitting and environmental reviewsfor infrastructure projects funded through the Infrastructure Investment and Jobs
Act (The White House, 2022).
A lack of socio-political support, including a failure to achieve broad consensus
among political parties and countries on long-term goals and a strategic vision forenergy infrastructure, can lead to delays, especially when there is a change ofgovernment. Opposition from sections of the public, including landowners,
environmentalists and indigenous groups, can also delay or halt projects, especially
if communication and consultation are inadequate. Engaging stakeholders aroundthe project route or site early and often, with appropriate communication strategies
as well as long-term planning with active support from different levels of government
and international co-operation for cross-border infrastructure projects, cansmoothen project development.
Bottlenecks in supply and technical constraints can also cause delays.
Installing transmission lines and pipelines and building underground storage
facilities requires specialised equipment and expertise, which can be subject tobottlenecks and supply shortages. This is particularly true for the offshore laying of
infrastructure, for which specialised vessels and platforms are usually booked morethan a year in advance. Construction workers usually require specific certifications
and training (e.g. for working offshore or for welding pipes). Weather, terrain andease of access can also affect the construction of infrastructure and cause project
delays. Governments and the private sector need to support training programmes
and the reskilling and/or upskilling of fossil energy sector workers that may lose theirjobs as the energy transition progresses.
Repurposing existing infrastructure for hydrogen and CO2 use can involve shorter
lead times as well as lower overall infrastructure investment costs (see Focus on
Repurposing Existing Infrastructure below).
Sources: IEA (2022a); European Council (2022); The White House (2022).

End of life

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Network equipment normally lasts a long time and can usually be reused or
recycled to a large degree. High-voltage overhead lines usually last at least
40 years (much longer if well maintained), but are often replaced sooner due tothe need to increase transmission capacity (difficulties in gaining right-of-way
access mean that it is generally much easier to use existing routes than to build
new lines). For distribution lines with poles made of material other than steel,lifetimes rarely exceed 40 years, especially in the case of wooden poles, which
tend to rot. Every part of the material used for overhead lines, including the
conductor, is easy to reclaim and recycle. In some cases, masts and pylons coatedwith anticorrosion paint containing lead or asbestos may need to be recycled by acertified company.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructureHigh-voltage cables have a normal lifetime of 40 years, though somemanufacturers claim 60 years. At the end of a cable’s lifetime, a decision needs tobe made whether to leave the it in the ground or take it out, which can be difficultand costly. In contrast to the new generation of cross-linked polyethylene cables,
many old oil-filled cables contain hazardous materials that can pollute the soil fora long time in the event of leakage, so usually need to be removed. The cableconductor, which consists of copper or aluminium, as well as polyethylene used
as insulation material, can be also recycled.
The normal lifetime of a power transformer is around 40 years, or 360 000
operating hours, though this can vary according to loading conditions and ambient
temperatures. In some countries, the transformer fleet is relatively old. For
example, in the United States the average age of large power transformers inoperation is 38-40 years. More than 70% of them are more than 25 years old andsome are more than 70 years old (United States, DOE, 2022b). Around threequarters of a transformer’s materials can be recycled, especially the steel, copperand oil.
As with EV batteries, stationary batteries can be recycled to recover valuable
materials such as cobalt, nickel, iron, graphite, lithium and manganese from thecathode (see Chapter 3). The manufacturing costs for a new cell can be 5-30%
lower when recycled cathode materials are used (NREL, 2021). Energy use andemissions along the supply chain are also lower when less raw material needs tobe extracted and processed. However, the processes used to recover and recycle
the various materials in batteries are complex and expensive.

Energy needs and emissions
Direct energy needs for manufacturing grid technologies, excluding the energy
needed to mine and process the materials required to manufacture thesetechnologies, are relatively small. Manufacturing transmission and distribution gridlines and cables used about 50 PJ of energy inputs worldwide in 2021 (equal toaround 0.01% of global final energy consumption), two-thirds in the form ofelectricity and one-third natural gas. In the NZE Scenario, energy demand roughly
doubles by 2050 to 100 PJ. The amount of energy embedded in the materials
used to make these assets, mainly copper and aluminium, is somewhat higher –about 150 PJ for copper and 570 PJ for aluminium in 2021. These amounts
increase to 340 PJ for copper and more than 1 000 PJ for aluminium in 2050.
Including this indirect energy use, the total energy needed to make lines andcables equals about 0.4% of total final electricity consumption in 2050 comparedwith 0.2% in 2021.

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Energy use is similar for transformers. Around 290 PJ were consumed globally to
manufacture transformers in 2021, and in the NZE Scenario this amount increases

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

to 570 PJ in 2030 and to 780 PJ in 2040 before falling to 570 PJ in 2050. Energy
required to extract the materials used to make transformers is in a similar range:
300 PJ in 2021 and 560 PJ in 2030 and 2050.
The operation of transmission and distribution grids themselves also consumes
energy. Transformers have efficiencies in the range of 95-99.7% depending ontype and size, with higher-grade GOES improving efficiency and saving money,
though these transformers cost more to manufacture. Overall, grid losses
worldwide amounted to 7% of electricity generation, emitting 1 000 Mt of CO2 (or2.6% of global energy sector emissions) in 2021. Those emissions fall rapidly in
the NZE Scenario as electricity generation is decarbonised. Improving grid
efficiency also reduces emissions as well as the need to build new power plants
and procure the associated materials. Average global grid losses drop from 7% in
2021 to 5.6% in 2050, resulting in cumulative material savings of 920 kt of copper(4% of global production in 2021), 155 kt of nickel (6%) and 470 kt of silicon (6%)
over 2022-2050.

Hydrogen transport and storage
Technology options
Today, hydrogen is produced mostly close to where it is used and supplied tocaptive consumers. As demand increases, there will be a stronger economic casefor producing low-emission hydrogen in areas with good renewable energy
resources, significantly increasing transport needs to connect production sites todemand centres. Where feasible, hydrogen will generally be transported byonshore or offshore pipelines, as it is the most efficient and affordable option for
relatively short distances. Where dedicated pipelines are not feasible due torelatively low volumetric flows and short distances, hydrogen can be transported
as compressed gas in multi-element gas container trailers or as liquefied hydrogenin cryogenic thermo-insulated vessel trailers. Depending on transport capacity, fordistances of more than 2 000-2 500 km, seaborne transportation may be the least
expensive option, as is generally the case for natural gas (IEA, 2022b).

Hydrogen pipelines

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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 canefficiently transport large volumes of hydrogen over hundreds of kilometres(Figure 5.12). Experience gained over the last century in building and operating
natural gas pipelines will be of great benefit to develop hydrogen lines. More than

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

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 inpre-construction development (Langenbrunner, Joly and Aitken, 2022). There isalso enormous potential to repurpose existing gas pipelines, which could avoid
decommissioning them before the end of their technical lifetime and reduce newmaterial 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
Trunkline
Sub-gathering
Gathering

Demand-side distribution lines operate at medium
pressure and connect large consumers or subdistribution lines to the trunkline. Sub-distributionlines – generally plastic pipes – transporthydrogen at low pressures to end users.

Gathering
LH2

Supply-side gathering and subgathering pipelines collect hydrogenfrom production, import and storage
facilities. The hydrogen is thencompressed and injected into atrunkline for transmission.

Distribution
H2

Distribution
Sub-distribution
Distribution

LH2

Large steel trunklines are used to transporthydrogen at high pressures from production or
import areas to demand centres.
IEA. CC BY 4.0.
Note: This chapter assesses only trunklines and large distribution hydrogen pipelines (usually exceeding 20 inches or
500 millimetres in diameter), as the characteristics of gathering and distribution lines are largely project-dependent.

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As with natural gas, pipeline networks with large transmission trunklines can efficiently
transport large volumes of hydrogen over hundreds of kilometres.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Hydrogen shipping
Hydrogen is more difficult to store and transport than natural gas because it is lessdense and has a low boiling point. One cubic metre of hydrogen contains only
one-third the energy of a cubic metre of natural gas at the same pressure andtemperature. In addition, hydrogen’s boiling point (-253°C) is lower than that ofnatural gas (-162°C). For long-distance transportation, hydrogen must be
converted to a denser form, either through liquefaction or conversion into achemical carrier that can be transported more easily (Figure 5.13). 41 Potential
carriers include ammonia, liquid organic hydrogen carriers (LOHCs) – organic
compounds that can absorb and release hydrogen through chemical reactions 42 –and synthetic hydrocarbon fuels (see Chapter 4). It could also be shipped in solid
form, such as hot briquetted iron 43 for steel manufacturers.
Technological pathways for long-distance transport for the supply ofhydrogen and ammonia by tanker
Transport and storage

Reconversion

Liquidhydrogenstorage tank

LiquidhydrogentankerLiquidhydrogenstorage tank

Regasification

Ammoniastorage tank

AmmoniatankerAmmoniastorage tank

Ammonia
cracking

Conversion
Liquefaction

Low-emissionhydrogenproduction

Air
separation
unit

HaberBoschprocess

LOHChydrogenation

Separation andpurification
LOHC
storage tank

ChemicaltankerLOHC
storage tank

Hydrogentransmission
and distribution

Ammonia
distribution

LOHC
dehydrogenation
Separation andpurification

IEA. CC BY 4.0.
Note: LOHC = liquid organic hydrogen carrier.

Delivering hydrogen over long distances requires its conversion to a denser form throughliquefaction, or to a chemical carrier such as ammonia or LOHC.

How hydrogen is used at its destination will determine the most appropriate way
to transport and store it. If hydrogen is transported as a chemical carrier andconverted back to hydrogen, energy losses can be considerable using current
technologies, though efficiency is expected to increase through future innovation(see Energy Needs and Emissions below). When hydrogen is converted into a

Companies such as Australia’s Provaris and Norway’s Gen2 Energy and Sirius Design & Integration are also considering
shipping compressed hydrogen (IEA, 2022b). It could be an alternative to liquefied hydrogen, particularly for shorter
distances.
42
Two companies – Chiyoda (Japan) and Hydrogenious LOHC (Germany) – are developing LOHC technology. It has alreadybeen proven in a few demonstration projects, including the AHEAD project to transport hydrogen as methylcyclohexane from
Brunei Darussalam to Japan (Chiyoda) and the HySTOC project to transport hydrogen as dibenzyltoluene in Finland.
43
Hot briquetted iron refers to direct reduced iron that has been compacted at a temperature above 650°C into pillow-shaped
high-density briquettes to facilitate handling.

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41

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

synthetic hydrocarbon fuel such as methane, methanol or diesel, CO2 is a required
input (see Chapter 4). Since the resulting fuel or feedstock is compatible withexisting oil and natural gas pipeline, shipping and storage infrastructure and canbe used in established end-use applications, synthetic hydrocarbon fuels are notdiscussed in this section.

Hydrogen storage
As hydrogen supply expands, transmission networks will need to becomplemented by underground geological storage facilities to balance supply
fluctuations resulting from electrolysers using variable renewable electricity andfrom seasonal changes in demand, as well as to bolster energy security in theevent of supply disruptions. Global natural gas underground storage capacity isequivalent to approximately 11% of annual gas demand, but in some regions, suchas in Europe, it reaches 25%, as it is used to cover seasonal rises in heating
demand. Hydrogen demand is expected to be less seasonal than that of gas, but
pronounced fluctuations in variable renewable energy generation will requiremeasures to create a more stable hydrogen supply for downstream uses, withflexible hydrogen storage being an important option. This will not only allow supply
to match demand but will minimise the oversizing of trade infrastructure andtechnologies for the production of hydrogen-derived fuels, allowing them tooperate at higher full load hours throughout the year to keep costs down.
Developing a new underground gas storage facility can take more than a decadeand requires considerable investment. Geological conditions determine
development potential, which can be limited in some areas. Alternatively,hydrogen could be stored on a small or large scale as a liquid carrier such as
ammonia, methanol or an LOHC, with the latter even using existing petrochemicalstorage tanks at ports and hubs.

Global hydrogen production reached 94 Mt in 2021, containing energy equal toabout 2.6% of final energy consumption, most of which was used in refining andin the industry sector (IEA, 2022b). Governments around the world have so far
pledged to produce around 125 Mt of hydrogen in 2030 in total – about 50 Mt shortof that needed to be on track with the NZE Scenario. Low-emission hydrogenmade up less than 1% of the total supply of hydrogen in 2021, a share that rises
to more than 50% in 2030 and close to 100% in 2050 in the NZE Scenario.
Hydrogen demand by 2050 is equivalent to almost 40% of today’s demand fornatural gas on an energy basis, and final consumption of hydrogen and hydrogenderived fuels is equivalent to about 9% of global final energy consumption in 2050
(Figure 5.14). Three-quarters of the hydrogen consumed in 2050 comes frommerchant producers, compared with just 7% in 2021. Hydrogen and hydrogenderived fuels are used by 2050 widely in the industry sector; as a transport fuel inshipping, aviation and heavy road freight; and as electricity storage.

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Hydrogen infrastructure needs in the NZE Scenario

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Global natural gas and hydrogen supplies in the NZE Scenario

IEA. CC BY 4.0.
Note: EJ = exajoule.

Hydrogen supply in the NZE Scenario surpasses that of gas in 2045 and by 2050 is
equivalent to 40% of the current natural gas supply, 75% of it from merchant producers.

The NZE Scenario calls for substantial investments in hydrogen pipelines, tankers
for shipping liquefied hydrogen (LH2), hydrogen carriers, related port terminals andlarge-scale underground storage facilities (Figure 5.15).
Average annual global investment in hydrogen and natural gas
infrastructure in the NZE Scenario

IEA. CC BY 4.0.
Notes: LH2 = liquefied hydrogen; HRS = hydrogen refuelling station. Investments in LH2 shipping are for liquefaction
facilities, storage tanks at export and import terminals, and LH2 tankers. Investments in ammonia shipping are for storage
tanks at export and import terminals, and ammonia tankers. Ammonia conversion includes the costs associated withconverting hydrogen to ammonia using the Haber-Bosch process and reconversion to hydrogen using ammonia cracking,
only when hydrogen in the form of H2 is delivered. Investments in natural gas infrastructure include transmission anddistribution pipelines, liquefaction and regasification terminals and liquefied natural gas tankers.

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In the NZE Scenario, hydrogen infrastructure requires annual investments of USD 52 billion
in 2026-2030 and USD 82 billion in 2041-2050, mostly for pipelines and storage.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Global annual investments reach on average more than USD 50 billion (in 2021
US dollars) in 2026-2030 (equal to almost 40% of current annual spending on
natural gas transport infrastructure and more than 60% of what will be spent in2026-2030) and more than USD 80 billion by 2041-2050 – more than triple what
will be needed by then for natural gas transport infrastructure.

Hydrogen pipelines
About 2 600 km of hydrogen pipelines ae currently operating in the United States,
2 000 km in Europe (IEA, 2022b), 400 km in China (Wu et al., 2022) and 200 km
in Korea (Stangarone, 2021). They are generally owned by merchant hydrogenproducers and are located close to large hydrogen users such as petroleum
refineries and chemical plants. The need for hydrogen transmission infrastructure
increases considerably in the NZE Scenario, reaching around 15 000 km in 2030
and 200 000 km by 2050 44 (Figure 5.16), including new and repurposed pipelines.
Global hydrogen transmission pipeline length in the NZE Scenario

IEA. CC BY 4.0.
Notes: km = kilometre. Pipelines are assumed to have a weighted average capacity of 6.9 GW, corresponding to a mix of
48-inch (~1 200 mm, 12.7 GW), 36-inch (~900 mm, 3.6 GW) and 20-inch (~500 mm, 0.9 GW) pipelines operating at 75% of
their design capacity for 5 000 full-load hours.

Hydrogen transmission infrastructure expands rapidly in the NZE Scenario to reach
200 000 km in 2050, evolving from a few small networks to interregional trunklines.

The length of the network in 2050 is considerably less than the more than
1.2 million km of natural gas pipelines in operation today, as hydrogen demand in
2050 is much smaller (approximately 40% of today’s demand for natural gas, inenergy terms). In addition, part of the hydrogen will be used to produce hydrogen-

It is assumed that 42% of the length of new pipelines are of 48-inch diameter, 38% are 36-inch and 20% are 20-inch.

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44

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

derived fuels that will not require hydrogen pipelines. Hydrogen transmission
evolves from small pipelines to large regional and interregional trunklines, moving
large flows of hydrogen over long distances from areas with good resources for
low-emission hydrogen production and storage to demand centres.
Global annual additions of new hydrogen pipelines rise to around 3 500 km in
2030 and 11 500 km in 2050. Natural gas pipelines repurposed for hydrogen makeup one-quarter of all hydrogen pipelines in 2050, though the share is much higher
in some regions, including Europe, where it reaches half. Roughly 13 500 km ofhydrogen pipelines, around half of them repurposed natural gas pipelines that
could be available by 2030, are currently under consideration (IEA, 2022b).
Although hydrogen can be transported through steel pipelines in much the same
way as natural gas, there are some additional technical difficulties. Unlike naturalgas, hydrogen may have a detrimental effect on the integrity of the pipeline due toembrittlement, 45 which can influence the fatigue behaviour of the pipeline material,
accelerating crack growth and reducing its lifetime. Hydrogen pipeline design willneed to follow certain codes under expert judgement. The American standard,
ASME B31.12, is currently the only one to provide specific requirements forhydrogen. 46 It imposes stricter rules than for natural gas pipelines to lower the riskof embrittlement, including some limitations on the use of high-strength steels
unless subject to testing (Monsma, 2022). 47 The embrittlement risk affects how
the pipeline will be operated, with less flexibility permitted in order to minimisepressure swings, such as from cyclic loading and linepack. 48 Hydrogentransmission pipelines built in upcoming decades will have markedly different
characteristics from today’s pipelines to overcome these problems (Table 5.2).
Compression requirements are different for hydrogen pipelines than for natural
gas pipelines. On average, a transmission pipeline can transport 10-20% lessenergy as hydrogen than as natural gas for a similar pressure drop, assuming thatthe velocity of hydrogen is approximately three times higher (González Díez et al.,2022). More turbines or motors and more powerful compressors are required tohandle the larger volumes (see Compressors for Hydrogen Transmission andStorage below).

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45
Hydrogen embrittlement is a metal’s loss of ductility, i.e. the material’s ability to be deformed without breaking, and areduction of its loadbearing capability. The absorption of hydrogen atoms or molecules by the metal results in material
separation (cracking) and, ultimately, embrittlement.
46
Many existing codes are under revision to add hydrogen-related requirements.
47
Low-strength steels exposed to hydrogen generally retain high levels of ductility, while higher-strength steels may have
reduced ductility, increasing the risk of embrittlement. Higher-strength steel allows the wall to be thinner for the same
operating pressure, reducing logistical and construction work, such as welding.
48
Linepack refers to storing gas in a pipeline by compressing it, increasing the pressure of the pipeline. The amount of gas
injected into a pipeline may differ from the amount of gas withdrawn at a specific time, providing short-term operational
flexibility to match supply with demand.

Energy Technology Perspectives 2023

Table 5.2

Chapter 5. Enabling infrastructure

Characteristics of existing hydrogen pipelines and desired features of new
ones
Characteristics of existing H2pipelines

Features of new H2 pipelines

Increase H2 carrying
capacity

Largest pipelines have 18-inch
diameter

Bigger pipelines, e.g. with ~36-48-inch
diameters

Decrease pipeline
investment costs minimise wall thickness

Low steel grades are used,generally below X52*

Higher steel grades are used to reduce theamount of steel needed

Make operations more
flexible

Loads are static

Pipelines can withstand pressure swings
resulting from cyclic loading and linepack

Objective*X52 is a grade of steel widely used for oil and gas pipelines. The two-digit number following the “X” indicates the minimum
yield strength of the pipeline (in thousand psi [pounds per square inch]).
Note: The desired characteristics of new hydrogen pipelines are assumed to meet the objectives without affecting the
integrity of the pipeline and without increasing the risk of embrittlement.

Hydrogen shipping
Exporting hydrogen by ship will be essential for some countries to take advantage
of low-cost opportunities to produce low-emission hydrogen, while other countries
will have to rely on imports to cover their hydrogen needs. Shipping hydrogen in
the form of LH2 is, however, a complex task, given its low volumetric density andlow liquefaction temperature. While shipping hydrogen in the form of ammonia or
LOHC over long distances can be done with existing tanker technologies, if
reconversion to hydrogen at the import location is needed, the overall efficiency
would be 60-70% 49, as energy consumption during the last stage is relatively
significant.
In the NZE Scenario, around 20 Mt of low-emission merchant hydrogen is tradedin 2030, 50 the majority assumed to be in the form of LH2 or ammonia, with around73 Mt traded in 2050, equal to almost 21% of global merchant hydrogen demand(Figure 5.17). In 2050, 75% of interregional 51 trade of hydrogen and hydrogenderived fuels is in the form of LH2 or ammonia (NH3). Hydrogen is also traded assynthetic liquid fuel, primarily for aviation, corresponding to one-third of synthetic
kerosene demand in 2050.

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49
Overall efficiency of hydrogen transport refers to total energy consumed to convert hydrogen to a higher-density carrier,
store it, ship it and reconvert it to deliver gaseous hydrogen.
50
The NZE Scenario covers interregional trade of gaseous hydrogen by pipeline and as LH2 by ship, as well as shipmentsof ammonia and synthetic liquid fuels. Other hydrogen carriers, such as LOHC, have not yet been explicitly modelled (IEA,
2022c).
51
Interregional trade refers to the transport of hydrogen and hydrogen-derived fuels among regions covered by the Global
Energy and Climate Model, but not among countries within the same region.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Global production of low-emission merchant hydrogen and interregional
trade in the NZE Scenario

IEA. CC BY 4.0.
Notes: Mt H2 = million tonnes of hydrogen; LH2 = liquefied hydrogen; NH3 = ammonia. Interregional trade is based onregions modelled in the NZE Scenario. Trade in LOHC is not explicitly modelled in the NZE Scenario.

Some 16% of global merchant hydrogen supply is shipped as LH2 or ammonia in 2050, withmore than 65% of exports coming from emerging economies in the NZE Scenario.

The projected pace of global expansion in LH2 and ammonia shipping in the NZE
Scenario is even greater than liquefied natural gas (LNG) growth during the first
25 years of its development, which started in the mid-1970s. By 2030, LH2 andammonia shipping is already equivalent to more than 10% of current LNG trade inenergy terms; this share rises to one-third by 2050 (Figure 5.18). Expansion inhydrogen shipping will require the construction of many tankers as well as export
terminal facilities. Kick-starting hydrogen trade in the next few years will hinge on
the commercialisation of emerging technologies for hydrogen transport andconversion, notably tankers for LH2, and the development of codes andregulations for the bulk transport of liquefied hydrogen and its use as a fuel.

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Hydrogen shipped as LH2 or ammonia is less energy-dense in volumetric terms
than LNG, so infrastructure requirements are greater in terms of space at port
facilities and number of ships. LH2 tankers that are to be commercialised by theend of the current decade are likely to be similar in volume to LNG tankers, andammonia tankers will be half as big, with both carrying one-third of the energy
content per shipment (Figure 5.19).

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructureInterregional trade and infrastructure for shipping low-emission hydrogenin the NZE Scenario compared with historical LNG trade

IEA. CC BY 4.0.
Notes: EJ = exajoule; LNG = liquefied natural gas; LH2 = liquefied hydrogen. For the LNG tanker count, small and mediumsized tankers, icebreakers and bunkering vessels are not included. Hydrogen traded as an LOHC is not explicitly modelledin the NZE Scenario.

While hydrogen shipped as LH2 or NH3 in 2050 in the NZE Scenario is equal to one-third oftoday’s LNG trade in energy terms, their lower density requires almost as many tankers.

Tanker capacity in energy and volume terms by energy carrier type in the
NZE Scenario, 2030

IEA. CC BY 4.0.
Notes: PJ/tanker = tanker capacity in petajoule; 1 000m /tanker = tanker capacity in thousand cubic metres; LH2 = liquefiedhydrogen; LNG = liquefied natural gas; LOHC = liquid organic hydrogen carrier; m3 = cubic metre. LNG tanker size
corresponds to the average size of tankers built since 2000; LH2 tanker size to the size expected by ship manufacturers.
While current ammonia tankers are often smaller, it is assumed that ammonia will be transported by very large gas tankers
to accommodate the expected increase in ammonia trade. LOHC tankers are supposed to carry methylcyclohexane, andoil product tankers to carry diesel. It is assumed that oil product tankers could carry LOHC tankers.
3

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In 2030, LH2 tankers are expected to be similar in volume to LNG tankers and ammonia
tankers to be half as big, with both carrying one-third of the energy content per shipment.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

LH2 transport
Shipping hydrogen in the form of LH2 may be especially attractive in places whereend users require high-purity hydrogen. While hydrogen liquefaction and storage
technologies have been used for decades, mostly in the space and petrochemicalindustries, they have never been deployed on the scale projected in the NZE
Scenario. The world’s first and only shipment of liquefied hydrogen from Australia
to Japan took place in February 2022, as part of the Hydrogen Energy Supply
Chain (HESC) demonstration project (HESC, 2022). At the commercial phase, the
HESC project aims to produce 225 kilotonnes per year (ktpa) of LH2. A number ofother such projects have also been announced, for example in Australia at theports of Gladstone and Townsville in Queensland, and at Kwinana in metropolitan
Perth. The port of Sines (Portugal) is also studying the feasibility of LH2 trade.
Announced projects could boost global output to 0.6 Mt by 2030 if they allmaterialise (IEA, 2022b).
Hydrogen liquefaction is a reasonably well-established technology with a total
global capacity of around 500 tonnes per day (tpd) at the end of 2021 (IEA,
2022b). However, improvements are required for it to be deployed on a larger
scale, as well as to lower costs and improve efficiency. The most recent plants
consume approximately 10 kilowatt-hours of electricity per kg of H2 (kWh/kg H2) –equivalent to around 30% of the energy content of the hydrogen produced (basedon lower heating value). The size of the plants in operation or under construction
is still below 100 tpd. However, large LH2 plants are planned at the future export
port terminals mentioned above, with capacities in the 100-800 tpd range.
Improvements are expected to raise efficiency in larger plants to 6-8 kWh/kg H2
by 2030 in the NZE Scenario. 52
Due to hydrogen’s low boiling point compared with natural gas (-253°C comparedwith -162°C for natural gas), special thermal insulation is needed to minimise highboil-off rates during storage. 53 Large-scale LH2 storage technology in use today
has changed little since the 1960s, with tanks often featuring double-shell vacuum
insulation. Innovation is needed to enlarge tanks from their current volume of lessthan 5 000 cubic metre (m3) to sizes similar to those used for LNG, which typicallyrange from 40 000 to 200 000 m3.

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52
The Strategic Research and Innovation Agenda (SRIA) 2021-2027 of the European Union Clean Hydrogen Joint
Undertaking has an energy intensity target of 6-8 kWh/kg H2 by 2030 (Clean Hydrogen Joint Undertaking, 2022), while the
US Department of Energy (DOE) Technical Targets for Hydrogen Delivery have an ultimate goal of 6 kWh/kg H2.
53
Despite tank insulation, small amounts of heat will cause gas evaporation, known as boil-off, which must be removed to
avoid an increase in pressure.

Energy Technology Perspectives 2023

Table 5.3

Chapter 5. Enabling infrastructure

Announced designs for liquefied hydrogen tankers expected to becommercial before 2030
H2 cargo
containment

Country

Approval inprinciple*

Volume (m3)

Korea Shipbuilding & Offshore
Engineering (KSOE), Hyundai
Mipo Dockyard

Spherical

Korea

Korean Registerof Shipping (KRS)

20 000Samsung Heavy Industries

Type C

Korea

American Bureauof Shipping (ABS)20 000

C-Job Naval Architects, LH2
EuropeSpherical

Netherlands-

37 500Kawasaki Heavy Industries (KHI)

Spherical

Japan

Nippon Kaiji
Kyokai (ClassNK)

160 000

Samsung Heavy Industries

Membrane

Korea

Lloyd’s Register

160 000

GTT

MembraneFranceDNV-

Company* An approval in principle is an independent assessment of conceptual and innovative shipbuilding within an agreed
framework, confirming that the ship design is feasible and that no significant obstacles exist to prevent the concept frombeing realised.
Note: m3 = cubic metre.
Source: IEA analysis based on company announcements.

Shipping LH2 is similar to LNG but, like for storage, boil-off rates during the voyage
should be minimised, for instance by using double-shell vacuum insulation tanks
or membrane-based insulation systems. 54 In addition, LH2 ships aim to usehydrogen boil-off as fuel for the loaded leg of the journey, employing it as a lowemission shipping fuel while avoiding the need to vent it. The world’s first LH2 shipbuilt for the HESC demonstration project – the Suiso Frontier, made by Kawasaki
Heavy Industries – has a capacity of 1 250 m3 (75 tonnes of LH2 per trip) and uses
double-shell vacuum insulation tanks (HESC, 2022). Several other companies areworking on design concepts with the aim of commercialising them by 2030, which
is subsequently assumed in the NZE Scenario (Table 5.3).
LH2 trade in the NZE Scenario is projected to take off much more rapidly than LNG
trade did after the first ocean shipment in 1959. Since then, the size of the LNG
tanker fleet has increased more than 50 times, from 5 000 m3 to more than
260 000 m3 for Q-max LNG tankers. LH2 tanker designs will benefit from thisexperience. According to proposed KHI and Samsung Heavy Industry designs fortankers that could be in operation by 2030, their capacities will be 130 times
greater on average than the first 1 250 m3 demonstration shipment of the Suiso
Frontier tanker in 2022 (the storage tank is expected to be 32 times larger but
there would be four storage tanks instead of one) (Figure 5.20).

Most large new LNG tankers are membrane-type ships with prismatic cargo tanks and double insulation systems, but manyin the current operating fleet are Moss-type (named after the company that first designed it), characterised by spherical selfsupporting cargo tanks (four or five depending on the size) that usually extend halfway above the deck.

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Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

600

300 000500

250 000400

200 000300

150 000

200

x130

x5

100

100 000
50 000

x5

1950

1960

1970

LNG trade (left axis)
MethanePioneer

Tanker size (m³)

LNG trade (bcm)

Global LNG trade and largest LNG and LH2 tanker sizes

MethanePrincess

1980

1990

2000

LNG tanker size (right axis)

E.T. Corp. fleet for
Asian market

Standard size
increases

2010

2020

2030

LH₂ tanker size (right axis)
Q-Flex and
Q-Max

Suiso
HESC
Frontier scale-up

IEA. CC BY 4.0.
Notes: LNG = liquefied natural gas; LH2 = liquefied hydrogen; m = cubic metre; bcm = billion cubic metres.
Sources: IEA analysis based on Cedigaz (2018); ICIS (2022) and HESC (2022).
3

It took almost 50 years for LNG tankers to reach the size the hydrogen industry aims toachieve for LH2 tankers by 2030, leveraging knowledge gained from LNG shipping.

Ammonia transport
About 70% of ammonia is currently used for fertiliser, including the downstream useof its derivatives, while the remainder is employed for various industrial applications
such as plastics, explosives and synthetic fibres (IEA, 2021). In the NZE Scenario,
ammonia is also used as a fuel in power plants and for shipping, and as a hydrogen
carrier that can be cracked to deliver hydrogen.
Ammonia is currently produced using nitrogen sourced from the air and hydrogen, 70%of which is produced through steam methane reforming (SMR) of natural gas and theremaining 30% mainly from coal (mostly in China). Global ammonia trade amounts toaround 20 Mt – equal to just over 10% of global ammonia supply of around 182 Mt in2019 (IEA, 2021). Ammonia trade is small relative to output, as other ammonia
derivatives, particularly urea, offer a more convenient way to transport nitrogen for
fertiliser. Some countries also favour domestic production for reasons of industrial
activity and fertiliser self-sufficiency. The main exporters have access to abundantnatural gas reserves so can produce ammonia for export at relatively low cost. Largescale infrastructure for ammonia storage and transport using mature technologies
already exists with well-established international shipping routes (Figure 5.21).

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According to planned export-oriented projects, an estimated 6 Mt of low-emissionhydrogen traded as ammonia (equivalent to 34 Mt of ammonia) could come on line by2030 – 10 Mt short of the NZE Scenario projection (equal to five times current global
trade of fossil-based ammonia). A substantial expansion of existing port and shipping
infrastructure would be needed to accommodate this increase. Trade continues to riseto 30 Mt of low-emission hydrogen (168 Mt of ammonia) by 2050, equal to almost ten
times current trade.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructureInternational ammonia trade flows via shipping, 2019

IEA. CC BY 4.0.
Notes: Only flows greater than 0.1 Mt are shown. Total ammonia shipping amounted to 20 Mt in 2019.
Source: IEA analysis based on CEPII (2022).

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Differences in ammonia production costs drive trade, as countries with abundant natural gas reserves can produce ammonia for export at
relatively low cost.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructureOver 120 ports worldwide can handle ammonia on a large scale. Expanding thecapacity of terminals substantially, as required after 2030 in the NZE Scenario,
would hinge on enlarging existing facilities and creating new ones, including toserve emerging trade routes for low-emission ammonia. Making space available
in often congested ports may be tricky, as ammonia handling has to meet strict
technical standards, including distance considerations for safety reasons. In
addition, while some export projects may be able to make use of existing port
infrastructure, ammonia derived from electrolytic hydrogen would come largely
from areas with good renewable resources, where infrastructure for ammonia
exports or even well-developed port infrastructure with deep water berths may notexist yet. Ammonia storage capacity at ports is often in the range of 15-60 kt,
though some large import and export ports have capacities of more than 100 kt.
Storage capacity at import and export terminals worldwide totals almost 5 Mt.
Assuming that import and export storage tanks are loaded and unloaded 15 times
per year, the projected expansion of global ammonia trade in the NZE Scenario
would require 12 Mt of storage in 2030 and 22 Mt in 2050.
Ammonia is shipped in fully refrigerated non-pressurised tankers often designed
to carry liquefied petroleum gas (LPG) (as long as no parts containing copper orzinc or their alloys are in contact with the cargo). There are about 200 gas tankers
in operation across the world capable of transporting ammonia, 40 of which are in
exclusive use (DNV, 2022a). They range in size from 30 000 to 80 000 m3 (2055 kt
of ammonia), with the latest orders having capacities of up to 87 000 m3 (MOL,2021). The increase in trade envisioned in the NZE Scenario implies the need forvery large gas tankers, often exceeding 80 000 m3, to ship ammonia. By 2030,
more than 175 very large gas tankers would need to be dedicated year-round to
low-emission ammonia shipping, increasing to almost 300 in 2050. Tanker
manufacturing capacity may struggle to keep pace with these needs, given
competing demand from other sectors (see Material Needs and Supply Chains
below).

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The amount of ammonia that can be directly consumed for emerging energy uses
such as power generation or as a fuel for shipping depends on innovation. Lowemission hydrogen can also be temporarily converted into ammonia for longdistance trade, for which shipping and storage technologies are already mature(unlike for LH2), and then reconverted back into hydrogen using ammonia
crackers. Ammonia cracking is currently carried out at high temperatures and istherefore highly energy-intensive, consuming roughly 30% of the fuel’s energy
content. Ammonia cracking at lower temperatures (less than 450°C) is lessenergy-intensive but involves the use of catalysts made with expensive precious
metals. The use of low-temperature ammonia cracking with no or limited use ofsuch precious metals, which is not yet commercial, accelerates in the NZE
Scenario after 2030. Recent progress made by companies such as Thyssenkrupp
Uhde and Topsoe suggests this is achievable (IEA, 2022b).

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Hydrogen transport costs
Lowering costs through technological advances is critical to raise prospects forhydrogen transport, particularly for cross-border trade. It is likely that, where
feasible, onshore or offshore pipelines will be preferred: it is the most efficient andleast costly way to transport hydrogen up to a distance of 2 000-2 500 km forcapacities below 600 ktpa in 2030 in the NZE Scenario (Figure 5.22).
Large-diameter pipelines may be cheaper even over longer distances where
feasible; however, hydrogen production and demand may be too small initially tojustify investment in a large pipeline (with significant oversizing until production
grows), or the construction of a pipeline across different jurisdictions may be
impracticable. It is generally more affordable to site electrolytic hydrogenproduction facilities next to a power generation source and transport the hydrogento demand centres, rather than transmit electricity over long distances.
Indicative levelised cost of delivering hydrogen, by transport option anddistance in the NZE Scenario, 2030

IEA. CC BY 4.0.
Notes: HVDC = high-voltage direct current; H2 = hydrogen; ktpa = kilotonnes per year; LH2 = liquefied hydrogen; LOHC =liquid organic hydrogen carrier (methylcyclohexane considered); USD/kg H2 = USD per kilogramme of hydrogen. Hydrogenpipelines refer to onshore transmission pipelines operating at 25-75% of their design capacity for 5 000 full-load hours.
Electricity transmission by offshore HVDC indicates electricity transmission required to obtain 1 kg H2 in an electrolyser with
69% efficiency. Transport costs by ship include investment and operational costs to convert hydrogen to a higher-density
carrier, store it, ship it and reconvert it to deliver gaseous hydrogen. Shipping capacity range corresponds to the annual
capacity of a port terminal with 10 to 30 shipments per year.

