Cleantech Supply Chain Issues Threaten Transition

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    Stockholm (NordSIP) – A new report from the International Energy Agency (IEA) highlights some of the potentially serious supply chain risks as the world accelerates towards the low-carbon transition.  The organisation’s 2023 edition of Energy Technology Perspectives (ETP-2023) provides almost 500 pages of detailed analysis of clean energy supply chains, including mining, technology manufacturing and installation, enabling infrastructure and policy actions.

    Chinese domination

    Transition investing presents a vast array of opportunities, with the cleantech market expected to be worth roughly USD 650 billion a year by 2030, with an expected 14 million jobs associated with it.  However, there are considerable concentration risks built into its current global structure.  On the manufacturing side, the three largest producing countries account for almost three quarters of the market for products like solar panels, wind turbines, heat pumps, batteries and electrolysers.  The picture is similar for the supply chain of the raw materials most in demand for renewable energy technologies.  China’s dominance across the board is evident in the following chart from the IEA report, which shows geographic concentration by supply chain (% share per manufacturing country, 2021 data).

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    Prices are creeping back up

    The report also presents a challenge to the assumption that the price of clean technology is generally falling.  While the price of solar panels if often used as a compelling example of the rapidly improving viability of renewables when compared to fossil fuels, recent supply chain-driven rises in cobalt, lithium and nickel have driven the price of batteries up after a long period of decline.  Steel and copper price increases have driven up the cost of non-Chinese manufactured wind turbines, and even solar technology is creeping upwards.

    While sounding these notes of caution, the IEA is not advocating any move back to fossil fuels.  The information in this extensive report should be used to underpin an effort to diversify and strengthen supply chains for clean technology.  According to the IEA, renewable energy is one area where the benefits of globalisation are definitely still needed.  There are vast global flows of materials and components, but concentration and bottlenecks need to be addressed to ensure that all nations can take effective steps towards the low-carbon transition.


    Images courtesy of Ed White from Pixabay (edited) and International Energy Agency (IEA)
    Richard Tyszkiewicz
    Richard Tyszkiewicz
    Richard has over 30 years’ experience in the international investment industry. He has worked closely with major Nordic investors on consultancy projects, focusing on the evaluation of external asset managers. While doing so, Richard built up a strong practical understanding of the challenges faced by institutional investors seeking to integrate ESG into their portfolios. Richard has an MA degree in Management and Spanish from St Andrews University, and sustainability qualifications from Cambridge University, PRI and the CFA Institute.
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