IEA《2023年能源技术展望》VIP专享VIP免费

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2023-04-18
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Technology

Perspectives

2023

Energy

The IEA examines the

full spectrum

of energy issues

including oil, gas and

coal supply and

demand, renewable

energy technologies,

electricity markets,

energy efficiency,

access to energy,

demand side

management and

much more. Through

its work, the IEA

advocates policies that

will enhance the

reliability, affordability

and sustainability of

energy in its

31 member countries,

11 association countries

and beyond.

This publication and any

map included herein are

without prejudice to the

status of or sovereignty over

any territory, to the

delimitation of international

frontiers and boundaries and

to the name of any territory,

city or area.

Source: IEA.

International Energy Agency

Website: www.iea.org

IEA member

countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Lithuania

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

Republic of Türkiye

United Kingdom

United States

The European

Commission also

participates in the

work of the IEA

IEA association

countries:

Argentina

Brazil

China

Egypt

India

Indonesia

Morocco

Singapore

South Africa

Thailand

Ukraine

INTERNATIONAL ENERGY

AGENCY

Energy Technology Perspectives 2023 Abstract

PAGE | 3

I EA. CC BY 4.0.

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 for

energy and materials, and shortages of critical minerals, semiconductors and

other 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 and

scale-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 critical

questions 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?

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 decision-

makers in governments and industry seeking to tap into the opportunities offered

by the emerging new energy economy, while navigating uncertainties and

safeguarding energy security.

