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Energy communities as digitally decentralized energy supply systems

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Human progress has often gone hand in hand with our energy development. However, it is nowadays unequivocally considered that our energy development and particularly our energy consumption is gradually leading more and more to the phenomenon of climate change. Looking at various studies, we can see that in the last 150 years, as our energy consumption has gradually been increasing, our global surface temperature over land and water has also risen by about 1.5 degrees Celsius.

In the last couple of years, these developments have rung several alarm bells internationally, so that as a result, various treaties, agreements, etc. have been concluded on a global stage.
One of the best known and most extensive ones is probably the Paris Agreement. Following its magnitude and ambitious realization, the European Union then concluded the Clean Energy Package in 2019, in order to help push the implementation at the Union level.

The core content of the Clean Energy Package

Already in 2016, the European Commission presented the “Clean Energy for all Europeans Package” for the first time. It consists of four regulations and four directives, each of which were adopted by the European Parliament in the time frame from the end of 2018 to early summer of 2019.  The package aims to make a significant contribution to stopping climate change, but above all, to usher in a new era of energy policy and to focus on individual citizens, by giving them a great deal of flexibility but also an impetus to take action themselves.

Among other things, the Clean Energy Package should simplify the process of switching electricity suppliers (in up to 24 hours). In addition, dynamic pricing and intelligent electricity meters will help to save costs and energy. However, in the event of impending energy poverty – quasi-droughts – the member state should then have the authority and it should also be able to regulate market prices at short notice and actively support and protect affected households. Furthermore, a support cap for environmentally harmful power plants in Europe is to apply from 2025. This measure will include all power plants that use fossil fuels.

The member states are also instructed to assess the risk of capacity bottlenecks, draw up national plans and to cooperate and support each other on a regional level.

Thus, ultimately, by 2030, in addition to the goal of gaining 32% of energy demand from renewable sources, greenhouse gas emissions should be reduced by 40%.
At the same time, energy efficiency should increase by at least 32.5% and at least 15% of the networks should be interconnected on a Union-wide level.

However, in achieving these ambitious goals, the European Clean Energy Package envisages that one of the key segments should be the new format of so-called energy communities – which have been defined in the Renewable Energy Directive 2018/2001 and are to be implemented nationally in the same way as the other directive topics according to Art 288 TFEU.

Two concepts of energy communities

The EU has set two similar concepts of energy communities through its directives –
the “renewable energy communities” (Renewable Energy Directive (EU) 2018/2001) on the one side and the “citizen energy communities” (Internal Electricity Market Directive (EU) 2019/944) on the other side. The idea behind both of them is to push the creation of communities that organize collectively and of citizen-driven energy actions, which will help to pave the way for a much-needed clean energy transition while moving the individual citizens to the fore.
Let’s take a deeper look at their respective structure.

Art 2 sec 16 of the Renewable Energy Directive (RED II) defines a renewable energy community as a “legal entity”,

  • which, in accordance with the legislation currently in force, is based on open and completely voluntary participation, is autonomous/independent and is under the effective control of the members or shareholders established in the immediate vicinity of the renewable energy projects owned and operated by that legal entity,
  • whose members or shareholders are natural persons, local authorities or municipalities, or small and medium-sized enterprises,
  • and whose aspiration is not primarily based on financial gain, but is to provide economic, social community and/or environmental benefits to its shareholders or members in which it is active.

Those communities have the right to collectively generate, consume, sell and store renewable energy. In addition, those entities shall generate a wider adoption of renewable energies, active participation in the energy transition, local investments, a reduction of energy consumption, lower supply tariffs, an improvement of energy efficiency and, in view of that, lead to the elimination of any energy poverty.

On the other hand, there is the citizen energy community, which was introduced by the Electricity Directive (ED II). It is defined in art 2 sec 11 as a legal entity,

  • which is based on open and completely voluntary participation and which is actually controlled by its members or shareholders, who may be natural persons, but also legal entities (like local authorities or small businesses);
  • whose main focus is not based on a financial return, but rather on offering community, economic or environmental benefits to its members/shareholders or to the local areas in which it operates;
  • and may additionally operate in the areas of generation, supply, distribution, consumption, aggregation, storage and services (in the energy sector) for its shareholders/members.

