There is a new industrial age where clean energy technologies are growing and evolving. The International Energy Agency (IEA) published a report on Energy Technology Perspectives for 2023 and there are new plans for small nuclear reactors. The IEA report is an analysis of risks and opportunities surrounding the development of clean energy technology and their supply chains in the context of energy security, resilience and sustainability. Separately, new small nuclear reactors are an option to develop a core base load power supply at a fraction of the cost of traditional large nuclear power plants.
New Opportunities, And Risks
It is the dawn of a new industrial age in the energy world where there will be clean energy technology manufacturing. This new age is creating major new markets and millions of jobs. There are new risks from this transition to clean energy, prompting countries across the globe to devise industrial strategies to secure their place in this new global energy economy.
The IEA Energy Technology Perspectives for 2023 highlights the global manufacturing of clean energy technologies and their global supply chains. The technologies include solar panels, wind turbines, electric vehicle (EV) batteries, electrolysers for hydrogen and heat pumps. The report considers the evolution of these clean technologies and their impact on the clean energy transition in future years.
The global market for key mass-manufactured clean energy technologies will be worth around USD 650 billion a year by 2030, if countries implement their energy and climate pledges. This is around more than three times today’s level. Related clean energy manufacturing jobs would more than double from 6 million today to around 14 million by 2030. There would be further rapid industrial and employment growth in the following decades as transitions progress.
There are currently risks with global supply chains associated with the shift to clean energy technologies. These risks include highly geographically concentrated manufacturing of technologies, resource mining and processing of those resources needed for the technologies. Technologies such as solar panels, wind, electric vehicle batteries, electrolysers and heat pumps have the three largest producer countries account for at least 70% of manufacturing capacity for each technology. China dominates all of them. Mining for critical minerals is also concentrated in a small number of countries. The Democratic Republic of Congo produces over 70% of the world’s cobalt, and more than 90% of global lithium production is concentrated in three countries: Australia, Chile and China.
Currently the global supply chains are already tight and this has pushed up clean energy technology prices in recent years. This makes the transition to clean energy sources more expensive. Increasing prices for the key resources of cobalt, lithium and nickel led to the first ever rise in EV battery prices. These prices increased by nearly 10% globally during 2022. Wind turbines and solar photo voltaic (PV) costs outside China have also been rising after years of declines. Dependencies on key suppliers increase risks as the recent war in Ukraine demonstrated the reliance on Russian fossil fuels, especially gas in Europe.
Industrial Policies
Major economies are actively combining their climate, energy security and industrial policies into broader economic strategies. In the USA there is the Inflation Reduction Act whilst the EU has its Fit for 55 package and REPowerEU plan. Japan has its Green Transformation programme, and the Production Linked Incentive scheme in India that encourages manufacturing of solar PV and batteries. China is working to meet and even exceed the goals of its latest Five-Year Plan.
Government policies can easily affect private investment where there could be a competitive edge. There are relatively short lead times, around 1-3 years typically, to bring manufacturing facilities online. This means a project pipeline can expand rapidly in an environment that is conducive to investment. Only 25% of the announced manufacturing projects globally for solar PV are under construction or beginning construction imminently, according to the report. The number is around 35% for EV batteries and less than 10% for electrolysers. Government policies and market developments will affect the success of these projects. International trade is also important and the IEA emphasises the clean energy supply chains where almost 60% of solar panels cross international borders for example. It is even crucial for EV batteries and wind turbine components, despite their bulkiness, with China being the main net exporter today.
Resource production can also be a challenge as new critical mineral mines need to be developed with increased governance, social and environmental considerations. There is a long lead time for the development of these mines. The mineral resources are geographically unevenly distributed and there will need to be collaboration and strategic agreements for the continued security of supplies to meet the increasing growth and demand.
The IEA Executive Summary report can be read here.
Small Nuclear Reactors
Rolls Royce is working with a consortium of other companies to develop a new generation of cheaper Small Nuclear Reactors. The compact nuclear reactors should be easier to develop than much larger power plants as they will be small modular reactors that do not need large sites to be developed. The site size required would be around one-and-a-half UK football pitches or two baseball fields. The new reactors would power a city of around half a million people with around 440MW equivalent of electricity being generated. It should have a lifespan of around 60 years.
Small nuclear reactors provide further stability and security of supply to electricity grids alongside other sources including renewables. The technology also opens nuclear power up to new opportunities and applications. This includes electricity generated for production of steel smelters for example, and this would allow traditional carbon intensive fuel sources to be retired. This is seen as one technology that would allow a transition to net zero power supplies.
Conclusion
The IEA highlight the transition to lower carbon power is not without risks, some of which include supply chains but also the geographical concentration of key resources. Small nuclear reactors may be another solution to provide power on smaller scale sites more quickly than traditional large power plants. This would complement the journey to renewable resources of power and would provide a consistent base load of energy along side renewable sources.
Mapped It 