The age of clean technology manufacturing offers big opportunities for the countries that embrace it, including positive synergies with climate and energy security goals, as well as benefits for economic growth.
Countries will need to define industrial strategies fit for the clean technology manufacturing age in accordance with their national circumstances, considering potential strengths with regards to different technology areas, as well as priority needs for collaboration and strategic partnerships with third countries. Governments seeking to stimulate domestic manufacturing also have a unique possibility to influence local demand for clean energy technologies at the same time, such as by supporting incentives for purchasing EVs. For suppliers, local markets offer benefits such as lower transport and administrative costs for reaching potential buyers.
The majority of announced manufacturing projects across most key clean energy technologies do not have committed investments. In the United States, for example, almost 40% of the announced battery factories are under construction whereas the figure is just 2% for electrolysers. In Europe, the equivalent figures are around 10% and 15% respectively. However, such manufacturing facilities can be brought online with relatively short lead times – around 1-3 years on average – meaning that deployment can rapidly scale up if support is maintained. Likewise, manufacturing projects that have been announced but not firmly committed may end up moving to different countries in response to policy shifts and market developments.
In an era of great change, project developers and investors are on the lookout for supportive policies that could give them the edge in different markets, and since the beginning of the decade, several major economies have introduced new policies to boost domestic clean technology manufacturing. Examples from the past year alone include the Inflation Reduction Act in the United States, the Net Zero Industry Act in the European Union and various milestones in Japan’s Green Transformation programme. Together with China’s latest Five-Year-Plan (2021-2025) and India’s Production Linked Incentive scheme, these policies are transforming industrial policy relevant to clean energy technology and reshaping the balance of global trade.
In this part of the briefing, we examine the impact of recent policy developments on progress towards domestic deployment targets in selected regions and countries. We consider the potential role of these policies in shaping the expansion of clean technology manufacturing in the future, as a starting point for decision-making.
Policy frameworks are not the only factor influencing change in technology manufacturing. Each country will need to carefully consider their own individual circumstances to assess where in the supply chain to specialise domestically, and where it might be more effective to establish strategic partnerships or to make direct investments in other countries. One of the major differentiators in the competitiveness of energy-intensive industry sectors in different countries, and thus their attractiveness for manufacturers, is the cost of energy. This is especially true for natural gas and electricity, the prices of which vary significantly between countries.