At first sight, they both seem quite similar, but there are some fundamental differences. In short, citizen energy communities are communities that operate on a supra-regional basis and jointly use, store or sell their generated energy, and are not limited to renewable sources.
Additionally, any actor can participate in such a community as long as shareholders or members, which are engaged in large scale commercial activity and for whom the energy area is constituting a primary field of economic activity, do not exercise any decision-making power. Renewable energy communities, on the other hand, are regionally active players that are spatially limited to the generation, use, storage and sale of renewable energy, but will additionally benefit from lower local grid tariffs and presumably from a tax exemption, as they can operate on lower levels of the grid due to their geographical regionality. The renewable energy communities must be capable of staying autonomous, and also the participation of the members mustn’t constitute their primary economic activity. As a practical example, one could outline the following simple scenario: If 10 households in a locality join together to form an independent society, invest jointly in a suitable photovoltaic system and use the energy generated from it together, this will be known as a renewable energy community.

The idea behind the energy communities seems promising on paper, but the EU`s goals behind them are ambitious and require, in addition to the legal framework, a social rethinking of the European population, a steady backing of the state (at least initially) and, last but not least, the support of power-generating companies, without which the plan to generate 100% of the total electricity demand from renewable energy sources in the near future (and fulfilling the goals set for 2030 and 2050) will not be feasible.


One of the biggest challenges in this regard will be solving the question on how to create as many incentives as possible for every individual to ensure the establishment and participation in energy communities, as they are supposed to have such a large contribution to the energy transition.

One of these incentives could be that the energy communities would also be regarded as companies for tax purposes and thus become entitled to deduct input tax. The rules for when a community is considered a business / or has entrepreneurial status for tax purposes vary somewhat from state to state. However, most of them follow the principle of the three fundamental pillars – permanence, self-sufficiency and intent to generate revenue. The new energy communities are fulfilling all three of these conditions. Especially the critical third point, namely the intention to generate revenue is met, since an energy community is subject to an exchange of services – electricity for reimbursement of costs – which altogether should ultimately suffice for the status of entrepreneurship, regardless of whether the revenue generation is in the foreground or not. So in my opinion the option for input tax deductibility should be affirmative. In such a scenario, a community could at least be reimbursed, (depending on the respective state) in Austria or Germany, for example, with 20% of the costs for maintenance, repair, purchases and thus make the model of energy communities even more economically attractive.

Another issue is the choice of the corporate form. When the EU announced the Clean Energy Package including the energy communities, it also stipulated that an easy entry and exit from the community must be possible for each individual. Of course, this also raises the question of which legal form to choose. The choice of legal form ultimately determines the organizational effort, the costs and the liability regime to a large extent. The legal form of public limited companies will probably be too expensive for small energy communities of private means and superstructure.. In the case of limited liability companies, the strict formal requirements could result in difficulties with flexible changes of members, and in the case of associations and cooperatives, the ideational purpose must be clearly in the foreground, which could also become problematic in the instance of larger communities. Here, I think that real-life practice will show which legal form will prevail.

Likewise, the question of benefits vs. expenses is a valid one. From a purely economic and technological point of view, the entire power grid benefits from the fact that local energy communities are to consume the electricity where it is generated. This means that the electricity does not have to be transported over wide and higher-ranking network levels. This should also save the customers/members of such local energy communities a significant amount of money in grid fees for higher-level grid tiers. However, the question that is actually arising during the first implementation, is who and how exactly one would set up a simple, functioning platform where everyone from young to old, from technology aficionados to technology muffles can participate in this new way of energy consumption and exchange.

Several research projects are currently underway to solve these initial problems. It is already clear that a separate support and funding office is to be set up nationally (maybe even on a European stage), which is to serve as a kind of contact point for any questions from interested parties and is also to help and encourage the founding of energy communities in this regard. With this in mind, many countries are considering the use of additional limited funding, for example, through special quotas and funding opportunities that are only granted for a limited initial period. In this way, first movers would ultimately generate advantages and, as an additional effect, it would likely be possible to achieve a greater influx to the energy communities right from the start.


