Few countries control Global Renewable Energy Supply Chains

This report delves into the structure of global supply chains for renewable energy technologies, such as solar PV, onshore and offshore wind, lithiumion batteries (LIBs), and green hydrogen. The study also reveals that these technologies’ manufacturing capacities and sub-components are concentrated in a few countries, making supply chains vulnerable to risks.

In 2021, China, Japan, Malaysia, and Germany were the only four countries responsible for 70 percent of global solar photovoltaic cell and module exports. In addition, windpowered generators were exported by China, Germany, Denmark, and Spain, accounting for over 80 percent of the market. At the same time, lithiumion batteries were supplied by China, Poland, the Republic of Korea, and Japan, accounting for over 70 percent of the world’s supply. The study, entitled ‘Developing Resilient Renewable Energy Supply Chains for the Energy Transition,’ was presented during a side event of India’s G20 Presidency in Gandhinagar, Gujarat, and demonstrated the limited number of geographies responsible for manufacturing renewable energy (RE) technologies and their sub-components. The study also revealed that although prices for solar modules, lithium-ion batteries, and wind generators had decreased significantly in the last decade (2012–2021), the traded values of these technologies had continued to rise steadily. Middle-income countries, in particular, have an overly concentrated import mix of these technologies and components. The concentration has increased over time, implying that only a few countries export RE components.

The current global economic development aspirations coincide with intensifying climate risks, growing geopolitical adversities, and shrinking carbon space. For several countries, progress on the sustainable development goals (SDGs) is slow, energy demand is rising, and their fiscal bandwidth is stressed as they strike a balance between cleaning up their energy mix and maintaining the affordability of energy supplies for large proportions of their populations (UN 2022, Carbon Tracker, and CEEW 2021; Ghosh, A.; Ganesan, K. 2015). For the world to achieve a net-zero future, solar and wind power capacities must grow 20 and 11 times between 2020 and 2050, respectively (IRENA 2022, IEA 2021a). With the rise in variable renewable energy (RE) shares in electricity systems, storage solutions must see massive growth. And, for the hard-to-abate sectors, the green hydrogen ecosystem must be scaled up rapidly.

The rapid adoption of RE will not only help decarbonise the electricity systems but also help realise the desired impacts of the SDGs. However, a speedy and riskproof transition to RE will only be possible if countries can secure access to key technologies’ uninterrupted and affordable supply chains.

This report provides an overview of the current structure of global supply chains for several renewable energy technologies, namely solar photovoltaic (solar PV), onshore and offshore wind, lithium-ion batteries (LIBs), and green hydrogen. Our study briefly explores the manufacturing landscape for critical components in these supply chains, including requirements for key minerals, skills, logistics, infrastructure, and associated innovations. Additionally, the report analyses the evolution of exports and imports of key components and equipment in these sectors from 2012 to 2021, assessing the concentration and dependency of key components and products. This story presents some of the key findings.

RE supply chains
The manufacturing capacities and sub-components of renewable energy (RE) technologies are concentrated in a few countries, making supply chains vulnerable to risks. To ensure resilient RE supply chains, tracking global manufacturing capacity and trade flows accurately and diversifying supply chains are important. Additionally, new avenues of supply and investments must be created, and infrastructure for producing and moving raw materials and finished products must be developed. Collaborations must be formalised between technology-development labs worldwide and globally accepted standards and certification systems for emerging RE technologies like green hydrogen established. This includes the establishment of interoperability in operational and safety standards and the developing of harmonised certification systems for healthy global trade.

Solar PV trade
Global trade has seen steady growth but with a high concentration of exporters. The traded values of solar modules, LIBs, and wind generators have increased steadily over the last decade. However, 70 percent of the global exports of solar PV and more than 80 percent of total exports in the wind have come from only four countries. This has led to a highly concentrated import mix across RE technologies in many countries, particularly lower-income countries.

Green hydrogen
Green hydrogen is in its nascent stages of development and needs collaborative effort to scale up efficiently. To achieve the global net-zero target by 2050, 850 GW of electrolysers must be deployed by 2030, requiring at least 100 GW of annual manufacturing capacity. However, country-level commitments only amount to 62 GW per annum by 2030, and investments worth USD 700 billion are needed, with global commitments standing at approximately USD 100 billion. Besides the capacity and deployment challenges, electrolysers and fuel cells, which are at the heart of the green hydrogen ecosystem, use critical minerals and rare earth elements with the same access issues plaguing other RE solutions. A disconnect between standards, regulations, and certification systems could also slow down the scaling up of the green hydrogen ecosystem.

In conclusion, the report identifies four strategic priorities for the Group of Twenty (G20) to ensure resilient RE supply chains. These include comprehensive tracking of global RE manufacturing capacity and trade flows, creating new avenues of supply and investments, enabling the co-development of technologies and innovations, and facilitating the development of globally accepted standards and certification systems for emerging RE technologies.