/459

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TechnologyPerspectives2023EnergyTheIEAexaminesthefullspectrumofenergyissuesincludingoil,gasandcoalsupplyanddemand,renewableenergytechnologies,electricitymarkets,energyefficiency,accesstoenergy,demandsidemanagementandmuchmore.Throughitswork,theIEAadvocatespoliciesthatwillenhancethereliability,affordabilityandsustainabilityofenergyinits31membercountries,11associationcountriesandbeyond.Thispublicationandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Source:IEA.InternationalEnergyAgencyWebsite:www.iea.orgIEAmembercountries:AustraliaAustriaBelgiumCanadaCzechRepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNewZealandNorwayPolandPortugalSlovakRepublicSpainSwedenSwitzerlandRepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEAIEAassociationcountries:ArgentinaBrazilChinaEgyptIndiaIndonesiaMoroccoSingaporeSouthAfricaThailandUkraineINTERNATIONALENERGYAGENCYEnergyTechnologyPerspectives2023AbstractPAGE3IEA.CCBY4.0.AbstractTheCovid-19pandemicandRussia’sinvasionofUkrainehaveledtomajordisruptionstoglobalenergyandtechnologysupplychains.Soaringpricesforenergyandmaterials,andshortagesofcriticalminerals,semiconductorsandothercomponentsareposingpotentialroadblocksfortheenergytransition.Againstthisbackdrop,theEnergyTechnologyPerspectives2023(ETP-2023)providesanalysisontherisksandopportunitiessurroundingthedevelopmentandscale-upofcleanenergyandtechnologysupplychainsintheyearsahead,viewedthroughthelensesofenergysecurity,resilienceandsustainability.Buildingonthelatestenergy,commodityandtechnologydata,aswellasrecentenergy,climateandindustrialpolicyannouncements,ETP-2023explorescriticalquestionsaroundcleanenergyandtechnologysupplychains:Wherearethekeybottleneckstosustainablyscaleupthosesupplychainsatthepaceneeded?Howmightgovernmentsshapetheirindustrialpolicyinresponsetonewenergysecurityconcernsforcleanenergytransitions?Whichcleantechnologyareasareatgreatestriskoffailingtodevelopsecureandresilientsupplychains?Andwhatcangovernmentsdotomitigatesuchriskswhilemeetingbroaderdevelopmentgoals?TheEnergyTechnologyPerspectivesseriesistheIEA’sflagshiptechnologypublication,whichhasbeenkeysourceofinsightsonallmattersrelatingtoenergytechnologysince2006.ETP-2023willbeanindispensableguidebookfordecision-makersingovernmentsandindustryseekingtotapintotheopportunitiesofferedbytheemergingnewenergyeconomy,whilenavigatinguncertaintiesandsafeguardingenergysecurity.EnergyTechnologyPerspectives2023ForewordPAGE4IEA.CCBY4.0.ForewordTheglobalenergysectorisinthemidstofprofoundchangesthataresettotransformitinthecomingdecadesfromonebasedoverwhelminglyonfossilfuelstooneincreasinglydominatedbyrenewablesandothercleanenergytechnologies.Anewglobalenergyeconomyisemergingevermoreclearly,withtherapidgrowthofsolar,wind,electricvehiclesandarangeofothertechnologiessuchaselectrolysersforhydrogen.Thistransitionisinturnchangingtheindustriesthatsupplythematerialsandproductsunderpinningtheenergysystem,heraldingthedawnofanewindustrialage–theageofcleanenergytechnologymanufacturing.AttheInternationalEnergyAgency(IEA),wearededicatedtoimprovingthesecurity,resilienceandsustainabilityoftheglobalenergysystem.ThoseinterlinkedprioritiesareattheheartofthiseditionofEnergyTechnologyPerspectives2023(ETP-2023),thelatestintheIEA’stechnologyflagshipseriesthatbeganin2006.Asdecision-makersseektounderstandandadapttothechangesunderway,ETP-2023servesastheworld’sfirstcomprehensiveglobalguidebookonthecleanenergytechnologyindustriesoftodayandtomorrow.Itprovidesadetailedanalysisofcleanenergytechnologymanufacturinganditssupplychainsaroundtheworld–andhowtheyarelikelytoevolveasthecleanenergytransitionadvancesintheyearsahead.Majoreconomiesaroundtheworld–fromAsiatoEuropetoNorthAmerica–aresteppingupeffortstoexpandtheircleanenergytechnologymanufacturingwiththeoverlappingaimsofadvancingnetzerotransitions,strengtheningenergysecurityandcompetinginthenewenergyeconomy.Andthecurrentglobalenergycrisishasonlyacceleratedtheseefforts.Thesetrendshavemassiveimplicationsforgovernments,businesses,investorsandcitizensaroundtheworld.Everycountryneedstoidentifyhowitcanbenefitfromtheopportunitiesandnavigatethechallengesofthisnewenergyeconomy.Thisreportshowsthattherapidgrowthofcleantechnologymanufacturingissettocreatenewmarketsworthhundredsofbillionsofdollarsaswellasmillionsofnewjobsinthecomingyears,assumingcountriesmakegoodontheenergyandclimatepledgestheyhaveannounced.Atthesametime,theindustrialstrategiesthatcountriesdeveloptosecuretheirplacesinthisnewenergyeconomywillneedtotakeintoaccounttheemergingchallengesthatthesechangesbring.Today,wealreadyseepotentiallyriskylevelsofconcentrationincleanenergysupplychainsglobally–bothinthemanufacturingofthetechnologiesandinthecriticalmineralsonwhichtheyrely.EnergyTechnologyPerspectives2023ForewordPAGE5IEA.CCBY4.0.ThesechallengesarewhatmakeETP-2023suchavitalandtimelycontributionaspolicymakersareworkingtodevisetheindustrialstrategiestobenefittheireconomies–andprojectdevelopersandinvestorsareweighingkeydecisionsonfuturemanufacturingoperations.Ouranalysisshowsthattheglobalprojectpipelineisverylarge–enoughtomovetheworldmuchclosertoreachinginternationalenergyandclimategoalsifitallcomestofruition.Butthemajorityofthoseannouncedprojectsarenotyetunderconstructionorsettobeginconstructionimminently.Governmentshavearolehereinprovidingthesupportivepoliciesandbroaderindustrialstrategiesthatcanprovidedevelopersandinvestorswiththevisibilityandconfidencetheyneedtogoahead.However,thisreportalsoshowsissuesofwhichgovernmentsneedtobemindful,suchastheimportanceofensuringfairandopeninternationaltradeincleanenergytechnologies,whichwillbeessentialforachievingrapidandaffordableenergytransitions.ETP-2023alsomakesclearthatformostcountries,itisnotrealistictotrytocompeteacrossallpartsofcleanenergytechnologysupplychains.Countrieswillneedtoplaytotheirstrengths,whetherthatcomesintheformofmineralresources,low-costcleanenergysupplies,aworkforcewithrelevantskills,orsynergieswithexistingindustries.Andsincenocountrywillbeinapositiontocovereverypartofthesupplychainatonce,internationalcollaborationwillbeanessentialelementinindustrialstrategies.Thiscanincludestrategicpartnershipsandforeigndirectinvestment,forexample.ThesearejustsomeofthekeyissuesonwhichETP-2023providesextremelyvaluableinsights.I’mconfidentdecision-makersaroundtheworldwillgreatlyappreciatetheseandthemanyotherscontainedinthesepages.Andforthis,IwouldliketothanktheexcellentteamattheIEA’sEnergyTechnologyPolicyDivision,undertheoutstandingleadershipofmycolleagueTimurGül,foralltheworkthatwentintoproducingthisreport,whichwillserveasareferenceforyearstocome.Dr.FatihBirolExecutiveDirectorInternationalEnergyAgencyEnergyTechnologyPerspectives2023AcknowledgementsPAGE6IEA.CCBY4.0.AcknowledgementsThisstudywaspreparedbytheEnergyTechnologyPolicy(ETP)DivisionoftheDirectorateofSustainability,TechnologyandOutlooks(STO),withinputfromotherdivisionsoftheInternationalEnergyAgency(IEA).ThestudywasdesignedanddirectedbyTimurGül,HeadoftheEnergyTechnologyPolicyDivision.ThemodellingandanalyticalteamsofEnergyTechnologyPerspectives2023(ETP-2023)werecoordinatedbyAraceliFernandez(HeadoftheTechnologyInnovationUnit)andUweRemme(HeadoftheHydrogenandAlternativeFuelsUnit).PeterLevi(industrialcompetitiveness)andLeonardoPaoli(investmentneeds)wereresponsiblefortheanalysisofcross-cuttingtopicsthroughoutthereport.TheprincipalauthorsandcontributorsfromtheETPdivisionwere(inalphabeticalorder):PraveenBains(synthetichydrocarbonfuels),JoseMiguelBermudez(hydrogenproductionincludingelectrolysers),AmarBhardwaj(electrolysers),SaraBudinis(directaircapture,technologymanufacturing),ElizabethConnelly(fuelcelltrucks,technologymanufacturing),ChiaraDelmastro(heatpumps,technologymanufacturing),MathildeFajardy(bioenergywithcarboncapture,riskassessment),StavroulaEvangelopoulou(electricityinfrastructure),BreannaGasson(riskassessment),AlexandreGouy(criticalminerals,materials),CarlGreenfield(policy),WillHall(sustainability,materials),MathildeHuismans(wind,datamanagement),MegumiKotani(policy),Jean-BaptisteLeMarois(statusofcleantechnologysupplychains,innovation),RafaelMartínezGordón(heatpumps,wind),ShaneMcDonagh(fuelcelltrucks),RachaelMoore(CO2managementinfrastructure),FaidonPapadimoulis(trade,datamanagement),FrancescoPavan(electrolysers,hydrogeninfrastructure),AmaliaPizarroAlonso(hydrogeninfrastructure),RichardSimon(resilience,innovation),JacobTeter(policy),TiffanyVass(materials,policy)andBiqingYang(Chinaindustrialpolicy).TheIEA’sEnergyModellingOfficeledbyChiefEnergyModellerLauraCozzicoordinatedtheemploymentanalysis,inparticularDanielWetzel,CaleighAndrewsandOliviaChen;andtheanalysisonelectricityinfrastructure,inparticularMichaelDrtil.OtherkeycontributorsfromacrosstheIEAwereJulienArmijo,PiotrBojek,LeonardoCollina,ShobhanDhir,ConorGask,PabloGonzalez,IlkkaHannula,EnergyTechnologyPerspectives2023AcknowledgementsPAGE7IEA.CCBY4.0.GeorgeKamiya,SamanthaMcCulloch,YannickMonschauer,TakashiNomura,NasimPour,VidaRoziteandFabianVoswinkel.ValuablecommentsandfeedbackwereprovidedbyotherseniormanagementandnumerousothercolleagueswithintheIEA,inparticularKeisukeSadamori,LauraCozzi,DanDorner,TimGould,BrianMotherway,PaoloFrankl,HeymiBahar,SimonBennett,ThomasSpencerandBrentWanner.CarolineAbettan,LiselottFredriksson,RekaKoczkaandPer-AndersWidellprovidedessentialsupportthroughouttheprocess.ThanksalsototheIEACommunicationsandDigitalOfficefortheirhelpinproducingthereport,particularlytoJadMouawad,CurtisBrainard,JonCuster,HortenseDeRoffignac,TanyaDyhin,MerveErdem,GraceGordon,BarbaraMoure,JethroMullen,IsabelleNonain‐Semelin,JuliePuech,ClaraVallois,GregoryViscusi,ThereseWalshandWonjikYang.TrevorMorganprovidedwritingsupporttothereportandholdseditorialresponsibility.ErinCrumandKristineDouaudwerethecopy-editors.TheworkcouldnothavebeenachievedwithoutthefinancialsupportprovidedbytheGovernmentsofAustraliaandJapan.Severalseniorgovernmentofficialandexpertsprovidedessentialinputandfeedbacktoimprovethequalityofthereport.Theyinclude:MattAntesDepartmentofEnergy,UnitedStatesFlorianAusfelderDECHEMAMatthewAylottDepartmentforBusiness,EnergyandIndustrialStrategy,UnitedKingdomHarmeetBawaHitachiEnergyAdamBaylin-SternCarbonEngineeringMarlenBertramInternationalAluminiumInstituteFabrizioBezzoUniversitàdiPadovaSouvikBhattacharjyaTERI,theEnergyandResourcesInstitute,IndiaChrisBolestaDirectorate-GeneralforEnergy,EuropeanCommissionJavierBonaplataArcelorMittalAntoineBoubaultBureaudeRecherchesGéologiquesetMinières,FranceKeithBurnardTechnologyCollaborationProgrammeonGreenhouseGasR&DWangCanTsinghuaUniversityDiegoCarvajalEuropeanCopperAllianceRolandChavasseInternationalLithiumAssociationXavierChenBeijingEnergyClubJianhongChengChinaNationalInstituteofStandardizationEnergyTechnologyPerspectives2023AcknowledgementsPAGE8IEA.CCBY4.0.BeatriceCodaCINEA,theEuropeanClimate,InfrastructureandEnvironmentExecutiveAgency,EuropeanCommissionRussellConklinDepartmentofEnergy,UnitedStatesJasminCooperImperialCollegeLondonJamesCraigTechnologyCollaborationProgrammeonGreenhouseGasR&DColinCunliffDepartmentofEnergy,UnitedStatesIlkavonDalwigkEITInnoEnergyGaneshDasTataPowerCharisDemouliasAristotleUniversityofThessalonikiAlbertoDiLulloEniTimDixonTechnologyCollaborationProgrammeonGreenhouseGasR&DSayantaDuttaHyzonMotorsÅsaEkdahlWorldSteelAssociationSaraEvangelistiGasandHeatSpAPharoahLeFeuvreEnagasAlanFinkelGovernmentofAustraliaFridtjofFossumUnanderAkerHorizonsHiroyukiFukuiToyotaJanFredrikGarvikHydrogenProSaraGiarolaPolitecnicodiMilanoJamesGlynnColumbiaUniversityStefanGossensSchaefflerAGAsthaGuptaIndependentconsultantEmmanuelHacheIFPEnergiesnouvellesMartinHaighShellChenHaishengChinaEnergyStorageAllianceNevilleHargreavesVelocysClareHarrisShellYuyaHasegawaMinistryofEconomy,TradeandIndustry,JapanNikolaosHatziargyriouNationalTechnicalUniversityofAthensRolandHequetJohnCockerillVincentD’HerbemontIFPEnergiesnouvellesChrisHeronEurometauxLudovanHijfteCarbonCollectorsNeilHirstImperialCollegeLondonGeoffHolmesCarbonEngineeringNoévanHulstInternationalPartnershipforHydrogenandFuelCellsintheEconomyMarieIshikawaToyotaRishabhJainCouncilonEnergy,EnvironmentandWater,IndiaAyakaJonesDepartmentofEnergy,UnitedStatesBirteHolstJørgensenTechnicalUniversityofDenmarkRobertKennedySmithDepartmentofEnergy,UnitedStatesEnergyTechnologyPerspectives2023AcknowledgementsPAGE9IEA.CCBY4.0.BalachanderKrishnanShirdiSaiElectricalsLtdLeifChristianKrögerThyssenkruppNuceraOjiKunoToyotaOleksandrLaktionovNaftogazMartinLambertOxfordInstituteforEnergyStudiesFranciscoLaverónIberdrolaXiaoLinTechnologyCollaborationProgrammeonHybridandElectricVehiclesSebastianLjungwaldhNorthvoltClaudeLoreaGlobalCementandConcreteAssociationPatriciaLoriaCarbonCaptureInc.GiuseppeLorubioAristonRichardLowesRegulatoryAssistanceProjectLouisMarieMalbecIFPEnergiesnouvellesFoivosMariasCINEA,theEuropeanClimate,InfrastructureandEnvironmentExecutiveAgency,EuropeanCommissionMercedesMaroto-ValerHeriot-WattUniversityRickMasonPlugPowerMarcMelainaDepartmentofEnergy,UnitedStatesDennisMesinaDepartmentofEnergy,UnitedStatesRobertoMilliniEniDianeMillisCarbonCleanVincentMinierSchneiderElectricMarkMistryNickelInstituteDanielMonfortBureaudeRecherchesGéologiquesetMinières,FranceVictoriaMonsmaDNVNirvasenMoonsamyOilandGasClimateInitiativeSimoneMoriEnelHidenoriMoriyaToyotaPoulGeorgMosesTopsoeRaminMoslemianDNVVivekMurthiNikolaJaneNakanoCenterforStrategicandInternationalStudiesHidetakaNishiMinistryofEconomy,TradeandIndustry,JapanMotohikoNishimuraKawasakiHeavyIndustriesTakashiNomuraToyotaOlgaNoskovaTopsoeThomasNowakEuropeanHeatPumpAssociationKoichiNumataToyotaShaunOnoratoUnitedStatesNationalRenewableEnergyLaboratoryStavrosPapathanasiouNationalTechnicalUniversityofAthensClaudiaPavariniSnamIngaPetersenGlobalBatteryAllianceEnergyTechnologyPerspectives2023AcknowledgementsPAGE10IEA.CCBY4.0.CédricPhilibertIFRI,l’InstitutfrançaisdesrelationsinternationalesLarryPittsPlugPowerJoanaPortugalUniversitéFédéraledeRiodeJaneiroAndrewPurvisWorldSteelAssociationAdityaRamjiUniversityofCalifornia,DavisJuliaReinaudBreakthroughEnergyStephanRenzTechnologyCollaborationProgrammeonHeatPumpingTechnologiesMarkRichardsRioTintoGrégoireRigoutAirLiquidePabloRiesgoAbeledoDirectorate-GeneralforEnergy,EuropeanCommissionAgustínRodríguezRiccioTopsoeAntonioRuizNikolaToshiyukiSakamotoInstituteofEnergyEconomics,JapanGerhardSalgeHitachiEnergyMaríaSiciliaSalvadoresEnagasBarişSanliPermanentDelegationofTürkiyetotheOECDAbhishekSaxenaNITIAayog,NationalInstitutionforTransformingIndiaHannahSchindlerFederalMinistryforEconomicAffairsandClimateAction,GermanyOlafSchilgenVolkswagenThoreSekkenesEITInnoEnergyCoryShumakerHyzonMotorsJimSkeaImperialCollegeLondonGuillaumedeSmedtAirLiquideRobertSpicerBPVivekSrinivasanCommonwealthScientificandIndustrialResearchOrganisation,AustraliaMartinStuermerInternationalMonetaryFundBertStuijNetherlandsEnterpriseAgencyPeterTaylorUniversityofLeedsWimThomasIndependentconsultantDietmarTourbierCommonwealthScientificandIndustrialResearchOrganisation,AustraliaLyleTryttenIndependentconsultantYusukeTsukaharaAsahiKaseiInésTungaEnergySystemsCatapultCorneliusVeithFederalMinistryforEconomicAffairsandClimateAction,GermanyRahulWalawalkarIndiaEnergyStorageAllianceMichaelWangArgonneNationalLaboratoryAmandaWilsonNaturalResourcesCanadaMarkusWråkeSwedishEnergyResearchCentreAkiraYabumotoJ-PowerEnergyTechnologyPerspectives2023AcknowledgementsPAGE11IEA.CCBY4.0.MakotoYasuiChiyodaNozomiYokooToyotaShihoYoshizawaMinistryofEconomy,TradeandIndustry,JapanAlanZhaoCumminsEnergyTechnologyPerspectives2023TableofcontentsPAGE12IEA.CCBY4.0.TableofcontentsExecutivesummary................................................................................................................20Introduction.............................................................................................................................26Purposeofthisreport............................................................................................................26Cleanenergyandtechnologysupplychains........................................................................27Scopeandanalyticalapproach.............................................................................................29Reportstructure....................................................................................................................34References............................................................................................................................35Chapter1.Energysupplychainsintransition....................................................................36Highlights...............................................................................................................................36Thecleanenergytransition...................................................................................................37Implicationsofnetzeroforsupplychains.............................................................................50References............................................................................................................................75Chapter2.Mappingoutcleanenergysupplychains.........................................................81Highlights...............................................................................................................................81Assessingvulnerabilitiesinsupplychains............................................................................82Geographicdiversityandenergysecurity............................................................................85Resilienceofsupplychains.................................................................................................115Supplychainsustainability..................................................................................................128References..........................................................................................................................135Chapter3.Miningandmaterialproduction.......................................................................142Highlights.............................................................................................................................142Materialneedsfornetzeroemissions................................................................................143Mineralextraction................................................................................................................156Materialsproduction............................................................................................................169References..........................................................................................................................199Chapter4.Technologymanufacturingandinstallation...................................................206Highlights.............................................................................................................................206Overview.............................................................................................................................207Massmanufacturingofcleantechnologiesandcomponents............................................212Installationoflarge-scale,site-tailoredtechnologies..........................................................248References..........................................................................................................................267Chapter5.Enablinginfrastructure.....................................................................................276Highlights.............................................................................................................................276Theroleofenablinginfrastructure......................................................................................277EnergyTechnologyPerspectives2023TableofcontentsPAGE13IEA.CCBY4.0.Electricitygrids....................................................................................................................279Hydrogentransportandstorage.........................................................................................300CO2managementinfrastructure.........................................................................................330Focusonrepurposingexistinginfrastructure......................................................................343References..........................................................................................................................349Chapter6.Policyprioritiestoaddresssupplychainrisks.............................................356Highlights.............................................................................................................................356Designingpoliciesforsupplychains...................................................................................357Prioritisingpolicyaction......................................................................................................364References..........................................................................................................................431Annex.....................................................................................................................................439Glossary..............................................................................................................................439Cleansupplychaincharacteristics.....................................................................................444Regionaldefinitions.............................................................................................................453Acronymsandabbreviations...............................................................................................454Unitsofmeasure.................................................................................................................455Currencyconversions.........................................................................................................456References..........................................................................................................................457ListoffiguresFigureI.1Stepsandinterdependenciesoftechnologyandenergysupplychains..................28FigureI.2Keyelementsforeachstepinselectedcleanenergyandtechnologysupplychains31Globalmass-basedresourceflowsintotheenergysystem,2021...........................39GlobaltotalprimaryenergysupplyintheNZEScenario.........................................41GlobalenergyflowsintheNZEScenario................................................................43Totalprimaryenergysupply,electrificationratesandenergyintensityin2030intheAPSandNZEScenario..................................................................................44GlobalcumulativeenergysectorCO2emissionsreductionsbydecarbonisationpillarandcleanenergyandtechnologysupplychainsstudiedinETP-2023,2021-2050..............................................................................................45GlobaldeploymentofselectedcleanenergytechnologiesintheNZEScenario....47Heatpumpsandheatingdistributionsystemmarketpriceandinstallationtimeforatypicalhouseholdbytypeofequipment,2021.........................................48TimeframeforprototypetomarketintroductionandearlyadoptionforselectedcleanenergytechnologiesinthepastandtheNZEScenario.................................49Globalaveragerawmaterialrequirementsforselectedenergytechnologies,2021...................................................................................................52GlobalsupplygapwiththeNZEScenarioandgeographicconcentrationbystageandtechnologybasedonexpansionannouncements,2030....................55Globalinvestmentinselectedcleanenergysupplychainsneededtobringonlineenoughcapacityin2030intheNZEScenario,bysupplychainstep...........56Costofcapitalforbulkmaterialproductionindustriesbycountry/regionalgrouping,2020.........................................................................................................57EnergyTechnologyPerspectives2023TableofcontentsPAGE14IEA.CCBY4.0.Indicativelevelisedcostofproductionforselectedbulkmaterials...........................59Increaseintheglobalaveragepricesofselectedcleanenergyproductsfromswitchingtolow-emissionbulkmaterialproduction.................................................60Leadtimesforminingofselectedminerals..............................................................61Rangeof(top)andaverage(bottom)globalleadtimesforselectedcleanenergytechnologysupplychains.........................................................................................64Globalscaling-upofselectedenergyandothersupplychainsbyleadtimeinthepast(solid)andtheNZEScenario(dashed)............................................................66Typicaloperatinglifetimeofselectedenergytechnologies......................................67Globalenergysectoremploymentbytechnology....................................................68Energyemploymentbyregionandsupplychainstep,2019...................................69Energyemploymentinselectedsectorsbyregion,2019........................................70GlobalenergysectoremploymentbytechnologyintheNZEScenario...................72Globalemploymentbyskilllevel,2019....................................................................73Interconnectionsbetweenselectedenergyandtechnologysupplychains.............84Regionalsharesofglobalfossilfuelanduraniumproductionandresources,2021........................................................................................................85Globalreservesandextractionofselectedresourcesbyregion,2021...................86Regionalsharesofglobalproductionofselectedcriticalmaterials,2021...............89Estimatedend-usesharesofglobalconsumptionofselectedbulkmaterials,2021.........................................................................................................90Regionalsharesinglobalproductionofbulkmaterialsandintermediatecommodities,2021...................................................................................................91Regionalsharesofmanufacturingcapacityforselectedmass-manufacturedcleanenergytechnologiesandcomponents,2021..................................................95Regionalsharesinglobalinstalledoperatingcapacityofselectedlarge-scalesite-tailoredcleanenergytechnologies,2021.....................................101Shareofinter-regionaltradeinglobalproductionforselectedminerals,materialsandtechnologies,2021..........................................................................105Tradebalancealongsupplychainsinselectedcountries/regions,2021...............106Globaltradeflowsoflithium-ionbatteriesandelectricvehicles,2021..................108EVimportstoEuropebycountryofproductionandmanufacturer,2021..............109GlobaltradeflowsalongthesolarPVsupplychain,2021.....................................111GlobaltradeflowsofwindenergycomponentsinUSD,2021...............................112Globalinter-regionaltradeflowsofheatpumps,2021..........................................113Heatpumpmanufacturingcapacitybycompanyheadquartersandplantlocation,andinstallationsbyregion/country,2021................................................115Internationalpricesofselectedcriticalandbulkmaterialsandenergy..................116Energyintensityofextractingandproducingselectedcriticalandbulkmaterials,andofmanufacturingselectedenergytechnologies,2021...................118Averagemanufacturingcostbreakdownofselectedenergytechnologiesandcomponentsbycommodity,2019-2021.................................................................119Averageammoniaproductioncostsbytechnologyandcomponentinselectedregions/countries,2022..........................................................................................121Returnonassetsofcompaniesinselectedupstream,bulkmaterialsandmanufacturingsectors............................................................................................123Globalinventoriesasashareofannualconsumptionforselectedbulkmaterials,mineralsandfuels.................................................................................124Semiconductormanufacturingcapacityandmarketsharerevenue,2021............127SupplychainstepsharesintotalCO2emissionsfromtheproductionofsolarPV,windturbines,EVsandheatpumps,2021.............................................129Globalaveragelife-cyclegreenhousegasemissionsintensityofselectedenergytechnologies,2021.....................................................................................130EnergyTechnologyPerspectives2023TableofcontentsPAGE15IEA.CCBY4.0.GlobalaverageprimaryenergyandCO2emissionsintensityofminingandprocessingofselectedcriticalandbulkmaterials,2021........................................131Globalmass-basedresourceflowsintotheenergysystemintheNZEScenario,2050.....................................................................................144TotalglobalmaterialdemandbytypeintheNZEScenario...................................147GlobalcriticalmaterialdemandbyenduseintheNZEScenario..........................149EstimatedglobalbulkmaterialdemandbyenduseintheNZEScenario.............150ShareofsecondaryproductionintheglobalsupplyofselectedmaterialsintheNZEScenario...............................................................................................154ChangeinglobaldemandforselectedmineralsintheNZEScenario,2021-2030..............................................................................................................157Primaryproductionofselectedmineralsbycountry/regionintheNZEScenarioandbasedoncurrentlyanticipatedsupply.............................................................159Anticipatedinvestmentinminingofcriticalmineralsbyregion/countryandthatrequiredtomeetmineraldemandover2022-2030intheNZEScenario..............161Sharesoftheleadingregionsinglobalminingofselectedcriticalmineralsin2021and2030basedoncurrentlyanticipatedinvestments..............................163Globalenergyintensityandaveragegradeoforeproductionforselectedmetals......................................................................................................166TheoreticalglobalenergyconsumptionandCO2emissionsinminingofselectedmineralsformeetingNZEScenariodemandlevelsatcurrentcarbonintensity......................................................................................................167DecompositionofchangeinglobaldirectCO2emissionsfromminingofselectedmineralsbetween2021and2050intheNZEScenario..........................169Productionofselectedcriticalmaterialsbycountry/regionintheNZEScenarioandbasedoncurrentlyanticipatedsupply.............................................................171Anticipatedinvestmentincriticalmaterialproductionbyregion/countryandthatrequiredtomeetdemandover2022-2030intheNZEScenario...........................172Sharesoftheleadingregionsinglobalprocessingofselectedcriticalmineralsin2021and2030basedoncurrentlyanticipatedinvestments..................................173Emissionsintensityofdifferentlithiumhydroxideproductionroutesbyfuelusedandprocesstemperature,2021....................................................................176Productionofbulkmaterialsbycountry/regionandtypeoftechnologyintheNZEScenario...............................................................................................179EstimatesofnearzeroemissionmaterialproductionbasedonprojectannouncementsandtheNZEScenarioin2030....................................................182Sharesoftheleadingregionsinglobalproductionofselectedbulkmaterialsin2021and2030intheNZEScenario..................................................................184Currentglobalmanufacturingcapacity,announcedcapacityadditions,capacityshortfallin2030relativetotheNZEScenario,andleadtimesforselectedmass-manufacturedcleanenergytechnologiesandcomponents...................................208Currentglobalcapacity,announcedcapacityadditions,capacityshortfallin2030relativetotheNZEScenario,andinstallationleadtimesforselectedlarge-scale,site-tailoredcleanenergytechnologies................................209Globalemploymentinmanufacturingandinstallingselectedmass-manufacturedcleanenergytechnologiesintheNZEScenario,2019and2030..........................210Announcedglobalcumulativeinvestmentinmassmanufacturingofselectedcleanenergytechnologiesbyregion/countryandthatrequiredtomeetdemandin2030intheNZEScenario,2022-2030.................................................214SolarPVmanufacturingcapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenario.......................................................216Windpowermanufacturingcapacitybycomponentandcountry/regionaccordingtoannouncedprojectsandintheNZEScenario...................................220Financialindicatorsfornon-Chinesewindturbinemanufacturers.........................222EnergyTechnologyPerspectives2023TableofcontentsPAGE16IEA.CCBY4.0.Batteryandcomponentmanufacturingcapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenario.......................................................225Heavy-dutyfuelcelltruckandmobilefuelcellmanufacturingcapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenario...........229Heatpumpmanufacturingcapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenario..........................................................................235GlobalannualsalesofheatpumptechnologiesforbuildingsintheNZEScenario.........................................................................................................240Electrolysermanufacturingcapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenario..........................................................................242Announcedglobalcumulativeinvestmentinlarge-scale,site-tailoredcleanenergytechnologiesbyregion/countryandthatrequiredtomeetdemandin2030intheNZEScenario,2022-2030...............................................................250CapacityofhydrogenproductionfromnaturalgaswithCCSbycountry/regionaccordingtoannouncedprojectsandintheNZEScenario...................................252Directaircapturecapacitybycountry/regionforuseandstorageaccordingtoannouncedprojectsandintheNZEScenario.......................................................256CapacityofbioenergywithCO2capturedforuseandstoragebycountry/regionaccordingtoannouncedprojectsandintheNZEScenario...................................259Low-emissionsynthetichydrocarbonfuelproductioncapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenario...................................262Globalhistoricdeploymentandinvestmentsinelectricityandnaturalgasinfrastructure..........................................................................................................277Keytechnologycomponentsofelectricitygrids.....................................................280Globalhigh-voltagedirectcurrent(HVDC)transmissionlinesbycountry/regionandlinetype...........................................................................................................281GrosselectricitygridadditionsinadvancedandemergingeconomiesintheNZEScenario...............................................................................................284Averageannualtransformerandstationary-batterycapacityadditionsintheNZEScenario...............................................................................................285AverageannualmaterialneedsforselectedgridtechnologiesintheNZEScenario...............................................................................................287Typicalmaterialcompositionofoverheadlinesandcablesbyweight,2021........288Typicalmaterialcompositionoftransformersandstationarybatteriesbyweightandvalue,2021..........................................................................................289Globaltradeflowsofgrain-orientedsteelbyweight,2020....................................293Globaltradeflowsoftransformersabove10MWinmonetaryterms,2020..........294AverageleadtimestobuildnewelectricitygridassetsinEuropeandtheUnitedStates,2010-2021.......................................................................................296Hydrogenpipelinenetworkconfiguration...............................................................301Technologicalpathwaysforlong-distancetransportforthesupplyofhydrogenandammoniabytanker..........................................................................................302GlobalnaturalgasandhydrogensuppliesintheNZEScenario...........................304AverageannualglobalinvestmentinhydrogenandnaturalgasinfrastructureintheNZEScenario...............................................................................................304GlobalhydrogentransmissionpipelinelengthintheNZEScenario......................305Globalproductionoflow-emissionmerchanthydrogenandinterregionaltradeintheNZEScenario...............................................................................................308Interregionaltradeandinfrastructureforshippinglow-emissionhydrogenintheNZEScenariocomparedwithhistoricalLNGtrade......................................309TankercapacityinenergyandvolumetermsbyenergycarriertypeintheNZEScenario,2030.......................................................................................................309GlobalLNGtradeandlargestLNGandLH2tankersizes......................................312Internationalammoniatradeflowsviashipping,2019...........................................313EnergyTechnologyPerspectives2023TableofcontentsPAGE17IEA.CCBY4.0.Indicativelevelisedcostofdeliveringhydrogen,bytransportoptionanddistanceintheNZEScenario,2030.......................................................................315Indicativelevelisedcostofdeliveringhydrogen,byshipping-optionstepanddistanceintheNZEScenario,2030.......................................................................316GlobalundergroundgeologicalstoragecapacityforhydrogenintheNZEScenarioandhistoricalgrowthinnaturalgasstoragebyregion...........................318GloballiquefiedgastankerdeliveriesbycountryandtypeintheNZEScenario...............................................................................................323Leadtimesofselectednaturalgasinfrastructureprojects.....................................326GlobalenergyconsumptionforhydrogentransportationintheNZEScenario......328EnergyconsumptionandoverallefficiencyofhydrogentransportanddistanceintheNZEScenario,2030.....................................................................................329CO2flowsthroughtheCO2managementvaluechain...........................................331CO2pipelinenetwork..............................................................................................332CriteriaforCO2source-sinkmatching....................................................................335IndicativeCO2shippingandoffshorepipelinetransportationcosts.......................338ExistingandplannedannualglobalCO2storageinjectioncapacity,comparedwithprojectedNZEScenarioneedsin2030..........................................................339LeadtimesfortheCO2storagecomponentofselectedCCUSprojectswithdedicatedstorage...................................................................................................341LeadtimesofselectedrecentnaturalgasandCO2pipelineprojects...................342Figure6.1Risksthreateningaccelerationoftheglobalcleanenergytransition.....................366Figure6.2AnnualenergysectorinvestmentsbyregionalgroupingintheNZEScenario......370Figure6.3PublicenergyR&DbyregionandcorporateenergyR&Dbytechnology..............373Figure6.4Riskstotheenergysecurityofglobalcleanenergysupplychains........................386Figure6.5Geographicconcentrationforkeycriticalminerals,materialproductionandmanufacturingoperationsforcleanenergytechnologies......................................388Figure6.6AnnouncedprojectthroughputanddeploymentforkeycleanenergytechnologiesintheAPSandtheNZEScenario....................................................389Figure6.7MarketsizeforkeycleanenergytechnologiesandnetfossilfueltradeintheAPS..............................................................................................................391Figure6.8Employmentincleanenergytechnologymanufacturingbyregion.......................393Figure6.9Concentrationsofthelargestenterprisesinglobalmanufacturingcapacityandmaterialproduction,2021.......................................................................................395Figure6.10Risktoresilienceofglobalselectedcleanenergyandtechnologysupplychains..........................................................................................................404Figure6.11Industryend-userpricesfornaturalgasandelectricityinselectedcountries.......406Figure6.12Indicativeproductioncostsforhydrogenandhydrogen-basedcommoditiesproducedviaelectrolysis........................................................................................408Figure6.13Globalcathodeproductionforpassengerlight-dutyBEVsbychemistryintheNZEScenario.................................................................................................................410Figure6.14RiskoffailingtoreduceCO2emissionsinthemostintensivestepsofselectedcleanenergyandtechnologysupplychains............................................416Figure6.15Numberofcompaniescommittedtopurchasinglow-emissionsteelbyend-usesector,andglobalmarketsizeforselectedbulkmaterialsintheNZEScenario...419ListofboxesBox2.1Cleanenergysupplychainsinterdependencies......................................................84Box2.2Thedifferentstepsofmetalproduction....................................................................87Box2.3Resilienceandvulnerabilitiesintheammoniasupplychain..................................120Box2.4Stockpilesofcriticalmineralsandenergysecurity................................................123EnergyTechnologyPerspectives2023TableofcontentsPAGE18IEA.CCBY4.0.Box2.5ThechipshortageisholdingbackthedeploymentofEVs....................................126Box2.6Miningwastestoredbehindtailingsdams.............................................................133Box3.1Clarifyingmaterials-relatedterminology.................................................................144Box3.2Behaviouralchangetoreducethesupplychainchallenge....................................152Box3.3Increasingrecyclabilityofcleanenergytechnologies............................................155Box3.4Plansfornearzeroemissionmaterialproduction..................................................180Box4.1Potentialinstallationbottlenecksinthewindsector...............................................211Box4.2Carbonintensityoftechnologymanufacturing.......................................................214Box4.3Theheatpumpmarket:Synergiesbetweenendusesandsubsectors.................240Box4.4Strategiestodecarboniseroadtransport:Potentialroleforlow-emissionsynthetichydrocarbonfuels...................................................................................264Box5.1Whydoenergyinfrastructureprojectstakesolong?.............................................296Box5.2Environmentalimpactsofliquefiedgasshipping....................................................330Box6.1Casestudy:ThesolarPVsupplychaininChina...................................................361Box6.2Casestudy:Strategicpartnershipsincleanenergysupplychains........................363Box6.3Casestudy:Policyresponsestothesemiconductorshortage..............................367Box6.4Casestudy:StrategiesforcleanenergysupplychainsintheUnitedStatesandEurope.............................................................................................................374Box6.5Casestudy:IdentifyingstrategicprojectsintheEuropeanUnion.........................376Box6.6Casestudy:Aone-stopshopforEVchargingsupportintheUnitedStates.........378Box6.7Casestudy:EnhancingtransferableskillsinAlberta.............................................380Box6.8Casestudy:FinancinginnovationintheEuropeanUnion.....................................383Box6.9Casestudies:Supportfornewminesandmanufacturingplants...........................401Box6.10Casestudy:EUright-to-repairrules.......................................................................412Box6.11Casestudy:RepurposingfossilenergyinfrastructureintheUnitedKingdomandUnitedStates...................................................................................................414Box6.12Casestudy:StandardsforconcreteandasphaltintheUnitedStates..................420Box6.13Lifecycle-basedlow-carbonfuelstandards............................................................421Box6.14Casestudy:IncentivisingthecirculareconomyofbatterysupplychainsintheEuropeanUnion.....................................................................................................423Box6.15Casestudy:Supportingsustainablebatteryvaluechainsby2030andthebatterypassport......................................................................................................425Box6.16Casestudy:TheshiftingfocusofEUclimatepolicyonsupplychains..................428Box6.17Casestudy:IncentivisingcleanconstructionmaterialsintheUnitedStates.........430ListoftablesCharacteristicsofsecure,resilientandsustainablecleanenergytechnologysupplychains............................................................................................................83Examplesofdigitaltechnologyuseacrosscleanenergysupplychains...............125Useofsemiconductorsincleanenergytechnologies............................................126Environmentalimpactofminingforselectedminerals...........................................133Leadingmineralsandmaterialsforcleanenergysupplychainsbytype...............145Examplesofgovernmentsupply-sidesupportforlow-emissionmaterialproduction...............................................................................................................185Examplesofgovernmentdemand-sidepoliciesforlow-emissionmaterialproductionandprivate-andpublic-sectorcommitments.......................................186Topsteelproducersandleadingexistingorplannedprojectsmakingprogresstowardsnearzeroemissionsteelproduction.........................................................188Topcementproducersandleadingexistingorplannedprojectsmakingprogresstowardsnearzeroemissioncementproduction.....................................192EnergyTechnologyPerspectives2023TableofcontentsPAGE19IEA.CCBY4.0.Topplasticsproducersandleadingexistingorplannedprojectsmakingprogresstowardsnearzeroemissionplasticsproduction.....................................195Topaluminiumproducersandleadingexistingorplannedprojectsmakingprogresstowardsnearzeroemissionaluminiumproduction.................................197SelectedannouncedexpansionprojectsformanufacturingsolarPVsupplychaincomponents..................................................................................................217Announcedexpansionprojectsofselectedbatterymakersandautomakers........226Expansionplansofselectedheavy-dutyfuelcelltruckandfuelcellmanufacturers........................................................................................................230Announcedheatpumpmanufacturerexpansionprojectsbycountryandtypeofinvestment..........................................................................................................237Announcedexpansionplansofkeyelectrolysermanufacturers............................244PlannedcapacityexpansionsofselectedcompaniestoproducehydrogenfromnaturalgaswithCCS..............................................................................................252Directaircaptureexpansionprojectsofselectedcompanies................................257AnnouncedBECCexpansionprojectsofselectedcompanies..............................260Announcedlow-emissionsynthetichydrocarbonfuelcapacitybycompany.........263Table5.1Globalgrain-orientedsteelmanufacturingcapacitybycountryandmanufacturer,2020................................................................................................292Table5.2Characteristicsofexistinghydrogenpipelinesanddesiredfeaturesofnewones................................................................................................................307Table5.3Announceddesignsforliquefiedhydrogentankersexpectedtobecommercialbefore2030............................................................................................................311Table5.4Characteristicsoftypesofundergroundgeologicalstorageforhydrogen.............317Table5.5Selectedcompaniescommercialisingorplanningtocommercialisecompressorssuitableforhydrogentransmissionandstorage....................................................324Table5.6CO2pipelinedeploymentforCO2captureintheNZEScenario,2050..................337Table5.7FossilfuelinfrastructurewithpotentialforrepurposingfortransportingorstoringhydrogenandCO2..................................................................................................344Table5.8TechnicalaspectsofrepurposingoilandgaspipelinesforhydrogenandCO2transport.................................................................................................................345Table5.9ExistingandplannedprojectstorepurposenaturalgaspipelinestocarryCO2....346Table6.1Supplychainriskassessmentframework..............................................................358Table6.2Policyrecommendationsforsecure,resilientandsustainablesupplychains.......364Table6.3Accreditationrequirementsforcleanenergysectorworkersbytechnologyinselectedcountries,2022........................................................................................372Table6.4Componentsofsupplychainconcentration...........................................................385Table6.5Traceabilitystandards,protocolsandinitiatives....................................................426EnergyTechnologyPerspectives2023ExecutivesummaryPAGE20IEA.CCBY4.0.ExecutivesummaryTheenergyworldisintheearlyphaseofanewindustrialage–theageofcleanenergytechnologymanufacturing.Industriesthatwereintheirinfancyintheearly2000s,suchassolarPVandwind,andthe2010s,suchasEVsandbatteries,havemushroomedintovastmanufacturingoperationstoday.Thescaleandsignificanceoftheseandotherkeycleanenergyindustriesaresetforfurtherrapidgrowth.Countriesaroundtheworldaresteppingupeffortstoexpandcleanenergytechnologymanufacturingwiththeoverlappingaimsofadvancingnetzerotransitions,strengtheningenergysecurityandcompetinginthenewglobalenergyeconomy.Thecurrentglobalenergycrisisisapivotalmomentforcleanenergytransitionsworldwide,drivingawaveofinvestmentthatissettoflowintoarangeofindustriesoverthecomingyears.Inthiscontext,developingsecure,resilientandsustainablesupplychainsforcleanenergyisvital.Everycountryneedstoidentifyhowitcanbenefitfromtheopportunitiesofthenewenergyeconomy,definingitsindustrialstrategyaccordingtoitsstrengthsandweaknesses.This2023editionofEnergyTechnologyPerspectives(ETP-2023)providesacomprehensiveinventoryofthecurrentstateofglobalcleanenergysupplychains,coveringtheareasofmining;productionofmaterialslikelithium,copper,nickel,steel,cement,aluminiumandplastics;andthemanufacturingandinstallationofkeytechnologies.Thereportmapsouthowthesesectorsmayevolveinthecomingdecadesascountriespursuetheirenergy,climateandindustrialgoals.Anditassessestheopportunitiesandtheneedsforbuildingupsecure,resilientandsustainablesupplychainsforcleanenergytechnologies–andexaminestheimplicationsforpolicymakers.ThenewenergyeconomybringsopportunitiesandrisksCleanenergytransitionsoffermajoropportunitiesforgrowthandemploymentinnewandexpandingindustries.Thereisaglobalmarketopportunityforkeymass-manufacturedcleanenergytechnologieswortharoundUSD650billionayearby2030–morethanthreetimestoday’slevel–ifcountriesworldwidefullyimplementtheirannouncedenergyandclimatepledges.Relatedcleanenergymanufacturingjobswouldmorethandoublefrom6milliontodaytonearly14millionby2030,withoverhalfofthesejobstiedtoelectricvehicles,solarPV,windandheatpumps.Ascleanenergytransitionsadvancebeyond2030,thiswouldleadtofurtherrapidindustrialandemploymentgrowth.Buttherearepotentiallyriskylevelsofconcentrationincleanenergysupplychains–bothforthemanufacturingoftechnologiesandthematerialsonEnergyTechnologyPerspectives2023ExecutivesummaryPAGE21IEA.CCBY4.0.whichtheyrely.Chinacurrentlydominatesthemanufacturingandtradeofmostcleanenergytechnologies.China’sinvestmentincleanenergysupplychainshasbeeninstrumentalinbringingdowncostsworldwideforkeytechnologies,withmultiplebenefitsforcleanenergytransitions.Atthesametime,thelevelofgeographicalconcentrationinglobalsupplychainsalsocreatespotentialchallengesthatgovernmentsneedtoaddress.Formass-manufacturedtechnologieslikewind,batteries,electrolysers,solarpanelsandheatpumps,thethreelargestproducercountriesaccountforatleast70%ofmanufacturingcapacityforeachtechnology–withChinadominantinallofthem.Thegeographicaldistributionofcriticalmineralextractioniscloselylinkedtoresourceendowments,andmuchofitisveryconcentrated.Forexample,DemocraticRepublicofCongoaloneproduces70%oftheworld’scobalt,andjustthreecountriesaccountformorethan90%ofgloballithiumproduction.Concentrationatanypointalongasupplychainmakestheentiresupplychainvulnerabletoincidents,betheyrelatedtoanindividualcountry’spolicychoices,naturaldisasters,technicalfailuresorcompanydecisions.Theworldisalreadyseeingtherisksoftightsupplychains,whichhavepushedupcleanenergytechnologypricesinrecentyears,makingcountries’cleanenergytransitionsmoredifficultandcostly.Increasingpricesforcobalt,lithiumandnickelledtothefirsteverriseinbatteryprices,whichjumpedbynearly10%globallyin2022.ThecostofwindturbinesoutsideChinahasalsobeenrisingafteryearsofdecline,withthepricesofinputssuchassteelandcopperaboutdoublingbetweenthefirsthalfof2020andthesameperiodin2022.SimilartrendscanbeseeninsolarPVsupplychains.GovernmentsareracingtoshapethefutureofcleanenergytechnologymanufacturingCountriesaretryingtoincreasetheresilienceanddiversityofcleanenergysupplychainswhilealsocompetingforthehugeeconomicopportunities.Majoreconomiesareactingtocombinetheirclimate,energysecurityandindustrialpolicies.TheInflationReductionActintheUnitedStatesisacleararticulationofthis,butthereisalsotheFitfor55packageandREPowerEUplanintheEuropeanUnion,Japan’sGreenTransformationprogramme,theProductionLinkedIncentiveschemeinIndiathatencouragesmanufacturingofsolarPVandbatteries,andChinaisworkingtomeetandevenexceedthegoalsofitslatestFive-Year-Plan.Therearebigdividendsforcountriesthatgettheircleanenergyindustrialstrategiesright.Projectdevelopersandinvestorsarewatchingcloselyforthepoliciesthatcangivethemacompetitiveedgeindifferentmarkets,andwillrespondtosupportivepolicies.Only25%oftheannouncedmanufacturingprojectsgloballyforsolarPVareunderconstructionorbeginningconstructionEnergyTechnologyPerspectives2023ExecutivesummaryPAGE22IEA.CCBY4.0.imminently–thenumberisaround35%forEVbatteriesandlessthan10%forelectrolysers.TheshareishighestinChina,where25%oftotalsolarPVand45%ofbatterymanufacturingisalreadyatsuchanadvancedstageofimplementation.IntheUnitedStatesandEurope,lessthan20%ofannouncedbatteryandelectrolyserfactoriesareunderconstruction.Therelativelyshortleadtimesofaround1-3yearsonaveragetobringmanufacturingfacilitiesonlinemeanthattheprojectpipelinecanexpandrapidlyincountrieswithanenvironmentthatisconducivetoinvestment.Manufacturingprojectsannounced,butnotfirmlycommitted,inonecountrytodaycouldendupactuallybeingdevelopedelsewhereinresponsetoshiftsinpoliciesandmarketdevelopments.Greatereffortsareneededtodiversifyandstrengthencleanenergysupplychains.Chinaaccountsformostofthecurrentannouncedmanufacturingcapacityexpansionplansto2030forsolarPVcomponents(around85%forcellsandmodules,and90%forwafers);foronshorewindcomponents(around85%forblades,andaround90%fornacellesandtowers);andforEVbatterycomponents(98%foranodeand93%forcathodematerial).Hydrogenelectrolysersarethemainexception,witharoundone-quarterofmanufacturingcapacityannouncementsfor2030beinginChinaandtheEuropeanUnion,respectively,andanother10%intheUnitedStates.CleanenergysupplychainsbenefitfrominternationaltradeInternationaltradeisvitalforrapidandaffordablecleanenergytransitions,butcountriesneedtoincreasediversityofsuppliers.ForsolarPV,manycomponentsaretradedtoday,inparticularwafersandmodules.Theshareofinternationaltradeinglobaldemandisnearly60%forsolarPVmodules,witharoundhalfofthesolarmodulesmanufacturedinChinabeingexported–predominantlytoEuropeandtheAsiaPacificregion.ThesituationissimilarforEVs,forwhichmostofthetradeincomponentsflowsfromAsiaintoEurope,whichimportsaround25%ofitsEVbatteriesfromChina.Windturbinecomponentsareheavyandbulky,buttheinternationaltradeoftowers,bladesandnacellesisquitecommon.Chinaisamajorplayerinwindturbinecomponentmanufacturing,accountingfor60%ofglobalcapacityandhalfoftotalexports,mostofwhichgotootherAsiancountriesandEurope.IntheUnitedStates,oneofthelargestwindpowermarkets,thedomesticcontentofbladesandhubsislowerthan25%.Forheatpumps,theshareofinternationaltradeinglobalmanufacturingisbelow10%,withmostofitfromChinatoEurope.Theannouncedmanufacturingpipelineto2030isverylargeformanycleanenergytechnologies.Ifallannouncedprojectstoexpandmanufacturingcapacitiesweretomaterialiseandallcountriesimplementtheirannouncedclimatepledges,ChinaalonewouldbeabletosupplytheentireglobalmarketforsolarPVEnergyTechnologyPerspectives2023ExecutivesummaryPAGE23IEA.CCBY4.0.modulesin2030,one-thirdoftheglobalmarketforelectrolysers,and90%oftheworld’sEVbatteries.AnnouncedprojectsintheEuropeanUnionwouldbesufficienttosupplyallofthebloc’sdomesticneedsforelectrolysersandEVbatteries,butwouldcontinuetobehighlydependentonimportsforsolarPVandwind,anareawhereitcurrentlyhasatechnologicaledge.ThesituationissomewhatsimilarintheUnitedStates,althoughfurthercapacityadditionsarehighlylikelyasaresultoftheInflationReductionAct.Thecurrentglobalpipelineofannouncedprojectswouldexceeddemandforsometechnologies(solarPV,batteriesandelectrolysers)andfallsignificantlyshortforothers(windcomponents,heatpumpsandfuelcells).Thishighlightstheimportanceofclearandcredibledeploymenttargetsfromgovernmentstolimitdemanduncertaintyandguideinvestmentdecisions.CriticalmineralsbringtheirownsetofchallengesTheminingofcriticalmineralsistheonlystepincleanenergytechnologysupplychainsthatdependsonresourceendowmentalone.Thelongleadtimesfornewmines,whichcanbewellovertenyearsfromthestartofprojectdevelopmenttofirstproduction,increasetheriskthatcriticalmineralssupplybecomesamajorbottleneckincleantechnologymanufacturing.Moreover,thehighgeographicalconcentrationoftoday’sproductioncreatessecurityofsupplyrisks,makinginternationalcollaborationandstrategicpartnershipscrucial.Clearpolicysignalsaboutfuturedeploymentareparticularlyimportanttode-riskinvestmentsinthissector,ascompaniesdevelopingnewminingcapacityneedtobeconfidentthatcleanenergytechnologiesfurtherdownthesupplychainwillbesuccessfullyscaledupintime.ThemajorityofannouncedprojectsfortheprocessingandrefiningofkeycriticalmineralsaresettobelocatedinChina.Thesemidstreamprocessestendtobeenergy-intensive.Chinaaccountsfor80%oftheannouncedadditionalproductioncapacityto2030forcopperanddominatesannouncedrefiningcapacityofkeymetalsusedinbatteries(95%forcobalt,andaround60%forlithiumandnickel).Currentlyplannedexpansionsofmineralprocessingcapacityworldwidefallwellshortofthevolumesthatwillbeneededforrapiddeploymentofcleanenergytechnologies.PolysiliconforsolarPVsupplychainsistheonlyareainwhichasurplusofcapacityby2030cancurrentlybeexpected.Mitigatingrisksincriticalmineralsuppliesrequiresanew,morediversifiednetworkofdiverseinternationalproducer-consumerrelationships.Thesewillbebasednotonlyonmineralresources,butalsoontheenvironmental,socialandgovernancestandardsfortheirproductionandprocessing.Thesenewpartnershipsneedtobebalancedinwaysthatofferresource-richproducers,especiallyindevelopingeconomies,theopportunitytomovebeyondprimaryproduction.Stockpilingoptionscanalsoprovidesafeguardsagainstdisruption,butEnergyTechnologyPerspectives2023ExecutivesummaryPAGE24IEA.CCBY4.0.acomprehensivesuiteofpoliciesinsupportofmineralssecurityneedstoincludeattentiononthedemandside,notablyviarecyclingprogrammesandsupportfortechnologyinnovation.Countries’cleanenergyindustrialstrategiesneedtoreflecttheirstrengthsandweaknessesFormostcountries,itisnotrealistictocompeteeffectivelyacrossallpartsoftherelevantcleanenergytechnologysupplychains.Theyneednottodoso.Competitivespecialismsoftenarisefrominherentgeographicadvantages,suchasaccesstolow-costrenewableenergyorthepresenceofamineralresource,whichcanleadtolowerproductioncostsforenergyandmaterialcommodities.Buttheycanalsoarisefromotherattributes,likealargedomesticmarket,ahigh-skilledworkforceorsynergiesandspilloversstemmingfromexistingindustries.Holisticallyassessingandnurturingthesecompetitiveadvantagesshouldformacentralpillarofgovernments’industrialstrategies,designedinaccordancewithinternationalrulesandcomplementedbystrategicpartnerships.Energycostswillcontinuetobeamajordifferentiatorinthecompetitivenessofcountries’energy-intensiveindustrysectors.Industrialcompetitivenesstodayiscloselylinkedtoenergycosts,especiallynaturalgasandelectricity,whichvarygreatlybetweenregions.Thisremainsthecaseinthecleanenergytransition.Forexample,productioncostsofhydrogenfromrenewableelectricitycouldbemuchlowerinChinaandtheUnitedStates(USD3-4/kg)thaninJapanandWesternEurope(USD5-7/kg)usingthebestresourcesinthosecountriestoday,translatingintosimilardifferencesinproductioncostsforderivativecommodities,suchasammoniaandsteel.Ascountriesmakeprogresstowardstheirclimatepledges,withrenewableelectricitycostscontinuingtheirdeclineandelectrolysercostsfallingrapidly,thecostdifferencebetweenregionsislikelytoshrinksomewhat,butcompetitivenessgapswillremain.Carefullyconsideringwhereinthesupplychaintospecialisedomestically,andwhereitmightbebettertoestablishstrategicpartnershipsormakedirectinvestmentsinthirdcountries,shouldformkeyconsiderationsofcountries’industrialstrategies.Newinfrastructurewillformthebackboneofthenewenergyeconomyinallcountries.Thiscoversareassuchasthetransportation,transmission,distributionorstorageofelectricity,hydrogenandCO2.Buildingcleanenergyinfrastructurecantake10yearsormore,typicallyinvolvinglargecivilengineeringprojectsthathavetoadheretoextensivelocalplanningandenvironmentalregulations.Whileconstructionisinmostcasesarelativelyefficientprocess,taking2-4yearsonaverage,planningandpermittingcancausedelaysandcreatebottlenecks,withEnergyTechnologyPerspectives2023ExecutivesummaryPAGE25IEA.CCBY4.0.theprocesstaking2-7years,dependingonthejurisdictionandtypeofinfrastructure.Leadtimesforinfrastructureprojectsareusuallymuchlongerthanforthepowerplantsandindustrialfacilitiesthatconnecttothem.Thestoryofthenewenergyeconomyisstillbeingwritten–supplychainsarecentraltothenarrativeIndustrialstrategiesforcleanenergytechnologymanufacturingrequireanall-of-governmentapproach,closelycoordinatingclimateandenergysecurityimperativeswitheconomicopportunities.Thiswillmeanidentifyingandfosteringdomesticcompetitiveadvantages;carryingoutcomprehensiveriskassessmentsofsupplychains;reducingpermittingtimes,includingforlargeinfrastructureprojects;mobilisinginvestmentandfinancingforkeysupplychainelements;developingworkforceskillsinanticipationoffutureneeds;andacceleratinginnovationinearly-stagetechnologies.Everycountryhasadifferentstartingpointanddifferentstrengths,soeverycountrywillneedtodevelopitsownspecificstrategy.Andnocountrycangoitalone.Evenascountriesbuildtheirdomesticcapabilitiesandstrengthentheirplacesinthenewglobalenergyeconomy,thereremainhugegainstobehadfrominternationalco-operationaspartofeffortstobuildaresilientfoundationfortheindustriesoftomorrow.EnergyTechnologyPerspectives2023IntroductionPAGE26IEA.CCBY4.0.IntroductionPurposeofthisreportTheInternationalEnergyAgency(IEA)EnergyTechnologyPerspectives(ETP)technologyflagshipseriesofreportshasbeenprovidingcriticalinsightsintokeytechnologicalaspectsoftheenergysectorsince2006.Cleanenergytechnologiesandinnovationarevitaltomeetthepolicygoalsofenergysecurity,economicdevelopmentandenvironmentalsustainability.Cost-effectiveenergyandenvironmentalpolicymakingmustbebasedonaclearunderstandingofthepotentialfordeployingthesetechnologies.ETPseekstohelpachievethisgoalbyassessingtheopportunitiesandchallengesassociatedwithexisting,newandemergingenergytechnologies,andidentifyinghowgovernmentsandotherstakeholderscanacceleratetheglobaltransitiontoacleanandsustainableenergysystem.TheCovid-19pandemicandtheRussianFederation’s(hereafter,“Russia”)invasionofUkrainehavecriticallydisruptedglobalenergyandtechnologysupplychains,leadingtosoaringgas,oilandcoalprices,aswellasshortagesofcriticalminerals,semiconductorsandothermaterialsandcomponentsneededtomanufacturecleanenergytechnologies.Thecurrentglobalenergycrisisposesathreattonear-termeconomicprospectsandisthreateningtoslowtherolloutofsomecleanenergytechnologies,butitalsostrengthenstheeconomiccaseforacceleratingtheshiftawayfromfossilfuelsbymassivelyraisinginvestmentsinrenewables,energyefficiencyandothercleanenergytechnologies.Therecentspateofextremeweathereventsacrosstheplanetremindsusoftheurgentneedforradicalactiontoreininemissionsofgreenhousegases.AstheIEAhasrepeatedlystressed,theworlddoesnotneedtochoosebetweentacklingtheenergycrisisandtheclimatecrisis.Thesocialandeconomicbenefitsofacceleratingcleanenergytransitionsareashugeasthecostsofinaction.Secure,resilientandsustainablesupplychainsformanufacturingcleanenergytechnologiesandproducinglow-emissionenergycommoditiesarecentraltotheglobalenergytransition.Thesesupplychainsdependlargelyonmineralsandonanarrayofmaterialsandcomponentsderivedfromthem,ratherthanonfossilfuelsupplies.Asaresult,energysecurityconsiderationswillincreasinglybeaboutaccesstothoseresourcesandgoods.Importantlessonscanbedrawnfromestablishedmarketsandtechnologiessuchassolarphotovoltaics(PV)inshapingemergingmarketsforbatteries,low-emissionhydrogenandothertechnologiesthatarepoisedtoplaykeyrolesinthecleanenergytransition.EnergyTechnologyPerspectives2023IntroductionPAGE27IEA.CCBY4.0.TheprimarypurposeofthiseditionofETPistohelpgovernmentandindustrydecisionmakersovercomehurdlesindevelopingandexpandingthecleanenergytechnology1supplychainstheworldneedstoreachnetzeroemissionsbymid-century.Throughthelensesofenergysecurity,resiliencyandsustainability,ETP-2023focusesthroughoutontheopportunitiesandrisksinvolvedinscalingupcleanenergyandtechnologysupplychainsintheyearsahead.Itsetsoutwherekeycleanenergyandtechnologysupplychainsstandtodayandassesseshowquicklytheyneedtoexpandfortheworldtobeontrackfornetzeroemissions,anditidentifiesvulnerabilitiesandrisksinadaptingthemtoanetzeroworldaswellasemergingopportunitiestoestablishthenewglobalenergyeconomy.Italsoexamineshowgovernmentscandesignmoreeffectivepoliciesandstrategiestoencouragegreatersupplychainsecurity,resiliencyandsustainability.ETP-2023buildsonthe2020revampofthisseries,aimedatimprovingitsusefulnessandrelevanceforpolicymakersandotherstakeholders.ItdrawsonandupdatestheIEA’songoinganalysisofcriticalmineralsandrecentdetailedassessmentsoftechnologysupplychainsforelectricvehicle(EV)batteriesandsolarPV,aswellastheIEA’sextensivecleanenergytechnologytrackingandanalyticalactivities.ETPanalysisalsobenefitsfromIEATechnologyCollaborationProgrammeexpertiseandresearchprovidedbyexpertsaroundtheworldwhosupportthisworkwithtechnologydataandanalyticalinsights.CleanenergyandtechnologysupplychainsEnergyandtechnologysupplychainsrefertothesequencesofsteps,orstages,requiredtodeliveratechnologyoranenergyservicetothemarket.Theyincludeextractingnaturalresources(suchasminerals),producingmaterialsandfuels,manufacturingcomponentsandassemblingthemintoatechnologyorsystem,installingandoperatingthattechnology,andmanagingwastesgeneratedduringitsoperatinglifetimeandwhenitisbeingdismantledattheendofitslifespan.Anenergytechnologycomprisesacombinationofhardware,techniques,skills,methodsandprocessesusedtoproduceenergyandprovideenergyservices,i.e.energyproduction,transformation,storage,transportationanduse.Inthisreportwedistinguishbetweentechnologysupplychainsandenergysupplychains,basedonthefinalservicedelivered:1Cleanenergytechnologycomprisesthosetechnologiesthatresultinminimalorzeroemissionsofcarbondioxide(CO2)andpollutants.Forthepurposesofthisreport,cleanenergytechnologyreferstolowornearzeroemissionstechnologiesthatdonotinvolvetheproductionortransformationoffossilfuels–coal,oilandnaturalgas–unlesstheyareaccompaniedbycarboncapture,utilisationandstorage(CCUS)andotheranti-pollutionmeasures.EnergyTechnologyPerspectives2023IntroductionPAGE28IEA.CCBY4.0.•Technologysupplychainsrefertothedifferentstepsneededtoinstallatechnology,withinputsofmaterials,componentsandservicesinvolvedateachstage.Inthecaseofcleanenergytechnologies,themainstepsincludetheextractionofminerals;theprocessingofthosemineralsintousablematerials;themanufacturingofcomponents;theirassemblyintofinishedequipment;theinstallationofthatequipment;itsoperation;anditsdecommissioningandreuseorrecyclingofcertaincomponents.Thesetechnologiesincludesupply-sideequipment,suchassolarPVsystems(rangingfromhouseholdsystemstolargeutility-scaleplants)andelectrolyserstoproducehydrogen,aswellasend-useequipmentsuchasEVs,heatpumpsandhydrogen-poweredfuelcellvehicles.•Energysupplychainsrefertothedifferentstepsneededtosupplyafuelorfinalenergyservicetoendusers,usuallyinvolvingtradeofthatenergycommodityalongandacrosstechnologysupplychains.Stepsincludepowergenerationorfueltransformation,aswellastheirtransportation,transmission,distributionandstorage.Examplesincludethesupplyofrenewableelectricity(suchassolarPVandwindpower)andlow-emissionhydrogenandsynthetichydrocarbonfuels,suchassynthetickerosene.Technologysupplychainsandenergysupplychainsareinterrelated.Producing,generating,transportingandstoringanyformofenergyrequirestechnologies,whichneedtobemanufacturedandbroughtintoservice.Inparallel,allthedifferentstepsalongthetechnologysupplychainconsumeenergyandthusdependonenergysupplychains.FigureI.1StepsandinterdependenciesoftechnologyandenergysupplychainsIEA.CCBY4.0.Energyandtechnologysupplychainsareinterdependent,asoneisunabletooperatewithouttheother.Recenttrendsintechnologycostsandenergypricesillustratetheinterlinkagesbetweenthetwotypesofsupplychains.Thepricesofmanymineralsandmetalsthatareessentialforsomeleadingcleanenergytechnologieshavesoaredinthelastfewyears,duetoacombinationofrisingdemand,disruptedsupplychains,EnergyTechnologyPerspectives2023IntroductionPAGE29IEA.CCBY4.0.concernsaboutfuturesupplyandrisingenergyprices.Forexample,thepriceoflithiumhasnearlydoubledsincethebeginningof2022(seeChapter2).Cathodematerialssuchaslithium,nickel,cobaltandmanganese,whichareessentialformakinglithium-ionbatteries,accountedforlessthan5%ofbatterypackcostsinthemiddleofthelastdecadewhentherewereonlyahandfulofbatterygigafactories;thatsharehasrisentoover20%today.ScopeandanalyticalapproachRiskassessmentframeworkforsupplychainsDisruptionstocleanenergytechnologysupplychainscouldhaveamajorimpactontheworld’sabilitytoachieveclimateandenergygoals.Understandingtheriskprofileofeachelementofthesupplychainisakeystepindeterminingwheretofocuseffortstoenhancesecurity,resilienceandsustainability,andindevelopingpoliciestoaddresspotentialvulnerabilities.Theseprofilescanlookverydifferentdependingonthecountry,regionandtechnologyandwillchangeovertimeasnewtechnologiesandmaterialsemergeandmature,andasmarketsdevelop.Makingsupplychainssecure,resilientandsustainablecanonlybeachievedthroughacomprehensiveandco-ordinatedapproach.Thismeanstakingactiontodevelopsupplychainsthatcanmeettheneedsofanetzeropathwayandthatcanabsorb,accommodateandrecoverfromshort-termshocksandadjusttolong-termchangesinsupply,includingperiodicmaterialshortages,theeffectsofclimatechangeandnaturaldisasters,andotherpotentialmarketdisruptions.Theneedtoreducetheemissionsintensityandenvironmentalimpactofcleanenergytechnologysupplychainsthemselvesisparticularlyurgent.TheIEAhasdevelopedariskassessmentframeworkthatbothgovernmentandbusinessescanusetocapturetherisksandvulnerabilitiesofsupplychains.ItwasfirstpresentedinSecuringCleanEnergyTechnologySupplyChains,publishedinJuly2022(IEA,2022a).ForthepurposesofETP-2023,theanalysishasbeensignificantlyexpandedtoprovideacomprehensiverisk-assessmentframeworkfortechnologyandenergysupplychainsbasedonthecombinedassessmentoflikelihoodandimpactmetricsrelevanttofouridentifiedpotentialrisks:insufficientscaleuppace,andsupplyinsecurity,inflexibilityandunsustainability.Theframeworkisdesignedtobeappliedtocurrentsupplychainstructurestoassesshowwelltheycanadaptandrespondintheshorttomediumterm.Thisreportusesittoprovideaglobalperspective,butitcanbeappliedatthenationalorregionallevel.EnergyTechnologyPerspectives2023IntroductionPAGE30IEA.CCBY4.0.ScenarioanalysisAnalysisinthisreportisunderpinnedbyglobalprojectionsofcleanenergytechnologiesderivedfromtheIEA’sGlobalEnergyandClimate(GEC)model(IEA,2022b),adetailedbottom-upmodellingframeworkcomposedofseveralinterlinkedmodelscoveringenergysupplyandtransformation,andenergyuseinthebuildings,industryandtransportsectors.Themodellingframeworkincludes26regionsorcountriescoveringthewholeworld(seeAnnex).TheETP-2023projectionperiodis2021to2050.Themostrecentyearofcompletehistoricaldatais2020,thoughpreliminarydataareavailableforsomecountriesandsectorsforpartsof2021andhavebeenusedtoadjusttheprojections.Weemploytwoscenariostodescribepossibleenergytechnologypathways:•TheNetZeroEmissionsby2050(NZE)Scenario–thecentralscenariointhisreport–isanormativescenariothatsetsoutapathwaytostabiliseglobalaveragetemperaturesat1.5°Cabovepre-industriallevels.TheNZEScenarioachievesglobalnetzeroenergysectorCO2emissionsby2050withoutrelyingonemissionsreductionsfromoutsidetheenergysector.Indoingso,advancedeconomiesreachnetzeroemissionsbeforedevelopingeconomiesdo.TheNZEScenarioalsomeetsthekeyenergy-relatedUNSustainableDevelopmentGoals,achievinguniversalaccesstoenergyby2030andsecuringmajorimprovementsinairquality.•TheAnnouncedPledgesScenario(APS)assumesthatgovernmentswillmeet,infullandontime,alltheclimate-relatedcommitmentstheyhaveannounced,includinglonger-termnetzeroemissionstargetsandNationallyDeterminedContributions(NDCs),aswellascommitmentsinrelatedareassuchasenergyaccess.Itdoessoirrespectiveofwhetherthesecommitmentsareunderpinnedbyspecificpoliciestosecuretheirimplementation.Pledgesmadeininternationalforaandinitiativesonthepartofbusinessesandothernon-governmentalorganisationsarealsotakenintoaccountwherevertheyaddtotheambitionofgovernments.Neitherscenarioshouldbeconsideredapredictionorforecast.Rather,theyareintendedtoofferinsightsintotheimpactsandtrade-offsofdifferenttechnologychoicesandpolicytargets,andtoprovideaquantitativeframeworktosupportdecisionmakingintheenergysectorandstrategicguidanceontechnologychoicesforgovernmentsandotherstakeholders.ThefocusoftheanalysisinETP-2023isonthetechnologyrequirementsoftheNZEScenario;theAPSisemployedwithaviewtounderstandinggeographicalconcentrationandregionalneeds.Thescenariosandresultsareconsistentwiththosepresentedinthe2022WorldEnergyOutlook(IEA,2022c).EnergyTechnologyPerspectives2023IntroductionPAGE31IEA.CCBY4.0.SelectedenergyandtechnologysupplychainsThisreportanalysessixcleanenergyandtechnologysupplychainsindetail(FigureI.2).TheywereselectedbasedontheircriticalimportancetothecleanenergytransitiondescribedintheNZEScenario.Together,theycontributearoundhalfofthecumulativeemissionsreductionsto2050inthatscenario.Threearecleanenergysupplychains–forlow-emissionelectricity(includingsolarPVandwindwiththeirrespectivetechnologysupplychains);low-emissionhydrogen(includingtechnologysupplychainsforelectrolysersandnaturalgas-basedplantswithcarboncaptureandstorage[CCS]);andlow-emissionsynthetichydrocarbonfuels(includingtechnologysupplychainsfordirectaircapture[DAC]andbioenergywithcarboncapture[BECC]toprovideCO2,connectedtothelow-emissionhydrogensupplychain).Thethreeothersarecleantechnologysupplychains–forelectriccars(includingthebatterysupplychain);fuelcelltrucks(includingthefuelcellsupplychain);andheatpumpsforbuildings.FigureI.2KeyelementsforeachstepinselectedcleanenergyandtechnologysupplychainsLOW-EMISSIONELECTRICITYLOW-EMISSIONHYDROGENEnergyTechnologyPerspectives2023IntroductionPAGE32IEA.CCBY4.0.LOW-EMISSIONSYNTHETICHYDROCARBONFUELSBATTERYELECTRICVEHICLESHEATPUMPSEnergyTechnologyPerspectives2023IntroductionPAGE33IEA.CCBY4.0.FUELCELLTRUCKSIEA.CCBY4.0.Notes:BECC=bioenergywithcarboncapture.DAC=directaircapture.FT=Fischer-Tropsch.ETP-2023studiessixselectedcleanenergyandtechnologysupplychainsindetail.EnergyTechnologyPerspectives2023IntroductionPAGE34IEA.CCBY4.0.ReportstructureChapter1reviewsthecurrentstatusoftheglobalcleanenergytransitionandoutlinestheextentofthechangesrequiredtocleanenergyandtechnologysupplychaintoputtheworldontheNZEScenario’snetzeropathway,aswellassomepotentialrisksthatcouldarise.Chapter2assessesindetailhowthekeycleanenergyandtechnologysupplychainsfunctiontodayandtheirvulnerabilitiesascleanenergytransitionsadvance,focusingonthelinkbetweengeographicconcentrationandsecurity,resiliencetomarketshocksandenvironmentalperformance.Chapter3quantifiesglobalmineralandmaterialneedsforthetransitiontonetzeroemissionsandanalysestheextenttowhichcurrentexpansionplansarecompatiblewiththattrajectory.Italsodiscussesthepolicyandmarketfactorsdrivinginvestmentsinkeyregionsandthemaincorporatestrategiesinthisstepofthesupplychain.Chapter4assessprospectsforthesupplyofmass-manufacturedandlarge-scalesite-tailoredcleanenergytechnologies,focusingontheexpansionofmanufacturingandinstallationcapacitybasedoncurrentandannouncedconstructionactivity.LikeChapter3,Chapter4alsodiscussesthepolicyandmarketfactorsdrivinginvestmentsinkeyregionsandthemaincorporatestrategiesinthisstepofthesupplychain.Chapter5analyseshowandatwhatpaceenergyandCO2infrastructureneedstobetransformedtocost-effectivelysustainthecleanenergysupplychainsthatwillbeneededfornetzeroemissions,focusingonelectricity,hydrogenandCO2transportation,transmission,distributionandstorage.Chapters6setsouthowpolicymakerscansupportthedevelopmentandexpansionofsecure,resilientandsustainablesupplychains,thetoolsattheirdisposalandhowbesttousethem,drawingonrecentexperiencearoundtheworld.EnergyTechnologyPerspectives2023IntroductionPAGE35IEA.CCBY4.0.ReferencesIEA(InternationalEnergyAgency)(2022a),SecuringCleanEnergyTechnologySupplyChains,https://www.iea.org/reports/securing-clean-energy-technology-supply-chainsIEA(2022b),GlobalEnergyandClimateModel,https://www.iea.org/reports/global-energy-and-climate-modelIEA(2022c),WorldEnergyOutlook,https://www.iea.org/reports/world-energy-outlook-2022EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE36IEA.CCBY4.0.Chapter1.EnergysupplychainsintransitionHighlights•Momentumforcleanenergytransitionsisaccelerating,drivenbyincreasinglyambitiousenergyandclimatepolicies,technologicalprogressandrenewedenergysecurityconcernsfollowingRussia’sinvasionofUkraine.CleanenergyinvestmentreachedUSD1.4trillionin2022,up10%relativeto2021andrepresenting70%ofthegrowthintotalenergysectorinvestment.Despitethisimportantprogress,fossilfuelsstillaccountfor80%oftheprimaryenergymix.•Cleanenergytechnologydeploymentmustacceleraterapidlytomeetclimategoals.IntheNetZeroEmissionsby2050(NZE)Scenario,globalproductionofelectriccarsincreasessix-foldby2030;renewablesaccountforover60%ofpowergeneration(upfrom30%today);andelectricitydemandincreasesby25%,accountingfornearly30%oftotalfinalconsumption(upfrom20%today).Ifdeliveredinfull,announcedprojectstoexpandcleantechnologymanufacturingcapacitywouldmeettheneedsfor2030intheNZEScenarioforsolarPVmodulesandapproachthatrequiredforEVbatteries,butwouldfallshortinotherareas,leavinggapsof40%forelectrolysersand60%forheatpumps.•Thetransitiontocleanenergyhingesoncleanenergytechnologysupplychains.USD1.2trillionofcumulativeinvestmentwouldberequiredtobringenoughcapacityonlineforthesupplychainsstudiedinETP-2023tobeontrackwiththeNZEScenario’s2030targets.Announcedinvestmentscoveraround60%ofthistotal.Givenprojectleadtimes,mostinvestmentsarerequiredduring2023-2025,atanaverageofUSD270billionperyearduringthatperiod,whichisnearlyseventimestheaveragerateofinvestmentover2016-2021.•Criticalmaterialslikecopper,lithium,cobaltandnickelarechangingtheenergysecurityparadigm.Manufacturingatypical-sizeelectriccarrequiresfivetimesasmuchofthesematerialsasaregularcar.AnticipatedsupplyexpansionsuggeststhatproductioncouldfallwellshortofNZEScenariorequirementsfor2030,withdeficitsofupto35%forlithiumminingand60%fornickelsulfateproduction.•Leadtimestoestablishnewsupplychainsandexpandexistingonescanbelong,requiringpolicyinterventionstoday.Openingminesordeployingcleanenergyinfrastructurecantakemorethanadecade.Buildingafactoryorrampingupoperationsformass-manufacturedtechnologiesrequiresonlyaround1-3years.•CleanenergysectorjobsintheNZEScenariosoarfrom33to70millionover2021-2030,offsettingthelossof8.5millioninfossilfuel-relatedsectors.Buildingalarge,skilledworkforceiskeytomeetingnetzerotargets,butlabourandskillsshortagesinexpandingcleanenergyindustriesarealreadycreatingbottlenecks.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE37IEA.CCBY4.0.ThecleanenergytransitionRecenttrendsinenergytechnologiesThemovetocleanenergyisacceleratingTheglobalcleanenergytransitionisaccelerating,drivenbyacombinationofpolicy,technologicalchangeandeconomics.Theneedtoreducegreenhousegasemissionsdrasticallyandurgentlyinthefaceofevermorestartlingevidenceofglobalclimatechangeisnowwidelyaccepted,reflectedinincreasinglyambitiousnationalgoals.TheglobalenergycrisisfollowingtheRussianFederation’s(hereafter,“Russia”)invasionofUkrainehasbolsteredenergysecurityconcernsaboutsupplyofconventionalfuelssuchasoilandgas,providingfurtherimpetustotheneedandpolicysupportforcleanenergytechnologies.AsoftheendofNovember2022,87countriesandtheEuropeanUnionhadannouncedpledgestoreduceemissionstonetzerothiscentury,coveringover85%oftheworld’semissionsand85%ofitsgrossdomesticproduct.Notableannouncementssince2021includethePeople’sRepublicofChina’s(hereafter,“China”)targetofcarbonneutralityby2060(IEA,2021a),India’snetzeroemissionsby2070goal(GovernmentofIndia,2022)andIndonesia’snetzeroemissionsby2060target(IEA,2022a).Ifallannouncementsandtargetsaremetinfullandontime,theywillbeenoughtoholdtheriseinglobaltemperaturestoaround1.7°Cin2100(IEA,2022b;IEA,2022c).Overthelastdecade,theuptakeofcleanenergytechnologiesandthesupplyofenergyfromnon-fossilsources,notablyrenewables,hasacceleratedrapidly.In2022,renewablesaccountedfor30%ofglobalpowergeneration,upfrombelow20%in2010,withnotableincreasesinsolarPV,wind,hydropowerandbioenergyoutput(IEA,2022d).Electrificationisacceleratingacrossallend-usesectors.Intransport,salesofelectriccarsexceeded10millionin2022,or13%oftheglobalcarmarket,bringingtheirtotalnumberontheworld’sroadstoover25million,upfrompracticallyzeroin2010(IEA,2022e).Thereweremorethan1000gigawattsthermal(GWth)ofheatpumpcapacityoperatingworldwidein2021,upfromaround500GWthin2010,withsalesgrowing13%relativeto2020.2InvestmentincleanenergytechnologyisincreasingquicklyandexceededUSD31.4trillionin2022,accountingfornearly70%ofyear-on-yeargrowthinoverallenergyinvestment,andupfromaboutUSD1trillionin2015(IEA,2022f).2Heatpumpsincludedinthisanalysisareelectric,andarethoseusedprimarilyforheating(spaceand/orwater)inbuildingsandtheonesforwhichheatingfunctionisjustasimportantasitscoolingfunction,aimingtoexcludetotheextentpossibleair-airreversibleheatpumpsunitsboughtprimarilyforspacecooling.Theyincludebothcentralisedanddecentralisedunitsinbuildings.3AllUSDvaluesinthisreportareexpressedinrealtermsbased2021prices.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE38IEA.CCBY4.0.Inthecaseofelectriccars,globalspendingbygovernmentsandconsumersdoubledtoaboutUSD280billionin2021,abouttentimesmorethanin2015.Thisincreasetookplacedespitedifficultmarketconditionsandmanufacturingconstraints:thecombinedrevenuesoftheworld’s25largestcarmanufacturersstagnatedbetween2015and2021,beforereboundingin2022.Renewables,powergridsandenergystoragein2022accountedformorethan80%ofthenearlyUSD1trillionoftotalpowersectorinvestment,ledbysolarPV,upfrom75%oftheUSD800billioninvestedin2015,whiletheshareoffossilfuelpowerfellfromabout20%to10%overthesameperiod.Aggregateinvestmentinoil,gasandcoalsupplyamountedtojustaboveUSD800billionin2022,downfromoverUSD1trillionin2015.Capitalspendingbyoilandgascompanies4oncleanenergytechnologieshasriseninrecentyears,expectedtoreachjustover5%oftheirtotalupstreaminvestmentin2022,upfrom0.5%in2015.TheworldstillreliesheavilyonfossilfuelsDespitetherapidrecentgrowthincleanenergytechnologies,theworldstillreliespredominantlyonfossilfuelsforitsenergysupply(Figure1.1).Infact,growthincleanenergysupplysince2000hasbeendwarfedbythatofoil,gasandcoal,especiallyintheemerginganddevelopingeconomies.Inthosecountries,theshareoffossilfuelsintotalprimaryenergysupplyincreasedfrom77%in2000to80%in2021,mainlyduetoajumpincoal,from27%to35%.Intheadvancedeconomies,thesharedroppedfrom82%to77%overthesameperiod.Asaresult,theoverallshareoffossilenergyintheglobalenergymixhasremainedalmostconstantatabout80%.Oilremainsthesinglelargestsourceofprimaryenergy,makingup29%oftotalenergysupplyin2021(downfrom37%in2000),followedbycoalat26%(upfrom23%)andnaturalgasat23%(upfrom21%).Bioenergyisstillthesinglelargestsourceofnon-fossilenergy,accountingforaround10%oftotalprimaryenergyusein2021,thoughoverone-thirdisintheformoftraditionalbiomass,oftenusedinunsustainableandpollutingways.Nuclearpowermakesup5%ofsupply,hydropoweraround2%,andsolarandwindtogetheramere2%.Whileelectrificationhasacceleratedoverthelasttwodecades,fossilfuelsstilldominateenergyenduse,accountingforaround35%oftotalenergyuseinbuildingsand95%intransport.4IncludesthemajorsBP,Chevron,ConocoPhillips,Eni,ExxonMobil,ShellandTotalEnergies,aswellasADNOC(AbuDhabiNationalOilCompany),CNPC(ChinaNationalPetroleumCorporation),CNOOC(ChinaNationalOffshoreOilCorporation),Equinor,Gazprom,KuwaitPetroleumCorporation,Lukoil,Petrobras,Repsol,Rosneft,SaudiAramco,SinopecandSonatrach.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE39IEA.CCBY4.0.Globalmass-basedresourceflowsintotheenergysystem,2021IEA.CCBY4.0.Notes:Physicalmassflowsoffuelsandmaterialsintheenergysystem,inmilliontonnes.The“energysystem”includes:devicesthatdirectlyproduceorconsumeenergy(e.g.solarpanelsandmotors);equipmentandstructuresthathouseenergy-consumingdevicesandinturncanpassivelyhaveanimpactonenergyconsumption(e.g.buildingenvelopesandcarbodies);infrastructurethatdirectlytransportsenergyorCO2(e.g.electricitygridsandCO2pipelines);andinfrastructurewhosebuild-outcouldbedirectlyaffectedbyshiftsintechnologyduetocleanenergytransitions(e.g.railinfrastructureandroads).Industrymaterialdemandincludesthatfromequipmentbutnottheplantshell.Regionofproductionreferstoregionofextractionforfuelsandminerals,andproductionforbulkmaterials(steel,cement,aluminium).Forcriticalminerals(copper,lithium,nickel,cobaltandneodymium),volumesrefertothematerials(metals)derivedfromthem.AsimilargraphfortheNetZeroEmissionsby2050(NZE)Scenariofor2050isinChapter3.Sources:IEAanalysisbasedonIEAdata;USGS(2022).Despitetherapidrecentgrowthincleanenergytechnologiesanddemandformetalscriticaltothem,theworldstillreliesprimarilyoncoal,oilandgastomeetitsenergyneeds.Inadditiontothedirectuseofenergy,end-usesectorsconsumelargeamountsofenergyembeddedinmaterials,suchascementforinfrastructureandbuildings,steelforvehiclesandmanufacturinggoods,andchemicalsforfertilisersandconsumergoods.Theproductionofthesebulkmaterialstodayalsoreliesmainlyonfossilfuels,eitherforcombustionorasfeedstock.In2021,coalmadeuparound75%oftheenergyusedinglobalsteelproductionandmorethanhalfofthatusedtomakecement,whileabout70%ofchemicalsproductionwasbasedonoilornaturalgas.Thedemandforso-called“criticalminerals”,5fromwhich5Inthisreport,fivemaincriticalmineralsareanalysed:copper,lithium,cobalt,nickelandneodymium.Theywereselectedbasedontheiruseinkeycleanenergytechnologies,potentialconstraintsintheirsupplyandrisksrelativetothegeographicalconcentrationoftheirproduction.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE40IEA.CCBY4.0.metalssuchascopper,nickelandcobaltareproduced,hasbeenincreasingbrisklyinrecentyears,drivenbythedeploymentofcleanenergytechnologiessuchasbatteries,yettheircombinedproductionbymassrepresentsjust0.3%ofthatofcoaltoday.Theextractionandprocessingofcriticalmineralstypicallyreliesonfossilfuelsatpresent.Muchofthemomentumforcleanenergyisrecentandhasthusyettotranslateintomajorchangeinglobalenergysupply(IEA,2022g).MostcountrieshavebeenstrengtheningpolicysupportforcleanenergysincetheParisAgreementin2015,andevenmoresosince2020aspartofCovid-19economicrecoverypackages.Forexample,theUnitedStatespassedtheInflationReductionActin2022,authorisingUSD370billioninspendingonenergyandclimatechange(USCongress,2022).InthewakeofRussia’sinvasionofUkraine,theEuropeanUnionadoptedtheREPowerEUplan,whichisexpectedtomobiliseanadditionalEUR210billionincleanenergytechnologyinvestmentoverfiveyearsandsupporttheFitfor55package–asetofproposalstoreviseandupdateEUlegislationandtoputinplacenewinitiativeswiththeaimofreducingEUemissionsbyatleast55%by2030(EC,2022;EuropeanCouncil,2022).AttheGlobalCleanEnergyActionForumco-organisedbyMissionInnovationandtheCleanEnergyMinisterial,16countriescollectivelyannouncedUSD94billioninspendingforcleantechnologydemonstrationprojectsby2026,followingIEAanalysisofglobalneedsfornetzero(USDepartmentofEnergy,2022;IEA,2022h).Japanhasestablishedaroadmaptoreachnetzeroby2050withsupportfordevelopingemergingtechnologiesthroughtheJPY2trillionGreenInnovationFund(Japan,METI,2021;NEDO,2021).China’s14thFive-YearPlancontainsactionplansfortechnologydevelopmentaimedatachievingapeakinCO2emissionsby2030(China,NEA,2022;China,NDRC,2021).Indiaisincreasingsupplychaininvestmentstoboostdomesticmanufacturinginstrategicindustriesincludingbatteries(overUSD2billion),cars(overUSD3billion),solarPV(nearlyUSD600million)andsteel(USD800million)throughtheProductionLinkedIncentiveschemeoverthe2022-2027period(India,MCI,2021aand2021b;India,MHI,2022aand2022b;India,MNRE,2022;India,UnionCabinet,2020).CleanenergytechnologyneedsfornetzeroNetzerocallsforadeeptransformationoftheenergysectorAchievingglobalnetzeroemissionsofCO2by2050requirescurbingthegrowthinenergydemandalongsidearadicalchangeintheenergymix,involvingawholesaleshifttorenewableandothercleanenergysourcesandtechnologies(Figure1.2).IntheNZEScenario,behaviouralchanges,improvementsinenergyefficiency,andswitchingtorenewablesenableafallintotalprimaryenergysupplyEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE41IEA.CCBY4.0.by10%between2021and2030,despitetheglobaleconomygrowingbynearlyathird.Totalfinalconsumptionfallsby9%overthesameperiod.Theannualrateofenergyintensityimprovementnearlytriplestomorethan4%peryearcomparedwiththepreviousdecade.Between2030and2050,globaldemandfallsmoreslowly,byjust15%intotal,asthescopeforfurtherenergyconservationeffortsandefficiencyimprovementsdiminishes,andgrowingpopulationandeconomicactivitycontinuetodriveupunderlyingdemandforenergyservices.Renewables–ledbysolarPVandwind–seethebiggestincreaseinsupplyto2050intheNZEScenario,complementedbysignificantincreasesinnuclear.Solaroutputjumps23-foldandthatofwind13-fold,whilenuclearpowerdoublesbetween2021and2050.By2050,solarandwindtogethermakeupabout40%oftotalprimaryenergysupplyandnuclear12%.Totalcapacityadditionsofrenewablesquadruplefrom300GWin2021tonearly1200GWin2030,theirshareoftotalpowergenerationreachingover60%;additionsslowtoabout1100GWby2050astheneedtoreplaceexistingfossilfuel-basedcapacitydiminishes,withrenewablesaccountingforabout90%ofgenerationbythen.Unabatedfossilfuelsprovidedaround65%oftotalfinalconsumptionin2021,excludingfossilfuelusefornon-energypurposessuchaschemicalfeedstock.IntheNZEScenario,thissharefallstoaround55%in2030andto15%by2050.Inabsoluteterms,theconsumptionofbioenergyinend-usesectorsrisesmodestlyover2021-2050,butthismasksashiftinitscomposition:theuseofmodernbioenergyrisessharplywhileitstraditionaluseisphasedoutcompletelyby2030asfullaccesstomodernenergyisachievedinallcountries.GlobaltotalprimaryenergysupplyintheNZEScenarioIEA.CCBY4.0.RenewablesandnucleardisplacemostfossilfueluseintheNZEScenario,withtheshareoffossilfuelsplungingfromalmost80%in2021tolessthan20%in2050.010020030040050060070020102020203020402050EJOthersourcesRenewablesNuclearNaturalgasOilCoalHistoricalScenarioEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE42IEA.CCBY4.0.Electricitybecomesthelargestenergyvector,withdemandmorethandoublingbetween2021and2050,bywhichtimeitmeetsmorethanhalfoftotalfinalconsumption(Figure1.3).Totalelectricitygenerationgrowsby3.5%peryearto2050tomeetthatdemand.Hydrogenandhydrogen-basedfuelsemergeassignificantend-useformsofenergy,especiallyafter2030,beingdeployedmainlyinheavyindustryandlong-distancetransport;theirshareoftotalfinalconsumptionreachesnearly10%in2050.Theshareofbioenergyreachesaround15%in2050.Carboncapture,utilisationandstorage(CCUS)playsanincreasinglyimportantrole:CO2capturegrowsfromaround0.04Gtin2021to1.2Gtin2030and6.2Gtin2050,withindustryandfueltransformationsectorsaccountingformorethan40%,directaircapture(DAC)foraround5%,andpowerandheatgenerationfortherestbythen.ThetransformationoftheglobalenergysystemdescribedintheNZEScenarioresultsinarapiddeclineinenergysectorCO2emissions(energy‐relatedandfromindustrialprocesses),fallingbyabout30%by2030andby95%by2050relativeto2021.Residualemissionsin2050fromsectorswherereducingthemistechnicallydifficultandcostly,suchasaviation,shipping,roadfreightandheavyindustry,areentirelycompensatedbycarbonremovalfrombioenergywithcarboncaptureandstorage,whichremovesCO2fromtheatmosphereindirectly,anddirectaircapturewithstorage,resultinginoverallnetzeroemissions.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE43IEA.CCBY4.0.GlobalenergyflowsintheNZEScenario20212050IEA.CCBY4.0.Notes:Someelectricityisusedtogeneratehydrogenfromwaterelectrolysis,whilesomehydrogen(andhydrogen-basedfuelssuchasammonia)isinturnusedforpowergenerationin2050.Lossesincludefuel,heatandpowerdistributionlosses,aswellastransformationprocessconversionlossesandownuse.ElectricitybecomesthelargestenergyvectorintheNZEScenario,withdemandmorethandoublingbetween2021and2050.Announcedpledgesfallshortofnetzero,butstillrequiremajorshiftsintheenergysectorDespitestrongprogress,currentpledgesbygovernmentsandcompaniesasreflectedintheAnnouncedPledgesScenario(APS)arenotenoughtoputtheworldontracktoachievenetzeroemissionsby2050.In2050,energy-relatedCO2EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE44IEA.CCBY4.0.emissionsintheAPSamounttoabout11GtCO2.Nevertheless,achievingthosepledgeswillstillrequirequickdecarbonisationthisdecade.Emissionsfallbyabout15%over2021-2030intheAPS(40%intheNZEScenario),whichcallsformajorshiftsintheenergysector.IntheAPS,renewablesovertakecoalandaccountforoverafifthoftotalprimaryenergysupplyin2030,whiletheshareoffossilfuelsdropsfrom80%todayto70%(Figure1.4).Electrificationaccelerates–25%oftotalfinalconsumptionin2030–andthecarbonintensityofpowersimultaneouslydropsbyabout40%.Growthdecorrelatesfromemissions,andtheenergyintensityoftheglobaleconomyfallsbyaquarterover2021-2030.Cleanenergytechnologiesaredeployedquickly:in2030,salesofelectriccarsexceed40million(upfrom10milliontoday),320GWthofheatpumpsareinstalled(upfrom100GWth),and30Mtoflow-emissionhydrogenareproduced(upfromlessthanone).Totalprimaryenergysupply,electrificationratesandenergyintensityin2030intheAPSandNZEScenarioIEA.CCBY4.0.Note:TFC=totalfinalconsumption;PPP=purchasingpowerparity.NZE=NetZeroEmissionsby2050Scenario.APS=AnnouncedPledgesScenario.Inthemiddlegraphonelectrification,carbonintensitylabels(%)refertothedecreaseinelectricitycarbonintensityinAPSandNZEin2030relativeto2021.Intheright-handsidegraphonenergyintensity,labels(%)refertothedecreaseinenergyintensityinAPSandNZEin2030relativeto2021.WhilecurrentpledgesasreflectedintheAPSfallshortofnetzeropathways,theystillrequiremajortransformationoftheenergysector.MassivedeploymentofcleanenergytechnologiesisneededThedecarbonisationoftheenergysystemenvisionedintheNZEScenariorestsoneightmainpillars:behaviouralchangeandavoideddemand,energyefficiency,hydrogen,electrification,bioenergy,windandsolar,CCUS,andotherfuelshifts26%21%16%23%21%20%29%28%26%12%22%31%5%6%8%0100200300400500600700APSNZE20212030EJCoalNaturalgasOilRenewablesNuclearOther-24%-33%0123APSNZE20212030GJperthousandUSD(2021,PPP)Energyintensity-39%-64%02004006000%10%20%30%APSNZE20212030ElectricityshareofTFC(left)Carbonintensity(right)gCO2/kWhTotalprimaryenergysupplyElectrificationEnergyintensityEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE45IEA.CCBY4.0.(e.g.switchingfromcoalandoiltonaturalgas,nuclear,hydropower,geothermal,concentratingsolarpowerandmarineenergy).Behaviouralchangeandenergyefficiencygainsdonotrequirefundamentalchangestoexistingenergysystems,buttheotherpillars,whichaccountforover70%oftotalcumulativeemissionsreductionsover2021-2050,requirethemassivedeploymentofnewtypesofequipmentandinfrastructure.ForthepurposeofETP-2023,weselectkeyenergytechnologiesandenablinginfrastructureacrossthemajordecarbonisationpillarsfromtheNZEScenariotoassessandillustratetheimplicationsforsupplychainsofthecleanenergytransition(Figure1.5).Takentogether,theyaccountfornearly50%oftotalcumulativeemissionsreductionsover2021-50.Someselectedenergyandtechnologysupplychainsarespecifictoaparticularpillar,suchaselectriccarsandheatpumpsforelectrification,fuelcelltrucksforhydrogen,orsolarPVandwind.Somearemorecross-cuttinginnature,suchaslow-emissionhydrogenandlow-emissionsynthetichydrocarbonfuels.GlobalcumulativeenergysectorCO2emissionsreductionsbydecarbonisationpillarandcleanenergyandtechnologysupplychainsstudiedinETP-2023,2021-2050IEA.CCBY4.0.Notes:“Otherfuelshifts”includeotherrenewables,nuclear,andswitchingfromcoalandoiltonaturalgas.“Behaviour”includesenergyservicedemandchangesfromuserdecisions(e.g.changingheatingtemperature),aswellasavoideddemand,whichreferstoenergyservicedemandchangesfromtechnologydevelopments(e.g.digitalisation).Thetechnologiesfeaturedintheright-handsidediagramarethoseselectedforstudyinETP-2023.Sixcleanenergyandtechnologysupplychainsholdthepotentialtounlockaround50%ofcumulativeemissionsreductionsto2050intheNZEScenario.ThescaleandspeedoftherequireddeploymentofcleanenergytechnologiesneedstoincreasedramaticallytomeettheneedsoftheNZEScenario(Figure1.6).Globalproductionofelectricvehicles(EVs)(excludingtwo-andElectrificationBehaviourEfficiencyHydrogenOtherfuelshiftsCCUSDecarbonisationpillarsSupplychainsHeatpumpsLow-emissionhydrogenLow-emissionelectricityLow-emissionsynthetichydrocarbonfuelsElectriccarsFuelcelltrucksBioenergyTechnologysupplychainsEnergysupplychainsSolarPVandwind31%17%16%10%10%5%4%7%0%20%40%60%80%100%2021-2050Emissionsreductions(%)OtherfuelshiftsHydrogenBehaviourCCUSBioenergyEfficiencyElectrificationSolarPVandwindCumulativeemissionsreductionsEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE46IEA.CCBY4.0.three-wheelers)increases15-foldto2050,whilethedeploymentofrenewablesnearlyquadruples.Low-emissionsynthetichydrocarbonfuels(primarilyjetkerosene),productionofwhichisminimaltodayasmosttechnologiesarestillunderdevelopment,reach2.4billionlitresin2030(morethantheoilconsumptionofdomesticaviationinJapanin2021)andover105billionlitresby2050(equivalenttothetotaloilconsumptionofdomesticandinternationalaviationintheUnitedStatesandtheEuropeanUnioncombinedin2021).Productionoflow-emissionhydrogenfromelectrolysisornaturalgas-basedhydrogenwithcarboncaptureandstorage(CCS)jumpsfromaround0.5Mtin2021to450Mtin2050–equalinenergyequivalenttermstoabouthalfoftheworld’senergyconsumptioninthetransportsectorin2021.Inmanycases,availablecleanenergytechnologiesonthemarkettodayarenotyetcompetitivewithexistingfossilfuel-basedones,despiterecentcostreductions.Theformeraregenerallymorecapital-intensive,i.e.theupfrontcostofpurchasingorinstallingthemishigherperunitofcapacityastheytendtoinvolvemoreextensiveandcostlyinputs,thoughtheirrunningandmaintenancecostsaretypicallylower.Forsometechnologies,higherupfrontcostsareoutweighedbysavingsduringuse,thoughthisvariesbyregion.Ingeneral,costsinrealtermsareexpectedtocontinuetodeclineovertimeasdeploymentincreasesandwithinnovation.EVsareacaseinpoint.Thepricegapbetweenelectricandinternalcombustionengine(ICE)carshasbeenshrinking,thanksmainlytomajorreductionsinthecostofmakingbatteries,helpingtostimulateEVdemand.Improvementsinperformanceandrecentfuelpricehikesarealsoboostingtheirattractiveness.Yetelectriccarsremainmoreexpensiveandoffershorterdrivingrangesinmostcases.Foramedium-sizedcar,abatteryEVtypicallycostsaroundUSD10000(orroughly40%)morethanaconventionalalternative(beforetaxesandsubsidies).ThepricepremiumisgenerallysmallerinChina,averagingabout10%,duetosmallervehiclesizeandgreatercompetitionamongcarmakers,whileithasbeenrisingrecentlyinEuropefollowinglargeinvestmentsaimedatimprovingvehicleperformance.Heatpumps–atechnologythatefficientlyprovidesheatingandcoolingtobuildingsandindustry–alsohaveanupfrontpricepremiumwhencomparedwithfossilfuelheatingequipment,thoughheatpumpspaybackovertheirlifetimeinmanyregionstoday.ThetotalcostofpurchasingandinstallingaheatpumprangesfromUSD1500toUSD10000formosthomes,butvariessubstantiallydependingontheregionandthetypeofunitinstalled(Figure1.7).Installationcanaddsubstantiallytototalcost;especiallyiftheenergydistributionsystemneedstobeupgradedtoaccommodateheatpumps(i.e.enlargingradiatorsorunderfloorexchangers),thiscanaddcost.Thismatterssubstantiallyformoreefficientground-sourceheatpumps,whereinstallationcantakeuptoseveralweeksandEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE47IEA.CCBY4.0.requiresdrillingandundergroundpiping,makingtheirtotalcostmuchhigherthanotheroptions.Installationtimeandcostscoulddeclineasheatpumpsbecomemorecommon,andoffergreateropportunitiesthaninmanufacturing.Themostexpensivecomponentsinheatpumps(e.g.heatexchangers,compressors)havealreadybeenmassmanufacturedforalongtime,makingfurthermanufacturingcostreductionsmorelimitedthanforothercleanenergytechnologies.GlobaldeploymentofselectedcleanenergytechnologiesintheNZEScenarioIEA.CCBY4.0.Notes:HF=hydrocarbonfuelsThescaleandspeedofdeploymentofcleanenergytechnologiesandtheirassociatedsupplychainsacceleratedramaticallyintheNZEScenario.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE48IEA.CCBY4.0.Heatpumpsandheatingdistributionsystemmarketpriceandinstallationtimeforatypicalhouseholdbytypeofequipment,2021IEA.CCBY4.0.Notes:HP=heatpumps.Forground-sourceheatpumps,theinstallationcostsincludedrillingcostsandundergroundpipes.HPinstallationcostincludeslabourandbalanceofplant.Distributionsystemcostsincludelabourandmaterials.Theuncertaintylinereferstoinstallationtime.Themarketpriceofheatpumpssignificantlydependsoninstallationcosts,wherethebiggestpotentialforloweringcostslies.Manysupply-sidecleanenergytechnologiesalsoinvolvehighercapitalcoststhantheirfossilfuelequivalents.ThemainexceptionissolarPV,whichisalreadycheaperinmostlocations,notaccountingfortheadditionalcostsassociatedwithitsintermittencyandvariability.ThecapitalcostofsolarPVcurrentlyrangesfromUSD600perkilowatttoUSD1000/kWdependingontheregion,anduptoUSD1800/kWincludingbatterystorage.Bycomparison,thecostofaconventionalcoal-firedpowerplantvariesbetweenUSD600/kWandUSD2100/kWdependingontheefficiencyoftheplantandfluegastreatmentaswellastheregion.EquippingtheplantwithCCUScanpushthecostuptobetweenUSD1800/kWandUSD6600/kW.Hydrogencapitalcostsarealsoveryhigh.ThecostofaconventionalnaturalgasreformerplantsitsatUSD780perkWofhydrogenoutput(USD1470perkWofhydrogenoutputifequippedwithCCUS),whilethecapitalcostforaninstalledelectrolyserrangesfromUSD1400perkilowattelectrical(kWe)toUSE1770/kWe(USD2150-2720perkWofhydrogenoutput).Capitalcostisanimportantcostcomponentforhydrogenproductioncost,especiallyinthecaseofelectrolysers.Naturalgaspricesaffecttheeconomicsofproducinghydrogenfromnaturalgasreforming,withorwithoutCCUS,makingtheelectrolysisacheaperproductionroutewhengaspricesarehigh(seeChapter2).AtthepricesofUSD25permillionBritishthermalunitstoUSD45/MBtuthatprevailedinEuropeduring2022,hydrogenproductioncostswereUSD4.8/kgtoUSD8.6/kg,almost80%ofwhichwasduetothefuelcost.Inthesameregion,hydrogenproducedwithrenewablescancostaslowasUSD4/kg(IEA,2022i).02460204060Air-airsplitAir-airductedAir-waterHybridGround-sourceWeeksThousandUSD(2021)HPHPinstallationDistributionsystemTotalInstallationtimeEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE49IEA.CCBY4.0.GettingtonetzeroisnotpossiblewithoutmoreinnovationManyofthecleanenergytechnologiesrequiredtogettonetzerobymid-centuryarenotavailableatscaletoday.Whiletheemissionsreductionsto2030intheNZEScenariocanbeachievedwithexistingtechnologies,abouthalfoftheemissionsreductionsin2050comefromtechnologiesatprototypeordemonstrationstagestoday.Thisincludeskeytechnologies,suchascement,steelandaluminiumproductionwithCCUS;hydrogen-basedsteelmaking;andDAC.Bringingnewtechnologiesandsolutionstomarkettakestime.Experienceshowsthattheinnovationprocessusuallytakes20to70yearsfromprototypetocommercialisation,withlarge-scaleprocesstechnologiestakingtypicallylongerthansmallmodulartechnologies(Figure1.8).TheNZEScenariorequiresashorteningofinnovationcycles,whichcanbepartiallyachievedbyimprovingthecommercialadvantageofcleanenergytechnologies.Thereareseveralpromisingprojectsseekingtoaddresspressinginnovationgapsinabroadrangeoftechnologyareas,buttheyneedtoprogressquicklytoplayamajorroleinthenextthreedecades.Globalco-operationandinternationalknowledgetransfer,aswellastrackingprogress,suchasintheETPCleanEnergyTechnologyGuideandtheIEACleanEnergyDemonstrationProjectsDatabase,willbevitalinthisregard(IEA,2022h;IEA,2022j).TimeframeforprototypetomarketintroductionandearlyadoptionforselectedcleanenergytechnologiesinthepastandtheNZEScenarioIEA.CCBY4.0.Notes:mfg.=manufacturing;DRI=directreducediron;H2=hydrogen;FC=fuelcell;Li-ion=lithium-ion.Initialcommercialuptakeisdefinedasthetimeuntiltake-upin1%ofthemarketandmarketintroductionaswhenthefirstcommercialmodelisavailableonthemarket.Directaircaptureisassumedtoreachinitialcommercialscaleat1MtofCO2peryearandmarketintroductionat1%ofthemarket.Historicalfiguresarecalculatedforselectedmarket-leadingcountries(NorwayforLi-ionbatteries;GermanyforsolarPV;Denmarkforwindpower;andtheUnitedStatesfornaturalgasDRI).Sources:IEAanalysisbasedonGrossetal.(2018);WorldsteelAssociation(2020);Comin&Hohjin(2004).AlsoseeIEA(2020a).ThetimetobringemergingcleantechnologiestomarketisgenerallyshorterintheNZEScenariothanwasthecaseforexistingtechnologies.194019601980200020202040Li-ionbatteryforEVSolarPVWindpowerIron–naturalgasDRIHeavy-dutyFCtrucksSolid-statebatteryDirectaircaptureAluminium–inertanodeIronoreelectrolysisH₂directreducedironCCUSincementproductionMassmfg.SitetailoredHistoricalexamplesEmergingtechnologiesPre-2022RemainingtimetomarketintroductionInitialcommercialuptakeHistorical–tomarketintroductionHistorical–initialcommercialuptakePrototype:1909EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE50IEA.CCBY4.0.ImplicationsofnetzeroforsupplychainsExpandingexistingchainsandsettingupnewonesThetransitiontocleanenergyhingesonsupplychainsAchievingnetzerowouldhavefar-reachingimplicationsforthesupplychainsofbothcleanenergyandfossilfuels,withprofoundchangestothecurrentenergysystem.Existingsupplychainswouldneedtobeexpandedandmodified,whilenewonesforemergingtechnologieswouldneedtobecreated.Thecleanenergytransitionisalreadytriggeringshiftsinglobalsupplychainsdeliveringenergytechnologies,includingmining,materialproduction,technologymanufacturing,energytransmissionanddistributionsystems,andotherenablinginfrastructure.Itishelpingtocutrelianceonfossilfuelsandtheneedtoinvestintheirassociatedsupplychains,butitisincreasingtheneedtoputinplacenewsupplychainsformanufacturingcleanenergytechnologyequipment;produceanddelivercleanfuels;andexpand,upgradeanddevelopnewelectricitytransmissionanddistributionsystemsthatcanhandleflexiblychangingloadsandsourcesofgeneration.Theenergytransitionistakingplaceinacontextofgloballyinterconnectedsupplychains.Mostexistingtechnologiesareproducedandtradedaroundtheworld.Today,70%ofglobaltradeisinintermediateparts,componentsandservices,therestbeingfinishedgoodsandservices(OECD,2022a).Manufacturingisspreadacrossmanycountries,oftenbasedonwhereskillsandmaterialsareavailableatthelowestcost.Inmanycountries,alargeshareofdomesticemploymentissustainedbytrade,rangingfromabout10%intheUnitedStatesto20%inFranceand30%inGermany(OECD,2022b).Inmanyemerginganddevelopingeconomiesthatarelessintegratedintotoday’sglobalenergysupplychains,thereisconsiderablepotentialforestablishingnewonesthatleapfrogfossil-basedoptions.Inthosewithamoreestablishedpresenceinenergysupplychains,opportunitiesareemergingforthemtomovequicklytodevelopcleanenergyalternatives,ontheconditionthatthemarketpowerofincumbentsuppliersdoesnotconstituteabarriertoinvestmentandthatincentivesforcleanenergyarehighenough.CriticalmineralsarechangingtheenergysecurityparadigmUntilrecently,discussionsaboutenergysecuritywerelargelyfocusedonthesupplyoffossilfuels,particularlyoil.TheIEAitselfwascreatedinthewakeofthe1973-1974oilcrisis.Halfacenturylater,fossilfuelsareonceagainattheheartofanenergycrisis,providingastarkreminderofthecontinuingimportanceoftheEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE51IEA.CCBY4.0.securityofsupplyoftraditionalfuelsontheroadtonetzero.Butenergysecurityinthefuturewillbeconcernedincreasinglywiththereliabilityofcleanenergysupplychains.Therawmaterials,equipmentandcomponentsinvolvedincleanenergysupplychainsdiffermarkedlyfromthoseneededforfossilfuels.Inparticular,thereisamuchgreaterrelianceonawidevarietyofcriticalminerals(Figure1.9).Theyincludetherareearthelements(REEs)andothermetalssuchascopper,nickel,lithium,cobalt,manganese,graphite,siliconandplatinumgroupelements.Thetypesofmineralresourcesneededvarybytechnology.Batteriesmakeuseoflithium,cobalt,manganeseandnickel.ThemagnetsinsomewindturbinesandelectricenginesrequireREEs.Electricitynetworksandelectricappliances,equipmentandEVsrequirecopper.Electrolysersandfuelcellsrequirenickelorplatinumgroupmetals,dependingonthetechnologytype.Thequantitiesofcriticalmineralsandotherrawmaterialsneededforcleanenergytechnologiescanbelarge.Forexample,makinga55kWhbatteryandassociatedsystemsforasmallelectriccartypicallyrequiresover200kgofcriticalminerals,includingcopper,lithium,nickel,manganese,cobaltandgraphite,comparedwithjust35kgofcopperforthepowertrainofacomparableICE.Solarandwindalsogenerallyrequiremoresteel,aluminiumand,insomecases,cementperunitofcapacitythanfossilfuel-basedgeneratingtechnologies.Forexample,anonshorewindplantrequiresninetimesmoremineralresourcesthanagas-firedplantwiththesamecapacity.Thedeploymentofcleanenergytechnologiesisalreadypushingupoveralldemandforcriticalminerals.Inaggregate,theuseofcriticalmineralssolelyforthosetechnologiesincreasedbyaround20%between2016and2021.Involumeterms,copperistheleadingcriticalmineral,accountingfor70%ofthetotalconsumptionofcriticalmineralsforcleanenergyin2021,thoughtheuseoflithiumandcobalthasincreasedmoreinpercentagetermssince2016.Demandformineralsinotherindustrialsectorshasalsoincreasedinrecentyears(e.g.lithiumandcobaltforbatteriesinelectronics,copperincarsandbuildings,nickelinalloys),butitisgrowingmuchmorequicklyinthecleanenergysector.Whiletheremaybescopetoreducetheamountofsuchmineralsandothermaterialsneededthroughinnovation,globaldemandforthemissettosoarascleanenergytransitionsaccelerate.Theincreasingrelianceoncriticalmineralsischangingthetraditionalenergysecurityparadigm,whichfocusedonfossilfuelsupply,andparticularlyoil.Settingupsecure–thatis,reliableandaffordable–globalsupplychainsforcriticalmineralsiscrucial,notonlytoacceleratedeploymentofcleanenergytechnologiestomeetnetzero,butalsotoensurethatthefutureenergysysteminanetzeroworldissecure(alsoseeChapters2and3).EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE52IEA.CCBY4.0.Globalaveragerawmaterialrequirementsforselectedenergytechnologies,2021IEA.CCBY4.0.Notes:PEM=polymerelectrolytemembrane;gas-CCSH2=naturalgas-basedhydrogenproductionwithCCS;HV-DC=high-voltagedirectcurrent;AC=alternatingcurrent.“Othercritical”includeszinc,tin,silver,lead,graphite,boron,chromiumandmolybdenum.Forinfrastructure,onlycopper,steelandaluminiumcomponentsaretakenintoaccount.Thesteelinoverheadtransmissionsincludesthematerialneedsfortheconductorandthetowers.ForEVbatteries,thecurrentmixofbatterychemistryisused(seeIEA[2022e]formoredetails).Themassoffuelsuchasoil,coaloruraniumisnotincluded.Sources:IEAanalysisbasedonIEA(2021b);IEA(2022e);IEA(2022k);Greening&Azapagic(2012);Saoud,Harajli,&Manneh(2021);Violanteetal.(2022).Therawmaterialsandequipmentinvolvedincleanenergysupplychainsdiffermarkedlyfromthoseforfossilfuels,withmuchgreaterrelianceonavarietyof“criticalminerals”.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE53IEA.CCBY4.0.Near-termprospectsTheworldisnotyetontrackforsecure,resilientandsustainablesupplychainsItisfarfromcertainthattheglobalsupplychainsneededtosupportthedeploymentofcleanenergytechnologiesprojectedintheNZEScenariowillbeabletoexpandattherequiredrates.Movingquicklythisdecadeisvital:anydelaymeansthatachievingnetzerobymid-centurywillbeoutofreachorachievableonlyatgreatercost.Thiscallsforanimmediateaccelerationinthepaceofcleanenergydeploymentandtherequisiteexpansionoftheirsupplychains.ForthepurposesofETP-2023,weexaminethecurrentstatusandexpansionplansforanumberofcleanenergyandtechnologysupplychains,basedonpublicannouncementsandindustrydata,toassesswhethertheyareinlinewiththetrajectoriesoftheNZEScenario,intermsofthepaceofscale-uprequired,andtheirlevelofsecurity,resilienceandsustainability.Threemetricsareused:•Productioncapacitygap:Weassesswhetherspecifictechnologiesorelementsinenergysupplychainsareontracktoreachtherequiredlevelsofdeploymentby2030intheNZEScenario.Formineralsextraction/miningandmaterialproduction,werelyprimarilyonthird-partyestimatesoflikelysupplyavailabilityinthecomingyears,whicharebasedonprojectsthatareunderdevelopment/constructionoratthelateplanningstageandareexpectedtobeonlinebeforetheendofthedecade.Fortechnologymanufacturing,werelyonboththird-partyandin-houseassessmentsofannouncedfutureproductioncapacityplans.6Thesupplygap–definedasthedifferencebetweenwhatisrequiredintheNZEScenarioby2030andwhatiscurrentlyannounced,asashareoftheformer–isusedasaproxyfortheadditionaleffortsneeded.Wealsocalculatetheinvestmentneededtofilleachofthesegaps.•Geographicalandcorporateconcentration(seealsoChapter2forfurtheranalysis):TheenergysupplychainsrequiredintheNZEScenarioneedtobesecureandresilienttoensureasmoothtransitionandfunctioningofglobalenergysystems.Ifagivenstepofthesupplychainisheavilyconcentratedinoneregionoramongasmallnumberofcompanies,theriskofasupplydisruptionislikelytobegreater.Weassessed,therefore,whetherannouncedinvestmentplansimplyamoreconcentratedoramorediversesupplychainforeachofthemaintechnologies.•EnergyneedsandCO2emissions(seealsoChapter2):Notallstepsofthesupplychainsofcleanenergytechnologiesarecompatiblewithnetzeroatpresent.Miningextractionandprocessing,materialproductionandtechnology6BasedonannouncementsuptoNovember2022.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE54IEA.CCBY4.0.manufacturingcurrentlygiverisetolargeCO2emissions.TheexpansionofthesesupplychainswouldneedtobeaccompaniedbyadrasticreductionintheirCO2footprint.WeassessforeachsteptheimpactofscalingupproductiononglobalenergydemandandCO2emissions.Therestofthissectionprovidesanoverviewoftheprospectsto2030foreachstepofcleanenergyandtechnologysupplychainsbasedonthethreemetricsdescribedabove.Chapters3-5delvemoredeeplyintotheirimplicationsandprovidemoredetailsforeachstepacrossdifferentregions(Chapter3formineralextractionandmaterialproduction;Chapter4formanufacturingandinstallation;andChapter5forinfrastructure).SupplygapsvarybytechnologyandsupplychainstepFortheextractionofcriticalminerals,thegapbetweenprojectedneedsintheNZEScenarioandexpectedsupplyin2030isabove25%forlithiumandnickel,andnearly20%forcopper(Figure1.10).Thegap,at35%,islargestinpercentagetermsforlithium,whiletheshortfallinsupplyinabsoluteterms,at6Mt,islargestforcopper.Overall,theextractionofcriticalmineralsremainsheavilyconcentratedinresource-richcountriesin2030,withcobaltremainingthemostconcentrated.Forcriticalmaterialproduction,thesupplygapin2030isgenerallysimilartothatformining,withsomeexceptions.At60%,thegapfornickelsulfateproductionismuchhigherthanfornickelmining,andthegapforcobaltprocessingaswell,at40%.Inthecaseofbulkmaterials,demanddoesnotincreasesignificantlyintheNZEScenario,inpartthankstomeasurestoenhancematerialefficiency,andthesupplygapisclosetozeroasaresult.Theexpectedgeographicconcentrationoftheproductionofcriticalmaterialsby2030isjustashighasformineralsmining,withChinaremainingthedominantproducer.IntheNZEScenario,geographicconcentrationofbulkmaterialproductiondecreasesgradually,primarilyduetodecreasingvolumesinChinaandincreasedoutputinIndia,SoutheastAsiaandAfrica.SeeChapter3forfurtherdetailsonmineralsandmaterialssupplygapsandhowtoovercomethem.Thepicturefortechnologymanufacturingismuchmorediverse.Forafewcleanenergytechnologies,especiallythoserelatedtosolarPV,currentannouncementsconcerningmanufacturingcapacitypointtoanincreaseinglobalcapacitythatismorethansufficienttomeetprojecteddemandin2030intheNZEScenario.ForEVbatterymanufacturing,thesupplygapisrelativelysmall.Forbothtechnologygroups,manufacturingremainshighlyconcentratedinChina.Thesupplygapissignificantlyhigherforelectrolysersatabout50%,anduptoover60%forheatpumpsandbioenergywithcarboncapture(BECC).Expectedproductioncapacityismoreevenlydistributedgeographicallyforelectrolysersandheatpumps,buthighlyconcentratedforBECC.SeeChapter4forfurtherdetailsontechnologymanufacturingsupplygapsandhowtoovercomethem.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE55IEA.CCBY4.0.GlobalsupplygapwiththeNZEScenarioandgeographicconcentrationbystageandtechnologybasedonexpansionannouncements,2030IEA.CCBY4.0.Notes:ThegapisdefinedasthedifferencebetweenrequiredproductionintheNZEScenarioandprojectedproductiontakingintoaccountcurrentproductionandannouncedexpansionplans,expressedasashareoftheformer.Theregions/countriesincludedinthisanalysisareAfrica,OtherAsiaPacific,China,Europe,Eurasia,NorthAmerica,CentralandSouthAmerica,andtheMiddleEast.Gas-CCSH2=naturalgas-basedhydrogenproductionwithcarboncaptureandstorage.SyntheticHCfuels=low-emissionsynthetichydrocarbonfuels.Sources:IEAanalysisbasedoncompanyannouncement.IEA(2021b);USGS(2022);S&PGlobal(2022a);S&PGlobal(2022b);S&PGlobal(2022c);S&PGlobal(2022d);EC(2020);Fraseretal.(2021);InfoLink(2022);BNEF(2022);BNEF(2020).AlsoseetheAnnexestothisreport.Currentexpansionannouncementspointtolargeproductiongapsforsomecleanenergysupplyelements,notablylithiumandnickelminingandprocessing.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE56IEA.CCBY4.0.MoreinvestmentsareneededurgentlytoavoidbottlenecksBridgingtheproductiongapsdescribedabovewouldrequireenormousadditionalinvestmentsinthecomingyears.Thetotalcumulativeinvestmentinmining,criticalmaterialproductionandmanufacturingofthecleanenergytechnologiesselectedinthisreportrequiredtobringthenecessarycapacityonlineby2030amountstoaroundUSD1.2trillion,7in2021dollars(Figure1.11).Investmentsassociatedwithprojectsalreadyannouncedreacharound60%ofthis,withlargegapsincriticalmineralminingandforsometechnologymanufacturing.Whilemobilisingsuchlevelsofinvestmentisachievable,thetimelineisextremelytight,especiallygiventhelongleadtimestobringproductiontomarket.Mostoftheinvestment(includingforprojectsalreadyannounced)needstooccurover2023-2025,implyinganaverageofmorethanUSD270billionperyearovertheperiod.Tocompare,thisisabouttwo-thirdsofcurrentannualcapitalspendingoftheoilandgasindustry,andnearlyseventimeshigherthantheaverageannualinvestmentseenincleanenergysupplychainsover2016-2021.Globalinvestmentinselectedcleanenergysupplychainsneededtobringonlineenoughcapacityin2030intheNZEScenario,bysupplychainstepIEA.CCBY4.0.Notes:CAPEX=capitalexpenditures.Onlyreferstotheinvestmentsneededtobringonlineenoughcapacityin2030–notcountingwhatwouldbeneededtofurtherscaleupinsubsequentyears–forthesubsetofcleanenergytechnologiesselectedinETP-2023.Assumingconstructiontimesoffiveyearsformining,threeforprocessingplantsandtwofortechnologymanufacturing.Investmentsareassumeduniformovertheavailableperiod.Excludessite-tailoredtechnologyinstallation.Sources:IEAanalysisbasedoncompanyannouncement;Bartholomeusz(2022);S&PCapital(2022).MostofthesupplychaininvestmentsneededtomeetNZEScenariotargetsin2030aremadeover2023-2025,atanannualaverageseventimeshigherthanover2016-2021.7Thisrefersonlytotheinvestmentsneededtobringenoughcapacityonlinein2030forthetechnologiesselectedinETP-2023,excludingtheinvestmentsthatwouldalsobeneededby2030tofurtherscaleupdeploymentinsubsequentyears.0501001502002016-20212023-2030BillionUSDCopperminingOtherCriticalmineralminingCriticalmineralprocessingCleantechnologymanufacuringAverageyearlyCAPEX0500100015002023-2030BillionUSDCumulativeCAPEXFinalinvestmentdecisionyear20232024202520262027202820292030TimeavailableforfinalinvestmentdecisionEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE57IEA.CCBY4.0.Fortheminingofcopper,lithium,nickelandcobaltalone,investmentofaroundUSD130billionperyearover2023-2025isrequired,whichwouldbedirectedtoanyminingprojectalreadyinthepermittingpipeline.Thisisequivalenttotheentiremetalminingindustryinvestmentsof2021(S&PGlobal,2022e),implyingadoublingofoverallinvestmentsinthesectorin2023.Thecopperminingmarket,whichaccountsforoverhalfoftherequiredmininginvestments,maybeinpartbalancedthroughdemandreductioninothersectorsandrecycling.Fortherefiningofthoseminerals,announcedprojectscoverabout80%ofinvestmentneedsforcopper,butonlyover40%forothermetals.Intermsofcleantechnologymanufacturingcapacity,announcedprojectscovertwo-thirdsofinvestmentneedsto2030.TheoverallinvestmentneededincleanenergysupplychainsismuchhigherthantheinvestmentrequiredtodevelopthoseunderstudyinETP-2023andbringsufficientcapacityonlineby2030.Intotal,investmentincleanenergytechnologiesandinfrastructurereachesoverUSD4.5trillionin2030intheNZEScenario(IEA,2022f).Thisscaleofinvestmentisunprecedented.Mobilisingitacrossallregions,technologiesandsupplychainsisanenormoustask.Bottleneckscanoccurasaresultofpolicyandregulatoryrisks,alackofconfidenceindemonstrationandfirst-of-a-kindprojects,uncertaintyaboutprojectpipelines,widermacroeconomicfactorssuchascurrencystability,andgeopoliticalevents.Theriskofunderinvestmentincleanenergyandsupplybottlenecksisparticularlyacuteintheemergingeconomies.Onehurdletoinvestmentinthosecountriesistheirhighercostofcapital,whichhasasignificantimpactonthefinancialviabilityofcleanenergyprojects.Forexample,financingcostsformaterialproductionprojectscanbemorethantwicethatintheadvancedeconomies,dueagreaterperceptionofrisk(Figure1.12).CostsinChinatendtobelowerduetotheimportanceofstate-ownedenterprisesandtheirabilitytoraisecheappublicfinance.Costofcapitalforbulkmaterialproductionindustriesbycountry/regionalgrouping,2020IEA.CCBY4.0.Source:AdaptedfromIEA(2021c).Financingcostsforbulkmaterialproductionintheemergingeconomiescanbemorethantwicethoseinadvancedeconomies,drivenbyagreaterperceptionofrisk.0%2%4%6%8%10%CementChemicalsIron&steelOtheremergingmarketanddevelopingeconomiesChinaAdvancedeconomiesEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE58IEA.CCBY4.0.EachstepofthesupplychainmustbedecarbonisedEachstepofthesupplychainofalltypesofcleanenergyandtechnologyisdecarbonisedintheNZEScenario,theirtotalassociatedCO2emissionsfallingby95%between2021and2050.Manufacturingisalmostcompletelydecarbonisedby2050,whiletherearesomeresidualemissionsinbulkmaterialproductionandmineralprocessing(offsetbynegativeemissionselsewhereintheenergysystem).Thedecarbonisationpathwaysvaryacrosssectorsandsupplychainsteps.Theyinvolvemainlyelectrificationinminingandmanufacturing,andtheuseoflow-emissionhydrogenandCCUSinmaterialproduction.ImportantprogressismadeindecarbonisingtheminingofcriticalmineralsovertherestofthecurrentdecadeintheNZEScenario.ThecurrentenergyandCO2emissionsintensitiesofminingoperationsforcriticalmineralsarehigherthanformorecommonlyusedmineralsduetothelowerconcentrationofthemineralsintheores.Withrisingdemandanddecliningoregrades,globalCO2emissionsfromminingcriticalmineralscoulddoubleover2021-2030to30Mt(seeChapter3).Emissionsfrommaterialproduction,whicharecurrentlythelargestofallsupplychainsteps,decreasequicklyintheNZEScenario,down40%forcementand25%forironandsteelover2021-2030.Emissionsfromtechnologymanufacturingaretypicallysmallerthanothersteps,andfallsteadilymainlythankstoelectrification(seeChapter2).Decarbonisingsupplychainswouldcomeatacost,althoughtheimpactonfinalconsumerswould,inmostcases,bemarginal.Producinglow-emissionbulkmaterials,notablysteel,cementandaluminium,resultsinsignificantadditionalcostscomparedwithconventionalproductionroutes(Figure1.13).Costpremiumsforlow-emissionalternativestodayvarybasedondifferenttechnologyoptions,withsomeclaimingnearcostequivalence(e.g.smeltingreductionwithCCUS),whileothersarelikelytocommandasignificantpremium(e.g.hydrogendirectreduction).Costestimateswarrantfurtheranalysisasthefirstsetofplantsarebuiltoverthe2020s.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE59IEA.CCBY4.0.IndicativelevelisedcostofproductionforselectedbulkmaterialsIEA.CCBY4.0.Notes:OPEX=operationalexpenditures.Levelisedcostisaproxyforproductioncosts,calculatedastheaveragenetpresentfinancialcostofproducingagood,accountingfortotalcostsandoutputoverthelifetimeofthefactoryorplant.Estimatedcostsinarangeoftypicalpricecontextssince2019.Ontheleft-handsideforsteel,thecostbreakdownisforaconventionalblastfurnace-basicoxygenfurnace.Therangesontherighthandsiderepresentdifferentproductionroutes.Low-emissionestimatesarebasedonplantsthathavereachedcommercialscale.Sources:IEAanalysisbasedonIEA(2020b);MPP(2022).Costpremiumsoflow-emissionalternativeroutesforproducingbulkmaterialsvarysignificantlybymaterialandtechnology.Althoughthecostofproducingbulkmaterialsusinglow-emissiontechnologiesisgenerallysignificantlyhigherthanusingconventionalones,theestimatedimpactonfinalpricesforcleanenergyproductsistypicallysmall,asbulkmaterialcostsrepresentarelativelysmallshareoftheirtotalproductioncost.Forexample,a50%increaseinthecostofsteelat2021priceswouldresultinanincreaseofonlyaround0.5%inthefinalaveragecostofanelectriccar,0.2%foraresidentialheatpump,1%foranoffshorewindfarmand1.5%forutility-scalesolarPV.Basedon2021costs,fullydecarbonisingproductionforthesebulkmaterialswouldpushupthecostofmakinganelectriccarby0.7%,aheatpumplessthan0.3%,anoffshorewindfarmby0.6%,utility-scalesolarPVover2%andatypicalhouseby1.4%(Figure1.14).Manufacturers’abilitytopassoncostincreasestoconsumersdependsonthemagnitudeoftheincreaseandoncompetitionwithconventionalproducts.Forexample,vehicleandhomeheatingsystemmarketsareparticularlycompetitive,potentiallymakingitmoredifficultforEVandheatpumpmanufacturerstopassoncostincreases.ProducersofwindturbinesandsolarPVmodulesarecurrentlybetterplacedtopassonhighercoststhankstosurgingwholesalepowerpricesinmostregions.Nonetheless,somecompaniesorconsumersmaybewillingtopayapremiumforcleanproducts.Forexample,atleasttencompaniesintheautomotivesectorhavecommittedthemselvestousing“greensteel”from2025(H2GreenSteel,2022;SteelZero,2022;FirstMoversCoalition,2022).0306090120150ConventionalLow-emissionCement05001000150020002500ConventionalLow-emissionAluminium02004006008001000ConventionalLow-emissionSteelUSDpertonne0%20%40%60%80%100%ConventionalsteelRawmaterialsFuelFixedOPEXCAPEXEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE60IEA.CCBY4.0.Increaseintheglobalaveragepricesofselectedcleanenergyproductsfromswitchingtolow-emissionbulkmaterialproductionIEA.CCBY4.0.Notes:Basedon2021costsoftypicalproducts:USD36000foranelectriccar;USD11000foraheatpump,USD2860/kWforanoffshorewindfarm,USD880/kWforsolarPVandUSD300000forasingle-familyhome.Theassumedcostpremiumsforlow-emissionmaterialsare10-50%forsteel;60-110%forcementand10-50%foraluminium,withthesecostrangesinformingthesensitivitiesforeachmaterial.Sources:IEAanalysisbasedonIEA(2020b);MPP(2022).Decarbonisingcleanenergysupplychainswouldcomeatacost,althoughtheimpactonbuyerswould,inmostcases,bemarginal.SupplychainleadtimesandproductdurabilityBuildingminesandfactoriesandrampingupoutputtakestimeThetimeneededtoputinplaceandexpandsupplychainsisamajorconstraintonhowquicklythecleanenergytransitioncanbeachieved.Theindustriesandinfrastructurethatunderpintheworld’sexistingenergysupplychainstookdecadestodevelop–fossilandcleantechnologiesalike.Buildinganewfactory,mine,roadorpipelinetakestime,asdoesexpandingproductionfromexistingfactoriesandfacilities.Inadditiontoleadtimes–definedasthetimethatpassesfromwhenaprojectisannounced(i.e.acompanystatestheintenttobuildagivenfacility)towhentheprojectbeginscommercialoperation–thereareproductionramp-uptimes:onceanewproductionfacilityisestablished,sometimeisneededbeforethemachineryisabletoproduceatitsfullnominalcapacity.Leadtimesareimportantastheyhaveanimpactonthespeedatwhichsupplycanreacttodemand.Theinabilitytoexpandsupplyquickly,especiallywhenspareproductioncapacityistight,canhindertheabilitytomeetarapidincreaseindemand,suchasthatofsolarPVandEVs.Theresultisbottlenecksinsupplyandhigherprices,ashasbeenthecasewithsemiconductorsandEVsupplychainssince2020(seeChapter2)(IEA,2022l).Afailuretoanticipatefuturedemandalongsidebarrierstoinvestmentcouldhinderglobaldecarbonisationeffortsandholdbackprogresstowardsacleanenergyfuture.SolarPVTypicalhouseSteelCementAluminiumSteelsensitivityCementsensitivityAluminiumsensitivityCombinedsensitivity0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%ElectriccarHeatpumpOffshorewindfarmEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE61IEA.CCBY4.0.Thelongertheleadtimeforagivensupplychaincomponent,thegreatertheriskofunderinvestment,co-ordinationandsequencingissueswithotherstepsofthesupplychain,andfuturebottlenecksinsupply.Ifprojectsatagivenstepofthesupplychainareundertakensequentially,longleadtimesincreasethetimebetweenthefirstandsecondgenerationsofplants.Ifprojectsarecarriedoutinparallel,longleadtimesmayreducetheopportunitytolearnfromeachother.Longleadtimesalsoincreaseinvestmentriskand,therefore,thecostofcapital,componentsandfinalproducts:investinginaprojectthatisduetostartgeneratingrevenueswithinayearisinherentlylessriskyandeasiertofinancethanonestartingtopaybackinseveralyears.Longleadtimesalsoimplygreaterexposuretoregulatory,politicalandmarketchanges.Someofthelongestleadtimesincleanenergysupplychainsareintheupstream,i.e.miningofrawminerals(Figure1.15).Insomecases,theentireprocesscantakemorethantwodecades.Thiscomprisesthetimeneededforexploration(toidentifyaneconomicallyextractableresource)andconstruction(buildingthemineandstartingcommercialoperation).Explorationoftentakesalongtime(usuallymorethanadecade)anddoesnotalwaysresultinadevelopmentproject.Thefastestminingoperationshavealeadtimeofunderfiveyears,butrampingupproductiontofullcapacitytypicallytakesalmostasmuchtime.Forestablishedminingtechniques,rampingupproductioncantakeuptothreetofouryears.Incaseswheremorecomplexoperationsareinvolved,ramp-uptimescanbemuchlonger.Forexample,mosthigh-pressureacidleachingnickelproductionprojectsinIndonesiahaverequiredfiveyearstoreachnominalproduction(IEA,2021b).LeadtimesforminingofselectedmineralsIEA.CCBY4.0.Note:Leadtimeaveragesarebasedonthetop35miningprojectsthatcameonlinebetween2010and2019.Sources:IEAanalysisbasedonS&PGlobal(2020);S&PGlobal(2019);Fraseretal.