Energy communities will allow us to combine technological innovations. The goal is to turn a user not only into a consumer but also into a producer, a so-called prosumer.
Energy communities could soon be expanded to include other energy services, such as e-mobility concepts, where electric cars could also be used jointly as part of a car sharing system. In a further step, these e-cars could also serve as additional electrical storage units that can be supplied to the community via an intelligent e-charging station in the event of energy shortages.

Blockchain is also currently experiencing a big buzz in the energy sector. Just to name one example: This technology could be combined with digital platforms (apps) for energy communities in order to achieve better traceability and documentation by visualizing individual energy consumption, for example, and to create an additional incentive for the individual members of an energy community to save energy (competitions, prizes).

Through the implementation of energy communities on a large scale, the cityscapes will also have to change so that the broad masses will be involved as well. This opens up an opportunity to develop new innovations through broad public input and, subsequently, to work as a community on a sustainable city, community and region of the future.

Lastly, it is important to note that the Clean Energy Package and the goals it enshrines will also create many new jobs. Installations of megawatt solar farms on rooftops over agricultural land or between crops will provide additional revenue streams for farmers. The recycling of photovoltaic systems with a service life of 20-30 years will also offer a large, yet almost untapped, market with considerable potential. Experts expect up to 4 million new jobs to be created in the next 15-20 years in connection with the energy turnaround in the European Union alone.

As one can see, the goals are set high – it remains to be hoped that as many of these subpoints as possible can be implemented to finally achieve the great goal of the energy transition and the associated reversal of climate change in the upcoming decades.

Mak Bajrektarevic of the Vienna University of Economics. Besides researching legal and energy aspects of the contemporary world (authoring numerous articles and co-authoring the book on the topic for the US publisher), he is cofounder of the largest university sports platform in Europe, ACSL.

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The Nuclear State without Nuclear: Nuclear Energy Tragedy pertaining Indian Regional Development

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India’s national energy policy is heavily dependent on fossil fuel consumption to attain its energy demands; around 70 percent of the energy requirements are overwhelmingly met by coal, where the share of nuclear power is below 3 percent. Coal is essential for baseload in electrification, and the production of steel and significant industries thrive on coal consumption alone. In the year 2020-21, India produced 716 million tons of coal, nearly two times higher compared to 2011-12, when India produced 431 million tons to supply the ever-growing demand for power. Despite such enormous production, India is one of the largest coal importers. Not alone, the coal simultaneously India dependence on oil imports, according to reports, stood at 76 percent, which is predicted to surge up to severe levels by 2040.    

Despite the heavy reliance on fossil fuels and the fact that India maintained its carbon emissions level below (” emissions per capita, total or kWh produced”) the Paris agreement 2015 levels, meticulous analysis reveals that the carbon emission level of India has risen by 200 percent since 1990. Climate change affects the agrarian sector, which makes up about 42 percent of India’s workforce, pushing it under the blade of job cuts if the water scarcity gets severe; it also threatens the inhabitants of hilly areas whose employment is dependent on the mesmeric mountains tourism. The scope of development of any region in this modern world significantly relies on the consumption of power to run factories, lighten up houses, and fast irrigation systems in farms for large quantities of production.   

India’s current electricity distribution has 371.054 GW GRIDs, divided into five regions Northern, Eastern, Western, North Eastern, and Southern; seventeen percent of this electric GRID is exercised by the agriculture sector, where the commercial agencies use 48 percent. With the emerging depletion of fossil fuels, nuclear power adoption, along with other clean energy power sources, is considered one of the priorities of the Indian government.

However, reports depicted that those policies’ effects are not present on the ground, where nuclear energy contributes merely three percent to the total energy production. The nuclear proportion in China’s energy production is four times greater than India’s; India must adapt to the nuclearization of India’s rural area, paving the way for future growth. The recent enclosure of twenty-five-year-old coal plants in India reflects a minor contribution concerning carbon emissions reduction. At the same time, the consequence brought India into the coal crisis in the northern region.