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Where feasible, pipelines are the cheapest hydrogen transport option up to a certain
distance, while for longer distances shipping becomes more cost-effective.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

In 2030, LH2 tanker technology is expected to reach the early commercialisation
phase, with transport costs of delivering hydrogen averaging USD 2.0-3.7/kg H2
for an 8 000-km trip in the NZE Scenario. 55 The cost of hydrogen shipping as LH2
is driven by the cost for the LH2 storage facilities at both the export and importports (Figure 5.23). The costs of shipping ammonia and LOHC are expected to belower, at USD 1.9-2.2/kg H2 and USD 2.0-2.5/kg H2 respectively. However, theenergy needed to convert hydrogen into ammonia or LOHC and reconvert it backis the main cost component for these two shipping options.
Reducing energy consumption could considerably reduce hydrogen delivery
costs, particularly since ammonia and LOHC reconversion requires energy at theimport terminal, where energy would generally cost more than at the port of export.
In contrast, hydrogen liquefaction benefits from lower energy costs at the export
terminal.
Indicative levelised cost of delivering hydrogen, by shipping-option stepand distance in the NZE Scenario, 2030

IEA. CC BY 4.0.
Notes: LOHC = liquid organic hydrogen carrier (methylcyclohexane considered); USD/kg H2 = USD per kilogramme ofhydrogen. The cost per stage includes all capital and operational expenditures except those related to energy, which areillustrated separately with a pattern fill. The discount rate is 5%. It is assumed that import and export terminals handle 20
shipments per year on average.

Storage tanks are the largest cost element in shipping hydrogen as LH2, while the cost ofenergy for reconversion is the main expense for ammonia or an LOHC as hydrogen carrier.

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55
The levelised transport cost of delivering hydrogen includes investment and operational costs to convert hydrogen to ahigher-density carrier, store it, ship it and reconvert it to deliver gaseous hydrogen.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Overall, the cost of shipping hydrogen as LH2, ammonia or LOHC is
USD 16-31/GJ by 2030 in the NZE Scenario. This is considerably more than the
average cost range of liquefaction, shipping and regasification of natural gas,
which is currently around USD 3-7/GJ. However, if hydrogen can be produced at
low cost, despite high shipping costs, its cost could be lower than recent recordhigh international gas prices. 56

Bulk hydrogen storage
Four types of underground geologic storage in operation today for natural gas
could also be used to store hydrogen: salt caverns, depleted reservoirs (oil andgas fields), 57 saline aquifers and lined hard-rock caverns (IEA, 2022e). Each typehas its own physical characteristics, affecting the type of service provided(Table 5.4).
Table 5.4

Characteristics of types of underground geological storage for hydrogen
Salt cavern

Depleted gas field

Saline aquifer

Lined hard-rockcavernMedium

Low

Low

High

Low

MediumMediumMediumCushion gas*25-35%

45-60%

50-70%

10-20%

Capacity

Medium

Large

Large

Small

Annual cycles

Multiple

Few

Few

Multiple

Geographic
availability

LimitedVariable

Variable

Abundant

Specific
investment
Levelised cost of
storage* The volume of gas required as permanent inventory in a storage facility to maintain sufficient pressure to meet withdrawal
demands at a high rate, even at low storage levels.

Depleted reservoirs and saline aquifers are relatively abundant and account foraround 90% of existing global gas storage capacity (IGU, 2022). However, due totheir porous nature, they have limited flexibility and can operate with only a few
cycles per year. They play a very important role in meeting seasonal fluctuations
in gas demand and enhancing security of supply today. Salt caverns are more
flexible, with several cycles per year, but their geographical availability is limited
and they typically have less working storage capacity. Lined hard-rock caverns
can undergo several injection and withdrawal cycles per year, making them well
suited to peaking purposes, but they are costly to build. Fast-cycling salt caverns

In Q3 2022, the European TTF (Title Transfer Facility [the Netherlands]) natural gas price averaged USD 55/MBtu(USD 52/GJ), and the Asian spot price for LNG averaged USD 45/MBtu (USD 43/GJ) (IEA, 2022d).
57
The term “depleted gas field” refers to hydrogen storage in depleted reservoirs, as it dominates project announcements.

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Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

and lined hard-rock caverns are more suitable to meet short-term supply
fluctuations, which would be particularly useful for electrolytic hydrogen, while
depleted gas fields and saline aquifers could be used to store large amounts ofhydrogen between seasons and provide supply security.
The rapid growth in hydrogen supply envisioned in the NZE Scenario calls for acorresponding increase in bulk storage in underground facilities, in addition to
storage tanks at port terminals, hydrogen plants, industrial sites of end users andrefuelling stations. Global bulk storage capacity would need to rise from 0.5 TWhat present to 90 TWh, or 30 billion cubic metres (bcm), in 2030 and 1 300 TWh(450 bcm 58) in 2050, assuming capacity equal to 10% of annual production,
including imports (Figure 5.24).
Global underground geological storage capacity for hydrogen in the NZE
Scenario and historical growth in natural gas storage by region

IEA. CC BY 4.0.
Notes: bcm = billion cubic metres (under normal conditions); TWh = terawatt-hour. The NZE Scenario assumes thatstorage capacity equals 3% of total annual hydrogen demand in 2030 and 10% in 2050. “Announced projects” are projects
that are not yet operational, including those under construction, with a final investment decision, under feasibility
assessment or projects that have been publicly announced, e.g. through a press release or a memorandum of
understanding.
Sources: IEA analysis based on data from Rystad Energy (2022) and GIE (2021).

Rapid hydrogen supply growth in the NZE Scenario will require an increase in bulk
underground storage, equal to more than twice that of natural gas over the last 30 years.

Because of hydrogen’s much lower volumetric density, storage volume in 2050 isclose to that of natural gas today, requiring an increase in volume of more than
twice that of natural gas during the last 30 years.

Under normal conditions

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Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Several salt cavern hydrogen storage projects are in development, either adjacent
to or involving repurposing of existing natural gas storage caverns. Both options
benefit from expedited permitting processes, access to existing infrastructure andeasier siting approvals than for greenfield developments. There are also several
projects being planned involving repurposing depleted gas fields and aquifers
currently used for storing natural gas. More research is needed to evaluate theeffects of residual natural gas in depleted fields, in-situ bacteria reactions in saline
aquifers and depleted gas fields that may contaminate the hydrogen or cause
losses, and the risk of leakage due to the smaller size of the hydrogen moleculecompared with methane (natural gas). At present, the combined capacity ofplanned salt cavern storage projects for hydrogen to be available by 2030 amounts
to around 3.2 TWh, equal to a mere 0.1% of total merchant hydrogen demand in
the NZE Scenario. Underground storage will play an important role in providing
flexibility to the energy system, particularly where variable renewable energy
sources dominate the power generation mix, enhancing security of supply.
However, current research, development and demonstration activity remains
worryingly weak, especially since the lead time from planning to commissioning
such facilities can be more than a decade.
While hydrogen may compete with natural gas for access to suitable geologicalformations for bulk storage, it is unlikely to compete with CO2, for which salt
caverns and lined hard-rock caverns are unsuitable. Compared with hydrogenstorage, significantly more CO2 storage is required in the NZE Scenario. Today,
there are more than 700 underground natural gas storage facilities in operation
with a storage capacity of around 450 bcm, similar to the volume of hydrogenstorage required in 2050. By comparison, around 86 500 Gt of CO2 (around48 000 bcm 59) will have been cumulatively stored in thousands of CO2 storagesites around the world and some 3 250 bcm of CO2 will be injected for permanentstorage in 2050 in the NZE Scenario. Unlike hydrogen and natural gas, CO2
storage is not cyclical, so storage capacity needs to continue to grow over time.
CO2 storage in depleted oil or gas fields and in saline aquifers is a more maturetechnology with fewer technical constraints, and alternative storage options are
more limited than for hydrogen. This suggests that the majority of these resources
would probably be developed to store CO2 rather than hydrogen. Regions andcountries should therefore consider both their CO2 and hydrogen storage needs
when devising resource development strategies and plans.

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59
CO2 is conventionally presented as the amount of mass injected: here, the number of bcm at 15°C and 0.98 bars allows
for comparison with hydrogen.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Hydrogen refuelling stations
To serve the fuel cell electric vehicle (FCEV) market, hydrogen refuelling stations(HRSs) are essential. Over 4 600 HRSs would need to be installed by 2030 in the
NZE Scenario to support the growing fleet of heavy-duty fuel cell trucks, assuming
an average nameplate capacity of over 2.5 tonnes per day. 60 At the end of 2021,
about 730 HRSs were dispensing fuel at 350 and/or 700 bars to 880 heavy-duty
trucks, 3 600 medium-duty trucks, 4 700 buses and around 42 000 cars.
Careful planning is needed to avoid bottlenecks and delays in scaling up refuelling
infrastructure in line with the NZE Scenario. The time needed for permitting, design
approvals, construction and inspection of completed stations is generally short. In
California, the median time to open a new station has been around 2.5 years in
the recent past. Manufacturing of station components, of both current technologies
not yet designed for high-throughput refuelling and innovative components forhigher flow rates, would need to ramp up quickly. Major station components
include storage tanks, compressors, heat exchangers, nozzles, hoses,
breakaways and receptacles, and fuel dispensers. For heavy-duty truck HRSs
with a capacity of over 1 tonne per day, hydrogen will likely be delivered as LH2
either by tanker or pipeline, since large numbers of gaseous tube trailer deliveries
can complicate operations. Standardised components do not exist for liquidhydrogen dispensing, so this is not likely to play a significant role this decade.
Innovative technology is being developed to enable fast refuelling of fuel cell trucks
with 700-bar onboard hydrogen storage, to allow for fuelling times and driving
ranges comparable to diesel trucks. The US DOE has set a target flow rate of
10 kg per minute for trucks with onboard storage capacity of 60 kg, which would
boost driving range to about 1 200 km and cut refuelling time to just 6 minutes(Marcinkoski et al., 2019). Refuelling protocols currently limit flow rates for safety
reasons, meaning that refuelling can take 30 minutes or longer for a 40-kg tank.
The industry is seeking to change those protocols to allow for high-throughput
700-bar refuelling, which would require new safety standards for HRSs by theInternational Standards Organisation (ISO). Both will probably take another three
to four years to be finalised.
The US National Renewable Energy Laboratory (NREL) has developed simulation
models and a test station to encourage the development of technologies, protocols
and standards. In April 2022, NREL demonstrated flow rates of 14 kg/minute. Asa next important step, NREL plans to test new station components, such as
nozzles and hoses, that have been adapted to the higher targeted flow rates. In

The total number of HRSs in 2030 in the NZE Scenario would need to be even higher to support fuel cell cars, vans, buses
and medium-duty trucks.

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Chapter 5. Enabling infrastructure

addition, flow control strategies, including valves that control flow rates, may need
to be reassessed. Commercialisation of these new station components is
expected to take two to three years.
Fuel providers have already begun building stations with higher capacities to serveheavy-duty fuel cell trucks and buses. For example, as part of the
HyAMMED/H2Haul project, Air Liquide has built a 1-tonne-per-day station insouthern France to serve eight trucks and other FCEVs (Air Liquide, 2020). The
station was designed to allow for upgrading to high-throughput refuelling once thenecessary components have been tested and qualified. For a project with the Portof Los Angeles, two HRSs with capacity of 1.5 tonnes per day have been built. In
addition, three HRSs are planned for the R-HySE project in France, each with acapacity of 2 tonnes per day, to support 50 fuel cell trucks by 2025.
Because current stations are not technically capable of providing high-throughput
refuelling through a single nozzle, some fuel cell trucks have been designed for
multiple fuelling points so that more than one nozzle can be used concurrently to
reduce refuelling time with current infrastructure. Others, however, havemaintained designs with single fuelling points and instead are working to advance
protocol and technology developments.

Material needs and supply chains
Hydrogen pipelines
Steel pipeline manufacturing is a well-established industry. Global production ofsteel tubular products is estimated at 130 Mt, with pipelines (primarily used in oil
and gas applications) accounting for 28 Mt, or 21% of the total (Trupply, 2022).
This compares with 1 900 Mt of crude steel produced annually today. In the NZE
Scenario, the falling need for oil and gas pipelines as the global energy system isdecarbonised is partially offset by increased demand for hydrogen and CO2
pipelines.

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The steel required for new hydrogen pipelines worldwide amounts to 1.1 Mt in
2030 and 3.5 Mt in 2050 in the NZE Scenario – a relatively small fraction of current
steel pipe production capacity. Although pipelines with smaller diameters needless steel, their carrying capacity is proportionately much less, increasing steel
intensity per unit of hydrogen transported. For instance, a 20-inch pipeline (X70
steel) uses around 30% of the steel of a 48-inch pipeline, but the capacity is morethan ten times smaller, so steel intensity is almost four times higher, raising
investment and operating costs as well as the environmental impact of steel
production. Similarly, the use of high-strength steels allows for thinner walls,
cutting steel consumption by 25%, for example, when X70 steel is used instead of
X52 for a 48-inch hydrogen pipeline (80 bars), though it is more expensive.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

However, as less is known about their operational performance, concerns about
safety could lead to very conservative designs, offsetting these material gains(Golisch et al., 2022). In the long term, better understanding of the behaviour ofhydrogen pipelines will probably lead to less steel-intensive pipelines. In addition,lighter composite pipelines with no embrittlement risk may also be used forhydrogen transport, particularly for offshore hydrogen-production gathering lines(Strohm, 2022).
When possible, repurposing existing pipelines to transport hydrogen or CO2 could
reduce steel consumption, pipeline costs and the environmental impact of material
manufacturing and construction. Repurposing also has the potential todramatically reduce lead times. Current pipe manufacturing capacity seems to be
sufficient to meet projected demand for hydrogen and CO2 pipelines through to2050 in the NZE Scenario. But while there are plenty of producers of tubular steel
products in the global market, the number of laboratories capable of doing the insitu gaseous hydrogen testing often required for certification is limited, 61 whichmight cause bottlenecks (Martin et al., 2022).

Liquefied gas tankers
As with pipelines, the main material used to build a hydrogen or ammonia tanker
is steel, which is needed to make the hull, onboard equipment and tank structures.
Building the 200 ships needed to transport LH2 and the 300 ships to transportammonia in 2050 in the NZE Scenario would require a little over 7 Mt of steel,assuming that ammonia ships are comparable in size to very large gas carriers(60 000-80 000 m3) and that the ones used for LH2 are closer to LNG tankers. 62
This is equivalent to the United Kingdom’s current steel production, or about
0.01% of projected global cumulative crude steel demand by 2050 in the NZE
Scenario. However, although the amount of steel used is relatively small, liquefied
gas tankers require specific steel types able to withstand very low temperatures inareas in contact or with a risk of being in contact with the cargo. In addition, thesteel used in shipbuilding has to be very durable to cope with rough seas. Carbon
manganese steel can be used in parts of LPG tankers that are in contact with or
next to the cargo, suitable for temperatures as low as -55°C, while the more
expensive 9% Ni steel is commonly used in LNG tankers, withstanding
temperatures of -165°C. In areas not at risk of being in contact with the cargo,
steels that offer high strength with limited thickness (to decrease weight) are used.

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61
Rosen and Salzgitter Mannesmann Forschung in Germany, Corinth Pipeworks in Greece, RINA in Italy and DNV in the
United States have facilities for hydrogen testing in compliance with the requirements of the ASME B31.12 standards. Mostof them opened in just the last few years.
62
For current Panamax type ships with an average capacity of about 70 000 m3, the weight of the steel is more than
11 000 tonnes. Large LNG tankers usually have a capacity of 140 000-180 000 m3 and need about 20 000 tonnes.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Global production of the cryogenic alloys used is small, and shipyards haveagreements with steel manufacturers that supply them the specific type of steel
needed.
More than 170 dedicated year-round ammonia tankers and 20 LH2 tankers need
to be built by 2030 in the NZE Scenario, equal to around 40% of total liquefied gas
tanker deliveries over the last five years. This could conflict with demand for othertypes of liquefied gas tankers and for vessels in general, considering that liquefied
gas tankers accounted for 9% of all ships built in 2020 in terms of gross cargocapacity (UNCTAD, 2021). Therefore, while shipbuilding capacities are unlikely toconstrain the ability to supply these ships in the longer term (towards 2050),
competing demands for ships could cause delays in the near and medium term,
particularly during this decade (Figure 5.25).
Global liquefied gas tanker deliveries by country and type in the NZE
Scenario

IEA. CC BY 4.0.
Notes: LH2 = liquefied hydrogen; LNG = liquefied natural gas; LPG = liquefied petroleum gas. For the LNG tanker count,small and medium-sized tankers, icebreakers and bunkering vessels are not included. Ammonia is often shipped in tankers
designed to carry LPG, as it has a lower boiling point than ammonia, so LPG tankers are used as a reference for tankers
that could carry ammonia.
Sources: IEA analysis based on VesselFinder (2022) and UNCTAD (2021).

More than 170 dedicated ammonia tankers and 20 LH2 tankers need to be built by 2030 in
the NZE Scenario, equal to around 40% of total gas tanker deliveries over the last 5 years.

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Making liquefied gas tankers is more complex than building most other types ofship, limiting opportunities for new entrants. It requires considerable co-ordination,
as workers need to assemble thousands of different components, which must be
manufactured correctly and arrive in time. This is reflected in the higher price andlonger construction times of these vessels (Brun, 2017). Incumbent shipbuilders

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

may be best placed to develop technologies for future gas tankers, including new
propulsion systems, and also to build them, given the complexity of the supply
chains and the tight schedules.
Korea, China and Japan dominate the market for liquefied gas tankers. In 2020,
China overtook Japan as the second-largest producer of such tankers, which havehistorically been supplied mainly by Korean and Japanese shipbuilders (UNCTAD,
2021). Before the Covid-19 pandemic, the shipbuilding sector had already been
facing fierce competition and was in the process of restructuring, in some caseswith government financial assistance, leading to some consolidation in the sector
in China and Korea (UNCTAD, 2020). In Korea, Hyundai Heavy Industries (theworld’s largest shipbuilder) tried to acquire Daewoo Shipbuilding and Marine
Engineering, which would have given it control of at least 60% of the market for
LNG tankers (European Commission, 2022b). But in 2022, the European Union
prohibited the proposed merger on the grounds that it would reduce global LNG
tanker market competition, potentially restricting supplies and raising prices, andultimately increasing the cost of energy for European consumers. Some Japanesecompanies have moved into other, more profitable businesses, and others havegone bankrupt.
While shipbuilding capacity is concentrated in the Asia-Pacific region, where mostproducers are largely self-sufficient for material inputs, hydrogen equipment isalso manufactured by companies headquartered and with factories elsewhere,
notably in Europe and North America. For example, GTT and ICT, which
manufacture tank membrane systems compatible with ammonia and hydrogen
respectively, are both based in Europe. According to GTT’s order book, 137 of the
161 membrane systems it is to deliver by 2025, mainly to shipbuilders in Asia, will
equip LNG tankers with capacities generally greater than 170 000 m3 (GTT, 2022).

Compressors for hydrogen transmission and storage
Without major facility or workforce adaptations, companies already active in this
sector are able to manufacture compressors (including new high-speed centrifugal
compressors) for new hydrogen pipelines and for injecting the gas into
underground storage facilities (Table 5.5).
Selected companies commercialising or planning to commercialisecompressors suitable for hydrogen transmission and storage
CompanyCountry

Compressor type

Atlas Copco

SwedenCentrifugal compressors

Baker Hughes

United States

Hydrogen-ready turbo-compression centrifugal
compressors

Burckhardt Compression

Switzerland

Reciprocating compressors

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Table 5.5

Energy Technology Perspectives 2023

Company

Chapter 5. Enabling infrastructure

Country

Compressor typeDenairChina

Reciprocating compressors

Siemens

Germany

Centrifugal compressors

Kawasaki Heavy Industry

Japan

Centrifugal compressors

MAN Energy Solutions

Germany

Hydrogen compression for pipelines

Mitsubishi Heavy Industries

Japan

Working on improving high-speed centrifugal
compressors for hydrogen (ready in 2023-2024)

Neuman & Esser

Germany

Reciprocating compressors

SIAD Macchine Impianti

Italy

Reciprocating compressors

The materials needed to manufacture them are easily obtained and unlikely to beaffected by major bottlenecks. For capacities of up to 2 GW, current state-of-theart piston compressors are the most economical solution, with several companies
manufacturing them around the world. Larger capacities require centrifugal
compressors (which use turbo motors) to improve efficiency. The technology is
not yet commercially available, but it is expected to become so in the next few
years if sufficient demand materialises.

Potential lead times for hydrogen infrastructure
Lead times to build new hydrogen infrastructure are likely to vary from country tocountry and project to project due to differences in several factors, notably
regulations, permitting rules, public acceptance and conformity with standards,
common to most energy infrastructure projects (Box 5.1, above). Natural gas
infrastructure lead times are a good indication of how long it will take to completehydrogen projects due to similarities in project types and in
manufacturing/construction processes (Figure 5.26). In general, the larger the
project and the greater the environmental impact, the longer planning andconstruction take. Gas infrastructure projects typically have long lead times;
similar lead times for hydrogen projects could pose a major threat to the timely
expansion of infrastructure needed to achieve net zero emissions by mid-century.
Planning and permitting of most recent natural gas pipelines took two to eight
years, but some of these projects had been discussed for decades before afeasibility study was initiated. Construction usually lasts around three years forboth onshore and offshore projects, but some pipelines were completed in lessthan two years, such as the onshore 440-km North European Natural Gas Pipelinein Germany commissioned in 2013 and the offshore 275-km Baltic Pipe between
Poland and Denmark commissioned in 2022 (Baltic Pipe Project, 2022).

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LNG terminals provide an indication of potential lead times for LH2 export andimport terminals. They usually take three to five years to build, while the entire

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

planning and construction process, including the preparation of feasibility studies,can take up to 12 years. The construction period for an onshore LNG terminal isdetermined by the amount of time needed to install the storage tanks, whichusually takes about 30 months for engineering and construction. This sets theschedule for the entire project, including the procurement of other components.
The other element that is most time-consuming is construction of the jetty, though
in some cases jetty-less floating technology can be used, enabling gas transfer
between the tanker and an offshore or onshore terminal without a jetty.
Floating terminals can be delivered in half the time of an onshore terminal.
Construction of onshore infrastructure rather than development of the unit itself
typically determines the lead time. Converting an LNG vessel to a floating storage
and regasification unit (FSRU) can take one to two years, while the construction
time for a new one is about two to three years. Moving existing FSRUs from one
place to another can also be carried out quickly. The same yard availability
considerations as for ships applies to new FSRUs. Permitting, approval and local
opposition can delay projects substantially. In response to the Russian invasion of
Ukraine, some recently planned FSRU projects in Europe are moving ahead inless than a year and new regulations are being enacted to reduce lead times, suchas the German LNG Acceleration Act passed in May 2022 (Germany, BMWK,2022).
Lead times of selected natural gas infrastructure projects

IEA. CC BY 4.0.
Notes: LNG = liquefied natural gas. Average lead times are presented for underground gas storage, LNG terminals, floating
LNG terminals, gas tankers, and onshore and offshore pipelines. Bars represents average lead times and lines depict
typical ranges based on selected recent projects.

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Developing new gas infrastructure takes considerable time, so planning must start well inadvance and strategies to shorten lead times should be explored.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

The construction of very large gas tankers (often called very large gas carriers) for
transporting LPG, which serves as a proxy for ammonia, usually takes about ayear and a tanker for transporting LNG, which could serve as a proxy for an LH2tanker, takes two to four years. However, actual lead times can be longer because
construction may not begin as soon as the order is placed if capacity at the
shipbuilding yard is unavailable. A long order book, including demand for othership types such as container ships, may delay the construction and completion ofliquefied gas tankers: for example, several LNG tankers ordered in 2022 are notexpected to be delivered before 2026 (DART, 2022; The Maritime Executive,2022). Total yard capacity has remained constant since 2019, but the number ofactive ones has decreased by 16% to 283 at present (Danish Ship Finance, 2022).
Only 26 yards are now building LNG and LPG tankers, and order books are fairly
full in many yards, with no capacity available for new LNG orders until 2027
(Bangkok Post, 2022).
Developing underground storage facilities for hydrogen is likely to involve
considerable lead times unless they are based on existing natural gas facilities.
Underground natural gas storage projects have lead times of five to ten years forsalt caverns and depleted reservoirs, and 10-12 years for aquifer storage (IEA,
2022b). For hydrogen storage projects, which would undoubtedly make use of salt
caverns, even larger time lags can be expected at the beginning, as practicalexperience with such facilities is very limited. While permitting would probably bemuch quicker to repurpose existing natural gas storage facilities, the flushing time
for a salt cavern – the time it takes to flush out the rock salt deposit by injecting
water to create space for the gas – is generally two to five years (Neuman & Esser
Group, 2022). The HyStock project in the Netherlands estimates that permitting
and construction could take about seven years in total, not including the planningphase (Hystock, 2022).

Energy needs and emissions
The energy consumed in transporting low-emission hydrogen worldwide to deliverhydrogen and ammonia 63 is projected to rise from almost zero at present to around
700 PJ in 2030 (equivalent to 0.2% of total final energy demand), and to more than
2 000 PJ in 2050 (0.6%) in the NZE Scenario (Figure 5.27). Expressed as a shareof the energy content of the hydrogen transported, energy consumption fortransportation amounts to 7% in 2030 and 5% in 2050.
Although only 16% of merchant hydrogen is shipped as LH2 or ammonia in 2050
in the NZE Scenario, shipping accounts for more than three-quarters of all theenergy required to move hydrogen from where it is generated to centres ofdemand, including through interregional trade and intraregional hydrogentransmission via pipeline. This is because shipping hydrogen, regardless of theEnergy consumed to transport low-emission hydrogen as a synthetic fuel is not included in this section.

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Chapter 5. Enabling infrastructure

distance, requires 8-17 kWh/kg H2 of energy to convert the hydrogen to a form
with a higher energy density (in volume terms) and/or reconvert it back tohydrogen when a carrier is used, i.e. the maximum overall efficiency would be
66-81%. 64 Hydrogen transport by pipeline does not have such an energy penalty,
as energy consumption increases proportionally with distance. Hydrogen transport
through a 48-inch pipeline over a distance of 8 000 km (operating at least at 75%
of its design capacity) requires 4-7 kWh/kg H2 of energy for compression, which
would result in maximum overall efficiency of 82-89%. The construction andoperation of a pipeline to transport hydrogen over 1 000 km involves energy
consumption equal to 0.5-3.5% of the energy content of the hydrogen that will betransported during the pipeline’s lifetime.
Global energy consumption for hydrogen transportation in the NZE
Scenario

IEA. CC BY 4.0.
Notes: PJ = petajoule. LH2 = liquefied hydrogen. Pipeline transportation of hydrogen covers interregional trade andintraregional transmission.

Global energy use for transporting hydrogen rises from almost zero today to the equivalentof 0.2% of total final energy demand in 2030 and 0.6% in 2050 in the NZE Scenario.

The shipping of hydrogen requires significant energy when energy for conversion
and reconversion is accounted for (Figure 5.28). Improving the energy efficiency
of hydrogen shipping will therefore need to remain a priority, not only to bring costs
down but to minimise the environmental impacts, building on efforts for liquefied
gas shipping today (Box 5.2). The EU SRIA aims to achieve overall efficiency ofOverall hydrogen transport efficiency is the ratio of net energy provided by the delivered hydrogen divided by that quantity
and the total energy consumed during compression or conversion of the hydrogen into a higher-density carrier, and its
storage, transport and reconversion into hydrogen gas (when required).

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64

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructurearound 74% (12 kWh consumed/kg H2 delivered) by 2030 for hydrogen shipping(Clean Hydrogen Joint Undertaking, 2022).
Energy consumption and overall efficiency of hydrogen transport anddistance in the NZE Scenario, 2030

IEA. CC BY 4.0.
Notes: kWh/kg H2 = kilowatt-hour per kilogramme of hydrogen. H2 = hydrogen. LOHC = liquefied organic hydrogen carrier.
100% throughput capacity means that the pipeline is operated at 100% of its theoretical maximum capacity. The energy
consumption of an LH2 tanker is assumed to be equivalent to the amount of hydrogen boil-off gas during the voyage, andthe energy consumption of LH2 import and export storage tanks is hydrogen boil-off gas and electricity. Overall efficiency ofhydrogen transport refers to the energy consumed during the conversion of hydrogen to a higher-density carrier, its
storage, shipment and reconversion to gaseous hydrogen. 1 kg of hydrogen contains 33.3 kWh.

Long-distance shipping of hydrogen is expected to have an overall efficiency of 60-80%,
but there are major opportunities to reduce energy consumption and lower costs.

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Hydrogen is an indirect greenhouse gas (GHG), as it interacts with other gases
and chemical species in the atmosphere, affecting the concentration of methane,ozone and water vapour. Some estimates indicate that hydrogen could have a
global warming potential (GWP) over a 100-year time horizon of
11 ± 5 kg CO2-eq/kg H2 (United Kingdom, BEIS, 2022), compared with29.8 ± 11 kg CO2-eq/kg H2 for fossil methane. Given hydrogen’s small moleculesize, high diffusivity and low viscosity, leakage is possible along the entire value
chain, particularly during its transport and storage. However, information on how
much hydrogen leaks from pipelines, compressors, loading/unloading operations
and storage is still limited. Mitigating potential climate impacts will require further

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

research to understand hydrogen’s GWP, the deployment of technologies andoperational practices to minimise leaks, and the implementation of robust leakdetection and repair mechanisms.

Box 5.2

Environmental impacts of liquefied gas shipping

The bulk of GHG emissions from liquefied gas shipping, excluding conversion andpotential reconversion, come from fuel combustion during transport. However, as
the shipping sector decarbonises, including by using some LH2 or ammonia tanker
cargo as fuel, direct emissions should fall, though in the case of ammonia
combustion, measures will be needed to minimise N2O and NOx emissions. Fuelconsumption by the main engine is influenced by the condition of the hull’s surface,
the load, the weather and the ship’s speed. Liquefied gas transport was responsiblefor 7% of global GHG emissions from shipping (0.2% of total emissions) and 8% offuel consumption in shipping in 2018 (0.2% of total final energy consumption) (IMO,2020). Improving the energy efficiency of shipping methane, hydrogen, ammonia
and CO2 would be economically beneficial because fuel costs would be lower, andthe environmental impacts would also be reduced.
Once a ship reaches the end of its useful lifetime, it is sold to a shipbreaking or
demolition shipyard, where it is disassembled. An estimated 95% of the materials
used in its construction can be recycled or reused (UNEP, n.d.), primarily steel,which makes up 75-85% of a ship’s weight (Brun, 2017). Some steel plates andbeams can be extracted and directly reused by the construction industry, or they
can be re-rolled and reused (without melting, thereby using less energy). In 2021,
demolition and scrapping of liquefied gas tankers took place in India, Bangladesh
and Türkiye (UNCTAD, 2021). There are concerns about the safety andenvironmental effects of ship disposal, with many of them being broken up on
beaches. Some conventions and regulations concerning shipbreaking have been
issued, including the International Maritime Organization’s 2009 Hong Kong
Convention for the Safe and Environmentally Sound Recycling of Ships (though it
has not been ratified by enough countries to enter into force) and the EU Ship
Recycling Regulation, in force since 2019.
Sources: Brun (2017); IMO (2020); UNEP (n.d.); UNCTAD (2021).

CO2 management infrastructure
Types of CO2 transport and storage infrastructure

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Infrastructure for CO2 management includes CO2 transport and storage facilities.
Once captured, CO2 can be used on site or transported, in most cases by pipelineor ship, either to a point of use or to a permanent underground storage site
(Figure 5.29). For the purposes of this report, CO2 shipping refers to vessel-based
oceangoing transport, including ocean barges.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

CO2 flows through the CO2 management value chain
CaptureStorageTransport
Shipping

Point sources

CO2
Liquefaction

Shipping

Pipeline

Industrial clusters

Direct air capture

Buffer storage

Compression

Use

Pipeline transport
IEA. CC BY 4.0.

Notes: CO2 = carbon dioxide. Blue arrows indicate the flow of CO2.

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.

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 areoften oversized relative to near-term transport demand, but this can increase riskfor 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 ofprojects in Europe and the United States have recently been announced to build
multi-user CO2 pipelines to transport CO2 to dedicated storage sites.
CO2 must be compressed to pipeline specifications after capture. The ISO
27913/2016 standard provides requirements for CO2 pipelines while DNV-RPF104 is a recommended practice. Depending on distance, diameter and CO2phase, booster stations may be needed along the pipeline to maintain pressure.
CO2 can be transported through a pipeline in gaseous form (or phase) or as aliquid, or in its dense phase. 65 The phase determines the required pipeline
specifications, including grade of steel, and how it is operated, including

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65
CO2 is in its dense phase when it is above its critical pressure but below its critical temperature. When above both criticaltemperature and pressure it is a supercritical fluid. In both cases, CO2 exhibits the properties of both a liquid and a gas.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

temperature, pressure and compression. In general, carbon steel is the most costeffective material for CO2 pipeline transport, with the grade of steel varying from
X60 to X120 (Onyebuchi et al., 2018). For short distances and small volumes,
transporting CO2 in gaseous form can be cost-effective (Knoope, Ramírez andFaaij, 2013), while transforming the gas into a denser phase, as a supercriticalfluid or a sub-cooled liquid, is more economical for large volumes and long
distances.
CO2 pipeline networks are an integral component of the hub-and-cluster model ofcarbon capture, utilisation and storage (CCUS) projects, but their configurationmust be optimised to be cost-effective (Figure 5.30). Network design is determinedby the volumes and rates of inputs and outputs, along with distance andgeographic considerations.
CO2 pipeline network
Trunkline
Sink-side pipelines transport CO2 fromtrunklines to storage sites or further onward
transport connections. Distribution lines willterminate at a storage site, while subdistribution lines will transport CO2 to individual
wells. The flow rate of sub-distribution lines
needs to be tied to injection rate.

Gathering

Gathering
Sub-gathering

Distribution

Source-side pipelines aggregate CO2collected at various sources (sub-gatheringlines) and connect larger or aggregated flows(gathering lines) to central trunklines.

Sub-distribution
Distribution

Trunklines transportlarge, aggregatedvolumes of CO2 typicallyin its dense phase.
IEA. CC BY 4.0.
Note: CO2 = carbon dioxide.
Source: Based on United States, DOE (2022c).

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Efficient pipeline networks usually have a trunk-style transmission line with branches forgathering and distribution.

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Chapter 5. Enabling infrastructure

CO2 shipping
Today, CO2 shipping is limited to small-scale applications moving food-grade CO2from production sites to distribution terminals, where it is further distributed to end
users. In recent years, several regions and countries, including Europe, Japan and
Korea, have expressed interest in shipping large volumes of CO2 to storage sites.
CO2 transport by ship has not yet been demonstrated at the scale required in the
NZE Scenario. However, two medium-pressure CO2 ships are under construction
for the European Northern Lights Project – an open-source transportation andstorage initiative aimed at storing CO2 in depleted offshore fields in Norway – andother projects are pursuing shipping as a transport solution.
CO2 shipping requires port infrastructure similar to that used for LNG and LPG,
including facilities for CO2 liquefaction, temporary storage and loading/unloading.
These facilities need to expand in line with CO2 shipments.
When shipping is the selected transport method, CO2 needs to be liquefied first.
Liquefaction involves a combination of cooling and compression of the CO2.
Liquefying CO2 to -30˚C to -55˚C requires the use of cryogenic technology, which
is more costly and energy-intensive than the compression required to move CO2
by pipeline. Liquification processes can involve closed or open systems (AlBaroudi et al., 2021). Closed systems use an external refrigeration system, while
open systems cool the CO2 solely by compression and expansion, without the useof an external refrigerant. Open systems have a simpler design but are lessefficient. During liquefaction, water needs to be removed from the CO2 inlet stream
by condensation and regenerative adsorption to prevent hydration, freezing andcorrosion. Other contaminants (volatile components such as nitrogen and argon)
must be removed as well to prevent dry-ice formation.

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The flow of CO2 from a source through liquefaction is typically continuous. Since
shipping occurs in discrete runs and is a batch process, intermediate buffer
storage is usually required to store the gas between ship journeys. Buffer storage
can reduce ship loading time and enable fast loading. It also provides overflow
storage in the case of delays. It typically comprises industrial CO2 storage tanks
but can also be in the form of a vessel, depending on the type of shipping. For
example, the Dutch company Carbon Collectors is developing a transport solutionin which barges are used to collect, move and then inject CO2 into offshore storagesites (Carbon Collectors, n.d.). CO2 loading can be performed using conventional
articulated loading arms developed for other cryogenic liquids such as LPG and
LNG. The liquid is transferred through an insulated pipeline, adapted to the chosenpressure and temperature, from the temporary storage or liquefaction facility to
the loading arm and ship.

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Chapter 5. Enabling infrastructure

Other transport modes
Rail transport is currently used only for moving small volumes of CO2. Specialisedrail cars have been developed to transport CO2 in cryogenic conditions (VTG,
n.d.a; n.d.b). There may be opportunities to transport bulk CO2 by rail over shortdistances using existing railways, but the high cost of building new dedicated raillines for large-scale CO2 transportation makes it uneconomical compared withusing pipelines, oceangoing ships, and barges on inland waterways. Tank trucks
can be used for short-distance transportation by road, which can be an economical
option for volumes of up to 30 tonnes of liquefied CO2 (stored in cryogenic vessels,
typically at 17 bars and -30°C).

CO2 storage
CO2 storage infrastructure is composed of the surface and subsurface facilities
used to inject CO2 into geological formations at a depth of at least 800 metres,
where it is permanently stored (IEA, 2022a). Suitable storage resources include
saline aquifers, depleted oil and gas fields, and other unconventional resources.
These resources are unevenly distributed around the world. 66 Globally, potential
resources are ample, but further resource assessment and development isrequired to prove reserves. Once a resource has been identified, it can take atleast three to ten years to develop a functioning CO2 storage site.
Confidence in the availability of CO2 storage is a precursor to investment in CO2
capture facilities, so one of the greatest hurdles in developing CO2 management
infrastructure is accelerating the assessment and development of CO2 storage
resources and developing CO2 transport infrastructure in parallel with resource
assessments. Source-sink matching is used to match sources of captured CO2 tosinks (storage sites), based on the rate and duration of the supply of the gas(Figure 5.31). It can also support the design of optimised CO2 transport networks.
The expected rate and duration of CO2 supply from the source needs to match therate and duration of CO2 injection that a site or resource can support. Once thetwo have been matched, transport pathways can be optimised.