(2021);Heijlenetal.(2021).Explorationtakesthemosttimeinbringingnewminesintooperation,whileconstructionandrampingupproductiontofullcapacitytypicallytakealmostadecade.12.54.44.036912151821YearsGlobalaverage,2010-2019Discovery,explorationtofeasibilityFeasibilitytoproductionRamp-uptimeAverageobservedleadtimeforselectedminerals(fromfeasibilitytoproduction)246810CopperNickelLithiumYearsEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE62IEA.CCBY4.0.Thereareseveralreasonsfortheselongleadtimes.Explorationandresourceappraisalcarrysubstantialrisk,makingitdifficultforminingcompaniestoobtainfinancingfromlenders.Asaresult,theyoftenusetheirowncashflowstopayforinvestment.Financingminingoperationscanalsobedifficult,largelybecauseofuncertaintyaboutfuturemarketdemandandcommodityprices–especiallyifsupplychainsarenascent.Thefinancialstructureofminingprojectsisusuallyahighlyleveragedmixofdebtandequity,withthegoalofgeneratingasmuchcashandaslittlebalancesheetprofitaspossible.Mineengineeringandconstructionalsotaketimeduetotheirlargescaleandcomplexity,aswellastheneedtomakeuseofotherinfrastructuresuchasports,roadsandpowerplantsbeforeoperationscanstart.Largeamountsofearthandrockneedtobedisplacedbeforereachingtheore-containinglayers.Permittingisalsoaverytime-consumingstep,primarilybecauseoftheimportanceofcarryingoutrigorousimpactandenvironmentalassessmentsandlegalprocedures,andensuringlocalcommunityacceptanceandequity.Thisisparticularlytrueofheavilycontestedprojectssuchasthoseinareaswithindigenouspopulationsorofsignificantenvironmentalconcern.Materialproductionprojectsgenerallytakelesstimetocompletethanminingprojects,butcanstilltakeseveralyears.Likeotherheavyindustrialprojects,timeisneededtoprocurethenecessarymachineryandtoobtaintherequiredenvironmentalpermitstobuildandoperateplants.Commissioningmanufacturingfacilitiesforcomponentsusedinmakingcleanenergyproductscantakeuptofiveyears(Figure1.16).Inadditiontotheconstructionwork,additionaltimeisneededtohonethemanufacturingprocess,whichcantakeuptoayeardependingonthecomplexityoftheprocessandthecompany’sexperience.Forexample,buildingacompletelynewpolysiliconfactorycantake12to42monthsandrampingupproductionanother6months,whilebuildingnewproductionlinesforwafers,cellsandmodulesatexistingfactoriescantakeaslittleas4months,oncethego-aheadhasbeengiven.Factoriestoassemblefinalcleanenergytechnologiescangenerallybebuiltrelativelyquickly.ForEVs,theexcessproductioncapacityofexistingautomotivefactoriesmeansthatitisoftensufficienttoretoolanexistingfactorytobeabletorampupproductioninthenearterm.Vehicleassemblytechnologyismatureandtherearealotofmachinerysuppliersavailable,soraisingcapacitycanbeveryquick.Similarly,forPVmoduleassembly,standardmachineryisoftenused,resultinginrelativelyshortleadtimes.Forbothcomponentmanufacturingandfinalassembly,ramp-uptimescanbesimilartoconstructiontimes.Forexample,constructionofTesla’sfirstgigafactoryinNevadaintheUnitedStatesstartedin2014andcameonlinein2017,butreacheditsnominalcapacityof35GWhonlyin2021.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE63IEA.CCBY4.0.Buildingandexpandingenablinginfrastructuresuchaspipelines,CO2storagefacilitiesandelectricitygridsalsoinvolvelongleadtimes,insomecasesoveradecade(Figure1.16).Theseprojectshavesimilarcharacteristicstominingprojects,includingtheirlargescale,highcapitalrequirementsandvastlandcoverage,sometimesacrossdifferentjurisdictions.Asaresult,theyfacesimilarobstacles,includingpermittingandapprovalprocesses,financing,andpublicacceptance.Limitedavailabilityofspecialistequipmentandskillscanalsocausebottlenecks,particularlyforoffshoreprojects.Developingsupplychainsforemergingcleanenergytechnologiesastheybecomeavailableareunsurprisinglylikelytotakemuchlongerthanforexistingones.ManyofthetechnologiesneededintheNZEScenario,includingDAC,low-emissionsynthetichydrocarbonfuelsandsomelow-emissiontechnologiesinheavyindustry,arestillattheprototypeordemonstrationstagestodayandarenotyetcommerciallyavailableatscale.Theyfirstneedtobedemonstratedinrealoperatingconditions,probablyrequiringseveral“first-of-a-kind”facilitiesatdifferentsizesorindifferentregions,beforetheycanbedeployedsuccessfullyonacommercialscale.Inparallel,fullyfledgedsupplychainswouldneedtobeestablishedandexpandedprogressively.Permittingislikelytotakemoretimeforplantsthatmakeuseofnoveltechnologies.Forsmall,modularorstandardisedtechnologiessuchassolarPV,batteries,heatpumpsandfuelcells,leadtimesaregenerallymuchshorterthanforlarge,morecomplexorspecialisedtechnologiessuchasthoseusedinbiorefineries,BECCandCCUSfacilities,advancednuclearreactors,andmines.Thisisespeciallytruewhentechnologydesignsdependonthespecificusetowhichitisputandwhenitislinkedtoexistingfacilities,suchasretrofittingCCUStoanexistingpowerplant,whichcanincreasethetimeneededfortestingtomakesuretheimpactontheoperationsoftheexistingplantisminimised.Forcomplexandnoveltechnologies,shortagesofskilledlabourcanlengthenleadtimesandrequireextraplanning.Forexample,biorefineryshutdownsforupgradescanbeplannedtogetherwithotherrefineriesintheregiontooptimisetheuseofscarcelabour.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE64IEA.CCBY4.0.Rangeof(top)andaverage(bottom)globalleadtimesforselectedcleanenergytechnologysupplychainsIEA.CCBY4.0.Notes:ConstructionforCO2storageoftenoccursduringdetailedengineeringandaheadofpermittingsincewellsareusuallydrilledduringsitecharacterisationtoacquirethedataneededforpermitting.Asaresult,constructiontimehasbeencombinedwithfeasibility,detailedengineering,andpermitting.LNG=Liquefiednaturalgas.Sources:IEAanalysisbasedoncompanyannouncements;IEA(2021b);IEA(2022m);UnitedKingdom,DepartmentforBusiness,Energy&IndustrialStrategy(2020);IEA(2022e).Someofthelongestleadtimesincleanenergysupplychainsareinmaterialproductionandenablinginfrastructure,suchaspowertransmissionorCO2management.024681012DACBECCSynthesisNaturalgas-basedhydrogenwithCCSElectrolyserOffshorewindOnshorewindUtilitysolarPVBatteryElectriccarAnodeandcathodeTruckMobilefuelcellHeatpumpsWindSolarPVwafersSolarPVcellsandmodulesPolysiliconCriticalmaterialsBulkmaterialsSyntheticHCfuelsH2ElectricityEVbatteriesFuelcelltrucksLow-emissionelectricityInstallation-Commissioning(low-emission)ManufacturingMaterialproductionYears24681012PipelinesUndergroundgasstorageCO₂storageLNGregasificationterminalHigh-voltageoverheadlineHigh-voltagecablesDACBECCSynthesisNaturalgas-basedhydrogenwithcaptureInfrastructureSite-tailoredtechnologiesFeasibility,engineeringandpermittingConstructionTotalRangeofleadtimesforselectedsupplychaincomponentsAverageleadtimesforselectedsupplychaincomponentsH2EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE65IEA.CCBY4.0.AcceleratingdeploymentcallsforshorterleadtimesShorterleadtimeswouldhelpfacilitateanaccelerationinthedeploymentofcleanenergytechnologies.Formineralsextraction,leadtimestoopennewminesandexpandexistingonesarereducedsubstantiallyintheNZEScenario,includingacutinpermittingtimestojustoneyear–theminimumtimerequiredtoprepareathoroughenvironmentalassessmentandensureadequatesafeguards.Inaddition,policysupport,theprospectoflong-termdemandgrowthandhighmineralpricescangivemoreconfidencetoinvestors,shorteningtheperiodneededtosecurefinancingforminingprojects.Thereareseveralhistoricalexamplesoftherapiddeploymentofnewtechnologies,notablymodularandmass-manufacturedtechnologies,beingachievedbycompressingleadtimes,whichsuggestthattherapidratesofdeploymentofcleanenergytechnologiesintheNZEScenarioareachievableinasimilarway.Forexample,theurgentproductionofaircraftduringWorldWarIIandtherecentlaunchofCovid-19vaccinemanufacturinginvolvedcompressingleadtimesdrastically,inbothcasestolessthanoneyearcomparedwithseveralyearspreviously(Figure1.17).Theirsuccesswasdueinparttorelativelymatureprocessesfordevelopingtheproductsandbuildingfactories,aswellasthecriticalcircumstances,whichensuredmassivedemanddirectlyfromgovernmentsandenabledthemtoappropriateswathesofexistingindustrialcapacityforemergencyretrofittingandreuse.ForcertainmassmanufacturedcleanenergytechnologiessuchasEVs,globaldeploymentisstillgrowingrapidly,approachingtheratesrequiredintheNZEScenario,implyingthatleadtimesshouldnotbeacauseofsupplybottlenecks.Fortechnologiesandprojectswithinherentlylongerleadtimes,suchasminingprojectsandnuclearpowerplants,therearealsohistoricexamplessuggestingindustrycouldsustainfastgrowthrates.Inthe2000s,ironoremininggrewata10%annualrate,anexpansionwhichwasmainlydrivenbysurgingdemandinChinaandatenfoldincreaseinironorepricesbetween2000and2010(IMF,2022).IntheNZEScenario,lithiumminingexpandsmuchmorequicklyatanannualrateof25%over2021-2030,afterwhichgrowthslowsdownandpeakproductionisreachedin2040.Basicoxygenfurnacesweredeployedveryquicklyinthe1960satanaverageannualgrowthrateofover35%.Oncethetechnologyreachescommercialscalebythe2030sintheNZEScenario,hydrogen-basedsteelproductiongrowsonaveragebyonly17%peryear;however,gettingthefirstcommercial-scaleplantsinthelate2020sisthemainchallenge.Forthistohappen,producersneedafundamentalcostadvantageandclearfinancialincentivetolowerleadtimesandencourageinvestmentandinnovationascommercialdeploymentbegins.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE66IEA.CCBY4.0.Globalscaling-upofselectedenergyandothersupplychainsbyleadtimeinthepast(solid)andtheNZEScenario(dashed)IEA.CCBY4.0.Notes:BOF=basicoxygenfurnacesteelmaking;H2DRI=hydrogendirectreductionbasedsteelmaking;NZE=NetZeroEmissionsby2050Scenario.HistoricsolarPVmanufacturingcapacityusesadditionstoworld’sgridsasaproxyformanufacturingcapacity.DataareglobalaveragesexceptforUSmilitaryaircraftproductionandFrenchandUSnuclearcapacity.USnuclearcapacityisplottedforthesametimeperiodasFrenchnuclearcapacity,thoughthehistoricpeakwasin2019,asUSnuclearcapacitysawlittlevariationbetween2005and2019.Sources:IEAanalysisbasedonUSGS(2022);Comin&Hohjin(2004);Richter(2022).Historicexamplessuggestthatrapiddeploymentofcleanenergybycompressingleadtimesistechnicallypossible,especiallymodularandmass-manufacturedtechnologies.Shorteningleadtimesshouldnotbetakenforgranted:thereareseveralexamplesofleadtimesforenergyprojectsincreasing,whichserveasacautionarytale.TherapidslowdownintherateofgrowthinnuclearpowergenerationinFrance,fromaround85TWhperyearover1978-1986toaround15TWhperyearover1990-2005,wasinpartduetoasubstantialincreaseinleadtimesfromaboutfiveyearsin1980totenyearsin2000(Berthélemy&Rangel,2013).CleanenergytechnologiesneedtobemademoredurableDifferencesinthedurabilityofcleanenergytechnologiesrelativetoconventionalfossilfueloneshaveimportantimplicationsforboththeircompetitivenessandsustainability.Forexample,theoperationalperformanceofrenewablessuchassolarPVandwindcandropafteradecade,withmosthavingalifetimeofaround25-years.Incontrast,coal-andgas-firedpowerplantscanoperatefor30to40yearsormore,thoughintermittentlarge-scalerefurbishmentmaybeneeded(Figure1.18).SomeICEcarscanbeusedforseveraldecades,especiallysecond-handonesthataresoldtoemergingeconomiesatlowprices,whileEVbatteries020406080100403020100Timetopeakdeployment(years)Covidvaccineproduction(2020-2021)USmilitaryaircraftproduction(1939-1944)SolarPVmanufacturingcapacity(2000-2039,dashedinNZE)Progresstopeakdeployment(%)706050403020100Timetopeakdeployment(years)Lithiummining(2017-2040,dashedinNZE)Ironoreproduction(1973-2011)Steel-BOFcapacity(1952-2024)Steel-H2DRIcapacity(2023-2060,dashedinNZE)Frenchnuclearcapacity(1970-2005)USnuclearcapacity(1970-2005)ShorterleadtimesLongerleadtimesEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE67IEA.CCBY4.0.tendtodegradebyupto30%after8yearsandaretypicallyretiredwithin15years(UNECE,2022).Technologicaladvancesarelikelytoimprovebatterydurability,suchthatEVscouldultimatelymatchthedurabilityofICEvehiclesastheyarebasedonsimplertransmissionsandpowertrains.Regularmaintenanceandend-of-lifemanagementplayaconsiderableroleinensuringthesustainabilityofcleantechnologies.Insomecases,cleanenergytechnologiescanalreadybemoredurablethantheirmorecarbon-intensivealternatives.OneexampleisLEDtechnologiesforlighting,whichlastmuchlongerthantungsten-filamentlightsourcesandcompactfluorescentlamps.Recyclingandrefurbishingobsoleteequipmentcangreatlyreducetheenergyandemissionsintensityofcleantechnologysupplychains.TypicaloperatinglifetimeofselectedenergytechnologiesIEA.CCBY4.0.Notes:CSP=concentratingsolarpower.Biomassinpowerproductionreferstodedicatedbiomass;biomassinheatingreferstomodernbiomass.Heatpumpsinthisexampleareair-to-waterunits.Heatsubstationreferstoheatexchangers(districtheating).Source:IEAanalysisbasedonSchlömeretal.(2014).Somecleanenergytechnologiesarelessdurablethanexistingfossilfuelones,increasingtheneedforrecyclingandrefurbishingobsoleteequipmenttolimitenvironmentaleffects.EmploymentalongcleanenergysupplychainsCleanenergyemploymenttodayLabourmarketsworldwidehaveexperiencedmajorupheavalssincethestartoftheCovid-19pandemic,duetotheeconomicdisruptioncausedbyrestrictionsonthemovementofpeopleandcommercialactivity.EnergysectoremploymenthasnotbeenimmunefromtheseshocksandhasalsobeenaffectedbytherecentenergycrisisinthewakeofRussia’sinvasionofUkraine.Whilehigherenergy0102030405060WindonshoreWindoffshoreSolarPVCSPHydropowerGeothermalBiomassNuclearCoalGasHeatpumpSolarthermalHeatsubstationBiomassboilerGasboilerPowerproductionHeatingYearLifetimeConstructiontimeEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE68IEA.CCBY4.0.priceshave,inmanycases,boostedthedemandforworkersintheoil,gasandcoalindustries,thegrowingattractivenessofcleanenergytechnologiesandtheirincreasingdeploymentispushingupdemandforworkersinthosesectorsaswell.Strongerpolicyresponsestotheclimateandenergycrisesareexpectedtocontinuetodriveashiftinemploymentawayfromthefossilenergyindustriestocleanenergysectorsinthecomingyearsanddecades.Overallenergysectoremploymentissettogrowsteadilythrough2030asdemandforenergyservicescontinuestoexpandandsupplyshiftstomorelabour-intensiveactivities(Figure1.19).GlobalenergysectoremploymentbytechnologyIEA.CCBY4.0.Note:Cleanenergyemploymentincludesworkersinbioenergysupply(includingfarmers),nuclearandrenewablesforpowergeneration,gridsandstorage,EVmanufacturing,andenergyefficiency(suchasbuildingretrofits,heatpumpmanufacturing,andventilationandair-conditioninginstallations).LabourmarketdisruptionsassociatedwiththeCovid-19pandemicmade2020employmentdifficulttoassess,so2020estimatesareindicative.Estimatesfor2020-2022aremodelledbasedonlatestIEAenergybalancesandinvestmentdata,undertheassumptionthatlabourintensityandthejobcreationpotentialofnewinvestmentremainconstantacrossyears;formoredetailspleaserefertotheWorldEnergyEmploymentreportmethodology.Sources:IEAanalysisbasedonIEA(2022n).Thetotalnumberofjobsincleanenergysupplyanduse,andtheirshareoftotalenergyemployment,hasgrowninrecentyearsdespitetheCovid-19pandemic.Over65millionpeopleareemployedworldwideintheenergysector,includingdirectjobsinenergysupplyindustriesaswellasindirectjobsinmanufacturingessentialcomponentsofenergytechnologiessuchasthemanufacturingofvehiclesorheatpumps(Figure1.19).Aroundtwo-thirdsofenergyworkersareengagedinthedevelopmentofnewprojectsorequipment,whiletheotherthirdareinvolvedinoperatingormaintainingexistingassets.Energyworkersarespreadacrosseconomicsectors:over14millionemployeesworkatutilitiesandfirmsprovidingprofessionalservices,approximately22millioninmanufacturingofequipment,16millioninconstructionofenergyfacilities,9millionintherawmaterialssector,and9millioninrelatedactivitiessuchaswholesaletradeandenergytransport.0%25%50%75%100%02040608020192020E2021E2022EMillionemployeesFossilfuelsCleanenergyShareofenergyemploymentrelatedtocleanenergyEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE69IEA.CCBY4.0.Overallenergyemploymentisconcentratedincountrieswithmajormanufacturinghubsandlargeenergyproductionindustries,especiallywherenewenergyfacilitiesarebeingbuilt.Asaresult,almostthree-fifthsofallenergyemploymentisintheAsiaPacificregion,withChinaaloneaccountingforalmost30%oftheglobalenergyworkforcewithnearly20millionenergyworkers(Figure1.20).Cleanenergyemploymentnowaccountsforjustoverhalfoftheglobalenergyworkforce.Thisisinlargepartduetothecontinuedgrowthinnewprojects,whichgeneratethemostjobs(constructionandinstallationactivitiesarehighlylabour-intensive).Mostnewenergyprojectstodayinvolvecleanenergysupplyorend-useactivities.EurasiaandtheMiddleEastarenowtheonlyregionswheretheshareofcleanenergyemploymentdoesnotexceedhalf.Low-emissionpowergenerationcurrentlyemploysanestimated7.8millionworkersworldwide,withover4.2millioninsolarandwindalone.Fossilfuel-basedpowergenerationemploysjust3.4million(Figure1.21).Thereareroughlythesamenumberofworkersinlow-emissionpowergenerationasintheoilsupplyindustry,whichemploysthemostpeopleamongthethreefossilfuelsupplysectors.Invehiclemanufacturing,10%ofthealmost14millionworkersworldwidearealreadyinvolvedinmakingEVs,theirbatteriesandrelatedcomponents.Energyemploymentbyregionandsupplychainstep,2019IEA.CCBY4.0.Notes:CandSAmerica=CentralandSouthAmerica.ValuechainstepsandeconomicsectorsforemploymentarealignedwithInternationalStandardIndustrialClassification(ISIC)rev.4(astandardclassificationofeconomicactivities).“Rawmaterials”includesagriculture(ISICcodeA)forbioenergyproduction,aswellasminingandquarrying(ISICcodeB)forfossilfuels(excludescriticalmineralsmining).“Manufacturing”(ISICcodeC)includesbothtraditionalmanufacturingandmaterialprocessingsuchasthemanufactureofrefinedpetroleumproducts.“Construction”(ISICcodeF)indicatesinstallation,while“Professionalsandutilities”encompassesthesupplyofelectricity,gas,steamandairconditioning(ISICcodeD),aswellasprofessional,scientificandtechnicalactivities(ISICcodeM)."Wholesaleandtransport”referstowholesaleandretailtrade(ISICcodeG),andtransportationandstorage(ISICcodeH).Endusesreferstojobsinvehiclesmanufacturing(includingrelatedbatteries),energyefficiencyforindustry,andbuildings(retrofitsandefficientheatingandcooling).Sources:IEAanalysisbasedonIEA(2022n).Themanufacturingandconstructionofnewprojectsdominatesenergyemploymenttoday.0510152025FuelsupplyPowersectorEndusesMillionemployeesRestofworldOtherAsiaPacificIndiaChinaAfricaEuropeCandSAmericaNorthAmerica0510152025FuelsupplyPowersectorEndusesWholesaleandtransportProfessionalandutilitiesConstructionManufacturingRawmaterialsEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE70IEA.CCBY4.0.Energyemploymentinselectedsectorsbyregion,2019IEA.CCBY4.0.Notes:FossilfuelPG=fossilfuelpowergeneration.EVemploymentincludesmanufacturingofEVbatteriesandotherrelatedcomponents.Sources:IEAanalysisbasedonIEA(2022n).Low-emissionenergytechnologysectorsalreadyemploylargenumbersofworkers,thoughtheirshareoftotalenergyemploymentvariesmarkedlyacrossregions.LabourshortagesandskillsgapsAnadequatelyskilledandsufficientlylargeworkforcewillbecentraltotheenergytransition.Butshortagesofskilledlabourinemergingcleanenergysectors,coupledwithbroaderlabourmarketdifficulties,arealreadylimitingthepaceandextentofnewprojectsinseveralkeyregions,raisingdoubtsaboutthespeedofthetransitionintheneartomediumterm.InChina,forexample,manufacturersarestrugglingtofillpositionsinfactoriesinthefaceofadecliningworkingpopulation,withyoungpeopleandcollegegraduatesgenerallymoreattractedbywhite-collarjobs(Nulimaimaiti,2022).TheMinistryofEducationhasestimatedthattherewillbeashortageofalmost30millionworkersinChina’smanufacturingsectorby2025,includingtalentgapsofover9millioninpowerequipment,over1millioninnewenergyvehiclesandoveraquarterofamillioninoffshoreengineeringequipment(GovernmentofChina,2017).Meanwhile,adearthoftradesmen,suchasplumbers,pipefitters,electricians,heatingtechniciansandconstructionworkers,isalreadyrestrictingthepaceofinstallationsofcleanenergytechnologiesinEuropeandtheUnitedStates,includingsolarPV,windturbinesandheatpumps(McGrath,2021;SEIA,2021b;Weise,2022;Hovnanian,Luby&Peloquin,2022).Somefast-growingcleanenergysectorsarealsofacingashortageoftherequisiteskillsneededtoscaleupoutput.Inthewindsector,insufficienttrainingcapacityanddifferencesincertificationrequirementsacrosscountriesarecontributingto3.43.01.212.31.30.40%20%40%60%80%100%FossilfuelPGSolarPVWindICEsEVsHeatpumpsMillionemployeesNorthAmericaCandSAmericaEuropeAfricaChinaIndiaOtherAsiaPacificRestofworldEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE71IEA.CCBY4.0.bottlenecksinnewinstallations.TheGlobalWindOrganisationandtheGlobalWindEnergyCouncilestimatethat480000trainedworkerswillbeneededtobuild,installandoperatethewindcapacitythatisplannedtocomeonlinebetween2021and2025,butonly150000workershadbeenabletobetrainedbytheendof2021(GWOandGWEC,2021).Offshorewindprojectsrequirebettertrainedworkersandmorelabourinputpermegawattthanonshoreprojectsovertheirlifetime.Therearegrowingconcernsthatshortagesoftrainedpersonnelintheoffshorewindsectorcoulddelayinstallationsinthecomingyears(GWEC,2021).IntheEVsector,skillsshortagesarealreadyemerginginbothproductionandmaintenance.Batteryproducersarestrugglingtohireenoughresearchandengineeringspecialists(HeekyongYang,2021),whilevehicletechniciansandmechanicsareunpreparedfortheimpendingexpansionofEVfleetsasICEbansandEVtargetdeadlinesapproach(AutomotiveManagement,2021).Severalcountrieswithmajorhydrogenambitions,includingCanadaandtheNetherlands,arefacingdifficultiesinfindingqualifiedpersonnel(Hufnagel-Smith,2022;CEDelft,2021).Inaddition,heatpumpmanufacturershaveflaggedalackoftrainedlabourtoinstallnewunitsasapotentialbottleneckforwiderdeployment.MillionsofjobswillneedfillingtorealiseenergytransitionsThecleanenergytransitionwillinvolveamassivechangeinenergysectoremployment,withmanyjobssettobelostintraditionalactivitiesinproducingandsupplyingfossilfuels,butmanymorecreatedincleanenergysectors,includingintheirsupplychains.Fillingthosenewjobswillbekeytoavoidingbottlenecksandspeedinguptransitionsaroundtheworld.Globalenergysectoremploymentgrowsfromaround65milliontodaytoalmost90millionin2030intheNZEScenario.Nearlyallofthenewjobsareincleanenergysectors.Employmentinoil,gasandcoalfuelsupplyandatpowerplantsthatarenotequippedwithcarboncapturefacilitiesdeclinesbyaround8.5millionto13millionoverthesameperiod(Figure1.22).ThedeploymentofcleantechnologiesintheNZEScenarioimpliesaneedtorecruitalargenumberofworkersinthosesectors.Forexample,jobsinwindandsolarPVincreasebyalmost10%peryearonaverageover2021-2030ascapacityadditionscontinuetogrow.WiththeshareofEVsintotalcarsalesreachingover60%in2030,morepeopleworkinmanufacturingEVs,includingtheirbatteries,thaninmakingICEvehicles.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE72IEA.CCBY4.0.GlobalenergysectoremploymentbytechnologyintheNZEScenarioIEA.CCBY4.0.Note:End-useefficiencyemploymentreferstoemploymentinefficiencyimprovementsforbuildingsandindustry;formoredetailspleaserefertotheWorldEnergyEmploymentreportmethodology.Sources:IEAanalysisbasedonIEA(2022n).CleanenergysectoremploymentsoarsintheNZE,from32millionin2019to70millionin2030,morethanoffsettingthelossof8.5millionjobsinfossilfuelandrelatedindustries.MoreskilledworkersareneededinthecleanenergysectorOverall,theenergysectoremploysmorehighlyskilledworkersthanotherindustries,with45%oftheworkforcerequiringsomedegreeoftertiaryeducation,fromuniversitydegreestovocationalcertifications,comparedwiththeeconomy-wideaverageof24%(Figure1.23).Manyenergyfirmsarealreadyfacingaverycompetitiveenvironmentforhiringcandidateswiththeneededskillsets,particularlyforpositionsinthefieldofscience,technology,engineeringandmathematics(STEM),followedbyprojectmanagersandothertechnicalroles(IEA,2022n).Thebiggesthiringgapsgloballyatpresentareinprojectmanagementandinformationtechnology(IT)(GlobalEnergyTalentIndex,2022).Thecontinuingshiftinemploymenttocleanenergyjobscouldexacerbatetheseskillshortages.10203040201920302019203020192030FuelsupplyPowersectorEndusesMillionemployeesEnd-useefficiencyVehicles:EVsandbatteriesVehicles:ICEsPowergridsandstorageOtherpowergenerationWindSolarPVFossilfuelpower:unabatedLow-emissionfuelsOilandgasCoalCriticalmineralsminingEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE73IEA.CCBY4.0.Globalemploymentbyskilllevel,2019IEA.CCBY4.0.Note:HighskilllevelreferstoISCO-08skilllevels3and4,mediumtoISCO-08skilllevel2andlowtoISCO-08skilllevel1.Sources:IEAanalysisbasedonIEA(2022n);InternationalLabourOrganization(2022).Theenergysectordemandsmorehighlyskilledworkersthanotherindustries,with45%oftheworkforcehavingsomeformoftertiaryeducation.Thespecificskillsrequiredinthesupplyofcleanenergyandthecurrentlabourshortagesvaryconsiderablyaccordingtothetypeoftechnology.Inthepowersector,safetyexperts,constructionmanagers,cybersecurityprofessionalsandsoftwaredevelopers,aswellasskilledmiddle-managementprojectengineers,arealreadydifficulttorecruit(Naschert,2022).Thebroaderdearthofconstructionworkersandtradespeopleisstartingtolimitsolarandwindpowercapacityadditionsinsomelocations.Thereisalsoawidespreadshortageofelectricianswhorequiremulti-yeartraining(SEIA,2021a).Inthecaseofrenewables,aroundtwo-thirdsofsolarPVandonshorewindjobsrequireminimalformaltraining,whereas30%ofjobsrequireSTEMdegreesand5%ofjobsareforhighlyqualifiednon-STEMprofessionalssuchaslawyersandregulationexperts(IRENA,2021).Inpowergrids,increaseddigitalisationofnetworksisboostingtheneedforITskills.Thebiggestskillsshortagestodayinrenewablesareinconstructionandengineering;followedbyplanning,organisingandscheduling;projectdevelopment;andon-siteconstructionandfabrication(GlobalEnergyTalentIndex,2022).Inhydrogenproduction,thereisstrongdemandforengineeringskills,aswellasthoseindesigning,operatingandmaintaininghydrogeninfrastructureandvehicles.Skillsshortagesarelessofaconstrainttoexpandingcapacityinsomeotherareas.InthecaseofEVs,manymanufacturing-relatedskillscangenerallybetransferredfromICEs.Inaddition,EVstendtohavefewercomponentsthanICEs,simplifyingtheassemblyprocess.However,forthemaintenanceandrepairofEVs,more16%60%24%LowMediumHighEconomy-wideemployment5%50%45%EnergyemploymentEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE74IEA.CCBY4.0.mechanicswillneedtoreceiveelectricaltrainingtohandlehigh-voltagebatteries(InstituteoftheMotorIndustry,2021).EVbatteryproducershavealsobeenfacingshortagesinresearchanddevelopment(HeekyongYang,2021).Somefossilfuelworkershaveskillsthatcanbetransferredtocleanenergysectors,whichwillhelpalleviateshortagesandprovidethemwithnewopportunities.Forexample,coalminershaveskillsthatcanbeusedinminingcriticalminerals.BasedonnewgeospatialanalysiscarriedoutbytheIEA,anestimated40%ofcoalworkersworldwideareemployedwithin200kmofacriticalmineralreserve.Nonetheless,opportunitiesforshiftingminingandrelatedjobswillbelimited,especiallyasthevolumesofcriticalmineralsneedingtobeminedissmallwhencomparedwiththevolumeofcoalminedtoday.Itmayalsobepossibletotransfersomemarine-basedtechnicalskillsfromtheoffshoreoilandgasindustrytotheoffshorewindsector,includinghydrodynamics,shippingoperationsandtheapplicationofhealthandsafetyrules(C&SPartners,2021).OilandgasengineeringskillsarehighlyapplicabletoCCUSandgeothermalincludingseismicinterpretation,drillingandwellcompletions,reservoirmapping,andflowassurance.TheIntegratedPeopleandSkillsStrategyoftheUnitedKingdom’sNorthSeaTransitionDealestimatesthat90%oftheexistingUKoilandgasworkforcehavemediumtohighskillstransferability,withoverhalfoftheexistingoilandgasworkforceopentoconsideringamoveintooffshorewindorrenewablesgenerally(EnergySkillsAlliance,2022).Chemicalengineersinrefinerieshaveskillsthatareusefulintheproductionofbiofuelsandhydrogenandrawmaterialsextraction.EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE75IEA.CCBY4.0.ReferencesAutomotiveManagement(2021),EVskillsgapwillmaterialisein2026,warnstheIMI,10Novemberhttps://www.am-online.com/news/aftersales/2021/11/10/ev-skills-gap-will-materialise-in-2026-warns-the-imiBartholomeusz,S.(2022),Theworldhasabigprobleminthedrivetonetzero,TheAge,24Octoberhttps://www.theage.com.au/business/markets/the-world-has-a-big-problem-in-the-drive-to-net-zero-20221024-p5bs8w.htmlBerthélemy,M.,&Rangel,L.(2013),Nuclearreactors’constructioncosts:Theroleofleadtime,standardizationandtechnologicalprogress,https://hal.archives-ouvertes.fr/hal-00956292/documentBNEF(BloombergNEF)(2022),1H2022BatteryMetalsOutlook:SupplyTurbulenceAhead.BNEF(2020),GlobalNickelOutlook2020-2030.C&SPartners(2021),Materializingleadership:Fromoilandgastorenewableenergies,https://concretesteelpartners.com/wp-content/uploads/2021/06/Odd-Stromsnes-From-OG-to-Renewable-publish.pdfCEDelft(2021),Jobsfrominvestmentingreenhydrogen,https://cedelft.eu/wp-content/uploads/sites/2/2021/04/CE_Delft_200427_Jo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InnovationFundprojects,https://green-innovation.nedo.go.jp/en/about/EnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE79IEA.CCBY4.0.OECD(OrganisationforEconomicCo-operationandDevelopment)(2022a),Wheredomythingscomefrom?Howtradeworkstoday,https://www.oecd.org/trade/understanding-the-global-trading-system/how-trade-works/OECD(2022b),Whyopenmarketsmatter,https://www.oecd.org/trade/understanding-the-global-trading-system/why-open-markets-matter/Richter,F.(2022),FromzeroCOVID-19vaccinesto11.2billioninayear,WorldEconomicForum,4Januaryhttps://www.weforum.org/agenda/2022/01/covid-19-vaccines-2021/S&PCapital(2022),Lithiumprojectpipelineinsufficienttomeetloomingmajordeficit.S&PGlobal(2022a),Copperglobalsupply-demandbalance,August2022.S&PGlobal(2022b),COVID-19recoveryboostedcapex16%in2021;largerrecoveryexpected.S&PGlobal(2022c),Ironoreglobalsupply-demandbalance,August2022.S&PGlobal(2022d),Lithiumandcobaltglobalsupply-demandbalance,January2022.S&PGlobal(2022e),CommodityInsights,https://www.spglobal.com/commodityinsights/enS&PGlobal(2020),Topminesaveragetimefromdiscoverytoproduction:16.9years,https://www.spglobal.comS&PGlobal(2019),Lithiumsupplyissettotripleby2025.Willitbeenough?,https://www.spglobal.comSaoud,A.,Harajli,H.,&Manneh,R.(2021),Cradle-to-gravelifecycleassessmentofanairtowaterheatpump:CasestudyfortheLebanesecontextandcomparisonwithsolarandconventionalelectricwaterheatersforresidentialapplication,JournalofBuildingEngineering,Vol.44,103253,https://doi.org/10.1016/j.jobe.2021.103253Schlömer,S.etal.(2014),AnnexIII:Technology-specificcostandperformanceparameters,https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_wg3_ar5_annex-iii.pdfSEIA(SolarEnergyIndustriesAssociation)(2021a),TheU.S.solarworkforce,https://www.seia.org/sites/default/files/2021-05/SEIA-Solar-Workforce-Labor-Factsheet-May2021.pdfSEIA(2021b),NationalSolarJobsCensus2020,https://www.seia.org/sites/default/files/2021-05/National-Solar-Jobs-Census-2020-FINAL.pdfSteelZero(2022),SteelZeroMembers.https://www.theclimategroup.org/steelzero-membersUNECE(UnitedNationsEconomicCommissionforEurope)(2022),MajorautomarketsjoinforcesfordraftUNlegislationonelectricvehiclebatterydurability,12October,https://unece.org/circular-economy/press/major-auto-markets-join-forces-draft-un-legislation-electric-vehicle-batteryUnitedKingdom,DepartmentforBusiness,Energy&IndustrialStrategy(2020),HeatPumpManufacturingSupplyChainResearchProject,https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/943712/heat-pump-manufacturing-supply-chain-research-project-report.pdfUSCongress(2022),H.R.5376–InflationReductionActof2022,https://www.congress.gov/bill/117th-congress/house-bill/5376/textUSDepartmentofEnergy(2022),UnitedStatesannounces$94billionofglobalpublicfundingtoacceleratecleanenergyworldwide,23September,https://www.energy.gov/articles/united-states-announces-94-billion-global-public-funding-accelerate-clean-energy-worldwideEnergyTechnologyPerspectives2023Chapter1.EnergysupplychainsintransitionPAGE80IEA.CCBY4.0.USGS(UnitedStatesGeologicalSurvey)(2022),MineralCommoditySummary2022,https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdfViolante,A.C.etal.(2022),Comparativelifecycleassessmentofthegroundsourceheatpumpvsairsourceheatpump,RenewableEnergy,Vol.188,pp.1029-1037,https://doi.org/10.1016/j.renene.2022.02.075Weise,Z.(2022),EUlooksatanelectricalternativetoRussiangas:Theheatpump,Politico,18March,https://www.politico.eu/article/eu-heat-pumps-stop-russia-gas/WorldsteelAssociation(2020),SteelStatisticalYearbook,https://www.worldsteel.org/publications/bookshop/product-details%7E2020-Monthly-crude-steel-and-iron-production-statistics-Steel-Statistical-Yearbook-%7EPRODUCT%7Estatistics2020%7E.htmlEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE81IEA.CCBY4.0.Chapter2.MappingoutcleanenergysupplychainsHighlights•Theproductionofcriticalmineralsishighlyconcentratedgeographically,raisingconcernsaboutsecurityofsupplies.TheDemocraticRepublicofCongosupplies70%ofcobalttoday;China60%ofrareearthelements(REEs);andIndonesia40%ofnickel.Australiaaccountsfor55%oflithiumminingandChilefor25%.Processingofthesemineralsisalsohighlyconcentrated,withChinabeingresponsiblefortherefiningof90%ofREEsand60-70%oflithiumandcobalt.Chinaalsodominatesbulkmaterialsupply,accountingforaroundhalfofglobalcrudesteel,cementandaluminiumoutput,thoughmostisuseddomestically.•Chinaistheleadingglobalsupplierofcleanenergytechnologiestodayandanetexporterformanyofthem.Chinaholdsatleast60%oftheworld’smanufacturingcapacityformostmass-manufacturedtechnologies(e.g.solarPV,windsystemsandbatteries),and40%ofelectrolysermanufacturing.Europeisgenerallyanetimporter,withtheexceptionofwindturbinecomponents;aboutone-quarterofelectriccarsandbatteries,andnearlyallsolarPVmodulesandfuelcellsareimported,mostlyfromChina.ForsolarPV,ChinasuppliesequipmentdirectlytoallmarketsexceptNorthAmerica.TheUnitedStatesimportstwo-thirdsofitsPVmodules,primarilyfromSoutheastAsia,whereChinesecompanieshavebeenactivelyinvesting.•RecentsupplychaindisruptionsresultingfromtheCovid-19pandemicandRussia’sinvasionofUkraine,combinedwithrapidlygrowingdemand,havedramaticallyincreasedthecostofmaterialsandenergy.Theaveragepriceoflithiumwasnearlyfourtimeshigherin2022thanin2019,andtwiceforcobaltandnickel.Batterymetalpricehikesinearly2022ledtoincreasingbatteryprices–upnearly10%globallyrelativeto2021–afteryearsofcontinuousdecline.ThepriceofsolarPV-gradepolysilicon,copperandsteelallroughlydoubledbetweenthefirsthalfof2020andthatof2022.TheseincreasescontributedtopushingupthepriceofPVmodulesrisingby25%andthatofwindturbinesoutsideChinarisingbyupto20%.•Cleanenergytechnologieshavefarlowerlife-cycleCO2intensitiesthantheirfossilcounterparts,buttheirsupplychainsarestillanimportantsourceofCO2emissionsandotherpollutants.Materialproductionandtechnologymanufacturingtypicallyaccountforover90%oftheemissionsforthecleanenergytechnologysupplychainsanalysed.Reducingemissionsfromthesestepsischallenging,giventhecurrentlackofcommerciallyavailablelow-emissiontechnologiesinmanycases,butanimportantundertakinginthetransitiontonetzeroemissions.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE82IEA.CCBY4.0.AssessingvulnerabilitiesinsupplychainsUnderstandingthefunctioningofcleanenergysupplychainstodayandtheirvulnerabilitiesiscrucialtolaythefoundationsforexpandingthemasthecleanenergytransitionadvances(Table2.1).Thegoalmustbetoensurethatbothenergyandtechnologysupplychainsaresecure,resilientandsustainable.Thischapterassessesthosevulnerabilitiesindetailforselectedcleanenergysupplychains,focusingonthelinkbetweengeographicconcentrationandsecurity,resiliencetomarketshocks,andenvironmentalperformance.Thecleanenergytransitionisaffectingthenatureofenergysecurity,whichdependsonadequateandtimelyinvestmentstoensuresupplystaysinlinewithdemand.Themovetocleanenergyisshiftingthefocusfromfossilfuelstocriticalminerals,thoughtheformerwillremainimportanttoenergysecurityduringthetransition,especiallyatitsearlystages.Comparedwithfossilfuelsupply,thesupplychainsforcleanenergytechnologiestodayaregenerallymoregeographicallyconcentrated.Globalsupplychainsarenotalwaysmorevulnerablethandomesticonesandmaybenecessaryduetoalackofeconomicallyviabledomesticresourcesforindividualstepsofsupplychains.However,someexternalsourcesofkeymaterialsandcomponentsmaybeconsideredinsecure.Thisisaparticularconcernifalargeshareofsupplycomesfromcountriessubjecttoacutegeopoliticalrisksduetoconflict,socialinstability,unfairtradepracticesorhumanrightsissues.Theglobalenergycrisishasreinforcedthisconcern.Inthelongerterm,ascountriesapproachnetzeroemissions,demandforprimaryinputstocleanenergysupplychainsshouldstarttodecline,asnewcapacityisrequiredmainlytomeetnewenergydemandratherthanalsoreplaceexistingfossilfuelincumbenttechnologies.Buildingresiliencetodisruptionsalongsupplychainsisvitaltomitigatingemergingproblemsforenergysystems.Mostlow-emissiontechnologiesrelyondomesticenergyresources,suchassunshineandwind,buttheequipment,criticalminerals,materialsandcomponentsneededtoexploitthoseandproduceend-useequipmentoftenrelyonglobalsupplychains.Anoilsupplycrisis,whenithappens,hasbroadrepercussionsacrosstheeconomy.Thesupplyofelectricity,whichissettoplayanincreasinglyimportantroleinmeetingenergyneeds,low-emissionhydrogenandderivativefuels(includingammonia),andbioenergy/biofuelswillfacesimilarthreatsinthefuture.Ashortageorspikeinthepriceofarawmaterialorcomponentrequiredforproducingkeycleanenergytechnologiessuchasbatteries,solarpanelsorelectrolyserswillaffecttheiravailability,whichcouldleadtodelaysindecarbonisingtheenergysystemandincreasingtheoverallcostsoftheenergytransition.Thegoalofsustainabilityconcernsenergytechnologysupplychainsaswellasthesupplyofenergyitself.TheuseofcleanenergytechnologiesmayinvolveEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE83IEA.CCBY4.0.feweremissions,buttheirsupplychainsmayresultinsignificantemissionsandotherenvironmentalimpacts.Today,emissionsfromcleanenergysupplychainscomemainlyfrombulkmaterialsproduction.Reducingthemwillbetough,sincemanyofthetechnologiesrequiredtodosoarenotyetcommerciallyavailable.Miningandtechnologymanufacturingarealsoresponsibleforasignificantshareofemissions,butreducingthemshouldbeeasiersincethereisgreaterscopeforswitchingtoelectricity.Inanycase,theemissionsfromsupplychainsandotherenvironmentalimpactsshouldnotbeareasontostalltherapidroll-outofcleantechnologiesinthenearterm,sinceinmostcasessupplychainemissionsaredwarfedbythosethataresavedasaresultoftheiruse.Supplychainsneedtomeettheneedsofanetzeroenergysystemwhilethemselvesbeingcompatiblewithit,andbeabletoabsorb,accommodateandrecoverfrombothshort-termshocksandlong-termchanges,includingmaterialshortages,climatechange,naturaldisastersandotherpotentialsupplydisruptions.Thegoalshouldbetoachievethiswhilemaintainingacommitmenttotheprinciplesofopenandtransparentmarkets.Self-sufficiencyisnotalwaysanoption–particularlyforsomeelementsofthesupplychainthatareboundtotheavailabilityofcertainnaturalresourcesthataregeographicallyconcentrated–nornecessarilyaneconomicallyoptimalapproach.AcombinationofopenmarketswithintherulesoftheWorldTradeOrganization,strategicpartnershipsanddiversityofsupplysourceswill,inmanycases,beabetterapproach(seeChapter6).Characteristicsofsecure,resilientandsustainablecleanenergytechnologysupplychainsObjectiveCharacteristicsSecureAdequate,reliableanduninterruptedsupplyofinputs.Diversityinmarket,suppliersandtechnologies.ResilientAbletorespondandquicklyadjusttosuddenmarketshocksonpricesordemand.Stableandaffordableprices.Effectiveinterconnectionwithothersupplychainsthatcandeliveranequivalenttechnologyorservice.SustainableGreenhousegasemissionsaslowaspossibleandconsistentwithclimateobjectives.Truesupplychaintransparencyandimpactassessments(e.g.airandwaterpollution,biosphereprotection)withstrengtheningenvironmental,socialandgovernancemeasures(ESG)alongtheentiresupplychain.Efficientandresponsibleuseofnaturalresources,includingthroughpromotionofmaterialefficiencyandend-of-lifestewardship.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE84IEA.CCBY4.0.Box2.1CleanenergysupplychainsinterdependenciesSupplychainslinksuppliersofinputstoconsumersofoutputs,oftenspanningmultiplesectorsandcountriestoformcomplexnetworks.Theseinterdependenciesarealsovulnerabilitiesintermsofresilience.Inthecaseofcleanenergy,certaintechnologiesandtechnologyorenergysupplychainsare“foundational”,i.e.withoutthem,thesuperstructureofsupplychainswouldnotbeabletofunctionproperly.Forexample,anydisruptiontolow-emissionelectricitysupplywoulddirectlyaffectlow-emissionhydrogenproduction,andinturnlow-emissionsynthetichydrocarbonfuelsproduction(Figure2.1).InterconnectionsbetweenselectedenergyandtechnologysupplychainsIEA.CCBY4.0.Notes:DAC=directaircapture.BECC=bioenergywithcarboncapture.Theuseofcross-cuttingtechnologiescanalsoexposethecleanenergysystemandsupplychainstonewvulnerabilities.Thesetechnologiesaretypicallydeployedindifferentsectorsandsupplychainsteps,hencehavebroadimpactsincaseofdisruption.Forexample,carboncapture,utilisationandstorage(CCUS)cancontributetodecarbonisingindustry,powerandfossil-basedhydrogenproduction,aswellasprovidecarbondioxideremovalandCO2forsyntheticfuelproduction.Asaresult,disruptionsinthesupplyofCO2capturecomponentsoralongtheCO2transportandstorageinfrastructurecouldhaveanimpactoncleanenergysupplyacrossseveralsectors.Itiscrucialthatindustryandpolicymakersassessthesevulnerabilitiesatthesystemlevelandreducethemthroughtargetedmeasures,suchasbydeliberatelybuildingredundancyintothesystemintheformofovercapacityoralternativesupplyorproductionroutes.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE85IEA.CCBY4.0.GeographicdiversityandenergysecurityExtractionofcriticalmineralsTheshiftfromfossilenergytolessemissions-intensivetechnologiesandfuelswillfundamentallychangeglobalenergysupplychains,includingthetypesofnaturalresourcesneeded.Inparticular,cleantechnologiesdependmuchmoreoncriticalminerals.Whiletheworld’sresourcesofthesemineralsareverylargeandunlikelytoconstrainsupplyinthelongterm,productionandprocessingoperationsformanyofthemarehighlyconcentratedinasmallnumberofcountriesatpresent,makingsuppliesvulnerabletopoliticalinstability,geopoliticalrisksandexportrestrictions.Ingeneral,thesupplyofcriticalmineralsismoregeographicallyconcentratedthanthatofoil,gasandcoal.Regionalsharesofglobalfossilfuelanduraniumproductionandresources,2021IEA.CCBY4.0.Notes:CSA=CentralandSouthAmerica.UraniumresourcesareidentifieduraniumresourcesassuminganinternationalmarketpriceofUSD130/kg.Fossilfuelresourcesconsidertheremainingtechnicallyrecoverableresources.Sources:IEAanalysisbasedonIEAdata;WISEUraniumProject(2020).FossilfuelproductiontodayisconcentratedinNorthAmerica,theMiddleEastandChina.Thecountriesthatdominatemineralsproductiontodayaregenerallyverydifferenttotheleadingproducersoffossilfuels(Figure2.2,Figure2.3).TheUnitedStatesiscurrentlytheworld’sbiggestproducerofbothoilandgas,butfeaturesprominentlyonlyinsilver,copperandrareearthelements(REEs)mining.AlthoughthePeople’sRepublicofChina(hereafter,“China”)istheworld’sleadingproducerofcoal,ithasrelativelysmallresourcesofoilandgas.YetitdominatesproductionofREEs,accountingfor60%ofglobaloutput,andisalsoabigEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE86IEA.CCBY4.0.producerofironore,lithiumandcopper.WhileseveralcountriesintheMiddleEastaremajoroilandgasproducers,theyproduceveryfewcriticalminerals.TheminingofthosemineralsisconcentratedinAfrica,SouthAmerica,AustraliaandIndonesia,whiletheirprocessingisconcentratedinChina.Globalreservesandextractionofselectedresourcesbyregion,2021IEA.CCBY4.0.Notes:Al=aluminium;Mn=manganese;PGM=platinumgroupmetals;REE=rareearthelements;CSA=CentralandSouthAmerica.PGMminingincludesonlyplatinumandiridium.Reservesdataareuncertainascompaniesandcountriesdonotalwaysdisclosetheirfullreserves.Sources:IEAanalysisbasedonUSGS(2022);S&PGlobal(2022a).Leadingcountriesinmineralsextractiontodayareverydifferentfromfossilfuelproducers,withminingconcentratedinAfrica,SouthAmericaandAsiaPacific.Thedegreeofgeographicconcentrationofcriticalmineralstodayvariessignificantly.Forlithium,cobaltandREEs,thetopthreeproducingnationscontrolthree-quartersormoreofglobaloutput.SouthAfricasuppliesmorethan70%oftheworld’splatinumneedsforalluses–oneofthehighestconcentrationsofanymineral.Miningoforesofcobalt,whichisavitalcomponentoflithium-ion(Li-ion)batteriesandsuperalloysusedinturbines,nuclearreactorsandsensors,isalsohighlyconcentrated,withtheDemocraticRepublicofCongoholding70%ofglobal153kt7600kt3Mt95Mt21Mt880Mt100kt22Mt280kt120Gt24kt530kt380t70Mt20Mt1500Mt1600Mt85Gt390Mt32Gt0%10%20%30%40%50%60%70%80%90%100%MiningReservesMiningReservesMiningReservesMiningReservesMiningReservesMiningReservesMiningReservesMiningReservesMiningReservesMiningReservesCobaltNickelCopperLithiumREESilverPGMMnSteelAlOtherAsiaPacificEuropeCSANorthAmericaEurasiaMiddleEastAfricaChinaUnspecifiedSharelargestregionEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE87IEA.CCBY4.0.production,althoughthemajorityofthoseminesareownedbyChinesefirms.Miningcompaniespaybackthegovernmentwithroyaltiesatratesthatare4-8%ofminingrevenues.Thereareseriousclaimsthatcorruptionandotherfactorsdeprivecommunitiesofsuchbenefits(Eurometaux,2022).Forlithium,Australiaaccountsfor55%ofminingandChileover25%.Outputofcopperoresistheleastconcentratedofallthemaincriticalminerals,withthethreeleadingproducers–Chile,PeruandChina–accountingforlessthanhalfofglobalsupply.Marketconcentrationisalsohigh.Forinstance,thetopfivelithiumproducingcompaniescontrolledalmost80%ofglobalminingcapacityin2021(BNEF,2021a).Provenreservesformostcriticalmineralsaremoregeographicallywidespreadthancurrentproduction.8Thissuggeststhatthereisconsiderablescopeforincreasingthediversityofthesourcesofthesemineralsandreducingover-relianceonasmallnumberofmajorproducers.ForREEs,thedistributionofreservesisverydifferenttothatofcurrentmining,implyingthatmanycountrieshaveconsiderablepotentialtoboostoutput.Political,economicandenvironmentalfactorsaffecttheextenttowhicheachregionmaybewillingtoexploititsresources.Forexample,whileChinesereservesofREEsaccountforlessthan40%ofglobalreserves,about60%ofglobalREEextractiontakesplaceinChina,illustratingthegovernment’sstrongsupportforcriticalmineralproduction.Box2.2ThedifferentstepsofmetalproductionProducingmetalsinvolvesmanystepsandprocessesthatcutacrossdifferentelementsofsupplychainstoconverttherawmaterial,suchasametallicore(acompoundcontainingthemetal),toafinalforminwhichthemetalcanbeusedasaninputtomanufacturing.Theprincipalstepsareasfollows:Explorationandminingoftheore,includingtheremovalofsoilandrocktogainaccesstoit.Mostoresareextractedformopen-castorundergroundmines,butafewmetals,suchasmagnesium,arepartlyextractedfromseawaterusingelectrolysis(passinganelectriccurrentthroughawatersolutionofthecompound).Theenergyintensityofthisstepisaffectedbythestrippingratio(ofwasterocktoore)andthegradeofore.Inthisreport,thisstepissimplyreferredtoasmining.Transportationoftheoreaftercrushingtoamillorprocessingplant,usuallyinbulkorinlargebags.Purificationoftheore,involvingtheseparationofthemetalfromvariousimpuritiescontainedintheore(usuallythroughacombinationofsievingand8Reservesaredefinedasknownresourcesandquantifieddepositsthatcanbeeconomicallyextracted.Reservesaresmallerthanresources,whicharetheamountofbothdiscoveredandsuspectedundiscovereddeposits.Geologicaldiscoveriesandchangesintechnologyandmarketpricescanaffectwhatareconsideredreserves.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE88IEA.CCBY4.0.flotationmethodsusingwaterandchemicals).Loworegrademineralsrequiremorepurificationsteps,resultinginhigherenergyandemissionsintensities.Storageoftailings–leftovermaterialsfromtheprocessingofminedore–usuallyintheformofslurryinwater-filledpoolsknownastailingsdamstopreventtailingpowderfromblowingawayandpollutingtheareasurroundingthemine(seeBox2.6).Reductionoftheore(theconversionoftheorefromitsoxidisedstatetoitspureform)throughsmeltingtoproducemetalsthatcanbeusedinmanufacturing.Forexample,ironiscurrentlymostlyreducedbyreactingironoxidewithcarbonandcarbonmonoxideinablastfurnace.Inthisreport,refiningandreductionstepsaresimplyreferredtoasmaterialsproduction.CriticalandbulkmaterialsproductionProcessingofcriticalmineralsismoreconcentratedthanreservesAftermineralsareextractedfromtheground,theyfirstneedtobeprocessedandrefinedtoreachtherequiredlevelofpurityforuse.Forexample,EVbatterymanufacturingrequiresnickelsulfate,whichcanbeproducedfromnickelsulfidesandhydroxidesorcanbederivedfromrefinednickel,whichitselfisproducedthroughapurificationofrawnickelore(LeGleuher,2022).Thesestepsinvolveadvancedphysicalandchemicaltreatmenttechniques,whichcanbehighlyenergy-,capital-andskills-intensive.Thedegreeofgeographicalconcentrationofcriticalmaterialsproductionisevengreaterthanthatofmineralsextraction(Figure2.4).Chinadominatesprocessingofseveralofthem:itholdsashareofaround30%ofglobalprocessingfornickel(thefigureishigheriftheinvolvementofChinesecompaniesinIndonesianoperationsisincluded),60-70%forlithiumandcobalt,andashighas90%forREEs(toconvertthemintooxides,metalsandmagnets).Noothercountrycontrolsmorethanafifthofcriticalmaterialsproduction,withtheexceptionofChile,whichprocessesalmostone-thirdoftheworld’slithium,andIndonesia,whichdoesthesamefornickel.Chinahasbuiltintegratedsupplychainsfromminingandprocessingofsomecriticalmineralstomanufacturing.Thisisthecaseforpermanentmagnets,whichareusedinwindturbinesandEVsandarecomposedtoalargeextentofneodymium,anREE.Inothercases,Chinaimportsoresandconcentratesproducedelsewhereforlocalprocessingandintegrationintodomesticsupplychains.Forexample,lithiumistypicallyimportedfromAustralia,refinedandsubsequentlyintegratedintoEVbatteriesforvehiclesmadedomestically.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE89IEA.CCBY4.0.Somecountrieshaveincreasedtheirprocessingofcriticalmineralsinlinewithextraction.ThisisthecasewithnickelinIndonesia,theminingandprocessingofwhichhasincreasedsignificantlyoverthelastdecadeinlinewithrisingEVbatterydemand.Thecountrywastheworld’slargestnickelminerin2021atnearly40%ofglobaloutput,havingboostedextractioncapacitytwofoldsince2012,andaccountedforabout30%ofglobalrefinednickelproduction,upfromjust1%in2012.Incontrast,theDemocraticRepublicofCongoproducedlessthan1%ofrefinedcobaltalthoughitaccountedforover70%ofminingoutput.Ingeneral,otherstepsalongcleanenergysupplychainsaremorelikelytoexperiencebottlenecksthanprocessing(seeChapter1).However,thereareexceptions.Inthecaseofpolysiliconproduction,bottlenecksaremorelikelyattheprocessingstage,duetoitscomplexity.Rawmineralsmustbeofveryhighqualitytoyieldmetallurgical-gradesiliconofabove98%purity,whichthenneedstoundergomultiplerefiningstepstoproducepolycrystallinesiliconwith99.9999%purityforsolarPVapplications.Chinacurrentlycontrolsabout70%ofmetallurgical-gradesiliconproductionand80%ofthepolysiliconproduction(USGS,2022).Regionalsharesofglobalproductionofselectedcriticalmaterials,2021IEA.CCBY4.0.Sources:IEAanalysisbasedonBNEF(2020);S&PGlobal(2022a);WBMS(2022);AdamasIntelligence(2020).Theconcentrationoftheprocessingandrefiningofmineralsisgreaterthanthatofextraction,withChinadominatingtheprocessingofseveralofthem.BulkmaterialsproductionishighlyconcentratedaswellCleanenergytechnologiesandinfrastructurearemadefromlargeamountsofbulkmaterials,notablysteel,cement,aluminiumandplastics.SolarPVplantsandwindfarmsgenerallyrequiremorebulkmaterialsperunitofcapacitythanfossilfuel-basedpowerplants,withsomeexceptions(alsoseeChapter1).TherawmaterialsEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE90IEA.CCBY4.0.andfuelsrequiredfortheproductionofbulkmaterials,includingironore,limestone,bauxite,oilandnaturalgas,arewidelyavailableandtherearefewbottlenecksatpresenttoincreasingcapacityinmostpartsoftheworld.Indeed,thereisglobalovercapacityintheproductionofsomebulkmaterials.Bulkmaterialneedsvaryenormouslyacrossenergyend-usesectors.Steelandcementarevitalforbuildingsandinfrastructure,withdemandgenerallyhighestintheemergingeconomieswhereeconomicdevelopmentisfastest,notablyChinaandAsiaPacific.Otherend-usesectors,suchasthemanufacturingofconsumerproducts,packaging,industrialandelectricalequipment,andvehicles,alsomakeuseoflargeamountsofawiderrangeofbulkmaterials,includingaluminiumandplastics(Figure2.5).Estimatedend-usesharesofglobalconsumptionofselectedbulkmaterials,2021IEA.CCBY4.0.Notes:Energyinfrastructureincludeselectricitygridsandoilandgaspipelines.Industrialequipmentdoesnotincludematerialdemandfromtheplantshell.Transportincludesvehiclesandestimatedmaterialdemandfromroadandrailinfrastructure.Otherincludesnon-energyinfrastructureandmiscellaneoususes.Sources:IEAanalysisbasedonWorldsteel(2022a);USGS(2022);IAI(2022);Platts(2022);Geyer,Jambeck&Law(2017).Bulkmaterialsareusedinadiverserangeofenduses,withthemaindriversvaryingsubstantiallybymaterial.Bulkmaterialsproductionisrelativelyhighlyconcentratedgeographically,althoughnottothesameextentascriticalmaterials(Figure2.6).Chinaaccountsformorethanhalfoftheworld’sproductionofcrudesteel,cementandalumina,andmorethanaquarterofprimarychemicalproduction.Whilesomeofthisproductionisexported,China’sdevelopmentpathhasbeenespeciallymaterial-intensive,withdemandforcementandsteelinparticularbeinghigherrelativetothecountry’seconomicactivitythaninothermajorcountries.BulkmaterialsareEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE91IEA.CCBY4.0.generallylessgloballytradedthancriticalmaterials,asaresultoftheirwiderglobalavailabilityandhighercostsoftransportationrelativetotheirvalue,encouragingproductionclosetodemandcentres.Regionalsharesinglobalproductionofbulkmaterialsandintermediatecommodities,2021IEA.CCBY4.0.Notes:Plasticsincludesresinidentifiercodes01-07,whichexcludesfibres.Ironincludespigironanddirectreducediron.High-valuechemicalsincludeethylene,propylene,benzene,tolueneandmixedxylenes.Sources:IEAanalysisbasedonWorldsteel(2022a);USGS(2022);IAI(2022);Platts(2022);Geyer,Jambeck,&Law(2017).Chinaproducesmorethanhalfoftheworld’scrudesteelandcement,andalargeshareofaluminiumandprimarychemicals,mostlyforthedomesticmarket.CrudesteelandironSteelisusedinawiderangeofenduses,withabouthalfofdemandcomingfromthebuildingsandtransportsectors.Crudesteelcanbeproducedfromscraporiron,ormorecommonlyamixtureofthetwo.Iron–madefromironore–isvirtuallyunlimitedinitssupply,whereasscrapavailabilityisafunctionofpaststeelproductionanduse.Countrieswithmatureinfrastructureandvehiclestockstendtohaveampledomesticsuppliesofscrap,whereasemergingeconomiesoftenneedtoproducemoreironinordertoincreasetheiroutputofcrudesteel.Ironaccountsforover65%ofthemetallicinputstocrudesteelproduction,withscrapaccountingfortheremainder.Globally,around85%ofavailablescrapiscollectedforrecycling.Aroundone-quarterofallthesteelproducedworldwideistradedinternationallyasintermediatesteelproducts(finishedandsemi-finished),withtheremainderbeingusedbynext-tiermanufacturersinthecountryinwhichitwasproduced.Theresultingproductscontainingsteelarealsotraded.Figuresforthetradeinvolumesofsteelcontainedingoodsaremuchmoreuncertain;estimatesfrom2019suggestthataround20%ofthissteelisexported,withalmost75%oftheEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE92IEA.CCBY4.0.steelcontainedingoodsusedinthecountrieswherethegoodsareproduced(Worldsteel,2022a).ThoughChinausesaround95%ofitsproductiondomestically,itisthelargestnetexporterofsteelat43Mtin2021–orathirdofglobalnetexports.TheotherleadingnetexportersaretheRussianFederation(hereafter,“Russia”),Japan,KoreaandIndia,whiletheleadingnetimportersaretheUnitedStates,theEuropeanUnion,SoutheastAsiaandtheMiddleEast.CementandclinkerCement,theprimaryingredientformakingconcrete,isgenerallyproducedclosetothepointofuseduetothehighcostoftransportasaheavymaterialandthewidespreadavailabilityoflimestoneasaninput.Abouthalfofglobalcementproductionisusedforconstructingbuildingsandtheremainderformakingawidevarietyofothertypesofinfrastructure,includingforcleanenergy.Chinaisboththebiggestconsumerandproducerofcement,producingaround2.4Gtin2021andaccountingforaround55%ofglobalproduction,followedbyIndia(8%),theEuropeanUnion(4%)andtheUnitedStates(2%).Theexpectationofrisingdemandforcementtomeetnewconstructionneedsgenerallyleadstoinvestmentinlocalproduction,reducingtheneedforcostlyimports.AluminiumandaluminaTheuseofaluminiumisrelativelyevenlydistributedaroundtheworldandacrosseconomicsectors,withthetransportsectoraccountingforabout25%ofglobaldemand,andconstructionandpackagingeachforabout15%.Aluminiumisanimportantinputtothecleanenergytransition,withtheproductionofseveralcleantechnologies,includingsolarPVinstallationsandEVs,requiringsignificantamounts.Electricitynetworksaloneaccountforabout8%ofaluminiumdemandtoday.Likesteel,aluminiumcanbeproducedfromvirginmineralinputs(bauxite)orfromscrap.Bauxiteisfirsttransformedintoalumina(aluminiumoxide),whichundergoeselectrolysisinasmeltertoproducealuminium.Aroundone-thirdofaluminiumwasproducedfromscrap(excludingthatgeneratedduringaluminiumproduction)in2021,ofwhich60%wasend-of-lifescrap,withtheremainderbeingsourcedfromthemanufacturingofaluminiumproducts.Chinaisthelargestproducerofaluminium,accountingforover40%ofglobalproduction.TheUnitedStatesaccountsforaround5%andCanadaforaround6%ofglobalproduction,mostlyusingscrapandimportedalumina.Approximately40%ofaluminiumistradedinternationally,withexportsledbyRussia(netexportsaccountingfor11%oftotalexports),CanadaandtheUnitedArabEmirates(9%each),andIndia(8%).Chinaproduces55%oftheworld’salumina–anevenlargersharethanaluminium,reflectinginpartlowerdomesticscrapavailabilitythanthatinmanyindustrialisedeconomies.AustraliaandBrazilaretheworld’sEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE93IEA.CCBY4.0.largestaluminaexporters,owinginparttotheirabundantbauxitereserves;together,theyaccountformorethan20%oftheworld’saluminaproduction,butjust4%ofaluminiumproduction.PlasticsandhighvaluechemicalsThemainthermoplastics–polyethylene,polypropylene,polyvinylchloride,polyethyleneterephthalateandpolystyrene–areusedprimarilyforpackaging,whichabsorbs36%ofglobalsupply,construction(16%),textiles(15%),automotive(7%)andconsumerproduct(10%)applications.Somecleanenergytechnologiesmakeextensiveuseofplastics.Forexample,mostwindturbinemanufacturersuselightweightplasticcompositestomakeblades,whilesolarpanelsoftenusevariousplasticstoprotectorconnectsomeofthepanels’parts.Plasticsareproducedprimarilyfromhigh-valuechemicals–ethylene,propylene,benzene,tolueneandmixedxylenes–whichareinturnproducedfromoilproducts.Lessthanafifthofplasticwasteiscurrentlycollectedforrecycling,andlessthanatenthofplasticproductionisbasedonpost-consumerscrapmaterial,reflectingthepracticaldifficultiesandcostoftherecyclingprocessesinvolved.Thegeographicdistributionofprimarychemicalsproductionreflectsbothregionaldemandandcostfactors,especiallythelocalavailabilityandcostofoilfeedstocks.Consequently,regionswell-endowedwithoilandgasresources,suchastheMiddleEastandUnitedStates,arebigproducers.Chinaistheworld’sleadingproducerofbothhigh-valuechemicalsandkeythermoplastics,accountingforaround25%ofworldoutput.TheUnitedStatesandEuropealsoholdstrongpositionsintheglobalchemicalandplasticsindustries,withtheUnitedStatesaccountingfornearly20%ofcombinedproductioninthesesectorsandEuropefor10%.High-valuechemicalproductionandplasticsproductionaregenerallylocatedtogether.Whileplasticresinsandderivativeproductsaretradedextensively,high-valuechemicalsareoftengaseous(e.g.ethylene)andhighlytoxic(e.g.benzene),makingtransportcumbersomeandexpensive.TechnologymanufacturingandinstallationTechnologymanufacturingreferstotheproductionoftechnologiesusinglabour,toolsandenergytotransformmaterialsintofinishedgoods.Inthecaseofthecleanenergytechnologiescoveredinthisreport,thesegoodsarecategorisedasfollows:•Mass-manufacturedtechnologies,whichareassembledinspecialisedfactoriesinlargevolumesusingseveralcomponentsandsub-assemblies,withtheready-to-useendproductexitingthefactoryfloor.ExamplesincludesolarPVmodules,windturbinescomponents,EVbatteries,fuelcellsandfuelcelltrucks,heatpumps,andelectrolysers.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE94IEA.CCBY4.0.•Large-scalesite-tailoredtechnologies,whichareusuallyindividuallydesignedandsizedtofitspecificlocalconditions.ExamplesincludemostCCUSapplications,synthetichydrocarbonproductionandbioenergy-relatedtechnologies.Theseareeffectivelysystemsformedbycomponents,someofwhichcanbemassmanufactured.Chinadominatesmass-manufacturedcleantechnologiesChinadominatestheproductionofmass-manufacturedtechnologiesandcomponentsthankstolowmanufacturingcosts,astrongbaseinmaterialsproductionandsustainedpolicysupportontheseindustrysegments.Itcontrolsatleasthalfoftheoutputofmostofthemainsuchtechnologies,notablysolarPVandEVbatteries(Figure2.7).TherestoftheAsiaPacificregioncontinuestomanufacturetechnologiesinwhichtheyholdstrongintellectualproperty,suchasbatteriesandfuelcells.Asthemarketsforthesetechnologiesexpand,capacitytoproducethesetechnologiescanoftenexceedshort-termproductionneeds.Currently,manufacturingcapacityexceedsproductionformosttechnologiesinallregions,particularlyelectrolysers,EVbatteriesandfuelcelltrucks(seerespectivesectionsbelow).SolarPVandwindpowerSolarPVandwindaretheleadinglow-emissionelectricitygenerationtechnologiesbeingdeployedworldwidetoday.Overthelastdecade,China’sdominanceofmanufacturingofsolarPVequipmenthasgrown,reducingthesharesofEurope,JapanandtheUnitedStates.Today,China’sshareinthemanufacturingofsilica-basedsolarPVmodulesexceeds70%–almostdoublethecountry’sshareofglobaldemand.Thecountryishometotheworld’stoptensuppliersofsolarPVmanufacturingequipment.AsiaPacific(excludingChina)hostsaroundone-fifthofmodulemanufacturing,andtheremainingcapacityislocatedmostlyinEuropeandNorthAmerica.Manufacturingofwindturbinesisalsoheavilyconcentratedgeographically.Thetop15manufacturersaccountedforalmost90%ofthetotalcapacitydeployedin2021.Amongthose,Chinesecompaniesweretheleaders,withmorethan55%ofthetotal,followedbyEuropeancompanies,witharound35%,andAmericanones,withlessthan10%.Themarketingstrategiesoftheseenterprisesvaryconsiderablyacrossregions.InChina,mostofthewindfarmsthathavebeeninstalledwerebuiltbyChinesemanufacturers,accountingformorethan95%ofthetotalcapacitydeployeddomestically.Europeanmanufacturershaveamuchmoreinternationalbusiness,installingaround65%oftheiroutputinotherregions,wheretheyhavebuiltlocalmanufacturingfacilities.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE95IEA.CCBY4.0.Regionalsharesofmanufacturingcapacityforselectedmass-manufacturedcleanenergytechnologiesandcomponents,2021IEA.CCBY4.0.Notes:FC=fuelcell.Heatpumpscapacityreferstothermaloutput.Sources:IEAanalysisbasedonInfoLink(2022);BNEF(2022);BNEF(2021b);BenchmarkMineralIntelligence(2022);GRV(2022);UN(2022a);WoodMackenzie(2022).Around90%ofmass-manufacturingcapacityforseveralkeycleanenergytechnologiesisconcentratedinChinaandtheAsiaPacificregion.EVbatteriesThemarketforEVsisbooming.SalesofEVsnearlydoubledto6.6millionin2021andexceeded10millionsalesin2022.Ofthese,mostwerefullbatteryEVs,accountingforover70%ofEVssold,withtherestbeingplug-inhybrids.EVmanufacturinghascertainsynergieswithothersectors,mostobviouslywiththeconventionalinternalcombustionengine(ICE)vehicleindustry.ThoughtheproductionofEVsinvolvesthemanufacturingofspecialtycomponentsnotusedformakingICEvehicles,withthebatterybeingthemostcriticalcomponent.TherapidincreaseinEVsalesand,morerecently,Russia’sinvasionofUkraine,haveEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE96IEA.CCBY4.0.testedtheresilienceofbatterysupplychains,thoughoutputhastodatemanagedtokeeppacewithdemand.GlobaldemandforautomotiveLi-ionbatteriesdoubledto340GWhin2021.ChinadominatesproductionateverystageoftheEVbatterysupplychain,withtheexceptionoftheminingofmetalsneededtomakecathodematerials.Two-thirdsofglobalbatterycellproduction,aswellasaround80%oftheproductionofcathodeandover90%ofanodematerial,isinChina.EuropeisresponsibleforoveraquarterofEVproduction,butholdsverylittleoftherestofthesupplychainapartfromcobaltprocessing,inwhichithasashareofaround16%(mostlyinBelgiumandFinland).TheUnitedStateshasasmallerstakeintheglobalEVbatterysupplychain,withonlyaround10%ofEVandbatteryproductioncapacity.BothKoreaandJapanhaveconsiderablesharesofthesupplychaindownstreamofrawmaterialprocessing,particularlyincathodeandanodematerialproduction.Koreaholds13%ofglobalcathodeand3%ofanodematerialproductioncapacitywhileJapanaccountsfor14%(cathode)and10%(anode).BothEVsandtheirbatteriestendtobeproducedclosetowheretheyaresold.OnlyChinaexportssignificantamountsofbothEVsandbatteriesoverlongdistances.Thetopfivebatterymanufacturers,headquarteredinKorea,ChinaorJapan,holdover50%ofglobalmanufacturingcapacity,withChina’sCATL–ContemporaryAmperexTechnologyCo.Limited,themarketleader–aloneholdingaround15%.EVbatteryproductioncapacitycurrentlyexceedsdemand,asfactorieshavegenerallybeendeliberatelyoversizedinanticipationofcontinuingstronggrowthindemand.Inaddition,somefactoriesarestillrampingupproductiontoreachnameplatecapacity,aprocessthatcantakefromthreetosixyears(Fleischmannetal.,2021).Overcapacityisnonethelessstartingtofall:theglobalaverageutilisationrateforalltypesofbatteryfactorieswas43%ofcapacityin2021,upfrom33%in2020.FuelcelltrucksAlmost900heavy-dutyfuelcelltrucks9weresoldworldwidein2021,90%oftheminChina.Switzerlandwasthesecond-largestmarket,witharound8%ofsales.Theproductionoffuelcelltrucksinvolvesthemanufacturingofsomespecialtycomponentsnotusedformakingconventionaldiesel-basedICEtrucks.Theyincludethehydrogentanksforon-boardstorageandthefuelcellsystem.Currently,globalfuelcelltruckmanufacturers’claimednameplatecapacityaggregatestoover13000trucks/year,implyingsignificantidlecapacityand9Heavy-dutyreferstotruckswithagrossvehicleweightover15tonnes.WefocusonthisspecificvehiclesegmentasitisthevehiclecategorythatisprojectedtohavethelargestshareoffuelcellvehiclesintheNetZeroEmissionsby2050Scenario.Theglobalfleetofbatteryelectricheavy-dutytruckswasmorethananorderofmagnitudebiggerthanthatoffuelcelltrucksin2021.Theformerisprojectedtoremainthedominantzero-emissionpowertraininthatscenario.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE97IEA.CCBY4.0.enormouspotentialtoincreasenear-termdeploymentwithexistingfacilitiesconcentratedinChina,Korea,theUnitedStatesandEurope.TheleadingmanufacturersoftrucksareChina’sSAICHongyan,whichcanmanufacturearound3000trucks/year,Korea’sHyundai(2000trucks/year),andtheAmericancompaniesHyzonMotors(1000trucks/yearintheNetherlands)andNikola(2500trucks/yearintheUnitedStatesand2000trucks/yearinGermany).Manyotherestablishedmanufacturersarealsowellpositionedtobeginproductionoffuelcelltrucksinthenearfuturegiventheshortleadtimesinvolvedinretoolingexistingassemblyplantsandthelargeshareofcomponentscommontofuelcell,batteryelectricandICEtrucks.Severalfuelcellsuppliersarecollaboratingwithtruckmanufacturers,forexample,CumminswithDaimlerintheUnitedStatesandScaniainEurope;KenworthwithToyotaintheUnitedStatesunderalong-standingdeal;andWeichaiPowerandSinotruckinChina.Allthesemanufacturerscouldquicklyramp-upproductionbyleveragingtheirsubstantialexistingcapacityandsupplychains.Fuelcelltruckstypicallyrelyonproton-exchangemembrane(PEM)technologythatconvertshydrogentoelectricity,whichisusedtopowertheelectricmotorandchargethevehicle’sbattery.PEMfuelcellmanufacturingcapacityforallvehicles,includingcars,vans,trucksandforklifts,totalledover290000systems/yearin2021andisthoughttohavereachedover330000systems/yearin2022.Around65%ofcapacityin2021wasinChina,wheretheleadingproducersareRefire,SinoSynergy,WeichaiandWuhanHydraVFuelCellTechnologies.Koreahasover15%ofcapacity,withHyundaithelargestmanufacturer.Thereissubstantialexistingmanufacturingcapacityforhigh-pressureon-boardvehiclehydrogenstoragetanks.Theleadingmanufacturershavetakenadvantageoftheknowledgeandexperiencegainedwithothercompressedgasstorage,inparticularnaturalgas.Manyalsosupplyequipmentforhydrogendistributionviatubetrailersandforstationaryhydrogenstoragesuchasatrefuellingstations.High-pressurestoragevesselmanufacturingisalreadywell-establishedinNorthAmerica,EuropeandAsia.Anumberofmanufacturersofthistypeofequipmenthaveeitheralreadyenteredthemarketforon-boardhydrogenstorageforheavy-dutyvehiclesorplantodoso.Luxfer,whichhasfactoriesinCanada,China,theUnitedKingdomandtheUnitedStates,providedtanksfortheHyundaiheavy-dutytruckssoldrecentlyinSwitzerland.HexagonPurus,whichhasmanufacturingfacilitiesinCanada,GermanyandtheUnitedStates,hasacontracttoprovideon-boardstoragetankstoNikola.Toyotacurrentlymanufacturesitsowntanksandisalsopositioningitselfasasuppliertoothermanufacturers.HeatpumpsMorethan1000gigawattsthermal(GWth)ofheatpumpcapacitywasinoperationinbuildingsworldwideattheendof2021,meetingaround10%ofthetotalbuildingEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE98IEA.CCBY4.0.heatingneeds.Globalheatpumpsalesincreasedbyabout13%in2021.ThemarketgrewquickestintheEuropeanUnion,wheresalesrose35%,theUnitedStates(15%),Japan(13%)andChina(13%forair-sourceheatpumps).Air-sourceheatpumps(air-airandair-water)accountforthemajorityofheatpumpsalesworldwide,makingupover80%ofthemarketin2021.Globalheatpumpmanufacturingcapacity(excludingairconditioners)amountedtoaround120GWthattheendof2021.ManufacturingisdominatedbyChina,withalmost40%oftotalcapacity,NorthAmerica(30%),Europe(15%)andotherAsiaPacific(over10%).WhileChinaandotherAsiaPacificdominatetheglobalheatpumpmarket,inparticularforsplitsystems(withbothindoorandoutdoorunitsconnectedbyasetofpipes),Europeistheleaderinthemarketforhydronicsystems(wherebyheatisconveyedviahotwater)andlarge-scaleapplications.Thetopfourglobalmanufacturersaccountedforaround40%oftotalcapacityin2021.Heatpumpmanufacturersmostlyservethelocalmarket,withonlyChinaexportingsignificantnumbersofheatpumps.Severalheatpumpcomponentssuchasfans,pumps,tanks,expansionvalves,heatexchangersandcompressorsarealsocommontootherheatingequipmentorotherindustries.Inparticular,spaceheatingandwaterheatingheatpumpssharethesametypeofcomponentswithair-conditioningunitsandrefrigerators,whichmakesthetotaldemandforcomponentsoftherefrigerationcyclemuchlargerthantheonefromheatpumpsalone.Nonetheless,thesecomponentsarenotalwaysinterchangeableacrossequipment.Theirproductioniscurrentlydominatedbyasmallnumberofcompanies.Someofthemainheatpumpmanufacturersalsomakeheatpumpcomponentssuchasheatpumpcompressors,whichcurrentlymakeupaboutone-quarterofthecostofaheatpump,andfans.Mitsubishi,CarrierandDaikin,whichtogetheraccountedforover30%ofalltheheatpumpsproducedin2021,alreadyproducetheirowncompressors.Whilecompressorsareneededinmanyindustries,thedesignandmanufacturingofsuchacomponentisaspecialisedindustryandsomeheatpumpcompressorsmightrequirespecificdesignsforcertaintemperaturerangesandrefrigerants.Themarketiscurrentlydominatedbyafewsuppliers.Europeimportsalargeshareofthecompressorsitneedstomakeair-airheatpumps,whereasthecompressorsitneedsforair-waterandground-sourceheatpumpsaretypicallymanufacturedwithintheregionbycompaniessuchasDanfoss,BitzerandEmersonCopeland(Lyonsetal.,2022).Theglobalheatpumpindustryisfacingsomebottlenecksamidrapidgrowth,inpartduetolimitedsuppliesofsemiconductors,whichareusedincontrolpanels,electricpumpsandfans.However,somemanufacturersintheheatpumpindustryareconfidentthatcurrentshortagescanbeovercomewithinthenext12-18EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE99IEA.CCBY4.0.months.Ifcomponentsbecomeavailable,theremaybepotentialtoincreaseoutputatexistingfacilitiesbyroughly20%.10Insomecases,thereisalsopotentialforassemblylinestoswitchbetweenproducingairconditionersandheatpumps,whichusesimilartechnology(reversibleheatpumpscanproducebothheatandprovidecooling).Thescopeforraisingproductionatshortnoticevariesamongmanufacturers.Some,particularlyinEurope,arealreadyoperatingatratesclosetomaximumcapacity.ThemanufactureofrefrigerantsusedinheatpumpsisconcentratedinChinaandNorthAmerica,withtheformerbeingthelargestexporter(CEMAC,2020;UnitedKingdom,DepartmentforBusiness,Energy&IndustrialStrategy,2020).Thelocationofmanufacturingsitesisdrivenprimarilybytheproximityofchemicalfeedstockandtheavailabilityofacheapandspecialisedlabourforce.KeyrefrigerantmanufacturersincludeHoneywellInternationalandChemoursCompanyintheUnitedStates,DongyueGroupandSinochemGroupinChina,andDaikininJapan.HeatpumpingtechnologiespredominantlyrelyonhydrofluorocarbonrefrigerantssuchasR410A,buttheshareofotherswithlowerglobalwarmingpotentials(GWPs),suchasR32,andnaturalrefrigerants(suchaspropane)israpidlyincreasing(BSRIA,2020).ElectrolysersTechnologiestoproducelow-emissionhydrogentodayincludewaterelectrolysisandfossil-basedhydrogenwithcarboncaptureandstorage(CCS),generallyusingnaturalgasasthefeedstock(seebelow).Waterelectrolysers,whichcanbemassproduced,arecurrentlybasedonasmallnumberoftechnologies,includingalkaline,polymerelectrolytemembrane,solidoxideelectrolysercell(SOEC)andanionexchangemembrane(AEM).Alkalinetechnologiesdominatethemarkettoday,thoughpolymerelectrolytemembraneonesarealsocommerciallyavailable.SOECandAEMelectrolysersareunderdemonstration,withtheformeratalargescale,andareexpectedtobecommercialisedsoon.Alkalineelectrolysersareextensivelydeployedinthechlor-alkaliindustry,whichaccountsforthemajorityofthecurrentglobalinstalledelectrolysercapacityofmorethan20GW.However,thiscapacityisdedicatedtotheproductionofchlorine,withhydrogenbeingaby-productoftheprocess.Onlyaround500MWofelectrolysershadbeendeployedgloballyforthededicatedproductionofhydrogenasoftheendof2021,producingaround35ktthatyear.Thereisagrowingnumberofprojectsunderdevelopmentthoughand,ifallwererealised,globalinstalledelectrolysercapacitycouldreach134GWin2030,11withEurope,10IEAanalysisbasedonresearch,industryconsultationanddatafromGlobalResearchView.11Thiswouldincreaseto240GWifprojectsatveryearlystagesofdevelopment(i.e.whereonlyaco-operationagreementamongstakeholdershasbeenannounced)areincluded.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE100IEA.CCBY4.0.AustraliaandLatinAmericaaccountingfornearlythree-quartersofthiscapacity.Alkalineelectrolysersaretechnologicallylesssophisticatedanddonotrequireexpensivecatalysts,thoughtheiroperationislessflexiblethanpolymerelectrolytemembraneorAEMonesandarelessefficientthanSOECones.Theycan,nonetheless,provideenoughflexibilitytodealwithintermittentrenewablesandprovideprimarygridservices(Thyssenkrupp,2020).Electrolysermanufacturingcapacityworldwidetodayamountstoaround10GWperyear,whichismuchlargerthancurrentannualdeployment(IEA,2022a).Thissparecapacitywouldbemorethansufficienttomeetrelativelysmallincreasesindemandinthenearterm.Largerincreasesinlinewithgovernmentclimatetargetsandannouncedindustrialplansforelectrolysis-basedproductionofhydrogenwouldrequirenewmanufacturingcapacity.Electrolysercomponentscanbeproducedonalargescaleandeasilydistributedgloballytofacilitieswhereelectrolysersystemsareassembledandsoldlocally.Transportingthewholeelectrolyseroverlongdistancesiscostlyanddifficult,astheyarebulky.ElectrolysersarecurrentlymanufacturedmostlyinChina,whichholdsover40%ofglobalcapacity,andinEurope,at25%.TherestaremadeinNorthAmerica,JapanandIndia.Thereareanumberofcompaniesactiveinthesector,includingThyssenkruppNucera,PERIC,JohnCockerillandNelHydrogen.Chinesemanufacturershave,onaverage,largermanufacturingcapacitiesperplantthanthoseinEurope.ChinaiscurrentlytheleaderinalkalineelectrolysersthankstocheapermaterialsandlabourthaninEurope.Large-scalesite-tailoredtechnologiescouldexploitsynergiesLarge-scalesite-tailoredtechnologiesaresettobenefitfromextensivesynergieswithotherindustries,especiallyoilandgas,thathavewell-establishedsupplychains.Fornow,theirdeploymenthasbeenconcentratedinafewregionsonly,sosupplychainsarerelativelyunder-developed,incontrasttomass-manufacturedtechnologies(Figure2.8).InEurope,anumberofpolicieshavebeenputinplacetoencouragethetake-upofcleanenergytechnologies,favouringdeploymentofemergingtechnologieswithlimitedinternationaltrading,suchaselectrolysersandDACplants.TheUnitedStatesiswell-placedtobuildlarge-scalefacilitiesthankstoafavourablepolicyenvironmentandextensiveinfrastructure.Thisshouldsupportthedeploymentofemergingcleanenergysupplychains,includingfortheproductionoflow-emissionhydrogenandlow-emissionsynthetichydrocarbonfuels.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE101IEA.CCBY4.0.Regionalsharesinglobalinstalledoperatingcapacityofselectedlarge-scalesite-tailoredcleanenergytechnologies,2021IEA.CCBY4.0.Notes:DAC=directaircapture;BECC=bioenergywithcarboncapture;Gas-CCSH2=naturalgas-basedhydrogenproductionwithCCS;hc=hydrocarbon;bbl=barrel.Sharesarebasedonnominalcapacity.Synthesisreferstolow-emissionsynthetichydrocarbonfuelsproduction.Sources:IEAanalysisbasedoncompanyannouncements.Thecapacityoflarge-scalesite-tailoredcleanenergytechnologiesisalmostentirelyconcentratedinEuropeandNorthAmerica.Low-emissionhydrogen:Naturalgas-basedhydrogenwithCCSLow-emissionhydrogencanbeproducedusingnaturalgasorbiomassasthefeedstockinconjunctionwithCCS,inadditiontowaterelectrolysis.Steammethanereforming(SMR)iscurrentlythedominanttechnologyforgas-basedproductionofhydrogen,thoughautothermalreforming,whichleadstohigherefficienciesand,whencombinedwithCCUS,highercapturerates,isexpectedtogainmarketshareinthefuture.12PartialelectrificationoftheSMRprocesscouldalsohelpcutcombustionemissions,leavingonlytheconcentratedprocessfluxofCO2tocapture.Around0.1%ofthededicatedglobalhydrogenproductionofnearly94Mtin2021camefromwaterelectrolysis,butitsmarketsharecouldincreaseinthefuturewithlowerrenewableelectricityandelectrolysercosts.AlthoughonlyafewSMRwithCCUSplantsareinoperationtoday,thereisconsiderableexperienceinbuildingandoperatingthem,andstrongsynergieswiththeoilandgassector,characterisedbywell-establishedsupplychainsforcomponentsandaskilledlabourforce.Atpresent,therearesixsuchplantsoperatingaroundtheworld,withatotalinstalledproductioncapacityofaround0.3Mtofhydrogen,alloftheminNorthAmerica(inrefineriesandfertiliser12InanSMRprocess,naturalgasistransformedintosyngasinareformer,whichisthenconvertedintoahydrogen-richmixtureinawater-gasshift(WGS)reactor,fromwhichhigh-purityhydrogencanbeobtained.Roughly60%oftheprocessCO2comesfromnaturalgasoxidationinthereformerandWGSreactorinahighconcentrationstream,whichcanbecapturedrelativelyeasily,whiletherestisemittedfromthereformerfurnace,inalowerconcentrationfluegasstream.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE102IEA.CCBY4.0.factoriesequippedwithCCUSasearlyasthe1980s).13Whileover95%oftheCO2emittedduringhydrogenproductioncanbecaptured,mostcaptureunitswereinstalledtocaptureonlyprocessemissions,whichmakeuproughly60%oftotalplantemissions.Low-emissionsynthetichydrocarbonfuelsLow-emissionsynthetichydrocarbonfuelscandisplacefossil-basedfuelsforapplicationswherealternativecarbonmitigationoptionsarenottechnicallyorcommerciallyavailable.Synthetichydrocarbonfuelsaremadefromsynthesisgas(primarilyamixtureofhydrogen,carbonmonoxideandCO2)usingcatalysts.SuitablefeedstocksincludeelectrolytichydrogenandatmosphericCO2,captureddirectlythroughDACorindirectlythroughBECC.Dependingonthechoiceofcatalystandprocessconditions,variousfuelscanbeproducedfromsynthesisgas.Theproductioncapacityforlow-emissionsynthetichydrocarbonfuelsisextremelylimitedtoday,withonlythreepilotprojectsinEurope.AlthoughCO2canalsobecapturedfromconcentratedsourcessuchasindustrialandpowerplants,usingsuchCO2forsynthetichydrocarbonfuelsproductionwouldeventuallyincreasethetotalamountofCO2intheatmosphere.Inanetzeroenergysystem,CO2willneedtocomefromDACorBECCplants.DACandBECCplantsarecurrentlyassembledandbuiltbyjustafewcompaniesbasedinEuropeandNorthAmerica.Thesecompanieseitherbuildandoperatetheirownplants,orlicencetheirintellectualpropertytoprojectdeveloperswhoareinchargeofmanufacturing,assembling,buildingandcommissioningtheplant.Giventhesmallnumberofplayers,thereisnoestablishedtraderoutebutratherpartnershipsbetweensuppliersandprojectdevelopers.SomecomponentsofbothDACandBECCplantssuchasseparationcolumns,CO2compressorsandheatexchangers,whichareusedinoilrefiningandotherindustrialsectors,arecurrentlymassmanufacturedandwidelytradedattheinternationallevel.Around2.5MtofbiogenicCO2peryeariscurrentlybeingcapturedannuallyaroundtheworld,morethan90%ofitfrombioethanolplants.Aroundhalfofthecapturedgasisused,mainlyinthefoodandbeverageindustryandforenhancedoilrecovery,whiletheotherhalfisstoredundergroundindedicatedfacilities.BECCplantsareconcentratedintheUnitedStates,thoughsomesmaller-scaleplantsoperateinEuropeandJapan.Mostofthe17DACplantsinoperationareyoung–aroundfiveyearsoldonaverage–andverysmall:thelargestoperating13TheAlReyadahsteelmillinAbuDhabi,whichfeaturesCO2capturefromgasreforminganddirectironreduction,isalsoconsidered(inherent)low-emissionshydrogenproductionunderIEAdefinitions,butisexcludedhereasnotstrictlySMRwithCCUS.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE103IEA.CCBY4.0.planthasanominalcapturecapacityofjust4000tonnesofCO2/year.GlobalDACcapturecapacityamountstoaround8000tonnesofCO2/year.Synthetichydrocarbonfuelproductioncurrentlyreliesonthemethanol-to-gasolineorFischer-Tropsch(FT)process,bothofwhicharewell-establishedtechnologies.Whileupto800PJ/yearoffossil-basedFTsynthesishasbeendeployedtodate,onlyaround0.02PJ/year(11bbl/day)ofthisislowemissions.ThisincludesthreepilotprojectsinEurope–twoinGermany(AtmosfairandKopernikusprojects)andoneinFrance(Methycentreproject)–thatuseCO2sourcedfrombiogasupgradingorDAC.Onlyonecompany–Germany’sINERATECGmbH–iscurrentlymanufacturingthereactorsneededforthosepilotFTplants.Large-scale,fossil-basedFTplantsandtheirmanufacturingarecurrentlyconcentratedintheMiddleEast,ChinaandSouthAfrica.Theseplantshavebeencommissionedandoperatedbyafewlargeengineeringandoilandgascompanies,includingSasol,ShellandSynfuelsChina.Someofthecomponentsandcompetencescouldbeeasilytransferredfromfossil-basedapplicationstolow-emissionones.Low-emissionFTplantswouldmakeuseofthesamecatalysts–akeycomponentinthesynthesisprocess–thatareusedtodayinfossil-basedapplications.Theyareheavilyreliantoncriticalmaterials,includingcobalt,rhodium,ruthenium,platinumandpalladium.Theyhavebeenproducedonalargescalefordecades,sotheneedsofnewlow-emissionplantscouldtakeadvantageofexistingsupplychains.Afewofthetopcatalystproducers,includingClariant,AxensandVelocys,areactivelyinvolvedinlow-emissionFTprojects.Thegeographicaldistributionoftheseandothertopcatalystmanufacturersmirrorthatofthesmall-scaleFTmanufacturers,withactivityconcentratedinEuropeandtheUnitedStates.Internationaltradeinminerals,materialsandenergytechnologiesShiftingfromafossilfuel-basedenergyeconomytoonethatprovidestherawmaterialsneededtomakecleanenergytechnologiesandrelatedinfrastructureinvolvesamajorchangeintradeflowsamongthedifferentstepsoftheirsupplychains.Theleadingproducingcountriesofmaterials,andmanufacturersofequipmentandcomponentsforcleanenergytechnologies,generallydiffermarkedlyfromthemainfossilfuelproducers.Vulnerabilitiesassociatedwiththegeographicalconcentrationofproductionandmanufacturingfacilitieswillundoubtedlypersistformanycommoditiesandtechnologies,especiallyforthosewithlongleadtimes,anddespiteeffortstodevelopdomesticcapacityanddiversifysourcesofsupply.Thiscouldleadtobottlenecks,disruptionsinsupplyanddelaysindeployingsomecleanenergyEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE104IEA.CCBY4.0.technologies.Thewayinternationaltradepolicyandtariffsplayoutwillbeacrucialfactorindeterminingthepaceatwhichcleanenergytransitionsadvance.CriticalmineralsareheavilytradedregionallyCriticalmineralsarecurrentlythemostheavilytradedinputstocleanenergysupplychains,drivenbytradeinlithiumandcobalt.Fortheseminerals,theshareofinter-regionaltradeintotalproduction14isaround40%higherthanthatofbulkmaterialsand150%higherthanthatoffossilenergy(Figure2.9).Thedegreetowhichcriticalmineralsaretradedvariesaccordingtotheirgeographicaldistribution.Forexample,aboutfour-fifthsofcobaltproductionandjustunderhalfofthatoflithiumaretradedacrossregions,asoresareoftenrefinedinChina,evenifextractedelsewhere.Theshareofoutputthatistradedislowerfornickeloreandcopperore,around40%,asabiggershareofthesemineralsisrefinedintheregionwhereitisextracted.Theshareoftradeintheproductionofcriticalmaterials(e.g.lithiumcarbonate,refinedcopper)isgenerallylower.Polysiliconisalsorelativelylesstradedacrossregions,notablyduetoChina’sdominantpositioninpolysiliconproductionanduse.Theshareofinter-regionaltradeislesspronouncedforbulkmaterialsrequiredincleanenergysupplychainsandinfrastructure,typicallyaveraging25-40%.Aluminiumandplasticsareatthehigherendofthisrange,asthelocationofaluminiumproductionisusuallydeterminedbyaccesstocheapelectricityandthatofplasticstocheapoilandgas.Furtherdownthesupplychain,finalcleanenergytechnologiesandproducts–withthenotableexceptionofsolarPVmodules–arelessheavilytraded.14Theshareoftradeiscalculatedasthesumoftrade(theaverageoftotalexportsandtotalimports)dividedbyglobalproduction.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE105IEA.CCBY4.0.Shareofinter-regionaltradeinglobalproductionforselectedminerals,materialsandtechnologies,2021IEA.CCBY4.0.Note:Dataarefor2020forcoal,oil,gas.TheshareiscalculatedasthesumoftradetoandfromAfrica,AsiaPacific,CentralandSouthAmerica,China,Eurasia,Europe,Japan,Korea,theMiddleEast,andNorthAmericadividedbyglobalproduction.Sources:IEAanalysisbasedonWBMS(2022);S&PGlobal(2022a);USGS(2022);Worldsteel(2022b);IEA(2021a);IEA(2022b);IEA(2022c);UN(2022a);BNEF(2021c);E4tech(2022).Criticalmineralsaregenerallytradedacrossregionsmorethancriticalandbulkmaterials,cleanenergytechnologyequipmentandproducts,andfossilenergy.Formatureandestablishedsupplychainsofalltypes,governmentsandindustrytypicallyhandletherisksassociatedwithgeographicalconcentrationbyestablishingdedicatedmechanismstominimisetheimpactsofpotentialdisruptionsandincreasediversityofsupplies.Manycleanenergytechnologysupplychainsarenewandevolvingrapidly,socanbemorevulnerabletohighgeographicalconcentration.Forinstance,forthree(batteries,wind,solarPV)outofthetencleanenergytechnologiesanalysedinthisreport,over70%ofthemanufacturingcapacityislocatedinChina,andover35%foranotherthreetechnologies.Inadditiontotheenergysecuritybenefitsofgreaterdiversity,thereisahugeeconomicopportunitytobegraspedbycountriesandindustrybyinvestinginthesupplychainsofnewandemergingcleanenergytechnologies.0%20%40%60%80%HeatpumpsWindturbinesSolarPVFuelcellsLi-ionbatteriesElectriccarsPlasticsIronandsteelAluminiumPolysiliconNickelrefinedproductsCopperrefinedproductsBauxiteoreNickeloreLithiumoreCopperoreCobaltoreNaturalgasCrudeoilCoalCleanenergytechnologiesBulkmaterialsRefinedcriticalmineralsRawcriticalmineralsFossilfuelsEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE106IEA.CCBY4.0.Tradebalancealongsupplychainsinselectedcountries/regions,2021IEA.CCBY4.0.Notes:Tradebalanceisthevolumeofnetexportsdividedbyproductionineachregionforthenetexporters(positive)orimportsdividedbyconsumptionineachregionforthenetimporters(negative).Darkredindicatesahighershareofimportsintotalconsumption,whilelightredindicatesasmallershare.Blueisforexportswithdarkershadesindicatingahighershareofexportsovertotalproduction.Theanalysisisbasedonphysicalunits,notmonetarytradeflows.Duetodataavailability,monetaryflowsareusedforheatpumpsandwindturbines.Sources:IEAanalysisbasedonWBMS(2022);IEA(2021a);IEA(2022b);IEA(2022c);IEA(2022d);USGS(2022);Worldsteel(2022b);UN(2022a);BNEF(2021c);E4tech(2022);ThomsonReuters(2022);OICA(2022).China,JapanandKoreaaremajornetexportersofmostcleanenergytechnologiesbutimportersofcriticalmineraloretomeettheirneeds.China’sdominanceinsupplychainstodayisnotacoincidence.Itscleanenergytechnologyindustryhasbeenoveradecadeinthemaking,drivenbyindustrialpolicyfocusedonseveralkeytechnologies.Chinaisakeynetglobalexporterofmanycleanenergytechnologies,notablysolarPVmodules,exportingoverhalfofitsoutput(Figure2.10).Chinaaccountsfor25%oftheinter-regionalexportsofEVsandover80%ofLi-ionbatteries,mostlygoingtoEuropeandotherAsiancountries,thoughmostofthecountry’soutputofthesegoodsgoestothedomesticmarket.Chinaisclosetobeingself-sufficientinbulkmaterialsandexportsasignificantshareofsteel.However,ChinaisalargeimporterofothermaterialsChinaEuropeUnitedStatesJapanKoreaLi-ionbatteries13%-30%-7%27%-14%Electriccars8%-27%3%76%58%Fuelcells–mobility5%-92%-4%61%8%Electrolysers0%0%0%0%0%SolarPV–modules52%-100%-65%-92%45%Windturbines14%6%-38%-46%80%Heatpumps14%-25%2%17%8%Lithiumore-75%0%-100%0%0%Cobaltore-98%-100%100%-100%0%Nickelore-88%-66%100%-100%-100%Copperore-80%-40%30%-100%-100%Nickelrefinedproducts-51%-22%-100%23%-58%Copperrefinedproducts-25%-11%-45%41%-1%SolarPV–polysilicon-54%37%17%40%64%Coal-8%-43%15%-100%-99%Oil-78%-72%-18%-97%-100%Naturalgas-41%-57%9%-98%-98%Ironandsteel5%2%-24%31%17%Plastics-21%-10%21%6%44%Aluminium-7%-53%-80%-100%-100%Energytechnologyaverage15%-38%-16%6%26%Criticalmineralsaverage-85%-52%33%-75%-50%Refinedcriticalmineralsaverage-43%1%-43%35%2%Energy(fossil)average-42%-57%2%-98%-99%Bulkmaterialsaverage-8%-20%-28%-21%-13%AveragesEnergytechnologyBulkmaterialsCriticalmineralsFossilenergyEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE107IEA.CCBY4.0.andproductssuchassomecriticalminerals,fossilfuels,polysiliconandcriticalmaterialssuchasnickel(mainlyfromIndonesia).EuropeisabigimporterofcleanenergytechnologiessuchasEVs,batteries,fuelcellsandsolarPV(itimportsnearlyallitssolarpanels),butisanetexporterofwindturbinecomponents(accountingforaquarterofinter-regionalexports).Itimportslargevolumesofmaterialssuchasaluminiumand,toalesserextent,plastic,whileitexportspolysilicon(accountingfornearlyhalfofexports).Itimportsmostofitsmineralsandfossilfuels,exceptthoseforwhichithasnoprocessingcapacityatpresent,suchaslithium.TheUnitedStatesisasmallnetimporterofmostcleanenergytechnologies.TheshareofimportsinmeetingdomesticdemandarehighestforsolarPV,ataroundtwo-thirdsofdomesticdemand.ThanksmainlytoTesla,theUnitedStatesisanetexporterofEVs,andaccountsfornearly20%oftotalinter-regionalexports.TheUnitedStatesisamajornetimporterofrefinedcriticalmineralsandaluminium,butimportsalmostnorawcriticalmineralasithasverylittlerefiningcapacity.Bycontrast,itisanetexporteroffossilfuelswiththeexceptionofcrudeoil,15aswellasplastics(USEIA,2022).JapanexportsmorethanhalfofitsproductionofEVs(althoughoverallvolumesaresmall).Itaccountsfor80%oftotalexportsoffuelcells,mainlypassengercars.Bycontrast,itreliesmainlyonimportsforsolarPVmodules.KoreaisanetimporterofEVbatteries,entirelyfromChina,butisanetexporterofEVsandsolarPVpanels.Together,JapanandKorearepresentoveraquarteroftheglobaltradeofEVs(Chinamakesupforanotherquarter)anddominatethenascentexportmarketinfuelcellvehicles.Bothcountriesimportthevastmajorityofthemineralsandfossilfuelstheyconsume.PolicyhasbeenkeytotheboominEVtradeThepositionofcountriesandindustriesinthesupplychainsofnewandemergingtechnologiesdependsonavarietyoffactors,rangingfromtheaccesstoresourcestothecostofproductionandtheskillsavailableinthedomesticworkforce.Industrialpolicyandplanningisanotherkeydriver.TherecentevolutionofglobaltradeinLi-ionbatteriesandEVs(Figure2.11)providesausefulcasestudyofhowindustrial,climateandenergypoliciescanworktogethertospurthedevelopmentofnewindustriesalongcleantechnologysupplychains.15Intermsoftotalpetroleum,theUnitedStatesisanetexportersince2020forthefirsttimesince1949.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE108IEA.CCBY4.0.Globaltradeflowsoflithium-ionbatteriesandelectricvehicles,2021IEA.CCBY4.0.Notes:Unit:GWh.FlowsrepresentbatterypacksproducedandsoldasEVs.Sources:IEAanalysisbasedonEVVolumesfromBenchmarkMineralIntelligenceandcompanyannouncements.ChinaistheleadingexporterofbothEVsandtheirbatteries,soldprimarilytoEurope,whiletheUnitedStatesislargelyself-sufficientinboth.ChinahasatoweringpresenceinglobalEVandbatterymarkets,supplyingbothdomesticandinternationalmarkets.Europeisthemaintradepartner:nearly25%ofthebatteriesusedinEVproductioninEuropecomefromChina,andmorethan15%ofthebatteriesembeddedinEVssoldinEuropeaswell.China’sEVindustryhasdevelopedquicklyinthelastdecadethankstosustainedpolicysupportsuchasdomesticEVpurchaseincentivesinplacesince2009.Theseschemesofficiallyopenedupnationwidein2013andwereexpandedin2014withtheintroductionoftaxexemptionsforEVconsumers(GovernmentofChina,2013;2014).Inresponsetoweakerthanexpecteddemand,bothmeasureswereextendedseveraltimes.Domesticelectriccarsalesgrewfromaround15000in2013toaround220000in2015,makingChinathelargestEVmarketintheworldeversince.Salesreachedaround6.4millionin2022.ThefocusofChina’sEVpolicyondomesticsaleshasattractedinternationalcarmanufacturerstoproducemodelsthere.Around20%ofalltheelectriccarssoldinChinain2021weremadebyforeigncarmakers.BecauseEVproductioncostsinChinaarerelativelylow,thosecarmakers,aswellasdomesticones,alsoexportpartoftheirChineseoutput.Forexample,around60%oftheEVssoldinEuropeandimportedfromChinaweremanufacturedbyinternationalcarmakerssuchasTesla(Figure2.12).EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE109IEA.CCBY4.0.EVimportstoEuropebycountryofproductionandmanufacturer,2021IEA.CCBY4.0.Source:IEAanalysisbasedonEVVolumes(2022).Europeimports40%ofitsEVsfromChina.Overall,mostimportsaremanufacturedbycarmakersheadquarteredintheUnitedStates(30%),EuropeandKorea(20%each).TheexpansionofbatterymanufacturingcapacitytosupplytheEVindustryhasalsobeenastrategicpriorityinChina.In2015,China’sMinistryofIndustryandInformationTechnology(MIIT)releasedtheAutomotivePowerBatteryIndustryNormativeConditions,aimingtoencourageEVbatterydevelopmentandregulatetheindustry(China,MIIT,2015).From2015to2016,MIITreleasedfourlistsofcompaniesthatmettheseconditions,thelastonewith57companies,allofwhichwereChinese.SinceEVsonsaleinChinaneedtobeequippedwithbatteriesfromthelistedcompaniesinordertoreceivegovernmentsubsidies,thispolicyfavouredthegrowthofdomesticcompanies.ThishelpedtocreateglobalgiantssuchasCATL,whichisnowtheworld’slargestbatterymaker.In2019,MIITofficiallyannouncedtheabolitionofthecompanylists,whichhasbroughtbackcompetitionfromforeigncompanies(ChinaMIIT,2019).In2021,Chinaheld75%ofglobalEVbatterymanufacturingcapacity,which,at685GWh,wassignificantlyhigherthanannualbatterydemandof210GWh.Chinaalsohashightradetariffs,of40%,forbattery-relatedgoodsimportedinthecountry,whichencouragesdomesticproduction.Before2013,Chinaalreadyheldlargesharesoftheglobalrefiningofbatterymetals,notablylithiumandcobalt,aswellasmanufacturingofanodesandcathodes,thankstoitslargebatteryindustrytosupplyconsumerelectronics.TheseindustrieshaveboomedwiththerisingEVdemand,leadingmanytraditionalforeignbatterymakersfromKoreaandJapantoinvestinChina.LGbuiltitsfirstbatteryfactoryinChinain2014,whilePanasonicopenedonein2017.ExistingsupplychainsandChina’sstrongmanufacturingbasefacilitatedtherapidexpansionoftheseproductionfacilities.IntheEuropeanUnion,strategicindustrialpolicyonbatteriesbeganmuchlater.In2017,theEuropeanCommissionsetuptheEuropeanUnionBatteryAlliance–050100150200250300ChinaKoreaUSJapanOtherThousandvehiclesLocationofEVsproducedforexporttoEuropeChinaJapanKoreaUSEuropeCarmakerheadquartersbasedin:EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE110IEA.CCBY4.0.apublic-privateorganisationtaskedwithco-ordinatingEuropeanindustrialplayerstospurinvestmentsinthebatteryindustry–whichresultedinthe2018StrategicActionPlanforbatteries.ThisworkwasfollowedbytheimplementationofImportantProjectsofCommonEuropeanInterest(IPCEI),throughwhichEuropeancountriescouldprovidepublicsubsidiestoco-financethedevelopmentofadomesticbatteryindustry.ThefirstIPCEI,worthEUR3.2billion(USD3.8billion),wasannouncedin2019andasecondoneworthEUR2.9billion(USD3.4billion)wasannouncedin2021,financingarangeofprojectsfromrawmaterialextractiontobatteryrecycling.ThenewEUindustrialstrategyfordomesticbatteryproduction,alongsideclearpoliciesoncuttingCO2emissionsfromroadtransportandanincreasinglysupportiveinvestmentenvironment,hasledtolargeinvestmentsinthebatteryindustryinEurope,thoughnolargeplanthasyetcomeonline.Nonetheless,batteryproductioncapacityintheEuropeanUnioncouldreachnearly500GWhby2026,comparedwitharound35GWhin2020(BeermandandVorholt,2022).Unlikeforbatterymanufacturing,batterycomponentfactorieshavenotreceivedasmuchinvestment,meaningthatEuropeislikelytocontinueimportingthosecomponentsforalongertime.Inresponsetoanabsenceofdomesticproduction,theEuropeanUniondecidedin2020toreducetariffsonbatteriesandbatterycomponentstoincreasetheavailabilityofEVsonthemarket,asthedomesticsupplychainwouldhavenotbeenabletosatisfytherapidgrowthneededtomeetclimatetargets(EU,2020).TheUnitedStatesbeganprioritisingbatterymanufacturingwiththepost-financialcrisisAmericanRecoveryandReinvestmentActof2009(USDOE,2009),whichmadeavailableUSD2billion(nominalvalue)ingrantsforbatteryandcomponentmanufacturing.Thisledtotheconstructionofsomeofthelargebatteryfactoriesinoperationtoday,suchasLG’sfactoryinMichiganandAESC’sfactoryinTennessee.Italsoprovidedalow-interestloantoTesla,whichresultedintheconstructionofthecountry’slargestbatteryfactoryinNevada,commissionedin2016.DuringtheTrumpadministration,theUnitedStatesincreasedtariffsonalistofgoodsmadeinChina,includingbatteriesandmostothercomponents,to7.5-25%.TheInflationReductionAct(IRA),adoptedin2022,redefinedtheUScleanenergyindustrialstrategy.Itincludesprovisionsforproductionsubsidiesforbatteryandbatterycomponentmanufacturingand,importantly,limitsEVpurchaseincentivestodomesticallyproducedmodels.Itisexpectedtostimulatemajornewinvestmentsinthecomingmonthsandyears.However,theIRAalsodiscouragesimportingcomponentsmanufacturedincountriesthatdonothaveatradeagreementwiththeUnitedStates,whichcouldslowtheexpansionofEVproductionandsalesintheneartermgiventherelativelimitedpossibilitiesforquicklyboostingdomesticproductionofsomecomponents.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE111IEA.CCBY4.0.PolicysupporthasboostedtradeinothercleanenergysupplychainsDevelopingasupplychainforcleanenergytechnologiesisalengthyprocess.MorethanadecadeofpolicysupportwasneededtodevelopChina’sdominantplaceinthecurrentglobalEVbatteryindustry,whichbenefitedfromastrongbaseintheformofawell-establishedconsumerelectronicsbatteryindustryandastrongpolicypush.TheprocesswassimilarforChina’ssolarPVindustry,withpolicysupportdatingbacktothe10thFive-YearPlanin2001.Today,ChinaisbyfarthelargestglobalsupplierateachstepoftheglobalsolarPVsupplychain;ataround340GW/year,itsmanufacturingcapacityforPVmodulesaloneismorethantwicetheglobalPVmoduleinstallations,withmanufacturingcapacityutilisationratesforsolarcomponentsrangingfrom40-50%in2021(Figure2.13).ChinadirectlysuppliesallmarketsexceptNorthAmerica,wheretheUnitedStateshasimposedimporttariffsonsolarPVelementsfromChina.Chinesecompanies,however,havebeenactivelyinvestinginproductioncapacityinSoutheastAsiaforsupplyingtheregionandexportingtotheUnitedStates,asthesecountriesarenotsubjecttothesameimporttariffsregime.GlobaltradeflowsalongthesolarPVsupplychain,2021IEA.CCBY4.0.Note:Normalisedvaluesbasedongigawattsequivalentofcapacity.Source:IEAanalysisbasedonIEA(2022b).ChinaaccountsforthevastmajorityofmanufacturingandexportsgloballyexcepttoNorthAmerica.TheAsiaPacificregion,especiallySoutheastAsia,isalsoakeyexporter.Eventhoughwindturbinecomponentsareheavyandbulky,theinternationaltradeoftowers,bladesandnacellesisquitecommon.Forexample,intheUnitedStates,oneofthelargestwindmarkets,thedomesticcontentofbladesandhubsislowerthan25%(USDOE,2022a).Therefore,regionswithcompetitiveEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE112IEA.CCBY4.0.labourmarketsandgoodavailabilityofresources–suchassteel,whichaccountsonaverageforalmost30%ofthecostsofanonshorewindturbine–mayhaveacompetitiveadvantage.Chinaisalsoamajorplayerinwindturbinecomponentproduction,accountingfor60%ofglobalmanufacturingcapacityandhalfoftotalexports,mostofwhichgotootherAsiancountriesandEurope(Figure2.14).NorthAmericawasthebiggestnetimporterin2021,withone-quarterofimports(calculatedonaregionalbasis)comingfromadiversesetofcountries.Duetothehighcostsofshippingturbinecomponents,suchasblades,nacelles,platforms,towersandvessels,onlylessthanafifthoftheirglobaloutputistradedinter-regionally.Inaddition,regulatoryandtradepoliciesareincreasinglypushingmanufacturerstobuildtheirsupplychainsinthecountriesinwhichtheyareinstalled.Themostcommonpoliciesincludelocalmanufacturingrequirements,subsidiesorincentivesforbuildinglocalmanufacturingcapacity,andimporttariffs.Morethan20countries,including7advancedeconomies,haveimplementedlocalcontentrequirementsforwindenergy,aswellassolarPV(PIIE,2021).Forinstance,inBrazil,developersareineligibleforlow-costfinancingfromthecountry’sdevelopmentbankunlesstheyuselocalequipment(Bazilian,Cuming&Kenyon,2020).IntheUnitedStates,theIRAprovidestaxcreditsfordomesticproductionofoffshorewindcomponents,whileanti-dumpingdutiesareimposedonseveralcountries,includingCanada,Indonesia,SpainandVietNam.TheEuropeanUnionimposesalevyonsomeimportsofsteeltowersforwindturbinesfromChina(EU,2021).GlobaltradeflowsofwindenergycomponentsinUSD,2021IEA.CCBY4.0.Note:Dataforwind-poweredgeneratingsetswereusedasabasistoestimatetradeforwindnacellesandblades.Sources:IEAanalysisbasedonEurostat(forgeneratingsets,wind-powered,DS-645593)Eurostat(2022);USDepartmentofEnergy(forwind-poweredgeneratingsets,towers,generators,blades,hubsandnacelles)USDOE(2022a);theUSInternationalTradeCommission(forwind-poweredgeneratingsetsandparts,bladesandhubs)USITC(2021);USITC(2022);andanalysisbasedonIEAinvestmentsdataIEA(2022e).Chinaaccountsformorethan60%ofglobalwindturbinemanufacturingandhalfofexports,andEuropeisthesecond-largestexporterofwindturbines.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE113IEA.CCBY4.0.HeatpumpsarenotwidelytradedEstablishingadomesticmanufacturingindustrydoesnotalwaysinvolveexports.Forexample,heatpumpswithintheboundariesofthisanalysisaretradedmuchlessthansolarPVmodules,thoughsomeindividualcomponentsarewidelytraded.Theshareofinter-regionaltradeinglobalmanufacturingislessthan10%forheatpumps,comparedwithnearly60%forsolarPV.Heatpumpsarerelativelybulky,makingthemcostlytotransport.Heatpumpsarealsoadaptedtoregionalconditionsandoftennotsuitableforamarketotherthantheonetheywereproducedfor.Forexample,theEcocutewaterheatershavebeendevelopedspecificallyfortheJapanesemarket(HPTCJ,2022).Heatpumpsalsoneedtomeetlegalrequirementsinlocalmarketsconcerningrecyclability,efficiency,voltage,safetyandrefrigerants.In2021,EuropeandNorthAmericawerenetimportersofmainlyheatingheatpumps16,whileChina,JapanandKoreawerenetexporters(Figure2.15).Themarketofair-to-airreversibleheatpumps,whichinsomecaseshaveaheatingfunctionjustasimportantasthecoolingfunction,ismoredynamicandledbyAsiancountrieswhichareexportingworldwide.Globalinter-regionaltradeflowsofheatpumps,2021IEA.CCBY4.0.Notes:HP=heatpumps.Normalisedvaluesbasedongigawattsofthermaloutput.heatpumpsalesandproductionarebasedonmarketdataandIEAmodellingestimates.tradeflowsarebasedontheUNComtradedatabase(harmonisedsystemproductcode:841861).Code841861refersto“heatpumpsotherthanairconditioningmachinesofheadingno.8415”(i.e.itexclusivelyreferstoheatingequipment),anditisthereforeusedasaproxyfor“mainlyheatingheatpumps”.SeveraladditionalUNComtradecodesareassociatedwithheatpumptechnology:code8415forairconditioners,code841581forreversibleair-to-airheatpumps,andcode841869for“refrigeratingorfreezingequipment,heatpumpsotherthancompressiontypeunitswhosecondensersareheatexchangers”.However,thosegroupingsincludebothcoolingandheating-orientedequipment.Sources:IEAanalysisbasedonUN(2022a)andcompanyannouncements.Theheatpumpmarketisregionallycompartmentalised.ChinaandNorthAmericaimportveryfewunits,whileChineseimportsaccountforaround20%ofEuropeansales.16AssociatedinthisinstancetoHSproductcode:841861,whichrefertothenarrowerdefinitionofheatpumps“Heatpumps;otherthanairconditioningmachinesofheadingno.8415”.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE114IEA.CCBY4.0.MostofthelargestheatpumpmanufacturersareheadquarteredintheAsiaPacificregion(includingChina),manufacturingabout75%oftheheatpumpssoldgloballyin2021(Figure2.16).CompanieswithheadquartersinJapanaccountedforalmost40%oftheglobalmarket,andthoseinChinaabout30%.ThefivelargestglobalmanufacturershavetheirheadquartersinAsiaPacific.However,abouthalfoftheproductioncapacityofmanufacturersheadquarteredinAsiaPacificislocatedoutsideoftheregion.ManufacturingofheatpumpsbycompanieswithheadquartersinChinaislargelyforthedomesticmarket.Chinahostsabout40%ofglobalheatpumpmanufacturingcapacity,ofwhichabouttwo-thirdisfromlocalcompanies.Mostofthemanufacturingcapacityinthecountryislocatedinjustfourprovinces:Shandong,Anhui,ZhejiangandGuangdong.Drivenbygrowingdomesticandexternaldemand,manufacturingcapacityinChinacontinuestoexpand,benefitingfromcomplementaritieswiththeair-conditionerindustry,withseveralnewChineseplayersemergingeachyear(AskCI,2022).Toencouragetheuptakeofmoreefficientmodelsandfacilitateexports,Chinaisdevelopingmorestringentenergyefficiencystandardsandtestingpracticestoalignthemwithinternationalstandards(ECECP,2022;Cheng,2022).China’sheatpumpexportsalmostdoubledin2021comparedwith2020,drivenmainlybydemandinEurope,whichhasbeenthemaindestinationofair-sourceheatpumpequipmentforseveralyears.InEurope,intra-regionaltradeiscommon,butthesuddensurgeindemandforheatpumpsin2021,combinedwithanopentradepolicy,ledtoasharpincreaseinimportsfromoutsidethecontinent,almostexclusivelyfromAsiancountries.Withabout170heatpumpfactories,Europeaccountsforabout15%ofglobalmanufacturingcapacity(Lyonsetal.,2022).CompanieswithheadquartersinEuropeaccountforabout10%ofglobalheatpumpcapacity.EuropeisaleaderinmanufacturinghydronicsystemsandmanycompanieshavemarketsalsooutsideEurope,whileabouthalfofmanufacturingcapacitywithintheregionisownedbycompanieswithheadquarterselsewhere.Thecurrentenergycrisisandpolicysupportforheatpumpsisattractinginvestment.AnnouncedexpansionplansintheregionsuggestthatmanufacturingcapacityinEuropewillkeeppacewiththeexpectedmedium-termgrowthindemand(seeChapter4).Asinotherregions,themarketforheatpumpsinNorthAmericaisgrowingrapidly.In2021,itaccountedforabout30%ofglobalheatpumpmanufacturingcapacity,mostlyintheUnitedStates,andenoughtocoverdomesticdemand.ImportstotheUnitedStateswerelimited,andforeigncompaniesaccountedforabout70%ofdomesticproduction.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE115IEA.CCBY4.0.Heatpumpmanufacturingcapacitybycompanyheadquartersandplantlocation,andinstallationsbyregion/country,2021IEA.CCBY4.0.Notes:ROW=restoftheworld;HQ=headquarters.Bluecolumnsrefertotheglobalmanufacturingcapacityoffirmsheadquarteredinthecountry/region,notonlytheirmanufacturingcapacityinthecountry/region.Greencolumnsrefertothetotalmanufacturingcapacityinthecountry/region,regardlessofwheremanufacturersareheadquartered.Sources:IEAanalysisbasedoncompanystrategyannouncements;EHPA(2022);AHRI(2022);Chinabaogao(2022);JRAIA(2022).MorethanhalfoftheheatpumpssoldinEuropeandNorthAmericaaremanufacturedbycompaniesheadquarteredabroad.ResilienceofsupplychainsRecentcommoditysupplydisruptionsandpricerisesGlobalcommoditypriceshavebeensurgingacrosstheboardinthelastfewyearsinthewakeofsupplydisruptionsresultingfromtheCovid-19pandemic,risingdemandastheglobaleconomystartedtorecover,andRussia’sinvasionofUkraineinFebruary2022.ElectricityshortagesinChinaandthegeopoliticalrepercussionsofthewarinUkraine,includingeconomicsanctionsonRussiaandlowergasexportstoEurope,havefurtherdisruptedsupplychainsanddrivenupthepricesofawiderangeofcommodities.Europehasbeenhitparticularlyhardbyhighergasprices,whichhavedrivenupelectricityprices.CleanenergytechnologysupplychainshavebeenaffectedbysanctionsonRussia,suchasthoseofEVbatteries,sinceRussiaisaleadingproducerofClass1nickel.Disruptionstosupplychainsinthelastfewyearsalongsiderisingmaterialandmineralcostshavealreadystartedtodriveupthecostofkeycleanenergytechnologies,whichcoulddelayeffortstoacceleratethetransition.Forexample,theaveragecostofsolarPVmodulesworldwidereboundedby25%betweenthefirsthalfof2020andthatof2022,havingdeclinedformanyyears,primarilyduetopriceincreasesofmaterialinputs(IEA,2022e).Inparticular,thepriceofPV-gradepolysilicondoubledoverthatperiod,beforedroppingagainattheendof2022(Bloomberg,2023).ThecostofwindturbinesoutsideChinahasalsobeenrisingafteryearsfalling,duetosupplyproblems,risingdemand,andmore01020304050EuropeNorthAmericaChinaJapanKoreaROWGWthTotalmanufacturingcapacityofcompanieswithHQintheregionTotalmanufacturingcapacityintheregionInstallationsEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE116IEA.CCBY4.0.expensiveinputs:copperandsteelpricesdoubledbetweenthefirsthalfof2020andthatof2022.WhileChinesewindturbinepricescontinuedtofallbyaround40%overthisperiod,theyroseelsewherebyupto20%(BNNBloomberg,2022).Spikingpricesofcobalt,lithiumandnickelinthebeginningof2022ledtohigherbatterypackprices,whichroseby7%inrealtermsonaveragein2022relativeto2021,withsignificantregionaldisparities:up24%intheUnitedStatesand33%inEuropewhileremainingcheapestinChina(BNEF,2022b).Evenlow-costcathodechemistrybatterypackssuchaslithiumironphosphateincreased–by27%–duetotheirexposuretolithiumcarbonateprices.LeadingEVcarmakers,includingTeslaandFord,haveraisedpricesandloweredprofitforecastsasaresultofhigherbatterypricesandtherisingcostofotherrawmaterialsandcomponents(Reuters,2022;Lambert,2022).Recenthighenergypriceshavealsocontributedtohigherproductioncostsforenergy-intensivebulkmaterialssuchascement,steel,ammoniaandothermetals.Asthebaseinputstomanyothersupplychains,theeffectshavebeenfar-reaching.TheEUsteelindustryhasbeenparticularlyaffected,withproductionfromAugusttoOctoberabout15%lowerin2022thanin2021duetorecordgasandelectricityprices(Worldsteel,2022b).Chinesesteelproductiondroppedbyover6%year-on-yearinthefirsthalfof2022,duetocoalandelectricityshortagesandreducedconstructiondemand,partlycausedbytheimpactofmeasurestocurbthespreadofCovid-19(China,MIIT,2022).Electricityshortageswereexacerbatedbyareducedhydropowersupplyduetodroughtandsurgingdemandforcoolingduetoaheatwave,resultinginlowerindustrialoutput.Forexample,alargeproportionofindustrialmanufacturingin19citiesinSichuanwasshutdownforsixdaysinAugust2022(Sohu,2022).InternationalpricesofselectedcriticalandbulkmaterialsandenergyIEA.CCBY4.0.Notes:LNG=liquefiednaturalgas;TTFMA=TitleTransferFacility.Pricesarequarterlyvaluesindexedtothebeginningof2015forcriticalandbulkmaterials,andtothebeginningof2017forenergyprices.Germanpowervaluesaremonthlyaverages.Sources:IEAanalysisbasedonS&PGlobal(2022b)andBloomberg(2022a).GlobalcommoditypriceshavesurgedduetoincreasingdemandandsupplydisruptionscausedbytheCovid-19pandemic,China’senergycrisisandRussia’sinvasionofUkraine.0250500750100020152017201920212023IndexCriticalmaterialsCobaltLithiumNickelPlatinumCopperSilicon010020030040020152017201920212023BulkmaterialsAluminiumConcreteSteel025050075010002017201820192020202120222023EnergyAsianspotLNGBrentEUimportedcoalGermanpowerTTFMAEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE117IEA.CCBY4.0.TheCovid-19pandemichasalsohadanadverseimpactonindustrialsupplychains,contributingtothejumpincommoditypricesin2021(Figure2.17).Forexample,duringthefirstwaveinIndiainearly2020,industrialoutputdroppedbyover60%betweenFebruaryandAprilasthecountryexperiencedastrictlockdownwithsomesectorsceasingactivityentirely;ittookaboutfivemonthsforoutputtorecoverfully.Inthesecondwaveinearly2021,nomandatorylockdownandbettersupplychainpreparednesslimitedthespeedandseverityofthefallinIndianindustrialoutputtoabout20%betweenMarchandMay,withasimilarrecoverytime.Thesteelandcementindustrieswerehitparticularlyhardbytheinitialrestrictionsoneconomicactivity,withproductionfallingbyapproximately75%forsteeland85%forcementinthefirstwave,whiledeclineswerelimitedto10-20%inthesecondwave(GovernmentofIndia,2022).ImpactofhighercostsoncleanenergytechnologiesIncreasesinenergyandothercommoditypricescanaffectspecificcleanenergytechnologiesindifferentwaysandtovaryingdegrees,mainlyaccordingtotheextenttowhichtheydependondifferenttypesofcommodities,includingenergy(Figure2.18).Industrypricesofenergy,especiallygasandelectricity,varygreatlyacrossregions,andsodopricetrendsincaseofdisruption.Incontrast,pricesofnon-energycommoditiestendtobemorehomogeneousglobally,withsomeexceptions.Sometechnologiesareheavilydependentonbulkandcriticalmaterials,withmanufacturingaccountingforasmallershareoftheirtotalcost.Forexample,bulkandcriticalmaterialsmakeupalargeshareofthetotalcostofsupplyingEVbatteriesandmanufacturingelectriccars,fuelcelltrucks,heatpumps,solarPVpanelsandwindturbines(Figure2.19).Inthecaseofcars,thecostofcriticalmaterialsforEVs–andthatofbulkmaterialsforbothEVsandconventionalvehicles–ismuchhigherthantheenergycostsassociatedwithmanufacturingandassembly.Whilethecostofpartsandvehiclemanufacturingandassemblycanalsobeexposedtoenergypricedisruptionssuchasthatofnaturalgas,theyaremuchmoreexposedtodisruptionsinthecostsofbulkandcriticalmaterials.Dependingonthecountryofproduction,theaggregatecostofcriticalmaterialstoproduceanEVmaybethreetosixtimeshigherthanthecostoftheenergyneededformanufacturing–anditisseventimeshigherthanthecostofthecriticalmaterialsneededforanICEvehicle.Overall,theenergycostsinmanufacturinganEVcanbe10%higherthanthoseforanICEvehicle.Higherenergycostshavedrivenupthecostofproducingcriticalminerals,theextractionandprocessingofwhichareparticularlyenergy-intensive.Inmostcases,miningandrefiningsuchmineralsaremoreenergy-intensivepertonnethanforaluminiumandsteel,althoughthevolumesusedincleanenergytechnologiesaremuchsmaller.Forcertaincriticalmaterials,alargeshareoftheenergycurrentlyusedforthesesteps,muchofitforrefining,isintheformofnaturalgas:35%forcobaltandnickel,and50%formanganese.Highergaspriceshavealsodrivenupthepriceofelectricity,whichmakesupmuchoftherestoftheenergyusedinminingandprocessingformanyofthem.Theextenttowhichgasandelectricitypriceshaverisenvariesenormouslyacrossregions,resultinginbigshiftsintherelativecompetitivenessofmanufacturers,withEuropeanmineralrefinersbeingdisadvantagedthemost.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE118IEA.CCBY4.0.Energyintensityofextractingandproducingselectedcriticalandbulkmaterials,andofmanufacturingselectedenergytechnologies,2021IEA.CCBY4.0.Notes:FC=fuelcell.Criticalandbulkmaterialsincludeenergyintensityfromminingandprocessingrawores.Primaryproductiononly.Theestimateforwindpowerassumesapermanentmagnetof650kgwithanenergyintensityof119.0megajoules/kg.Sources:IEAanalysisbasedonHongyueJinetal.(2018);SiemensGamesa(2021);Goldwind(2021);Vestas(2021).Theextractionandprocessingofcriticalmaterialsandthemanufacturingofcleanenergytechnologiesarehighlyenergy-intensive,relyingmainlyonfossilfuels.0102030405060ICEcarElectriccarICEtruckElectrictruckFCtruckTransportMWh/vehicle020406080100120HeatpumpsBoilersBuildingsMWh/MW050100150200250300350SolarPVWindPowerMWh/MWElectricityCoalNaturalgasOil0102030CopperLithiumcarbonateNickel(ClassI)ManganeseCobaltNeodymiumoxideSteelAluminiumCementCriticalmaterialsBulkmaterialskWh/kgEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE119IEA.CCBY4.0.Averagemanufacturingcostbreakdownofselectedenergytechnologiesandcomponentsbycommodity,2019-2021IEA.CCBY4.0.Notes:CHN=China;EUR=Europe(France,Germany,Italy,theNetherlandsandPoland).Averagepricesover2019-2021areused,withtheexceptionofelectricityinChina(averageoverthefirsthalfof2022).Energycostsrefertothecostofenergyusedtomanufacturevehiclepartsandassemblethevehicle,includingmaterialtransformationstepsandEVbatteryassembly,butexcludingminingandproductionofmaterials.Foroil,pricesofliquidpetroleumgasareused,orthatoflightfueloil,gasolineordiesel,dependingondataavailability.Globalaveragepricesareusedforcriticalandbulkmaterials.Sources:IEAanalysisbasedonS&PGlobal(2022b);USGS(2022);Saoud,Harajli&Manneh(2021).Materialsgenerallyaccountforagreatershareoftotalmanufacturingcoststhanenergy.Itcanbemoreexpensivetoproducecleanenergytechnologiesthanincumbentones.020406080100120Energy(US)Energy(EUR)Energy(CHN)BulkmaterialsCriticalmaterialsEnergy(US)Energy(EUR)Energy(CHN)Energy(US)Energy(EUR)Energy(CHN)BulkmaterialsCriticalmaterialsExc.Poly-SiPoly-SiSolarPVWindUSD/kWElectricityCoalNaturalgasOilCobaltCopperLithiumNickelZincAluminiumCementSteelSilicon05101520Energy(US)Energy(EUR)Energy(CHN)BulkmaterialsCriticalmaterialsEnergy(US)Energy(EUR)Energy(CHN)BulkmaterialsCriticalmaterialsGasboilerHeatpumpUSD/kW020004000600080001000012000Energy(US)Energy(EUR)Energy(CHN)BulkmaterialsCriticalmaterialsEnergy(US)Energy(EUR)Energy(CHN)BulkmaterialsCriticalmaterialsICEtruckFCtruckUSD/vehicle02004006008001000120014001600Energy(US)Energy(EUR)Energy(CHN)BulkmaterialsCriticalmaterialsEnergy(US)Energy(EUR)Energy(CHN)BulkmaterialsCriticalmaterialsICEcarElectriccarUSD/vehicleEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE120IEA.CCBY4.0.Higherenergycostshavealsodepressedtheproductionofammonia,especiallyinEurope,wherethepriceofnaturalgas–theleadingfeedstock–hasincreasedmost(Box2.3).Thecostofproducingammoniadependsheavilyonthepriceofenergy.Around70%ofEuropeanammoniaproductioncapacityhadbeentakenofflineinAugust2022,withanestimated40%remainingofflineinOctoberdespitereductionsingasprices(IFA,2022).Ammoniaproductionhadalreadybeendisruptedin2021byvariousgassupplydisruptions,includingintheUnitedStates,wheretheavailabilityofnaturalgaswashitbycoldweatherandtheeffectsofHurricaneIda(AmericanFarmBureauFederation,2022).Asaresult,USammoniapricesincreasedsixfoldbetweenthefirstquarterof2020andthatof2022(Bloomberg,2022b).Higherammoniapricesworldwidehavepushedupthecostofammonia-basedfertilisersand,therefore,contributedtofoodpriceincreases:theFoodandAgricultureOrganizationindexoffoodpricesjumpedbyathirdovertheyeartoMarch2022toanall-timehigh(UNFAO,2022).Globaldemandforammoniaisrelativelypriceinelasticas70%ofammoniaisusedformakingfertiliser.Asaresult,reducedsupplyhasasignificantimpactonfoodpriceswithcatastrophicconsequencesforfoodsupply,especiallyinemergingeconomies(IEA,2022f).Theeffectsofhigherenergypricesonindustriesandproductsfurtherdownthesupplychainareoftenlessobvious,butnolessimportant.Forexample,AdBlue–afueladditiveusedtoreduceemissionsfromdieselcarsandtrucks–isacrucialcomponentinthetruckingindustry.Itisderivedfromurea,whichisalsoakeyingredientinfertiliserproduction,producedusingnaturalgas.HighnaturalgaspricesinChinain2021ledtorestrictionsontheexportofureatosupportthedomesticfertiliserindustry.ThisledtoacriticalshortageofAdBlueinKoreaandAustraliainDecember2021,withpricesinAustraliaquadrupling.Morerecently,reducedureaproductioninGermanyhasledtoasharpfallininventoriesofAdBlueandmuchhigherpricesacrossEurope.Box2.3ResilienceandvulnerabilitiesintheammoniasupplychainAmmoniaoffersagoodexampleofhowsupplychainscanberesilientorvulnerabletodisruption.GlobalammoniaproductionheldupwellcomparedwithotherindustrialsectorsatthestartoftheCovid-19pandemicandreboundedin2021.Producingalternativestoammonia-basedproductsisparticularlydifficult,andthenear-termpotentialfordemand-sidesubstitutionislimited.Demandforammonia-basedfertiliserisrelativelyprice-inelastic,i.e.demandrespondslittletochangesinprice,sothatmodestreductionsinsupplyresultinmuchbiggerincreasesinprice.Despitethis,productionfellbackin2022withhighernaturalgasprices,whichhavedrivenupcostssignificantlyandmadeproductioninsomepartsoftheworld,notablyEurope,uneconomic.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE121IEA.CCBY4.0.Ammoniaproductioniswidelydistributedaroundtheworld,withtraderepresentingaround10%ofworldoutput(30%forurea–themainderivativeofammonia)(IEA,2021b).Thereisanextensivenetworkofport,pipelineandstoragefacilities,generallyspecificallydedicatedtoammoniaorderivatives.Demandishighlyseasonal,sostoragecapacityislarge.Forexample,capacityintheUnitedStatesamountstoabouthalfofitsannualproduction,spreadacrossmorethan10000facilities(RoyalSociety,2020).Tradeprovidesadegreeofflexibilityinammoniasupply,helpingtolimitfluctuationsinammoniapricesintheeventofshort-termchangesinproductionordemand,thoughchangesinshippingpatternscanstilltakemonthsorevenyears.Buildingnewinfrastructurecantakeseveralyears,whichislongerthanforothermaterialsthatdonotrequirespecialisedfacilitiesandcanuseexistingflexibleinfrastructurethatcanbequicklyrefitted.Thedevelopmentofnewmarketsforammonia,suchasuseasamarinetransportfuel,wouldaddtotheneedforadditionalstorageandproductioncapacity.Averageammoniaproductioncostsbytechnologyandcomponentinselectedregions/countries,2022IEA.CCBY4.0.Notes:TTF=TitleTransferFacility.Fornaturalgas,averageindustrialpricesfromJanuarytoOctober2022havebeenused;thedashedareaforEuroperepresentstheadditionalcostofusingtheTTFnaturalgasprice.Capitalexpendituresincludethecostsoftheinstalledplant,assumingacostofcapitalof5%.NaturalgascostsareintherangeofUSD7/MWhtoUSD80/MWh(USD140/MWhinthecaseofTTF),electricitycostsareintherangeUSD20/MWhtoUSD30/MWh.Costsrelatedtocarbonpricing,whereapplicable,areincludedintheoperationalexpenditures.Theheavydependenceofammoniaproductiononfossilenergyisakeysupplychainvulnerabilityforfertilisersandotherammonia-basedproducts(Figure2.20).About70%ofalltheammoniaproducedworldwidein2021wasbasedonnaturalgas,withcoalsupplyingthebulkoftherest.Beingbothfeedstockandrawmaterial,gasandcoalmakeupagreaterproportionofthetotalcostofproducingammoniathanformanyothercommoditiessuchassteel.Gasandcoalmarkets020040060080010001200140016001800SMRElectrolysisSolarPVSMRElectrolysisSolarPVSMRElectrolysisSolarPVSMRElectrolysisSolarPVSMRElectrolysisSolarPVSMRElectrolysisSolarPVSMRElectrolysisSolarPVAustraliaChile,ColombiaChinaEuropeIndiaMiddleEastUnitedStatesUSD/tonneCapitalexpendituresNaturalgasOperationalexpendituresElectricityTTFEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE122IEA.CCBY4.0.canbeveryvolatile,makingammoniaproductionhighlyvulnerabletogeopoliticalandotherfactorsthataffectsupplyinthenearterm.Asahighlytradeablecommodity,ammoniaproducersinregionswheregaspricesarehighestmaybeforcedtoidlecapacityattimeswhenproductionisuneconomic.Diversifyingsourcesofgasasawayofloweringprices–theapproachbeingadoptedbyEuropeinthefaceofashortfallinRussiangas–cantakeyears.Inthelongerterm,switchingtorenewablehydrogenfromelectrolysiswouldmakeammoniasupplychainsmoreresilient,butthatproductionpathgenerallyremainsmoreexpensivefornowdespitehighergasprices.ImpactofmineralpricerisesonminingcompanyprofitsTherecentsurgeincommoditypriceshasledtoasharpincreaseintheprofitsoffirmsinvolvedintheextractionofrawmaterials,includingfossilenergyandminerals,andtheproductionofbulkmaterialssuchascement,steelandaluminium(Figure2.21).Companiesinvolvedinextractingcriticalminerals,notablylithium,nickelandcopperhaveenjoyedthebiggestgainsinprofits,withtheincreaseinthepricesofthosemetalsmorethanoffsettingtheeffectofhigherenergycosts.Thisisboostingtheattractivenessofnewinvestmentinminingprojects,thoughtheleadtimesaregenerallyverylong.Firmsinthemiddleofthesupplychainthatproducebulkmaterialshaveseenmoremodestimprovementsintheirprofitabilityasenergyaccountsforalargeshareofproductioncosts.Metalrefinersandsmeltershavegenerallyprofitedlessfromhighercommoditypricesastheyhavebeenharderhitbyhigherenergycosts,especiallyinEurope,wheresomehavebeenforcedtohaltoperations.Bycontrast,theprofitmarginsofseveralmanufacturingindustrieshavebeensqueezedbytheincreaseinthecostsofbulkmaterialsandenergy.Inthecaseofwindequipmentmanufacturing,steelandconcreteaccountforalargeshareofcosts,whichcannotalwaysbepassedquicklyontobuyerswithhigherprices,therebyreducingtheirmargins.Inthelongterm,however,higherfossilenergyandelectricitypricesshouldboostthecompetitivenessofwindpowerandotherrenewablegeneratingtechnologies,increasingdemandforturbines,despitehigherinstallationcosts.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE123IEA.CCBY4.0.Returnonassetsofcompaniesinselectedupstream,bulkmaterialsandmanufacturingsectorsIEA.CCBY4.0.Notes:Mineral=criticalminerals;HVAC=heating,ventilationandairconditioning;Wind=windpowerequipment.Source:IEAanalysisbasedonBloombergdata.Highercommoditypriceshaveboostedtheprofitsoffirmsinvolvedintheextractionoffossilenergyandminerals,and–toalesserextent–producersofbulkmaterials.Box2.4StockpilesofcriticalmineralsandenergysecurityMaintainingadequatestockpilesofvitalmaterialandcomponentsisessentialforcompaniestohandleanytemporarydisruptionsordislocationsinsupply.Strategicreservestohandlemoreseveredisruptionsaretheresponsibilityofgovernments.Thepracticalitiesandcostsinvolvedinmaintainingcommercialinventoriesvarygreatly,accordingtothetypeofmaterial,thequantitiesconsumedandtheseasonalityofdemandforthefinalproduct.Forexample,solidsaregenerallyeasiesttostore,followedbyliquidsandthengases.Commoditiesforwhichdemandisseasonal,suchasammoniausedformakingfertiliser,generallyrequirelargerinventories.0%5%10%15%20%2016201820202022ReturnonassetsUpstreamMetalminingOilandgasCoalminingMineralmining0%5%10%15%20%2016201820202022BulkmaterialsSteelCementAluminium0%5%10%15%20%2016201820202022ManufacturingAutomotiveHVACWindSolarPVEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE124IEA.CCBY4.0.Globalinventoriesasashareofannualconsumptionforselectedbulkmaterials,mineralsandfuelsIEA.CCBY4.0.Note:Metalsrepresentaverageinventory2016-2021anditsannualvariabilityoverthetimeperiod.Source:IEAdata;WBMS(2022).Currentcommercialstockpilesaregenerallymuchlargerforbulkcommodities,oilandgasthanforcriticalminerals,reflectingmainlythegreaterseasonalityofdemandand,inthecaseofoil,theheightenedrisksofdisruptionsandthelargecostsassociatedwiththem(Figure2.22).Inaddition,adisruptiontomineralsupplieswouldbelessimmediatethanadisruptiontooilsupplies,asitwouldinfluenceproductionofnewequipmentandproductsonlyratherthantheuseofexistingequipment.However,criticalmineralsuppliesarecurrentlymoregeographicallyconcentratedthanthatofoil.Lackofdataandstorageatdifferentstagesofproductsmakeassessingtotalglobalinventoriesforbulkmaterialssuchascement,steelandammoniadifficult,withonlylimiteddatapointsavailable.Forexample,Chinesesteelinventorieswereestimatedtobearound37Mt(4%ofnationalproduction)beforetheCovid-19pandemic,andnewestimatessuggesttheyballoonedsincetoapproximately100Mtduetoweakdemand(S&PGlobal,2020).Companiesneedtobalancethecostofmaintaininginventorieswiththeflexibilitytheyprovideascriticalmineralsbecomeamoreimportantpartoftheglobalenergysystem.DigitalisationofsupplychainsDigitaltechnologiescanspeeduptheenergytransitionDigitaltechnologiescanimproveefficiency,reducecostsandaccelerateinnovationacrosscleanenergysupplychains,buttheyneedtobemaderesilienttoanumberofthreats.Therearemanywaysinwhichtheycouldcontributetospeedingupthecleanenergytransition(Table2.2).Theycanhelpoptimisetheoperationsofelectricitysystems(WindEurope,2021;ETIPWind,2016;GE,2015).Machine0%10%20%AluminiumCadmiumCopperLeadNickelTinZincCrudeoilNaturalgasMetalsFossilfuelsEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE125IEA.CCBY4.0.learning(ML)canacceleratethedevelopmentanddiscoveryofnovelbatterymaterialstoreducetheuseofcriticalmaterialsinEVbatteries,aswellasimprovesupplyanddemandforecastingandreal-timeanalysisofgridconditions(DeepMind,2019).Satelliteimagingandmachinelearningcanhelpidentifylocationsofhighersolarandwindoutput.Blockchaintechnologycanenhancetransparencyandtrackingofcriticalmaterialsandenhancetheenvironmental,socialandcorporategovernanceofmineralsextraction.Productpassportscanfacilitaterecyclingbyprovidinginformationonmaterialcomposition.Theresilienceofdigitalhardwareandcomponentsisbecomingincreasinglyimportantasenergyandothersystemsbecomemorereliantondigitaltechnologies.Forexample,semiconductorchipsareessentialfornearlyeveryelectronicdevice,includingEVs,solarpanelsandelectricitygrids(Table2.3).TheaverageEVcontains2000to3000chips–twotothreetimesmorethaninaconventionalcar(Yoon,2021).ExamplesofdigitaltechnologyuseacrosscleanenergysupplychainsCleanenergysupplychainsMaterialsextractionandprocessingManufacturingandinstallationOperationEndoflifeandrecyclingEVsSolarPVWindElectrolysersCCUSSmartandconnectedminingtoimprovesafety,boostthroughputandreduceemissions.BlockchaintoenhancetransparencyandtrackingofcriticalmaterialsandincentivisehighESGperformance.MLtoacceleratedevelopmentofnovelbatterymaterialsandscreenalternativeprocessesforhydrogenproductionandpotentialcatalystsforCCUS.MLanddigitaltwinstooptimiseEVbatterydesignandperformance.3DprintingofsolarPVandfuelcellstoreducematerialuse,boostperformanceandimprovedurability.Digitallyenabledsharedandautomatedmobilitytoreducemineraldemand.ML-optimisedEVfastchargingprotocolstoreducebatterydegradation.PredictivemaintenancethroughIoT,MLanddronestoincreaseefficiencyandextendlifetimesofsolarPV,windandgrids.Productpassportstofacilitaterecycling.MLandroboticstoimprovewasterecovery.Digitalplatformstohostsecondarymaterialsmarkets.Digitallyconnecteddismantlingandprocessingplantstoaggregatewastevolumes.Note:IoT=InternetofThings.EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE126IEA.CCBY4.0.UseofsemiconductorsincleanenergytechnologiesSemiconductormaterialsApplicationsincleanenergytechnologiesPhotovoltaicsemiconductorsSolarcellsinconventional,thinfilmandperovskitePVsWidebandgapsemiconductors(SiC,GaN)PowerelectronicsinsolarPV,otherrenewablesandgrids,EVs,andelectrifiedindustryConventionalsemiconductorsElectronicsandcommunicationinsolarPV,otherrenewables,grids,EVs,efficientcomputing,andelectrifiedandefficientindustryNote:SiC=siliconcarbide;GaN=galliumnitride.Source:AdaptedfromUSDOE(2022b).Box2.5ThechipshortageisholdingbackthedeploymentofEVsTheongoingglobalchipshortagehashadasevereimpactonseveralcleanenergytechnologies,notablyEVmanufacturing.Theshortagetookholdin2020,drivenbysurgingdemandforcomputersandotherconsumerelectronicsduringtheearlydaysoftheCovid-19pandemicandshortagescausedbythetemporaryclosureoffactoriesandsupplychaindisruptionsduringlockdowns.ThesupplyshortagehasbeenexacerbatedbyfiresinsemiconductorsplantsinJapanandGermany,poweroutagesaffectingfactoriesinTexas,andseveredroughtsinTaiwan.Globalsupply,nonetheless,reboundedin2021to1.15trillionunits,wortharecordUSD550billionin2021–anincreaseof26%(SIA,2022a).Computingandcommunicationseachaccountedforaround30%ofthemarket,whileendusesforenergy–automotiveandindustrial–eachaccountedfor12%(SIA,2022b).WithstronggrowthinEVsandautomateddriving,theautomotiveindustrycouldrepresentnearly15%ofsemiconductordemandby2030,upfrom8%today(McKinsey,2022).McKinseyprojectsthattheglobalsemiconductormarketcouldexceedUSD1trillionby2030,withautomotiveandindustrialelectronicsdemandgrowingonaverageby11%peryear–twiceasfastascomputing,communicationsandconsumerelectronics.TheUnitedStatesaccountedfornearlyhalfoftheglobalmarketbyrevenuein2021butonly12%ofmanufacturingcapacity,downfrom37%in1990(Figure2.23)(SIA,2022c).Asiaaccountedfornearlythree-quartersofglobalmanufacturingcapacity,ledbyTaiwan(22%)andKorea(21%)(Varasetal.,2020).Chinaisexpectedtoaddabout40%ofthenewcapacitythatisexpectedtocomeonlineby2030,becomingthelargestsemiconductorproducer.ItisunclearhowlegislationintroducedintheEuropeanUnionandtheUnitedStatestoboostdomesticsemiconductorinnovationandmanufacturingwillaffectthemarket.Theenergycostcrisisisalsohavinganimpactonchipmanufacturing,whichishighlyenergy-andwater-intensive,withenergycostsaccountingforasignificantEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE127IEA.CCBY4.0.shareofoperatingexpenses.TaiwanSemiconductorManufacturingCompany(TSMC),theworld’slargestcontractchipmaker,consumed18TWhofelectricityin2021–one-thirdhigherthanin2019(TSMC,2021).RecentincreasesinelectricitypricesinTaiwancouldcauseknock-oneffectsonchipcostandsupply(Bloomberg,2022a).Semiconductormanufacturingcapacityandmarketsharerevenue,2021IEA.CCBY4.0.Manufacturingcapacityfiguresarefor2020.Note:Marketsharesarebasedon2021revenues.Sources:Varasetal.