Rural backwardness constitutes the majority due to the low electricity consumption, whose reasons are ample, sometimes due to geographical limitations and atmospheric restrictions, especially in hilly areas. The electric GRID distribution and maintenance could be better, where the electricity surplus is concentrated in a few sectors based in metro cities. During the Covid Preventive lockdown, seventy percent of power consumption drop in rural India has been noticed; this development questions India’s energy policies which heavily relied upon fossil fuels for energy production. Four states, named Chhattisgarh, Jharkhand, Orissa, and Madhya Pradesh, comprise 550 million tons of coal, equivalent to 75-80 percent of coal consumption. The argument in favor of coal is due to its cost-effectiveness and availability.  

Another reason for low rural development is the GRID-electrification system, being the primary source of power supply in the rural household, reported monthly energy consumption of 39 kWh, half of India’s national energy consumption average, which is a significant obstacle to the adoption of modern technology for overall growth in rural areas. The reason is not alone political but mismanagement of electricity distribution. As the question of this paper addressed, Why Nuclear? Why not other sources of non-Fossil fuels energy?   

Mathematical Evidence  

For example, the number of atoms of Uranium 235 per kilogram is 2.564×1024 releasing the energy per gram is around 2.29×104 kWh. [Dr S.N Ghosal, Nuclear Physics].  Thermal plants produce the same energy after running for 229 hours at the capacity of 1 MW. When one kilogram of coal burns, it generates 8.926 kWh after exhausting the total mass of 2.56×103 kg. The above estimates demonstrate the advantage of using uranium for power generation. 

However, the nuclear economic constraint unrevealed the enormous cost comes alongside Nuclear Power Plant projects, especially the cost of 1000 megawatts generation is around 5500 dollars, whereas natural gas provides the same quantity of energy for under 1000 dollars; the construction durations refrain policymakers to entertain the nuclear reactor as a feasible power generation source where it takes around seven years to complete and 15-16 years to breakeven.

Nuclear dependency globally was now 10 percent, peaked at 17.7 in 1996, and this is the second obstacle for nuclear energy globally. However, India’s view, contrary to the other nations, being the largest reserve of Thorium, gives an upper hand to maximize energy production by establishing thorium reactors which are undergoing the three-stage plan. Besides thorium reactors, SMRs are in consideration, especially the recent development in the USA where private firm Nu Scale advanced to develop the Small Modular Nuclear Reactor with the capacity of generating 50 Megawatts, which is not par to the level of traditional reactors but corresponds to the resilience it could provide electrifying those lands where electric GRIDs yet not connected. The rural area primarily benefits from such development as such modules are self-sustainable, where the reliance will be on water recycling, limiting water misuse.

The case of Jadugoda was an infamous case where Uranium plant radiation contributed to severe health deterioration, highlighted by Kyoto university research. Radiation is one of the critical issues alongside nuclear waste, which hinders nuclear energy’s ability to obtain massive consent, especially in rural areas.

Other Renewable sources talking about Hydropower, India has 18 pressurized heavy water reactors in operation, with another four projects launched totaling 2.8 GW capacity. India 2019 took over Japan, becoming the fifth-largest hydropower producer generating 162.10 TWh from 50 TWH installed capacity. Close to 100 hydropower currents are used, contributing around twelve percent to the total power generation. The procedure of hydropower generation emphasizes water flow tremendously; without the fast running, the water plant will be defunct and fail to produce power. This forces the policymakers to ignore the natural effects on the regions of the water flow is adequate. 

Climate change models are clear about the cascading impacts of global warming trends on the glaciers of the Himalayas, the primary source of water in the region that sustains the drainage network within the mountain chain. The current hydro onslaught in the Himalayas deliberately ignores contentious externalities such as social displacement, ecological impacts, and environmental and technological risks. In the rural areas, if the regions do not have such a large flow of water, it will discourage the policy marker from implementing it even if one state possesses water, it will obstruct the construction of such projects because of shortage of water and possibly drainage hindering to fulfill the critical water needs, especially in the Punjab region.

 Wind energy mechanical power through wind turbines as of 28 February 2021, India installed wind power capacity was 38.789 GW, the world’s fourth largest installed wind power capacity. Like hydropower, nature requires to perform its task where the wind flow determines the total power production. If a region is not naturally gifted, then feasibility is under question.

