Innovation

The IEA Clean Energy Technology Guide contains information on more than 500 individual technology designs and components that can contribute to getting on track with the NZE Scenario. There have been important developments across various sectors since our last assessment in 2022, as well as several additions to our tracking. Selected examples are featured below. 

Why is this technology important?

Sodium-ion batteries have the potential to completely avoid the use of less abundant critical metals, and are the only battery chemistry currently under development that does not require lithium. Their main drawback is their lower energy density, which means that they are better suited to stationary storage and lower-range EVs. 

What happened?

In 2022, the world’s largest battery manufacturer, CATL, announced that it would begin production of sodium-ion batteries by 2023, and the IEA assessment of this technology increased from TRL 3/4 (early prototype) to TRL 6 (full prototype at scale) as a result. Since then, multiple carmakers have announced plans to market sodium-ion electric cars (e.g. BYD’s Seagull), indicating further technological progress and an upgrade to TRL 8 (first-of-a-kind commercial) if sales materialise as planned. 

What remains to be done?

In the NZE Scenario, today’s early-stage EV technologies, including advanced battery designs and alternative chemistries such as sodium-ion batteries, reach market maturity by 2030, helping to guarantee continued cost declines, improved performance and lower exposure to materials with volatile prices. The sodium-ion batteries developed by CATL are estimated to cost 30% less than lithium iron phosphate batteries, but their energy density remains much lower than lithium-ion counterparts. More efforts will be needed to develop alternative battery chemistry options for higher-range vehicles, such as solid-state batteries. There is also uncertainty on the number of charge-discharge cycles sodium-ion batteries can endure: some prototypes claim a 80% capacity retention for 400 cycles, others more than 3 000 cycles, while lithium-ion batteries average at 3 500. For more information, see the IEA Global EV Outlook. 

Why is this technology important?

Solid oxide electrolysers (SOEC) are the most efficient technology among electrolyser designs, resulting in lower electricity demand, and can be integrated in industrial processes where waste heat is available. In addition, they have lower requirements for critical material than the two main types of electrolysers used today (alkaline and proton exchange membrane). The co-existence of several designs can help to diversify and increase the resilience of electrolyser supply chains. 

What happened?

The two largest demonstration SOEC electrolysers started operating in 2023. Sunfire installed a 2.6 MW SOEC electrolyser in a Neste oil refinery in the Netherlands, and Bloom Energy installed a 4 MW electrolyser in a NASA research centre in California. Bloom Energy also increased its manufacturing capacity in 2022, moving towards GW-scale operations in the United States. Topsoe advanced the construction of an industrial-scale 500 MW/yr manufacturing facility in Denmark, expected to be online in 2025. Based on these developments, SOEC are quickly approaching niche commercialisation, having only been commercialised in the past year. As a result, the IEA assessment of SOEC electrolysers has increased from TRL 7 (pre-commercial demonstration) to TRL 8 (first-of-a-kind commercial). 

What remains to be done?

In the NZE Scenario, the cumulative deployment of electrolysers for low-emission hydrogen reaches over 550 GW by 2030, up from under 1 GW in 2022. The rapid commercialisation of all electrolyser designs can facilitate this level of deployment by diversifying the technology pool and reducing pressures in the scale up of supply chains. 

Why is this technology important?

Process emissions from the calcination of limestone make up about two-thirds of global emissions of the cement industry and are the hardest to abate. Lowering these emissions will rely on widespread deployment of low-cost carbon capture. By performing the calcination of limestone in a sealed vessel, direct separation makes it possible to obtain a concentrated stream of CO₂, which simplifies the capture process and is expected to result in considerably lower capture costs. If the source of heating is low- or zero-carbon, the process could achieve near zero-emission cement production. 

What happened?

Following the success of LEILAC-1, which attained a carbon capture capacity of 25 ktCO₂/yr at a cement plant in Belgium, LEILAC-2 was announced and awarded EUR 16 million from the EU Horizon programme. The project aims to build a scalable and modular design with an operational capacity of 100 ktCO₂ per year to be retrofitted into Heidelberg Materials cement plant in Hanover. As of early 2023, the final investment decision has been passed and construction period has started. If plans materialised as announced, the IEA assessment of this technology would increase from TRL 6 (full prototype at scale) to TRL 7 (pre-commercial demonstration).  

