LONDON, 8 June 2023 – Rapidly scaling sustainable, diversified, and resilient clean energy supply chains is key to achieving net-zero targets on-time and at as low a cost as possible, according to the ETC. Its latest insights briefing, “Better, Faster, Cleaner: Securing clean energy technology supply chains”, highlights that global supply of key materials and components is sufficient to meet growing demand for clean energy technologies (wind, solar, batteries, grids, heat pumps) over the medium- to long-term. However, in the short- to medium-term policy and industry action is critical to overcome supply chain challenges that put the energy transition at risk.
Clean energy supply chain challenges
The global transition to net-zero demands a massive increase in clean energy technology. Clean electrification is the backbone of the transition to net-zero and will provide over 60% of all energy consumed in 2050, up from 20% today. Achieving this would need wind and solar capacity to increase 2.5-4 times and electric vehicle sales will need to grow over sixfold by 2030 from current levels. While it is fundamentally possible to deliver the transition at cost by mid-century, three key supply-side challenges must be addressed in the short to medium-term:
- Scaling manufacturing and supply quickly enough to meet demand, which could be challenging for key raw materials (lithium and copper) that are difficult to substitute and in high-demand, and particularly complex components (e.g., offshore wind transport vessels or grid transformers) that are costly and have long lead times.
- Environmental and social concerns around mining and manufacturing.
- Geographic concentration of clean energy supply chains, especially in China for solar PV and EV battery manufacturing.
These challenges can be addressed by strong regulation and industry action, but might also entail cost trade-offs if near-shoring is also prioritised. For example, the estimated costs of building solar PV manufacturing capacity (from polysilicon through to modules) are currently almost 4 times higher in the EU and the US than in China. Other considerations include balancing political priorities, such as creating local jobs and energy security, with feasibility challenges, for example, caused by stringent environmental and social standards, slow permitting, and difficulties in accessing finance.
“The energy transition is fundamentally achievable if supply chain risks are managed. In addressing these challenges, there are some clear wins to pursue and some trickier trade-offs which require deep thought from governments and industry. The priority should be to rapidly scale and diversify supply chains to build resilient clean energy capacity while localising manufacturing where there is a clear competitive advantage and alignment with domestic priorities,” says Adair Turner, Chair of the Energy Transitions Commission.
Immediate policy and industry action are key to progress the energy transition at the speed and scale required to meet net-zero targets by 2050.
“The supply chains covered in this report are critical to the energy transition. Key factors for reliability, risk, and stability are brought to the forefront, while bottlenecks and key actions inform for a more rapid and just transition.” said Jean-Pascal Tricoire, Chairman of Schneider Electric.
Key areas of particular short-term concern are:
- Scale-up extraction of copper (critical to all technologies) and lithium (a critical battery input) which are difficult to substitute.
- Overall supply chain concentration in China (particularly solar PV and batteries).
- Manufacturing of cathode/anode materials, high-power grid transformers, vessels for offshore wind installations and sub-sea cable laying are highly specialised and difficult to scale.
- High life-cycle emissions from continued coal use in nickel extraction and polysilicon production, and high life-cycle emissions from battery manufacturing.
Critical areas of action for governments & policymakers and industry
- Governments should set clear strategic visions for the energy transition, with specific targets and timeframes for key sectors (e.g., gigawatt installation targets by specific dates, Internal Combustion Engine (ICE) bans by specific dates etc.) to drive market certainty and investment decisions.
- Accelerate action to close supply-demand balances by: scaling supply from mining through to manufacturing, driving improvements in technology and material efficiency, and pushing for more circular business models by scaling recycling and reuse at the end of life.
- Minimise the adverse environmental and social impact of supply chain developments via strong regulation of life cycle carbon emissions, shifting production to less carbon-intensive grids, using purchasing power and high-quality defined environmental and social standards, and enforcing higher supply chain traceability.
- Ensure a diversified, resilient, and secure supply of materials and components for the energy transition. Overall, clean energy manufacturing competition is not zero-sum, it presents a global opportunity for growth. Industry and policymakers should act to diversify supply for mining, refining and manufacturing.
“Our decarbonization targets imply a transition from an “expenditure” economy based on fossil fuels to an “investment” economy in clean energies. Materials and component supplies will be increasingly important. Industry has the ability and the will to scale-up their activities, although policy action is needed now to ensure the production of materials and components can increase to the levels needed and to reinforce the global supply chains. Innovation and international collaboration will also be key to achieve material efficiency and recycling of used products.” said Agustín Delgado, Chief Innovation and Sustainability Officer at Iberdrola.
Energy security as a global priority
The Covid-19 pandemic, volatile commodity and shipping costs, the Russian invasion of Ukraine and the ensuing European energy crisis resulted in delays and price increases that shocked global supply chains. This led governments around the world to realise the importance of energy security, reassess domestic policies and invest more in clean energy. Most notable was the passage of the US Inflation Reduction Act in 2022 and the EU Green Deal Industrial Plan, announced in response.
The ETC’s accompanying EU Policy Toolkit proposes action for EU policymakers to address Europe’s vulnerability to supply chain shocks, given its high dependence on imports for key raw materials (copper, lithium, nickel and cobalt in particular) and components for clean energy technology. It builds on existing EU regulations and recommendations from the Insights Briefing.
“The latest ETC Insights Briefing highlights that we have the critical minerals needed to support the transition to clean energy, and can innovate to address critical supply chain bottlenecks created by market tightness, environmental and social concerns, and concentration of production. We should be optimistic that solutions are already emerging from research and development, process efficiency, community engagement, and material recycling that will pull this future closer. The clean energy manufacturing market represents a compelling opportunity for private and public sectors around the world. ” said Jon Creyts, CEO of RMI.
“Better, Faster, Cleaner: Securing clean energy technology supply chains” has been developed in collaboration with the European Climate Foundation and ETC members from across industry, financial institutions and environmental advocacy including Arcelor Mittal, Bank of America, BP, EBRD, HSBC, Iberdrola, Impax, Legal and General, National Grid, Ørsted, Rio Tinto, Schneider Electric, Royal Dutch Shell, Tata Group, Volvo Group, the World Resources Institute and Worley.
This report constitutes a collective view of the Energy Transitions Commission. Members of the ETC endorse the general thrust of the arguments made in this report but should not be taken as agreeing with every finding or recommendation. The institutions with which the Commissioners are affiliated have not been asked to formally endorse the report.
To read the full report, click here.
 ETC (2021), Making Clean Electrification Possible.
 BNEF (2022), Building solar factories to rival China won’t be cheap.