(2020);SIA(2022c).CybersecurityrisksaregrowingAstheenergysystembecomesmoredigitalised,connectedandautomated,cybersecurityrisksareincreasing.Hackersarebecomingincreasinglysophisticated,withsuccessfulattackstriggeringthelossofoperatingcontroloverdevicesandprocesses,inturncausingphysicaldamageorservicedisruption.Therearemanywaysinwhichcyberattackscouldaffectenergysystems,suchasavirusinfiltratinganindustrialcontrolsystemthroughUSBflashdrives,themanipulationofalargenumberofhigh-wattageconnecteddevicesorcompromisedequipmentfromsupplychainvulnerabilities(IEA,2021c).Thesupplychainsofpowersystemsareparticularlyvulnerabletocyberattacks.Forexample,maliciouscodecanbeinsertedintosoftwareatanearlydevelopmentphase,withbackdoorsbuiltintohardwaretoenableremoteaccessafterinstallation,therebyallowingattackerstostealdataordisablesystems.Thishighlightshowtheresilienceofthesystemalsodependsonthelevelofcyberresilienceofeachstakeholderalongthesupplychain.0%20%40%60%80%100%ManufacturingcapacityMarketshareOtherChinaTaiwanEuropeJapanKoreaUSBycountry0%20%40%60%80%100%MarketshareGovernmentIndustrialConsumerAutomotiveCommunicationsComputingBysectorEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE128IEA.CCBY4.0.SupplychainsustainabilityReducingemissionsfromthemining,processing,manufacturingandtransportofmaterialsandfinalcleanenergyproductsisessentialastheirdeploymentincreases.Theupstreamstepsofcleanenergytechnologysupplychainstodayaregenerallymoreemissions-intensivethandownstreamones,mainlybecausetherequiredtemperatureofthermalprocessingishigherandbecauselow-emissionalternativestofossilfuels,includingelectricity,arenotyetwidelyavailable.Thetaskofreducingsupplychainemissionsismadeharderbythesheerrateofgrowthofsupplyexpectedinthecomingyears,aswellastheprospectofadeclineinthequalityofcriticalmineralresources,whichmeansmoreenergyisneededtoproduceatonneofthoseminerals.CarbonintensityCleanenergytechnologiesare,bydefinition,capableofprovidingserviceswithoutdirectlyemittingasignificantamountofCO2,buttheirsupplychainsmaydo,dependingonthetypeofenergyusedintheproductionprocessesandtransportation.Theearlierstepsofcleanenergytechnologysupplychainstodayaregenerallymoreemissions-intensivethanlaterones,mainlybecausethetemperatureofthermalprocessingishigherandbecausepracticallow-emissionalternativestofossilfuels,includingelectricity,arenotyetavailable.Materialproductionistypicallythemostenergy-intensivestepand,consequently,generatesthemostCO2emissions.Globally,steel,aluminium,cement,paperandchemicalsproductiontogetheremitthreetimesmorethanallotherindustriescombined.InthecaseofEVbatteries,miningandmaterialproductioncurrentlyaccountformorethan50%ofthetotalemissionsassociatedwithitsproduction(Figure2.24).Achievingnetzerowouldrequirethattheseemissionsareeliminatedorbalancedbyemissionremovalinothersectors(seeChapter1).Themining,materialproductionandmanufacturingsegmentsofcleanenergytechnologysupplychainstendtobemoreenergy-andemissions-intensivethanthoseofconventionalfossilenergy.However,thoseemissionsareoftenbalancedbymuchlowerdirectemissionsfromoperation(Figure2.25).WhilethemanufacturingofanEVtodayemitsonaveragearound50%moreCO2thananequivalentICEcar,thisdifferenceismorethanoffsetbythemuchhigheremissionsfromtheoilusedindrivinganICEvehicleoveritslifetimecomparedwiththosefromgeneratingtheelectricityusedfordrivingtheEV.Calculatedonawell-to-wheels(orlife-cycle)basis,anEVcurrentlyemitsonaverage50%lessCO2thananICEcarworldwide.Thisadvantagewillcontinuetogrowaselectricitysystemsdecarbonise.Theemissionssavingsfromswitchingtocleanenergytechnologiesareconsiderablylargerwhenthelife-cycleemissionsassociatedwiththesupplyofEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE129IEA.CCBY4.0.fossilfuels,includingtheconstructionofupstream,transportationandrefiningfacilitiesandtheiroperations,aretakenintoconsideration(Scope1-3).17Forexample,drillingoilandgaswellsandbuildingrefineriesrequirelargequantitiesofcementandsteel,whileoperatingthosefacilitiescallsforsignificantamountsofenergy,usuallyintheformofnaturalgas,fuelgasesobtainedon-siteandelectricity(generatedon-siteorsuppliedfromthegrid).Weestimatethatthosesupplychainemissionsamounttoaround19kgofCO2equivalentperGJofoil,representingabout20%ofitsaveragelife-cycleemissions,16kgperGJofgas(20%)and12kgperGJofcoal(10%).SupplychainstepsharesintotalCO2emissionsfromtheproductionofsolarPV,windturbines,EVsandheatpumps,2021IEA.CCBY4.0.Notes:Includesdirectandindirectemissions,withindirectemissionscomprisedofemissionsforelectricitygenerationandtheproductionofchemicalsusedforminingandmaterialproduction.OnshorewindandsolarPVtechnologymanufacturingdoesnotincludetransportandinstallation.EVbatteryvaluesrefertoNMC333batterytype.“Manufacturing”inEVbatteriesincludestheemissionsrelatedtotheproductionofcomponentssuchasthecathode,aswellastheassemblyofthebatterypack.Anemissionfactorof458gCO2/kWhisusedtocalculateelectricity-relatedemissions.Sources:IEAanalysisbasedonEmilsson&Dahllöf(2019);Naumann,Schropp&Gaderer(2022);IEA(2022b);ArgonneNationalLaboratory(2022);SiemensGamesa(2021);Vestas(2021);Goldwind(2021).MaterialproductionandtechnologymanufacturingaccountformostoftheCO2emissionsoftheselectedcleantechnologysupplychains.17Directemissions,alsocalledScope1emissions,includeemissionsfromfuelusedduringoperationsandprocessemissions.Indirectemissionsareeitherassociatedwiththegenerationofpurchasedelectricity,steamandheat(Scope2)oranyotheremissionsrelatedtothepurchaseofgoodsandservicesusedinmanufacturing(Scope3).0%25%50%75%100%PVOnshorewindEVbatteryHeatpumpTechnologymanufacturingMaterialproductionMiningShareindirectemissionsEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE130IEA.CCBY4.0.Globalaveragelife-cyclegreenhousegasemissionsintensityofselectedenergytechnologies,2021IEA.CCBY4.0.Notes:FC=fuelcell(poweredbyhydrogen);CO2-eq=carbondioxideequivalent.Stackedbarsrepresentanaveragecasewhileerrorbarsrepresentlowandhighcases.Materialsincluderesourceextractionandprocessing.Manufacturingincludesmanufacturingofcomponentsandofthefinalproduct.Directemissionsareemissionsfromfossilfuelconsumedduringoperation.Powersupplyemissionsarethoseassociatedwiththeelectricityconsumedduringoperation.Othersupplyemissionsincludeindirectemissionsfromfossilfuelandhydrogenproductionandrefining.Otheremissionsincludemethaneandrefrigerantemissions.Powergenerationemissionsareovertheaveragelifetimeofapowerplant.Forvehicles,disposalandrecyclingarenotincluded.Theaveragedistancetravelledassumedis200000kmforacarand1.6millionkmforatruck.Fuelcelltrucksemissions’higherbounduseSMR-basedhydrogenwhiletheaverageandlowerbounduseelectrolysis-basedhydrogen.ItisassumedthatEVshaveabatterycapacityof55kWh.Forheatpumps,itisassumedthat50%oftherefrigerantisventedtotheatmosphereintheaveragecase(20%forlowand80%forhigh).Thecoefficientofperformance(whichmeasurestheefficiencyofinputtooutputofenergy)isassumedtobe3/4/5(low/medium/high)forheatpumpsand0.85/0.90/0.98forgasboilers.ForEVsandheatpumps,theemissionsintensityofelectricityisconsideredat27/458/602gCO2/kWh(low/medium/high).Forelectrolysis,weassumepowerprovidedbylow-emissionenergysources:5/37/82gCO2/kWh.Fornaturalgas,8kgCO2-eq/GJofupstreamemissionsand8kgCO2-eq/GJformethaneemissionsareassumed.Foroilproducts,thosevaluesare12and7kgCO2-eq/GJrespectively.Formoreinformationonthosetechnologies,pleaserefertootherIEApublicationssuchastheGlobalEVOutlook2022ortheGlobalHydrogenReview2022.Sources:IEAanalysisbasedonSchlömeretal.(2014);Naumann,Schropp&Gaderer(2022);IEA(2021a);ArgonneNationalLaboratory(2022);UNECE(2021).Theupstreamstepsofcleanenergytechnologysupplychainstendtobemoreenergy-andemissions-intensivethanthoseforfossilenergy,butcleanenergytechnologiesemitfarlessinoperation.020040060080010001200WindonshoreSolarPVutilityHydropowerNuclearCoalGas010203040506070EVICE024681012ElectrolysisSMRMaterials&manufacturingMaterialsManufacturingOperation–DirectemissionsOperation–PowersupplyemissionsOperation–OthersupplyemissionsOtheremissions0246810121416HeatpumpGasboiler02004006008001,0001,2001,4001,6001,800H₂ICEPowergeneration(kgCO₂-eq/MWh)Heating(tCO₂-eq/kW)Light-dutyvehicle(tCO₂-eq/vehicle)Trucks(tCO₂-eq/vehicles)Hydrogen(tCO₂-eq/tH₂)EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE131IEA.CCBY4.0.Heatpumpscontainrefrigerantswithdamagingclimatepotentialifreleasedintheatmosphere.InthecaseofthewidelyusedR-134arefrigerant,emissionsareequivalentto1430kgCO2perkilogramme.DespitetheongoingshifttowardslowerGWPrefrigerants,itisvitalthatleakagesareavoidedduringtheoperationanddecommissioningofheatpumps.TheiruseisbeingphasedoutundertheKigaliAmendmenttotheMontrealProtocol,whichwassignedin2016andbecameeffectivein2019for145countriescovering80%ofglobalgreenhousegasemissions(UN,2022b;IEA,2022g).Carbonintensitytodayvarieswidelyacrossthemineralsandmaterialsneededforcleanenergysupplychains(Figure2.26).Forsome,intensityalsovariesacrosscompaniesandregionsaccordingtosite-specificfactors,operationalpractices,thesourceofpower,thefuelsusedandproductionpathways.Ingeneral,cobaltismuchmoreenergy-andcarbon-intensivethansteel,thoughmuchsmalleramountsareusuallyneededtomakespecificproducts.Forexample,anEVtypicallyrequiresaround7kgofcobaltcomparedwith920kgofsteeland220kgofaluminium(ArgonneNationalLaboratory,2022).Inaddition,emergingsourcesoflithiumandnickelarelikelytobemoreenergy-intensivethancurrentones,whichcouldleadtohigheremissionsunlessminingandprocessingcompaniesswitchtolower-emissionsfuels(seeChapter3).Indirectemissionsassociatedwiththesupplyofelectricityorchemicalsfurtherincreasesthecarbonfootprint.Forinstance,Class1nickelemissionsintensityjumpfrom3.4tonnesofCO2pertonneto8.9tCO2/twhenindirectemissionsareincluded.GlobalaverageprimaryenergyandCO2emissionsintensityofminingandprocessingofselectedcriticalandbulkmaterials,2021IEA.CCBY4.0.Notes:LC=lithiumcarbonate;MJ/Kg=megajoulesofenergyusedtoproduceakgofmaterial;kgCO2/kg=kilogrammesofCO2emittedinproducingakilogrammeofmaterial.Onlydirectemissionsareconsidered.Neodymiumoxidevaluesareforproductionfrombastnäsiteore.Sources:IEAanalysisbasedonArgonneNationalLaboratory(2022);IEA(2021a).Carbonintensityvarieswidelyacrossmineralsandmaterials,accordingtooperationalpractices,oregrade,powersources,fuelsandproductionpathways.05101520050100150200CopperLCfrombrineLCfromspodumeneManganeseCobaltClass1nickelNickelhydroxideNeodymiumoxideSteelAluminumkgCO2/kgMJ/kgMiningenergyProcessingenergyEmissionsintensity(rightaxis)EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE132IEA.CCBY4.0.OtherenvironmentalimpactsofcriticalmineralsExploitingmineralwealthcan,inprinciple,createeconomicvalue,improvelivelihoodsandgeneratetaxrevenue.However,itcanentailharmfulenvironmentalconsequencesotherthanemissions,includingbiodiversitylossandsocialdisruptionduetoland-usechange,waterdepletionandpollution,waste,andairpollution.Whilemining,bytheverynatureoftheactivity,willalwayshaveanimpactonthelocalenvironment,itshouldbecarriedoutinawaythatminimisesdamageandavoidsperpetuationofenvironmentalinjusticethrougheffectiveregulationandresponsiblecorporatepractices.Thepublicandinvestorsareincreasinglydemandingthatcompaniesaddressenvironmentalconcerns,andfailuretodosocanunderminetheirreputation,questiontheirsociallicencetooperate,hindertheirabilitytoraisecapital,andevenexposethemtolegalaction.Waterneedsforminingandprocessingcriticalmineralsareoftenveryhigh,leadingtoconcernsaboutwaterstressandwastewatertreatment.Forexample,producingjust1tonneoflithiumrequiresonaverage330m3ofwater.Waterneedsforcopperorcobaltarelowerat30m3/tonneto60m3/tonne(Table2.4).Criticalmineralsgenerallyrequiremorewaterthanothertypesofheavyindustry.Theimpactisfurtherincreasedbythefactthantheproductionofcertainmineralsisconcentratedwithinalreadywater-stressedregions,suchaslithiumneartheAtacamaDesertregion.Miningandprocessingofthosemineralsalsogeneratelargeamountsofnon-waterwaste,comparedwithothermaterials,suchasironandsteelandaluminium(Nassaretal.,2022).Therock-to-metalratio–thequantityofrockextractedandtreatedtoproduce1kgofmetal–averages250kgofrockperkgofnickel,860forcobaltand830000forplatinum,comparedwithjust9forironand7foraluminium.ThismeansthatanOlympicswimmingpool’sworthofwasterockisproducedfor6kgofplatinum,whichisneededtoproducethefuelcellcomponentsofabout50fuelcelltrucks.Therock-to-metalratiosofcriticalmineralsarehigherbecausetheirconcentrationinthegroundismuchlower.Treatinganddisposalofminingwaste,includingwater,isamassiveundertaking(Box2.5).Theimpactofminingoperations,includingcuts,tailingdamsandplants,onthelandisfarfromnegligible,coveringanestimated100000km²oftheplanet’ssurface–anareacomparabletothesizeofIceland(Mausetal.,2022).Therearearound1600miningoperationsinkeybiodiversityareasandafurther2000inprotectedareas,including33inworldheritagesites(UNEP,2020).EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE133IEA.CCBY4.0.EnvironmentalimpactofminingforselectedmineralsWateruse(m3/tonne)Shareinwaterscarceareas(%)Rock-to-metalratio(tonnes/tonne)Acidicwaste(tonnes/tonne)Shareinbiodiversityriskareas(%)Coal0.220%N.A.N.A.25%Iron0.650%9N.A.20%Bauxite0.435%7N.A.17%Nickel539%2501854%Cobalt576%860480%Lithium33075%160022%Copper3239%5106720%Neodymium63013%N.A.24001%GoldN.A.25%3000000N.A.15%PlatinumN.A.80%8300000N.A.N.A.Notes:Ratiosareforpureelements.ThewateruseforneodymiumisforREEproductionasawhole.Therock-to-metalratiooflithiumrefersonlytoproductionfromhardrockwhilethewaterusevaluereferstobrine.Coalbiodiversityriskusesthermalcoalvalues.ShareinwaterscarceareasrepresentstheshareofproductionlocatedincountrieswithmoderatetoveryhighwaterscarcityrisksaccordingtotheWWF,whileshareinbiodiversityriskareasisbasedonVeriskMaplecroftdata.Sources:IEA(2021a);Nassar,etal.(2022);Eurometaux(2022);ArgonneNationalLaboratory(2022);USGS(2009);VeriskMaplecroft(2021);WWF(2021);BP(2021).Box2.6MiningwastestoredbehindtailingsdamsMiningofmineralsinevitablyresultsinresiduescalledtailings,includinggroundrock,unrecoverableanduneconomicmetals,chemicals,organicmatter,andeffluent,whichareoftenstoredinreservoirscreatedbytailingsdams,intheformofaslurryoffineparticles.Tailingscontainhazardoussubstancesthatcanbehighlytoxicandevenradioactive.Solidtailingsareoftenusedaspartofthestructureofthedamitself.Thesereservoirsareneededtopreventfineparticlesthatresultfromthegrindingoftherockfrombeingreleasedintotheairandwaterandharmingtheenvironment.Tailingsdams,ofwhichtherearethoughttobearound3500throughouttheworld,areamongthelargestengineeredstructuresonearth.Theyareusuallyintendedforlong-termorpermanentstorage.Poorconstructionandmaintenance,combinedwithextremeclimaticevents,canleadtocatastrophicdamfailure,suchasthe2019BrumadinhoDamdisasterinBrazil,whichkilledmorethan260people.ThefailurerateoftailingsdamsisestimatedtobetwoordersofmagnitudehigherthanthatofEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE134IEA.CCBY4.0.conventionalwaterdams(Azam&Li,2010).Leakagesarealsoamajorriskfortheenvironmentandlocalpopulations.Moreenvironmentallyacceptablemeansofdisposingoftailingswillneedtobefound.Alternativesolutionsunderdevelopmentincludereprocessingsomeofthewasteorfixingitusingplantlifeorbacteria.Drystacking,whichinvolvesextractingwaterfromminewastesothatitcanbestoredsafelyasdrydirt,isanotherpossibility,thoughitislikelytobeexpensiveandonlypracticalforsmallerminesinaridclimates.Itisalsopossibletorecovermetalfromtailingswhichcouldnotbeextractedinthepastthankstomoreadvancedmethods.TheInternationalCouncilonMiningandMetals(ICMM)establishedastandardonresponsibletailingmanagementwithanemphasisontherespectoflocalcommunities,closemonitoringoftailingfacilities,transparencyandpreparednessincaseoffailure(ICMM,2020).EnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE135IEA.CCBY4.0.ReferencesAdamasIntelligence(2020),Rareearthmagnetmarketoutlookto2030.AHRI(Air-Conditioning,Heating,andRefrigerationInstitute)(2022),Monthlyshipments,https://www.ahrinet.org/analytics/statistics/monthly-shipmentsAmericanFarmBureauFederation(2021),Toomanytocount:Factorsdrivingfertilizerpriceshigherandhigher,13December,https://www.fb.org/market-intel/too-many-to-count-factors-driving-fertilizer-prices-higher-and-higherArgonneNationalLaboratory(2022),GREETmodel,https://greet.es.anl.gov/AskCI(2022),Analysisoftheupper,middleandlowerreachesofChina'sheatpumpindustrychainin2022(withapanoramicviewoftheindustrychain),https://www.askci.com/news/chanye/20220823/1644171966298_6.shtml[translated]Azam,S.,&Li,Q.(2010),Tailingsdamfailures:Areviewofthelastonehundredyears,GeotechNews,https://www.researchgate.net/publication/265227636_Tailings_Dam_Failures_A_Review_of_the_Last_One_Hundred_YearsBazilian,M.,Cuming,V.,&Kenyon,T.(2020),Local-contentrulesforrenewablesprojectsdon’talwayswork,EnergyStrategyReviews,Vol.32,100569,https://doi.org/10.1016/J.ESR.2020.100569Beermand,V.andVorholt,F.,(2022),Europeanbatterycellproductionexpands,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nternationalTradeCommission)(2021),TheEvolutionofGlobalOnshoreWindTurbineBladeProductionandTrade,https://www.usitc.gov/publications/332/executive_briefings/ebot-the_evolution_of_global_onshore_wind_turbine_blade_production_and_trade.pdfUSITC(2022),ChineseWindTurbineExportGrowthContinuedin2021,https://www.usitc.gov/publications/332/executive_briefings/ebot_chinese_wind_turbine_export_growth_continued_in_2021.pdfEnergyTechnologyPerspectives2023Chapter2.MappingoutcleanenergysupplychainsPAGE141IEA.CCBY4.0.Varas,A.,Varadarajan,R.,Goodrich,J.&Yinug,F.(2020),GovernmentincentivesandUScompetitivenessinsemiconductormanufacturing,BCG&SIA,https://www.semiconductors.org/wp-content/uploads/2020/09/Government-Incentives-and-US-Competitiveness-in-Semiconductor-Manufacturing-Sep-2020.pdfVeriskMaplecroft(2021),Miningoperationsfacegrowingbiodiversityrisks,https://www.maplecroft.com/insights/analysis/mining-operations-face-growing-biodiversity-risks/Vestas(2021),SustainabilityReport2021,https://www.vestas.com/content/dam/vestas-com/global/en/investor/reports-and-presentations/financial/2021/Sustainability_Report_2021.pdf.coredownload.inline.pdfWBMS(WorldBureauofMetalStatistics)(2022),WorldMetalStatisticsYearbook.WindEurope(2021),Windenergydigitalisationtowards2030,https://windeurope.org/intelligence-platform/product/wind-energy-digitalisation-towards-2030/WISEUraniumProject(2020),Uraniummapsandstatistics,http://www.wise-uranium.org/umaps.htmlWoodMackenzie(2022),Windturbinebladessupplychaintrends2022,GlobalWindEnergySupplyChainSeries,p.7.Worldsteel(2022a),2022worldsteelinfigures,https://worldsteel.org/wp-content/uploads/World-Steel-in-Figures-2022.pdfWorldsteel(2022b),Monthlycrudesteelandironproductionstatistics,https://worldsteel.org/publications/bookshop/monthly-subscription-1/WWF(WorldWideFundforNature)(2021),WWFWaterRiskFilter,https://waterriskfilter.org/Yoon,J.(2021),Smartercarsintensifyracetogetthetopchips,FinancialTimes,7December,https://www.ft.com/content/0f70afa6-1a14-4a9f-8f2f-f7e31bbb274aEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE142IEA.CCBY4.0.Chapter3.MiningandmaterialproductionHighlights•Cleanenergytransitionsrequiresubstantialmaterialinputs.Criticalminerals(notablylithium,cobalt,nickel,copperandneodymium)andbulkmaterials(steel,cement,plasticsandaluminium)arerequiredforarangeoftechnologiesandinfrastructure,fromwindturbinesandEVbatteriestoelectricitygrids.Demandforeachofthefivekeycriticalmineralsincreases1.5to7timesby2030intheNetZeroEmissionsby2050(NZE)Scenarioascleantechnologydeploymentsoars.Greatermaterialefficiencyacrossalldemandsegmentscanmorethanoffsetincreasedsteelandcementdemandforcleanenergytechnologiesandinfrastructure.•Miningcapacityforcriticalmineralsneedstoexpandswiftlytogetontrackwithnetzerogoals.Whilecurrentanticipatedinvestmentswillleadtosubstantialgains,capacitywouldstillfallwellshortofglobalNZEScenarioneedsin2030.Thelargestgapisforlithium,withanticipatedexpansionscoveringjusttwo-thirdsof2030requirements.Leadtimesfornewminesarelonganduncertain,meaningthatinvestmentofaroundUSD360-450billionwouldbeneededmostlyoverthenextthreeyearstobridgethisgap.•Capacitytoprocessthesemineralsintousablematerialsmustalsoexpandconsiderably.Currentlyanticipatedprojectspointtolargesupplygapsforsomecriticalmaterialsunlessnewplansareannouncedsoon,regardlessofwhetherminingcapacityissufficient.Thecurrentannouncementsimplyshortfallsof60%fornickelsulphateand35%forlithium,relativetowhatisneededintheNZEScenarioby2030.Geographicdiversificationcouldreducetheriskofsupplydisruptions,butcurrentexpansionplanspointtocontinueddominancebyChina.•Conventionalbulkmaterialproductioncapacityisemissions-intensiveandverydifficulttodecarbonise.Mostnearzeroemissionproductionroutesarenotyetcommerciallyavailable,butmustexpandfromminimalquantitiesofoutputtodaytoaround130milliontonnes(Mt)ofprimarysteeland370Mtofcementproductionby2030intheNZEScenario.Amongannouncedprojects,thoseweassessaslikelytoachievenearzeroemissionproductionimmediatelyyieldjust10%ofNZEScenarioneedsforprimarysteelin2030and3%forcement.TheseprojectsaremainlyinEuropeandNorthAmerica,butdemandgrowsmostinemergingmarketsanddevelopingeconomies,pointingtotheneedforincreasedinternationalco-operation.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE143IEA.CCBY4.0.MaterialneedsfornetzeroemissionsThenewcleanenergyeconomydepictedintheNetZeroEmissionsby2050(NZE)Scenariorequiresamassiveexpansionofthesupplychainsneededtomanufacturetheequipmentforcleanenergytechnologiesonalargescaleandtobuildsupportinginfrastructure.Thetaskiscomplicatedbythefactthatmanycleanenergytechnologiesandinfrastructurerelyoncriticalmaterials,thesupplyofwhichmaybechallengingtoscaleupquickly.Onbalance,thetransitiontocleanenergytechnologieswillreducethetotalmassofresources–includingbothenergyandmaterials–enteringtheenergysystem,despitealargeincreaseindemandforsomecriticalmaterials18(Figure3.1).Thiswillbedrivenlargelybyachangeintheformofmuchoftheenergyinputs,asprimaryenergyflowsincreasinglyoriginatedirectlyfromtheenergyinsolarradiationandwind,insteadofthechemicalbondsinmass-basedsolid,liquidorgaseousfossilfuels.IntheNZEScenario,themassofresourcesenteringtheenergysystemin2050isabouthalfthatoftoday.Biomassaccountsforabout45%ofthemassinputsin2050,materialsneededtobuildandsustaincleanenergyassetsforabout35%,andfossilfuelsfortherest(ofwhichabouthalfisconsumedinfacilitiesequippedwithcarboncapture,utilisationandstorage[CCUS]andaround20%isusedforfeedstock).Mostofthemassreductionsrelativetotodaycomefromreducedfossilfueluse.Forexample,sixtimesmorecoalthansteel(inmassterms)enterstheenergysystematpresent;by2050,steelinputsareroughlydoublethatofcoal.Thematerialneedsofcleanenergytechnologysupplychains,andoftheeconomymorebroadly,facetwocrucialchallengesintheNZEScenario:supplyandemissions.Meetingthegrowthindemandforcriticalmaterials,whichrequiresamassiveexpansionofminestoextractrawmineralsandplantstoprocessmineralsintofinalmaterials,isamassiveundertaking.Giventhelongleadtimesinvolved,especiallyindevelopingnewmines,earlyplanningwouldbeneeded.Productionofbothcriticalandbulkmaterialsisveryenergy-andcarbon-intensivetoday.Thosesupplychainsarerapidlydecarbonisedinthatscenariotobecompatiblewiththeglobalnetzerotrajectory.18Inthischapter,the“energysystem”includesdevicesthatdirectlyproduceorconsumeenergy(e.g.solarpanelsandmotors),equipmentandstructuresthathouseenergy-consumingdevicesandinturncanpassivelyimpactenergyconsumption(e.g.buildingenvelopesandcarbodies),infrastructurethatdirectlytransportsenergyorCO2(e.g.electricitygridsandCO2pipelines),andinfrastructurewhosebuild-outcouldbedirectlyaffectedbyshiftsintechnologyduetocleanenergytransitions(e.g.railinfrastructureandroads).EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE144IEA.CCBY4.0.Globalmass-basedresourceflowsintotheenergysystemintheNZEScenario,2050IEA.CCBY4.0.Notes:Physicalmassflowsoffuelsandmaterialsintheenergysystem,inmilliontonnes.Seefootnote1aboveforadetaileddefinitionoftheenergysystem.Criticalmaterialsincludecopper,lithium,nickel,cobaltandneodymium.Industrymaterialdemandincludesthatfromindustrialequipmentbutnottheplantshell.Theequivalentgraphfor2021isinChapter1.Themassofresourcesusedintheenergysystemin2050intheNZEScenarioisabouthalfthatoftoday.Materialsaccountforaboutone-thirdoftheinputsin2050.TheremainderofthissectiongoesintomoredetailaboutdemandformaterialsintheNZEScenario,aswellasthematerialefficiencymeasuresthatreducetotaldemandformaterialsandoptimisematerialusetominimisesupplychainpressures.Thesubsequentsectionsassessmineralextractionandmaterialproductioninmoredepth,lookingintohowtheexpansionofsupplyandreductionsinCO2emissionscanbeachievedateachofthesestepsincleanenergysupplychains.Box3.1Clarifyingmaterials-relatedterminologyWedistinguishbetweentwomainstepsinthesupplychainrelatedtomaterials:mineralextraction/miningandmaterialproduction.Mineralsareextractedfromtheearthintheformofmineralores–naturallyoccurringrocksorsedimentsthatcontaintherelevantmineralinsufficientconcentrationsforeconomicalextraction(oresareoftencomposedofseveraldifferentminerals).Oresareusuallyupgradedattheminetoliberateandconcentratethemineralsofinterest.ThematerialproductionstepinvolvesthefurtherprocessingofthesemineralsinindustrialEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE145IEA.CCBY4.0.plantstoachievethechemicalcompositionrequiredforuse.Thismayinvolveextractingapuremetalinelementalform,orprocessingintoadesiredalloyormineralcompound.Giventhedivisionintothesetwomainsteps,weuse“minerals”torefertowhatisextractedatmines,measuredintermsofthetargetelementcontainedwithinmineralores,and“materials”forwhatisproducedatindustrialplantsforlateruse.Wealsodistinguishbetweentwomaingroupsofmaterials(andthemineralstheyarederivedfromthem):Critical:Thesearematerialsthatareimportantforcleanenergytechnologiesandinfrastructureandthatcouldfacesupplygapsifsufficienteffortsarenottakentoscaleupsupply.Thevolumesofcriticalmaterialstendtobesmallrelativetoothermaterials(currentglobalproductionofeachtypeofcriticalmaterialiswellunder100Mtperyear).Demandfromcleanenergytransitionscoulddriveaveryrapidincreaseintotaldemand.Bulk:Thesearelarge-volumematerialsproducedinquantitiesapproachingorexceeding100Mtperyearglobally.Theydifferfromcriticalmaterialsinthatcleanenergytransitionsarenotanticipatedtoposeariskofsupplygaps,astherawmineralsneededtomakethemarecomparativelywidespreadandabundant.Theyarealreadywidelyusedinenergyandothersectorssocleanenergytransitionsarenotexpectedtoleadtoalargeoverallincreaseintotaldemand.Whilevariousmaterialscouldtechnicallyfitundereachcategory,inthischapterwefocusonthosecriticalmaterialsthatareparticularlyimportantformakingcleanenergytechnologies,andthebulkmaterialsthatarecurrentlymostenergy-andemissions-intensiveandthatareneededforcleanenergytechnologiesandinfrastructure(Table3.1).LeadingmineralsandmaterialsforcleanenergysupplychainsbytypeMineralsMaterialsCritical•coppercontainedinores•lithiumcontaininores(orbrine)•nickelcontainedinores•cobaltcontainedinores•neodymiumcontainedinores•copper•lithium(anditscompounds)•nickel(anditscompounds)•cobalt(anditscompounds)•neodymium•polysiliconBulk•ironcontainedinores(toproducesteel)•aluminiumcontainedinores•steel•cement•aluminium•plasticsNotes:Mineralsandrawresourcesthatareusedtoproducesomeofthematerialsshowninthetableandthatareextractedbutnotminedareexcludedfromthisanalysis,duetotheirmuchloweremissionsintensityinthecaseofquarrying,ortheverydifferentnatureofextractioninthecaseofenergyrawmaterials.Thisincludeslimestonethatisquarriedforcementproductionandoilfromwhichplasticsarederived(seeChapter1).Quartzandothermineralsfromwhichpolysiliconisderivedareexcludedduetoalackofreliabledataonenergyintensityandthelowriskofsupplygaps.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE146IEA.CCBY4.0.MaterialdemandTheevolutionofthedemandformaterialsthatgointomakingcleanenergytechnologiesandinfrastructureintheNZEScenarioisdrivenbyarangeoffactorsthatfallintotwomaincategories:thosethataffecttotalactivityandthosethataffectthematerialintensityofactivity.Theprimarydeterminantsofactivityaretheoveralldemandforparticularenergyservicesinendusesectorsandthemixoftechnologiesusedtomeetthatdemand.Forexample,totalpassengervehiclesalesarecurbedinthatscenariobyswitchingtoothermodesoftransport,whiletheshareofEVsintotalvehiclesalesincreasesrapidly.Theresultisthattotalelectricitydemandgrowsconsiderablyduetoincreasingelectrificationofroadvehiclesaswellasothersectors,whiletheshareofwindandsolarPVenergyinpowergenerationexpands.Withregardtomaterialintensity,innovationprogressivelyreducestheoverallmaterialintensityofcleanenergytechnologiesandinfrastructureintheNZEScenario.Forexample,theamountofmetalrequiredperunitofstoredenergyinbatteriesdeclinessteadilyastheirenergydensityincreases,thankstotechnicaladvancesinchemistry.Innovationalsoreducestherelativeamountsofcriticalmaterials–whichcanbeexpensiveandaremoreatriskofsupplydisruptions–neededforarangeofcleanenergytechnologies.Forinstance,innovativecatalystsarealreadyreducingtheneedforplatinumgroupmetalsinelectrolysers,whilethefutureuseofinnovativeperovskitesolarPVtechnologiescouldreducedemandforenergy-intensivepolysilicon–oneofthemainmaterialinputstoPVcellproductiontoday.Materialefficiencymeasuresalsoreducetheoverallmaterialintensityofeconomicactivity,includingthatofcleantechnologies,whileprovidingthesameservice.Inmanycases,thisinvolvesreducedoveralldemandformaterials,thoughinsomecasesitcanincreaserelianceoncertainmaterialsthatreducethelife-cycleemissionsofagiventechnology(forexample,lightermaterialsusedinvehiclesimprovefueleconomy).Intermsofmaterialdemand,theimpactofcleanenergytransitionsismostpronouncedforcriticalmaterials.GainsinmaterialefficiencyaremorethanoffsetbytherapidpaceofdeploymentofcleanenergytechnologiesandinfrastructureintheNZEScenario.Alreadyby2030,globalcleanenergytechnologyandinfrastructure19demandforeachoffivemaincriticalmaterials–copper,lithium,cobalt,nickelandneodymium–isbetween3and14timeshigherthanin2021,dependingonthematerial,suchthatcombineddemandforthesematerialsgrows19Inthecontextofthischapter,estimatesofmaterialdemandfrom“cleanenergytechnologiesandinfrastructure”arebasedonaselectionoftechnologiesandinfrastructurethataccountformuchoftheadditionaldemandforcriticalandbulkmaterialsduetocleanenergytransitions.Thetechnologiesandinfrastructureincludedareasfollows:renewableandnuclearpowergeneration,electricitygrids,EVbatteriesandmotors,hydrogenproductionandfuelcellsinfuelcellelectricvehicles,andinfrastructureforhydrogendistributionandCO2transportandstorage.Othercomponentsofthe“energysystem”(asdefinedinfootnote1)–suchascarbodies,buildingenvelopesandrailinfrastructure–arenotincludedinthiscategory.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE147IEA.CCBY4.0.from6Mtto20Mt.Thispushesuptotaldemandfromallusesforeachofthesematerialsbybetween1.5and8times,suchthatcombineddemandgrowsfrom26Mtto43Mt(Figure3.2).TotalglobalmaterialdemandbytypeintheNZEScenarioIEA.CCBY4.0.Source:IEAanalysisbasedonUSGS(2022).IntheNZEScenario,deploymentofcleanenergytechnologiesrapidlyincreasesdemandforcriticalmaterials,whilematerialefficiencycurbsgrowthindemandforbulkmaterials.After2030,growthindemandformostcriticalmineralsismuchmoremodest,evenasthein-usestocksofthesematerialscontinuetogrowrapidly.IntheNZEScenario,technologydeploymentratesmustacceleratequicklythisdecade.Insomecases,deploymentratesreachsufficientlyhighlevelsalreadybyaround2030,andthenthoseratesaremaintainedatsimilarlevelsthroughouttherestofthescenario.Forexample,combinedwindandsolarPVcapacityadditionsquadruplefromabout250GWperyeartodayto1000GWin2030,asfossil-basedpowercapacityisrapidlyreplaced.Theannualrateofadditionsisthensustainedataround1000GWthroughto2050,inordertomeetincreasingdemandforelectricityfromdecarbonisingend-usesectors–assuch,thetotalinstalledcapacityofwindandsolarincreasesbythreetimesfrom2030to2050.Materialsubstitutionandimprovedefficiencyalsoplayaroleinlimitingtheincreaseinmaterialdemand.ThisisthecaseforEVs,wheretherateofdeploymentcontinuestogrowevenafter2030–salesofpassengerelectriccarsarenearly70%higherin2050than2030.However,throughinnovationtoincreasebatterydensityandswitchingtobatterychemistriesreliantonmaterialswithlowersupplyrisks,demandforcobaltandnickelgrowsataconsiderablyslowerpacethanforlithiumoverthatperiod.IntheAnnouncedPledgesScenario(APS),whichreflectscurrentgovernmentambitions,cleantechnologiesaredeployedmoreslowlythanintheNZEScenario.Thisleadstoaslowerincreaseindemandforcriticalmaterials.Between2021and010002000300040005000600070008000202120302050Mt/yearBulkmaterialsSteelCementAluminium0102030405060202120302050Mt/yearCriticalmaterialsCopperLithiumNickelCobalt&neodymiumEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE148IEA.CCBY4.0.2030,combineddemandforcriticalmaterialsgrowsataround3.3%annuallyintheAPS,onlyamoderateincreasecomparedwiththe2.7%annualgrowthobservedoverthelastdecade,andconsiderablylowerthanthe4.8%annualincreaserequiredto2030intheNZEScenario.Between2030and2050,demandformostcriticalmineralsgrowsonlymodestlyintheNZEScenario.Incontrast,intheAPSdemandgrowthcontinuesmorestronglyafter2030andeventuallymeetssimilarlevelsasintheNZE.Actualfuturedemandwillbedeterminedbytheextenttowhichpublic-andprivate-sectoractorsareabletomeettheircurrentemissionsreductionambitionsthroughdeployingcleanenergytechnologies,orevenexceedsuchambitionsinanefforttokeepglobalwarmingto1.5°C.Cleanenergytechnologiesandinfrastructure–inparticularEVbatteries,electricitygenerationandgrids,andlow-emissionhydrogenproduction–arethemaindriversofincreasingdemandforcriticalmaterialsintheNZEScenarioovertheperiodto2050(Figure3.3).Whilethespecifictechnologydrivervariesbymaterial,cleantechnologiesaccountforagrowingshareoftotaldemandforallcriticalmaterials.TheshareofEVandgridstoragebatteriesintotalgloballithiumdemandrisesfrom45%in2021toalmost90%in2030.Forcopper,thesharegoingtorenewablepowergeneration,EVsandpowernetworksrisesfromabout25%to45%.Fornickel,demandgrowthfromEVs,powergenerationandelectrolysersoutpacesthatfrommostothernickelenduses,suchthattheirshareofdemandreachescloseto60%in2030,comparedwithonly10%todayandlessthan5%justadecadeago.Totaldemandforlithiumincreasesmostrapidly,sevenfoldbetween2021and2030.ThisislargelydrivenbyitsimportantroleinEVbatteries,forwhichtherearefewalternatives,sincedemandforEVssoarsoverthatperiod.Demandforcopper,theleadingmetalinvolumetermsamongallthecriticalminerals,increases45%–thesmallestincreaseinpercentagetermsamongthefivemetals,butthebiggestinabsoluteterms(justover1Mtperyearonaverageto2030),90%ofwhichisdirectlydrivenbycleanenergytechnologies,essentiallyelectricitynetworks,EVs,solarPVandwindturbines.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE149IEA.CCBY4.0.GlobalcriticalmaterialdemandbyenduseintheNZEScenarioIEA.CCBY4.0.DemandforcriticalmaterialsincreasesrapidlyintheNZEScenario,drivenmainlybycleanenergytechnologiesandinfrastructure.Cleanenergytechnologiesandinfrastructureareexpectedtoleadtogrowingdemandforsomebulkmaterialsinspecificsegments–forexample,aluminiumforsolarpanelframesandsteelforwindturbines.However,totalglobaldemandforbulkmaterialsdoesnotjumprapidlyintheNZEScenariointhewayitdoesforcriticalmaterials(Figure3.4).Demandforcementandsteellargelystagnates,whiledemandforaluminiumandplasticscontinuestogrowalthoughatmuchlowerratesthancriticalmaterials.Forcementandsteel,cleanenergytechnologiesandinfrastructureaccountforonlyarelativelysmallportionoftotaldemand.Forexample,electricitygeneration–includingforfossil,nuclearandrenewabletechnologies–todayaccountsforonlyabout2-3%ofcementandsteeldemand.IntheNZEScenario,demandfromelectricitygenerationforsteelnearlytriplesandforcementdoublesby2030,butthisstillequatestoonlyabout5%oftotaldemandforeach.Meanwhile,demandforbothcementandsteelfromenergyinfrastructure–thatis,combineddemandfromelectricitygrids,oilandgaspipelines,hydrogenpipelines,andCO2transportandstorage–roughlydoublesbetweennowand2050intheNZEScenario,evenasdemandfromoilandgaspipelinesinparticulardeclinessharply.Yetin2050thissegmentstillaccountsforonlyabout7%oftotalsteelandlessthan2%oftotalcementdemand.Instead,themaindriversofoveralldemandforcementandsteelcomefromotherdemandsegments,includingconstructionforbothmaterialsandmanufacturingofvehiclesandconsumergoodsforsteel.Percapitademandforbulkmaterialstendstoleveloffandevendecreaseaseconomiesreachmaturity,asdemandcomesmainlyfromreplacingandrepairingexistingstocksofgoodsandproducts,rather050100150200250300350202120302050202120302050202120302050202120302050CopperNickelCobaltNeodymiumSolarPVWindOtherlow-carbongenerationEVbatteryEVmotorGridstoragebatteryElectricitynetworksHydrogenOther0200400600800100012001400202120302050LithiumIndex(100=2021)EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE150IEA.CCBY4.0.thanbuildingormakingnewones.Muchofgrowthindemandforthesematerialsintheemergingmarketanddevelopingeconomiesisoffsetbyagradualdeclineindemandintheadvancedeconomiesandevensomeemergingmarketeconomies,leadingtorelativelyflatglobaldemandto2050intheNZEScenario.Materialefficiencymeasuresalsoplayakeyroleincurbingoverallglobaldemand(seebelow).Thestoryforaluminiumissomewhatdifferent.Electricitygenerationandgridstodayaccountforabout10%ofaluminiumdemand.Thisdemandmorethandoublesby2050intheNZEScenario,andisoneofthecentraldriversofincreasingtotalaluminiumdemand.Thetransportsectoralsohasamajorimpact,asvehiclesaccountforaboutaquarteroftoday’saluminiumdemand.Thisdemandsegmentgrowsbyabout60%by2050intheNZEScenario,duetoacombinationofvehiclelightweightingtoimprovefueleconomyandfacilitatesmallerbatteriesinEVs,andincreasingpenetrationofEVsthatrelymoreonaluminiumthanconventionalvehicles.Evenaftermaterialefficiencymeasuresreducedemandfromothersegments,thesechangestogetherresultinabouta35%increaseintotalaluminiumdemandby2050.Similarly,thedemanddriversforplastics–includingalargerolefrompackagingandconsumergoods–leadtomoderatelyincreasingdemandto2050despitematerialefficiencymeasures.Still,theincreasesseenforaluminiumandplasticsareconsiderablylowerthanthatofcriticalmaterials.EstimatedglobalbulkmaterialdemandbyenduseintheNZEScenarioIEA.CCBY4.0.Notes:Energyinfrastructureincludeselectricitygrids,oilandgaspipelines,hydrogentransport,andCO2transportandstorage.Industryincludesmaterialdemandfromindustrialequipmentbutnotfromtheplantshell.Transportincludesvehiclesandestimatedmaterialdemandfromroadandrailinfrastructure.Otherincludesnon-energyinfrastructure,consumergoods,packaging,textilesandmiscellaneoususes.Globaldemandforcementandsteelisrelativelyflatasitislessdrivenbycleanenergytechnologiesandinfrastructure,whiledemandforaluminiumincreasesmoresubstantiallyduetoitsroleinelectricitygenerationanddistributionandlow-emissionvehicles.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE151IEA.CCBY4.0.MaterialefficiencyUsingmaterialsmoreefficientlyplaysacentralroleincurbingoveralldemandintheNZEScenario.Itdirectlyreducestheneedforemissions-intensiveproductionintheneartermandreducestheneedtodeploycostlynearzeroemissionproductiontechnologiesinthelongterm,thusavoidingtheneedtoinvesttrillionsofdollarsinmaterialproduction(seeChapter6).Italsohelpsalleviatetheriskofsupplyshortages,particularlyinthecaseofcriticalmaterials.Materialefficiencyencompassesaportfolioofmeasuresatallstagesofsupplychains.Manyofthesestrategiescanalreadybeadoptedtoday,althoughinnovationcanhelpexpandtheoverallpotential.Someofthesechangesinvolveactionsbybusinessesandotherbehaviouralchangesonthepartofconsumers(Box3.2).Design,manufacturingandmaterialsubstitutionBetterdesignoffinalproductsandreducedwasteinmanufacturingsignificantlyreduceuseofmaterialsalongcleanenergysupplychainsintheNZEScenario.Forexample,improvementsindesignandmanufacturingreducesteeldemandbyabout10%in2050intheNZEScenariorelativetoabaselinewithlimitedmaterialefficiency.Theopportunitiesforefficiencyindesignandmanufacturingarediverse.Lightweightcardesignsreducematerialneededforbothcarbodiesandpowertrains,whilebuildingssystemoptimisationreducesmaterialneedsinconstruction.Inminingandmanufacturing,adoptionofbestpractices,upskillingofworkersandinnovativetechniquescanreducematerialwastage.Forexample,improvingsortingofminingwastecanlimittheamountofusefulmineralsthatendupintailingsdams,additivemanufacturingcanreducescrapgenerationinvehiclemanufacturing,bestpracticesonconstructionsitescanoptimisetheamountofcementusedinconcrete,andnewtechniquessuchasultrasoniccoatingcouldreducetheuseofsomecriticalmaterialsinelectrolysersbyuptohalf(Sono-tek,2022).Materialsubstitutionalsoplaysanimportantrole.Thiscaninvolvesubstitutinglower-emissionmaterials,lightermaterialsoralternativematerialstolowerthedependenceoncriticalmineralsthatarevulnerabletodisruptionsorareinshortsupply(seeChapter6).ExamplesincludealternativechemistriesformakingEVbatteries,switchingtodifferentelectrolyserdesigns,andusinginnovativesuperconductingmagnetsthatdon’trelyonrareearthelements(REEs)forwindturbinesandEVmotors.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE152IEA.CCBY4.0.ReuseandlifetimeextensionsReusingfinalproductsandextendingtheirlifetimesalsomajorlyreducesmaterialrequirementsintheNZEScenario.Forexample,longerbuildinglifetimesreducecementdemandby13%in2050intheNZEScenariorelativetoabaselinewithlimitedmaterialefficiency.Potentialforlongerlifetimescanbemaximisedbyconsideringdurabilityandreusabilitywhendesigningproducts.Forexample,heatpumpscanbedesignedwithinverterstoreducecyclingofmotorsandincreasesystemlifetime,whilebuildingscanbebuilttolastlongerthroughfactoringmodularityandrepurpose-abilityintothedesign.Encouragingreparabilityandbettermaintenanceofequipment,vehiclesandappliancescanalsoextendlifetimes.Thiscanbeaidedbypredictivemaintenanceusingnoveldigitaltechnologiesthatremotelymonitor,detectandpre-emptivelyaddresspotentialproblems–includingsensors,digitaltwinsandmachinelearning.Partialcomponentreplacementisanotheroption.Forexample,Ballard,aCanadianpowersystemscompany,isofferingrefurbishmentoftheirfuelcellstoreplacethemembranewhileretainingthelonger-livedexistinghardwareandplates,extendingtheusefulserviceoftheirsystems(Ballard,2018).Lifetimescanalsobeextendedthroughrepurposing.RepurposingEVbatteriesforsecondaryuseinstationaryenergystoragecouldhelpreducedemandforcriticalmaterials.RepurposingexistingoilandgaspipelinestotransportCO2orhydrogencanreducematerialneedsandlowerscosts(seeChapter5).Reusingorextendingthelifetimesofproductsshouldgenerallybepursuedonlyininstanceswhereitleadstooveralllife-cycleemissionsreductions.Incaseswhereitwouldslowtheroll-outofsubstantiallylower-emissiontechnologies,recyclingmaybeabetteroption.Forexample,recyclingthematerialsfrominternalcombustionenginevehiclesmaybepreferabletoextendinglifetimes,inordertonotslowtheroll-outofzeroemissionsvehicles.Box3.2BehaviouralchangetoreducethesupplychainchallengeChangesinconsumerbehaviourthatresultinlowerdemandforenergyproductsandservicesisanimportantleverinreducingthescaleofthecleanenergyandtechnologysupplychainsrequiredtogettonetzero.Thescopeofsuchchangesandthepotentialforcuttingenergyneedsarebothconsiderable.Forexample,switchingtopublictransportcutstheneedforfueltoruncarsandtomakethematerialsneededtomakethecaritself.Consumerbehaviourisaffectedbymanyfactors,includingprice,socialnormsandfashions,andpublicawarenesscampaigns.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE153IEA.CCBY4.0.RecyclingandsecondaryproductionIntheNZEScenario,opportunitiestoincreaserecyclingandsecondaryproductionaremaximised,bringingseveralbenefits.Theneedformineralextractionisreduced,alongwiththeenvironmentaldamageitinvolves.Production-phaseemissionsarereduced,sincerecycledproductionisgenerallyconsiderablylessenergy-andemissions-intensivethanprimaryproduction.Forinstance,recyclednickelrequiresonlyabout25%oftheenergyrequirementsofprimaryClassInickel(ArgonneLaboratory,2022),whilesecondaryaluminiumproductionemits96%lessCO2thanprimaryproduction(Eurometaux,2022).Recyclingcanalsoreducethevulnerabilityofsupplychainstodisruptionsifrecyclingiscarriedoutclosetodemandcentres.EVsareanexampleofhowmaterialsdemandcanbecutthroughbehaviouralchange.MinimisingthesizeoftheEVbattery,whichdependsondrivingpatternsandreducingrangeanxiety,wouldgreatlyreducedemandforcriticalmaterials.Maintainingratherthanincreasingthecurrentaveragerangeofelectriccarswouldenablebatteriestobe20-25%smallerthanintheNZEScenarioin2030and2050,resultingina20%reductionincriticalmaterialneedsformakingEVbatteries(IEA,2022a).EncouragingmoreefficientutilisationofeachEV(e.g.throughcarorridesharing)couldalsohelpalleviatestrainsonmaterialsupplyintheneartermwhileachievingthesame(orlarger)emissionsreductions.Thecurrentenergycrisishaspromptedseveralpublicinitiativestoconserveenergy,particularlyinEurope,showcasingthescaleoftheeffortthatcanbemobilisedintherightpoliticalandeconomicconditions.TheEuropeanCommissionhassetoutarangeofdemand-sidemeasurestosaveenergyintheREPowerEUpackage(seeChapter1),whichcouldsavearound13bcmperyearofgasimportsthroughbehaviouralchanges(EuropeanCommission,2022a).RecentrelatedworkincludestheIEA’s10-PointPlantoReducetheEuropeanUnion'sRelianceonRussianNaturalGasand10-PointPlantoCutOilUse,andtheinclusionofanewchapterondemand,servicesandsocialaspectsofmitigationinWorkingGroupIII’scontributiontotheSixthAssessmentReportoftheIntergovernmentalPanelonClimateChange(IPCC)(IEA,2022b;IEA,2022c;IPCC,2022).EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE154IEA.CCBY4.0.ShareofsecondaryproductionintheglobalsupplyofselectedmaterialsintheNZEScenarioIEA.CCBY4.0.Note:Forsteel,theshareofscrapintotalmetalinputsisused,includinginternalandmanufacturingscrap.Foraluminium,internalscrapisexcludedinlinewiththereportingconventionoftheindustry.Valuesfornickelandcobaltdonotincludetheireventualrecyclingaspartofmetalalloyssuchasstainlesssteel.Forplastic,thecombinedproductionofallplastictypesisused.Sources:IEAanalysisbasedonUSGS(2022);IEA(2021);AluminiumAssociation(2021).TheshareofsecondaryproductionincreasesstronglyintheNZEScenario,particularlyforcriticalmaterialsafter2030asthefirstwaveofcleanenergytechnologiesreachestheendoftheirlife.Forbulkmetalssuchassteelandaluminium,increasingrecyclingandsecondaryproductioninvolvesimprovingcollectionrates,implementingadvancedsortingtechnologiesandexpandingthecapacityofwell-establishedsecondaryproductionroutessuchaselectricarcfurnacesforsteel.Thepotentialforincreasedrecyclingratesisrelativelymodestforsteelandaluminiumsincerecyclingroutesarealreadywell-establishedandend-of-lifecollectionratesarealreadyhigh(about85%forsteeland70%foraluminium),asthereisastrongeconomicincentive–secondaryproductiontendstobelesscostlythanprimary.IncreasedsecondaryproductionforsteelandaluminiumintheNZEScenariocomeslargelyfromincreasedscrapavailabilityasproductsreachendoflife,ratherthanduetodrasticallyhighercollectionrates.Forotherbulkmaterials,thepotentialforimprovementismuchgreater.Lessthan20%ofplasticwasteiscollectedforrecyclingtodayandlessthan10%oftotalplasticproductionusesrecycledmaterialasaninput.Innovativechemicalandfeedstockrecyclingmethodsarebeingdevelopedtoovercomethelimitedyieldrateachievablewithcurrentmechanicalrecyclingtechniquesandexpandtherangeofplasticswhichcanbeeasilyrecycled.IntheNZEScenario,collectionratesreachover50%by2050thankstotechnologydevelopment,behaviouralchangeandinfrastructureexpansiondrivenbypolicyinterventions.Forcement,EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE155IEA.CCBY4.0.recyclingisoverallmuchmorecomplicated,butinnovationisunderwaytorecoverportionsofcement,suchasthroughconcretefinesrecycling.Forthecriticalmaterialsthatarewidelyusedtoday,suchascopperandnickel,recyclingprocessesarealreadywellestablished.Forexample,copperfromwires,electronicsandlargerproductsisrelativelyeasytoseparateoutforrecycling.Forsomepreciousmetals,thecollectionratesforrecyclingarehigh,suchasgoldat86%andnickelat60%,whilethereisstillconsiderablepotentialtoincreasetherateforothermetals,suchascopperat46%andcobaltat32%(IEA,2021).Bycontrast,recyclingratesareverylowforthosecriticalmaterialsthathaveonlyrecentlybeguntobeusedwidelyandthathavelowconcentrationinfinalproducts.Forexample,lithiumandREEshaverecyclingratesbelow1%,astherecyclingsectorhashadlittletimetodeveloprecyclingprocessesandinfrastructure,andtheirlowconcentrationmakesrecoverymoreexpensive.ThesecondaryproductionofcriticalmineralsasashareoftotalsupplyremainslowerthanforsteelandaluminiumthroughouttheprojectionperiodoftheNZEScenario.Therapidgrowthindemandforcriticalmaterialsisveryrecentcomparedwiththelifetimesofproductstheyareusedin.Asaresult,theshareofsecondaryproductionincreasessignificantlyonlyafter2030,asthecriticalmaterialsusedtoproducevehicles,equipmentandappliancesinthe2020sbecomeavailableforrecycling.Forexample,secondaryproductionoflithiumgrowsfromnegligibleamountstodaytoalmost35%ofglobalsupplyin2050(Figure3.5).Box3.3IncreasingrecyclabilityofcleanenergytechnologiesImprovingrecyclabilityisakeypartofimprovingthesustainabilityofcleanenergytechnologysupplychains.Innovationwillbeimportanthere,bothtodesigntechnologiestobemorerecyclableandtoimprovetheefficiencyofrecyclingmethods.Thehurdlesvarybytechnology–herewetakeacloserlookatEVbatteriesandwindturbinebladesasillustrativeexamples.EVbatteriesEVbatteriesaredifficulttorecycleduetotheircomplexcomposition.Thesimplestmethodtorecyclethemisthroughpyrometallurgy,wherethewholebatteryissmeltedtoseparateitsmetals;however,thisprocessisnotadaptedtorecoverlithium,andthemetalsrecoveredneedadditionalenergytoberemanufacturedintobatterycomponents.Analternativemethodisdirectrecycling,knownascathodehealing,wherebatterycomponentsarephysicallyunpackaged,separatedandrecycledorreused.Thisallowsrecoveryofentirecomponents,thoughdoingsoEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE156IEA.CCBY4.0.MineralextractionSomeofthemarketsforthemineralsthatareneededinlargequantitiestoproducematerialsneededforcleanenergytechnologiesarealreadymature.Forexample,ironoreformakingsteel,andbauxiteformakingaluminiumandcopperoreshavebeenminedextensivelyforaverylongtime.Theextractionofothers,notablycriticalmineralssuchaslithiumandcobalt,isrelativelysmalltoday.DemandforallofthemaincriticalmineralsgrowsmassivelyinthecomingdecadeasdemandfromcleanenergytechnologiesexpandsintheNZEScenario(Figure3.6).Bycontrast,thetransformationoftheenergysectorhaslittleimpactontotaldemandforironoreandbauxite,giventhatmaterialefficiencyimprovementslargelyoutweighthemodestincreaseinmaterialdemandfromcost-effectivelyonalargescalewouldrequirelargevolumesofwell-designedbatteries(Sloop,etal.,2020;Harper,etal.,2019).Abigexpansionofrecyclingcapacity–drivenlargelybyincreasingvolumesofbatteriesreachingtheendoftheirlife–slowstherateofgrowthincriticalmineralminingneededformakingEVbatteriesafter2030intheNZEScenario.Forexample,increasingrecyclingratesoflithiumenablesminingcapacitytobeexpandedeightfoldfrom2021to2050,ratherthan13-foldwererecyclingratestoremainconstant,reducingrequiredinvestmentinlithiumminingbyUSD12billion.RecyclingandreuseofEVbatteriescontributesmosttocuttingtheneedforlithiumminingandprocessing,withgridbatteriesandotherbatteriesfromoutsideofcleanenergytechnologiescontributingtolessthan10%ofthetotalrecycledorreusedlithiumin2050inthatscenario.WindturbinebladesWindturbinesareanothertechnologywherefurtherdevelopmentisneededtoexpandrecycling.Whilemostpartsofawindturbinecanberecycled,windturbinebladescanbedifficultbecauseofthecompositematerialsusedintheirconstruction.Windpowerisexpectedtoproduceapproximately5%oftotalcompositewasteworldwidein2025,withthatnumberlikelytogrowsignificantlyinthefutureasmoreturbinesaredecommissioned(WindEurope,2020).Currenttechnologiesforcompositerecyclinggenerallyuselargeamountsofenergyandcanbecostly,butnewtechniquesforrecyclingareunderdevelopment,includingsolvolysisandpyrolysis(Goldwind,2022).Designingbladestoenhancerecyclabilitywithoutsacrificingperformancecanplayaroleinreducingend-of-lifewaste,whileemergingadditivemanufacturingtechniquescouldreducewastefromthemanufacturingstage(SiemensGamesa,2022).EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE157IEA.CCBY4.0.cleanenergytechnologies(seesectiononmaterialdemandabove)andincreasingavailabilityofscrapleadstoreductionsintheneedforprimaryproductionandthusmineralores.ChangeinglobaldemandforselectedmineralsintheNZEScenario,2021-2030IEA.CCBY4.0.Note:Basedonthemassofthemineralintheore.DemandforcriticalmineralsgrowsveryrapidlyintheNZEScenario,whiledemandformineralstoproducebulkmetalsdeclinesmarginally,albeitfromamuchhigherstartingpoint.ExpansionplansandgapwiththenetzerotrajectoryRecentincreasesinclimatepolicyambitionandspecificgovernmentmeasurestoacceleratetheenergytransitionaroundtheworldaredrivingupexpectationsofincreasedglobaldemandforcriticalmineralsandstimulatinginvestmentsintheminingsector.Anumberofnewprojectshavebeenannouncedrecently,thoughmanyoftheseprojectswillonlyincreasesupplyseveralyearsaheadduetothelongleadtimes(seeChapter1).ThecleanenergyexpansionintheNZEScenariorequirestheextractionofcriticalmineralstoincreaserapidly,atratesthataremuchhigherthaninthepast.Mineexpansionneedsareparticularlyhighinthecurrentdecade.Forexample,therateofgrowthinoutputofcopperandlithiumneedstodoubleover2021-2030comparedwiththepreviousdecade.Expansionrequirementsaremoremodestover2030-2050,sincetheelectricityandroadtransportsectors–themainsourcesofcriticalmineraldemand–havealreadylargelyswitchedtocleantechnologiesinthe2030sintheNZEScenario.Incontrasttocriticalminerals,miningofironoreandbauxitefallsoverthecurrentdecade,thanksmainlytoincreasedavailabilityofscrapthatenablesincreasedsecondaryproductionandmaterialefficiencythatsubstantiallycurbsgrowthintotaldemand.-200%0%200%400%600%CopperLithiumNickelCobaltNeodymiumIronAluminiumCriticalmineralsOthermineralsEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE158IEA.CCBY4.0.TomeetrisingdemandforcriticalmineralsintheNZEScenario,bothextractionfromknownresourcesandextensiveexplorationareneededtoincreaseresourceavailability.Theminingindustryhasalreadystartedrespondingtopolicyandmarketsignalspointingtoarapidincreaseindemandforcriticalmineralsbysteppingupinvestmentinnewcapacity.Asaresult,miningcapacityforallfivekeyminerals,takingaccountofalready-announcedexpansionprojects,isprojectedtobesignificantlyhigherin2030thantoday.However,thisanticipatedincreaseincapacitystillfallsshortofthatrequiredtomeettheprojectedlevelsofdemandinthatyearintheNZEScenarioforallminerals(Figure3.7).Thesizeofthegapbetweentheprimaryproductionthatisanticipated20toresultfromcurrentlyanticipatedinvestmentsinexpandingcapacityandthatprojectedintheNZEScenarioin2030variesacrosstheleadingcriticalminerals.Thebiggestgapisinlithiumsupply,amountingto35%ofwhatisneededtobeontrackwiththatscenario.ThismeansthatmuchmoreinvestmentwouldbeneededinthenextthreeyearsinlithiumminingtomeettheNZEScenariodemandby2030.Explorationdrillcountssuggestthatthisupturnmaybeforthcoming:fourtimesmoredrillingwascarriedoutin2022thanthepreviousyear,thoughhowquicklytheresultsleadtonewcapacityisveryuncertain(S&PGlobal,2022a).Thenumberofprojectsandresultinganticipatedcapacityfornickelmininghavegrownrapidlyoverthepastyear,inlargepartduetoafocusbytheIndonesiangovernmentonthissector.ThiscountryhasaboutafifthoftheknownglobalnickelreservesandisattractinginternationalinvestmentfrombothminingcompaniesandbatterycompaniessuchasLG,whichhasinvestedinaUSD300millionIndonesianmineproject(Christina&Suroyo,2022).Indonesiamightbeabletorampupoutputrapidly,withouttherisksandlongleadtimeassociatedwithexploration,especiallyaspermittingandadministrativeprocedureshavebeenaccelerated.Theshorterleadtimesinthiscountryarealreadyhelpingencouragedevelopmentofnickelminingoperations,withoutputnearlydoublingbetween2020and2022(S&PGlobal,2022b).Thissuggeststhatitmaybepossibletofilltheglobalnickelsupplygapby2030.Forcobalt,thesupplygapisoneofthelowestofallcriticalmineralsat10%,thankstoinnovationsinbatterychemistryoverthelastfiveyearsthathavereducedthecobaltcontentofbatteries.Thisisagoodexampleofhowinnovationcanhelpreducemineraldemandinthefaceofrisingcostsandconcernsaboutenvironmental,socialandgovernanceconsiderations.20Anticipatedsupplyreferstoexpectedfutureproductionbasedonexpertjudgementfromthirdpartydataproviders.Expectationsincommoditypricescanhavealargeimpactontheexpectedsupply–ahigherpricemightleadtomoresupplycomingonline.Atthesametime,unexpecteddelaysinfinancing,permitting,orconstructioncoulddelayprojects,yieldingalowersupply.Thevalueisthereforelowerthanasumofallannouncedprojects.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE159IEA.CCBY4.0.Primaryproductionofselectedmineralsbycountry/regionintheNZEScenarioandbasedoncurrentlyanticipatedsupplyIEA.CCBY4.0.Notes:NZE=NetZeroEmissionsby2050Scenario;ROW=restoftheworld;CSA=CentralandSouthAmerica.OtherAsiaPacificexcludesChina.Anticipatedsupplyincludesexistingproduction.Anticipatedsupplyrelatesto2026forcopperandironoreandto2030forlithium,cobalt,nickelandneodymium(seenote3).Forneodymium,theshareofproducingregionsisassumedtobeproportionaltoREEproductionandisconstantovertimeduetoalackofprecisedata.Mineralsareshownintermsoftheirmassintheore,exceptforironore.Sources:IEAanalysisbasedonUSGS(2022);S&PGlobal(2022c);S&PGlobal(2022d);S&PGlobal(2022e);EuropeanCommission(2020);Eurometaux(2022).Anticipatedsupplyfallsshortofthatrequiredtomeetprojecteddemandin2030intheNZEScenarioforallmineralsexceptiron.0100002000030000400002021Anticipatedsupply2030-NZECopperkt/year01000200030004000500060002021Anticipatedsupply2030-NZENickel01002003004005006007008002021Anticipatedsupply2030-NZELithiumkt/year0501001502002503003502021Anticipatedsupply2030-NZECobalt0204060801002021Anticipatedsupply2030-NZENeodymiumoxidekt/yearChinaOtherAsiaPacificEuropeNorthAmericaAfricaEurasiaMiddleEastCSAROWNZEdemand0500100015002000250030002021Anticipatedsupply2030-NZEIronoreEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE160IEA.CCBY4.0.ScalingupminingcapacityforclosingthegaptoNZEScenariocomeswithaninvestmentrisk,asitreliesonthescale-upofcleanenergytechnologiesfurtherdownthevaluechain,includinginareassuchasPVandbatteriesinparticular.Theoutlookappearsbrighttheregiventhattheseareareasofcleanenergywithrecordinstallationstoday,andmanufacturingcapacityisrapidlyexpanding(seeChapter4).However,justhowlargethegapmightbeby2030remainsuncertain:forexample,demandlevelsinlinewithcurrentgovernmentambitions,asdepictedintheAPS,are10%to40%lowerthanintheNZEScenarioforcriticalminerals.Therefore,intheAPSthereisasignificantlysmallergapcomparedwithanticipatedinvestmentsthantheequivalentgapintheNZEScenario:nickelandcopperaretheonlytwocommoditiesforwhichthereisagapbetweenAPSdemandlevelsandanticipatedsupply,at10%fornickeland5%forcopper.Private-sectorplansforproductioncapacityexpansionatagloballevelseemthereforetobewellalignedwithcurrentgovernmentplans,butcurrentplansarenotsufficienttolimitglobalwarmingto1.5°C.Theextractionofmineralsneededforcleanenergytechnologiesandinfrastructurecanbeincreasedbyeitherdevelopinggreenfieldminingprojectsorexpandingoutputatexistingmines.Openinganewminetakesalongtimefromdiscoverytoproduction,onaverage17years(seeChapter1).Thisprocessrequiresengineeringworks,includinginstallinginfrastructure,strippingoverburden(rockandsoiloverlyingthemineral-bearingseams)inthecaseofsurfaceminesordiggingshaftsandtunnelsinthecaseofundergroundmines,anddesigningandinstallingminingequipment,aswellasadministrativeproceduresrelatedtoenvironmentalassessments,permitting,andnegotiationwithlocalcommunities.Oncereserveshavebeenprovenandthedecisiontoinvesthasbeentaken,anewminecaninprinciplebebuiltinunderfiveyears,dependingonprojectspecificationsandintheabsenceoflegalcomplications.Duetotheheavyinvestmentsrequiredandthelong-termnatureofsuchprojects,confidenceinpersistentdemandisrequiredtoencourageinvestmentinmining.Expandingtheproductioncapacityofexistingminesgenerallytakesmuchlesstime,becausemuchoftheinfrastructureandequipmentisalreadyinplaceandadministrativeproceduresaremorestraightforwardandlessatriskofbeingstalledbypublicopposition.Butthescopeforexpandingoutputatexistingminesinmostcasesisrelativelylimited,sothatmostoftheincreaseinoutputneededovertheperiodto2030wouldhavetocomefromnewminingprojects.Forlithiumandnickel,over70newaverage-sizedmines21arerequiredtoreachtheoutputvolumeneededtomeettheneedsoftheNZEScenariointhatyear.Forcobalt,30minesareneededand,forcopper,astaggering80newmineswouldberequired–ahugetask.Thesecapacityadditionsarefeasible,buttimeisshort.InvestmentwouldneedtoflowintonewprojectswithinthenextthreeyearstobringtheprojectpipelineuptospeedwiththeNZEScenariotrajectoryby2030,assumingnomajordelaysinpermittingandconstruction.Weestimatethattotalinvestmentofaround21Thequadraticaverageofthesizeofallexistingminesforagivenmineralisusedhere.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE161IEA.CCBY4.0.USD360billiontoUSD450billion(inreal2021dollars)22wouldbeneededcumulativelyover2022-2030incriticalmineralminingtoreachtheprojectedlevelofproductioninthatscenario.Two-thirdsofthetotalisforcopperminingandmostoftherestisfornickel.Cobaltrequiresrelativelylittleextrainvestmentasitisoftenaco-productofnickelandcopperoperations.ThecumulativeinvestmentrequiredtobringonlinetheanticipatedsupplyisaroundUSD180billiontoUSD220billion,implyingashortfallofUSD180billiontoUSD230billionworthofadditionalprojectstomeettheneedsoftheNZEScenario(Figure3.8).MostcurrentlyanticipatedinvestmentsareinAfrica,CentralandSouthAmerica,andAsiaPacific.Additionalinvestmentswouldhavetostartflowingatthelatestby2025toallowtimeforconstructionandcommissioningby2030.Anticipatedinvestmentinminingofcriticalmineralsbyregion/countryandthatrequiredtomeetmineraldemandover2022-2030intheNZEScenarioIEA.AllrightsreservedNotes:CSA=CentralandSouthAmerica;ROW=restoftheworld.OtherAsiaPacificexcludesChina.Anticipatedinvestmentscoverfourcriticalminerals(lithium,nickel,copperandcobalt)(seenote3).Neodymiumnotincludedbecauseofalackofdata.Cobaltproductionbeingmainlyaco-productofcopperandnickel,theadditionalcapitalinvestmentneededtoopenacopper-cobaltminecomparedwithapurecoppermineisconsidered.Arangeisquotedforanticipatedandrequiredinvestments,consideringtherangeofavailablecostestimatesfordiversefeasibilitystudiesofminingprojects.Sources:IEAanalysisbasedoncompanyfeasibilitystudies;Bartholomeusz(2022);S&PCapital(2022);USGS(2022);S&PGlobal(2022c);S&PGlobal(2022d);S&PGlobal(2022e);EuropeanCommission(2020);Eurometaux(2022);Jervois(2020).AroundathirdofanticipatedmininginvestmentsareconcentratedinAfricaandCentralandSouthAmerica,butadditionalinvestmentsarerequiredtomeettheneedsoftheNZEScenario.22Investmentrequirementsforminingactivitiesarehighlyuncertainastheyvaryconsiderablyaccordingtooregrade,minetypeanddepositcomposition.Forthesereasonsthereportedinvestmentvaluesareprovidedasarange.AnticipatedinvestmentUSD360-450billion0%20%40%60%80%100%ROWCSAAfricaEuropeNorthAmericaOtherAsiaPacificChinaUSD180-220billionRequiredinvestmentCopper62%Lithium4%Nickel33%Cobalt1%AnticipatedinvestmentInvestmentgapEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE162IEA.CCBY4.0.Whiledemandforcriticalmineralsin2040intheNZEScenarioislargerthanin2030,therateofincreaseslowssignificantlyafter2030ascleanenergytechnologiessaturatethemarketandrecyclinggrows.ThiswouldmakeiteasiertomobilisesufficientinvestmentinmineralextractiontomeettheneedsoftheNZEScenario.Nonetheless,explorationactivitiesandthefirmingupofresourcesintoprovenreserveswouldstillneedtoaccelerate,inparallelwithcapacityexpansionsatexistingmines,toavoidbottlenecksfurtherintothefuture.Amajordriverforinvestmentinminingexplorationandoperationistheexpectedpriceofcommodities.Higherpriceswouldmakeprojectsmoreprofitableandexpandpotentialsupplybyincreasingthenumberofresourcesthatcanbeextractedprofitably.IntheNZEScenario,theveryrapidscale-upofdemandislikelytobesofastthatcommoditypricesmightremainatlevelsclosetorecenthistoricalpeaksupto2040,helpingtostimulateinvestment(Boer,Pescatori&Stuermer,2021).Forbothcriticalandbulkmaterials,increasedsecondaryproductionusingrecycledinputsreducesdemandforrawmineralsand,therefore,theneedfornewminesintheNZEScenario.Inthecaseofironore,thereisnoinvestmentgapto2030.Thishingesondevelopingadditionalrecyclinginfrastructure,whichshouldnotbeparticularlyhardgiventhematurityofsuchinfrastructure.GeographicaldistributionAnticipatedinvestmentsintheminingofcriticalmineralspointtoanoverallmodestimprovementinthegeographicaldiversityofproductioninthecomingyears.Theproductionofmostoftheleadingmineralsiscurrentlyhighlyconcentratedinasmallnumberofcountriesandregions(seeChapter2).Thedeclineinconcentrationby2030impliedbytheanticipatedsupplyvariesbymineral.Thatofnickelproductionispoisedtoincreasesubstantially,withtheshareheldbyIndonesia–theleadingproducer–duetoincreasebyover10percentagepointstoalmosthalfofworldproductiononcecurrentprojectsarecompleted(Figure3.9).Inthecaseoflithiummining,anticipatedcapacityadditionswouldleadsupplyin2030tobeonlyslightlymorediversethanitisnow,mostlythankstothestart-upofmininginCanada.AustraliaandChilewillstillaccountforaround70%ofallminingonceallthoseadditionsarefullyoperational.Ongoinginvestmentsintheminingofcobalt,whichhasthehighestconcentrationamongthefivecriticalmineralsassessed,arenotexpectedtosignificantlyaffectthegeographicdistribution,withtheDemocraticRepublicofCongoremainingfarandawaythedominantproducer.Copper,ironoreandbauxiteextractionismuchmorediversetodaythanfortheothermetals,andisduetoremaindiverseoncecurrentlyanticipatedinvestmentsEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE163IEA.CCBY4.0.arecompleted.Nonetheless,somekeyproducingcountrieswillcontinuetodominateglobalsupply.Chilewillstillaccountforaroundaquarterofworldcopperproductionwhencurrentprojectsarecompletedin2026,whileAustraliawillremaintheleadingironoreproducerwith38%ofglobalmarketshare.Sharesoftheleadingregionsinglobalminingofselectedcriticalmineralsin2021and2030basedoncurrentlyanticipatedinvestmentsIEA.CCBY4.0.Notes:DRC=DemocraticRepublicofCongo;CSA=CentralandSouthAmerica.Stableisdefinedasachangeoflessthan4%.Dotsrepresent2021valueandthearrowthechangeto2030.Sources:IEAanalysisbasedonUSGS(2022);S&PGlobal(2022c);S&PGlobal(2022d);S&PGlobal(2022e);EuropeanCommission(2020);Eurometaux(2022).Anticipatedinvestmentsinminingofcriticalmineralspointtoanoverallmodestimprovementinthegeographicaldiversityofproductioninthecomingyears,exceptfornickel.RegionalpolicyandmarketdevelopmentsPoliciesbeingadoptedinvariouscountriesmayhelpwiththescale-upofmineralextractionand/orthereductioninrawmineralneedsthroughrecycling,particularlyforcriticalminerals.AccordingtotheIEA’sCriticalMineralsPolicyTracker,releasedinNovember2022,nearly200suchpoliciesandregulationsarenowinplacearoundtheworld,ofwhichover100newoneshavebeenenactedinthepasttwoyearsalone,withagrowingattentiontotheadoptionandimplementationofsustainableandresponsiblepracticesincriticalmineralsupplychains(IEA,2022d).IntheUnitedStates,aspartoftheInfrastructureInvestmentandJobsActsignedin2021,theDepartmentofEnergyisimplementingaUSD6billiongrantprogrammeincludingUSD3billionforbatterymanufacturingandrecycling.Thisincludesfinancingdemonstrationprojectsandcommercial-scalefacilitiesforbatteryrecycling(BGRGroup,2022).Somemajorprojectsfundedthroughthis0%20%40%60%80%DRCAustraliaCSAAfricaNorthAmericaAustraliaCSAChinaIndonesiaPhilippinesAustraliaChinaAustraliaCobaltCopperLithiumNickelREE2021level:IncreasingDecreasingStable2030levelEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE164IEA.CCBY4.0.granthavealreadybeenannounced:LilacSolutionsisinvestinginlithiumproductionfromlowconcentrationbrine,andCirbaSolutionsisdevelopingafacilitytorecyclelithium-ion(Li-ion)batteries(WhiteHouse,2022;USDOE,2022).Inaddition,theInflationReductionAct(IRA),signedin2022,requirestheuseofcriticalmineralsthatareextracted,processedorrecycledintheUnitedStatesorcomefromcountrieswithwhichtheUnitedStateshasfreetradeagreements,forEVstoqualifyforfederaltaxcredits(LoanProgramsOffice,2022).Thisisexpectedtoincentiviseinvestmentsinminingoperationswithinthe20countriestheUnitedStateshasfreetradeagreementswith,includingChileandAustralia.Inaddition,theDefenseProductionActof1950,whichgivesthepresidentauthoritytomobiliseindustryfornationaldefencereasons,wasinvokedovercriticalmineralsandbatteriessupplyin2022.ThisgivesthegovernmentthepossibilityofstrengtheningtheUSdomesticindustrialbaseforlarge-capacitybatteriesandtheircomponentminerals,usingloansandpurchasecommitmentstoincentivisecompaniestoexpanddomesticmining(Biden,2022).Australiaisaimingtoencourageexpansionofitscriticalmineralextractioncapacity,notablycobalt,vanadiumandREEs(Australia,DepartmentofIndustry,Science,EnergyandResources2022).Thecountryisalreadytheworld’slargestsupplierofironore,bauxiteandlithium.Tosupportthisgoal,thegovernmentplanstointroducemeasurestode-risknewminingprojects,createanenablingenvironmentandstrengtheninternationalpartnershipsbyofferingfinancialsupporttoprojectsatdiverselevelsofdevelopment,includingenablinginfrastructureandresearch,developmentanddemonstration.In2021,theAustraliangovernmentestablishedtheAUD2billion(Australiandollars)CriticalMineralsFacilitytosupportcriticalmineralprojectswithloans,loanguarantees,bondsandworkingcapitalsupportasacomplementtocommercialfinancing(AustralianGovernment,2021).TheEuropeanUnioniscurrentlyhighlydependentonimportsofcriticalminerals.Forinstance,EUcountriessupply4%ofcopperorebutrepresent12%ofrefinedcopperdemand(WBMS,2022).Freetradeagreementshavebeennegotiatedwithmineralexporters,suchaswithKoreain2015(whichproduces20%oftheworld’sindium23),andtheassociationagreementwithChile,alargelithiumproducer,isbeingmodernised(EPRS,2021).DemandforlocallysourcedrawmineralsisencouragingnewlithiumminingprojectsinEurope,includingoneledbyVulcaninGermanyingeothermalbrines(Vulcan,2022),aBarosolithiummineprojectinPortugal(Savannah,2019)andtheEchassièresminefromImerysinFrance(Vif,2022).InvestmentsarealsobeingmadeinresearchprogrammessuchasRawMatCop,whichreliesonearthobservationdatafromtheCopernicussatellite23Indiumhasdiverseapplicationsinsemiconductors,solarPVandthecontrolrodsofnuclearpowerreactors.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE165IEA.CCBY4.0.systemtoassistinexplorationormonitoringofminingsites,andtheEITRawMaterialsprogrammesupportsstart-upsandinnovativeprojectsaroundrawmaterials(Kasmaeeyazdi,etal.,2021;EIT,2022).Someoilandgascompaniesandinstitutionsarealsoinvestingincriticalmineralsupply.InArgentina,thenationaloilcompany,YPF,hasstartedlithiumexploration(Bianchi&Morland,2022).CO2emissionsExtractingmineralsisahighlyenergy-intensiveprocess.Mostoftheenergycurrentlyusedinminingoperationsisoffossilorigin(eitherdirectuseoffossilfuelsorelectricitygeneratedusingthem)andsomineralextractionactivitiesresultinsignificantCO2emissions.Forexample,inAustralia,theminingandquarryingsectormeetsbetween60%and70%ofitsenergyneedswithfossilfuels,therestbeingmainlyelectricity.Thisenergyisrequiredtopowerthevariousmachineryusedfordiggingandextractingearthandrocks,aswellason-sitetrucks,ventilation,crushingandseparatingtheore.InadditiontoCO2andothergreenhousegasemissions,miningalsohasconsiderableimpactsonecosystems,air,waterandlocalpopulations(seeChapter2).Theenergyintensityofminingvariesconsiderablybymineraltype,thequalityoftheore(primarilytheconcentrationoftheoreintheminedrock)andthenatureoftheminingprocessinvolved.Forinstance,theaverageoregradeofminednickelis30timeslowerthanthatofbauxite,whichlargelyexplainswhytheenergyintensityofnickelminingis30timeshigherthanbauxite(Figure3.10).Differentminingprocessescanalsoresultinverydifferentenergyintensitiesforthesamemineral.Carbonintensitiesalsovaryaccordingtothetypeofenergyused.Anexpecteddeteriorationinthequalityofore(asmeasuredbyoreconcentration)mayincreasetheenergyintensityofminingoperations.Duetoacombinationofhigherdemand,internationalmarketpricesandbettertechnologies,lowerconcentrationreserveshavebecomemoreeconomicallyviablethaninthepast,pushingtheglobalaverageoregradedown.Copperoregradecoulddeclinebybetween1.5%and3.7%peryearofthenextdecades(Northeyetal.,2014;Cochilco,2021),andnickelbyaround1.2%peryearonaverage(Olafsdottir&Sverdrup,2021).Thisrateoforequalitydeclinecouldleadtoa25-30%increaseinenergyintensityofminingoperationsby2050fortheseminerals.Bulkmineraloregradeisalsodecreasing.Forexample,averageironoregradehasdroppedfromabove55%in1980stoaround45%atpresent(Mudd,2013).Largedeposits,suchasthesedimentarymetamorphictypeinthePeople’sRepublicofChina(hereafter,“China”),haveoregradesbelow35%(Lietal.,2014).Weretheaverageoregradetodroptosuchalevelby2050,ironoreminingenergyintensitywouldrisebyabout25%,allotherthingsbeingequal.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE166IEA.CCBY4.0.GlobalenergyintensityandaveragegradeoforeproductionforselectedmetalsIEA.CCBY4.0.Notes:Logarithmicscale.Energyintensityisbasedontheprimaryproductionofmetals,includingminingandprocessing.Metalspresentedinthisfigureare,indecreasingoregradeorder:iron,chromium,aluminium,magnesium,zinc,titanium,nickel,copper,lithium,zirconium,vanadium,cobalt,tantalum,tin,molybdenum,gallium,silver,palladium,platinum,goldandrhodium.Lithiumoregradevaluesareforhardrockdepositsandnotbrine.Potentialenergyefficiencyimprovementsareexcluded.Sources:IEAanalysisbasedonArgonneLaboratory(2022);UNEP(2013);Nassaretal.(2022).Orequalityissettofallasthebestresourcesaredepletedatexistingminesandhigherpricesandbettertechnologiesmakelower-qualityoresmoreeconomicatnewmines.Assumingenergyintensities(theamountofenergyneededtoextractatonneofmineral)evolveinlinewiththedegradingoregrade,totalglobalenergyuseinminingcriticalmineralswoulddoublebetween2021and2030tomeettherisingdemandlevelsdepictedintheNZEScenario(Figure3.11).Copperwouldremainthelargestcontributortoenergyneedsforminingofcriticalminerals(largerthanironoreandbauxitecombined),accountingforaround70%oftheirtotalenergyusein2030.Cobalt,despitebeingmoreenergy-intensivetoextractthancopper,wouldstillmakeup2%oftotalenergyuseforcriticalmineralminingduetothefarsmallervolumesextracted.Theincreasesfromcriticalmineralswouldmorethanoffsetsmalldeclinesinenergyuseinminingbulkminerals.Inparticular,energyuseforminingironorewoulddropbyaround5%,asaresultofstagnantsteeldemandandincreasedrecycling,whilethatusedtoextractbauxitewouldincreaseslightly.11010010001000010000010000000.00000010.0000010.000010.00010.0010.010.11MJ/kgOregrade20212050GoldIronSilverCobaltGoldNickelAluminiumCopperLithiumEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE167IEA.CCBY4.0.TheoreticalglobalenergyconsumptionandCO2emissionsinminingofselectedmineralsformeetingNZEScenariodemandlevelsatcurrentcarbonintensityIEA.CCBY4.0.Notes:Theenergyandemissionsintensitiesofminingareassumedtoevolvefollowingoregradedepletionandignoringpotentialefficiencygains.Forlithium,theweightedaverageofproductionfrombrineandspodumeneisused.Neodymiumnotincludedbecauseofalackofdata.Sources:IEAanalysisbasedonArgonneLaboratory(2022);IEA(2021);WarrenCentre(2020).Atconstantintensities,globalenergyuseandemissionsfromminingcriticalmineralsdoublebetween2021and2030withrisingoutputintheNZEScenario.Assumingcarbonintensitiesevolveinlinewiththedegradingoregrade,globalCO2emissionsfromminingcriticalmineralsdoubleover2021-2030intheNZEScenario.Theincreaseinemissionswouldbelargestforlithium,at700%,duetothebigincreaseinoutput.Emissionsfromironoreminingwouldfallby5%andthosefrombauxitemineswouldincreaseslightly.Asaresult,totalemissionsfromcriticalmineralswouldbefivetimesgreaterthanthosefromironoreminingin2030,comparedwithtwotimestoday.Nonetheless,totalminingemissionswouldstillbesmallcomparedwithotherindustrialsectors,includingcriticalmineralprocessingandbulkmaterialproduction.Emissionsfromminingthesixmineralsconsideredherecombinedin2030wouldbeequaltojust1%ofthosefromsteelproductionemissionstodayor0.1%ofglobalenergysectoremissions.OverallemissionsfromminingofalltypesofmineralsfallsharplyintheNZEScenariothankstoincreasedelectrification,thedeploymentofinnovativetechnologiesandfuelswitching.DecarbonisingminingoperationsTheprincipalwayinwhichCO2emissionsfromminingoperationscanbereducedisbyswitchingtodecarbonisedelectricityastheprimaryformofenergy.Drilling,digging,loading,hauling,crushingandseparation,aswellasmineventilation,allrequirelotsofenergy.Formostoftheseprocesses,electrificationisalreadya05101520250100200300400500202120302021203020212030CriticalmineralsIronoreBauxiteEmissions(Mt)Energyconsumption(PJ)CopperLithiumCobaltNickelEmissionsEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE168IEA.CCBY4.0.practicaloption.Forexample,theBordengoldmineinCanadabecameoneofthefirstall-electricundergroundminingoperationsin2019(MiningTechnology,2020).Inadditiontoemissionssavings,usingelectricalequipmentcanbringotherbenefits,suchassavingsincoolingandventilationfromswitchingfrominternalcombustionengines,whichgiveoffalotofheat.Electrifyingminingtrucks,whichareanimportantsourceofon-siteemissionsaswellaslocalairpollutants,ismoredifficultusingcurrenttechnologies.Thosetrucksaredesignedtocarryverylargepayloads,soswitchingtoEVswouldmeantheywouldneedlargebatteriesthatwouldneedtoberechargedregularly,thoughthiswouldbefacilitatedbytheiroperationwithinconfinedareaswithpredictable,usuallyshort,routes.AconsortiumledbyShellisdesigningasystemallowingtheelectrificationoftruckswitha220tonnepayloadandchargingpointsatloadingandunloadingpoints(Gleeson,2022).Hydrogenorhydrogen-derivedfuelscouldprovetobeaviablealternativeforpoweringminingtrucks(Chen,2022).Otherelectrificationalternativesexistsuchasthroughcatenarylinesortheuseofconveyorbelts.Amajorproblemforminingoperationsisthattheyareoftenisolatedfromtheelectricitygridandsocurrentlyrelyonfossilfuelstomeeton-siteenergyneeds.Buttherecentdeclinesinthecostofrenewableshavemadethemmoreattractiveasanalternative,distributedthroughmicrogrids,transformedon-siteintohydrogenorpairedwithotherenergystorageoptions.Worldwide,miningcompaniesinvestedin3.4GWofrenewableenergycapacitybothon-siteandoff-sitein2019,upfrom0.3GWin2015(BNEF,2020b).Nevertheless,therateofdeploymentwouldneedtoincreaseatamuchfasterratetodecarbonisemostminingoperationsbefore2050.AnexampleoftheimpactofcleanelectricityonminingemissionsistheSwedishcompanyBoliden,whichisabletoproduceprimarycopperwithacarbonfootprintoflessthan1.5kgofCO2perkgofoutput,comparedwithanaverageof4kgofCO2fortheindustry(includingalldirectandindirectemissions)thankstoheavyrelianceonhydroelectricity(Onstad&Harvey,2021).IntheNZEScenario,electrificationand,toalesserextent,recyclingandefficiencygainseliminatealmostallminingemissionsby2050,despitetheimpactofincreaseddemandandfallingorequality(Figure3.12).Innovationcouldevenleadthesectortoachievenetnegativeemissions,astheminingindustrycouldstoresomeCO2throughthemineralcarbonationofcertaintailingwaste.CompaniessuchasCanadaNickelandDeBeersareexperimentingwiththismethod(CanadaNickel,2022;DeBeers,2022).EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE169IEA.CCBY4.0.DecompositionofchangeinglobaldirectCO2emissionsfromminingofselectedmineralsbetween2021and2050intheNZEScenarioIEA.CCBY4.0.Notes:Emissionsfromminingofironore,bauxite,copper,cobalt,nickelandlithiumareincluded.Otherfuelshiftsincludehydrogen,bioenergyandotherdirectrenewableenergyuse.Copperoregradeisassumedtofallfrom0.60%to0.39%in2050,nickelfrom0.81%to0.56%andironorefrom44%to30%.Lithiumandcobaltoregradesfollowthesametrendsasthatofcopperwhilebauxitefollowsthatofironore.Sources:IEAanalysisbasedonIEA(2021);ArgonneLaboratory(2022);McKinsey(2020).Electrification,aswellasrecyclingandefficiencygains,eliminatesalmostallminingemissionsby2050intheNZEScenario,despiterisingdemandandfallingorequality.MaterialsproductionTheproductionofcriticalandbulkmaterialsisanimportantstepwithinsupplychainsforcleanenergytechnologiesandinfrastructure.Mineraloresneedtoundergoprocessingandrefiningbeforetheyareusefulforcleanenergytechnologymanufacturing.Forcriticalmaterials,therapidbuild-outofprocessingfacilitiesanddecarbonisationofproductionprocessesisneededtomeetdemandintheNZEScenario.Nearzeroemissionproductionprocessesforbulkmaterialshavethelargestpotentialtoreducetotalemissionsfrommaterialproduction,giventhelargevolumesofproduction.CriticalmaterialsproductionExpansionplansandgapswiththenetzerotrajectoryForcriticalmaterials,mineralrefiningandprocessingcapacity–referredtohereasproductioncapacity–doesnotnecessarilyfollowminingcapacity,asprocessingplantsarenotalwayslinkedtotheoutputofasinglemine.Asaresult,gapscanemergebetweenthesupplyofrawcriticalmineralsandthecapacitytorefinethemintheeventofamismatchbetweenexpansionprojects,potentiallyleadingtobottlenecks–especiallyastheleadtimesinbuildingprocessing010203040502021emissionsActivityOregradeRecyclingEfficiencygainsElectrificationandotherfuelshift2050emissionsMtCO₂EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE170IEA.CCBY4.0.facilitiesgenerallyamounttoseveralyears(thoughtheyareshorterthanforminingprojects–seeChapter1).Thus,tomeetprojecteddemandforallcriticalmaterialsintheNZEScenarioin2030,capacitywouldneedtoincreasesufficientlyinbothminingandprocessingfacilities.Furthermore,producingthespecificchemicalsrequiredfortechnologymanufacturing,forinstanceforcathodesusedinLi-ionbatteries,requiresmultiplerefiningstepstogofromoretoconcentratetothefinalchemical,thusmultiplyingthepotentialbottlenecks.Currentlyanticipatedexpansionsofproductioncapacitypointtoasignificantgapemerginginthesupplyofsomerefinedcriticalmaterials,notablynickelandlithium,regardlessofwhetherminingcapacityissufficient.Inthecaseofnickelsulfate,capacityadditionswouldquadrupletotalcapacitybutwouldstillcoveronly40%ofdemandintheNZEScenarioby2030(Figure3.13).Bycontrast,anticipatedexpansioninminingwouldsatisfy75%ofdemand.Forlithiumhydroxideandcarbonate,theprojectedgapinproductioncapacityin2030isaround35%,whichisaroundthatofmining.Thisimpliesthat,unlessnewexpansionprojectsinprocessingaswellasminingarelaunchedsoon,therequiredexpansionofEVfleetsworldwidetoremainontrackfornetzeroby2050willbeseverelyhindered.Forcobaltsulfate,thereisalooming25%gapinproductioncapacity,eventhoughanticipatedminingcapacityisclosetodemand.Forcopper,theproductioncapacitygapisonly15%(comparedwith20%inmining).Inthepastfewyears,polysiliconsupplyhasbeenabottleneckinsolarPVsupplychains,asithasgrownlessrapidlythanthatofcells,wafersandmodules.Thesupply-demandbalancewasparticularlytightin2021.However,during2022manykeylarge-scalemanufacturersannouncedexpansionplanstosecuresufficientsupplyofpolysiliconinthecomingyears.Forexample,ZhonghuanSemiconductorsrecentlyannouncedaninvestmentofUSD3.3billioninnewpolysiliconmanufacturingcapacity,XinteEnergyUSD2.8billionandHoshineSiliconUSD2.7billion(Shaw&Hall,2022a;Shaw&Hall,2022b;Shaw,2022).IntheAPS,ascenarioinlinewithcurrentgovernmentambitions,supplygapsformaterialprocessingdoexistbutatasmallerscalethanintheNZEScenario,sincedemandforcriticalmineralsislower.In2030,about5%ofcopper,40%ofnickelsulfateand5%ofneodymiumoxideneedsintheAPSarenotmetbyanticipatedmaterialsupply.Meanwhile,anticipatedsupplycouldmeetAPSdemandin2030forlithiumchemicals,cobaltsulfateandpolysilicon.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE171IEA.CCBY4.0.Productionofselectedcriticalmaterialsbycountry/regionintheNZEScenarioandbasedoncurrentlyanticipatedsupplyIEA.CCBY4.0.Notes:NZE=NetZeroEmissionsby2050Scenario;CSA=CentralandSouthAmerica.OtherAsiaPacificexcludesChina.Anticipatedsupplyincludesexistingproduction.Anticipatedsupplyrefersto2026forcopperand2030forcobaltsulfate,nickelsulfate,lithium,neodymiumandpolysilicon(seenote3).Forneodymium,theshareofproducingregionsisassumedtobeproportionaltorareearthproductionandconstantovertime.Accesseddataforpolysiliconproductioncapacitywasconvertedtoproductionconsideringan85%utilisationrate.Sources:IEAanalysisbasedonIEA(2021);USGS(2022);BNEF(2022);BNEF(2020a);S&PGlobal(2022d);S&PGlobal(2022e);EuropeanCommission(2020);Fraseletal.(2021);InfoLink(2022);Eurometaux(2022),AdamasIntelligence(2020).AnticipatedsupplypointstoagapinthesupplyofsomecriticalmaterialsrelativetotheNZEScenario,notablynickelandlithium,regardlessofwhetherminingcapacityissufficient.05000100001500020000250003000035000400002021Anticipatedsupply2030–NZECopperkt/year0500100015002000250030002021Anticipatedsupply2030–NZENickelsulfate01002003004005006007002021Anticipatedsupply2030–NZELithiumhydroxideandcarbonatekt/year0501001502002503002021Anticipatedsupply2030–NZECobaltsulfate01002003004005006007008009002021Anticipatedsupply2030–NZEPolysiliconGW/yearChinaOtherAsiaPacificEuropeNorthAmericaAfricaEurasiaMiddleEastCSAUnspecifiedNZEdemand0204060801001202021Anticipatedsupply2030–NZENeodymiumoxidekt/yearEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE172IEA.CCBY4.0.Incontrasttomining,nickelisthemetalrequiringthelargestadditionalinvestmentsinproductionplantstosatisfyincreaseddemandintheNZEScenario.Polysiliconistheonlycriticalmaterialforwhichanticipatedsupplyissufficienttosatisfyprojecteddemand.Chinaisinvestingthemostinnewcriticalmaterialproductioncapacity,accountingforabout70%ofglobalanticipatedinvestments,followedbytherestoftheAsiaPacificregionandNorthAmerica.Intotal,betweenUSD90billionandUSD210billion24wouldneedtobeinvestedcumulativelyover2022-2030ininstallingcriticalmineralprocessingcapacitytomeetprojecteddemand(Figure3.14).Currentlyanticipatedinvestmentsaccountforaroundtwo-thirdsofthat.Anticipatedinvestmentincriticalmaterialproductionbyregion/countryandthatrequiredtomeetdemandover2022-2030intheNZEScenarioIEA.CCBY4.0.Notes:ROW=restoftheworld.OtherAsiaPacificexcludesChina.Anticipatedinvestmentscoverlithium,nickel,copper,cobaltandpolysilicon(seenote3).Neodymiumisnotincludedbecauseofalackofdata.Cobaltproduction,beingmainlyaco-productofcopperandnickel,itisassumedthatthecapitalexpenditureforcobaltisatthesamelevelasnickel.Arangeisquotedfortheanticipatedandrequiredinvestments,consideringtherangeofavailablecostestimatesfordiversefeasibilitystudiesofmaterialproductionprojects.Sources:IEAanalysisbasedoncompanyfeasibilitystudies;Bartholomeusz(2022);IEA(2021);USGS(2022);BNEF(2022);BNEF(2020a);S&PGlobal(2022d);S&PGlobal(2022e);EuropeanCommission(2020);Fraseletal.(2021);InfoLink(2022);Eurometaux(2022).Anticipatedinvestmentsincriticalmaterialproduction,concentratedinChina,fallwellshortofthatrequiredintheNZEScenario,especiallyinnickelprocessing.24Investmentrequirementsforcriticalmaterialproductionactivitiesarehighlyuncertainastheyvaryconsiderablyaccordingtofactorssuchasthegradeofthemineralorebeingprocessed,thespecificprocessingtechnologyandthelocation.Forthesereasonsthereportedinvestmentvaluesareprovidedasarange.AnticipatedinvestmentUSD90-210billion0%20%40%60%80%100%ROWMiddleEastNorthAmericaOtherAsiaPacificChinaUSD70-160billionRequiredinvestmentCopper19%Lithium22%Nickel55%Cobalt4%Polysilicon41%AnticipatedinvestmentInvestmentgapEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE173IEA.CCBY4.0.GeographicaldistributionofproductionplantsAnticipatedinvestmentsintheproductioncapacityofmostcriticalmaterialspointstoacontinuationofthegeographicalconcentrationofsupplyinChinainthecomingyears.Thecountryisalreadytheleadingproducerofallrefinedcriticalmetals,anditsshareofglobaloutputissettoriseto2030(Figure3.15).Processingofcopperores,ofwhichalmost40%isminedinChileandPeru,andcobalt,morethantwo-thirdsofwhichcomesfromDemocraticRepublicofCongo,issettobecomeincreasinglyconcentratedinChina;itsshareoftotalrefinedoutputisrisingfrom35%to45%forcopperandremainsabove70%forcobaltsulfate.Sharesoftheleadingregionsinglobalprocessingofselectedcriticalmineralsin2021and2030basedoncurrentlyanticipatedinvestmentsIEA.CCBY4.0.Note:LiOH=lithiumhydroxide;Li2CO3=lithiumcarbonate;REE=rareearthelement.Stableisdefinedasachangeoflessthan3%.2030valuesbasedonanticipatedcapacityasseeninFigure3.13.Sources:IEAanalysisbasedonIEA(2021);USGS(2022);BNEF(2022);BNEF(2020a);S&PGlobal(2022d);S&PGlobal(2022e);EuropeanCommission(2020);Fraseletal.(2021);InfoLink(2022);Eurometaux(2022).AnticipatedinvestmentsincriticalmaterialproductioncapacitypointtothecontinuingdominationofChinainglobalsupply.RegionalpolicyandmarketdevelopmentsPoliciestosupportinvestmentinexpandingcriticalmaterialproductionhaverecentlybeenintroducedinseveralcountries.Indonesiahasbeenaleaderinminingnickeloreforyears,butmostwasexportedtobeprocessedelsewhere.Toencouragelocalrefiningofnickel,thegovernmentintroducedanexportbanonnickelorebetween2014and2017(Huber,2021)andlaunchedapolicyin2019toincreasethevalueaddedrealisedintheterritory.Asaresult,itsshareofglobalrefinednickeloutputrosefrom1%in2013to30%in2021(WBMS,2022).Thegovernmentwantstogoevenfurtherindevelopingdomesticsupplychainsby0%20%40%60%80%100%ChinaEuropeChinaChileChinaChileChinaJapanChinaChinaEuropeCobaltsulfateCopperLiOH&Li2CO3NickelsulfateREEPolysilicon2021level:IncreasingDecreasingStable2030levelEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE174IEA.CCBY4.0.prioritisingthedevelopmentofanEVindustry,withaUSD1.1billionbatteryplant,thefirstinthecountry,alreadyinconstruction(BKMP,2021).Tofurtheracceleratethetransitiontobatterymanufacturing,theIndonesiangovernmentintendstointroduceamoratoriumontheconstructionofnewrotarykiln-electricfurnaces,whichareusedtoproducenickelpigiron(alow-valueproduct,mostlyusedinthesteelindustry),inthehopeofredirectinginvestmenttonickelsulfateproductionforbatteries(Setiawan,2022).Australiahasanimportantroleintheglobalminingindustrybutexportslargesharesofitsextractedoretoothercountriesforprocessing.TheAustraliangovernmentstrategyaimstomovetheeconomytowardsdownstreamprocessing(Australia,DepartmentofIndustry,Science,EnergyandResources,2022).ConcreteresultsofthisstrategyincludetheModernManufacturingInitiative,whichisprovidingfundingofAUD119.6millionforthedevelopmentofnickelandcobaltbatterymaterialrefineries;AUD14.8millionhasbeenallocatedforREEprocessingandAUD6millionforlithiumhydroxideproduction(Nabanidham&Cook-Revell,2022).IntheUnitedStates,theInfrastructureInvestmentandJobsActincludesaUSD6billiongrantprogrammeincludingUSD3billionaimedtofundthedomesticproductionofmaterialsneededfortheEVsupplychain,includingtherefiningofnickel,lithiumandcobalt,aswellasREEs(BGRGroup,2022).TheDepartmentofDefenseawardedMPMaterialUSD35millionforthedevelopmentofrareearthalloysandpermanentmagnetproductioncapacity(WhiteHouse,2022).IntheEuropeanUnion,twoImportantProjectsofCommonEuropeanInterestonbatteriesaredirectingpublicfundingforthedevelopmentofinnovativeprojectsfortheprocessingofbatterymetals(IPCEI,2022).TheCommissionisworkingonaCriticalRawMaterialsActaimedatreducingthedependencyonexternalsupplierswithafocusonlocalproductionandrecyclingcapacity(EuropeanCommission,2022b).CO2emissionsTheenergyintensityofprocessingcriticalminerals–theamountofenergyneededtoproduceatonneofmaterialoutput–variessignificantlybytypeofmaterial,mineralqualityandtheprocesstechnologyused(seeChapter2).Energyintensityisaprimarydeterminantoftheemissionsintensityofmaterialproduction–theamountofCO2emittedpertonneofmaterialoutput–theotherfactorbeingthetypesofenergyused.Criticalmaterialsgenerallyrequiremoreenergytoproducethanbulkmaterials,rangingfrom20GJ/tonneforcoppertoaround70GJ/tonnefornickel.Althoughemissionsfromcriticalmaterialproductionaremodesttodayinabsoluteterms,accountingforjust0.04%ofglobalenergysectoremissions,theywouldEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE175IEA.CCBY4.0.growrapidlyiftheyweretocontinuetooperateastheydotodaywhilesupplyingthelevelsofdemandrequiredintheNZEScenario.Assumingconstantenergyintensitiesandfuelshares,25globalCO2emissionsfromproducingthefiveleadingcriticalmaterials–copper,lithium,cobalt,nickelandneodymium–wouldmorethantripleto55Mtin2030,lithiumbeingthelargestcontributoroftheincrease.Theincreaseduseofthesemetalswouldcontribute,however,toasignificantnetreductioninlife-cycleemissionsbyenablingthedeploymentofcleanenergytechnologiesandinfrastructure,evenattoday’semissionsintensity.Thereareopportunitiestoreduceemissionsfromtheprocessingofcriticalmineralsthroughbestavailabletechnologies,increasedelectrificationandfuelswitching(fromcoaltonaturalgasforinstance)inthenearterm.However,deeperdecarbonisationoftheseprocesses,whichrequirehigh-temperatureheat,wouldrequiretechnologydevelopmentsgearedtowardsadaptingexistingprocessestoalternativefuelssuchashydrogenanddifferenttypesofbiofuels,integratingCCUSmoreeasilyandviabledirectelectrificationoptions.WhilealternativesarebeingdevelopedforLi-ionbatteries,innovationinnetzerocompatibleproductionroutesneedstoacceleratetoprovideviablealternativesforalltheothercriticalmaterials.Copperproductiongoesthroughtwomainroutestoday:pyrometallurgy,whichusessmeltingandaccountsforaround80%ofprimarycopperproductiontoday,andhydrometallurgy,whichreliesonacidsandaccountsfortheremainder(Rötzer&Schmidt,2020).Pyrometallurgyinvolvesmuchhighertemperaturesandreliesmoreonfossilfuels,whilehydrometallurgyrequiresmorechemicalinputs.Thosetworoutesarenotexclusivetocopper;othermetalssuchasnickelcanbeproducedusingsimilarprocesses.Fossilfuelsaremainlyusedtoprocesscoppertoday,butalternativesarepossible.Low-emissionhydrogenorhydrogen-basedfuelscouldbepossibleenergysourcesforthehigh-temperaturesmeltingprocess.ThecompanyAurubisistestingtheuseoflow-emissionammoniatoreplace20%ofthenaturalgasusedinitscopperrodproductionplants(Evans,2022).OtheralternativesincludeCCUSorevenrenewableenergysourcesintandemwithhightemperatureheatstorage.Technologiesonthemarkettodaycannoteasilyaccommodatethesealternatives:theuseofpurehydrogenrequiresadaptationoftheequipment.Innovationandinvestmentsareneeded.Lithiumisusuallyproducedfromeitherbrineorspodumene,thelatterbeingfarmoreenergy-andcarbon-intensive(Figure3.16).MostbrineproductionisinSouthAmerica.Mineral-richbrineispumpedfromthegroundandleftin25Seefootnoteinprevioussection.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE176IEA.CCBY4.0.evaporationpondsforuptotwoyearstoconcentratethelithiumchloridesaltpresentinthebrine.Multiplephasesremoveboronandmagnesiumfromthisbrine.Sodaashisaddedforaprecipitationreactionthatyieldslithiumcarbonateasasolid.Thischemicalcanthenbefurthertreatedwithcalciumhydroxidetoproducelithiumhydroxide.Thisprocessisnotveryenergy-intensiveasthesunpowersmuchoftheevaporationstepanddoesnotrequirehightemperature,butdoesusealotofchemicalswiththeirownindirectemissions.Inthecaseoflithiumextractedfromspodumene,therockmustbeheatedinakilnforonehourat1100°Candthenroastedat250°Cfortenminuteswithsulfuricacidtoproducelithiumsulfate,fromwhichlithiumhydroxideisproduced.Theseheatingstepsusuallyusecoaltopowerthehigh-temperaturekilnsandsteamproduction.Emissionsintensityofdifferentlithiumhydroxideproductionroutesbyfuelusedandprocesstemperature,2021IEA.CCBY4.0.Notes:Onlydirectemissionsfortheprocessingstepsareincluded,notmining.Mediumtemperatureincludessteamsupplyandhightemperaturecoversspodumenekilns.Source:Kellyetal.(2021).Lithiumhydroxideproducedfromhardrockisfivetimesmoreemissions-intensivethanfrombrine,halfthoseemissionscomingfromhard-to-decarbonisehigh-temperatureheat.Considerableeffortsareunderwaytodevelopcost-effectivetechnologiestodecarbonisethoseproductionroutes.Forthespodumeneroute,theOutotecprocessproduceslithiumhydroxideusingsodaashinsteadofacid,leadingtobetteryields,thoughhigh-temperaturetreatmentofspodumeneisstillrequired(MetsoOutotec,2019).Itmaybepossibletoreplacefossilfuelswithrenewableelectricityorlow-emissionhydrogenorusecarboncaptureinthisprocess,butlittleresearchexistssofar.Completelynewproductionroutessuchasdirectlithiumextractionmethods,whichaimtoextractlithiumfrombrinewithoutrelyingonlargeevaporationpools,0246810FueluseHeatFueluseHeatBrineSpodumenetCO₂/tFuelsusedDieselCoalNaturalgasTemperaturelevelMediumtemperatureHightemperatureEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE177IEA.CCBY4.0.arealsobeingdeveloped.Forinstance,electrodialysisenablesextractinghigh-puritylithiumhydroxidedirectlyfrombrine,requiringonlyelectricity.However,thistechnologyisstillatthelaboratoryscale(Gragedaetal.,2020;Zavahiretal.,2021).OneofthemostambitiousprojectsisbeingledbyVulcanEnergyinGermany.Theirgeothermalplantwillproduceelectricityforsaletothegridandusetheheatderivedtoextractlithiumfromthegeothermalbrine(Vulcan,2022).Nickelsulfateproductioncantakeanumberofroutes.Traditionally,themostcommonrouteinvolvedtheuseofhigh-puritynickel(Class1)comingfromhigher-gradesulfidedeposits.ThisroutehasthelowestCO2intensityofproduction,butthereisrelativelylittlescopetoexpandproduction.Therecentincreaseintheavailabilityoflateriteores(mostlyfromIndonesia)hasincreasedthepopularityoftherouteinvolvingmixedhydroxideprecipitate(MHP)asanintermediatestep.First,lateriteoremustgothroughaprocesscalledhigh-pressureacidleachingresultinginMHPcontainingamixofnickel,cobaltandotherelements.Thisprecipitateisthenrefinedtoextractnickelsulfate.Theseproductionstepsrequirealotofelectricityandchemicals,makingthisroutemoreenergy-andCO2-intensivethanthetraditionalroutefromClass1nickel(Dry,Vaughan&Hawker,2019).Alternativeroutesfornickelsulfateincludeproductionfrommatte(yieldingnickelthatisaround75%pure),crudenickelsulfatederivedfromcopperorplatinumgroupmetalproduction,andrecycling(LeGleuher,2021).MuchofthenickelcomingfromIndonesia,whichwillaccountforalargeportionofthegrowthinnickelminingcapacityinthenextfewyears,islikelytobeveryenergy-andemissions-intensive,giventhatithaslateriteoresratherthansulfidedeposits.Thus,innovationtoreducetheenvironmentalimpactofnickelproductionprocessesfromlateritedepositsareofutmostimportance.Examplesincludehydrometallurgicaltechniques,whichhavebeendemonstratedonlyatlaboratoryorpilotscale,suchasthedirectnickelprocess(TotalMateria,2017).Directuseofrenewablesatproductionsitescouldalsohelpreduceemissions.SomecompaniesarealreadyinvestingheavilyinrenewablepowertosatisfytheirelectricityneedssuchasthenickelproducerPronyResourcesinNewCaledonia,whichaimstohavetwo-thirdsofitselectricitysuppliedbyacombinationofsolarpowerandbatterystoragein2025(PronyResources,2021).Theproductionofcriticalmaterialsispartofthenon-ferrousmetalsectorwhich,ifaluminiumisexcluded,wasresponsibleforemitting65MtofCO2globallyin2021.Thisistheequivalentofonly2%ofthe2.8GtofCO2emissionsfromtheironandsteelsector.Itisimportanttonotethatevenifcriticalmaterialextractionandproductionarerelativelycarbon-intensivetoday,thecleanenergytechnologiessuchasEVstheysupportstillbringmajorreductionsinlife-cycleCO2emissions(seeChapter2).Emissionsfromcriticalmaterialproductionare,inanycase,muchsmallerthanthosefrombulkmaterialproduction(seebelow).EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE178IEA.CCBY4.0.BulkmaterialproductionExpansionplansandgapscomparedwiththeNZEScenarioDemandforsteelandcementgrowsmodestlyintheshorttermandisrelativelystableoverthelongertermintheNZEScenario,asreductionsfrommaterialefficiencymorethanoutweighmodestincreasesindemandfromcleanenergytechnologiesandinfrastructure(seematerialdemandandefficiencysectionsabove).Whiledemandgrowthisstrongerforaluminiumandplasticsrelativetosteelandcement,itismuchmoremodestthanthegrowthforcriticalmaterials.Giventhismodestgrowth,aswellasthewidespreadavailabilityofrawmaterials,therewouldnotbeamajorriskofsupplybottlenecksforbulkmaterialsinthisscenario.Productioncapacitiesinmostcasesarealreadysufficienttomeetprojecteddemand,andcapacitycouldmostlikelybeincreasedsufficientlyforthosematerialsforwhichdemandincreases.However,currentconventionalcapacityisemissions-intensive,duetoacombinationofheavyrelianceonfossilfuelsandprocessemissionsthatresultfromchemicalreactionsinconventionalproductionmethods.IntheNZEScenario,conventionalcapacityisrapidlyreplacedbynearzeroemissiontechnologies,througheitherretrofitsornewcapacityadditions,faroutpacingthetotalgrowthinbulkmaterialdemand.26Totalprimarysteelproductionactuallyfallsbyabout30Mtbetween2021and2030,whilenearzeroemissionsprimaryoutputincreasesbyabout130Mt(Figure3.17).Forcement,nearzeroemissionproductionrisesmorethantwiceasmuchastotaldemandoverthesameperiod.Theglobalaveragedirectemissionsintensityofbulkmaterialproductionfallsbetween20and30%from2021to2030intheNZEScenario,dependingonthematerial.Indirectemissionsfromelectricityproductionfallevenmorerapidly.By2050,directemissionsfromallbulkmaterialsfallinabsolutetermsbynearly95%,andindirectemissionsarefullydecarbonised.Aconsiderableportionoftheemissionsreductionsinbulkmaterialproductionto2030intheNZEScenariocomefromincrementalimprovementstoexistingconventionalproductionroutes,suchasimprovedenergyefficiency,partialblendingofalternativefuelssuchasbioenergyandreductionsinindirectemissionsthroughuseofzeroemissionelectricity.Insomecases,theseimprovementsareasteponthewaytonearzeroemissionsproductioninthelongerterm.Forexample,thesteelsectorisblendingincreasingportionsofelectrolytichydrogenintodirectreducediron(DRI)unitsthatcouldeventuallybecapableofusing100%electrolytichydrogen.Thematerialefficiencyimprovementsdiscussedearlierinthischapterplayasignificantroletoo,bothbyreducingtheoveralldemandforbulkmaterialsandbyprovidingmorerecycledmaterialsforsecondaryproduction.However,primaryproductioncannotbe26TheIEAhasproposeddefinitionsforlowandornearzeroemissionsteelandcementproductioninthereportAchievingNetZeroHeavyIndustrySectorsinG7Members(IEA,2022e).Theyaredesignedtobestable,absoluteandambitious,andtheyarecompatiblewithatrajectorythatreachesnetzeroemissionsfromtheglobalenergysystembymid-century.Acomplementarysetofdefinitionsforlow-emissionproductionwasalsoproposed,torecognisetheimportantinterimstepstakentowardsloweremissionsintensityandinparticulartowardsachievingnearzeroemissionproduction.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE179IEA.CCBY4.0.fullyreplaced.Somematerialsremainlocked“inuse”fordecadesforsomemajorendusessuchasbuildingsandinfrastructure,andtotaldemandishigherthanitwasdecadesago,sotheavailabilityofrecycledmaterialinputswillbeinsufficienttofullyreplacetheneedforprimaryproduction,atleastoverthenextmultipledecades.Inthecaseofcement,fullrecyclingisnottechnicallypossible,thoughinnovationisunderwaytorecoversomeportionsofcementforrecycling.Productionofbulkmaterialsbycountry/regionandtypeoftechnologyintheNZEScenarioIEA.CCBY4.0.Notes:NZE=NetZeroEmissionsby2050Scenario;Innovative=nearzeroemissionsprimaryproductionroutes;HVC=high-valuechemicals(ethylene,propyleneandaromatics),whicharemainlyusedtoproduceplastic.OtherAsiaPacificexcludesChina.Globalproductionofbulkmaterialsgrowsmodestlyto2030intheNZEScenario,butmaterialproductionwithinnovativenearzeroemissiontechnologiesincreaserapidly.0%2%4%6%8%10%012024036048060020212030–NZEHVCShareofinnovativetechnologyConventionalInnovativeShareinnovativetechnologies(rightaxis)0%2%4%6%8%10%01000200030004000500020212030–NZECementMt/yearChinaOtherAsiaPacificEuropeNorthAmerica0%2%4%6%8%10%0500100015002000250020212030–NZESteelMt/year0%2%4%6%8%10%0408012016020020212030–NZEAluminiumShareofinnovativetechnologyEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE180IEA.CCBY4.0.Thedevelopmentanddeploymentofnearzeroemissionprimaryproductionmethodsforbulkmaterialsisneededurgentlyfortheworldtogetontrackfornetzeroemissionsby2050.Whileresearch,developmentanddemonstration(RD&D)effortsareunderwayonvarioustechnologies,effortswillneedtobesteppeduptobringthesetechnologiestothecommercialisationstagewithinthenextfewyears.IntheNZEScenario,earlycommercialdeploymentoccursfromthemid-2020s,suchthatinnovativenearzeroemissionprocessroutesaccountforabout4-8%oftotalproductionby2030.Thisearlydeploymentiscrucialnotonlytoachieveemissionscuts,butalsotoachievethetechnologylearning,costreductionsandsupportinginfrastructurescale-upneededfortheirrapidlarge-scaledeploymentfrom2030.Nearzeroemissiontechnologiesforbulkmaterialscentrelargelyaroundhydrogen,directelectrification,CCUSandalternativerawmaterials.Theoptionsvarybymaterial.Forsteel,electrolytichydrogenplaysaleadingroleintheNZEScenario,particularlyintheDRIroute,asdoesCCUS-equippedproduction.Directelectrificationthroughironoreelectrolysisisalsopossible.Forcement,CCUSisthemainpathtonearzeroemissionproduction,giventhattwo-thirdsofemissionscomefromtheprocessitselfratherthanthecombustionofthefuelsusedtoprovideheat.Useofalternativerawmaterialsthatdonotproduceprocessemissionsisanotheroption,alongwithpotentialtoelectrifythermalenergyneedsinthekiln.Forplasticsproduction,CCUSanddirectelectrificationplayanimportantrole.Foraluminiumproduction,therearetwomainsourcesofdirectemissionstotackle:high-temperatureheatingforaluminarefiningandprocessemissionsfromthedecompositionofanodesinaluminiumsmelting.Useofbioenergy,hydrogen,solarthermalandelectricityareoptionstotacklealuminarefining.Anodesmadefromalternativeinertmaterialsarethemostadvancedsolutionforaluminiumsmelting,whileCCUSisalsobeingexplored.Box3.4PlansfornearzeroemissionmaterialproductionIndustrialproducersaroundtheworldareundertakingprojectstoreduceemissionsfromproducingbulkmaterials.ToevaluatehowcurrentannouncementsstackupagainstwhatisrequiredintheNZEScenario,weconsidertwocategoriesofprojects,basedaroundtheproductiondefinitionsofnearzeroemissionmaterialproductionproposedinthereportAchievingNetZeroHeavyIndustrySectorsinG7Members(IEA,2022e):Nearzeroemission:projectsthat,onceoperational,willbenearzeroemissionfromthestart,e.g.acementplantcapturingnearlyallCO2emissions;aDRI-basedsteelplantoperatingfullyonhydrogenproducedfromrenewableelectricity.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE181IEA.CCBY4.0.Nearzeroemissioncapable:projectsthatwillachievesubstantialemissionsreductionsfromthestart–butfallshortofnearzeroemissionsinitially–withplanstocontinuereducingemissionsovertimesuchthattheycouldlaterachievenearzeroemissionproductionwithoutsubstantialadditionalcapitalinvestmentsincoreprocessequipment,e.g.aCCUS-equippedcementplantcapturingonlyprocessemissionsinitially,withplanstotransitiontozeroemissionfuelstoeliminatecombustionemissions;aDRI-basedsteelplantgraduallyblendingincreasingsharesofelectrolytichydrogen,displacingitsinitialuseofnaturalgas.Projectsthatwillachievesubstantialemissionreductionsbutdonothaveplanstocontinuereducingtowardsnearzeroemissions(e.g.,acementplantwithanelectrickilnbutnoplanstocaptureprocessemissions,ablastfurnace-basedsteelplantwithpartialblendingofelectrolytichydrogen)arenotincludedineitherofthesetwocategories.Basedonourassessment,announcedprojectstodayhavethepotentialtodeliver13Mtperyearofnearzeroemissionprimarysteelproductionby2030,oraround10%ofthelevelreachedintheNZEScenario.Thesefiguresexcludescrap-basedproduction,forwhichnearzeroemissionproductioncanbeachievedwithonlyminoralterationstoexistingprocesstechnology,togetherwiththeuseoflowcarbonelectricity.Forprojectsthatdonotachievenearzeroemissionproductioninitially,butplantodosoovertime–withoutsubstantialadditionalcapitalinvestmentsincoreprocessequipment–itisnotalwaysclearif,andbywhenthetransitionwilltakeplace.Thisisparticularlythecaseintheironandsteelsectorfornaturalgas-basedDRIplants,forwhichprojectannouncementsincreasinglymentiontheuseofhydrogen,butoftendonotspecifykeydetails,suchastheshareoflow-emissionhydrogenthatistargeted,thetimeframeforachievingitorthesourceofthehydrogen.Basedonourassessmentofannouncedprojectswithplanstotransitionovertime,weidentifyafurther55Mtperyearofnearzeroemissioncapableprimarysteelproductionthatcouldmaterialiseby2030.Ifthetransitionofalltheseprojectswerefullycompleteby2030,thetotalannouncednearzeroemissionprimarysteelproductionwouldequatetojustunderhalfofthatrequiredintheNZEScenariobythattime.Nearlyalloftheannouncedprojectsareforhydrogen-basedDRIplants,alongsideasmallernumberofCCUS-equippedprojects.Morethan60%oftheannouncedcapacityisinEurope.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE182IEA.CCBY4.0.EstimatesofnearzeroemissionmaterialproductionbasedonprojectannouncementsandtheNZEScenarioin2030IEA.CCBY4.0.Notes:NZE=NetZeroEmissionsby2050Scenario.“Nearzeroemission”and“Nearzeroemissioncapable”production,asdefinedinthetextabove,areassessedbasedonprojectannouncements,manyofwhichcontainincompleteinformation,andaresubjecttochange.Sources:Companyannouncements;AgoraEnergiewende(2021).Forcement,announcedprojectsweassessarelikelytoachievenearzeroemissionproductionfromthestart–andarescheduledtobeoperationalby2030–amounttoabout12Mtperyearofcementproduction.AlloftheseprojectsinvolvetheuseofCCUS,andtheircombinedoutputequatestoaround3%ofthenearzeroemissioncementproductionin2030intheNZEScenario.Anadditional5Mtperyearofproductionfromannouncedprojectsthatareassessedtobenearzeroemissioncapablearealsoforthcoming(Figure3.18).Theseareeitherprojectsthatinitiallyplantocaptureonlyaportionoftheplant’semissions,orwherecarboncaptureisplannedbutitisuncleariftheCO2isintendedtobepermanentlysequestered.Ifalloftheseprojectsdidachievenearzeroemissionproduction,thetotaloutputwouldamountto5%ofthelevelsintheNZEScenarioin2030.Oftheseprojects,mostarestillintheconceptorfeasibilitystagesandonlyoneisunderconstruction.Abouttwo-thirdsofplannedcapacityisinEuropeandtherestinNorthAmerica.Increasedtransparencyinannouncedprojectplans–suchasdetailsontargetcapacityandproductionlevels,intendedstart-updates,andkeyoperationalparameters(e.g.,targetlevelsandsourceofanyhydrogenused;theintendeduseorfateofcapturedCO2)–wouldhaveseveraladvantages.Itwouldmakepossiblemorerobusttrackingofprogresstowardsnetzerogoals.Itwouldhelpmoreeasily050100150NearzeroemissionNearzeroemissioncapableGapwithNZEScenarioMtPrimarysteelproductionEuropeNorthAmericaAsiaRestofworldTotalEstimatesbasedonprojectannouncements0100200300400NearzeroemissionNearzeroemissioncapableGapwithNZEScenarioCementproductionEstimatesbasedonprojectannouncementsEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE183IEA.CCBY4.0.GeographicaldistributionThegeographicalconcentrationofbulkmaterialproduction,whichisalreadyconsiderablylowerthanthatofcriticalmaterialproduction,wouldnotchangemuchbeforetheendofthecurrentdecadebasedoncurrentinvestmentplans.Chinaisbyfarthelargestproducerofbulkmaterials,accountingfor25-55%ofglobalproductiontoday,dependingonthematerial.Muchoftherestofproductionisrelativelydispersedamongmultipleproducingcountries.Inmanycountries,muchoftheoutputofbulkmaterialsgoestothedomesticmarket,butinternationaltradeisimportantinsomecases.Around20%ofsteelproductionand40%ofaluminiumaretradedassemi-finishedproducts.Additionaltradeoccursthroughmaterialsembeddedinend-useproducts.Thosetradenetworksarewellestablishedandcarryvolumesmuchhigherthanforcriticalmaterials,whichimplieslowerriskwhenthereissomedegreeofgeographicalconcentration.Inthecaseofcement,mostproductioniscarriedoutclosetocentresofdemandduetohightransportcosts,sogeographicalconcentrationisinherentlylessofaconcern.ThereisnomajorregionalredistributionofbulkmaterialproductionduringthecurrentdecadeintheNZEScenario(Figure3.19).ThemainexceptionisChina,whichseesmarginalfallsinitssharesofsteeloutput(by3percentagepoints),cement(7percentagepoints)andaluminium(by4percentagepoints),between2021and2030duetodecliningdomesticneedsasitseconomymatures.Itnonethelesscontinuestodominateglobalsupply.Bycontrast,strongeconomicgrowthinsomeotheremergingeconomies,notablyIndia,resultsinanincreaseintheirsharesofglobalproductionofthesematerials.connectproducerswithpotentialbuyers,whoareincreasinglymakingcommitmentstopurchasenearzeroemissionsteelandcement(seeChapter6).Itwouldalsofacilitatemoreopendialogueandinturnhelpaccelerateprogressonthegapstoachievenearzeroemissionmaterialproduction,suchascoordinationof,andinvestmentin,lowemissionhydrogensupplyandCO2transportandstorageinfrastructure.Onceprojectsareoperational,transparentdataonrealisedproductionvolumes,emissionsetc.wouldfurthersupporttheseobjectives.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE184IEA.CCBY4.0.Sharesoftheleadingregionsinglobalproductionofselectedbulkmaterialsin2021and2030intheNZEScenarioIEA.CCBY4.0.Notes:CSA=CentralandSouthAmerica;HVC=Highvaluechemicals,themaininputformakingplastics.OtherAsiaPacificexcludesChina.Stableisdefinedasachangeoflessthan2%.Source:IEAanalysisbasedonUSGS(2022);WorldSteelAssociation(2022);IAI(2022).BulkmaterialproductioncontinuestobedominatedbyChina,thoughitsmarketshareissettodeclineslightlyforsteel,cementandaluminium.PolicyandmarketdevelopmentstowardsnearzeroemissionsGovernmentpoliciesareincreasinglypushingcompaniesinvolvedinbulkmaterialproductiontore-evaluatetheirportfoliosandplanforthecleanenergytransition.Thisincludesnetzeroemissiontargets,broaderemissionsreductionsplansandindustry-focusedroadmaps.Carbonpricingsystemsappliedtoindustry,suchastheEU’sEmissionsTradingSystem(ETS),Canada’soutput-basedcarbonpriceandKorea’sETS,arestartingtoimprovetheeconomicsoflower-emissionproduction.EUplanstointroduceacarbonborderadjustmentmechanismmaybestartingtoputpressureoncompaniesthatexporttotheUnion.Manytechnologiesfornearzeroemissionproductionarenotyetmarket-readyandwillhaveconsiderablyhighercostsatleastinitially.Asaresult,broaderplansandcarbonpricingatmoderatelevelsarelikelyinsufficienttodriveinitialroll-out,andsopoliciestargetingnearzeroemissionproductionareneeded.Thisincludessupply“push”policiesthathelpwithlargeupfrontcapitalinvestmentsanddemand“pull”policiesthatprovideconfidencethattherewillbeabuyerdespitethehighercostofproduction.Theyarecomplementaryandthusbotharecritical.Technologyreadinessiscurrentlyakeybottleneck,inthatevenmaterialuserswillingtopayapremiumtodecarbonisetheirsupplychainsarefindingthereisarelativescarcityofnearzeroemissionmaterialsexpectedtobeavailableinthecomingyears.Thissuggeststhatcurrentcommitmentsforpurchasingnearzeroemissionmaterials–0%20%40%60%ChinaOtherAsiaPacificEuropeChinaOtherAsiaPacificNorthAmericaChinaOtherAsiaPacificEuropeOtherAsiaPacificChinaNorthAmericaSteelAluminiumCementHVC2021level:IncreasingDecreasingStable2030levelEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE185IEA.CCBY4.0.whileimportanttohelpaddressthe“pull”side–areinsufficientontheirowntoovercometherisksofinvestingininnovationtobringthesetechnologiestomarket.Conversely,evenwithsubstantialinvestmentsupporttodevelopandbuildnearzeroemissionplants(the“push”side),thebusinesscasefordoingsoismissingwithoutconfidencethattherewillbeabuyerwillingtopayapremiumforthematerialsproduced.Examplesofgovernmentsupply-sidesupportforlow-emissionmaterialproductionEuropeNorthAmericaAsiaandOceaniaSteel•EUinnovationfundandSwedishEnergyAgency:Hybrit•Spain’sRecoveryandResiliencePlan,FrenchandBelgiangovernmentinvestments:ArcelorMittal(DRI)•Canada’sNetZeroAccelerator:ArcelorMittal(DRI)•US45Q/48CCCUSand45V/48Chydrogendeploymenttaxcredits•CanadaCCUSInvestmentTaxcredit•JapanGreenInnovationFund(hydrogen-basedsteelmaking)Cement•EUInnovationfund:EQIOM(CCS:K6programme),Holcim(CCS:GO4ECOPLANET,Carbon2Business),HeidelbergMaterialsmembercompanyDevnya(CCS:ANRAV-CCUS)•NorweiganLongshipprogramme:HeidelbergMaterialsmembercompanyNorcem(CCS:Brevik)•US45Q/48CCCUStaxcredits•CanadaCCUSInvestmentTaxcredit•USInfrastructureInvestmentandJobsAct:fundingforCCUS•USDepartmentofEnergy’sNationalEnergyTechnologyLaboratory:Holcim(CCS)•NationalResearchCouncilofCanadaIndustrialResearchAssistanceProgram:Holcim(CCUS)•EmissionsReductionAlberta:HeidelbergMaterialsmembercompanyLehigh(CCS)Plastics•EUInnovationfund:Neste(recycling),MetsäGroup(bio-basedplastics),BASF(CCS)•US45Q/48CCCUStaxcredits•CanadaCCUSInvestmentTaxcredit•JapanNationalBudget(recycling)Aluminium•North-RhineWestphaliastatefunding:ArctusandTRIMET(inertanodes)•CanadianandQuebecgovernmentfunding:Elysis(inertanodes)•AustralianRenewableEnergyAgency:Aloca,RioTinto(zeroemissionfuelsforaluminarefining)Sources:HYBRIT(n.d.);ArcelorMittal(2022a,b);ArcelorMittal(2021a,b);Brevik(2022);EuropeanCommission(2022c);Holcim(2020);Lafarge(2019);EmissionsReductionAlberta(2020);InternationalEnergyAgency(2022f);Elysis(n.d.);Trimet(n.d.).EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE186IEA.CCBY4.0.Severalgovernmentshaverecentlyintroducedmeasurestospeeduptheadoptionoflow-emissiontechnologiesinbulkmaterialproduction.Forexample,onthesupplyside,theUSInfrastructureInvestmentandJobsActenactedinNovember2021andtheIRAofAugust2022allocatedfundingforsuchtechnologies,particularlyCCUSandhydrogen,whiletheRePowerEUplanlaunchedon18May2022increasedfundingtorenewablesandhydrogen.Onthedemandside,Japan’sGXLeaguepolicy,launchedinFebruary2022,isencouragingprivate-sectoractorstoreducetheirsupplychainemissions,whiletheFederalBuyCleanInitiativebytheUS,announcedaspartofanexecutiveorderinDecember2021,willprovidesupportthroughpublicprocurementoflower-emissionmaterials.Multipleotherpublic-andprivate-sectoreffortsaredrivingincreasedmomentumfornearzeroemissionmaterials.Examplesofgovernmentdemand-sidepoliciesforlow-emissionmaterialproductionandprivate-andpublic-sectorcommitmentsSteelCementPlasticsAluminiumDirectprivate-sectorpurchaseagreements•Vehiclemanufacturers(e.g.Volvo,GeneralMotors,Mercedes-Benz)•Powercompanies(e.g.Ørsted)•Equipmentmanufacturers(e.g.Miele,Lindab)Private-sectordemandcreationinitiatives•SteelZero•FirstMoversCoalition•ConcreteZero•FirstMoversCoalition•FirstMoversCoalition•FirstMoversCoalitionPrivate-sectortargetstoreducelife-cycleemissions•Vehiclemanufacturers:Daimler,VolvoCars,Hyundai,Toyota,Ford,Nissan,BMW,Renault,GM,BMW•Construction:Lendlease,BalfourBeatty,Skanska,BouyguesConstruction•Construction:Lendlease,BalfourBeatty,Skanska,BouyguesConstruction•Vehiclemanufacturers:Daimler,VolvoCars,Hyundai,Toyota,Ford,Nissan,BMW,Renault,GM,BMWPublicprocurement•CEMIDDI•USIRAprovisions•CEMIDDI•USIRAprovisions•USIRAprovisionsOtherpublicpolicieswithdemandcreationpotential•Germany’sCCFD•France’sRE2020regulation•Germany’sCCFD•France’sRE2020regulation•Germany’sCCFD•Germany’sCCFD•France’sRE2020regulationSources:Company,governmentandnon-governmentalorganisationannouncements.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE187IEA.CCBY4.0.SteelTheglobalsteelindustryhasalargenumberofplayers,with113steelcompanieseachproducingmorethan2Mtin2021(WorldSteelAssociation,2022).Thetoptenproducersaccountforaboutaquarterofglobalproduction.MostareheadquarteredinAsia,mainlyChina,Japan,KoreaandIndia;onlyoneisintheEuropeanUnion.Manyaremulti-nationalswithoperationsaroundtheworld.MostoftheleadingproducersareinChina,whichaccountsfor53%ofglobalproductiontoday,comparedwith8%intheEuropeanUnionand6%inNorthAmerica.Nearzeroemissionsteelcanbeproducedusinginnovativeprimaryproductionrouteswithsufficientemissionsreductionsandalsoscrap-basedelectricarcfurnace(EAF)productionifusingzeroemissionelectricitytoeliminateindirectemissionsandalsominimisingresidualon-sitedirectemissions.Givenlimitationsinscrapavailability,itwillbeimportanttodevelopnearzeroemissionprimaryroutesinparalleltoachievingnearzeroemissionsinscrap-basedproduction.Today,toourknowledge,onlyoneprojectintheworldoperatingatcommercialscalecouldqualifyasnearzeroemissionprimaryproduction:anaturalgasDRI-EAFplantwithCCSintheUnitedArabEmiratesoperatedbyEmiratesSteelIndustries,capturing0.8MtCO2peryear.Additionally,about150MtofnaturalgasorcoalDRI-EAFisproducedannually,mostofwhichwouldhavethetechnologicalcapabilitytorelativelyeasilytransitiontonearzeroemissionsbyconvertingtorunonzero-orlow-emissionhydrogen–anumberoffurnacemodelsmayrequiresomelow-riskequipmentmodificationstoenablethis,whilesomeofthemoreadvancedfurnaceswouldrequirenoequipmentchanges(Astoria,Hughes&Mizutani,2022).Meanwhile,thereisabout310Mtofscrap-basedEAFproductionannually,whichcouldapproachnearzeroemissionslevelsthroughfulluseofzeroemissionelectricityandeffortstominimiseresidualon-siteemissions.Asofmid-2022,124Mt/yearofsteelcapacityadditionshavebeenannouncedthathavethepotentialtoachievenearzeroemissionsifconvertedovertimetorunfromzeroorlow-emissionelectricityandhydrogen(AgoraEnergiewende,2021).Abouthalfofthesearescrap-basedEAFandtheotherhalfnaturalgas-andorhydrogen-basedDRI-EAF.Mostoftheseannouncedprojects,however,arenotyetbackedbyfinalinvestmentdecisions.InthecaseofDRI-EAFplants,manyannouncementsdiscussplanstograduallytransitionfromnaturalgastolow-emissionhydrogenasinputs,althoughthespecificplansarenotfullyclearinmanycasesfortheportionofhydrogenthatwillbeeventuallyusedandbywhen.OnlyoneknownCCUSprojectwithpotentialtoqualifyasnearzeroemissions–ifthecapturedCO2weretransportedtoapermanentstoragesite–isexpectedtobeonlineby2030–the3DprojectbyArcelorMittalapplyingcarboncapturetoablastfurnaceinFrance,whichwouldbeabletocaptureabout1MtofCO2peryear.Whiletherearealsoseveralcarboncaptureandutilisation(CCU)projectsalreadyoperatingorunderdevelopmentthatmakeuseofcarbon-richblastfurnaceoff-EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE188IEA.CCBY4.0.gases,thesewouldnotbeconsiderednearzeroemissiongiventhattheproducedfuelsorchemicalswouldlaterreleasetheCO2totheatmosphere.Forcomparisontocurrentandannouncedcapacityadditions,intheNZEScenario,thereisabout130Mtnearzeroemissionprimaryproductionby2030globally.Giventheover200MtoftotalDRI-EAFcapacitythatwouldbeonlineifannouncedplanswererealised(includingannouncedandexistingcapacity),thereisgoodpotentialforsufficientnearzeroemission-readysteelcapacitytobeinplace.Amajorcaveathoweveristhattheseplantswouldneedtorunfullyonlow-emissionhydrogentoreachnearzeroemissionslevels–announcedplanssuggesttherewillbeamajorshortfallinthisregard.TopsteelproducersandleadingexistingorplannedprojectsmakingprogresstowardsnearzeroemissionsteelproductionEuropeNorthAmericaAsiaRestofworldTopproducers(locationofheadquarters)•ArcelorMittal•ChinaBaowu•Ansteel•Shagang•HBIS•Jianlong•Shougang•NipponSteel•POSCO•TataSteelProducersundertakingprojectstowardsnearzeroemissionproduction:DRI•H2GreenSteel•SSAB(Hybritproject)•ArcelorMittal•TataSteel•Thyssenkrupp•Saarstahl•Liberty•Salzgitter•Nucor•ArcelorMittalNorthAmerica•HBIS•Baosteel•Sinosteel•POSCOCCUS•ArcelorMittal(3Dproject)•EmiratesSteelElectrification•ArcelorMittal(Siderwinproject)•BostonMetal•ElectraSteelForDRI,producersmarkedwithanasteriskareworkingtowardsprojectsthatwillbefullyfuelledbyelectrolytichydrogenfromthestart;otherprojectsareDRIplantsthatcouldtransitiontofullelectrolytichydrogeninfuture(someproducershavestatedexplicitplansforthis,othershavenotstatedadditionaldetails).Note:Anumberofproducersareincludedinthislistthatareundertakingprojectsthatcoulddeveloptechnologiestoaidnearzeroemissionproduction,butnoclearplanshaveyetbeenannouncedforfullynearzeroemissioncapacityadditions.ThisexplainsthecontrastbetweenthelisthereandannouncedprojectsinFigure3.18.Sources:Company,governmentandnon-governmentalorganisationannouncements;WorldSteelAssociation(2022).Muchofthemomentumaroundhydrogen-basedDRIisintheEU(IEA,2022e).Thefirstcommercial-scalefullyelectrolytichydrogen-basedDRIplantsareexpectedtocomeonlinealreadyinthe2024-2026periodinEU–thesemayincludeplantsbystart-upH2GreenSteel(2.5MtinSweden)andtheHybritEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE189IEA.CCBY4.0.projectinvolvingSSAB(1.2MtinSweden).OtherprojectsplannedinEurope,aswellasasmallernumberofprojectsinNorthAmericaandChina,willinitiallybefuelledfullyorpartiallywithnaturalgasorotherfossilfuel-derivedgases.Somehaveexplicitlystatedplanstotransitiontoelectrolytichydrogenasitbecomesavailable.Whileadditionalscale-upeffortsareneededtodemonstrate100%useofhydrogenatcommercialscale,Tenova’sEnergironDRItechnologywasusedtosuccessfullyprovefullyhydrogen-basedironmakingatpilotscaleintheHybritproject.ThistechnologyisbeingusedforseveraloftheplannedDRIprojects,includingthoseinChina,whichprovidesapositiveindicationforpotentialtotransitiontonearzeroemissionproduction.Thereisalsogrowingmomentumaroundironoreelectrolysis,whichalthoughstillatthepilotstagecouldhaveconsiderablegrowthpotential.Muchoftheactivityisledbyventurecapital-backedUS-basedstart-ups,withtheearliestBostonMetalaimingforcommercialdeploymentfrom2026andElectraSteelinthelate2020s.ArcelorMittalisalsodevelopingironoreelectrolysisthroughtheSiderwinprojectinFrance,alsoaimingforcommercialscaleinthelate2020s.Meanwhile,recentprogressonapplyingCCStothesteelindustryhasbeenmodest.BesidesthealreadymentionedEmiratesSteelIndustriesplantintheUnitedArabEmiratesandthe3DprojectinFrance,theCourse50projectinJapancontinuestoworktowardsapplyingcarboncapturetotheblastfurnace,althoughitisnotexpectedtoberolledoutthisdecade(commercial-scaledemonstrationonlyistargetedby2030).PlansareuncertainregardingthefutureoftheHISarnainnovativesmeltingreductionwithCCUStechnology.FollowingasuccessfulpilotprojectinIJmuiden,Netherlands,TataSteelannouncedthatitwouldinsteadpursuehydrogenDRIattheIJmuidenplant.Plansarestillunderwaytodevelopasecondlarge-scalepilotplant(0.5Mt)employingtheHIsarnasmeltingreductiontechnologyinIndia,buttherearenoannouncedplanstoincludeCO2storageinthatdemoplant.Itistobeseenwhetherrecentpolicyandmarketdevelopments,suchasCCUS-relatedincentivesintheUSIRAandhighernaturalgasprices,couldgiveaboosttoplanstoapplyCCStothesteelindustry,includingoncoal-basedblastfurnaces.Thereisanotableabsenceofnearzeroemission-capableprojectsinseveralmajoremergingmarketanddevelopingeconomies,wheremuchofthefuturegrowthisexpected.Forexample,Indiasteelproductionisexpectedtonearlytriple(toreachnearly350Mt)betweennowand2050intheNZEScenario,yetvirtuallyallplannedprimarycapacityadditionsareforconventionalblastfurnace-basedproductionwithoutCCUS.Internationalfinancemechanisms–targetedtowardsnearzeroemissionproductionroutesanddesignedtomobiliseprivatecapital–couldhelptoclosethisgapthroughsupportforcapitalinvestments.Whiletherearesomeemergingeffortsinthisarea,forexampletherecentlydevelopedClimateInvestmentFundsIndustryTransitionprogramme,muchmoreisneeded.OtherEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE190IEA.CCBY4.0.complementarypolicies,suchasdemandcreationmechanismsordomesticcarbonpricing,wouldalsolikelybeneededtomakethebusinesscaseforsuchprojectsgivenhigheroperatingcosts.ManyoftheprojectsannouncedtodatearereceivingsomeformofdirectgovernmentsupportforRD&Danddeployment.Asmallernumberofprojectsareinsteadrelyingmostlyorsolelyonprivatecapital.Thisincludesthealready-notedUSstart-upsworkingonironoreelectrolysis,andalsoH2GreenSteel,whichhasraisedfundsthroughequityfinancingrounds(H2GreenSteel,2022).Fundingavailableviarecentlyenactedpolicies,suchastheUSIRA,couldservetocatalystadditionalprojectsinthecomingyears.Onthedemand-pullside,themostdirectsupporthascomefromdirectprivate-sectorpurchaseagreements.Variousend-usercompanieshavemadecommitmentstopurchasenearzeroemissionsteelfromcompaniessuchasSSAB,Salzgitter,NucorandH2GreenSteel.Althoughnotprovidingasstrongademand-pullsignalasadirectpurchasecommitment,severalotherprivate-sectorinitiativesandpublicpoliciesaresignallingtosteelproducersalikelygrowingmarketfornearzeroemissionsteel.KeyinitiativestocreatedemandfromtheprivatesectorincludeSteelZero(aninitiativeofClimateGroupandResponsibleSteel)andtheFirstMoversCoalition(launchedbytheUSgovernment),whichcollectivelycoverover40companies.Intermsofpublicprocurement,theCleanEnergyMinisterial’sIndustrialDeepDecarbonisationInitiative(CEMIDDI)hasdevelopedaGreenPublicProcurementPledge,throughwhichmembercountriesareexpectedtoannouncecommitmentstolowandnearzeroemissionsteelprocurementoverthecourseof2023.Otherdemand-pullpoliciesatthenationallevelincludeGerman’sexploratorycallforproposalsthispastMayforcarboncontractsfordifference(CCfD)inenergy-intensiveindustries,includingsteel(byhelpingbridgethecostgapbetweenconventionalandnearzeroemissionproduction,aCCfDwouldhelpsteelproducerssellnearzeroemissionproductionatcurrentmarketratesandthusreducethechallengeoffindingabuyer);France’sRE2020buildingsregulationthatsetembodiedcarbontargetsforbuildingsconstruction;andtheUSIRAprovisions(sections60503and60506)thattogetherallocatedoverUSD4billionforthepurchaseoflow-carbonconstructionmaterialsforgovernmentbuildingsandgovernment-fundedhighways.CementTheglobalcementindustrylikewisehasalargenumberofplayers.Thetoptenproducersaccountforjustunder30%ofglobalproduction,andarerelativelydistributedgeographically(BizVibe,2020a).Thetopfourproducersaloneaccountfor20%ofproduction:twoEuropean-basedmultinationalswithaffiliatecompaniesandproductionwidespreadglobally(HolcimandHeidelbergMaterials)andtwoEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE191IEA.CCBY4.0.Chinesecompanies(AnhuiConchandChinaNationalBuildingMaterials).TheotherproducersinthetoptenareheadquarteredalsoinEuropeandAsia,aswellasLatinAmericaandEurasia.Thewiderdispersionofmajorcountriesisexplainedbythefactthatcementisoftenproducedrelativelyclosetowhereitisconsumedandisnotwidelytradedinternationally(seeChapter2).ThelargestchallengeforproducingcementwithnearzeroemissionsistoaddresstheprocessCO2emissionsfromcalcination,whichaccountforabouttwo-thirdsofemissions.CCSiscurrentlythemostadvancedsolutionoverall,withmultipledifferentcapturetechnologiesatdifferentstagesoftechnologyreadiness.ItisimportanttoconsiderwheretheCO2willenduptodeterminewhetheritistrulynearzeroemissions–unlessCO2useresultsinpermanentstorage(e.g.inbuildingmaterials),theCO2wouldneedtobestoredindedicatedpermanentstoragefacilities.WhileCCUapplicationswithoutpermanentstoragehavevalueinthenearterminprovidingabusinesscasetoadvancecarboncapturetechnologiesandmaycontinuetoplayamodestroleinsomespecificapplicationsinthelongerterminaworldtransitingtonetzero,scale-upofsupportingCO2transportandstorageinfrastructurewillbecriticaltoenablewidespreadtrulynearzeroemissioncementproduction.Reducingtheclinkertocementratiothroughincreasingtheuseofsupplementarycementitiousmaterials(SCMs)willalsobeimportanttoreduceemissions.Here,calcinedclayandlimeareexpectedtoplayanincreasingrole,asavailabilityofconventionalSCMs–particularlyflyashfromcoalplantsandgroundgranulatedblastfurnaceslagfromsteelproduction–considerablydeclinesduetocleanenergytransitions.However,SCMsareunlikelytobeabletoachievenearzeroemissionsproductionalone,giventhatthecurrentknowntechnicalminimumclinkerrequirementincementformostapplicationsis50%.Withregardtocarboncapture,thefirstfull-scaleprojectforcementisexpectedtocomeonlinein2024–theBrevikplantinNorway,operatedbyNorcem(amemberofHeidelbergMaterialsGroup)thatwillcapture0.4MtCO2/year,orhalfoftheplant’semissions,usingchemicalabsorption.Intotal,thereareprojectsatcementplantsinthepipelinethatareexpectedtocaptureabout10MtCO2/yearby2030ifincludingonlyprojectswithannouncedplannedstartdates,or15MtCO2/yearifassumingallannouncedprojectsasoftodaywillhavesufficienttimetostartby2030(valuesexcludeprojectsthathavestatedplanstousetheCO2inwaysthatwillnotleadtopermanentstorage).Thisisonlyabout6to9%oftheapproximately175Mtcapturedandstoredin2030intheNZEScenario,signallingalargegapbetweenplannedcapacityadditionsandthatneededtogetontrackfornetzeroby2050.Oftheplannedcapacityadditions,mostareinEuropeandNorthAmerica;ahandfulofpilotordemonstrationprojectsarealsotakingplaceinAsia.ItisworthalsonotingtheimportantroleofothercompanieswithintheCCUSvaluechaininenablingcementCCUSprojects,includingCO2captureEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE192IEA.CCBY4.0.technologiesproviders(e.g.Svante,MitsubishiHeavyIndustriesGroup,AkerCarbonCapture,CarbonClean)andcompaniesinvolvedinCO2transportandstorage(e.g.OxyLowCarbonVentures,Equinor,Enbridge,CarbonCollectors).TopcementproducersandleadingexistingorplannedprojectsmakingprogresstowardsnearzeroemissioncementproductionEuropeNorthAmericaAsiaRestofworldTopproducers(locationofheadquarters)•Holcim•HeidelbergMaterials(includingmembercompanyItalcementi)•AnhuiConch•ChinaNationalBuildingMaterials•ChinaResourcesCement•TaiwanCement•Cemex•Votorantim•EurocementProducersundertakingprojectstowardsnearzeroemissionproduction:CCUS•HeidelbergMaterialsGroup(includingmembercompaniesNorcem,HansonUK,Cementa,Italcementi,Devnya)•Holcim•BuzziUnicem(includingmembercompanyDyckerhoff)•Cemex•Schwenk•Vicat•Lhoist•CRH(includingmembercompaniesEQIOM,Tarmac)•FLSmidth•Titan•AalborgPortland•CIMPOR-IndústriadeCimentos•HeidelbergMaterialsGroup(includingmembercompanyLehigh)•Holcim•Cemex•TaiwanCement•DalmiaCement•TaiheiyoCement•AnhuiConch•BBMGCorporation•ChinaResourcesCement•BoralAlternativerawmaterials•CEMEX•Materrup•Brimstone•Solidia•TerraCO2•ForteraNote:Anumberofproducersareincludedinthislistthatareundertakingprojectsthatcoulddeveloptechnologiestoaidnearzeroemissionproduction,butnoclearplanshaveyetbeenannouncedforfullynearzeroemissioncapacityadditions.ThisexplainsthecontrastbetweenthelisthereandannouncedprojectsinFigure3.18.Sources:Company,governmentandnon-governmentalorganisationannouncements;BizVibe(2020a).AsidefromCCUS,anothertechnologycategorythatcouldsubstantiallyreduceoreveneliminateprocessemissionsareclinkersoralternativebindingmaterialsbasedonrawmaterialsotherthanlimestone.Whilemultipletechnologiesareunderdevelopment,therearevariouschallengesrelatedtosuitabilityforadiversityofapplicationsandrawmaterialavailability,orsomeleadtoonlypartialemissionsreductions.Somealternativesarealreadybeingproducedatcommercialscalebuthaveonlybeenusedincertainlargenon-structuralEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE193IEA.CCBY4.0.applications(e.g.SolidiaCement).Othertechnologiesareinearlierstagesofdevelopmentbutcouldbeverypromisingifcommercialised.Forexample,US-basedstart-upBrimstonehassuccessfullyproducedatlabscaleazero-emissioncementwithachemicalcompositionidenticaltoordinaryPortlandcementclinker(thusovercomingchallengesrelatedtolimitationstotheapplicationsforwhichtheycanbeusedandregulatorybarrierstoadoption)thatcanachievezeroorevennegativeemissionsandisaimingfordemonstrationby2024.Electrickilnscouldalsohelpeliminatefuelcombustionemissions–severalprojectsareworkingtowardsdevelopingthistechnology,includingsuccessfulpilot-scaletrialsbyVTTinFinland.Aswithsteel,theconcentrationofactivitytodeploynearzeroemissioncementproductionislargelyinadvancedeconomies,despitetheexpectationthatemergingmarketanddevelopingeconomieswillcontinuetoaccountformuchoffutureproduction(about85%in2050intheNZEScenario).Thissignalstheneedforgreaterinternationalfinancesupport,aswellascollaborationthroughtechnologyco-development,capacitybuildingandknowledgesharing.Likewise,muchofcurrentlyplannedCO2transportandstorageinfrastructureisinNorthAmericaandEurope,whichindicatesaneedforexpandedscale-upinotherpartsoftheworld.Governmentfinancialsupportisanimportantenablerofmanyoftheongoingandplannedprojects.Inadditiontogovernmentfundingthroughgrants,taxincentivescanbehelpfulindrivingincreasedinvestmentsinemissions-reducingprojects.IntheUnitedStates,the45QtaxcreditforCCUSwasexpandedandextendedthroughtheIRA,legislatedinAugust2022:thecreditforCO2capturedfrompowerandindustrialplantshasbeennearlydoubled,andthedeadlinetoqualifyforthecreditisextendedbysevenyearsto2033.InCanada,the2022federalbudgetannounceddetailsofarefundableInvestmentTaxCreditforCCUSprojectsfrom2022and2040,atcreditratesrangingfrom37.5-60%dependingontheprojectsegment(theserateswillbehalvedstartingin2031toencourageindustrytomovequickly).Demand-pullmeasurescanalsohelpdrivedeploymentofnearzeroemissioncement.Manyofthegovernmentpoliciesnotedaboveforsteelarealsorelevantforcement,includingtheCEMIDDIGreenPublicProcurementpledge,Germany’scallforproposalsforaCCfD,France’sRE2020buildingregulationembodiedcarbontargets,andtheUSIRAlow-carbonconstructionmaterialprocurementprovisions.Ontheprivate-sectorside,theFirstMover’sCoalitionislaunchinganinitiativeforconcreteandtheClimateGroup'sConcreteZeroinitiativelaunchedinJuly2022with17memberfirmscommittingtoprocure30%low-emissionconcreteby2025and50%by2030.Directprivate-sectorpurchaseagreementstonearzeroemissioncementarenotobservedasinthesteelsector.