Basalts, peridotites, unmineable coal seams and organic shales can also, in principle, be used for CO2 storage (IEA,
2022a). Pilot projects for each have been launched, but further demonstration is required to test their technical and economic
feasibility. Storage in basalts is the most advanced of these options: the Icelandic company Carbfix has injected more than
80 kt of CO2 into a basalt reservoir since 2014. The company plans to develop a second site, at which it will inject 500 kt CO2
per year starting in 2026.

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Chapter 5. Enabling infrastructure

Criteria for CO2 source-sink matching

IEA. CC BY 4.0.
Note: CO2 = carbon dioxide.
Source: IEA (2022a).

Source-sink matching is used to pair sources of captured CO2 with storage sites, based on
the rate and duration of sustainable injection.

CO2 infrastructure needs in the NZE Scenario
The deployment of CO2 transport and storage infrastructure accelerates rapidly in
the NZE Scenario. The total amount of CO2 captured worldwide is projected toincrease from 44 Mt today to 1.2 Gt in 2030 and 6.2 Gt in 2050. Around 95% of all
captured CO2 is stored, so injection capacity for CO2 storage needs to expand
from 42 Mt today to 1.2 Gt in 2030 and 5.9 Gt in 2050. CO2 transport infrastructure
would need to keep pace with this expansion.

Transport
A substantial expansion of CO2 transport infrastructure in the form of CO2 pipeline
networks, the CO2 shipping fleet and port infrastructure for CO2 handling isrequired to accommodate CCUS deployment in the NZE Scenario. In certain
regions, pipelines would most likely become the dominant mode of transport, whileother regions may rely on shipping, depending on geographic considerations,existing infrastructure and international trade of CO2 destined for storage.

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In 2021, more than 30 Mt of CO2 was transported from its point of capture, mainly
by pipeline, to oilfields for CO2-EOR. An additional 10 Mt of CO2 was transported
via pipeline to dedicated storage sites. Global aggregate pipeline length would

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructureneed to expand from around 9 500 km today to between 30 000 and 50 000 km
by 2030, with some of this capacity used to transport CO2 to and within ports prior
to shipping. The rate of increase in capacity to 2030 will be constrained by thelong lead times associated with new pipeline development and construction, andthe small number of projects currently under development. According to projects
in development, more than 7 000 km of new, multi-user CO2 pipelines are due toenter into operation by 2030, in addition to six projects involving the repurposing
of existing pipelines to create multi-user CO2 pipelines. By then, around 280 Mt of
CO2 could be transported from points of capture to dedicated CO2 storage sites or
to oilfields for CO2-EOR, 67 and around 15 Mt CO2 could be used either on site or
nearby in a variety of products.
CO2 pipeline infrastructure expands much faster between 2030 and 2050 in the
NZE Scenario, mainly to transport captured CO2 to storage sites, with total pipeline
length in 2050 reaching between 100 000 and 600 000 km, depending on whether
CO2 transmission is local, intraregional or interregional (Table 5.6). For
comparison, around 650 000 km of crude oil and petroleum product pipelines are
in existence today (GlobalData Energy, 2019).
The eventual mix of localised trunklines and short gathering/distribution lines,
intraregional transport by pipeline and interregional transport by pipeline orshipping will determine the overall length of the global network.
Shipping CO2 is more flexible than transporting it by pipeline and can be costcompetitive over long distances and for small volumes (Figure 5.32). For countries
and regions with limited access to nearby CO2 storage, substantial port
infrastructure, and emissions located near ports, shipping may be cheaper thanbuilding an extensive pipeline network. For shipping to become more efficient, lowpressure CO2 ships need to be developed. Low-pressure CO2 ships (5.5 to
9.8 bars and -55°C to -41°C) can carry larger tanks and cargoes than mediumpressure carriers (14 to 20 bars and -30°C to -19.5°C) due to the temperature andpressure at which they operate. Medium-pressure conditions are not practical forship sizes above 10 000 t CO2.

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67
Most CO2 injected for EOR is retained in the reservoir over a project’s lifetime, but additional monitoring and verification
are essential to confirm that the CO2 has been permanently stored.

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Table 5.6

Chapter 5. Enabling infrastructure

CO2 pipeline deployment for CO2 capture in the NZE Scenario, 2050

Line
type

Description

Deployment
concentration

Local
trunklines

Multi-user
trunklines
developed
between existing
industrial clusters
and CO2 storage
resources within
100 km. Gatheringlines and
distribution lines
limited in length.

CO2 capture
concentrated inindustrial clusters
located nearstorage resourcesor ports.
No offshore
trunklines
between regions.

Intraregional
trunklines

Longer trunklines
connecting
sources and sinks
within a region.
Gathering anddistribution lines
may be longer
depending on
routing of thetrunklines.

CO2 capture
deployment more
widely spread withlonger gatheringlines connecting
geographically
distributed
emitters totrunklines.
Limited regional
offshore pipelines.

Inter- andintraregional
trunklines

Interregional
trunklines
crossing countries
and regions tomove CO2 tostorage sites.

Geographicallydispersed CO2
capture. Long
interregional
trunklines both onand offshore.

Length(km)

Importance ofshipping

Cumulative
steel needs(Mt)

100 000200 000

High, as limited
offshore pipelines
make shipping fromregions with little
storage to regionswith more storage
important.

19-39

300 000400 000

Medium,concentrated inregions more reliant
on offshore storage.

58-78

500 000600 000

Medium to low,
concentrated inregions more reliant
on offshore storageand in regions with
CO2 ship-based
exports/imports.

97-117

Notes: km = kilometre; Mt = million tonnes.

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For capture rates from 0.2 up to 1.6 Mt CO2/year, Brevik has developed a shipconcept based on the design of an existing ship type (Brevik Engineering, 2017).
For capacities above 10 000 t CO2, new designs are needed. Depending on the
ship’s shape, tanks may need to be arranged one on top the other, which is more
complex structurally. Increasing the length of the tanks and the ship would lead toa long and narrow ship, which is not well suited to ports. Demonstrating direct
offshore injection can also support the acceleration of ship-based CO2 transport,
since direct injection can eliminate the need to construct onshore receiving
terminals and can simplify the infrastructure needed for offshore storage facilities.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Indicative CO2 shipping and offshore pipeline transportation costs

IEA. CC BY 4.0.
Notes: t CO2 = tonne of carbon dioxide. Shipping costs based on cryogenic shipping from the Netherlands to Norway. Lefthand chart assumes a distance of 1 000 km, right-hand chart assumes annual capacity of 2 Mt CO2.
Source: IEAGHG (2020).

Shipping is generally competitive with offshore pipelines for long-distance transportationof small volumes of CO2.

Storage

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There are currently just seven commercial-scale (injection capacity of 100 kt CO2
per year or greater) dedicated CO2 storage sites around the world with a total
injection capacity of around 10 Mt/year. In addition, captured CO2 is being injected
into oilfields during CO2-EOR operations, most of which is expected to remain
permanently stored. This technology, the use of which is concentrated in the
United States, has been the main driver for the construction of CO2 capture
facilities and CO2 pipelines, though its use will most likely decline during theenergy transition in response to lower demand for fossil fuels. The majority ofstorage projects being pursued today target dedicated storage. A considerable
amount of capacity to inject CO2 into geological formations is in development, but
it nonetheless falls short of planned capture capacity expected to becommissioned by 2030 and total storage capacity required in the NZE Scenario(Figure 5.33).

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Existing and planned annual global CO2 storage injection capacity,
compared with projected NZE Scenario needs in 2030

IEA. CC BY 4.0.
Notes: Mt CO2 = million tonnes of carbon dioxide. Includes commercial-scale projects with CO2 capture or injection capacity
over 100 000 tonnes per year. Capture capacities, storage capacities and planned operation dates come from individual
project descriptions. Total CO2 storage includes plans for dedicated CO2 storage, CO2-EOR, and projects to develop CO2
storage without specifying what kind. Most of the CO2 injected for EOR is retained in the reservoir over a project’s lifetime,
but additional monitoring and verification are essential to confirm that the CO2 has been permanently stored (IEA, 2015).
Source: Based on IEA tracking and Global CCS Institute data.

Substantial capacity to inject CO2 into geological formations is already in development, butthere is a growing gap between capture and storage injection capacity.

Material and equipment needs
Material needs
Both CO2 shipping and storage infrastructure rely heavily on steel, while storage
also requires large amounts of cement. CO2 ships require similar kinds of materials
as hydrogen ships, though different grades of steel, membrane lines andinsulation are used. The amount of steel, its grade and how it is lined depend
mainly on the pressure under which the CO2 is transported. The “Inter- andintraregional trunklines” deployment case has a cumulative steel demand of
97-117 Mt of tubular steel between now and 2050 (Table 5.6). Steel used for CO2
pipelines in the NZE Scenario makes up only a fraction of the 130 Mt of tubular
steel produced annually today. As a result, tubular steel availability is unlikely tolimit deployment.

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The availability of well construction material and components is also unlikely toconstrain the development of shipping or storage capacity, since the increase indemand would be largely offset by declining needs in the upstream and midstream
oil and gas sector. The bulk materials required for CO2 storage are mainly to build
injection wells and are therefore similar to those needed for oil and gas wells. They
include well casing and tubing, usually made from steel, cement and wellheads

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure(the surface components of an underground well that provide the structural andpressure-containing equipment for drilling and production). Since CO2 mixed withwater is corrosive, storage wells are sometimes constructed using corrosionresistant materials, including special types of steel. Portland cement reacts
chemically with CO2, leading to dissolution of alkaline cement phases andprecipitation of carbonates, though a few metres of good-quality, well-bonded
cement can form an effective CO2 seal (Carey, 2013; Duguid, 2009). Some
projects nevertheless choose to employ specialised cement. Less than 5 Mt of
cement in total is required to support CO2 storage infrastructure that canaccommodate injection of 5.9 Gt CO2 per year (United States, DOE, 2022c). Thisis negligible compared with current annual global production, suggesting that
cement will not restrict deployment of CO2 management infrastructure.

Equipment needs and manufacturing
For CO2 ships, equipment needs and manufacturing are broadly similar tohydrogen ships (discussed above), while compressors and pumps, which areintegral to CO2 transportation and storage, are mass-produced for a range ofsectors (see Chapter 4). The construction of CO2 pipelines, shipping and storage
infrastructure nonetheless requires some specialised equipment, such as drillingrigs and mechanical devices, along with skilled technicians to operate them. The
manufacturing of equipment used for offshore activities, especially drilling rigs andpipelaying equipment, is heavily concentrated in oil- and gas-producing regions.
Developers of CO2 storage sites may need to compete with oil and gas producers
for access to drilling rigs, which could cause delays depending on equipment
availability. CO2 storage sites require monitoring equipment. Today, over 50
different types of monitoring technologies have been deployed at sites around theworld. Monitoring technologies typically rely on mass-manufactured equipment
and should not curtail CO2 storage deployment. However, the expertise required
to analyse the results of monitoring programmes is limited and could present abottleneck if steps are not taken to expand related competencies.

Lead times

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Lead times to deploy CO2 management infrastructure vary by infrastructure typeand region. Currently, the majority of CCUS projects have been developed in afull-chain manner, meaning that projects include capture, transport and storage ofCO2. This makes identifying the exact lead times for CO2 infrastructure difficult.
Nonetheless, infrastructure for CO2 storage would be expected to take longer todevelop than for CO2 capture or CO2 transport due to the need for resource
assessments. Since confidence in CO2 storage must be gained before
construction of CO2 capture facilities and CO2 transport infrastructure canadvance, resource assessment usually proceeds first.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Globally, very few potential CO2 storage resources – the amount of capacity inboth discovered and undiscovered deposits – have been declared provenreserves (discovered resources of a known size, for which exploitation isconsidered technically and economically feasible). It can take three to ten years
to build a storage facility once the resource has been identified, depending on anumber of factors, including ease of access to the resource, its geologicalcharacteristics and planning procedures and rules (Figure 5.34). Some countries
and regions have performed national or regional resource assessments, but suchassessments usually focus on the volume of pore space available for storage andrarely provide estimates of potential sustainable rates of injection. Both factors are
essential to determine how much CO2 should be transported to the potential
storage site and what rate CO2 can be captured at.
Lead times for the CO2 storage component of selected CCUS projects withdedicated storage

IEA. CC BY 4.0.
Notes: Years in brackets refer to commissioning date. Assessment of the Sleipner and Snøhvit resources occurred during
the development of nearby gas resources.
Sources: Industry sources and IEA research.

Resource assessment makes up a significant portion of CO2 storage project lead times.

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Subsurface data collection takes time and can be very expensive. In some cases,
data collected during oil and gas exploration and production can be used to assess
the potential for CO2 storage. However, such data is typically proprietary andaccess may be restricted. Depleted oil and gas fields may be faster to develop
due to the extensive data already collected on them. Permitting procedures cangreatly extend lead times for developing storage sites, especially in countries
lacking a legal and regulatory framework for CCUS (IEA, 2022f). Lead times forCO2 storage can be reduced through precompetitive assessments of CO2 storage
resources and dedicated data collection campaigns (IEA, 2022a).

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

Lead times to build CO2 transport infrastructure depend on the type of
infrastructure required. In the case of CO2 pipelines, six to nine years have been
observed for new-build pipelines, which is similar to oil and natural gas pipelines(Figure 5.35). Lead times for CO2 tankers and barges are likely to be similar to
those for liquified hydrogen tankers, for which construction could be constrainedby shipyard capacity and booked orders. No commercial-scale CO2 shipping
terminals are operating as yet, though Northern Lights is building a CO2 importterminal in Norway. Based on the project’s announced timeline, around five years
could be required to design and construct the infrastructure required to transportand store CO2, including liquefaction facilities, temporary storage, and loading andunloading equipment.
Lead times of selected recent natural gas and CO2 pipeline projects

IEA. CC BY 4.0.
* Construction has started but the commissioning date is uncertain.
Notes: Year of commissioning is indicated in parentheses. The Trans Adriatic Pipeline connects Azerbaijan to Greece andAlbania, where an offshore pipeline in the Adriatic Sea connects with Southern Italy.

Planning and permitting of most recent pipelines took two to eight years, with construction
usually lasting about 3 years for both onshore and offshore projects.

Energy needs and emissions

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Following its capture, preparing CO2 for transport will include compression,
removing impurities present in the stream, dehydration and/or liquefication.
Compression and liquefaction are highly energy-intensive, so the choice of energy
has a significant impact on emissions intensity. Electrification can reduce
emissions from CO2 transport and storage infrastructure Shipping companies are
exploring electric ships for short-range shipping and barging, as well ship-based
CO2 capture. Emissions can also come from leaks, but they can be minimised withthe use of effective leak detection and repair programmes. In the case of dedicatedEnergy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

CO2, storage, the risk of leakage is small if wells are sealed correctly and if wellfunctioning measurement, monitoring and verification programmes are in place.
While most of the CO2 injected for EOR is retained in the reservoir over the lifetimeof a project, additional monitoring and verification are essential to confirm that theCO2 has been permanently stored. Containment is a key selection criterion for
dedicated CO2 storage sites.

Focus on repurposing existing infrastructure
The NZE Scenario’s pathway to net zero emissions involves a rapid and
immediate decline in the consumption of oil and natural gas. As a result, certain
oil and gas sector assets such as platforms, gas networks and shipping terminals
would quickly become stranded. This existing infrastructure could potentially be
repurposed or reused to fast-track the deployment of CO2 or hydrogen
infrastructure, reducing lead times and the amount and cost of new infrastructurethat would need to be built. Repurposing can also shrink a project’s environmental
footprint by reducing new material demands and construction needs, and it canhelp infrastructure owners maximise the economic lifetime of their assets while
reducing or deferring decommissioning costs. Existing infrastructure needs to beassessed on an individual basis to determine whether it is suitable for repurposing
and what modifications are required. Infrastructure owners should be encouraged
to incorporate a reuse audit in their decommissioning process to aid repurposing
endeavours.
New and existing natural gas infrastructure can be used to transport and store
biomethane or synthetic methane, which have almost identical physical andchemical characteristics to natural gas. Some reconfiguration may be needed toaccommodate more decentralised production, particularly for biomethane, anddifferences in gas quality. Existing oil-related infrastructure can be used totransport and store LOHCs and liquid synthetic fuels, though there are somesafety considerations for certain chemicals used as LOHCs.
The physical and chemical properties of CO2 and hydrogen are different fromnatural gas and oil, so some reconfiguration and adaptation would be required forexisting transport and storage infrastructure to be repurposed (Table 5.7).

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For hydrogen, there are several projects assessing the feasibility of repurposing
natural gas pipelines and decommissioned underground natural gas storage
facilities (IEA, 2022b), and although experience in repurposing LNG terminals for
LH2 or ammonia is lacking, feasibility is being discussed in the context of planned
LNG import capacity expansions in Europe. For CO2, some pipelines have alreadybeen repurposed and several other projects are assessing further pipeline
repurposing (Table 5.9). Some of the infrastructure found in depleted oil and gas
fields, including wells and site facilities, may possibly be reused for CO2 storage
activities.

Energy Technology Perspectives 2023

Table 5.7

Chapter 5. Enabling infrastructure

Fossil fuel infrastructure with potential for repurposing for transporting or
storing hydrogen and CO2
Infrastructure typeHydrogen

CO2

Pipelines*●●

Offshore platforms●●

Well infrastructure-● to ●● to ●● to ●-● to ●● to ●-Natural gas shipping terminals
Subsea systems
Underground gas storage†● high potential ● moderate potential ● low potential*In the case of hydrogen pipelines, repurposing mainly targets natural gas transmission lines.
This does not consider depleted gas fields, but rather existing underground natural gas storage.
Note: Subsea systems are the underwater infrastructure used to produce oil or gas or to inject CO2.

†

Repurposing oil and gas pipelines for hydrogen and CO2
In principle, existing pipelines can be repurposed to transport either CO2 orhydrogen (Table 5.8). The suitability of a pipeline for repurposing and the technicalmodifications required depend on its design and operational parameters, including
the type of steel, the age and condition of the line, welding and operating pressure.
The economic case for repurposing hinges on three basic conditions:•

The existence of unused pipelines or under-utilised loop pipelines, wherein one ormore lines could be repurposed for pure hydrogen and/or CO2 while the otherline(s) remain in operation.

•

Proximity of the pipeline to both the sources and destinations of the hydrogen or
CO2, with relatively large volumes of minimum market uptake.

•

Favourable market factors, including the cost of building new hydrogen pipelines
versus CO2 pipelines or other alternative means of transport.

Conversion of an existing pipeline must not compromise its safety or integrity,
which can be maintained with appropriate technical modifications. Nonetheless, itis necessary to develop new standards and regulations specifically for
repurposing. For example, there is no defect assessment code for repurposed
pipelines to determine which pre-existing defects could be considered acceptable.

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So far, only one natural gas pipeline has been converted to carry pure hydrogen– a 12-km line in the Netherlands (Gasunie, 2018). The Dutch government hasannounced it will invest EUR 750 million to develop a 1 400-km national hydrogen

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructuretransmission network by 2026-2031, of which 85% will comprise repurposed
natural gas pipelines. Gas transmission system operators in other countries,
including Belgium, Denmark, Germany, Italy, Spain and United Kingdom, haveannounced plans to repurpose parts of their networks to hydrogen (IEA, 2022b).
Table 5.8

Technical aspects of repurposing oil and gas pipelines for hydrogen andCO2 transport

Specification

Hydrogen

CO2Standards

Onshore: ASME B31.12
Offshore: no standard*

ISO 27913:2016 or DNVGL-RP-F104(onshore and offshore)

Wall thickness

Given by the repurposed pipeline

Given by the repurposed pipeline

Maximum allowable
operating pressure

For onshore lines, possible tocalculate according to the
ASME B31.12 standard, depending
on wall thickness, pipeline diameterand steel strength

Dependent on the pipeline’s maximum
allowable operating pressure and on
the phase CO2 is being transported in

Metallic material
integrity

Risk of embrittlement, resulting inlimitations when using higher-strength
steel, as hydrogen can induce a
reduction in ductility

Corrosion risks from CO2 when mixed
with water or from specific impurities.
Risk of brittle fracture, depending on
operational parameters

Non-metallic material
integrity

Risk of leakage and material
degradation

Low-temperature brittleness andmaterial or chemical degradation

Internal coatings

Exceeding erosion velocity due tohydrogen flowing at high speed(~60 m/s) may affect the internal flow
coating, increasing friction andpressure losses

Anti-corrosion coatings can be used toreduce friction; however, someinternal coatings may be incompatible
with CO2

Free-spanning offshore
pipelines

Fatigue crack growth rate induced andfracture resistance reduced in existinglines due to lateral buckling caused bywaves, leading to a higher risk ofembrittlement

Higher weight of CO2 compared withmethane can increase mechanicalstress.

* Although there is no standard for offshore hydrogen transmission by pipeline, the H2Pipe project is revising the feasibilityof adapting the DNV-ST-F101 standard for submarine pipeline systems (DNV, 2021).
Notes: m/s = metre per second. Non-metallic pipeline elements include seals and elastomers. Free-spanning offshore
pipelines are suspended above the seabed, so are subject to more vibration than buried pipelines.

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The European Hydrogen Backbone initiative, which includes 31 European gas
infrastructure operators (from 25 EU member states and Norway, Switzerland andthe United Kingdom), suggests an initial 28 000-km hydrogen pipeline network by
2030 and around 53 000 km by 2040, of which about 60% would be repurposed
natural gas pipelines (European Hydrogen Backbone, 2022). Other countries,
such as Canada, Chile, India, Japan, Korea and Mexico, are also exploring theEnergy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

possibility of repurposing their natural gas pipelines (DNV, 2022b; Canada,
NRCAN, 2020). At least two trunklines have already been repurposed for CO2,
and a number of other projects are being considered (Table 5.9).
Table 5.9

Existing and planned projects to repurpose natural gas pipelines to carry
CO2

Project

Pipeline

Original
targetresource

Country

Length(km)

Diameter(inches)

StatusAcorn

Goldeneye

Gas

UnitedKingdom

102

20

In development

Humber Zero

LOGGS 36”
trunkline

Gas

UnitedKingdom

118

36

In development

Neptune Energy
L10-area

Unspecified

Gas

Netherlands

Cranfield EOR

West
Gwinville
Pipeline

Gas

UnitedStates80

18

Operating since
2008

OCAP

OCAP
pipeline

Oil

Netherlands

97

26

Operating since2005

In development

Notes: OCAP = organic carbon dioxide for assimilation in plants. EOR = enhanced oil recovery. LOGGS = Lincolnshire
Offshore Gas Gathering System. km = kilometre.
Sources: OCAP (n.d.); Offshore Engineer (2021); Denbury (n.d.); Chrysaor (2021); Humber Zero (n.d.); Shell (2019); Roset al. (2014).

New oil and gas pipelines are still being built, either to replace existing ones or toconnect new areas. It is vital that developers of this new infrastructure consider
the potential to make these pipelines hydrogen- or CO2-ready at the design phaseto reduce future repurposing costs and minimise the risk of stranded assets.
Making access to public funding conditional on such design requirements is one
approach (see Chapter 6). For example, in the revised EU Trans-European
Networks for Energy (TEN-E) regulation, which entered into force in June 2022,
natural gas and oil pipelines are (with a few exceptions) ineligible for classificationas Projects of Common Interest (PCI), which benefit from faster permitting andregulatory approval as well as EU financial assistance (European Commission,
2022c). Hydrogen and CO2 pipelines used for natural gas during an interim period
can benefit from PCI status.

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In the case of hydrogen-ready pipelines, the goal is to ensure that new natural gas
pipelines can transport gaseous hydrogen or hydrogen-natural gas mixtures
without additional design limitations once repurposed (i.e. the pipeline would nothave to operate at a lower pressure, which would reduce the volumetric density ofthe transported hydrogen and therefore the amount being transported). For
example, some new pipelines being considered as hydrogen-ready are certified
according to the ASME B31.12 Option B standard (see Hydrogen Pipelines

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

section above). It is estimated that repurposing natural gas pipelines to transporthydrogen could cut investment costs by 50-80% relative to building new lines (IEA,
2022b). Onshore natural gas pipelines are already being built or upgraded to behydrogen-ready in Italy, Poland, Greece and Australia (Snam, 2021; Corinth
Pipeworks, 2022; Gas Pathways, 2022; Cenergy, 2022).
When repurposing is not technically feasible and/or natural gas demand remains
significant, building new hydrogen and/or CO2 pipelines alongside existing natural
gas ones could nonetheless benefit from established right-of-way and siting
permits, thereby reducing costs and shortening lead times for pipeline
development. Co-routing different new pipelines parallel to each other in the sameright of way can also reduce construction time, cost and environmental impact
compared with laying pipelines independently. The Delta Corridor project in the
Netherlands includes the construction of parallel 400-km pipelines for hydrogen,CO2, LPG and propylene, with cost savings estimated at around 30% (Port ofRotterdam, 2021).

Repurposing LNG terminals
In response to the energy crisis caused by the Russian invasion of Ukraine,several countries in Europe are looking into alternative gas supply options,
including increased imports of LNG, which would require the construction of newimport terminals, while the largest regasification capacity under construction is stillin the Asia Pacific region. While new infrastructure can help diversify natural gas
supplies in the short term, the long lifetimes of such facilities mean that thisinfrastructure could become locked in, making it harder to transition to a
decarbonised energy system. New facilities must therefore be designed and built
in a way that facilitates their later conversion for purposes related to hydrogen,hydrogen-based fuels or ammonia to minimise the risk of stranded assets,
accelerate the deployment of low-emission fuels and reduce investment needs
and lead times. Planning for conversion during terminal design is critical to enable
the future transition to other fuels, as repurposing – especially for liquefiedhydrogen – may not be possible for core components. In contrast with pipelines,
no practical experience exists in repurposing LNG terminals for hydrogen orammonia, but the following options could be explored (IEA, 2022b):
Repurposing import LNG terminals for LH2: Due to the lower temperature anddensity of LH2 compared with LNG, repurposing an existing LNG terminal istechnically very complex. In particular, the LNG storage tank would need to be
replaced to avoid excessive boil-off rates, and pipe insulation would need to bechanged to minimise energy losses. If any converted equipment is not sufficiently
insulated, surrounding oxygen in the air could condense around the surfaces andcreate an explosion risk, as oxygen’s dew point is above hydrogen’s.

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•

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure•

Designing new liquefied hydrogen import terminals for initial LNG use: New
LH2 terminals could be designed to be used initially for LNG. Due to the higher
temperature of LNG, part of the equipment (such as tank and pipe insulation) would
need to be over-designed for LNG use, but this should not lead to any major
technical problems. Other components, such as pumps, would require specificdesign and configuration to be compatible with the density difference of the two
fluids.

•Repurposing LNG terminals for ammonia: As the boiling temperature ofammonia is well above that of LNG, it can be more easily handled. Somemodifications would be needed, such as pump replacement and adjustments to theboil-off-gas system, but they are less complex than those required to repurpose for
LH2. Because ammonia is heavier than LNG, storage tank capacity would be lower
for ammonia.

•

Designing new LNG import terminals to be ammonia-ready: It is possible toplan for future ammonia accommodation when designing new LNG terminals,
considering the heavier weight of ammonia compared with LNG for the storagetank. Some components, such as pumps, would still need to be replaced.

•

Repurposing LNG terminals for CO2: Due to the low temperature and pressureof LNG, regasification terminals are unlikely to be suitable for repurposing for CO2,
which needs to be stored at a higher temperature and pressure. However, someloading/unloading infrastructure may be able to handle CO2.

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Depending on an LNG terminal’s design, age and condition, repurposing
opportunities may be limited. Brownfield developments may make it possible toreuse some elements such as the jetty, power connections and land foundations(especially relevant at congested ports with space constraints), and could help
reduce lead times.

Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

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Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

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Chapter 5. Enabling infrastructure

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Energy Technology Perspectives 2023

Chapter 5. Enabling infrastructure

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Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Chapter 6. Policy priorities toaddress supply chain risks
Highlights• Clean energy and technology supply chains are at the nexus of climate, energy
and industrial policy, and so establishing them requires an all-of-government
approach. As a supply chain is only as strong as its weakest link, we present acomprehensive risk assessment framework to assist policymakers. The focus ison key bottlenecks impeding the rollout of clean energy supply chains, as well aspriority actions to enhance their security, resilience and sustainability.
• Any supply chain faces the risk of bottlenecks; for new clean technology supply
chains, time is a critical factor. Project lead times are particularly long for enabling
infrastructure for electricity, hydrogen, and CO2 management, as well as formines. It is therefore essential to reduce permitting times; mobilise investment
and financing for key supply chain elements; develop skills in anticipation of futureneeds; and accelerate innovation in early-stage technologies.
• High geographical and market concentrations threaten clean energy technology
supply security: today, the three largest producing countries hold 70-85% of
global manufacturing capacity of mass-manufactured technologies like solar PV
modules, wind, batteries and electrolysers. The combined output from announced
manufacturing projects for key clean energy technologies in China could
potentially supply 60% of the global total in monetary terms, implying
considerable net export potential. Together, the output from projects announced
in the United States and the European Union is equivalent to two-thirds of
combined market size implied by their announced climate pledges by 2030, with
the US Inflation Reduction Act expected to prompt more project announcements.
• Boosting supply chain resilience is important, as market disruptions and input
price fluctuations can have profound cost implications. Reducing and diversifying
material inputs and designs are key primary measures to reduce exposure, alongwith building repairability into new production capacity concepts and strategic
oversizing. Designing industrial strategies that foster domestic competitive
advantages will also be important, as the relevance of energy costs does notdiminish with the transition to clean energy. For example, some regional
differences in renewable hydrogen production costs will persist, producing knockon effects for the cost of derived products such as steel and ammonia.

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• Environmental and social risks must be addressed to build sustainable supply
chains. The most emission-intensive steps of clean technology supply chains arebulk and critical material production, followed by technology manufacturing.
Policies need to focus on expanding lead markets for near zero emission
materials and on scaling up minimum recycled content requirements; traceability
standards; and environmental, social and governance regulations.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Designing policies for supply chains
Policies for clean energy and technology supply chains are at the intersection ofclimate, energy and industrial policy. Establishing secure, resilient and sustainablesupply chains therefore requires a comprehensive and co-ordinated approach thattakes account of the knock-on effects and interactions of the broader policy mix.
Fallout from the Covid-19 pandemic and Russia's invasion of Ukraine have forced
a global reckoning of how governments think about energy security, climate goals
and supply chains. Today's crises are a reminder of the interconnectedness of ourenergy systems and their technology supply chains, and that our current relianceon fossil fuels is unstainable. Yet this situation can – and must – be a catalyst forachieving a cleaner, more secure energy future.
The goal for all governments must be to ensure that supply chains are secure,resilient and sustainable while accelerating the deployment of clean energy
technologies. Chapter 2 assessed in detail the vulnerabilities of selected clean
energy supply chains that could compromise achievement of this goal, drawing
particular attention to the risks associated with surging demand for critical minerals
and reliance on supplies from a very small number of countries, leading to a newenergy security paradigm. Policies must therefore be redesigned to address thesevulnerabilities, taking care to avoid practices that may deter investment in – andlimit diversification of – critical mineral resources, respecting international trade
rules and norms, and working in a collaborative fashion for the good of everyone.
This chapter considers how governments should go about designing policies on
clean energy supply chains and sets out broad recommendations on prioritisingaction.

Applying a risk assessment framework
Understanding the risk profile of each element of the supply chain is a key step indetermining where to focus efforts to enhance security, resilience andsustainability, and how to develop policies to address potential vulnerabilities.
These profiles can look very different depending on the country, region and supply
chain and will undoubtedly change over time as new technologies and materials
emerge, and as technologies mature and markets develop.

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Both governments and businesses can use a risk assessment framework toevaluate supply chain risks and vulnerabilities. The IEA has developed such aframework, first presented in the Securing Clean Energy Technology Supply
Chains report, published in July 2022 (IEA, 2022a). For the purpose of this report,
analysis has been significantly expanded to provide a more comprehensive risk
assessment framework that analyses a range of vulnerabilities that may prevent
energy and technology supply chains from being secure, resilient and sustainable
while scaling up and developing at the pace required for climate objectives(Table 6.1). Two criteria are typically used in risk assessments, which eachelement can be tested against:

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks•

Likelihood: How likely is it that a given clean energy or technology supply chain
fails to expand at the pace required to meet climate objectives in a secure, resilientand sustainable way?

•

Impact: What is the effect of failing to achieve security, resilience and sustainability
while expanding a given clean energy or technology supply chain?

The framework is designed to be applied to current supply chain structures, witha view to assessing risks in the short to medium term at the global, national orregional level towards a given targeted clean energy transition if no action were to
be taken. We have applied the framework here to analyses of the preceding
chapters to assess potential risks for deployment delays, and failure to achieve
security, resilience and sustainability from a global perspective. We focus on the
gap between near-term prospects for scaling up clean energy and technology
supply chains based on planned projects and the ambition required in the Net Zero
Emissions by 2050 (NZE) Scenario.
Table 6.1
Criterion

Supply chain risk assessment framework
Description

How it is applied in ETP-2023

Accelerating clean energy transitions: What is the risk of a supply chain element failing to scale up at thepace required to meet the trajectory?

Likelihood

Longer lead times and labour shortages
increase the probability of not scaling up
quickly enough. Technologies at earlier
development stages are most at risk.

What are the lead times to develop additional
mining, material production, manufacturing
capacity and infrastructure?

Impact

The impact of failing to scale up will be lower
if the investment gap between the expected
throughput capacity and that required tomatch a targeted clean energy transition
trajectory is relatively small.

What is the investment gap to match NZE
Scenario needs in 2030?

Likelihood

The likelihood of a disruption increases withsignificant market concentration at the firm or
geographic level. Exposure to geopoliticalrisks, such as trade restrictions, conflict orpolitical instability will also increase thelikelihood of disruption.

How concentrated is production
geographically (at the country and region
level)?

Impact

The impact of supply disruption can be
reduced if there is enough redundancy or
strategic over-sizing of supply capacity.
Readily available substitutable technologies
and materials that can be used relatively
easily as alternatives can also reduce theimpact of a supply disruption.

What is the utilisation rate of existing
capacity?
Can the materials or manufacturing
processes be directly substituted withalternatives?
How advanced are the alternatives (what is
the TRL of alternative technologies ormaterials)?

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Security: What is the risk of a supply chain element experiencing a supply disruption?

Energy Technology Perspectives 2023

Criterion

Chapter 6. Policy priorities to address supply chain risks

Description

How it is applied in ETP-2023

Resilience: What is the risk of a supply chain element not being able to respond quickly to a shock in themarket?
Likelihood

Longer lead times increase the probability of
not being able to react to a market shock
quickly enough.

What is the lead time to develop additional
mining, material production, manufacturing
capacity and infrastructure?

Impact

The impact of a sudden change in demandcan be reduced if there is enoughredundancy or strategic over-sizing of supply
capacity. Readily available substitutable
technologies and materials that can be used
relatively easily as alternatives can also
reduce the impact of a sudden demandchange.

What is the utilisation rate of existing
capacity?
Can the materials or manufacturing
processes be directly substituted withalternatives?
How advanced are the alternatives (what is
the TRL of alternative technologies ormaterials)?

Sustainability: What is the risk of a supply chain element not being able to operate within sustainable
standards/not having a CO2 footprint compatible with stated goals?

Likelihood

Exposure to environmental and social issues
increases the likelihood of a supply chain
element failing to meet environmental andsocial standards.

Focus on CO2 emissions: How emissionsintensive is the supply chain element?

Impact

The greater the relative importance of agiven element in the functioning of its supply
chain, the larger the impact of that element
failing to comply with targeted social andenvironmental standards. The impact canalso be reduced if there are alternative
components, techniques and approaches
that are less exposed to social andenvironmental issues and that can be
implemented relatively easily.

Focus on CO2 emissions: What is thecontribution of a given element to the total
emissions of its supply chain?

Notes: NZE Scenario = Net Zero Emissions by 2050 Scenario; TRL = technology readiness level.

Our approach applies quantitative metrics when they are available, complemented
by expert judgement, to assess likelihoods and impacts against each of theidentified objectives to determine the degree of risk for each step in the supply
chain, from resource extraction to material production, component and technology
manufacturing, and installation and infrastructure construction, excluding
operation. Supply chains were assessed independently of one another.

•

Accelerating deployment: Expansion lead times (likelihood) and the investment
gap between near-term plans and the targeted trajectory (impact).

•

Security: Degree of regional concentration of supply (likelihood) and difficulty inswitching to alternative technologies or materials (impact).

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To represent risk magnitude in a risk matrix, several key indicators for likelihoodand impact were chosen for each objective:

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks•

Resilience: Expansion lead times (likelihood) and difficulty in switching toalternative technologies or materials (impact).

•

Sustainability: CO2 emissions intensity of activities in each supply chain step
(likelihood) and contribution of each step to supply chain CO2 emissions (impact).

We applied the risk assessment to the six energy and technology supply chains
analysed in this report, namely those for low-emission electricity (solar
photovoltaic [PV] and wind turbines); low-emission hydrogen (electrolysers andnatural gas-based hydrogen production with carbon capture and storage [CCS]);
low-emission synthetic hydrocarbon fuels (including direct air capture [DAC] andbioenergy with carbon capture [BECC]); electric vehicles (EVs); fuel cell trucks;
and heat pumps. We also applied the risk assessment to the infrastructure
underpinning these supply chains, including electricity networks, hydrogentransport and storage, and CO2 management. The next section presents theresults of this assessment, as well as an assessment of how the various risks andvulnerabilities can be reduced and recommendations for government policy
prioritisation.