What remains to be done?

Engineering studies for other projects looking at applying this technology in commercial settings began in 2022. Application of the technology in emerging markets and developing economies (EMDEs) needs to be advanced in particular, as they currently produce 85% of the emissions from the cement industry, a trend which is expected to continue. Use of low-emission fuel sources such as renewable electricity as the heating source needs to be developed, proven, and taken up for this to become a near zero-emission production method. Further developing CO₂ utilisation and storage technologies is also important, in parallel to carbon capture. 

Why is this technology important? Offshore wind will be an important source of renewable electricity in the transition to net zero, but around 80% of the world’s offshore wind resource potential lies in waters deeper than 60 metres. Floating turbines are needed to utilise this resource. Floating offshore wind can also be used to produce hydrogen, thus supporting broader decarbonisation efforts.  

What happened? Floating offshore wind is not a new technology. The first MW-scale floating turbines were installed in the 2000s and the first commercial project (Hywind Scotland, 30 MW) started operating in the United Kingdom in 2017. As of 2022, global installed floating offshore wind stood around 190 MW, or just 0.3% of total offshore wind capacity. The success of smaller-scale demonstrators, further technology advancements and cost reductions are now convincing countries and corporates to scale-up and include floating offshore wind in their planning. Far larger projects are under construction, at capacities of up to 90 MW, with floating parks of several hundred MW announced for 2025-2026. In China, a 1 GW farm is planned for 2027 in Wanning (Hainan). Plans for a 6-GW floating wind farm for 2030 have been announced in Korea. Countries are setting more ambitious targets, such as the United States (15 GW by 2035) and the United Kingdom (5 GW by 2030). Most operating projects use semi-submersible or spar-type floating foundations, which in the IEA assessment have reached TRL 8 (first-of-a-kind commercial demonstration) and this could be further upgraded in the coming years if announced projects come to fruition. In 2022, the world’s first floating hydrogen production platform was inaugurated in France, with electricity from a floating offshore wind turbine. 

What remains to be done? Floating offshore wind is expensive, with electricity costs being roughly 50% higher compared to fixed-bottom offshore wind. Further cost reductions, for example through standardisation and modularisation, will be critical for the success of the technology. The United States announced a Floating Offshore Wind Shot, with the aim of reducing costs by 70% to USD 45/MWh by 2035. 

Why is this technology important?

This technology makes use of micro-organisms to help recover metals (lithium, cobalt, copper, nickel, manganese, aluminium), which could prove important for meeting demand for key critical minerals for energy technologies in the future, as well as reducing energy consumption relative to production from raw minerals. Waste is ground to a fine powder in which bacteria thrive, dissolving the contained metals, which can then be extracted.  

What happened?

Bioleaching has already been in use in the mining industry for years, with about 5% of gold and 20% copper produced with this technology. In 2022, company Mint Biomining built the first electronic waste biorefinery in Australia after receiving AUD 4.2 million (USD 2.7 million) in public funding. This plant is set to recycle 3 000 tonnes of electronic waste per year. As a result, the IEA assessment of bioleaching for electronic waste – including lithium-ion batteries – increased from a TRL of 3-4 (early prototype) to 8 (first-of-a-kind commercial). 

What remains to be done?

The competitiveness of this technology compared to more conventional metal recycling methods such as pyro- and hydro-metallurgy remains to be demonstrated. Furthermore, while the efficiency rate through bioleaching can be higher than via other methods, it takes much longer. 

Why is this technology important?

Vacuum Insulation Panels (VIPs) are a thin and high-performance insulation material, allowing for a thinner building envelope that is therefore relevant for applications where space is limited – as in most urban environments. Many existing buildings will still be standing by 2050, and not all meet energy efficiency standards. VIPs are particularly important for the renovation of existing buildings, a critical pillar to achieve net zero emissions. 

What happened?