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE194IEA.CCBY4.0.PlasticsLeadingproducersofplasticsincludeacombinationofdedicatedchemicalproducersandoilandgasproducersthatalsoproducechemicalproducts.TopproducersareheadquarteredlargelyintheUnitedStates,theMiddleEast,theEuropeanUnionandAsia,withalargerdiversityofcompaniesinvolvedinproducingrecycledplastics.Regionswithsignificantoilandgasresourcesareadvantageousforproduction,asthemaindeterminantofthechoiceofroutetoproduceaparticularchemicalproductistheavailabilityand,therefore,costoffeedstockssuchasnaphthaandethane.Movingtowardsnearzeroemissionsplasticsinvolvestwoaspects.Firstisincreasingrecyclingandrecycledproduction.Plasticsrecyclingisanareawheremajoreffortsareneededtoimprovecollectionrates,improvesortingandexpandtherangeofplasticsthatcanberecycledthroughtechnologyinnovation.Thiscontraststometalssuchasteelandaluminium,wherealthoughthereiscertainlysomeroomtoexpandrecycling,recyclingratesarealreadymuchhigherandrecyclingtechnologieswell-established,resultinginlowerpotentialtoincreasesecondaryproduction.Secondistodevelopnearzeroemissionmethodstoproduceplasticsfromvirginmaterials.Here,CCUSisoneoftheleadingoptions,aswellasdirectelectrification.Thereareconsiderableeffortsongoingtodevelopnewmethodstorecycleabroaderrangeofplasticsandtoreducedowncycling,whichoccurswhenplasticsarerecycledintoalowergradeofplastic.ThereisageneralconcentrationofeffortsinthisareainEuropeandNorthAmerica,althoughproducersaredevelopingprojectsinotherregionssuchasAsiaandtheMiddleEast.Companiesinvolvedincludeboththemajorchemicalproducers,butalsosmallercompaniesandstart-ups.Therearefewerdevelopmentsunderwaytoachievenearzeroemissionsfromvirginproduction,althoughstillsomepotentiallypromisingefforts.Acoupleofknownsmall-scaleCCUSprojectsonhigh-valuechemicalsplantshavebeendevelopedinChina.SeveralprojectsinEuropeandtheUnitedStatesarelookingintoelectrifyingsteamcrackers,oneofthekeyunitsforproducinghigh-valuechemicals.Thecurrentprojectsareallatrelativelylowtechnologyreadinesslevels,fromconcepttosmallpilot,althoughplantsareunderwaytoquicklyscaleuptodemonstrationasearlyas2023andcommercialisationasearlyas2024.Innovationisalsocontinuingonalternativebio-basedmaterialstoproduceplastics,althoughconcernsaboutpoorbiodegradationandtheavailabilityandmanagementofbio-resourceshaveslowedtheuptakeofthesetechnologies.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE195IEA.CCBY4.0.TopplasticsproducersandleadingexistingorplannedprojectsmakingprogresstowardsnearzeroemissionplasticsproductionEuropeNorthAmericaAsiaRestofWorldTopproducers(locationofheadquarters)•BASF•ENI•LyondellBasellIndustries•INEOS•Lanxess•Dow•ExxonMobil•ChevronPhillips•DuPont•Sinopec•FormosaPlastics•MitsubishiChemical•LGChemical•SABICProducersundertakingprojectstowardsnearzeroemissionproduction:Improvedrecyclingtechniques•ENI(membercompanyVersalis)•Neste•LyondellBasell•OMV•Borealis•PlasticEnergy•Quantafuel•FuenixEcogyGroup•Carbios•Mura•WornAgainTechnologies•AgilyxCorporation•INEOSStyrolution•PureCycle•LoopIndustries•BP•Eastman•LicellaCCUS•YangchangPetroleum•Sinopec•SABICElectrification•BASF•Borealis•BP•LyondellBasell•SABIC•Total•CoolbrookSources:BizVibe(2020b);PolymerDatabase(2022);PlasticRanger(2021).Governmentinnovationfundinghasagainbeenimportantfortheresearchanddevelopmentprojectsthatareunderway.Comparedwithotherbulkmaterials,creatingdemand-pullfornearzeroemissionplasticsmaybemorechallenging,giventhatthereisalessclear“chunky”categoryofdemandtotargetsuchasconstructionorvehicles,eventhoughplasticsareindeedusedforsomecomponentswithinthosedemandsegments.Nevertheless,demandcreationwillbeimportant,andseveralpoliciesalreadymentionedcouldbeapplicable.Forexample,Germany’sCCfDproposalcouldapplytoplasticsproduction.Additionally,theFirstMover’sCoalitionisscheduledtolaunchitsChemicalscommitmentatthe27thConferenceoftheParties.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE196IEA.CCBY4.0.AluminiumTheglobalaluminiumindustryissomewhatmoreconcentratedthanothermaterials,atleastforprimaryproduction:theoutputofthetoptenaluminiumproducersaccountsforabouthalfofglobalprimaryaluminiumproduction(BizVibe,2020c;Rusal,2019).HalfofthetopproducersareinChina,whiletheresthavegloballydispersedheadquarters,inEurasia,Australia,NorthAmerica,theMiddleEastandEurope.ThemajorroleofChinainprimaryaluminiumproduction(nearly60%ofglobaltotal)explainsthedominanceofmajorproducersthere.Withregardtorecycledproduction,thereisquitealargenumberofsmaller,geographicallydispersedproducers.Movingtowardsnearzeroemissionsaluminiumproductioninvolvesthreekeyaspects:1)improvingscrapcollectionandsortinginordertomaximiserecycledproduction;2)decarbonisingdirectemissionsfromaluminiumproduction–ofwhichprocessemissionsfromaluminiumsmeltingandfossilfuelcombustionemissionsfromaluminarefiningarethetwolargestsources;and3)decarbonisingindirectemissionsfromelectricityusedinaluminiumsmelting.Theindustryoftenplacesconsiderableemphasisonthelastcomponent–decarbonisingpowerinputs–sincetheseemissionsaccountforalargeportionofemissions–about70%oftotal(directandindirect)aluminiumproductionemissionsglobally.Zero-emissionelectricitygenerationtechnologiesarealreadycommerciallyavailable,oftenatcompetitivecosts,althoughtechnical,economicandlogisticalchallengesremainrelatedtooperatingaluminiumsmeltingwithvariablerenewableelectricity,giventhatconventionalsmelterscannoteasilyadapttofluctuatingpowerinputs.Addressingdirectemissionswillbeevenmorechallenging,giventhattechnologiesforfulldecarbonisationarenotyetmarketready.Thus,agreateremphasisonalsotacklingdirectemissionsisneeded.Inertanodesarecurrentlythetechnologyatamoreadvancedstageofdevelopmentwithinthosethatcouldeliminateprocessemissionsfromaluminiumsmelting.Yeteffortsinthisareaarerelativelyconcentratedinafewkeydemonstrationandpilotprojects:ElysisinCanada(acollaborationbetweenAlcoaandRioTinto),Rusal’sdevelopmentsintheRussianFederation,andacollaborationbetweenTRIMETandArctusAluminiuminEurope.Thefirsttwoaretargetingcommercialisationby2024.Othertechnologiestoreducealuminiumsmeltingprocessemissionsareatmuchearlierstagesofdevelopment,includingCCUS(conceptstate)andchlorideelectrolysis(lab-scaletesting).Besidestheinertanodepilotanddemonstrationprojectsandtheirplansfortechnologycommercialisation,therearenomajorconcreteannouncementsonplansfortechnologydeployment.Thiscompareswithabout7Mtofaluminiumproductionfrominnovativeroutesby2030intheNZEScenario.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE197IEA.CCBY4.0.TopaluminiumproducersandleadingexistingorplannedprojectsmakingprogresstowardsnearzeroemissionaluminiumproductionEuropeNorthAmericaAsiaRestofworldTopproducers(locationofheadquarters)•NorskHydro•Alcoa•Chalco•Hongqiao•Xinfa•EastHopeGroupCompany•ChinaPowerInvestmentCorp•Rusal•RioTintoAlcan•EmiratesGlobalAluminiumProducersundertakingprojectstowardsnearzeroemissionproduction:Inertanodes•TRIMET•ArctusAluminium•Alcoa•RioTinto•RusalCCUS•Alvance•NorskHydro•AlbaChlorideelectrolysis•NorskHydroZero-emissionfuelsforaluminarefining•Alcoa•RioTinto•South32•HydroSources:Company,governmentandnon-governmentalorganisationannouncements;BizVibe(2020c).Decarbonisingaluminarefiningcentreslargelyaroundswitchingtolow-emissionfuels,includingbioenergy,solarthermal,electricityandhydrogen.Initialstepsarealreadybeingtakeninthisregard.In2022,anelectricboilerwasinstalledattheHydroAlunortealuminaplantinBraziltoprovideaportionoftheplant’ssteamdemand;twoadditionalelectricboilersareplannedby2024.SeveralotherprojectsaretakingplaceatsmallpilotstageinAustralia,thesecond-largestalumina-producingcountry(Chinaisthelargest)withabout15%ofglobalproduction.Developmentsarealsounderwaytoincreasetheflexibilityofaluminiumsmeltingsothatitcanmoreeasilysupportintegrationofvariablerenewableelectricitysources.EnPotsuccessfullytestedthefirstfullindustrial-scaleinstallationofits“virtualbattery”flexibleheatmanagementtechnologyforaluminiumsmeltersinGermanyin2019,andisnowworkingtowardscommercialroll-out.Aswithsteelandcement,thegeographicaldispersionofeffortstodevelopnearzeroemissiontechnologiesforaluminiumproductionisstark.DespitethecurrentconcentrationofproductioninChina,andexpectedfuturegrowthinAsiamorebroadly,therearenoknownR&DprojectsunderwayinAsiatoaddressdirectemissions.Whileeffortstherehavebeenmorefocusedonaddressingindirectemissionsfromelectricitygeneration,giventheregion’shighrelianceonfossilEnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE198IEA.CCBY4.0.fuel-basedelectricityforaluminiumproduction,itwillalsobeimportanttoaddressdirectemissionsinordertoreachnetzeroemissions.Aswiththeothermaterials,governmentfundinghasbeencriticaltomostoftheongoingprojectstodeveloptechnologiestoreducealuminium’sdirectemissions.Private-sectorinvestmenthasalsoplayedaroleinsomecases.Forexample,ApplehasinvestedintheElysis,andhasalsoagreedtoprovidetheprojectwithtechnicalsupport.Whilethereareseveralgovernmentpoliciesinspecificcountriesthatcouldhelpcreatedemandpullfornearzeroemissionaluminium,atthemomentthereisgreatermomentumintheprivatesectortowardscreatingdemand.AluminiumispartoftheFirstMover’sCoalition,withaluminiumpurchaserssettingatargetofatleast10%oftheirannualprimaryaluminiumprocurementvolumesbeinglow-CO2primaryaluminium.Additionally,multiplevehiclemanufacturershavesettargetstoreducetheirlife-cycleorScope3emissions.Giventhatasubstantialportionofaluminiumisusedinvehicles,anduseisexpectedtocontinueincreasinginfutureduetolightweighting,suchtargetscouldhelpdrivedemandforlow-emissionaluminium.Theprivatesectorisalreadydevelopingmarketsandproductlinestoofferlow-emissionaluminiumatapremium.Forexample,multiplealuminiumcompanieshavelaunchednew,lower-emissionproductlines(e.g.Alcoa’sSustanalineandRioTinto’sRenewAlproducts),whilethemarketintelligenceagencyHARBORAluminiumlauncheda“green”primaryaluminiumsportpremiumin2019.Whiletheseeffortsarelikelyatthemomenttomostlyofferthepremiumforaluminiumproducedwithrenewableelectricity,overtimetheycouldevolvetomorestringentrequirementsandthushelpdrivedemandforaluminiumalsowithnearzerodirectemissions.EnergyTechnologyPerspectives2023Chapter3.MiningandmaterialproductionPAGE199IEA.CCBY4.0.ReferencesAdamasIntelligence(2020),Rareearthmagnetmarketoutlookto2030.AgoraEnergiewende(2021),GlobalSteelTransformationTracker,https://www.agora-energiewende.de/en/service/global-steel-transformation-tracker/ArcelorMittal(2022a),ArcelorMittal’sdecarbonisationplanforSpainmovesforwardwithgovernmentcommitmenttofunding,https://corporate.arcelormittal.com/media/news-articles/arcelormittal-s-decarbonisation-plan-for-spain-moves-forward-with-government-commitment-to-fundingArcelorMittal(2022b),ArcelorMittalacceleratesitsdecarbonisationwitha€1.7billioninvestmentprogrammeinFrance,supportedbytheFrenchGovernment,https://corporate.arcelormittal.com/media/press-releases/arcelormittal-accelerates-its-decarbonisation-with-a-1-7-billion-investment-programme-in-france-supported-by-the-french-governmentArcelorMittal(2021a),ArcelorMittalsignsletterofintentwiththegovernmentsofBelgiumandFlanders,supporting€1.1billioninvestmentindecarbonisationtechnologiesatitsflagshipGentplant,https://corporate.arcelormittal.com/media/press-releases/arcelormittal-signs-letter-of-intent-with-the-governments-of-belgium-and-flanders-supporting-1-1-billion-investment-in-decarbonisation-technologies-at-its-flagship-gent-plantArcelorMittal(2021b),ArcelorMittalandtheGovernmentofCanadaannounceinvestmentofCAD$1.765billionindecarbonisationtechnologiesinCanada,https://corporate.arcelormittal.com/media/press-releases/arc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esetechnologiesareatearlystageofdevelopmentandtypicallyinvolvelongprojectleadtimes.•Theworkforcetoinstallandmanufacturecleanenergytechnologiesneedstogrowsubstantially.Today,around33millionpeopleareworkingincleanenergy.By2030,intheNZEScenario,anadditional8millionworkerswillbeneededtomanufactureelectricvehiclesandtheirbatteries,thoughthereisapossibilityforworkerscurrentlyinvolvedinmanufacturinginternalcombustionengine(ICE)vehiclestoworkinthemajorityoftheseroles.Anadditional4millionworkerswillbeneededtoinstall(75%)andmanufacture(25%)solarPV,windandheatpumpsystems.•Supportiveindustrialpolicies,accesstolow-costenergyandmaterials,availabilityofworkersandtradepolicieslargelyexplainChina’sgloballydominantmanufacturingbase.Othercountriesareworkingtoexpandtheircleanenergymanufacturingcapacity:notablerecentpolicyeffortsincludetheUSInflationReductionAct,theREPowerEUplan,Japan’sGreenTransformationinitiativeandIndia’sProductionLinkedIncentivescheme.However,onthebasisofcurrentexpansionplants,today’slevelofgeographicalconcentrationappearssettoremainhighthroughoutthepresentdecade.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE207IEA.CCBY4.0.OverviewTheNetZeroEmissionsby2050(NZE)Scenario’scleanenergytrajectoryinvolvesmassivecleanenergytechnologydeployment,whichhingesontheparallelexpansionofmanufacturingandinstallationcapacity.Wethereforeassessprospectsforthesecleantechnologysupplychainstagesinthischapter,focusingontheexpansionofmanufacturingandinstallationcapacitybasedoncurrentandannouncedconstructionactivity27.Wedistinguishbetweentwobroadtechnologycategories:Mass-manufacturedtechnologies,whichareassembledinspecialisedfactoriesinlargevolumesusingseveralmanufacturedcomponentsandsub-assemblies,withtheready-to-useendproductexitingthefactoryfloor.Oftheselectedsupplychainsanalysedinthisreport,solarPVmodules,windturbines,electriccars,fuelcelltrucks,heatpumpsandelectrolysersarekeytechnologiesthatfallintothiscategory.Large-scale,site-tailoredtechnologies,whichareusuallyindividuallydesignedandmanufacturedtofitspecificlocalconditions.Theymayconsistofanumberofcomponentsthatthemselvesaremassmanufactured,buttheirengineering,assemblyandinstallationaresite-specific.Ofthesupplychainsanalysedinthisreport,naturalgas-basedhydrogenwithcarboncaptureandstorage(CCS),directaircapture(DAC),bioenergywithcarboncapture(BECC),andlow-emissionsynthetichydrocarbonfuelsareincludedinthiscategory.ThischapterassessestheleadtimesinvolvedintechnologymanufacturingandinstallationandidentifiesgapsinmeetingNZEScenariodemandin2030,accordingtocurrentcapacityexpansionplansforthespecificsupplychainsreviewedinthisreport.Leadtimesarebasedonhistoricalvalues,thoughtheymaydecreaseinupcomingyearsassupplychainsmatureandlocalpermittingproceduresimprove.Thescopeforreducingleadtimesisparticularlyimportantfortheinstallationofsite-tailoredtechnologies,someofwhichareataveryearlystageofdeployment,withfutureprojectsalmostcertainlytakingmuchlesstimetocompleteasindustryexperiencegrows.Announcedprojectsforexpandingcapacityorbuildingnewfacilitiesincludeprojectsthatareatdifferentstagesofdevelopment,withsomealreadyunderconstructionandothersnotyetatthefinalinvestmentdecisionstage.However,theyshouldnotbetakenasaproductionforecast.Whilecapacityadditionscouldturnouttobehigherthancurrentpublicannouncements(thisisespeciallythecaseformass-manufacturedtechnologies,whichtendtobeannouncedjust27BasedonannouncementsuptoNovember2022.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE208IEA.CCBY4.0.beforeconstructionbegins),notallannouncedprojectswillmaterialise.Howthesefactorsplayoutwillvarybytechnology.Nevertheless,ourassessmentprovidesanindicationofwhichtechnologiesaremostlikelytobesubjecttosupplyshortfalls.Ouranalysissuggeststhatcomponentandtechnologymanufacturingisnotlikelytorepresentamajorbottleneckincleanenergysupplychainsintheshorttomediumterm(Figure4.1).Prospectsforinstallingsystemsarelesscertain,particularlyforlarge-scale,site-tailoredtechnologies,whichtypicallyinvolvelongerleadtimesandforwhichinvestmentannouncementspointtosubstantialfinancingshortfalls.Thoseshortfallsaremostsignificantforlow-emissionsynthetichydrocarbonfuelproductionandBECC(Figure4.2).Announcementsforsite-tailoredtechnologiesareoftenmadepriortoorduringfront-endengineeringanddesign(FEED)workoratthefinalinvestmentdecisionstage,somajorexpansionplanswouldneedtobeformalisedinthenextfewyearsfordeploymenttoaccelerateasquicklyasprojectedintheNZEScenario.Currentglobalmanufacturingcapacity,announcedcapacityadditions,capacityshortfallin2030relativetotheNZEScenario,andleadtimesforselectedmass-manufacturedcleanenergytechnologiesandcomponentsIEA.CCBY4.0.Notes:NZE=NetZeroEmissionsby2050Scenario;PV=photovoltaics;EV=electricvehicle.Announcedcapacityadditionstakeaccountofprojectstoexpandorbuildnewfacilitiesthathavealreadyreachedthefinalinvestmentdecisionstageandthatareunderconstructionorabouttobeginconstruction,aswellasthoseawaitingsuchadecision.Leadtimereferstobringingonlinenewmanufacturingcapacity.Announcedmanufacturingexpansionsandleadtimesimplythatformass-manufacturedtechnologiesthereisstilltimetoaddressshortfallsinmanufacturingcapacity.02468100%20%40%60%80%100%SolarPV-moduleSolarPV-cellSolarPV-waferOnshorewindOffshorewindEV-batteryEV-anodeEV-cathodeFuelcelltruckFuelcellstackHeatpumpElectrolyseryearsShareofsupplyin2030intheNZEScenario20212030-plannedcapacityadditions2030-gapbetweenplannedcapacityandNZEAverageleadtimeandtypicalrange(rightaxis)EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE209IEA.CCBY4.0.Currentglobalcapacity,announcedcapacityadditions,capacityshortfallin2030relativetotheNZEScenario,andinstallationleadtimesforselectedlarge-scale,site-tailoredcleanenergytechnologiesIEA.CCBY4.0.Notes:NZE=NetZeroEmissionsby2050Scenario;DAC=directaircapture;BECC=bioenergywithcarboncapture;Gas-CCSH2=naturalgas-basedhydrogenwithcarboncaptureandstorage.“Synthesis”referstolow-emissionsynthetichydrocarbonfuels.Announcedcapacityadditionstakeaccountofprojectstoexpandorbuildnewfacilitiesthathavealreadyreachedthefinalinvestmentdecisionstageandthatareunderconstructionorabouttobeginconstruction,aswellasthoseawaitingsuchadecisionbutthatareexpectedtoproceed.Forlarge-scale,site-tailoredtechnologies,theaverageleadtimebetweenthefirstfeasibilitystudiesandplantcommissioningisuptofiveyears.Amajorworkforceexpansionwillbeneededinupcomingyearstomanufactureandinstallthesecleanenergytechnologies.Over8millionjobsmanufacturingEVsandtheirbatterieswillneedtobefilledgloballyby2030intheNZEScenario,though7millionofthosecanprobablybemetthroughashiftintheworkforcefromICEvehiclemanufacturing.ForsolarPV,windandheatpumpsystems,thenumberofadditionalworkersneededtoinstallthetechnologieswilloutnumberthoserequiredtomanufacturethemaroundtwo-to-one.Thus,theinstallerworkforcegrowssubstantiallyforeachofthesesegmentsintheNZEScenarioby2030:onemillionadditionalworkersareneededgloballytoinstallsolarPVpanels,anothermilliontoinstallwindturbinesandaround800000toinstallheatpumps(Figure4.3).ThenumberofsolarPVinstallersexpandsthemost,astheshareoflabour-relatedprojectcostsremainsmuchlargerthanfortheothertechnologies.Theneedforheatpumpinstallersrisesmostsharply–nearlyfivefoldby2030–butmuchofthisdemandcouldbemetbyconstructionworkerswhotodayinstallotherheatingandairconditioningequipment.Increasingthenumberofwindsysteminstallerswillbemorechallenging,asmanyofthenewpositionsrequirehigher-levelskills02468100%20%40%60%80%100%Gas-CCSH₂DACBECCSynthesisyearsShareofsupplyin2030intheNZEScenario20212030-plannedcapacityadditions2030-gapbetweenplannedcapacityandNZEAverageleadtimeandtypicalrange(rightaxis)EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE210IEA.CCBY4.0.andmorestringentcredentialstohandlespecialisedtransportandconstructionequipmentaswellasadditionalsafetyconsiderations,especiallyintheoffshorecontext.Globalemploymentinmanufacturingandinstallingselectedmass-manufacturedcleanenergytechnologiesintheNZEScenario,2019and2030IEA.CCBY4.0.Notes:PV=photovoltaics;EV=electricvehicle;ICE=internalcombustionengine;HVAC=heating,ventilationandairconditioning.Source:IEA(2022a).TheNZEScenariorequiresamajorworkforceexpansiontomanufactureandinstallcleanenergytechnologies,particularlytoinstallsolarPVandwindsystems.Alackofskilledworkersmayhinderthedeploymentofcleanenergytechnologiesinupcomingyears.AshortageofwindturbineandheatpumpinstallershasalreadyemergedinmajormarketssuchasEurope,theUnitedStatesandAustralia,withover98%ofUSemployersinwindturbineconstructionreportinghiringdifficultiesin2022(UnitedStates,DOE,2022e)(IEA,2022b).WithintheEuropeanUnion,19membercountriesandregionsarereportingshortagesinkeyoccupationsmostrelevanttoheatpumpinstallation.Chinaisstrugglingtorecruitworkersinmanufacturing,withlabourshortagesexpectedtoswelltonearly30millionemployeesby2025(seeChapter1).Inaddition,technologyinstallationcanrequirespecialisedequipmentaswellaslabour,whichcouldposepotentialbottlenecks(seeBox4.1).036920192030201920302019203020192030SolarPVWindHeatpumpsEVsandEVbatteriesMillionemployeesLikelyshiftfromotherHVACinstallationLikelyshiftfromICEvehiclemanufacturingInstallationManufacturingEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE211IEA.CCBY4.0.Buildingupatrainedworkforcetoinstallanewtechnologytakestime,soproactiveandstrategiclabourplanningisneededtopreventshortages.Establishedexperiencewithsimilartechnologiesalreadyinusecanbeleveragedtoreducethetimeandeffortneededtotrainingcleanenergymanufacturersandinstallers.Forexample,vehicleassemblylineworkerscanbeshiftedtoproductionlinesforelectricvehiclesandboilerinstallerscouldberedeployedtoinstallheatpumps.Althoughshiftingtheseworkersdoesrequireadditionaltraining,muchofitcanbedoneonthejoborthroughshorttrainingcourses.Forexample,whileitcouldtakeuptofouryearsforsomeonewithoutpreviousexperienceinheatingandcoolinginstallationtobecomeacertifiedheatpumpinstaller(dependingonthelevelofqualification),workerswithpreviousexperienceinstallingheatingsystemscouldbetrainedinjustafewweeks.Workforcerequirementsalsodependonthelengthoftheinstallationprocess,whichvariesbytechnologytypeandsize.Forinstance,installinganoffshorewindfarmtakessixormoreyears.Forlarge-scalesolarPVfarms,installerscanspend8-14monthsonaproject,whiledistributedrooftopPVsystemscantypicallybeinstalledinjustafewdays.Meanwhile,installingorreplacingaboilerwithaheatpumpinabuildingalsonormallytakesonlyafewdays,thoughthisisstilllongerthanthetimeneededtosimplyreplaceafossilfuel-firedboilerwithanotherone.Small-scale,short-durationprojectstypicallyrelyonalessspecialisedworkforce,Box4.1PotentialinstallationbottlenecksinthewindsectorInstallingawindturbinerequiresfewerworkersperunitofcapacitythansolarPV,butmorematerialinputs,notablycementandcabling,aswellasspecialisedmachinerytotransportandpositiontheturbine.Inthecaseofoffshorewindfarms,specialisedvesselsarerequired,whichincreasinglyneedtobecapableofhandlingtallerandlargerwindturbines.Thereareconcernsthatashortageofsuchvesselscouldleadtodelaysincompletingnewprojects.OutsideofChina,therearecurrentlyaroundtenvesselsthatcanbeusedtobuildoffshorewindfarms,eachwithanabilitytoinstallroughly0.5-0.7GWofcapacityperyear(WindEurope,2022).Newvesselsareunderconstructionandothersareplanned,whichshouldboostthefleettoatleast25vesselsby2026.Itisexpectedthatthenewvesselswillbedesignedtohandlelargerturbines,reachingroughly1.3GWpervesselperyearby2030,makingtheconstructionprocessmoreefficient.Asaresult,currentplanspointtoinstallationcapacityincreasingfivefoldbytheendofthedecadetowellover30GWperyear.ButintheNZEScenario,installationsofoffshorewind,excludingChina,exceed65GWin2030,requiringatotalofover50vessels.Toavoidbottlenecks,thecurrentrateofwindturbineinstallationvesselconstructionwouldneedtobemaintainedthroughto2030.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE212IEA.CCBY4.0.whichmayworkonlypart-timeoncleanenergyprojectssuchasrooftopsolarPVandheatpumps.Standardisedcredentialsoraccreditationscanhelpensurethatworkershavetherequisitetrainingforsuchprojects,whereaslong-durationprojectscanrelymoreonon-the-jobtraining.Site-tailoredsystemssuchasgas-basedhydrogenproductionwithCCS,BECC,DACandsynfuelproductionalsorequireatrainedworkforcetomanufactureequipmentandbuildandoperatetheplant.Theworkforcerequirementishighestduringtheconstructionphase.Forexample,itisestimatedthatthe8MtCO2/yearBECCSprojectatDraxpowerplantintheUnitedKingdomcouldrequireasmanyas4000full-timeequivalentsperyearduringthefour-yearconstructionphase.Likemostenergyassets,operatingthefacilitywillrequirefarfewerworkers:onlyaround375peoplewillbeneededtooperatetheplantanditstransportandstorageinfrastructure(Drax,2021a).Retrofittingexistingplantswithcarboncaptureisalsoawaytoretainemploymentinaregion,andannouncedoperationaljobsareoftenacombinationofbothnewandretainedjobs.Thetotalworkforcerequirementforsite-specificcleanenergyinstallationsismuchlowerthanformass-manufacturedtechnologies.Theadditionalworkforcerequirementforboththeconstructionandoperationofgas-basedhydrogenproductionwithCCS,DAC,BECC,andlow-emissionsynthetichydrocarbonfuelproductionplantscouldreach150000to300000by2030intheNZEScenario,dependingonplantscaleandwhetherprojectsareretrofitsornewbuilds.Manyoftheseinstallationswillrelyonconstructionandprocessingequipmentusedalreadyinthethermalpowergeneration,naturalgasprocessingandchemicalproductionsectors,andcoulddrawupontheexistingpoolofskilledworkersintheseareas.However,thiswouldnotsafeguardtheseprojectsfromthebroaderconstructionandmanufacturinglabourshortagespresentinmanyeconomies.MassmanufacturingofcleantechnologiesandcomponentsFormass-manufacturedcleanenergytechnologies,bottlenecksresultingfromgapsbetweenannouncedmanufacturingcapacityexpansionandprojectedproductionin2030intheNZEScenarioarelessofaconcernthanforstepshigherinthesupplychain.Themainreasonisthatleadtimesforbringingnewmanufacturingcapacityonlinearerelativelyshort,averagingonetofouryears(seeChapter1),sothereisstilltimetofillanycurrentshortfallsinmanufacturingcapacity.However,itremainsuncertainjusthowmanycurrentplanswillactuallyproceed,asinvestmentdecisionscanchangewithfluctuationsindemand,policysupportandcosts.Theseuncertaintiesaretypicallymoreacuteinemergingeconomiesduetohigherfinancingcosts.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE213IEA.CCBY4.0.Forsometechnologies,manufacturersarecurrentlyoperatingwellbelowfullcapacity,asmanyinvestmentsweremadeinanticipationofhigherdemand,toallowplantstooperateflexiblyandrespondquicklytoshort-termdemandvariations.Forexample,batteryfactorieswereoperatingatjustunder40%oftheirnameplatecapacityonaverageworldwidein2021,andthecapacityutilisationrateforsolarPVmoduleswasaround40%.UtilisationratesaregenerallylowerinChina.Intheshortterm,thereisalowerriskofbottlenecksinmanufacturingthanforotherstagesofthesupplychain.However,thisisnotthecaseforalltechnologies.Forexample,theutilisationrateatmostheatpumpfactoriesiscloserto80%,whichisbroadlyinlinewithstandardmanufacturingindustrypracticeofallowingenoughsparecapacitytodealwithunplannedmaintenanceorlogisticalproblems–althoughsignificantdifferencesexistacrossfacilities(seeChapter2).UndertheNZEScenario,expandingtheglobalmanufacturingcapacityofthesixselectedcleanenergytechnologiesreviewedinthisreport–wind,solarPV,EVbatteries,electrolysers,heatpumpsandfuelcelltrucks–willrequirecumulativeinvestmentofaroundUSD640billion(inreal2021USdollars)over2022-2030(Figure4.4).Aroundtwo-thirdsisneededtoscaleupEVbattery(includinganodeandcathode)manufacturingandaround15%wouldbededicatedtowindpower.AboutUSD470billionalreadyclaimedbyprojectsinthepipeline,mostofwhichareinChina,EuropeandNorthAmerica.Thisrepresentsabouttwo-thirdsofthecumulativeinvestmentrequired.Shortfallsininvestmentto2030amounttoaroundUSD90billionforEVbatteries,USD45billionforfuelcellsandfuelcelltrucks,andaroundUSD15billionforheatpumps.Scalingupcleanenergytechnologymanufacturingcapacityiscrucialnotonlytomeethigherdemandin2030,buttoestablishthefoundationneededtoachievenetzeroemissionsby2050.Deploymentofmostofthemass-manufacturedtechnologiescontinuestoincreaseafter2030,thoughmoreslowlythanduringthecurrentdecadeasmarketsreachsaturation.Forexample,globalEVbatterysalesgrowonaveragebymorethan15%peryearover2022-2030,slowingtoaround5%duringthe2030sandjust1%inthe2040s,whenEVsaccountforalmostallcarsales.InthecaseofbothelectrolysersandsolarPVsystems,meetingthemanufacturingcapacityscaleuprequiredduringthecurrentdecadeintheNZEScenariowouldbesufficienttoalsomeetdemandafter2030,asnoadditionalcapacityinvestmentisneeded.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE214IEA.CCBY4.0.Announcedglobalcumulativeinvestmentinmassmanufacturingofselectedcleanenergytechnologiesbyregion/countryandthatrequiredtomeetdemandin2030intheNZEScenario,2022-2030IEA.CCBY4.0.Notes:Requiredinvestmentisthatassociatedwithprojecteddeploymentto2030intheNZEScenario.EVbatteriesincludeanodeandcathodemanufacturing;solarPVincludesmoduleandcellmanufacturing.Expandingmass-manufacturingcapacityforcleanenergytechnologiestotheNZEScenariolevelwillrequirearoundUSD640billionofinvestmentover2022-2030,with80%allocatedtowindsystemsandEVbatteries.EVbattery69%Wind13%SolarPV4%Electrolysers2%Heatpumps3%Fuelcellsandfuelcelltrucks9%AnnoucedinvestmentInvestmentgapAnnouncedinvestmentUSD(2021)640billion0%20%40%60%80%100%OtherUndefinedAsiaPacificChinaNorthAmericaEuropeUSD(2021)470billionRequiredinvestmentBox4.2CarbonintensityoftechnologymanufacturingManufacturing,assembling,installingandconstructingcleanenergytechnologiestendnottobeenergy-intensiveorcarbon-intensiveprocesses.Thisisbecausetheydonotgenerallyinvolvehightemperaturesbutrathermechanicaloperations,whichusemuchlessenergy.Theglobalmanufacturingsectorfallswithinthe“lightindustry”categoryofenergyuse,whichaccountsforaround5%ofglobalCO2emissionstoday.Formosttechnologies,electricityiscurrentlythemainenergyinput,accountingforaround35%oftotalenergyconsumptioninthemanufacturingsectorin2021,followedbynaturalgasat20%.Givenitsheavyrelianceonelectricity,theentiresectorhalvesitsemissionsfromtoday’slevelby2035intheNZEScenario,thankstotheparallelincreaseintheelectrificationofmanufacturingandthedecarbonisationofpowergeneration.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE215IEA.CCBY4.0.SolarPVGlobalsolarPVdeploymentoverthelastdecadeorsohasbeennothingshortofspectacular,withinstalledgenerationcapacityrisingtoover1000GWby2022,comparedwithjust40GWin2010.SolarPVgenerationaccountedfor4%ofglobalelectricitygenerationand14%oftotalrenewablegenerationin2022.Thismomentumisexpectedtocontinuefortheforeseeablefutureaspolicygoalsbecomeincreasinglyambitiousandcompetitivenesswithfossil-basedgeneratingtechnologiesimproves.ExpansionplansandthegapwiththenetzerotrajectoryTheannouncedexpansionplansofsolarPVmanufacturersarewellontracktosatisfyprojecteddemandby2030intheNZEScenario.Modulemanufacturingcapacityisalreadyfarinexcessofcurrentdemandwithaglobalaverageutilisationrateoflessthan50%in2021.Announcedexpansionplanswouldraisecapacitytoaround790GWby2027,enoughtocoveralldemandprojectedfor2030intheNZEScenario.Thesituationforcellmanufacturingisalmostidentical,withannouncedexpansionplansboostingglobalmanufacturingcapacitytoaround810GWby2027–easilyenoughtosatisfyprojecteddemandin2030.Wafersarealsoontrack,withamarginsimilartothatofcellsandmodules:ifallprojectsarecompletedontime,manufacturingcapacitywouldreachmorethan790GWby2027.AlthoughannouncedexpansionswouldcoverprojectedNZEScenariodemandto2030,manufacturingcapacitystillneedstoexceeddemand,asitisunrealistictoexpectmanufacturerstooperatecontinuouslyatmaximumcapacity.Evenso,assuminganaverageutilisationrateof85%inallthreemanufacturingstages,announcedmodule,cellandwafercapacityexpansionswouldstillcoverNZEScenariorequirements,withsurplusesof14GWformodules,36GWforcells,and22GWforwafers(Figure4.5).MostofthemajormanufacturersofallsolarPVsupplychaincomponentsareinChina,whichcurrentlysuppliesmorethan70%oftheworld’smodulesandanevenlargershareofsubcomponents(seeChapter2).Inthecaseofwafers,LONGiandZhonghuanSolararethelargestmanufacturersworldwide,coveringaround50%ofglobalmanufacturingcapacity.Forsolarcells,Tongwei,Aiko,LONGiandTrinacombinedrepresentaround40%ofglobalmanufacturingcapacity.Thesametrendappliestomodulemanufacturing,withthemainmanufacturers(LONGi,Trina,JinkoSolarandJASolar)togetherconstitutingapproximately40%ofglobalcapacity.Accordingtocurrentexpansionplans,thehighconcentrationofmanufacturinginChinaisnotexpectedtodecreaseinupcomingyears,withitsshareofglobalmanufacturingcapacityreaching78%formodules,85%forcellsand94%forwafersin2027.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE216IEA.CCBY4.0.SolarPVmanufacturingcapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenarioIEA.CCBY4.0.Notes:GW=gigawatts;RoW=restofworld;NZE=NetZeroEmissionsby2050Scenario.Announcedcapacityincludesexistingcapacity.ThemanufacturingcapacityneededtomeetprojecteddemandintheNZEScenario(NZEdemand)isestimatedassumingautilisationrateof85%.NZEresidualcapacity,thus,representsthemanufacturingcapacitythatwouldremainunused,onaverage,whichprovidessomeflexibilitytoaccommodatedemandfluctuations.Announcedexpansionprojectsformodule,cellandwafermanufacturing,mostlyinChina,aresufficienttocoverthecapacityneededby2030intheNZEScenario.Thesamecompanieswillalsocontinuetodominatethemarketinthenextfewyears,asthetopfivemanufacturersgloballyhaveplanstoatleastdoubletheirmanufacturingcapacityofthethreekeycomponentsinthenextfouryears.Together,theyaccountfor42%ofglobalcapacityadditionsformodules,48%forcellsand57%forwafersto2026.Modulemanufacturingisexpectedtoremaintheleastconcentratedstepinthesupplychain,withtheAsia-Pacificregioncoveringaround15%ofglobalmanufacturingcapacity(117GW)in2027.TherehavebeenmanyexpansionannouncementsinthesolarPVsupplychainindustryinrecentyears,particularlyin2022,withseveralmulti-billion-dollarinvestmentsannouncedacrossdifferentstepsofthesupplychain(Table4.1).Forexample,LONGirecentlyannouncedinvestmentofUSD2.4billiontoincreaseitsmanufacturingcapacityforsiliconwafersby20GW,monocrystallinecellsby30GWandsolarmodulesby5GWinInnerMongolia(PVTIME,2022).CanadianSolarannouncedarecord-highinvestmentofUSD9.8billioninaproductionbaseinQinhai,China,aimingtoannuallyproduce200000tonnesofpolysilicon,250000tonnesofsiliconmetal,50GWofsiliconingotcasting,10GWofwafers,10GWofcellsand10GWofmodules(Shaw,2022).AlthoughmostoftheexpansionplansareinChina,somemajorinvestmentshavebeenannouncedinotherregions.OneexampleisEnel’sdecisiontobuilda3-GW-per-yearmodulefactoryinSicily,duetocomeonlineby2024,supportedbyagrantfromtheEuropeanUnion(Enel,2022).01002003004005006007008009002021Announced2030NZESolarPV-modulesGWChinaOtherAsiaPacificEuropeNorthAmericaMiddleEastRoWNZEdemandNZEresidualcapacity2021Announced2030NZESolarPV-cells2021Announced2030NZESolarPV-wafersEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE217IEA.CCBY4.0.SelectedannouncedexpansionprojectsformanufacturingsolarPVsupplychaincomponentsManufacturerComponentRegionofannouncedexpansionExpectedcompletionBillionUSDCanadianSolarModules,cells,silicon,cruciblesQinghai,China20279.8LONGiWafers,cellsandmodulesInnerMongolia,China20242.4ShangjiWafersJiangsu,China2024-20252TongweiCellsSichuan,ChinaFirstphase20231.9QCellsModulesSouthCarolina,US20241.8JiangxiJinkoModulesandaluminiumframesJiangxi,China2023-20251.5JiangxiJinkoMonocrystallinesiliconpullrodsQinghai,China2023-20241.4SolarSpaceCellsAnhui,China20231.4EgingPVModules,cellsandwafersAnhui,ChinaN/A1.4FirstSolarModulesAlabama,UnitedStates20251.2JASolarCellsandmodulesJiangsu,China20231Notes:N/A=notavailable.Onlyselectedexpansionplansannouncedduring2022withaninvestmentofoverUSD1billionarelistedinthetable.RegionalpolicyandmarketdevelopmentsChina’sdominanceinmostofthesolarPVsupplychainstepsisinlargeparttheconsequenceofstrongpolicysupportoverthelastcoupleofdecades.Since2001,alltheFive-YearPlans(the10th,11th,12th,13thand14th)havepromotednationalsolarsupplychainsthroughvariousmechanismsandincentives,consideringthesolarPVindustryanemergingstrategicsector.Lowlabourcostsandamplelandavailabilityalsohelped.The14thFive-YearPlan,releasedinJune2022,setatargetof33%ofelectricitygenerationcomingfromrenewablesby2025,includingan18%targetmainlyforwindandsolartechnologies(SinoGermanCooperationonClimateChange,2022).ConsideringtheshortleadtimesofChina’ssolarPVindustryandtheannouncedexpansionplansinplace,thesepoliciestostimulatedemandareessentiallysupportingdomesticsolarPVmanufacturing,asChinesemanufacturershavealreadyshownthattheycanrampuptheirproductiontomatchgrowingdemand.IntheUnitedStates,theInflationReductionAct(IRA)enactedinAugust2022aimsto–amongothergoals–lowerenergycosts,increaseenergysecurity,enhancedomesticmanufacturingofcleantechnologiesanddecarboniseallEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE218IEA.CCBY4.0.sectorsoftheeconomy.ItisexpectedtomobiliseUSD370billioninenergyandclimateinvestments(EverettandLevine,2022),ofwhichasizeableamountisexpectedtoflowtothesolarPVindustry,stimulatingdemandandsecuringandstrengtheninglocalsupplychains(MarylandCleanEnergyCenter,2022).TheIRAaimstoprovidetenyearsofconsumertaxcreditstomakehomesmoreenergy-efficient,includingthroughtheinstallationofrooftopsolarsystems,aswellasoverUSD60billionforcleanenergymanufacturing,includingtaxcreditstoacceleratedomesticmanufacturingofsolarpanelsanduptoUSD10billiontobuildcleantechnologymanufacturingfacilities.IntheEuropeanUnion,theREPowerEUplanreleasedinMay2022proposesatargetof320GWofsolarPVby2025andalmost600GWby2030(EuropeanCommission,2022a).Withinthisplan,theEUSolarEnergyStrategysetsoutdifferentinitiativestostrengthentheEuropeansolarPVsupplychain,includingtheEuropeanSolarPVIndustryAlliance,whichaimstofacilitateinnovation-ledexpansionofasolidandresilientsolarPVvaluechain,withparticularfocusonthemanufacturingstage.Thestrategyseekstodiversifythesupplyofcriticalmaterials,inparticularpolysilicon,improveresourceefficiencyandcircularity,andachievemanufacturingcapacityequivalentto30GWofsolarPVateachstepofthevaluechainby2025(EuropeanCommission,2022c).InIndia,theProductionLinkedIncentive(PLI)SchemeundertheNationalProgrammeonHighEfficiencySolarPVModuleswasapprovedin2022,withtheaimofreducingthecountry’sdependenceonimportsofsolarenergytechnologiesandstrengtheningthedomesticsolarPVmanufacturingecosystem.Theschemeestimatesthatmanufacturingcapacitycouldbeincreasedbyaround65GWindifferentstepsofthesolarPVsupplychain(India,PMIndia,2022).InOctober2022,theMinistryofNewandRenewableEnergyandtheSolarEnergyCorporationofIndialaunchedthesecondphaseofthePLI,withanincentivepackageofaroundUSD3billiontoencouragethecreationofacompletelocalecosystemofintegratedsolarPVmanufacturingfrompolysilicon,ingot,wafer,cellandmodulefacilities.WindpowerLikesolarPV,windpowerdeploymenthasbeenagreatsuccessstory.Ledchieflybytheconstructionofonshorewindfarms,globaldeploymentofwindturbinesworldwidehasgrownalmosttwentyfoldsince2000,whendevelopersinstalledonlyaround5GWofgenerationcapacityandEuropeancompaniessupplied90%ofthemarket.Globalinstalledwindgenerationcapacityreachedaround830GWin2021,providingalmostone-quarterofglobalrenewableelectricity,surpassedonlybyhydropower.Thankstotherealisationofeconomiesofscale,technologicalinnovationandstrongpolicysupportforcleanenergytechnologies,windisnowEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE219IEA.CCBY4.0.amongthemostaffordableoptionsfornewgenerationcapacityallovertheworld.Chinesemanufacturershaveprovidedupto40%oftheequipmentusedincapacitydeployedtodate.Manycountries,especiallyChinaandmostadvancedeconomies,havesetambitiousrenewablestargetsfor2030,yetthewindindustryisfacingseveraldifficultiesinexpandingmanufacturingandinstallationcapacitytoexploittheseopportunities.Worseninginflationarypressure,fiercecompetition,highfinancingcostsandlongpermittingprocessesareshrinkingmarginsformanufacturersofwindturbines,nacelles(whichhousethegenerator,gearbox,drivetrainandbrakeassembly)andtowers.Inaddition,costsarebeingpushedupbytheneedtoupgrademanufacturinglinesinresponsetoconstanttechnologicaladvances.ExpansionplansandthegapwiththenetzerotrajectoryAtpresent,onshoreandoffshorewindcomponentmanufacturersareexpandingcapacitymoreslowlythanthatrequiredintheNZEScenario,whichcallsforglobaldeploymentofwindturbinestoquadruplebetween2021and2030,withcapacityreachingaround315GWonshoreandaround85GWoffshore.Announcedexpansionplanswouldincreaseonshoreblademanufacturingcapacitybyonly11%toaround110GWby2030.Inthecaseofonshorenacelles,manufacturingcapacitywouldgrowbyaround8%to108GW,whilethatofonshoretowersexpandsbyjust5%to92GW.Thepictureissimilarforoffshorewindcomponents.Manufacturershaveannouncedcapacityexpansionsof55%foroffshoretowers,31%forbladesand21%fornacelles,buttheseincreasesarestillfarbelowwhatisneededby2030intheNZEScenario(Figure4.6).Thereisstilltimetofillthisgap:leadtimestobuildnewmanufacturingcapacityrangefrom15monthsto2years,andtheindustryhasshowninthepastthatitcanquicklyrampupcapacityattimesofstrongdemand.Forexample,installationssurgedbyaround70%between2015and2020.Inaddition,currenthighfossilfuelprices,whicharesettinghighwholesaleelectricityprices,areprovidingastrongincentivetoinvestinmanypartsoftheworld,notablyEurope.Nonetheless,theconsiderablegapbetweencurrentexpansionplansandthatneededtobeontrackforthenetzerotrajectorymeansthatasignificantnear-termboostinmanufacturinginvestmentisneeded.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE220IEA.CCBY4.0.Windpowermanufacturingcapacitybycomponentandcountry/regionaccordingtoannouncedprojectsandintheNZEScenarioIEA.CCBY4.0.Notes:GW=gigawatts;RoW=restofworld;NZE=NetZeroEmissionsby2050Scenario.Announcedcapacityincludesexistingcapacity.Minimumfacilitycapacityof500MW/yearisassumedwhencapacitydataisunavailable.ThemanufacturingcapacityneededtomeetprojecteddemandintheNZEScenario(NZEdemand)isestimatedassumingautilisationrateof85%.NZEresidualcapacity,thus,representsthemanufacturingcapacitythatwouldremainunused,onaverage,whichprovidessomeflexibilitytoaccommodatedemandfluctuations.Sources:IEAanalysisbasedonBloombergNEF(2021)andWoodMackenzie(2022).Announcedexpansionprojectsforbothoffshoreandonshorecomponentmanufacturingarefarfromsufficienttocoverthecapacityneededby2030intheNZEScenario.AnnouncedcapacityexpansionplansshowthatthemanufacturingofkeywindcomponentswillremainconcentratedinChina.Inthecaseofonshorecomponents,Chinaisexpectedtoholdsharesof64%forglobalmanufacturingcapacityofnacelles,63%forbladesand56%fortowersonceexpansionsarecompleted.Likewise,foroffshorecomponentsChina’sshareofglobaloffshoreblademanufacturingcapacityisduetoriseto80%,thatofoffshorenacellesto70%andthatofoffshoretowersto60%.Surprisingly,althoughmostcomponentmanufacturingcapacityexpansionplansareinChina,mostofthecommissioned0501001502002503003504002021Announced2030NZEBladeonshoreGW2021Announced2030NZENacelleonshore2021Announced2030NZEToweronshore0204060801001202021Announced2030NZEBladeoffshoreGWChinaOtherAsiaPacificEuropeNorthAmericaMiddleEastRoWNZEdemandNZEresidualcapacity2021Announced2030NZEToweroffshore2021Announced2030NZENacelleoffshoreEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE221IEA.CCBY4.0.onshoreandoffshorewindprojectsaretakingplaceprimarilyinEuropeandNorthAmerica.Inthecaseofonshorewindturbines,Chinaaccountsfor80-90%ofannouncedmanufacturingcapacityadditionsofonshorenacelles,bladesandtowers,andforoffshoreturbinesitisresponsiblefor35%ofannouncedmanufacturingcapacityadditionsfornacelles,75%fortowersand60%forblades.NorthAmericaandAsiaPacificcombinedcoveraround50%ofannouncedexpansionsforoffshorenacelles,whileEuropeaccountsfor25%ofallannouncedmanufacturingadditionsforoffshoreblades.Whilewindturbineandequipmentmanufacturersdonotusuallyreleasedetailsaboutplannedcomponentmanufacturingcapacityincreases,somemajorannouncementshavebeenmaderecently.InApril2022,Envisionannounceditsintentiontobuildanewplanttoproducebladeswithanaggregatecapacityofaround2GWperyear(Lee,2022),whileSinomaScienceandTechnologyareinvestingUSD28.8milliontobuildabladefactoryinBahia,Brazil.FlenderannouncedinSeptember2021aplantoexpandmanufacturingcapacityforwinddrivesystemsinTianjin(China)(Flender,2021).MingYangSmartEnergyissettingupamanufacturingfacilitycapableofsupplying1GWperyearofturbinesinGermany(Richard,2021).In2021,Al-YamamahWindEnergySystemsannouncedaninvestmentofaroundUSD80milliontoopenatowerfactoryinSaudiArabia(ArabNews,2021).Offshorewindmanufacturinginvestmentannouncementshavebeenmorecommonrecently,owingtoincreasingdemanddrivenbypolicyincentivesandcapacitytargets.Thisreflectstoalargeextentthegreaterattentiongiventooffshoreindustrydevelopments,partlyduetotheirnoveltyandlargerscale.RecentannouncementsincludeGoldwind’splanstoinvestaroundRMB19billionin2022todevelopawindpowerindustrybase,includingwindturbinemanufacturing,inChina(Xiaomei,2022).In2021,theUKgovernmentannouncedaninvestmentofaroundGBP270milliontoboosttheoffshorewindmanufacturingindustryintheHumberregion,securingover1340jobs(UnitedKingdom,UKGovernment,2021).SiemensGamesaannouncedin2022anexpansionofitsoffshorenacellemanufacturingactivitiesinTaiwan,triplingthecapacityoftheplants(SiemensGamesa,2022).In2021,GEannouncedanexpansionofitsoffshorewindnacellefactoryinMontorideBretagne(Buljan,2021).IntheUnitedStates,wheretheBidenadministrationhasannouncedagoalofdeploying30GWofoffshorewindby2030,recentinvestmentsintheoffshorewindsupplychain,includingblades,nacelles,towersandsubstations,totaloverUSD1.5billion(NREL,2022).Despitepolicyincentivesandstrongmarketsignalsinmanycountries,somewindmanufacturersarestrugglingtoincreaseoutputduetosupplychaindisruptionsandhighercostsresultingfromtheeffectsoftheCovid-19pandemicandRussia’sinvasionofUkraine.Costshadbeenfallingsteadilybefore2020,encouragingwindpowerdeveloperstobidaggressivelyfornewcapacityinauctionsandbilateralcontracts,drivingdownpricestounderUSD50/MWhinmanyregions.Technologyinnovationledtomoreefficientturbines,largerrotorsandhighertowers,whilewindEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE222IEA.CCBY4.0.farmsweregrowinginsizetoexploiteconomiesofscale.Manufacturersaccommodatedtheirsupplychainstoincorporatetheseupgrades.Forinstance,GERenewableEnergyexpandedseveraltimesitsGaspébladefacilityinCanadaandVestasinvestedintransformingitsoffshorenacellefactoryatLindøPortofOdenseinDenmarktoproduce15MWoffshoreturbines.Theseinnovationleapsledtoamindsetinwhichmanufacturersbelievedininfinitecostdrops.Developersandmanufacturersalsotookadvantageoflowinterestratesandexpansionarymonetarypolicies.Thisexpansionarycyclehassincereversed.Vestas,SiemensGamesa,GeneralElectricandNordex,whichsuppliedmorethan90%ofthemarketoutsideChinain2021,allreporteddouble-digitnegativeprofitmarginsandnegativecashflowsforthefirsthalfof2022(Figure4.7).ChinesemanufacturerssuchasGoldwindarefaringbetter,butalsoreportedstagnantrevenuesandmarginsforthefirsthalfof2022.Financialindicatorsfornon-ChinesewindturbinemanufacturersIEA.CCBY4.0.Notes:Q=quarter;EBIT=earningsbeforeinterestandtax.CompaniessurveyedincludeVestas,SiemensGamesa,GERenewableEnergyandNordex.Thefourleadingnon-Chinesewindturbinemanufacturershavereportedlowerrevenuesandworseninglossessince2021,duetosupplychaindisruptionsandcostpressures.RegionalpolicyandmarketdevelopmentsAnumberofcountriesaroundtheworldhavefocusedonstimulatinginvestmentinwindenergythroughvariousmeasures,includingmandatedminimumsharesinthepowergenerationmix(renewableportfoliostandards),feed-intariffs,competitivetenderstoprocurewindprojects,fiscalincentivessuchastaxcreditsorrebatesandcarbonpricing.Privatecompanieshaverespondedbytargetingcleanenergygoalsintheirenergyconsumptionmixesand,inthecaseofutilities,byofferinglong-termpowerpurchaseagreementstowinddeveloperstoguaranteestablecashflows.Inresponsetorecentsupplychainproblems,policymakersarenowstartingtopaymoreattentiontothesecurityofsupplyofwindequipmentandcomponents.-4000-20000200040006000800010000120001400016000Q1Q2Q3Q4Q1Q220212022USDmillionRevenueEBITEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE223IEA.CCBY4.0.China’s14thFive-YearPlanprovidesforthecontinuedexpansionofwinddeploymentandmanufacturing,settingmoreaggressivetargetsthanthepreviousplan.Withinitsfundamentalstrategies,thisplanputswindandsolardevelopmentasthetopprioritytoenhancedomesticenergysupplyandadvancedecarbonisation.Althoughitlacksspecifictargetsforwindcapacityadditions,theplanaimstoreach1.2TWofwindandsolarcapacityby2030.Tosupportthisgoal,theplanrequireschangesinregulationsongridconnectionstofavourrenewablesandenergystorage.Oneofthemainwaysthesegoalsaretobeachievedisthroughthecreationofso-called“cleanenergybases”–unprecedentedlylarge-scaleconcentrationsofwindandsolarpower.Thebasesareareasdesignatedforthesimultaneousconstructionofnumerouslargewindandsolarparks,combinedwithlong-distancetransmissionlinestodemandcentres.Morethan500GWofwindandsolarprojectshavebeenidentifiedunderacentralgovernmentschemeandareexpectedtobeinstalledby2030,withoffshorewindbasesaccountingfor60GW.Provincialtargetsandinitiativesarealsodrivingwinddevelopments,especiallyoffshore.Coastalprovinces,includingGuangdong,Fujian,Zhejiang,JiangsuandShandong,havesetgoalsforbuildingmorethan60GWofoffshorewindplantsintotalby2025.Chinesewindturbinemanufacturersprofitedfromfederalfeed-intariffstoscaleuptheirbusinessesandachieveconsiderablecostreductionsinthe2000s.However,thisregimeexpiredin2020foronshorewindandin2021foroffshorewind,promptingdeveloperstorushtocommitto70GWofonshorewindcapacityin2020and17GWofoffshorein2021(comparedwithaverageannualdeploymentof19GWofonshorewindandlessthan1GWofoffshorewindoverthepreviousdecade).Thisdemonstratedtheabilityofwindturbinemanufacturerstorapidlyadjusttheirsupplychainsandaccelerateproduction.MostrecentChinesepolicyactionhasfocusedonsettingdeploymenttargetsandstimulatinginvestmentincapacity,ratherthanreinforcingandstrengtheningsupplychains.However,theseincentivesareattractinginvestmentinincreaseddomesticmanufacturingcapacityatallstepsofthewindsupplychain,asthecountryhasaccesstocheaplabourandrawmaterialinputs(mostlysteel)andhasimposedhighimporttariffsonwindpower-relatedgoods.IntheUnitedStates,theIRAiscurrentlythemostinfluentialpieceoflegislationaffectingthewindturbinemanufacturingindustryinNorthAmerica.Itextendsproductiontaxcreditsandinvestmenttaxcreditstowindprojectsthatbeginconstructionbeforetheendof2024(theywereduetoendby2022).However,theseextensionsaresubjecttoconditionsconcerningwagesandapprenticeships.TheproductiontaxcreditsshouldresultinalevelisedcostofnewsolarPVandwindcapacitythatiscompetitivewithmostothergeneratingoptions,whichRystadEnergy(2022)hasestimatedwilldriveadoublingofUSonshorewindcapacityby2030.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE224IEA.CCBY4.0.TheIRAsupportswindturbinemanufacturersindirectlybyboostingdeveloperdemandfornewturbines,nacellesandtowers.Italsograntsadditionaltaxcreditsforprojectsthatmeetcertaindomestic-contentrequirements.Toclaimtheadditionalcredit,developersmustcertifythatanysteel,ironormanufacturedproductthatisacomponentofafacilityuponcompletionofconstructionwasproducedintheUnitedStates.Toprotectitsnationalmanufacturingmarket,in2021theUnitedStatesimposedanti-dumpingdutiesandcountervailingdutiesofasmuchas73%onimportedwindtowersfromSpainuponentryintotheUnitedStates.InEurope,REPowerEUaimstoboostcleanenergyproduction,withthegoalforrenewableenergysourcestomakeup45%oftheEUprimaryenergymixin2030.TheplanprovidesforEUR86billionofspendingonrenewablesto2027,aswellasnewlegislationtospeedpermittingproceduresforwindfarms.Underthisregulation,windenergycapacityisexpectedtomorethandoubleby2030.TheEuropeanCommissionalsoimposedanti-dumpingdutiesonimportsofsteelwindtowersfromChinain2021,rangingfrom7.2%to19.2%,afteraninvestigationrevealedthatChinesetowersvaluedataroundEUR300millionwerebeingimportedatdumpedprices(EuropeanCommission,2021a).EVbatteriesStrongbatterysupplychainsarecrucialforrealisingEVdeploymentprospects,forbothlight-dutyandheavy-dutyvehicles.EVsalesandproductionhaveacceleratedtremendouslyoverthepastfiveyearsinresponsetopolicyincentivesandstrategicinvestmentsbycarmakers,withthetechnologynowseenastheprimarymeansofdecarbonisingroadtransport.Strongpolicieshavebeenintroducedinallmajorcarmarkets.Ifallcurrenttargetswereachieved,35%ofcarssoldgloballyin2030wouldbeelectric,withmajormarketssuchastheUnitedStates,ChinaandEuropereachingover50%bythatyear.Everymajorautomobilemanufacturerhasrespondedbyadoptingambitiousmulti-billion-dollarplansforelectrifyingtheirvehicleline-ups.AssemblingEVsinsteadofconventionalvehiclesrequiresonlyminorretoolingofexistingfactories.Theprincipalchangeistheprocurementofbatteries,whichaccountfor25-40%ofthetotalcostofanEVandwhichhavetheirown,completelydifferent,supplychain.Batteriesarealsousedforgrid-storageapplications.Inmanyinstances,thetechnology(atthecelllevel)usedforgridapplicationsisverysimilartothatusedforautomotiveapplications.Theirroleistoenabletheintegrationofmorerenewablesintoelectricitysystemsbycompensatingfortheirintermittencyandvariability,thoughtheystillcontributetolessthan10%oftotalbatterydemandin2030intheNZEScenario.ExpansionplansandthegapwiththenetzerotrajectoryCurrentEVbatteryindustryexpansionplanssuggestthatglobalmanufacturingisbroadlyontracktomeetthetrajectoryofdemandrequiredtoattainnetzeroEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE225IEA.CCBY4.0.emissions.Announcementsbybatterymakerspointtototalmanufacturingcapacityofaround5500GWhperyearby2030–oversixtimesmorethanthatavailabletodayand80%ofthatrequiredintheNZEScenario(Figure4.8).Oftheseannouncedprojects,aroundone-thirdarealreadyunderconstruction.Announcedplansforanodeandcathodemanufacturingindicateamorethantenfoldincreaseincapacityforbothproducts,exceedingtheneedsoftheNZEScenario.Therewasasurgeininvestmentannouncementsincomponentmanufacturingfacilitiesin2022,drivenbyChina,ofwhichroughlyone-thirdarealreadyunderconstruction.Chemistrydevelopmentsforbatteriesinthecomingyearsmeanthatdemandforspecifictypesofcathodesisuncertain,thoughthisinvestmentsurgecouldleadtooversupplybytheendofthedecade.Thetimeneededtobuildabatteryfactoryisshrinkingasmoreplayersgaintheexperienceneededtosetupoperationsrapidly.Leadtimesinvolvedinadvancingfromannouncinganewprojecttobringingproductiononlinecanbearoundfouryearsfornewcompanies,aswasthecaseforNorthvolt’sfirstplantinSweden(2017-2022),butcanbeasshortassixmonthswhenconditionsareverygood,aswithCATL’sShanghaiplantinthesecondhalfof2021(theyonlyhadtoinstallmachinery,asthebuildingwasalreadyavailable).Batteryandcomponentmanufacturingcapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenarioIEA.CCBY4.0.Notes:RoW=restofworld;NZE=NetZeroEmissionsby2050Scenario.Announcedcapacityincludesexistingcapacity.ThemanufacturingcapacityneededtomeetprojecteddemandintheNZEScenario(NZEdemand)isestimatedassumingautilisationrateof85%.NZEresidualcapacity,thus,representsthemanufacturingcapacitythatwouldremainunused,onaverage,whichprovidessomeflexibilitytoaccommodatedemandfluctuations.BatteriesforEVandgridstorageapplicationsareincludedindemand,withthelatteraccountingfor9%ofthetotalintheNZEScenarioin2030.AnnouncedprojectsincludebatteryfactoriesfromTier1andTier2batterymakers,aspertheBenchmarkMineralIntelligenceclassification.Source:IEAanalysisbasedonBenchmarkMineralIntelligence(2022).Currentexpansionprojects,mostlyinChina,areexpectedtoboostEVbatteryproductionmorethanfivefoldby2030,meeting80%ofprojecteddemandin2030intheNZEScenario.0123456782021Announced2030NZEEV-batteriesTWhChinaOtherAsiaPacificEuropeNorthAmericaRoWNZEdemandNZEresidualcapacity024681012142021Announced2030NZEEV-anodesMt/yr02468101214162021Announced2030NZEEV-cathodesMt/yrEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE226IEA.CCBY4.0.Thebatteryindustryisundergoingrapidchange,withvariousnewplayersenteringthebusinessinallmajorregionsandexistingmanufacturersexpandingtheirinternationaloperationsandenteringjointventureswithestablishedautomakers.Thecurrentpipelineofnewprojectsisdominatedbyincumbents,ledbyChina’sCATLandBYD,theUScompanyTeslaandKorea’sLGEnergySolutions(LGES),whichtogetheraccountfor40%ofglobalannouncedexpansions(Table4.2).AnnouncedexpansionprojectsofselectedbatterymakersandautomakersManufacturerCompanyHQManufacturingcapacity20212030Batterymaker(GWh/year)CATLChina148890BYDChina84510LGESKorea108600TeslaUnitedStates10370Allcompanies8505500Automaker(millionelectriccars/year)VolkswagenGermany0.41.4TeslaUnitedStates1.020ToyotaJapan0.13.5Allcompanies6.6Note:HQ=headquarters.Sources:BenchmarkMineralIntelligence(2022)andcompanyannouncements.ThegeographicaldistributionofplannedEVbatterymanufacturingexpansionsismorediversethanthatofcurrentcapacity,soconcentrationissettofall.ThecombinedshareofEuropeandNorthAmericainglobalEVassemblycapacityisexpectedtorisefrom14%in2021to24%onceallexpansionshaveallbeenbroughtonline,probablyby2025accordingtocurrentplans,thoughthatofJapanandKoreawoulddropfrom8%to3%unlessnewprojectsarelaunched.Chinaisnonethelesssettoremainthedominantproducer,itsglobalmarketshareholdingfirmataround70%withplannedcapacityof3700GWh.Bycontrast,plannedinvestmentsinbatterycomponentmanufacturingaremuchmoreheavilyconcentratedinChina,withitsshareofglobalinstalledcapacitysettoexceed90%forcathodesand95%foranodesifallannouncedprojectsarebroughttofruition.TheonlyotherregionthatisexpectedtoincreaseitsmarketshareofcathodesandanodesisEuropethankstoinvestmentsmadebychemicalcompaniessuchasUmicore,withtheregion’sshareofglobalmanufacturingcapacityreachingaround3%forcathodesand1%foranodes.MarketsharesdeclineinallotherregionsexceptChina.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE227IEA.CCBY4.0.RegionalpolicyandmarketdevelopmentsInNorthAmerica,theIRAintheUnitedStatesprovidessignificantincentivestoproduceEVsandtheircomponents,byofferinggrantstobuildnewcapacityandrestrictingEVpurchaseincentivestovehiclesmanufactureddomestically.EvenbeforetheIRAwasenacted,importantinvestmentshadbeenannouncedintheUnitedStates,aswellasinCanadaandMexico.SinceNorthAmericaisamajorautomotivemarket,withsalesofover16millioncarssperyear,theshifttoEVsisinevitablyspurringinterestinproducingbatteriesandtheircomponentslocallyforlogisticalandcostreasons,atrendthatwillbereinforcedbytheIRA.Therehasbeenstrongco-operationthroughjointventureswithJapaneseandKoreanbatterymanufacturers,followingthemodelthatbroughtTeslasuccessinitsrelationshipwithJapan’sPanasonic,whichbeganin2009(Tesla,2011).FromKorea’sLGESpartnershipwithGeneralMotors,whichstartedin2019,onebatteryfactoryintheUnitedStatesisalreadyoperationalandthreemorehavebeenannounced(Shepardson,2022),whileStellantisannouncedplanstopartnerwithLGEStobuildafactoryinCanadain2021(Stellantis,2022).TeslaplanstosignificantlyincreaseitsbatterymanufacturingcapacityintheUnitedStatesbytriplingcapacityatitsGigafactory1facility,aswellasopeninganewfactoryinTexas.Basedontheseinvestments,batterymanufacturingcapacityinNorthAmericaisexpectedtoincreasetoaround840GWh.Thiswouldmeetabout80%oftargetedregionaldemandin2030underannouncedpledges.However,moreplanstoexpandcapacityareexpectedtobeannouncedinupcomingmonthsandyearsowingtoIRAincentives.NorthAmericadependsheavilyonimportsforitsbatterycomponentsupplies.Inaggregate,theregionhasmanufacturingcapacityoflessthan15ktofcathodematerialandunder5ktofanodematerial,importingaround85%ofallitsdomesticbatterycomponentneedsonanetbasisin2021.Onceallannouncedcapacityexpansionsforanodeandcathodemanufacturinghavebeencompleted,asmuchas55ktofthesecomponents–equivalenttothatneededtoproduce35GWhofbatteries–couldbeproducedintheregion,thoughthisisequaltojust5%ofwhatisneededtosupplyallplannedbatterycapacity.ItislikelythattheIRAwillencouragebatterycomponentmanufacturerstoinvestevenmoreintheregion.InEurope,batterycapacityexpansionsarebeingtriggeredbysurgingdemandfromautomakersastheygearuptoexpandelectriccarproductiontokeepupwithEVdemand,whichisbeingdrivenbynewEUCO2emissionsstandardsandthemandatoryphaseoutofinternalcombustionenginevehicles.TheshareofEVsintheregion’stotalpassengercarsaleswouldreachover50%in2030assumingcurrenttargetsaremet.BatterysupplyisalsobeingboostedbytwoEUImportantProjectsofCommonEuropeanInterest(IPCEI),whichprovideforEUR6.1billiontobeinvesteddirectlybytheEuropeanUnionandmemberstategovernmentstoleverageprivatecapitaltobuildupdomesticbatterysupplychains.VolkswagenEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE228IEA.CCBY4.0.aloneaimsformanufacturingcapacityof240GWhinEuropeby2030(Volkswagen,2021),whileseveralotherautomakershavejoinedforceswithlocalandforeignbatterymakerstoincreaseproduction.Forexample,Stellantis,SaftandMercedesBenzhavecreatedajointventure–ACC–whichaimstoinstallmanufacturingcapacityofnearly120GWhby2030(ACC,2022).Together,theseprojectswouldboostEuropeanmanufacturingcapacitytoover740GWh,whichisequivalenttoprojecteddemandintheregionin2030ifannouncedpolicytargetsaremet.Productionofupstreambatterycomponentsisalsoexpanding,withincumbentEuropeanchemicalcompaniessuchasUmicoreandBASFleadinginvestment.Totalmanufacturingcapacityforcathodesintheregionisexpectedtoreach340kt(equivalentto225GWhofbatteryproduction)basedoncurrentplans,accountingforaboutone-thirdoftargetedEuropeandemandin2030undercurrentgovernmentannouncements.AfteradecadeofstronggrowthresultingfromaclearEVpolicycombinedwithastrategicpolicyonEVbatteryvaluechains,Chinaisatthecentreoftheglobalbatterysupplychain.ThemaindriverofgrowthinbatteryandcomponentproductionincomingyearswillbedomesticdemandforEVs.Theworld’slargestbatterymaker,CATL,hasaglobalmarketshareofone-third(Bloomberg,2022).Plannedandongoinginvestmentsbythecompanycouldboostmanufacturingcapacitytonearly890GWh–sixtimesthe2021level.Componentmanufacturingisalsogrowingrapidlyasestablishedcompaniescontinuetoexploittheircompetitiveadvantageresultingfromaccesstocheapmaterialsandalargedomesticdemandmarket.Chinaaccountsfor95%ofgrowthincathodeandanodemanufacturingcapacityworldwideundercurrentplans.FuelcelltrucksFuelcellelectricvehicles(FCEVs)poweredbyhydrogenhavebeenunderdevelopmentfordecades,butcommercialisationofcarsandbusesbeganonlyinthelast10-15years.Morerecently,attentionhasshiftedtothedevelopmentofheavy-dutytrucks,forwhichfuelcelltechnologiescanofferadvantagesoverstandardbatteryEVtechnologiesintermsofrange,refuellingtime28andenergydensity(whichallowsforheavierpayloads).However,competitionwithbatteryelectrictrucksisfiercebecausebatterycostsarefallingrapidlyanddeploymentplansaregrowingquickly.Asaresult,futurefuelcelltruckdeploymentishighlyuncertain.28SeeChapter5foradiscussionofhydrogenrefuellingtechnologiesforheavy-dutyfuelcelltrucks.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE229IEA.CCBY4.0.Governmentsandindustryareshowingagrowingcommitmenttodecarbonisingheavy-dutytrucking,exemplifiedbytheMemorandumofUnderstandingonZero-EmissionMedium-andHeavy-DutyVehiclessignedby16countriesin2021andanother11countriesin2022,whichsetsagoalof100%zero-emissiontruckandbussalesby2040(withaninterimtargetof30%by2030).Werecurrentgovernmenttargetstobeachieved,about7%ofheavy-dutytrucksalesgloballyin2030wouldbelowemissions,ofwhichweprojectabout10%(over20000)wouldbefuelcelltrucks,mainlyservingthelong-haultruckingsector.ExpansionplansandthegapwiththenetzerotrajectoryManufacturerannouncementssuggestthatglobalheavy-dutyfuelcelltruckmanufacturingcapacitywillreachover90000trucksperyearby2030.Thisisaboutseventimesexistingmanufacturingcapacityandwouldaccountforabout50%ofthatrequiredintheNZEScenario.Thereisplentyoftimetomakeuptheshortfall.Ground-breakingofamanufacturingsitetothestartoffuelcelltruckmanufacturingcantakeaslittleassixmonthsforrelativelysmallfacilitiesmanufacturingaround3000trucksperyear(forexample,theSAICHongyanplantcommissionedin2021[Electrive,2022]).Expandingafactoryofthissizetoacapacityofabout20000trucksperyearcantakeanotheryearortwo.Heavy-dutyfuelcelltruckandmobilefuelcellmanufacturingcapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenarioIEA.CCBY4.0.Notes:RoW=restofworld;NZE=NetZeroEmissionsby2050Scenario.Announcedcapacityincludesexistingcapacity.ThemanufacturingcapacityneededtomeetprojecteddemandintheNZEScenario(NZEdemand)isestimatedassumingautilisationrateof85%.NZEresidualcapacity,thus,representsthemanufacturingcapacitythatwouldremainunused,onaverage,whichprovidessomeflexibilitytoaccommodatedemandfluctuations.Capacitiesin2021andannouncedcapacitiesincludematerialhandlingequipmentandothertransportapplications;NZEdemandforfuelcellsisbasedonfuelcellvehiclesonly.Sources:IEAanalysisbasedonSamsunetal.(2022),E4tech(2022)andcompanyannouncements.Expansionprojectsindicateasevenfoldincreaseinglobalfuelcelltruckmanufacturingcapacityto90000trucksperyearby2030–50%ofthatrequiredintheNZEScenario.040801201602002021Announced2030NZEThousand/yearChinaOtherAsiaPacificEuropeNorthAmericaMiddleEastRoWNZEdemandNZEresidualcapacityHeavy-dutyfuelcelltrucks01002003004005002021Announced2030NZEGW/yearMobilefuelcellsystemsEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE230IEA.CCBY4.0.Fuelcellmanufacturingannouncementsindicatethatautomotivefuelcellmanufacturingcapacitywillincreasefivefoldto90GW/yearby2030.Basedonprojectedfuelcelltrucksalesin2030intheNZEScenario,onlyanestimatedone-thirdofannouncedfuelcellmanufacturingcapacitywouldneedtobeusedfortruckmanufacturing.Fuelcellmanufacturingisexpectedtobeabletokeeppacewithgrowthindemand,sincenewfactoriescantakeaslittleasayearortwotobringonline.Inaddition,fuelcelltruckmanufacturerstendtoeithermaketheirfuelcellsin-houseorsetuppartnershipswithfuelcellmanufacturers.Forexample,DaimlerandVolvohavesetupajointventure,Cellcentric,tosupplyfuelcellsystemsforheavy-dutytrucks,whileToyotaisplanningtoopenamanufacturingfacilityintheUnitedStatestoproducefuelcellpowertrainmodulesforheavy-dutytrucks.Expansionplansofselectedheavy-dutyfuelcelltruckandfuelcellmanufacturersManufacturerCompanyHQManufacturingcapacity20212030Heavy-dutyfuelcelltruckmanufacturers(trucks/year)HyzonUnitedStates100040000NikolaUnitedStates450030000HyundaiKorea200011000Fuelcellmanufacturers(systems/year)HyundaiKorea40000500000SymbioFrance--200000HydraVChina25000100000Source:FuelcellmanufacturingcapacitydatafromE4tech(2022).Severalexpansionsofmanufacturingcapacityforfuelcellcomponents(includingmembraneelectrodeassemblies[MEAs]andbipolarplates)aswellasforhydrogenstoragetanksforFCEVshavealsobeenannounced.Hyzon,afuelcelltruckmanufacturer,announcedin2021theconstructionofanMEAmanufacturingfacilityintheUnitedStates,whichatfullcapacitywillmakeenoughMEAstosupporttheproductionof12000fuelcelltrucksperyear(Hyzon,2021).Dana,whichproducesbipolarplatesforBosch,whichinturnsuppliesfuelcellsystemstoNikola,announcedplanstoexpanditsGermanfacilityfrom350000to4millionplatesperyearinthenextyearortwo(InnovationsregionUlm,2022).Withrespecttostoragetanks,Faurecia(aHyundaipartner)recentlyannounceditsplanstoexpandafactoryinFrancefrom10000to100000tanksperyearby2025(Surfeo,2022).NikolaandHyzon,29bothAmerican-headquarteredcompaniesfoundedinthelasttenyearstosupplyzero-emissionheavy-dutytrucks,accountforthebulkof29AlthoughHyzonitselfwasfoundedin2020,itbeganasasubsidiaryofSingapore-basedHorizonFuelCellTechnologieswithalmost20yearsofexperiencedevelopingfuelcells.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE231IEA.CCBY4.0.announcedfuelcelltruckmanufacturingcapacityexpansions.Nikolacanincreaseitsmanufacturingcapacityalmostsevenfoldjustbyexpandingexistingplants.Hyzonplansformanufacturinglinestoreachacapacityof40000fuelcellvehicles(includingheavy-dutytrucksandbuses)peryearby2025.Together,thesetwocompaniescouldsupplyalmosthalfofprojectedNZEScenariodemandin2030iftheirplanscometofruition.ToyotaandHyundai,whichhavealonghistoryofdevelopingfuelcellvehicles,havealsobegunproducingheavy-dutyfuelcelltrucks,whileothertruckmakers(e.g.Daimler,MAN,Scania,VolvoandDAF)haveannouncedtheirintentiontodoso.Announcementsaboutfuturemanufacturingcapacity,however,havebeenfairlylimited,includingforChinesecompanies,whichhavemadethelargestnumberofheavy-dutyfuelcelltruckstodate.HyundaiisopeningafuelcelltruckmanufacturingplantinChinawithaninitialcapacityof6500trucksperyear,butotherwisesalestargetsaretheonlyindicationofmanufacturingcapacityexpansions.Ingeneral,incumbenttruckmakersshouldbeabletomodifycurrentproductionlinestomanufacturefuelcelltruckstomeetpotentialfuturedemand.Forthesereasons,thelackofannouncementsshouldnotbeseenasahurdletoproducingthe150000heavy-dutyfuelcelltrucksneededin2030intheNZEScenario.Toputthisintoperspective,Hyundai’sJeonjuplantinKoreacurrentlyhasacapacityofover100000commercialvehiclesperyear.Thegeographicaldistributionofheavy-dutyfuelcelltruckmanufacturingcapacityissettobecomemorediversebasedonannouncedexpansions.China’sshareinglobalcapacitywoulddropfrom45%in2021to20%in2030ifallcurrentplansarefulfilledandnootherexpansionsareundertaken.ManufacturingcapacityintheUnitedStateswouldgrowtentimesto25000trucksperyearoverthesameperiodbasedonannouncementsfromHyzonandNikola,thoughitsshareofglobalmanufacturingcapacitywouldonlyreachabout25%.ManufacturingcapacityinEuropecouldrisetoaround12000trucksperyearin2030basedonNikola’sandDaimler’sannouncements(itisassumedthatHyundaiwillcontinuemanufacturingfuelcelltrucksfortheEuropeanmarketinKorea).BasedonannouncedsalestargetsforEuropeandtheUnitedStates,Koreanmanufacturingcapacitywouldincreasefrom2000trucksperyeartodayto4500peryearin2030.BasedonHyzon’sannouncedtargetcapacityglobally,andspecifiedcapacityintheUnitedStatesandEurope,capacityinotherregionscouldreachalmost35000trucksperyear,includingnewmanufacturingcapacityof10000peryearinSaudiArabia.Koreaissettobecomeevenmoreimportantinthemanufacturingofmobilefuelcells,manyofthemdestinedfortrucks,withitsglobalmarketsharejumpingfrom20%in2021toover50%in2030.SuchisthescaleofHyundai’sannouncementthatChina’ssharewouldplungefrom50%to25%.BecauseToyotahasnotmadeanyannouncementsaboutexpandingcapacity,Japan’ssharewoulddropfromalmost20%todaytolessthan5%in2030,thoughToyotaisknowntobecapableofexpandingmanufacturingcapacityrapidlyasdemandgrows.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE232IEA.CCBY4.0.RegionalpolicyandmarketdevelopmentsFuelcelltruckdeploymentisataveryearlystage,soindustryprofessionalsacrossandalongthesupplychain,includingfuelcellsuppliers,truckmanufacturers,hydrogenproducersandrefuellingstationdevelopers,haveformedpartnerships,collaborationsandjointventurestosupportmarketexpansion.Industryactivityandinvestmentis,unsurprisingly,focusedoncountrieswithsupportivepolicyframeworks.InEurope,governmentsupportandprivatesectorcommitmentstoclimateneutralitysuggestanenvironmentthatispotentiallyconducivetofuelcelltrucks.Recently,theEuropeanCommissionlaunchedtheAlternativeFuelsInfrastructureFacilitytosupportthebuildingofinfrastructureforlow-emissionvehicles,includinghydrogenrefuellingstations.Inaddition,theproposedAlternativeFuellingInfrastructureRegulationwouldsetrequirementsontheavailabilityofhydrogenrefuellingstations.InSwitzerland,federaltaxesonheavyvehicleshaveencourageddeploymentofheavy-dutyfuelcelltrucks,aselectricdrivetrainsbenefitfromataxexemption.TheEuropeanUnionhasalsoprovidedfundingforanumberofprojectstosupportfuelcelltruckdeployment.Forexample,theH2Haulprojectisunderwaytodeploythem,certifyingthemassafeforEuropeanroads,andtoinstallhydrogenrefuellinginfrastructure.Inaddition,theEuropeanUnion’sPRHYDEprojectaimstodeveloprecommendationsforanon-proprietaryheavy-dutyrefuellingprotocoltobeusedforfuturestandardisationactivitiesfortrucksandotherheavy-dutytransportsystemsusinghydrogentechnologies.In2020,acoalitionstatementincludingindustrystakeholderssuchasToyota,Hyundai,HyzonandBallarddescribedajointambitiontodeploy100000heavy-dutyfuelcellandhydrogentrucksinEuropefrom2030(FuelCellsandHydrogenJointUndertaking&HydrogenEurope,2020).Inaddition,thecollaborativeH2Accelerateinitiative,involvingDaimlerTruckAG,IVECO,OMV,Shell,TotalEnergiesandVolvoGroup,isassessingthetechnicalandcommercialviabilityofhydrogen-fuelledtrucking.IntheUnitedStates,theDepartmentofEnergyhassetambitioustargetsforheavy-dutyfuelcelltruckstomakethemcompetitivewithconventionaldieseltrucks.Tosupportthisgoal,theHydrogenandFuelCellTechnologiesOfficehasco-funded,withindustry,first-of-a-kindresearchandmodellingcapabilitiestosupportmedium-andheavy-dutyhydrogenfuellingprotocolsandhardwaredevelopmentattheNationalRenewableEnergyLaboratory.Althoughthereisnofederalregulationrequiringthetransitiontozero-emissionstrucks,California’sAdvancedCleanTrucksRulerequiresthat40-75%ofheavy-dutytrucksales,dependingontrucktype,bezero-emissionsby2035.Followingthisruling,another16statesplustheDistrictofColumbia,aswellasCanada’sprovinceofQuebec,signedamemorandumofunderstanding(MOU)establishingEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE233IEA.CCBY4.0.goalstomakeatleast30%ofnewmedium-andheavy-dutyvehiclesaleszero-emissionsby2030and100%bynolaterthan2050.CanadaisalsopartofaGlobalMOUonZero-EmissionMedium-andHeavy-DutyVehicles,whichaimsfor100%zero-emissionstruckandbussalesby2040(withaninterimtargetof30%by2030).Atpresent,theonlypublichydrogenrefuellingstationsoperatingintheUnitedStatesareinCalifornia.Nikolaaimstoextendthenetworkbyformingpartnershipswithinfrastructureandfuelproviderstosupportfleetsofheavy-dutyfuelcelltrucks.InKorea,thegovernment’sHydrogenEconomyRoadmaplaysouttargetsforfuelcellvehicleproduction,exportsanddomesticdeployment.Itincludesatargetof30000fuelcelltrucksontheroadby2040.TheKOHYGENconsortium,formedin2021,aimstobuild300heavy-dutyhydrogenstationsby2040tosupportfuelcelltruckdeployment.Korea’sHyundaiMotorshasalonghistoryoffuelcelldevelopment,beginningin1998.InitsrecentFCEVVision2030,HyundaiMotorGroupannouncedagoaltoproduce700000fuelcellsystemsannually,including500000forFCEVs.Tosupportthis,itisopeningasecondfuelcellmanufacturingfacilityinKorea.Sincetheearly2000s,Japan’sNewEnergyandIndustrialTechnologyDevelopmentOrganization(NEDO)hasbeenreleasingtechnologyroadmapstoexpandfuelcelltechnologiesandprovidinggrantstosupportexpansion.TheleadingJapaneseautomakers,ToyotaandHonda,havebeenamongtheleadersincommercialisingFCEVs.In2019,Japan’sthirdStrategicRoadmapforHydrogenandFuelCellssetthegoalof800000fuelcellvehiclesby2030.InMarch2022,NEDOreleasedtheFuelCellHeavyDutyVehicleTechnologyRoadmap,whichsettargetsfor2030and2040forthedomesticdeploymentoffuelcelltrucks.Recently,Hino,aToyotasubsidiarythatmakescommercialvehicles,receivedagrantfromNEDOtotestsuchatruckatCalifornianports.InChina,in2022thegovernmentlauncheditsfirstnational-levelhydrogendevelopmentplanwiththegoalofhaving50000fuelcellvehiclesinoperationby2025.Inits14thFive-YearPlan,hydrogenwasoneofsixareasoffocus.Historically,Chinahasprioritisedthedevelopmentanddeploymentofheavy-dutyFCEVs,includingtrucksandbuses,makingittheleaderindeploymentofboth.Manymanufacturershaveleveragedtheirexperience,ortheexperienceofparentandsistercompanies,infuelcellbusmanufacturingtoexpandtoheavy-dutytrucks.ChinesesuccessintheearlydeploymentofFCEVscanbecredited,tosomeextent,topartnershipsandjointventureswithnon-Chinesefuelcellproviders.WhilefuelcellmanufacturerssuchasBallard,HyundaiandToyotaarestillinvolvedintheChinesemarket,domesticcompaniesareplayingagrowingrole.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE234IEA.CCBY4.0.HeatpumpsHeatpumps30arerapidlypenetratingmajorheatingmarkets,particularlyNorthAmerica,EuropeandnorthernandeasternAsia.Heatpumptechnologiescanbedeployedinabroadrangeofclimatesandtailoredtoprovidebothheatingandcooling(reversibleunits)orheatingonly(spaceand/orwater).Air-to-air,air-to-waterandwaterorground-sourceheatpumpshavebeenavailableformanyyears,withuptakedrivenprimarilybygrowingdemandforspacecoolingservices(usingair-airunits)andbypoliciestoreplacefossilfuel-basedalternatives.Onlyrecentlyhaveelectricheatpumpsbeenrecognisedmorewidelyasoneofthecriticaltechnologiestodecarboniselow-andmedium-temperatureheatproduction,duetotheirhigherefficiencycomparedwithconventionaloptionsandtheongoingdecarbonisationofpowergeneration.Theycoveredlessthan10%ofglobalheatingneedsin2021,butsalesgrew13%toarecordlevelin2021despiteCovid-19-relatedsupplychaindisruptions(shortagesandlongerdeliverytimesforheatpumpcomponentsandmaterials)andcontinuedtorisestronglyin2022(IEA,2022c).Partofthereasonforgrowingheatpumpdemandisincreasedpolicysupportinseveralcountrieswithlargeheatingmarkets,aswellasrecord-highnaturalgaspricessinceRussia’sinvasionofUkraine,particularlyinEurope.Financialincentivesarecurrentlyavailableinover30countries,whichtogethercovermorethan70%oftoday’sheatingdemand(IEA,2022d).Asaresult,partoftheboilerindustryishorizontallydiversifyingtowardsheatpumps:aroundhalfofheatpumpstodayaremadebymanufacturersthatalsomakeboilers,exploitingsynergiesinhydronicsystems.Mostairconditioner(AC)manufacturersalsoproduceair-sourceheatpumpsandarealsoexpandingtocoverthehydronicsegmentorviceversa:in2021,around75%ofheatpumpmanufacturingcapacitywasinthehandsofACmanufacturers,ofteninthesamefacilitytoexploitthesynergiesofair-to-airsystems(Box4.3).ExpansionplansandthegapwiththenetzerotrajectoryManufacturingcapacityissettogrowinthenextfewyears,buthowquicklyisveryuncertain,asfewexpansionprojectsareeverwidelyannouncedorpublicised.Globalheatpumpmanufacturingcapacitywouldneedtoalmostquadrupletoaround460GWthin2030tomeetprojecteddemandintheNZEScenario(Figure4.10).Unsurprisingly,capacityexpansionthatwouldresultfrompubliclyannouncedprojectsunderwayorplannedfallsfarshortofthisgoalandofthe30Heatpumpsincludedinthisanalysisarethoseprimarilyusedforheating(spaceand/orwater)inbuildingsandthoseforwhichtheheatingfunctionisjustasimportantasthecoolingcapability,aimingtoexcludeasmuchaspossibleair-airreversibleheatpumpunitsusedprimarilyforspacecooling.Theyincludebothcentralisedanddecentralisedunitsinbuildings.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE235IEA.CCBY4.0.collectivetargetssetbygovernmentsaroundtheworld,althoughinreality,expansionislikelytobemuchgreaterby2030.Leadtimesformanufacturingexpansionsorforconstructionofnewfactoriesarerelativelyshort,rangingfromonetothreeyears.Byfullyexploitingexistingfacilities,currentglobalmanufacturingcapacitycouldalreadyincreaseproductionbyanaverage20%comparedwith2021,31providingflexibilitytomeetdemandgrowthoverthenext12-18months,assumingcomponentsareavailable(seeChapter2).Greaterstandardisationofdevicesandautomationofproductionlines,includingimprovedtestingfacilities,arecriticaltofurtherboostmanufacturingcapacityonexistinglineswhilenewmanufacturingsitesarebeingconstructed.MeetingNZEScenariorequirementsin2030wouldrequireatotalofroughlyUSD15billionincumulativeinvestmenttoexpandmanufacturingcapacity,beyondwhathasalreadybeenannounced.Heatpumpmanufacturingcapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenarioIEA.CCBY4.0.Notes:RoW=restofworld;NZE=NetZeroEmissionsby2050Scenario.Announcedcapacityincludesexistingcapacity.ThemanufacturingcapacityneededtomeetprojecteddemandintheNZEScenario(NZEdemand)isestimatedassumingautilisationrateof85%.NZEresidualcapacity,thus,representsthemanufacturingcapacitythatwouldremainunused,onaverage,whichprovidessomeflexibilitytoaccommodatedemandfluctuations.Heatpumpcapacity(inGW)isexpressedasthermaloutputcapacity.Byandlarge,Europeisthemainregiontohaveconcretepublicexpansionplansfrommanufacturersinplace.Announcedheatpumpmanufacturingcapacitycoversonlyone-thirdofNZEScenariorequirementsfor2030,butshortleadtimesmeanthatcapacitycouldexpandquickly.Aswithothermass-manufacturedtechnologies,forwhichcapacityexpansionstypicallyfollownear-termdemandtrends,fewheatpumpmanufacturershave31Basedonresearch,industryconsultationanddatafromGlobalResearchView.01002003004005002021Announced2030NZEGWChinaOtherAsiaPacificEuropeNorthAmericaRoWNZEdemandNZEresidualcapacityEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE236IEA.CCBY4.0.announcedexpansionplans,partlybecauseheatpumpsoftenrepresentasmallproportionoftheirtotalproduction.Europeissomethingofanexception,with13manufacturersinGermany,Poland,Belgium,RepublicofTürkiye,theUnitedKingdom,France,Sweden,SlovakiaandtheCzechRepublichavingmadetheirconcreteexpansionplanspublic(Table4.4).About25%oftheseannouncementsarefromJapanesecompanies,2%arefromMidea,aChinesemanufacturer,andtherestarefromcompaniesheadquarteredinEurope.Abouthalfofthetotalinvestmentsinvolvestheexpansionofexistingfactories.InNovember2022,aChinesemanufacturerannouncedinvestmentsofaboutUSD45millionforanewfactoryinthecountry,perhapsanearlysignthatexpansionplansmayalsobecomepublicinregionsoutsideofEurope.TherealisationofannouncedinvestmentsoverthisdecadewouldtripleEuropeanmanufacturingcapacity,whileglobalcapacitywouldincreasebyroughly35%,thoughcapacitywouldremain50%belowcollectivetargetsfor2030undercurrentannouncedgovernmentambitions.Likeheatpumpproducers,componentmanufacturersrarelypublicisetheirexpansionplans.Nonetheless,mostoftheheatpumpindustryappearsconfidentthatitwillbeabletorampupoutputquicklyenoughtomeeta15-20%-per-yeardemandincrease.Demandwilllargelydependonthepolicylandscape.Bottlenecksincomponents,notablysemiconductorsandcompressors,couldemerge,especiallyifrapidchangestoheatpumpandrefrigerantstandardsdisruptsupplychains.Somemanufacturers,responsibleforproducingover30%ofheatpumpsworldwidein2021,alreadyproducetheirowncompressors.Whilecompressorsareneededinmanyindustries,someheatpumpcompressorsmightrequirespecificdesignsforcertaintemperaturesrangesandrefrigerants.Thus,harmonisationofinternationalstandardswillbeessentialtoensurethatcompressorsupplierscanmeetdemandinatimelyway.Policiestosupportthedomesticmanufacturingofsuchcomponentscouldofferbroaderbenefitssuchaslowertransportationcosts,whichcurrentlyconstitute6-14%oftotalheatpumpcosts,andfasterheatpumpproduction(UnitedKingdom,BEIS,2020).EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE237IEA.CCBY4.0.AnnouncedheatpumpmanufacturerexpansionprojectsbycountryandtypeofinvestmentHeatpumpmanufacturerHQlocation,2021RegionofannouncedexpansionProjectperiodMillionUSDTypeofinvestmentDaikinJapanPoland2022-25300NewfactoryBelgium2022-2310ExpansionGermany2022-25N/AExpansionCzechRepublic2022-2550ExpansionMitsubishiJapanTürkiye2022-24115ExpansionUnitedKingdom2021-2215ExpansionPanasonicJapanCzechRepublic2022-26145ExpansionStiebelEltronGermanyGermany2022-25600ExpansionBoschGroupGermanyN/A2022-25350N/APortugal2022-2310ExpansionViessmannGermanyPoland2022-23200ExpansionVaillantGermanySlovakiaN/A120ExpansionUnitedKingdom20223ExpansionSaunierDuvalGermanyFrance2020-2310ExpansionHovalLiechtensteinSlovakia-202440Expansion,NewfactoryCladeUnitedKingdomUnitedKingdomN/AN/AExpansionMideaGroupChinaItaly2022-2460NewfactoryNIBESwedenSweden2023-26445N/AIdealHeatingUnitedKingdomUnitedKingdom2021-2320ExpansionGuangdongRuixingChinaChinaN/A45NewfactoryDaikinalsoannouncedatargetannualgrowthrateof20%to2030,inEurope.Notes:HQ=headquarters;N/A=notavailable.Asnotexplicitlylinkedtoexpansionplans,thistableexcludesanadditionalinvestmentofEUR1billionannouncedbyViessmanntoexpanditsclimatesolutionportfolio,includingheatpumps,andaUSD115millionloanreceivedbyVaillanttofinanceheatpumpR&D.Source:IEAresearchbasedoncompanyannouncements.Today,China,JapanandKoreaarenetexportersofheatpumps,whileNorthAmericaandEuropearenetimporters(seeChapter2).Severalcountriesareimplementingpolicestoscaleupdomesticmanufacturing,andseveralnewenterprisesareenteringtheheatpumpmarkettomeetgrowingdemand.Overall,heatpumpmanufacturingcapacityisevenlydistributedgeographicallyandthemarketislessconcentratedthanformostothermass-manufacturedcleanenergyEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE238IEA.CCBY4.0.technologies.Thisisnotexpectedtochangemuchbefore2030accordingtocurrenttrendsandinvestmentplans.CompaniesbasedinnorthernandeasternAsiaareexpectedtoremainthelargestproducers,butsignificantcapacitygrowthisexpectedinbothEuropeandNorthAmerica.RegionalpolicyandmarketdevelopmentsVariouspoliciesareinplacetosupporttheheatpumpmarketandovercomecurrentdeploymentbarriers.Buildingcodesandstandards,financialinstruments,targetedenergypricing,mandatoryperformance-basedlabels,renewable/energyefficiencytargetsandmeasurestobanfossilfuelinstallationshavebeenandwillcontinuetobeinstrumental,notonlytodriveuptakeofthistechnology,butalsotospurinnovation.Policiestoreinforcesupplychainsaregenerallylesscommon,buttheyareemerginginseveralcountries.InEuropeseveralpoliciesareinplacetobothdrivetechnologydeploymentandreinforcesupplychainstomaintainandexpandEuropeanheatpumpindustrycapacityandcompetitiveness,attractinginvestmentsfrommanufacturers(Table4.4).Bansonnewfossilfuel-firedboilerinstallationsarealsopartofpolicypackagesinvariouscountries,andfinancialsupportschemestoreducetherelativelyhighupfrontcapitalcostsofresidentialheatpumpsarealsopresentinmorethan25countries(IEA,2022d).WhilebuildingenergycodesarebecomingmorestringentalloverEurope,heatpumpshavealsobeenpromotedformanyyearsaspartofthePassivhausstandard(PassiveHouseInstitute,2022).Suchpolicieshavebeencriticaltoattractinvestmentintheregion.REPowerEUaimstodoublethecurrentheatpumpdeploymentrate,whichwouldleadtotheinstallationof30millionnewheatpumpunitsbetween2022and2030.AnumberofEuropeancountrieshavesetheatpumptargets:forexample,6millioninGermanyby2030(AGORAEnergiewende,2021),whichwouldrequireathreefoldincreaseinannualinstallationscomparedwith2021,and600000installationsperyearintheUnitedKingdomby2028(UnitedKingdom,HMGovernment,2020)–a14-foldincrease.OtherEuropeancountrieswithtargetsareBelgium,France,Hungary,Italy,PolandandSpain(IEA,2022d).Measurestoreinforceheatpumpsupplychainsarealsoemerging:forexample,theUnitedKingdomhassetasideGBP30millionforaHeatPumpInvestmentAcceleratorCompetitionaspartofitsEnergySecurityStrategy2022(UnitedKingdom,HMGovernment,2022).IntheUnitedStates,policyactionstoscaleupdomesticdemandandmanufacturingcapacityinthelastfewyearshavestrengthenedtheheatpumpmarketandaimtofullycoverrisingdemandwithdomesticproduction.ThemostrecentexampleistheIRA,whichplanstopromoteheatpumpinstallationthroughtaxcredits,purchaseincentivesandrebates.PolicyactionisalsoEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE239IEA.CCBY4.0.happeningattheregionallevel:forexample,NewYorkCitywillbannaturalgasuseinnewbuildingsofuptosevenstoreysby2023,andforthoseoversevenstoreysby2027.InCalifornia,in2021theCaliforniaEnergyCommissionapprovedthefirstbuildingcodeinthenationtoincludeheatpumpsasabaselinetechnology.Toacceleratethedeploymentofcold-climateheatpumps,theUSDepartmentofEnergylaunchedtheResidentialColdClimateHeatPumpTechnologyChallengetocommercialisethistechnologyby2024(UnitedStates,DOE,2022a).TheUnitedStatesrecentlyaffirmedtheimportanceofheatpumptechnologiesinapresidentialdeterminationtoinvoketheDefenseProductionAct(DPA)forfivekeyenergytechnologiesimportantforenergysecurity.Theinclusionofheatpumpswillallowthefederalgovernmenttouseavarietyoftoolstoexpanddomesticheatpumpmanufacturing.ThroughtheIRA,CongressappropriatedUSD250millionininvestmentsfordomesticheatpumpmanufacturing(UnitedStates,DOE,2022b).Thenon-profitorganisationRewiringAmericaalsoproposedapolicyplantoboostheatpumpandcomponentmanufacturingthroughmeasuressuchaspublic-privatecostsharing(RewiringAmerica,2022).InChina,thegovernmenthasintroducedseveralmeasuresoverthelastfewyearstoboostheatpumpsuppliesandusage.Since2016,heatpumpshavegainedmomentuminnorthernChinainparticular,beingakeycomponentoftheCoaltoElectricityProgramme,theAirPollutionPreventionandControlLawandtheCleanWinterHeatingPlanforNorthernChinatoretrofitcoal-firedhouseholdheating,especiallyinruralareas.In2022,theChinesegovernmentreleasedtheCarbonPeakingActionPlanforUrbanRuralConstruction,whichhighlightsheatpumpusetodecarbonisespaceandwaterheating.In2022,anewbuildingregulationintroducedrequirementsforinstalledheating,ventilationandairconditioning(HVAC)systems,includingheatpumps.Thesepoliciestoboostdemandforheatpumps,coupledwithgrowingdemandforspacecoolingequipment,areatthecoreofthegrowthinChinesemanufacturingcapacity,withhundredsofnewlyregisteredfactoriesestablishedeveryyear(AskCI,2022)becauseChinadoesnotimportheatpumps,largelyduetohighimporttariffs.Chinaiscurrentlytheworld’slargestproducerofheatpumps,accountingforabout40%ofglobalmanufacturingcapacity.32InNovember2022China’sNationalDevelopmentandReformCommission(NDRC)releasedanewpolicytostimulatethemanufactureofmoreefficientproducts,covering20producttypesincludinglow-temperatureair-sourceheatpumps,multi-connectedairconditioners,andheatpumpwaterheaters(China,NDRC,2022).32Excludingairconditioners.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE240IEA.CCBY4.0.Box4.3Theheatpumpmarket:SynergiesbetweenendusesandsubsectorsAnimportantfeatureofheatpumpsusedforheatinginbuildingsisthatthethermodynamiccycleattheheartofthetechnology–andthusmostofthekeycomponents–iscommontoairconditioningandrefrigerationandcanbeusedinmanyothersectorssuchasroadvehicles,industryanddistrictheating.Withtheuseofheatpumpsinalltheseapplicationsexpectedtogrow,synergiesamongsharedcomponentsandrawmaterialscanbeexploited,aswellassharedskills(e.g.aluminiumcastingisrequiredformanufacturingbothautomotivepartsandheatpumps).Thereareparticularlyseveralpotentialsynergiesbetweenheatpumpsandairconditioning,demandforwhichisgrowingstrongly(Figure4.11).Forexample,thereisflexibilitytoshiftassemblylinesbetweenairconditionersandheatpumps,whichcouldprovideanimportantcapacitybuffertoscaleupheatpumpmanufacturing,especiallyduringthisdecade.Inaddition,manufacturerscaninvestinR&Dthemesthatcouldsimultaneouslybenefitboththeheatingandcoolingmarkets,withpotentialtoalsoreduceequipmentcosts10-15%by2050(IEA,2020).Therearealsoopportunitiestodevelopmoreefficientcombinedsolutions(e.g.exploitingwasteheatfromairconditioningtoproducehotwaterduringthesummer).GlobalannualsalesofheatpumptechnologiesforbuildingsintheNZEScenarioNote:Systemscategorisedas"heatingandspacecooling"arereversibleunitsintendedforbothspaceheatingandcooling.Systemscategorisedas"spacecooling"mayalsoincludereversibleunitsthatcanprovideheat,buttheprimaryfunctioniscooling.Theallocationappliedhereavoidsdoublecounting.IEA.CCBY4.0.0200400600800100012002017-212026-302046-502017-212026-302046-50SpaceheatingmarketSpacecoolingmarketGWthHeatingonlyHeatingandspacecoolingSpacecooling(andheatingifreversible)EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE241IEA.CCBY4.0.ElectrolysersInterestinlow-emissionhydrogenandderivativefuelshasbeengrowinginrecentyearsinrecognitionoftheirpotentialtoreplacefossilfuelsinendusesthataredifficulttodecarbonise,suchasheavyindustry,shipping,aviationandheavy-dutyroadtransport.Thesharpfallinrenewableelectricitycostsalongwithcontinuedinnovationandscaleupinelectrolysistechnologieshavebroughtrenewablehydrogenclosertocostcompetitivenesswithunabatedfossilfuel-basedhydrogen.ExpansionplansandthegapwiththenetzerotrajectoryIngeneral,informationaboutmanufacturingcapacityforelectrolysercomponents,includingbipolarplates,gasdiffusionlayersandmembranes(theneedforwhichvariessignificantlyamongdifferentdesigns),isveryscarce.Thiscreatesuncertaintyaboutpotentialsupplychainbottlenecksandthechallengesinvolvedinelectrolyserexpansion.Accordingtocompanyannouncements,electrolysermanufacturingcapacityissettogrowtenfoldtomorethan100GWperyearby2030,accompaniedbyasimilarexpansionofcomponentmanufacturingcapacity(Figure4.12).Yetthisimpressivegrowth,eveniffullyrealised,isstillinsufficienttomeetprojectednear-termelectrolyserdemandgrowthintheNZEScenario,coveringonlyabouthalfofthe200-GW-per-yearmanufacturingcapacityrequiredin2030.Moreover,onlyaround8%ofannouncedelectrolysermanufacturingcapacityexpansionhasreachedfinalinvestmentdecision.BothgovernmenttargetsandindustryplanstoinvestininstallingelectrolysersalsofallshortofprojecteddeploymentintheNZEScenario,inwhichmorethan700GWofelectrolysiscapacityisinstalledby2030(IEA,2022e).Governmenttargetsinaggregatecallforcapacityofjust145-190GW,whileprojectscurrentlyunderdevelopment,ifcompletedinfullandontime,wouldresultin240GWofcapacitybythen.Makinggoodtheshortfallinmanufacturingcapacityiscomplicatedbythefactthatelectrolysishastogrowfromthelowestbaseofallthemaincleanenergytechnologiesdiscussedinthisreport:currentcapacityisonly5%ofthatrequiredin2030intheNZEScenario.Nonetheless,therelativelyshortleadtimesinvolvedinbuildingelectrolyserfactoriesmeanthatnewprojectscouldallowtheNZElevelofoutputtobeachieved.Typically,developinganelectrolyserfacilitytakestwotothreeyears,aswasthecasewithITMPower(2019-2021)(ITMPower,2021)andPlugPower(2019-2021)(PlugPower,2021a).Expandingexistingfacilities,assomemanufacturersareplanningtodo,couldbemuchquicker,especiallywhenthepotentialforfutureexpansionisintegratedintothedesignofanewfacility.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE242IEA.CCBY4.0.Electrolysermanufacturingcapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenarioIEA.CCBY4.0.Notes:RoW=restofworld;NZE=NetZeroEmissionsby2050Scenario.Announcedcapacityincludesexistingcapacity.ThemanufacturingcapacityneededtomeetprojecteddemandintheNZEScenario(NZEdemand)isestimatedassumingautilisationrateof85%.NZEresidualcapacity,thus,representsthemanufacturingcapacitythatwouldremainunused,onaverage,whichprovidessomeflexibilitytoaccommodatedemandfluctuations.Electrolysermanufacturingcapacityissettoexpandalmosttenfoldtomorethan100GWby2030,butthiswouldstillcoveronlyhalfofNZEScenariorequirements.Electrolysershavebeenmanufacturedatindustrialscalesincetheearly20thcenturyfortheiruseinthechlor-alkaliindustry.Thisapplicationstillaccountsforthemajorityofelectrolyserdemand,whereastheirusefordedicatedhydrogenproductionisstillintheearlystagesofcommercialisation(IEA,2022e).However,thisisexpectedtochangeintheveryshorttermandelectrolysermanufacturersarepreparingforamassivescaleupindemandfordedicatedhydrogenproduction.Announcementsofplanstodevelopelectrolysermanufacturingcapacitiesarecomingfromawidevarietyofcompanies(Table4.5).IncumbentmanufacturerssuchasNelHydrogen,JohnCockerill,thyssenkrupnucera,PERICandITMPowerareannouncingexpansionsoftheirexistingcapacities,whichinmanycasesarefurtherexpansionsofrecentlybuiltfacilities.Inaddition,traditionalfuelcellmanufacturerssuchasPlugPowerandBloomEnergyhavealsorecentlyenteredtheelectrolyserbusiness,makinguseoftheirexpertiseinthemanufacturingofseveralcommoncomponentsofpolymerelectrolytemembrane(PEM)fuelcells(PlugPower)andsolidoxidefuelcells(BloomEnergy)(BloomEnergy,2021;PlugPower,2021a).Partoftheseexpansionsareexpectedtohappenthroughjointventureswithnewpartners.ThisisthecaseforJohnCockerill,whichhasestablishedajointventurewithJinglitodevelopitsfirstmanufacturingsiteinChina(JohnCockerill,2019)andannouncedapartnership0501001502002502021Announced2030NZEGW/yearChinaOtherAsiaPacificEuropeNorthAmericaMiddleEastRoWNZEdemandNZEresidualcapacityEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE243IEA.CCBY4.0.withGreenkoGrouptoexpanditsmanufacturinginIndia(JohnCockerill,2022).Similarly,PlugPowerhasjoinedforceswithFortescueFutureIndustriestobuilda2-GWmanufacturingsiteinAustralia(PlugPower,2021b).Thesemanufacturersaccountformorethan60%oftheglobalprojectpipelineto2030.Companiesfromothersectorshavealsoannouncedplanstomanufactureelectrolysers.ThisisthecaseforsomeofthetopglobalmanufacturersofsolarPVpanels,suchasLONGiandSungrow(whichenteredtheelectrolyserbusinessin2021);theStatePowerInvestmentCorporationinChina,whichplanstobuild10GWofelectrolysermanufacturingcapacityby2027;andTopsoe,aDanishcatalysisandprocesstechnologydeveloperthatrecentlyreachedafinalinvestmentdecisiontobuildasolidoxideelectrolysermanufacturingsite(Bloomberg,2021;Topsoe,2022).ElectrolysermanufacturingtodayishighlyconcentratedinChinaandEurope,whichtogetheraccountfortwo-thirdsofglobalmanufacturingcapacity.Whilethesetworegionsareexpectedtomaintainaprominentroleinthemanufacturingofelectrolysers,theirsharesareanticipatedtofalltoaround25%eachby2030(althoughthisdropmaybelesspronounced,asone-fifthofannouncedexpansionshavenotyetbeenassignedspecificlocationsandpartofthiscapacitycouldbedeployedinEuropeandChina).RegionsthatdonotcurrentlyhavemanufacturingcapacityinoperationandexpecttodeploynewcapacityincludetheMiddleEast,withmorethan1%ofglobalmanufacturingcapacityexpectedtobeinstalledtherein2030,andAustralia,whereafactoryunderconstructionisexpectedtogivethecountrya2%share.Aselectrolysermanufacturingisexpectedtobelocatedclosetodemandcentresandasignificantnumberofglobalannouncementsarenotlinkedyettoaspecificlocation,theadoptionofpoliciestoboostrenewablehydrogenproductioncouldmodifythispictureasweapproach2030.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE244IEA.CCBY4.0.AnnouncedexpansionplansofkeyelectrolysermanufacturersManufacturerCompanyHQManufacturingcapacityManufacturinglocationTypeofelectrolyserToday(GW)2030(GW)TraditionalandnewelectrolysermanufacturersthyssenkruppnuceraGermanyGloballyAlkaline15NelHydrogenNorwayNorwayAlkaline0.52UnitedStatesPEM<0.1<0.1Other/unspecifiedAlkaline-8JohnCockerillBelgiumChinaAlkaline0.52IndiaAlkaline-2EuropeAlkaline-2Other/unspecifiedAlkaline-2ITMPowerUnitedKingdomUnitedKingdomPEM0.21.5Other/UnspecifiedPEM-3.5McPhyFranceEuropeAlkaline0.31.3HydrogenProNorwayChinaAlkaline0.30.3Other/UnspecifiedAlkaline-5OhmiumUnitedStatesIndiaPEM0.52SunfireGermanyEuropeAlkaline0.041TraditionalfuelcellmanufacturersPlugPowerUnitedStatesUnitedStatesPEM0.51.5AustraliaPEM-2Other/UnspecifiedPEM-1SiemensEnergyGermanyGermanyPEM0.250.25EuropePEM-3BloomEnergyUnitedStatesUnitedStatesSOEC1.52NewmarketentrantsLONGiChinaChinaAlkaline0.55SungrowChinaChinaAlkaline0.51TopsoeDenmarkDenmarkSOEC-5Remainingcurrentcapacityandotherannouncedexpansions4>40Valuesrepresenttotalexpansionsannouncedto2030,althoughinmostcasestheexpansionshavebeenannouncedforanearlieryearthan2030.Notes:HQ=headquarters;PEM=protonexchangemembrane;SOEC=solidoxideelectrolysercell.Source:IEAanalysisbasedonmanufacturerannouncementsandpersonalcommunications.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE245IEA.CCBY4.0.RegionalpolicyandmarketdevelopmentsInEurope,themaindriversofelectrolysisindustryexpansionarepolicytargetsfordeploymentandtheambitionofcompaniestheretoachievecommercialleadershipinthesector.Thetargetsforelectrolysisdeploymentin2030inEuropeare49-90GW,or30-50%ofaggregateglobaltargets,eventhoughtheregionaccountsforlessthan10%ofglobalhydrogendemandtoday(IEA,2022e).REPowerEUincludesatargetofproducing10MtofhydrogenusingelectrolysiswithinEUmemberstatesandimportinganother10Mtofrenewablehydrogenby2030.Thiswouldequateto65-80GWofelectrolysiscapacity,significantlyboostingthe44-GWtargetoftheFitfor55packagethatwasannouncedinJuly2021(EuropeanCommission,2022a).Tosupportthisobjective,theEuropeanCommissionsignedajointdeclarationinMay2022withelectrolysermanufacturerstoincreaseEUmanufacturingcapacitytenfoldto25GWperyearby2025.ThedeclarationoutlinesaseriesofactionsfortheEuropeanCommission,includingestablishingasupportiveregulatoryframework,facilitatingaccesstofinancingandpromotingefficientsupplychains(EuropeanCommission,2022d).InApril2022,theUnitedKingdomlauncheditsEnergySecurityStrategy,whichtargetslow-emissionhydrogenproductionof10GWby2030(doublingtheaimofitsearlierNationalHydrogenStrategy),withatleasthalfbeingelectrolytichydrogen(UnitedKingdom,HMGovernment,2022).Mostoftheworld’slargestelectrolysermanufacturersarebasedinEurope,includingthyssenkruppnucera,NelHydrogen,ITMPower,McPhyandSiemens,andhavealonghistoryoftechnologicalleadershipthatgovernmentsintheregionhopetoleveragetofacilitatedeploymentacrosstheglobe.Europeangovernmentsarealsoadoptingpoliciestosupportthecreationofelectrolysermanufacturingcapacity.TheEuropeanCommissionagreedtoincludehydrogenintheIPCEIscheme,whichallowsprojectsvalidatedbybothEUmemberstatesandtheCommissiontoreceivepublicsupportbeyondtheusualboundariesofstateaidrules,andin2022,15memberstatesreceivedapprovaltoprovideuptoEUR5.4billion(aroundUSD6billion)inpublicfundingfor41hydrogentechnologyvaluechainprojects,21ofwhichinvolveelectrolysistechnologies(EuropeanCommission,2022e)TheGermangovernmenthasbeenparticularlyactivewiththeH2Gigaflagshipproject(Germany,BMBF,2021),whichaimstomassproduceelectrolyserstoscaleuphydrogenproduction,andin2021itlaunchedaprogrammetoprovidefinancialsupportforinternationalrenewablehydrogenprojectsandpromotetheuseofGermantechnologyabroad(Germany,BMWK,2021).ItisunlikelythatthisstrategywillallowelectrolysermanufacturersinEuropetofocusonexports,astradinglargeelectrolysersystemsisdifficultandcostly.However,itcouldresultintheEuropeandeploymentofmanufacturingcapacityforsubcomponents(suchasstacks),whichcanbemoreeasilytradedtogloballydistributedassemblysites.ThefirstpriorityoftheFrenchNationalStrategyforDecarbonisedHydrogenistodevelopanelectrolysermanufacturingEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE246IEA.CCBY4.0.industryinthecountry,andtheFrenchgovernmenthasannounceditsintentiontoallocateEUR1.5billiontoanIPCEIinvolvingelectrolysermanufacturing(France,MinistèredelaTransitionénergétique,2020).Chinaistheworldleaderinelectrolysermanufacturing,withalmostitsentireproductionbeingalkalineelectrolysers.ItselectrolyserscostsignificantlylessthanthoseoftheUnitedStatesorEuropethankstolowerlabourcostsandagenerallymorematurematerialandcomponentsupplychain,mostofwhichislocallybased.Thiscostadvantageisattractinginternationalmanufacturers,whichhavebeguntobuyChinesemanufacturingcompaniesandhaveannouncedplanstodeploylargermanufacturingcapacitiesinChina.ThejointventurebetweenJohnCockerillandJinglinowhas500MWperyearofmanufacturingcapacity,withplanstoreach2GWperyearofmanufacturingcapacityinChina(JohnCockerill,2019).In2021,CumminsEnze(ajointventurebetweenCumminsandSINOPEC)startedconstructionofamanufacturingsiteinGuangdongProvincewithanexpectedcapacityof500MWperyear(scalableto1GW)(Cummins,2021).Accesstocheaprenewableelectricityisalsoattractinginterestinlow-emissionhydrogenproductionusingelectrolysersinChina,particularlytodealwithcurtailmentandbottlenecksintheelectricitygridsincehydrogenprovidesameansofstoringandtransportingrenewableenergyfromregionswithabundantresources(suchasInnerMongolia,XinjiangorthecoastalregionsofFujianandGuangdong)overthousandsofkilometrestoinlandregionswithlessrenewableenergypotentialandhighdemandforhydrogeninindustrialclusters(Shaanxi,Chongqing)(IEA,2021).Thisinterestbegantogrowlaterthaninotherregions,butthenumberofprojectsisincreasingrapidly,partlyinresponsetopolicyaction,withmostoftheannouncementsoccurringinthelastcoupleofyears.Thegovernment’sHydrogenIndustryDevelopmentPlanincludesatargettoproduce100000-200000tonnesofrenewablehydrogenby2025(EnergyIceberg,2022),alevelthatislikelytobesurpassedsinceprojectsinoperation,inconstructionandunderdevelopmentalreadyamounttoalmost250000tonnesperyear(IEA,2022e).Someprovincesalsohavetargetsforrenewablehydrogenproduction,andoccasionallytheyevensurpassthenationaltarget,suchasInnerMongolia’sgoalof500000tonnesperyearby2025(Argus,2021).Thisgrowinginterestinrenewablehydrogenproduction,alongwiththelowmanufacturingcostsofChineseelectrolysermanufacturers,isexpectedtotriggeraconsiderableexpansioninelectrolysermanufacturingcapacityinthecountry.TheUnitedStateshasthesecond-largestelectrolysermanufacturingcapacityafterChina,withthemajorcompaniesbeingPlugPower,BloomEnergyandNelHydrogen.ApartfromrecentlyannouncedexpansionsthatwillboostPlugPower’scapacityto1.5GWperyearandBloomEnergy’sto2.5GWperyear,activityhasbeenverylimited.However,thesituationisbeginningtochangethankstorecentfederalgovernmentpolicies,primarilytheIRA,thatincludeseveralfinancialEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE247IEA.CCBY4.0.incentivesforlow-emissionhydrogendeployment,includingtheCleanHydrogenProductionTaxCredit(UnitedStates,Congress,2022).Thistaxcreditprovidesanincentiverelativetothecarbonintensityofhydrogenproduction;itcanreachasmuchasUSD3/kgofhydrogen,whichisexpectedtoensurethefinancialfeasibilityofasignificantnumberofprojects.ThiswouldboostelectrolyserdemandintheUnitedStates,whichwillmostlikelyattractinvestmentinelectrolysermanufacturing.Justtwomonthsafterthebillwassigned,CumminsannouncedplanstobuildanewelectrolysermanufacturingsiteinMinnesotawithacapacityof500MWperyear,scalableto1GW(Cummins,2022).Theothermaingovernmentmeasuretoencouragelow-emissionhydrogenuptakeisaUSD7-billioncalllaunchedinSeptember2022(aspartofalargerUSD8-billionprogramme)forthedeploymentofsixtotenhydrogenhubs–whichwillbeselectedinspring2023–tobeimplementedbytheUSDepartmentofEnergy’sOfficeofCleanEnergyDemonstrations(UnitedStates,DOE,2022c).Inaddition,theUSgovernmentannouncedfundingofUSD1billionforaCleanHydrogenElectrolysisProgramtoreduceproductioncosts,andUSD500millionforCleanHydrogenManufacturingandRecyclingInitiativestosupportequipmentmanufacturinganddomesticsupplychains(TheWhiteHouse,2022).Fundingforbothprogrammes(atotalofUSD9.5billion)willcomefromtheInfrastructureInvestmentsandJobsAct(IIJA).TheDefenceProductionActofJune2022grantedthegovernmentauthoritytoinvestincompaniesthatcanmanufactureandinstallkeyenergytechnologies,includingelectrolysers(UnitedStates,DOE,2022d).Cross-cuttingequipmentInadditiontothespecialisedcleanenergytechnologiesoftheselectedsupplychainsdiscussedabove,someequipmentisalsomass-manufacturedandiscommontoseveralofthem.Suchequipmentincludescompressors,pumps,fans,heatexchangers,separationcolumnsandstoragetanks,andisrequiredfortheproduction,distributionandstorageoffluidsandgases.Thiscross-cuttingequipmentisneededmainlyforlarge-scale,site-tailoredcleanenergytechnologies.Themanufacturingofthesedevicescanbenefitfromsynergieswithotherindustriesinwhichthisequipmenthasbeenusedfordecades,notablyoilandgas,chemicalsandpowergeneration,leveragingaccesstoalargeanddiversepoolofsupplierslocatedindifferentregionswithwell-establishedmanufacturingfacilitiesandsupplychains.Compressorsandpumps,whicharewidelyusedintheoilandgasindustry,willberequiredalongCO2andhydrogensupplychains.Asdemandfornaturalgascompressionfallstowards2030,existinggascompressormanufacturerscouldadjusttheirmanufacturingfacilitiesandoperatingworkforcetoCO2andhydrogencompressormanufacturing.Equally,chemicalabsorptioncolumns,whicharepartEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE248IEA.CCBY4.0.ofstate-of-the-artCO2capturesystems,areusedacrossawiderangeofapplicationstoday,suchasacidgasremoval,chemicalssynthesis,ethanoldehydrationandfluegasdesulfurisation.Aleadingmanufacturer,Sulzer,has100000distillationandabsorptioncolumnscurrentlyinoperation.ChemicalabsorptioncolumnstomeetoverallCO2captureneedsacrossallCCUSapplicationsin2030wouldonlyincurafewpercentagepoints’increaserelativetothisparticularfleettoday,whileuseinotherapplicationssuchasfluegasdesulfurisationisexpectedtocontractascoal-basedpowerisphasedout.Recognisingthepotentialforthesesectoraltechnologyspillovers,somecoreequipmentwillneedtobeadapted,eithertoanewworkingfluid(e.g.CO2)ortoadifferentscale.ForDAC,largefanswillbeneededtomoveairinverylargefacilities,andthemanufacturingofnewaircontactorsandcollectors,inthecaseofsolid-DACtechnologydesign(IEA,2022f),willneedtobescaledup.Thesupplychainforlarge-scalecentrifugalCO2compressorsisnotyetestablishedandsomeexistingCCUSfacilitieshaveexperiencedprocurementtimesofthreetofourmonths.Nonetheless,thisissignificantlyshorterthanleadtimestypicallyassociatedwithpermitting,financingandinstallingthesesystems.Installationoflarge-scale,site-tailoredtechnologiesLarge-scale,site-tailoredtechnologiesareusuallyindividuallydesignedandmanufacturedtofitspecificprocessesandlocalconditions.Thesetechnologiesrequiresite-specificengineeringandinstallationtoagreaterdegreethanthemass-manufacturedtechnologiesdiscussedabove,astheycannotbedirectlymanufactured,thoughtheircomponentscanbe.Ofthesupplychainsanalysedinthisreport,naturalgas-basedhydrogenproductionwithCCS(partofthelow-emissionhydrogensupplychain),DAC,BECCandlow-emissionsynthetichydrocarbonfuelsynthesis(partofthelow-emissionsynthetichydrocarbonfuelsupplychain)aretechnologiescategorisedassite-tailored.Thesetechnologiesarenotfullycommercialyet;manyofthefacilitiescurrentlyoperatingorunderconstructionarefirst-orsecond-of-a-kindprojects,oftenbackedbypublicfunding.Theyrequirewide-rangingexpertiseandlargeupfrontinvestments,soareoftendevelopedbyindustrialconsortia.Theinstallationstepforthesetechnologiesisparticularlycritical,withleadtimestypicallymuchlongerthanformass-manufacturedtechnologies,mainlyduetothetimeittakestosecurefundingandpermits,andthentoassemblethetechnologiesonalargescale.Leadtimesfromthefirstfeasibilitystudiestoplantcommissioningaretypicallyaroundfiveyears,ofwhicharoundthreearejusttoreachthefinalinvestmentdecision(FID).Forlarge-scale,site-tailoredtechnologies,plantelaborationneedstobealignedwithinfrastructuredevelopment(forfuelorCO2transport).ThisEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE249IEA.CCBY4.0.cross-chainsequencingcancauseprojectleadtimestoincrease:forexample,Canada’sAlbertaCarbonTrunkLine,a240-kmCO2pipelinewithacapacityofupto15MtofCO2peryearfinallycameonlinein2020,afulltenyearsaftertheprojectwasannounced,duetodifferencesinthetimingofspecificprojectsegments.Large-scalefacilitiescanalsotakeyearstoreachnominaloperatingcapacity,withlittleflexibilitytoadjustoutputwithoutadditionalinvestmentintheeventofhigherdemand.Effortstoshortenleadtimes(forinstancebyreducingpermittingtimes)willbeneededtomakesurethesetechnologiesscaleuptothelevelrequiredbytheendofthedecade.Theplanneddeploymentoflarge-scale,site-tailoredtechnologiescurrentlyfallsshortofthatprojectedin2030intheNZEScenario,despiteasurgeinprojectannouncementsinthepasttwoyears.Whileover230CCUSprojectsinvolvingvarioushydrogen,DACandBECCapplicationshavebeenannouncedsincethestartof2021,33plannedcapturecapacityby2030wouldmeetonlyone-thirdofprojectedneedsforhydrogenproductionusinggaswithCCS,15%forlow-emissionsynthetichydrocarbonfuelsand20%forBECC.ThisisinlargepartrelatedtouncertaintyaboutfutureclimatepoliciesandtheirimpactondemandforCO2managementservicesandlow-emissionfuels,whichisimpedingfinancingandinvestment.SmoothpermittingandfinancingalsodependentstronglyonthedevelopmentofCO2transportandstorageinfrastructure(seeChapter5),withprojectstargetingCO2storagetakingonaveragetwiceaslongtocompletethanprojectsthatinvolveCO2utilisation.DACiscurrentlyontrackforrequireddeploymentin2030undertheNZEScenario,thoughmanyannouncedDACprojectsareatveryearlystagesofdevelopment(withoutanassignedlocation,whichwillbefinaliseddependingonhowregionalclimatepolicyenvironmentsevolve)andstillneedpolicysupporttoachieveapositiveFID.Boostingproductioncapacityforlarge-scale,site-tailoredtechnologiestothedegreeenvisionedintheNZEScenariowouldrequirea60%increaseininvestmentscomparedwithwhathasalreadybeenannounced.CumulativeglobalinvestmentwouldneedtorisebyaroundUSD150billion(in2021USdollars)by2030,inadditiontotheroughlyUSD260billionassociatedwithalready-announcedprojects,34withDACaccountingforaroundthree-quartersofthisspending(Figure4.13).Inpercentageterms,theinvestmentgapiswidestforlow-emissionsynthetichydrocarbonfuelproduction.Theregionalbreakdownofannouncedinvestmentsisrelativelydiverse,withNorthAmericaandEuropeaccountingforaroundhalfofthetotal.33Thisincludes1PointFiveandCarbonEngineering’sannouncementtodeploy100large-scaleDACfacilitiesby2035(Oxy,2022a).34OnlyafewannouncedprojectshadreachedFIDasofDecember2022.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE250IEA.CCBY4.0.Announcedglobalcumulativeinvestmentinlarge-scale,site-tailoredcleanenergytechnologiesbyregion/countryandthatrequiredtomeetdemandin2030intheNZEScenario,2022-2030IEA.CCBY4.0.Notes:Gas-CCSH2=naturalgas-basedhydrogenproductionwithCCS;DAC=directaircapture;BECC=bioenergywithCCUS.“Synthesis”referstoproductionoflow-emissionsynthetichydrocarbonfuels.“Requiredinvestment”isforprojecteddeploymentto2030intheNZEScenario.Boostingcapacitytomanufacturelarge-scale,site-tailoredtechnologiestothedegreeprojectedintheNZEScenariowouldrequirea60%increaseinplannedinvestmentover2022-2030.Thepaceofgrowthinlarge-scale,site-tailoredtechnologiesrequiredtobeontrackfortheNZEScenariopeaksthisdecadeeventhoughdeploymentby2030remainsmodest,reflectingthecurrentverylowlevelsofdeployment.However,therateofcapacityexpansionmustbesustainedbeyond2030,averagingaround25%peryearforDACandaround35%forlow-emissionsynthetichydrocarbonfuelsinthe2030s(naturalgas-basedhydrogenwithCCSandBECCgrowthratesarecloserto10%).Naturalgas-basedhydrogenwithCCSReformingofnaturalgasinconjunctionwithCCSisanimportantsourceoflow-emissionhydrogenproductionintheNZEScenario,meetingaround20%ofglobalhydrogenneedsin2030and25%in2050.Onlyaround0.4Mtperyeariscurrentlyproducedinthismanner,withanother0.3Mtcomingfromcoal-andoil-basedCCSroutes,andlessthan100ktfromelectrolysis.Steammethanereforming(SMR)withCO2captureforhydrogenproductionhassofarbeendeployedmostlyasaretrofitsolutioninrefineriesandfertiliserplantsinNorthAmerica,thefirstCO2captureunitretrofitdatingbacktothe1980s.Gas-CCSH₂43%DAC47%BECCS10%Synthesis<1%AnnouncedinvestmentInvestmentgapAnnouncedinvestmentUSD(2021)410billion0%20%40%60%80%100%UndefinedlocationOthercountriesOtherAsiaPacificEurasiaNorthAmericaEuropeUSD(2021)260billionRequiredinvestmentEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE251IEA.CCBY4.0.HydrogenproductionisthemainsourceofCO2captureafternaturalgasprocessing,astheproductionprocessemitsahigh-concentrationCO2stream,whichkeepsthecostdown.Today,around11MtCO2,or25%oftotalCO2capturecapacity,iscapturedfromhydrogenproductionand4MtCO2comesfromSMRplants.Forhydrogenproductiontodeliveremissionsreductions,capturedCO2mustbepermanentlystored;upstreamCO2,methaneandnitrousoxideemissionsfromnaturalgasextractionandsupplymustbeminimised;andcaptureratesmustbehigh.Today,onlythethreeSMRunitsoftheQuestprojectinCanadacaptureCO2forpermanentstorage(Alberta,DepartmentofEnergy,2020),whileotherprojectsusecapturedCO2forenhancedoilrecovery(EOR).35ExpansionplansandthegapwiththenetzerotrajectoryLow-emissionhydrogenandammoniaproductionarecontinuingtoincitenewCCSdevelopments.Closetoone-thirdofCO2captureprojectsunderconstructionorinplanninginvolvehydrogenorammoniaproductionacrossarangeofapplications,includingdedicatedproduction,refineries,fertiliserandironandsteel.Ifallannouncedprojectswererealised,hydrogenproductioncapacityfromgasreformingwithCCSwouldincreasemorethantwentyfoldfromaround0.5Mtperyearin2021to11Mtperyearby2030,throughbothSMRandautothermalreforming(ATR)processes.Thisisstill22Mtperyearshortofthenearly33Mtofproductioncapacityneededin2030intheNZEScenario(Figure4.14).Moreover,someprojects(Table4.6)underdevelopmentwillneedfurtherpolicyandfinancialsupporttocometofruition.Todate,veryfewprojectshavereachedFID,andtherecentsurgeingasprices,especiallyinEurope,couldleadtodelaysorcancellationsofplannedprojects.Sincemostoperatingplantsarecapital-intensivefirst-of-a-kindfacilities,projectleadtimeshavehistoricallybeenlong,rangingfrom1.5to9years,withanaverageofaround4years.Permittingandfinancingoftenconstituteanimportanthurdle,takingonaveragealmostaslongasconstruction.ProjectsthatrequiretheconstructionofnewCO2managementinfrastructureforCO2transportandstoragetendtohavelongerleadtimes.Newhydrogenfacilitiesareincreasinglybeingsitedclosetoindustrialclusters.TheseclusterscanbeasourceofhydrogendemandandcancreateopportunitiestoshareconstructioncostsforCO2transportandstorageinfrastructurewithotheremitters,whichcouldcutoveralllow-emissionhydrogenprojectleadtimesoncethisinfrastructureisinplace.Abouthalfofgas-basedhydrogenproductionwithCCSfacilitiesarebeingdevelopedaspartofCO2transportandstoragehubscateringformultipleindustrialsources.35MostCO2injectedforEORisretainedinthereservoiroveraproject’slifetime,butadditionalmonitoringandverificationareessentialtoconfirmthattheCO2hasbeenpermanentlystored(IEA,2015).EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE252IEA.CCBY4.0.CapacityofhydrogenproductionfromnaturalgaswithCCSbycountry/regionaccordingtoannouncedprojectsandintheNZEScenarioIEA.CCBY4.0.Notes:RoW=restofworld;NZE=NetZeroEmissionsby2050Scenario.Announcedcapacityincludesexistingcapacity.Coversprojectsforwhichastartyearforoperationhasbeendisclosed(thoseatveryearlystagesofdevelopment,suchasthoseinwhichonlyaco-operationagreementamongstakeholdershasbeenannounced,arenotincluded).Announcedgas-basedhydrogenproductionwithCCSmeetsonlyone-thirdofNZEScenariorequirementsin2030.PlannedcapacityexpansionsofselectedcompaniestoproducehydrogenfromnaturalgaswithCCSCompanyCompanyHQ20212030ktperyearShellNetherlands98135AirProductsUnitedStates88870KochNitrogenCompany,ChaparralEnergyUnitedStates6868NutrienUnitedStates2929PCSNitrogen,Denbury(EOR)Canada2424AirLiquideFrance10108VertexHydrogen(EssarOil,ProgressiveEnergy)UnitedKingdom0770EquinorNorway0333BakkenEnergyUnitedStates0279Equinor,SSEThermalNorway0270H-visionconsortium(Deltaqinqs,AirLiquide,BP,Gasunie,PortofRotterdam,OnyxPower,Shell,Uniper,RoyalVopak,ExxonMobil,EBN,Equinor)Various0264KellasMidestreamUnitedKingdom0225051015202530352021Announced2030NZEMilliontonnesNZEdemandRoWMiddleEastNorthAmericaEuropeOtherAsiaPacificChinaEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE253IEA.CCBY4.0.CompanyCompanyHQ20212030ktperyearSuncorEnergy,AtcoCanada0195ADNOCUAE0162Uniper,ShellNetherlands/Germany0162AkerCarbonCapture,EquinorNorway049Notes:Includeonlylow-emissionhydrogencapacityofprojectswithanannouncedtimeline.RegionalpolicyandmarketdevelopmentsNorthAmericaisresponsibleforalmostallhydrogenproductioncapacityfromgasreformingwithCCUStoday,aswellasalmostone-thirdoftheprojectpipelineto2030,asnewprojectdevelopmentisbeingpropelledbygrowingdemandforlow-emissionhydrogenandhydrogen-basedfuels.Historically,however,strongCO2demandforEOR–especiallyintheUnitedStates–wastheprimarydriverforthedevelopmentofCO2capturetechnology,datingbacktothe1980s(thefirstfertiliserplantwasretrofittedwithCCUSin1982).In2021,theUnitedStatesaccountedformorethanhalfofglobalgas-basedhydrogenproductioncapacitywithCCUS.The45Qtaxscheme,introducedintheUnitedStatesin2008(atthattimeprovidingUSD10pertonne[t]ofCO2utilisedforEOR,andUSD20/tCO2stored),hasbeenthemainpolicysupportforCCUS,promptingtheretrofittingoftwoSMRfacilitieswithCCUSin2013(aPCSNitrogenfertiliserplantandanAirProductsplant)(UnitedStates,DOE,2018;Nutrien,2020).The45Qtaxcreditamounthasrisenprogressively;mostrecently,theInflationReductionAct(IRA)boostedittoUSD60/tCO2usedandUSD85/tCO2storedandalsoextendedconstructiondeadlinesto2033(UnitedStates,Congress,2022).Thispolicycontinuestosupportprojectdevelopment,withmorethan20newSMRandATRfacilitiestargetingCO2captureinupcomingyears,includingnewammoniaplantsdevelopedbyestablishedcompaniessuchasAirProductsandbynewmarketentrantssuchasBakkenEnergy.InCanada,awell-establishedCCUSlegalandregulatoryframework,aswellasgovernmentfundingforCCUSinAlbertaandintherestofCanada,ledtocommissioningoftheflagshipShell-operatedQuestprojectin2015(Alberta,DepartmentofEnergy,2020)andtheACTLsharedtransportandstorageinfrastructureprojectin2020(Alberta,DepartmentofEnergy,2019).Bothprojectsinvolvehydrogenproduction.InAlberta,thesectorisbenefitingfrombothacarbonstoragehubstrategytoreduceCO2transportandstoragecostsandaprovincialHydrogenRoadmap,whichtargetslow-emissionhydrogen,ammoniaandmethanolproductiontodecarboniselocalindustryandprovidesuppliesforexporttotherestofNorthAmerica,AsiaPacificandEurope(Alberta,GovernmentofAlberta,2021).EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE254IEA.CCBY4.0.InEurope,onlyonelarge-scalegas-basedhydrogenplantwithCO2captureiscurrentlyinoperation:France’sAirLiquidedemonstrationplantatPort-Jérôme.Government-fundedindustrialdecarbonisationprogrammes,suchastheUnitedKingdom’sindustrialclustercompetitionandtargetedfundingforprojectsthroughtheEuropeanInnovationfund,aredrivinggas-CCUShydrogenprojectdevelopment,andEuropecouldaccountfornearly40%oftotalcapacityby2030.TheseprojectsareoftenledbylargeindustrialconsortiaincludingoilcompaniesthathaveexpandedtheiractivitiestoCCUS(e.g.Equinor,Shell,BPandADNOC),aswellasbynewcapture-orstorage-as-a-servicecompanies(e.g.AkerCarbonCapture,CarbonCleanandStoregga),existinghydrogencompanies(suchasAirLiquide)andnewmarketentrantsinhydrogenproduction(e.g.VertexHydrogenandUniper).ButveryfewoftheseprojectshadreachedFIDasofOctober2022.ItremainsunclearwhetherrecentnaturalgaspricehikesmightdelayFIDsplannedfor2023,includingfortheBotlekrefineryatRotterdam,theBarentsBlueammoniaprojectinNorway,ProjectCavendish,HynetandSaltendintheUnitedKingdom,andtheExxonmobilrefineryatAntwerp.IntheUnitedArabEmirates,governmentandcorporate-levelnetzeroobjectives,andtheopportunitytocreatealow-emissionhydrogenandammoniahubarespurringdeploymentofgas-basedhydrogenproductionwithCCUS.TheAbuDhabiNationalOilCompanyplanstoexpandlow-emissionfuelproductioninthearea,withanewammoniafacilityplannedfor2025(ADNOC,2021).ArecentMOUsignedwithMitsuiandENEOS,toestablishclean-hydrogensupplychainsbetweentheUnitedArabEmiratesandJapan,couldalsopavethewaytonewinvestment(Mitsui,2022).DevelopmentisalsogainingspeedintheAsiaPacificregion,withhydrogenprojectsannouncedinAustralia,Japan,Indonesia,IndiaandKorea.InAustralia,fundinghasbeenmadeavailabletodevelopeighthydrogenhubs(CSIRO,2022).Thisstimulus,coupledwithstrongpolicysupportforCCUS(suchastheLong-TermEmissionsReductionPlanandtheEmissionsReductionfund,whichallowsCCUSprojectstotradecarboncredits)andwell-establishedCCUSlegalandregulatoryframeworks,hasledtotheannouncementofsixgas-basedhydrogenorammoniaplantswithCCUS,oneofwhichcouldbeoperationalasearlyas2025.InFebruary2022,IndonesiareleasedalegalandregulatorydraftframeworkforCCUS,thefirstoneinsoutheastAsia.ThecountryisalsocollaboratingwithJapanonlow-emissionammonia,aspartofanMOUsignedinJanuary2022(Japan,METI,2022).InChina,amedium-termplanforestablishingalow-emissionhydrogenindustrywasreleasedinMarch2022.However,mosthydrogenwithCCUSdevelopmentsarelikelytobecoal-basedgiventhelimitedavailabilityofnaturalgasinthecountry.