Policy approaches
It is the job of governments, in collaboration with industry and other stakeholders,to create conditions that encourage the development of clean technology supply
chains. Governments need to develop a cohesive a policy approach concerning
supply chains, comprising a set of measures targeting specific steps to address
supply chain development barriers as part of a broader set of energy and climate
policies to achieve net zero emissions. An extensive range of policy tools andmeasures, including various instruments for demand creation, innovation supportand investment risk mitigation, have already been proven effective to stimulateclean technology and fuel markets. They now need to be applied to their supply
chains.

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There are a variety of ways in which governments can and do stimulate investment
in clean technology supply chains. A mixture of technology-push policies that drive
innovations to market (e.g. funding research, development and demonstration[RD&D] to reduce costs and risks) and market-pull polices that incentivise theiruse and stimulate economies of scale has generally proven to be the most costeffective approach to deploy clean energy technologies (see Box 6.1). A range ofmarket-pull policies can also be used to stimulate demand for clean energy
technologies, products and services, facilitating their market uptake. Market
deployment boosts economies of scale and learning-by-doing benefits, which
improves the performance and reduces the cost of technologies, and builds
investor confidence in the prospect of the technologies becoming competitive.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Both policy approaches can draw on a range of financial and regulatory
instruments. Financial measures include energy and carbon taxes or penalties, aswell as subsidies such as grants, tax credits, low-cost loans and feed-in tariffs.
Regulatory measures include energy and emissions standards, restrictions on theuse of certain technologies or fuels (e.g. a ban on oil-fired boilers),
labelling/certification schemes, infrastructure planning and permitting, mandates(e.g. EV mandates and renewable portfolio standards), and direct government
procurement, programmes and investment. Such policy instruments are centralcomponents of the climate and energy policy toolkit, and when combined with anindustrial policy framework, can be applied to make supply chains more secure,resilient and sustainable.
The energy system transformation needed to achieve net zero emissions,involving a broad portfolio of technologies, will not happen at the necessary scaleor speed without clearly formulated long-term government strategies, integrated
into overall energy, climate and industrial policy and system planning, to guide andreduce the risks of investment decisions. Such long-term strategies need to beclear and incorporate near-term priorities, and their progress needs to be tracked
against medium-term milestones to make them credible and to secure buy-in frombusinesses and investors.

Box 6.1

Case study: The solar PV supply chain in China

China dominates all segments of the solar PV supply chain – the result of morethan two decades of government policies to develop a domestic industry. The initial
impetus came from the 10th Five-Year Plan for 2001-2005, which set a vision for
scaling up solar PV cell and module manufacturing. In its 11th Five-Year Plan
(2006-2010), emphasis was on promoting domestic polysilicon and equipment
manufacturing through grants, having identified reliance on imports of thesematerials as a hinderance to manufacturing PV cells.
Policy incentives initially targeted production. Grants, low-cost loans and funds
from the Ministry of Science and Technology led to the establishment of several
pioneering domestic manufacturers. The government also provided grants and tax
incentives to import manufacturing equipment from Europe and the United States
until Chinese companies were able to develop their own equipment technologies.
In the absence of domestic demand, Chinese solar PV manufacturers initiallysought to expand sales by exporting, improving their cost-competitiveness througheconomies of scale and integration of supply chain segments.

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Policies later shifted to boosting domestic demand to support climate change
mitigation efforts and give further impetus to domestic manufacturing, with China
becoming the world's largest market in 2013. The first major subsidy programme
supporting demand – the Golden Sun programme, launched in 2009 – provided

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Chapter 6. Policy priorities to address supply chain risks

grants for nearly 6 000 MW of capacity using efficient and proven technologies.
The government also introduced a feed-in tariff in 2011 and incentives for more
efficient cell technology under the Top Runner Programme in 2015, which
prompted Chinese manufacturers to shift their focus from multicrystalline to more
efficient monocrystalline technology. Economies of scale and technologicaladvances led to a drop in the average price of a PV module from around
USD 4.5/watt (W) in 2005 to USD 1.5/W in 2011. In 2021, China announced plans
to carry out demonstration programmes for distributed rooftop solar PV to
incentivise counties to deploy rooftop systems.
Source: IEA (2022b).

Collaborating on supply chain development
Collaborative efforts focusing on innovation and investment will be central to theprocess of developing policies for secure, resilient and sustainable supply chains.
Making net zero emissions a reality calls for a singular, unwavering focus from allgovernments in collaboration with businesses, investors and citizens, on all
aspects of the clean energy transition. All stakeholders need to play their part in
identifying and mapping out potential opportunities and vulnerabilities in supply
chains, taking account of local circumstances and the specific characteristics ofeach sector and technology. This requires transparent public dialogue andconsultations, developing programmes to boost skills in emerging industries andsupporting the growth of new job opportunities in more sustainable economic
activities.

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It is important that governments work together in an effective and mutually
beneficial manner to implement coherent measures that cross borders. Taking a
regional or international approach can facilitate the identification of opportunities
to develop common standards and approaches, as well as promote the sharing
best practices and provide a platform for co-ordinating the development of clean
technology supply chains (see Box 6.2). In particular, accelerating innovation,
developing international standards and co‐ordinating the scale-up of clean
technologies and their associated supply chains must be done in a way that links
national markets. International standards are important to support thedevelopment of markets for clean technologies and their associated supply
chains, as they facilitate trade and technology transfer. They are needed toovercome technical barriers in international commerce caused by differencesamong technical regulations and standards developed separately by countries,
national standards bodies and companies, and should be aligned withsustainability and climate goals. For instance, the application of traceability
standards in clean energy is progressing, especially in advanced economies, butmore attention is needed to ensure sustainable technology supply chains.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Co‐operation must also recognise differences in the stages of development ofdifferent countries and the varying situations of different parts of society. For many
wealthy countries, international co-operation is critical to achieve net zero
emissions. For many emerging economies, building these supply chains in theabsence of international assistance, including sustained and active technical cooperation and support, will be impossible.
Government collaboration and co-operation should focus particularly on creating
rules-based, transparent markets for clean technology supply chains. Internationaland multi-stakeholder co-operation can facilitate the transfer of knowledge withrespect to emerging technologies and avoid bottlenecks in their supply chains
when they reach the commercialisation stage. This is particularly important in the
middle and later steps of the supply chain: for example, manufacturers must be
ready to boost output if there are new innovations further up the supply chain, anddemand signals need to be sent to stimulate consumer interest, such as for nearzero emission steel, as new production technologies become available.

Box 6.2

Case study: Strategic partnerships in clean energy supply
chainsGovernments are already establishing strategic partnerships in the field of clean
energy supply chains. For example, in May 2022, 13 nations agreed to the IndoPacific Economic Framework for Prosperity, including a focus on securing criticalsupply chains to ensure access to key raw and processed materials,
semiconductors, critical minerals and clean energy technologies.
In the European Union, the Action Plan on Critical Raw Materials, launched in
2020, aims to reduce dependence on single supplier countries by developing
strategic partnerships to diversify the supply of sustainable critical raw materials.
Under this plan, the European Union signed an agreement with Canada andconvened in February 2022 to further develop policies, including to secure financial
support for critical mineral projects and develop environmental, social andgovernance (ESG) criteria and standards.
Zambia and the Democratic Republic of Congo signed a co-operationagreement in April 2022 to facilitate development of the battery supply chain forEVs. The two countries, both major producers of key critical minerals for EV
batteries (cobalt and copper), established a Battery Council to oversee the newagreement. The agreement is expected to provide a framework for bilateral cooperation. In December 2022, the United States signed a memorandum of
understanding with the two countries to aid this effort by providing technicalassistance for the EV supply chain and is exploring financing and support
mechanisms for investment.

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Sources: EC (2020); United States, DOS (2022).

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Prioritising policy action
Based on analysis in the previous chapters and results of the risk assessment
framework (presented below), we have developed a set of policy
recommendations that governments can use to prioritise action to lower the riskof and vulnerability to major supply disruptions, while accelerating clean energy
technology deployment. The policy recommendations aim to equip policymakers
with the tools necessary to accelerate clean energy transitions by anticipating andalleviating bottlenecks; secure supply chains through diversification; boost
resilience by reducing input needs; and establish sustainable supply chains byaddressing emissions and other harmful environmental and social effects.
Table 6.2 summarises the recommendations and they are discussed in turnbelow. Real-world case studies showcase how governments are applying therecommended actions.
Table 6.2

Policy recommendations for secure, resilient and sustainable supply chains

Review permitting andapproval processes [Casestudy: Box 6.5]••

Establish clear permit approval timelines and requirements
Create a “strategic project” designation for access toaccelerated processes, such as a one-stop shop for permitting

Prioritise and co-ordinate therollout of enabling
infrastructure [Case study:
Box 6.6]•

Draw up long-term plans for parallel development of clean
electricity generation and network expansion requirements
Plan and support industrial clusters
Provide technical assistance to emerging economies

Support recruitment, training
and accreditation
programmes [Case study:
Box 6.7]

•
•
•
•

•

Earmark funds to address specific supply chain gaps
Facilitate communication with companies through partnerships,
initiatives and joint ventures
Improve access to low-cost financing for demonstration projects

Develop geological surveys
for critical mineral resources••

Support critical mineral mapping efforts
Encourage collaboration and data-sharing

Consider critical mineralstockpiles•

Carefully design stockpiles to avoid exacerbating shortages•

Use tax incentives, early-mover grants and low-cost financing to
reduce risks for capital-intensive projects
Leverage funding from national development banks for grants,
technical assistance, credit enhancements and loan guarantees

Step up innovation
programmes [Case study:
Box 6.8]

Design industrial strategies
to incentivise investment[Case study: Box 6.9]
Co-ordinate supply chain
assessments••

Provide funding for apprenticeship opportunities, or requirethem as part of public procurement tenders
Harmonise accreditation standards•••

Create a new workstream under the Clean Energy Ministerial
Provide guidance to companies to assess and manage supply
chain risks (e.g. methodology, common definitions, indicators)

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Secure supply chains

Accelerate the clean energy transition

Key recommendations

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Key recommendations

Establish sustainability

Boost resilience

Review design andmanufacturing regulations•

Move from prescriptive to performance-based design standards

Promote repairability andlonger lifetimes [Case study:
Box 6.11]
Explore opportunities torepurpose infrastructure[Case study: Box 6.13]••

Establish requirements to build repairability into design stages
Create remanufacturing and second-life application
programmes
Examine reuse of retired coal power plants and infrastructure
Identify opportunities to repurpose pipelines and revise
decommissioning requirements

Leverage competitive
advantages•

Choose where to specialise based on geographic andworkforce advantages

Increase material reuse,recyclability and recycling
rates [Case study: Box 6.14]••

Establish circularity roadmaps and material recovery targets
Adopt product stewardship and extended producer
responsibility policies
Develop taxonomies for low- and near zero emission products
and materials
Require the use of traceability standards in public procurement
tenders

Adopt standards for clean
technologies and traceability[Case study: Box 6.15]

•
•

•
•

Consider ESG regulations[Case study: Box 6.16]•

Draw on the OECD’s Due Diligence Guidance for Responsible
Supply Chains

Support near zero emission
material production [Casestudy: Box 6.17]•••

Use public procurement for demand creation
Create lifecycle-based emissions standards for final products
Establish international sectoral agreements or clubs

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 (see Chapter 2). Ambitious government policies are needed to encourageboth 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.

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Our assessment of selected global supply chain risks shows that, among thedifferent supply chains steps, infrastructure deployment to enable hydrogenproduction and CO2 management is most at risk of falling short of the rate requiredin the NZE Scenario, owing to long lead times and large investment gaps. This isimportant because infrastructure affects the deployment of multiple supply chains,
including, within the group studied in this report, electrolytic and natural gas-basedhydrogen with CCS, fuel cell trucks, and low-emission synthetic hydrocarbon fuelproduction (Figure 6.1). Mining also presents a risk for supply chains that rely
heavily on critical minerals (fuel cell trucks, electric cars, solar PV, wind andelectrolytic hydrogen), while risks associated with manufacturing and installation
mainly concern some large-scale, site-tailored technologies (natural gas-basedhydrogen production with CCS, BECC, and synfuels) that require substantial
investments and involve long installation lead times.

Energy Technology Perspectives 2023

Figure 6.1

Chapter 6. Policy priorities to address supply chain risks

Risks threatening acceleration of the global clean energy transition

IEA. CC BY 4.0.
Notes: BECC = bioenergy with carbon capture; DAC = direct air capture. Supply disruption likelihood is based on leadtimes to deploy new facilities on a scale of 0 (shortest lead time, around 1 year) to 10 (longest lead time, around 10 years).
When different facilities (e.g. for mineral refining and bulk material production) are involved at a given step of the value
chain, the lead time corresponds to the maximum value. Impact is measured by the gap between current announced
investment and that required to achieve projected NZE Scenario deployment in 2030 on a scale of 0 (lowest gap, around0%) to 10 (highest gap, around 100%). For mining and processing, investment shortfalls in copper, cobalt, lithium andnickel were used to rate technologies. For electricity networks, the investment gap is the relative gap between the annual
electricity network investment in 2030 in the NZE scenario and the average according to current policy announcements andcommitments. Arrows indicate how individual points are connected within a supply chain.
Sources: IEA analysis. For data sources and further background on the investment analysis see Figure 1.11, and on thelead times analysis see Figures 1.15 (mining) and 1.16 (material production, manufacturing and installation, infrastructure).

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Along the clean energy and technology supply chains analysed, the deployment ofenabling infrastructure is the element at most risk of falling short of the required NZE
Scenario rate.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Strategic considerations
All supply chains are subject to the risk of bottlenecks emerging periodically as aresult of temporary mismatch between supply and demand at a particular point
along the chain. The global semiconductor shortage that emerged in 2020, which
has caused enormous disruption to supply chains generally worldwide, including
for clean energy technologies, is a prime example of such a bottleneck (seeBox 6.3).
There are several potential causes of bottlenecks, including shortages of criticalcomponents or sub-components and labour, the unavailability of commerciallyproven technologies, logistical problems, unplanned factory closures and weatherrelated events, among many others. The duration of bottlenecks can vary fromdays to years. It can be hard to predict precisely when or where they may occur,
but they can be anticipated and alleviated with appropriate business andgovernment action.
One slightly less obvious solution to the problem of lengthy lead times for supply
chains is to initiate project development earlier in anticipation of future demand
increases. This can be facilitated by improved “signalling”, i.e. the use of morereliable, accurate and earlier demand signals such as corporate and government
plans, strategies and forecasts, or by the creation of more favourable market
conditions through risk-sharing arrangements. Improved signalling could alsoenable the early involvement of stakeholders in the project development process,a critical component of building public trust and social acceptance.
Government prioritisation of key technologies and supply chains is critical in thisregard. Governments need to back up their climate ambitions with credible
roadmaps and implementation plans, detailing how and when specific milestones
are to be met. The greatest uncertainty for businesses and households is theextent of their country’s commitment to meet policy goals. If they do not haveconfidence in their country’s climate policies, they are likely to make investment
and spending decisions based on much more conservative expectations.
We focus here on four strategic areas to address these risks: shortening project
lead times, mobilising investment, hiring and upskilling workers, and boosting
innovation to shorten the time it takes for key technologies to reach the market.

Box 6.3

Case study: Policy responses to the semiconductor shortage

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The global semiconductor or “chip” shortage that emerged in 2020 has caused
enormous disruption to supply chains generally worldwide. Even before 2020,
difficulties in obtaining equipment to make older types of semiconductors had
begun to emerge, in part due to surging demand as various industries shifted tomore chip-intensive products. The Covid-19 pandemic reinforced these trends byEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

further boosting demand for products that require semiconductors of all types andby cutting supply volumes during lockdowns. Other events such as factory fires,winter storms and energy shortages also contributed.
In response, governments around the world have taken emergency measures toaddress immediate supply shortages. They have also taken the opportunity to
examine their respective supply chains to identify vulnerabilities and propose
longer-term policy solutions to prevent such shortages in the future.
In Europe, in February 2022 the European Commission proposed the European
Chips Act to increase the region’s resilience and reduce external supply
dependence by boosting Europe’s share of global semiconductor manufacturing
to 20% by 2030 compared with just 10% today. The Act will be supported by morethan EUR 43 billion in investment through 2030, of which around EUR 15 billion
will be additional to existing funding, and a similar amount of private sector funding
is being targeted. The Act makes use of a range of policy approaches: direct
investment in new technologies; access to facilities for prototyping and piloting;certification to guarantee quality for critical applications; improved investment
conditions in manufacturing facilities; access to equity financing for start-ups andsmall and medium-sized enterprises (SME); support for workforce development;
and global partnerships with like-minded countries.
The United States conducted a comprehensive review of a number of criticalsupply chains, including for semiconductors in 2021, resulting in many
recommendations to develop resilient and reliable semiconductor supply chains.
They include pursuing a policy of “reshoring” by encouraging domestic
manufacturing and RD&D, and “friend-shoring” by working collaboratively with likeminded economies to secure supply chains. A number of global semiconductor
manufacturers have since announced plans to expand manufacturing capacity in
the United States, including a USD 20-billion investment by Intel and a
USD 17-billion investment by Samsung. To aid this effort, in August 2022 theCreating Helpful Incentives to Produce Semiconductors for America Act and theScience Act of 2022 were signed into law to promote domestic semiconductor
manufacturing and research, and to accelerate the design, development, andmanufacturability of next-generation microelectronics. The law includes federal
incentives such as tax credits for manufacturing facilities and funding for workforce
development.

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In Australia, the government has launched a Modern Manufacturing Strategy,
making AUD 1.5 billion in funding available over four years in response to Covid-19
related supply chain disruptions. Building resilience into supply chains of products
critical to the national interest, including semiconductors, is a central componentof the strategy, with AUD 107 million in grant funding allocated for supply chain
resilience initiatives. The grant programme aims to help Australian businesses
invest in new equipment, technology, skills and processes, including required raw

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risksmaterials, intermediate materials and specialised manufacturing equipment. A
specific goal is to increase Australia’s share of the global semiconductor supply
chain, building on existing strengths and areas of competitive advantage. The
strategy also established the Office of Supply Chain Resilience.
Sources: EC (n.d.); The White House (2022a); Australia, Department of Industry, Science and Resources (2020).

Shortening lead times
Although minimising lead times to speed up deployment can reduce costs andincrease the competitive advantage of projects, it is often difficult in mature
sectors. The largest gains could be made by focusing on the supply chain
elements with the longest lead times, such as exploration for new resources inmining, which can take decades. Risk-sharing arrangements between the public
and private sectors can help reduce costs and accelerate this process, withfunding of precompetitive exploration (carried out before a bidding process for
exploration licences is launched) being particularly vital. Developing skills in thisarea can also accelerate exploration activities, as can using best practices inallocating licences and recouping inactive ones.
Focusing on elements common to several supply chains could also help cut leadtimes efficiently. For example, obtaining financing can cause delays in manycases, but can be addressed through capacity-building in the financial community,
such as in multilateral development banks. Redirecting financing and encouraging
lenders to prioritise projects that are compatible with net zero goals is essential.
Shortening the time needed to build new clean technology supply chain elements
could also help reduce costs and boost investment, indirectly boosting deployment
as well. Spending capital closer to the completion of a project saves on borrowing
costs and raises investment returns. A project’s construction costs can be reduced
by around 2.5% if the construction window is shortened from three to two years at
a 5% cost of capital, assuming evenly spread construction spending. For projects
with higher financing costs such as those often seen in emerging economies, this
impact is magnified. For example, for the same reduction in construction time, thecost is reduced by 7.1% with a 15% cost of capital. Reducing lead times also
reduces the amount of time capital is locked up in each project, and hence
increases the effective pool of capital available for projects to access. Conversely,
anything that delays project timelines increases the cost of capital by raising
uncertainty and risk, hence deterring investment.

Mobilising investment through policy

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All governments would need to have consistent and focused policies to mobilise
the scale of supply chain investment envisioned in the NZE Scenario. Global
energy sector investment requirements more than double between 2021 and
2030, with most of the increase occurring in emerging markets and developingEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

economies (Figure 6.2). The bulk of this investment is needed for clean energy
technologies. Given public funding constraints, the private sector would need tocontinue to provide most new investments. Enhanced collaboration amongdevelopers, investors, public financial institutions and governments could help
mobilise private capital, which will be particularly important in the next few years
as novel demonstration and infrastructure projects are launched.

USD (2021) billion

Figure 6.2

Annual energy sector investments by regional grouping in the NZE
Scenario

3 000

2 000
Other
Clean energy

1 000

0

ADV

EMDE
2021

ADV

EMDE
2030

ADV

EMDE
2050

IEA. CC BY 4.0.
Notes: ADV = advanced economies; EMDE = emerging markets and developing economies; NZE Scenario = Net Zero
Emissions by 2050 Scenario.
Source: IEA (2022c).

Clean energy investment needs nearly triple for advanced economies and nearly quadruple
for emerging markets and developing economies by 2030 in the NZE Scenario.

It is crucial to align policy support for clean energy supply with demand to avoid
supply chain imbalances and inefficiencies. Financing investments will require
access to financial support mechanisms and low-cost financing such as blendedfinance solutions, particularly in emerging economies. Central banks around theworld have recently been raising interest rates in response to rising inflation,
pushing up the cost of debt in energy-related sectors by over 30% from prepandemic levels (IEA, 2022c). Keeping financing costs low will be critical toaccelerate energy transitions as the energy sector becomes more capitalintensive.

Accrediting training schemes to help alleviate skill gaps

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Uncertainty about the pace of the clean energy transition also affects workforce
training and upskilling. Workers are less likely to invest time or money to gain theEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

new skills necessary to work with clean technologies if they are uncertain about
when or the extent to which those skills will be needed. Investment in workforce
training programmes is essential to establish a qualified workforce and makeenergy transitions “people-centred” to ensure that the benefits and costs involved
are distributed fairly and in a way that protects society’s most vulnerable (IEA,
2021a). The clean energy sector already faces difficulties hiring personnel to keep
pace with demand, and labour shortages have held back investment in somecountries (see Chapter 2).
To avoid bottlenecks, governments can play an important part in workforce
training, education and reskilling programmes as demand for clean energy jobs
increases, especially for technologies with long lead times. They have a moral
obligation to ensure a just energy transition for all and support workers in sectors
where employment may be reduced or lost. 68 Several cases of harmful
consequences of a failure to set out clear policy goals have already emerged. For
example, the UK heat pump sector has cited ambiguous government signals about
future policy support as a deterrent to investing in worker training, resulting in ashortage of qualified installers as demand increases (Norman and Regan, 2022;
Nesta, 2022).
In response to the growing need for new skills, several countries and companies
have begun to establish new accreditations – evaluations of conformity withrecognised standards performed by independent third-party organisations – fortraining in the clean energy sector (see Table 6.3). Today, accreditations forenergy supply chains are primarily available for installation (mainly for solar PV
and wind systems, and for heat pumps in some countries), and in some cases for
operations and maintenance. Accreditations in raw material extraction andmanufacturing are rare, as both typically rely on in-house worker training tailored
to a specific product.
Well-organised and accredited training programmes can translate into savings forclean energy companies of costs associated with creating or finding appropriate
training options, which could help reduce technology costs. Certification canensure high-quality products and installation. Poor installation of clean energy
technologies poses a significant risk for emerging industries, as it can damage thereputation of products and undermine their uptake. Industry-wide safety standards
and certifications can also facilitate widespread adoption of best practices.

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68
Set up by the IEA in January 2021, the Global Commission on People-Centred Clean Energy Transitions has formulated
a set of actionable recommendations to influence the clean energy policies and programmes of governments, funders,investors and international organisations to maximise their benefits to people and ensure the overall success of clean energy
transitions (https://www.iea.org/programmes/our-inclusive-energy-future#recommendations).

Energy Technology Perspectives 2023

Table 6.3

Chapter 6. Policy priorities to address supply chain risks

Accreditation requirements for clean energy sector workers by technology
in selected countries, 2022
United States

United Kingdom

China

India

Solar
PV

Requirements varyby state. About onethird have solarspecific certifications.

Although not legally
mandated, installers
must be certified by
the MCS for the solar
system to benefit
from government
incentives.

Mechanical andelectrical equipment
installers are required
to havecorresponding
qualifications.

Requirements varyby state; somejurisdictions require
licenced electrical or
general contractors.

Wind

No licence or
standard certificationis required to becomea wind turbine
technician, but the
US DOE maintains alist of wind energy
education andtraining programmes.

Employers may
require engagement
in or certification fromone of several
governmentsponsored training
schemes.

No specificcertification isrequired to work on
wind turbines, thoughsome employees
may need to havestate constructionengineeringcertificates.

No specificcertification isrequired, thoughemployers may
demand engineering
degrees or training
certificates.

EVs

Certification from the
National Institute for
Automotive Service
Excellence is usuallyrequired by larger
repair shops ordealerships.

The automotive
industry is generally
unregulated, so no
certification isrequired to service
vehicles.

Personnel performing
maintenance on EV
battery systems must
hold a generalelectrician certificate
and all techniciansmust undergo training
to gain generalcertification.

There is no single
certification to workon EVs. Mechanics
often begin theircareers asapprentices.

Heat
pumps

HVAC technician
licence andelectrician licencerequirements vary bystate, but alltechnicians who workwith equipment
containing
refrigerants must be
certified.

Installers must hold acertification inplumbing, HVAC, gasor similar to becertified by the MCS
and qualify forgovernment
incentives.

A voluntary industry
Qualification
Certificate System isin place for personnel
working withrefrigerants.

The servicing sector
remains largely
informal, and there isno universal
certification system
for HVAC
technicians.

Notes: PV = photovoltaic; EV = electric vehicle; HVAC = heating, ventilation and air conditioning; MCS = microgeneration
certification scheme.
Sources: RSI (2022); MCS (2022); China, NEA (2022); India, MNRE (2019); d’Estries (2021); United States, DOE (2022a);
National Careers Service (2022); Chinalawinfo (2022); India, National Qualifications Register (2021), United States, BLS(2022); IMI (2018); CAAM (2021); The Hindu (2022); IEA (2022d), Global EV Outlook 2022; UNEP (2015); Bhasin, Gorthi
and Chaturvedi (2020).

Reducing the time to get new technologies to market
Reducing the length of time from a technology’s conception until it iscommercialised and considered “material in the market” (i.e. well establishedcommercially) is critical. A range of measures can help meet this objective.

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Collaboration among firms, even in highly competitive industries, can improve
innovation efficiency. For example, in the steel sector, Baowu Steel launched theEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Global Low-carbon Metallurgical Alliance in 2021 to accelerate the pace oflearning regarding novel technologies. To date, the majority of progress in key
near zero emission iron and steel projects has been in Europe and North America.
These global collaborative initiatives can help reduce time to market and build themarket faster.
Reducing the time to market for a particular technology can also be achieved byincreasing spending on innovation (including by targeting innovation at areas ofthe supply chain most in need) and improving the efficiency of innovation. Areas
with potential spillovers between technologies, where breakthroughs could be
relevant for multiple technology areas (such as material innovation useful for bothelectrolysers and batteries) should be high-priority targets.
Public sector energy research and development (R&D) spending is currently
dominated by China (30% of total spending) and advanced economies (66% of
the total) (Figure 6.3). The energy sector made up 5-10% of total public R&D
spending (excluding prospecting for resources) between 2011 and 2020 incountries for which data are available (OECD, 2022).

USD billion

Figure 6.3

Public energy R&D by region and corporate energy R&D by technology
Government R&D

40

Corporate R&D

120
100

30
80
60

20

40
10
20

2015

2016

2017

2018

2019

2020

2021

2015

2016

2017

2018

2019

2020

2021

NuclearBatteries, hydrogen and energy storage
Thermal power and combustion equipment
Coal
Renewables
Oil and gas
Electricity generation, supply and networks
Automotive

Rest of world
Japan, Korea, Australia and New Zealand
EuropeNorth America
China

IEA. CC BY 4.0.
Note: R&D = research and development.
Source: IEA (2022c).

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Public sector energy R&D spending is currently dominated by China (30%) and advanced
economies (66%).

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Innovation, particularly in resource extraction, material processing and end-of-lifestages to reduce mineral and material dependency, will play a vital role inalleviating future bottlenecks for clean technology supply chains. Massive growthin the need for critical minerals to manufacture key components in clean
technology supply chains in the NZE Scenario will put pressure on existing links.
More and more companies are therefore searching for untapped deposits inremote corners of the world, often in places with limited infrastructure, and leadtimes to build new capacity are long. Policy support and co-ordination in thisregard are crucial. Innovation policies can help reduce mineral dependency byenabling the elaboration of methods to recycle raw materials and the developmentof low-cost alternative materials to manufacture clean energy technologies anddeliver the same service, allowing investors to better adapt to volatile prices anduncertain demand by increasing the rate of extraction and lowering costs.

Policy recommendations
We focus below on several specific measures targeted at clean energy andtechnology supply chains that can be particularly effective in reducing bottlenecks
as clean energy transitions progress, namely strategic reviews of permitting andapproval processes to improve efficiency and reduce lead times; prioritising andco-ordinating the rollout of enabling infrastructure; supporting recruitment andtraining programmes; and enhancing innovation funding and programmes totarget key challenges within energy supply chains.

Box 6.4

Case study: Strategies for clean energy supply chains in the
United States and EuropeIncrease critical material availabilityExpand domestic manufacturing capabilities



Invest in and support the formation of diverse, reliable and socially responsible
foreign supply chainsIncrease clean energy adoption and deployment

Improve end-of-life energy-related waste management



Attract and support a skilled workforce for the clean energy transition

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In February 2022, the United States Department of Energy (DOE) released acomprehensive report outlining how it plans to increase the security and resilienceof domestic clean energy supply chains. Based on detailed assessments of 13
energy technologies and components and a review of the supply chains of criticalproducts, including semiconductor manufacturing and advanced packaging, largecapacity batteries and critical minerals and materials, the strategy outlines actions
to achieve seven key objectives:

Energy Technology Perspectives 2023



Chapter 6. Policy priorities to address supply chain risks

Enhance supply chain knowledge and decision making

The strategy takes a “whole of government” approach and recommends more than60 specific policy actions across the federal government, including loans,government procurement, regulations and workforce development. It further
recommends actions that the US Congress should take, including introducing tax
incentives, procurement mandates, funding for recruitment and training, increased
RD&D and trade policies.
In Europe, in May 2022 the European Commission presented its REPowerEU
Plan in response to the global energy market disruptions brought on by Russia’s
invasion of Ukraine. Measures in the plan, which aims to increase energy savings,
diversify energy supplies and accelerate renewable energy deployment, include:Forging new energy partnerships with reliable suppliers, including future
co-operation on renewables and low-carbon gases.

Rapidly rolling out solar and wind energy projects combined with hydrogenproduction.

Introducing new legislation and recommendations for faster permitting of
renewable energy systems, especially in areas of low environmental risk.



Investing in an integrated and adapted gas and electricity infrastructure
network.

Ensuring industry access to critical raw materials by identifying mineral
resources and supporting critical raw material projects of strategic European
interest while ensuring a high level of environmental protection, including
through projects that promote a circular economy and resource efficiency.

Establishing a comprehensive regulatory framework for hydrogen.

Sources: United States, DOE (2022b); EC (2022a).

Review permitting and approval processes

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Permitting and approval processes are a key step in the development of a clean
energy project, whether it involves deploying a specific energy technology ordeveloping a new mine, processing facility or factory for producing or assemblingmaterials or components. As the risk assessment shows, establishing supporting
infrastructure for clean technologies, such as for hydrogen and CO2 management
and for mining projects, suffers from particularly long lead times (see Figure 6.1).
It can potentially take decades for these new projects to come on line due to avariety of factors, including permitting and litigation delays. Involving stakeholders
early on in these processes can help ensure that environmental impacts areadequately considered, the public is consulted and contingency plans are put inplace, helping to mitigate any potential delays. Improving the efficiency of thepermitting process to allow for the timely and transparent approval of permits forEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

new projects could help accelerate the deployment of clean technology supply
chains and ensure public engagement, without undermining the need to meetenvironmental standards.
To this end, governments can establish clear and direct permit approval timelines
and requirements, with flexibility built into regulations to give projects theopportunity to apply for application extensions. This can enable developers tobetter plan project timelines and reduce regulatory bottlenecks. While the lengthof permitting procedures will inevitably vary by country, governments should
provide a clear indication of how long they are likely to take. One approach to
improve the efficiency of the process is to create a “strategic project designation”
in permitting regulations that allows clean energy and related supply chain projects
access to accelerated processes and resources without compromising
environmental, labour or sustainability standards (see Box 6.5). Governments
would need to determine which projects fall into this category, based on whether
they are in the public interest and advance energy and climate policy goals. This
could include establishing a one-stop shop, whereby a single regulatory body or across-government co-ordinating group is responsible for co-ordinating thepermitting process when it involves different government agencies. This body
could also offer guidance and support on how to navigate permitting frameworks
if a proposed project involves multiple jurisdictions.
It is important that governments provide regulatory bodies with the necessary
resources and capacity to oversee and undertake permit approvals. This includes
ensuring adequate funding, technical expertise and staffing to review and process
permit applications, as well as establishing channels of communication acrossgovernment agencies to ensure smooth co-ordination.

Box 6.5

Case study: Identifying strategic projects in the European Union

Designates a national authority responsible for facilitating and co-ordinating
permitting for the project.

Requires EU countries to take measures to streamline environmental
assessment procedures to reduce regulatory bottlenecks.

Sets a maximum time limit of 3.5 years to process a project’s permit
application.

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The EU Trans-European Networks for Energy (TEN-E) policy aims to promotelinkages in energy infrastructure among member states. It identifies projects ofcommon interest (PCI) that will have significant impact and provide EU-wide
benefits. Importantly, the PCI designation also gives projects a priority status andaccess to accelerated planning and streamlined permitting arrangements tofacilitate faster commissioning. Specifically, PCI status:

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Granting similar strategic status to new mines and processing or manufacturing
facilities for clean energy projects, as well as to the infrastructure needed tosupport these projects (e.g. electricity transmission and distribution, EV charging,hydrogen and carbon capture, utilisation and storage [CCUS]) could enable
governments to reduce project lead times while still ensuring environmental criteria
are met.

Prioritise and co-ordinate the rollout of enabling infrastructure
Accelerating the deployment of clean energy technologies requires parallel
expansion of the infrastructure required to supply to end users the energy thesetechnologies produce. This includes electricity grids, EV charging infrastructure,hydrogen and CO2 pipeline networks, and CO2 storage facilities, as well as
infrastructure to support increased circularity, such as networks and facilities forcollecting, sorting, and reusing and recycling materials at the end of their useful
lives. Early government action is essential to ensure that buildouts and upgradesof this enabling infrastructure keep pace with technology deployment to prevent
bottlenecks (see Chapter 5).
For electricity systems, governments have a crucial role in drawing up long-term
visions and plans to ensure that electricity network expansion and modernisation
advance in parallel with the deployment of clean electricity generating
technologies and rising demand, including from emerging end uses such as EV
charging (see Box 6.6). Transmission capacity and generator connection
bottlenecks are major obstacles in expanding the role of clean electricity.
Governments and regulators need to examine current transmission planningpolicies and, if necessary, revise them in light of the time required for permitting.
Regulators can convene system operators to discuss multiregional planningapproaches that indicate where additional transmission expansion is needed, andthey can help co-ordinate the permitting process for large transmission projects.

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Government support and co-ordination can help ensure that enabling
infrastructure is built out in a timely way in the places where it is needed. This isparticularly important for hydrogen and CCUS infrastructure, given the amountneeded (see Chapter 5), and planning industrial clusters can help facilitate this.
Public funding, such as grants, loan support and direct equity stakes, can help
strengthen the business case for infrastructure projects, which usually involve verylarge upfront investments (IEA, 2020a). Governments can also help organise
technical workshops in partnership with industry to improve understanding of theextent and timing of infrastructure requirements as clean energy deployment
progresses, and they can conduct public outreach campaigns to allay concerns
about the social and environmental effects of infrastructure projects.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Infrastructure banks could be an important avenue through which to mobilise andtarget investment in clean energy infrastructure, while also providing technicalassistance on financial aspects and helping streamline approvals. For example,
the European Investment Fund has allocated EUR 400-600 million annually overthe next seven years to infrastructure projects through its Climate & Infrastructure
Funds, with a focus on climate action and environmental sustainability (EIF, 2021).
In emerging economies, attracting investment in infrastructure projects is likely to
be particularly difficult, primarily because of the smaller market size, lack oftechnical capacity in government and a higher cost of capital. The governments ofadvanced economies should provide international assistance in the form oftechnical support for policy development and concessional financing to catalyseprivate investments.

Box 6.6

Case study: A one-stop shop for EV charging support in the
United States

The United States aims to expand its national EV charging network to 500 000
chargers by 2030 – around four times the current number. The federal government
has allocated funding of USD 7.5 billion to support this goal, two-thirds for states
to fund charging stations along highway corridors. It has also announced a numberof measures, including the creation of a joint office run by the DOE and theDepartment of Transportation. The Joint Office of Energy and Transportation will
work closely with state governments, industry and other stakeholders to meet thenational goal, acting as a one-stop shop for resources on EV charging and related
topics. Initially, work will focus on providing technical support to states to deploy
EV charging infrastructure strategically by:Providing data and tools, including installed chargers and designatedcorridors.



Addressing gaps in existing datasets.



Facilitating connections among state governments and experts.

Providing guidance to state governments on federal programmes andregulations related to EV charging infrastructure.

Source: The White House (2022b).