VIPs are not an entirely new technology, and have already been used in infrastructure projects such as the renovation of London Bridge Station (2018) and the construction of the Grand Tower Frankfurt (2020). As of 2023, these panels are commercially available through several companies. The IEA assessment has therefore increased VIPs from TRL 8 (first-of-a-kind commercial) to TRL 9 (commercial operation in relevant environment). 

What remains to be done?

VIPs would need to last for more than 25 years to be a good fit for widespread building applications. While there have been installations in the past 15 years, few cases have long-term monitoring that would be necessary to draw conclusions on long-term performance. Furthermore, the ISO standard on VIPs is still under development. 

At least USD 90 billion in public funding needs to be allocated globally by 2026 for demonstration projects in clean energy technologies for them to be commercially ready by 2030 and help deliver net zero emissions by mid-century. In September 2022, several governments (Australia, Canada, the European Commission, Finland, France, Germany, Japan, the Netherlands, Norway, Poland, the Republic of Korea, Singapore, Sweden, the United Arab Emirates, the United Kingdom and the United States) came together and committed USD 94 billion by 2026 for clean energy demonstration.  

The IEA tracks major demonstration projects in a freely accessible database, which is updated regularly. As of mid-2023, for example, the database listed over 170 clean energy demonstration projects in industry, a sector where emissions can be hard to abate and many clean energy technologies still require demonstrating. Most of these projects were located in IEA member countries, particularly in Europe and North America. Data on funding remains scarce overall, but current tracking suggests public funding is essential to push forward demonstration in these technology areas, accounting for a large share of total funding – between 40-70% in most cases with some private co-funding, and up to 90% in some cases. 

Examples of key projects include: 

• Aluminium. Carbon-free aluminium smelting is making progress, as the Elysis project is expected to reach commercial scale in 2024 through deals with major companies like BMW. Electrification efforts for alumina refining include Alcoa’s Mechanical Vapour Recompression project and Renewable Powered Electric Calcination pilot in Australia, and Alunorte’s first commercial operation of an electric boiler – a more mature technology – in Brazil.  
• Cement. As mentioned above, a final investment decision was made for the LEILAC-2 project, a large-scale demonstration of capturing process CO2 emissions through direct separation in cement production, after the successful completion of LEILAC-1. 
• Chemicals. Six petrochemical companies in Belgium, Germany and the Netherlands (BASF, Borealis, BP, LyondellBasell, SABIC and Total) launched the “Cracker of the Future” consortium in 2019 to investigate how naphtha or gas steam crackers could be operated using renewables through electrification instead of fossil fuels to produce base chemicals. In 2022, BASF, SABIC and Lince started construction of a multi-megawatt demonstration plant to start operations in 2023. 
• Iron and steel. After producing the world’s first fossil-free steel through hydrogen-based direct reduction in 2021, the Hybrit project is making progress and aims to demonstrate industrial-scale production in 2026. As part of the programme, the world’s first rock cavern hydrogen storage facility started operations end-2022, with demonstration running until 2024. Meanwhile, the European Commission approved in 2023 state support to ArcelorMittal to demonstrate low-emission industrial steel production through hydrogen-based direct reduced iron in Gijon (Spain) for EUR 460 million and in Hamburg (Germany) for EUR 55 million, with operations expected to start in 2025-2026.  

Governments have a major role to play in shaping energy innovation priorities, including by allocating public budgets for energy RD&D. In 2022, public spending on energy R&D rose to nearly USD 44 billion globally, over 80% of which was allocated to clean energy R&D. At 5%, the increase was nearly on par with the average growth rate over the 2017-2021 period of 7%, but slower than the post-Covid-19 9% growth rate in 2021.  

As in 2021, we estimate that in 2022 China was the largest source of public energy R&D spending growth in absolute terms, accounting for a third of the global total, as support for clean energy innovation strengthened under the 14th Five-Year Plan (2021-2025). China has consolidated its place as the world’s top energy R&D spender, ahead of Europe and the United States, with growth in China masking less encouraging trends elsewhere. With the exception of Australia and Belgium, which recorded notable increases, there was a dip of 1.5% in 2022 among IEA member countries for which data are available. While the impacts of the pandemic do not seem to have led to a significant setback, the expectations of a spending boost as economies recovered are yet to materialise. Stagnation would not bode well for countries that are seeking to bolster their competitiveness in clean energy supply chains and manage inflationary pressures. Our estimates indicate that spending in EMDEs outside China has not grown in the past five years, accounting for just 5% of the global total in 2022. 

