The Global Energy Perspective 2023 models the outlook for demand and supply of energy commodities across a 1.5°C pathway, aligned with the Paris Agreement, and four bottom-up energy transition scenarios. These energy transition scenarios examine outcomes ranging from warming of 1.6°C to 2.9°C by 2100 (scenario descriptions outlined below in sidebar “About the Global Energy Perspective 2023”). These wide-ranging scenarios sketch a range of outcomes based on varying underlying assumptions—for example, about the pace of technological progress and the level of policy enforcement. The scenarios are shaped by more than 400 drivers across sectors, technologies, policies, costs, and fuels, and serve as a fact base to inform decision makers on the challenges to be overcome to enable the energy transition. In this article, we examine key bottlenecks that may need to be overcome for the energy transition, as well as the opportunities they could bring.

As economies recover from the recent energy crisis, there is opportunity to reflect on the progress of the energy transition. For example, 2023 saw strong growth in the build-out of multiple low-carbon technologies for energy production and consumption. Despite uncertainties including price spikes, volatility, and security of supply, the uptake in solar photovoltaic (PV), electric vehicles (EVs), and electric heat pumps was higher than ever before, and the expansion of wind capacity in 2022 was the third highest on record (after 2020 and 2021), despite significant challenges in the industry, particularly in offshore wind. Five low-carbon technologies are projected to be critical for the energy transition: solar, wind, EVs, heat pumps, and green hydrogen. These belong to a larger family of climate technologies needed to deliver a deep decarbonization of the whole economy.

Yet, going forward, multiple bottlenecks need to be overcome for the continued growth of these low-carbon energy technologies. While concerted action would be needed to address these bottlenecks, the growth trajectory of these important technologies could offer major opportunities for investment and innovation—and overcoming the hurdles would help keep the energy transition on track.

Scaling up these technologies at the necessary pace to keep in step with global net-zero commitments is projected to require significant effort, including the expansion of supply chains, which could pose major challenges. We stress-tested different scenarios for these five key electrification technologies by assessing them across six potential bottlenecks that could restrict their growth, with the aim to better understand the following questions:

In our energy transition scenario that would achieve existing climate commitments, two-thirds of the potential bottlenecks assessed run a risk of delaying the path to net-zero commitments. Around a quarter of these potential bottlenecks are classified as high risk, without unlocks identified to date.

All technologies are expected to be constrained by material and infrastructure bottlenecks, if left unaddressed. Overall, the biggest bottlenecks affecting all five technologies are expected to be the availability of key materials, especially lithium for EVs, iridium for green hydrogen electrolyzers, and rare earth elements, including dysprosium and terbium, for wind.1
Infrastructure could also become a significant bottleneck, including power grids for renewable energy sources (RES), hydrogen distribution and fueling networks, and, to lesser extent, EV charging networks.

The biggest bottlenecks in scaling wind are expected to be materials scarcity, local land regulations, and speed of investments. The highest-risk bottleneck is projected to be in materials—specifically the supply of rare earth metals for magnets, with severe imbalances in magnets for predominantly offshore wind expected by the end of this decade. Medium-risk bottlenecks could arise in land, infrastructure, and investment. Onshore wind is not expected to be constrained by land on a global level, but for some countries, due to land characteristics (such as mountains or islands) or regulations (slow permitting and minimum distance to built environments), land could be scarce.

In power T&D infrastructure, grid build-out would need to double until 2050 to meet commitments, which represents a slowdown compared to the pace of growth in the past five decades. However, execution at grid operators could be at risk due to a lack of technical personnel and slower pace of investments. Investments in wind generation have recently slowed down due to the pressure on returns as a result of increased interest rates and higher material and building costs, which could put future investments at risk.

The major bottlenecks for solar PV scale-up are projected to center on materials scarcity. Copper and tin are the most critical materials and will constitute the main bottleneck of solar PV development in most scenarios. However, unlocks are available, as supply could ramp up (especially for tin). The other medium-risk bottleneck facing solar is in infrastructure, which faces similar challenges concerning grid build-out as wind for large-scale developments.

Green hydrogen is projected to face significant risks across all bottlenecks assessed. In materials, the supply of iridium would need to ramp up to meet demand expectations. However, this lack of supply could in part be unlocked by changing from electrolyzers based on proton exchange membrane technology to other technologies. In manufacturing, around 130–345 gigawatts (GW) of electrolyzer capacity could be required to meet green hydrogen demand in 2030, of which 246 GW has been announced to date. However, only 2 GW is currently operational, and a final investment decision has been made for only another 7 GW (less than 5 percent of required capacity). For infrastructure, new fueling stations, transport capacity (pipelines and shipping), and storage terminals are needed. Green hydrogen is also expected to struggle to be cost competitive with blue or grey hydrogen before 2030 in most geographies, putting all scenarios relying on major green hydrogen expansion at risk.

Heat pump costs would need to come down to be competitive with gas-based alternatives. For most regions, although the total cost of ownership (TCO) for heat pumps is getting close to cost-competitiveness in 2030, it still remains more expensive than natural gas-based heating without subsidies. In manufacturing, heat pump demand growth is expected to be met by expanding current production capacity, but might fall short in faster scenarios, as these would require the opening of new production capacity in the short term.

Battery material is expected to be the key constraint to accelerated EV growth, but unlocks are available. Material availability is expected to be sufficient up to the Current Trajectory scenario, but Further Acceleration and Achieved Commitments scenarios would require material substitutions or other levers to meet goals. Shifting from nickel, manganese, cobalt-based batteries to manganese-based batteries could help in this regard. Other risks include manufacturing, where adjusted supply capacity may be sufficient to balance the lithium-ion battery market in 2030 up to the Further Acceleration scenario. Regarding cost competitiveness, the TCO of EVs is expected to be competitive with internal combustion engines by 2025 in most regions (including subsidies), and could become cheaper into the future, however, in the Further Acceleration and Achieved Commitments scenarios, material shortages are expected to delay the TCO crossover point.

Although the identified bottlenecks pose major risks for a successful, fast, and orderly energy transition, there are also multiple unlocks that are available today to resolve them and thus mitigate the risks of a delayed transition. When assessing these unlocks, we found that they can help address 11 out of the 16 bottlenecks. While concerted action would be necessary to implement these unlocks, they could also represent significant opportunities for investment and innovation. To overcome bottlenecks in each of the six dimensions while seizing the associated opportunities, the following actions may be needed:

Implementing these unlocks could be critical to ensuring the rapid scaling of key technologies to enable a fast and orderly energy transition and meet pressing climate goals.

To request access to the data and analytics related to our Transition bottlenecks and unlocks, or to speak to our team, please contact us.