Support recruitment, training and accreditation programmes

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Clean energy transitions must be people-centred and inclusive to ensure equitableand just outcomes and build public support. Governments have a responsibility to
manage the impacts of clean energy transitions, including reinforcing efforts tocultivate a skilled workforce for emerging industries and helping workers
previously employed in the fossil energy sector transition to new fields. Likewise,

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

it is important to protect communities directly affected by new mines, processing
and production facilities, and other related industrial projects.
There is a growing need to recruit and train workers for all segments of clean
energy and technology supply chains, including mining specialists, planttechnicians, engineers, researchers, administration staff, and tradespeople suchas electricians, plumbers and construction workers. In addition, the need for
qualified trainers is rising as workforce requirements expand. For example, afuture hydrogen economy will require specialised trainers to protect hydrogen
workers and consumers from safety risks. A dearth of qualified trainers is alreadyproving problematic in the offshore wind sector, with many industry participants in
Europe asserting that increasing the stock of qualified instructors is a top policy
priority (ETIPWind, 2013).
Offering government support for apprenticeship programmes is one way to boost
the availability of skilled workers for these roles. Although apprentice wages areoften very low, employers in emerging clean energy sectors may still be unable toafford to take them on (Branford and Roberts, 2022). When necessary, offering
direct financial assistance to employers or including a certain number ofapprentices as a requirement in public procurement tenders could improve
workforce capacity and support just transitions. Government authorities could alsoorganise workshops and training events in conjunction with industry to identify
opportunities to transfer skills and could subsidise programmes to help workers infossil fuel sectors acquire skills for other sectors, including clean energy. For some
activities, such as the mining of minerals, the skills required are similar to thoseneeded in coalmining and in oil and gas production (see Box 6.7).
The United Kingdom's North Sea Transition Deal (NSTD), an agreement between
the country's government and its offshore oil and gas industry, is a model for how
governments can enable a more efficient and just transition. NSTD initiatives
include the development of an energy apprenticeship programme that integrates
the currently scattered apprenticeship programmes, as well as stocktaking ofexisting graduate-level training frameworks to facilitate collaboration between
industry and the training sector (United Kingdom, BEIS, 2021).

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Accreditation can be important to increase the size of the workforce andstrengthen skills by reducing redundant training, clarifying what new workers needto learn and incentivising training bodies to improve the quality of their services.
Used wisely, an accreditation system can attract workers to the clean energy
sector by providing a clear pathway to employment, and can also ensure thequality of new supply projects and improve productivity. However, accreditation
could actually lead to hiring bottlenecks if qualifications are too difficult to attain or
too few accredited training schemes are available. International harmonisation ofstandards would help facilitate the free movement of personnel across national
borders when necessary. This is especially relevant for the solar and windEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

industries, in which most workers are involved in installation and therefore moveon to new projects several times a year, sometimes in different countries.
Governments need to work closely with local communities directly affected by newmines, facilities and other projects related to clean energy to understand theirconcerns and needs. This might involve the establishment of an investment orrevitalisation fund for projects that could be particularly beneficial for local
communities.

Box 6.7

Case study: Enhancing transferable skills in Alberta

As part of its minerals strategy, the provincial government of Alberta in Canada
has made developing a skilled workforce one of its guiding principles in expanding
the critical mineral mining sector. The government is supporting the retraining ofcoal industry workers for employment in other sectors, including mineral mining. It
offers dedicated funding and programmes such as the Tuition Voucher scheme,
which provides financial assistance to help coal workers access post-secondary
education to train for a new career. The government has also put in place a labour
and talent strategy to increase work-integrated learning possibilities, expand
apprenticeship opportunities and enhance connections between post-secondary
education and industry.
Source: Alberta, Ministry of Energy (2021).

Step up innovation programmes•Mineral extraction: Increased automation, heavy machinery operating on cleaner
fuels, efficient desalination facilities to extract minerals from less concentrated
ores, increased use of recycled water and digital techniques to identify optimal sites
for mineral extraction.

•

Material production: Near zero emission methods to produce both critical and bulk
materials, production methods that reduce mineral or material waste, and thedevelopment of cost-effective alternative materials with greater efficiency (e.g.
bioplastics and lightweight materials).

•Technology and product design and manufacturing: New designs that use lessmaterial or use smaller amounts of critical materials, designs that facilitate end-oflife recycling, manufacturing techniques with less material waste and zero
emissions manufacturing methods.

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Innovation at different steps in clean energy and technology supply chains is
critical to speed up deployment by reducing bottlenecks, time to market and leadtimes. Key areas where government support for innovation is needed at the four
steps in supply chain stages include:Energy Technology Perspectives 2023•

Chapter 6. Policy priorities to address supply chain risks

Reuse and recycling: Repurposing of existing infrastructure, improved methods for
end-of-life material separation and recovery, first-of-a-kind recycling techniques incritical mineral and plastic sectors lacking well-established techniques, recycling
techniques with a smaller carbon footprint.

Governments should identify technological supply chain gaps, establish a strategicplan for key technologies and earmark funds to finance their development in the fourinnovation areas over a specific time frame to bring them to market in a timely way.
For example, innovation to support material production is under way to address the
anticipated shortfall of iridium for hydrogen electrolysers.
The DOE issued a USD 122-million grant to develop a Catalyst Discovery Engine
that tests novel catalysts that could replace expensive, rare materials such as
iridium. The machine analyses catalyst materials up to 10 000 times faster thanexisting methods and succeeded in developing dozens of viable non-iridium
electrolysers (Hydrogen Tech World, 2022). With respect to technological design,
Kawasaki Heavy Industries is supplying the major German electric power company
RWE with the latest L30A gas turbine, which can run 100% on hydrogen, 100%
natural gas or a mixture of the two. Not only can it be retrofitted to existing natural
gas infrastructure, but the gas turbine also enhances the life of the combustor andsignificantly reduces nitrogen oxide emissions by controlling flame propagation.
International co-ordination of innovation efforts and knowledge-sharing is alsoessential to maximise the efficient use of resources within the short time frames
required by the NZE Scenario. International collaboration is vital to establish bilateral
trade and make the technologies affordable for import countries. It also attracts
foreign investment to export countries to reduce mineral dependency. Project
developers could finance their activities through the strategic use of multiple
innovation funds to bring a clean energy technology supply chain tocommercialisation. Obtaining necessary funds across related technology areas
would reduce time to market, make use of shared infrastructure and enable
developers to capitalise on synergies.
Global initiatives such as Mission Innovation provide a platform for governments tojoin efforts to share RD&D findings in critical innovation areas. At the regional level,
the EU Strategic Energy Technology (SET) Plan better co-ordinates national plans.
Similarly, Japan’s Asia Energy Transition Initiative (AETI) launched in 2021 provides
approximately USD 15 billion for technological innovation and commercialisation
along with USD 10 billion for renewables, liquified natural gas (LNG) and energy
efficiency projects to support the energy transition in Asian countries (Japan, METI,2021).

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Co-ordination within the private sector across various supply chain stages is also
important. For example, heat pump manufacturers should be aware of theinnovation gains offered by certain refrigerants so they are ready to ramp up
production capacity when new refrigerants reach the market. Governments canEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

increase dialogue through partnerships, strategic initiatives, joint ventures thatcombine public and private financing, and knowledge-sharing platforms. Openaccess publishing of government-supported innovation research throughknowledge-sharing requirements could promote co-ordination and innovation.
Streamlining funding application processes, for instance by establishing centralised
platforms that provide access to multiple government funding programmes, could
help reduce the administrative burden for technology developers.
Support for innovation in clean energy and technology supply chains will need to bea key component of the broader step increase in public RD&D funding essential forclean energy transitions. Past innovation experience has demonstrated the benefitsof appropriate targeting and co-ordination. For instance, for many years theJapanese government has supported research into the use of liquified hydrogen asa transport fuel through the New Energy and Industrial Technology Development
Organization (NEDO), which is responsible for public energy RD&D. Stable NEDO
funding for this activity, which did not overlap with private sector efforts, was a crucial
element in the successful commercialisation of the fuel in Japan.
We estimate that at least USD 90 billion in public funding (in real 2021 dollars) willneed to be mobilised by 2026 to support completion of a portfolio of demonstration
projects in critical areas to be on track for net zero emissions by 2050 (IEA, 2022e).
While the budgets required are large, there are historical precedents for the rapid
scale-up of energy innovation efforts, notably after the first oil shocks of 1973-1974,
when IEA member countries collectively more than doubled their spending on nonfossil energy R&D by 1980. To address particularly challenging emissions
reductions, technologies related to hydrogen, CCUS, electrification and bioenergy
are most in need of demonstration, but they represent only about 25% of global
public clean energy RD&D spending funding today. In September 2022, the IEA
released its new Clean Energy Demonstration Projects Database, which maps
major demonstration projects and could help with prioritisation of funds across therange of technology areas critical to achieve net zero emissions.
There are signs that much-needed increases in public funding of innovation could
materialise. In the United States, the 2021 Bipartisan Infrastructure Law and the2020 Energy Act together provide USD 62 billion of funding for major new clean
energy demonstration and deployment programmes, more than tripling total
spending and significantly expanding the overall RD&D budget (United States,
DOE, 2022c). A significant share is expected to go to demonstration projects.
Furthermore, at the Global Clean Energy Action Forum in the United States in
September 2022, more than a dozen countries announced USD 94 billion for clean
energy demonstration projects – exceeding the USD 90 billion in public funding
called for by the IEA and the United States (United States, DOE, 2022d).

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Government support for RD&D needs to be tailored in a way that helps leverage
private sector contributions. Of the USD 117 billion in energy RD&D spent by listedcompanies in 2021, around 60% went to the automotive and oil and gas sectors andEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

around 9% was allocated to renewables (IEA, 2022c). Strategic government
financing mechanisms could help increase private sector RD&D in other criticalsectors (see Box 6.8). It is estimated that approximately 50% of the total capital costof low-emission energy demonstration projects could be obtained from the private
sector.
For large-scale demonstration projects, measures are needed to improve access to
low-cost financing, such as credit enhancement (provisions used by a borrower toreduce debt by improving creditworthiness), risk-sharing schemes and in-kindadvisory support. Demand-pull measures such as public procurement or private
sector buying pools for clean technologies and products can also provide market
confidence to strengthen the business case for innovation. Governments can also
support clean energy start-ups through various mechanisms, including grants
through prizes and calls for projects, loans and loan guarantees, incubators, andpublic investments in venture capital funds (IEA, 2022f). Infrastructure banks could
be a useful model to administer and co-ordinate financing in support of private sector
clean technology innovation. For example, the European Investment Fund under
the European Investment Bank has channelled over EUR 1 billion to climate andenvironment venture capital and private equity funds since 2006 (EIF, 2022).

Box 6.8

Case study: Financing innovation in the European UnionThe Innovation Fund, financed from Emission Trading System revenues,
leverages private financing for large projects covering an entire supply chain
as well as small-scale projects focusing on emerging greenhouse gas (GHG)
reduction technologies through grants in multiple rounds. It aims to support
commercial demonstration of nascent technologies by introducing industrial
solutions into European countries to decarbonise them and support theirtransition to climate neutrality. By financing up to 60% of relevant costs for ten
years after a project enters into operation, the Innovation Fund reduces
investor risk. A third round of funding announced in July 2022 involves EU
investment of over EUR 1.8 billion in 17 large-scale innovative projects. One
is a hydrogen-based iron and steelmaking project involving an electric arc
furnace in Sweden, using pyrolysis and photoelectrocatalytic hydrogentechnologies.

For early-stage technologies, the European Commission funds research
projects under the Horizon Europe programme through grants, prizes andprocurement. The current 2021-2027 programme has a budget of EUR 95.5
billion, of which around EUR 15.1 billion is earmarked for climate, energy andmobility projects, including low-carbon aircrafts, railways, road and maritime
transport, as well as low-carbon steelmaking. Pillar II supports R&I

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The European Union has established several funds and instruments to leverage
private investment in first-of-a-kind clean energy demonstration projects:

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

partnerships for clean energy technologies such as the Clean Hydrogen
Partnership for renewable hydrogen production, storage and distribution.
Pillar III oversees the deployment of industrial applications and technologies.
Under the Horizon Europe programme, the European Commission establishedthe European Innovation Council, which primarily provides grants andinvestments for individual SMEs and start-ups.
Rules governing state aid allow for member states to invest directly in clean
energy technologies when designated “important projects of common
European interest” – ambitious cross-border breakthrough innovation andinfrastructure projects that can contribute significantly to the achievement of
EU strategies, including the European Green Deal. New rules that came into
effect at the beginning of 2022 set the criteria for the European Commission
to assess member state support to projects that overcome market failures andenable breakthrough innovation in key sectors and technologies andinfrastructure investments.

Additionally, the European Union facilitates dialogue and offers in-houseadvisory services through programmes such as the InvestEU Fund, which is
expected to mobilise more than EUR 372 billion of public and private
investment. Potential project applicants can ask the Advisory Hub of theInvestEU Fund for financial advice for projects backed by InvestEU or othersources. InvestEU also manages the EU-Catalyst partnership, which aims tomobilise up to EUR 820 million in funding during 2022-2026 to commercialisetechnologies for clean hydrogen, sustainable aviation fuels, DAC and longduration energy storage.

Sources: EC (2021a); EC (2021b); ERA Portal Austria (2022).

Securing supply chains
A high degree of supply chain concentration – the extent to which market sharesare concentrated among a small number of production facilities, firms, countries
or regions – carries major risks for the security of supply of clean energy
technologies. Concentration at any point along the supply chain makes the entire
chain vulnerable to incidents, be they related to an individual country’s policy
choices, natural disasters, technical failures or company decisions (Table 6.4).
Persistent interruptions along clean energy supply chains can lead to bottlenecks
and drive up the prices of intermediate and final products, delaying energy
transitions, raising the cost of meeting net zero goals and leading to a lessequitable transition (Figure 6.4).

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Today, there is a significant degree of concentration of facilities, firms andcountries across several clean technology supply chains (see Chapter 2). Manyof the raw and intermediate materials and components that comprise clean energy

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

supply chains are produced in a small number of countries or regions, with theleading producer sometimes holding a very large share of the global market for
certain inputs. Medium-term prospects for geographic diversity vary according to
the stage of the supply chain and type of input, with concentration likely to worsen
in some cases and improve in others (see Chapters 3-5). In some cases, supplies
are also concentrated among a small number of companies, carrying a risk ofexcessive market power and higher prices. Overreliance on individual production
or processing facilities and specific technologies also carries supply chain risks,
reducing resilience to shocks (see next section).
Table 6.4

Components of supply chain concentration

Type of concentration

Description

Jurisdictional
concentration

Extent to which production isconcentrated in a single
jurisdiction

Geographic concentration

Extent to which production isconcentrated in a single
geographic area

Facility concentration
Market concentration

Technology concentration

Extent to which production isconcentrated in a single facility
Extent to which production isconcentrated in a single
company
Extent to which global
production is centred on asingle technology

Associated risks potentially causing
supply chain disruption
Domestic policy changes
Geopolitical events
Natural hazards such as earthquakes andfires, and extreme weather events such as
drought and flooding
Technical failures of electricity grids, gas
networks or other infrastructure
Risks cited above
Onsite equipment failure
Risk of collusion, price-fixing and dumping
All abovementioned risks would be amplified,
especially material supply risksIntellectual property rights could slow
technology transfer

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Security risks cut across all steps of clean technology supply chains that areheavily reliant on core technologies, components or materials for which
manufacturing, mining or processing is highly concentrated, such as the supply
chains for solar PV, electric vehicles and wind systems (Figure 6.4). In the caseof solar PV, the supply chain is highly concentrated in China, and alternative
module technologies (such as thin films) and components (such as perovskite
instead of polysilicon) are still immature. In the case of EV battery and wind supply
chains, alternative battery chemistries and permanent magnet technologies arealso far from commercialisation at present. While the manufacturing of thesetechnologies is also highly concentrated, risks can be mitigated by the availabilityof spare manufacturing capacity when utilisation rates are low, as is the case foranode, cathode, battery, and PV module manufacturing. For large-scale sitetailored systems for which installation is also currently concentrated in a handfulof regions, risk is mitigated by the fact that most of them rely on components andparts that are more generic and easily substituted.

Energy Technology Perspectives 2023

Figure 6.4

Chapter 6. Policy priorities to address supply chain risks

Risks to the energy security of global clean energy supply chains

IEA. CC BY 4.0.
Notes: BECC = bioenergy with carbon capture; DAC = direct air capture. The likelihood of energy security risks is based onregional concentration (measured by the share of the largest mining, manufacturing or installation region in global supply)
on a scale of 0 (smallest share of top region: around 40%) to 10 (largest share of top region: 100%). When a step involves
different components or technologies, the rating is based on the most concentrated element. For gas-CCS H2, DAC, BECC
and synfuels, concentration relates to the location of the plants. Impact is measured by the availability of alternative
materials, processing/ manufacturing technologies, or spare capacity (using the average utilisation rate of existing
capacity), evaluated on a scale of 1 to 5, with 1 corresponding to readily available and 5 to no availability. Arrows indicate
how individual points are connected within a supply chain.
Sources: IEA analysis. For data sources and further background on the regional concentration analysis see Figures 2.2(mining), 2.3 (mineral refining), 2.5 (bulk material production), 2.6 (manufacturing) and 2.7 (installation and infrastructure).

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Security risks cut across all steps of clean energy supply chains that are heavily reliant ona core technology, material or component for which supply is highly concentrated.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Strategic considerations
Geographic concentration and market concentration – and policies to address
them – are inherently interlinked. Governments cannot practically seek to control
all dimensions of supply chain concentration. In particular, the absence of minerals
within a country’s borders limits the government’s ability to reduce its reliance on
imports. Governments should seek to harmonise their industrial strategies with
their energy and climate policies, taking account of the constraints and incentives
facing producers, manufacturers and financiers.

Geographic concentration and industrial strategy

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The preceding chapters of this report outline in detail the current state ofgeographic concentration for key components of clean technology supply chains.
Mining is often the focus of discussion around geographic concentration in clean
technology supply chains, partly because it is linked to natural resource
endowment. For the mining of key critical materials – copper, lithium, nickel andcobalt – the top three countries account for around 45-95% of global output today,with the largest producer country accounting for just over 70% (Figure 6.5). For
material production, the degree of geographic concentration is somewhat lower,
mainly due to the presence of mature markets for both inputs and outputs. For the
manufacturing of key clean mass-manufactured technologies – solar PV(modules), wind (nacelles), batteries (for EVs) and electrolysers – the largest three
countries account for 70-85% of global manufacturing capacity, with the largest
single producer accounting for up to around 70%.

Energy Technology Perspectives 2023

Figure 6.5

Chapter 6. Policy priorities to address supply chain risks

Geographic concentration for key critical minerals, material production
and manufacturing operations for clean energy technologies

Manufacturing

Electrolysers
Heat pumps
Solar PVWind

Critical mineralmining

Critical material
production

Bulk material
production

Batteries
Steel
CementAluminium
CopperLithium
NickelCobaltCopperLithium
NickelCobalt0%Largest producing country

20%

40%
Second-largest

60%
Third-largest

80%

100%

Other countries

Notes: “Wind” corresponds to nacelle manufacturing. “Solar PV” corresponds to module manufacturing. “Batteries”
corresponds to electric vehicle batteries.
Sources: Wood Mackenzie (2022); BloombergNEF (2020); BloombergNEF (2021); USGS (2022); WorldSteel (2022); S&P
Global (2022a); World Bureau of Metal Statistics (2022).

The top three producing countries account for more than half of global output for mostcomponents and processing steps of clean energy technology supply chains.

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Many countries and companies are already acting, aiming to cement their place inthe new energy economy – one that is on track to deliver net zero emissions forthe energy system. The pipeline of announced projects for mass manufacturing ofclean energy technologies paints a mixed picture, but a distinctly positive one forsome technologies at the global level. This is particularly true for solar PV, forwhich announced manufacturing capacity for finished modules – and their main
components – already exceeds NZE Scenario requirements for 2030 (Figure 6.6).
For others, announced manufacturing capacity exceeds the level required for
deployment under announced government targets, as described by theAnnounced Pledges Scenario (APS).

Energy Technology Perspectives 2023

Share of 2030 APS deployment

Figure 6.6

Chapter 6. Policy priorities to address supply chain risks

Announced project throughput and deployment for key clean energy
technologies in the APS and the NZE Scenario

400%

300%

200%

NZE
APS

100%

0%

Solar PV
2021

Batteries

Wind

Announced projects: committed

Heat pumps

Electrolysers

Announced projects: preliminary

Fuel cells
Gap to NZE
IEA. CC BY 4.0.

Notes: PV = photovoltaic; APS = Announced Pledges Scenario; NZE = Net Zero Emissions by 2050 Scenario. Announced
projects for expanding capacity or building new facilities include projects that are at different stages of development, withsome already under construction (committed) and others not yet at the final investment decision stage (preliminary).
Deployment and throughput are expressed in physical units, normalised to APS 2030 deployment levels. Solar PV refers tomodule manufacturing capacity. Batteries refers to EV batteries. Wind figures are calculated using an average of thecapacity ratings for blades, nacelles and towers, both for onshore and offshore installations. Heat pumps refer to output
capacities of equipment used primarily for heating.

Announced manufacturing capacity can meet ambitious climate goals by 2030, butinvestment is firm for only around 10-40% of announced projects globally.

However, two aspects of these announced projects need to be scrutinised, aside
from the significant gaps that remain for wind, electrolysers, heat pumps and fuelcells. First, the pipeline of announced projects is constantly evolving. For many
projects that have been announced, there is a significant degree of uncertainty as
to whether, where and when the necessary investments will actually take place.
For example, only less than 10% of the 91 GW of announced electrolyser
manufacturing capacity has reached final investment decision or is underconstruction; for batteries the figure is 35% and for wind, 40%. Conversely, further
capacity announcements are likely to materialise before 2030, particularly fortechnologies for which manufacturing plants have short lead times, provided
market and policy signals are consistent and clear. It is likely that final investment
decisions as well as further project announcements will benefit from clear policy
signals.

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Second, while the global manufacturing gap (or lack thereof) is a relevant metric,
the currently high degree of regional concentration in clean energy technology
manufacturing capacity – notably in China – does not change substantiallyEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

according to existing announcements. China accounts for 85% of announced
manufacturing capacity for solar PV, 75% for wind, 70% for batteries and 25% forelectrolysers.
Due to uncertainties about future economic and policy developments, it is difficult
to predict the future location of manufacturing plants beyond the time frame of
projects under development or at the planning stage. Clean energy technology
products themselves and their components can all be traded between regions oncompetitive international markets. Unlike mining or extraction of fossil fuels, theirmain inputs – materials, labour and energy – are either mobile or can be locallysourced. Given these characteristics, focusing on supporting the scale-up of
domestic manufacturing capacity for clean energy technologies is an important
industrial policy opportunity to enable participation in the new energy economy
under governments’ net zero pledges. Governments are therefore increasingly
focusing their industrial strategies on these supply chain steps.
Looking at future domestic demand for clean technologies is a good starting point
for governments examining the extent to which their industrial strategies canalleviate risks related to high geographic concentration while tapping into theopportunities of the new energy economy. Building up domestic clean energy
technology manufacturing is a key opportunity to diversify supply chains, as well
as boost economic growth. Local markets are often attractive to suppliers, given
the lower transportation and administrative costs associated with delivering
products to buyers. Furthermore, governments looking to stimulate a domestic
manufacturing industry often have some degree of control over demand for clean
energy technologies, as they usually fit within the remit of other areas of public
policy (e.g. incentives for purchasing EVs). For countries seeking to secure or
improve their export position, the demand of other countries (and overall global
demand) should also be considered.

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Since the APS reflects governments’ actual policies and pledges as of late 2022,
it is the most relevant lens for examining some of the potential scope ofgovernments’ industrial strategies, which are likely to be developed on the basisof these pledges. The combined global market for key mass-manufactured clean
technologies – solar PV equipment, batteries, wind systems, heat pumps,
electrolysers and fuel cells – reaches USD 650 billion per year by 2030 in the APS(Figure 6.7). Domestic demand in China, the European Union, the United Statesand India account for nearly three-quarters of the global market for key clean
technologies by 2030 in the APS. The remaining countries of the Asia Pacificregion account for a further 10%.

Energy Technology Perspectives 2023

USD billion

Figure 6.7

Chapter 6. Policy priorities to address supply chain risksMarket size for key clean energy technologies and net fossil fuel trade in
the APS
Market size for key clean energy
technologies, 2030

400

Net trade in fossil fuels, 2021-2030
200

300

0

200

- 200

100

- 400

0

China

European
Union

UnitedStates

India

Other
Asia
Pacific
Domestic supply, announced projects
Domestic demand, APS - 2030

- 600

China

European
Union
2021

UnitedStates

India

Other
Asia
Pacific

APS - 2030

IEA. CC BY 4.0.
Notes: Key clean energy technologies include solar PV systems, batteries, wind systems, heat pumps, electrolysers andfuel cells. Market size is calculated based on module or unit price, excluding installation and construction costs. All market
sizes and revenues are expressed in undiscounted 2021 US dollars.

Clean technology deployment helps reduce fossil fuel import bills in many regions;stimulating domestic manufacturing can be an important industrial opportunity.

If all announced projects for manufacturing these technologies come to fruition,
the market value of their outputs would be around USD 650 billion per year in
2030, very similar to the market size of global demand in the APS for thetechnologies in aggregate. For individual technologies, however, there are
significant disparities. For solar PV modules, announced projects are set to deliver
USD 100 billion per year of output globally, compared with the APS market size ofaround USD 55 billion in 2030, constituting a USD 45 -billion manufacturing
surplus relative to deployment according to countries’ net zero pledges. Similarly,
surpluses are projected for batteries (USD 90 billion) and electrolysers (just under
USD 10 billion). These surpluses imply that without a further increase in climate
ambition, some of these projects could operate at very low utilisation rates,
compromising their commercial viability. Conversely, announced projects for wind(nacelles, blades and towers), heat pumps and fuel cells fall short of the global
market size in the APS by USD 140 billion combined, indicating a demand gap
that could be filled by new project announcements.

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Surpluses and deficits between the projected output of announced projects and
APS demand also exist at the country level, implying potentially stark differencesin the balance of trade between countries. China appears well positioned tocapture USD 390 billion, or 60% of the outputs of announced manufacturing

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

capacity in monetary terms. Around 60% of this output (USD 240 billion per year)
would be destined for export, on a net basis. Together, the United States and theEuropean Union are set to capture USD 170 billion in 2030, while their domestic
markets are projected to grow to nearly USD 270 billion in the APS, implying
potential net import needs of around USD 100 billion if no additional capacity isforthcoming. The US Inflation Reduction Act may substantially change this picture,
however, and is likely to reduce US net import requirements or even lead to net
export opportunities across these clean energy supply chains.
Increasing domestic manufacturing is not risk-free. In the short term, measures toreduce geographic concentration and enhance domestic supplies have thepotential to increase costs. Historical examples include India’s policy to indigenise
manufacturing of equipment during the 1970s, which made many businesses buy
domestically produced equipment that was uncompetitive (Business Standard,2021). More recently, import tariffs on solar PV cells and modules introduced in
the United States to promote domestic manufacturing drove up costs, resulting inlost opportunities for employment, investment and deployment as the tariffs
hindered potential further growth (SEIA, 2019).
Governments need to carefully balance the benefits of enhanced energy security
with potential economic costs. Two important economic benefits are fossil fuelimport savings (for net-importing countries) and new or expanded employment
opportunities.
Global fossil fuel trade today is dominated by just a few major producing countries
and regions, with a large number of countries being dependant on imports fromthese regions to meet domestic demand. Current policies and pledges, if fully
implemented, would lead to lower fossil fuel import shares in domestic energy
consumption in many major importing countries, replaced mainly by domestic
production of renewable electricity and other low-emission fuels. In the APS, net
imports of coal, oil and gas combined would decline by USD 145 billion, or 40%,
between 2021 and 2030 in the European Union, and by USD 55 billion, or 15%,
in China. The United States would increase its fossil fuel exports moderately under
the same projections. In emerging and developing countries such as India, fossil
fuel imports would increase slightly to satisfy rapidly growing demand, althoughfossil fuel shares in domestic energy consumption would still generally decline.

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One of the key incentives for governments to cultivate domestic manufacturing
capacity is job creation. The clean energy transition has contributed to a surge inenergy sector employment (+25% globally since 2019), with clean energy now
representing more than 50% of the global energy workforce. In the United States,
for instance, clean energy jobs rose by nearly 150 000 in 2021, boosting energy
sector employment 3% (United States, DOE, 2021; 2022e). The majority of
employment in clean energy is associated with building new clean energy projects

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

and installing equipment, with clean energy manufacturing making up roughly 20%of the clean energy workforce (Figure 6.8). Today, this employment isoverwhelmingly concentrated in China for solar PV, wind, heat pumps and electricvehicles. Shifting manufacturing hubs for these four key technologies would
influence where new manufacturing jobs are created. In the APS, clean energy
manufacturing jobs more than double from 6 million today to nearly 14 million by
2030, with over 50% of these jobs tied to the four key technologies.
Figure 6.8

Employment in clean energy technology manufacturing by region
Manufacturing employment for clean energy technologies by region, 2019

Solar PVWind
EVs
Heat pumps
20%

0%
North America

CSAM

40%

EuropeAfrica

60%

China

India

80%
Other Asia Pacific100%
Rest of world

Clean energy manufacturing employment by technology in the APS, 2019 and 2030
2019
APS - 2030
0%Solar PV

20%
Wind

EVs

40%
Heat pumps

60%
Other manufacturing jobs

80%

100%

Other energy jobs
IEA. CC BY 4.0.

Notes: CSAM = Central and South America; EV = electric vehicle. “Other energy jobs” includes clean energy-related
employment in construction, utilities, professional and scientific activities, wholesale markets, and transport for all clean
energy technologies.

Energy sector employment for key clean technologies grows markedly in the APS, with the
EV share increasing the most.

The number of workers needed at new manufacturing facilities depends heavily
on prevailing wages in the region and the level of automation. Today, a large, fully
integrated solar PV facility in China employs around 1 000-1 100 people per GWof capacity manufactured. However, equipping new facilities with the latest
automation technologies means they will have significantly lower job intensity thanthose installed a decade ago, and smaller plants in countries with cheaper labour
can require up to 60% more employees (IEA, 2022b).

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New manufacturing capacity will have to be added for most of these technologies,
but for EVs, many existing vehicle production facilities may simply retool their
existing production. These new plants could be more automated so that the
number of workers assembling vehicles would be fewer, but manufacturing
batteries onsite would increase the total number of workers at these facilities inEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

most regions. As all manufacturing operations will experience efficiency gains andincreased automation in the future, cost efficiencies need to be balanced against
labour objectives (i.e. better wages and benefits, enhanced job security, andimproved safety, representation and inclusion). The presence and strength oflabour unions will also play a crucial role in shaping domestic clean energy supply
chains.

Market concentration and corporate strategy
If unchecked, a high degree of market concentration – overreliance on a small
number of companies for the supply of a given good – can lead to supply chain
fragility. Firms look to maximise returns to shareholders, but large market sharescan be a concern for policymakers on competition grounds. Firms’ corporate
strategies in the context of clean energy and technology supply chains cantherefore be relevant to policymakers.

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In mature, competitive industries, market concentration tends to be lower because
the ability of firms to maintain a structural technological advantage dissipates overtime. In the steel, cement and aluminium industries, the largest single producers
account for 6-11% of global production, with the top five producers accounting for
18-38% combined (Figure 6.9). For emerging technologies, the opposite tends tobe true, especially for those that have not yet achieved commercial-scale
deployment. The leading manufacturers of plants for DAC, BECC, low-emission
synthetic hydrocarbon fuel production and gas-based hydrogen production with
CCS hold at least 30% of global production capacity, with concentration
particularly high in the case of DAC and low-emission synthetic hydrocarbon fuels.
In fact, there are only three commercial manufacturers of DAC plants globally, withthe leader covering around 75% of global operating capacity, while there is only
one manufacturer of synthesis plants.

Energy Technology Perspectives 2023

Figure 6.9

Chapter 6. Policy priorities to address supply chain risks

Concentrations of the largest enterprises in global manufacturing capacityand material production, 2021

100%

75%

50%

25%

Bulk materials

Site-tailored technologies

Other manufacturers
Second- and third-largest manufacturers

Heat pumps

Wind systems

Solar modules

Electrolysers

Fuel cell trucks

Batteries

gas-CCS H₂

Synthetic HC fuels

BECC

DAC

Aluminium

CementSteel

0%

Mass-manufactured technologies
Fourth- and fifth-largest manufacturers
Largest manufacturer

IEA. CC BY 4.0.

Notes: DAC = direct air capture; BECC = bioenergy with carbon capture; gas-CCS H2 = natural gas-based hydrogen withcarbon capture and storage. Synthetic HC fuels refers to low-emission synthetic hydrocarbon fuel production.
“Electrolysers” includes proton exchange membrane, alkaline, and solid oxide electrolysers. Manufacturing capacity forelectrolysers includes capacity for chlor-alkali electrolysers. Manufacturing capacity refers to maximum manufacturing
capacity in the case of bulk materials (i.e. steel, cement, aluminium) and mass-manufactured technologies (i.e. EV
batteries, fuel cell trucks, hydrogen electrolysers, solar PV equipment, wind systems and heat pumps) and installed
production capacity in the case of customised technologies (i.e. DAC, BECC, synthesis and natural gas-CCS H2).

For several clean energy technologies, the top three manufacturers together account for
more than half of global manufacturing capacity.

For mass-manufactured technologies, the picture is more mixed. A small numberof companies dominate the global market, with the top three manufacturers
together accounting for at least around one-third of global manufacturing capacityin each case. For electrolysers, solar PV equipment and heat pumps,
concentration is somewhat lower, with the top five manufacturers accounting forless than half of production.

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The clean energy transition is already having a major impact on the energy
sector’s corporate landscape. Many new companies are emerging to meet growthin demand for finished products and materials needed for their supply chains,notably in EV, heat pump, fuel cell truck and DAC manufacturing, while several
well-stablished manufacturers and energy companies are diversifying into clean
energy technologies, leveraging their know-how and expertise in related fields. As
global manufacturing capacity increases to meet growing demand for clean
technologies as the clean energy transition progresses, the diversity of corporate
players is likely to continuing growing as opportunities for new entrants expand,provided markets remain open and competitive.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risksSome new participants may enter the market horizontally, by gradually shifting
production from their current core clean energy business to other technologies orcomponents, such as solar PV manufacturers transitioning to batteries and EV
manufacturers to stationary batteries. Other enterprises may integrate vertically,by beginning to manufacture key components or materials not readily available on
the market, or by reinforcing their supply chain, such as car manufacturers thatmove into battery manufacturing. For the most innovative and least deployed
applications, new market players may emerge from research centres andacademia to exploit promising ideas and validate them by developing prototypes
and advancing to pre-commercial demonstration, with the eventual aim of largescale commercialisation.
Horizontal expansion can help increase the diversification of certain markets byadding more companies, thereby reducing the risk of monopoly/oligopoly andmarket instability. Horizontal expansion can allow companies to build on their
existing capacity to expand their business. It can optimise production processes
and logistics to reduce the overall cost of some of the shared components andgoods. Horizontal expansions have already occurred in several companies looking
to shift their core markets to emerging clean energy technologies, as well as incompanies seeking to diversify their portfolios away from the manufacturing oftraditional energy technologies. An example of the former strategy is Ørsted,
formerly known as Danish Oil and Natural Gas, which has transformed itself into
an electricity company focused mostly on renewables.
Horizontal expansions often exploit similarities across assembly lines andcomponents, leveraging expertise that can be used to make different
technologies. Examples include air conditioners, commercial refrigeration units
and heat pumps. For instance, around 75% of total heat pump production is frommanufacturers already producing air conditioners. Some commercial refrigeration
manufacturers have also started to produce large heat pumps (Star Refrigeration,n.d.). Synergies also exist within the EV automotive sector (Hyundai, 2020), where
heat pumps provide air conditioning and where similar skills for aluminium casting
are required both for manufacturing of automotive parts and heat pumps.
When opportunities to exploit such synergies do not exist, particularly for large
projects involving multiple competences, partnerships can support horizontal
expansion. For instance, a utility and a green steel company signed a
EUR 2.3-billion green hydrogen deal in 2021 (Iberdrola, 2021). Such expansions
might also allow companies to enter clean energy technology markets more
quickly than if they invest individually.

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In most cases, vertical expansions, which involve a company moving into supply
chain activities upstream or downstream of its existing business, are aimed at
reinforcing the company’s position in its existing business by securing key
components and materials for future expansion. For example, in 2022 an alkaline

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

electrolysis manufacturer acquired an electroplating company to bring in-houseone of the core production processes for electrolysers (Sunfire, 2022). EV battery
and electric car manufacturers are also expanding into the lithium mining andrefining business to increase the resilience of their supply chains.
Vertical expansions can allow companies to exert more control over their supply
chains, reducing the risk of disruptions. However, they can lead to moreconcentrated markets, which tend to be more vulnerable. Vertical expansions are
obviously most attractive for companies facing acute uncertainties about theircomponent and material supplies. But, as with horizontal expansions, they canalso help optimise production processes, product quality controls and standards
compliance. On the other hand, vertical expansion might limit operational flexibility
and lock manufacturers into single, specific technology solutions, eliminating thepossibility of switching supplier as market conditions change and technologies
evolve.

Policy recommendations
Diversifying supply chains by reducing reliance on individual countries, firms or
technologies can reduce risks to supply chain security. Given the scale of clean
energy technology deployment required to achieve net zero emissions, newopportunities are likely to emerge for firms and countries with access to resources,
skills and capital to enter the market, potentially leading to greater diversity.
Significant opportunities exist to diversify most mineral supplies by developing
new reserves, but this could come at a cost, as incumbent producers have an
inherent cost advantage. As a result, governments need to step in to encourage
investment in new facilities. There are a number of ways in which they can do so,
including developing geological surveys for mineral resources, building stockpilesof these minerals, incentivising investment in new mines and facilities acrossregions, and coordinating supply chain assessments and experience-sharing-.