In 2022, energy R&D spending by listed companies was up 10% relative to 2021, reaching USD 131 billion. While this growth rate was slightly under that of 2021 (14%), both years stand significantly above pre-pandemic rates, indicating swift recovery. Spending in 2022 was 25% higher than pre-pandemic levels in 2019.  

However, in many cases spending did not keep pace with higher revenues for energy companies, reflecting the fact that R&D budgets are typically set in advance and that high energy prices were unanticipated. This opens opportunities to further increase R&D spending in 2023. Much of the growth in recent years has come from companies headquartered in China, which accounted for over 40% of the total in 2022 compared to 20% in 2015. In Europe and the United States, growth stood at around 5% in 2022 relative to 2021. We estimate that in 2022, EMDEs excluding China accounted for about 3% of corporate energy R&D spending (by country of headquarters). 

In 2022, lines of business that saw important growth included the following: 

• Automotive, the biggest area of energy-related corporate R&D spending, was up 8% to USD 52 billion. 
• Spending on batteries, hydrogen and fuel cells boomed by 50% relative to 2021 to USD 5 billion, nearly five times the level in 2015.  
• Spending on renewables was up 15% to USD 15 billion, more than double the level in 2015. 
• To compare, spending on oil and gas was up 6% to USD 19.5 billion and coal mining and processing up 15% to USD 6.7 billion. 

Heavy industry and the long-distance transport sector require some of the most transformational technology changes in the NZE Scenario. This turns the spotlight on companies outside those typical to the energy sector, which allocate only part of their R&D to energy efficiency or fuel switching. Key developments in these sectors in 2022 included: 

• Cement companies spent USD 3.5 billion on R&D, a small increase of 5% relative to 2021 but nearly three times the levels in 2015.  
• Similarly, iron and steel producers spent about USD 18 billion on R&D, a slight 1% increase relative to 2021, but more than twice the budgets allocated in 2015.  
• Chemicals producers increased spending by 10% in 2022 to USD 54 billion, its first significant increase since 2015 levels. 
• In pulp and paper production, R&D spending dipped slightly but remained above the USD 2 billion threshold, around 40% higher than spending levels in 2015. 
• After a dip in 2021 in the wake of the Covid-19 pandemic, R&D spending by long-distance transport companies rebounded in 2022, to more than 2019 pre-pandemic levels in many cases. Spending was up by 9% in aviation to just under USD 14 billion, 7% in rail to nearly USD 5.5 billion, and 6% in shipping to USD 3.1 billion and 6% in trucks to nearly USD 14.5 billion. 
  

Early-stage VC typically supports entrepreneurs with funding for technology testing and design. This is often a good fit for technologies with lower upfront capital needs, but in recent years it has increasingly been directed to more “asset-heavy” technologies (e.g. heavy industry, long-distance transport, carbon capture, utilisation and storage [CCUS] and nuclear).  

A new high was reached in 2022 as energy technology start-ups raised USD 6.7 billion of early-stage VC funds, up nearly 20% relative to 2021 and three times as high as pre-pandemic levels in 2019. Most notably, start-ups in CO2 capture, energy efficiency, nuclear and renewables nearly doubled or more than doubled their 2021 level of funding, which was already much higher than the average for the preceding decade.  

Early-stage energy VC has shown impressive resilience to the economic impacts of the pandemic and the global macroeconomic crisis. Clean energy is set to continue to outperform other segments – such as agriculture and food, bio, medical and digital technologies – for which VC investment has fallen dramatically since 2021. This indicates continued investor confidence in energy transitions and recognition of major market opportunities for disruptive new energy technologies. Preliminary data for the first quarter of the year suggest growth could continue in 2023. 

