“New energy economy” according to IEA
According to the International Energy Agency, the world has transitioned to a new energy economy driven by renewable energy technologies. Its latest Energy Technology Outlook report highlights the challenges ahead, with diversification of materials and equipment supplies as a priority.
Every two or three years, the International Energy Agency (IEA) publishes the state of the art in the energy sector. L’Energy Technology Insightsa type of technical solutions, their relation to market dynamics and energy transition, is a reference in the world.
Many countries still recovering from the health crisis and under stress from the war in Ukraine may find opportunities for growth and job creation with new industries of the energy transition. According to the IEA, this market will amount to 650 billion dollars a year by 2030, which is three times more than today. Relevant jobs could increase from 6 million to 14 million by 2030, half of them in the most widespread technologies: solar photovoltaics, wind power, electric vehicles and heat pumps.
Diversify supplies better
The world is already facing strain on supply chains, leading to increases in the cost of raw materials, which are reflected in the prices of finished products. Fossil fuels are subject to these limitations, but so are new markets. Thus, lithium, nickel and cobalt increased the price of electric batteries by 10% in 2022, as did other materials (steel, copper doubled in price between mid-2020 and mid-2022) for wind power. Emerging markets risk exacerbating this phenomenon by increasing dependence on concentrated production in certain countries. This is the case in wind energy, batteries, electrolysers, solar panels and heat pumps, where 70% of production capacity is already monopolized by the three largest producers of each of these technologies, mostly China.
Therefore, each country is interested in diversifying these supply chains and developing manufacturing policies in its territory. Europe, USA, India, Japan, China, everyone is trying to gain competitive advantage “This New Energy Economy” According to Fatih Birol, CEO of AIE. Big investment plans have been announced. If achieved, they could meet two-thirds of the needs to achieve carbon neutrality in the IEA’s NZE (net zero emissions) scenario. In some areas, such as photovoltaics, it is even all of them (see graph).
But investments are currently at different stages of development depending on the technology. Compared to the announcements made worldwide, only 25% of photovoltaic plant projects are under construction, 35% are intended for electric vehicle batteries and 10% for electrolysers. Here again, China is ahead of other regions of the world and combines the largest projects. It actually dominates international trade in these technologies, such as wind energy, which accounts for half of world exports. In addition to competitiveness issues, countries need to further organize themselves, as the total number of announced projects will lead to global capacity in photovoltaics, batteries and electrolysers, and enough power for wind components, heat pumps and fuel cells. To avoid extreme imbalances, Fatih Birol calls for strategic partnerships between countries to use complementary tools and respond to the climate emergency.
Make a long-term plan
In this technology race for BEA, each country will depend on its relative advantages (access to mineral resources, renewable energy deposits, cheap energy, etc.). However, investment in the infrastructures of this new energy economy will be essential to transport, distribute or store electricity, hydrogen and CO2.2. The long delay in the construction of these infrastructures makes it necessary to foresee them.
Another key issue highlighted by the IEA is the issue of critical minerals. In this field, in the long-term perspective, it is necessary to plan new mining opportunities, as well as processing/production chains of products made from these minerals. China already has control and can keep it, as it alone announces 80% of new production capacity by 2030 for copper, 95% for cobalt and 60% for lithium and nickel.
However, it should be noted that in the NZE scenario, the International Energy Agency does not envisage a real reduction in the consumption of materials (cement, steel) or even an increase (aluminum). Similarly, material recycling rates are increasing, but in an unpretentious way. Certainly, with a stronger measure of vigilance, the needs would be lower and this would prevent too many mines from opening, with significant environmental and social costs.