Develop geological surveys for critical mineral resources

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Governments have the primary responsibility for mapping critical mineral
resources. National geological surveys provide scientific information about acountry’s natural resources and essential data and analysis on a variety ofcommodities and minerals, including the technical and economic potential fordeveloping new sources of supply. To promote critical mineral supply
diversification, governments need to devote adequate funding to geologicalsurveys. They should also support critical mineral mapping efforts in othercountries that do not have the resources or capacity to do so. This can include
direct funding, sponsoring mapping initiatives and providing technical assistance.
Enhanced co-operation and knowledge-sharing among geological surveys cancontribute to a better understanding of resource endowment and, in the long term,enhance prospects for major new sources of supply. Collaboration and data-

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

sharing efforts can also enable better mapping and tracking of critical mineralstocks, which can improve understanding of supply disruption vulnerability andwhich resources might become available through recycling.

Consider critical mineral stockpiles
It is important that governments evaluate the need to introduce or bolster
stockpiles of critical minerals as a means of weathering short-term supply
disruptions. Some countries have been operating mineral stockpiling schemes formany years. The United States operates a stockpile primarily for national security
reasons and more recently to support the clean energy transition. Critical mineralstockpiles are usually funded through a public procurement process. Suchstockpiling schemes need to be carefully designed, based on a periodic review ofpotential vulnerabilities, and ensure that they do not exacerbate shortages anddrive prices up in the short term. In general, such schemes can be more effective
for minerals with smaller markets, opaque pricing and a concentrated supply
structure than for those with well-developed markets and ample liquidity.

•

Systematic market monitoring to identify potential areas of stress in mineral supply
based on the latest policy, technology and investment trends.

•

Creating a platform for policy and technology dialogue on critical minerals tofacilitate knowledge exchange and experience-sharing. The platform will also
discuss various measures IEA member countries can undertake together to ensure
secure and transparent mineral supply chains.

•

Establishing a comprehensive, freely accessible database of policy measurestaken or planned by governments around the world to ensure reliable supplies ofcritical minerals.

•

Strengthening efforts to collect data systematically in areas for which reliable publicdata are scarce, such as recycling, environmental and social performance, andRD&D.

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At the IEA Ministerial in 2022, member countries recognised the growing
importance of critical minerals and materials for clean energy transitions andundertook to investigate the option of stockpiling alongside other potential
mechanisms such as public procurement via offtake agreements, regular stresstesting, joint recycling targets and measures to reward good ESG performance.
Several countries interested in closer co-operation launched a voluntary IEA
Critical Minerals Security Programme, which will include stockpiling and,potentially, other elements such as recycling and resilient and transparent supply
chain mechanisms. Participating countries have agreed to work together andshare experience and data from their national programmes. The programme aims
to strengthen IEA activities on market monitoring, technology innovation, supply
chain resilience, recycling, environmental and social standards and international
collaboration (IEA, 2022g). Planned near-term activities include:Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Design industrial strategies to incentivise investment
Governments have a number of options at their disposal to design their industrial
strategies. Every country has a different starting point and different goals, so no
single one-size-fits-all strategy exists. The initial step is to define what the strategy
aims to achieve, especially if those aims extend beyond interventions to
structurally improve industrial performance. Sustainability, resilience and strategic
independence are all widely accepted goals to include within a broader definitionof “performance”, but interventions to incentivise investment must be designed inaccordance with international trade regulations, such as those of the World Trade
Organization.
Stimulating domestic manufacturing is often the first consideration of countries
seeking to alleviate geographic concentration. Here in particular, realistic goals
must be clearly stated at the outset. Total self-sufficiency is not realistic when it
comes to clean energy technology supply chains. Even for large, diversified
economies, failing to prioritise the areas that would be of greatest benefit toincentivise, or to carefully consider strategic and competitive opportunities when
mandating domestic capacity (or re-shoring capacity that has been relocated),
could lead to inefficient resource allocation.
Once priorities are established, a combination of “push” policies targeting the
supply of a given mineral, material or manufacturing plant and “pull” policies,
designed to boost demand for outputs from the manufacturing sector, can be
introduced. These industrial strategies should be designed in co-ordination withbroader horizontal measures in the energy and climate policy domains, such ascarbon pricing, energy efficiency incentives and material efficiency strategies.
When stimulating domestic supply is not a viable or efficient option, countries may
benefit from considering strategic partnerships. Diverse partnerships with multiple
partners are preferable to overreliance on a single bilateral arrangement. Such
strategies can be used to bridge gaps in the supply of a mineral, material or
technology that is critical to the functioning of a domestic industry. Securing
supplies of critical minerals and bulk materials produced with substantially lower
emissions are key areas where this strategy may produce a more efficient solution,
albeit with reduced strategic autonomy relative to domestic production. Forenergy-intensive commodities, consideration should be given as to which specificsteps in the supply chain offer the greatest benefits when situated domestically(e.g. taking account of employment and value-added advantages, existing R&D
competences, and the availability of low-cost, low-carbon energy resources), andwhich might be more competitively hosted by a suitable strategic partner.

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Governments have several tools at their disposal (see Box 6.9) that can be
deployed both domestically and internationally to reduce the risk of capitalintensive projects and incentivise private investment:

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks•

Tax incentives, such as investment tax credits, can specifically target mines, plants
and factories, and associated equipment.

•

Grants for building early-mover facilities that support clean technology supply
chains can reduce project risk and lead to learning and cost savings for the next
facilities.

•

Low-cost loans, insurance and loan guarantees can be effective instruments for
projects that cannot attract adequate financing from commercial banks, which isoften the case for clean energy technologies and their supply chains.

•

Lower royalties for strategic mining projects that support clean energy transitions,while still maintaining support for local communities, can make such investment
more attractive to private investors.

•

Differentiated markets can be established and regulated for products produced with
substantially lower emissions.

National development banks (NDBs) can be important in catalysing investments
in key parts of supply chains. They can combine different sets of financial
instruments to meet the needs of a specific project, from pre-investment support
such as grants and technical assistance, to investment support such as credit
enhancements, funding subsidies, loans and guarantees (IDB, 2013). The
governments of many emerging economies where large chunks of the energy
sector are publicly owned are facing severe difficulties in obtaining financing forenergy projects. International concessional financing, through bilateralagreements or administrated through multilateral developments banks, can play a
critical role in filling financing gaps in these countries by funding capacity-building
or providing debt and equity financing to clean technology supply chain projects(IEA, 2022c).

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In addition to specific financial instruments, governments should prioritise efforts
to stimulate private investment in clean energy technologies within the frameworkof domestic industrial policies by signalling activities, areas or regions of interestfor technology supply chains. For example, the development of strategic
roadmaps for a given region or technology can incentivise investments in newmines, processing facilities and factories.

Energy Technology Perspectives 2023

Box 6.9

Chapter 6. Policy priorities to address supply chain risks

Case studies: Support for new mines and manufacturing plants

In 2021, the Australian government established the Critical Minerals Facility, witha budget of AUD 2 billion, to support critical mineral projects under its Critical
Minerals Strategy. Managed by the Australian export credit agency Export Finance
Australia, the facility provides loans, loan guarantees, working capital support andbonds to mining and processing facilities. As of April 2022, three projects hadreceived loans:

EcoGraf Limited received an AUD 40-million loan to develop the AustralianBattery Anode Facility in Western Australia.

Renascor Resources received an AUD 185-million loan to develop an
integrated graphite mine and processing facility in South Australia.

Iluka Resources received an AUD 1.25-billion loan to develop Australia’s first
integrated rare-earth element (REE) refinery in Western Australia. The refinerywill produce REE oxide products (praseodymium, dysprosium, neodymium
and terbium), which are used in permanent magnets in EVs, power generationand defence.

Tax and royalty incentives for critical mineral mining projects are also available insome jurisdictions. For example, the Northern Territory government allows royalty
payments from mineral extraction projects to be deducted from income tax
payments. In Western Australia, where lithium mining is prevalent, royalties arecapped at 5% of the value of the lithium concentrate produced.
In the United States, the DOE’s Loan Programs Office (LPO) provides loans andloan guarantees to qualifying clean energy projects to address shortfalls infinancing from the commercial debt market. The LPO has identified criticalminerals for use in EV batteries and charging infrastructure as a key area ofinterest, enabling projects to access debt capital at US Treasury rates.
Approximately USD 20 billion in loans and guarantees is available for projects
along the battery supply chain, including in mining, extraction, processing,
manufacturing, assembly, recovery and recycling. In addition to low-cost financing,
the US established a new advanced manufacturing production credit under the
Inflation Reduction Act to incentivise the domestic production of various
components, including applicable critical minerals used in renewable energy
generation, storage and related manufacturing. Under the regulation, a tax credit
equal to 10% of the cost of production is awarded to producers of applicable criticalminerals produced in the United States.

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India has introduced incentives for manufacturing EVs and their components,
including advanced-chemistry EV batteries, in response to the supply uncertainties
caused by the Covid-19 pandemic. Two schemes under a national productionlinked incentive programme jointly provided incentives worth INR 440 billion(USD 5.3 billion) in 2021. The schemes aim to secure critical supply chains as well

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

as promote domestic manufacturing and value-added production in the economy.
The National Programme on Advanced Chemistry Cell Battery Storage aims toachieve manufacturing capacity of 50 GWh. In July 2022, the government selected
three companies under this programme, with production expected to begin in 2024.
The scheme was oversubscribed, with qualified bids totalling 128 GWh.
Sources: India, Ministry of Heavy Industries (2021); India, Ministry of Heavy Industries (2022); Export Finance Australia(2021); Export Finance Australia (2022); S&P Global (2022b); Western Australia, Department of Mines, Industry
Regulation and Safety (2019); United States, DOE (2022f); Invest India (n.d.).

Co-ordinate supply chain assessments
International organisations and forums are natural avenues for countries todiscuss supply chain questions, share best practices and experiences, andco-ordinate assessments. Governments have already started to convene
meetings to discuss ways to build supply chain resilience. For example, the UnitedStates hosted a supply chain summit with 14 countries and the European Unionin October 2021, as well as a Supply Chain Ministerial Forum in July 2022 to seek
consensus on how to reinforce supply chain resilience. Yet there is no dedicatedchannel for continued dialogue focused on supply chain issues for clean energy
technologies. Networks of existing international forums should be leveraged toestablish such a platform.
One option is to create a new workstream focused on clean energy supply chains
under the Clean Energy Ministerial (CEM). The CEM is a high-level global forum
to promote policies and programmes that advance clean energy technologies andto share lessons learned and best practices. Nearly 30 countries participate in the
CEM across 20 different workstreams focused on various clean energy
technologies and solutions. A new cross-cutting workstream on clean energy
supply chains could leverage the efforts and knowledge base of existing
workstreams. The CEM Transforming Solar Supply Chains initiative could serve
as a potential model for a broader cross-cutting workstream on clean technology
supply chains. Launched at the Global Clean Energy Action Forum in September
2022, this initiative focuses specifically on the solar PV manufacturing value chain,including raw materials, polysilicon, ingots, wafers, cells and modules, andassociated equipment. The initiative will aim to boost overall supply chain capacity
and resilience by supporting large-scale manufacturing in different regions aroundthe world.

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Government co-operation with the private sector is also needed to ensure secureclean technology supply chains. Often, companies are not fully aware of their
supply chain vulnerabilities and threats to them, nor have they developed
mitigation and emergency response measures (EC, 2021c). To this end,
governments can provide guidance to companies to assess and manage supply

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

chain-related risks (e.g. detailed methodologies, common definitions, vulnerability
and impact indicators, and recommended mitigation measures). Governments canalso act as a centralised resource to help improve integrated monitoring andreporting of vulnerabilities for clean technology supply chains. Learning fromexisting initiatives – such as the COMET Framework, which creates a robust
carbon accounting system for emissions-reporting across supply chains, or Trase,
which maps the international trade and financing of commodities – governments
can provide common monitoring and reporting frameworks to better assess supply
chain risks.

Boosting supply chain resilience

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Reducing and diversifying critical inputs to clean technology supply chains are theprimary ways to make clean energy and technology supply chains more resilient,i.e. better able to cope with and limit the impact of market shocks such as priceinstability. The resilience of a supply chain can be measured by the time required
to scale up production of a supply chain element in the event of a rapid increasein demand or a price shock, and by whether market-ready alternatives, or sparecapacity, exist for this particular element. For example, long lead times mean risks
to resilience are more acute at the mining stage for mass-manufactured systems,
owing to reliance on certain minerals, while low resilience for large-scale, sitetailored systems is driven by reliance on CO2 and hydrogen infrastructure, which
also feature long development lead times. Our assessment of threats to theresilience of clean energy and technology supply chains demonstrates that
infrastructure for transporting and storing CO2 and hydrogen present the mostacute risk. Mining of critical minerals is also a vulnerable step, particularly formass-manufactured systems for which alternative technologies are not yet
available, but constitutes a relatively lower risk to resilient supply chains(Figure 6.10).

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Figure 6.10 Risk to resilience of global selected clean energy and technology supply
chainsIEA. CC BY 4.0.
Notes: BECC = bioenergy with carbon capture; DAC = direct air capture. The likelihood of a threat to resilience is based onlead times to deploy a new facility on a scale of 0 (shortest lead time: around 1 year) to 10 (longest lead time: around 10
years). When multiple facilities (e.g. for mineral refining and bulk material production) are involved at a given step of thevalue chain, the lead time corresponds to the maximum value. Impact is measured by the availability of alternative
materials, processing/manufacturing technologies, or spare capacity (using the average utilisation rate of existing capacity),
evaluated on a scale of 1 to 5, with 1 corresponding to readily available and 5 to unavailable. Arrows indicate how
individual points are connected within a supply chain.
Sources: IEA analysis. For data sources and further background on the lead time analysis see Figures 1.15 (mining) and1.16 (material production manufacturing, installation and infrastructure).

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The least resilient steps are mining for mass-manufactured systems with low availability ofalternative technologies or chemistries, and infrastructure development for systems thatinvolve CO2 or H2 management.

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Chapter 6. Policy priorities to address supply chain risks

Strategic considerations
Short-term disruptions in clean technology supply chains can have profound cost
implications and undermine the world’s chances of reaching net zero emissions
by mid-century. Boosting supply chain resilience can enable quicker responses tothese disruptions. Earlier in this chapter we covered some ways to improve supply
chain resilience (such as shortening lead times) to accelerate the clean energy
transition. Other key approaches to enhance the resilience of these chains are toensure stable and affordable pricing through continued access to low-cost
renewables as a way to hedge against energy and commodity price swings,
especially as energy transitions require greater reliance on electricity, and topromote material substitution and design diversification to reduce demand forindividual critical minerals and increase resilience to supply constraints.

Energy prices and competitiveness
Maintaining stable and affordable prices for energy and commodities – particularly
those that are traded in competitive international markets – is critical to ensure theresilience of clean energy technology supply chains. International markets withmany suppliers generally lead to more stable and affordable prices, but countries
also must also capitalise on their strengths when shaping their role in the new
global energy economy. Most countries will need to choose which supply chains
and steps to specialise in, due to their resource limitations and other constraints.
Maintaining an economically sustainable position in these markets will help lower
the frequency and severity of price shocks – and reduce exposure to them when
they do occur. Competitiveness is therefore a key consideration when
governments are designing their industrial strategies and assessing those of their
key suppliers.

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Energy is a key component of overall production costs, especially in heavy
industries such as steel, chemicals and cement. Natural gas and electricity are thetwo main energy inputs for material and technology manufacturers today, theprices of which, including taxes and excises for industrial users, vary significantly
between countries (Figure 6.11). This gives producers in regions with relatively
low energy costs a competitive advantage. For example, prices for industrial usersof natural gas and electricity remain far lower in the United States than in Europe,
creating an incentive for some manufacturers to shift production. The prices ofcoal and oil products, which are more easily traded internationally (as transport
costs represent a smaller share of the price), vary much less among regions,excluding the impact of taxes (e.g. from emissions trading schemes).

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

USD/MWh

Figure 6.11 Industry end-user prices for natural gas and electricity in selected
countries
Natural gas

100

Electricity

250
200

75

150
50
100
25

50

0
2019

2020
China

2021

2022
United States

0
2019
Germany

2020

2021
France2022
Japan
IEA. CC BY 4.0.

Notes: Data for gas are from the China LNG Factory Price National Index. Electricity data are calculated from the “gridproxy electricity tariff for 30 provinces and cities in China”. Electricity data for China not available prior to reforms toliberalise markets at the province level in October 2021. Prices include taxes and are shown in 2021 US dollars using
market exchange rates.
Sources: IEA (2022h); Shanghai Petroleum and Gas Exchange (2022); State Grid Corporation of China (2022); China
Southern Power Grid (2022).

Energy prices for industrial users vary considerably between regions, creating a structuraladvantage for producers of energy-intensive products in regions with low energy costs.

The clean energy transition will entail greater reliance on electricity, so if regional
differences in electricity prices persist, the result will be considerable cross-region
variations in the production costs of a wide range of energy products and bulk
materials. Based on recent grid electricity prices, producing low-emissionhydrogen using grid-connected electrolysers would cost 120% more in Western
Europe and Japan than in China, and 80% more than in the United States (Figure
6.12). Western Europe becomes much more competitive when considering the
production costs that could be achieved using low-cost variable renewable energy(VRE) provided by solar PV and wind installations. Hydrogen production costs ofaround USD 6/kg in Western Europe, USD 9/kg in Japan, USD 5/kg in the UnitedStates and USD 4/kg in China could be achieved using the better renewable
resources in these countries today.

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Substantially lower costs – with less variation between regions – can be envisaged
if countries are successful in implementing their announced pledges. As
electrolyser costs decline rapidly in the APS, together with continuing declines in
the cost of solar PV and wind, hydrogen production costs using electrolysis andlow-cost VRE could drop to USD 1.3/kg by 2030. This would make low-emissionhydrogen via electrolysis competitive with the reference production cost of
USD 1.4-4.4/kg, using today’s main incumbent pathway (steam methane
reforming using natural gas). These production costs exclude the impact of any

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

direct subsidies, such as those offered in the US Inflation Reduction Act. The
Inflation Reduction Act makes available effective subsidies of up to USD 3/kg forhydrogen produced with renewable electricity, relative to domestic production
costs in the APS in 2030 of USD 1.7-3.0/kg.
Virtually all hydrogen is consumed where it is produced today because
transporting and storing it is expensive. Therefore, countries’ domestic hydrogenproducers are not in direct competition with one another. This is not the case forchemicals and materials such as ammonia and crude steel, which are traded incompetitive international markets and have the potential to be produced in large
volumes using low-emission hydrogen in the future (the technologies for doing so
are still in the demonstration phase today).

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If ammonia and steel were manufactured using low-emission electrolytic hydrogenproduced from grid electricity, the wide variation in production costs between
regions would lead to significant competitiveness gaps. As for low-emissionhydrogen, these differences persist – although narrow markedly – in the APS
when VRE is used, with production costs in the range of USD 480-1 500/t forammonia and USD 520-980/t for crude steel in 2030. The key to making suchprocess arrangements viable is flexibility, by adapting the process technology toaccommodate some degree of variation in its load/capacity factor, or by storingsurplus hydrogen or electricity when renewables output is at its highest.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Figure 6.12 Indicative production costs for hydrogen and hydrogen-based
commodities produced via electrolysis
Hydrogen via electrolysis
Western Europe
Japan
United States
China
Current reference
0

5

15

10
Ammonia via electrolysis

USD/kgWestern Europe
Japan
United States
China
Current reference
0

1 000

2 000
Crude steel via H2-DRI

3 000
USD/tonne

Western Europe
Japan
United States
China
Current reference0
Recent grid electricity

500
VRE 2021

1 000
VRE APS - 2030

1 500
USD/tonne
Current reference
IEA. CC BY 4.0.

Notes: VRE = variable renewable energy ; APS = Announced Pledges Scenario; H2-DRI = hydrogen-based direct reducediron. The VRE cost range represents electrolysis powered by solar PV, offshore wind or onshore wind. For ammonia andcrude steel production, an additional hydrogen storage cost to guarantee a minimum load of 80% is considered. ‘Current
reference’ values show production costs using the dominant incumbent means of production today with unabated fossil
fuels. Recent prices for natural gas and grid electricity (as per Figure 6.11) are used to compute the cost ranges in eachregion where relevant. The cost of capital is assumed at 5%, while the other techno-economic assumptions are sourced
from the references below.
Sources: IEA (2022h); IEA (2022i); IEA (2020b); IEA (2021b); S&P Global (2022c); Bloomberg (2022).

Considerable variations in electricity costs for industrial users between countries have
implications for the competitiveness of industries exposed to international trade.

Substituting alternative materials and designs

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Material substitution and design diversification are important to reduce demandfor individual critical minerals and increase resilience to supply constraints. Thiscan include pursuing alternative designs that are overall less reliant on materials
with potential for supply bottlenecks or constraints. It may also include pursuing aEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

portfolio of designs in parallel, such that if supply constraints arise for one
particular critical material, it could be possible to pivot to increase manufacturingof an alternative design that is dependent on different materials.
Alternative chemistries for making EV batteries are one example of such material
substitution. The cathodes of EV batteries historically tended to be made withsignificant amounts of cobalt, but they have recently been substituted by variants
that have higher nickel content and less cobalt. This trend is the result of a searchfor better performance, as well as industry attempts to reduce reliance on cobalt– a costly metal supplied as an ore mainly from the Democratic Republic of Congo.
Manufacturers are now also turning to less nickel-intensive cathode variants withsimilar efficiencies and energy densities, such as lithium iron phosphate (LFP).
These are gaining a major foothold and their share of total battery production
increases rapidly, to around 30% by 2030 in the NZE Scenario (Figure 6.13).
LFP chemistries are less reliant on constrained materials, cheaper and more
durable, though their energy density is less than -that of nickel-based ones (100160 watt-hours [Wh]/kilogramme [kg] compared with 160-250 Wh/kg). As such,they are best suited to stationary energy storage applications, but can be an
attractive option for certain EV types due to their cost advantage. In addition,
efforts are being made to make cathodes with more manganese to reduce thecobalt and nickel content, lowering costs and reducing the risk of disruptions tonickel supply.

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Compared to the status quo, this substitution and diversification makes EV supply
chains more resilient to shocks in certain battery metal prices. However, there isa trade-off: this potential to switch materials could threaten the economic viabilityof potential future resource extraction projects, potentially slowing the pace of
required investment. If critical mineral prices remain higher for longer, automakers
would likely respond strongly to this market signal by shifting more quickly to LFP
cathode chemistries (as represented in the Figure 6.13 “constrained” case).

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Figure 6.13 Global cathode production for passenger light-duty BEVs by chemistry in
the NZE Scenario
100%

Innovative
Other
LFP

80%

High-nickel
Low-nickel

60%
40%
20%
0%

2017

2018

2019

2020

2021

2030 2030 Base Constrained
IEA. CC BY 4.0.

Notes: NZE = Net Zero Emissions by 2050 Scenario; BEV = battery electric vehicle; LFP = lithium iron phosphate. “Lownickel” includes: NMC333. “High-nickel” includes: NMC532, NMC622, NMC721, NMC811, NCA and NMCA (NMC = lithium
nickel manganese cobalt oxide; NCA = lithium nickel cobalt aluminium oxide). The cathode sales shares are based on
production capacity.
Source: IEA analysis based on IEA (2022d); EV Volumes (2022).

Switching away from high-nickel chemistries to LFP batteries could reduce the need fornickel extraction and processing.

An important goal of battery innovation efforts is to diversify designs to reducereliance on lithium, the critical mineral that is least substitutable with current
technologies and the one facing the largest potential shortfall in supply inupcoming years based on planned projects (see Chapter 3). Sodium-ion batteries
are a promising alternative, but they are approximately ten years away fromwidespread commercialisation. Machine learning can be used to help accelerate
the development of novel battery materials to improve battery density and reducereliance on key battery metals such as lithium, nickel and cobalt (NREL, 2021).

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Electrolysers are another key technology for which pursuing a mix of different
designs could help reduce reliance on specific critical mineral inputs. Alkaline
electrolysers require a significant amount of nickel, which is also needed to makeEV batteries and therefore increases pressure on global nickel production.
Polymer electrolyte membrane (PEM) electrolysers use iridium, which currently
has limited applications and for which it is difficult to ramp up global production,
as it is produced as a by-product of platinum group metal and nickel mining(Kiemel et al., 2021). Future nickel and iridium demand could be moderated
through further innovation. Additionally, developing different technologies meansthat if an unforeseen supply shock drives up the price of one mineral, electrolysers
using another mineral could emerge as an economically viable alternative.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Innovation will be critical in this regard. Electrolyser manufacturers are alreadytrying to reduce precious metal loadings using improved manufacturing
techniques such as novel catalyst formulations and coating techniques (EC,2022b; Heraeus, 2022; H2UTechnologies, 2022). Bringing to market and scaling
up other designs such as solid oxide electrolyser cells and anion exchange
membrane electrolysers can also help lower critical mineral needs and enhance
the flexibility of electrolyser supply chains. In addition, highly innovativeelectrolyser designs that are approaching commercialisation are also adopting
strategies to minimise material needs. Hysata’s design uses a capillary systemthat results in a step-change in efficiency compared with conventional designs(95% compared with around 75%), which leads to lower material needs per unitof hydrogen output and a simplified balance of plant (the supporting components
and auxiliary systems of the plant) (Hysata, 2022). Clean Power Hydrogen (CPH2)
has a membrane-free electrolyser technology that avoids the use of platinumgroup metals and reduces the risk of stack failure, which can increase theoperative life of the system (CPH2, 2022).

Policy recommendations
Improving resilience can be achieved with increased material efficiency throughmore recyclability, repairability and reuse to reduce primary material needs. A
number of policy options are available to governments to encourage thesepractices, including standardisation of rules affecting repairs, incentives to support
material efficiency, mandates and other measures to improve recyclability andrecycling rates, and various measures to promote the repurposing of existing
infrastructure, such as oil and gas pipelines, to handle CO2 and hydrogen.

Review design and manufacturing regulations
Reducing the amount of bulk or critical materials that go into a product in the firstplace can have an important impact on overall material demand. Design
regulations can help encourage reductions in material use. For example, movingfrom prescriptive to performance-based design standards can facilitate theefficient use of materials while also promoting the adoption of near zero emission
materials. An example here are building codes that focus on strength
requirements, rather than requiring that a certain amount of cement or steel beused. Lifecycle or embodied carbon regulations can also help promote design
efficiency. An example is France's RE2020 regulation, which caps buildings’
embodied carbon emissions. Green labelling and certification related to embodied
emissions, as well as factoring embodied emissions into public procurement
decisions, can also help create demand for material efficient designs.

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R&D support is crucial, particularly with regard to critical materials. Governments
should support the development of designs and technologies that use reduced
amounts of scarce materials, and should co-ordinate or mandate the incorporationof material-efficient design training into the curriculum of engineers and architects.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Promote repairability and longer lifetimes
Using products and technologies longer will reduce total material needs.
Governments can help normalise practices to achieve this, including favouring
reusable over disposal products when possible and promoting repairability,
remanufacturing and second-life applications (see Box 6.10).
Policy intervention at the design stage is important. Bans on certain single-use
products can spur the design of reusable products. Requirements to build
repairability into design can prevent planned obsolescence. One example isrequirements for component standardisation under product stewardshipregulations. Incentives for modular design can also facilitate future repurposing.
Government programmes can also facilitate repairing and repurposing. They
could set requirements covering both manufacturers and importers to make spareparts available, and facilitate remanufacturing and second-life applications suchas the collection of end-of-life EV batteries for use in stationary applications,provided adequate safety precautions are in place. Tax incentives anddisincentives could also be used, e.g. reduced property taxes on a building thathas been repurposed by a new owner or taxes on building demolitions.

Box 6.10

Case study: EU right-to-repair rules

The European Union’s Ecodesign Directive provides a framework for thedevelopment of detailed rules to improve the environmental performance of a wide
range of energy-intensive products such as household appliances, information andcommunication technologies, and engineering goods, as well as products that
affect energy use such as windows and insulation. To enhance the repairability ofthese products, the directive requires manufacturers and importers to improve thedesign of certain products, make essential spare parts available and allow
independent repairers access to technical information to help them repair products.

Creating a set of requirements tailored to the particular characteristics of the
product groups concerned.

Expanding the coverage of the requirements to product durability, reliability,
reparability and ease of maintenance, as well as energy use, resource use
and minimum recycled content, and waste prevention and reduction.

Implementing a digital product passport for the product groups covered by the
proposal to help businesses and customers make informed choices throughaccess to transparent environmental information.

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As part of the EU Green Deal, the European Commission has proposed to expand
the directive to cover other product groups that have a significant environmental
impact, including steel. Among other areas, the proposal includes:

Energy Technology Perspectives 2023



Chapter 6. Policy priorities to address supply chain risks

Preventing the destruction of unsold goods by requiring businesses to disclose
the amounts of and reasons for product discards each year, and how they areprocessed. A wholesale ban on the destruction of unsold goods for certain
products is also envisaged.

In April 2022, the European Parliament adopted a resolution calling for the right torepair to address the whole lifecycle of products, from product design toproduction, standardisation, information labelling (including reparability andexpected lifespan), consumer guarantees, and public procurement. For instance,
products will need to be designed so that a repairer can use common tools to
replace the parts, which would prevent manufacturers from sealing their products
in a way that impedes repair.
Source: National Law Review (2022).

Explore opportunities to repurpose infrastructure
When feasible, governments should consider adopting policies that encourage therepurposing of existing infrastructure, especially existing gas pipelines, which could
significantly reduce the cost of establishing national and regional hydrogentransportation networks (see Chapter 5). There is also considerable potential torepurpose oil and gas pipelines to transport captured CO₂ in many parts of theworld. Benefits include avoiding the need for new construction and thus material
input requirements, reducing stranded assets, and reducing lead times throughavoiding the need to secure new land rights and right-of-way permits.
While industry may be better placed to conduct technical reviews of existing
infrastructure assets, governments can play an important role in identifying
opportunities to repurpose infrastructure by commissioning repurposing studies,
standardising the assessment process and offering incentives to pipeline operators
to repurpose assets. Regulators can assist in the physical repurposing of
infrastructure by providing clear decommissioning and permitting requirements.

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When possible, governments should also encourage the reuse of retired power
generation assets as the clean energy transition progresses, as well as the use ofexisting grid connections. For example, there may be scope to make use of the sites
and associated facilities of coal-fired power plants to build new large-scale cleanenergy generating plants, such as nuclear reactors or bioenergy-based combined
heat and power plants (see Box 6.11). This could not only save construction costs
and material needs, but also help provide employment for the local community.
Policymakers can encourage this by identifying these assets and facilitating
discussion among utilities, project developers and local communities to identify
potential opportunities.

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Chapter 6. Policy priorities to address supply chain risks

Government financing could also be used to promote infrastructure repurposing.
For example, infrastructure banks are one medium through which governments canhelp mobilise private investment in infrastructure projects that might not otherwise
occur. A portion of funds could be earmarked for infrastructure repurposing in
support of the clean energy transition, thus encouraging the private sector to seekout relevant opportunities, including innovative repurposing projects.

Box 6.11

Case study: Repurposing fossil energy infrastructure in the
United Kingdom and United States

In the United Kingdom, the government believes the repurposing of oil and gas
infrastructure to transport hydrogen and captured CO2 could make a major
contribution to meet net zero goals. To this end, the North Sea Transition Authority(NSTA) is looking at how to maximise the repurposing of infrastructure. It has
already developed a screening tool to help the operators of offshore oil and gas
fields identify potential opportunities ahead of decommissioning. The tool will
initially be sent to dozens of companies operating 120 fields that are nearing (orhave reached) the end of their production lives. The NSTA will then review
company data submissions and work with the operators to explore repurposing
options and address potential barriers.
In the United States, the DOE released a report in September 2022 investigating
the benefits and drawbacks of building nuclear reactors at coal-fired power plantsites. In addition to offering employment and local economic benefits, the study
found that reusing coal infrastructure for advanced nuclear reactors could reduce
construction costs by 15-35% if the coal plant's electrical equipment (e.g.
transmission lines and switchyards), cooling ponds or towers, and civil
infrastructure (e.g. roads and office buildings) are reused.
Sources: NSTA (2022); United States, DOE (2022g).

Design industrial strategies that leverage competitive advantages
Establishing competitive positions in international markets for clean energy
technology manufacturing and material production is a central consideration whencountries are designing their industrial strategies. Economically competitive
production and manufacturing operations are more resilient to price and demand
shocks, which in turn enables more supply resilience for customers and more
resilient markets for suppliers.

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A first step to establish a competitive position in a supply chain is to choose whatarea to specialise in. For most countries, it is not realistic (or necessary) tocompete effectively across all steps of all the clean energy technology supply
chains they rely on. Competitive specialisations often arise from inherent
geographic advantages, such as access to low-cost renewable energy or thepresence of a mineral resource, which can lead to lower production costs forEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risksenergy and material commodities. But they can also stem from other attributes,
such as a large domestic market, a highly skilled workforce or synergies andspillovers from existing industries. Governments should consider the attributes
that could enable competitive specialisations in their own economies, capitalisingon their own strengths while also evaluating those of other countries. Internationalorganisations can be of assistance, providing comparative analysis andidentification of best practices.
Over-emphasis on economic competitiveness can also hamper efforts to improve
supply chain resilience. “Just-in-time” production lines and highly optimised asset
utilisation are both examples of strategies to improve financial performance that –when taken too far – can come at the expense of resilience. Increased robustness,
facilitated by system-level redundancy and strategic oversizing of critical nodes orelements in supply chains, including infrastructure, is increasingly important toremain competitive in volatile markets. Improving resilience through thesestrategies can result in increased upfront costs. But these costs can lead toconsiderable savings in the event of a demand shock or price spike if production
and manufacturing operations are spared from disruptions and thus shielded fromnegative impacts on competitivity.

Establishing sustainable supply chains
It is vital that mining, manufacturing and activities in other elements of the supply
chain do not give rise to significant GHG emissions, other harmful environmental
effects and/or damaging social consequences, such as human rights violations
and modern slavery. CO2 emissions from clean energy and technology supply
chains currently vary markedly by step and supply chain. While the CO2 intensityof mining of some critical minerals can be high, mining contributes little to theoverall emissions stemming from clean energy technology supply chains thatmake use of the minerals (Figure 6.14).

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In contrast, the emissions intensity of material production processes – either tosupply bulk materials (for technologies such as wind turbines), critical materials(such as lithium and cobalt for EVs) or specific materials (such as sorbents for
DAC or polysilicon for PV modules) – are often larger relative to that of other steps
within these particular supply chains. Manufacturing processes tend to rely moreon electricity and are less energy-intensive, which usually leads to lower CO2
intensity, particularly for wind turbines, heat pumps, fuel cell trucks, and sitetailored technologies, for which manufacturing emissions are below 25% of overall
supply chain emissions. For solar PV, electric vehicles and electrolysers which
involve the manufacturing of specific components such as wafers, cells, PV
modules, and batteries, this share can increase to 30 to 50%.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Figure 6.14 Risk of failing to reduce CO2 emissions in the most intensive steps of
selected clean energy and technology supply chains

IEA. CC BY 4.0.
Notes: BECC = bioenergy with carbon capture; DAC = direct air capture. Contributions to total supply chain CO2 emissions
are calculated based on the share of each step in total supply chain CO2 emissions. Total supply chain include direct andindirect emissions from resource extraction, material production, and manufacturing, and direct emissions from operation.
Operation only represents a high share of emissions for gas-based hydrogen production with CCS, for which it is assumed
that 5% of natural gas emissions are not captured. Most manufacturing process are heavily electrified and emissions areon average lower than material production, typically representing less than 25% of overall supply chain emissions for heatpumps, wind turbines, fuel cell trucks, and site-tailored systems. For solar PV, electric vehicles, and electrolysers, the share
can increase to 30-50%. Likelihood is measured by the CO2 intensity of mining and processing materials contained in the
different technologies, scaled from 0 (low CO2 intensity: around 2 kg CO2/kg) to 10 (high CO2 intensity: around 50 kg CO2/kg) and represented on a logarithmic scale.
Sources: For data sources and further background on the emissions analysis see Figure 2.21. Other sources forelectrolysers, gas-based H2 production with CCS, BECC, and DAC include consultation with industries, Gerloff (2021);
Cetinkaya et al. (2012); NREL (2001); Deutz and Bardow (2021); World Resource Institute (2022); Koornneef et al. (2008);
Pehnt and Henkel (2009).

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While the CO2 intensity of mining of some critical minerals can be high, mining contributes
little to the lifecycle emissions of the technologies that make use of the minerals.

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Chapter 6. Policy priorities to address supply chain risks

Strategic considerations
Reducing emissions from the mining, processing, manufacturing and transport ofmaterials and final clean energy products is essential as their deployment
increases. The task of reducing supply chain emissions is made more challenging
by the sheer rate of growth of supply needed to achieve net zero emissions by
mid-century, as well as the prospect of a decline in the quality of critical mineral
resources, which means more energy will be needed to produce each tonne ofthese minerals. Governments can make supply chains more sustainable byincreasing the material efficiency of clean energy transitions (thereby reducing
investment needs for new minerals and materials and increasing emissions
savings) and by scaling-up markets for near-zero emission materials.

