China, which has long been the leader in clean technology manufacturing, saw its global investment share drop in 2023, from 85% to 75%, amid rising investments in the United States and Europe, particularly in the battery manufacturing sector.
Shifts in global clean tech investment
According to a report by the International Energy Agency (IEA) released on May 6, investment in battery manufacturing in the US and Europe more than tripled last year.
This surge is largely fuelled by major policy initiatives such as the US’ Inflation Reduction Act and the EU’s Net Zero Industry Act, which prioritize building domestic clean tech manufacturing capacities.
US investments in electric vehicle (EV) battery production reached $40 billion from 2020 to the third quarter of 2023.
China’s evolving market share
Despite the decrease, China remains a formidable player, accounting for more than 80% of the world’s battery manufacturing capacity, with the US and the EU each holding about 5%.
However, the IEA projects that by 2030, China’s share could decline to around 60%, as the shares of the European Union and the United States are expected to nearly triple.
Cost dynamics in manufacturing
The report also highlights the cost advantages that China continues to hold across clean energy technologies, including battery, wind, and solar PV manufacturing.
Production costs in China remain significantly lower than in other regions, with facilities in India being 20%-30% more expensive, and those in the US and Europe costing 70%-130% more.
However, the IEA notes that these cost disparities, largely driven by operational costs including energy, labor, and materials, are not fixed and can be influenced by governmental policies.
Solar PV and other technologies
In solar photovoltaic (PV) manufacturing, China is expected to maintain over 80% of the market share through 2030, despite growing capacities in the US and India.
Meanwhile, the global solar panel industry faces a glut, with average factory utilization down to 50%, though current capacities are sufficient to meet projected demands for 2030.
Additional findings in battery and other sectors
Battery manufacturing saw significant growth in 2023, with new capacity additions totalling 780 GWh, bringing global capacity to 2.5 terawatt-hours (TWh), triple the current demand.
Projections suggest that global battery manufacturing capacity could exceed 9 TWh by 2030 if all announced expansions are realized.
Conversely, the manufacturing of wind turbines and electrolysers grew less rapidly, and heat pump production even slowed due to market stagnation, indicating potential shortfalls in future supply relative to the needs projected under the IEA’s Net Zero Emissions (NZE) Scenario.
Market implications and future outlook
As 40% of investments in clean energy manufacturing in 2023 were for facilities expected to come online in 2024, the upcoming year could see significant shifts in production capacities and market dynamics.
These developments underscore a crucial period of transition in the global clean tech landscape, where strategic investments and policies will play pivotal roles in shaping the future of energy technology manufacturing.
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