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE255IEA.CCBY4.0.DirectAirCaptureExpansionplansandthegapwiththenetzerotrajectoryDACtechnologiescaptureCO2directlyfromtheatmosphere.CurrentDACdeploymentisextremelylimited,withonly17plantsoperatingworldwide(inEurope,theUnitedStatesandCanada),capturinglessthan10ktCO2peryear(IEA,2022f).OnlyafewcommercialagreementsareinplacetosellorstorethecapturedCO2.Alltheoperatingplantsaresmall-scale,withthelargestonecapturing4000tCO2/yearinIceland(Climeworks,2022).Mostoftheplantscommissionedtodatearebeingoperatedfortestinganddemonstrationpurposesonly,withonlytwoplantsstoringthecapturedCO2permanentlyingeologicalformations.ThreeDACprojectsarecurrentlyunderconstruction,withthelargestexpectedtocomeonlinein2024inIceland(nominalcapturecapacityof36ktCO2/year)andintheUnitedStates(initialnominalcapturecapacityof500ktCO2/year,withplanstoscaleuptoasmuchas1000ktCO2/year).Withsomeoftheseprojects,developersareofferingcommercialservicestoindividualsandcompanieswillingtopayarecurringsubscriptionfeetohaveCO2removedfromtheatmosphereandstoredundergroundontheirbehalf.Thesecarbonremovalservices,whichareprovingextremelypopular,areofferedexclusivelythroughthevoluntarycarbonmarketandarebeingpurchasedmostlybycompaniestomeettheirownclimatetargets.Theirpopularitystemsmainlyfromtheirveryhighremovalpotential(IPCC,2022)whenassociatedwithgeologicalstorage.Mostareoversubscribedduetotheverylimitedinstalledoperatingcapacityavailableatpresent.Fast-growingdemandforair-capturedCO2,forbothcarbonremovalandlow-emissionsynthetichydrocarbonfuelproduction,istranslatingintoseveralannouncementsfornew,largerplants.SomeofthelargestprojectsunderdevelopmentareintheUnitedStatesandtheUnitedKingdom(withnominalcapturecapacityineachcaseofbetween0.5and5MtCO2/year)(Storegga,2021;CarbonCapture,2022;CarbonEngineering,2021a).Plansformorethan110DACfacilitiesarenowatvariousstagesofdevelopment.36Ifallweretoadvance,DACdeploymentwouldreachNZEScenariorequirementsfor2030(Figure4.15).LeadtimesforDACplantsrangefromtwotosixyearsdependingonthetechnology,suggestingthatNZEScenariodeploymentcouldbeachievedwithadequatepolicysupport.Basedonannouncedprojectsinadvanceddevelopment,NorthAmericaisexpectedtodeploysubstantialDACcapacitybytheendofthisdecade.Almost40%ofglobalannouncedcapacitytobeoperationalin2030isintheUnitedStates36Including1PointFiveandCarbonEngineering’sannouncementtodeploy100DACfacilitiesby2035,eachwithacapturecapacityofupto1MtCO2peryear.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE256IEA.CCBY4.0.(includingtheDAC-1projectandtheMatagordaCountyeFuelsproject,bothinTexas).AnumberofprojectshavealsobeenannouncedinEurope,buttheyonlyamounttolessthan5%ofglobalplannedcapacityfor2030.TheUnitedKingdomisleadingthewaywithtwosizeableDACdevelopments–theNorth-EastScotlandDACprojectandtheAtmosFUELproject(CarbonEngineering,2021c;2021d).OthermajorundertakingsincludetheNorske-fuelprojectandtheKollsnesDACprojectinNorwayandtheMammothprojectinIceland(Norske-fuel,2022;Climeworks,2022).OverhalfofannouncedDACcapacityfor2030(currentlyinearlydevelopmentstages)hasnotyetbeenlinkedtoaspecificlocation,withprojectdevelopersawaitingfavourableregulationsbeforefinalisingtheirexpansionplans.InNovember2022,1PointFiveandCarbonEngineeringannouncedplanstodeploy100large-scaleDACfacilities(eachwithacapturecapacityofupto1Mtperyear)by2035(Oxy,2022a),30ofwhichwillbeintheUnitedStatesowingtotheIRA’srecentincreasetothe45Qtaxcredit.RemainingprojectsareexpectedtobedeployedmostlyinChinaandSoutheastAsia(Oxy,2022b),withsomelikelytomaterialiseinEuropeandtheMiddleEast(whichhasrecentlyshowninterestinDACtesting[Climeworks,2021]).Multiplecriteriawillbeconsideredforthefinalisationoflocations,includingdemandgrowthforcarbonremovalcreditsorlow-carbonfuels,publicpoliciesandincentives,andtechnoeconomicconditionssuchastheavailabilityofgeologicalstorageandlow-carbonenergysources.Directaircapturecapacitybycountry/regionforuseandstorageaccordingtoannouncedprojectsandintheNZEScenarioIEA.CCBY4.0.Notes:NZE=NetZeroEmissionsby2050Scenario.Dedicatedstorageonly.Announcedcapacityincludesexistingcapacity.“Unspecified”refersto69of100facilitiesrecentlyannouncedby1PointFiveandCarbonEngineering,forwhichlocationshavenotyetbeenfinalised.ThefateofthecapturedCO2(storageoruse)hasnotbeendisclosed.AnnouncedDACtechnologydeploymentisroughlyinlinewithNZEScenarioprojectionsfor2030,thoughstrongerpolicysupportisneededtoensureprojectsproceed.0123452021Announced2030NZECO₂utilisationMtCO2/yrChinaOtherAsiaPacificEuropeNorthAmericaMiddleEastUnspecifiedNZEdemand0102030405060702021Announced2030NZECO₂storageMtCO2/yrEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE257IEA.CCBY4.0.AgrowingnumberofcompaniesareenteringtheDACbusiness,alltryingtoreachthedemonstrationphasewiththeirproprietarytechnologies,withsomeclosetopre-commercialdemonstration(Table4.7).WhileDACtechnologymanufacturersinitiallydevelopedtheirintellectualpropertyindependently,theyarenowbeginningtocollaboratewithsyntheticfuelproducerstotestandoperatetheirtechnologiesatlargerscales.ExamplesincludetheNorske-fuelproject,theMerrittElectrofuelsProjectandtheHaruOnidemonstrationproject,allofwhichaimtoproducesynthetichydrocarbonfuelsfromelectrolytichydrogenandCO2capturedfrommultiplesourcesincludingbioenergyproduction,industrialapplicationsandtheair(Norske-fuel,2022;CarbonEngineering,2021b;HaruOni,2022).DirectaircaptureexpansionprojectsofselectedcompaniesCompanyCompanyHQ20212030ktCO2/yearClimeworksSwitzerland5.01100GlobalThermostatUnitedStates1.51500CarbonEngineeringCanada0.459000CarbonCaptureUnitedStates-5000Note:HQ=headquarters.2021and2030valuesreferrespectivelytoestimatedoperatingcapacityandplannedoperatingcapacity.RegionalpolicyandmarketdevelopmentsCountriesandregionsthathavetakenanearlyleadinsupportingDACresearch,development,demonstrationanddeploymentincludetheUnitedStates,theEuropeanUnion,theUnitedKingdom,CanadaandJapan.TheUnitedStateshasestablishedanumberofpoliciesandprogrammestosupportDAC,includingthe45Qtaxcredit(recentlyincreasedtoUSD180/tCO2undertheIRAof2022,withacapturethresholdofaslittleas1ktCO2/year)andtheCaliforniaLowCarbonFuelsStandardcredit(tradedatanaverageofaroundUSD180/tCO2inlate2021).Meanwhile,theInfrastructureInvestmentandJobsAct(signedintolawinNovember2021)includesfunding(USD3.5billion)toestablishfourlarge-scaleDAChubsandrelatedtransportandstorageinfrastructure.InCanadathe2022federalbudgetproposedaninvestmenttaxcreditforCCUSprojectsbetween2022and2030,valuedataround60%forDACprojectswhenCO2isstoredataneligiblepermanentsequestrationsite(IEA,2022g).TheEuropeanCommissionhasbeensupportingDACthroughvariousresearchandinnovationprogrammes,includingtheHorizonEuropeprogrammeanditsEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE258IEA.CCBY4.0.predecessors(i.e.theSeventhFrameworkprogrammeandHorizon2020),aswellasthroughtheInnovationFund(launchedin2020forthe2020-2030decadewithaninitialbudgetofaroundUSD11.8billion).Moreover,inDecember2021theEuropeanCommissionreleaseditsfirstCommunicationonSustainableCarbonCycles,suggestingthatby20305MtofCO2shouldberemovedannuallyfromtheatmosphereandpermanentlystoredthroughsolutionssuchasDAC(EuropeanCommission,2021c).IntheUnitedKingdom,inOctober2021thegovernmentsetoutaNetZeroStrategyaimedatachievingnetzeroemissionsby2050.Itidentifiestheneedforaround80MtofCO2removalby2050usingDACandBECCtechnologies(UnitedKingdom,BEIS,2021).BioenergywithcarboncaptureBECCinvolvesthecaptureofCO2fromabiogenicsource,suchasfromplantsproducingbiofuels,bio-basedheatandpowerorbiohydrogen,orfromindustrialfacilitiesthatusebiomassasafuelorfeedstock.CO2canbeeitherstoredtoprovideremovalorusedasacarbon-neutralfeedstockforlow-emissionsyntheticfuelproduction.Around2.5MtCO2peryeararecurrentlycapturedfrombiogenicsources,over90%inbioethanolfacilities–currentlythelowest-costBECCapplicationduetothehighconcentrationofCO2intheprocessgasstream.Aroundhalfisstoredindedicatedstorage,whiletheotherhalfissold,forexampletogreenhousesforyieldenhancementorforEOR.ExpansionplansandthegapwiththenetzerotrajectoryBolsteredbycountry-levelnetzeroannouncementsandlow-emissionfuelstrategies,theBECCprojectpipelinehasgrowninrecentyears.Closeto40MtCO2/yearcouldbecapturedin2030,witharound65%frombioethanolandbiodieselplantsand35%fromheatandpowerplants,accordingtopubliclyannouncedplans.Whilethisrepresentsa15-foldincreasefromtoday’slevels,itstillfallsfarshortofthe180MtCO2/yearrequiredin2030intheNZEScenario(Figure4.16).MostofthecapturedCO2includedundercurrentplansisassociatedwithdedicatedstorage,whilelessthan1MtCO2/yearistobeusedforlow-emissionsyntheticfuelproduction–onlyone-thirdthelevelprojectedintheNZEScenario.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE259IEA.CCBY4.0.CapacityofbioenergywithCO2capturedforuseandstoragebycountry/regionaccordingtoannouncedprojectsandintheNZEScenarioIEA.CCBY4.0.Notes:NZE=NetZeroEmissionsby2050Scenario.Announcedcapacityincludesexistingcapacity.Includesonlylarge-scaleprojects(>0.1MtCO2peryear)withanannouncedtimeline,targetingCO2capturefrombiofuelproduction,heatandpowerplants,industrialfacilities,orhydrogenproductionrelyingpartlyorfullyonbiomass.Someprojects(e.g.cementorwaste-to-energyfacilities)alsoincludecaptureofnon-biogenicemissionsincommunicatedcapturecapacities.WhenthefractionofbiogenicemissionsoftotalcapturedCO2isunknown,itisassumedthattheshareofbiogenicemissionsis10%incementfacilitiesand50%inwaste-to-energyplants.CO2utilisationincludesprojectstargetinglow-emissionsyntheticfuelproduction.CO2storageincludesprojectstargetingdedicatedstorage.AnnouncedBECCcapacityamountstoonlyone-thirdofNZEScenariorequirementsin2030.ProjectexperienceinbioethanolandbiopowerplantsequippedwithCCUSsuggeststhatprojectleadtimesonthecapturesidecanrangefrom1.5to6.5years,averaging3.5years.However,leadtimesdependstronglyontheapplicationanddestinationoftheCO2.Theonlytwoplantsinvolvingstoragethatareinoperationtoday–bothbioethanolplantsintheUnitedStates–tookaroundsevenyearstocomplete(includingtheconstructionoftransportandstorageinfrastructure).Incontrast,projectsinvolvingtheuseofcapturedCO2werecompletedinlessthanfouryears.Bioethanolplantstendtoinvolveshorterleadtimesthanbio-basedpowerapplications.Leadtimesareasshortasonetotwoyearsforbioethanolplants,astheyonlyrequiretheinstallationofCO2dryingandcompressionunits,whicharelesscapital-intensivethanfullcaptureunits.Giventhatcurrentfacilitiesarefirst-orsecond-of-a-kind,leadtimeswillmostlikelyshortenasdeploymentincreases.IntheUnitedStates,theleadtimeforretrofittingthesecondbioethanolfacilitywithCCSwasoneyearshorterthanforthefirst.Nonetheless,investmentdecisionsareneededintheneartermforthetechnologytomaturesufficientlytobeontrackforNZEScenariodeploymentin2030.012342021Announced2030NZECO₂utilisationMtCO2/yrChinaOtherAsiaPacificEuropeNorthAmericaMiddleEastRoWNZEdemand0501001502002021Announced2030NZECO₂storageMtCO2/yrEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE260IEA.CCBY4.0.AnnouncedBECCexpansionprojectsofselectedcompaniesOperator/projectdeveloperCompanyHQTechnologyprovider2030(MtCO2/yr)SummitCarbonSolutionsUnitedStatesXebecAdsorption(compression)8DraxUnitedKingdomMitsubishi(capture)8IllinoiscleanfuelsUnitedStates6.3PoetUnitedStatesNavigatorCO2Ventures(CCUS)5CoryUnitedKingdom1.5ZEROsIncUnitedStates1.5ViridorUnitedKingdomAkerCarbonCapture(capture)0.95StockolmExergiSwedenCO2Capsol(capture)0.7WhiteEnergyUnitedStatesOxyLowCarbonVentures(storage)0.7Amager-BakkeDenmarkBabcock&Wilcox(capture,solvent)0.5VelocysUnitedStatesOxyLowCarbonVentures(storage)0.5VestforbrændingDenmark0.45AemetisUnitedStatesKoch(capture)0.4RedCarEnergyUnitedKingdom0.4HafslundOsloCelsioNorwayShell(capture),Equinor(storage),TechnipEnergies(EPC)0.4CleanEnergySystemsUnitedStatesCleanEnergySystems(capture),SchlumbergerNewEnergy(storage)0.3MidwestAgEnergyGroupUnitedStatesCarbonAmericaDevelopments0.2VäxjöEnergiSwedenMidrocGroup0.18RegionalpolicyandmarketdevelopmentsThevastmajorityofBECCcapacitywillstillbebasedinNorthAmericaandEuropebytheendofthisdecadeaccordingtocurrentplans(Table4.8).IntheUnitedStates,thesectorhasbenefittedfromsupportivepoliciescoveringbioenergy,low-emissionfuelsandCCUS.Forexample,the2018FarmBillestablishedavarietyofnewprogrammestohelpdevelopanddeployawiderangeofcarbonremovaltechnologies(UnitedStates,Congress,2018),whiletheEnergyActof2020containsseveralprovisionstopromotethem(UnitedStates,Congress,2020).Inaddition,theIRAprovidesseveralBECCincentives,includingtheexpansionandextensionofthe45Qtaxcredit,theSecond-GenerationBiofueltaxcredit,andtheCleanFuelsProductiontaxcredit(UnitedStates,Congress,2022).Asfirst-generationbioethanolplantsdonotcurrentlymeetlow-emissioncriteriatoqualifyfortheIRAtaxcredits,theIRAmayservetopromoteCCUSdeploymentattheseplants.ThepolicylandscapehasresultedintheUnitedStateshavingthelargestoperatingBECCprojecttodate,theIllinoisIndustrialCCSProject,whichhasbeencapturing1MtCO2peryearforpermanentstorageinadeepgeologicalformationsince2017(ADM,2020).TheRedTrailEnergybioethanolCCSprojectalsorecentlycameonlineinNorthDakota(Upstream,2021).The45QcreditcontinuesEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE261IEA.CCBY4.0.todrivedeployment,witharound40bioethanolfacilitiesplannedtostartcapturingCO2before2025,totallingaround15MtofbiogenicCO2capturecapacity.Thisincludesroughly30facilitiesthatarepartoftheMidwestCarbonExpressproject,ledbyanewCCUSprojectdeveloper,SummitCarbonSolutions(SummitCarbonSolutions,2021).InEurope,interestinBECChasbeenspurredmostlybycorporateandcountry-levelnetzeroannouncementsandcarbonremovalpolicies.Intotal,thereareplanstocapturearound10MtofbiogenicCO2fromheatandpowerplants,witharound80%fromdedicatedbioenergyheatandpowerplantsand20%fromwaste-to-energyplants.IntheEuropeanUnion,whilecarbonremovalisnotcreditedundertheEUEmissionsTradingSystem,thefirstCommunicationonSustainableCarbonCycles,releasedbytheCommissioninDecember2021,suggeststhat5MtofCO2shouldberemovedannuallyby2030fromtheatmosphereandpermanentlystoredusingtechnologiessuchasBECC(EuropeanCommission,2021b).InJanuary2021,theSwedishgovernmenttaskedtheSwedishEnergyAgencywithdesigningasupportschemeforBECC,tobeimplementedin2023asareverseauction(Sweden,SwedishEnergyAgency,2022).IntheUnitedKingdom,theNetZeroStrategysetouta5MtCO2peryeartargetforengineeredcarbonremovalthroughBECCandDACby2030,withtheaimofachieving80Mtby2050(UnitedKingdom,BEIS,2021).ApublicconsultationonbusinessmodelsforremovalswasalsolaunchedinJuly2022,withafocusonfirst-of-a-kindBECCpowerplants(UnitedKingdom,BEIS,2022).TheUKpowerstationDrax,inpartnershipwithMitsubishiHeavyIndustries(capture)andtheNorthernEndurancePartnership(storage),currentlyleadsBECCdeploymentinEurope(Drax,2021b).Low-emissionfuelsupportisalsopartlydrivingBECCuptake.InDenmark,sourcingCO2fromabio-firedpowerplantforuseinfuelproductionisbeingexploredaspartoftheGreenFuelsforDenmarkproject(Orsted,2022),andCO2useisalsobeingconsideredatwaste-to-energyfacilitiesinDenmark(Vestforbrænding,2019)andPortugal(Veolia,2022).Thefirstretrofittingofalarge-scalebiomass-firedpowerplantwithCO2capturewasinJapanin2020(Toshiba,2020),althoughnostoragesitefortheCO2hasyetbeenidentified.Morerecently,PertaminaannouncedplanstoretrofitapulpandpapermillinIndonesia(Marubeni,2022).Low-emissionsynthetichydrocarbonfuelsExpansionplansandthegapwiththenetzerotrajectoryLow-emissionsynthetichydrocarbonfuelsareexpectedtoplayasmallbutimportantroleindecarbonisingtransportmodesintheNZEScenario(seeBoxEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE262IEA.CCBY4.0.4.4),mainlyinaviationbecausealternativesolutionsposesignificanttechnicalchallengesandsyntheticfuelsmeetone-quarterofthesector’sfinalenergyconsumptionin2050.Low-emissionFischer–Tropsch(FT)synthetichydrocarbonfuelproductioniscurrentlylimitedtoafewpilotplantsinEurope,withtotalproductioncapacityofaroundtenbarrelsperdayin2021,using1800tCO2.Muchlargerfossil-basedFTplantshavebeenoperatedbylargeengineeringandoilandgascompaniessuchasSasol,ShellandSynfuelsChinafordecades.Somecomponentsandcompetencesareeasilytransferrablefromfossil-basedapplicationstonon-fossilones.Thefocusatpresentisonthelarge-scaledemonstrationofnewcomponentsoflow-emissionFTsynthesis,suchasthereversewater-gasshiftprocess.Basedoncurrentannouncements,plannedcapacityadditionsfallwellshortofNZEScenarioneedsfor2030(Figure4.17).Around15projectshavebeenannouncedworldwideforsynthetichydrocarbonfuelproduction,whichwouldresultintotalcapacityofover35000barrels/dayin2030(using6MtCO2/year)iftheyarecompletedontime.Oftheseprojects,roughlytenfocusonFTsynthesisusingatleastsomeCO2fromBECCorDAC,accountingforaround15%ofplannedcapacity(Table4.9).Giventhatconstructionleadtimesforsynthesisplantsrangefromtwotofouryears,NZEScenariodeploymentcanbeachievedonlywithasubstantialstrengtheningofpolicysupportinthenextfewyears.Low-emissionsynthetichydrocarbonfuelproductioncapacitybycountry/regionaccordingtoannouncedprojectsandintheNZEScenarioIEA.CCBY4.0.Notes:RoW=restofworld;NZE=NetZeroEmissionsby2050Scenario.Announcedcapacityincludesexistingcapacity.Announcedcapacityand2030NZEvaluesincludeFTsynthesisusingatmosphericorbiogenicCO2sources.010000200003000040000500002021Announced2030NZEbarrels/dNZEdemandRoWMiddleEastNorthAmericaEuropeOtherAsiaPacificChinaEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE263IEA.CCBY4.0.Announcedlow-emissionsynthetichydrocarbonfuelproductionfallswellshortofNZEScenariorequirementsfor2030.Announcedlow-emissionsynthetichydrocarbonfuelcapacitybycompanyCompanyCompanyHQ20212030Capacity(barrels/d)INERATECGmbHGermany1111HIFMultiplelocations023400InfiniumUnitedStates03050SunfireGermany02400LanzaTechMultiplelocations02900CarbonEngineeringCanada01450EDLAnlagenbauGermany01100SynkeroNetherlands01100TopsoeDenmark0400ENEOSJapan0300EmergingFuelsTechnologyUnitedStates0170BP-JohnsonMattheyUnitedKingdom050Companiesfocusingonnon-FTsynthesis.Note:TheInfiniumprojectplanstousenon-biogenicprocessCO2andisthereforeexcludedfromFigure4.17above.Accordingtoannouncedexpansionsto2030,thegeographicdiversityoflow-emissionsynthetichydrocarbonfuelproductionisexpectedtoincreasebetween2021and2030,witharound40%oftheplannedoperatingcapacitytobebasedinNorthAmerica,thevastmajorityintheUnitedStates(HIFGlobal,2022)andlessthan5%ofglobalcapacityinCanada(CarbonEngineering,2021b).RegionalpolicyandmarketdevelopmentsTheInternationalCivilAviationOrganisation(ICAO)issettoapprovea2050netzerogoalfortheaviationsector(ICAO,2022).WhiletheICAO'supdatedemissionsreductiongoalstillreliesstronglyonout-of-sectoroffsets,italsoenvisagesachievingemissionsreductionsthroughsustainableaviationfuels(SAFs)andlow-carbonaviationfuels.IftheICAOfocuscontinuestoshifttoin-sectoremissionreductionopportunities,itcouldsubstantiallyincreasedemandforsynthetichydrocarbonfuelsfromlow-emissionhydrogenandnon-fossilCO2sources.IntheUnitedStates,theIRAintroducedfuelproductionsubsidiesforsustainableaviationfuelsthatmeetcertainGHGreductionthresholdsorCO2emissionsfactors,dependingonthesubsidy.ThiscouldprovidefinancialsupportforsynthetickeroseneprojectsutilisingbiogenicandatmosphericCO2.InCalifornia,EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE264IEA.CCBY4.0.theLowCarbonFuelStandardprovidescreditsforfuelswithalowercarbonintensitythanthetransportationfuelbaseline,withcreditstradingataroundUSD80/tonneofCO2avoidedinDecember2022,andashighasUSD200/tonneofCO2avoidedduring2019-2021.ThismeasurecanbecombinedwiththeUS45Qtaxcredit(whichhasrecentlybeenincreasedundertheIRAtoUSD60/tonneofCO2used,providedemissionsreductionsareverified)(UnitedStates,Congress,2022).Around30%ofplannedcapacityforsynfuelproductionin2030isinEurope,wherenewplantswillbelocatedinNorway(Norske-fuel,2022),theUnitedKingdom(CarbonEngineering,2021c)andSweden(LiquidWind,2022)aswellasafewothercountries.IntheEuropeanUnion,theRenewableEnergyDirectivepromotestheuseof“recycledcarbonfuels”aslongastheygenerateemissionssavingsofatleast70%relativetotheirfossilcounterparts.TheREFuelEUaviationpolicyproposalthatiscurrentlyunderconsiderationinEuropeincludesaprovisiontomandate0.7%syntheticaviationfuelinthetotalaviationfuelmixby2030,increasingto28%by2050.Ifthispolicyproposalbecomeslaw,regionaldemandforsynthetichydrocarbonfuelswouldrise.Governmentmandatesalreadyrequirelow-carbonaviationfuelblendsof0.5%inNorway,1%inSwedenand1%inFrance;theUnitedKingdomiscurrentlyconsultingonasimilarmandate.In2021,theUKgovernmentannouncedaGBP180-millionfundingpackagetosupportthedesignandconstructionofsustainableaviationfuelplantsinthecountry.IntheNetherlands,thesustainableenergytransitionsubsidyschemeSDE++isbeingusedtofinanceanadvancedmethanolplantatAmsterdam.Box4.4Strategiestodecarboniseroadtransport:Potentialroleforlow-emissionsynthetichydrocarbonfuelsImprovingtheefficiencyofinternalcombustionengine(ICE)vehicleshasbeenapowerfulmeanstomoderategrowthinoiluseandCO2emissionsinpassengertransport.Followingthefirstoilshock,stringentfueleconomystandardsintheUnitedStatesdroverapidimprovementsinvehicleefficiency,whichincreasedfromroughly18litresper100km(l/100km)in1975to11l/100kmin1985.Fueleconomystandardsarenowcommonplaceinmostadvancedeconomies,andalsoinmanyemergingones.Weestimatethatthespecificfuelconsumptionofthegloballight-dutyvehiclefleethasdecreasedroughly25%since2000andhasyieldedover6.5GtofCO2emissionssavings,despitediminishingreturnsinrecentyears.HybridpowertrainsadditionallyhelpedcutoiluseandCO2emissions.Thistechnology,pioneeredbyJapaneseoriginalequipmentmanufacturers(OEMs),allowsa35%reductioninfuelconsumptiononaveragecomparedwithanequivalentEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE265IEA.CCBY4.0.ICEvehicle.Salesofhybridvehiclesbegantorisein2000;theynowaccountforjustunder5%ofnewcarsalesglobally,eventhoughthemarketshareishigherincountriessuchasJapan(>30%).Hybridshaveproveneffectivetoreduceemissionsfromcars,deliveringtotalsavingsofaround250MtCO2since2000.Zero-emissionvehicles(ZEVs),includingbattery,plug-in,andfuelcellelectricvehicles,arethenexttechnologyfrontierinpassengercars.Theyareexpectedtoaccountforroughly13%ofallnewlight-dutyvehiclesalesin2022,particularlythankstorapidmarketadoptionofelectriccarsinChinaandEurope.Giventhattheirfuelscanbeproducedwithoutemissionsortheuseofoil,ZEVscaneffectivelyhelpmitigateclimatechangeandreduceoiluseatthesametime.Ascountriestransitiontorenewablesandotherlow-emissionelectricitygenerationtechnologies,thegreenhousegasemissionsreductionpotentialofZEVswillcontinuetogrow.However,ascarscanhaveausefullifetimeofmorethan20years,itiscrucialtoscaleupZEVdeploymentquickly.IntheNZEScenario,nonewICEcarsaresoldasof2035andZEVs,predominantlyelectriccars,accountfor100%ofnewcarssalesglobally.TherapidscaleupofEVsalesintheNZEScenariodoes,however,putpressureonsupplychainsforbatteriesandthemetalsrequiredtoproducethem,withlithiumsuppliesthrough2030beingparticularlytight(seeChapter3).Batteryinnovationisonewaytoovercomesuchbottlenecks.AnotheroptionistouseadvancedbiofuelsinICEvehiclesorhybrids,butlimitationsontheavailabilityofsustainablebioenergyisakeybottleneck.Athirdoptionunderpublicdiscussioninsomecountriesissynthetichydrocarbon(HC)fuels,whicharepredominantlyusedinaviationintheNZEScenariobutcould,inprinciple,alsobeusedinothermodesoftransport.AnadvantageofsyntheticHCfuelsisthattheirproductiongenerallyreliesontheFischer-Tropsch(FT)process,whichcanbeoptimisedtoproducesynthetickerosenebutcurrentlydoesnotallowforperfectselectivity–thatis,notallinputscanbeturnedintotheexactchemicalcompositionrequiredforaviationfuel.Researchiscurrentlyunderwayontheuseofdifferentcatalystsandrefinerydesigns,throughwhichtheoutputslatecouldvaryfromroughlyequalpartsofgasoline,dieselandjetkerosenetomostlyjetkeroseneandasmallshareofby-productnaphtha.Inonerelativelytechnologicallymatureoption,roughlyone-quarteroftheoutputofajetkerosene-maximisedFTprocesscouldbestandardmotorgasoline.Thisoffersthepotentialtoproducelow-emissiongasolineasaby-productoflow-emissionkerosene,foruseinICE,hybridorplug-inhybridvehicles.IntheNZEScenario,projectedvolumesofsyntheticHCfuelforaviationimplythepossibilitytoproduceover450millionlitresofsyntheticgasolineby2030,andmorethan35billionlitresby2050whenassuminga1-to-3ratioinproduction.Thiswouldbesufficienttofuelaround650000carsby2030,and130millionby2050.InotherEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE266IEA.CCBY4.0.words,in2050intheNZE,allICEandhybridcarsremainingafterthephaseoutoftheirsalesin2035couldbefuelledbycarbon-neutralgasoline.Ofcourse,furtherupscalingofproductionispossible,andanimportantupsideisthatexistingrefuellinginfrastructurecouldcontinuetobeusedandthederivedfuelcouldbetradedglobally,muchlikeoilproductstoday.Carbon-neutralgasolineis,however,anexpensivefuel,eveninthelongrun;IEAanalysisusingfavourablecostexpectationsforlow-emissionhydrogenproductionandforcapturingbiogenicoratmosphericcarbonsuggestsanoil-equivalentpriceofbetweenUSD115and170perbarrelby2050.Therelativeefficiencyofthetwooptionsalsobearsconsideration:poweringamid-sizecarforoneyearwithsyntheticHCfuelsrequiresoversixtimesmorelow-emissionelectricitythanifthesamecarwereelectric–inotherwords,fuellingthe400millionICEandhybridcarsprojectedtobeontheroadinadvancedeconomiesintheNZEScenarioby2030wouldrequireatleastanadditional5700TWh(a20%increase)oflow-emissionelectricity,morethanalltheelectricitygeneratedbyNorthAmericatoday.Anotherimportantconsiderationisaviationsectorlow-emissionfueldemand,whichislikelytooutstripsupplyforalongtime.Ifjetkerosenecouldcommandasufficientlyhighprice,itmightbecomemoreprofitableforfuelproducersto“force”ahigherselectivityoftheFTprocesstoproducemorejetkeroseneattheexpenseofenergyefficiencyandgasolineproduction.Evenifthecostsofforcinghigherselectivityremainhigh,theopportunitytoproduceamixofautomotive-gradegasolineanddistillates(includingdieselandfueloil)pointstoadvantagesbeyondcars,namelyintheheavy-dutyroad,railandshippingsubsectors.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE267IEA.CCBY4.0.ReferencesACC(2022),Ourgigafactorieswillbeproducing40GWheachby2030,https://www.acc-emotion.com/stories/our-gigafactories-will-be-producing-40-gwh-each-2030-how-much-power-does-representADM(2020),CarbonReductionFeasibilityStudy,https://assets.adm.com/Sustainability/2019-Reports/ADM-WSP-Feasibility-Study-and-Goal-Document.pdfADNOC(2021),ADNOCtoBuildWorld-ScaleBlueAmmoniaProject,https://www.adnoc.ae/news-and-media/press-releases/2021/adnoc-to-build-world-scale-blue-ammonia-projectAGORAEnergiewende(April2021),KlimaneutralesDeutschland2045,WieDeutschlandseineKlimazieleschonvor2050erreichenkann,https://www.agora-energiewende.de/veroeffentlichungen/klimaneutrales-deutschland-2045/Alberta,DepartmentofEnergy(2020),QuestCarbonCaptureandStorageproject:Annualreport,2020,https://open.alberta.ca/publications/quest-carbon-capture-and-storage-project-annual-report-2020Alberta,DepartmentofEnergy(2019),AlbertaCarbonTrunkLineproject:Knowledgesharingreport,2019,https://open.alberta.ca/publications/alberta-carbon-trunk-line-project-knowledge-sharing-report-2019Alberta,GovernmentofAlberta(2021),HydrogenRoadmap,https://www.alberta.ca/hydrogen-roadmap.aspxArabNews(2021),Al-Yamamah’snewfactorywillmeet40percentofKingdom’swindtowerdemands,CEOsays,https://www.arabnews.com/node/1807696/business-economyArgus(2021),China’sInnerMongoliatargetsgreenhydrogenexpansion,https://www.argusmedia.com/en/news/2246287-chinas-inner-mongolia-targets-green-hydrogen-expansionAskCI(2022),Analysisoftheupper,middleandlowerreachesofChina'sheatpumpindustrychainin2022(withapanoramicviewoftheindustrychain),https://www.askci.com/news/chanye/20220823/1644171966298_6.shtmlBenchmarkMineralIntelligence(2022),LithiumIonBatteryGigafactoriesAssessment,https://www.benchmarkminerals.com/gigafactories/(accessedNovember2022).BloomEnergy(2021),BloomEnergyUnveilsElectrolyzertoSuperchargethePathtoLow-Cost,Net-ZeroHydrogen,https://investor.bloomenergy.com/press-releases/press-release-details/2021/Bloom-Energy-Unveils-Electrolyzer-to-Supercharge-the-Path-to-Low-Cost-Net-Zero-Hydrogen/default.aspxBloomberg(2022),Tesla’sChineseBatteryMakerIsScopingOutFactorySitesinMexico,Bloomberg(2021),China’sSolarGiantsMakeaBidtoDominateHydrogenPower,12December,https://www.bloomberg.com/news/articles/2021-12-12/china-s-solar-giants-make-a-bid-to-dominate-hydrogen-power#xj4y7vzkgBloomberg(2022),Tesla’sChineseBatteryMakerIsScopingOutFactorySitesinMexico,https://www.bloomberg.com/news/articles/2022-07-18/electric-battery-news-catl-seeks-mexico-site-for-tesla-ford#xj4y7vzkgBloombergNEF(2021),GlobalWindTurbineMarketShares2014-20,BNEF.EnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE268IEA.CCBY4.0.Buljan,A.(2021),GEExpandingFactoryinFrancetoHouseHaliade-XNacelleAssembly,OffshoreWind,2February,https://www.offshorewind.biz/2021/02/02/ge-expanding-factory-in-france-to-house-haliade-x-nacelle-assembly/CarbonEngineering(2021a),Newpartnershiptodeploylarge-scaleDirectAirCaptureinNorway,https://carbonengineering.com/news-updates/partnership-dac-norway/CarbonEngineering(2021b),Engineeringbeginsonlarge-scalecommercialfacilityinCanadatoproducefuelfromair,https://carbonengineering.com/news-updates/large-scale-commercial-facility-fuel-from-air/CarbonEngineering(2021c),EngineeringbeginsonUK’sfirstlarge-scalefacilitythatcapturescarbondioxideoutoftheatmosphere,https://carbonengineering.com/news-updates/uks-first-large-scale-dac-facility/CarbonEngineering(2021d),CarbonEngineeringandLanzaTechpartnertoadvancejetfuelmadefromair,https://carbonengineering.com/news-updates/ce-lanzatech-jet-fuel/CarbonCapture(2022),ProjectBison,https://www.carboncapture.com/project-bisonChina,NDRC(NationalDevelopmentandReformCommission)(2022),NoticeonIssuingthe"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anasonic-enters-supply-agreement-tesla-motors-supply-automotivegrade-battery-cTheWhiteHouse(2022),FactSheet:Biden-⁠HarrisAdministrationAdvancesCleanerIndustrialSectortoReduceEmissionsandReinvigorateAmericanManufacturing,https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/15/fact-sheet-biden-harris-administration-advances-cleaner-industrial-sector-to-reduce-emissions-and-reinvigorate-american-manufacturing/Topsoe(2022),TopsoeConfirmsFinalInvestmentDecisionForConstructionofWorld'sLargestSOECElectrolyzerPlant,https://blog.topsoe.com/topsoe-confirms-final-investment-decision-for-construction-of-worlds-largest-electrolyzer-plantToshiba(2020),ToshibaStartsOperationofLarge-ScaleCarbonCaptureFacility,https://www.global.toshiba/ww/news/energy/2020/10/news-20201031-01.htmlUnitedKingdom,BEIS(DepartmentforBusiness,Energy&IndustrialStrategy)(2022),Businessmodelforpowerbioenergywithcarboncaptureandstorage(PowerBECCS),https://www.gov.uk/government/consultations/business-model-for-power-bioenergy-with-carbon-capture-and-storage-power-beccsUnitedKingdom,BEIS(2021),NetZeroStrategy:BuildBackGreener,https://www.gov.uk/government/publications/net-zero-strategyEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE274IEA.CCBY4.0.UnitedKingdom,BEIS(2020),HeatPumpManufacturingSupplyChainResearchProject,https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/943712/heat-pump-manufacturing-supply-chain-research-project-report.pdfUnitedKingdom,HMGovernment(2022),BritishEnergySecurityStrategy,Policypaper,https://www.gov.uk/government/publications/british-energy-security-strategy/british-energy-security-strategyUnitedKingdom,HMGovernment(2020),TheTenPointPlanforaGreenIndustrialRevolution,https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/936567/10_POINT_PLAN_BOOKLET.pdfUnitedKingdom,UKGovernment(2021),WindofchangefortheHumberregion,https://www.gov.uk/government/news/wind-of-change-for-the-humber-regionUnitedStates,Congress(2022),H.R.5376–InflationReductionActof2022,https://www.congress.gov/bill/117th-congress/house-bill/5376UnitedStates,Congress(2020),H.R.7516-CleanEnergyInnovationandDeploymentActof2020,https://www.congress.gov/bill/116th-congress/house-bill/7516/textUnitedStates,Congress(2018),H.R.2-AgricultureImprovementActof2018,https://www.congress.gov/bill/115th-congress/house-bill/2UnitedStates,DOE(DepartmentofEnergy)(2022a),ResidentialColdClimateHeatPumpChallenge,https://www.energy.gov/eere/buildings/residential-cold-climate-heat-pump-challengeUnitedStates,DOE(2022b),Biden-HarrisAdministrationAnnounces$250MillionInvestmentFromInflationReductionActForDomesticHeatPumpManufacturing,https://www.energy.gov/articles/biden-harris-administration-announces-250-million-investment-inflation-reduction-actUnitedStates,DOE(2022c),Biden-HarrisAdministrationAnnouncesHistoric$7BillionFundingOpportunitytoJump-StartAmerica'sCleanHydrogenEconomy,https://www.energy.gov/articles/biden-harris-administration-announces-historic-7-billion-funding-opportunity-jump-startUnitedStates,DOE(2022d),PresidentBidenInvokesDefenseProductionActtoAccelerateDomesticManufacturingofCleanEnergy,https://www.energy.gov/articles/president-biden-invokes-defense-production-act-accelerate-domestic-manufacturing-cleanUnitedStates,DOE(2022e),UnitedStatesEnergy&EmploymentReport2022,UnitedStates,DOE(2018),DemonstrationofCarbonCaptureandSequestrationofSteamMethaneReformingProcessGasUsedforLarge-ScaleHydrogenProduction,https://www.osti.gov/biblio/1437618Upstream(2021),NorthDakotaapproveslandmarkCCSproject,https://www.upstreamonline.com/energy-transition/north-dakota-approves-landmark-ccs-project/2-1-1085735Veolia(2022),Cutting-edgePower-to-Liquidprojecttransformsmunicipalwaste-derivedCO2intosustainableaviationfuels(SAF)inPortugal,https://www.veolia.com/en/our-media/newsroom/press-releases/power-liquid-project-transforms-municipal-waste-waste-derived-CO2-portugalEnergyTechnologyPerspectives2023Chapter4.TechnologymanufacturingandinstallationPAGE275IEA.CCBY4.0.Vestforbrænding(2019),VestforbrændingwillcaptureCO2inthefuture,https://www.vestfor.dk/nyheder-og-presse/nyheder/vestforbraending-vil-indfange-co2-i-fremtiden/Volkswagen(2021),VolkswagenGroupcreatesEuropeancompanyforitsbatterybusiness,https://www.volkswagenag.com/en/news/2021/12/volkswagen-group-creates-european-company-for-its-battery-busine.htmlWindEurope(2022),Offshorewindvesselavailabilityuntil2030:BalticSeaandPolishperspective,WindEurope.WoodMackenzie(2022),GlobalWindTurbineOEMsMarketShareForecasts2022,WoodMackenzie.Xiaomei,S.(2022),18.8billion!GoldwindDeploysWenzhouOffshoreWindPowerIndustryBase,Saatao,14April,https://www.seetao.com/details/151202.htmlEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE276IEA.CCBY4.0.Chapter5.EnablinginfrastructureHighlights•Infrastructuretotransportandstoreelectricity,hydrogenandCO2isanoften-overlooked–butcritical–enablerofcleanenergytransitions.TheNetZeroEmissionsby2050(NZE)Scenarioisausefulindicatorofthepotentialneeds:intheNZEScenario,thegloballengthofpowertransmissionlinesincreasesbyaround185%anddistributionlinesbyalmost165%over2021-2050,with85%oftheadditionsoccurringinemergingeconomies.Tradeinlow-emissionhydrogen,whichisalmostnon-existenttoday,coversmorethan20%ofglobalmerchanthydrogendemandby2030.AnnualCO2storageinjectioncapacityjumpsfromaround42milliontonnes(Mt)ofCO2todaytoaround1.2gigatonnes(Gt)by2030,requiringahugeexpansionofCO2transportandstorageinfrastructure.•Suchrapidgrowthwouldplaceconsiderabledemandsonsupplychains.AnnualMetaluseforpowertransmissionlines,distributiongridsandtransformersgrowsbyaround50%in2022-2030intheNZEScenario,comparedtotoday.Copperusedforgridsandtransformersin2022-2030correspondstoalmost20%ofglobalcopperproductionin2030.Manufacturingpowertransformersrequiresgrain-orientedelectricalsteel(GOES),withfivecountries–China,Japan,Korea,RussiaandUnitedStates–todayaccountingforalmost85%ofglobalproductioncapacityof3.8Mtperyear.DemandforGOESalonedoublesto6Mtperyearover2022-2030intheNZEScenario.•Globalannualinvestmentsinlow-emissionhydrogenandhydrogen-derivedfueltransport,includinginpipelines,storagefacilities,terminalsandrefuellingstationsreachmorethanUSD50billionoverthelatterhalfofthisdecadeintheNZEScenario–equaltoalmost40%ofcurrentannualspendingonnaturalgaspipelinesandshippinginfrastructure.Withincreasingdemandforhydrogenandhydrogen-derivedfuelsovertime,infrastructureinvestmentsreachmorethanUSD80billionin2041-2050.•CO2infrastructuredeploymentalsoacceleratesintheNZEScenario,butitisconstrainedbytherequiredleadtimesfordevelopingCO2storagecapacity.Unlikeforcriticalminerals,fewerassessmentshavebeendonetoidentifyCO2storagereserves.ConfidenceinCO2storageavailabilityisnecessarytoassureinvestmentincapturefacilitiesandtransportinfrastructure,soresourcesmustbeassessedassoonaspossible.•Buildingenergyinfrastructuretodaycantakemorethanadecade.Whileconstructionisinmostcasesarelativelyefficientprocess,takingtwotofouryears,planningandpermittingcanoftencausedelaysandcreatebottlenecks,withtheprocesstakingtwotosevenyears,dependingonthejurisdictionandinfrastructuretype.Leadtimesforinfrastructureprojectsareusuallymuchlongerthanforthefacilitiesthatconnecttothem.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE277IEA.CCBY4.0.TheroleofenablinginfrastructureTransportation,transmission,distributionandstorageinfrastructureisacriticalelementofthesupplychainsforlow-emissionelectricityandhydrogenproduction,andCO2management.Theunevengeographicdistributionoffossil-basedandrenewableenergyresourcesrequiresinfrastructuretolinkregionswhereenergycanbeproducedatlowercostwithdemandcentres,whileenergystorageisneededtobalancefluctuationsinproductionanddemand.Similarly,CO2needstobetransportedfromwhereitisgeneratedtogeologicalstoragesiteswhereitcanbeinjectedandpermanentlyremovedfromtheatmosphere.InfrastructurethatmovesorstoresenergyorCO2playsacentralroleinenablingdecarbonisationoftheenergysystemwhileimprovingenergysecuritybydiversifyingsupplyroutesforenergyimportsandensuringenergysectorresiliencetosupplydisruptions.Long-termplanning,takingaccountofinterdependenciesamongdifferentcarriersandsectorcoupling,isvitaltoensurethatthisenablinginfrastructureexpandsandadaptsinatimelymanner.Infrastructureisalreadyanimportantelementofenergysupplychainstoday.Thegloballengthoftheelectricitytransmissionanddistributiongridgrewbymorethanone-quarteroverthelastdecade,reachingroughly80millionkilometres(km)today(Figure5.1).GlobalhistoricdeploymentandinvestmentsinelectricityandnaturalgasinfrastructureIEA.CCBY4.0.Notes:km=kilometre.Electricitygridlengthsincludetransmissionanddistribution.Investmentsinelectricityinfrastructureincludetransmissionanddistributiongridsaswellasstationarystorage.Investmentsinnaturalgasinfrastructureincludenaturalgaspipelines,liquefiednaturalgas(LNG)terminalsandLNGtankers.Infrastructureisanimportantelementofenergysupplychainstoday,accountingfor36%ofinvestmentsintheelectricitysectorand51%inthenaturalgassector.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE278IEA.CCBY4.0.AnnualinvestmentsinelectricitygridsandstationarystoragetotalledonaverageUSD313billionintheperiod2016-2021,makingupmorethanone-thirdofallelectricitysectorinvestments.Fornaturalgasproduction,transportandstorage,infrastructureinvestmentsaccountedformorethan50%ofinvestmentsinthissectorin2016-2021.Overall,electricityandnaturalgasinfrastructureclaimedaround20%ofenergysectorinvestmentsinthisperiod.Thepurposeofthischapteristoassesstheroleofinfrastructureincleanenergytechnologysupplychainsandidentifypotentialbottlenecksininfrastructuredevelopment,focusingonelectricity,hydrogenandCCUS–keydecarbonisationpillarsforwhichinfrastructureisanessentialstepintheenergysupplychain.Therequirementsandpotentialbarrierstoscalingupinfrastructureforelectricity,hydrogenandCO2areverydifferent:Electricitytransmissionanddistributionnetworkshaveexistedformorethanacentury.Increasingelectrificationoftheenergysystemandboostingelectricitygenerationfromvariableutility-ownedanddistributedrenewablesourceswillrequiremajornetworkchangestoensurethatsupplyanddemandarealwaysinbalance,giventhatelectricityismoredifficultandexpensivetostorethansolid,liquidorgaseousfuels.Digitalisation,smartsystemsandnewhigh-powersemiconductortechnologiesarebecomingincreasinglyimportanttogainbettercontroloverelectricityflowsandmaintainnetworkstability.Hydrogeninfrastructureisataverynascentstagetoday,thoughsomeregionalhydrogenpipelinenetworksandstoragesitesalreadyexistinEurope,theUnitedStatesandtheAsiaPacificregion.Duetoitslowvolumetricenergydensityandliquefactionpoint,aswellasitsdetrimentaleffectonsteel,hydrogenismoredifficultandcostlytotransportandstorethannaturalgas,asitinvolvesmoreenergyintensivecompressionandliquefaction,orconversiontohigher-densitycarriers.CO2managementinfrastructure(transportnetworksandgeologicalstoragesites)willneedtobedevelopedinparallelwith(ifnotearlierthan)CO2capturefacilities.ConfidenceintheavailabilityofsuitablestorageresourcesthatcansupportsustainedCO2injectionwillbevitaltothedevelopmentofcapturefacilities,aswillassurancesthatpathwaysexisttotransportCO2fromitspointofcapturetothepointofstorage.Forthistohappen,storageresourcesaroundtheworldwillneedtobemorethoroughlyassessedandjurisdictionswillhavetoworktogethertodeveloplegalandregulatoryframeworksthatfacilitatethetransportandgeologicalstorageofCO2.ProgressindeployinginfrastructureforcleanenergyandCO2managementiscurrentlyveryuneven.Electricitygridsexistinallcountriestodaybutarenotalwaysadaptedtohandleincreasingvariablerenewableenergygenerationortosupportdemand-sideflexibilitymeasures.InfrastructureforhydrogenandCO2isEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE279IEA.CCBY4.0.ataveryearlystageofdevelopment.Gettingtonetzerobymid-centurywillthereforerequirearapidscaleupofenergyinfrastructure.Insomecases,majorinnovationsareneededtoreducecostsandimproveperformancetomakeinfrastructurecommerciallyviable.ElectricitygridsTypesofgridsandtechnologycomponentsElectricitygridsandnetworksarealreadyacentralpartoftheglobalenergysystemandwillbecomeevenmoreimportantasthecleanenergytransitionadvances.Therearearound80millionkmofpowerlinesintheworld.Eachgridcanbedifferentiatedbyvoltagelevel.Low-voltagelinesoflessthan1kilovolt(kV)supplyelectricitytoresidentialandcommercialusers,whilemedium-voltagelines(1-35kV)areusedtosupplyvillagesandsmallandmedium-sizedindustrialsites.37Together,theselinesformthedistributionnetwork.Thedistributionnetworksofcitiesandlargeindustrialconsumersareconnectedtothehigh-voltagenetwork,which–togetherwithextra-highvoltage(morethan245kV)38andultra-highvoltage(morethan800kV)lines–formsthetransmissiongridusedtotransportelectricityoverlongerdistances(Figure5.2).Mostelectricitygridstodaycarryalternatingcurrent(AC),historicallyproducedbyrotatinggeneratorsinthermalorhydroelectricpowerplants.Renewablegeneratingtechnologiessuchassolarphotovoltaic(PV)andwindsystems,aswellasbatteriesandfuelcells,areconnectedtothepowergridbypower-electronicconverters.39AmajoradvantageofACoverDCfornetworksisthatthevoltagecanbemodifiedrelativelyeasilyusingpowertransformerstoup-transformtheelectricityfortransportoverlongdistancestominimiselossesanddown-transformitforindustrial,commercialandresidentialusesinregionalorlocaldistributiongrids.Transformershaveawiderangeofratedpower.Distributiontransformershaveacapacityof0.15-15megavoltamperesorMVA(whichmeasuresapparentpower),dependingonthecountry.Inthetransmissiongrid,ratingsforsmallpowertransformersareupto50MVAandformediumonesareupto100MVA,whilelargetransformershavehigherpowerratings.37MediumvoltagelevelsaccordingtotheInternationalElectrochemicalCommissionIEC60038:1kV-35kV;EuropeanNormEN50160:1kV-36kV;AmericanNationalStandardsInstituteANSIC84.1:2.4kV-69kV.38HighvoltagelevelsaccordingtotheInternationalElectrochemicalCommissionIEC60038:above245kV;EuropeanNormEN50160:36kV-150kV;AmericanNationalStandardsInstituteANSIC84.1:above345kV.39SolarPVsystems,batteriesandfuelcellsgeneratedirectcurrent(DC)thatcannotbeconnecteddirectlytoanACgrid,sooutputmustbeconvertedtoAC.WindpowersystemsusuallygenerateAC,buttheyarealsoconnectedtothegridbyaninverterwithadirectvoltageintermediatecircuit(AC/DC/AC)tobeabletooperatethewindturbineirrespectiveofthegridfrequencyatthemostefficientspeedaccordingtowindconditions.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE280IEA.CCBY4.0.KeytechnologycomponentsofelectricitygridsIEA.CCBY4.0.Note:HVAC=high-voltagealternatingcurrent;HVDC=high-voltagedirectcurrent.Powergridscomprisetransmissionanddistributionnetworks,withoverhead,undergroundandsubseaACandDCcables,eachwithdifferenttechnologyandmaterialneeds.High-voltagedirectcurrent(HVDC)point-to-pointtransmission,whichinvolvesfewerpowerlosses,isbecomingmorecommon,mainlyforlongdistancesbutalsoovermediumandshortdistances.Thetechnologywasfirstusedinthe1930semployingmercury-arcvalves,butafter1970stheintroductionofhigh-powersemiconductorsledtotheuseofthyristorsinHVDCconverterstations,whichmakessmallerHVDCsystemsmoreeconomical.Thelatestgeneration(insulated-gatebipolartransistors)offersseveralfurtherbenefits,suchasindependentandflexiblecontrolofactiveandreactivepower(whichflowsbackandforthwithinthesystem),flexibleACvoltagecontrol,andtheabilitytostabilisethesystemintheeventofnetworkfaultsandtoblack-startnetworks(restorepartofagridwithoutrelyingontheexternaltransmissionnetworkintheeventofatotalorpartialshutdown).MostHVDClinkstodayhavevoltagesofbetween300kVand800kV,butthereareprojectsthatoperateat1100kV,suchasoneinthePeople’sRepublicofChina(hereafter,“China”),whichhasatransmissioncapacityofupto12gigawatt(GW).Besidesbeinganefficientwaytotransmitpoweronshore,HVDCsystemscanalsoconnectoffshorewindfarms,particularlyinremotelocationswhereunderwaterACcablingisnoteconomicalortechnicallyfeasible.Today,HVDCtransmissionlossesover1000kmarearound3%comparedwithmorethan7%usingAClines.ThetotallengthofHVDClinesaroundtheworldhasalmosttripledsince2010,reachingmorethan100000km(withtotaltransmissioncapacityofmorethan350GW)attheendof2021,thoughthisstillrepresentsjust2%oftotaltransmissionlength(Figure5.3).Long-distanceoverheadlinesinChinaandEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE281IEA.CCBY4.0.Brazil,andundergroundandsubmarinecablesinEuropemakeupmostofthisgrowth.Almost50%ofallHVDClineswereinChinain2021,whileEuropeaccountedfor10%ofglobalHVDClinelength.Globalhigh-voltagedirectcurrent(HVDC)transmissionlinesbycountry/regionandlinetypeIEA.CCBY4.0.Notes:UG=undergroundcable;SC=subseacable;OH=overheadtransmissionline;km=kilometre;GW=gigawatt.Dataareforyear-end.“Capacity”referstoglobalHVDCtransmissioncapacity,butexcludesthecapacityofHVDCback-to-backsystems,whichareusedtolinktwoACnetworks.Datafor2023-2030arebasedonannouncedprojects.Sources:IEAresearch;RTEInternational(2022).ThegloballengthofHVDClineshasalmosttripledsince2010totodaywithadditionsofoverheadlinesinChina,NorthAmericaandIndia,andoffshorecablesinEurope.Bothhigh-voltageAC(HVAC)andHVDCtransmissionlinescaninvolveoverhead,undergroundorsubseacables.Overheadlinesusuallyconsistofuninsulatedwiresandaresuspendedbytowersorpolesmadeofsteel,aluminium,concreteorreinforcedplastics.Asthesurroundingairprovidesinsulation,overheadpowerlinesaregenerallythecheapesttransmissionoption.Undergroundcablesconsistofconductorsencasedininsulatingmaterialandoftenaprotectivejacket.Theycostuptofivetimesmorethanoverheadlines,duetohighermaterialneedsandconstruction/installationcosts,buttheyareincreasinglybeingusedinadvancedeconomiesbecausetheyarelessvisibleandvulnerabletoextremeweatherevents.Thewayelectricitygridsareoperatedischangingwiththeemergenceofnewvariablesourcesofgenerationandtypesofdemand.Mostoperationaldecisionstodayarebasedonloadflowanalysisinlocalmonitoringsystems,whichworkswellwhenthepowerflowsfromcentralisedgenerationcapacitytoconsumersarelargelypredictablewithinalocalornationalsystem.TheincreasingintegrationofenergyflowsoverlongerdistancesandtheriseofvariablerenewablepowerEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE282IEA.CCBY4.0.generationisreducingthepredictabilityofelectricityflowsthroughthesystem,makingithardertopreventlocallineoverloads.Newmonitoringandcontroldevicesthatusedigitaltechnologiescanprovidesysteminformationinrealtimeandhelpdealwiththeseproblems.Dynamiclinesensorscanincreasethetransmissioncapacityratingoflinesbasedonenvironmentalandweatherconditions,Thedeploymentofsmartmetersinthedistributionnetworkisanessentialstepindevelopingsmartgrids.Around1.1billionsmartmetershadbeeninstalledgloballyattheendof2021–almost40%ofallresidentialmeters.Smartmeterscanincreaseservicequalityandenabletheintroductionofinnovativedemand-sideresponsemeasuresbyallowingcustomerstomanagetheirconsumption,e.g.basedonvariableelectricitytariffs.Anotherstepisremotecontrolandadvancedprotectiondevicescapableofmanagingbidirectionalenergyflowsandidentifyinggridfaultsquickly.Otherdigitalsolutionsincludeadvancedvoltageregulationatthedistribution-gridlevelthatcanincreasethehostingcapacityofthegridandenabletheintegrationoftheincreasingnumberofdecentralisedsourcesofrenewableelectricity.In2021,digitalinfrastructureaccountedfor19%ofglobalinvestmentinelectricitygrids,with75%ofitinthedistributiongrid.Theabilitytooperateanetworkcoveringalargeareadependsonpowerelectronictechnologiessuchassynchronouscondensers,staticsynchronouscompensatorsandthyristor-controlledseriescompensation,whicharepartofthefamilyofflexibleACtransmissiondevices.Thesedevicesallowcontroloverpowerflows,voltagelevelsandotherstabilitycharacteristicsalmostinrealtimewhilegeneratingreactivepower,whichincreasespowertransmissioncapacityandstabilisesthegrid.ThesecapabilitiesbecomeincreasinglyimportantasthecontributionofsolarPVandwindpowergenerationgrows,astheseinverter-basedsourcesprovidelimitedamountsofinertia(theenergystoredinlargerotatinggenerators),whichisnecessarytokeepthenetworkstabilised,especiallyintheeventofanunplannedpoweroutage.Historically,inertiahasbeenlargelyprovidedbylargeconventionalpowerplants.Energystorageissettobeanincreasinglyimportantpartofelectricitygridsasrenewables-basedgenerationincreases.Energystoragesystems,suchasbatteriesorpumped-storagehydroplants,canalsosupporttheintegrationofgrowingsharesofvariablerenewableelectricitygenerationandeffectivelybalanceincreasingelectrifieddemandondifferenttimescales,frommillisecondstoseasons.Batterysystemsarebecomingmorecommonthankstotechnologicaladvancesandlowercosts.Globalinstalledcapacityreached27GW(108gigawatthours[GWh])attheendof2021.Asbatteriesaremodularandscalable,theycanbedeployedquicklyanywheretobalancevariablerenewablegenerationandprovidevariousgridservicesonashorttimescalebyrespondinginstantaneouslytosuddensupply-demandimbalancesandbymaintainingfrequencystability.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE283IEA.CCBY4.0.Batterysystemsequippedwithvirtualsynchronousmachinecontrolalgorithmscandeliveraninertialresponsesimilartothemechanicalinertiaprovidedbyrotatingmachines.Withover160GWofinstalledcapacityworldwide,pumped-storagepowerplantsarethelargestsourceofelectricitystoragetoday.Pumped-storagehydrofacilitiesequippedwithvariable-speedpumpssuppliedbystaticfrequencyconverterscanregulatetheirspeedandpowerconsumptioninpumpingmodeandincreasesystemflexibilityandstability.Pumped-storagehydroreservoirscanstorelargeamountsofenergylongerthanbatteriesandcanperformasubstantialnumberofcharge-dischargecyclesoveraverylongperiod.Otherstorageoptionsincludecompressedairstorage,withthreelarge-scaleplantsinoperationinGermany,theUnitedStatesandChina(Borrietal.,2022).Storingelectricityintheformofhydrogeninundergroundstoragesitessuchassaltcavernsandreconvertingitbacktoelectricityisanotherlong-term,large-scalestorageoption(seeBulkHydrogenStoragebelow).Gravitystoragecouldbeacost-effectivewaytocompensateforshort-termlossesofpoweravailability.Othershort-termstorageoptionssuchashigh-powercapacitatorsorflywheelscouldbeusedtostabilisethegrid.Storingelectricityintheformofhigh-temperatureheatandconvertingtheheatbackintoelectricityisanotherstorageoptionunderinvestigation.GridexpansionintheNZEScenarioElectricitygridsundergorapidexpansionintheNetZeroEmissionsby2050(NZE)Scenario.By2030,thegloballengthoftransmissionlinesincreasesbyalmost2.5millionkm(comparedwith1millionkmover2013-2021),whiledistributionnetworksgrowbymorethan16millionkm(12millionkmin2013-2021).Mostoftheadditionsoccurafter2030,withthegloballengthoftransmissionlinesincreasingbymorethan9.5millionkm(+186%)by2050,anddistributionlinesby115millionkm(almost165%)over2022-2050.Grossadditionsareevenmoreimpressive,totallingmorethan170millionkm,asmanyexistinglineswillneedtobereplacedby2050(Figure5.4).Around80%ofglobalgrossgridadditionsoccurintheemergingmarketanddevelopingeconomies.Inadvancedeconomies,themajorityofnewlinesreplaceexistingones.HVACremainsthedominanttechnologyfortransmissionlinesintheNZEScenario.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE284IEA.CCBY4.0.GrosselectricitygridadditionsinadvancedandemergingeconomiesintheNZEScenarioIEA.CCBY4.0.Around80%ofglobalgrossgridadditionsto2050areinemergingeconomiesintheNZEScenario,withthebulkofnewlinesinadvancedeconomiesreplacingexistingones.TherapidgrowthinelectricityuseintheNZEScenario,whichjumpsbyalmost50%between2021and2030,drivesupdemandforalltypesofelectricalsupplyequipment.Globaltransformeradditionsdoublefromanaverageof2.4GW/yearover2012-2021to4.9GW/yearin2022-2030,withthree-quartersoccurringinemergingeconomies(Figure5.5).Additionsfallagainafter2040asdemandgrowthbeginstoslow.Stationarybatterystoragealsogrowsrapidly,withcapacityrisingfrom108GWhtodayto3100GWhby2030mainlyowingtotheincreasingneedforsystemflexibility.Nonetheless,stationary-batterydeploymentisstilldwarfedbythatofelectricvehicle(EV)batteries,whichregisterglobalcapacityof5.5terawatt-hours(TWh)in2030.By2050,withhigherpowersystemflexibilityneedspromptinggreaterdeploymentofstationarybatteries,theircapacityrisesto15.5TWh.AverageannualgridinvestmentsofUSD520billion(inreal2021USdollars)areneededduring2022-2030intheNZEScenario–almosttwicetheUSD308billionspentin2021–andUSD1034billionperyearisrequiredover2031-2050.Electricitygridsrepresent30%ofpowersectorinvestmentsby2030and45%by2050.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE285IEA.CCBY4.0.Averageannualtransformerandstationary-batterycapacityadditionsintheNZEScenarioIEA.CCBY4.0.Note:EMDE=emergingmarketsanddevelopingeconomies.Drivenbyincreasingelectricitydemand,capacityadditionsfortransformersandbatterystoragegrowrapidlyintheNZEScenario,especiallyinemergingeconomies.ChargingstationsforEVsSuitableaccesstoEVchargingequipmentisessentialtoenablewidespreadelectricvehicledeployment.Therearetwobroadcategoriesofchargers:•Privatechargers.Thesearechargerslocatedatresidences,workplacesanddepots,withpowerratingsthattypicallyrangefrom3kilowatt(kW)to22kW.Electricitypricingthroughthesechargersisoftensimilartoresidentialorcommercialtariffs,makingthemtheleastcostlychargingoptioninmostcases.ThisiscurrentlytheprimaryEVchargingmethod,withanestimated15millionprivatechargingpointsworldwideatend-2021.•Publiclyaccessiblechargers.Thesearestreet-accessiblechargers,locatedmostlyinurbanareassuchshoppingcentresandparkinggaragesandalonghighways.Theirpowerrangesfrom11kWto350kWforelectriccars.Electricitypricingforpublicchargerstendstobehigherthanforprivatechargerssinceequipmentandgridconnectioncostshavetoberecovered.PublicchargingnetworksarenecessaryforEVownerswhowishtoundertakelong-distancejourneysorwhodonothaveaccesstoahomecharger(suchasthoselivinginmultifamilyresidences).Therewereabout1.8millionpublicEVchargingpointsworldwideattheendof2021.ThenumberofchargingpointsincreasesrapidlyintheNZEScenario,inlinewithEVfleetexpansion.Leadtimestoinstallcharginginfrastructurevary:homechargerscanbeinstalledwithoutanypermissionifbelowagivenpowerthreshold,whilemorepowerfulchargerscanusuallybeapprovedwithinweeksinmostEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE286IEA.CCBY4.0.countries.Forpubliccharginginfrastructure,constructiontimeisusuallyaroundsixmonthswhenmajorgridupgradesarenotrequiredbutcanbeasmuchas1.5yearsifhigh-voltageinfrastructureneedstobebuilt.Permittingtimecantriplethelengthoftheseleadtimes.RisingEVchargingloadswillputgrowingpressureonpowergrids.Inadvancedeconomies,EVpenetrationofupto40%ofthefleetcanbemanagedwithoutanymajorworktothegrid,withmostmodificationsinvolvingtransformerupgradestoensuretheyarevoltage-regulatedbecauseEVchargingloadsaregenerallyevenlyspreadovertime(includingwithintheday).AstheEVshareexpands,stressonthegridcanbecomeproblematicifchargingpatternsarenotwellmanaged.IntheNZEScenario,smartchargingtechnologiesandbroadergriddigitalisationarerolledoutrapidlytomaintaingridresilienceaschargingloadsincrease.ThenumberofEVsworldwidejumpsfrom60millionin2021toover700millionin2030intheNZEScenario,requiringaverageannualinvestmentsofUSD30billion(in2021USdollars)inchargingfacilitiesover2022-2030.AsthenumberofEVsontheroadincreases,eachpublicchargerwillbeusedbymorevehicles,reducinginvestmentneeds.However,theaveragepowerratingofpublicchargersisexpectedtoincreaseasdemandforfast-chargersgrows.MaterialneedsandsupplychainsRawmaterialneedsDemandformaterialstomakeequipmentforelectricitygrids,especiallycopperandaluminium,soarsintheNZEScenario.Theuseofcopperfortransmissionlines,distributiongridsandtransformersincreasesfromanaverageof5milliontonnesperyear(Mt/year)in2012-2021to6Mt/yearover2022-2030,levellingoffat12Mt/yearin2041-2050,whileannualaluminiumdemandgrowsfrom12Mt/yearto16Mt/yearand26Mt/yearoverthesameperiods(Figure5.6).Distributiongridsaccountforaround80%ofthecopperdemandandmorethanhalfofthealuminiumdemandin2050.Thecopperusedforgridsandtransformersin2022-2030correspondstoalmost20%ofglobalcopperproductionin2021;theshareforaluminiumisalmost25%.Aggregatedemandformaterialstomaketransformers,includingsteel,copper,aluminium,transformeroilandinsulationmaterialsrisesfrom9Mt/yearin2012-2021to17Mt/yearin2022-2030andmorethan23Mt/yearin2031-2040,beforefallingbackto17Mt/yearin2041-2050.Demandformaterialstomakegridbatteries,mostlycopper,graphiteandvanadium,escalatesfromjust0.01Mt/yearin2012-2021to0.45Mt/yearin2021-2030andmorethan2Mt/yearin2041-2050.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE287IEA.CCBY4.0.AverageannualmaterialneedsforselectedgridtechnologiesintheNZEScenarioIEA.CCBY4.0.Notes:Mt=milliontonnes.Materialdemandsfortransmissionanddistributionlinesincludeconductorcablesandwires,butnotsteelfortowersandpoles.Fortransmissionanddistributionlines,aluminiumisusedforoverheadlinesandcopperforcables.Thedemandformaterialstomakeequipmentforelectricitygrids,especiallycopperandaluminium,soarsoverthenexttwodecadesintheNZEScenario.Copperandaluminiumarethemainmaterialsformakingelectricitycablesandlines.Duetoitsgoodelectricalconductivity,copperhaslongbeenthepreferredchoice,thoughitisthreetimesheavierandmuchmoreexpensivethanaluminium.Aluminiumhasonlyabout60%oftheconductivityofcopper,whichmeansmuchthickerwiresareneeded.Astheconductivity-to-weightratioofaluminiumisbetterthanthatofcopper,itisusuallypreferredforoverheadpowerlines,whilecopperismostoftenusedforundergroundandsubseacables.Theamountofthesematerialsneededfortransmissionanddistributionlinesdependsonvoltage.Transmissioncapacityistheproductofcurrentandvoltage:ifvoltageisincreasedwiththesamecurrent,transmissioncapacityincreases.Currentdeterminesthethicknessoftheconductoraswellasthelosses,whilevoltagedetermineshowmuchinsulationisneeded–eitherairforanoverheadlineorinsulatingmaterialsuchascross-linkedpolyethyleneinthecaseofacable.Conductormaterialandlossescanthereforebereducedbyincreasingthetransmissionvoltage.Anoverheadtransmissionlinerequiresaround11kilogrammesofaluminiumpermegawattandperkilometre(kg/MW/km),comparedwith65kg/MW/kmforanoverheaddistributionlinewithmuchlowervoltage.Undergroundcablesrequire101kg/MW/kmofcopperfortransmissionand438kg/MW/kmfordistribution.AnHVDClinerequiresevenlessmetal–around5kg/MW/kmofaluminiumforanoverheadlineand29kg/MW/kmofcopperforanundergroundcable(Figure5.7).HVDClinesrequirelessmaterialEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE288IEA.CCBY4.0.becausefewerlines(onlyoneortwo)areneededthanforathree-phaseACsystem.Inaddition,HVDCsystemsusuallyrunathighervoltages,furtherreducingmaterialneedsrelativetoACforthesamecapacity.Typicalmaterialcompositionofoverheadlinesandcablesbyweight,2021IEA.CCBY4.0.Notes:HVAC=high-voltageACtransmission;HVDC=high-voltageDCtransmission.Materialsinoverheadlinesincludeconductors,towersandpoles.Overheadlineconductorsaremadeofmainlyaluminium(~70%)andsomesteel(~30%),whilethemajorityofsteelusedinoverheadlinesystemsisforthetowersandpoles.Byweight,halfofthematerialneededtomakeapowertransformerissteel:two-thirdsofwhichisgrain-orientedelectricalsteel(GOES)withspecificmagneticpropertiesandhighpermeability,andtherestconstructionsteel(Figure5.8).IntheNZEScenario,demandforGOESformakingtransformersdoublesfromnearly3.0Mtin2020toalmost6Mt/yearin2020-2030,exceedingtoday’smanufacturingcapacityof3.8Mt/year.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE289IEA.CCBY4.0.Typicalmaterialcompositionoftransformersandstationarybatteriesbyweightandvalue,2021IEA.CCBY4.0.Notes:LFP=lithiumironphosphate;VFB=vanadiumflowbatteries.“Other”includespressboard,paper,plastics,porcelainandrubberfortransformers.Electricalsteelandcopperaccountforaroundhalfofthematerialcostsfortransformers,whilecopperalonemakesuparound40%ofthematerialcostofanLFPstationarybattery.Othermaterialsneededtomaketransformersincludecopper,aluminium,transformeroilforinsulation,insulationmaterial,pressboard,paper,plastics,porcelainandrubber.Aluminiumismainlyusedinlow-voltagedistributiontransformers.Thankstoitsgoodelectricalandcoolingproperties,mineraloilisthemaintypeofoilusedintransformerstoinsulateandcoolthetransformerwindings(coppercoils)andcore.Accidentalfirescausedbymineraloil-basedtransformersandthenon-biodegradablenatureofsuchoilhaveledtothedevelopmentofbio-basedtransformeroils,whicharenon-combustibleandnon-toxic(GEGridSolutions,2017).EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE290IEA.CCBY4.0.Materialsarethemaincostcomponentfortransformers,accountingfor60-75%ofthecostofalargepowertransformer.Copperaccountsforaroundone-quarteroftotalmaterialcostsandGOESforbetweenone-fifthandone-quarter.GOEScomesindifferentqualitygrades,withhighlypermeablegradesallowingthetransformertobesmaller,requiringlessoilandreducingelectricallosses.Minimumefficiencystandardsfortransformers,suchastheEnergyEfficiencyProgramforCertainCommercialandIndustrialEquipmentintheUnitedStates(UnitedStates,DOE,2021;2022a),andtheEcodesignDirectiveintheEuropeanUnion(EuropeanCommission,2019),arepushingtheuseofhigher-qualityGOEStypes,thoughEuropeanmanufacturershavewarnedofshortages.Fordistributiontransformers,theuseofamorphoussteelinsteadofGOEScanbeanalternativetoachievehighertransformerefficiencies,butresultsinlargerandheaviertransformerscomparedtotransformersusingGOESandrequiresamorelabour-intensivemanufacturingprocess.Lithium-ion(Li-ion)batteries,developedprimarilyforEVs,currentlyaccountforthemajorityofinstalledbatterycapacityinstationaryapplications,thoughlithiumironphosphate(LFP)batteriesarenowthedominanttechnologyfornewadditions.Newbatterytechnologiesforstationaryapplicationsareunderdevelopment,notablyvanadiumflowbatteries(VFBs).VFBperformancedoesnotdegradeforatleast25yearsandtheycanendureahighernumberofcharginganddischargingcyclesthanLi-ionbatteries,thoughtheyaretoobulkyandheavyforEVs.VFBsrequirefewerrawmaterialssuchasnickelandcobalt,buttheyneedvanadium.Today,thatmetalislargelyusedinthesteelsector,accountingfor92%oftheglobalvanadiumdemandof110kilotonnes(kt)in2021(60%inChina).Threemajorrawmaterialsourcessupportvanadiumproductionglobally:co-productionfromsteelslag(73%),andextractionfromprimaryresources(17%)andsecondarysources(10%)(BushveldMinerals,2022).GrowthinVFBuseforstorageapplicationsintheNZEScenariocorrespondstoaverageannualdemandof300ktofvanadiumduring2031-2040–threetimesthecurrentlevel–whichcouldbecoveredbyknownreservesof22-24Mt(SimandlandParadis,2022).Manufacturersofstationarybatteriesarealsocarryingoutresearchanddevelopmentonsodium-ionbatteries,whichrelyonsodium–arelativelyabundantelement.CelldesignandrelatedcomponentmaterialprocessingaresimilarforLi-ionbatteries,enablingtheuseofexistingbatterymanufacturingequipmentandtechniques.Theyareexpectedtobecomecommerciallyavailableafter2025.EquipmentmanufacturingThereareseveralsuppliersofhigh-voltageACandDCcablesandoverheadlinesinternationally,includingNKTinDenmark,NexansinFrance,SüdkabelinGermany,PrysmianinItaly,SumitomoinJapan,GeneralCableintheUnitedEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE291IEA.CCBY4.0.States,NBOandZTTinChinaandLSCableinKorea.Dataonmanufacturingcapacityforcablesandoverheadlinesaredifficulttoobtainforsomeregions.Europehadannualmanufacturingcapacityofaround11280kmforHVACandHVDCcablesin2016,ofwhich6550kmareforlandand4730kmsubsea(ENTSO-EandEuropacable,2018).Mostcablemanufacturershaveplantsaroundtheworld.Plantsaregenerallylocatedclosetodemandcentrestoavoidcostlylong-distancetransportofheavycables:shippinga200-km-longcableweighing10000tonnesfromEuropetoAsiacantakeapproximatelyonemonth.ProcurementleadtimesforlargeHVACorHVDCcablesarearoundtwotofouryears,sincethemanufacturingofcablesisatime-consumingprocessandinvolvesanumberofsequentialoperations.Forexample,makingsubseacablesinvolvesconductorstranding,insulationextrusionorlapping,sheathing,thejointingofseparatecablestoalongerone,armouringandtesting(ENTSO-EandEuropacable,2018;SKMandETI,2010;Worzyk,2009).TheleadingmanufacturersoflargepowertransformersareHitachiEnergy(Switzerland),SiemensEnergy(Germany),MitsubishiandToshiba(Japan),GeneralElectricandWestinghouse(UnitedStates),HyundaiHeavyIndustries(Korea),ChintandChinaXDElectric(China)andComptonGreaves(India),togetheraccountingformorethan40%oftheglobalmarket.Theproductionofmedium-voltageanddistributiontransformersisspreadoveramuchlargernumberofcompanies.Thestepstomanufactureapowertransformerinvolvethebuildingofthecore,productionofthewindings,assemblyofthecoreandwindingsandproductionofthetankfortheoil,aswellasfinalassemblyofthetransformerandtesting.Largepowertransformersareextremelyheavy,weighing100-400tonnes,sotransportingthemfromthefactorytothefinaldestination,usuallyinparts,isaconsiderableundertaking,accountingforuptoone-fifthofthetotalcost.GOESisakeymaterialforpowertransformers.GlobalmanufacturingcapacityforGOESwasaround3.8Mtin2020,thoughproductionwasonly2.8MtduetoeffectsoftheCovid-19pandemic.ManufacturingislimitedtoafewproducersinChina,Japan,France,Germany,India,Poland,theCzechRepublic,theRussianFederation(hereafter,“Russia”),Brazil,KoreaandtheUnitedStates(Table5.1).Chinaisthelargestmarket,withestimatedannualdomesticconsumptionof1.33Mtin2020,followedbytheEuropeanUnionwith0.23MtandtheUnitedStateswith0.15Mt(China,MinistryofCommerce,2021).EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE292IEA.CCBY4.0.Table5.1Globalgrain-orientedsteelmanufacturingcapacitybycountryandmanufacturer,2020CountryCapacity(kt/year)CompaniesChina1780Baowu,Anshan,HebeiShougang,TISCOEuropeanUnion400ThyssenKruppElectricalSteel,StalProdukt,GOSteelFrydekMistekJapan480JFESteel,NipponSteel&SumitomoMetalKorea300POSCORussia330NLMKUnitedStates300AKSteelOthercountries190Aperam(Brazil),ThyssenKrupp(India)World3780Note:kt=kilotonne.Sources:China,MinistryofCommerce(2021);EuropeanCommission(2022a).Almost40%ofglobalGOESproductionwastradedinternationallyin2020.Fivecountries–Japan,Russia,China,KoreaandGermany–accountedformorethan90%ofallGOESexports,reflectingtherelativelysmallnumberofproducingcountries.TheleadingimporterswereIndia,Mexico,Türkiye,ItalyandCanada,whichtogetherwereresponsibleforalmost60%ofallGOESimports(Figure5.9).SeveralcountrieshaveimposedtariffsonGOESimportsinresponsetoaccusationsofdumping.Thetransformerindustryis,however,facingshortages,whicharedrivingupprices:theaverageinternationalpriceinSeptember2022was70%abovetheaveragefor2020.SanctionsonexportsfromRussia,whichaccountedforalmost10%ofglobalproductioncapacityin2020,isamajorreason.Growingdemandfornon-orientedelectricalsteel(NOES)formakingEVmotors,whichhasledsomesteelproducerstoswitchpartoftheirproductionfromGOES,isanothercontributingfactor.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE293IEA.CCBY4.0.Globaltradeflowsofgrain-orientedsteelbyweight,2020IEA.CCBY4.0.Note:Onlytradeflowsof4kilotonnesorlargerareshown.Source:IEAanalysisbasedonCEPII(2022).Fiveproducers–Japan,Russia,China,KoreaandGermany–accountformorethan90%ofallGOESexports,withIndiaandMexicobeingthelargestimporters.Around450000transformerswithacapacityabove10megawatt(MW),i.e.includingsmall,mediumandlargepowertransformers,weretradedgloballyin2020,withatotalvalueofUSD3billion.Inmonetaryterms,Chinaaccountedformorethanone-quarteroftotalexports,followedbyKorea,Mexico,Germany,ItalyandTürkiye(Figure5.10),withthesesixcountriestogethermakingupalmost75%ofthetotal.Inmonetaryterms,theUnitedStateswastheprimaryimporteroftransformersin2020,receivingmorethanone-thirdofallsuchimports.MexicowastheleadingexportertotheUnitedStates,withasignificantshareofMexicanimportsofGOESbeingusedtomanufacturetransformers.Importsoftransformersareunsurprisinglyconcentratedinregionswithrapidlygrowingelectricitydemand,notablytheMiddleEastandSoutheastAsia40,whicheachaccountforaround10%ofallimports.40SoutheastAsiarefersheretoBruneiDarussalam,Cambodia,Indonesia,LaoPeople’sDemocraticRepublic,Malaysia,Myanmar,thePhilippines,Singapore,ThailandandVietNam.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE294IEA.CCBY4.0.Globaltradeflowsoftransformersabove10MWinmonetaryterms,2020IEA.CCBY4.0.Note:OnlytradeflowswithvaluesofmorethanUSD15millionareshown.Source:IEAanalysisbasedonCEPII(2022).Chinaistheleadingexporteroftransformers,particularlytootheremergingeconomies,whiletheUnitedStatesisthemainimporter,principallyfromMexicoandEurope.HVDCtransmissionsystemsareusuallysuppliedintwoparts,thepoint-to-pointlinesandtheconvertorstations,oftenbydifferentcompanies.TheleadingproducerofconverterstationsisHitachiEnergy(formerlyABB)inSwitzerland,followedbySiemens(Germany)andGeneralElectric(UnitedStates),MitsubishiElectric(Japan),NRElectricandC-EPRIElectricPowerEngineering(China)andBharatHeavyElectricalsLimited(India).Themaincomponentsareconvertervalvesmadefromhigh-powersemiconductors(insulated-gatebipolartransistorsorthyristors),conversionpowertransformers,measuringinstrumentsandvoltage/currenttransformers,harmonicfiltersandshuntcapacitors,andcontrolsystems.HitachiEnergyhasitsownfactoryformakingpowersemiconductors,whereastheothersuppliershavetosourcethesekeycomponentsexternallyfromsemiconductormanufacturers.Procurementleadtimesforconverterstationsareusuallyaroundtwotothreeyears.LeadtimesLeadtimesforplanningandbuildingthemajorassetsthatmakeupelectricitygridscanbeverylong.AverageleadtimesfornewoverheadtransmissionlinesinEuropeandtheUnitedStatestodayarearoundtenyears,ofwhichsevenarerequiredforplanningandpermitting,andaroundthreeforconstruction(Figure5.11).However,somerecentprojectshavetakenmuchlonger(upto13years).Itisusuallymuchquickertobuildnewgeneratingplants:utility-scalesolarPVandEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE295IEA.CCBY4.0.onshorewindprojectstakethreetofiveyearsandoffshorewindfarmsuptoseven.Longleadtimestoconnectnewplantstothegridcanslowdeployment.IntheUnitedStates,theaveragegridconnectiontimeforpowerplantsincreasedfrom2.5yearsin2000-2010to3.9yearsin2011-2020(Randetal.,2022).Planningandbuildinglow-voltagedistributionlinesisfaster,varyingfromsixmonthstotwoyears,dependingontheregion(NetbeheerNederland,2019).Variousfactorscanreducethepaceofinfrastructureprojectdeployment(Box5.1).Obtainingright-of-waypermitsandenvironmentalimpactassessmentsandpermitscontributetolongleadtimesfortransmissionprojects.BasedoncompletedtransmissionprojectsintheUnitedStatesover2016-2022,obtainingright-of-wayauthorisationstook3-11yearsandenvironmentalimpactassessments2-9years(USPermittingCouncil,2022).InEurope,permittingtimesforonshorewindprojectsvaryfromthreetonineyearsbetweencountries,andforutility-scalePVtherangeisonetofouryears(EuropeanCommission,2021).Publicoppositionoftenslowsthisprocess.InGermany,thedecisiontoprioritiseundergroundcablesoveroverheadlinesfortheSüdlinktransmissionprojectfromnortherntosouthernGermanyhelpedincreasepublicacceptance,butitrequiredchangestotheplannedroute,furtherdelayingthepermittingprocess(Energiechronik,2020).Althoughconstructionofnewtransmissionlinesisnormallymuchquicker,supplychainconstraintscancausedelays.Subseacables,forexample,requirecable-layingvessels.The45cable-layingvesselsinoperationworldwidetodaycanlayatotalof4200-7000kmofcableperyear(dependingonthetypeofproject).Thecurrentfleetofvesselsissufficienttocoverthecable-layingneedsforoffshorewinddeploymentupto2030intheNZEScenario,butadditionalvesselswouldbeneededforanysubseainterconnectorcables.Procurementtimesforkeyequipmentmustalsobetakenintoaccountintheplanningprocessfortransmissionlines.Shortagesofmaterials,particularlyGOES,arelikelytoincreaseprocurementtimesforpowertransformersinthenearfuture.InOctober2022,utilitiesintheUnitedStatesreportedthatprocurementtimesfordistributiontransformershadincreasedfrom2-3monthsin2021touptoabout12monthsin2022,withsomeutilitiesreportingleadtimesofmorethanthreeyears(APPA,2022).EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE296IEA.CCBY4.0.AverageleadtimestobuildnewelectricitygridassetsinEuropeandtheUnitedStates,2010-2021IEA.CCBY4.0.Notes:Barsrepresentsaverageleadtimesandlinesreflecttypicalrangesbasedonselectedrecentprojects.TheleadtimetoconnectpowerplantstothegridintheUnitedStatesistheaveragefor2011-2020,whileleadtimesforoverheadandundergroundtransmissionlinesaswellassubseacablescover2010-2021.Theconstructiontimeforlargepowertransformersisbasedonindustrysources.Sources:IEAresearch;USPermittingCouncil(2022);Randetal.(2022).PlanningandpermittingofnewtransmissionlinesinEuropeandtheUnitedStatestypicallytakessixtosevenyears,whiletheconstructionitselfrequiresonlytwotothree.Box5.1Whydoenergyinfrastructureprojectstakesolong?Leadtimesassociatedwithinfrastructureprojectscanbeverylong,rangingfrom8to13yearsfortransmissiongrids,potentiallyupto3-12yearsforhydrogeninfrastructure,andupto10yearsforCO2.Reducingthesetimeswillbecriticaltospeedupdeployment.Fourmainfactorsdeterminehowlongittakestodeployaproject:projecteconomics,thecomplexityofpermittingprocedures,socio-politicalsupportandtechnicalconstraints.Dependingonthebusinessmodeltheyrelyon,infrastructureprojectsofalltypes(transport,transmission,distributionandstorage)canfacefinancingdifficulties.Inthecaseofelectricitytransmissionanddistribution,projectsareoftenoperatedfollowingaregulated-asset-basebusinessmodel,whichlimitsrevenueandreturnsoninvestment.Manyadvancedeconomieshaveputinplacearrangementstosupportthefinancingoftheseprojects,butthehighcostofcapitalanddifficultiesattractingprivateinvestmentareoftenaprobleminemergingeconomies.Financingthedevelopmentofnewerinfrastructuretypes,suchasCO2orhydrogenpipelinesandstorage,canbeespeciallydifficultbecausemarketsfortheservicestheyprovidearenascentanditisunclearunderwhichregulationsandbusinessmodelsEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE297IEA.CCBY4.0.theywilloperate.Governmentscanreduceinvestmentrisksforthesecapital-intensiveprojectsthroughmeasuressuchaslow-interestloansorloanguarantees.DevelopingbusinessmodelsforhydrogenorCO2infrastructurecanreduceinvestmentrisksandattractprivateinvestments(IEA,2022a).Thetimeneededtoobtainpermitsandapprovalstobuildcleanenergyinfrastructurevariesbyinfrastructuretype,butitisonaverageuptosixyearsforpipelines(usingnaturalgaspipelinesasaproxy)andtransmissiongrids.Thecomplexityoftheseprojects,whichcaninvolvelinescrossingseveraljurisdictions,explainswhytheytakesolong.Alargenumberofstudies,plansandreportsoftenhavetobeprovidedtorespectvariousregulations.Fornewinfrastructuretypes,includingpipelinesandstoragesitesforhydrogenorCO2aswellasportfacilitiesforCO2orhydrogen,itisnotalwaysclearwhichregulatorshouldbeinchargeofpermitting,andgloballyonlyalimitednumberofregulatorshaveexperiencewiththeseprojects.Asaresult,first-of-a-kindprojectsusuallyinvolvelongerpermittingtimes.Theycanbereducedbyvariousmeasures,suchasimprovingco-ordinationamongthegovernmentagenciesinvolved,providingclearresponsibilitiesandtimelinesaswellasadequatestaff,andensuringthatregulationsarefitforpurposeandapplicabletonewenergyinfrastructuretypes.Effortstoimprovepermittingprocessesforinfrastructureandrenewableenergytechnologiesarecurrentlyunderwayinseveralcountries.WhilerevisionstotheEURenewableEnergyDirectivearestillinthelegalprocess,theEUCouncilhasagreedonatemporaryframeworktosetdeadlinesforgrantingpermitsforrooftopsolarPV,heatpumpsandtherepoweringofexistingrenewablepowerplantsaswellastoprovidethepossibilityforsimplifiedassessmentofrenewableenergyprojects(EuropeanCouncil,2022).TheUSgovernmentrecentlypresentedaPermittingActionPlantoacceleratefederalpermittingandenvironmentalreviewsforinfrastructureprojectsfundedthroughtheInfrastructureInvestmentandJobsAct(TheWhiteHouse,2022).Alackofsocio-politicalsupport,includingafailuretoachievebroadconsensusamongpoliticalpartiesandcountriesonlong-termgoalsandastrategicvisionforenergyinfrastructure,canleadtodelays,especiallywhenthereisachangeofgovernment.Oppositionfromsectionsofthepublic,includinglandowners,environmentalistsandindigenousgroups,canalsodelayorhaltprojects,especiallyifcommunicationandconsultationareinadequate.Engagingstakeholdersaroundtheprojectrouteorsiteearlyandoften,withappropriatecommunicationstrategiesaswellaslong-termplanningwithactivesupportfromdifferentlevelsofgovernmentandinternationalco-operationforcross-borderinfrastructureprojects,cansmoothenprojectdevelopment.Bottlenecksinsupplyandtechnicalconstraintscanalsocausedelays.Installingtransmissionlinesandpipelinesandbuildingundergroundstoragefacilitiesrequiresspecialisedequipmentandexpertise,whichcanbesubjecttoEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE298IEA.CCBY4.0.bottlenecksandsupplyshortages.Thisisparticularlytruefortheoffshorelayingofinfrastructure,forwhichspecialisedvesselsandplatformsareusuallybookedmorethanayearinadvance.Constructionworkersusuallyrequirespecificcertificationsandtraining(e.g.forworkingoffshoreorforweldingpipes).Weather,terrainandeaseofaccesscanalsoaffecttheconstructionofinfrastructureandcauseprojectdelays.Governmentsandtheprivatesectorneedtosupporttrainingprogrammesandthereskillingand/orupskillingoffossilenergysectorworkersthatmaylosetheirjobsastheenergytransitionprogresses.RepurposingexistinginfrastructureforhydrogenandCO2usecaninvolveshorterleadtimesaswellasloweroverallinfrastructureinvestmentcosts(seeFocusonRepurposingExistingInfrastructurebelow).Sources:IEA(2022a);EuropeanCouncil(2022);TheWhiteHouse(2022).EndoflifeNetworkequipmentnormallylastsalongtimeandcanusuallybereusedorrecycledtoalargedegree.High-voltageoverheadlinesusuallylastatleast40years(muchlongerifwellmaintained),butareoftenreplacedsoonerduetotheneedtoincreasetransmissioncapacity(difficultiesingainingright-of-wayaccessmeanthatitisgenerallymucheasiertouseexistingroutesthantobuildnewlines).Fordistributionlineswithpolesmadeofmaterialotherthansteel,lifetimesrarelyexceed40years,especiallyinthecaseofwoodenpoles,whichtendtorot.Everypartofthematerialusedforoverheadlines,includingtheconductor,iseasytoreclaimandrecycle.Insomecases,mastsandpylonscoatedwithanticorrosionpaintcontainingleadorasbestosmayneedtoberecycledbyacertifiedcompany.High-voltagecableshaveanormallifetimeof40years,thoughsomemanufacturersclaim60years.Attheendofacable’slifetime,adecisionneedstobemadewhethertoleavetheitinthegroundortakeitout,whichcanbedifficultandcostly.Incontrasttothenewgenerationofcross-linkedpolyethylenecables,manyoldoil-filledcablescontainhazardousmaterialsthatcanpollutethesoilforalongtimeintheeventofleakage,sousuallyneedtoberemoved.Thecableconductor,whichconsistsofcopperoraluminium,aswellaspolyethyleneusedasinsulationmaterial,canbealsorecycled.Thenormallifetimeofapowertransformerisaround40years,or360000operatinghours,thoughthiscanvaryaccordingtoloadingconditionsandambienttemperatures.Insomecountries,thetransformerfleetisrelativelyold.Forexample,intheUnitedStatestheaverageageoflargepowertransformersinoperationis38-40years.Morethan70%ofthemaremorethan25yearsoldandEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE299IEA.CCBY4.0.somearemorethan70yearsold(UnitedStates,DOE,2022b).Aroundthree-quartersofatransformer’smaterialscanberecycled,especiallythesteel,copperandoil.AswithEVbatteries,stationarybatteriescanberecycledtorecovervaluablematerialssuchascobalt,nickel,iron,graphite,lithiumandmanganesefromthecathode(seeChapter3).Themanufacturingcostsforanewcellcanbe5-30%lowerwhenrecycledcathodematerialsareused(NREL,2021).Energyuseandemissionsalongthesupplychainarealsolowerwhenlessrawmaterialneedstobeextractedandprocessed.However,theprocessesusedtorecoverandrecyclethevariousmaterialsinbatteriesarecomplexandexpensive.EnergyneedsandemissionsDirectenergyneedsformanufacturinggridtechnologies,excludingtheenergyneededtomineandprocessthematerialsrequiredtomanufacturethesetechnologies,arerelativelysmall.Manufacturingtransmissionanddistributiongridlinesandcablesusedabout50PJofenergyinputsworldwidein2021(equaltoaround0.01%ofglobalfinalenergyconsumption),two-thirdsintheformofelectricityandone-thirdnaturalgas.IntheNZEScenario,energydemandroughlydoublesby2050to100PJ.Theamountofenergyembeddedinthematerialsusedtomaketheseassets,mainlycopperandaluminium,issomewhathigher–about150PJforcopperand570PJforaluminiumin2021.Theseamountsincreaseto340PJforcopperandmorethan1000PJforaluminiumin2050.Includingthisindirectenergyuse,thetotalenergyneededtomakelinesandcablesequalsabout0.4%oftotalfinalelectricityconsumptionin2050comparedwith0.2%in2021.Energyuseissimilarfortransformers.Around290PJwereconsumedgloballytomanufacturetransformersin2021,andintheNZEScenariothisamountincreasesto570PJin2030andto780PJin2040beforefallingto570PJin2050.Energyrequiredtoextractthematerialsusedtomaketransformersisinasimilarrange:300PJin2021and560PJin2030and2050.Theoperationoftransmissionanddistributiongridsthemselvesalsoconsumesenergy.Transformershaveefficienciesintherangeof95-99.7%dependingontypeandsize,withhigher-gradeGOESimprovingefficiencyandsavingmoney,thoughthesetransformerscostmoretomanufacture.Overall,gridlossesworldwideamountedto7%ofelectricitygeneration,emitting1000MtofCO2(or2.6%ofglobalenergysectoremissions)in2021.ThoseemissionsfallrapidlyintheNZEScenarioaselectricitygenerationisdecarbonised.Improvinggridefficiencyalsoreducesemissionsaswellastheneedtobuildnewpowerplantsandprocuretheassociatedmaterials.Averageglobalgridlossesdropfrom7%inEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE300IEA.CCBY4.0.2021to5.6%in2050,resultingincumulativematerialsavingsof920ktofcopper(4%ofglobalproductionin2021),155ktofnickel(6%)and470ktofsilicon(6%)over2022-2050.HydrogentransportandstorageTechnologyoptionsToday,hydrogenisproducedmostlyclosetowhereitisusedandsuppliedtocaptiveconsumers.Asdemandincreases,therewillbeastrongereconomiccaseforproducinglow-emissionhydrogeninareaswithgoodrenewableenergyresources,significantlyincreasingtransportneedstoconnectproductionsitestodemandcentres.Wherefeasible,hydrogenwillgenerallybetransportedbyonshoreoroffshorepipelines,asitisthemostefficientandaffordableoptionforrelativelyshortdistances.Wherededicatedpipelinesarenotfeasibleduetorelativelylowvolumetricflowsandshortdistances,hydrogencanbetransportedascompressedgasinmulti-elementgascontainertrailersorasliquefiedhydrogenincryogenicthermo-insulatedvesseltrailers.Dependingontransportcapacity,fordistancesofmorethan2000-2500km,seabornetransportationmaybetheleastexpensiveoption,asisgenerallythecasefornaturalgas(IEA,2022b).HydrogenpipelinesAslow-emissionhydrogenproductionvolumesincreaseandtransportdistancesexpand,anetworkofhydrogenpipelineswillneedtobedevelopedtoconnectareaswithgoodresourcesforproductiontostoragesitesanddemandcentres.Aswithnaturalgas,pipelinenetworkswithlargetransmissiontrunklinescanefficientlytransportlargevolumesofhydrogenoverhundredsofkilometres(Figure5.12).Experiencegainedoverthelastcenturyinbuildingandoperatingnaturalgaspipelineswillbeofgreatbenefittodevelophydrogenlines.Morethan1.2millionkmofnaturalgastransmissionpipelineshavebeeninstalledworldwide(IEA,2022b),andapproximatelyanother200000kmareunderconstructionorinpre-constructiondevelopment(Langenbrunner,JolyandAitken,2022).Thereisalsoenormouspotentialtorepurposeexistinggaspipelines,whichcouldavoiddecommissioningthembeforetheendoftheirtechnicallifetimeandreducenewmaterialneeds,loweringcostssignificantlyandbenefittingtheenvironment(seeFocusonRepurposingExistingInfrastructurebelow).Blendinghydrogenintonaturalgasstreamscouldbeaninterimstrategytokick-starthydrogenproductionbeforedemandishighenoughtojustifyinvestingindedicatedhydrogenpipelines.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE301IEA.CCBY4.0.HydrogenpipelinenetworkconfigurationIEA.CCBY4.0.Note:Thischapterassessesonlytrunklinesandlargedistributionhydrogenpipelines(usuallyexceeding20inchesor500millimetresindiameter),asthecharacteristicsofgatheringanddistributionlinesarelargelyproject-dependent.Aswithnaturalgas,pipelinenetworkswithlargetransmissiontrunklinescanefficientlytransportlargevolumesofhydrogenoverhundredsofkilometres.HydrogenshippingHydrogenismoredifficulttostoreandtransportthannaturalgasbecauseitislessdenseandhasalowboilingpoint.Onecubicmetreofhydrogencontainsonlyone-thirdtheenergyofacubicmetreofnaturalgasatthesamepressureandtemperature.Inaddition,hydrogen’sboilingpoint(-253°C)islowerthanthatofnaturalgas(-162°C).Forlong-distancetransportation,hydrogenmustbeconvertedtoadenserform,eitherthroughliquefactionorconversionintoaSupply-sidegatheringandsub-gatheringpipelinescollecthydrogenfromproduction,importandstoragefacilities.Thehydrogenisthencompressedandinjectedintoatrunklinefortransmission.TrunklineSub-distributionDistributionLargesteeltrunklinesareusedtotransporthydrogenathighpressuresfromproductionorimportareastodemandcentres.DistributionDemand-sidedistributionlinesoperateatmediumpressureandconnectlargeconsumersorsub-distributionlinestothetrunkline.Sub-distributionlines–generallyplasticpipes–transporthydrogenatlowpressurestoendusers.GatheringSub-gatheringGatheringH2DistributionLH2LH2EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE302IEA.CCBY4.0.chemicalcarrierthatcanbetransportedmoreeasily(Figure5.13).41Potentialcarriersincludeammonia,liquidorganichydrogencarriers(LOHCs)–organiccompoundsthatcanabsorbandreleasehydrogenthroughchemicalreactions42–andsynthetichydrocarbonfuels(seeChapter4).Itcouldalsobeshippedinsolidform,suchashotbriquettediron43forsteelmanufacturers.Technologicalpathwaysforlong-distancetransportforthesupplyofhydrogenandammoniabytankerIEA.CCBY4.0.Note:LOHC=liquidorganichydrogencarrier.Deliveringhydrogenoverlongdistancesrequiresitsconversiontoadenserformthroughliquefaction,ortoachemicalcarriersuchasammoniaorLOHC.Howhydrogenisusedatitsdestinationwilldeterminethemostappropriatewaytotransportandstoreit.Ifhydrogenistransportedasachemicalcarrierandconvertedbacktohydrogen,energylossescanbeconsiderableusingcurrenttechnologies,thoughefficiencyisexpectedtoincreasethroughfutureinnovation(seeEnergyNeedsandEmissionsbelow).Whenhydrogenisconvertedintoasynthetichydrocarbonfuelsuchasmethane,methanolordiesel,CO2isarequiredinput(seeChapter4).Sincetheresultingfuelorfeedstockiscompatiblewithexistingoilandnaturalgaspipeline,shippingandstorageinfrastructureandcanbeusedinestablishedend-useapplications,synthetichydrocarbonfuelsarenotdiscussedinthissection.41CompaniessuchasAustralia’sProvarisandNorway’sGen2EnergyandSiriusDesign&Integrationarealsoconsideringshippingcompressedhydrogen(IEA,2022b).Itcouldbeanalternativetoliquefiedhydrogen,particularlyforshorterdistances.42Twocompanies–Chiyoda(Japan)andHydrogeniousLOHC(Germany)–aredevelopingLOHCtechnology.Ithasalreadybeenproveninafewdemonstrationprojects,includingtheAHEADprojecttotransporthydrogenasmethylcyclohexanefromBruneiDarussalamtoJapan(Chiyoda)andtheHySTOCprojecttotransporthydrogenasdibenzyltolueneinFinland.43Hotbriquettedironreferstodirectreducedironthathasbeencompactedatatemperatureabove650°Cintopillow-shapedhigh-densitybriquettestofacilitatehandling.Low-emissionhydrogenproductionConversionLiquefactionLiquidhydrogentankerAmmoniatankerChemicaltankerLOHChydrogenationAmmoniastoragetankLOHCstoragetankRegasificationLiquidhydrogenstoragetankAmmoniacrackingLOHCdehydrogenationSeparationandpurificationSeparationandpurificationHaber-BoschprocessAirseparationunitLiquidhydrogenstoragetankAmmoniastoragetankLOHCstoragetankHydrogentransmissionanddistributionAmmoniadistributionReconversionTransportandstorageEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE303IEA.CCBY4.0.HydrogenstorageAshydrogensupplyexpands,transmissionnetworkswillneedtobecomplementedbyundergroundgeologicalstoragefacilitiestobalancesupplyfluctuationsresultingfromelectrolysersusingvariablerenewableelectricityandfromseasonalchangesindemand,aswellastobolsterenergysecurityintheeventofsupplydisruptions.Globalnaturalgasundergroundstoragecapacityisequivalenttoapproximately11%ofannualgasdemand,butinsomeregions,suchasinEurope,itreaches25%,asitisusedtocoverseasonalrisesinheatingdemand.Hydrogendemandisexpectedtobelessseasonalthanthatofgas,butpronouncedfluctuationsinvariablerenewableenergygenerationwillrequiremeasurestocreateamorestablehydrogensupplyfordownstreamuses,withflexiblehydrogenstoragebeinganimportantoption.Thiswillnotonlyallowsupplytomatchdemandbutwillminimisetheoversizingoftradeinfrastructureandtechnologiesfortheproductionofhydrogen-derivedfuels,allowingthemtooperateathigherfullloadhoursthroughouttheyeartokeepcostsdown.Developinganewundergroundgasstoragefacilitycantakemorethanadecadeandrequiresconsiderableinvestment.Geologicalconditionsdeterminedevelopmentpotential,whichcanbelimitedinsomeareas.Alternatively,hydrogencouldbestoredonasmallorlargescaleasaliquidcarriersuchasammonia,methanoloranLOHC,withthelatterevenusingexistingpetrochemicalstoragetanksatportsandhubs.HydrogeninfrastructureneedsintheNZEScenarioGlobalhydrogenproductionreached94Mtin2021,containingenergyequaltoabout2.6%offinalenergyconsumption,mostofwhichwasusedinrefiningandintheindustrysector(IEA,2022b).Governmentsaroundtheworldhavesofarpledgedtoproducearound125Mtofhydrogenin2030intotal–about50MtshortofthatneededtobeontrackwiththeNZEScenario.Low-emissionhydrogenmadeuplessthan1%ofthetotalsupplyofhydrogenin2021,asharethatrisestomorethan50%in2030andcloseto100%in2050intheNZEScenario.Hydrogendemandby2050isequivalenttoalmost40%oftoday’sdemandfornaturalgasonanenergybasis,andfinalconsumptionofhydrogenandhydrogen-derivedfuelsisequivalenttoabout9%ofglobalfinalenergyconsumptionin2050(Figure5.14).Three-quartersofthehydrogenconsumedin2050comesfrommerchantproducers,comparedwithjust7%in2021.Hydrogenandhydrogen-derivedfuelsareusedby2050widelyintheindustrysector;asatransportfuelinshipping,aviationandheavyroadfreight;andaselectricitystorage.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE304IEA.CCBY4.0.GlobalnaturalgasandhydrogensuppliesintheNZEScenarioIEA.CCBY4.0.Note:EJ=exajoule.HydrogensupplyintheNZEScenariosurpassesthatofgasin2045andby2050isequivalentto40%ofthecurrentnaturalgassupply,75%ofitfrommerchantproducers.TheNZEScenariocallsforsubstantialinvestmentsinhydrogenpipelines,tankersforshippingliquefiedhydrogen(LH2),hydrogencarriers,relatedportterminalsandlarge-scaleundergroundstoragefacilities(Figure5.15).AverageannualglobalinvestmentinhydrogenandnaturalgasinfrastructureintheNZEScenarioIEA.CCBY4.0.Notes:LH2=liquefiedhydrogen;HRS=hydrogenrefuellingstation.InvestmentsinLH2shippingareforliquefactionfacilities,storagetanksatexportandimportterminals,andLH2tankers.Investmentsinammoniashippingareforstoragetanksatexportandimportterminals,andammoniatankers.AmmoniaconversionincludesthecostsassociatedwithconvertinghydrogentoammoniausingtheHaber-Boschprocessandreconversiontohydrogenusingammoniacracking,onlywhenhydrogenintheformofH2isdelivered.Investmentsinnaturalgasinfrastructureincludetransmissionanddistributionpipelines,liquefactionandregasificationterminalsandliquefiednaturalgastankers.IntheNZEScenario,hydrogeninfrastructurerequiresannualinvestmentsofUSD52billionin2026-2030andUSD82billionin2041-2050,mostlyforpipelinesandstorage.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE305IEA.CCBY4.0.GlobalannualinvestmentsreachonaveragemorethanUSD50billion(in2021USdollars)in2026-2030(equaltoalmost40%ofcurrentannualspendingonnaturalgastransportinfrastructureandmorethan60%ofwhatwillbespentin2026-2030)andmorethanUSD80billionby2041-2050–morethantriplewhatwillbeneededbythenfornaturalgastransportinfrastructure.HydrogenpipelinesAbout2600kmofhydrogenpipelinesaecurrentlyoperatingintheUnitedStates,2000kminEurope(IEA,2022b),400kminChina(Wuetal.,2022)and200kminKorea(Stangarone,2021).Theyaregenerallyownedbymerchanthydrogenproducersandarelocatedclosetolargehydrogenuserssuchaspetroleumrefineriesandchemicalplants.TheneedforhydrogentransmissioninfrastructureincreasesconsiderablyintheNZEScenario,reachingaround15000kmin2030and200000kmby205044(Figure5.16),includingnewandrepurposedpipelines.GlobalhydrogentransmissionpipelinelengthintheNZEScenarioIEA.CCBY4.0.Notes:km=kilometre.Pipelinesareassumedtohaveaweightedaveragecapacityof6.9GW,correspondingtoamixof48-inch(~1200mm,12.7GW),36-inch(~900mm,3.6GW)and20-inch(~500mm,0.9GW)pipelinesoperatingat75%oftheirdesigncapacityfor5000full-loadhours.HydrogentransmissioninfrastructureexpandsrapidlyintheNZEScenariotoreach200000kmin2050,evolvingfromafewsmallnetworkstointerregionaltrunklines.Thelengthofthenetworkin2050isconsiderablylessthanthemorethan1.2millionkmofnaturalgaspipelinesinoperationtoday,ashydrogendemandin2050ismuchsmaller(approximately40%oftoday’sdemandfornaturalgas,inenergyterms).Inaddition,partofthehydrogenwillbeusedtoproducehydrogen-44Itisassumedthat42%ofthelengthofnewpipelinesareof48-inchdiameter,38%are36-inchand20%are20-inch.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE306IEA.CCBY4.0.derivedfuelsthatwillnotrequirehydrogenpipelines.Hydrogentransmissionevolvesfromsmallpipelinestolargeregionalandinterregionaltrunklines,movinglargeflowsofhydrogenoverlongdistancesfromareaswithgoodresourcesforlow-emissionhydrogenproductionandstoragetodemandcentres.Globalannualadditionsofnewhydrogenpipelinesrisetoaround3500kmin2030and11500kmin2050.Naturalgaspipelinesrepurposedforhydrogenmakeupone-quarterofallhydrogenpipelinesin2050,thoughtheshareismuchhigherinsomeregions,includingEurope,whereitreacheshalf.Roughly13500kmofhydrogenpipelines,aroundhalfofthemrepurposednaturalgaspipelinesthatcouldbeavailableby2030,arecurrentlyunderconsideration(IEA,2022b).Althoughhydrogencanbetransportedthroughsteelpipelinesinmuchthesamewayasnaturalgas,therearesomeadditionaltechnicaldifficulties.Unlikenaturalgas,hydrogenmayhaveadetrimentaleffectontheintegrityofthepipelineduetoembrittlement,45whichcaninfluencethefatiguebehaviourofthepipelinematerial,acceleratingcrackgrowthandreducingitslifetime.Hydrogenpipelinedesignwillneedtofollowcertaincodesunderexpertjudgement.TheAmericanstandard,ASMEB31.12,iscurrentlytheonlyonetoprovidespecificrequirementsforhydrogen.46Itimposesstricterrulesthanfornaturalgaspipelinestolowertheriskofembrittlement,includingsomelimitationsontheuseofhigh-strengthsteelsunlesssubjecttotesting(Monsma,2022).47Theembrittlementriskaffectshowthepipelinewillbeoperated,withlessflexibilitypermittedinordertominimisepressureswings,suchasfromcyclicloadingandlinepack.48Hydrogentransmissionpipelinesbuiltinupcomingdecadeswillhavemarkedlydifferentcharacteristicsfromtoday’spipelinestoovercometheseproblems(Table5.2).Compressionrequirementsaredifferentforhydrogenpipelinesthanfornaturalgaspipelines.Onaverage,atransmissionpipelinecantransport10-20%lessenergyashydrogenthanasnaturalgasforasimilarpressuredrop,assumingthatthevelocityofhydrogenisapproximatelythreetimeshigher(GonzálezDíezetal.,2022).Moreturbinesormotorsandmorepowerfulcompressorsarerequiredtohandlethelargervolumes(seeCompressorsforHydrogenTransmissionandStoragebelow).45Hydrogenembrittlementisametal’slossofductility,i.e.thematerial’sabilitytobedeformedwithoutbreaking,andareductionofitsloadbearingcapability.Theabsorptionofhydrogenatomsormoleculesbythemetalresultsinmaterialseparation(cracking)and,ultimately,embrittlement.46Manyexistingcodesareunderrevisiontoaddhydrogen-relatedrequirements.47Low-strengthsteelsexposedtohydrogengenerallyretainhighlevelsofductility,whilehigher-strengthsteelsmayhavereducedductility,increasingtheriskofembrittlement.Higher-strengthsteelallowsthewalltobethinnerforthesameoperatingpressure,reducinglogisticalandconstructionwork,suchaswelding.48Linepackreferstostoringgasinapipelinebycompressingit,increasingthepressureofthepipeline.Theamountofgasinjectedintoapipelinemaydifferfromtheamountofgaswithdrawnataspecifictime,providingshort-termoperationalflexibilitytomatchsupplywithdemand.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE307IEA.CCBY4.0.Table5.2CharacteristicsofexistinghydrogenpipelinesanddesiredfeaturesofnewonesObjectiveCharacteristicsofexistingH2pipelinesFeaturesofnewH2pipelinesIncreaseH2carryingcapacityLargestpipelineshave18-inchdiameterBiggerpipelines,e.g.with~36-48-inchdiametersDecreasepipelineinvestmentcosts-minimisewallthicknessLowsteelgradesareused,generallybelowX52HighersteelgradesareusedtoreducetheamountofsteelneededMakeoperationsmoreflexibleLoadsarestaticPipelinescanwithstandpressureswingsresultingfromcyclicloadingandlinepackX52isagradeofsteelwidelyusedforoilandgaspipelines.Thetwo-digitnumberfollowingthe“X”indicatestheminimumyieldstrengthofthepipeline(inthousandpsi[poundspersquareinch]).Note:Thedesiredcharacteristicsofnewhydrogenpipelinesareassumedtomeettheobjectiveswithoutaffectingtheintegrityofthepipelineandwithoutincreasingtheriskofembrittlement.HydrogenshippingExportinghydrogenbyshipwillbeessentialforsomecountriestotakeadvantageoflow-costopportunitiestoproducelow-emissionhydrogen,whileothercountrieswillhavetorelyonimportstocovertheirhydrogenneeds.ShippinghydrogenintheformofLH2is,however,acomplextask,givenitslowvolumetricdensityandlowliquefactiontemperature.WhileshippinghydrogenintheformofammoniaorLOHCoverlongdistancescanbedonewithexistingtankertechnologies,ifreconversiontohydrogenattheimportlocationisneeded,theoverallefficiencywouldbe60-70%49,asenergyconsumptionduringthelaststageisrelativelysignificant.IntheNZEScenario,around20Mtoflow-emissionmerchanthydrogenistradedin2030,50themajorityassumedtobeintheformofLH2orammonia,witharound73Mttradedin2050,equaltoalmost21%ofglobalmerchanthydrogendemand(Figure5.17).In2050,75%ofinterregional51tradeofhydrogenandhydrogen-derivedfuelsisintheformofLH2orammonia(NH3).Hydrogenisalsotradedassyntheticliquidfuel,primarilyforaviation,correspondingtoone-thirdofsynthetickerosenedemandin2050.49Overallefficiencyofhydrogentransportreferstototalenergyconsumedtoconverthydrogentoahigher-densitycarrier,storeit,shipitandreconvertittodelivergaseoushydrogen.50TheNZEScenariocoversinterregionaltradeofgaseoushydrogenbypipelineandasLH2byship,aswellasshipmentsofammoniaandsyntheticliquidfuels.Otherhydrogencarriers,suchasLOHC,havenotyetbeenexplicitlymodelled(IEA,2022c).51Interregionaltradereferstothetransportofhydrogenandhydrogen-derivedfuelsamongregionscoveredbytheGlobalEnergyandClimateModel,butnotamongcountrieswithinthesameregion.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE308IEA.CCBY4.0.Globalproductionoflow-emissionmerchanthydrogenandinterregionaltradeintheNZEScenarioIEA.CCBY4.0.Notes:MtH2=milliontonnesofhydrogen;LH2=liquefiedhydrogen;NH3=ammonia.InterregionaltradeisbasedonregionsmodelledintheNZEScenario.TradeinLOHCisnotexplicitlymodelledintheNZEScenario.Some16%ofglobalmerchanthydrogensupplyisshippedasLH2orammoniain2050,withmorethan65%ofexportscomingfromemergingeconomiesintheNZEScenario.TheprojectedpaceofglobalexpansioninLH2andammoniashippingintheNZEScenarioisevengreaterthanliquefiednaturalgas(LNG)growthduringthefirst25yearsofitsdevelopment,whichstartedinthemid-1970s.By2030,LH2andammoniashippingisalreadyequivalenttomorethan10%ofcurrentLNGtradeinenergyterms;thissharerisestoone-thirdby2050(Figure5.18).Expansioninhydrogenshippingwillrequiretheconstructionofmanytankersaswellasexportterminalfacilities.Kick-startinghydrogentradeinthenextfewyearswillhingeonthecommercialisationofemergingtechnologiesforhydrogentransportandconversion,notablytankersforLH2,andthedevelopmentofcodesandregulationsforthebulktransportofliquefiedhydrogenanditsuseasafuel.HydrogenshippedasLH2orammoniaislessenergy-denseinvolumetrictermsthanLNG,soinfrastructurerequirementsaregreaterintermsofspaceatportfacilitiesandnumberofships.LH2tankersthataretobecommercialisedbytheendofthecurrentdecadearelikelytobesimilarinvolumetoLNGtankers,andammoniatankerswillbehalfasbig,withbothcarryingone-thirdoftheenergycontentpershipment(Figure5.19).EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE309IEA.CCBY4.0.Interregionaltradeandinfrastructureforshippinglow-emissionhydrogenintheNZEScenariocomparedwithhistoricalLNGtradeIEA.CCBY4.0.Notes:EJ=exajoule;LNG=liquefiednaturalgas;LH2=liquefiedhydrogen.FortheLNGtankercount,smallandmedium-sizedtankers,icebreakersandbunkeringvesselsarenotincluded.HydrogentradedasanLOHCisnotexplicitlymodelledintheNZEScenario.WhilehydrogenshippedasLH2orNH3in2050intheNZEScenarioisequaltoone-thirdoftoday’sLNGtradeinenergyterms,theirlowerdensityrequiresalmostasmanytankers.TankercapacityinenergyandvolumetermsbyenergycarriertypeintheNZEScenario,2030IEA.CCBY4.0.Notes:PJ/tanker=tankercapacityinpetajoule;1000m3/tanker=tankercapacityinthousandcubicmetres;LH2=liquefiedhydrogen;LNG=liquefiednaturalgas;LOHC=liquidorganichydrogencarrier;m3=cubicmetre.LNGtankersizecorrespondstotheaveragesizeoftankersbuiltsince2000;LH2tankersizetothesizeexpectedbyshipmanufacturers.Whilecurrentammoniatankersareoftensmaller,itisassumedthatammoniawillbetransportedbyverylargegastankerstoaccommodatetheexpectedincreaseinammoniatrade.LOHCtankersaresupposedtocarrymethylcyclohexane,andoilproducttankerstocarrydiesel.ItisassumedthatoilproducttankerscouldcarryLOHCtankers.In2030,LH2tankersareexpectedtobesimilarinvolumetoLNGtankersandammoniatankerstobehalfasbig,withbothcarryingone-thirdoftheenergycontentpershipment.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE310IEA.CCBY4.0.LH2transportShippinghydrogenintheformofLH2maybeespeciallyattractiveinplaceswhereendusersrequirehigh-purityhydrogen.Whilehydrogenliquefactionandstoragetechnologieshavebeenusedfordecades,mostlyinthespaceandpetrochemicalindustries,theyhaveneverbeendeployedonthescaleprojectedintheNZEScenario.Theworld’sfirstandonlyshipmentofliquefiedhydrogenfromAustraliatoJapantookplaceinFebruary2022,aspartoftheHydrogenEnergySupplyChain(HESC)demonstrationproject(HESC,2022).Atthecommercialphase,theHESCprojectaimstoproduce225kilotonnesperyear(ktpa)ofLH2.Anumberofothersuchprojectshavealsobeenannounced,forexampleinAustraliaattheportsofGladstoneandTownsvilleinQueensland,andatKwinanainmetropolitanPerth.TheportofSines(Portugal)isalsostudyingthefeasibilityofLH2trade.Announcedprojectscouldboostglobaloutputto0.6Mtby2030iftheyallmaterialise(IEA,2022b).Hydrogenliquefactionisareasonablywell-establishedtechnologywithatotalglobalcapacityofaround500tonnesperday(tpd)attheendof2021(IEA,2022b).However,improvementsarerequiredforittobedeployedonalargerscale,aswellastolowercostsandimproveefficiency.Themostrecentplantsconsumeapproximately10kilowatt-hoursofelectricityperkgofH2(kWh/kgH2)–equivalenttoaround30%oftheenergycontentofthehydrogenproduced(basedonlowerheatingvalue).Thesizeoftheplantsinoperationorunderconstructionisstillbelow100tpd.However,largeLH2plantsareplannedatthefutureexportportterminalsmentionedabove,withcapacitiesinthe100-800tpdrange.Improvementsareexpectedtoraiseefficiencyinlargerplantsto6-8kWh/kgH2by2030intheNZEScenario.52Duetohydrogen’slowboilingpointcomparedwithnaturalgas(-253°Ccomparedwith-162°Cfornaturalgas),specialthermalinsulationisneededtominimisehighboil-offratesduringstorage.53Large-scaleLH2storagetechnologyinusetodayhaschangedlittlesincethe1960s,withtanksoftenfeaturingdouble-shellvacuuminsulation.Innovationisneededtoenlargetanksfromtheircurrentvolumeoflessthan5000cubicmetre(m3)tosizessimilartothoseusedforLNG,whichtypicallyrangefrom40000to200000m3.52TheStrategicResearchandInnovationAgenda(SRIA)2021-2027oftheEuropeanUnionCleanHydrogenJointUndertakinghasanenergyintensitytargetof6-8kWh/kgH2by2030(CleanHydrogenJointUndertaking,2022),whiletheUSDepartmentofEnergy(DOE)TechnicalTargetsforHydrogenDeliveryhaveanultimategoalof6kWh/kgH2.53Despitetankinsulation,smallamountsofheatwillcausegasevaporation,knownasboil-off,whichmustberemovedtoavoidanincreaseinpressure.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE311IEA.CCBY4.0.Table5.3Announceddesignsforliquefiedhydrogentankersexpectedtobecommercialbefore2030CompanyH2cargocontainmentCountryApprovalinprincipleVolume(m3)KoreaShipbuilding&OffshoreEngineering(KSOE),HyundaiMipoDockyardSphericalKoreaKoreanRegisterofShipping(KRS)20000SamsungHeavyIndustriesTypeCKoreaAmericanBureauofShipping(ABS)20000C-JobNavalArchitects,LH2EuropeSphericalNetherlands-37500KawasakiHeavyIndustries(KHI)SphericalJapanNipponKaijiKyokai(ClassNK)160000SamsungHeavyIndustriesMembraneKoreaLloyd’sRegister160000GTTMembraneFranceDNV-Anapprovalinprincipleisanindependentassessmentofconceptualandinnovativeshipbuildingwithinanagreedframework,confirmingthattheshipdesignisfeasibleandthatnosignificantobstaclesexisttopreventtheconceptfrombeingrealised.Note:m3=cubicmetre.Source:IEAanalysisbasedoncompanyannouncements.ShippingLH2issimilartoLNGbut,likeforstorage,boil-offratesduringthevoyageshouldbeminimised,forinstancebyusingdouble-shellvacuuminsulationtanksormembrane-basedinsulationsystems.54Inaddition,LH2shipsaimtousehydrogenboil-offasfuelfortheloadedlegofthejourney,employingitasalow-emissionshippingfuelwhileavoidingtheneedtoventit.Theworld’sfirstLH2shipbuiltfortheHESCdemonstrationproject–theSuisoFrontier,madebyKawasakiHeavyIndustries–hasacapacityof1250m3(75tonnesofLH2pertrip)andusesdouble-shellvacuuminsulationtanks(HESC,2022).Severalothercompaniesareworkingondesignconceptswiththeaimofcommercialisingthemby2030,whichissubsequentlyassumedintheNZEScenario(Table5.3).LH2tradeintheNZEScenarioisprojectedtotakeoffmuchmorerapidlythanLNGtradedidafterthefirstoceanshipmentin1959.Sincethen,thesizeoftheLNGtankerfleethasincreasedmorethan50times,from5000m3tomorethan260000m3forQ-maxLNGtankers.LH2tankerdesignswillbenefitfromthisexperience.AccordingtoproposedKHIandSamsungHeavyIndustrydesignsfortankersthatcouldbeinoperationby2030,theircapacitieswillbe130timesgreateronaveragethanthefirst1250m3demonstrationshipmentoftheSuiso54MostlargenewLNGtankersaremembrane-typeshipswithprismaticcargotanksanddoubleinsulationsystems,butmanyinthecurrentoperatingfleetareMoss-type(namedafterthecompanythatfirstdesignedit),characterisedbysphericalself-supportingcargotanks(fourorfivedependingonthesize)thatusuallyextendhalfwayabovethedeck.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE312IEA.CCBY4.0.Frontiertankerin2022(thestoragetankisexpectedtobe32timeslargerbuttherewouldbefourstoragetanksinsteadofone)(Figure5.20).GlobalLNGtradeandlargestLNGandLH2tankersizesIEA.CCBY4.0.Notes:LNG=liquefiednaturalgas;LH2=liquefiedhydrogen;m3=cubicmetre;bcm=billioncubicmetres.Sources:IEAanalysisbasedonCedigaz(2018);ICIS(2022)andHESC(2022).Ittookalmost50yearsforLNGtankerstoreachthesizethehydrogenindustryaimstoachieveforLH2tankersby2030,leveragingknowledgegainedfromLNGshipping.AmmoniatransportAbout70%ofammoniaiscurrentlyusedforfertiliser,includingthedownstreamuseofitsderivatives,whiletheremainderisemployedforvariousindustrialapplicationssuchasplastics,explosivesandsyntheticfibres(IEA,2021).IntheNZEScenario,ammoniaisalsousedasafuelinpowerplantsandforshipping,andasahydrogencarrierthatcanbecrackedtodeliverhydrogen.Ammoniaiscurrentlyproducedusingnitrogensourcedfromtheairandhydrogen,70%ofwhichisproducedthroughsteammethanereforming(SMR)ofnaturalgasandtheremaining30%mainlyfromcoal(mostlyinChina).Globalammoniatradeamountstoaround20Mt–equaltojustover10%ofglobalammoniasupplyofaround182Mtin2019(IEA,2021).Ammoniatradeissmallrelativetooutput,asotherammoniaderivatives,particularlyurea,offeramoreconvenientwaytotransportnitrogenforfertiliser.Somecountriesalsofavourdomesticproductionforreasonsofindustrialactivityandfertiliserself-sufficiency.Themainexportershaveaccesstoabundantnaturalgasreservessocanproduceammoniaforexportatrelativelylowcost.Large-scaleinfrastructureforammoniastorageandtransportusingmaturetechnologiesalreadyexistswithwell-establishedinternationalshippingroutes(Figure5.21).50000100000150000200000250000300000100200300400500600195019601970198019902000201020202030Tankersize(m³)LNGtrade(bcm)LNGtrade(leftaxis)LNGtankersize(rightaxis)LH₂tankersize(rightaxis)MethanePioneerMethanePrincessE.T.Corp.fleetforAsianmarketStandardsizeincreasesQ-FlexandQ-MaxSuisoFrontierHESCscale-upx130x5x5EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE313IEA.CCBY4.0.Accordingtoplannedexport-orientedprojects,anestimated6Mtoflow-emissionhydrogentradedasammonia(equivalentto34Mtofammonia)couldcomeonlineby2030–10MtshortoftheNZEScenarioprojection(equaltofivetimescurrentglobaltradeoffossil-basedammonia).Asubstantialexpansionofexistingportandshippinginfrastructurewouldbeneededtoaccommodatethisincrease.Tradecontinuestoriseto30Mtoflow-emissionhydrogen(168Mtofammonia)by2050,equaltoalmosttentimescurrenttrade.Internationalammoniatradeflowsviashipping,2019IEA.CCBY4.0.Notes:Onlyflowsgreaterthan0.1Mtareshown.Totalammoniashippingamountedto20Mtin2019.Source:IEAanalysisbasedonCEPII(2022).Differencesinammoniaproductioncostsdrivetrade,ascountrieswithabundantnaturalgasreservescanproduceammoniaforexportatrelativelylowcost.Over120portsworldwidecanhandleammoniaonalargescale.Expandingthecapacityofterminalssubstantially,asrequiredafter2030intheNZEScenario,wouldhingeonenlargingexistingfacilitiesandcreatingnewones,includingtoserveemergingtraderoutesforlow-emissionammonia.Makingspaceavailableinoftencongestedportsmaybetricky,asammoniahandlinghastomeetstricttechnicalstandards,includingdistanceconsiderationsforsafetyreasons.Inaddition,whilesomeexportprojectsmaybeabletomakeuseofexistingportinfrastructure,ammoniaderivedfromelectrolytichydrogenwouldcomelargelyfromareaswithgoodrenewableresources,whereinfrastructureforammoniaexportsorevenwell-developedportinfrastructurewithdeepwaterberthsmaynotexistyet.Ammoniastoragecapacityatportsisoftenintherangeof15-60kt,thoughsomelargeimportandexportportshavecapacitiesofmorethan100kt.Storagecapacityatimportandexportterminalsworldwidetotalsalmost5Mt.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE314IEA.CCBY4.0.Assumingthatimportandexportstoragetanksareloadedandunloaded15timesperyear,theprojectedexpansionofglobalammoniatradeintheNZEScenariowouldrequire12Mtofstoragein2030and22Mtin2050.Ammoniaisshippedinfullyrefrigeratednon-pressurisedtankersoftendesignedtocarryliquefiedpetroleumgas(LPG)(aslongasnopartscontainingcopperorzincortheiralloysareincontactwiththecargo).Thereareabout200gastankersinoperationacrosstheworldcapableoftransportingammonia,40ofwhichareinexclusiveuse(DNV,2022a).Theyrangeinsizefrom30000to80000m3(2055ktofammonia),withthelatestordershavingcapacitiesofupto87000m3(MOL,2021).TheincreaseintradeenvisionedintheNZEScenarioimpliestheneedforverylargegastankers,oftenexceeding80000m3,toshipammonia.By2030,morethan175verylargegastankerswouldneedtobededicatedyear-roundtolow-emissionammoniashipping,increasingtoalmost300in2050.Tankermanufacturingcapacitymaystruggletokeeppacewiththeseneeds,givencompetingdemandfromothersectors(seeMaterialNeedsandSupplyChainsbelow).Theamountofammoniathatcanbedirectlyconsumedforemergingenergyusessuchaspowergenerationorasafuelforshippingdependsoninnovation.Low-emissionhydrogencanalsobetemporarilyconvertedintoammoniaforlong-distancetrade,forwhichshippingandstoragetechnologiesarealreadymature(unlikeforLH2),andthenreconvertedbackintohydrogenusingammoniacrackers.Ammoniacrackingiscurrentlycarriedoutathightemperaturesandisthereforehighlyenergy-intensive,consumingroughly30%ofthefuel’senergycontent.Ammoniacrackingatlowertemperatures(lessthan450°C)islessenergy-intensivebutinvolvestheuseofcatalystsmadewithexpensivepreciousmetals.Theuseoflow-temperatureammoniacrackingwithnoorlimiteduseofsuchpreciousmetals,whichisnotyetcommercial,acceleratesintheNZEScenarioafter2030.RecentprogressmadebycompaniessuchasThyssenkruppUhdeandTopsoesuggeststhisisachievable(IEA,2022b).HydrogentransportcostsLoweringcoststhroughtechnologicaladvancesiscriticaltoraiseprospectsforhydrogentransport,particularlyforcross-bordertrade.Itislikelythat,wherefeasible,onshoreoroffshorepipelineswillbepreferred:itisthemostefficientandleastcostlywaytotransporthydrogenuptoadistanceof2000-2500kmforcapacitiesbelow600ktpain2030intheNZEScenario(Figure5.22).Large-diameterpipelinesmaybecheaperevenoverlongerdistanceswherefeasible;however,hydrogenproductionanddemandmaybetoosmallinitiallytojustifyinvestmentinalargepipeline(withsignificantoversizinguntilproductiongrows),ortheconstructionofapipelineacrossdifferentjurisdictionsmaybeimpracticable.ItisgenerallymoreaffordabletositeelectrolytichydrogenEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE315IEA.CCBY4.0.productionfacilitiesnexttoapowergenerationsourceandtransportthehydrogentodemandcentres,ratherthantransmitelectricityoverlongdistances.Indicativelevelisedcostofdeliveringhydrogen,bytransportoptionanddistanceintheNZEScenario,2030IEA.CCBY4.0.Notes:HVDC=high-voltagedirectcurrent;H2=hydrogen;ktpa=kilotonnesperyear;LH2=liquefiedhydrogen;LOHC=liquidorganichydrogencarrier(methylcyclohexaneconsidered);USD/kgH2=USDperkilogrammeofhydrogen.Hydrogenpipelinesrefertoonshoretransmissionpipelinesoperatingat25-75%oftheirdesigncapacityfor5000full-loadhours.ElectricitytransmissionbyoffshoreHVDCindicateselectricitytransmissionrequiredtoobtain1kgH2inanelectrolyserwith69%efficiency.Transportcostsbyshipincludeinvestmentandoperationalcoststoconverthydrogentoahigher-densitycarrier,storeit,shipitandreconvertittodelivergaseoushydrogen.Shippingcapacityrangecorrespondstotheannualcapacityofaportterminalwith10to30shipmentsperyear.Wherefeasible,pipelinesarethecheapesthydrogentransportoptionuptoacertaindistance,whileforlongerdistancesshippingbecomesmorecost-effective.In2030,LH2tankertechnologyisexpectedtoreachtheearlycommercialisationphase,withtransportcostsofdeliveringhydrogenaveragingUSD2.0-3.7/kgH2foran8000-kmtripintheNZEScenario.55ThecostofhydrogenshippingasLH2isdrivenbythecostfortheLH2storagefacilitiesatboththeexportandimportports(Figure5.23).ThecostsofshippingammoniaandLOHCareexpectedtobelower,atUSD1.9-2.2/kgH2andUSD2.0-2.5/kgH2respectively.However,theenergyneededtoconverthydrogenintoammoniaorLOHCandreconvertitbackisthemaincostcomponentforthesetwoshippingoptions.55Thelevelisedtransportcostofdeliveringhydrogenincludesinvestmentandoperationalcoststoconverthydrogentoahigher-densitycarrier,storeit,shipitandreconvertittodelivergaseoushydrogen.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE316IEA.CCBY4.0.Reducingenergyconsumptioncouldconsiderablyreducehydrogendeliverycosts,particularlysinceammoniaandLOHCreconversionrequiresenergyattheimportterminal,whereenergywouldgenerallycostmorethanattheportofexport.Incontrast,hydrogenliquefactionbenefitsfromlowerenergycostsattheexportterminal.Indicativelevelisedcostofdeliveringhydrogen,byshipping-optionstepanddistanceintheNZEScenario,2030IEA.CCBY4.0.Notes:LOHC=liquidorganichydrogencarrier(methylcyclohexaneconsidered);USD/kgH2=USDperkilogrammeofhydrogen.Thecostperstageincludesallcapitalandoperationalexpendituresexceptthoserelatedtoenergy,whichareillustratedseparatelywithapatternfill.Thediscountrateis5%.Itisassumedthatimportandexportterminalshandle20shipmentsperyearonaverage.StoragetanksarethelargestcostelementinshippinghydrogenasLH2,whilethecostofenergyforreconversionisthemainexpenseforammoniaoranLOHCashydrogencarrier.Overall,thecostofshippinghydrogenasLH2,ammoniaorLOHCisUSD16-31/GJby2030intheNZEScenario.Thisisconsiderablymorethantheaveragecostrangeofliquefaction,shippingandregasificationofnaturalgas,whichiscurrentlyaroundUSD3-7/GJ.However,ifhydrogencanbeproducedatlowcost,despitehighshippingcosts,itscostcouldbelowerthanrecentrecord-highinternationalgasprices.5656InQ32022,theEuropeanTTF(TitleTransferFacility[theNetherlands])naturalgaspriceaveragedUSD55/MBtu(USD52/GJ),andtheAsianspotpriceforLNGaveragedUSD45/MBtu(USD43/GJ)(IEA,2022d).EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE317IEA.CCBY4.0.BulkhydrogenstorageFourtypesofundergroundgeologicstorageinoperationtodayfornaturalgascouldalsobeusedtostorehydrogen:saltcaverns,depletedreservoirs(oilandgasfields),57salineaquifersandlinedhard-rockcaverns(IEA,2022e).Eachtypehasitsownphysicalcharacteristics,affectingthetypeofserviceprovided(Table5.4).Table5.4CharacteristicsoftypesofundergroundgeologicalstorageforhydrogenSaltcavernDepletedgasfieldSalineaquiferLinedhard-rockcavernSpecificinvestmentMediumLowLowHighLevelisedcostofstorageLowMediumMediumMediumCushiongas25-35%45-60%50-70%10-20%CapacityMediumLargeLargeSmallAnnualcyclesMultipleFewFewMultipleGeographicavailabilityLimitedVariableVariableAbundantThevolumeofgasrequiredaspermanentinventoryinastoragefacilitytomaintainsufficientpressuretomeetwithdrawaldemandsatahighrate,evenatlowstoragelevels.Depletedreservoirsandsalineaquifersarerelativelyabundantandaccountforaround90%ofexistingglobalgasstoragecapacity(IGU,2022).However,duetotheirporousnature,theyhavelimitedflexibilityandcanoperatewithonlyafewcyclesperyear.Theyplayaveryimportantroleinmeetingseasonalfluctuationsingasdemandandenhancingsecurityofsupplytoday.Saltcavernsaremoreflexible,withseveralcyclesperyear,buttheirgeographicalavailabilityislimitedandtheytypicallyhavelessworkingstoragecapacity.Linedhard-rockcavernscanundergoseveralinjectionandwithdrawalcyclesperyear,makingthemwellsuitedtopeakingpurposes,buttheyarecostlytobuild.Fast-cyclingsaltcavernsandlinedhard-rockcavernsaremoresuitabletomeetshort-termsupplyfluctuations,whichwouldbeparticularlyusefulforelectrolytichydrogen,whiledepletedgasfieldsandsalineaquiferscouldbeusedtostorelargeamountsofhydrogenbetweenseasonsandprovidesupplysecurity.TherapidgrowthinhydrogensupplyenvisionedintheNZEScenariocallsforacorrespondingincreaseinbulkstorageinundergroundfacilities,inadditiontostoragetanksatportterminals,hydrogenplants,industrialsitesofendusersandrefuellingstations.Globalbulkstoragecapacitywouldneedtorisefrom0.5TWh57Theterm“depletedgasfield”referstohydrogenstorageindepletedreservoirs,asitdominatesprojectannouncements.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE318IEA.CCBY4.0.atpresentto90TWh,or30billioncubicmetres(bcm),in2030and1300TWh(450bcm58)in2050,assumingcapacityequalto10%ofannualproduction,includingimports(Figure5.24).GlobalundergroundgeologicalstoragecapacityforhydrogenintheNZEScenarioandhistoricalgrowthinnaturalgasstoragebyregionIEA.CCBY4.0.Notes:bcm=billioncubicmetres(undernormalconditions);TWh=terawatt-hour.TheNZEScenarioassumesthatstoragecapacityequals3%oftotalannualhydrogendemandin2030and10%in2050.“Announcedprojects”areprojectsthatarenotyetoperational,includingthoseunderconstruction,withafinalinvestmentdecision,underfeasibilityassessmentorprojectsthathavebeenpubliclyannounced,e.g.throughapressreleaseoramemorandumofunderstanding.Sources:IEAanalysisbasedondatafromRystadEnergy(2022)andGIE(2021).RapidhydrogensupplygrowthintheNZEScenariowillrequireanincreaseinbulkundergroundstorage,equaltomorethantwicethatofnaturalgasoverthelast30years.Becauseofhydrogen’smuchlowervolumetricdensity,storagevolumein2050isclosetothatofnaturalgastoday,requiringanincreaseinvolumeofmorethantwicethatofnaturalgasduringthelast30years.Severalsaltcavernhydrogenstorageprojectsareindevelopment,eitheradjacenttoorinvolvingrepurposingofexistingnaturalgasstoragecaverns.Bothoptionsbenefitfromexpeditedpermittingprocesses,accesstoexistinginfrastructureandeasiersitingapprovalsthanforgreenfielddevelopments.Therearealsoseveralprojectsbeingplannedinvolvingrepurposingdepletedgasfieldsandaquiferscurrentlyusedforstoringnaturalgas.Moreresearchisneededtoevaluatetheeffectsofresidualnaturalgasindepletedfields,in-situbacteriareactionsinsalineaquifersanddepletedgasfieldsthatmaycontaminatethehydrogenorcauselosses,andtheriskofleakageduetothesmallersizeofthehydrogenmoleculecomparedwithmethane(naturalgas).Atpresent,thecombinedcapacityof58UndernormalconditionsEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE319IEA.CCBY4.0.plannedsaltcavernstorageprojectsforhydrogentobeavailableby2030amountstoaround3.2TWh,equaltoamere0.1%oftotalmerchanthydrogendemandintheNZEScenario.Undergroundstoragewillplayanimportantroleinprovidingflexibilitytotheenergysystem,particularlywherevariablerenewableenergysourcesdominatethepowergenerationmix,enhancingsecurityofsupply.However,currentresearch,developmentanddemonstrationactivityremainsworryinglyweak,especiallysincetheleadtimefromplanningtocommissioningsuchfacilitiescanbemorethanadecade.Whilehydrogenmaycompetewithnaturalgasforaccesstosuitablegeologicalformationsforbulkstorage,itisunlikelytocompetewithCO2,forwhichsaltcavernsandlinedhard-rockcavernsareunsuitable.Comparedwithhydrogenstorage,significantlymoreCO2storageisrequiredintheNZEScenario.Today,therearemorethan700undergroundnaturalgasstoragefacilitiesinoperationwithastoragecapacityofaround450bcm,similartothevolumeofhydrogenstoragerequiredin2050.Bycomparison,around86500GtofCO2(around48000bcm59)willhavebeencumulativelystoredinthousandsofCO2storagesitesaroundtheworldandsome3250bcmofCO2willbeinjectedforpermanentstoragein2050intheNZEScenario.Unlikehydrogenandnaturalgas,CO2storageisnotcyclical,sostoragecapacityneedstocontinuetogrowovertime.CO2storageindepletedoilorgasfieldsandinsalineaquifersisamorematuretechnologywithfewertechnicalconstraints,andalternativestorageoptionsaremorelimitedthanforhydrogen.ThissuggeststhatthemajorityoftheseresourceswouldprobablybedevelopedtostoreCO2ratherthanhydrogen.RegionsandcountriesshouldthereforeconsiderboththeirCO2andhydrogenstorageneedswhendevisingresourcedevelopmentstrategiesandplans.HydrogenrefuellingstationsToservethefuelcellelectricvehicle(FCEV)market,hydrogenrefuellingstations(HRSs)areessential.Over4600HRSswouldneedtobeinstalledby2030intheNZEScenariotosupportthegrowingfleetofheavy-dutyfuelcelltrucks,assuminganaveragenameplatecapacityofover2.5tonnesperday.60Attheendof2021,about730HRSsweredispensingfuelat350and/or700barsto880heavy-dutytrucks,3600medium-dutytrucks,4700busesandaround42000cars.CarefulplanningisneededtoavoidbottlenecksanddelaysinscalinguprefuellinginfrastructureinlinewiththeNZEScenario.Thetimeneededforpermitting,designapprovals,constructionandinspectionofcompletedstationsisgenerallyshort.In59CO2isconventionallypresentedastheamountofmassinjected:here,thenumberofbcmat15°Cand0.98barsallowsforcomparisonwithhydrogen.60ThetotalnumberofHRSsin2030intheNZEScenariowouldneedtobeevenhighertosupportfuelcellcars,vans,busesandmedium-dutytrucks.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE320IEA.CCBY4.0.California,themediantimetoopenanewstationhasbeenaround2.5yearsintherecentpast.Manufacturingofstationcomponents,ofbothcurrenttechnologiesnotyetdesignedforhigh-throughputrefuellingandinnovativecomponentsforhigherflowrates,wouldneedtorampupquickly.Majorstationcomponentsincludestoragetanks,compressors,heatexchangers,nozzles,hoses,breakawaysandreceptacles,andfueldispensers.Forheavy-dutytruckHRSswithacapacityofover1tonneperday,hydrogenwilllikelybedeliveredasLH2eitherbytankerorpipeline,sincelargenumbersofgaseoustubetrailerdeliveriescancomplicateoperations.Standardisedcomponentsdonotexistforliquidhydrogendispensing,sothisisnotlikelytoplayasignificantrolethisdecade.Innovativetechnologyisbeingdevelopedtoenablefastrefuellingoffuelcelltruckswith700-baronboardhydrogenstorage,toallowforfuellingtimesanddrivingrangescomparabletodieseltrucks.TheUSDOEhassetatargetflowrateof10kgperminutefortruckswithonboardstoragecapacityof60kg,whichwouldboostdrivingrangetoabout1200kmandcutrefuellingtimetojust6minutes(Marcinkoskietal.,2019).Refuellingprotocolscurrentlylimitflowratesforsafetyreasons,meaningthatrefuellingcantake30minutesorlongerfora40-kgtank.Theindustryisseekingtochangethoseprotocolstoallowforhigh-throughput700-barrefuelling,whichwouldrequirenewsafetystandardsforHRSsbytheInternationalStandardsOrganisation(ISO).Bothwillprobablytakeanotherthreetofouryearstobefinalised.TheUSNationalRenewableEnergyLaboratory(NREL)hasdevelopedsimulationmodelsandateststationtoencouragethedevelopmentoftechnologies,protocolsandstandards.InApril2022,NRELdemonstratedflowratesof14kg/minute.Asanextimportantstep,NRELplanstotestnewstationcomponents,suchasnozzlesandhoses,thathavebeenadaptedtothehighertargetedflowrates.Inaddition,flowcontrolstrategies,includingvalvesthatcontrolflowrates,mayneedtobereassessed.Commercialisationofthesenewstationcomponentsisexpectedtotaketwotothreeyears.Fuelprovidershavealreadybegunbuildingstationswithhighercapacitiestoserveheavy-dutyfuelcelltrucksandbuses.Forexample,aspartoftheHyAMMED/H2Haulproject,AirLiquidehasbuilta1-tonne-per-daystationinsouthernFrancetoserveeighttrucksandotherFCEVs(AirLiquide,2020).Thestationwasdesignedtoallowforupgradingtohigh-throughputrefuellingoncethenecessarycomponentshavebeentestedandqualified.ForaprojectwiththePortofLosAngeles,twoHRSswithcapacityof1.5tonnesperdayhavebeenbuilt.Inaddition,threeHRSsareplannedfortheR-HySEprojectinFrance,eachwithacapacityof2tonnesperday,tosupport50fuelcelltrucksby2025.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE321IEA.CCBY4.0.Becausecurrentstationsarenottechnicallycapableofprovidinghigh-throughputrefuellingthroughasinglenozzle,somefuelcelltruckshavebeendesignedformultiplefuellingpointssothatmorethanonenozzlecanbeusedconcurrentlytoreducerefuellingtimewithcurrentinfrastructure.Others,however,havemaintaineddesignswithsinglefuellingpointsandinsteadareworkingtoadvanceprotocolandtechnologydevelopments.MaterialneedsandsupplychainsHydrogenpipelinesSteelpipelinemanufacturingisawell-establishedindustry.Globalproductionofsteeltubularproductsisestimatedat130Mt,withpipelines(primarilyusedinoilandgasapplications)accountingfor28Mt,or21%ofthetotal(Trupply,2022).Thiscompareswith1900Mtofcrudesteelproducedannuallytoday.IntheNZEScenario,thefallingneedforoilandgaspipelinesastheglobalenergysystemisdecarbonisedispartiallyoffsetbyincreaseddemandforhydrogenandCO2pipelines.Thesteelrequiredfornewhydrogenpipelinesworldwideamountsto1.1Mtin2030and3.5Mtin2050intheNZEScenario–arelativelysmallfractionofcurrentsteelpipeproductioncapacity.Althoughpipelineswithsmallerdiametersneedlesssteel,theircarryingcapacityisproportionatelymuchless,increasingsteelintensityperunitofhydrogentransported.Forinstance,a20-inchpipeline(X70steel)usesaround30%ofthesteelofa48-inchpipeline,butthecapacityismorethantentimessmaller,sosteelintensityisalmostfourtimeshigher,raisinginvestmentandoperatingcostsaswellastheenvironmentalimpactofsteelproduction.Similarly,theuseofhigh-strengthsteelsallowsforthinnerwalls,cuttingsteelconsumptionby25%,forexample,whenX70steelisusedinsteadofX52fora48-inchhydrogenpipeline(80bars),thoughitismoreexpensive.However,aslessisknownabouttheiroperationalperformance,concernsaboutsafetycouldleadtoveryconservativedesigns,offsettingthesematerialgains(Golischetal.,2022).Inthelongterm,betterunderstandingofthebehaviourofhydrogenpipelineswillprobablyleadtolesssteel-intensivepipelines.Inaddition,lightercompositepipelineswithnoembrittlementriskmayalsobeusedforhydrogentransport,particularlyforoffshorehydrogen-productiongatheringlines(Strohm,2022).Whenpossible,repurposingexistingpipelinestotransporthydrogenorCO2couldreducesteelconsumption,pipelinecostsandtheenvironmentalimpactofmaterialmanufacturingandconstruction.Repurposingalsohasthepotentialtodramaticallyreduceleadtimes.CurrentpipemanufacturingcapacityseemstobesufficienttomeetprojecteddemandforhydrogenandCO2pipelinesthroughto2050intheNZEScenario.ButwhilethereareplentyofproducersoftubularsteelEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE322IEA.CCBY4.0.productsintheglobalmarket,thenumberoflaboratoriescapableofdoingthein-situgaseoushydrogentestingoftenrequiredforcertificationislimited,61whichmightcausebottlenecks(Martinetal.,2022).LiquefiedgastankersAswithpipelines,themainmaterialusedtobuildahydrogenorammoniatankerissteel,whichisneededtomakethehull,onboardequipmentandtankstructures.Buildingthe200shipsneededtotransportLH2andthe300shipstotransportammoniain2050intheNZEScenariowouldrequirealittleover7Mtofsteel,assumingthatammoniashipsarecomparableinsizetoverylargegascarriers(60000-80000m3)andthattheonesusedforLH2areclosertoLNGtankers.62ThisisequivalenttotheUnitedKingdom’scurrentsteelproduction,orabout0.01%ofprojectedglobalcumulativecrudesteeldemandby2050intheNZEScenario.However,althoughtheamountofsteelusedisrelativelysmall,liquefiedgastankersrequirespecificsteeltypesabletowithstandverylowtemperaturesinareasincontactorwithariskofbeingincontactwiththecargo.Inaddition,thesteelusedinshipbuildinghastobeverydurabletocopewithroughseas.CarbonmanganesesteelcanbeusedinpartsofLPGtankersthatareincontactwithornexttothecargo,suitablefortemperaturesaslowas-55°C,whilethemoreexpensive9%NisteeliscommonlyusedinLNGtankers,withstandingtemperaturesof-165°C.Inareasnotatriskofbeingincontactwiththecargo,steelsthatofferhighstrengthwithlimitedthickness(todecreaseweight)areused.Globalproductionofthecryogenicalloysusedissmall,andshipyardshaveagreementswithsteelmanufacturersthatsupplythemthespecifictypeofsteelneeded.Morethan170dedicatedyear-roundammoniatankersand20LH2tankersneedtobebuiltby2030intheNZEScenario,equaltoaround40%oftotalliquefiedgastankerdeliveriesoverthelastfiveyears.Thiscouldconflictwithdemandforothertypesofliquefiedgastankersandforvesselsingeneral,consideringthatliquefiedgastankersaccountedfor9%ofallshipsbuiltin2020intermsofgrosscargocapacity(UNCTAD,2021).Therefore,whileshipbuildingcapacitiesareunlikelytoconstraintheabilitytosupplytheseshipsinthelongerterm(towards2050),competingdemandsforshipscouldcausedelaysinthenearandmediumterm,particularlyduringthisdecade(Figure5.25).61RosenandSalzgitterMannesmannForschunginGermany,CorinthPipeworksinGreece,RINAinItalyandDNVintheUnitedStateshavefacilitiesforhydrogentestingincompliancewiththerequirementsoftheASMEB31.12standards.Mostofthemopenedinjustthelastfewyears.62ForcurrentPanamaxtypeshipswithanaveragecapacityofabout70000m3,theweightofthesteelismorethan11000tonnes.LargeLNGtankersusuallyhaveacapacityof140000-180000m3andneedabout20000tonnes.