Boosting material efficiency for cost savings and emissions reductions
Improving material efficiency would make the task of expanding raw mineral
extraction and processing less monumental. This would reduce investment needs
as well as environment impacts from land-use change and habitat loss. For
example, if additional material efficiency in the NZE Scenario were notforthcoming, making up the necessary production with CO2 capture-equipped
cement plants would require extra cumulative investment of about USD 225 billion(in 2021 US dollars) by 2050. Savings would be around USD 710 billion for using
additional hydrogen DRI plants to make up the shortfall in steel production, withboth figures excluding the significant additional savings in energy infrastructure
and resource extraction investment that would also be needed.
Material efficiency gains can reduce manufacturing costs when the benefits
outweigh the costs of implementing the strategy, thereby helping accelerate theuptake of clean energy technologies and lower their overall cost. For example,
right-sizing EV batteries to a range that covers at least 90% of daily trips, together
with policies to ensure that vehicle size and weight do not continue to increase,
reduce the upfront cost of an EV by more than USD 2 500 in the NZE Scenario.
Car leasing options, to enable EV buyers to lease cars with a longer range foroccasional trips of more than 200 km, could be a convenient and more affordable
option in such a case. Companies and countries that exploit opportunities to boost
material efficiency will improve their competitive advantage, leading to greater
investment, market shares and job creation.

Scaling up lead markets for near zero emission materials

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As material production contributes a substantial share of supply chain emissions
for clean technologies and infrastructure, using near zero emission materials will
be important for supply chain decarbonisation. While costs for producing suchmaterials are likely considerably higher than for conventional production, theimpact on prices of end-use technologies is fairly small, given that materials
account for a relatively small portion of final costs (see Chapter 1). Consequently,

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Chapter 6. Policy priorities to address supply chain risks

manufacturers can pass these marginal costs on to consumers so that higher
production costs do not prove a major barrier to manufacturers using loweremission materials. Since near zero emission material production routes have notyet been commercialised, the collective purchasing power of manufacturers andconsumers across multiple end-use sectors can support the scale-up of early
production. Indeed, as part of their strategies to improve the sustainability of their
supply chains, a growing number of companies from a range of sectors are alreadymaking commitments to procure lower-emission materials.
Recent commitments to procure near zero emission steel illustrate this. The
number of companies pledging to purchase near zero emission steel is growing
rapidly, with over 60 having made a commitment as of 2022, more than double
the number in 2021 (Figure 6.15). This includes agreements made under industry
initiatives as well as independent commitments negotiated between buyers andproducers. Pledges have been made by companies in various sectors, indicatingthat they feel confident in passing costs through to consumers for a range of end
uses.

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Partly in response to these commitments, along with other public sector schemes
such as the CEM’s Industrial Deep Decarbonisation Initiative, a growing numberof steel producers are formulating plans to produce near zero emission steel.
Some companies, such as H2 Green Steel, are making these a core part of theirdecarbonisation strategy (see Chapter 3) (H2 Green Steel, 2022). To help
accelerate the deployment of near zero emission steel production, steel buyers
can send stronger demand signals regarding the size of this market by disclosing
more details regarding demand commitments, including total volumes, expected
emissions levels and purchase time frames.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Figure 6.15 Number of companies committed to purchasing low-emission steel by
end-use sector, and global market size for selected bulk materials in the
NZE Scenario
Bulk material
market sizes

60

USD billion (2021)

Number of companies

Low-emission steel
commitments

50
40
30
20

2 000
1 500
1 000
500

10
0

2021

2022

Transport

Construction

Steel products

White goods

Energy

Other

0

Conv

Near
zero

2021
Cement

Conv.

Near
zero

2030
Aluminium

Conv.

Near
zero

2050
Steel

IEA. CC BY 4.0.
Notes: “Low-emission steel” is used when referring to procurement commitments, as many do not state the exact level ofemissions being targeted, but rather the broader aim to purchase lower-emission steel. “Conv.” Refers to conventional
production. “Near zero” indicates near zero emission production. Near zero emission steel and aluminium production isapproximated on a direct-emissions basis, based on the deployment of innovative technologies in primary production only.
Average market prices for 2017-2021 are used to calculate all market sizes.
Sources: IEA research based on company announcements; Bloomberg (2022); S&P Global (2022d).

The number of companies committed to purchasing low-emission steel more than doubled
between 2021 and 2022, covering a diverse range of end-use sectors.

The need to decarbonise material production also generates new opportunities forinvestment and growth. In the NZE Scenario, the combined global markets for all
crude steel, cement and aluminium shrink from approximately USD 1.8 trillion in
2021 to just under USD 1.5 trillion (in 2021 US dollars) in 2050 as demand forthese materials drops. At the same time, the share of near zero emission material
production jumps from almost zero in 2021 to around 95% of total production in
2050, providing opportunities for countries and companies that develop theseproduction processes to capture new markets.

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The use of novel digital tracking approaches, such as digital passports, cansupport efforts to scale up markets for low- and near zero emission production.
SSAB’s SmartSteel 1.0 gives steel a digital identity, allowing customers to identify
its material properties and download associated certificates with an app (SSAB,
2018). Digital platforms could also be used to host secondary-material markets,
such as for construction materials and metals (e.g. Backacia). This is beginning toaffect the wider industry, not just frontrunners, as governments look to adopt
market-wide measures on traceability. For example, the European Commission’sEnergy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

proposal for a Regulation on Ecodesign for Sustainable Products introduced in
March 2022 requires digital passports for other clean energy technologies,
including solar panels (EC, 2022c).

Box 6.12

Case study: Standards for concrete and asphalt in the UnitedStatesIn March 2022, the US General Services Administration (GSA), which is
responsible for centralised procurement for the federal government, issued new
standards for the concrete and asphalt used in GSA construction, modernisationand paving projects. These standards establish design and performance criteria
for GSA projects. To strengthen this effort, the GSA gathered feedback frommanufacturers on the availability of low-carbon construction materials andproducts.
The new low-embodied-carbon standard for concrete requires GSA projectcontractors to provide environmental product declarations, when available, thatsummarise the primary environmental impacts of the product's extraction,transportation and manufacturing. In addition, the GSA is asking its contractors toprovide concrete that meets a 20% reduction in embodied carbon compared withnational GHG limits for concrete.
The new asphalt standard also requires environmental product declarations and at
least two environmentally preferable techniques or practices to be used during thematerial's manufacture or installation. Based on industry feedback, GSA-approved
techniques and practices include bio-based or alternative binders, recycled content
and reduced mix temperatures.
Source: GSA (2022).

Policy recommendations

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To address emissions from the mining, material production, manufacturing andtransport of materials and of final clean energy products, governments can utilise
a variety of policy mechanisms. For the mining and manufacturing steps, the bulkof direct emissions can be dealt with through electrification. Tax credits andrebates for highly efficient motors and industrial heat pumps can play a role, ascan efficiency standards that encourage greater electrification (see Chapter 4).
For bulk materials, financing measures can help promote investment in near zero
emission production facilities, while emissions trading schemes can provide a
broad signal for decarbonisation. Lifecycle-based regulations applied to final
products and fuels could also help drive emissions reductions all the way up the
supply chain, such as low-carbon fuel standards that include upstream emissions(Box 6.13).

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Lifecycle approaches can help identify “hot spots” of environmental and societal
concern, which can then be targeted by policymakers. A holistic view of clean
technology supply chains is needed to ensure that lower overall emissions can beachieved; in this regard, it is critical that lifecycle assessments and lifecycle-based
regulations incorporate end-of-life requirements. Well-conceived regulations canpromote designs for component modularity, recyclability and interoperability.
Finally, standardised lifecycle assessment procedures could be adopted, toreduce compliance costs and time requirements (IEA, 2019).
A range of policy options are available: minimum recycled content requirements(as described in the previous section); traceability standards; environmental,social and governance regulations; and policies to create demand for low- andnear zero emission fuels and materials.

Box 6.13

Lifecycle-based low-carbon fuel standards

California introduced the world’s first low-carbon fuel standard (LCFS) in 2009. An
LCFS requires regulated entities (typically fuel and energy providers to thetransport sector) to gradually reduce the lifecycle GHG emissions of all thetransportation fuels they sell. It sets benchmark lifecycle GHG values (typicallycalled “carbon intensity”) for gasoline, diesel and various alternative fuels, taking
into account emissions associated with all of the steps of producing, transportingand consuming the fuel. These carbon intensity values are usually revisedannually, tracking reductions in GHGs emitted in producing, refining and delivering
conventional transport fuels, as technologies are upgraded or replaced with more
efficient ones. An LCFS allows all fuel providers the flexibility to determine which
mix of fuels they supply in meeting the standards through a credit trading system.
While the LCFS mechanism itself is straightforward in principle, it can be complex
to operate given the data and methodological considerations that go into lifecycle
analysis to determine carbon intensity values for different fuels. It may also favour
biofuels and reduce the pace of electrification if lifecycle accounting fails toeffectively incorporate the effects of land-use change in producing biofuels and thetrue level of GHG emissions in power generation.
In light of the success of California’s LCFS, various other national and regional
governments have either adopted or are considering introducing one. They havebeen implemented in Oregon and Washington in the United States, in Canada(known as Clean Fuel Regulations) and Brazil (Renovabio). More recently, the EU
Fit for 55 programme has incorporated some aspects of an LCFS. In emerging
economies such as India, where the shift to EVs is encountering technology andcost barriers, an LCFS-type mechanism may be an effective market-based
approach to encourage the adoption of low-emission fuels. It may also work wellin hard-to-abate transport sectors such as aviation and shipping.

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Sources: Yeh et al. (2016); ICCT (2022); CARB (2022).

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Increase material reuse, recyclability and recycling rates
As demand for key mineral and bulk material inputs to make clean energy
technologies increases, fostering a circular approach through reuse and recycling
will be increasingly important in clean technology supply chains. Governments canestablish circularity roadmaps and material recovery targets to help establish thedirection of progress (see Box 6.14). Policies targeting specific parts of the supply
chain will also be important.
Future material reusability and recyclability should already be considered during
the design and manufacturing stage. Governments can adopt product stewardshipand extended producer responsibility policies to push companies that design,
manufacture and sell products to incorporate end-of-life considerations into theiractivities. Stewardship policies make all companies involved in all stages of a
product’s lifecycle responsible for its end-of-life effects, while extended producer
policies place responsibility on the manufacturer.
There are examples of such schemes for various products, such as extended
producer responsibility requirements under the EU Waste Electrical and Electronic
Equipment Directive and the Battery Directive. Such schemes could be developed
or extended for key technologies within clean energy value chains. Doing so would
encourage producers to develop products that can be more easily recycled and to
explore options for remanufacturing, while also helping ensure sufficientinvestment in reuse and recycling infrastructure. Minimum recycled content
requirements could also motivate manufacturers to actively participate inincreased recycling. Additionally, for bulk materials, governments can obligate
suppliers to buy back unused materials during construction or used materials forrecycling (IEA, 2019).
Governments can also play an active role in increasing material reuse andrecycling rates. Policies targeting the consumer (e.g. landfill and waste collection
fees, recycling rebates and buyback programmes) can help incentive reuse andrecycling. Public co-ordination and financial support for recycling infrastructure isalso important to improve collection, sorting and recycling. Governments could
also develop programmes to increase co-ordination along supply chains, such as
publicly available material registries to connect potential suppliers with users ofmaterials for reuse.

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R&D support would also be useful to expand options to recycle materials for which
cost-efficient methods are not already readily available. Policymakers should also
facilitate the efficient collection and transport of spent EV batteries, foster productdesign and labelling to help streamline the recycling process, and harmonise
regulations on international movement of batteries (IEA, 2021c). The European
Union is a leader in this area.

Energy Technology Perspectives 2023

Box 6.14

Chapter 6. Policy priorities to address supply chain risks

Case study: Incentivising the circular economy of battery supply
chains in the European Union

Within the framework of the European Green Deal and Circular Economy Action
Plan, the European Commission has issued a legislative proposal that would set
mandatory requirements for all batteries to minimise environmental effects along
the supply chain and encourage greater recycling. Among other things, theregulation will:Introduce carbon footprint and material content labelling requirements for all
batteries sold in the European Union through a digital battery passport.



Establish minimum recycled content requirements for cobalt (16%), lead
(85%), lithium (6%) and nickel (6%).



Set collection rate targets for EV batteries and eliminate collection charges forend users, as 61% of batteries will have to be collected for recycling by 2031.

Require economic operators selling batteries (including automotive OEMs) toestablish supply chain due diligence obligations for responsible raw material
sourcing.

While the regulation reached provisional political agreement in December 2022,
more details have yet to be published.

Adopt standards for clean technologies and traceability
Technical regulations are essential to ensure the safe and sustainable deploymentof clean energy technologies and their supply chains, as well as lower costs.
Standards can be used to establish a common set of criteria and metrics to assessa large array of clean technology supply chains. Standardisation efforts are
typically led by third-party organisations to facilitate communication, collaborationand certification, but governments can promote or require the use of standards
that increase the supply chain transparency of clean energy technologies throughregulations and working with industry.

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Developing taxonomies and definitions for low- and zero emission products andmaterials will be particularly important for clean technology supply chains todetermine which technologies and practices are deemed acceptable. They can beused directly by the public sector or serve as guidance for the private sector,
notably in sustainable financing. For example, the IEA has proposed definitions
for near zero emission steel and cement production (IEA, 2022j). The low-carbon
fuel standards pioneered by the California Air Resources Board are based on adetailed set of values for the GHG emissions associated with different types ofenergy (Box 6.13).

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Governments can also require the use of traceability standards in public
procurement tenders or trade regulations as a first step in promoting transparency
in clean technology supply chains. They can incorporate carbon-footprint
requirements for technologies such as EV batteries or heat pumps, and for fuelssuch as low-emission hydrogen. Agreeing on an international methodology forcalculating carbon footprints is essential but will be far from easy, as themethodology would need to be underpinned by broad scientific consensus while
incorporating regular improvements in data collection. The process could build on
existing work, however, such as the principles and frameworks for lifecycle
assessment developed by the International Standards Organization (ISO, 2022).
Traceability standards can also include content-origin stipulations to better
manage and promote fair labour practices and protect against human rights
abuses. Such standards can be applied to all steps of clean energy supply chains,providing useful information for plant operators and consumers to decide what
technology/equipment to purchase depending on how the constituent materials
were produced and/or the technology was manufactured. Governments canleverage existing traceability work done for solar PV supply chains, such as the
Solar Supply Chain Traceability Protocol, and for REE supplies, such as thatcarried out by the ISO (Table 6.5). One of the traceability standards for EV
batteries is the battery passport being developed by the Global Battery Alliance(Box 6.15).
Benefits of regional and (when feasible) international harmonisation extend
beyond traceability standards; regulations, taxonomies and definitions applicable
across multiple jurisdictions can lend clarity and consistency that are appreciatedby financier and private enterprise alike. One example of such a globally
harmonised approach is the UNECE’s World Forum for Harmonization of Vehicle
Regulation, wherein governments representing more than 90% of global roadvehicle production discuss and agree upon globally unified technical policies
including regulations and other instruments relating to pollution, safety, security
and technical standards for the automotive sector.

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Global target-setting, as well as consensus on taxonomies and definitions, will be
particularly important in international sectors such as (non-domestic) aviation andmaritime shipping. In these sectors, GHG emissions are not accounted to any
particular country or supraregional block, but rather fall under the jurisdiction of
the United Nations’ International Civil Aviation Organisation (ICAO) andInternational Maritime Organisation (IMO). While these organisations have faced
challenges in achieving consensus on sufficiently ambitious targets, as well as theregulations that would be needed to make them credible, increased scrutiny fromcivil society, financing groups and ambitious public and private sector actors canbe instrumental to both raise targets and ensure that the frameworks adopted are
effective.

Energy Technology Perspectives 2023

Box 6.15

Chapter 6. Policy priorities to address supply chain risks

Case study: Supporting sustainable battery value chains by
2030 and the battery passport

The Global Battery Alliance (GBA) report “A Vision for a Sustainable Battery Value
Chain in 2030” highlights the economic, environmental and energy access
opportunities that could emerge from a transition to a more sustainable battery
value chain. The 2019 projections include lifecycle cost reductions of up to 23%,
which could result in 10 million jobs and generate USD 150 billion in economic
value worldwide by 2030. Based on the rapid market adoption of EVs since thattime, the GBA and McKinsey have substantially increased the job growth andeconomic value projections across the entire lithium-ion battery value chain. A
report documenting their updated projections will be released in early 2023.
Increasing the uptake of sustainable batteries hinges on the creation of a circularbattery value chain that creates economic opportunities and protects human rights.
This also presents opportunities for substantial emission reductions, including a
reduction of up to 90% material and manufacturing emissions reduction per kWhin the lifecycle emissions at the cell level by 2030. To this end, in 2020 the GBA
agreed on ten guiding principles, which have been agreed to by over 100 public
and private bodies, including foundations, government agencies, mining
enterprises, automotive, chemical and cell manufacturers, and energy companies.
As a key action area, the GBA proposed the “Battery Passport” to make battery
value chains more sustainable, circular and responsible by establishing a digitaltwin of a physical battery in EVs. The passport aims to increase transparency inthe global battery value chain by collecting, exchanging, collating and reporting
data among stakeholders. The goal is to provide end-users with key information
about a battery’s material origin, chemical make-up, manufacturing history andsustainability performance. As part of this effort, the GBA released a Greenhouse
Gas Rulebook for calculating and tracking the GHG footprint of EV batteries toenable consumers to make more responsible purchasing decisions and drive theindustry toward sustainable sourcing practices. The rulebook will create aframework for benchmarking batteries against the GBA’s verifiable definition of asustainable and responsible battery. The first battery passport is scheduled to belaunched by the GBA in January 2023.
Another key initiative of the GBA is the Critical Minerals Advisory Group, which is
working to build consensus on key priorities, coordinating policy development, anddeveloping long term circularity strategies and an industry wide roadmap for thebattery value chain.

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Source: GBA (2023).

Energy Technology Perspectives 2023

Table 6.5

Chapter 6. Policy priorities to address supply chain risks

Traceability standards, protocols and initiatives

Standard

Category

Description

Scope
United States

Solar Supply Chain
Traceability Protocol

LP

A set of recommended policies and procedures
designed to identify the source of a product’s
material inputs and trace the movement of these
inputs throughout the supply chain

UN Global Compact

LP, ESA principle-based framework for corporate socialand environmental responsibility

GlobalISO 23664:2021
Traceability of rareearths in the supply
chain, from mine toseparate products

ES

Specifies the information to be recorded bysupply chain businesses for REEs or products,from mine to separate products

GlobalDirective on corporate
sustainability due
diligence

LP, ES

Due-diligence rules that require member states
to identify and, when necessary, prevent, end or
mitigate adverse impacts of their value chain
activities on human rights and the environment

European
Union

Global Battery
Passport

LP, ESThe Global Battery Alliance will launch the
Global Battery Passport – a data source on
battery provenance – in January 2023

GlobalOECD’s Due Diligence
Guidance for
Responsible Supply
Chains

Detailed recommendations to help companies
address human rights issues and avoid
contributing to conflict through their mineralpurchasing decisions and practices
Defines good practices for responsible mining,providing a list of expectations that independent
auditors will use as the benchmark for
responsible mines

LP

Initiative for
Responsible Mining
Assurance

LP, ES

Responsible Minerals
Initiative

LP

Member-based initiative that provides guidance
and audits to companies on responsibly sourced
minerals based on international standards

GlobalExtractive Industries
Transparency Initiative

GovernanceRequires transparency along the extractive
industry value chain governing what should be
disclosed and when

GlobalEnergy Resource
Governance Initiative

LP, ES

Designed to promote sound mining sector
governance and resilient energy mineral supply
chains through the sharing of best practices

GlobalEnvironmental productdeclarations

ES

Quantifies environmental information on the
lifecycle of a product to enable comparisons
between products fulfilling the same function

GlobalThe Greenhouse Gas
ProtocolES

Establishes a standardised framework tomeasure and manage GHG emissions fromoperations and value chains

GlobalGlobal Reporting
Initiative

LP, ESGRI Standards provide a framework forcompany sustainability reporting

GlobalGlobalGlobal

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Notes: LP = labour practice; ES = environmental sustainability; GHG = greenhouse gas.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Consider ESG regulations
There is a growing need to improve ESG in clean energy supply chains,particularly in mining and processing. Failure to anticipate and address ESG risks
early on could lead to supply disruptions, which could slow the pace of energy
transitions. For instance, substandard practices could lead to negative public
perception of a given clean energy sector and perhaps also a retroactive tighteningof environmental or labour standards, which should be a prerequisite in the firstplace – this may lead to interruptions in operations.
Although identifying and addressing risks across jurisdictions with a patchwork oflegal frameworks and local contexts is technically challenging and resourceintensive, ignoring ESG supply chain risks can be increasingly costly in light ofpressure from consumers, investors and regulators to eliminate corrupt andsocially unacceptable practices in their supply chains (IEA, 2021c). If a company’s
strong ESG performance is rewarded in the marketplace, other companies will see
an incentive to address ESG concerns. Corruption and bribery pose major liability
risks for companies, but they can be managed with adequate supply chain duediligence practices.
Policymakers can promote ESG through co-ordinated policy efforts in providing
technical and political support to countries seeking to improve legal and regulatory
practices, incentivising producers to adopt more sustainable operational practices
and ensuring that companies undertake due diligence to identify, assess andmitigate risks. The European Union has recently been adopting regulations
targeting ESG considerations, including a ban on products made with forced
labour and the Carbon Border Adjustment Mechanism, which is a key element of
the European Union's Fit for 55 package (Box 6.16). A new regulation focusing on
EV battery value chains, which is expected to mandate minimum standards oftrade flow transparency, responsible sourcing, and material recovery andrecycling, has been proposed.

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Governments can encourage or require stricter disclosure and due-diligencerequirements through financial regulations, drawing on the OECD’s Due Diligence
Guidance for Responsible Supply Chains (OECD, 2016). This document provides
detailed recommendations for companies sourcing minerals or metals, including
tin, tantalum, tungsten and gold, from conflict-affected and other high-risk zones.
This framework can also be applied to cobalt, copper and lithium – key mineral
inputs for clean energy technologies to reduce risks associated with conflict aswell as corruption, labour practices and the environment.

Energy Technology Perspectives 2023

Box 6.16

Chapter 6. Policy priorities to address supply chain risks

Case study: The shifting focus of EU climate policy on supply
chainsThe European Union has put in place a set of measures over the past few years
to achieve its pledge of reaching net zero GHG emissions by 2050, including theEuropean Green Deal, the EU Taxonomy and the Fit for 55 package (a set ofrevisions and updates of EU legislation as well as new initiatives to meet the targetof reducing GHG emissions by 55% by 2030). A crucial element of Fit for 55 is the
Carbon Border Adjustment Mechanism (CBAM), which is intended to tax the mostcarbon-intensive imports – aluminium, cement, electricity, fertilisers, and iron andsteel – from countries that do not price CO2 emissions to the extent that theEuropean Union does. European producers subject to the EU Emissions Trading
System (EU ETS) are considered to be at a competitive disadvantage to external
producers, resulting in carbon leakage – a shift in carbon-intensive production tocountries with less stringent climate policies. The CBAM will gradually replace
previous measures used to address leakage, most notably the free allocation of
EU ETS allowances. These allowances will be gradually phased out as the CBAM
comes into effect, with the CBAM effectively mirroring the EU ETS for non-EU
producers. In the future, the CBAM is expected to be extended to other energyintensive sectors. The European Council aims to formally adopt CBAM only once
relevant elements in other dossiers (such as the EU ETS) are resolved. Under thecurrent provisional agreement, the CBAM will initially only oblige data reporting,
and will become operational starting in October 2023.
The European Commission is also showing willingness to regulate social andgovernance issues, in addition to environmental ones. In February 2022, it
proposed a directive on corporate sustainability due diligence, and more recently
a prohibition on the sale of products made with forced labour on the EU market,
regardless of whether they are produced in Europe or are imported. Authorities in
EU member states would be tasked with implementing the ban, but theCommission would help them assess which goods fall into this category based on
submissions from civil society organisations, a global database on such risks incertain supply chains and geographies, and corporate due-diligence reporting. A
new EU Forced Labour Product Network will support such efforts. In investigating
potential cases, national authorities will rely on principles of risk-based assessment
and proportionality. The proposal is due to be considered by the European
Parliament and Council; if it becomes law, it will enter into force after two years.

Support near zero emission material production

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Governments can help make materials produced with low or near zero emissions
more widely available and more affordable, thus smoothing the way for their use
in clean energy technologies and infrastructure. Since production technologies fornear zero emission materials are not yet commercially available in many cases,

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

and since production costs are likely to be higher than for conventional routes,
government support will be important for commercialisation and early deployment,
and to help bridge the longer-term remaining cost gap. Here, supply-push anddemand-pull policies can play complementary roles, reinforced by international
co-operation to overcome challenges related to international competitiveness.
Supply-push policies are critical to get technologies to the market and to overcome
the financial constraints inherent in building large-scale, capital-intensive projects.
Examples include programmes to fund and share knowledge among R&D anddemonstration projects; financing measures to overcome the higher risks of early
projects; and co-ordination and incentives to expand supporting infrastructure.
Meanwhile, demand-pull policies help give producers confidence that they will beable to sell materials produced with low or near zero emissions, despite their likely
higher costs, thus solidifying the business case. While private sector procurement
can help with this (discussed above), public policies will be important to strengthen
demand signals. In the earliest stages of technology deployment, targeted policies
providing direct support will be important. For example, carbon contracts fordifference subsidise the cost gap with conventional material production, allowing
producers to sell on conventional markets.
For subsequent rollout, other policies can help with market creation, including
public procurement, co-ordination of private sector buying pools, near zero
emission material production mandates (formulated like zero emission vehicle
mandates, for example), and lifecycle-based emission standards for final products
or construction projects. In the longer term, once wider-spread production andinnovation have lowered costs and reduced risks, carbon pricing may be sufficient
to sustain the continued rollout of near zero emission material production.

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Public procurement as a demand-creation mechanism is gaining popularity tosupport the use of near zero emission materials (see Box 6.17). This could help
directly decarbonise clean energy supply chains if low-carbon content
requirements are applied to government-funded energy-related infrastructure
projects, or otherwise provide a demand signal to scale up supply more broadly.
For example, the CEM’s Industrial Deep Decarbonisation Initiative (IDDI)
aggregates public sector procurement of near zero emission steel and concrete tosend a clear market signal to producers (UNIDO, 2021). To illustrate the scale ofimpact, IDDI now covers approximately 70-110 Mt of total steel demand, equal toaround 5% of the global market. Governments can use public tenders orcompetitive solicitations that balance price with specific criteria such as carbon
content. They could include emissions criteria in bidding-price calculations, ortargets for embodied carbon or shares of materials in the tender. Targets set forseveral years in advance would best stimulate innovation and reduce investment
risks for technology providers and manufacturers.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Measures to address the international competitiveness of near zero emission
material production will also be important. Options may include international
sectoral agreements or clubs, or policies such as carbon-based borderadjustments. International financing, capacity-building and technology
co-development can help ease the challenge by facilitating higher ambition
globally on industry emissions reductions. For further discussion on push, pull andinternational competitiveness policies for stimulating low- and near zero emission
material production, see the IEA report Achieving Net Zero Heavy Industry Sectors
in G7 Members (IEA, 2022j).

Box 6.17

Case study: Incentivising clean construction materials in the
United States

The Federal Buy Clean Initiative aims to prioritise the use of domestically madelow-carbon construction materials in federal procurement and federally funded
projects. In addition to funding from the Infrastructure Investment and Jobs Act,the Inflation Reduction Act provides USD 4.5 billion to federal agencies to identify
and use materials and products that produce substantially lower GHG emissions.
In September 2022, the United States announced new actions under this initiative
to prioritise the purchase of key low-carbon construction materials, covering 98%
of materials purchased by the federal government. It intends to:Prioritise the government's purchasing of steel, concrete, asphalt and flat glassthat have fewer embodied emissions.



Expand the inclusion of low-carbon construction materials to federally funded
projects, such as infrastructure projects.

Convene state governments to establish partnerships.

Increase data transparency through supplier reporting to help manufacturers
track and reduce emissions.



Launch pilot programmes in partnership with regional contractors to advancefederal procurement of clean construction materials.

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Source: The White House (2022c).

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

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Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

EC (European Commission) (2022a), REPowerEU: Affordable, secure and sustainableenergy for Europe, https://ec.europa.eu/info/strategy/priorities-2019-2024/europeangreen-deal/repowereu-affordable-secure-and-sustainable-energy-europe_en
EC (2022b), Addressing the sustainability and criticality of electrolyser and fuel cell materials,
https://ec.europa.eu/info/funding-tenders/opportunities/portal/screen/opportunities/topicdetails/horizon-jti-cleanh2-2022-0701;callCode=null;freeTextSearchKeyword=;matchWholeText=true;typeCodes=1,2;statu
sCodes=31094501;programmePeriod=null;programCcm2Id=null;programDivisionCode=null;focusAreaCode=null;destination=null;mission=null;geographicalZonesCode=null;programmeDivisionProspect=null;startDateLte=null;startDateGte=null;crossCuttingPriorit
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EC (2021a), Horizon Europe, budget: Horizon Europe - The most ambitious EU research &innovation programme ever, https://op.europa.eu/en/publication-detail//publication/1f107d76-acbe-11eb-9767-01aa75ed71a1
EC (2021b), Innovation Fund (InnovFund) Call for proposals Annex B: Methodology for
Relevant Costs calculation, https://ec.europa.eu/info/fundingtenders/opportunities/docs/2021-2027/innovfund/wp-call/2021/call-annex_b_innovfundlsc-2021_en.pdf
EC (2021c), Study on the Resilience of Critical Supply Chains for Energy Security and Clean
Energy Transition During and After the COVID-19 Crisis,
https://op.europa.eu/en/publication-detail/-/publication/b80d77b6-2a3b-11ec-bd8e01aa75ed71a1/language-en
EC (2020), Critical Raw Materials Resilience: Charting a Path towards greater Security andSustainability, https://ec.europa.eu/docsroom/documents/42849
EC (n.d.), European Chips Act, https://commission.europa.eu/strategy-and-policy/priorities2019-2024/europe-fit-digital-age/european-chips-act_en
EIF (European Investment Fund) (2022), Climate & Infrastructure Funds,
https://engage.eif.org/investeu/climate-infrastructure-funds
EIF (2021), Climate & Infrastructure Funds, https://www.eif.org/what_we_do/equity/climateand-infrastructure-funds/index.htm
ERA Portal Austria (2022), EU Innovation Fund invests € 1.8 billion in 17 large-scaleinnovative clean-tech projects, https://era.gv.at/news-items/eu-innovation-fund-invests18-billion-in-17-large-scale-innovative-clean-tech-projects/
ETIPWind (European Technology & Innovation Platform on Wind Energy) (2013), Workers
Wanted: The EU Wind Energy Sector Skills Gap,
https://etipwind.eu/files/reports/TPWind-Workers-Wanted.pdf
EV Volumes (2022), Global EV Sales for 2022 H1, https://www.ev-volumes.com/
Export Finance Australia (2022), Transforming Australia’s critical minerals sector,
https://www.exportfinance.gov.au/newsroom/transforming-australia-s-critical-mineralssector/

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Export Finance Australia (2021), Critical Minerals,
https://www.exportfinance.gov.au/criticalminerals/

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GBA (Global Battery Alliance) (2023), Greenhouse Gas Rulebook,https://www.globalbattery.org/press-releases/launch-of-greenhouse-gas-rulebook/
Gerloff N. (2021), Comparative Life-Cycle-Assessment analysis of three major waterelectrolysis technologies while applying various energy scenarios for a greenerhydrogen production, Journal of Energy Storage, 43, 102759,
https://doi.org/10.1016/j.est.2021.102759
GSA (US General Services Administration) (2022), GSA lightens the environmental footprintof its building materials, https://www.gsa.gov/about-us/newsroom/news-releases/gsalightens-the-environmental-footprint-of-its-building-materials-03302022
H2 Green Steel (2022), H2 Green Steel has pre-sold over 1.5 million tonnes of green steel tocustomers, https://www.h2greensteel.com/latestnews/h2-green-steel-has-pre-sold-over15-million-tonnes-of-green-steel-to-customers
H2UTechnologies (2022), H2UTechnologies website,
https://www.h2utechnologies.com/technology
Heraeus (2022), Heraeus information sheet,https://www.heraeus.com/media/media/hch/media_hch/products___solutions/hydrogen_systems/Heraeus_Brochure_Electrocatalysts_PEM_Electrolyzers.pdf
Hydrogen Tech World (2022), New tool revolutionizes discovery of non-iridium catalysts for H2
production, https://hydrogentechworld.com/new-tool-revolutionizes-discovery-of-noniridium-catalysts-for-h2-production
Hysata (2022), Technology, https://hysata.com/technology/
Hyundai (2020), Hyundai and Kia Turn Up EV Efficiency with New Heat Pump Technology,
https://www.hyundai.news/eu/articles/press-releases/hyundai-and-kia-turn-up-evefficiency-with-new-heat-pump-technology.html
Iberdrola (2021), Iberdrola and H2 Green Steel sign 2.3 billion euros green hydrogen deal,
https://www.iberdrola.com/press-room/news/detail/deal-green-hydrogen-iberdrola-h2green-steel
ICCT (International Council on Clean Transportation) (2022), Opportunities and Risks for a
National Low-Carbon Fuel Standard, https://theicct.org/wpcontent/uploads/2022/03/risks-low-carbon-fuel-standard-mar22.pdf
IDB (Inter-American Development Bank) (2013), The Role of National Development Banks in
Catalyzing International Climate Finance,
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IEA (International Energy Agency) (2022a), Securing Clean Energy Technology Supply
Chains, https://www.iea.org/reports/securing-clean-energy-technology-supply-chains
IEA (2022b), Solar PV Global Supply Chains, https://www.iea.org/reports/solar-pv-globalsupply-chains
IEA (2022c), World Energy Investment 2022, https://www.iea.org/reports/world-energyinvestment-2022
IEA (2022d), Global EV Outlook 2022, https://www.iea.org/reports/global-ev-outlook-2022
IEA (2022e), The Need for Net Zero Demonstration Projects, https://www.iea.org/reports/theneed-for-net-zero-demonstration-projects

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IEA (2022f), How Governments Support Clean Energy Start-ups,
https://www.iea.org/reports/how-governments-support-clean-energy-start-ups

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Chapter 6. Policy priorities to address supply chain risks

IEA (2022g), 2022 IEA ministerial communiqué, https://www.iea.org/news/2022-ieaministerial-communique
IEA (2022h), OECD Energy Prices and Taxes quarterly, December 2022 edition,
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IEA (2022i), Global Hydrogen Review 2022,
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IEA (2022j), Achieving Net Zero Heavy Industry Sectors in G7 Members,
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IEA (2021a), Recommendations of the Global Commission on People-Centred Clean Energy
Transitions, https://www.iea.org/reports/recommendations-of-the-global-commission-onpeople-centred-clean-energy-transitions
IEA (2021b), Ammonia Technology Roadmap, https://www.iea.org/reports/ammoniatechnology-roadmap
IEA (2021c), The Role of Critical Minerals in Clean Energy Transitions,
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IEA (2020a), Energy Technology Perspectives 2020, https://www.iea.org/reports/energytechnology-perspectives-2020
IEA (2020b), Iron and Steel Technology Roadmap, https://www.iea.org/reports/iron-and-steeltechnology-roadmap
IEA (2019), Material Efficiency in Clean Energy Transitions,
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IMI (Institute of the Motor Industry) (2018), Electric Vehicle Maintenance Standards,
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India, Ministry of Heavy Industries (2022), Three Companies signed Program Agreement
under (PLI) Scheme for Advanced Chemistry Cell (ACC) Battery Storage,
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India, Ministry of Heavy Industries (2021), Cabinet approves Production Linked Incentive
scheme “National Programme on Advanced Chemistry Cell Battery Storage”,
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India, MNRE (Ministry of New and Renewable Energy) (2019), Guidelines for Development ofDecentralised Solar Power Plants, https://mnre.gov.in/img/documents/uploads/file_f1580894745068.pdf
India, National Qualifications Register (2021), Qualification Details: O&M MechanicalTechnician – Wind Power Plant, https://www.nqr.gov.in/qualification-title?nid=5947
Invest India (n.d.) Production Linked Incentive (PLI) Schemes in India
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ISO (International Standards Organization) (2022), ISO 14040:2006 Environmental
management – Life cycle assessment – Principles and framework,https://www.iso.org/standard/37456.html

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Japan, METI (Ministry of Economy, Trade and Industry) (2021), Asia Energy Transition
Initiative (AETI),
https://www.meti.go.jp/english/press/2021/pdf/20210528001_aetieng.pdf

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Kiemel, S. et al. (2021) Critical materials for water electrolysers at the example of the energy
transition in Germany, International Journal of Energy Research 45, pp. 9914-9935,
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Koornneef, J. et al. (2008) Life cycle assessment of a pulverized coal power plant with postcombustion capture, transport and storage of CO2, International Journal of Greenhouse
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MCS (2022), Becoming certified, https://mcscertified.com/installers-manufacturers/becomingcertified/
National Careers Service (2022), Wind turbine technician,https://nationalcareers.service.gov.uk/job-profiles/wind-turbinetechnician#:~:text=Entry%20requirements,You'll%20usually%20need%3A,a%20higher%20or%20degree%20apprenticeship
National Law Review (2022), Reduce, Reuse, Recycle, Repair? Current and Future Right-ToRepair Rules in the European Union and United Kingdom,
https://www.natlawreview.com/article/reduce-reuse-recycle-repair-current-and-futureright-to-repair-rules-european-union
Nesta (2022), Shortage of trained heat pump installers could set back net zero,
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Norman, A. and N.O. Regan (2022), Installing for time, https://www.smf.co.uk/wpcontent/uploads/2022/02/Installing-for-time-Jan-2022.pdf
NREL (National Renewable Energy Laboratory) (2021), Machine Learning Method Could
Speed the Search for New Battery Materials,
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NREL (2001) Life Cycle Assessment of Hydrogen Production via Natural Gas Steam
Reforming, https://www.nrel.gov/docs/fy01osti/27637.pdf
NSTA (North Sea Transition Authority) (2022), New tool to maximise infrastructure
repurposing, https://www.nstauthority.co.uk/news-publications/news/2022/new-tool-tomaximise-infrastructure-repurposing/OECD (Organisation for Economic Co-operation and Development) (2022), Gross domestic
expenditure on R&D by sector of performance and socio-economic objective (SEO),
https://stats.oecd.org/
OECD (2016), Due Diligence Guidance for Responsible Supply Chains of Minerals from
Conflict-Affected and High-Risk Areas: Third Edition,
https://www.oecd.org/corporate/mne/mining.htm
Pehnt M. and J. Henkel (2009), Life cycle assessment of carbon dioxide capture and storage
from lignite power plants, International Journal of Greenhouse Gas Control, 3 (1), 4966, https://doi.org/10.1016/j.ijggc.2008.07.001
RSI (The Refrigeration School Inc.) (2022), Solar Certification and Licensing Requirements byState, https://www.rsi.edu/blog/solar/solar-certification-and-licensing-requirements-bystate/

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S&P Global (2022a), Lithium and cobalt global supply-demand balance, January 2022.

