China’s pace puts pressure on global clean energy transition

Global clean energy investments have increased significantly over the past decade, rising from $248 billion in 2014 to $745 billion in 2023. During this time, China has deployed more clean energy technologies than all other countries combined. While concerns persist about China's dominance in renewable energy supply chains, Rystad Energy’s analysis highlights that China's rapid scale-up has not only positioned it as a cleantech leader but also triggered a global response, creating a ripple effect. Other nations are now following China's lead, accelerating their own energy transitions in response to this competitive pressure.

Further analysis from Rystad Energy also suggests that China’s total spending, to date, in solar and wind has outpaced the rest of the world, climbing from $150 billion in 2020 to nearly $400 billion in 2023. However, as other regions catch up, China’s investment lead is projected to narrow by the year’s end and may fade entirely by 2027 amid increasing spending by the rest of the world.

China also excels on a per-capita basis, surpassing key regions like Europe and the US. Between 2020 and 2024, China has made substantial investments in renewable energy infrastructure relative to its population size—a feat more challenging compared to the less populated US and Europe. While Europe and the US are gradually increasing their capital expenditure, they are expected to lag behind China through the end of the decade.

The scale of China’s investments cleantech capacity has had a profound impact on the global energy transition. Unmatched capacity growth and the resulting price cuts for Chinese equipment have enabled other regions to accelerate their renewable energy investments. This competitive pressure has also driven domestic cleantech manufacturing industries worldwide to increase their output. The results are clear: as China ramped up its cleantech investments, the rest of the world followed in quick succession

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Vast manufacturing capabilities and infrastructure are the primary drivers behind China’s kingship in the cleantech sector, particularly its solar and battery supply chains. The country controls around 80% of the global solar PV module supply chain and produced, on average, 90% of all the world’s solar PV components last year. This share is expected to grow further, as China shows no signs of loosening its logistical grip, with production projected to increase by 150% by 2030. However, 2027 marks a critical point when the rest of the world is expected to begin outpacing China in manufacturing, a direct result of growing investments, particularly in the US.

Regions including Europe, the US and India are actively expanding their solar panel manufacturing capacity to reduce reliance on China. The US and India are aggressively investing in cell manufacturing and module assembly plants, aiming to achieve self-sufficiency by 2026. However, their production costs remain significantly higher than China's. Chinese modules cost around $0.10 per watt, while US prices hover around $0.30 per watt, impacting project economics and the overall pace of the energy transition.

As nations work to develop their own cleantech manufacturing capabilities, China's massive production capacity positions it as a dominant price leader, posing a significant challenge. On one hand, countries are eager to build local industries to boost resilience, create jobs, and drive innovation, all while grappling with China's lower prices. At the same time, these countries often trail behind China on the learning curve and have set more ambitious climate targets. This creates a complex dilemma: whether to invest in domestic cleantech manufacturing to advance local industry or to rely on Chinese supplies to meet climate goals. Balancing the growth of local industries with the need to utilize China's existing capabilities is a critical issue for achieving global climate objectives.

Balancing domestic manufacturing with a cost-effective energy transition is particularly challenging for countries with limited infrastructure. Although using Chinese components can speed up the deployment of clean technologies and help meet climate goals, it raises concerns about over-reliance on a single supplier, with fears that this dependence could expose countries to potential risks from geopolitical tensions, trade restrictions, or supply chain disruptions. Consequently, nations must navigate the balance of ensuring energy security and affordability while safeguarding long-term strategic interests.

Subsidies and government support have been pivotal in shaping the energy transition and cleantech development, particularly in how different regions manage imports and tariffs. In the US, India and the European Union (EU), current policies lean toward tariffs and other restrictive measures to curb Chinese imports. For instance, the US Biden administration recently raised the import tax on Chinese electric vehicles (EVs) from 25% to 100%, bringing the total duties to 102.5%. Meanwhile, the EU has proposed tariffs on Chinese-made EVs ranging from 17% to 36.3%. These moves are responses to concerns over job protection and industry competitiveness in the US, while the EU cites China's alleged unfair subsidization practices as the basis for its tariffs. Collectively, these policies might impede the global energy transition compared to a scenario where Chinese imports could flow more freely.

In contrast, China’s local EV industry, valued at $230.8 billion between 2009 and 2023, has rapidly strengthened its global position. With a dominant role in both battery energy storage and manufacturing – controlling 77% of global battery production capacity and set to install more battery storage than the rest of the world combined – China continues to lead the market. Although subsidies are being gradually phased out, the government still offers substantial tax exemptions, projected to reach $76 billion over the next four years. This financial support has made EVs more affordable, accelerating their adoption and fueling a large domestic market that drives industry growth. These initiatives align with China's broader environmental goals, which aim to reduce air pollution, cut oil dependency and achieve carbon-reduction targets. In contrast, the EU lacks direct EV subsidies at the union-wide level, instead relying on policies such as emission regulations that make internal combustion engines less competitive.

As China phases out some subsidies with the maturing market, the extensive government support it has provided positions the country as a major player in the global EV industry. This dominance presents a dilemma for the US and the EU: whether to embrace Chinese imports for faster, more affordable expansion of their EV fleets, or impose trade barriers and bolster domestic incentives to support local manufacturers, which may result in slower adoption and higher costs. In turn, these nations might have to investigate increased subsidies and incentives as a necessity in order to maintain a comparable pace of decarbonization.

Contacts

Lars Nitter Havro
Head of Energy Macro
Phone: +47 24 00 42 00
lars.nitter.havro@rystadenergy.com

Kartik Selvaraju
Media Relations Manager 
Phone: +65 8779 4619
kartik.selvaraju@rystadenergy.com 

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