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE323IEA.CCBY4.0.GloballiquefiedgastankerdeliveriesbycountryandtypeintheNZEScenarioIEA.CCBY4.0.Notes:LH2=liquefiedhydrogen;LNG=liquefiednaturalgas;LPG=liquefiedpetroleumgas.FortheLNGtankercount,smallandmedium-sizedtankers,icebreakersandbunkeringvesselsarenotincluded.AmmoniaisoftenshippedintankersdesignedtocarryLPG,asithasalowerboilingpointthanammonia,soLPGtankersareusedasareferencefortankersthatcouldcarryammonia.Sources:IEAanalysisbasedonVesselFinder(2022)andUNCTAD(2021).Morethan170dedicatedammoniatankersand20LH2tankersneedtobebuiltby2030intheNZEScenario,equaltoaround40%oftotalgastankerdeliveriesoverthelast5years.Makingliquefiedgastankersismorecomplexthanbuildingmostothertypesofship,limitingopportunitiesfornewentrants.Itrequiresconsiderableco-ordination,asworkersneedtoassemblethousandsofdifferentcomponents,whichmustbemanufacturedcorrectlyandarriveintime.Thisisreflectedinthehigherpriceandlongerconstructiontimesofthesevessels(Brun,2017).Incumbentshipbuildersmaybebestplacedtodeveloptechnologiesforfuturegastankers,includingnewpropulsionsystems,andalsotobuildthem,giventhecomplexityofthesupplychainsandthetightschedules.Korea,ChinaandJapandominatethemarketforliquefiedgastankers.In2020,ChinaovertookJapanasthesecond-largestproducerofsuchtankers,whichhavehistoricallybeensuppliedmainlybyKoreanandJapaneseshipbuilders(UNCTAD,2021).BeforetheCovid-19pandemic,theshipbuildingsectorhadalreadybeenfacingfiercecompetitionandwasintheprocessofrestructuring,insomecaseswithgovernmentfinancialassistance,leadingtosomeconsolidationinthesectorinChinaandKorea(UNCTAD,2020).InKorea,HyundaiHeavyIndustries(theworld’slargestshipbuilder)triedtoacquireDaewooShipbuildingandMarineEngineering,whichwouldhavegivenitcontrolofatleast60%ofthemarketforLNGtankers(EuropeanCommission,2022b).Butin2022,theEuropeanUnionprohibitedtheproposedmergeronthegroundsthatitwouldreduceglobalLNGtankermarketcompetition,potentiallyrestrictingsuppliesandraisingprices,andEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE324IEA.CCBY4.0.ultimatelyincreasingthecostofenergyforEuropeanconsumers.SomeJapanesecompanieshavemovedintoother,moreprofitablebusinesses,andothershavegonebankrupt.WhileshipbuildingcapacityisconcentratedintheAsia-Pacificregion,wheremostproducersarelargelyself-sufficientformaterialinputs,hydrogenequipmentisalsomanufacturedbycompaniesheadquarteredandwithfactorieselsewhere,notablyinEuropeandNorthAmerica.Forexample,GTTandICT,whichmanufacturetankmembranesystemscompatiblewithammoniaandhydrogenrespectively,arebothbasedinEurope.AccordingtoGTT’sorderbook,137ofthe161membranesystemsitistodeliverby2025,mainlytoshipbuildersinAsia,willequipLNGtankerswithcapacitiesgenerallygreaterthan170000m3(GTT,2022).CompressorsforhydrogentransmissionandstorageWithoutmajorfacilityorworkforceadaptations,companiesalreadyactiveinthissectorareabletomanufacturecompressors(includingnewhigh-speedcentrifugalcompressors)fornewhydrogenpipelinesandforinjectingthegasintoundergroundstoragefacilities(Table5.5).Table5.5SelectedcompaniescommercialisingorplanningtocommercialisecompressorssuitableforhydrogentransmissionandstorageCompanyCountryCompressortypeAtlasCopcoSwedenCentrifugalcompressorsBakerHughesUnitedStatesHydrogen-readyturbo-compressioncentrifugalcompressorsBurckhardtCompressionSwitzerlandReciprocatingcompressorsDenairChinaReciprocatingcompressorsSiemensGermanyCentrifugalcompressorsKawasakiHeavyIndustryJapanCentrifugalcompressorsMANEnergySolutionsGermanyHydrogencompressionforpipelinesMitsubishiHeavyIndustriesJapanWorkingonimprovinghigh-speedcentrifugalcompressorsforhydrogen(readyin2023-2024)Neuman&EsserGermanyReciprocatingcompressorsSIADMacchineImpiantiItalyReciprocatingcompressorsEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE325IEA.CCBY4.0.Thematerialsneededtomanufacturethemareeasilyobtainedandunlikelytobeaffectedbymajorbottlenecks.Forcapacitiesofupto2GW,currentstate-of-the-artpistoncompressorsarethemosteconomicalsolution,withseveralcompaniesmanufacturingthemaroundtheworld.Largercapacitiesrequirecentrifugalcompressors(whichuseturbomotors)toimproveefficiency.Thetechnologyisnotyetcommerciallyavailable,butitisexpectedtobecomesointhenextfewyearsifsufficientdemandmaterialises.PotentialleadtimesforhydrogeninfrastructureLeadtimestobuildnewhydrogeninfrastructurearelikelytovaryfromcountrytocountryandprojecttoprojectduetodifferencesinseveralfactors,notablyregulations,permittingrules,publicacceptanceandconformitywithstandards,commontomostenergyinfrastructureprojects(Box5.1,above).Naturalgasinfrastructureleadtimesareagoodindicationofhowlongitwilltaketocompletehydrogenprojectsduetosimilaritiesinprojecttypesandinmanufacturing/constructionprocesses(Figure5.26).Ingeneral,thelargertheprojectandthegreatertheenvironmentalimpact,thelongerplanningandconstructiontake.Gasinfrastructureprojectstypicallyhavelongleadtimes;similarleadtimesforhydrogenprojectscouldposeamajorthreattothetimelyexpansionofinfrastructureneededtoachievenetzeroemissionsbymid-century.Planningandpermittingofmostrecentnaturalgaspipelinestooktwotoeightyears,butsomeoftheseprojectshadbeendiscussedfordecadesbeforeafeasibilitystudywasinitiated.Constructionusuallylastsaroundthreeyearsforbothonshoreandoffshoreprojects,butsomepipelineswerecompletedinlessthantwoyears,suchastheonshore440-kmNorthEuropeanNaturalGasPipelineinGermanycommissionedin2013andtheoffshore275-kmBalticPipebetweenPolandandDenmarkcommissionedin2022(BalticPipeProject,2022).LNGterminalsprovideanindicationofpotentialleadtimesforLH2exportandimportterminals.Theyusuallytakethreetofiveyearstobuild,whiletheentireplanningandconstructionprocess,includingthepreparationoffeasibilitystudies,cantakeupto12years.TheconstructionperiodforanonshoreLNGterminalisdeterminedbytheamountoftimeneededtoinstallthestoragetanks,whichusuallytakesabout30monthsforengineeringandconstruction.Thissetstheschedulefortheentireproject,includingtheprocurementofothercomponents.Theotherelementthatismosttime-consumingisconstructionofthejetty,thoughinsomecasesjetty-lessfloatingtechnologycanbeused,enablinggastransferbetweenthetankerandanoffshoreoronshoreterminalwithoutajetty.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE326IEA.CCBY4.0.Floatingterminalscanbedeliveredinhalfthetimeofanonshoreterminal.Constructionofonshoreinfrastructureratherthandevelopmentoftheunititselftypicallydeterminestheleadtime.ConvertinganLNGvesseltoafloatingstorageandregasificationunit(FSRU)cantakeonetotwoyears,whiletheconstructiontimeforanewoneisabouttwotothreeyears.MovingexistingFSRUsfromoneplacetoanothercanalsobecarriedoutquickly.ThesameyardavailabilityconsiderationsasforshipsappliestonewFSRUs.Permitting,approvalandlocaloppositioncandelayprojectssubstantially.InresponsetotheRussianinvasionofUkraine,somerecentlyplannedFSRUprojectsinEuropearemovingaheadinlessthanayearandnewregulationsarebeingenactedtoreduceleadtimes,suchastheGermanLNGAccelerationActpassedinMay2022(Germany,BMWK,2022).LeadtimesofselectednaturalgasinfrastructureprojectsIEA.CCBY4.0.Notes:LNG=liquefiednaturalgas.Averageleadtimesarepresentedforundergroundgasstorage,LNGterminals,floatingLNGterminals,gastankers,andonshoreandoffshorepipelines.Barsrepresentsaverageleadtimesandlinesdepicttypicalrangesbasedonselectedrecentprojects.Developingnewgasinfrastructuretakesconsiderabletime,soplanningmuststartwellinadvanceandstrategiestoshortenleadtimesshouldbeexplored.Theconstructionofverylargegastankers(oftencalledverylargegascarriers)fortransportingLPG,whichservesasaproxyforammonia,usuallytakesaboutayearandatankerfortransportingLNG,whichcouldserveasaproxyforanLH2tanker,takestwotofouryears.However,actualleadtimescanbelongerbecauseconstructionmaynotbeginassoonastheorderisplacedifcapacityattheshipbuildingyardisunavailable.Alongorderbook,includingdemandforothershiptypessuchascontainerships,maydelaytheconstructionandcompletionofliquefiedgastankers:forexample,severalLNGtankersorderedin2022arenotexpectedtobedeliveredbefore2026(DART,2022;TheMaritimeExecutive,2022).Totalyardcapacityhasremainedconstantsince2019,butthenumberofEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE327IEA.CCBY4.0.activeoneshasdecreasedby16%to283atpresent(DanishShipFinance,2022).Only26yardsarenowbuildingLNGandLPGtankers,andorderbooksarefairlyfullinmanyyards,withnocapacityavailablefornewLNGordersuntil2027(BangkokPost,2022).Developingundergroundstoragefacilitiesforhydrogenislikelytoinvolveconsiderableleadtimesunlesstheyarebasedonexistingnaturalgasfacilities.Undergroundnaturalgasstorageprojectshaveleadtimesoffivetotenyearsforsaltcavernsanddepletedreservoirs,and10-12yearsforaquiferstorage(IEA,2022b).Forhydrogenstorageprojects,whichwouldundoubtedlymakeuseofsaltcaverns,evenlargertimelagscanbeexpectedatthebeginning,aspracticalexperiencewithsuchfacilitiesisverylimited.Whilepermittingwouldprobablybemuchquickertorepurposeexistingnaturalgasstoragefacilities,theflushingtimeforasaltcavern–thetimeittakestoflushouttherocksaltdepositbyinjectingwatertocreatespaceforthegas–isgenerallytwotofiveyears(Neuman&EsserGroup,2022).TheHyStockprojectintheNetherlandsestimatesthatpermittingandconstructioncouldtakeaboutsevenyearsintotal,notincludingtheplanningphase(Hystock,2022).EnergyneedsandemissionsTheenergyconsumedintransportinglow-emissionhydrogenworldwidetodeliverhydrogenandammonia63isprojectedtorisefromalmostzeroatpresenttoaround700PJin2030(equivalentto0.2%oftotalfinalenergydemand),andtomorethan2000PJin2050(0.6%)intheNZEScenario(Figure5.27).Expressedasashareoftheenergycontentofthehydrogentransported,energyconsumptionfortransportationamountsto7%in2030and5%in2050.Althoughonly16%ofmerchanthydrogenisshippedasLH2orammoniain2050intheNZEScenario,shippingaccountsformorethanthree-quartersofalltheenergyrequiredtomovehydrogenfromwhereitisgeneratedtocentresofdemand,includingthroughinterregionaltradeandintraregionalhydrogentransmissionviapipeline.Thisisbecauseshippinghydrogen,regardlessofthedistance,requires8-17kWh/kgH2ofenergytoconvertthehydrogentoaformwithahigherenergydensity(involumeterms)and/orreconvertitbacktohydrogenwhenacarrierisused,i.e.themaximumoverallefficiencywouldbe66-81%.64Hydrogentransportbypipelinedoesnothavesuchanenergypenalty,asenergyconsumptionincreasesproportionallywithdistance.Hydrogentransportthrougha48-inchpipelineoveradistanceof8000km(operatingatleastat75%63Energyconsumedtotransportlow-emissionhydrogenasasyntheticfuelisnotincludedinthissection.64Overallhydrogentransportefficiencyistheratioofnetenergyprovidedbythedeliveredhydrogendividedbythatquantityandthetotalenergyconsumedduringcompressionorconversionofthehydrogenintoahigher-densitycarrier,anditsstorage,transportandreconversionintohydrogengas(whenrequired).EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE328IEA.CCBY4.0.ofitsdesigncapacity)requires4-7kWh/kgH2ofenergyforcompression,whichwouldresultinmaximumoverallefficiencyof82-89%.Theconstructionandoperationofapipelinetotransporthydrogenover1000kminvolvesenergyconsumptionequalto0.5-3.5%oftheenergycontentofthehydrogenthatwillbetransportedduringthepipeline’slifetime.GlobalenergyconsumptionforhydrogentransportationintheNZEScenarioIEA.CCBY4.0.Notes:PJ=petajoule.LH2=liquefiedhydrogen.Pipelinetransportationofhydrogencoversinterregionaltradeandintraregionaltransmission.Globalenergyusefortransportinghydrogenrisesfromalmostzerotodaytotheequivalentof0.2%oftotalfinalenergydemandin2030and0.6%in2050intheNZEScenario.Theshippingofhydrogenrequiressignificantenergywhenenergyforconversionandreconversionisaccountedfor(Figure5.28).Improvingtheenergyefficiencyofhydrogenshippingwillthereforeneedtoremainapriority,notonlytobringcostsdownbuttominimisetheenvironmentalimpacts,buildingoneffortsforliquefiedgasshippingtoday(Box5.2).TheEUSRIAaimstoachieveoverallefficiencyofaround74%(12kWhconsumed/kgH2delivered)by2030forhydrogenshipping(CleanHydrogenJointUndertaking,2022).EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE329IEA.CCBY4.0.EnergyconsumptionandoverallefficiencyofhydrogentransportanddistanceintheNZEScenario,2030IEA.CCBY4.0.Notes:kWh/kgH2=kilowatt-hourperkilogrammeofhydrogen.H2=hydrogen.LOHC=liquefiedorganichydrogencarrier.100%throughputcapacitymeansthatthepipelineisoperatedat100%ofitstheoreticalmaximumcapacity.TheenergyconsumptionofanLH2tankerisassumedtobeequivalenttotheamountofhydrogenboil-offgasduringthevoyage,andtheenergyconsumptionofLH2importandexportstoragetanksishydrogenboil-offgasandelectricity.Overallefficiencyofhydrogentransportreferstotheenergyconsumedduringtheconversionofhydrogentoahigher-densitycarrier,itsstorage,shipmentandreconversiontogaseoushydrogen.1kgofhydrogencontains33.3kWh.Long-distanceshippingofhydrogenisexpectedtohaveanoverallefficiencyof60-80%,buttherearemajoropportunitiestoreduceenergyconsumptionandlowercosts.Hydrogenisanindirectgreenhousegas(GHG),asitinteractswithothergasesandchemicalspeciesintheatmosphere,affectingtheconcentrationofmethane,ozoneandwatervapour.Someestimatesindicatethathydrogencouldhaveaglobalwarmingpotential(GWP)overa100-yeartimehorizonof11±5kgCO2-eq/kgH2(UnitedKingdom,BEIS,2022),comparedwith29.8±11kgCO2-eq/kgH2forfossilmethane.Givenhydrogen’ssmallmoleculesize,highdiffusivityandlowviscosity,leakageispossiblealongtheentirevaluechain,particularlyduringitstransportandstorage.However,informationonhowmuchhydrogenleaksfrompipelines,compressors,loading/unloadingoperationsandstorageisstilllimited.Mitigatingpotentialclimateimpactswillrequirefurtherresearchtounderstandhydrogen’sGWP,thedeploymentoftechnologiesandoperationalpracticestominimiseleaks,andtheimplementationofrobustleakdetectionandrepairmechanisms.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE330IEA.CCBY4.0.Box5.2EnvironmentalimpactsofliquefiedgasshippingThebulkofGHGemissionsfromliquefiedgasshipping,excludingconversionandpotentialreconversion,comefromfuelcombustionduringtransport.However,astheshippingsectordecarbonises,includingbyusingsomeLH2orammoniatankercargoasfuel,directemissionsshouldfall,thoughinthecaseofammoniacombustion,measureswillbeneededtominimiseN2OandNOxemissions.Fuelconsumptionbythemainengineisinfluencedbytheconditionofthehull’ssurface,theload,theweatherandtheship’sspeed.Liquefiedgastransportwasresponsiblefor7%ofglobalGHGemissionsfromshipping(0.2%oftotalemissions)and8%offuelconsumptioninshippingin2018(0.2%oftotalfinalenergyconsumption)(IMO,2020).Improvingtheenergyefficiencyofshippingmethane,hydrogen,ammoniaandCO2wouldbeeconomicallybeneficialbecausefuelcostswouldbelower,andtheenvironmentalimpactswouldalsobereduced.Onceashipreachestheendofitsusefullifetime,itissoldtoashipbreakingordemolitionshipyard,whereitisdisassembled.Anestimated95%ofthematerialsusedinitsconstructioncanberecycledorreused(UNEP,n.d.),primarilysteel,whichmakesup75-85%ofaship’sweight(Brun,2017).Somesteelplatesandbeamscanbeextractedanddirectlyreusedbytheconstructionindustry,ortheycanbere-rolledandreused(withoutmelting,therebyusinglessenergy).In2021,demolitionandscrappingofliquefiedgastankerstookplaceinIndia,BangladeshandTürkiye(UNCTAD,2021).Thereareconcernsaboutthesafetyandenvironmentaleffectsofshipdisposal,withmanyofthembeingbrokenuponbeaches.Someconventionsandregulationsconcerningshipbreakinghavebeenissued,includingtheInternationalMaritimeOrganization’s2009HongKongConventionfortheSafeandEnvironmentallySoundRecyclingofShips(thoughithasnotbeenratifiedbyenoughcountriestoenterintoforce)andtheEUShipRecyclingRegulation,inforcesince2019.Sources:Brun(2017);IMO(2020);UNEP(n.d.);UNCTAD(2021).CO2managementinfrastructureTypesofCO2transportandstorageinfrastructureInfrastructureforCO2managementincludesCO2transportandstoragefacilities.Oncecaptured,CO2canbeusedonsiteortransported,inmostcasesbypipelineorship,eithertoapointofuseortoapermanentundergroundstoragesite(Figure5.29).Forthepurposesofthisreport,CO2shippingreferstovessel-basedoceangoingtransport,includingoceanbarges.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE331IEA.CCBY4.0.CO2flowsthroughtheCO2managementvaluechainIEA.CCBY4.0.Notes:CO2=carbondioxide.BluearrowsindicatetheflowofCO2.Oncecaptured,CO2canbeusedonsiteortransported,inmostcasesbypipelineorship,eithertoapointofuseortoapermanentundergroundstoragesite.CO2pipelinesPipelinescanbeanefficientandcheapmethodtotransportCO2overlongdistances.Theyoffersubstantialeconomiesofscale,withtransportcostsdecreasinglogarithmicallywithvolume.Tocapitaliseonthisbenefit,pipelinesareoftenoversizedrelativetonear-termtransportdemand,butthiscanincreaseriskfordevelopersandmakefinancingmoredifficult.Today,therearearound9500kmofpipelinesofallsizestransportingCO2.Around90%ofthemareintheUnitedStatesandwerebuilttotransportCO2fromnaturalreservoirsandindustrialsourcestooilfieldsforCO2-enhancedoilrecovery(CO2-EOR).AnumberofprojectsinEuropeandtheUnitedStateshaverecentlybeenannouncedtobuildmulti-userCO2pipelinestotransportCO2todedicatedstoragesites.CO2mustbecompressedtopipelinespecificationsaftercapture.TheISO27913/2016standardprovidesrequirementsforCO2pipelineswhileDNV-RP-F104isarecommendedpractice.Dependingondistance,diameterandCO2phase,boosterstationsmaybeneededalongthepipelinetomaintainpressure.CO2canbetransportedthroughapipelineingaseousform(orphase)orasaliquid,orinitsdensephase.65Thephasedeterminestherequiredpipelinespecifications,includinggradeofsteel,andhowitisoperated,including65CO2isinitsdensephasewhenitisaboveitscriticalpressurebutbelowitscriticaltemperature.Whenabovebothcriticaltemperatureandpressureitisasupercriticalfluid.Inbothcases,CO2exhibitsthepropertiesofbothaliquidandagas.UseCaptureStoragePointsourcesIndustrialclustersDirectaircaptureTransportShippingBufferstorageLiquefactionShippingPipelineCompressionPipelinetransportCO2EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE332IEA.CCBY4.0.temperature,pressureandcompression.Ingeneral,carbonsteelisthemostcost-effectivematerialforCO2pipelinetransport,withthegradeofsteelvaryingfromX60toX120(Onyebuchietal.,2018).Forshortdistancesandsmallvolumes,transportingCO2ingaseousformcanbecost-effective(Knoope,RamírezandFaaij,2013),whiletransformingthegasintoadenserphase,asasupercriticalfluidorasub-cooledliquid,ismoreeconomicalforlargevolumesandlongdistances.CO2pipelinenetworksareanintegralcomponentofthehub-and-clustermodelofcarboncapture,utilisationandstorage(CCUS)projects,buttheirconfigurationmustbeoptimisedtobecost-effective(Figure5.30).Networkdesignisdeterminedbythevolumesandratesofinputsandoutputs,alongwithdistanceandgeographicconsiderations.CO2pipelinenetworkIEA.CCBY4.0.Note:CO2=carbondioxide.Source:BasedonUnitedStates,DOE(2022c).Efficientpipelinenetworksusuallyhaveatrunk-styletransmissionlinewithbranchesforgatheringanddistribution.Sink-sidepipelinestransportCO2fromtrunklinestostoragesitesorfurtheronwardtransportconnections.Distributionlineswillterminateatastoragesite,whilesub-distributionlineswilltransportCO2toindividualwells.Theflowrateofsub-distributionlinesneedstobetiedtoinjectionrate.Sub-gatheringGatheringSource-sidepipelinesaggregateCO2collectedatvarioussources(sub-gatheringlines)andconnectlargeroraggregatedflows(gatheringlines)tocentraltrunklines.TrunklineSub-distributionDistributionGatheringDistributionTrunklinestransportlarge,aggregatedvolumesofCO2typicallyinitsdensephase.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE333IEA.CCBY4.0.CO2shippingToday,CO2shippingislimitedtosmall-scaleapplicationsmovingfood-gradeCO2fromproductionsitestodistributionterminals,whereitisfurtherdistributedtoendusers.Inrecentyears,severalregionsandcountries,includingEurope,JapanandKorea,haveexpressedinterestinshippinglargevolumesofCO2tostoragesites.CO2transportbyshiphasnotyetbeendemonstratedatthescalerequiredintheNZEScenario.However,twomedium-pressureCO2shipsareunderconstructionfortheEuropeanNorthernLightsProject–anopen-sourcetransportationandstorageinitiativeaimedatstoringCO2indepletedoffshorefieldsinNorway–andotherprojectsarepursuingshippingasatransportsolution.CO2shippingrequiresportinfrastructuresimilartothatusedforLNGandLPG,includingfacilitiesforCO2liquefaction,temporarystorageandloading/unloading.ThesefacilitiesneedtoexpandinlinewithCO2shipments.Whenshippingistheselectedtransportmethod,CO2needstobeliquefiedfirst.LiquefactioninvolvesacombinationofcoolingandcompressionoftheCO2.LiquefyingCO2to-30˚Cto-55˚Crequirestheuseofcryogenictechnology,whichismorecostlyandenergy-intensivethanthecompressionrequiredtomoveCO2bypipeline.Liquificationprocessescaninvolveclosedoropensystems(AlBaroudietal.,2021).Closedsystemsuseanexternalrefrigerationsystem,whileopensystemscooltheCO2solelybycompressionandexpansion,withouttheuseofanexternalrefrigerant.Opensystemshaveasimplerdesignbutarelessefficient.Duringliquefaction,waterneedstoberemovedfromtheCO2inletstreambycondensationandregenerativeadsorptiontopreventhydration,freezingandcorrosion.Othercontaminants(volatilecomponentssuchasnitrogenandargon)mustberemovedaswelltopreventdry-iceformation.TheflowofCO2fromasourcethroughliquefactionistypicallycontinuous.Sinceshippingoccursindiscreterunsandisabatchprocess,intermediatebufferstorageisusuallyrequiredtostorethegasbetweenshipjourneys.Bufferstoragecanreduceshiploadingtimeandenablefastloading.Italsoprovidesoverflowstorageinthecaseofdelays.IttypicallycomprisesindustrialCO2storagetanksbutcanalsobeintheformofavessel,dependingonthetypeofshipping.Forexample,theDutchcompanyCarbonCollectorsisdevelopingatransportsolutioninwhichbargesareusedtocollect,moveandtheninjectCO2intooffshorestoragesites(CarbonCollectors,n.d.).CO2loadingcanbeperformedusingconventionalarticulatedloadingarmsdevelopedforothercryogenicliquidssuchasLPGandLNG.Theliquidistransferredthroughaninsulatedpipeline,adaptedtothechosenpressureandtemperature,fromthetemporarystorageorliquefactionfacilitytotheloadingarmandship.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE334IEA.CCBY4.0.OthertransportmodesRailtransportiscurrentlyusedonlyformovingsmallvolumesofCO2.SpecialisedrailcarshavebeendevelopedtotransportCO2incryogenicconditions(VTG,n.d.a;n.d.b).TheremaybeopportunitiestotransportbulkCO2byrailovershortdistancesusingexistingrailways,butthehighcostofbuildingnewdedicatedraillinesforlarge-scaleCO2transportationmakesituneconomicalcomparedwithusingpipelines,oceangoingships,andbargesoninlandwaterways.Tanktruckscanbeusedforshort-distancetransportationbyroad,whichcanbeaneconomicaloptionforvolumesofupto30tonnesofliquefiedCO2(storedincryogenicvessels,typicallyat17barsand-30°C).CO2storageCO2storageinfrastructureiscomposedofthesurfaceandsubsurfacefacilitiesusedtoinjectCO2intogeologicalformationsatadepthofatleast800metres,whereitispermanentlystored(IEA,2022a).Suitablestorageresourcesincludesalineaquifers,depletedoilandgasfields,andotherunconventionalresources.Theseresourcesareunevenlydistributedaroundtheworld.66Globally,potentialresourcesareample,butfurtherresourceassessmentanddevelopmentisrequiredtoprovereserves.Oncearesourcehasbeenidentified,itcantakeatleastthreetotenyearstodevelopafunctioningCO2storagesite.ConfidenceintheavailabilityofCO2storageisaprecursortoinvestmentinCO2capturefacilities,sooneofthegreatesthurdlesindevelopingCO2managementinfrastructureisacceleratingtheassessmentanddevelopmentofCO2storageresourcesanddevelopingCO2transportinfrastructureinparallelwithresourceassessments.Source-sinkmatchingisusedtomatchsourcesofcapturedCO2tosinks(storagesites),basedontherateanddurationofthesupplyofthegas(Figure5.31).ItcanalsosupportthedesignofoptimisedCO2transportnetworks.TheexpectedrateanddurationofCO2supplyfromthesourceneedstomatchtherateanddurationofCO2injectionthatasiteorresourcecansupport.Oncethetwohavebeenmatched,transportpathwayscanbeoptimised.66Basalts,peridotites,unmineablecoalseamsandorganicshalescanalso,inprinciple,beusedforCO2storage(IEA,2022a).Pilotprojectsforeachhavebeenlaunched,butfurtherdemonstrationisrequiredtotesttheirtechnicalandeconomicfeasibility.Storageinbasaltsisthemostadvancedoftheseoptions:theIcelandiccompanyCarbfixhasinjectedmorethan80ktofCO2intoabasaltreservoirsince2014.Thecompanyplanstodevelopasecondsite,atwhichitwillinject500ktCO2peryearstartingin2026.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE335IEA.CCBY4.0.CriteriaforCO2source-sinkmatchingIEA.CCBY4.0.Note:CO2=carbondioxide.Source:IEA(2022a).Source-sinkmatchingisusedtopairsourcesofcapturedCO2withstoragesites,basedontherateanddurationofsustainableinjection.CO2infrastructureneedsintheNZEScenarioThedeploymentofCO2transportandstorageinfrastructureacceleratesrapidlyintheNZEScenario.ThetotalamountofCO2capturedworldwideisprojectedtoincreasefrom44Mttodayto1.2Gtin2030and6.2Gtin2050.Around95%ofallcapturedCO2isstored,soinjectioncapacityforCO2storageneedstoexpandfrom42Mttodayto1.2Gtin2030and5.9Gtin2050.CO2transportinfrastructurewouldneedtokeeppacewiththisexpansion.TransportAsubstantialexpansionofCO2transportinfrastructureintheformofCO2pipelinenetworks,theCO2shippingfleetandportinfrastructureforCO2handlingisrequiredtoaccommodateCCUSdeploymentintheNZEScenario.Incertainregions,pipelineswouldmostlikelybecomethedominantmodeoftransport,whileotherregionsmayrelyonshipping,dependingongeographicconsiderations,existinginfrastructureandinternationaltradeofCO2destinedforstorage.In2021,morethan30MtofCO2wastransportedfromitspointofcapture,mainlybypipeline,tooilfieldsforCO2-EOR.Anadditional10MtofCO2wastransportedviapipelinetodedicatedstoragesites.GlobalaggregatepipelinelengthwouldEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE336IEA.CCBY4.0.by2030,withsomeofthiscapacityusedtotransportCO2toandwithinportspriortoshipping.Therateofincreaseincapacityto2030willbeconstrainedbythelongleadtimesassociatedwithnewpipelinedevelopmentandconstruction,andthesmallnumberofprojectscurrentlyunderdevelopment.Accordingtoprojectsindevelopment,morethan7000kmofnew,multi-userCO2pipelinesareduetoenterintooperationby2030,inadditiontosixprojectsinvolvingtherepurposingofexistingpipelinestocreatemulti-userCO2pipelines.Bythen,around280MtofCO2couldbetransportedfrompointsofcapturetodedicatedCO2storagesitesortooilfieldsforCO2-EOR,67andaround15MtCO2couldbeusedeitheronsiteornearbyinavarietyofproducts.CO2pipelineinfrastructureexpandsmuchfasterbetween2030and2050intheNZEScenario,mainlytotransportcapturedCO2tostoragesites,withtotalpipelinelengthin2050reachingbetween100000and600000km,dependingonwhetherCO2transmissionislocal,intraregionalorinterregional(Table5.6).Forcomparison,around650000kmofcrudeoilandpetroleumproductpipelinesareinexistencetoday(GlobalDataEnergy,2019).Theeventualmixoflocalisedtrunklinesandshortgathering/distributionlines,intraregionaltransportbypipelineandinterregionaltransportbypipelineorshippingwilldeterminetheoveralllengthoftheglobalnetwork.ShippingCO2ismoreflexiblethantransportingitbypipelineandcanbecost-competitiveoverlongdistancesandforsmallvolumes(Figure5.32).ForcountriesandregionswithlimitedaccesstonearbyCO2storage,substantialportinfrastructure,andemissionslocatednearports,shippingmaybecheaperthanbuildinganextensivepipelinenetwork.Forshippingtobecomemoreefficient,low-pressureCO2shipsneedtobedeveloped.Low-pressureCO2ships(5.5to9.8barsand-55°Cto-41°C)cancarrylargertanksandcargoesthanmedium-pressurecarriers(14to20barsand-30°Cto-19.5°C)duetothetemperatureandpressureatwhichtheyoperate.Medium-pressureconditionsarenotpracticalforshipsizesabove10000tCO2.67MostCO2injectedforEORisretainedinthereservoiroveraproject’slifetime,butadditionalmonitoringandverificationareessentialtoconfirmthattheCO2hasbeenpermanentlystored.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE337IEA.CCBY4.0.Table5.6CO2pipelinedeploymentforCO2captureintheNZEScenario,2050LinetypeDescriptionDeploymentconcentrationLength(km)ImportanceofshippingCumulativesteelneeds(Mt)LocaltrunklinesMulti-usertrunklinesdevelopedbetweenexistingindustrialclustersandCO2storageresourceswithin100km.Gatheringlinesanddistributionlineslimitedinlength.CO2captureconcentratedinindustrialclusterslocatednearstorageresourcesorports.Nooffshoretrunklinesbetweenregions.100000-200000High,aslimitedoffshorepipelinesmakeshippingfromregionswithlittlestoragetoregionswithmorestorageimportant.19-39Intra-regionaltrunklinesLongertrunklinesconnectingsourcesandsinkswithinaregion.Gatheringanddistributionlinesmaybelongerdependingonroutingofthetrunklines.CO2capturedeploymentmorewidelyspreadwithlongergatheringlinesconnectinggeographicallydistributedemitterstotrunklines.Limitedregionaloffshorepipelines.300000-400000Medium,concentratedinregionsmorereliantonoffshorestorage.58-78Inter-andintra-regionaltrunklinesInterregionaltrunklinescrossingcountriesandregionstomoveCO2tostoragesites.GeographicallydispersedCO2capture.Longinterregionaltrunklinesbothon-andoffshore.500000-600000Mediumtolow,concentratedinregionsmorereliantonoffshorestorageandinregionswithCO2ship-basedexports/imports.97-117Notes:km=kilometre;Mt=milliontonnes.Forcaptureratesfrom0.2upto1.6MtCO2/year,Brevikhasdevelopedashipconceptbasedonthedesignofanexistingshiptype(BrevikEngineering,2017).Forcapacitiesabove10000tCO2,newdesignsareneeded.Dependingontheship’sshape,tanksmayneedtobearrangedoneontoptheother,whichismorecomplexstructurally.Increasingthelengthofthetanksandtheshipwouldleadtoalongandnarrowship,whichisnotwellsuitedtoports.Demonstratingdirectoffshoreinjectioncanalsosupporttheaccelerationofship-basedCO2transport,sincedirectinjectioncaneliminatetheneedtoconstructonshorereceivingterminalsandcansimplifytheinfrastructureneededforoffshorestoragefacilities.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE338IEA.CCBY4.0.IndicativeCO2shippingandoffshorepipelinetransportationcostsIEA.CCBY4.0.Notes:tCO2=tonneofcarbondioxide.ShippingcostsbasedoncryogenicshippingfromtheNetherlandstoNorway.Left-handchartassumesadistanceof1000km,right-handchartassumesannualcapacityof2MtCO2.Source:IEAGHG(2020).Shippingisgenerallycompetitivewithoffshorepipelinesforlong-distancetransportationofsmallvolumesofCO2.StorageTherearecurrentlyjustsevencommercial-scale(injectioncapacityof100ktCO2peryearorgreater)dedicatedCO2storagesitesaroundtheworldwithatotalinjectioncapacityofaround10Mt/year.Inaddition,capturedCO2isbeinginjectedintooilfieldsduringCO2-EORoperations,mostofwhichisexpectedtoremainpermanentlystored.Thistechnology,theuseofwhichisconcentratedintheUnitedStates,hasbeenthemaindriverfortheconstructionofCO2capturefacilitiesandCO2pipelines,thoughitsusewillmostlikelydeclineduringtheenergytransitioninresponsetolowerdemandforfossilfuels.Themajorityofstorageprojectsbeingpursuedtodaytargetdedicatedstorage.AconsiderableamountofcapacitytoinjectCO2intogeologicalformationsisindevelopment,butitnonethelessfallsshortofplannedcapturecapacityexpectedtobecommissionedby2030andtotalstoragecapacityrequiredintheNZEScenario(Figure5.33).EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE339IEA.CCBY4.0.ExistingandplannedannualglobalCO2storageinjectioncapacity,comparedwithprojectedNZEScenarioneedsin2030IEA.CCBY4.0.Notes:MtCO2=milliontonnesofcarbondioxide.Includescommercial-scaleprojectswithCO2captureorinjectioncapacityover100000tonnesperyear.Capturecapacities,storagecapacitiesandplannedoperationdatescomefromindividualprojectdescriptions.TotalCO2storageincludesplansfordedicatedCO2storage,CO2-EOR,andprojectstodevelopCO2storagewithoutspecifyingwhatkind.MostoftheCO2injectedforEORisretainedinthereservoiroveraproject’slifetime,butadditionalmonitoringandverificationareessentialtoconfirmthattheCO2hasbeenpermanentlystored(IEA,2015).Source:BasedonIEAtrackingandGlobalCCSInstitutedata.SubstantialcapacitytoinjectCO2intogeologicalformationsisalreadyindevelopment,butthereisagrowinggapbetweencaptureandstorageinjectioncapacity.MaterialandequipmentneedsMaterialneedsBothCO2shippingandstorageinfrastructurerelyheavilyonsteel,whilestoragealsorequireslargeamountsofcement.CO2shipsrequiresimilarkindsofmaterialsashydrogenships,thoughdifferentgradesofsteel,membranelinesandinsulationareused.Theamountofsteel,itsgradeandhowitislineddependmainlyonthepressureunderwhichtheCO2istransported.The“Inter-andintraregionaltrunklines”deploymentcasehasacumulativesteeldemandof97-117Mtoftubularsteelbetweennowand2050(Table5.6).SteelusedforCO2pipelinesintheNZEScenariomakesuponlyafractionofthe130Mtoftubularsteelproducedannuallytoday.Asaresult,tubularsteelavailabilityisunlikelytolimitdeployment.Theavailabilityofwellconstructionmaterialandcomponentsisalsounlikelytoconstrainthedevelopmentofshippingorstoragecapacity,sincetheincreaseindemandwouldbelargelyoffsetbydecliningneedsintheupstreamandmidstreamoilandgassector.ThebulkmaterialsrequiredforCO2storagearemainlytobuildinjectionwellsandarethereforesimilartothoseneededforoilandgaswells.Theyincludewellcasingandtubing,usuallymadefromsteel,cementandwellheadsEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE340IEA.CCBY4.0.(thesurfacecomponentsofanundergroundwellthatprovidethestructuralandpressure-containingequipmentfordrillingandproduction).SinceCO2mixedwithwateriscorrosive,storagewellsaresometimesconstructedusingcorrosion-resistantmaterials,includingspecialtypesofsteel.PortlandcementreactschemicallywithCO2,leadingtodissolutionofalkalinecementphasesandprecipitationofcarbonates,thoughafewmetresofgood-quality,well-bondedcementcanformaneffectiveCO2seal(Carey,2013;Duguid,2009).Someprojectsneverthelesschoosetoemployspecialisedcement.Lessthan5MtofcementintotalisrequiredtosupportCO2storageinfrastructurethatcanaccommodateinjectionof5.9GtCO2peryear(UnitedStates,DOE,2022c).Thisisnegligiblecomparedwithcurrentannualglobalproduction,suggestingthatcementwillnotrestrictdeploymentofCO2managementinfrastructure.EquipmentneedsandmanufacturingForCO2ships,equipmentneedsandmanufacturingarebroadlysimilartohydrogenships(discussedabove),whilecompressorsandpumps,whichareintegraltoCO2transportationandstorage,aremass-producedforarangeofsectors(seeChapter4).TheconstructionofCO2pipelines,shippingandstorageinfrastructurenonethelessrequiressomespecialisedequipment,suchasdrillingrigsandmechanicaldevices,alongwithskilledtechnicianstooperatethem.Themanufacturingofequipmentusedforoffshoreactivities,especiallydrillingrigsandpipelayingequipment,isheavilyconcentratedinoil-andgas-producingregions.DevelopersofCO2storagesitesmayneedtocompetewithoilandgasproducersforaccesstodrillingrigs,whichcouldcausedelaysdependingonequipmentavailability.CO2storagesitesrequiremonitoringequipment.Today,over50differenttypesofmonitoringtechnologieshavebeendeployedatsitesaroundtheworld.Monitoringtechnologiestypicallyrelyonmass-manufacturedequipmentandshouldnotcurtailCO2storagedeployment.However,theexpertiserequiredtoanalysetheresultsofmonitoringprogrammesislimitedandcouldpresentabottleneckifstepsarenottakentoexpandrelatedcompetencies.LeadtimesLeadtimestodeployCO2managementinfrastructurevarybyinfrastructuretypeandregion.Currently,themajorityofCCUSprojectshavebeendevelopedinafull-chainmanner,meaningthatprojectsincludecapture,transportandstorageofCO2.ThismakesidentifyingtheexactleadtimesforCO2infrastructuredifficult.Nonetheless,infrastructureforCO2storagewouldbeexpectedtotakelongertodevelopthanforCO2captureorCO2transportduetotheneedforresourceassessments.SinceconfidenceinCO2storagemustbegainedbeforeconstructionofCO2capturefacilitiesandCO2transportinfrastructurecanadvance,resourceassessmentusuallyproceedsfirst.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE341IEA.CCBY4.0.Globally,veryfewpotentialCO2storageresources–theamountofcapacityinbothdiscoveredandundiscovereddeposits–havebeendeclaredprovenreserves(discoveredresourcesofaknownsize,forwhichexploitationisconsideredtechnicallyandeconomicallyfeasible).Itcantakethreetotenyearstobuildastoragefacilityoncetheresourcehasbeenidentified,dependingonanumberoffactors,includingeaseofaccesstotheresource,itsgeologicalcharacteristicsandplanningproceduresandrules(Figure5.34).Somecountriesandregionshaveperformednationalorregionalresourceassessments,butsuchassessmentsusuallyfocusonthevolumeofporespaceavailableforstorageandrarelyprovideestimatesofpotentialsustainableratesofinjection.BothfactorsareessentialtodeterminehowmuchCO2shouldbetransportedtothepotentialstoragesiteandwhatrateCO2canbecapturedat.LeadtimesfortheCO2storagecomponentofselectedCCUSprojectswithdedicatedstorageIEA.CCBY4.0.Notes:Yearsinbracketsrefertocommissioningdate.AssessmentoftheSleipnerandSnøhvitresourcesoccurredduringthedevelopmentofnearbygasresources.Sources:IndustrysourcesandIEAresearch.ResourceassessmentmakesupasignificantportionofCO2storageprojectleadtimes.Subsurfacedatacollectiontakestimeandcanbeveryexpensive.Insomecases,datacollectedduringoilandgasexplorationandproductioncanbeusedtoassessthepotentialforCO2storage.However,suchdataistypicallyproprietaryandaccessmayberestricted.Depletedoilandgasfieldsmaybefastertodevelopduetotheextensivedataalreadycollectedonthem.Permittingprocedurescangreatlyextendleadtimesfordevelopingstoragesites,especiallyincountrieslackingalegalandregulatoryframeworkforCCUS(IEA,2022f).LeadtimesforCO2storagecanbereducedthroughprecompetitiveassessmentsofCO2storageresourcesanddedicateddatacollectioncampaigns(IEA,2022a).EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE342IEA.CCBY4.0.LeadtimestobuildCO2transportinfrastructuredependonthetypeofinfrastructurerequired.InthecaseofCO2pipelines,sixtonineyearshavebeenobservedfornew-buildpipelines,whichissimilartooilandnaturalgaspipelines(Figure5.35).LeadtimesforCO2tankersandbargesarelikelytobesimilartothoseforliquifiedhydrogentankers,forwhichconstructioncouldbeconstrainedbyshipyardcapacityandbookedorders.Nocommercial-scaleCO2shippingterminalsareoperatingasyet,thoughNorthernLightsisbuildingaCO2importterminalinNorway.Basedontheproject’sannouncedtimeline,aroundfiveyearscouldberequiredtodesignandconstructtheinfrastructurerequiredtotransportandstoreCO2,includingliquefactionfacilities,temporarystorage,andloadingandunloadingequipment.LeadtimesofselectedrecentnaturalgasandCO2pipelineprojectsIEA.CCBY4.0.Constructionhasstartedbutthecommissioningdateisuncertain.Notes:Yearofcommissioningisindicatedinparentheses.TheTransAdriaticPipelineconnectsAzerbaijantoGreeceandAlbania,whereanoffshorepipelineintheAdriaticSeaconnectswithSouthernItaly.Planningandpermittingofmostrecentpipelinestooktwotoeightyears,withconstructionusuallylastingabout3yearsforbothonshoreandoffshoreprojects.EnergyneedsandemissionsFollowingitscapture,preparingCO2fortransportwillincludecompression,removingimpuritiespresentinthestream,dehydrationand/orliquefication.Compressionandliquefactionarehighlyenergy-intensive,sothechoiceofenergyhasasignificantimpactonemissionsintensity.ElectrificationcanreduceemissionsfromCO2transportandstorageinfrastructureShippingcompaniesareexploringelectricshipsforshort-rangeshippingandbarging,aswellship-basedCO2capture.Emissionscanalsocomefromleaks,buttheycanbeminimisedwiththeuseofeffectiveleakdetectionandrepairprogrammes.InthecaseofdedicatedEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE343IEA.CCBY4.0.CO2,storage,theriskofleakageissmallifwellsaresealedcorrectlyandifwell-functioningmeasurement,monitoringandverificationprogrammesareinplace.WhilemostoftheCO2injectedforEORisretainedinthereservoiroverthelifetimeofaproject,additionalmonitoringandverificationareessentialtoconfirmthattheCO2hasbeenpermanentlystored.ContainmentisakeyselectioncriterionfordedicatedCO2storagesites.FocusonrepurposingexistinginfrastructureTheNZEScenario’spathwaytonetzeroemissionsinvolvesarapidandimmediatedeclineintheconsumptionofoilandnaturalgas.Asaresult,certainoilandgassectorassetssuchasplatforms,gasnetworksandshippingterminalswouldquicklybecomestranded.Thisexistinginfrastructurecouldpotentiallyberepurposedorreusedtofast-trackthedeploymentofCO2orhydrogeninfrastructure,reducingleadtimesandtheamountandcostofnewinfrastructurethatwouldneedtobebuilt.Repurposingcanalsoshrinkaproject’senvironmentalfootprintbyreducingnewmaterialdemandsandconstructionneeds,anditcanhelpinfrastructureownersmaximisetheeconomiclifetimeoftheirassetswhilereducingordeferringdecommissioningcosts.Existinginfrastructureneedstobeassessedonanindividualbasistodeterminewhetheritissuitableforrepurposingandwhatmodificationsarerequired.Infrastructureownersshouldbeencouragedtoincorporateareuseauditintheirdecommissioningprocesstoaidrepurposingendeavours.Newandexistingnaturalgasinfrastructurecanbeusedtotransportandstorebiomethaneorsyntheticmethane,whichhavealmostidenticalphysicalandchemicalcharacteristicstonaturalgas.Somereconfigurationmaybeneededtoaccommodatemoredecentralisedproduction,particularlyforbiomethane,anddifferencesingasquality.Existingoil-relatedinfrastructurecanbeusedtotransportandstoreLOHCsandliquidsyntheticfuels,thoughtherearesomesafetyconsiderationsforcertainchemicalsusedasLOHCs.ThephysicalandchemicalpropertiesofCO2andhydrogenaredifferentfromnaturalgasandoil,sosomereconfigurationandadaptationwouldberequiredforexistingtransportandstorageinfrastructuretoberepurposed(Table5.7).Forhydrogen,thereareseveralprojectsassessingthefeasibilityofrepurposingnaturalgaspipelinesanddecommissionedundergroundnaturalgasstoragefacilities(IEA,2022b),andalthoughexperienceinrepurposingLNGterminalsforLH2orammoniaislacking,feasibilityisbeingdiscussedinthecontextofplannedLNGimportcapacityexpansionsinEurope.ForCO2,somepipelineshavealreadybeenrepurposedandseveralotherprojectsareassessingfurtherpipelinerepurposing(Table5.9).Someoftheinfrastructurefoundindepletedoilandgasfields,includingwellsandsitefacilities,maypossiblybereusedforCO2storageactivities.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE344IEA.CCBY4.0.Table5.7FossilfuelinfrastructurewithpotentialforrepurposingfortransportingorstoringhydrogenandCO2InfrastructuretypeHydrogenCO2Pipelines●●Offshoreplatforms●●Wellinfrastructure-●to●Naturalgasshippingterminals●to●●to●Subseasystems-●to●Undergroundgasstorage†●to●-●highpotential●moderatepotential●lowpotentialInthecaseofhydrogenpipelines,repurposingmainlytargetsnaturalgastransmissionlines.†Thisdoesnotconsiderdepletedgasfields,butratherexistingundergroundnaturalgasstorage.Note:SubseasystemsaretheunderwaterinfrastructureusedtoproduceoilorgasortoinjectCO2.RepurposingoilandgaspipelinesforhydrogenandCO2Inprinciple,existingpipelinescanberepurposedtotransporteitherCO2orhydrogen(Table5.8).Thesuitabilityofapipelineforrepurposingandthetechnicalmodificationsrequireddependonitsdesignandoperationalparameters,includingthetypeofsteel,theageandconditionoftheline,weldingandoperatingpressure.Theeconomiccaseforrepurposinghingesonthreebasicconditions:•Theexistenceofunusedpipelinesorunder-utilisedlooppipelines,whereinoneormorelinescouldberepurposedforpurehydrogenand/orCO2whiletheotherline(s)remaininoperation.•ProximityofthepipelinetoboththesourcesanddestinationsofthehydrogenorCO2,withrelativelylargevolumesofminimummarketuptake.•Favourablemarketfactors,includingthecostofbuildingnewhydrogenpipelinesversusCO2pipelinesorotheralternativemeansoftransport.Conversionofanexistingpipelinemustnotcompromiseitssafetyorintegrity,whichcanbemaintainedwithappropriatetechnicalmodifications.Nonetheless,itisnecessarytodevelopnewstandardsandregulationsspecificallyforrepurposing.Forexample,thereisnodefectassessmentcodeforrepurposedpipelinestodeterminewhichpre-existingdefectscouldbeconsideredacceptable.Sofar,onlyonenaturalgaspipelinehasbeenconvertedtocarrypurehydrogen–a12-kmlineintheNetherlands(Gasunie,2018).TheDutchgovernmenthasannounceditwillinvestEUR750milliontodevelopa1400-kmnationalhydrogenEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE345IEA.CCBY4.0.transmissionnetworkby2026-2031,ofwhich85%willcompriserepurposednaturalgaspipelines.Gastransmissionsystemoperatorsinothercountries,includingBelgium,Denmark,Germany,Italy,SpainandUnitedKingdom,haveannouncedplanstorepurposepartsoftheirnetworkstohydrogen(IEA,2022b).Table5.8TechnicalaspectsofrepurposingoilandgaspipelinesforhydrogenandCO2transportSpecificationHydrogenCO2StandardsOnshore:ASMEB31.12Offshore:nostandardISO27913:2016orDNVGL-RP-F104(onshoreandoffshore)WallthicknessGivenbytherepurposedpipelineGivenbytherepurposedpipelineMaximumallowableoperatingpressureForonshorelines,possibletocalculateaccordingtotheASMEB31.12standard,dependingonwallthickness,pipelinediameterandsteelstrengthDependentonthepipeline’smaximumallowableoperatingpressureandonthephaseCO2isbeingtransportedinMetallicmaterialintegrityRiskofembrittlement,resultinginlimitationswhenusinghigher-strengthsteel,ashydrogencaninduceareductioninductilityCorrosionrisksfromCO2whenmixedwithwaterorfromspecificimpurities.Riskofbrittlefracture,dependingonoperationalparametersNon-metallicmaterialintegrityRiskofleakageandmaterialdegradationLow-temperaturebrittlenessandmaterialorchemicaldegradationInternalcoatingsExceedingerosionvelocityduetohydrogenflowingathighspeed(~60m/s)mayaffecttheinternalflowcoating,increasingfrictionandpressurelossesAnti-corrosioncoatingscanbeusedtoreducefriction;however,someinternalcoatingsmaybeincompatiblewithCO2Free-spanningoffshorepipelinesFatiguecrackgrowthrateinducedandfractureresistancereducedinexistinglinesduetolateralbucklingcausedbywaves,leadingtoahigherriskofembrittlementHigherweightofCO2comparedwithmethanecanincreasemechanicalstress.Althoughthereisnostandardforoffshorehydrogentransmissionbypipeline,theH2PipeprojectisrevisingthefeasibilityofadaptingtheDNV-ST-F101standardforsubmarinepipelinesystems(DNV,2021).Notes:m/s=metrepersecond.Non-metallicpipelineelementsincludesealsandelastomers.Free-spanningoffshorepipelinesaresuspendedabovetheseabed,soaresubjecttomorevibrationthanburiedpipelines.TheEuropeanHydrogenBackboneinitiative,whichincludes31Europeangasinfrastructureoperators(from25EUmemberstatesandNorway,SwitzerlandandtheUnitedKingdom),suggestsaninitial28000-kmhydrogenpipelinenetworkby2030andaround53000kmby2040,ofwhichabout60%wouldberepurposednaturalgaspipelines(EuropeanHydrogenBackbone,2022).Othercountries,suchasCanada,Chile,India,Japan,KoreaandMexico,arealsoexploringtheEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE346IEA.CCBY4.0.possibilityofrepurposingtheirnaturalgaspipelines(DNV,2022b;Canada,NRCAN,2020).AtleasttwotrunklineshavealreadybeenrepurposedforCO2,andanumberofotherprojectsarebeingconsidered(Table5.9).Table5.9ExistingandplannedprojectstorepurposenaturalgaspipelinestocarryCO2ProjectPipelineOriginaltargetresourceCountryLength(km)Diameter(inches)StatusAcornGoldeneyeGasUnitedKingdom10220IndevelopmentHumberZeroLOGGS36”trunklineGasUnitedKingdom11836IndevelopmentNeptuneEnergyL10-areaUnspecifiedGasNetherlandsIndevelopmentCranfieldEORWestGwinvillePipelineGasUnitedStates8018Operatingsince2008OCAPOCAPpipelineOilNetherlands9726Operatingsince2005Notes:OCAP=organiccarbondioxideforassimilationinplants.EOR=enhancedoilrecovery.LOGGS=LincolnshireOffshoreGasGatheringSystem.km=kilometre.Sources:OCAP(n.d.);OffshoreEngineer(2021);Denbury(n.d.);Chrysaor(2021);HumberZero(n.d.);Shell(2019);Rosetal.(2014).Newoilandgaspipelinesarestillbeingbuilt,eithertoreplaceexistingonesortoconnectnewareas.Itisvitalthatdevelopersofthisnewinfrastructureconsiderthepotentialtomakethesepipelineshydrogen-orCO2-readyatthedesignphasetoreducefuturerepurposingcostsandminimisetheriskofstrandedassets.Makingaccesstopublicfundingconditionalonsuchdesignrequirementsisoneapproach(seeChapter6).Forexample,intherevisedEUTrans-EuropeanNetworksforEnergy(TEN-E)regulation,whichenteredintoforceinJune2022,naturalgasandoilpipelinesare(withafewexceptions)ineligibleforclassificationasProjectsofCommonInterest(PCI),whichbenefitfromfasterpermittingandregulatoryapprovalaswellasEUfinancialassistance(EuropeanCommission,2022c).HydrogenandCO2pipelinesusedfornaturalgasduringaninterimperiodcanbenefitfromPCIstatus.Inthecaseofhydrogen-readypipelines,thegoalistoensurethatnewnaturalgaspipelinescantransportgaseoushydrogenorhydrogen-naturalgasmixtureswithoutadditionaldesignlimitationsoncerepurposed(i.e.thepipelinewouldnothavetooperateatalowerpressure,whichwouldreducethevolumetricdensityofthetransportedhydrogenandthereforetheamountbeingtransported).Forexample,somenewpipelinesbeingconsideredashydrogen-readyarecertifiedaccordingtotheASMEB31.12OptionBstandard(seeHydrogenPipelinesEnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE347IEA.CCBY4.0.sectionabove).Itisestimatedthatrepurposingnaturalgaspipelinestotransporthydrogencouldcutinvestmentcostsby50-80%relativetobuildingnewlines(IEA,2022b).Onshorenaturalgaspipelinesarealreadybeingbuiltorupgradedtobehydrogen-readyinItaly,Poland,GreeceandAustralia(Snam,2021;CorinthPipeworks,2022;GasPathways,2022;Cenergy,2022).Whenrepurposingisnottechnicallyfeasibleand/ornaturalgasdemandremainssignificant,buildingnewhydrogenand/orCO2pipelinesalongsideexistingnaturalgasonescouldnonethelessbenefitfromestablishedright-of-wayandsitingpermits,therebyreducingcostsandshorteningleadtimesforpipelinedevelopment.Co-routingdifferentnewpipelinesparalleltoeachotherinthesamerightofwaycanalsoreduceconstructiontime,costandenvironmentalimpactcomparedwithlayingpipelinesindependently.TheDeltaCorridorprojectintheNetherlandsincludestheconstructionofparallel400-kmpipelinesforhydrogen,CO2,LPGandpropylene,withcostsavingsestimatedataround30%(PortofRotterdam,2021).RepurposingLNGterminalsInresponsetotheenergycrisiscausedbytheRussianinvasionofUkraine,severalcountriesinEuropearelookingintoalternativegassupplyoptions,includingincreasedimportsofLNG,whichwouldrequiretheconstructionofnewimportterminals,whilethelargestregasificationcapacityunderconstructionisstillintheAsiaPacificregion.Whilenewinfrastructurecanhelpdiversifynaturalgassuppliesintheshortterm,thelonglifetimesofsuchfacilitiesmeanthatthisinfrastructurecouldbecomelockedin,makingithardertotransitiontoadecarbonisedenergysystem.Newfacilitiesmustthereforebedesignedandbuiltinawaythatfacilitatestheirlaterconversionforpurposesrelatedtohydrogen,hydrogen-basedfuelsorammoniatominimisetheriskofstrandedassets,acceleratethedeploymentoflow-emissionfuelsandreduceinvestmentneedsandleadtimes.Planningforconversionduringterminaldesigniscriticaltoenablethefuturetransitiontootherfuels,asrepurposing–especiallyforliquefiedhydrogen–maynotbepossibleforcorecomponents.Incontrastwithpipelines,nopracticalexperienceexistsinrepurposingLNGterminalsforhydrogenorammonia,butthefollowingoptionscouldbeexplored(IEA,2022b):•RepurposingimportLNGterminalsforLH2:DuetothelowertemperatureanddensityofLH2comparedwithLNG,repurposinganexistingLNGterminalistechnicallyverycomplex.Inparticular,theLNGstoragetankwouldneedtobereplacedtoavoidexcessiveboil-offrates,andpipeinsulationwouldneedtobechangedtominimiseenergylosses.Ifanyconvertedequipmentisnotsufficientlyinsulated,surroundingoxygenintheaircouldcondensearoundthesurfacesandcreateanexplosionrisk,asoxygen’sdewpointisabovehydrogen’s.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE348IEA.CCBY4.0.•DesigningnewliquefiedhydrogenimportterminalsforinitialLNGuse:NewLH2terminalscouldbedesignedtobeusedinitiallyforLNG.DuetothehighertemperatureofLNG,partoftheequipment(suchastankandpipeinsulation)wouldneedtobeover-designedforLNGuse,butthisshouldnotleadtoanymajortechnicalproblems.Othercomponents,suchaspumps,wouldrequirespecificdesignandconfigurationtobecompatiblewiththedensitydifferenceofthetwofluids.•RepurposingLNGterminalsforammonia:AstheboilingtemperatureofammoniaiswellabovethatofLNG,itcanbemoreeasilyhandled.Somemodificationswouldbeneeded,suchaspumpreplacementandadjustmentstotheboil-off-gassystem,buttheyarelesscomplexthanthoserequiredtorepurposeforLH2.BecauseammoniaisheavierthanLNG,storagetankcapacitywouldbelowerforammonia.•DesigningnewLNGimportterminalstobeammonia-ready:ItispossibletoplanforfutureammoniaaccommodationwhendesigningnewLNGterminals,consideringtheheavierweightofammoniacomparedwithLNGforthestoragetank.Somecomponents,suchaspumps,wouldstillneedtobereplaced.•RepurposingLNGterminalsforCO2:DuetothelowtemperatureandpressureofLNG,regasificationterminalsareunlikelytobesuitableforrepurposingforCO2,whichneedstobestoredatahighertemperatureandpressure.However,someloading/unloadinginfrastructuremaybeabletohandleCO2.DependingonanLNGterminal’sdesign,ageandcondition,repurposingopportunitiesmaybelimited.Brownfielddevelopmentsmaymakeitpossibletoreusesomeelementssuchasthejetty,powerconnectionsandlandfoundations(especiallyrelevantatcongestedportswithspaceconstraints),andcouldhelpreduceleadtimes.EnergyTechnologyPerspectives2023Chapter5.EnablinginfrastructurePAGE349IEA.CCBY4.0.ReferencesAirLiquide(2020),AirLiquidewillbuildthefirsthigh-pressurehydrogenrefuelingstationforlong-haultrucksinEurope,1July,www.airliquide.com/group/press-releases-news/2020-07-01/air-liquide-will-build-first-high-pressure-hydrogen-refueling-station-long-haul-trucks-europeAlBaroudi,H.etal.(2021),Areviewoflarge-scaleCO2shippingandmarineemissionsmanagementforcarboncapture,utilisationandstorage,AppliedEnergy,Vol.287,116510,https://www.sciencedirect.com/science/article/pii/S0306261921000684APPA(AmericanPublicPowerAssociation)(2022),APPASurveyofMembersShowsDistributionTransformerProductionNotMeetingDemand,12October,https://www.publicpower.org/periodical/article/appa-survey-members-shows-distribution-transformer-production-not-meeting-demandBalticPipeProject(2022),GAZ-SYSTEMcompletedBalticPipeconstruction,27September,https://www.baltic-pipe.eu/gaz-system-completed-baltic-pipe-construction/BangkokPost(2022),Europe'sNatural-GasCrunchSparksGlobalBattleforTankers,24August,https://www.bangkokpost.com/business/2375570/europes-natural-gas-crunch-sparks-global-battle-for-tankers//Borri,E.etal.(2022),CompressedAirEnergyStorage–AnOverviewofResearchTrendsandGapsthroughaBibliometricAnalysis,Energies,Vol.15/20,7692,https://doi.org/10.3390/en15207692BrevikEngineering(2017),CO2shiptransportstudy,https://www.brevik.com/project/co2-ship-transport-study/Brun,F.(2017),KoreaandtheShipbuildingGlobalValueChain,DukeGVCCenter,29September,www.globalvaluechains.org/cggclisting/chapter-4-korea-and-the-shipbuilding-global-value-chain/BushveldMinerals(2022),AboutVanadium,https://www.bushveldminerals.com/about-vanadium/Canada,NRCAN(NaturalResourcesCanada)(2020),HydrogenstrategyforCanada,https://www.nrcan.gc.ca/sites/nrcan/files/environment/hydrogen/NRCan_Hydrogen-Strategy-Canada-na-en-v3.pdfCarbonCollectors(n.d.),CO2transportandstorage:Thisishowitisdone,https://carboncollectors.nl/co2-transport-storage/Carey,J.W.(2013)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derulesandnorms,andworkinginacollaborativefashionforthegoodofeveryone.Thischapterconsidershowgovernmentsshouldgoaboutdesigningpoliciesoncleanenergysupplychainsandsetsoutbroadrecommendationsonprioritisingaction.ApplyingariskassessmentframeworkUnderstandingtheriskprofileofeachelementofthesupplychainisakeystepindeterminingwheretofocuseffortstoenhancesecurity,resilienceandsustainability,andhowtodeveloppoliciestoaddresspotentialvulnerabilities.Theseprofilescanlookverydifferentdependingonthecountry,regionandsupplychainandwillundoubtedlychangeovertimeasnewtechnologiesandmaterialsemerge,andastechnologiesmatureandmarketsdevelop.Bothgovernmentsandbusinessescanuseariskassessmentframeworktoevaluatesupplychainrisksandvulnerabilities.TheIEAhasdevelopedsuchaframework,firstpresentedintheSecuringCleanEnergyTechnologySupplyChainsreport,publishedinJuly2022(IEA,2022a).Forthepurposeofthisreport,analysishasbeensignificantlyexpandedtoprovideamorecomprehensiveriskassessmentframeworkthatanalysesarangeofvulnerabilitiesthatmaypreventenergyandtechnologysupplychainsfrombeingsecure,resilientandsustainablewhilescalingupanddevelopingatthepacerequiredforclimateobjectives(Table6.1).Twocriteriaaretypicallyusedinriskassessments,whicheachelementcanbetestedagainst:EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE358IEA.CCBY4.0.•Likelihood:Howlikelyisitthatagivencleanenergyortechnologysupplychainfailstoexpandatthepacerequiredtomeetclimateobjectivesinasecure,resilientandsustainableway?•Impact:Whatistheeffectoffailingtoachievesecurity,resilienceandsustainabilitywhileexpandingagivencleanenergyortechnologysupplychain?Theframeworkisdesignedtobeappliedtocurrentsupplychainstructures,withaviewtoassessingrisksintheshorttomediumtermattheglobal,nationalorregionalleveltowardsagiventargetedcleanenergytransitionifnoactionweretobetaken.Wehaveappliedtheframeworkheretoanalysesoftheprecedingchapterstoassesspotentialrisksfordeploymentdelays,andfailuretoachievesecurity,resilienceandsustainabilityfromaglobalperspective.Wefocusonthegapbetweennear-termprospectsforscalingupcleanenergyandtechnologysupplychainsbasedonplannedprojectsandtheambitionrequiredintheNetZeroEmissionsby2050(NZE)Scenario.Table6.1SupplychainriskassessmentframeworkCriterionDescriptionHowitisappliedinETP-2023Acceleratingcleanenergytransitions:Whatistheriskofasupplychainelementfailingtoscaleupatthepacerequiredtomeetthetrajectory?LikelihoodLongerleadtimesandlabourshortagesincreasetheprobabilityofnotscalingupquicklyenough.Technologiesatearlierdevelopmentstagesaremostatrisk.Whataretheleadtimestodevelopadditionalmining,materialproduction,manufacturingcapacityandinfrastructure?ImpactTheimpactoffailingtoscaleupwillbeloweriftheinvestmentgapbetweentheexpectedthroughputcapacityandthatrequiredtomatchatargetedcleanenergytransitiontrajectoryisrelativelysmall.WhatistheinvestmentgaptomatchNZEScenarioneedsin2030?Security:Whatistheriskofasupplychainelementexperiencingasupplydisruption?LikelihoodThelikelihoodofadisruptionincreaseswithsignificantmarketconcentrationatthefirmorgeographiclevel.Exposuretogeopoliticalrisks,suchastraderestrictions,conflictorpoliticalinstabilitywillalsoincreasethelikelihoodofdisruption.Howconcentratedisproductiongeographically(atthecountryandregionlevel)?ImpactTheimpactofsupplydisruptioncanbereducedifthereisenoughredundancyorstrategicover-sizingofsupplycapacity.Readilyavailablesubstitutabletechnologiesandmaterialsthatcanbeusedrelativelyeasilyasalternativescanalsoreducetheimpactofasupplydisruption.Whatistheutilisationrateofexistingcapacity?Canthematerialsormanufacturingprocessesbedirectlysubstitutedwithalternatives?Howadvancedarethealternatives(whatistheTRLofalternativetechnologiesormaterials)?EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE359IEA.CCBY4.0.CriterionDescriptionHowitisappliedinETP-2023Resilience:Whatistheriskofasupplychainelementnotbeingabletorespondquicklytoashockinthemarket?LikelihoodLongerleadtimesincreasetheprobabilityofnotbeingabletoreacttoamarketshockquicklyenough.Whatistheleadtimetodevelopadditionalmining,materialproduction,manufacturingcapacityandinfrastructure?ImpactTheimpactofasuddenchangeindemandcanbereducedifthereisenoughredundancyorstrategicover-sizingofsupplycapacity.Readilyavailablesubstitutabletechnologiesandmaterialsthatcanbeusedrelativelyeasilyasalternativescanalsoreducetheimpactofasuddendemandchange.Whatistheutilisationrateofexistingcapacity?Canthematerialsormanufacturingprocessesbedirectlysubstitutedwithalternatives?Howadvancedarethealternatives(whatistheTRLofalternativetechnologiesormaterials)?Sustainability:Whatistheriskofasupplychainelementnotbeingabletooperatewithinsustainablestandards/nothavingaCO2footprintcompatiblewithstatedgoals?LikelihoodExposuretoenvironmentalandsocialissuesincreasesthelikelihoodofasupplychainelementfailingtomeetenvironmentalandsocialstandards.FocusonCO2emissions:Howemissions-intensiveisthesupplychainelement?ImpactThegreatertherelativeimportanceofagivenelementinthefunctioningofitssupplychain,thelargertheimpactofthatelementfailingtocomplywithtargetedsocialandenvironmentalstandards.Theimpactcanalsobereducediftherearealternativecomponents,techniquesandapproachesthatarelessexposedtosocialandenvironmentalissuesandthatcanbeimplementedrelativelyeasily.FocusonCO2emissions:Whatisthecontributionofagivenelementtothetotalemissionsofitssupplychain?Notes:NZEScenario=NetZeroEmissionsby2050Scenario;TRL=technologyreadinesslevel.Ourapproachappliesquantitativemetricswhentheyareavailable,complementedbyexpertjudgement,toassesslikelihoodsandimpactsagainsteachoftheidentifiedobjectivestodeterminethedegreeofriskforeachstepinthesupplychain,fromresourceextractiontomaterialproduction,componentandtechnologymanufacturing,andinstallationandinfrastructureconstruction,excludingoperation.Supplychainswereassessedindependentlyofoneanother.Torepresentriskmagnitudeinariskmatrix,severalkeyindicatorsforlikelihoodandimpactwerechosenforeachobjective:•Acceleratingdeployment:Expansionleadtimes(likelihood)andtheinvestmentgapbetweennear-termplansandthetargetedtrajectory(impact).•Security:Degreeofregionalconcentrationofsupply(likelihood)anddifficultyinswitchingtoalternativetechnologiesormaterials(impact).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE360IEA.CCBY4.0.•Resilience:Expansionleadtimes(likelihood)anddifficultyinswitchingtoalternativetechnologiesormaterials(impact).•Sustainability:CO2emissionsintensityofactivitiesineachsupplychainstep(likelihood)andcontributionofeachsteptosupplychainCO2emissions(impact).Weappliedtheriskassessmenttothesixenergyandtechnologysupplychainsanalysedinthisreport,namelythoseforlow-emissionelectricity(solarphotovoltaic[PV]andwindturbines);low-emissionhydrogen(electrolysersandnaturalgas-basedhydrogenproductionwithcarboncaptureandstorage[CCS]);low-emissionsynthetichydrocarbonfuels(includingdirectaircapture[DAC]andbioenergywithcarboncapture[BECC]);electricvehicles(EVs);fuelcelltrucks;andheatpumps.Wealsoappliedtheriskassessmenttotheinfrastructureunderpinningthesesupplychains,includingelectricitynetworks,hydrogentransportandstorage,andCO2management.Thenextsectionpresentstheresultsofthisassessment,aswellasanassessmentofhowthevariousrisksandvulnerabilitiescanbereducedandrecommendationsforgovernmentpolicyprioritisation.PolicyapproachesItisthejobofgovernments,incollaborationwithindustryandotherstakeholders,tocreateconditionsthatencouragethedevelopmentofcleantechnologysupplychains.Governmentsneedtodevelopacohesiveapolicyapproachconcerningsupplychains,comprisingasetofmeasurestargetingspecificstepstoaddresssupplychaindevelopmentbarriersaspartofabroadersetofenergyandclimatepoliciestoachievenetzeroemissions.Anextensiverangeofpolicytoolsandmeasures,includingvariousinstrumentsfordemandcreation,innovationsupportandinvestmentriskmitigation,havealreadybeenproveneffectivetostimulatecleantechnologyandfuelmarkets.Theynowneedtobeappliedtotheirsupplychains.Thereareavarietyofwaysinwhichgovernmentscananddostimulateinvestmentincleantechnologysupplychains.Amixtureoftechnology-pushpoliciesthatdriveinnovationstomarket(e.g.fundingresearch,developmentanddemonstration[RD&D]toreducecostsandrisks)andmarket-pullpolicesthatincentivisetheiruseandstimulateeconomiesofscalehasgenerallyproventobethemostcost-effectiveapproachtodeploycleanenergytechnologies(seeBox6.1).Arangeofmarket-pullpoliciescanalsobeusedtostimulatedemandforcleanenergytechnologies,productsandservices,facilitatingtheirmarketuptake.Marketdeploymentboostseconomiesofscaleandlearning-by-doingbenefits,whichimprovestheperformanceandreducesthecostoftechnologies,andbuildsinvestorconfidenceintheprospectofthetechnologiesbecomingcompetitive.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE361IEA.CCBY4.0.Bothpolicyapproachescandrawonarangeoffinancialandregulatoryinstruments.Financialmeasuresincludeenergyandcarbontaxesorpenalties,aswellassubsidiessuchasgrants,taxcredits,low-costloansandfeed-intariffs.Regulatorymeasuresincludeenergyandemissionsstandards,restrictionsontheuseofcertaintechnologiesorfuels(e.g.abanonoil-firedboilers),labelling/certificationschemes,infrastructureplanningandpermitting,mandates(e.g.EVmandatesandrenewableportfoliostandards),anddirectgovernmentprocurement,programmesandinvestment.Suchpolicyinstrumentsarecentralcomponentsoftheclimateandenergypolicytoolkit,andwhencombinedwithanindustrialpolicyframework,canbeappliedtomakesupplychainsmoresecure,resilientandsustainable.Theenergysystemtransformationneededtoachievenetzeroemissions,involvingabroadportfoliooftechnologies,willnothappenatthenecessaryscaleorspeedwithoutclearlyformulatedlong-termgovernmentstrategies,integratedintooverallenergy,climateandindustrialpolicyandsystemplanning,toguideandreducetherisksofinvestmentdecisions.Suchlong-termstrategiesneedtobeclearandincorporatenear-termpriorities,andtheirprogressneedstobetrackedagainstmedium-termmilestonestomakethemcredibleandtosecurebuy-infrombusinessesandinvestors.Box6.1Casestudy:ThesolarPVsupplychaininChinaChinadominatesallsegmentsofthesolarPVsupplychain–theresultofmorethantwodecadesofgovernmentpoliciestodevelopadomesticindustry.Theinitialimpetuscamefromthe10thFive-YearPlanfor2001-2005,whichsetavisionforscalingupsolarPVcellandmodulemanufacturing.Inits11thFive-YearPlan(2006-2010),emphasiswasonpromotingdomesticpolysiliconandequipmentmanufacturingthroughgrants,havingidentifiedrelianceonimportsofthesematerialsasahinderancetomanufacturingPVcells.Policyincentivesinitiallytargetedproduction.Grants,low-costloansandfundsfromtheMinistryofScienceandTechnologyledtotheestablishmentofseveralpioneeringdomesticmanufacturers.ThegovernmentalsoprovidedgrantsandtaxincentivestoimportmanufacturingequipmentfromEuropeandtheUnitedStatesuntilChinesecompanieswereabletodeveloptheirownequipmenttechnologies.Intheabsenceofdomesticdemand,ChinesesolarPVmanufacturersinitiallysoughttoexpandsalesbyexporting,improvingtheircost-competitivenessthrougheconomiesofscaleandintegrationofsupplychainsegments.Policieslatershiftedtoboostingdomesticdemandtosupportclimatechangemitigationeffortsandgivefurtherimpetustodomesticmanufacturing,withChinabecomingtheworld'slargestmarketin2013.Thefirstmajorsubsidyprogrammesupportingdemand–theGoldenSunprogramme,launchedin2009–providedEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE362IEA.CCBY4.0.grantsfornearly6000MWofcapacityusingefficientandproventechnologies.Thegovernmentalsointroducedafeed-intariffin2011andincentivesformoreefficientcelltechnologyundertheTopRunnerProgrammein2015,whichpromptedChinesemanufacturerstoshifttheirfocusfrommulticrystallinetomoreefficientmonocrystallinetechnology.EconomiesofscaleandtechnologicaladvancesledtoadropintheaveragepriceofaPVmodulefromaroundUSD4.5/watt(W)in2005toUSD1.5/Win2011.In2021,ChinaannouncedplanstocarryoutdemonstrationprogrammesfordistributedrooftopsolarPVtoincentivisecountiestodeployrooftopsystems.Source:IEA(2022b).CollaboratingonsupplychaindevelopmentCollaborativeeffortsfocusingoninnovationandinvestmentwillbecentraltotheprocessofdevelopingpoliciesforsecure,resilientandsustainablesupplychains.Makingnetzeroemissionsarealitycallsforasingular,unwaveringfocusfromallgovernmentsincollaborationwithbusinesses,investorsandcitizens,onallaspectsofthecleanenergytransition.Allstakeholdersneedtoplaytheirpartinidentifyingandmappingoutpotentialopportunitiesandvulnerabilitiesinsupplychains,takingaccountoflocalcircumstancesandthespecificcharacteristicsofeachsectorandtechnology.Thisrequirestransparentpublicdialogueandconsultations,developingprogrammestoboostskillsinemergingindustriesandsupportingthegrowthofnewjobopportunitiesinmoresustainableeconomicactivities.Itisimportantthatgovernmentsworktogetherinaneffectiveandmutuallybeneficialmannertoimplementcoherentmeasuresthatcrossborders.Takingaregionalorinternationalapproachcanfacilitatetheidentificationofopportunitiestodevelopcommonstandardsandapproaches,aswellaspromotethesharingbestpracticesandprovideaplatformforco-ordinatingthedevelopmentofcleantechnologysupplychains(seeBox6.2).Inparticular,acceleratinginnovation,developinginternationalstandardsandco‐ordinatingthescale-upofcleantechnologiesandtheirassociatedsupplychainsmustbedoneinawaythatlinksnationalmarkets.Internationalstandardsareimportanttosupportthedevelopmentofmarketsforcleantechnologiesandtheirassociatedsupplychains,astheyfacilitatetradeandtechnologytransfer.Theyareneededtoovercometechnicalbarriersininternationalcommercecausedbydifferencesamongtechnicalregulationsandstandardsdevelopedseparatelybycountries,nationalstandardsbodiesandcompanies,andshouldbealignedwithsustainabilityandclimategoals.Forinstance,theapplicationoftraceabilitystandardsincleanenergyisprogressing,especiallyinadvancedeconomies,butmoreattentionisneededtoensuresustainabletechnologysupplychains.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE363IEA.CCBY4.0.Co‐operationmustalsorecognisedifferencesinthestagesofdevelopmentofdifferentcountriesandthevaryingsituationsofdifferentpartsofsociety.Formanywealthycountries,internationalco-operationiscriticaltoachievenetzeroemissions.Formanyemergingeconomies,buildingthesesupplychainsintheabsenceofinternationalassistance,includingsustainedandactivetechnicalco-operationandsupport,willbeimpossible.Governmentcollaborationandco-operationshouldfocusparticularlyoncreatingrules-based,transparentmarketsforcleantechnologysupplychains.Internationalandmulti-stakeholderco-operationcanfacilitatethetransferofknowledgewithrespecttoemergingtechnologiesandavoidbottlenecksintheirsupplychainswhentheyreachthecommercialisationstage.Thisisparticularlyimportantinthemiddleandlaterstepsofthesupplychain:forexample,manufacturersmustbereadytoboostoutputiftherearenewinnovationsfurtherupthesupplychain,anddemandsignalsneedtobesenttostimulateconsumerinterest,suchasfornearzeroemissionsteel,asnewproductiontechnologiesbecomeavailable.Box6.2Casestudy:StrategicpartnershipsincleanenergysupplychainsGovernmentsarealreadyestablishingstrategicpartnershipsinthefieldofcleanenergysupplychains.Forexample,inMay2022,13nationsagreedtotheIndo-PacificEconomicFrameworkforProsperity,includingafocusonsecuringcriticalsupplychainstoensureaccesstokeyrawandprocessedmaterials,semiconductors,criticalmineralsandcleanenergytechnologies.IntheEuropeanUnion,theActionPlanonCriticalRawMaterials,launchedin2020,aimstoreducedependenceonsinglesuppliercountriesbydevelopingstrategicpartnershipstodiversifythesupplyofsustainablecriticalrawmaterials.Underthisplan,theEuropeanUnionsignedanagreementwithCanadaandconvenedinFebruary2022tofurtherdeveloppolicies,includingtosecurefinancialsupportforcriticalmineralprojectsanddevelopenvironmental,socialandgovernance(ESG)criteriaandstandards.ZambiaandtheDemocraticRepublicofCongosignedaco-operationagreementinApril2022tofacilitatedevelopmentofthebatterysupplychainforEVs.Thetwocountries,bothmajorproducersofkeycriticalmineralsforEVbatteries(cobaltandcopper),establishedaBatteryCounciltooverseethenewagreement.Theagreementisexpectedtoprovideaframeworkforbilateralco-operation.InDecember2022,theUnitedStatessignedamemorandumofunderstandingwiththetwocountriestoaidthiseffortbyprovidingtechnicalassistancefortheEVsupplychainandisexploringfinancingandsupportmechanismsforinvestment.Sources:EC(2020);UnitedStates,DOS(2022).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE364IEA.CCBY4.0.PrioritisingpolicyactionBasedonanalysisinthepreviouschaptersandresultsoftheriskassessmentframework(presentedbelow),wehavedevelopedasetofpolicyrecommendationsthatgovernmentscanusetoprioritiseactiontolowertheriskofandvulnerabilitytomajorsupplydisruptions,whileacceleratingcleanenergytechnologydeployment.Thepolicyrecommendationsaimtoequippolicymakerswiththetoolsnecessarytoacceleratecleanenergytransitionsbyanticipatingandalleviatingbottlenecks;securesupplychainsthroughdiversification;boostresiliencebyreducinginputneeds;andestablishsustainablesupplychainsbyaddressingemissionsandotherharmfulenvironmentalandsocialeffects.Table6.2summarisestherecommendationsandtheyarediscussedinturnbelow.Real-worldcasestudiesshowcasehowgovernmentsareapplyingtherecommendedactions.Table6.2Policyrecommendationsforsecure,resilientandsustainablesupplychainsKeyrecommendationsAcceleratethecleanenergytransitionReviewpermittingandapprovalprocesses[Casestudy:Box6.5]•Establishclearpermitapprovaltimelinesandrequirements•Createa“strategicproject”designationforaccesstoacceleratedprocesses,suchasaone-stopshopforpermittingPrioritiseandco-ordinatetherolloutofenablinginfrastructure[Casestudy:Box6.6]•Drawuplong-termplansforparalleldevelopmentofcleanelectricitygenerationandnetworkexpansionrequirements•Planandsupportindustrialclusters•ProvidetechnicalassistancetoemergingeconomiesSupportrecruitment,trainingandaccreditationprogrammes[Casestudy:Box6.7]•Providefundingforapprenticeshipopportunities,orrequirethemaspartofpublicprocurementtenders•HarmoniseaccreditationstandardsStepupinnovationprogrammes[Casestudy:Box6.8]•Earmarkfundstoaddressspecificsupplychaingaps•Facilitatecommunicationwithcompaniesthroughpartnerships,initiativesandjointventures•Improveaccesstolow-costfinancingfordemonstrationprojectsSecuresupplychainsDevelopgeologicalsurveysforcriticalmineralresources•Supportcriticalmineralmappingefforts•Encouragecollaborationanddata-sharingConsidercriticalmineralstockpiles•CarefullydesignstockpilestoavoidexacerbatingshortagesDesignindustrialstrategiestoincentiviseinvestment[Casestudy:Box6.9]•Usetaxincentives,early-movergrantsandlow-costfinancingtoreducerisksforcapital-intensiveprojects•Leveragefundingfromnationaldevelopmentbanksforgrants,technicalassistance,creditenhancementsandloanguaranteesCo-ordinatesupplychainassessments•CreateanewworkstreamundertheCleanEnergyMinisterial•Provideguidancetocompaniestoassessandmanagesupplychainrisks(e.g.methodology,commondefinitions,indicators)EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE365IEA.CCBY4.0.KeyrecommendationsBoostresilienceReviewdesignandmanufacturingregulations•Movefromprescriptivetoperformance-baseddesignstandardsPromoterepairabilityandlongerlifetimes[Casestudy:Box6.11]•Establishrequirementstobuildrepairabilityintodesignstages•Createremanufacturingandsecond-lifeapplicationprogrammesExploreopportunitiestorepurposeinfrastructure[Casestudy:Box6.13]•Examinereuseofretiredcoalpowerplantsandinfrastructure•IdentifyopportunitiestorepurposepipelinesandrevisedecommissioningrequirementsLeveragecompetitiveadvantages•ChoosewheretospecialisebasedongeographicandworkforceadvantagesEstablishsustainabilityIncreasematerialreuse,recyclabilityandrecyclingrates[Casestudy:Box6.14]•Establishcircularityroadmapsandmaterialrecoverytargets•AdoptproductstewardshipandextendedproducerresponsibilitypoliciesAdoptstandardsforcleantechnologiesandtraceability[Casestudy:Box6.15]•Developtaxonomiesforlow-andnearzeroemissionproductsandmaterials•RequiretheuseoftraceabilitystandardsinpublicprocurementtendersConsiderESGregulations[Casestudy:Box6.16]•DrawontheOECD’sDueDiligenceGuidanceforResponsibleSupplyChainsSupportnearzeroemissionmaterialproduction[Casestudy:Box6.17]•Usepublicprocurementfordemandcreation•Createlifecycle-basedemissionsstandardsforfinalproducts•EstablishinternationalsectoralagreementsorclubsAcceleratingthecleanenergytransitionAchievingnetzeroemissionswillrequireanunprecedentedaccelerationofglobaldeploymentofcleanenergytechnologiesandthefacilitiestosupporttheirsupplychains.Rapiddeploymentofthesetechnologiesinthenextdecadeiscrucial:anydelayswillmeanthatreachingnetzerobymid-centurywillbecomeincreasinglydifficult(seeChapter2).Ambitiousgovernmentpoliciesareneededtoencouragebothdemandforcleanenergyandsupplyofthetechnologiesandskillsneededtoproduceit.Policiesneedtoconsidercurrentandfuturebottlenecksinvolvedinexpandingcleanenergyandtechnologysupplychains.Ourassessmentofselectedglobalsupplychainrisksshowsthat,amongthedifferentsupplychainssteps,infrastructuredeploymenttoenablehydrogenproductionandCO2managementismostatriskoffallingshortoftheraterequiredintheNZEScenario,owingtolongleadtimesandlargeinvestmentgaps.Thisisimportantbecauseinfrastructureaffectsthedeploymentofmultiplesupplychains,including,withinthegroupstudiedinthisreport,electrolyticandnaturalgas-basedhydrogenwithCCS,fuelcelltrucks,andlow-emissionsynthetichydrocarbonfuelproduction(Figure6.1).Miningalsopresentsariskforsupplychainsthatrelyheavilyoncriticalminerals(fuelcelltrucks,electriccars,solarPV,windandelectrolytichydrogen),whilerisksassociatedwithmanufacturingandinstallationmainlyconcernsomelarge-scale,site-tailoredtechnologies(naturalgas-basedhydrogenproductionwithCCS,BECC,andsynfuels)thatrequiresubstantialinvestmentsandinvolvelonginstallationleadtimes.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE366IEA.CCBY4.0.Figure6.1RisksthreateningaccelerationoftheglobalcleanenergytransitionIEA.CCBY4.0.Notes:BECC=bioenergywithcarboncapture;DAC=directaircapture.Supplydisruptionlikelihoodisbasedonleadtimestodeploynewfacilitiesonascaleof0(shortestleadtime,around1year)to10(longestleadtime,around10years).Whendifferentfacilities(e.g.formineralrefiningandbulkmaterialproduction)areinvolvedatagivenstepofthevaluechain,theleadtimecorrespondstothemaximumvalue.ImpactismeasuredbythegapbetweencurrentannouncedinvestmentandthatrequiredtoachieveprojectedNZEScenariodeploymentin2030onascaleof0(lowestgap,around0%)to10(highestgap,around100%).Forminingandprocessing,investmentshortfallsincopper,cobalt,lithiumandnickelwereusedtoratetechnologies.Forelectricitynetworks,theinvestmentgapistherelativegapbetweentheannualelectricitynetworkinvestmentin2030intheNZEscenarioandtheaverageaccordingtocurrentpolicyannouncementsandcommitments.Arrowsindicatehowindividualpointsareconnectedwithinasupplychain(herewiththeexampleofgas-CCSH2).Sources:IEAanalysis.FordatasourcesandfurtherbackgroundontheinvestmentanalysisseeFigure1.11,andontheleadtimesanalysisseeFigures1.15(mining)and1.16(materialproduction,manufacturingandinstallation,infrastructure).Alongthecleanenergyandtechnologysupplychainsanalysed,thedeploymentofenablinginfrastructureistheelementatmostriskoffallingshortoftherequiredNZEScenariorate.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE367IEA.CCBY4.0.StrategicconsiderationsAllsupplychainsaresubjecttotheriskofbottlenecksemergingperiodicallyasaresultoftemporarymismatchbetweensupplyanddemandataparticularpointalongthechain.Theglobalsemiconductorshortagethatemergedin2020,whichhascausedenormousdisruptiontosupplychainsgenerallyworldwide,includingforcleanenergytechnologies,isaprimeexampleofsuchabottleneck(seeBox6.3).Thereareseveralpotentialcausesofbottlenecks,includingshortagesofcriticalcomponentsorsub-componentsandlabour,theunavailabilityofcommerciallyproventechnologies,logisticalproblems,unplannedfactoryclosuresandweather-relatedevents,amongmanyothers.Thedurationofbottleneckscanvaryfromdaystoyears.Itcanbehardtopredictpreciselywhenorwheretheymayoccur,buttheycanbeanticipatedandalleviatedwithappropriatebusinessandgovernmentaction.Oneslightlylessobvioussolutiontotheproblemoflengthyleadtimesforsupplychainsistoinitiateprojectdevelopmentearlierinanticipationoffuturedemandincreases.Thiscanbefacilitatedbyimproved“signalling”,i.e.theuseofmorereliable,accurateandearlierdemandsignalssuchascorporateandgovernmentplans,strategiesandforecasts,orbythecreationofmorefavourablemarketconditionsthroughrisk-sharingarrangements.Improvedsignallingcouldalsoenabletheearlyinvolvementofstakeholdersintheprojectdevelopmentprocess,acriticalcomponentofbuildingpublictrustandsocialacceptance.Governmentprioritisationofkeytechnologiesandsupplychainsiscriticalinthisregard.Governmentsneedtobackuptheirclimateambitionswithcredibleroadmapsandimplementationplans,detailinghowandwhenspecificmilestonesaretobemet.Thegreatestuncertaintyforbusinessesandhouseholdsistheextentoftheircountry’scommitmenttomeetpolicygoals.Iftheydonothaveconfidenceintheircountry’sclimatepolicies,theyarelikelytomakeinvestmentandspendingdecisionsbasedonmuchmoreconservativeexpectations.Wefocushereonfourstrategicareastoaddresstheserisks:shorteningprojectleadtimes,mobilisinginvestment,hiringandupskillingworkers,andboostinginnovationtoshortenthetimeittakesforkeytechnologiestoreachthemarket.Box6.3Casestudy:PolicyresponsestothesemiconductorshortageTheglobalsemiconductoror“chip”shortagethatemergedin2020hascausedenormousdisruptiontosupplychainsgenerallyworldwide.Evenbefore2020,difficultiesinobtainingequipmenttomakeoldertypesofsemiconductorshadbeguntoemerge,inpartduetosurgingdemandasvariousindustriesshiftedtomorechip-intensiveproducts.TheCovid-19pandemicreinforcedthesetrendsbyEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE368IEA.CCBY4.0.furtherboostingdemandforproductsthatrequiresemiconductorsofalltypesandbycuttingsupplyvolumesduringlockdowns.Othereventssuchasfactoryfires,winterstormsandenergyshortagesalsocontributed.Inresponse,governmentsaroundtheworldhavetakenemergencymeasurestoaddressimmediatesupplyshortages.Theyhavealsotakentheopportunitytoexaminetheirrespectivesupplychainstoidentifyvulnerabilitiesandproposelonger-termpolicysolutionstopreventsuchshortagesinthefuture.InEurope,inFebruary2022theEuropeanCommissionproposedtheEuropeanChipsActtoincreasetheregion’sresilienceandreduceexternalsupplydependencebyboostingEurope’sshareofglobalsemiconductormanufacturingto20%by2030comparedwithjust10%today.TheActwillbesupportedbymorethanEUR43billionininvestmentthrough2030,ofwhicharoundEUR15billionwillbeadditionaltoexistingfunding,andasimilaramountofprivatesectorfundingisbeingtargeted.TheActmakesuseofarangeofpolicyapproaches:directinvestmentinnewtechnologies;accesstofacilitiesforprototypingandpiloting;certificationtoguaranteequalityforcriticalapplications;improvedinvestmentconditionsinmanufacturingfacilities;accesstoequityfinancingforstart-upsandsmallandmedium-sizedenterprises(SME);supportforworkforcedevelopment;andglobalpartnershipswithlike-mindedcountries.TheUnitedStatesconductedacomprehensivereviewofanumberofcriticalsupplychains,includingforsemiconductorsin2021,resultinginmanyrecommendationstodevelopresilientandreliablesemiconductorsupplychains.Theyincludepursuingapolicyof“reshoring”byencouragingdomesticmanufacturingandRD&D,and“friend-shoring”byworkingcollaborativelywithlike-mindedeconomiestosecuresupplychains.AnumberofglobalsemiconductormanufacturershavesinceannouncedplanstoexpandmanufacturingcapacityintheUnitedStates,includingaUSD20-billioninvestmentbyIntelandaUSD17-billioninvestmentbySamsung.Toaidthiseffort,inAugust2022theCreatingHelpfulIncentivestoProduceSemiconductorsforAmericaActandtheScienceActof2022weresignedintolawtopromotedomesticsemiconductormanufacturingandresearch,andtoacceleratethedesign,development,andmanufacturabilityofnext-generationmicroelectronics.Thelawincludesfederalincentivessuchastaxcreditsformanufacturingfacilitiesandfundingforworkforcedevelopment.InAustralia,thegovernmenthaslaunchedaModernManufacturingStrategy,makingAUD1.5billioninfundingavailableoverfouryearsinresponsetoCovid-19relatedsupplychaindisruptions.Buildingresilienceintosupplychainsofproductscriticaltothenationalinterest,includingsemiconductors,isacentralcomponentofthestrategy,withAUD107millioningrantfundingallocatedforsupplychainresilienceinitiatives.ThegrantprogrammeaimstohelpAustralianbusinessesinvestinnewequipment,technology,skillsandprocesses,includingrequiredrawEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE369IEA.CCBY4.0.materials,intermediatematerialsandspecialisedmanufacturingequipment.AspecificgoalistoincreaseAustralia’sshareoftheglobalsemiconductorsupplychain,buildingonexistingstrengthsandareasofcompetitiveadvantage.ThestrategyalsoestablishedtheOfficeofSupplyChainResilience.Sources:EC(n.d.);TheWhiteHouse(2022a);Australia,DepartmentofIndustry,ScienceandResources(2020).ShorteningleadtimesAlthoughminimisingleadtimestospeedupdeploymentcanreducecostsandincreasethecompetitiveadvantageofprojects,itisoftendifficultinmaturesectors.Thelargestgainscouldbemadebyfocusingonthesupplychainelementswiththelongestleadtimes,suchasexplorationfornewresourcesinmining,whichcantakedecades.Risk-sharingarrangementsbetweenthepublicandprivatesectorscanhelpreducecostsandacceleratethisprocess,withfundingofprecompetitiveexploration(carriedoutbeforeabiddingprocessforexplorationlicencesislaunched)beingparticularlyvital.Developingskillsinthisareacanalsoaccelerateexplorationactivities,ascanusingbestpracticesinallocatinglicencesandrecoupinginactiveones.Focusingonelementscommontoseveralsupplychainscouldalsohelpcutleadtimesefficiently.Forexample,obtainingfinancingcancausedelaysinmanycases,butcanbeaddressedthroughcapacity-buildinginthefinancialcommunity,suchasinmultilateraldevelopmentbanks.Redirectingfinancingandencouraginglenderstoprioritiseprojectsthatarecompatiblewithnetzerogoalsisessential.Shorteningthetimeneededtobuildnewcleantechnologysupplychainelementscouldalsohelpreducecostsandboostinvestment,indirectlyboostingdeploymentaswell.Spendingcapitalclosertothecompletionofaprojectsavesonborrowingcostsandraisesinvestmentreturns.Aproject’sconstructioncostscanbereducedbyaround2.5%iftheconstructionwindowisshortenedfromthreetotwoyearsata5%costofcapital,assumingevenlyspreadconstructionspending.Forprojectswithhigherfinancingcostssuchasthoseoftenseeninemergingeconomies,thisimpactismagnified.Forexample,forthesamereductioninconstructiontime,thecostisreducedby7.1%witha15%costofcapital.Reducingleadtimesalsoreducestheamountoftimecapitalislockedupineachproject,andhenceincreasestheeffectivepoolofcapitalavailableforprojectstoaccess.Conversely,anythingthatdelaysprojecttimelinesincreasesthecostofcapitalbyraisinguncertaintyandrisk,hencedeterringinvestment.MobilisinginvestmentthroughpolicyAllgovernmentswouldneedtohaveconsistentandfocusedpoliciestomobilisethescaleofsupplychaininvestmentenvisionedintheNZEScenario.Globalenergysectorinvestmentrequirementsmorethandoublebetween2021and2030,withmostoftheincreaseoccurringinemergingmarketsanddevelopingEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE370IEA.CCBY4.0.economies(Figure6.2).Thebulkofthisinvestmentisneededforcleanenergytechnologies.Givenpublicfundingconstraints,theprivatesectorwouldneedtocontinuetoprovidemostnewinvestments.Enhancedcollaborationamongdevelopers,investors,publicfinancialinstitutionsandgovernmentscouldhelpmobiliseprivatecapital,whichwillbeparticularlyimportantinthenextfewyearsasnoveldemonstrationandinfrastructureprojectsarelaunched.Figure6.2AnnualenergysectorinvestmentsbyregionalgroupingintheNZEScenarioIEA.CCBY4.0.Notes:ADV=advancedeconomies;EMDE=emergingmarketsanddevelopingeconomies;NZEScenario=NetZeroEmissionsby2050Scenario.Source:IEA(2022c).Cleanenergyinvestmentneedsnearlytripleforadvancedeconomiesandnearlyquadrupleforemergingmarketsanddevelopingeconomiesby2030intheNZEScenario.Itiscrucialtoalignpolicysupportforcleanenergysupplywithdemandtoavoidsupplychainimbalancesandinefficiencies.Financinginvestmentswillrequireaccesstofinancialsupportmechanismsandlow-costfinancingsuchasblended-financesolutions,particularlyinemergingeconomies.Centralbanksaroundtheworldhaverecentlybeenraisinginterestratesinresponsetorisinginflation,pushingupthecostofdebtinenergy-relatedsectorsbyover30%frompre-pandemiclevels(IEA,2022c).Keepingfinancingcostslowwillbecriticaltoaccelerateenergytransitionsastheenergysectorbecomesmorecapital-intensive.AccreditingtrainingschemestohelpalleviateskillgapsUncertaintyaboutthepaceofthecleanenergytransitionalsoaffectsworkforcetrainingandupskilling.Workersarelesslikelytoinvesttimeormoneytogainthe0100020003000ADVEMDEADVEMDEADVEMDE202120302050USD(2021)billionOtherCleanenergyEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE371IEA.CCBY4.0.newskillsnecessarytoworkwithcleantechnologiesiftheyareuncertainaboutwhenortheextenttowhichthoseskillswillbeneeded.Investmentinworkforcetrainingprogrammesisessentialtoestablishaqualifiedworkforceandmakeenergytransitions“people-centred”toensurethatthebenefitsandcostsinvolvedaredistributedfairlyandinawaythatprotectssociety’smostvulnerable(IEA,2021a).Thecleanenergysectoralreadyfacesdifficultieshiringpersonneltokeeppacewithdemand,andlabourshortageshaveheldbackinvestmentinsomecountries(seeChapter2).Toavoidbottlenecks,governmentscanplayanimportantpartinworkforcetraining,educationandreskillingprogrammesasdemandforcleanenergyjobsincreases,especiallyfortechnologieswithlongleadtimes.Theyhaveamoralobligationtoensureajustenergytransitionforallandsupportworkersinsectorswhereemploymentmaybereducedorlost.68Severalcasesofharmfulconsequencesofafailuretosetoutclearpolicygoalshavealreadyemerged.Forexample,theUKheatpumpsectorhascitedambiguousgovernmentsignalsaboutfuturepolicysupportasadeterrenttoinvestinginworkertraining,resultinginashortageofqualifiedinstallersasdemandincreases(NormanandRegan,2022;Nesta,2022).Inresponsetothegrowingneedfornewskills,severalcountriesandcompanieshavebeguntoestablishnewaccreditations–evaluationsofconformitywithrecognisedstandardsperformedbyindependentthird-partyorganisations–fortraininginthecleanenergysector(seeTable6.3).Today,accreditationsforenergysupplychainsareprimarilyavailableforinstallation(mainlyforsolarPVandwindsystems,andforheatpumpsinsomecountries),andinsomecasesforoperationsandmaintenance.Accreditationsinrawmaterialextractionandmanufacturingarerare,asbothtypicallyrelyonin-houseworkertrainingtailoredtoaspecificproduct.Well-organisedandaccreditedtrainingprogrammescantranslateintosavingsforcleanenergycompaniesofcostsassociatedwithcreatingorfindingappropriatetrainingoptions,whichcouldhelpreducetechnologycosts.Certificationcanensurehigh-qualityproductsandinstallation.Poorinstallationofcleanenergytechnologiesposesasignificantriskforemergingindustries,asitcandamagethereputationofproductsandunderminetheiruptake.Industry-widesafetystandardsandcertificationscanalsofacilitatewidespreadadoptionofbestpractices.68SetupbytheIEAinJanuary2021,theGlobalCommissiononPeople-CentredCleanEnergyTransitionshasformulatedasetofactionablerecommendationstoinfluencethecleanenergypoliciesandprogrammesofgovernments,funders,investorsandinternationalorganisationstomaximisetheirbenefitstopeopleandensuretheoverallsuccessofcleanenergytransitions(https://www.iea.org/programmes/our-inclusive-energy-future#recommendations).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE372IEA.CCBY4.0.Table6.3Accreditationrequirementsforcleanenergysectorworkersbytechnologyinselectedcountries,2022UnitedStatesUnitedKingdomChinaIndiaSolarPVRequirementsvarybystate.Aboutone-thirdhavesolar-specificcertifications.Althoughnotlegallymandated,installersmustbecertifiedbytheMCSforthesolarsystemtobenefitfromgovernmentincentives.Mechanicalandelectricalequipmentinstallersarerequiredtohavecorrespondingqualifications.Requirementsvarybystate;somejurisdictionsrequirelicencedelectricalorgeneralcontractors.WindNolicenceorstandardcertificationisrequiredtobecomeawindturbinetechnician,buttheUSDOEmaintainsalistofwindenergyeducationandtrainingprogrammes.Employersmayrequireengagementinorcertificationfromoneofseveralgovernment-sponsoredtrainingschemes.Nospecificcertificationisrequiredtoworkonwindturbines,thoughsomeemployeesmayneedtohavestateconstructionengineeringcertificates.Nospecificcertificationisrequired,thoughemployersmaydemandengineeringdegreesortrainingcertificates.EVsCertificationfromtheNationalInstituteforAutomotiveServiceExcellenceisusuallyrequiredbylargerrepairshopsordealerships.Theautomotiveindustryisgenerallyunregulated,sonocertificationisrequiredtoservicevehicles.PersonnelperformingmaintenanceonEVbatterysystemsmustholdageneralelectriciancertificateandalltechniciansmustundergotrainingtogaingeneralcertification.ThereisnosinglecertificationtoworkonEVs.Mechanicsoftenbegintheircareersasapprentices.HeatpumpsHVACtechnicianlicenceandelectricianlicencerequirementsvarybystate,butalltechnicianswhoworkwithequipmentcontainingrefrigerantsmustbecertified.Installersmustholdacertificationinplumbing,HVAC,gasorsimilartobecertifiedbytheMCSandqualifyforgovernmentincentives.AvoluntaryindustryQualificationCertificateSystemisinplaceforpersonnelworkingwithrefrigerants.Theservicingsectorremainslargelyinformal,andthereisnouniversalcertificationsystemforHVACtechnicians.Notes:PV=photovoltaic;EV=electricvehicle;HVAC=heating,ventilationandairconditioning;MCS=microgenerationcertificationscheme.Sources:RSI(2022);MCS(2022);China,NEA(2022);India,MNRE(2019);d’Estries(2021);UnitedStates,DOE(2022a);NationalCareersService(2022);Chinalawinfo(2022);India,NationalQualificationsRegister(2021),UnitedStates,BLS(2022);IMI(2018);CAAM(2021);TheHindu(2022);IEA(2022d),GlobalEVOutlook2022;UNEP(2015);Bhasin,GorthiandChaturvedi(2020).ReducingthetimetogetnewtechnologiestomarketReducingthelengthoftimefromatechnology’sconceptionuntilitiscommercialisedandconsidered“materialinthemarket”(i.e.wellestablishedcommercially)iscritical.Arangeofmeasurescanhelpmeetthisobjective.Collaborationamongfirms,eveninhighlycompetitiveindustries,canimproveinnovationefficiency.Forexample,inthesteelsector,BaowuSteellaunchedtheEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE373IEA.CCBY4.0.GlobalLow-carbonMetallurgicalAlliancein2021toacceleratethepaceoflearningregardingnoveltechnologies.Todate,themajorityofprogressinkeynearzeroemissionironandsteelprojectshasbeeninEuropeandNorthAmerica.Theseglobalcollaborativeinitiativescanhelpreducetimetomarketandbuildthemarketfaster.Reducingthetimetomarketforaparticulartechnologycanalsobeachievedbyincreasingspendingoninnovation(includingbytargetinginnovationatareasofthesupplychainmostinneed)andimprovingtheefficiencyofinnovation.Areaswithpotentialspilloversbetweentechnologies,wherebreakthroughscouldberelevantformultipletechnologyareas(suchasmaterialinnovationusefulforbothelectrolysersandbatteries)shouldbehigh-prioritytargets.Publicsectorenergyresearchanddevelopment(R&D)spendingiscurrentlydominatedbyChina(30%oftotalspending)andadvancedeconomies(66%ofthetotal)(Figure6.3).Theenergysectormadeup5-10%oftotalpublicR&Dspending(excludingprospectingforresources)between2011and2020incountriesforwhichdataareavailable(OECD,2022).Figure6.3PublicenergyR&DbyregionandcorporateenergyR&DbytechnologyIEA.CCBY4.0.Note:R&D=researchanddevelopment.Source:IEA(2022c).PublicsectorenergyR&DspendingiscurrentlydominatedbyChina(30%)andadvancedeconomies(66%).102030402015201620172018201920202021USDbillionGovernmentR&DRestofworldJapan,Korea,AustraliaandNewZealandEuropeNorthAmericaChina204060801001202015201620172018201920202021CorporateR&DNuclearBatteries,hydrogenandenergystorageThermalpowerandcombustionequipmentCoalRenewablesOilandgasElectricitygeneration,supplyandnetworksAutomotiveEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE374IEA.CCBY4.0.Innovation,particularlyinresourceextraction,materialprocessingandend-of-lifestagestoreducemineralandmaterialdependency,willplayavitalroleinalleviatingfuturebottlenecksforcleantechnologysupplychains.MassivegrowthintheneedforcriticalmineralstomanufacturekeycomponentsincleantechnologysupplychainsintheNZEScenariowillputpressureonexistinglinks.Moreandmorecompaniesarethereforesearchingforuntappeddepositsinremotecornersoftheworld,ofteninplaceswithlimitedinfrastructure,andleadtimestobuildnewcapacityarelong.Policysupportandco-ordinationinthisregardarecrucial.Innovationpoliciescanhelpreducemineraldependencybyenablingtheelaborationofmethodstorecyclerawmaterialsandthedevelopmentoflow-costalternativematerialstomanufacturecleanenergytechnologiesanddeliverthesameservice,allowinginvestorstobetteradapttovolatilepricesanduncertaindemandbyincreasingtherateofextractionandloweringcosts.PolicyrecommendationsWefocusbelowonseveralspecificmeasurestargetedatcleanenergyandtechnologysupplychainsthatcanbeparticularlyeffectiveinreducingbottlenecksascleanenergytransitionsprogress,namelystrategicreviewsofpermittingandapprovalprocessestoimproveefficiencyandreduceleadtimes;prioritisingandco-ordinatingtherolloutofenablinginfrastructure;supportingrecruitmentandtrainingprogrammes;andenhancinginnovationfundingandprogrammestotargetkeychallengeswithinenergysupplychains.Box6.4Casestudy:StrategiesforcleanenergysupplychainsintheUnitedStatesandEuropeInFebruary2022,theUnitedStatesDepartmentofEnergy(DOE)releasedacomprehensivereportoutlininghowitplanstoincreasethesecurityandresilienceofdomesticcleanenergysupplychains.Basedondetailedassessmentsof13energytechnologiesandcomponentsandareviewofthesupplychainsofcriticalproducts,includingsemiconductormanufacturingandadvancedpackaging,large-capacitybatteriesandcriticalmineralsandmaterials,thestrategyoutlinesactionstoachievesevenkeyobjectives:IncreasecriticalmaterialavailabilityExpanddomesticmanufacturingcapabilitiesInvestinandsupporttheformationofdiverse,reliableandsociallyresponsibleforeignsupplychainsIncreasecleanenergyadoptionanddeploymentImproveend-of-lifeenergy-relatedwastemanagementAttractandsupportaskilledworkforceforthecleanenergytransitionEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE375IEA.CCBY4.0.EnhancesupplychainknowledgeanddecisionmakingThestrategytakesa“wholeofgovernment”approachandrecommendsmorethan60specificpolicyactionsacrossthefederalgovernment,includingloans,governmentprocurement,regulationsandworkforcedevelopment.ItfurtherrecommendsactionsthattheUSCongressshouldtake,includingintroducingtaxincentives,procurementmandates,fundingforrecruitmentandtraining,increasedRD&Dandtradepolicies.InEurope,inMay2022theEuropeanCommissionpresenteditsREPowerEUPlaninresponsetotheglobalenergymarketdisruptionsbroughtonbyRussia’sinvasionofUkraine.Measuresintheplan,whichaimstoincreaseenergysavings,diversifyenergysuppliesandacceleraterenewableenergydeployment,include:Forgingnewenergypartnershipswithreliablesuppliers,includingfutureco-operationonrenewablesandlow-carbongases.Rapidlyrollingoutsolarandwindenergyprojectscombinedwithhydrogenproduction.Introducingnewlegislationandrecommendationsforfasterpermittingofrenewableenergysystems,especiallyinareasoflowenvironmentalrisk.Investinginanintegratedandadaptedgasandelectricityinfrastructurenetwork.EnsuringindustryaccesstocriticalrawmaterialsbyidentifyingmineralresourcesandsupportingcriticalrawmaterialprojectsofstrategicEuropeaninterestwhileensuringahighlevelofenvironmentalprotection,includingthroughprojectsthatpromoteacirculareconomyandresourceefficiency.Establishingacomprehensiveregulatoryframeworkforhydrogen.Sources:UnitedStates,DOE(2022b);EC(2022a).ReviewpermittingandapprovalprocessesPermittingandapprovalprocessesareakeystepinthedevelopmentofacleanenergyproject,whetheritinvolvesdeployingaspecificenergytechnologyordevelopinganewmine,processingfacilityorfactoryforproducingorassemblingmaterialsorcomponents.Astheriskassessmentshows,establishingsupportinginfrastructureforcleantechnologies,suchasforhydrogenandCO2managementandforminingprojects,suffersfromparticularlylongleadtimes(seeFigure6.1).Itcanpotentiallytakedecadesforthesenewprojectstocomeonlineduetoavarietyoffactors,includingpermittingandlitigationdelays.Involvingstakeholdersearlyonintheseprocessescanhelpensurethatenvironmentalimpactsareadequatelyconsidered,thepublicisconsultedandcontingencyplansareputinplace,helpingtomitigateanypotentialdelays.ImprovingtheefficiencyofthepermittingprocesstoallowforthetimelyandtransparentapprovalofpermitsforEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE376IEA.CCBY4.0.newprojectscouldhelpacceleratethedeploymentofcleantechnologysupplychainsandensurepublicengagement,withoutunderminingtheneedtomeetenvironmentalstandards.Tothisend,governmentscanestablishclearanddirectpermitapprovaltimelinesandrequirements,withflexibilitybuiltintoregulationstogiveprojectstheopportunitytoapplyforapplicationextensions.Thiscanenabledeveloperstobetterplanprojecttimelinesandreduceregulatorybottlenecks.Whilethelengthofpermittingprocedureswillinevitablyvarybycountry,governmentsshouldprovideaclearindicationofhowlongtheyarelikelytotake.Oneapproachtoimprovetheefficiencyoftheprocessistocreatea“strategicprojectdesignation”inpermittingregulationsthatallowscleanenergyandrelatedsupplychainprojectsaccesstoacceleratedprocessesandresourceswithoutcompromisingenvironmental,labourorsustainabilitystandards(seeBox6.5).Governmentswouldneedtodeterminewhichprojectsfallintothiscategory,basedonwhethertheyareinthepublicinterestandadvanceenergyandclimatepolicygoals.Thiscouldincludeestablishingaone-stopshop,wherebyasingleregulatorybodyoracross-governmentco-ordinatinggroupisresponsibleforco-ordinatingthepermittingprocesswhenitinvolvesdifferentgovernmentagencies.Thisbodycouldalsoofferguidanceandsupportonhowtonavigatepermittingframeworksifaproposedprojectinvolvesmultiplejurisdictions.Itisimportantthatgovernmentsprovideregulatorybodieswiththenecessaryresourcesandcapacitytooverseeandundertakepermitapprovals.Thisincludesensuringadequatefunding,technicalexpertiseandstaffingtoreviewandprocesspermitapplications,aswellasestablishingchannelsofcommunicationacrossgovernmentagenciestoensuresmoothco-ordination.Box6.5Casestudy:IdentifyingstrategicprojectsintheEuropeanUnionTheEUTrans-EuropeanNetworksforEnergy(TEN-E)policyaimstopromotelinkagesinenergyinfrastructureamongmemberstates.Itidentifiesprojectsofcommoninterest(PCI)thatwillhavesignificantimpactandprovideEU-widebenefits.Importantly,thePCIdesignationalsogivesprojectsaprioritystatusandaccesstoacceleratedplanningandstreamlinedpermittingarrangementstofacilitatefastercommissioning.Specifically,PCIstatus:Designatesanationalauthorityresponsibleforfacilitatingandco-ordinatingpermittingfortheproject.RequiresEUcountriestotakemeasurestostreamlineenvironmentalassessmentprocedurestoreduceregulatorybottlenecks.Setsamaximumtimelimitof3.5yearstoprocessaproject’spermitapplication.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE377IEA.CCBY4.0.Grantingsimilarstrategicstatustonewminesandprocessingormanufacturingfacilitiesforcleanenergyprojects,aswellastotheinfrastructureneededtosupporttheseprojects(e.g.electricitytransmissionanddistribution,EVcharging,hydrogenandcarboncapture,utilisationandstorage[CCUS])couldenablegovernmentstoreduceprojectleadtimeswhilestillensuringenvironmentalcriteriaaremet.Prioritiseandco-ordinatetherolloutofenablinginfrastructureAcceleratingthedeploymentofcleanenergytechnologiesrequiresparallelexpansionoftheinfrastructurerequiredtosupplytoenduserstheenergythesetechnologiesproduce.Thisincludeselectricitygrids,EVcharginginfrastructure,hydrogenandCO2pipelinenetworks,andCO2storagefacilities,aswellasinfrastructuretosupportincreasedcircularity,suchasnetworksandfacilitiesforcollecting,sorting,andreusingandrecyclingmaterialsattheendoftheirusefullives.Earlygovernmentactionisessentialtoensurethatbuildoutsandupgradesofthisenablinginfrastructurekeeppacewithtechnologydeploymenttopreventbottlenecks(seeChapter5).Forelectricitysystems,governmentshaveacrucialroleindrawinguplong-termvisionsandplanstoensurethatelectricitynetworkexpansionandmodernisationadvanceinparallelwiththedeploymentofcleanelectricitygeneratingtechnologiesandrisingdemand,includingfromemergingendusessuchasEVcharging(seeBox6.6).Transmissioncapacityandgeneratorconnectionbottlenecksaremajorobstaclesinexpandingtheroleofcleanelectricity.Governmentsandregulatorsneedtoexaminecurrenttransmissionplanningpoliciesand,ifnecessary,revisetheminlightofthetimerequiredforpermitting.Regulatorscanconvenesystemoperatorstodiscussmultiregionalplanningapproachesthatindicatewhereadditionaltransmissionexpansionisneeded,andtheycanhelpco-ordinatethepermittingprocessforlargetransmissionprojects.Governmentsupportandco-ordinationcanhelpensurethatenablinginfrastructureisbuiltoutinatimelywayintheplaceswhereitisneeded.ThisisparticularlyimportantforhydrogenandCCUSinfrastructure,giventheamountneeded(seeChapter5),andplanningindustrialclusterscanhelpfacilitatethis.Publicfunding,suchasgrants,loansupportanddirectequitystakes,canhelpstrengthenthebusinesscaseforinfrastructureprojects,whichusuallyinvolveverylargeupfrontinvestments(IEA,2020a).Governmentscanalsohelporganisetechnicalworkshopsinpartnershipwithindustrytoimproveunderstandingoftheextentandtimingofinfrastructurerequirementsascleanenergydeploymentprogresses,andtheycanconductpublicoutreachcampaignstoallayconcernsaboutthesocialandenvironmentaleffectsofinfrastructureprojects.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE378IEA.CCBY4.0.Infrastructurebankscouldbeanimportantavenuethroughwhichtomobiliseandtargetinvestmentincleanenergyinfrastructure,whilealsoprovidingtechnicalassistanceonfinancialaspectsandhelpingstreamlineapprovals.Forexample,theEuropeanInvestmentFundhasallocatedEUR400-600millionannuallyoverthenextsevenyearstoinfrastructureprojectsthroughitsClimate&InfrastructureFunds,withafocusonclimateactionandenvironmentalsustainability(EIF,2021).Inemergingeconomies,attractinginvestmentininfrastructureprojectsislikelytobeparticularlydifficult,primarilybecauseofthesmallermarketsize,lackoftechnicalcapacityingovernmentandahighercostofcapital.Thegovernmentsofadvancedeconomiesshouldprovideinternationalassistanceintheformoftechnicalsupportforpolicydevelopmentandconcessionalfinancingtocatalyseprivateinvestments.Box6.6Casestudy:Aone-stopshopforEVchargingsupportintheUnitedStatesTheUnitedStatesaimstoexpanditsnationalEVchargingnetworkto500000chargersby2030–aroundfourtimesthecurrentnumber.ThefederalgovernmenthasallocatedfundingofUSD7.5billiontosupportthisgoal,two-thirdsforstatestofundchargingstationsalonghighwaycorridors.Ithasalsoannouncedanumberofmeasures,includingthecreationofajointofficerunbytheDOEandtheDepartmentofTransportation.TheJointOfficeofEnergyandTransportationwillworkcloselywithstategovernments,industryandotherstakeholderstomeetthenationalgoal,actingasaone-stopshopforresourcesonEVchargingandrelatedtopics.Initially,workwillfocusonprovidingtechnicalsupporttostatestodeployEVcharginginfrastructurestrategicallyby:Providingdataandtools,includinginstalledchargersanddesignatedcorridors.Addressinggapsinexistingdatasets.Facilitatingconnectionsamongstategovernmentsandexperts.ProvidingguidancetostategovernmentsonfederalprogrammesandregulationsrelatedtoEVcharginginfrastructure.Source:TheWhiteHouse(2022b).Supportrecruitment,trainingandaccreditationprogrammesCleanenergytransitionsmustbepeople-centredandinclusivetoensureequitableandjustoutcomesandbuildpublicsupport.Governmentshavearesponsibilitytomanagetheimpactsofcleanenergytransitions,includingreinforcingeffortstocultivateaskilledworkforceforemergingindustriesandhelpingworkerspreviouslyemployedinthefossilenergysectortransitiontonewfields.Likewise,EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE379IEA.CCBY4.0.itisimportanttoprotectcommunitiesdirectlyaffectedbynewmines,processingandproductionfacilities,andotherrelatedindustrialprojects.Thereisagrowingneedtorecruitandtrainworkersforallsegmentsofcleanenergyandtechnologysupplychains,includingminingspecialists,planttechnicians,engineers,researchers,administrationstaff,andtradespeoplesuchaselectricians,plumbersandconstructionworkers.Inaddition,theneedforqualifiedtrainersisrisingasworkforcerequirementsexpand.Forexample,afuturehydrogeneconomywillrequirespecialisedtrainerstoprotecthydrogenworkersandconsumersfromsafetyrisks.Adearthofqualifiedtrainersisalreadyprovingproblematicintheoffshorewindsector,withmanyindustryparticipantsinEuropeassertingthatincreasingthestockofqualifiedinstructorsisatoppolicypriority(ETIPWind,2013).Offeringgovernmentsupportforapprenticeshipprogrammesisonewaytoboosttheavailabilityofskilledworkersfortheseroles.Althoughapprenticewagesareoftenverylow,employersinemergingcleanenergysectorsmaystillbeunabletoaffordtotakethemon(BranfordandRoberts,2022).Whennecessary,offeringdirectfinancialassistancetoemployersorincludingacertainnumberofapprenticesasarequirementinpublicprocurementtenderscouldimproveworkforcecapacityandsupportjusttransitions.Governmentauthoritiescouldalsoorganiseworkshopsandtrainingeventsinconjunctionwithindustrytoidentifyopportunitiestotransferskillsandcouldsubsidiseprogrammestohelpworkersinfossilfuelsectorsacquireskillsforothersectors,includingcleanenergy.Forsomeactivities,suchastheminingofminerals,theskillsrequiredaresimilartothoseneededincoalminingandinoilandgasproduction(seeBox6.7).TheUnitedKingdom'sNorthSeaTransitionDeal(NSTD),anagreementbetweenthecountry'sgovernmentanditsoffshoreoilandgasindustry,isamodelforhowgovernmentscanenableamoreefficientandjusttransition.NSTDinitiativesincludethedevelopmentofanenergyapprenticeshipprogrammethatintegratesthecurrentlyscatteredapprenticeshipprogrammes,aswellasstocktakingofexistinggraduate-leveltrainingframeworkstofacilitatecollaborationbetweenindustryandthetrainingsector(UnitedKingdom,BEIS,2021).Accreditationcanbeimportanttoincreasethesizeoftheworkforceandstrengthenskillsbyreducingredundanttraining,clarifyingwhatnewworkersneedtolearnandincentivisingtrainingbodiestoimprovethequalityoftheirservices.Usedwisely,anaccreditationsystemcanattractworkerstothecleanenergysectorbyprovidingaclearpathwaytoemployment,andcanalsoensurethequalityofnewsupplyprojectsandimproveproductivity.However,accreditationcouldactuallyleadtohiringbottlenecksifqualificationsaretoodifficulttoattainortoofewaccreditedtrainingschemesareavailable.Internationalharmonisationofstandardswouldhelpfacilitatethefreemovementofpersonnelacrossnationalborderswhennecessary.ThisisespeciallyrelevantforthesolarandwindEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE380IEA.CCBY4.0.industries,inwhichmostworkersareinvolvedininstallationandthereforemoveontonewprojectsseveraltimesayear,sometimesindifferentcountries.Governmentsneedtoworkcloselywithlocalcommunitiesdirectlyaffectedbynewmines,facilitiesandotherprojectsrelatedtocleanenergytounderstandtheirconcernsandneeds.Thismightinvolvetheestablishmentofaninvestmentorrevitalisationfundforprojectsthatcouldbeparticularlybeneficialforlocalcommunities.Box6.7Casestudy:EnhancingtransferableskillsinAlbertaAspartofitsmineralsstrategy,theprovincialgovernmentofAlbertainCanadahasmadedevelopingaskilledworkforceoneofitsguidingprinciplesinexpandingthecriticalmineralminingsector.Thegovernmentissupportingtheretrainingofcoalindustryworkersforemploymentinothersectors,includingmineralmining.ItoffersdedicatedfundingandprogrammessuchastheTuitionVoucherscheme,whichprovidesfinancialassistancetohelpcoalworkersaccesspost-secondaryeducationtotrainforanewcareer.Thegovernmenthasalsoputinplacealabourandtalentstrategytoincreasework-integratedlearningpossibilities,expandapprenticeshipopportunitiesandenhanceconnectionsbetweenpost-secondaryeducationandindustry.Source:Alberta,MinistryofEnergy(2021).StepupinnovationprogrammesInnovationatdifferentstepsincleanenergyandtechnologysupplychainsiscriticaltospeedupdeploymentbyreducingbottlenecks,timetomarketandleadtimes.Keyareaswheregovernmentsupportforinnovationisneededatthefourstepsinsupplychainstagesinclude:•Mineralextraction:Increasedautomation,heavymachineryoperatingoncleanerfuels,efficientdesalinationfacilitiestoextractmineralsfromlessconcentratedores,increaseduseofrecycledwateranddigitaltechniquestoidentifyoptimalsitesformineralextraction.•Materialproduction:Nearzeroemissionmethodstoproducebothcriticalandbulkmaterials,productionmethodsthatreducemineralormaterialwaste,andthedevelopmentofcost-effectivealternativematerialswithgreaterefficiency(e.g.bioplasticsandlightweightmaterials).•Technologyandproductdesignandmanufacturing:Newdesignsthatuselessmaterialorusesmalleramountsofcriticalmaterials,designsthatfacilitateend-of-liferecycling,manufacturingtechniqueswithlessmaterialwasteandzeroemissionsmanufacturingmethods.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE381IEA.CCBY4.0.•Reuseandrecycling:Repurposingofexistinginfrastructure,improvedmethodsforend-of-lifematerialseparationandrecovery,first-of-a-kindrecyclingtechniquesincriticalmineralandplasticsectorslackingwell-establishedtechniques,recyclingtechniqueswithasmallercarbonfootprint.Governmentsshouldidentifytechnologicalsupplychaingaps,establishastrategicplanforkeytechnologiesandearmarkfundstofinancetheirdevelopmentinthefourinnovationareasoveraspecifictimeframetobringthemtomarketinatimelyway.Forexample,innovationtosupportmaterialproductionisunderwaytoaddresstheanticipatedshortfallofiridiumforhydrogenelectrolysers.TheDOEissuedaUSD122-milliongranttodevelopaCatalystDiscoveryEnginethattestsnovelcatalyststhatcouldreplaceexpensive,rarematerialssuchasiridium.Themachineanalysescatalystmaterialsupto10000timesfasterthanexistingmethodsandsucceededindevelopingdozensofviablenon-iridiumelectrolysers(HydrogenTechWorld,2022).Withrespecttotechnologicaldesign,KawasakiHeavyIndustriesissupplyingthemajorGermanelectricpowercompanyRWEwiththelatestL30Agasturbine,whichcanrun100%onhydrogen,100%naturalgasoramixtureofthetwo.Notonlycanitberetrofittedtoexistingnaturalgasinfrastructure,butthegasturbinealsoenhancesthelifeofthecombustorandsignificantlyreducesnitrogenoxideemissionsbycontrollingflamepropagation.Internationalco-ordinationofinnovationeffortsandknowledge-sharingisalsoessentialtomaximisetheefficientuseofresourceswithintheshorttimeframesrequiredbytheNZEScenario.Internationalcollaborationisvitaltoestablishbilateraltradeandmakethetechnologiesaffordableforimportcountries.Italsoattractsforeigninvestmenttoexportcountriestoreducemineraldependency.Projectdeveloperscouldfinancetheiractivitiesthroughthestrategicuseofmultipleinnovationfundstobringacleanenergytechnologysupplychaintocommercialisation.Obtainingnecessaryfundsacrossrelatedtechnologyareaswouldreducetimetomarket,makeuseofsharedinfrastructureandenabledeveloperstocapitaliseonsynergies.GlobalinitiativessuchasMissionInnovationprovideaplatformforgovernmentstojoineffortstoshareRD&Dfindingsincriticalinnovationareas.Attheregionallevel,theEUStrategicEnergyTechnology(SET)Planbetterco-ordinatesnationalplans.Similarly,Japan’sAsiaEnergyTransitionInitiative(AETI)launchedin2021providesapproximatelyUSD15billionfortechnologicalinnovationandcommercialisationalongwithUSD10billionforrenewables,liquifiednaturalgas(LNG)andenergyefficiencyprojectstosupporttheenergytransitioninAsiancountries(Japan,METI,2021).Co-ordinationwithintheprivatesectoracrossvarioussupplychainstagesisalsoimportant.Forexample,heatpumpmanufacturersshouldbeawareoftheinnovationgainsofferedbycertainrefrigerantssotheyarereadytorampupproductioncapacitywhennewrefrigerantsreachthemarket.GovernmentscanEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE382IEA.CCBY4.0.increasedialoguethroughpartnerships,strategicinitiatives,jointventuresthatcombinepublicandprivatefinancing,andknowledge-sharingplatforms.Open-accesspublishingofgovernment-supportedinnovationresearchthroughknowledge-sharingrequirementscouldpromoteco-ordinationandinnovation.Streamliningfundingapplicationprocesses,forinstancebyestablishingcentralisedplatformsthatprovideaccesstomultiplegovernmentfundingprogrammes,couldhelpreducetheadministrativeburdenfortechnologydevelopers.SupportforinnovationincleanenergyandtechnologysupplychainswillneedtobeakeycomponentofthebroaderstepincreaseinpublicRD&Dfundingessentialforcleanenergytransitions.Pastinnovationexperiencehasdemonstratedthebenefitsofappropriatetargetingandco-ordination.Forinstance,formanyyearstheJapanesegovernmenthassupportedresearchintotheuseofliquifiedhydrogenasatransportfuelthroughtheNewEnergyandIndustrialTechnologyDevelopmentOrganization(NEDO),whichisresponsibleforpublicenergyRD&D.StableNEDOfundingforthisactivity,whichdidnotoverlapwithprivatesectorefforts,wasacrucialelementinthesuccessfulcommercialisationofthefuelinJapan.WeestimatethatatleastUSD90billioninpublicfunding(inreal2021dollars)willneedtobemobilisedby2026tosupportcompletionofaportfolioofdemonstrationprojectsincriticalareastobeontrackfornetzeroemissionsby2050(IEA,2022e).Whilethebudgetsrequiredarelarge,therearehistoricalprecedentsfortherapidscale-upofenergyinnovationefforts,notablyafterthefirstoilshocksof1973-1974,whenIEAmembercountriescollectivelymorethandoubledtheirspendingonnon-fossilenergyR&Dby1980.Toaddressparticularlychallengingemissionsreductions,technologiesrelatedtohydrogen,CCUS,electrificationandbioenergyaremostinneedofdemonstration,buttheyrepresentonlyabout25%ofglobalpubliccleanenergyRD&Dspendingfundingtoday.InSeptember2022,theIEAreleaseditsnewCleanEnergyDemonstrationProjectsDatabase,whichmapsmajordemonstrationprojectsandcouldhelpwithprioritisationoffundsacrosstherangeoftechnologyareascriticaltoachievenetzeroemissions.Therearesignsthatmuch-neededincreasesinpublicfundingofinnovationcouldmaterialise.IntheUnitedStates,the2021BipartisanInfrastructureLawandthe2020EnergyActtogetherprovideUSD62billionoffundingformajornewcleanenergydemonstrationanddeploymentprogrammes,morethantriplingtotalspendingandsignificantlyexpandingtheoverallRD&Dbudget(UnitedStates,DOE,2022c).Asignificantshareisexpectedtogotodemonstrationprojects.Furthermore,attheGlobalCleanEnergyActionForumintheUnitedStatesinSeptember2022,morethanadozencountriesannouncedUSD94billionforcleanenergydemonstrationprojects–exceedingtheUSD90billioninpublicfundingcalledforbytheIEAandtheUnitedStates(UnitedStates,DOE,2022d).GovernmentsupportforRD&Dneedstobetailoredinawaythathelpsleverageprivatesectorcontributions.OftheUSD117billioninenergyRD&Dspentbylistedcompaniesin2021,around60%wenttotheautomotiveandoilandgassectorsandEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE383IEA.CCBY4.0.around9%wasallocatedtorenewables(IEA,2022c).StrategicgovernmentfinancingmechanismscouldhelpincreaseprivatesectorRD&Dinothercriticalsectors(seeBox6.8).Itisestimatedthatapproximately50%ofthetotalcapitalcostoflow-emissionenergydemonstrationprojectscouldbeobtainedfromtheprivatesector.Forlarge-scaledemonstrationprojects,measuresareneededtoimproveaccesstolow-costfinancing,suchascreditenhancement(provisionsusedbyaborrowertoreducedebtbyimprovingcreditworthiness),risk-sharingschemesandin-kindadvisorysupport.Demand-pullmeasuressuchaspublicprocurementorprivatesectorbuyingpoolsforcleantechnologiesandproductscanalsoprovidemarketconfidencetostrengthenthebusinesscaseforinnovation.Governmentscanalsosupportcleanenergystart-upsthroughvariousmechanisms,includinggrantsthroughprizesandcallsforprojects,loansandloanguarantees,incubators,andpublicinvestmentsinventurecapitalfunds(IEA,2022f).Infrastructurebankscouldbeausefulmodeltoadministerandco-ordinatefinancinginsupportofprivatesectorcleantechnologyinnovation.Forexample,theEuropeanInvestmentFundundertheEuropeanInvestmentBankhaschannelledoverEUR1billiontoclimateandenvironmentventurecapitalandprivateequityfundssince2006(EIF,2022).Box6.8Casestudy:FinancinginnovationintheEuropeanUnionTheEuropeanUnionhasestablishedseveralfundsandinstrumentstoleverageprivateinvestmentinfirst-of-a-kindcleanenergydemonstrationprojects:TheInnovationFund,financedfromEmissionTradingSystemrevenues,leveragesprivatefinancingforlargeprojectscoveringanentiresupplychainaswellassmall-scaleprojectsfocusingonemerginggreenhousegas(GHG)reductiontechnologiesthroughgrantsinmultiplerounds.ItaimstosupportcommercialdemonstrationofnascenttechnologiesbyintroducingindustrialsolutionsintoEuropeancountriestodecarbonisethemandsupporttheirtransitiontoclimateneutrality.Byfinancingupto60%ofrelevantcostsfortenyearsafteraprojectentersintooperation,theInnovationFundreducesinvestorrisk.AthirdroundoffundingannouncedinJuly2022involvesEUinvestmentofoverEUR1.8billionin17large-scaleinnovativeprojects.Oneisahydrogen-basedironandsteelmakingprojectinvolvinganelectricarcfurnaceinSweden,usingpyrolysisandphotoelectrocatalytichydrogentechnologies.Forearly-stagetechnologies,theEuropeanCommissionfundsresearchprojectsundertheHorizonEuropeprogrammethroughgrants,prizesandprocurement.Thecurrent2021-2027programmehasabudgetofEUR95.5billion,ofwhicharoundEUR15.1billionisearmarkedforclimate,energyandmobilityprojects,includinglow-carbonaircrafts,railways,roadandmaritimetransport,aswellaslow-carbonsteelmaking.PillarIIsupportsR&IEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE384IEA.CCBY4.0.partnershipsforcleanenergytechnologiessuchastheCleanHydrogenPartnershipforrenewablehydrogenproduction,storageanddistribution.PillarIIIoverseesthedeploymentofindustrialapplicationsandtechnologies.UndertheHorizonEuropeprogramme,theEuropeanCommissionestablishedtheEuropeanInnovationCouncil,whichprimarilyprovidesgrantsandinvestmentsforindividualSMEsandstart-ups.Rulesgoverningstateaidallowformemberstatestoinvestdirectlyincleanenergytechnologieswhendesignated“importantprojectsofcommonEuropeaninterest”–ambitiouscross-borderbreakthroughinnovationandinfrastructureprojectsthatcancontributesignificantlytotheachievementofEUstrategies,includingtheEuropeanGreenDeal.Newrulesthatcameintoeffectatthebeginningof2022setthecriteriafortheEuropeanCommissiontoassessmemberstatesupporttoprojectsthatovercomemarketfailuresandenablebreakthroughinnovationinkeysectorsandtechnologiesandinfrastructureinvestments.Additionally,theEuropeanUnionfacilitatesdialogueandoffersin-houseadvisoryservicesthroughprogrammessuchastheInvestEUFund,whichisexpectedtomobilisemorethanEUR372billionofpublicandprivateinvestment.PotentialprojectapplicantscanasktheAdvisoryHuboftheInvestEUFundforfinancialadviceforprojectsbackedbyInvestEUorothersources.InvestEUalsomanagestheEU-Catalystpartnership,whichaimstomobiliseuptoEUR820millioninfundingduring2022-2026tocommercialisetechnologiesforcleanhydrogen,sustainableaviationfuels,DACandlong-durationenergystorage.Sources:EC(2021a);EC(2021b);ERAPortalAustria(2022).SecuringsupplychainsAhighdegreeofsupplychainconcentration–theextenttowhichmarketsharesareconcentratedamongasmallnumberofproductionfacilities,firms,countriesorregions–carriesmajorrisksforthesecurityofsupplyofcleanenergytechnologies.Concentrationatanypointalongthesupplychainmakestheentirechainvulnerabletoincidents,betheyrelatedtoanindividualcountry’spolicychoices,naturaldisasters,technicalfailuresorcompanydecisions(Table6.4).Persistentinterruptionsalongcleanenergysupplychainscanleadtobottlenecksanddriveupthepricesofintermediateandfinalproducts,delayingenergytransitions,raisingthecostofmeetingnetzerogoalsandleadingtoalessequitabletransition(Figure6.4).Today,thereisasignificantdegreeofconcentrationoffacilities,firmsandcountriesacrossseveralcleantechnologysupplychains(seeChapter2).ManyoftherawandintermediatematerialsandcomponentsthatcomprisecleanenergyEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE385IEA.CCBY4.0.supplychainsareproducedinasmallnumberofcountriesorregions,withtheleadingproducersometimesholdingaverylargeshareoftheglobalmarketforcertaininputs.Medium-termprospectsforgeographicdiversityvaryaccordingtothestageofthesupplychainandtypeofinput,withconcentrationlikelytoworseninsomecasesandimproveinothers(seeChapters3-5).Insomecases,suppliesarealsoconcentratedamongasmallnumberofcompanies,carryingariskofexcessivemarketpowerandhigherprices.Overrelianceonindividualproductionorprocessingfacilitiesandspecifictechnologiesalsocarriessupplychainrisks,reducingresiliencetoshocks(seenextsection).Table6.4ComponentsofsupplychainconcentrationTypeofconcentrationDescriptionAssociatedriskspotentiallycausingsupplychaindisruptionJurisdictionalconcentrationExtenttowhichproductionisconcentratedinasinglejurisdictionDomesticpolicychangesGeopoliticaleventsGeographicconcentrationExtenttowhichproductionisconcentratedinasinglegeographicareaNaturalhazardssuchasearthquakesandfires,andextremeweathereventssuchasdroughtandfloodingTechnicalfailuresofelectricitygrids,gasnetworksorotherinfrastructureFacilityconcentrationExtenttowhichproductionisconcentratedinasinglefacilityRiskscitedaboveOnsiteequipmentfailureMarketconcentrationExtenttowhichproductionisconcentratedinasinglecompanyRiskofcollusion,price-fixinganddumpingTechnologyconcentrationExtenttowhichglobalproductioniscentredonasingletechnologyAllabovementionedriskswouldbeamplified,especiallymaterialsupplyrisksIntellectualpropertyrightscouldslowtechnologytransferSecurityriskscutacrossallstepsofcleantechnologysupplychainsthatareheavilyreliantoncoretechnologies,componentsormaterialsforwhichmanufacturing,miningorprocessingishighlyconcentrated,suchasthesupplychainsforsolarPV,electricvehiclesandwindsystems(Figure6.4).InthecaseofsolarPV,thesupplychainishighlyconcentratedinChina,andalternativemoduletechnologies(suchasthinfilms)andcomponents(suchasperovskiteinsteadofpolysilicon)arestillimmature.InthecaseofEVbatteryandwindsupplychains,alternativebatterychemistriesandpermanentmagnettechnologiesarealsofarfromcommercialisationatpresent.Whilethemanufacturingofthesetechnologiesisalsohighlyconcentrated,riskscanbemitigatedbytheavailabilityofsparemanufacturingcapacitywhenutilisationratesarelow,asisthecaseforanode,cathode,battery,andPVmodulemanufacturing.Forlarge-scalesite-tailoredsystemsforwhichinstallationisalsocurrentlyconcentratedinahandfulofregions,riskismitigatedbythefactthatmostofthemrelyoncomponentsandpartsthataremoregenericandeasilysubstituted.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE386IEA.CCBY4.0.Figure6.4RiskstotheenergysecurityofglobalcleanenergysupplychainsIEA.CCBY4.0.Notes:BECC=bioenergywithcarboncapture;DAC=directaircapture.Thelikelihoodofenergysecurityrisksisbasedonregionalconcentration(measuredbytheshareofthelargestmining,manufacturingorinstallationregioninglobalsupply)onascaleof0(smallestshareoftopregion:around40%)to10(largestshareoftopregion:100%).Whenastepinvolvesdifferentcomponentsortechnologies,theratingisbasedonthemostconcentratedelement.Forgas-CCSH2,DAC,BECCandsynfuels,concentrationrelatestothelocationoftheplants.Impactismeasuredbytheavailabilityofalternativematerials,processing/manufacturingtechnologies,orsparecapacity(usingtheaverageutilisationrateofexistingcapacity),evaluatedonascaleof1to5,with1correspondingtoreadilyavailableand5tonoavailability.Arrowsindicatehowindividualpointsareconnectedwithinasupplychain(herewiththeexampleofelectriccars).Sources:IEAanalysis.FordatasourcesandfurtherbackgroundontheregionalconcentrationanalysisseeFigures2.2(mining),2.3(mineralrefining),2.5(bulkmaterialproduction),2.6(manufacturing)and2.7(installationandinfrastructure).Securityriskscutacrossallstepsofcleanenergysupplychainsthatareheavilyreliantonacoretechnology,materialorcomponentforwhichsupplyishighlyconcentrated.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE387IEA.CCBY4.0.StrategicconsiderationsGeographicconcentrationandmarketconcentration–andpoliciestoaddressthem–areinherentlyinterlinked.Governmentscannotpracticallyseektocontrolalldimensionsofsupplychainconcentration.Inparticular,theabsenceofmineralswithinacountry’sborderslimitsthegovernment’sabilitytoreduceitsrelianceonimports.Governmentsshouldseektoharmonisetheirindustrialstrategieswiththeirenergyandclimatepolicies,takingaccountoftheconstraintsandincentivesfacingproducers,manufacturersandfinanciers.GeographicconcentrationandindustrialstrategyTheprecedingchaptersofthisreportoutlineindetailthecurrentstateofgeographicconcentrationforkeycomponentsofcleantechnologysupplychains.Miningisoftenthefocusofdiscussionaroundgeographicconcentrationincleantechnologysupplychains,partlybecauseitislinkedtonaturalresourceendowment.Fortheminingofkeycriticalmaterials–copper,lithium,nickelandcobalt–thetopthreecountriesaccountforaround45-95%ofglobaloutputtoday,withthelargestproducercountryaccountingforjustover70%(Figure6.5).Formaterialproduction,thedegreeofgeographicconcentrationissomewhatlower,mainlyduetothepresenceofmaturemarketsforbothinputsandoutputs.Forthemanufacturingofkeycleanmass-manufacturedtechnologies–solarPV(modules),wind(nacelles),batteries(forEVs)andelectrolysers–thelargestthreecountriesaccountfor70-85%ofglobalmanufacturingcapacity,withthelargestsingleproduceraccountingforuptoaround70%.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE388IEA.CCBY4.0.Figure6.5Geographicconcentrationforkeycriticalminerals,materialproductionandmanufacturingoperationsforcleanenergytechnologiesNotes:“Wind”correspondstonacellemanufacturing.“SolarPV”correspondstomodulemanufacturing.