Meanwhile, growth-stage funding, which requires more capital to fund less risky innovation, product development and scale-up, rose by only 1% in 2022 and was very weak in Q1 2023. Global macroeconomic difficulties have reduced the amount of capital available and raised the cost of scaling up nascent businesses, despite higher fossil fuel prices in 2022 that could have contributed to making many clean energy start-ups a more attractive proposition. Ongoing restraint in the banking sector suggests investment is not expected to bounce back quickly. 

While a few EMDEs outside China are seeing strong activity in some cases, such as India, which accounts for a large share of global VC investments in electric two- and three-wheeler start-ups, we estimate that in 2022 these countries accounted for only around 5% of energy VC (by country of start-up headquarters). 

Since our last assessment in 2022, we observe a trend towards indirect policy support for clean energy innovation through industrial and supply chain strategies. Several governments have put forward major policy packages aiming at reshoring technology development and manufacturing. While these plans are not innovation-specific, they could significantly accelerate the rate of innovation and improve the competitiveness of pre-commercial technologies but may also erect barriers to knowledge sharing between regions. Batteries and critical minerals, hydrogen, advanced renewables and nuclear have gained particular focus. 

Major policy highlights in 2022-2023 include the United States’ Inflation Reduction Act (August 2022). The Act includes direct R&D funding (e.g. USD 2 billion for improvements to federal laboratories up to 2027), support for the scale-up of near-commercial technologies (e.g. USD 3.6 billion to guarantee up to USD 40 billion of loans to innovative technology projects and 50% grants to demonstration projects for industrial decarbonisation by 2026), and incentives for companies to develop better products (e.g. tax credits for domestic equipment manufacturing, low-emission fuel production, home retrofits and vehicles). Hydrogen, CCUS, electric vehicles and batteries, and critical minerals rank among core focus areas. These measures are in addition to the US Infrastructure Investment and Jobs Act, which provides extensive direct support, such as through the Office of Clean Energy Demonstrations, which as of mid-2023 had announced nearly USD 26 billion for projects across hydrogen, CCUS, industry, power and energy storage, and through the Office of Energy Efficiency and Renewable Energy, which provides up to USD 750 million for R&D and demonstration in clean hydrogen electrolysis, use and recycling. Other indirect measures include delays to corporate R&D amortisation until 2025 to stimulate private-led innovation. 

In the European Union, the Net Zero Industry Act and Green Deal Industrial Plan (Q1 2023) include targets for manufacturing, public procurement guidelines and regulatory exemptions for clean energy technology. The Act also expands support for innovation through the EU Innovation Fund and proposals for net zero regulatory sandboxes. These measures provide detail on energy technology as part of the overall New European Innovation Agenda (Q3 2022). Financing is not yet fully fleshed out, but there are indications that the Innovation Fund could dedicate EUR 40 billion to Green Deal R&D by 2030. In mid-2022 the Fund awarded EUR 1.8 billion of direct funding to 17 large projects in batteries, hydrogen, solar and wind, and – in response to the ongoing energy crisis – the fund’s budget has been doubled to EUR 3 billion for the next round. The European Union also runs five Important Projects of Common European Interest (IPCEI) to fund new technologies in hydrogen, batteries and microelectronics, for a total approved public funding of EUR 18 billion, expected to unlock a further EUR 36 billion in private funding. The European Union also operates InvestEU to support private-led technology development. Since 2020 the European Investment Bank (EIB) has extended EUR 7 billion in loans to support the energy-related R&D programmes of 45 firms, and in 2022 new energy R&D credit from the EIB reached its highest value since 2013, when such loans were a response to the global financial crisis. Recent focus is less on the automotive sector than in 2012-2017 and more on renewables and industrial decarbonisation. Under InvestEU, the EU also partnered with Breakthrough Energy Catalyst to invest USD 1 billiion over 2022-2026 in projects in hydrogen, aviation fuels, direct air capture and long-duration energy storage. 

Many individual countries have also set out policies to expand support to clean energy innovation. A selection of such policies is featured in the table below, and more information is available in the IEA policies and measures database and the online policy explorer developed by the OECD and European Commission focusing on science, technology and innovation policies.