The last alternative Fossil fuel, which is heavily praised by the young generation, is solar energy. The country currently has 44.3 GW installed capacity as of 31 August 2021, where solar energy has the potential to generate electricity for rural areas and simultaneously reduce Fossil fuels consumption. The New and Renewable Energy (MNRE) expected “the total investment for upgrading to 100 GW solar power capacity cost around $94 billion. The cost-efficiency factor is a plus point of solar energy. However, the pace still needs to catch up in the quest to replace conventional sources of energy.   

The fossil fuels burned by the factories in the urban areas are the primary power contributor supplying power to the rural areas. This system heavily depends on the GRIDs vulnerable to atmospheric shifts such as storms.  

Moreover, even a minor breakdown might defuse the electricity power supply GRIDs for days, if not weeks. To tackle these issues, Portable Nuclear plants could be set up to give the villagers access to electricity without interruption. The reduction of size assists the government official in planning the safety strategy more swiftly simultaneously; cost efficiency is another factor where a policymaker can cut factory expenses.

Figure 1 GRID-level system costs for dispatch able and renewable technologies Materials requirement for various electricity generation technologies (source: US Department of Energy)

Figure 1 deciphers the cost relationship enabling us to comprehend the long-term financial cost when the connection cost among other eco-friendly energy sources is too high compared to fossil fuels. Nuclear energy outperforms all existing energy sources considered eco-friendly in connection cost and balancing cost. This development also illustrates that the factories lean more towards fossil fuels because of the low cost. However, economically speaking, the employment of such industries could be more sustainable in the long term.

The Photovoltaic, Hydro, and onshore alternatives, well-established sources of energy production, are not that reliable, and variation in power generation discourages them from being considered a superior replacement. 

Solar is affordable but unreliable because intermittency issues require storing backup, and the production depends mainly upon the sun, like the wind, for turbine energy. In contrast, coal requires man labor to extract from the mines and ignite it to produce energy if we consider the process in abstraction. The case of nuclear is different nuclear energy do rely on 239 Uranium and 242 Plutonium, in some cases 232 Thorium to attain the level where power could be generated, and uranium, to be precise, is scared in quantity to solve the enormous issue Enrico Fermi already in the 1940s, stated that nuclear reactors operating with ‘fast’ neutron are capable to fission not only the rare isotope U-235 which indicates towards A fast-neutron reactor.

The Covid and Rural development     

During the lockdown, seventy percent of the power consumption drop in rural India has been noticed; this development questions India’s energy policies which heavily relied upon fossil fuels for energy production. The GRID-electrification, the primary source of power supply in the rural household, reported monthly energy consumption of 39 kWh half of India’s national energy consumption average, which is a significant obstacle to the adoption of modern technology for overall growth in rural areas. A significant downfall has been noticed in the employment sector, tabled whether it could replace fossil fuel, which constitutes a significant number in employing rural workers. 

Deloitte’s study of the European nuclear industry suggested that nuclear provides more jobs per TWh of electricity generated than any other clean energy source. According to the report, the nuclear industry sustains more than 1.1 million jobs in the European Union. Aggressive promotion of nuclear energy will impact all other fields, such as education, the health sector, and employment. Running a conventional reactor requires a team who can resolve the complex task; however, if the reactor is small and portable, the operation fixations reduce significantly. 

Providing adequate function training will become the source of employment while reducing fissile fuel dependency. At the same time, nuclear reactors require sophisticated hands to run the function, which could reduce the unemployment created by fossil fuel industries in response to a carbon tax or depletion of fuels, more precisely, a severe rise in fuel prices.    

The Limits    

Although the enormous potential for nuclear energy possesses few areas that are still vulnerable whose exploitation might invite catastrophic such as the illegal transfer of nuclear energy by non-state actors, one of the critical issues India is facing is news of uranium confiscations currently haunts the world that India security vulnerability enabled the private persons to have a hand over fissile materials, the other issue that should be considered is the maintenance of nuclear plants Chornobyl is an excellent example of what extend of potential a nuclear disaster possesses still in several regions in Ukraine radiation exist. [Barry W. Brook, “Why nuclear energy is sustainable and has to be part of the energy mix”].

India needs to accelerate the nuclear problem while strictly abiding by the security norms of the nuclear policy widely accepted as a nuclear safety benchmark. Meltdown, Hazardous nuclear waste and maintenance predominated the circle of nuclear crisis (except France and Sweden, as a significant proportion of electricity generation depends on nuclear plants); currently, SMR is echoing to minimize such externalities; however, the effectiveness of such small module reactors must be scrutinized under tests before it could be considered as a genuine alternative to traditional reactors.