“Batteries”correspondstoelectricvehiclebatteries.Sources:WoodMackenzie(2022);BloombergNEF(2020);BloombergNEF(2021);USGS(2022);WorldSteel(2022);S&PGlobal(2022a);WorldBureauofMetalStatistics(2022).Thetopthreeproducingcountriesaccountformorethanhalfofglobaloutputformostcomponentsandprocessingstepsofcleanenergytechnologysupplychains.Manycountriesandcompaniesarealreadyacting,aimingtocementtheirplaceinthenewenergyeconomy–onethatisontracktodelivernetzeroemissionsfortheenergysystem.Thepipelineofannouncedprojectsformassmanufacturingofcleanenergytechnologiespaintsamixedpicture,butadistinctlypositiveoneforsometechnologiesatthegloballevel.ThisisparticularlytrueforsolarPV,forwhichannouncedmanufacturingcapacityforfinishedmodules–andtheirmaincomponents–alreadyexceedsNZEScenariorequirementsfor2030(Figure6.6).Forothers,announcedmanufacturingcapacityexceedsthelevelrequiredfordeploymentunderannouncedgovernmenttargets,asdescribedbytheAnnouncedPledgesScenario(APS).0%20%40%60%80%100%CobaltNickelLithiumCopperCobaltNickelLithiumCopperAluminiumCementSteelBatteriesWindSolarPVHeatpumpsElectrolysersCriticalmineralminingCriticalmaterialproductionBulkmaterialproductionManufacturingLargestproducingcountrySecond-largestThird-largestOthercountriesEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE389IEA.CCBY4.0.Figure6.6AnnouncedprojectthroughputanddeploymentforkeycleanenergytechnologiesintheAPSandtheNZEScenarioIEA.CCBY4.0.Notes:PV=photovoltaic;APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.Announcedprojectsforexpandingcapacityorbuildingnewfacilitiesincludeprojectsthatareatdifferentstagesofdevelopment,withsomealreadyunderconstruction(committed)andothersnotyetatthefinalinvestmentdecisionstage(preliminary).Deploymentandthroughputareexpressedinphysicalunits,normalisedtoAPS2030deploymentlevels.SolarPVreferstomodulemanufacturingcapacity.BatteriesreferstoEVbatteries.Windfiguresarecalculatedusinganaverageofthecapacityratingsforblades,nacellesandtowers,bothforonshoreandoffshoreinstallations.Heatpumpsrefertooutputcapacitiesofequipmentusedprimarilyforheating.Announcedmanufacturingcapacitycanmeetambitiousclimategoalsby2030,butinvestmentisfirmforonlyaround10-40%ofannouncedprojectsglobally.However,twoaspectsoftheseannouncedprojectsneedtobescrutinised,asidefromthesignificantgapsthatremainforwind,electrolysers,heatpumpsandfuelcells.First,thepipelineofannouncedprojectsisconstantlyevolving.Formanyprojectsthathavebeenannounced,thereisasignificantdegreeofuncertaintyastowhether,whereandwhenthenecessaryinvestmentswillactuallytakeplace.Forexample,onlylessthan10%ofthe91GWofannouncedelectrolysermanufacturingcapacityhasreachedfinalinvestmentdecisionorisunderconstruction;forbatteriesthefigureis35%andforwind,40%.Conversely,furthercapacityannouncementsarelikelytomaterialisebefore2030,particularlyfortechnologiesforwhichmanufacturingplantshaveshortleadtimes,providedmarketandpolicysignalsareconsistentandclear.Itislikelythatfinalinvestmentdecisionsaswellasfurtherprojectannouncementswillbenefitfromclearpolicysignals.Second,whiletheglobalmanufacturinggap(orlackthereof)isarelevantmetric,thecurrentlyhighdegreeofregionalconcentrationincleanenergytechnologymanufacturingcapacity–notablyinChina–doesnotchangesubstantially0%100%200%300%400%SolarPVBatteriesWindHeatpumpsElectrolysersFuelcellsShareof2030APSdeployment2021Announcedprojects:committedAnnouncedprojects:preliminaryGaptoNZENZEAPSEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE390IEA.CCBY4.0.accordingtoexistingannouncements.Chinaaccountsfor85%ofannouncedmanufacturingcapacityforsolarPV,75%forwind,70%forbatteriesand25%forelectrolysers.Duetouncertaintiesaboutfutureeconomicandpolicydevelopments,itisdifficulttopredictthefuturelocationofmanufacturingplantsbeyondthetimeframeofprojectsunderdevelopmentorattheplanningstage.Cleanenergytechnologyproductsthemselvesandtheircomponentscanallbetradedbetweenregionsoncompetitiveinternationalmarkets.Unlikeminingorextractionoffossilfuels,theirmaininputs–materials,labourandenergy–areeithermobileorcanbelocallysourced.Giventhesecharacteristics,focusingonsupportingthescale-upofdomesticmanufacturingcapacityforcleanenergytechnologiesisanimportantindustrialpolicyopportunitytoenableparticipationinthenewenergyeconomyundergovernments’netzeropledges.Governmentsarethereforeincreasinglyfocusingtheirindustrialstrategiesonthesesupplychainsteps.Lookingatfuturedomesticdemandforcleantechnologiesisagoodstartingpointforgovernmentsexaminingtheextenttowhichtheirindustrialstrategiescanalleviaterisksrelatedtohighgeographicconcentrationwhiletappingintotheopportunitiesofthenewenergyeconomy.Buildingupdomesticcleanenergytechnologymanufacturingisakeyopportunitytodiversifysupplychains,aswellasboosteconomicgrowth.Localmarketsareoftenattractivetosuppliers,giventhelowertransportationandadministrativecostsassociatedwithdeliveringproductstobuyers.Furthermore,governmentslookingtostimulateadomesticmanufacturingindustryoftenhavesomedegreeofcontroloverdemandforcleanenergytechnologies,astheyusuallyfitwithintheremitofotherareasofpublicpolicy(e.g.incentivesforpurchasingEVs).Forcountriesseekingtosecureorimprovetheirexportposition,thedemandofothercountries(andoverallglobaldemand)shouldalsobeconsidered.SincetheAPSreflectsgovernments’actualpoliciesandpledgesasoflate2022,itisthemostrelevantlensforexaminingsomeofthepotentialscopeofgovernments’industrialstrategies,whicharelikelytobedevelopedonthebasisofthesepledges.Thecombinedglobalmarketforkeymass-manufacturedcleantechnologies–solarPVequipment,batteries,windsystems,heatpumps,electrolysersandfuelcells–reachesUSD650billionperyearby2030intheAPS(Figure6.7).DomesticdemandinChina,theEuropeanUnion,theUnitedStatesandIndiaaccountfornearlythree-quartersoftheglobalmarketforkeycleantechnologiesby2030intheAPS.TheremainingcountriesoftheAsiaPacificregionaccountforafurther10%.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE391IEA.CCBY4.0.Figure6.7MarketsizeforkeycleanenergytechnologiesandnetfossilfueltradeintheAPSIEA.CCBY4.0.Notes:KeycleanenergytechnologiesincludesolarPVsystems,batteries,windsystems,heatpumps,electrolysersandfuelcells.Marketsizeiscalculatedbasedonmoduleorunitprice,excludinginstallationandconstructioncosts.Allmarketsizesandrevenuesareexpressedinundiscounted2021USdollars.Cleantechnologydeploymenthelpsreducefossilfuelimportbillsinmanyregions;stimulatingdomesticmanufacturingcanbeanimportantindustrialopportunity.Ifallannouncedprojectsformanufacturingthesetechnologiescometofruition,themarketvalueoftheiroutputswouldbearoundUSD650billionperyearin2030,verysimilartothemarketsizeofglobaldemandintheAPSforthetechnologiesinaggregate.Forindividualtechnologies,however,therearesignificantdisparities.ForsolarPVmodules,announcedprojectsaresettodeliverUSD100billionperyearofoutputglobally,comparedwiththeAPSmarketsizeofaroundUSD55billionin2030,constitutingaUSD45-billionmanufacturingsurplusrelativetodeploymentaccordingtocountries’netzeropledges.Similarly,surplusesareprojectedforbatteries(USD90billion)andelectrolysers(justunderUSD10billion).Thesesurplusesimplythatwithoutafurtherincreaseinclimateambition,someoftheseprojectscouldoperateatverylowutilisationrates,compromisingtheircommercialviability.Conversely,announcedprojectsforwind(nacelles,bladesandtowers),heatpumpsandfuelcellsfallshortoftheglobalmarketsizeintheAPSbyUSD140billioncombined,indicatingademandgapthatcouldbefilledbynewprojectannouncements.SurplusesanddeficitsbetweentheprojectedoutputofannouncedprojectsandAPSdemandalsoexistatthecountrylevel,implyingpotentiallystarkdifferencesinthebalanceoftradebetweencountries.ChinaappearswellpositionedtocaptureUSD390billion,or60%oftheoutputsofannouncedmanufacturing0100200300400ChinaEuropeanUnionUnitedStatesIndiaOtherAsiaPacificUSDbillionDomesticsupply,announcedprojectsDomesticdemand,APS-2030-600-400-2000200ChinaEuropeanUnionUnitedStatesIndiaOtherAsiaPacific2021APS-2030Marketsizeforkeycleanenergytechnologies,2030Nettradeinfossilfuels,2021-2030EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE392IEA.CCBY4.0.capacityinmonetaryterms.Around60%ofthisoutput(USD240billionperyear)wouldbedestinedforexport,onanetbasis.Together,theUnitedStatesandtheEuropeanUnionaresettocaptureUSD170billionin2030,whiletheirdomesticmarketsareprojectedtogrowtonearlyUSD270billionintheAPS,implyingpotentialnetimportneedsofaroundUSD100billionifnoadditionalcapacityisforthcoming.TheUSInflationReductionActmaysubstantiallychangethispicture,however,andislikelytoreduceUSnetimportrequirementsorevenleadtonetexportopportunitiesacrossthesecleanenergysupplychains.Increasingdomesticmanufacturingisnotrisk-free.Intheshortterm,measurestoreducegeographicconcentrationandenhancedomesticsupplieshavethepotentialtoincreasecosts.HistoricalexamplesincludeIndia’spolicytoindigenisemanufacturingofequipmentduringthe1970s,whichmademanybusinessesbuydomesticallyproducedequipmentthatwasuncompetitive(BusinessStandard,2021).Morerecently,importtariffsonsolarPVcellsandmodulesintroducedintheUnitedStatestopromotedomesticmanufacturingdroveupcosts,resultinginlostopportunitiesforemployment,investmentanddeploymentasthetariffshinderedpotentialfurthergrowth(SEIA,2019).Governmentsneedtocarefullybalancethebenefitsofenhancedenergysecuritywithpotentialeconomiccosts.Twoimportanteconomicbenefitsarefossilfuelimportsavings(fornet-importingcountries)andneworexpandedemploymentopportunities.Globalfossilfueltradetodayisdominatedbyjustafewmajorproducingcountriesandregions,withalargenumberofcountriesbeingdependantonimportsfromtheseregionstomeetdomesticdemand.Currentpoliciesandpledges,iffullyimplemented,wouldleadtolowerfossilfuelimportsharesindomesticenergyconsumptioninmanymajorimportingcountries,replacedmainlybydomesticproductionofrenewableelectricityandotherlow-emissionfuels.IntheAPS,netimportsofcoal,oilandgascombinedwoulddeclinebyUSD145billion,or40%,between2021and2030intheEuropeanUnion,andbyUSD55billion,or15%,inChina.TheUnitedStateswouldincreaseitsfossilfuelexportsmoderatelyunderthesameprojections.InemerginganddevelopingcountriessuchasIndia,fossilfuelimportswouldincreaseslightlytosatisfyrapidlygrowingdemand,althoughfossilfuelsharesindomesticenergyconsumptionwouldstillgenerallydecline.Oneofthekeyincentivesforgovernmentstocultivatedomesticmanufacturingcapacityisjobcreation.Thecleanenergytransitionhascontributedtoasurgeinenergysectoremployment(+25%globallysince2019),withcleanenergynowrepresentingmorethan50%oftheglobalenergyworkforce.IntheUnitedStates,forinstance,cleanenergyjobsrosebynearly150000in2021,boostingenergysectoremployment3%(UnitedStates,DOE,2021;2022e).ThemajorityofemploymentincleanenergyisassociatedwithbuildingnewcleanenergyprojectsEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE393IEA.CCBY4.0.andinstallingequipment,withcleanenergymanufacturingmakinguproughly20%ofthecleanenergyworkforce(Figure6.8).Today,thisemploymentisoverwhelminglyconcentratedinChinaforsolarPV,wind,heatpumpsandelectricvehicles.Shiftingmanufacturinghubsforthesefourkeytechnologieswouldinfluencewherenewmanufacturingjobsarecreated.IntheAPS,cleanenergymanufacturingjobsmorethandoublefrom6milliontodaytonearly14millionby2030,withover50%ofthesejobstiedtothefourkeytechnologies.Figure6.8EmploymentincleanenergytechnologymanufacturingbyregionIEA.CCBY4.0.Notes:CSAM=CentralandSouthAmerica;EV=electricvehicle.“Otherenergyjobs”includescleanenergy-relatedemploymentinconstruction,utilities,professionalandscientificactivities,wholesalemarkets,andtransportforallcleanenergytechnologies.EnergysectoremploymentforkeycleantechnologiesgrowsmarkedlyintheAPS,withtheEVshareincreasingthemost.Thenumberofworkersneededatnewmanufacturingfacilitiesdependsheavilyonprevailingwagesintheregionandthelevelofautomation.Today,alarge,fullyintegratedsolarPVfacilityinChinaemploysaround1000-1100peopleperGWofcapacitymanufactured.However,equippingnewfacilitieswiththelatestautomationtechnologiesmeanstheywillhavesignificantlylowerjobintensitythanthoseinstalledadecadeago,andsmallerplantsincountrieswithcheaperlabourcanrequireupto60%moreemployees(IEA,2022b).Newmanufacturingcapacitywillhavetobeaddedformostofthesetechnologies,butforEVs,manyexistingvehicleproductionfacilitiesmaysimplyretooltheirexistingproduction.Thesenewplantscouldbemoreautomatedsothatthenumberofworkersassemblingvehicleswouldbefewer,butmanufacturingbatteriesonsitewouldincreasethetotalnumberofworkersatthesefacilitiesin0%20%40%60%80%100%SolarPVWindEVsHeatpumpsNorthAmericaCSAMEuropeAfricaChinaIndiaOtherAsiaPacificRestofworld0%20%40%60%80%100%2019APS-2030SolarPVWindEVsHeatpumpsOthermanufacturingjobsOtherenergyjobsManufacturingemploymentforcleanenergytechnologiesbyregion,2019CleanenergymanufacturingemploymentbytechnologyintheAPS,2019and2030EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE394IEA.CCBY4.0.mostregions.Asallmanufacturingoperationswillexperienceefficiencygainsandincreasedautomationinthefuture,costefficienciesneedtobebalancedagainstlabourobjectives(i.e.betterwagesandbenefits,enhancedjobsecurity,andimprovedsafety,representationandinclusion).Thepresenceandstrengthoflabourunionswillalsoplayacrucialroleinshapingdomesticcleanenergysupplychains.MarketconcentrationandcorporatestrategyIfunchecked,ahighdegreeofmarketconcentration–overrelianceonasmallnumberofcompaniesforthesupplyofagivengood–canleadtosupplychainfragility.Firmslooktomaximisereturnstoshareholders,butlargemarketsharescanbeaconcernforpolicymakersoncompetitiongrounds.Firms’corporatestrategiesinthecontextofcleanenergyandtechnologysupplychainscanthereforeberelevanttopolicymakers.Inmature,competitiveindustries,marketconcentrationtendstobelowerbecausetheabilityoffirmstomaintainastructuraltechnologicaladvantagedissipatesovertime.Inthesteel,cementandaluminiumindustries,thelargestsingleproducersaccountfor6-11%ofglobalproduction,withthetopfiveproducersaccountingfor18-38%combined(Figure6.9).Foremergingtechnologies,theoppositetendstobetrue,especiallyforthosethathavenotyetachievedcommercial-scaledeployment.TheleadingmanufacturersofplantsforDAC,BECC,low-emissionsynthetichydrocarbonfuelproductionandgas-basedhydrogenproductionwithCCSholdatleast30%ofglobalproductioncapacity,withconcentrationparticularlyhighinthecaseofDACandlow-emissionsynthetichydrocarbonfuels.Infact,thereareonlythreecommercialmanufacturersofDACplantsglobally,withtheleadercoveringaround75%ofglobaloperatingcapacity,whilethereisonlyonemanufacturerofsynthesisplants.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE395IEA.CCBY4.0.Figure6.9Concentrationsofthelargestenterprisesinglobalmanufacturingcapacityandmaterialproduction,2021IEA.CCBY4.0.Notes:DAC=directaircapture;BECC=bioenergywithcarboncapture;gas-CCSH2=naturalgas-basedhydrogenwithcarboncaptureandstorage.SyntheticHCfuelsreferstolow-emissionsynthetichydrocarbonfuelproduction.“Electrolysers”includesprotonexchangemembrane,alkaline,andsolidoxideelectrolysers.Manufacturingcapacityforelectrolysersincludescapacityforchlor-alkalielectrolysers.Manufacturingcapacityreferstomaximummanufacturingcapacityinthecaseofbulkmaterials(i.e.steel,cement,aluminium)andmass-manufacturedtechnologies(i.e.EVbatteries,fuelcelltrucks,hydrogenelectrolysers,solarPVequipment,windsystemsandheatpumps)andinstalledproductioncapacityinthecaseofcustomisedtechnologies(i.e.DAC,BECC,synthesisandnaturalgas-CCSH2).Forseveralcleanenergytechnologies,thetopthreemanufacturerstogetheraccountformorethanhalfofglobalmanufacturingcapacity.Formass-manufacturedtechnologies,thepictureismoremixed.Asmallnumberofcompaniesdominatetheglobalmarket,withthetopthreemanufacturerstogetheraccountingforatleastaroundone-thirdofglobalmanufacturingcapacityineachcase.Forelectrolysers,solarPVequipmentandheatpumps,concentrationissomewhatlower,withthetopfivemanufacturersaccountingforlessthanhalfofproduction.Thecleanenergytransitionisalreadyhavingamajorimpactontheenergysector’scorporatelandscape.Manynewcompaniesareemergingtomeetgrowthindemandforfinishedproductsandmaterialsneededfortheirsupplychains,notablyinEV,heatpump,fuelcelltruckandDACmanufacturing,whileseveralwell-stablishedmanufacturersandenergycompaniesarediversifyingintocleanenergytechnologies,leveragingtheirknow-howandexpertiseinrelatedfields.Asglobalmanufacturingcapacityincreasestomeetgrowingdemandforcleantechnologiesasthecleanenergytransitionprogresses,thediversityofcorporateplayersislikelytocontinuinggrowingasopportunitiesfornewentrantsexpand,providedmarketsremainopenandcompetitive.0%25%50%75%100%SteelCementAluminiumDACBECCSyntheticHCfuelsgas-CCSH₂BatteriesFuelcelltrucksElectrolysersSolarmodulesWindsystemsHeatpumpsBulkmaterialsSite-tailoredtechnologiesMass-manufacturedtechnologiesOthermanufacturersFourth-andfifth-largestmanufacturersSecond-andthird-largestmanufacturersLargestmanufacturerEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE396IEA.CCBY4.0.Somenewparticipantsmayenterthemarkethorizontally,bygraduallyshiftingproductionfromtheircurrentcorecleanenergybusinesstoothertechnologiesorcomponents,suchassolarPVmanufacturerstransitioningtobatteriesandEVmanufacturerstostationarybatteries.Otherenterprisesmayintegratevertically,bybeginningtomanufacturekeycomponentsormaterialsnotreadilyavailableonthemarket,orbyreinforcingtheirsupplychain,suchascarmanufacturersthatmoveintobatterymanufacturing.Forthemostinnovativeandleastdeployedapplications,newmarketplayersmayemergefromresearchcentresandacademiatoexploitpromisingideasandvalidatethembydevelopingprototypesandadvancingtopre-commercialdemonstration,withtheeventualaimoflarge-scalecommercialisation.Horizontalexpansioncanhelpincreasethediversificationofcertainmarketsbyaddingmorecompanies,therebyreducingtheriskofmonopoly/oligopolyandmarketinstability.Horizontalexpansioncanallowcompaniestobuildontheirexistingcapacitytoexpandtheirbusiness.Itcanoptimiseproductionprocessesandlogisticstoreducetheoverallcostofsomeofthesharedcomponentsandgoods.Horizontalexpansionshavealreadyoccurredinseveralcompanieslookingtoshifttheircoremarketstoemergingcleanenergytechnologies,aswellasincompaniesseekingtodiversifytheirportfoliosawayfromthemanufacturingoftraditionalenergytechnologies.AnexampleoftheformerstrategyisØrsted,formerlyknownasDanishOilandNaturalGas,whichhastransformeditselfintoanelectricitycompanyfocusedmostlyonrenewables.Horizontalexpansionsoftenexploitsimilaritiesacrossassemblylinesandcomponents,leveragingexpertisethatcanbeusedtomakedifferenttechnologies.Examplesincludeairconditioners,commercialrefrigerationunitsandheatpumps.Forinstance,around75%oftotalheatpumpproductionisfrommanufacturersalreadyproducingairconditioners.Somecommercialrefrigerationmanufacturershavealsostartedtoproducelargeheatpumps(StarRefrigeration,n.d.).SynergiesalsoexistwithintheEVautomotivesector(Hyundai,2020),whereheatpumpsprovideairconditioningandwheresimilarskillsforaluminiumcastingarerequiredbothformanufacturingofautomotivepartsandheatpumps.Whenopportunitiestoexploitsuchsynergiesdonotexist,particularlyforlargeprojectsinvolvingmultiplecompetences,partnershipscansupporthorizontalexpansion.Forinstance,autilityandagreensteelcompanysignedaEUR2.3-billiongreenhydrogendealin2021(Iberdrola,2021).Suchexpansionsmightalsoallowcompaniestoentercleanenergytechnologymarketsmorequicklythaniftheyinvestindividually.Inmostcases,verticalexpansions,whichinvolveacompanymovingintosupplychainactivitiesupstreamordownstreamofitsexistingbusiness,areaimedatreinforcingthecompany’spositioninitsexistingbusinessbysecuringkeycomponentsandmaterialsforfutureexpansion.Forexample,in2022analkalineEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE397IEA.CCBY4.0.electrolysismanufactureracquiredanelectroplatingcompanytobringin-houseoneofthecoreproductionprocessesforelectrolysers(Sunfire,2022).EVbatteryandelectriccarmanufacturersarealsoexpandingintothelithiumminingandrefiningbusinesstoincreasetheresilienceoftheirsupplychains.Verticalexpansionscanallowcompaniestoexertmorecontrolovertheirsupplychains,reducingtheriskofdisruptions.However,theycanleadtomoreconcentratedmarkets,whichtendtobemorevulnerable.Verticalexpansionsareobviouslymostattractiveforcompaniesfacingacuteuncertaintiesabouttheircomponentandmaterialsupplies.But,aswithhorizontalexpansions,theycanalsohelpoptimiseproductionprocesses,productqualitycontrolsandstandardscompliance.Ontheotherhand,verticalexpansionmightlimitoperationalflexibilityandlockmanufacturersintosingle,specifictechnologysolutions,eliminatingthepossibilityofswitchingsupplierasmarketconditionschangeandtechnologiesevolve.PolicyrecommendationsDiversifyingsupplychainsbyreducingrelianceonindividualcountries,firmsortechnologiescanreduceriskstosupplychainsecurity.Giventhescaleofcleanenergytechnologydeploymentrequiredtoachievenetzeroemissions,newopportunitiesarelikelytoemergeforfirmsandcountrieswithaccesstoresources,skillsandcapitaltoenterthemarket,potentiallyleadingtogreaterdiversity.Significantopportunitiesexisttodiversifymostmineralsuppliesbydevelopingnewreserves,butthiscouldcomeatacost,asincumbentproducershaveaninherentcostadvantage.Asaresult,governmentsneedtostepintoencourageinvestmentinnewfacilities.Thereareanumberofwaysinwhichtheycandoso,includingdevelopinggeologicalsurveysformineralresources,buildingstockpilesoftheseminerals,incentivisinginvestmentinnewminesandfacilitiesacrossregions,andcoordinatingsupplychainassessmentsandexperience-sharing-.DevelopgeologicalsurveysforcriticalmineralresourcesGovernmentshavetheprimaryresponsibilityformappingcriticalmineralresources.Nationalgeologicalsurveysprovidescientificinformationaboutacountry’snaturalresourcesandessentialdataandanalysisonavarietyofcommoditiesandminerals,includingthetechnicalandeconomicpotentialfordevelopingnewsourcesofsupply.Topromotecriticalmineralsupplydiversification,governmentsneedtodevoteadequatefundingtogeologicalsurveys.Theyshouldalsosupportcriticalmineralmappingeffortsinothercountriesthatdonothavetheresourcesorcapacitytodoso.Thiscanincludedirectfunding,sponsoringmappinginitiativesandprovidingtechnicalassistance.Enhancedco-operationandknowledge-sharingamonggeologicalsurveyscancontributetoabetterunderstandingofresourceendowmentand,inthelongterm,enhanceprospectsformajornewsourcesofsupply.Collaborationanddata-EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE398IEA.CCBY4.0.sharingeffortscanalsoenablebettermappingandtrackingofcriticalmineralstocks,whichcanimproveunderstandingofsupplydisruptionvulnerabilityandwhichresourcesmightbecomeavailablethroughrecycling.ConsidercriticalmineralstockpilesItisimportantthatgovernmentsevaluatetheneedtointroduceorbolsterstockpilesofcriticalmineralsasameansofweatheringshort-termsupplydisruptions.Somecountrieshavebeenoperatingmineralstockpilingschemesformanyyears.TheUnitedStatesoperatesastockpileprimarilyfornationalsecurityreasonsandmorerecentlytosupportthecleanenergytransition.Criticalmineralstockpilesareusuallyfundedthroughapublicprocurementprocess.Suchstockpilingschemesneedtobecarefullydesigned,basedonaperiodicreviewofpotentialvulnerabilities,andensurethattheydonotexacerbateshortagesanddrivepricesupintheshortterm.Ingeneral,suchschemescanbemoreeffectiveformineralswithsmallermarkets,opaquepricingandaconcentratedsupplystructurethanforthosewithwell-developedmarketsandampleliquidity.AttheIEAMinisterialin2022,membercountriesrecognisedthegrowingimportanceofcriticalmineralsandmaterialsforcleanenergytransitionsandundertooktoinvestigatetheoptionofstockpilingalongsideotherpotentialmechanismssuchaspublicprocurementviaofftakeagreements,regularstress-testing,jointrecyclingtargetsandmeasurestorewardgoodESGperformance.Severalcountriesinterestedincloserco-operationlaunchedavoluntaryIEACriticalMineralsSecurityProgramme,whichwillincludestockpilingand,potentially,otherelementssuchasrecyclingandresilientandtransparentsupplychainmechanisms.Participatingcountrieshaveagreedtoworktogetherandshareexperienceanddatafromtheirnationalprogrammes.TheprogrammeaimstostrengthenIEAactivitiesonmarketmonitoring,technologyinnovation,supplychainresilience,recycling,environmentalandsocialstandardsandinternationalcollaboration(IEA,2022g).Plannednear-termactivitiesinclude:•Systematicmarketmonitoringtoidentifypotentialareasofstressinmineralsupplybasedonthelatestpolicy,technologyandinvestmenttrends.•Creatingaplatformforpolicyandtechnologydialogueoncriticalmineralstofacilitateknowledgeexchangeandexperience-sharing.TheplatformwillalsodiscussvariousmeasuresIEAmembercountriescanundertaketogethertoensuresecureandtransparentmineralsupplychains.•Establishingacomprehensive,freelyaccessibledatabaseofpolicymeasurestakenorplannedbygovernmentsaroundtheworldtoensurereliablesuppliesofcriticalminerals.•Strengtheningeffortstocollectdatasystematicallyinareasforwhichreliablepublicdataarescarce,suchasrecycling,environmentalandsocialperformance,andRD&D.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE399IEA.CCBY4.0.DesignindustrialstrategiestoincentiviseinvestmentGovernmentshaveanumberofoptionsattheirdisposaltodesigntheirindustrialstrategies.Everycountryhasadifferentstartingpointanddifferentgoals,sonosingleone-size-fits-allstrategyexists.Theinitialstepistodefinewhatthestrategyaimstoachieve,especiallyifthoseaimsextendbeyondinterventionstostructurallyimproveindustrialperformance.Sustainability,resilienceandstrategicindependenceareallwidelyacceptedgoalstoincludewithinabroaderdefinitionof“performance”,butinterventionstoincentiviseinvestmentmustbedesignedinaccordancewithinternationaltraderegulations,suchasthoseoftheWorldTradeOrganization.Stimulatingdomesticmanufacturingisoftenthefirstconsiderationofcountriesseekingtoalleviategeographicconcentration.Hereinparticular,realisticgoalsmustbeclearlystatedattheoutset.Totalself-sufficiencyisnotrealisticwhenitcomestocleanenergytechnologysupplychains.Evenforlarge,diversifiedeconomies,failingtoprioritisetheareasthatwouldbeofgreatestbenefittoincentivise,ortocarefullyconsiderstrategicandcompetitiveopportunitieswhenmandatingdomesticcapacity(orre-shoringcapacitythathasbeenrelocated),couldleadtoinefficientresourceallocation.Onceprioritiesareestablished,acombinationof“push”policiestargetingthesupplyofagivenmineral,materialormanufacturingplantand“pull”policies,designedtoboostdemandforoutputsfromthemanufacturingsector,canbeintroduced.Theseindustrialstrategiesshouldbedesignedinco-ordinationwithbroaderhorizontalmeasuresintheenergyandclimatepolicydomains,suchascarbonpricing,energyefficiencyincentivesandmaterialefficiencystrategies.Whenstimulatingdomesticsupplyisnotaviableorefficientoption,countriesmaybenefitfromconsideringstrategicpartnerships.Diversepartnershipswithmultiplepartnersarepreferabletooverrelianceonasinglebilateralarrangement.Suchstrategiescanbeusedtobridgegapsinthesupplyofamineral,materialortechnologythatiscriticaltothefunctioningofadomesticindustry.Securingsuppliesofcriticalmineralsandbulkmaterialsproducedwithsubstantiallyloweremissionsarekeyareaswherethisstrategymayproduceamoreefficientsolution,albeitwithreducedstrategicautonomyrelativetodomesticproduction.Forenergy-intensivecommodities,considerationshouldbegivenastowhichspecificstepsinthesupplychainofferthegreatestbenefitswhensituateddomestically(e.g.takingaccountofemploymentandvalue-addedadvantages,existingR&Dcompetences,andtheavailabilityoflow-cost,low-carbonenergyresources),andwhichmightbemorecompetitivelyhostedbyasuitablestrategicpartner.Governmentshaveseveraltoolsattheirdisposal(seeBox6.9)thatcanbedeployedbothdomesticallyandinternationallytoreducetheriskofcapital-intensiveprojectsandincentiviseprivateinvestment:EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE400IEA.CCBY4.0.•Taxincentives,suchasinvestmenttaxcredits,canspecificallytargetmines,plantsandfactories,andassociatedequipment.•Grantsforbuildingearly-moverfacilitiesthatsupportcleantechnologysupplychainscanreduceprojectriskandleadtolearningandcostsavingsforthenextfacilities.•Low-costloans,insuranceandloanguaranteescanbeeffectiveinstrumentsforprojectsthatcannotattractadequatefinancingfromcommercialbanks,whichisoftenthecaseforcleanenergytechnologiesandtheirsupplychains.•Lowerroyaltiesforstrategicminingprojectsthatsupportcleanenergytransitions,whilestillmaintainingsupportforlocalcommunities,canmakesuchinvestmentmoreattractivetoprivateinvestors.•Differentiatedmarketscanbeestablishedandregulatedforproductsproducedwithsubstantiallyloweremissions.Nationaldevelopmentbanks(NDBs)canbeimportantincatalysinginvestmentsinkeypartsofsupplychains.Theycancombinedifferentsetsoffinancialinstrumentstomeettheneedsofaspecificproject,frompre-investmentsupportsuchasgrantsandtechnicalassistance,toinvestmentsupportsuchascreditenhancements,fundingsubsidies,loansandguarantees(IDB,2013).Thegovernmentsofmanyemergingeconomieswherelargechunksoftheenergysectorarepubliclyownedarefacingseveredifficultiesinobtainingfinancingforenergyprojects.Internationalconcessionalfinancing,throughbilateralagreementsoradministratedthroughmultilateraldevelopmentsbanks,canplayacriticalroleinfillingfinancinggapsinthesecountriesbyfundingcapacity-buildingorprovidingdebtandequityfinancingtocleantechnologysupplychainprojects(IEA,2022c).Inadditiontospecificfinancialinstruments,governmentsshouldprioritiseeffortstostimulateprivateinvestmentincleanenergytechnologieswithintheframeworkofdomesticindustrialpoliciesbysignallingactivities,areasorregionsofinterestfortechnologysupplychains.Forexample,thedevelopmentofstrategicroadmapsforagivenregionortechnologycanincentiviseinvestmentsinnewmines,processingfacilitiesandfactories.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE401IEA.CCBY4.0.Box6.9Casestudies:SupportfornewminesandmanufacturingplantsIn2021,theAustraliangovernmentestablishedtheCriticalMineralsFacility,withabudgetofAUD2billion,tosupportcriticalmineralprojectsunderitsCriticalMineralsStrategy.ManagedbytheAustralianexportcreditagencyExportFinanceAustralia,thefacilityprovidesloans,loanguarantees,workingcapitalsupportandbondstominingandprocessingfacilities.AsofApril2022,threeprojectshadreceivedloans:EcoGrafLimitedreceivedanAUD40-millionloantodeveloptheAustralianBatteryAnodeFacilityinWesternAustralia.RenascorResourcesreceivedanAUD185-millionloantodevelopanintegratedgraphitemineandprocessingfacilityinSouthAustralia.IlukaResourcesreceivedanAUD1.25-billionloantodevelopAustralia’sfirstintegratedrare-earthelement(REE)refineryinWesternAustralia.TherefinerywillproduceREEoxideproducts(praseodymium,dysprosium,neodymiumandterbium),whichareusedinpermanentmagnetsinEVs,powergenerationanddefence.Taxandroyaltyincentivesforcriticalmineralminingprojectsarealsoavailableinsomejurisdictions.Forexample,theNorthernTerritorygovernmentallowsroyaltypaymentsfrommineralextractionprojectstobedeductedfromincometaxpayments.InWesternAustralia,wherelithiumminingisprevalent,royaltiesarecappedat5%ofthevalueofthelithiumconcentrateproduced.IntheUnitedStates,theDOE’sLoanProgramsOffice(LPO)providesloansandloanguaranteestoqualifyingcleanenergyprojectstoaddressshortfallsinfinancingfromthecommercialdebtmarket.TheLPOhasidentifiedcriticalmineralsforuseinEVbatteriesandcharginginfrastructureasakeyareaofinterest,enablingprojectstoaccessdebtcapitalatUSTreasuryrates.ApproximatelyUSD20billioninloansandguaranteesisavailableforprojectsalongthebatterysupplychain,includinginmining,extraction,processing,manufacturing,assembly,recoveryandrecycling.Inadditiontolow-costfinancing,theUSestablishedanewadvancedmanufacturingproductioncreditundertheInflationReductionActtoincentivisethedomesticproductionofvariouscomponents,includingapplicablecriticalmineralsusedinrenewableenergygeneration,storageandrelatedmanufacturing.Undertheregulation,ataxcreditequalto10%ofthecostofproductionisawardedtoproducersofapplicablecriticalmineralsproducedintheUnitedStates.IndiahasintroducedincentivesformanufacturingEVsandtheircomponents,includingadvanced-chemistryEVbatteries,inresponsetothesupplyuncertaintiescausedbytheCovid-19pandemic.Twoschemesunderanationalproduction-linkedincentiveprogrammejointlyprovidedincentivesworthINR440billion(USD5.3billion)in2021.TheschemesaimtosecurecriticalsupplychainsaswellEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE402IEA.CCBY4.0.aspromotedomesticmanufacturingandvalue-addedproductionintheeconomy.TheNationalProgrammeonAdvancedChemistryCellBatteryStorageaimstoachievemanufacturingcapacityof50GWh.InJuly2022,thegovernmentselectedthreecompaniesunderthisprogramme,withproductionexpectedtobeginin2024.Theschemewasoversubscribed,withqualifiedbidstotalling128GWh.Sources:India,MinistryofHeavyIndustries(2021);India,MinistryofHeavyIndustries(2022);ExportFinanceAustralia(2021);ExportFinanceAustralia(2022);S&PGlobal(2022b);WesternAustralia,DepartmentofMines,IndustryRegulationandSafety(2019);UnitedStates,DOE(2022f);InvestIndia(n.d.).Co-ordinatesupplychainassessmentsInternationalorganisationsandforumsarenaturalavenuesforcountriestodiscusssupplychainquestions,sharebestpracticesandexperiences,andco-ordinateassessments.Governmentshavealreadystartedtoconvenemeetingstodiscusswaystobuildsupplychainresilience.Forexample,theUnitedStateshostedasupplychainsummitwith14countriesandtheEuropeanUnioninOctober2021,aswellasaSupplyChainMinisterialForuminJuly2022toseekconsensusonhowtoreinforcesupplychainresilience.Yetthereisnodedicatedchannelforcontinueddialoguefocusedonsupplychainissuesforcleanenergytechnologies.Networksofexistinginternationalforumsshouldbeleveragedtoestablishsuchaplatform.OneoptionistocreateanewworkstreamfocusedoncleanenergysupplychainsundertheCleanEnergyMinisterial(CEM).TheCEMisahigh-levelglobalforumtopromotepoliciesandprogrammesthatadvancecleanenergytechnologiesandtosharelessonslearnedandbestpractices.Nearly30countriesparticipateintheCEMacross20differentworkstreamsfocusedonvariouscleanenergytechnologiesandsolutions.Anewcross-cuttingworkstreamoncleanenergysupplychainscouldleveragetheeffortsandknowledgebaseofexistingworkstreams.TheCEMTransformingSolarSupplyChainsinitiativecouldserveasapotentialmodelforabroadercross-cuttingworkstreamoncleantechnologysupplychains.LaunchedattheGlobalCleanEnergyActionForuminSeptember2022,thisinitiativefocusesspecificallyonthesolarPVmanufacturingvaluechain,includingrawmaterials,polysilicon,ingots,wafers,cellsandmodules,andassociatedequipment.Theinitiativewillaimtoboostoverallsupplychaincapacityandresiliencebysupportinglarge-scalemanufacturingindifferentregionsaroundtheworld.Governmentco-operationwiththeprivatesectorisalsoneededtoensuresecurecleantechnologysupplychains.Often,companiesarenotfullyawareoftheirsupplychainvulnerabilitiesandthreatstothem,norhavetheydevelopedmitigationandemergencyresponsemeasures(EC,2021c).Tothisend,governmentscanprovideguidancetocompaniestoassessandmanagesupplyEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE403IEA.CCBY4.0.chain-relatedrisks(e.g.detailedmethodologies,commondefinitions,vulnerabilityandimpactindicators,andrecommendedmitigationmeasures).Governmentscanalsoactasacentralisedresourcetohelpimproveintegratedmonitoringandreportingofvulnerabilitiesforcleantechnologysupplychains.Learningfromexistinginitiatives–suchastheCOMETFramework,whichcreatesarobustcarbonaccountingsystemforemissions-reportingacrosssupplychains,orTrase,whichmapstheinternationaltradeandfinancingofcommodities–governmentscanprovidecommonmonitoringandreportingframeworkstobetterassesssupplychainrisks.BoostingsupplychainresilienceReducinganddiversifyingcriticalinputstocleantechnologysupplychainsaretheprimarywaystomakecleanenergyandtechnologysupplychainsmoreresilient,i.e.betterabletocopewithandlimittheimpactofmarketshockssuchaspriceinstability.Theresilienceofasupplychaincanbemeasuredbythetimerequiredtoscaleupproductionofasupplychainelementintheeventofarapidincreaseindemandorapriceshock,andbywhethermarket-readyalternatives,orsparecapacity,existforthisparticularelement.Forexample,longleadtimesmeanriskstoresiliencearemoreacuteattheminingstageformass-manufacturedsystems,owingtorelianceoncertainminerals,whilelowresilienceforlarge-scale,site-tailoredsystemsisdrivenbyrelianceonCO2andhydrogeninfrastructure,whichalsofeaturelongdevelopmentleadtimes.OurassessmentofthreatstotheresilienceofcleanenergyandtechnologysupplychainsdemonstratesthatinfrastructurefortransportingandstoringCO2andhydrogenpresentthemostacuterisk.Miningofcriticalmineralsisalsoavulnerablestep,particularlyformass-manufacturedsystemsforwhichalternativetechnologiesarenotyetavailable,butconstitutesarelativelylowerrisktoresilientsupplychains(Figure6.10).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE404IEA.CCBY4.0.Figure6.10RisktoresilienceofglobalselectedcleanenergyandtechnologysupplychainsIEA.CCBY4.0.Notes:BECC=bioenergywithcarboncapture;DAC=directaircapture.Thelikelihoodofathreattoresilienceisbasedonleadtimestodeployanewfacilityonascaleof0(shortestleadtime:around1year)to10(longestleadtime:around10years).Whenmultiplefacilities(e.g.formineralrefiningandbulkmaterialproduction)areinvolvedatagivenstepofthevaluechain,theleadtimecorrespondstothemaximumvalue.Impactismeasuredbytheavailabilityofalternativematerials,processing/manufacturingtechnologies,orsparecapacity(usingtheaverageutilisationrateofexistingcapacity),evaluatedonascaleof1to5,with1correspondingtoreadilyavailableand5tounavailable.Arrowsindicatehowindividualpointsareconnectedwithinasupplychain(herewiththeexampleofsolarPV).Sources:IEAanalysis.FordatasourcesandfurtherbackgroundontheleadtimeanalysisseeFigures1.15(mining)and1.16(materialproductionmanufacturing,installationandinfrastructure).Theleastresilientstepsareminingformass-manufacturedsystemswithlowavailabilityofalternativetechnologiesorchemistries,andinfrastructuredevelopmentforsystemsthatinvolveCO2orH2management.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE405IEA.CCBY4.0.StrategicconsiderationsShort-termdisruptionsincleantechnologysupplychainscanhaveprofoundcostimplicationsandunderminetheworld’schancesofreachingnetzeroemissionsbymid-century.Boostingsupplychainresiliencecanenablequickerresponsestothesedisruptions.Earlierinthischapterwecoveredsomewaystoimprovesupplychainresilience(suchasshorteningleadtimes)toacceleratethecleanenergytransition.Otherkeyapproachestoenhancetheresilienceofthesechainsaretoensurestableandaffordablepricingthroughcontinuedaccesstolow-costrenewablesasawaytohedgeagainstenergyandcommoditypriceswings,especiallyasenergytransitionsrequiregreaterrelianceonelectricity,andtopromotematerialsubstitutionanddesigndiversificationtoreducedemandforindividualcriticalmineralsandincreaseresiliencetosupplyconstraints.EnergypricesandcompetitivenessMaintainingstableandaffordablepricesforenergyandcommodities–particularlythosethataretradedincompetitiveinternationalmarkets–iscriticaltoensuretheresilienceofcleanenergytechnologysupplychains.Internationalmarketswithmanysuppliersgenerallyleadtomorestableandaffordableprices,butcountriesalsomustalsocapitaliseontheirstrengthswhenshapingtheirroleinthenewglobalenergyeconomy.Mostcountrieswillneedtochoosewhichsupplychainsandstepstospecialisein,duetotheirresourcelimitationsandotherconstraints.Maintaininganeconomicallysustainablepositioninthesemarketswillhelplowerthefrequencyandseverityofpriceshocks–andreduceexposuretothemwhentheydooccur.Competitivenessisthereforeakeyconsiderationwhengovernmentsaredesigningtheirindustrialstrategiesandassessingthoseoftheirkeysuppliers.Energyisakeycomponentofoverallproductioncosts,especiallyinheavyindustriessuchassteel,chemicalsandcement.Naturalgasandelectricityarethetwomainenergyinputsformaterialandtechnologymanufacturerstoday,thepricesofwhich,includingtaxesandexcisesforindustrialusers,varysignificantlybetweencountries(Figure6.11).Thisgivesproducersinregionswithrelativelylowenergycostsacompetitiveadvantage.Forexample,pricesforindustrialusersofnaturalgasandelectricityremainfarlowerintheUnitedStatesthaninEurope,creatinganincentiveforsomemanufacturerstoshiftproduction.Thepricesofcoalandoilproducts,whicharemoreeasilytradedinternationally(astransportcostsrepresentasmallershareoftheprice),varymuchlessamongregions,excludingtheimpactoftaxes(e.g.fromemissionstradingschemes).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE406IEA.CCBY4.0.Figure6.11Industryend-userpricesfornaturalgasandelectricityinselectedcountriesIEA.CCBY4.0.Notes:DataforgasarefromtheChinaLNGFactoryPriceNationalIndex.Electricitydataarecalculatedfromthe“gridproxyelectricitytarifffor30provincesandcitiesinChina”.ElectricitydataforChinanotavailablepriortoreformstoliberalisemarketsattheprovincelevelinOctober2021.Pricesincludetaxesandareshownin2021USdollarsusingmarketexchangerates.Sources:IEA(2022h);ShanghaiPetroleumandGasExchange(2022);StateGridCorporationofChina(2022);ChinaSouthernPowerGrid(2022).Energypricesforindustrialusersvaryconsiderablybetweenregions,creatingastructuraladvantageforproducersofenergy-intensiveproductsinregionswithlowenergycosts.Thecleanenergytransitionwillentailgreaterrelianceonelectricity,soifregionaldifferencesinelectricitypricespersist,theresultwillbeconsiderablecross-regionvariationsintheproductioncostsofawiderangeofenergyproductsandbulkmaterials.Basedonrecentgridelectricityprices,producinglow-emissionhydrogenusinggrid-connectedelectrolyserswouldcost120%moreinWesternEuropeandJapanthaninChina,and80%morethanintheUnitedStates(Figure6.12).WesternEuropebecomesmuchmorecompetitivewhenconsideringtheproductioncoststhatcouldbeachievedusinglow-costvariablerenewableenergy(VRE)providedbysolarPVandwindinstallations.HydrogenproductioncostsofaroundUSD6/kginWesternEurope,USD9/kginJapan,USD5/kgintheUnitedStatesandUSD4/kginChinacouldbeachievedusingthebetterrenewableresourcesinthesecountriestoday.Substantiallylowercosts–withlessvariationbetweenregions–canbeenvisagedifcountriesaresuccessfulinimplementingtheirannouncedpledges.AselectrolysercostsdeclinerapidlyintheAPS,togetherwithcontinuingdeclinesinthecostofsolarPVandwind,hydrogenproductioncostsusingelectrolysisandlow-costVREcoulddroptoUSD1.3/kgby2030.Thiswouldmakelow-emissionhydrogenviaelectrolysiscompetitivewiththereferenceproductioncostofUSD1.4-4.4/kg,usingtoday’smainincumbentpathway(steammethanereformingusingnaturalgas).Theseproductioncostsexcludetheimpactofany02550751002019202020212022USD/MWhNaturalgasChinaUnitedStatesGermanyFranceJapan0501001502002502019202020212022ElectricityEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE407IEA.CCBY4.0.directsubsidies,suchasthoseofferedintheUSInflationReductionAct.TheInflationReductionActmakesavailableeffectivesubsidiesofuptoUSD3/kgforhydrogenproducedwithrenewableelectricity,relativetodomesticproductioncostsintheAPSin2030ofUSD1.7-3.0/kg.Virtuallyallhydrogenisconsumedwhereitisproducedtodaybecausetransportingandstoringitisexpensive.Therefore,countries’domestichydrogenproducersarenotindirectcompetitionwithoneanother.Thisisnotthecaseforchemicalsandmaterialssuchasammoniaandcrudesteel,whicharetradedincompetitiveinternationalmarketsandhavethepotentialtobeproducedinlargevolumesusinglow-emissionhydrogeninthefuture(thetechnologiesfordoingsoarestillinthedemonstrationphasetoday).Ifammoniaandsteelweremanufacturedusinglow-emissionelectrolytichydrogenproducedfromgridelectricity,thewidevariationinproductioncostsbetweenregionswouldleadtosignificantcompetitivenessgaps.Asforlow-emissionhydrogen,thesedifferencespersist–althoughnarrowmarkedly–intheAPSwhenVREisused,withproductioncostsintherangeofUSD480-1500/tforammoniaandUSD520-980/tforcrudesteelin2030.Thekeytomakingsuchprocessarrangementsviableisflexibility,byadaptingtheprocesstechnologytoaccommodatesomedegreeofvariationinitsload/capacityfactor,orbystoringsurplushydrogenorelectricitywhenrenewablesoutputisatitshighest.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE408IEA.CCBY4.0.Figure6.12Indicativeproductioncostsforhydrogenandhydrogen-basedcommoditiesproducedviaelectrolysisIEA.CCBY4.0.Notes:VRE=variablerenewableenergy;APS=AnnouncedPledgesScenario;H2-DRI=hydrogen-baseddirectreducediron.TheVREcostrangerepresentselectrolysispoweredbysolarPV,offshorewindoronshorewind.Forammoniaandcrudesteelproduction,anadditionalhydrogenstoragecosttoguaranteeaminimumloadof80%isconsidered.‘Currentreference’valuesshowproductioncostsusingthedominantincumbentmeansofproductiontodaywithunabatedfossilfuels.Recentpricesfornaturalgasandgridelectricity(asperFigure6.11)areusedtocomputethecostrangesineachregionwhererelevant.Thecostofcapitalisassumedat5%,whiletheothertechno-economicassumptionsaresourcedfromthereferencesbelow.Sources:IEA(2022h);IEA(2022i);IEA(2020b);IEA(2021b);S&PGlobal(2022c);Bloomberg(2022).Considerablevariationsinelectricitycostsforindustrialusersbetweencountrieshaveimplicationsforthecompetitivenessofindustriesexposedtointernationaltrade.SubstitutingalternativematerialsanddesignsMaterialsubstitutionanddesigndiversificationareimportanttoreducedemandforindividualcriticalmineralsandincreaseresiliencetosupplyconstraints.Thiscanincludepursuingalternativedesignsthatareoveralllessreliantonmaterialswithpotentialforsupplybottlenecksorconstraints.Itmayalsoincludepursuinga051015WesternEuropeJapanUnitedStatesChinaCurrentreferenceUSD/kgHydrogenviaelectrolysis0100020003000WesternEuropeJapanUnitedStatesChinaCurrentreferenceUSD/tonneAmmoniaviaelectrolysis050010001500WesternEuropeJapanUnitedStatesChinaCurrentreferenceUSD/tonneCrudesteelviaH2-DRIRecentgridelectricityVRE2021VREAPS-2030CurrentreferenceEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE409IEA.CCBY4.0.portfolioofdesignsinparallel,suchthatifsupplyconstraintsariseforoneparticularcriticalmaterial,itcouldbepossibletopivottoincreasemanufacturingofanalternativedesignthatisdependentondifferentmaterials.AlternativechemistriesformakingEVbatteriesareoneexampleofsuchmaterialsubstitution.ThecathodesofEVbatterieshistoricallytendedtobemadewithsignificantamountsofcobalt,buttheyhaverecentlybeensubstitutedbyvariantsthathavehighernickelcontentandlesscobalt.Thistrendistheresultofasearchforbetterperformance,aswellasindustryattemptstoreducerelianceoncobalt–acostlymetalsuppliedasanoremainlyfromtheDemocraticRepublicofCongo.Manufacturersarenowalsoturningtolessnickel-intensivecathodevariantswithsimilarefficienciesandenergydensities,suchaslithiumironphosphate(LFP).Thesearegainingamajorfootholdandtheirshareoftotalbatteryproductionincreasesrapidly,toaround30%by2030intheNZEScenario(Figure6.13).LFPchemistriesarelessreliantonconstrainedmaterials,cheaperandmoredurable,thoughtheirenergydensityislessthan-thatofnickel-basedones(100-160watt-hours[Wh]/kilogramme[kg]comparedwith160-250Wh/kg).Assuch,theyarebestsuitedtostationaryenergystorageapplications,butcanbeanattractiveoptionforcertainEVtypesduetotheircostadvantage.Inaddition,effortsarebeingmadetomakecathodeswithmoremanganesetoreducethecobaltandnickelcontent,loweringcostsandreducingtheriskofdisruptionstonickelsupply.Comparedtothestatusquo,thissubstitutionanddiversificationmakesEVsupplychainsmoreresilienttoshocksincertainbatterymetalprices.However,thereisatrade-off:thispotentialtoswitchmaterialscouldthreatentheeconomicviabilityofpotentialfutureresourceextractionprojects,potentiallyslowingthepaceofrequiredinvestment.Ifcriticalmineralpricesremainhigherforlonger,automakerswouldlikelyrespondstronglytothismarketsignalbyshiftingmorequicklytoLFPcathodechemistries(asrepresentedintheFigure6.13“constrained”case).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE410IEA.CCBY4.0.Figure6.13Globalcathodeproductionforpassengerlight-dutyBEVsbychemistryintheNZEScenarioIEA.CCBY4.0.Notes:NZE=NetZeroEmissionsby2050Scenario;BEV=batteryelectricvehicle;LFP=lithiumironphosphate.“Low-nickel”includes:NMC333.“High-nickel”includes:NMC532,NMC622,NMC721,NMC811,NCAandNMCA(NMC=lithiumnickelmanganesecobaltoxide;NCA=lithiumnickelcobaltaluminiumoxide).Thecathodesalessharesarebasedonproductioncapacity.Source:IEAanalysisbasedonIEA(2022d);EVVolumes(2022).Switchingawayfromhigh-nickelchemistriestoLFPbatteriescouldreducetheneedfornickelextractionandprocessing.Animportantgoalofbatteryinnovationeffortsistodiversifydesignstoreducerelianceonlithium,thecriticalmineralthatisleastsubstitutablewithcurrenttechnologiesandtheonefacingthelargestpotentialshortfallinsupplyinupcomingyearsbasedonplannedprojects(seeChapter3).Sodium-ionbatteriesareapromisingalternative,buttheyareapproximatelytenyearsawayfromwidespreadcommercialisation.Machinelearningcanbeusedtohelpacceleratethedevelopmentofnovelbatterymaterialstoimprovebatterydensityandreducerelianceonkeybatterymetalssuchaslithium,nickelandcobalt(NREL,2021).Electrolysersareanotherkeytechnologyforwhichpursuingamixofdifferentdesignscouldhelpreducerelianceonspecificcriticalmineralinputs.Alkalineelectrolysersrequireasignificantamountofnickel,whichisalsoneededtomakeEVbatteriesandthereforeincreasespressureonglobalnickelproduction.Polymerelectrolytemembrane(PEM)electrolysersuseiridium,whichcurrentlyhaslimitedapplicationsandforwhichitisdifficulttorampupglobalproduction,asitisproducedasaby-productofplatinumgroupmetalandnickelmining(Kiemeletal.,2021).Futurenickelandiridiumdemandcouldbemoderatedthroughfurtherinnovation.Additionally,developingdifferenttechnologiesmeansthatifanunforeseensupplyshockdrivesupthepriceofonemineral,electrolysersusinganothermineralcouldemergeasaneconomicallyviablealternative.0%20%40%60%80%100%201720182019202020212030-Base2030-ConstrainedInnovativeOtherLFPHigh-nickelLow-nickelEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE411IEA.CCBY4.0.Innovationwillbecriticalinthisregard.Electrolysermanufacturersarealreadytryingtoreducepreciousmetalloadingsusingimprovedmanufacturingtechniquessuchasnovelcatalystformulationsandcoatingtechniques(EC,2022b;Heraeus,2022;H2UTechnologies,2022).Bringingtomarketandscalingupotherdesignssuchassolidoxideelectrolysercellsandanionexchangemembraneelectrolyserscanalsohelplowercriticalmineralneedsandenhancetheflexibilityofelectrolysersupplychains.Inaddition,highlyinnovativeelectrolyserdesignsthatareapproachingcommercialisationarealsoadoptingstrategiestominimisematerialneeds.Hysata’sdesignusesacapillarysystemthatresultsinastep-changeinefficiencycomparedwithconventionaldesigns(95%comparedwitharound75%),whichleadstolowermaterialneedsperunitofhydrogenoutputandasimplifiedbalanceofplant(thesupportingcomponentsandauxiliarysystemsoftheplant)(Hysata,2022).CleanPowerHydrogen(CPH2)hasamembrane-freeelectrolysertechnologythatavoidstheuseofplatinum-groupmetalsandreducestheriskofstackfailure,whichcanincreasetheoperativelifeofthesystem(CPH2,2022).PolicyrecommendationsImprovingresiliencecanbeachievedwithincreasedmaterialefficiencythroughmorerecyclability,repairabilityandreusetoreduceprimarymaterialneeds.Anumberofpolicyoptionsareavailabletogovernmentstoencouragethesepractices,includingstandardisationofrulesaffectingrepairs,incentivestosupportmaterialefficiency,mandatesandothermeasurestoimproverecyclabilityandrecyclingrates,andvariousmeasurestopromotetherepurposingofexistinginfrastructure,suchasoilandgaspipelines,tohandleCO2andhydrogen.ReviewdesignandmanufacturingregulationsReducingtheamountofbulkorcriticalmaterialsthatgointoaproductinthefirstplacecanhaveanimportantimpactonoverallmaterialdemand.Designregulationscanhelpencouragereductionsinmaterialuse.Forexample,movingfromprescriptivetoperformance-baseddesignstandardscanfacilitatetheefficientuseofmaterialswhilealsopromotingtheadoptionofnearzeroemissionmaterials.Anexampleherearebuildingcodesthatfocusonstrengthrequirements,ratherthanrequiringthatacertainamountofcementorsteelbeused.Lifecycleorembodiedcarbonregulationscanalsohelppromotedesignefficiency.AnexampleisFrance'sRE2020regulation,whichcapsbuildings’embodiedcarbonemissions.Greenlabellingandcertificationrelatedtoembodiedemissions,aswellasfactoringembodiedemissionsintopublicprocurementdecisions,canalsohelpcreatedemandformaterialefficientdesigns.R&Dsupportiscrucial,particularlywithregardtocriticalmaterials.Governmentsshouldsupportthedevelopmentofdesignsandtechnologiesthatusereducedamountsofscarcematerials,andshouldco-ordinateormandatetheincorporationofmaterial-efficientdesigntrainingintothecurriculumofengineersandarchitects.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE412IEA.CCBY4.0.PromoterepairabilityandlongerlifetimesUsingproductsandtechnologieslongerwillreducetotalmaterialneeds.Governmentscanhelpnormalisepracticestoachievethis,includingfavouringreusableoverdisposalproductswhenpossibleandpromotingrepairability,remanufacturingandsecond-lifeapplications(seeBox6.10).Policyinterventionatthedesignstageisimportant.Bansoncertainsingle-useproductscanspurthedesignofreusableproducts.Requirementstobuildrepairabilityintodesigncanpreventplannedobsolescence.Oneexampleisrequirementsforcomponentstandardisationunderproductstewardshipregulations.Incentivesformodulardesigncanalsofacilitatefuturerepurposing.Governmentprogrammescanalsofacilitaterepairingandrepurposing.Theycouldsetrequirementscoveringbothmanufacturersandimporterstomakesparepartsavailable,andfacilitateremanufacturingandsecond-lifeapplicationssuchasthecollectionofend-of-lifeEVbatteriesforuseinstationaryapplications,providedadequatesafetyprecautionsareinplace.Taxincentivesanddisincentivescouldalsobeused,e.g.reducedpropertytaxesonabuildingthathasbeenrepurposedbyanewownerortaxesonbuildingdemolitions.Box6.10Casestudy:EUright-to-repairrulesTheEuropeanUnion’sEcodesignDirectiveprovidesaframeworkforthedevelopmentofdetailedrulestoimprovetheenvironmentalperformanceofawiderangeofenergy-intensiveproductssuchashouseholdappliances,informationandcommunicationtechnologies,andengineeringgoods,aswellasproductsthataffectenergyusesuchaswindowsandinsulation.Toenhancetherepairabilityoftheseproducts,thedirectiverequiresmanufacturersandimporterstoimprovethedesignofcertainproducts,makeessentialsparepartsavailableandallowindependentrepairersaccesstotechnicalinformationtohelpthemrepairproducts.AspartoftheEUGreenDeal,theEuropeanCommissionhasproposedtoexpandthedirectivetocoverotherproductgroupsthathaveasignificantenvironmentalimpact,includingsteel.Amongotherareas,theproposalincludes:Creatingasetofrequirementstailoredtotheparticularcharacteristicsoftheproductgroupsconcerned.Expandingthecoverageoftherequirementstoproductdurability,reliability,reparabilityandeaseofmaintenance,aswellasenergyuse,resourceuseandminimumrecycledcontent,andwastepreventionandreduction.Implementingadigitalproductpassportfortheproductgroupscoveredbytheproposaltohelpbusinessesandcustomersmakeinformedchoicesthroughaccesstotransparentenvironmentalinformation.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE413IEA.CCBY4.0.Preventingthedestructionofunsoldgoodsbyrequiringbusinessestodisclosetheamountsofandreasonsforproductdiscardseachyear,andhowtheyareprocessed.Awholesalebanonthedestructionofunsoldgoodsforcertainproductsisalsoenvisaged.InApril2022,theEuropeanParliamentadoptedaresolutioncallingfortherighttorepairtoaddressthewholelifecycleofproducts,fromproductdesigntoproduction,standardisation,informationlabelling(includingreparabilityandexpectedlifespan),consumerguarantees,andpublicprocurement.Forinstance,productswillneedtobedesignedsothatarepairercanusecommontoolstoreplacetheparts,whichwouldpreventmanufacturersfromsealingtheirproductsinawaythatimpedesrepair.Source:NationalLawReview(2022).ExploreopportunitiestorepurposeinfrastructureWhenfeasible,governmentsshouldconsideradoptingpoliciesthatencouragetherepurposingofexistinginfrastructure,especiallyexistinggaspipelines,whichcouldsignificantlyreducethecostofestablishingnationalandregionalhydrogentransportationnetworks(seeChapter5).ThereisalsoconsiderablepotentialtorepurposeoilandgaspipelinestotransportcapturedCO₂inmanypartsoftheworld.Benefitsincludeavoidingtheneedfornewconstructionandthusmaterialinputrequirements,reducingstrandedassets,andreducingleadtimesthroughavoidingtheneedtosecurenewlandrightsandright-of-waypermits.Whileindustrymaybebetterplacedtoconducttechnicalreviewsofexistinginfrastructureassets,governmentscanplayanimportantroleinidentifyingopportunitiestorepurposeinfrastructurebycommissioningrepurposingstudies,standardisingtheassessmentprocessandofferingincentivestopipelineoperatorstorepurposeassets.Regulatorscanassistinthephysicalrepurposingofinfrastructurebyprovidingcleardecommissioningandpermittingrequirements.Whenpossible,governmentsshouldalsoencouragethereuseofretiredpowergenerationassetsasthecleanenergytransitionprogresses,aswellastheuseofexistinggridconnections.Forexample,theremaybescopetomakeuseofthesitesandassociatedfacilitiesofcoal-firedpowerplantstobuildnewlarge-scaleclean-energygeneratingplants,suchasnuclearreactorsorbioenergy-basedcombinedheatandpowerplants(seeBox6.11).Thiscouldnotonlysaveconstructioncostsandmaterialneeds,butalsohelpprovideemploymentforthelocalcommunity.Policymakerscanencouragethisbyidentifyingtheseassetsandfacilitatingdiscussionamongutilities,projectdevelopersandlocalcommunitiestoidentifypotentialopportunities.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE414IEA.CCBY4.0.Governmentfinancingcouldalsobeusedtopromoteinfrastructurerepurposing.Forexample,infrastructurebanksareonemediumthroughwhichgovernmentscanhelpmobiliseprivateinvestmentininfrastructureprojectsthatmightnototherwiseoccur.Aportionoffundscouldbeearmarkedforinfrastructurerepurposinginsupportofthecleanenergytransition,thusencouragingtheprivatesectortoseekoutrelevantopportunities,includinginnovativerepurposingprojects.Box6.11Casestudy:RepurposingfossilenergyinfrastructureintheUnitedKingdomandUnitedStatesIntheUnitedKingdom,thegovernmentbelievestherepurposingofoilandgasinfrastructuretotransporthydrogenandcapturedCO2couldmakeamajorcontributiontomeetnetzerogoals.Tothisend,theNorthSeaTransitionAuthority(NSTA)islookingathowtomaximisetherepurposingofinfrastructure.Ithasalreadydevelopedascreeningtooltohelptheoperatorsofoffshoreoilandgasfieldsidentifypotentialopportunitiesaheadofdecommissioning.Thetoolwillinitiallybesenttodozensofcompaniesoperating120fieldsthatarenearing(orhavereached)theendoftheirproductionlives.TheNSTAwillthenreviewcompanydatasubmissionsandworkwiththeoperatorstoexplorerepurposingoptionsandaddresspotentialbarriers.IntheUnitedStates,theDOEreleasedareportinSeptember2022investigatingthebenefitsanddrawbacksofbuildingnuclearreactorsatcoal-firedpowerplantsites.Inadditiontoofferingemploymentandlocaleconomicbenefits,thestudyfoundthatreusingcoalinfrastructureforadvancednuclearreactorscouldreduceconstructioncostsby15-35%ifthecoalplant'selectricalequipment(e.g.transmissionlinesandswitchyards),coolingpondsortowers,andcivilinfrastructure(e.g.roadsandofficebuildings)arereused.Sources:NSTA(2022);UnitedStates,DOE(2022g).DesignindustrialstrategiesthatleveragecompetitiveadvantagesEstablishingcompetitivepositionsininternationalmarketsforcleanenergytechnologymanufacturingandmaterialproductionisacentralconsiderationwhencountriesaredesigningtheirindustrialstrategies.Economicallycompetitiveproductionandmanufacturingoperationsaremoreresilienttopriceanddemandshocks,whichinturnenablesmoresupplyresilienceforcustomersandmoreresilientmarketsforsuppliers.Afirststeptoestablishacompetitivepositioninasupplychainistochoosewhatareatospecialisein.Formostcountries,itisnotrealistic(ornecessary)tocompeteeffectivelyacrossallstepsofallthecleanenergytechnologysupplychainstheyrelyon.Competitivespecialisationsoftenarisefrominherentgeographicadvantages,suchasaccesstolow-costrenewableenergyorthepresenceofamineralresource,whichcanleadtolowerproductioncostsforEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE415IEA.CCBY4.0.energyandmaterialcommodities.Buttheycanalsostemfromotherattributes,suchasalargedomesticmarket,ahighlyskilledworkforceorsynergiesandspilloversfromexistingindustries.Governmentsshouldconsidertheattributesthatcouldenablecompetitivespecialisationsintheirowneconomies,capitalisingontheirownstrengthswhilealsoevaluatingthoseofothercountries.Internationalorganisationscanbeofassistance,providingcomparativeanalysisandidentificationofbestpractices.Over-emphasisoneconomiccompetitivenesscanalsohampereffortstoimprovesupplychainresilience.“Just-in-time”productionlinesandhighlyoptimisedassetutilisationarebothexamplesofstrategiestoimprovefinancialperformancethat–whentakentoofar–cancomeattheexpenseofresilience.Increasedrobustness,facilitatedbysystem-levelredundancyandstrategicoversizingofcriticalnodesorelementsinsupplychains,includinginfrastructure,isincreasinglyimportanttoremaincompetitiveinvolatilemarkets.Improvingresiliencethroughthesestrategiescanresultinincreasedupfrontcosts.Butthesecostscanleadtoconsiderablesavingsintheeventofademandshockorpricespikeifproductionandmanufacturingoperationsaresparedfromdisruptionsandthusshieldedfromnegativeimpactsoncompetitivity.EstablishingsustainablesupplychainsItisvitalthatmining,manufacturingandactivitiesinotherelementsofthesupplychaindonotgiverisetosignificantGHGemissions,otherharmfulenvironmentaleffectsand/ordamagingsocialconsequences,suchashumanrightsviolationsandmodernslavery.CO2emissionsfromcleanenergyandtechnologysupplychainscurrentlyvarymarkedlybystepandsupplychain.WhiletheCO2intensityofminingofsomecriticalmineralscanbehigh,miningcontributeslittletotheoverallemissionsstemmingfromcleanenergytechnologysupplychainsthatmakeuseoftheminerals(Figure6.14).Incontrast,theemissionsintensityofmaterialproductionprocesses–eithertosupplybulkmaterials(fortechnologiessuchaswindturbines),criticalmaterials(suchaslithiumandcobaltforEVs)orspecificmaterials(suchassorbentsforDACorpolysiliconforPVmodules)–areoftenlargerrelativetothatofotherstepswithintheseparticularsupplychains.Manufacturingprocessestendtorelymoreonelectricityandarelessenergy-intensive,whichusuallyleadstolowerCO2intensity,particularlyforwindturbines,heatpumps,fuelcelltrucks,andsite-tailoredtechnologies,forwhichmanufacturingemissionsarebelow25%ofoverallsupplychainemissions.ForsolarPV,electricvehiclesandelectrolyserswhichinvolvethemanufacturingofspecificcomponentssuchaswafers,cells,PVmodules,andbatteries,thissharecanincreaseto30to50%.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE416IEA.CCBY4.0.Figure6.14RiskoffailingtoreduceCO2emissionsinthemostintensivestepsofselectedcleanenergyandtechnologysupplychainsIEA.CCBY4.0.Notes:BECC=bioenergywithcarboncapture;DAC=directaircapture.ContributionstototalsupplychainCO2emissionsarecalculatedbasedontheshareofeachstepintotalsupplychainCO2emissions.Totalsupplychainincludedirectandindirectemissionsfromresourceextraction,materialproduction,andmanufacturing,anddirectemissionsfromoperation.Operationonlyrepresentsahighshareofemissionsforgas-basedhydrogenproductionwithCCS,forwhichitisassumedthat5%ofnaturalgasemissionsarenotcaptured.Mostmanufacturingprocessareheavilyelectrifiedandemissionsareonaveragelowerthanmaterialproduction,typicallyrepresentinglessthan25%ofoverallsupplychainemissionsforheatpumps,windturbines,fuelcelltrucks,andsite-tailoredsystems.ForsolarPV,electricvehicles,andelectrolysers,thesharecanincreaseto30-50%.LikelihoodismeasuredbytheCO2intensityofminingandprocessingmaterialscontainedinthedifferenttechnologies,scaledfrom0(lowCO2intensity:around2kgCO2/kg)to10(highCO2intensity:around50kgCO2/kg)andrepresentedonalogarithmicscale.Sources:FordatasourcesandfurtherbackgroundontheemissionsanalysisseeFigure2.21.Othersourcesforelectrolysers,gas-basedH2productionwithCCS,BECC,andDACincludeconsultationwithindustries,Gerloff(2021);Cetinkayaetal.(2012);NREL(2001);DeutzandBardow(2021);WorldResourceInstitute(2022);Koornneefetal.(2008);PehntandHenkel(2009).WhiletheCO2intensityofminingofsomecriticalmineralscanbehigh,miningcontributeslittletothelifecycleemissionsofthetechnologiesthatmakeuseoftheminerals.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE417IEA.CCBY4.0.StrategicconsiderationsReducingemissionsfromthemining,processing,manufacturingandtransportofmaterialsandfinalcleanenergyproductsisessentialastheirdeploymentincreases.Thetaskofreducingsupplychainemissionsismademorechallengingbythesheerrateofgrowthofsupplyneededtoachievenetzeroemissionsbymid-century,aswellastheprospectofadeclineinthequalityofcriticalmineralresources,whichmeansmoreenergywillbeneededtoproduceeachtonneoftheseminerals.Governmentscanmakesupplychainsmoresustainablebyincreasingthematerialefficiencyofcleanenergytransitions(therebyreducinginvestmentneedsfornewmineralsandmaterialsandincreasingemissionssavings)andbyscaling-upmarketsfornear-zeroemissionmaterials.BoostingmaterialefficiencyforcostsavingsandemissionsreductionsImprovingmaterialefficiencywouldmakethetaskofexpandingrawmineralextractionandprocessinglessmonumental.Thiswouldreduceinvestmentneedsaswellasenvironmentimpactsfromland-usechangeandhabitatloss.Forexample,ifadditionalmaterialefficiencyintheNZEScenariowerenotforthcoming,makingupthenecessaryproductionwithCO2capture-equippedcementplantswouldrequireextracumulativeinvestmentofaboutUSD225billion(in2021USdollars)by2050.SavingswouldbearoundUSD710billionforusingadditionalhydrogenDRIplantstomakeuptheshortfallinsteelproduction,withbothfiguresexcludingthesignificantadditionalsavingsinenergyinfrastructureandresourceextractioninvestmentthatwouldalsobeneeded.Materialefficiencygainscanreducemanufacturingcostswhenthebenefitsoutweighthecostsofimplementingthestrategy,therebyhelpingacceleratetheuptakeofcleanenergytechnologiesandlowertheiroverallcost.Forexample,right-sizingEVbatteriestoarangethatcoversatleast90%ofdailytrips,togetherwithpoliciestoensurethatvehiclesizeandweightdonotcontinuetoincrease,reducetheupfrontcostofanEVbymorethanUSD2500intheNZEScenario.Carleasingoptions,toenableEVbuyerstoleasecarswithalongerrangeforoccasionaltripsofmorethan200km,couldbeaconvenientandmoreaffordableoptioninsuchacase.Companiesandcountriesthatexploitopportunitiestoboostmaterialefficiencywillimprovetheircompetitiveadvantage,leadingtogreaterinvestment,marketsharesandjobcreation.ScalingupleadmarketsfornearzeroemissionmaterialsAsmaterialproductioncontributesasubstantialshareofsupplychainemissionsforcleantechnologiesandinfrastructure,usingnearzeroemissionmaterialswillbeimportantforsupplychaindecarbonisation.Whilecostsforproducingsuchmaterialsarelikelyconsiderablyhigherthanforconventionalproduction,theimpactonpricesofend-usetechnologiesisfairlysmall,giventhatmaterialsaccountforarelativelysmallportionoffinalcosts(seeChapter1).Consequently,EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE418IEA.CCBY4.0.manufacturerscanpassthesemarginalcostsontoconsumerssothathigherproductioncostsdonotproveamajorbarriertomanufacturersusinglower-emissionmaterials.Sincenearzeroemissionmaterialproductionrouteshavenotyetbeencommercialised,thecollectivepurchasingpowerofmanufacturersandconsumersacrossmultipleend-usesectorscansupportthescale-upofearlyproduction.Indeed,aspartoftheirstrategiestoimprovethesustainabilityoftheirsupplychains,agrowingnumberofcompaniesfromarangeofsectorsarealreadymakingcommitmentstoprocurelower-emissionmaterials.Recentcommitmentstoprocurenearzeroemissionsteelillustratethis.Thenumberofcompaniespledgingtopurchasenearzeroemissionsteelisgrowingrapidly,withover60havingmadeacommitmentasof2022,morethandoublethenumberin2021(Figure6.15).Thisincludesagreementsmadeunderindustryinitiativesaswellasindependentcommitmentsnegotiatedbetweenbuyersandproducers.Pledgeshavebeenmadebycompaniesinvarioussectors,indicatingthattheyfeelconfidentinpassingcoststhroughtoconsumersforarangeofenduses.Partlyinresponsetothesecommitments,alongwithotherpublicsectorschemessuchastheCEM’sIndustrialDeepDecarbonisationInitiative,agrowingnumberofsteelproducersareformulatingplanstoproducenearzeroemissionsteel.Somecompanies,suchasH2GreenSteel,aremakingtheseacorepartoftheirdecarbonisationstrategy(seeChapter3)(H2GreenSteel,2022).Tohelpacceleratethedeploymentofnearzeroemissionsteelproduction,steelbuyerscansendstrongerdemandsignalsregardingthesizeofthismarketbydisclosingmoredetailsregardingdemandcommitments,includingtotalvolumes,expectedemissionslevelsandpurchasetimeframes.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE419IEA.CCBY4.0.Figure6.15Numberofcompaniescommittedtopurchasinglow-emissionsteelbyend-usesector,andglobalmarketsizeforselectedbulkmaterialsintheNZEScenarioIEA.CCBY4.0.Notes:“Low-emissionsteel”isusedwhenreferringtoprocurementcommitments,asmanydonotstatetheexactlevelofemissionsbeingtargeted,butratherthebroaderaimtopurchaselower-emissionsteel.“Conv.”Referstoconventionalproduction.“Nearzero”indicatesnearzeroemissionproduction.Nearzeroemissionsteelandaluminiumproductionisapproximatedonadirect-emissionsbasis,basedonthedeploymentofinnovativetechnologiesinprimaryproductiononly.Averagemarketpricesfor2017-2021areusedtocalculateallmarketsizes.Sources:IEAresearchbasedoncompanyannouncements;Bloomberg(2022);S&PGlobal(2022d).Thenumberofcompaniescommittedtopurchasinglow-emissionsteelmorethandoubledbetween2021and2022,coveringadiverserangeofend-usesectors.Theneedtodecarbonisematerialproductionalsogeneratesnewopportunitiesforinvestmentandgrowth.IntheNZEScenario,thecombinedglobalmarketsforallcrudesteel,cementandaluminiumshrinkfromapproximatelyUSD1.8trillionin2021tojustunderUSD1.5trillion(in2021USdollars)in2050asdemandforthesematerialsdrops.Atthesametime,theshareofnearzeroemissionmaterialproductionjumpsfromalmostzeroin2021toaround95%oftotalproductionin2050,providingopportunitiesforcountriesandcompaniesthatdeveloptheseproductionprocessestocapturenewmarkets.Theuseofnoveldigitaltrackingapproaches,suchasdigitalpassports,cansupporteffortstoscaleupmarketsforlow-andnearzeroemissionproduction.SSAB’sSmartSteel1.0givessteeladigitalidentity,allowingcustomerstoidentifyitsmaterialpropertiesanddownloadassociatedcertificateswithanapp(SSAB,2018).Digitalplatformscouldalsobeusedtohostsecondary-materialmarkets,suchasforconstructionmaterialsandmetals(e.g.Backacia).Thisisbeginningtoaffectthewiderindustry,notjustfrontrunners,asgovernmentslooktoadoptmarket-widemeasuresontraceability.Forexample,theEuropeanCommission’s010203040506020212022NumberofcompaniesTransportConstructionSteelproductsWhitegoodsEnergyOther0500100015002000ConvNearzeroConv.NearzeroConv.Nearzero202120302050USDbillion(2021)CementAluminiumSteelLow-emissionsteelcommitmentsBulkmaterialmarketsizesEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE420IEA.CCBY4.0.proposalforaRegulationonEcodesignforSustainableProductsintroducedinMarch2022requiresdigitalpassportsforothercleanenergytechnologies,includingsolarpanels(EC,2022c).Box6.12Casestudy:StandardsforconcreteandasphaltintheUnitedStatesInMarch2022,theUSGeneralServicesAdministration(GSA),whichisresponsibleforcentralisedprocurementforthefederalgovernment,issuednewstandardsfortheconcreteandasphaltusedinGSAconstruction,modernisationandpavingprojects.ThesestandardsestablishdesignandperformancecriteriaforGSAprojects.Tostrengthenthiseffort,theGSAgatheredfeedbackfrommanufacturersontheavailabilityoflow-carbonconstructionmaterialsandproducts.Thenewlow-embodied-carbonstandardforconcreterequiresGSAprojectcontractorstoprovideenvironmentalproductdeclarations,whenavailable,thatsummarisetheprimaryenvironmentalimpactsoftheproduct'sextraction,transportationandmanufacturing.Inaddition,theGSAisaskingitscontractorstoprovideconcretethatmeetsa20%reductioninembodiedcarboncomparedwithnationalGHGlimitsforconcrete.Thenewasphaltstandardalsorequiresenvironmentalproductdeclarationsandatleasttwoenvironmentallypreferabletechniquesorpracticestobeusedduringthematerial'smanufactureorinstallation.Basedonindustryfeedback,GSA-approvedtechniquesandpracticesincludebio-basedoralternativebinders,recycledcontentandreducedmixtemperatures.Source:GSA(2022).PolicyrecommendationsToaddressemissionsfromthemining,materialproduction,manufacturingandtransportofmaterialsandoffinalcleanenergyproducts,governmentscanutiliseavarietyofpolicymechanisms.Fortheminingandmanufacturingsteps,thebulkofdirectemissionscanbedealtwiththroughelectrification.Taxcreditsandrebatesforhighlyefficientmotorsandindustrialheatpumpscanplayarole,ascanefficiencystandardsthatencouragegreaterelectrification(seeChapter4).Forbulkmaterials,financingmeasurescanhelppromoteinvestmentinnearzeroemissionproductionfacilities,whileemissionstradingschemescanprovideabroadsignalfordecarbonisation.Lifecycle-basedregulationsappliedtofinalproductsandfuelscouldalsohelpdriveemissionsreductionsallthewayupthesupplychain,suchaslow-carbonfuelstandardsthatincludeupstreamemissions(Box6.13).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE421IEA.CCBY4.0.Lifecycleapproachescanhelpidentify“hotspots”ofenvironmentalandsocietalconcern,whichcanthenbetargetedbypolicymakers.Aholisticviewofcleantechnologysupplychainsisneededtoensurethatloweroverallemissionscanbeachieved;inthisregard,itiscriticalthatlifecycleassessmentsandlifecycle-basedregulationsincorporateend-of-liferequirements.Well-conceivedregulationscanpromotedesignsforcomponentmodularity,recyclabilityandinteroperability.Finally,standardisedlifecycleassessmentprocedurescouldbeadopted,toreducecompliancecostsandtimerequirements(IEA,2019).Arangeofpolicyoptionsareavailable:minimumrecycledcontentrequirements(asdescribedintheprevioussection);traceabilitystandards;environmental,socialandgovernanceregulations;andpoliciestocreatedemandforlow-andnearzeroemissionfuelsandmaterials.Box6.13Lifecycle-basedlow-carbonfuelstandardsCaliforniaintroducedtheworld’sfirstlow-carbonfuelstandard(LCFS)in2009.AnLCFSrequiresregulatedentities(typicallyfuelandenergyproviderstothetransportsector)tograduallyreducethelifecycleGHGemissionsofallthetransportationfuelstheysell.ItsetsbenchmarklifecycleGHGvalues(typicallycalled“carbonintensity”)forgasoline,dieselandvariousalternativefuels,takingintoaccountemissionsassociatedwithallofthestepsofproducing,transportingandconsumingthefuel.Thesecarbonintensityvaluesareusuallyrevisedannually,trackingreductionsinGHGsemittedinproducing,refininganddeliveringconventionaltransportfuels,astechnologiesareupgradedorreplacedwithmoreefficientones.AnLCFSallowsallfuelproviderstheflexibilitytodeterminewhichmixoffuelstheysupplyinmeetingthestandardsthroughacredittradingsystem.WhiletheLCFSmechanismitselfisstraightforwardinprinciple,itcanbecomplextooperategiventhedataandmethodologicalconsiderationsthatgointolifecycleanalysistodeterminecarbonintensityvaluesfordifferentfuels.Itmayalsofavourbiofuelsandreducethepaceofelectrificationiflifecycleaccountingfailstoeffectivelyincorporatetheeffectsofland-usechangeinproducingbiofuelsandthetruelevelofGHGemissionsinpowergeneration.InlightofthesuccessofCalifornia’sLCFS,variousothernationalandregionalgovernmentshaveeitheradoptedorareconsideringintroducingone.TheyhavebeenimplementedinOregonandWashingtonintheUnitedStates,inCanada(knownasCleanFuelRegulations)andBrazil(Renovabio).Morerecently,theEUFitfor55programmehasincorporatedsomeaspectsofanLCFS.InemergingeconomiessuchasIndia,wheretheshifttoEVsisencounteringtechnologyandcostbarriers,anLCFS-typemechanismmaybeaneffectivemarket-basedapproachtoencouragetheadoptionoflow-emissionfuels.Itmayalsoworkwellinhard-to-abatetransportsectorssuchasaviationandshipping.Sources:Yehetal.(2016);ICCT(2022);CARB(2022).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE422IEA.CCBY4.0.Increasematerialreuse,recyclabilityandrecyclingratesAsdemandforkeymineralandbulkmaterialinputstomakecleanenergytechnologiesincreases,fosteringacircularapproachthroughreuseandrecyclingwillbeincreasinglyimportantincleantechnologysupplychains.Governmentscanestablishcircularityroadmapsandmaterialrecoverytargetstohelpestablishthedirectionofprogress(seeBox6.14).Policiestargetingspecificpartsofthesupplychainwillalsobeimportant.Futurematerialreusabilityandrecyclabilityshouldalreadybeconsideredduringthedesignandmanufacturingstage.Governmentscanadoptproductstewardshipandextendedproducerresponsibilitypoliciestopushcompaniesthatdesign,manufactureandsellproductstoincorporateend-of-lifeconsiderationsintotheiractivities.Stewardshippoliciesmakeallcompaniesinvolvedinallstagesofaproduct’slifecycleresponsibleforitsend-of-lifeeffects,whileextendedproducerpoliciesplaceresponsibilityonthemanufacturer.Thereareexamplesofsuchschemesforvariousproducts,suchasextendedproducerresponsibilityrequirementsundertheEUWasteElectricalandElectronicEquipmentDirectiveandtheBatteryDirective.Suchschemescouldbedevelopedorextendedforkeytechnologieswithincleanenergyvaluechains.Doingsowouldencourageproducerstodevelopproductsthatcanbemoreeasilyrecycledandtoexploreoptionsforremanufacturing,whilealsohelpingensuresufficientinvestmentinreuseandrecyclinginfrastructure.Minimumrecycledcontentrequirementscouldalsomotivatemanufacturerstoactivelyparticipateinincreasedrecycling.Additionally,forbulkmaterials,governmentscanobligatesupplierstobuybackunusedmaterialsduringconstructionorusedmaterialsforrecycling(IEA,2019).Governmentscanalsoplayanactiveroleinincreasingmaterialreuseandrecyclingrates.Policiestargetingtheconsumer(e.g.landfillandwastecollectionfees,recyclingrebatesandbuybackprogrammes)canhelpincentivereuseandrecycling.Publicco-ordinationandfinancialsupportforrecyclinginfrastructureisalsoimportanttoimprovecollection,sortingandrecycling.Governmentscouldalsodevelopprogrammestoincreaseco-ordinationalongsupplychains,suchaspubliclyavailablematerialregistriestoconnectpotentialsupplierswithusersofmaterialsforreuse.R&Dsupportwouldalsobeusefultoexpandoptionstorecyclematerialsforwhichcost-efficientmethodsarenotalreadyreadilyavailable.PolicymakersshouldalsofacilitatetheefficientcollectionandtransportofspentEVbatteries,fosterproductdesignandlabellingtohelpstreamlinetherecyclingprocess,andharmoniseregulationsoninternationalmovementofbatteries(IEA,2021c).TheEuropeanUnionisaleaderinthisarea.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE423IEA.CCBY4.0.Box6.14Casestudy:IncentivisingthecirculareconomyofbatterysupplychainsintheEuropeanUnionWithintheframeworkoftheEuropeanGreenDealandCircularEconomyActionPlan,theEuropeanCommissionhasissuedalegislativeproposalthatwouldsetmandatoryrequirementsforallbatteriestominimiseenvironmentaleffectsalongthesupplychainandencouragegreaterrecycling.Amongotherthings,theregulationwill:IntroducecarbonfootprintandmaterialcontentlabellingrequirementsforallbatteriessoldintheEuropeanUnionthroughadigitalbatterypassport.Establishminimumrecycledcontentrequirementsforcobalt(16%),lead(85%),lithium(6%)andnickel(6%).SetcollectionratetargetsforEVbatteriesandeliminatecollectionchargesforendusers,as61%ofbatterieswillhavetobecollectedforrecyclingby2031.Requireeconomicoperatorssellingbatteries(includingautomotiveOEMs)toestablishsupplychainduediligenceobligationsforresponsiblerawmaterialsourcing.WhiletheregulationreachedprovisionalpoliticalagreementinDecember2022,moredetailshaveyettobepublished.AdoptstandardsforcleantechnologiesandtraceabilityTechnicalregulationsareessentialtoensurethesafeandsustainabledeploymentofcleanenergytechnologiesandtheirsupplychains,aswellaslowercosts.Standardscanbeusedtoestablishacommonsetofcriteriaandmetricstoassessalargearrayofcleantechnologysupplychains.Standardisationeffortsaretypicallyledbythird-partyorganisationstofacilitatecommunication,collaborationandcertification,butgovernmentscanpromoteorrequiretheuseofstandardsthatincreasethesupplychaintransparencyofcleanenergytechnologiesthroughregulationsandworkingwithindustry.Developingtaxonomiesanddefinitionsforlow-andzeroemissionproductsandmaterialswillbeparticularlyimportantforcleantechnologysupplychainstodeterminewhichtechnologiesandpracticesaredeemedacceptable.Theycanbeuseddirectlybythepublicsectororserveasguidancefortheprivatesector,notablyinsustainablefinancing.Forexample,theIEAhasproposeddefinitionsfornearzeroemissionsteelandcementproduction(IEA,2022j).Thelow-carbonfuelstandardspioneeredbytheCaliforniaAirResourcesBoardarebasedonadetailedsetofvaluesfortheGHGemissionsassociatedwithdifferenttypesofenergy(Box6.13).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE424IEA.CCBY4.0.Governmentscanalsorequiretheuseoftraceabilitystandardsinpublicprocurementtendersortraderegulationsasafirststepinpromotingtransparencyincleantechnologysupplychains.Theycanincorporatecarbon-footprintrequirementsfortechnologiessuchasEVbatteriesorheatpumps,andforfuelssuchaslow-emissionhydrogen.Agreeingonaninternationalmethodologyforcalculatingcarbonfootprintsisessentialbutwillbefarfromeasy,asthemethodologywouldneedtobeunderpinnedbybroadscientificconsensuswhileincorporatingregularimprovementsindatacollection.Theprocesscouldbuildonexistingwork,however,suchastheprinciplesandframeworksforlifecycleassessmentdevelopedbytheInternationalStandardsOrganization(ISO,2022).Traceabilitystandardscanalsoincludecontent-originstipulationstobettermanageandpromotefairlabourpracticesandprotectagainsthumanrightsabuses.Suchstandardscanbeappliedtoallstepsofcleanenergysupplychains,providingusefulinformationforplantoperatorsandconsumerstodecidewhattechnology/equipmenttopurchasedependingonhowtheconstituentmaterialswereproducedand/orthetechnologywasmanufactured.GovernmentscanleverageexistingtraceabilityworkdoneforsolarPVsupplychains,suchastheSolarSupplyChainTraceabilityProtocol,andforREEsupplies,suchasthatcarriedoutbytheISO(Table6.5).OneofthetraceabilitystandardsforEVbatteriesisthebatterypassportbeingdevelopedbytheGlobalBatteryAlliance(Box6.15).Benefitsofregionaland(whenfeasible)internationalharmonisationextendbeyondtraceabilitystandards;regulations,taxonomiesanddefinitionsapplicableacrossmultiplejurisdictionscanlendclarityandconsistencythatareappreciatedbyfinancierandprivateenterprisealike.OneexampleofsuchagloballyharmonisedapproachistheUNECE’sWorldForumforHarmonizationofVehicleRegulation,whereingovernmentsrepresentingmorethan90%ofglobalroadvehicleproductiondiscussandagreeupongloballyunifiedtechnicalpoliciesincludingregulationsandotherinstrumentsrelatingtopollution,safety,securityandtechnicalstandardsfortheautomotivesector.Globaltarget-setting,aswellasconsensusontaxonomiesanddefinitions,willbeparticularlyimportantininternationalsectorssuchas(non-domestic)aviationandmaritimeshipping.Inthesesectors,GHGemissionsarenotaccountedtoanyparticularcountryorsupraregionalblock,butratherfallunderthejurisdictionoftheUnitedNations’InternationalCivilAviationOrganisation(ICAO)andInternationalMaritimeOrganisation(IMO).Whiletheseorganisationshavefacedchallengesinachievingconsensusonsufficientlyambitioustargets,aswellastheregulationsthatwouldbeneededtomakethemcredible,increasedscrutinyfromcivilsociety,financinggroupsandambitiouspublicandprivatesectoractorscanbeinstrumentaltobothraisetargetsandensurethattheframeworksadoptedareeffective.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE425IEA.CCBY4.0.Box6.15Casestudy:Supportingsustainablebatteryvaluechainsby2030andthebatterypassportTheGlobalBatteryAlliance(GBA)report“AVisionforaSustainableBatteryValueChainin2030”highlightstheeconomic,environmentalandenergyaccessopportunitiesthatcouldemergefromatransitiontoamoresustainablebatteryvaluechain.The2019projectionsincludelifecyclecostreductionsofupto23%,whichcouldresultin10millionjobsandgenerateUSD150billionineconomicvalueworldwideby2030.BasedontherapidmarketadoptionofEVssincethattime,theGBAandMcKinseyhavesubstantiallyincreasedthejobgrowthandeconomicvalueprojectionsacrosstheentirelithium-ionbatteryvaluechain.Areportdocumentingtheirupdatedprojectionswillbereleasedinearly2023.Increasingtheuptakeofsustainablebatterieshingesonthecreationofacircularbatteryvaluechainthatcreateseconomicopportunitiesandprotectshumanrights.Thisalsopresentsopportunitiesforsubstantialemissionreductions,includingareductionofupto90%materialandmanufacturingemissionsreductionperkWhinthelifecycleemissionsatthecelllevelby2030.Tothisend,in2020theGBAagreedontenguidingprinciples,whichhavebeenagreedtobyover100publicandprivatebodies,includingfoundations,governmentagencies,miningenterprises,automotive,chemicalandcellmanufacturers,andenergycompanies.Asakeyactionarea,theGBAproposedthe“BatteryPassport”tomakebatteryvaluechainsmoresustainable,circularandresponsiblebyestablishingadigitaltwinofaphysicalbatteryinEVs.Thepassportaimstoincreasetransparencyintheglobalbatteryvaluechainbycollecting,exchanging,collatingandreportingdataamongstakeholders.Thegoalistoprovideend-userswithkeyinformationaboutabattery’smaterialorigin,chemicalmake-up,manufacturinghistoryandsustainabilityperformance.Aspartofthiseffort,theGBAreleasedaGreenhouseGasRulebookforcalculatingandtrackingtheGHGfootprintofEVbatteriestoenableconsumerstomakemoreresponsiblepurchasingdecisionsanddrivetheindustrytowardsustainablesourcingpractices.TherulebookwillcreateaframeworkforbenchmarkingbatteriesagainsttheGBA’sverifiabledefinitionofasustainableandresponsiblebattery.ThefirstbatterypassportisscheduledtobelaunchedbytheGBAinJanuary2023.AnotherkeyinitiativeoftheGBAistheCriticalMineralsAdvisoryGroup,whichisworkingtobuildconsensusonkeypriorities,coordinatingpolicydevelopment,anddevelopinglongtermcircularitystrategiesandanindustrywideroadmapforthebatteryvaluechain.Source:GBA(2023).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE426IEA.CCBY4.0.Table6.5Traceabilitystandards,protocolsandinitiativesStandardCategoryDescriptionScopeSolarSupplyChainTraceabilityProtocolLPAsetofrecommendedpoliciesandproceduresdesignedtoidentifythesourceofaproduct’smaterialinputsandtracethemovementoftheseinputsthroughoutthesupplychainUnitedStatesUNGlobalCompactLP,ESAprinciple-basedframeworkforcorporatesocialandenvironmentalresponsibilityGlobalISO23664:2021Traceabilityofrareearthsinthesupplychain,fromminetoseparateproductsESSpecifiestheinformationtoberecordedbysupplychainbusinessesforREEsorproducts,fromminetoseparateproductsGlobalDirectiveoncorporatesustainabilityduediligenceLP,ESDue-diligencerulesthatrequirememberstatestoidentifyand,whennecessary,prevent,endormitigateadverseimpactsoftheirvaluechainactivitiesonhumanrightsandtheenvironmentEuropeanUnionGlobalBatteryPassportLP,ESTheGlobalBatteryAlliancewilllaunchtheGlobalBatteryPassport–adatasourceonbatteryprovenance–inJanuary2023GlobalOECD’sDueDiligenceGuidanceforResponsibleSupplyChainsLPDetailedrecommendationstohelpcompaniesaddresshumanrightsissuesandavoidcontributingtoconflictthroughtheirmineral-purchasingdecisionsandpracticesGlobalInitiativeforResponsibleMiningAssuranceLP,ESDefinesgoodpracticesforresponsiblemining,providingalistofexpectationsthatindependentauditorswilluseasthebenchmarkforresponsibleminesGlobalResponsibleMineralsInitiativeLPMember-basedinitiativethatprovidesguidanceandauditstocompaniesonresponsiblysourcedmineralsbasedoninternationalstandardsGlobalExtractiveIndustriesTransparencyInitiativeGovernanceRequirestransparencyalongtheextractiveindustryvaluechaingoverningwhatshouldbedisclosedandwhenGlobalEnergyResourceGovernanceInitiativeLP,ESDesignedtopromotesoundminingsectorgovernanceandresilientenergymineralsupplychainsthroughthesharingofbestpracticesGlobalEnvironmentalproductdeclarationsESQuantifiesenvironmentalinformationonthelifecycleofaproducttoenablecomparisonsbetweenproductsfulfillingthesamefunctionGlobalTheGreenhouseGasProtocolESEstablishesastandardisedframeworktomeasureandmanageGHGemissionsfromoperationsandvaluechainsGlobalGlobalReportingInitiativeLP,ESGRIStandardsprovideaframeworkforcompanysustainabilityreportingGlobalNotes:LP=labourpractice;ES=environmentalsustainability;GHG=greenhousegas.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE427IEA.CCBY4.0.ConsiderESGregulationsThereisagrowingneedtoimproveESGincleanenergysupplychains,particularlyinminingandprocessing.FailuretoanticipateandaddressESGrisksearlyoncouldleadtosupplydisruptions,whichcouldslowthepaceofenergytransitions.Forinstance,substandardpracticescouldleadtonegativepublicperceptionofagivencleanenergysectorandperhapsalsoaretroactivetighteningofenvironmentalorlabourstandards,whichshouldbeaprerequisiteinthefirstplace–thismayleadtointerruptionsinoperations.Althoughidentifyingandaddressingrisksacrossjurisdictionswithapatchworkoflegalframeworksandlocalcontextsistechnicallychallengingandresource-intensive,ignoringESGsupplychainriskscanbeincreasinglycostlyinlightofpressurefromconsumers,investorsandregulatorstoeliminatecorruptandsociallyunacceptablepracticesintheirsupplychains(IEA,2021c).Ifacompany’sstrongESGperformanceisrewardedinthemarketplace,othercompanieswillseeanincentivetoaddressESGconcerns.Corruptionandbriberyposemajorliabilityrisksforcompanies,buttheycanbemanagedwithadequatesupplychaindue-diligencepractices.PolicymakerscanpromoteESGthroughco-ordinatedpolicyeffortsinprovidingtechnicalandpoliticalsupporttocountriesseekingtoimprovelegalandregulatorypractices,incentivisingproducerstoadoptmoresustainableoperationalpracticesandensuringthatcompaniesundertakeduediligencetoidentify,assessandmitigaterisks.TheEuropeanUnionhasrecentlybeenadoptingregulationstargetingESGconsiderations,includingabanonproductsmadewithforcedlabourandtheCarbonBorderAdjustmentMechanism,whichisakeyelementoftheEuropeanUnion'sFitfor55package(Box6.16).AnewregulationfocusingonEVbatteryvaluechains,whichisexpectedtomandateminimumstandardsoftradeflowtransparency,responsiblesourcing,andmaterialrecoveryandrecycling,hasbeenproposed.Governmentscanencourageorrequirestricterdisclosureanddue-diligencerequirementsthroughfinancialregulations,drawingontheOECD’sDueDiligenceGuidanceforResponsibleSupplyChains(OECD,2016).Thisdocumentprovidesdetailedrecommendationsforcompaniessourcingmineralsormetals,includingtin,tantalum,tungstenandgold,fromconflict-affectedandotherhigh-riskzones.Thisframeworkcanalsobeappliedtocobalt,copperandlithium–keymineralinputsforcleanenergytechnologiestoreducerisksassociatedwithconflictaswellascorruption,labourpracticesandtheenvironment.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE428IEA.CCBY4.0.Box6.16Casestudy:TheshiftingfocusofEUclimatepolicyonsupplychainsTheEuropeanUnionhasputinplaceasetofmeasuresoverthepastfewyearstoachieveitspledgeofreachingnetzeroGHGemissionsby2050,includingtheEuropeanGreenDeal,theEUTaxonomyandtheFitfor55package(asetofrevisionsandupdatesofEUlegislationaswellasnewinitiativestomeetthetargetofreducingGHGemissionsby55%by2030).AcrucialelementofFitfor55istheCarbonBorderAdjustmentMechanism(CBAM),whichisintendedtotaxthemostcarbon-intensiveimports–aluminium,cement,electricity,fertilisers,andironandsteel–fromcountriesthatdonotpriceCO2emissionstotheextentthattheEuropeanUniondoes.EuropeanproducerssubjecttotheEUEmissionsTradingSystem(EUETS)areconsideredtobeatacompetitivedisadvantagetoexternalproducers,resultingincarbonleakage–ashiftincarbon-intensiveproductiontocountrieswithlessstringentclimatepolicies.TheCBAMwillgraduallyreplacepreviousmeasuresusedtoaddressleakage,mostnotablythefreeallocationofEUETSallowances.TheseallowanceswillbegraduallyphasedoutastheCBAMcomesintoeffect,withtheCBAMeffectivelymirroringtheEUETSfornon-EUproducers.Inthefuture,theCBAMisexpectedtobeextendedtootherenergy-intensivesectors.TheEuropeanCouncilaimstoformallyadoptCBAMonlyoncerelevantelementsinotherdossiers(suchastheEUETS)areresolved.Underthecurrentprovisionalagreement,theCBAMwillinitiallyonlyobligedatareporting,andwillbecomeoperationalstartinginOctober2023.TheEuropeanCommissionisalsoshowingwillingnesstoregulatesocialandgovernanceissues,inadditiontoenvironmentalones.InFebruary2022,itproposedadirectiveoncorporatesustainabilityduediligence,andmorerecentlyaprohibitiononthesaleofproductsmadewithforcedlabourontheEUmarket,regardlessofwhethertheyareproducedinEuropeorareimported.AuthoritiesinEUmemberstateswouldbetaskedwithimplementingtheban,buttheCommissionwouldhelpthemassesswhichgoodsfallintothiscategorybasedonsubmissionsfromcivilsocietyorganisations,aglobaldatabaseonsuchrisksincertainsupplychainsandgeographies,andcorporatedue-diligencereporting.AnewEUForcedLabourProductNetworkwillsupportsuchefforts.Ininvestigatingpotentialcases,nationalauthoritieswillrelyonprinciplesofrisk-basedassessmentandproportionality.TheproposalisduetobeconsideredbytheEuropeanParliamentandCouncil;ifitbecomeslaw,itwillenterintoforceaftertwoyears.SupportnearzeroemissionmaterialproductionGovernmentscanhelpmakematerialsproducedwithlowornearzeroemissionsmorewidelyavailableandmoreaffordable,thussmoothingthewayfortheiruseincleanenergytechnologiesandinfrastructure.Sinceproductiontechnologiesfornearzeroemissionmaterialsarenotyetcommerciallyavailableinmanycases,EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE429IEA.CCBY4.0.andsinceproductioncostsarelikelytobehigherthanforconventionalroutes,governmentsupportwillbeimportantforcommercialisationandearlydeployment,andtohelpbridgethelonger-termremainingcostgap.Here,supply-pushanddemand-pullpoliciescanplaycomplementaryroles,reinforcedbyinternationalco-operationtoovercomechallengesrelatedtointernationalcompetitiveness.Supply-pushpoliciesarecriticaltogettechnologiestothemarketandtoovercomethefinancialconstraintsinherentinbuildinglarge-scale,capital-intensiveprojects.ExamplesincludeprogrammestofundandshareknowledgeamongR&Danddemonstrationprojects;financingmeasurestoovercomethehigherrisksofearlyprojects;andco-ordinationandincentivestoexpandsupportinginfrastructure.Meanwhile,demand-pullpolicieshelpgiveproducersconfidencethattheywillbeabletosellmaterialsproducedwithlowornearzeroemissions,despitetheirlikelyhighercosts,thussolidifyingthebusinesscase.Whileprivatesectorprocurementcanhelpwiththis(discussedabove),publicpolicieswillbeimportanttostrengthendemandsignals.Intheearlieststagesoftechnologydeployment,targetedpoliciesprovidingdirectsupportwillbeimportant.Forexample,carboncontractsfordifferencesubsidisethecostgapwithconventionalmaterialproduction,allowingproducerstosellonconventionalmarkets.Forsubsequentrollout,otherpoliciescanhelpwithmarketcreation,includingpublicprocurement,co-ordinationofprivatesectorbuyingpools,nearzeroemissionmaterialproductionmandates(formulatedlikezeroemissionvehiclemandates,forexample),andlifecycle-basedemissionstandardsforfinalproductsorconstructionprojects.Inthelongerterm,oncewider-spreadproductionandinnovationhaveloweredcostsandreducedrisks,carbonpricingmaybesufficienttosustainthecontinuedrolloutofnearzeroemissionmaterialproduction.Publicprocurementasademand-creationmechanismisgainingpopularitytosupporttheuseofnearzeroemissionmaterials(seeBox6.17).Thiscouldhelpdirectlydecarbonisecleanenergysupplychainsiflow-carboncontentrequirementsareappliedtogovernment-fundedenergy-relatedinfrastructureprojects,orotherwiseprovideademandsignaltoscaleupsupplymorebroadly.Forexample,theCEM’sIndustrialDeepDecarbonisationInitiative(IDDI)aggregatespublicsectorprocurementofnearzeroemissionsteelandconcretetosendaclearmarketsignaltoproducers(UNIDO,2021).Toillustratethescaleofimpact,IDDInowcoversapproximately70-110Mtoftotalsteeldemand,equaltoaround5%oftheglobalmarket.Governmentscanusepublictendersorcompetitivesolicitationsthatbalancepricewithspecificcriteriasuchascarboncontent.Theycouldincludeemissionscriteriainbidding-pricecalculations,ortargetsforembodiedcarbonorsharesofmaterialsinthetender.Targetssetforseveralyearsinadvancewouldbeststimulateinnovationandreduceinvestmentrisksfortechnologyprovidersandmanufacturers.EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE430IEA.CCBY4.0.Measurestoaddresstheinternationalcompetitivenessofnearzeroemissionmaterialproductionwillalsobeimportant.Optionsmayincludeinternationalsectoralagreementsorclubs,orpoliciessuchascarbon-basedborderadjustments.Internationalfinancing,capacity-buildingandtechnologyco-developmentcanhelpeasethechallengebyfacilitatinghigherambitiongloballyonindustryemissionsreductions.Forfurtherdiscussiononpush,pullandinternationalcompetitivenesspoliciesforstimulatinglow-andnearzeroemissionmaterialproduction,seetheIEAreportAchievingNetZeroHeavyIndustrySectorsinG7Members(IEA,2022j).Box6.17Casestudy:IncentivisingcleanconstructionmaterialsintheUnitedStatesTheFederalBuyCleanInitiativeaimstoprioritisetheuseofdomesticallymadelow-carbonconstructionmaterialsinfederalprocurementandfederallyfundedprojects.InadditiontofundingfromtheInfrastructureInvestmentandJobsAct,theInflationReductionActprovidesUSD4.5billiontofederalagenciestoidentifyandusematerialsandproductsthatproducesubstantiallylowerGHGemissions.InSeptember2022,theUnitedStatesannouncednewactionsunderthisinitiativetoprioritisethepurchaseofkeylow-carbonconstructionmaterials,covering98%ofmaterialspurchasedbythefederalgovernment.Itintendsto:Prioritisethegovernment'spurchasingofsteel,concrete,asphaltandflatglassthathavefewerembodiedemissions.Expandtheinclusionoflow-carbonconstructionmaterialstofederallyfundedprojects,suchasinfrastructureprojects.Convenestategovernmentstoestablishpartnerships.Increasedatatransparencythroughsupplierreportingtohelpmanufacturerstrackandreduceemissions.Launchpilotprogrammesinpartnershipwithregionalcontractorstoadvancefederalprocurementofcleanconstructionmaterials.Source:TheWhiteHouse(2022c).EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE431IEA.CCBY4.0.ReferencesAlberta,MinistryofEnergy(2021),RenewingAlberta’sMineralFuture,https://open.alberta.ca/dataset/9d147a23-cb06-413d-a60e-ad2d7fe4e682/resource/73ebd14b-a687-4772-9982-48843b677c28/download/energy-renewing-albertas-mineral-future-report-2021.pdfAustralia,DepartmentofIndustry,ScienceandResources(2020),MakeitHappen:TheAustralianGovernment’sModernManufacturingStrategy,https://www.industry.gov.au/data-and-publications/make-it-happen-the-australian-governments-modern-manufacturing-strategyBhasin,S.,A.GorthiandV.Chaturvedi(2020),AUniversalCertificationSystemforIndia’sRefrigerationandAir-ConditioningServicingSector,https://www.ceew.in/sites/default/files/ceew-study-on-universal-certification-for-indias-ac-sector-16Jul20.pdfBloomberg(2022),Commodities,https://www.bloomberg.com/markets/commoditiesBloombergNEF(2021),WindManufacturingandTrade:ADeepDive.BloombergNEF(2020),GlobalNickelOutlook2020-2030.Branford,Z.andJ.Roberts(2022),TheinstallerskillsgapintheUKheatpumpsectorandtheimpactsonajusttransitiontonet-zero,UniversityofStrathclyde,https://pure.strath.ac.uk/ws/portalfiles/portal/133553551/Branford_2022_Executive_summary_heat_pump_skills_gap_and_the_just_transition.pdfBusinessStandard(2021),WhatisPLIfor?https://www.business-standard.com/article/opinion/what-is-pli-for-121102001572_1.htmlCARB(CaliforniaAirResourcesBoard)(2022),LCFSDataDashboard,https://ww2.arb.ca.gov/resources/documents/lcfs-data-dashboard(accessedOctober2022).Chinalawinfo(2022),ProvisionsontheAdministrationofCertifiedConstructors[Revised],http://www.lawinfochina.com/display.aspx?lib=law&id=5822&CGid=CAAM(ChinaAssociationofAutomobileManufacturers)(2021),ElectricVehicleSafetyGuide,http://file.caam.org.cn/2021/12/1640229989024094298.pdfCetinkayaE.,Dincer,I.,andG.F.Naterer(2012),Lifecycleassessmentofvarioushydrogenproductionmethods,InternationalJournalofHydrogenEnergy,37(3),2071-2050,https://doi.org/10.1016/j.ijhydene.2011.10.064China,NEA(NationalEnergyAdministration)(2022),QuestionsandAnswersonHouseholdPhotovoltaicConstructionandOperation(2022Edition),http://www.nea.gov.cn/2022-08/31/c_1310657941.htmChinaSouthernPowerGrid(2022),ChinaSouthernPowerGridwebsite,https://shoudian.bjx.com.cn/CPH2(CleanPowerHydrogen)(2022),CPH2website,https://www.cph2.com/d'Estries,M.(2021),HowtoBecomeaWindTurbineTechnician:Training,TimingandMore,SkillPointe,5August,https://skillpointe.com/news-and-advice/how-become-wind-turbine-technician-training-timing-and-moreDeutzS.andA.Bardow(2021),Life-cycleassessmentofanindustrialdirectaircaptureprocessbasedontemperature–vacuumswingadsorption,NatureEnergy,6(2),203-213,10.1038/s41560-020-00771-9EnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE432IEA.CCBY4.0.EC(EuropeanCommission)(2022a),REPowerEU:Affordable,secureandsustainableenergyforEurope,https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/repowereu-affordable-secure-and-sustainable-energy-europe_enEC(2022b),Addressingthesustainabilityandcriticalityofelectrolyserandfuelcellmaterials,https://ec.europa.eu/info/funding-tenders/opportunities/portal/screen/opportunities/topic-details/horizon-jti-cleanh2-2022-07-01;callCode=null;freeTextSearchKeyword=;matchWholeText=true;typeCodes=1,2;statusCodes=31094501;programmePeriod=null;programCcm2Id=null;programDivisionCode=null;focusAreaCode=null;destination=null;mission=null;geographicalZonesCode=null;programmeDivisionProspect=null;startDateLte=null;startDateGte=null;crossCuttingPriorityCode=null;cpvCode=null;performanceOfDelivery=null;sortQuery=startDate;orderBy=desc;onlyTenders=false;topicListKey=topicSearchTablePageStateEC(2022c),Ecodesignforsustainableproducts,https://ec.europa.eu/info/energy-climate-change-environment/standards-tools-and-labels/products-labelling-rules-and-requirements/sustainable-products/ecodesign-sustainable-products_enEC(2021a),HorizonEurope,budget:HorizonEurope-ThemostambitiousEUresearch&innovationprogrammeever,https://op.europa.eu/en/publication-detail/-/publication/1f107d76-acbe-11eb-9767-01aa75ed71a1EC(2021b),InnovationFund(InnovFund)CallforproposalsAnnexB:MethodologyforRelevantCostscalculation,https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/innovfund/wp-call/2021/call-annex_b_innovfund-lsc-2021_en.pdfEC(2021c),StudyontheResilienceofCriticalSupplyChainsforEnergySecurityandCleanEnergyTransitionDuringandAftertheCOVID-19Crisis,https://op.europa.eu/en/publication-detail/-/publication/b80d77b6-2a3b-11ec-bd8e-01aa75ed71a1/la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axiosgenerate&stream=topUSGS(UnitedStatesGeologicalSurvey)(2022),MineralCommoditySummaries2022,https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdfWesternAustralia,DepartmentofMines,IndustryRegulationandSafety(2019),Lithiumroyaltyamendmentstoencouragedownstreamprocessing,https://dmp.wa.gov.au/News/Lithium-royalty-amendments-to-25938.aspxEnergyTechnologyPerspectives2023Chapter6.PolicyprioritiestoaddresssupplychainrisksPAGE438IEA.CCBY4.0.WoodMackenzie(2022),Windturbinebladessupplychaintrends2022,GlobalWindEnergySupplyChainSeries,https://www.woodmac.com/reports/power-markets-global-wind-supply-chain-trends-series-article-2-wind-turbine-blades-supply-chain-trends-150060824/WorldBureauofMetalStatistics(2022),MineralYearbook.WorldResourceInstitute(2022),DirectAirCapture:AssessingImpactstoEnableResponsibleScaling,https://www.wri.org/research/direct-air-capture-impactsWorldsteel(2022),SteelStatisticalYearbook,https://worldsteel.org/steel-by-topic/statistics/steel-statistical-yearbook/Yeh,S.etal.(2016),Areviewoflowcarbonfuelpolicies:Principles,programstatusandfuturedirections,EnergyPolicy,97,220-234,https://doi.org/10.1016/j.enpol.2016.07.029EnergyTechnologyPerspectives2023AnnexPAGE439IEA.CCBY4.0.AnnexGlossaryAnnouncedPledgesScenario(APS):Thisscenarioassumesthatgovernmentswillmeet,infullandontime,alloftheclimate-relatedcommitmentsthattheyhaveannounced,includinglonger-termnetzeroemissiontargetsandpledgesinNationallyDeterminedContributions,aswellascommitmentsinrelatedareassuchasenergyaccess.Itdoessoirrespectiveofwhetherornotthosecommitmentsareunderpinnedbyspecificpoliciestosecuretheirimplementation.Pledgesmadeininternationalforaandinitiativesonthepartofbusinessesandothernon-governmentalorganisationsarealsotakenintoaccountwherevertheyaddtotheambitionofgovernments.Announcedprojects/capacity:Newfacilitiesorexpansionsofcurrentfacilitiesaspublishedbymanufacturersorproducers.Theannouncementsaretakenatfacevalueandnojudgementismadeontheirfeasibility.Theyaresplitbetween“committed”,thosethatarecurrentlybeingbuiltorthathaverecentlyreceivedfinalinvestmentdecision;and“preliminary”,thosethathavebeenannouncedandarebeingplannedbuthavecurrentlynotreceivedfinalinvestmentdecisionandthereforearemorespeculative.Someannouncedvaluesaretakendirectlyfromproducersormanufacturers,whileothersareretrievedfromspecificdatabases.Anticipatedsupply:Potentialexpectedfutureproductionbasedonexpertjudgementfromthirdpartydataprovidersforcriticalmineralsandprocessedmaterials.Expectationsincommoditypricescanhavealargeimpactontheexpectedsupply–ahigherpricemightleadtomoresupplycomingonline.Atthesametime,unexpecteddelaysinfinancing,permitting,orconstructioncoulddelayprojects,yieldingalowersupply.Thevalueisthereforelowerthanasumofallannouncedprojects.Bioenergywithcarboncapture(BECC):AsuiteoftechnologiesinvolvinganyenergypathwaywhereCO2iscapturedfromabiogenicsourceincludingprocessemissionsaswellascombustionemissions.WhencoupledwithpermanentgeologicalCO2storage,BECCS(bioenergywithcarboncaptureandstorage)isacarbonremovaltechnology.Asanalternativetostorage,thecapturedCO2canalsobeutilisedasafeedstockforarangeofproductssuchassynthetichydrocarbonfuels.Bulkmaterials:Large-volumematerialsproducedinquantitiesapproachingorexceeding100Mtperyearglobally.Theydifferfromcriticalmaterialsinthatcleanenergytransitionsarenotanticipatedtoposeariskofsupplygaps,astherawmineralsneededtomakethemarecomparativelywidespreadandabundant.Theyarealreadywidelyusedinenergyandothersectorssocleanenergytransitionsarenotexpectedtoleadtoalargeoverallincreaseintotaldemand.Bulkmaterialsoffocusinthisreportaresteel,cement,aluminiumandplastic.EnergyTechnologyPerspectives2023AnnexPAGE440IEA.CCBY4.0.Carboncapture,utilisationandstorage(CCUS):AsuiteoftechnologiescapturingCO2fromlargepointsources(e.g.powergenerationorindustrialfacilities)aswellastheair.Ifnotbeingusedon-site,thecapturedCO2iscompressedandtransportedbypipeline,ship,railortrucktobeusedinarangeofapplications,orinjectedintodeepgeologicalformations(includingdepletedoilandgasreservoirsorsalineaquifers),whichcantraptheCO2forpermanentstorage.Cleanenergytechnology:ThoseenergytechnologiesthatresultinminimalorzeroemissionsofCO2andpollutants.Forthepurposesofthisreport,cleanenergytechnologyreferstolowornearzeroemissiontechnologiesthatdonotinvolvetheproductionortransformationoffossilfuels–coal,oilandnaturalgas–unlesstheyareaccompaniedbyCCUSandotheranti-pollutionmeasures.Criticalmaterials:Materialsthatareessentialforcleanenergytechnologiesandinfrastructurewhosesupplychainsarevulnerabletodisruptionandthatcouldfacesupplygapsifsufficienteffortsarenottakentoscaleupsupply.Thevolumesofcriticalmaterialstendtobesmallrelativetoothermaterials(currentglobalproductionofeachtypeofcriticalmaterialiswellunder100Mtperyear).Demandfromcleanenergytransitionscoulddriveaveryrapidincreaseintotaldemand.Criticalmaterialsoffocusinthisreportarecopper,lithium,nickel,cobalt,neodymiumandpolysilicon.Directaircapture(DAC):TechnologytocaptureCO2directlyfromtheatmosphereusingliquidsolventsorsolidsorbents.ItcanbecoupledwithpermanentstorageoftheCO2indeepgeologicalformationsoritsuseintheproductionoffuels,chemicals,buildingmaterialsorotherproducts.WhencoupledwithpermanentgeologicalCO2storage,DACS(DACwithstorage)isacarbonremovaltechnology.Endoflife:Thedecommissioningandprocessingofapieceofphysicalequipmentorinfrastructurehardwareonceithasreachedtheendofitsusefullife.Thiscouldinvolvereuseinasecondapplicationorrecycling,orcouldinvolvetreatmentanddisposal.Energysupplychains:Thedifferentstepsneededtosupplyafuelorfinalenergyservicetoend-users,usuallyinvolvingtradeofthatenergycommodityalongandacrosstechnologysupplychains(seealsofiguresI.1andI.2ofintroduction).Energytechnology:Thecombinationofhardware,techniques,skills,methodsandprocessesusedintheproductionofenergyandtheprovisionofenergyservices,i.e.howenergyisproduced,transformed,stored,transportedandused.Geographicalandcorporateconcentration:Denotesforeachofsupplychainstepofthemaintechnologieshowconcentratedtheexistingcapacityorannouncedinvestmentplansareinoneoralimitednumberofcountries,regionsorcorporations(seealsoChapter2forfurtheranalysis).Infrastructure:TheenablingphysicalfacilitiesandsystemsthatmoveandstoreenergyorCO2,linkinglocationswhereenergyorCO2isproducedtodemandcentres,andincludingstoragefacilitiestobalancefluctuationsinproductionanddemand,ortopermanentlystoreEnergyTechnologyPerspectives2023AnnexPAGE441IEA.CCBY4.0.CO2.Thisreportfocusesontechnologiesthatmakeuptransportation,transmission,distribution,andstorageofelectricity,hydrogen(orhydrogen-basedfuels)andCO2.Installation:Theon-sitedeploymentofcleantechnologies,bothmassmanufacturedandsite-tailoredones,suchasinstallingaheatpump,deployingwindfarmsorBECCplants.Thisincludestheprojectdevelopmentnecessaryforthephysicaldeployment,whereapplicable.Large-scale,site-tailoredtechnologies:Theseareusuallyindividuallydesignedandmanufacturedtofitspecificlocalconditions.Theymayconsistofanumberofcomponentsthatthemselvesaremassmanufactured,buttheirengineering,assemblyandinstallationaresite-specific.Ofthesupplychainsanalysedinthisreport,naturalgas-basedhydrogenwithCCUS,DAC,BECC,andlow-emissionsynthetichydrocarbonfuelsareincludedinthiscategory.Leadtime:Definedasthetimethatpassesfromwhenaprojectisannounced(i.e.acompanystatestheintenttobuildagivenfacilityorpartofinfrastructure)towhentheprojectiscommissioned.Thisincludesfeasibilitystudies(exceptformining),funding,permittingandactualconstructionoftheproject.Low-emissionsynthetichydrocarbonfuels:Synthetichydrocarbonfuelsmadefromsynthesisgas(primarilyamixtureofhydrogen,carbonmonoxideandCO2)usingcatalysts.SuitablefeedstocksincludeelectrolytichydrogenandatmosphericCO2,captureddirectlythroughDACorindirectlythroughBECC.Low-emissionhydrogen:Low-emissionhydrogenincludeshydrogenproducedviaelectrolysiswheretheelectricityisgeneratedfromalow-emissionenergysource(forexample,renewables,nuclear,biomassorfossilfuelswithCCUS),fossil-basedhydrogenproductionwithcarboncaptureandstorage,andbiomass-basedhydrogenproduction.Thesameprincipleappliestolow-emissionfeedstocksandfuelsmadeusinglow-emissionhydrogen,suchasammonia,orusinglow-emissionhydrogenandasustainablecarbonsource(ofbiogenicoriginordirectlycapturedfromtheatmosphere),suchasmethanolorothersynthetichydrocarbons.Manufacturingcapacity:Themaximumamountofacomponentortechnologyafacilityisnominallyabletoproduce.Mass-manufacturedtechnologies:Theseareassembledinspecialisedfactoriesinlargevolumesusingseveralmanufacturedcomponentsandsub-assemblies,withtheready-to-useendproductexitingthefactoryfloor.Oftheselectedsupplychainsanalysedinthisreport,solarPVmodules,windturbines,electriccars,fuelcelltrucks,heatpumpsandelectrolysersarekeytechnologiesthatfallintothiscategory.Materialproduction/mineralprocessing:Therefining,processingorfurthermodificationsfromtherawmineralintothematerialwhichissubsequentlyusedduringmanufacturingofatechnologyorcomponent.Thismayinvolveextractingapuremetalinelementalform,orprocessingintoadesiredalloyormineralcompound.EnergyTechnologyPerspectives2023AnnexPAGE442IEA.CCBY4.0.Materialefficiency:Aportfolioofmeasuresatallstagesofsupplychains,eachofwhichservesatleastoneofseveralends:reducingtotaldemandformaterialswhileprovidingthesameservice,optimisingmaterialusetominimisesupplychainpressures,substitutingdifferentmaterialstoreducelife-cycleemissions,orinthecaseofrecycling,reducingtheneedtoextractnewrawminerals.Materials:Materialsthatareproducedatindustrialplantsthroughrefining,processingorfurthermodificationsfromrawmineralsandareusedduringmanufacturingofatechnologyorcomponent(seealsoBox3.1).Mineralextraction/mining:Theextractionofmineraloresfromtheearthandtheupgradingoforesattheminesitetoliberateandconcentratethemineralsofinterest.Minerals:Naturallyoccurringrocksorsedimentsthatareextractedfromtheearthintheformofmineralores.Forthepurposesofthisreportthesearemeasuredintermsofthetargetelementcontainedwithinmineralores(seealsoBox3.1).Nearzeroemissioncapableproduction:Materialproductionthatachievessubstantialgreenhousegasemissionreductions,fallingshortofnearzeroemissionsinitially(seedefinitionof“nearzeroemissionmaterialproduction”)butforwhichtheproducerhasplanstocontinuereducingemissionsovertimesuchthatitcouldlikelylaterreachnearzeroemissionswithoutsubstantialadditionalcapitalinvestmentsincoreprocessequipment.Nearzeroemissionmaterialproduction:Materialproductionwithagreenhousegasemissionsintensitythatiscompatiblewithnetzeroemissionsfortheglobalenergysystem.TheIEAhasproposeddefinitionsfornearzeroemissionsteelandcementinthe2022reportAchievingNetZeroHeavyIndustrySectorsinG7Members.NetZeroEmissionsby2050(NZE)Scenario:Thecentralscenariointhisreport,anormativescenariothatsetsoutapathwaytothestabilisationofglobalaveragetemperaturesat1.5°Cabovepre-industriallevels.TheNZEScenarioachievesglobalnetzeroCO2emissionsby2050intheenergysectorwithoutrelyingonemissionsreductionsfromoutsidetheenergysector.Indoingso,advancedeconomiesreachnetzeroemissionsbeforedevelopingeconomiesdo.TheNZEScenarioalsomeetsthekeyenergy-relatedUnitedNationsSustainableDevelopmentGoals,achievinguniversalaccesstomodernenergyby2030andsecuringmajorimprovementsinairquality.Operation:Theusephaseofanenergytechnologyresultingintheproductionofanenergycarrier,suchastheproductionofhydrogenbyelectrolysers,ortheprovisionofanenergyservice,suchasthemobilitybyanEV.Productionramp-uptime:Thetimeneededfromtheproduction’sstartuntilafacilityisabletoproduceatitsfullnominalcapacitycommissioning.EnergyTechnologyPerspectives2023AnnexPAGE443IEA.CCBY4.0.Resilience(ofasupplychain):Inthecontextofthereport,thisreferstotheabilityofasupplychaintorespondandquicklyadjusttosuddenmarketshocksonpricesordemand.Thisisparticularlyinfluencedbypricesbeingstableandaffordable,aswellasthesupplychainhavingeffectiveinterconnectionwithothersupplychainsthatcandeliveranequivalenttechnologyorservice.Security(ofasupplychain):Inthecontextofthereport,thisreferstotheleveltowhichasupplychainhasadequate,reliableanduninterruptedsupplyofinputs.Thisisparticularlyinfluencedbythediversityofthesupplychainintermsofmarket,region,suppliersandtechnologies.Sustainability(ofasupplychain):Inthecontextofthereport,thisreferstoasupplychainminimisingitsgreenhousegasemissionsandotherenvironmentalimpactsconsistentwithclimateobjectives.Thisincludessupplychaintransparencyandreporting;strengtheningenvironmental,socialandgovernancemeasures;andefficientandresponsibleuseofnaturalresources,includingthroughpromotionofmaterialefficiencyandendoflifestewardship.Technologyandcomponentmanufacturing:Theproductionoftechnologiesorcomponentsusinglabour,toolsandenergytotransformmaterialsintofinishedgoods.Technologysupplychains:Thedifferentstepsneededtoinstallacleanenergytechnology,withinputsofmaterials,componentsandservicesinvolvedateachstage(seealsofiguresI.1andI.2ofintroduction).Utilisationrate:Theproportionofthemaximumcapacityofafacilitywhichisusedonaverageoverasetperiodoftime.EnergyTechnologyPerspectives2023AnnexPAGE444IEA.CCBY4.0.CleansupplychaincharacteristicsMiningandmaterialproductionRegionalcapacitiesforminingandreserves,2021Copper(kt)Nickel(kt)Cobalt(kt)Lithium(kt)Rareearthelements(kt)ReservesaMinedb,eReservesaMinedcReservesaMineddReservesaMineddReservesaMinedaWorld88000021000950002700760015022000100120000290China3%8%3%4%1%1%7%12%35%57%Europe4%5%0%3%0%1%0%0%1%0%NorthAmerica13%12%2%5%4%3%3%1%2%16%OtherAsiaPacific13%11%49%66%30%13%36%56%26%24%Central&SouthAmerica32%41%17%10%7%3%42%29%17%0%Africa6%13%0%4%48%76%1%2%1%1%Eurasia9%9%8%7%3%2%0%0%17%1%MiddleEast0%2%0%0%0%0%0%0%0%0%Unknown21%0%21%0%8%0%12%0%0%0%Notes:Worldvaluesareroundedto2significantfigures.Sources:a.USGS(2022),b.S&PGlobal(2022a),c.S&PGlobal(2022b),d.S&PGlobal(2022c),e.WBMS(2022).Regionalcapacitiesforcriticalmaterialproduction,2021CopperaNickelaNickelsulfatebCobaltaCobaltsulfatec,aLithiumdLithiumchemicalsc,dNeodymiumoxideeWorld2250027902281371199515039China34%29%56%69%70%59%59%90%Europe11%0%11%16%16%0%0%0%NorthAmerica7%4%0%4%4%1%1%0%OtherAsiaPacific16%41%17%5%5%3%3%0%Central&SouthAmerica14%0%0%0%0%37%37%0%Africa8%0%0%4%4%0%0%0%Eurasia7%4%0%1%1%0%0%0%MiddleEast2%0%0%0%0%0%0%0%Unknown0%21%16%0%0%0%0%10%Notes:Valuesareinkt.Lithiumchemicals=Lithiumcarbonate+LithiumhydroxideSources:a.WBMS(2022),b.Fraseretal.(2021),c.BNEF(2022)d.S&PGlobal(2022c)e.AdamasIntelligence(2020).EnergyTechnologyPerspectives2023AnnexPAGE445IEA.CCBY4.0.Regionalcapacitiesforbulkmaterialproduction,2021Steel(Mt)Cement(Mt)Plastics(Mt)Aluminium(Mt)World20004300310810China52%55%25%9%Europe11%7%9%2%NorthAmerica6%4%18%2%OtherAsiaPacific19%19%24%85%Central&SouthAmerica2%3%2%1%Africa1%5%1%0%Eurasia4%2%3%1%MiddleEast2%4%17%1%Source:IEA(2022a).EnergyTechnologyPerspectives2023AnnexPAGE446IEA.CCBY4.0.TechnologyandcomponentmanufacturingLow-emissionhydrogensupplychainManufacturingcapacityforelectrolysers,2022Electrolysers(GWel)World11China41%Europe26%NorthAmerica19%OtherAsiaPacific14%Central&SouthAmerica0%Africa0%Eurasia0%MiddleEast0%Notes:Electrolysermanufacturingcapacityincludesallelectrolysersindependentofhowtheseareused.Source:IEA(2022a).Low-emissionelectricitysupplychainManufacturingcapacityforwindtechnologycomponents,2021Tower(GW)Nacelle(GW)Blade(GW)OnshoreOffshoreOnshoreOffshoreOnshoreOffshoreWorld8818100269825China55%53%62%73%61%83%Europe16%41%13%26%18%12%NorthAmerica11%0%10%0%10%0%OtherAsiaPacific12%6%8%2%6%4%Central&SouthAmerica5%0%6%0%4%0%Africa1%0%0%0%0%0%Eurasia0%0%0%0%0%0%MiddleEast0%0%0%0%0%0%Notes:Ontowers:capacityfor2021onlyincludesfacilitiesdirectlyrelatedtothewindindustry;Onallcomponents’capacities:in2022certainfacilitiescloseddown,thesearenotaccountedforasanuncertainamountcanbereopenedagain,whichisnotclearasofthisdate.Source:DataprovidedbyWoodMackenzie.EnergyTechnologyPerspectives2023AnnexPAGE447IEA.CCBY4.0.ManufacturingcapacityandproductionforsolarPVcomponents,2021WafersCellsModulesProductionCapacityProductionCapacityProductionCapacityWorld190370190410190460China96%96%78%85%73%75%Europe0%1%1%1%2%3%NorthAmerica0%0%1%1%5%2%OtherAsiaPacific3%3%18%13%19%18%Central&SouthAmerica0%0%0%0%0%0%Africa0%0%0%0%0%1%Eurasia0%0%0%0%1%1%MiddleEast0%0%0%0%0%0%Source:InfoLink(2022).CleantechnologysupplychainsManufacturingcapacityandproductionforelectriccarsandbatterycomponents,2021Cathode(kt)Anode(kt)Batteries(GWh)Electriccars(Millions)Productiona,bCapacityaProductiona,bCapacityaProductionb,cCapacitycProductionb,dWorld44014002508103409106.8China77%68%92%87%66%75%54%Europe1%1%0%0%21%8%27%NorthAmerica16%1%2%1%11%6%10%OtherAsiaPacific5%26%7%13%2%10%7%Central&SouthAmerica0%0%0%0%0%0%0%Africa0%0%0%0%0%0%0%Eurasia0%0%0%0%0%0%0%MiddleEast0%0%0%0%0%0%0%Unknown0%2%0%1%2%0%2%Sources:IEAinternalanalysisanda.BNEF(2022),b.IEA(2022b),c.BenchmarkMineralIntelligence(2022),d.EVVolumes(2022).EnergyTechnologyPerspectives2023AnnexPAGE448IEA.CCBY4.0.Manufacturingcapacityandproductionforheatpumps,2021Heatpumps(GW)Productiona,cCapacityb,cWorld100120China38%39%Europe16%16%NorthAmerica29%29%OtherAsiaPacific13%14%Central&SouthAmerica0%0%Africa0%0%Eurasia0%0%MiddleEast2%2%Sources:a.IEAinternalanalysisandindustryconsultations,b.UN(2022),c.IEA(2022c).Manufacturingcapacityandproductionforfuelcellheavy-dutytruckscomponents,2021Fuelcellsystems(GW)Fuelcelltrucks(thousand)CapacityaProductionbCapacitybWorld190.914China48%84%45%Europe1%9%21%NorthAmerica4%0%18%OtherAsiaPacific38%6%14%Central&SouthAmerica0%0%0%Africa0%0%0%Eurasia0%0%0%MiddleEast0%0%0%Unknown7%0%0%Notes:Itisassumedthatproductionisproportionaltosales.Sources:a.E4tech(2022),b.IEAinternalanalysisandindustryconsultations.EnergyTechnologyPerspectives2023AnnexPAGE449IEA.CCBY4.0.DeploymentLow-emissionhydrogensupplychainHydrogenproductioninstalledcapacity,2022Naturalgas-basedhydrogenwithCCSElectrolysersMtH2MtH2GWelWorld0.320.0880.51China0%3%36%Europe3%16%31%NorthAmerica96%5%9%OtherAsiaPacific0%42%12%Central&SouthAmerica0%21%5%Africa0%1%1%Eurasia0%3%5%MiddleEast0%4%1%Notes:Theinstalledcapacityforelectrolysersreferstoelectrolysersfordedicatedhydrogenproductionin2022,excludingtheiruseinthechlor-alkaliindustry.Source:IEA(2022d).Low-emissionelectricitysupplychainGenerationcapacityadditionsofsolarPVmodulesandwindenergy,2021SolarPV(GW)Windenergy(GW)OnshoreOffshoreWorld15015021China37%41%80%Europe18%18%16%NorthAmerica18%20%0%OtherAsiaPacific20%8%5%Central&SouthAmerica6%6%0%Africa1%1%0%Eurasia1%2%0%MiddleEast1%0%0%Source:IEA(2022a).EnergyTechnologyPerspectives2023AnnexPAGE450IEA.CCBY4.0.Low-emissionsynthetichydrocarbonfuelssupplychainSynthetichydrocarbonfuelsynthesisinstalledcapacitywithdedicatedBECCorDAC,2021BECC(MtCO2)DAC(MtCO2)SyntheticHCFuels(bbl/d)World20.0111China0%0%0%Europe17%76%100%NorthAmerica75%24%0%Asia-Pacific8%0%0%Central&SouthAmerica0%0%0%Africa0%0%0%Eurasia0%0%0%MiddleEast0%0%0%Notes:SyntheticHCfuels=low-emissionsynthetichydrocarbonfuels.Source:IEAinternalanalysisandindustryconsultations.CleantechnologysupplychainsSalesofelectriccars,fuelcelltrucksandheatpumps,2021ElectriccarsFuelcelltrucksHeatpumpsMillionThousandsGWWorld6.61.796China53%94%33%Europe33%5%21%NorthAmerica10%0%31%OtherAsiaPacific3%0%12%Central&SouthAmerica0%0%0%Africa0%0%0%Eurasia0%0%0%MiddleEast0%0%3%Notes:Electriccarsonlyincludepassengerlightdutyvehicles;Fuelcelltrucksincludeheavyandmediumfreighttrucks.Sources:IEA(2022a),IEA(2022b).EnergyTechnologyPerspectives2023AnnexPAGE451IEA.CCBY4.0.InfrastructureElectricitygriddeployment,2021Electricitygridadditions(1000km)TransmissionDistributionWorld1300140China24%25%Europe16%18%NorthAmerica17%18%OtherAsiaPacific29%16%Central&SouthAmerica5%7%Africa4%5%Eurasia2%4%MiddleEast4%4%Sources:IEA(2022a).OthersupplychaincharacteristicsEmployment,2019ManufacturingemploymentMassmanufacturedManufacturingEstablished/Maturesupplychains(totaljobs)-thousandemployeesSolarPVPolysilicon24Wafers88Solarcells200Solarmodules270Othersolarjobs330Windenergy380Electriccars660Heatpumps120Emerging/Nascentsupplychains(jobintensity)-thousandemployeesperunitElectrolysers(GW/year)0.5-1Fuelcelltrucks(thousandtrucks/year)0.2-0.3Site-tailored(jobintensity)-thousandemployeesperunitConstructionOperationNaturalgas-basedH2withCCS(MtH2/year)4.60.5-2.3HydrocarbonsyntheticfuelsBECC(MtCO2/year)0.2-0.50-0.1DAC(MtCO2/year)0.7-20.2-0.3Synthesis(PJ/year)0.2-0.40-0.1Notes:PV=photovoltaic;DAC=directaircapture;BECC=bioenergywithcarboncapture.Source:IEA(2022e).EnergyTechnologyPerspectives2023AnnexPAGE452IEA.CCBY4.0.LeadtimesLeadtimeyearManufacturingplantsformass-manufacturedtechnologiesSolarPVPolysilicon1-3.5Wafers0.5-2Solarcells0.5-2Solarmodules0.5-2WindBlade1-2Tower1.5-2.5Nacelle1.5-2Electrolysers2-3ElectricvehiclesAnode2-5Cathode2-5Battery0.5-4.5Heatpumps1-3FuelcelltrucksFuelcellstacks1.5-2.5Fuelcelltrucks0.5-1.5Large-scale,site-tailoredtechnologiesGas-basedH2withCCS1.5-9SyntheticfuelsHydrocarbonfuelsynthesis2.5-4DAC2.5-5.5BECC1-5InfrastructureElectricityinfrastructureHVAC-OHL5-13HVDC-cables4-11Largepowertransformer1-4NaturalgasinfrastructureOnshorepipeline5-17.5Offshorepipeline4-9OnshoreLNGterminal5-12FloatingLNGterminal1.5-10LNGtanker1.5-4Undergroundgasstorage12CO2infrastructureCO2storage4-10Notes:PV=photovoltaic;DAC=directaircapture;BECC=bioenergywithcarboncapture;HVAC=high-voltagealternatingcurrent;HVDC=high-voltagedirectcurrent;OHL=overheadline;LNG=liquifiednaturalgas.Leadtimereferstothetimethatpassesfromwhenaprojectisannouncedtowhentheprojectiscommissioned.Thisincludesfeasibilitystudies,funding,permittingandactualconstructionofthefacilityorproject.Experienceonleadtimesforhydrogeninfrastructureislimited,thereforeleadtimesfornaturalgasinfrastructurecanprovideagoodindicationfortheleadtimesofhydrogeninfrastructureduetosimilaritiesinprojecttypesandmanufacturing/constructionprocesses.Sources:IEAinternalanalysisandindustryconsultations.EnergyTechnologyPerspectives2023AnnexPAGE453IEA.CCBY4.0.RegionaldefinitionsUnlessotherwisespecifiedaggregatedregionsrefertotheaggregationofcountriesasfollows:Africa:Algeria,Angola,Benin,Botswana,BurkinaFaso,Burundi,CaboVerde,Cameroon,CentralAfricanRepublic,Chad,Comoros,Côted'Ivoire,DemocraticRepublicoftheCongo,Djibouti,Egypt,EquatorialGuinea,Eritrea,Eswatini,Ethiopia,Gabon,Gambia,Ghana,Guinea,Guinea-Bissau,Kenya,Lesotho,Liberia,Libya,Madagascar,Malawi,Mali,Mauritania,Mauritius,Morocco,Mozambique,Namibia,Niger,Nigeria,RepublicoftheCongo,Rwanda,SaoTomeandPrincipe,Senegal,Seychelles,SierraLeone,Somalia,SouthAfrica,SouthSudan,Sudan,Togo,Tunisia,Uganda,UnitedRepublicofTanzania,ZambiaandZimbabweCentralandSouthAmerica:AntiguaandBarbuda,Argentina,Aruba,Bahamas,Barbados,Belize,Bermuda,Bolivia,Brazil,CaymanIslands,Chile,Colombia,CostaRica,Cuba,Curaçao,Dominica,DominicanRepublic,Ecuador,ElSalvador,Grenada,Guatemala,Guyana,Haiti,Honduras,Jamaica,Nicaragua,Panama,Paraguay,Peru,SaintKittsandNevis,SaintLucia,SaintVincentandtheGrenadines,Suriname,TrinidadandTobago,UruguayandVenezuelaChina:People'sRepublicofChinaand,HongKong,ChinaEurasia:Armenia,Azerbaijan,Georgia,Kazakhstan,KyrgyzRepublic,RussianFederation,Tajikistan,TurkmenistanandUzbekistanEurope:Albania,Austria,Belarus,Belgium,BosniaandHerzegovina,Bulgaria,Croatia,Cyprus69,70,Czechia,Denmark,Estonia,Finland,France,Germany,Gibraltar,Greece,Greenland,Hungary,Iceland,Ireland,Israel71,Italy,Kosovo,Latvia,Lithuania,Luxembourg,Malta,Monaco,Montenegro,Netherlands,NorthMacedonia,Norway,Poland,Portugal,RepublicofMoldova,Romania,Serbia,SlovakRepublicandSlovenia,Spain,Sweden,Switzerland,Türkiye,UkraineandUnitedKingdomMiddleEast:Bahrain,Iraq,IslamicRepublicofIran,Jordan,Kuwait,Lebanon,Oman,Qatar,SaudiArabia,SyrianArabRepublic,UnitedArabEmiratesandYemenNorthAmerica:Canada,MexicoandUnitedStates69NotebyRepublicofTürkiye:Theinformationinthisdocumentwithreferenceto“Cyprus”relatestothesouthernpartoftheisland.ThereisnosingleauthorityrepresentingbothTurkishandGreekCypriotpeopleontheisland.TürkiyerecognisestheTurkishRepublicofNorthernCyprus(TRNC).UntilalastingandequitablesolutionisfoundwithinthecontextoftheUnitedNations,Türkiyeshallpreserveitspositionconcerningthe“Cyprusissue”.70NotebyalltheEuropeanUnionMemberStatesoftheOECDandtheEuropeanUnion:TheRepublicofCyprusisrecognisedbyallmembersoftheUnitedNationswiththeexceptionofTürkiye.TheinformationinthisdocumentrelatestotheareaundertheeffectivecontroloftheGovernmentoftheRepublicofCyprus.71ThestatisticaldataforIsraelaresuppliedbyandundertheresponsibilityoftherelevantIsraeliauthorities.TheuseofsuchdatabytheOECDand/ortheIEAiswithoutprejudicetothestatusoftheGolanHeights,EastJerusalemandIsraelisettlementsintheWestBankunderthetermsofinternationallaw.EnergyTechnologyPerspectives2023AnnexPAGE454IEA.CCBY4.0.OtherAsiaPacific:Afghanistan,Australia,Bangladesh,Bhutan,BruneiDarussalam,Cambodia,CookIslands,Dem.People'sRep.ofKorea,Fiji,FrenchPolynesia,India,Indonesia,Japan,Kiribati,Korea,LaoPeople'sDemocraticRepublic,Malaysia,Maldives,Mongolia,Myanmar,Nepal,NewCaledonia,NewZealand,Pakistan,Palau,PapuaNewGuinea,Philippines,Samoa,Singapore,SolomonIslands,SriLanka,Thailand,Timor-Leste,Tonga,VanuatuandVietNamAcronymsandabbreviationsADNOCAbuDhabiNationalOilCompanyAEManionexchangemembraneAPSAnnouncedPledgesScenarioAUDAustraliandollarsBECCbioenergywithcarboncaptureCATLContemporaryAmperexTechnologyCo.LimitedCCfDcarboncontractsfordifferenceCCScarboncaptureandstorageCCUcarboncaptureandutilisationCCUScarboncapture,utilisationandstorageCEMIDDICleanEnergyMinisterial’sIndustrialDeepDecarbonisationInitiativeCNOOCChinaNationalOffshoreOilCorporationCNPCChinaNationalPetroleumCorporationCO2carbondioxideCO2-eqCO2equivalentDACdirectaircaptureDRIdirectreducedironEAFelectricarcfurnaceESGenvironmental,socialandgovernanceETP-2023EnergyTechnologyPerspectives2023ETSEmissionsTradingSystemEUEuropeanUnionEVelectricvehicleFCEVfuelcellelectricvehicleFTFischer-TropschGWPglobalwarmingpotentialICEinternalcombustionengineICMMInternationalCouncilonMiningandMetalsIEAInternationalEnergyAgencyIPCCIntergovernmentalPanelonClimateChangeIPCEIImportantProjectsofCommonEuropeanInterestIRAInflationReductionActITinformationtechnologyLi-ionlithium-ionMHPmixedhydroxideprecipitateMIITMinistryofIndustryandInformationTechnologyMLmachinelearningEnergyTechnologyPerspectives2023AnnexPAGE455IEA.CCBY4.0.NZENetZeroEmissionsby2050PEMproton-exchangemembranePVphotovoltaicRD&Dresearch,developmentanddemonstrationREErareearthelementSCMsupplementarycementitiousmaterialSMRsteammethanereformingSOECsolidoxideelectrolysercellSTEMscience,technology,engineeringandmathematicsTSMCTaiwanSemiconductorManufacturingWGSwater-gasshiftUnitsofmeasure°CdegreeCelsiusBblbarrelbcmbillioncubicmetresEJexajoulegCO2/kWhgrammeCO2perkilowatthourGJgigajouleGJ/tonnegigajoulepertonneGtgigatonneGtCO2gigatonneofcarbondioxideGWgigawattGW/yeargigawattperyearGWhgigawatt-hourGWthgigawattthermalhhourkgkilogrammekgCO2-eq/GJkilogrammeofCO2equivalentpergigajoulekgCO2/kgkilogrammeofCO2perkilogrammekgH2kilogrammeofhydrogenkmkilometrektkilotonnekt/yearkilotonneperyearktCO2/yearkilotonneofcarbondioxideperyearkWkilowattkWekilowattelectrickWhkilowatt-hourkWh/kgH2kilowatt-hourperkilogrammeofhydrogenLlitreL/100kmkmlitreper100kilometresMBtumillionBritishthermalunitMtmilliontonnesEnergyTechnologyPerspectives2023AnnexPAGE456IEA.CCBY4.0.Mt/yearmilliontonnesperyearMtCO2milliontonnesofcarbondioxideMtCO2/yearmilliontonnesofcarbondioxideperyearMtH2milliontonnesofhydrogenMWmegawattMWhmegawatt-hourPJpetajoulettonnetCO2tonneofcarbondioxidetCO2/yeartonneofcarbondioxideperyearTWhterawatt-hourUSDUnitedStatesdollarUSD/GJUnitedStatesdollarpergigajouleUSD/kgUnitedStatesdollarperkilogrammeUSD/kgH2UnitedStatesdollarperkilogrammeofhydrogenUSD/kWUnitedStatesdollarperkilowattUSD/kWeUnitedStatesdollarperkilowattelectricUSD/MBtuUnitedStatesdollarpermillionBritishthermalunitUSD/MWhUnitedStatesdollarpermegawatt-hourUSD/tUnitedStatesdollarpertonneUSD/tCO2UnitedStatesdollarpertonneofcarbondioxideUSD/WUnitedStatesdollarperwattWh/kgwatt-hourperkilogrammeCurrencyconversionsExchangerates(2021annualaverage)1USdollar(USD)equals:BritishPound0.73ChineseYuanRenminbi6.45Euro0.84IndianRupee73.92JapaneseYen109.75Source:OECD(2022).EnergyTechnologyPerspectives2023AnnexPAGE457IEA.CCBY4.0.ReferencesAdamasIntelligence(2020),Rareearthmagnetmarketoutlookto2030.BenchmarkMineralIntelligence(2022),BatteryGigafactoriesdatabase.BNEF(BloombergNEF)(2022),1H2022BatteryMetalsOutlook:SupplyTurbulenceAhead.E4tech(2022),Database,https://www.e4tech.com/EVVolumes(2022),Theelectricvehicleworldsalesdatabase,https://www.ev-volumes.com/Fraser,J.,Anderson,J.,Lazuen,J.,Lu,Y.,Heathman,O.,Brewster,N.,Bedder,J.andMasson,O.(2021),Studyonfuturedemandandsupplysecurityofnickelforelectricvehiclebatteries,Roskill,https://publications.jrc.ec.europa.eu/repository/handle/JRC123439IEA(InternationalEnergyAgency)(2022a),WorldEnergyOutlook2022,https://www.iea.org/reports/world-energy-outlook-2022IEA(2022b),GlobalElectricVehicleOutlook2022,https://www.iea.org/reports/global-ev-outlook-2022IEA(2022c),HeatPumps,https://www.iea.org/reports/heat-pumpsIEA(2022d),HydrogenProjectsDatabase,https://www.iea.org/data-and-statistics/data-product/hydrogen-projects-databaseIEA(2022e),WorldEnergyEmploymentReport,https://www.iea.org/reports/world-energy-employmentInfoLink(2022),InfoLinkonlinedatabase,https://www.infolink-group.com/index/enOECD(2022),OECDNationalAccountsStatistics,https://www.oecd-ilibrary.org/economics/data/oecd-national-accounts-statistics_na-data-enS&PGlobal(2022a),Copperglobalsupply-demandbalance,August2022.S&PGlobal(2022b),Nickelglobalsupply-demandbalance,August2022S&PGlobal(2022c),Lithiumandcobaltglobalsupply-demandbalance,January2022.UN(UnitedNations)(2022),ComtradeDatabase,https://comtradeplus.un.org/USGS(UnitedStatesGeologicalSurvey)(2022),MineralCommoditySummaries2022,https://pubs.er.usgs.gov/publication/mcs2022WBMS(WorldBureauofMetalStatistics)(2022),WorldMetalStatisticsYearbook.PAGE458IEA.CCBY4.0.InternationalEnergyAgency(IEA).ThisworkreflectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreflectthoseoftheIEA’sindividualMembercountriesorofanyparticularfunderorcollaborator.Theworkdoesnotconstituteprofessionaladviceonanyspecificissueorsituation.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespectofthework’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.SubjecttotheIEA’sNoticeforCC-licencedContent,thisworkislicencedunderaCreativeCommonsAttribution4.0InternationalLicence.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Unlessotherwiseindicated,allmaterialpresentedinfiguresandtablesisderivedfromIEAdataandanalysis.IEAPublicationsInternationalEnergyAgencyWebsite:www.iea.orgContactinformation:www.iea.org/contactTypesetinFrancebyIEA–January2023Coverdesign:IEAPhotocredits:©GettyImages

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