Energy technology manufacturing is rebalancing in a dynamic era for trade and industrial policy

The market for key energy technologies – solar PV, wind, batteries, electric vehicles, heat pumps, electrolysers – surpassed USD 1.1 trillion in 2025 after sustaining average annual growth of around 20% over the past decade. This expansion occurred despite continued price declines for many technologies. During the period 2023-2025 alone, solar PV module prices fell by around 50% and battery pack prices by around 30%.

Based on policies currently in place, the global market value of these energy technologies, which we examine in Energy Technology Perspectives 2026 (ETP-2026), is projected to reach around USD 1.9 trillion by 2035, which was roughly the size of the global crude oil market in 2025. If governments’ stated policy intentions are also considered, stronger policy support pushes the combined market value to more than USD 2.6 trillion by 2035. Across both scenarios, electric cars dominate the picture, accounting for around three‑quarters of total market value by the mid‑2030s.

Cross‑border trade has supported the rapid scaling of these energy technologies, even as trade policies affecting them have become more restrictive. Tariffs, duties, anti-dumping measures, local-content provisions and subsidy regimes have proliferated, tightening trade conditions and reshaping trade patterns. In 2024, for example, the announced trade‑weighted global average tariff and duty rate across the solar PV supply chain increased nine-fold relative to the previous year, reaching around 36%.

These changes have coincided with stronger policy efforts aimed at supporting domestic manufacturing, particularly in downstream segments close to the final consumer, such as solar PV module assembly and battery cell manufacturing, where scale‑up can often be achieved more quickly. Despite these increased incentives to manufacture domestically, international trade in key energy technologies continues to expand. The gross value of international trade in relevant products climbed to record levels in Q2 2025.

Demand for these energy technologies is increasingly driven by factors other than climate policy. Steep cost declines have strengthened their cost-competitiveness relative to incumbent technologies, while energy security concerns regarding imported fossil fuels have moved higher up the policy agenda since Russia’s full-scale invasion of Ukraine and the conflict in the Middle East that began on 28 February 2026.

As energy technology deployment accelerates against the backdrop of a rapidly changing geopolitical context, governments are presented with an evolving array of security concerns and trade-offs. Energy, trade and industrial policies are increasingly intertwined, with governments seeking to balance the affordability and speed of deployment against concerns around geographic concentration of manufacturing and economic security.

In 2023, investment in plants that manufacture key energy technologies reached nearly USD 220 billion. Investment then underwent a modest decline in 2024 and is estimated to have decreased further to under USD 200 billion in 2025. For comparison, global investment in oil production in 2024 was around USD 450 billion.

Batteries and electric vehicles accounted for the lion’s share of manufacturing investment in 2024 – more than three‑quarters of the total. Investment in solar PV manufacturing more than halved amid significant surplus capacity and stiff price competition, which was reflected in company margins, particularly in China. Wind manufacturing investment fell as supply chain disruptions squeezed margins and underwhelming auction results undermined investor confidence, especially in Europe.

China continues to attract most of the global investment in manufacturing for these technologies, accounting for around 70% of cumulative spending since 2020. It is also associated with a significant share of the manufacturing investment occurring in other countries, through its foreign direct investment.

While manufacturing investment is now cooling globally, underlying growth is taking place in several regions. Investment in the European Union nearly doubled between 2023 and 2024, spurred by industrial policies like the Net Zero Industry Act and Clean Industrial Deal. Korea saw a 25% increase in battery and EV manufacturing investment, and India's clean energy investment rose by more than 65%.

These regional increases are gradually broadening the base of manufacturing capacity, but global expansions are running significantly ahead of current deployment needs. For several technologies, the combined capacity of completed or cancelled projects now outweighs that of new announcements. This is clearly illustrated by manufacturing capacity for solar PV and battery cells. In 2024, installed capacity was more than double that of global demand (excluding any additions to inventories) for solar PV and more than triple that for battery cells.

Despite project cancellations and slowing investment in manufacturing capacity additions, production is still rising, particularly in China. The country’s domestic production across all the technologies and components we examine in ETP-2026 exceeds domestic demand, making export markets an important outlet for Chinese producers. China’s gross exports across these key energy technology product categories reached more than USD 160 billion in 2025, an increase of 11% relative to the previous year. China accounts for over 35% of global gross exports of these products, or approximately 50% when excluding intra-EU trade.  

Over the past decade, China’s solar PV output has increased thirteen‑fold to almost half a terawatt per year, with a large share of this expansion absorbed by domestic deployment. But around 40% of the increase in production was directed to export markets, underscoring how international demand has been integral to the industry’s rise.

Looking ahead, projections based on governments’ stated policies point to a similar interdependence between demand across international markets and Chinese exports for other key energy technologies: between 40% and 50% of the growth in China’s production of electric cars, battery cells and heat pumps over the next decade is destined for export markets. This reflects strong demand abroad and long lead times to build manufacturing capacity elsewhere.

As the Age of Electricity continues to unfold, many countries will remain reliant on international trade to satisfy demand for both clean energy technologies and fossil fuels. Where domestic production of energy technologies is insufficient to satisfy domestic demand, countries must rely on imports, as they do for fossil fuels. While there is a significant difference between imports of fossil fuels and those of energy technologies – energy flows vs. changes in stocks of equipment – monetary comparisons can provide a sense of scale.

The global traded value of fossil fuels in 2025 was around USD 1.6 trillion on a net basis, which is around six times higher than the equivalent figure for key energy technologies. The European Union’s energy import bill equated to around EUR 28 billion (USD 32 billion) per month in 2025, which was more than  five times higher than its net imports of key energy technologies. Even China’s substantial energy technology exports are dwarfed by the value of its fossil fuel imports.

Under stated policies, the European Union significantly decreases its reliance on fossil fuel imports over the coming decade. Measured as a share of total energy consumption, fossil fuel imports fall from 55% in 2024 to 40% in 2035. At the same time, the value of energy technology imports increases from USD 65 billion to USD 165 billion, resulting in a broadly flat net trade position across time for these two product categories combined. In the same scenario, China’s net exports of energy technologies more than double, reaching around USD 375 billion by 2035. By this time, they are approaching the value of its net fossil fuel imports, which decline by around 15% over the coming decade.

As energy technology deployment continues to surge, international trade remains essential to meeting demand. At the same time, increased domestic manufacturing can strengthen supply chain resilience and economic security, and enable greater participation in the economic opportunities associated with these supply chains.

Governments cannot prioritise everything at once in their industrial strategies. They need to be selective and play to their strengths, monitor progress and maintain political and economic headroom to course-correct as new evidence emerges. Strategies that balance openness to trade with targeted mitigation of specific security risks, maximising the benefits that can be obtained from partnerships and innovation, are likely to be most effective.

As governments work to identify priority areas for industrial strategy for their individual national or regional contexts, the IEA aims to provide an analytical aid to decision making. A forthcoming ETP Special Report on energy technology supply chains in Southeast Asia, leveraging the global analysis conducted for ETP-2026, will aim to enhance the current landscape of data and analysis on this topic to support policy makers in the region when designing their industrial strategies.