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

S&P Global (2022b), Renascor, EcoGraf secure loans under Australia's A$2B Critical
Minerals Facility, https://www.spglobal.com/marketintelligence/en/news-insights/latestnews-headlines/renascor-ecograf-secure-loans-under-australia-s-a-2b-critical-mineralsfacility-68692354
S&P Global (2022c), Unpacking ammonia’s market landscape and its role in the energy
transition, https://www.spglobal.com/commodityinsights/en/marketinsights/blogs/energy-transition/091622-ammonia-prices-supply-demand-hydrogenpower-bunker-fuelS&P Global (2022d), Commodity Prices.
SEIA (Solar Energy Industries Association) (2019), The Adverse Impact of Section 201
Tariffs: Lost Jobs, Lost Deployment and Lost Investments,
https://www.seia.org/sites/default/files/2019-12/SEIA-Tariff-Analysis-Report-2019-12-3Digital_0.pdf
Shanghai Petroleum and Gas Exchange (2022), China LNG Factory Price National Index,
https://www.shpgx.com/html/ChnLNGIndexHistory.html
SSAB (2018), SmartSteel 1.0 – The first step toward an internet of materials,
https://www.ssab.com/en/news/2018/05/smartsteel-10--the-first-step-toward-aninternet-of-materials
Star Refrigeration (n.d.), Star Refrigeration website, https://www.star-ref.co.uk/
State Grid Corporation of China (2022), [In December 2022, power grid enterprises acrossthe country will announce the agency power purchase price],https://news.bjx.com.cn/html/20221128/1272342.shtml
Sunfire (2022), Alkaline electrolysis scaling is picking up speed: Sunfire acquires
electroplating specialist, https://www.sunfire.de/en/news/detail/alkaline-electrolysisscaling-is-picking-up-speed-sunfire-acquires-electroplanting-specialist
The Hindu (2022), Delhi government to launch training programme for EV mechanics,
https://www.thehindu.com/news/cities/Delhi/delhi-government-to-launch-trainingprogramme-for-ev-mechanics/article65898443.ece
The White House (2022a), Biden-⁠Harris Administration Bringing Semiconductor
Manufacturing Back to America, https://www.whitehouse.gov/briefing-room/statementsreleases/2022/01/21/fact-sheet-biden-harris-administration-bringing-semiconductormanufacturing-back-to-america-2/
The White House (2022b), President Biden’s Economic Plan Drives America’s Electric
Vehicle Manufacturing Boom, https://www.whitehouse.gov/briefing-room/statementsreleases/2022/09/14/fact-sheet-president-bidens-economic-plan-drives-americaselectric-vehicle-manufacturing-boom/
The White House (2022c), Biden-⁠Harris Administration Announces New Buy Clean Actions to
Ensure American Manufacturing Leads in the 21st Century,
https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/15/fact-sheetbiden-harris-administration-announces-new-buy-clean-actions-to-ensure-americanmanufacturing-leads-in-the-21st-century/

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UNEP (United Nations Environment Programme) (2015), National Certification Schemes forRefrigeration and Air-Conditioning Service Technicians,
https://wedocs.unep.org/bitstream/handle/20.500.11822/26717/7756UNEP_ASHRAE_
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UNIDO (United Nations Industrial Development Organization) (2021), World’s largest steel
and concrete buyers make game-changing push for greener solutions,
https://www.unido.org/news/worlds-largest-steel-and-concrete-buyers-make-gamechanging-push-greener-solutions
United Kingdom, BEIS (Department for Business, Energy & Industrial Strategy) (2021), North
Sea Transition Deal,
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachmen
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United States, BLS (US Bureau of Labor Statistics) (2022), Careers in Electric Vehicles,
https://www.bls.gov/green/electric_vehicles/
United States, DOE (2022a), Wind Energy Education and Training Programs,
https://windexchange.energy.gov/training-programs
United States, DOE (Department of Energy) (2022b), America’s Strategy to Secure theSupply Chain for a Robust Clean Energy Transition,
https://www.energy.gov/sites/default/files/202202/America%E2%80%99s%20Strategy%20to%20Secure%20the%20Supply%20Chain%20for%20a%20Robust%20Clean%20Energy%20Transition%20FINAL.docx_0.pdf
United States, DOE (2022c), DOE Optimizes Structure to Implement $62 Billion in Clean
Energy Investments From Bipartisan Infrastructure Law,
https://www.energy.gov/articles/doe-optimizes-structure-implement-62-billion-cleanenergy-investments-bipartisanUnited States, DOE (2022d), United States Hosts FirstEver Global Clean Energy Action Forum to Accelerate Clean Energy Innovation and
Deployment, Fact sheet, https://www.energy.gov/sites/default/files/202209/USG%20GCEAF%20FACTSHEET_final_1.pdf
United States, DOE (2022e), United States Energy and Employment Report 2022,
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United States, DOE (2022f), Production Tax Credit and Investment Tax Credit for Wind
Energy, https://windexchange.energy.gov/projects/tax-credits
United States, DOE (2022g), Investigating Benefits and Challenges of Converting Retiring
Plants into Nuclear Plants, https://www.osti.gov/biblio/1886660 United States, DOE(2021), Fuels, United States Energy and Employment Report,
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Western Australia, Department of Mines, Industry Regulation and Safety (2019), Lithium
royalty amendments to encourage downstream processing,https://dmp.wa.gov.au/News/Lithium-royalty-amendments-to-25938.aspx

Energy Technology Perspectives 2023

Chapter 6. Policy priorities to address supply chain risks

Wood Mackenzie (2022), Wind turbine blades supply chain trends 2022, Global Wind Energy
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World Bureau of Metal Statistics (2022), Mineral Yearbook.
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Worldsteel (2022), Steel Statistical Yearbook, https://worldsteel.org/steel-bytopic/statistics/steel-statistical-yearbook/

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Yeh, S. et al. (2016), A review of low carbon fuel policies: Principles, program status andfuture directions, Energy Policy, 97, 220-234,
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Energy Technology Perspectives 2023

Annex

Annex
Glossary
Announced Pledges Scenario (APS): This scenario assumes that governments will meet,in full and on time, all of the climate-related commitments that they have announced,
including longer-term net zero emission targets and pledges in Nationally Determined
Contributions, as well as commitments in related areas such as energy access. It does soirrespective of whether or not those commitments are underpinned by specific policies tosecure their implementation. Pledges made in international fora and initiatives on the partof businesses and other non-governmental organisations are also taken into accountwherever they add to the ambition of governments.
Announced projects/capacity: New facilities or expansions of current facilities as
published by manufacturers or producers. The announcements are taken at face value andno judgement is made on their feasibility. They are split between “committed”, those thatare currently being built or that have recently received final investment decision; and“preliminary”, those that have been announced and are being planned but have currently
not received final investment decision and therefore are more speculative. Someannounced values are taken directly from producers or manufacturers, while others are
retrieved from specific databases.
Anticipated supply: Potential expected future production based on expert judgement fromthird party data providers for critical minerals and processed materials. Expectations incommodity prices can have a large impact on the expected supply – a higher price mightlead to more supply coming online. At the same time, unexpected delays in financing,permitting, or construction could delay projects, yielding a lower supply. The value istherefore lower than a sum of all announced projects.
Bioenergy with carbon capture (BECC): A suite of technologies involving any energy
pathway where CO2 is captured from a biogenic source including process emissions aswell as combustion emissions. When coupled with permanent geological CO2 storage,
BECCS (bioenergy with carbon capture and storage) is a carbon removal technology. Asan alternative to storage, the captured CO2 can also be utilised as a feedstock for a rangeof products such as synthetic hydrocarbon fuels.

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Bulk materials: Large-volume materials produced in quantities approaching or exceeding
100 Mt per year globally. They differ from critical materials in that clean energy transitions
are not anticipated to pose a risk of supply gaps, as the raw minerals needed to make them
are comparatively widespread and abundant. They are already widely used in energy andother sectors so clean energy transitions are not expected to lead to a large overall increase
in total demand. Bulk materials of focus in this report are steel, cement, aluminium andplastic.

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Annex

Carbon capture, utilisation and storage (CCUS): A suite of technologies capturing CO2
from large point sources (e.g. power generation or industrial facilities) as well as the air. If
not being used on-site, the captured CO2 is compressed and transported by pipeline, ship,
rail or truck to be used in a range of applications, or injected into deep geological formations(including depleted oil and gas reservoirs or saline aquifers), which can trap the CO2 forpermanent storage.
Clean energy technology: Those energy technologies that result in minimal or zero emissionsof CO2 and pollutants. For the purposes of this report, clean energy technology refers to low ornear zero emission technologies that do not involve the production or transformation of fossil
fuels – coal, oil and natural gas – unless they are accompanied by CCUS and other antipollution measures.

Critical materials: Materials that are essential for clean energy technologies andinfrastructure whose supply chains are vulnerable to disruption and that could face supply
gaps if sufficient efforts are not taken to scale up supply. The volumes of critical materials
tend to be small relative to other materials (current global production of each type of criticalmaterial is well under 100 Mt per year). Demand from clean energy transitions could drivea very rapid increase in total demand. Critical materials of focus in this report are copper,
lithium, nickel, cobalt, neodymium and polysilicon.
Direct air capture (DAC): Technology to capture CO2 directly from the atmosphere using
liquid solvents or solid sorbents. It can be coupled with permanent storage of the CO2 indeep geological formations or its use in the production of fuels, chemicals, building
materials or other products. When coupled with permanent geological CO2 storage, DACS(DAC with storage) is a carbon removal technology.
End of life: The decommissioning and processing of a piece of physical equipment or
infrastructure hardware once it has reached the end of its useful life. This could involvereuse in a second application or recycling, or could involve treatment and disposal.
Energy supply chains: The different steps needed to supply a fuel or final energy service toend-users, usually involving trade of that energy commodity along and across technology
supply chains (see also figures I.1 and I.2 of introduction).
Energy technology: The combination of hardware, techniques, skills, methods and processes
used in the production of energy and the provision of energy services, i.e. how energy is
produced, transformed, stored, transported and used.

Geographical and corporate concentration: Denotes for each of supply chain step of
the main technologies how concentrated the existing capacity or announced investment
plans are in one or a limited number of countries, regions or corporations (see also Chapter
2 for further analysis).

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Infrastructure: The enabling physical facilities and systems that move and store energy or
CO2, linking locations where energy or CO2 is produced to demand centres, and including
storage facilities to balance fluctuations in production and demand, or to permanently store

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Annex

CO2. This report focuses on technologies that make up transportation, transmission,
distribution, and storage of electricity, hydrogen (or hydrogen-based fuels) and CO2.
Installation: The on-site deployment of clean technologies, both mass manufactured andsite-tailored ones, such as installing a heat pump, deploying wind farms or BECC plants.
This includes the project development necessary for the physical deployment, whereapplicable.
Large-scale, site-tailored technologies: These are usually individually designed andmanufactured to fit specific local conditions. They may consist of a number of componentsthat themselves are mass manufactured, but their engineering, assembly and installation
are site-specific. Of the supply chains analysed in this report, natural gas-based hydrogenwith CCUS, DAC, BECC, and low-emission synthetic hydrocarbon fuels are included in thiscategory.
Lead time: Defined as the time that passes from when a project is announced (i.e. acompany states the intent to build a given facility or part of infrastructure) to when the
project is commissioned. This includes feasibility studies (except for mining), funding,permitting and actual construction of the project.
Low-emission synthetic hydrocarbon fuels: Synthetic hydrocarbon fuels made fromsynthesis gas (primarily a mixture of hydrogen, carbon monoxide and CO2) using catalysts.
Suitable feedstocks include electrolytic hydrogen and atmospheric CO2, captured directly
through DAC or indirectly through BECC.
Low-emission hydrogen: Low-emission hydrogen includes hydrogen produced via
electrolysis where the electricity is generated from a low-emission energy source (forexample, renewables, nuclear, biomass or fossil fuels with CCUS), fossil-based hydrogenproduction with carbon capture and storage, and biomass-based hydrogen production. The
same principle applies to low-emission feedstocks and fuels made using low-emissionhydrogen, such as ammonia, or using low-emission hydrogen and a sustainable carbon
source (of biogenic origin or directly captured from the atmosphere), such as methanol orother synthetic hydrocarbons.
Manufacturing capacity: The maximum amount of a component or technology a facility isnominally able to produce.
Mass-manufactured technologies: These are assembled in specialised factories in large
volumes using several manufactured components and sub-assemblies, with the ready-touse end product exiting the factory floor. Of the selected supply chains analysed in thisreport, solar PV modules, wind turbines, electric cars, fuel cell trucks, heat pumps andelectrolysers are key technologies that fall into this category.

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Material production/mineral processing: The refining, processing or further
modifications from the raw mineral into the material which is subsequently used during
manufacturing of a technology or component. This may involve extracting a pure metal inelemental form, or processing into a desired alloy or mineral compound.

Energy Technology Perspectives 2023

Annex

Material efficiency: A portfolio of measures at all stages of supply chains, each of which
serves at least one of several ends: reducing total demand for materials while providing thesame service, optimising material use to minimise supply chain pressures, substituting
different materials to reduce life-cycle emissions, or in the case of recycling, reducing theneed to extract new raw minerals.
Materials: Materials that are produced at industrial plants through refining, processing or
further modifications from raw minerals and are used during manufacturing of a technology
or component (see also Box 3.1).
Mineral extraction/mining: The extraction of mineral ores from the earth and theupgrading of ores at the mine site to liberate and concentrate the minerals of interest.
Minerals: Naturally occurring rocks or sediments that are extracted from the earth in theform of mineral ores. For the purposes of this report these are measured in terms of thetarget element contained within mineral ores (see also Box 3.1).
Near zero emission capable production: Material production that achieves substantial
greenhouse gas emission reductions, falling short of near zero emissions initially (seedefinition of “near zero emission material production”) but for which the producer has plans
to continue reducing emissions over time such that it could likely later reach near zero
emissions without substantial additional capital investments in core process equipment.
Near zero emission material production: Material production with a greenhouse gas
emissions intensity that is compatible with net zero emissions for the global energy system.
The IEA has proposed definitions for near zero emission steel and cement in the 2022
report Achieving Net Zero Heavy Industry Sectors in G7 Members.
Net Zero Emissions by 2050 (NZE) Scenario: The central scenario in this report, anormative scenario that sets out a pathway to the stabilisation of global averagetemperatures at 1.5°C above pre-industrial levels. The NZE Scenario achieves global net
zero CO2 emissions by 2050 in the energy sector without relying on emissions reductions
from outside the energy sector. In doing so, advanced economies reach net zero emissions
before developing economies do. The NZE Scenario also meets the key energy-related
United Nations Sustainable Development Goals, achieving universal access to modern
energy by 2030 and securing major improvements in air quality.
Operation: The use phase of an energy technology resulting in the production of an energy
carrier, such as the production of hydrogen by electrolysers, or the provision of an energy
service, such as the mobility by an EV.

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Production ramp-up time: The time needed from the production’s start until a facility isable to produce at its full nominal capacity commissioning.

Energy Technology Perspectives 2023

Annex

Resilience (of a supply chain): In the context of the report, this refers to the ability of a
supply chain to respond and quickly adjust to sudden market shocks on prices or demand.
This is particularly influenced by prices being stable and affordable, as well as the supply
chain having effective interconnection with other supply chains that can deliver anequivalent technology or service.
Security (of a supply chain): In the context of the report, this refers to the level to whicha supply chain has adequate, reliable and uninterrupted supply of inputs. This is particularly
influenced by the diversity of the supply chain in terms of market, region, suppliers andtechnologies.
Sustainability (of a supply chain): In the context of the report, this refers to a supply chain
minimising its greenhouse gas emissions and other environmental impacts consistent withclimate objectives. This includes supply chain transparency and reporting; strengthening
environmental, social and governance measures; and efficient and responsible use ofnatural resources, including through promotion of material efficiency and end of lifestewardship.
Technology and component manufacturing: The production of technologies orcomponents using labour, tools and energy to transform materials into finished goods.
Technology supply chains: The different steps needed to install a clean energy technology,
with inputs of materials, components and services involved at each stage (see also figures I.1
and I.2 of introduction).

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Utilisation rate: The proportion of the maximum capacity of a facility which is used on
average over a set period of time.

Energy Technology Perspectives 2023

Annex

Clean supply chain characteristics
Mining and material production
Regional capacities for mining and reserves, 2021
Copper (kt)
World
China
EuropeNorth
America
Other
Asia
Pacific
Central &South
America
AfricaEurasia
MiddleEast
Unknown

Nickel (kt)

Cobalt (kt)Reservesa Minedb,e Reservesa Minedc Reservesa Minedd
880 000
21 00095 000
2 700
7 600
150
3%
8%
3%
4%
1%
1%
4%
5%
0%
3%
0%
1%

Rare earth elements(kt)
Minedd Reservesa Mineda
100
120 000
290
12%
35%
57%
0%
1%
0%

Lithium (kt)Reservesa
22 000
7%
0%

13%

12%

2%

5%

4%

3%

3%

1%

2%

16%

13%

11%

49%

66%

30%

13%

36%

56%

26%

24%

32%

41%

17%

10%

7%

3%

42%

29%

17%

0%

6%
9%

13%
9%

0%
8%

4%
7%

48%
3%

76%
2%

1%
0%

2%
0%

1%
17%

1%
1%

0%

2%

0%

0%

0%

0%

0%

0%

0%

0%

21%

0%

21%

0%

8%

0%

12%

0%

0%

0%

Notes: World values are rounded to 2 significant figures.
Sources: a. USGS (2022), b. S&P Global (2022a), c. S&P Global (2022b), d. S&P Global (2022c), e. WBMS (2022).

Regional capacities for critical material production, 2021
CopperaNickelaWorld

22 5002 790

Nickelsulfateb
228

137

Cobaltsulfatec,a
119

China

34%

29%

EuropeNorth
America
Other
Asia
Pacific
Central &South
America
AfricaEurasia
MiddleEast
Unknown

11%

0%

56%

69%

70%

59%

59%

90%

11%

16%

16%

0%

0%

0%

7%

4%

0%

4%

4%

1%

1%

0%

16%

41%

17%

5%

5%

3%

3%

0%

14%

0%

0%

0%

0%

37%

37%

0%

8%
7%

0%
4%

0%
0%

4%
1%

4%
1%

0%
0%

0%
0%

0%
0%

2%

0%

0%

0%

0%

0%

0%

0%

0%

21%

16%

0%

0%

0%

0%

10%

Cobalta95

Lithiumchemicalsc,d150

Neodymiumoxidee39

Lithiumd

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Notes: Values are in kt. Lithium chemicals = Lithium carbonate + Lithium hydroxide
Sources: a. WBMS (2022), b. Fraser et al. (2021), c. BNEF (2022) d. S&P Global (2022c) e. Adamas Intelligence (2020).

Energy Technology Perspectives 2023

Annex

Regional capacities for bulk material production, 2021
Steel (Mt)

Cement (Mt)

Plastics (Mt)

Aluminium (Mt)

World

2 000

4 300

310

810

China

52%

55%

25%

9%

Europe

11%

7%

9%

2%

North America

6%

4%

18%

2%

Other Asia Pacific

19%

19%

24%

85%

Central & South America

2%

3%

2%

1%

Africa

1%

5%

1%

0%

Eurasia

4%

2%

3%

1%

Middle East

2%

4%

17%

1%

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Source: IEA (2022a).

Energy Technology Perspectives 2023

Annex

Technology and component manufacturing
Low-emission hydrogen supply chain
Manufacturing capacity for electrolysers, 2022
Electrolysers (GWel)
World

11

China

41%

Europe26%

North America

19%

Other Asia Pacific14%Central & South America

0%Africa0%

Eurasia0%

Middle East

0%

Notes: Electrolyser manufacturing capacity includes all electrolysers independent of how these are used.
Source: IEA (2022a).

Low-emission electricity supply chain
Manufacturing capacity for wind technology components, 2021
Tower (GW)

Nacelle (GW)

Blade (GW)

OnshoreOffshore

OnshoreOffshore

OnshoreOffshore

World

88

18

100

26

98

25

China

55%

53%

62%

73%

61%

83%

Europe

16%

41%

13%

26%

18%

12%

11%

0%

10%

0%

10%

0%

12%

6%

8%

2%

6%

4%

5%

0%

6%

0%

4%

0%

North
America
Other Asia
Pacific
Central &South
America
Africa

1%

0%

0%

0%

0%

0%

Eurasia

0%

0%

0%

0%

0%

0%

Middle East

0%

0%

0%

0%

0%

0%

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Notes: On towers: capacity for 2021 only includes facilities directly related to the wind industry; On all components’capacities: in 2022 certain facilities closed down, these are not accounted for as an uncertain amount can be reopened
again, which is not clear as of this date.
Source: Data provided by Wood Mackenzie.

Energy Technology Perspectives 2023

Annex

Manufacturing capacity and production for solar PV components, 2021
WafersCells

Modules

Production

Capacity

Production

Capacity

Production

Capacity

World

190

370

190

410

190

460

China

96%

96%

78%

85%

73%

75%

Europe

0%

1%

1%

1%

2%

3%

0%

0%

1%

1%

5%

2%

3%

3%

18%

13%

19%

18%

0%

0%

0%

0%

0%

0%

Africa

0%

0%

0%

0%

0%

1%

Eurasia

0%

0%

0%

0%

1%

1%

Middle East

0%

0%

0%

0%

0%

0%

North
America
Other Asia
Pacific
Central &South
America

Source: InfoLink (2022).

Clean technology supply chains
Manufacturing capacity and production for electric cars and battery
components, 2021
Cathode (kt)
Production

Anode (kt)a,bCapacitya

World

440

China
EuropeProduction

Batteries (GWh)

Capacitya

1400

250

77%

68%

1%

Production

Productionb,cCapacityc

810

340

910

6.8

92%

87%

66%

75%

54%

1%

0%

0%

21%

8%

27%

16%

1%

2%

1%

11%

6%

10%

5%

26%

7%

13%

2%

10%

7%

0%

0%

0%

0%

0%

0%

0%

Africa

0%

0%

0%

0%

0%

0%

0%

Eurasia

0%

0%

0%

0%

0%

0%

0%

Middle
East

0%

0%

0%

0%

0%

0%

0%

Unknown

0%

2%

0%

1%

2%

0%

2%

North
America
Other Asia
Pacific
Central &South
Americaa,bElectric
cars(Millions)b,dPAGE | 452

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Sources: IEA internal analysis and a. BNEF (2022), b. IEA (2022b), c. Benchmark Mineral Intelligence (2022), d. EV
Volumes (2022).

Energy Technology Perspectives 2023

Annex

Manufacturing capacity and production for heat pumps, 2021
Heat pumps (GW)
Productiona,cCapacityb,c

World

100

120

China

38%

39%

Europe16%

16%

North America

29%

29%

Other Asia Pacific

13%

14%

Central & South America

0%0%Africa0%0%Eurasia0%0%Middle East2%

2%

Sources: a. IEA internal analysis and industry consultations, b. UN (2022), c. IEA (2022c).

Manufacturing capacity and production for fuel cell heavy-duty trucks
components, 2021
Fuel cell systems (GW)
Capacitya

Fuel cell trucks (thousand)
Productionb

Capacityb

World

19

0.9

14

China

48%

84%

45%

Europe

1%

9%

21%

North America

4%

0%

18%

Other Asia Pacific

38%

6%

14%

Central & South America

0%

0%

0%

Africa0%0%0%Eurasia

0%

0%

0%

Middle East

0%

0%

0%

Unknown

7%

0%

0%

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Notes: It is assumed that production is proportional to sales.
Sources: a. E4tech (2022), b. IEA internal analysis and industry consultations.

Energy Technology Perspectives 2023

Annex

Deployment
Low-emission hydrogen supply chain
Hydrogen production installed capacity, 2022
Natural gas-basedhydrogen with CCS
Mt H2

Mt H2

GWel

World

0.32

0.088

0.51

China

0%

3%

36%

Europe

3%

16%

31%

North America

96%

5%

9%

Other Asia Pacific

0%

42%

12%

Central & South America

0%

21%

5%

Africa0%

1%

1%

Eurasia

0%

3%

5%

Middle East

0%

4%

1%

Electrolysers

Notes: The installed capacity for electrolysers refers to electrolysers for dedicated hydrogen production in 2022, excluding
their use in the chlor-alkali industry.
Source: IEA (2022d).

Low-emission electricity supply chain
Generation capacity additions of solar PV modules and wind energy, 2021
Solar PV (GW)Wind energy (GW)
OnshoreOffshore

World

150

150

21

China

37%

41%

80%

Europe

18%

18%

16%

North America

18%

20%

0%

Other Asia Pacific

20%

8%

5%

Central & South America

6%

6%

0%

Africa1%

1%0%

Eurasia

1%

2%

0%

Middle East

1%

0%

0%

PAGE | 454

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Source: IEA (2022a).

Energy Technology Perspectives 2023

Annex

Low-emission synthetic hydrocarbon fuels supply chain
Synthetic hydrocarbon fuel synthesis installed capacity with dedicated BECC or
DAC, 2021
BECC(Mt CO2)DAC(Mt CO2)

Synthetic HC Fuels(bbl/d)

World

2

0.01

11

China

0%

0%

0%

Europe

17%

76%

100%

North America

75%

24%

0%

Asia-Pacific

8%

0%

0%

Central & South America

0%

0%

0%

Africa0%0%0%Eurasia

0%

0%

0%

Middle East

0%

0%

0%

Notes: Synthetic HC fuels = low-emission synthetic hydrocarbon fuels.
Source: IEA internal analysis and industry consultations.

Clean technology supply chains
Sales of electric cars, fuel cell trucks and heat pumps, 2021
Electric cars

Fuel cell trucks

Heat pumps

MillionThousands

GW

World

6.6

1.7

96

China

53%

94%

33%

Europe

33%

5%

21%

North America

10%

0%

31%

Other Asia Pacific

3%

0%

12%

Central & South America

0%

0%

0%

Africa0%0%0%Eurasia

0%

0%

0%

Middle East

0%

0%

3%

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Notes: Electric cars only include passenger light duty vehicles; Fuel cell trucks include heavy and medium freight trucks.
Sources: IEA (2022a), IEA (2022b).

Energy Technology Perspectives 2023

Annex

Infrastructure
Electricity grid deployment, 2021
Electricity grid additions (1000 km)
Transmission

Distribution

World

1300

140

China

24%

25%

Europe16%

18%

North America

17%

18%

Other Asia Pacific

29%

16%

Central & South America

5%7%Africa4%

5%

Eurasia2%

4%Middle East4%

4%

Sources: IEA (2022a).

Other supply chain characteristics
Employment, 2019
Manufacturing employment
Mass manufactured

Manufacturing

Established/Mature supply chains (total jobs) - thousand employees

Solar PV

Polysilicon

24

Wafers88

Solar cells

200

Solar modules

270

Other solar jobs

330

Wind energy

380

Electric cars

660

Heat pumps

120

Emerging/Nascent supply chains (job intensity) - thousand employees per unit
Electrolysers (GW/year)

0.5 - 1

Fuel cell trucks (thousand trucks/year)

0.2 - 0.3

Site-tailored (job intensity) thousand employees per unit

Construction

Operation

4.6

0.5 - 2.3

BECC (Mt CO2/year)

0.2 - 0.5

0 - 0.1

DAC (Mt CO2/year)

0.7 - 20.2 - 0.3

Synthesis (PJ/year)

0.2 - 0.4

0 - 0.1

Natural gas- based H2 with CCS (Mt H2 /year)
Hydrocarbon synthetic fuels

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Notes: PV = photovoltaic; DAC = direct air capture; BECC = bioenergy with carbon capture.
Source: IEA (2022e).

Energy Technology Perspectives 2023

Annex

Lead times
Lead timeyear

Manufacturing plants for mass-manufactured technologies

Solar PVWind

Polysilicon

1 - 3.5

Wafers

0.5 - 2

Solar cells

0.5 - 2

Solar modules

0.5 - 2

Blade

1-2

Tower

1.5 - 2.5

Nacelle1.5 - 2

Electrolysers
Electric vehicles

2-3
Anode

2-5

Cathode2-5

Battery

0.5 - 4.5

Heat pumps
Fuel cell trucks

1-3
Fuel cell stacks

1.5 - 2.5

Fuel cell trucks

0.5 - 1.5

Large-scale, site-tailored technologies
Gas-based H2 with CCS
Synthetic fuels

1.5 - 9Hydrocarbon fuel synthesis

2.5 - 4DAC

2.5 - 5.5

BECC

1-5

HVAC - OHL

5 - 13

HVDC - cables

4 - 11

Large power transformer

1-4

Onshore pipeline

5 - 17.5

Offshore pipeline

4-9

Onshore LNG terminal

5 - 12

Floating LNG terminal

1.5 - 10

LNG tanker

1.5 - 4

Infrastructure
Electricity infrastructure

Natural gas infrastructure

Underground gas storage
CO2 infrastructure

CO2 storage

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Notes: PV = photovoltaic; DAC = direct air capture; BECC = bioenergy with carbon capture; HVAC = high-voltage
alternating current; HVDC = high-voltage direct current; OHL = overhead line; LNG = liquified natural gas. Lead time refers
to the time that passes from when a project is announced to when the project is commissioned. This includes feasibility
studies, funding, permitting and actual construction of the facility or project. Experience on lead times for hydrogen
infrastructure is limited, therefore lead times for natural gas infrastructure can provide a good indication for the lead times ofhydrogen infrastructure due to similarities in project types and manufacturing/construction processes.
Sources: IEA internal analysis and industry consultations.

Energy Technology Perspectives 2023

Annex

Regional definitions
Unless otherwise specified aggregated regions refer to the aggregation of countries asfollows:
Africa: Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cabo Verde, Cameroon,
Central African Republic, Chad, Comoros, Côte d'Ivoire, Democratic Republic of the Congo,
Djibouti, Egypt, Equatorial Guinea, Eritrea, Eswatini, Ethiopia, Gabon, Gambia, Ghana,
Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali,
Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Republic of theCongo, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South
Africa, South Sudan, Sudan, Togo, Tunisia, Uganda, United Republic of Tanzania, Zambia
and Zimbabwe
Central and South America: Antigua and Barbuda, Argentina, Aruba, Bahamas, Barbados,
Belize, Bermuda, Bolivia, Brazil, Cayman Islands, Chile, Colombia, Costa Rica, Cuba,
Curaçao, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala,
Guyana, Haiti, Honduras, Jamaica, Nicaragua, Panama, Paraguay, Peru, Saint Kitts andNevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago,
Uruguay and Venezuela
China: People's Republic of China and, Hong Kong, China
Eurasia: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Russian Federation,
Tajikistan, Turkmenistan and Uzbekistan
Europe: Albania, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia,
Cyprus 69,70, Czechia, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece,
Greenland, Hungary, Iceland, Ireland, Israel 71, Italy, Kosovo, Latvia, Lithuania, Luxembourg,
Malta, Monaco, Montenegro, Netherlands, North Macedonia, Norway, Poland, Portugal,
Republic of Moldova, Romania, Serbia, Slovak Republic and Slovenia, Spain, Sweden,
Switzerland, Türkiye, Ukraine and United Kingdom
Middle East: Bahrain, Iraq, Islamic Republic of Iran, Jordan, Kuwait, Lebanon, Oman, Qatar,
Saudi Arabia, Syrian Arab Republic, United Arab Emirates and Yemen
North America: Canada, Mexico and United States

Note by Republic of Türkiye: The information in this document with reference to “Cyprus” relates to thesouthern part of the island. There is no single authority representing both Turkish and Greek Cypriot people on the island.
Türkiye recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within thecontext of the United Nations, Türkiye shall preserve its position concerning the “Cyprus issue”.
70
Note by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus isrecognised by all members of the United Nations with the exception of Türkiye. The information in this document relates tothe area under the effective control of the Government of the Republic of Cyprus.
71
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of suchdata by the OECD and/or the IEA is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli
settlements in the West Bank under the terms of international law.

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69

Energy Technology Perspectives 2023

Annex

Other Asia Pacific: Afghanistan, Australia, Bangladesh, Bhutan, Brunei Darussalam,
Cambodia, Cook Islands, Dem. People's Rep. of Korea, Fiji, French Polynesia, India,
Indonesia, Japan, Kiribati, Korea, Lao People's Democratic Republic, Malaysia, Maldives,
Mongolia, Myanmar, Nepal, New Caledonia, New Zealand, Pakistan, Palau, Papua New
Guinea, Philippines, Samoa, Singapore, Solomon Islands, Sri Lanka, Thailand, Timor-Leste,
Tonga, Vanuatu and Viet Nam

Acronyms and abbreviations
Abu Dhabi National Oil Company
anion exchange membrane
Announced Pledges Scenario
Australian dollars
bioenergy with carbon capture
Contemporary Amperex Technology Co. Limited
carbon contracts for difference
carbon capture and storage
carbon capture and utilisation
carbon capture, utilisation and storage
Clean Energy Ministerial’s Industrial Deep Decarbonisation Initiative
China National Offshore Oil Corporation
China National Petroleum Corporation
carbon dioxide
CO2 equivalentdirect air capture
direct reduced ironelectric arc furnace
environmental, social and governance
Energy Technology Perspectives 2023
Emissions Trading System
European Union
electric vehicle
fuel cell electric vehicle
Fischer-Tropsch
global warming potential
internal combustion engine
International Council on Mining and Metals
International Energy Agency
Intergovernmental Panel on Climate Change
Important Projects of Common European Interest
Inflation Reduction Act
information technology
lithium-ion
mixed hydroxide precipitate
Ministry of Industry and Information Technology
machine learning

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ADNOC
AEM
APS
AUD
BECC
CATL
CCfD
CCS
CCU
CCUS
CEM IDDI
CNOOC
CNPC
CO2
CO2-eq
DAC
DRI
EAF
ESG
ETP-2023
ETS
EU
EV
FCEV
FT
GWP
ICE
ICMM
IEA
IPCC
IPCEI
IRA
IT
Li-ionMHP
MIIT
MLEnergy Technology Perspectives 2023

NZE
PEM
PV
RD&D
REE
SCM
SMR
SOEC
STEM
TSMC
WGS

Annex

Net Zero Emissions by 2050
proton-exchange membrane
photovoltaic
research, development and demonstration
rare earth element
supplementary cementitious material
steam methane reforming
solid oxide electrolyser cellscience, technology, engineering and mathematics
Taiwan Semiconductor Manufacturing
water-gas shift

Units of measure

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°C
degree Celsius
Bblbarrelbcm
billion cubic metres
EJ
exajoule
gramme CO2 per kilowatt hourg CO2/kWh
GJ
gigajoule
GJ/tonne
gigajoule per tonne
Gt
gigatonne
gigatonne of carbon dioxide
Gt CO2
GW
gigawatt
GW/yeargigawatt per year
GWh
gigawatt-hour
gigawatt thermal
GWth
h
hour
kg
kilogramme
kg CO2-eq/GJ kilogramme of CO2 equivalent per gigajoule
kilogramme of CO2 per kilogramme
kg CO2/kg
kilogramme of hydrogenkg H2km
kilometrektkilotonne
kt/yearkilotonne per year
kt CO2/year kilotonne of carbon dioxide per year
kWkilowatt
kilowatt electrickWekWhkilowatt-hourkilowatt-hour per kilogramme of hydrogen
kWh/kg H2
L
litre
L/100 km
km litre per 100 kilometres
MBtu
million British thermal unit
Mt
million tonnes

Energy Technology Perspectives 2023

Mt/year
Mt CO2
Mt CO2/year
Mt H2
MW
MWh
PJ
t
t CO2
t CO2/year
TWh
USD
USD/GJ
USD/kg
USD/kg H2
USD/kW
USD/kWe
USD/MBtu
USD/MWh
USD/t
USD/t CO2
USD/W
Wh/kg

Annex

million tonnes per year
million tonnes of carbon dioxide
million tonnes of carbon dioxide per year
million tonnes of hydrogenmegawatt
megawatt-hourpetajouletonne
tonne of carbon dioxide
tonne of carbon dioxide per year
terawatt-hour
United States dollar
United States dollar per gigajoule
United States dollar per kilogramme
United States dollar per kilogramme of hydrogen
United States dollar per kilowatt
United States dollar per kilowatt electric
United States dollar per million British thermal unit
United States dollar per megawatt-hour
United States dollar per tonne
United States dollar per tonne of carbon dioxide
United States dollar per watt
watt-hour per kilogramme

Currency conversions
Exchange rates(2021 annual average)

1 US dollar (USD)
equals:British Pound

0.73

Chinese Yuan Renminbi

6.45

Euro

0.84

Indian Rupee

73.92

Japanese Yen

109.75

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Source: OECD (2022).

Energy Technology Perspectives 2023

Annex

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