Nuclear energy is far superior to other fossil fuel energy alternatives. However, the low adaption is one of the critical issues that require tackling by incentivizing the research to develop several small scales portable nuclear reactor modules that stand on the international security parameters and simultaneously ensure a low probability of accidents. The employment prospect from nuclear reactors is enormous, and as the depletion of fossil fuel takes place could become the most employment service-providing sector.

 Two types of reactors are mainly highlighted first is a conventional nuclear reactor, and the second is portable nuclear reactors; government, in the long term, must concentrate on building small-scale reactors so cost efficiency will favor the rural people. Nuclear energy is a multi-sectoral project where the industries and the household will have greater access to electricity, but the complexity of reactor management advances specialization in education. Such problems are vital if India has any dream of total nuclearization.

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Azerbaijan seeks to become the green energy supplier of the EU

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image source: azernews

Recently, Georgia, Azerbaijan, Hungary and Romania signed an agreement to build a strategic partnership regarding green energy.   According to the document of the text, these four countries will be working together to develop a 1,195 kilometer submarine power cable underneath the Black Sea, thus effectively creating an energy transmission corridor from Azerbaijan via Georgia to Romania and Hungary.   For Europe, this is a golden opportunity that must be seized upon.

According to the International Monetary Fund, “Europe’s energy systems face an unprecedented crisis. Supplies of Russian gas—critical for heating, industrial processes and power—have been cut by more than 80 percent this year.  Wholesale prices of electricity and gas have surged as much as 15-fold since early 2021, with severe effects for households and businesses.  The problem could well worsen.” 

For this reason, Europe should switch as soon as possible to green energy supplies, so that they will rely less upon Russian gas and oil in the wake of the Ukraine crisis.   This will enable Europe to be energy independent and to fulfill its energy needs by relying upon better strategic partners, such as Azerbaijan, who are not hostile to Europe’s national security and the West more generally.  

By having this submarine power cable underneath the Black Sea, Azerbaijan can supply not only Hungary and Romania with green energy, but the rest of Europe as well if the project is expanded.   Israel, as a world leader in renewable energy, can also play a role in helping Azerbaijan become the green energy supplier of the EU, as the whole project requires Azerbaijan to obtain increased energy transmission infrastructure.  Israel can help Azerbaijan obtain this energy transmission infrastructure, so that Azerbaijan can become Europe’s green energy supplier.    

According to the Arava Institute of the Environment, “Israel, with its abundant renewable energy potential, in particular wind and solar, has excellent preconditions to embark on the pathway towards a 100% renewable energy system. Accordingly, Israel has already made considerable progress with regard to the development of renewable energy capacities.”   The Israeli government has been pushing hard for a clean Israeli energy sector by 2030.   Thus, Israel has the technical know-how needed to help Azerbaijan obtain the infrastructure that it needs to become the green energy supplier of Europe following the crisis in the Ukraine.

Given the environmental conditions present in Azerbaijan, which has an abundance of access to both solar and wind power, with Israeli technical assistance, Azerbaijan can help green energy be transported through pipelines and tankers throughout all of Europe, thus helping to end the energy crisis in the continent.   In recent years, Europe has sought to shift away from oil and gas towards more sustainable energy.     

With this recent agreement alongside other European policies, these efforts are starting to bear fruits.   In 2021, more than 22% of the gross final energy consumed in Europe came from renewable energy.   However, different parts of Europe have varying levels of success.   For example, Sweden meets 60% of its energy needs via renewable energy, but Hungary only manages to utilize renewable energy between 10% and 15% of the time.    Nevertheless, it is hoped that with this new submarine power cable underneath the Black Sea, these statistics will start to improve across the European Union and this will enable Europe to obtain true energy independence, free of Russian hegemony.  

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Energy Technology Perspectives 2023: Opportunities and emerging risks

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The energy world is at the dawn of a new industrial age – the age of clean energy technology manufacturing – that is creating major new markets and millions of jobs but also raising new risks, prompting countries across the globe to devise industrial strategies to secure their place in the new global energy economy, according to a major new IEA report.

