The energy transition, a “new industrial era”, assures the IEA

Posted on Jan 12, 2023, 3:41 PM

We are about to enter a “new industrial era”, “era of clean energy technologies”. This is how the International Energy Agency (IEA) introduced its new report (ETP-2023) on the outlook for the energy transition market. While a few years ago, almost twenty, photovoltaic panels and wind turbines were produced in dribs and drabs, decarbonized energy technologies have become a key sector for economies around the world.

Far from the discourse that renewable energies are not profitable, the IEA shows in this 450-page dossier that the energy transition is full of job opportunities, investment and economic development for the coming years. By 2030, the market for basic energy-cleaning technologies (solar panels, wind turbines, batteries, electrolyzers, heat pumps, etc.) should be multiplied by three to reach “a value of approximately 650 billion dollars per year”, according to the report..

If more than 65 million people work in the energy sector today, it is construction and installation activities, “very labor intensive”, which are experiencing “continuous growth”. In other words, it is above all new projects, and therefore primarily the production of carbon-free energy technologies, that create new jobs. The IEA estimates that industrial jobs in the sector should rise from 6 million today to nearly 14 million, driven by the production of electric vehicles and batteries.

The danger of highly concentrated production

The numbers are irreversible. “China currently dominates the production and trade of most clean energy,” including solar panels, batteries and wind turbines. Certainly, the country’s investment in these supply chains has reduced the global costs of key technologies. But the alarming geographical concentration (for each technology, at least 70% of the manufacturing capacity is held by three countries), is not without risks.

“Concentration at any point in a supply chain makes the entire supply chain vulnerable to incidents, whether related to a country’s political choices, natural disasters, technical failures or business decisions,” the IEA warned. In the same way that the gas market was severely disrupted by the war in Ukraine, the prices of clean energy could, tomorrow, jump if China gets involved in a conflict.

And according to the report, markets have already begun to anticipate the risks associated with production concentration by raising “the prices of clean energy technologies in recent years”. In 2022, the increase in the cost of cobalt, lithium and nickel led, for the first time, to an increase in the price of batteries for electric vehicles (+10%).

The need for “international cooperation”

IEA Director Fatih Birol is calling on countries to increase their low-carbon energy resilience because, according to him, “the world will benefit from a more diversified supply chain”. While the Democratic Republic of Congo produces more than 70% of the world’s cobalt, and Australia, Chile and China more than 90% of lithium, he encourages “a certain level of international cooperation”, because “no country which is an island of energy”.

The integration of developing countries (DC) in the production chains of carbon-neutral technologies will be one of the challenges in the coming years. Financing the energy transition of the poorest countries was also at the center of discussions at the last COP 28 in Egypt. The director of the IEA therefore invites each country to determine “how it can best benefit” from the new global energy economy, but also to engage in “managing the challenges” that lie ahead.

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