IEA report: Three policy areas to consider in growing global market for clean energy technology

Published on October 31, 2024 by Kim Riley

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While the increasing adoption of clean energy technologies presents countries with opportunities to manufacture and trade them, it also means that governments face some tough policy decisions, according to a new IEA report released Wednesday.

“The market for clean technologies is set to multiply in value in the coming decade, increasingly catching up with the markets for fossil fuels,” said IEA Executive Director Fatih Birol. “As countries seek to define their role in the new energy economy, three vital policy areas — energy, industry and trade — are becoming more and more interlinked.

“While this leaves governments with tough and complicated decisions ahead, this groundbreaking new IEA report provides a strong, data-driven foundation for their decisions,” he added.

The latest installment of the IEA’s flagship technology publication — Energy Technology Perspectives 2024 (ETP-2024) — focuses on the outlook for the top six mass-manufactured clean energy technologies: solar PV, wind turbines, electric vehicles (EVs), batteries, electrolysers, and heat pumps. 

Based on current policy settings, IEA says the global market for these technologies will increase from $700 billion in 2023 to more than $2 trillion by 2035 — close to the value of the world’s crude oil market in recent years. Trade in clean technologies is also expected to rise sharply and in a decade’s time, it will more than triple to reach $575 billion, more than 50 percent larger than the global trade in natural gas today, according to the report.

IEA says the report provides a first-of-its-kind analytical framework for policymakers as they navigate the clean energy manufacturing and trade landscape. In mapping out the current state of clean energy manufacturing and trade and how they are set to evolve, ETP-2024 explores how countries at different stages of development can capture the benefits of the emerging energy economy while working to secure cost-effective clean energy transitions.

“Clean energy transitions present a major economic opportunity, as we have shown, and countries are rightly seeking to capitalize on that,” Birol said. “However, governments should strive to develop measures that also foster continued competition, innovation, and cost reductions, as well as progress towards their energy and climate goals.”

The increase in the global clean technology market has been accompanied by a record wave of investment in the manufacturing of clean technologies as countries look to bolster their energy security and reduce emissions, the report says. 

According to ETP-2024, most of this spending is concentrated in the countries and regions that already have established a clear foothold in the sector and are looking to bolster their positions: China, the European Union, and the United States, and increasingly India. 

However, China is set to remain the world’s manufacturing powerhouse for the foreseeable future, according to the report, which says that under existing policies, the country’s clean technology exports are on track to exceed $340 billion in 2035.

At the same time, ETP-2024 says that the door of the new clean energy economy remains open to countries at different stages of development, and it identifies key opportunities for emerging and developing economies based on a country-by-country assessment of more than 60 indicators, such as the business environment, infrastructure for energy and transport, resource availability and domestic market size.

For example, Southeast Asia could become one of the cheapest places to produce polysilicon and wafers for solar panels within the next 10 years, while Latin America — particularly Brazil — has the potential to scale up its wind turbine manufacturing for export to other markets in the Americas, says the report. 

“Growth in the manufacturing and trade of clean energy technologies should be for the benefit of many economies, not just a few,” said Birol. “This report shows that countries in Southeast Asia, Latin America, Africa and beyond have strong potential to play important roles in the new energy economy. And it finds that with sound strategic partnerships, increased investment and greater efforts to bring down high financing costs, they can achieve this potential.”