Energy Technology Perspectives 2023, the latest instalment in one of the IEA’s flagship series, serves as the world’s first global guidebook for the clean technology industries of the future. It provides a comprehensive analysis of global manufacturing of clean energy technologies today – such as solar panels, wind turbines, EV batteries, electrolysers for hydrogen and heat pumps – and their supply chains around the world, as well as mapping out how they are likely to evolve as the clean energy transition advances in the years ahead.

The analysis shows the global market for key mass-manufactured clean energy technologies will be worth around USD 650 billion a year by 2030 – more than three times today’s level – if countries worldwide fully implement their announced energy and climate pledges. The related clean energy manufacturing jobs would more than double from 6 million today to nearly 14 million by 2030 – and further rapid industrial and employment growth is expected in the following decades as transitions progress.

At the same time, the current supply chains of clean energy technologies present risks in the form of high geographic concentrations of resource mining and processing as well as technology manufacturing. For technologies like solar panels, wind, EV batteries, electrolysers and heat pumps, the three largest producer countries account for at least 70% of manufacturing capacity for each technology – with China dominant in all of them. Meanwhile, a great deal of the mining for critical minerals is concentrated in a small number of countries. For example, the Democratic Republic of Congo produces over 70% of the world’s cobalt, and just three countries – Australia, Chile and China – account for more than 90% of global lithium production.

The world is already seeing the risks of tight supply chains, which have pushed up clean energy technology prices in recent years, making countries’ clean energy transitions more difficult and costly. Increasing prices for cobalt, lithium and nickel led to the first ever rise in EV battery prices, which jumped by nearly 10% globally in 2022. The cost of wind turbines outside China has also been rising after years of declines, and similar trends can be seen in solar PV.

“The IEA highlighted almost two years ago that a new global energy economy was emerging rapidly. Today, it has become a central pillar of economic strategy and every country needs to identify how it can benefit from the opportunities and navigate the challenges. We’re talking about new clean energy technology markets worth hundreds of billions of dollars as well as millions of new jobs,” said IEA Executive Director Fatih Birol. “The encouraging news is the global project pipeline for clean energy technology manufacturing is large and growing. If everything announced as of today gets built, the investment flowing into manufacturing clean energy technologies would provide two-thirds of what is needed in a pathway to net zero emissions. The current momentum is moving us closer to meeting our international energy and climate goals – and there is almost certainly more to come.”

“At the same time, the world would benefit from more diversified clean technology supply chains,” Dr Birol added. “As we have seen with Europe’s reliance on Russian gas, when you depend too much on one company, one country or one trade route – you risk paying a heavy price if there is disruption. So, I’m pleased to see many economies around the world competing today to be leaders in the new energy economy and drive an expansion of clean technology manufacturing in the race to net zero. It’s important, though, that this competition is fair – and that there is a healthy degree of international collaboration, since no country is an energy island and energy transitions will be more costly and slow if countries do not work together.”

The report notes that major economies are acting to combine their climate, energy security and industrial policies into broader strategies for their economies. The Inflation Reduction Act in the United States is a clear example of this, but there is also the Fit for 55 package and REPowerEU plan in the European Union, Japan’s Green Transformation programme, and the Production Linked Incentive scheme in India that encourages manufacturing of solar PV and batteries – and China is working to meet and even exceed the goals of its latest Five-Year Plan.

Meanwhile, clean energy project developers and investors are watching closely for the policies that can give them a competitive edge. Relatively short lead times of around 1-3 years on average to bring manufacturing facilities online mean that the 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 can have a significant effect on where the rest of these projects end up.

Amid the regional ambitions for scaling up manufacturing, ETP-2023 underscores the important role of international trade in clean energy technology supply chains. It shows that nearly 60% of solar PV modules produced worldwide are traded across borders. Trade is also important for EV batteries and wind turbine components, despite their bulkiness, with China the main net exporter today.

The report also highlights the specific challenges related to the critical minerals needed for many clean energy technologies, noting the long lead times for developing new mines and the need for strong environmental, social and governance standards. Given the uneven geographic distribution of critical mineral resources, international collaboration and strategic partnerships will be crucial for ensuring security of supply.

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