As the world enters a new industrial age, where technology manufacturing for clean energy will lead the way, total investments in clean energy technologies and infrastructure have to top $4.5 trillion in 2030 under the net-zero emissions by 2050 scenario, the International Energy Agency (IEA) said in a new report this week. The unprecedented scale of required investment will need industrial strategies from the countries to mobilize those investments across all regions, technologies, and supply chains. The task is enormous, and risks are also greater due to the heavily concentrated raw materials and material processing in a handful of countries, especially China, the IEA said.
Other hurdles to a robust development of clean energy technology include policy and supply chain bottlenecks, according to the agency.
"Bottlenecks can occur as a result of policy and regulatory risks, a lack of confidence in demonstration and first-of-a-kind projects, uncertainty about project pipelines, wider macroeconomic factors such as currency stability, and geopolitical events," the IEA said in its report.
Investment in clean energy is continuously rising, but it needs to rise much more, especially this decade if the world has a chance to reach net-zero by 2050, the international agency noted.
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Last year, clean energy investment hit $1.4 trillion, a 10% increase compared to 2021, and representing 70% of the growth in total energy sector investment.
Yet, fossil fuels still account for 80% of the primary energy mix in the world, the IEA said.
The energy transition depends on the supply chains in clean energy technology. As much as $1.2 trillion of cumulative investment would be required to bring enough capacity online for the supply chains to be on track with the NZE Scenario's 2030 targets. Currently announced investments cover around 60% of this estimate.
Considering the lead times from decision to production, most investments will have to be made during 2023-2025, at an average of $270 billion per year, which is nearly seven times the average rate of investment over 2016-2021, the IEA said.
"Lead times to establish new supply chains and expand existing ones can be long, requiring policy interventions today. Opening mines or deploying clean energy infrastructure can take more than a decade. Building a factory or ramping up operations for mass-manufactured technologies requires only around 1-3 years."
Apart from the need to scale up investments, and to do that now for projects to be up and running in 2030, the world needs to diversify its clean energy supply chains.
"The production of critical minerals is highly concentrated geographically, raising concerns about security of supplies," the IEA says.
For example, the Democratic Republic of Congo supplies 70% of today's cobalt, China supplies 60% of rare earth elements (REEs), and Indonesia 40% of nickel. Australia accounts for 55% of lithium mining and Chile for 25%. China processes 90% of REEs and 60-70% of lithium and cobalt, and it also dominates bulk material supply, accounting for around half of global crude steel, cement and aluminum output, though most is used domestically.
Diversification will also need enormous investment and the right supportive policies for establishing supply chains outside China.
"As we have seen with Europe's reliance on Russian gas, when you depend too much on one company, one country or one trade route – you risk paying a heavy price if there is disruption," IEA Executive Director Fatih Birol said in a statement.
"The era of clean technology manufacturing means every country needs to develop an industrial strategy that reflects its strengths & addresses areas where it's less competitive," Birol noted.
Many economies are competing to be leaders in the new energy economy, he added.
"It’s important, though, that this competition is fair – and that there is a healthy degree of international collaboration, since no country is an energy island and energy transitions will be more costly and slow if countries do not work together.”
By Tsvetana Paraskova for Oilrpice.com
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Now the IEA is coming up with another unachievable goal of investing $4.5 trillion in clean energy Tech by 2030. As I recall the world spent some $6 trillion in the last decade on renewables managing only to reduce coal’s share in global primary energy by 1%.
Instead of these outlandish calls by the IEA, the only rational approach to global energy transition is a balanced diversification approach where all energy sources compete with each other for a bigger share in global primary energy. The bigger the renewables’ share the lower the need would be for fossil fuels.
Along with global investments in clean energy, there should also be investments in oil and gas otherwise the world will be headed for more prohibitive energy prices and a disastrous global energy crisis lasting for years to come.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert