Global clean energy investments have increased significantly over the past decade, rising from $248bn in 2014 to $745bn in 2023, according to Rystad Energy. During this time, China has deployed more clean energy technologies than all other countries combined. Its rapid scale-up has positioned the country as a clean tech leader, controlling, for example, around 80% of the global solar PV module supply chain and producing, on average, 90% of all the world’s solar PV components last year.  

Meanwhile, China’s domestic electric vehicle (EV) industry, valued at $230.8bn between 2009 and 2023, has rapidly strengthened its global position. The country now holds 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, adds Rystad Energy.

However, while using Chinese components can help other countries speed up the deployment of clean technologies and meet climate goals, many nations are increasingly concerned that a dependence on a single supplier could expose them to potential risks from geopolitical tensions, trade restrictions or supply chain disruptions.

As a result, regions such as Europe, the US and India are actively expanding their domestic clean tech manufacturing capacity in order to reduce reliance on Chinese imports. The US and India, for example, are aiming to achieve self-sufficiency in solar cell manufacturing and module assembly plants by 2026. However, their production costs remain significantly higher than China’s. Chinese modules cost around $0.10/W, while US prices hover around $0.30/W, impacting project economics and the overall pace of the energy transition, notes Rystad Energy.

In an effort to boost the US domestic supply chain, the Department of Energy has announced plans to invest $3bn in 25 selected projects across 14 states to boost the domestic production of advanced batteries and battery materials nationwide. Doing so will enhance US energy security and economic competitiveness, while strengthening the nation’s grid and supporting electrification of the transportation sector, it says.  

Subsidies and government support in the US and elsewhere are also being used in an attempt to curb China’s supply chain dominance. For instance, the US recently raised the import tax on Chinese EVs from 25% to 100%, citing concerns over job protection and industry competitiveness, bringing the total duties to 102.5%. Meanwhile, the European Union has proposed tariffs on Chinese-made EVs ranging from 17% to 36.3%.

As global investment and government support for the development of domestic clean tech capabilities continues to grow, Rystad Energy expects China’s supply chain lead to narrow, with 2027 targeted as a potential date at which the rest of the world could begin outpacing China in manufacturing.

Record growth driving the cost advantage of renewable power

Meanwhile, a new report from the International Renewable Energy Agency (IRENA) puts a positive spin on the development of renewable supply chains in China and the rest of the world. It suggests that 81% (382 MW) of the record 473 GW of new utility-scale renewable projects commissioned in 2023 were cheaper than fossil fuel alternatives, ‘offering countries a compelling business and investment case to triple renewables by 2030’.

According to the Renewable power generation costs in 2023 report, solar photovolatic’s (PV) global costs in 2023, for example, were 56% lower than fossil fuel and nuclear options, dropping to around US¢4/kWh in just one year.  

‘Overall, the renewable power deployed globally since 2000 has saved up to $409bn in fuel costs in the power sector,’ it concludes.

Commenting on the report’s findings, IRENA’s Director-General Francesco La Camera says: ‘Renewable power remains cost-competitive vis-à-vis fossil fuels. The virtuous cycle of long-term support policies has accelerated renewables. In return, growth has led to technology improvements and cost reductions. Prices for renewables are no excuse anymore; on the contrary. The record growth of renewables in 2023 exemplifies this. Low-cost renewables represent a key incentive to significantly increase ambition and triple renewable power capacity by 2030, as modelled by IRENA and set by the UAE Consensus at COP28.’

Achieving the tripling renewables target requires global renewable capacity to reach 11.2 TW by 2030, adding an average of 1,044 GW of new capacity annually through 2030. Some 8.5 TW would come from solar PV and onshore wind alone, according to IRENA’s World Energy Transitions Outlook.

Most importantly, the tripling goal must be accompanied by key energy transition enablers, such as battery energy storage systems. Storage project costs have dropped by 89% between 2010 and 2023, facilitating the integration of high shares of solar and wind capacity by helping address grid infrastructure challenges, notes the report.

‘Renewable power generation has become the default source of least-cost new power generation. Policy makers and stakeholders should focus on ensuring that policies, regulations, market structures, support instruments, de-risking mechanisms and financing are all rapidly aligned with the tripling target and submitted in the next round of Nationally Determined Contributions (NDCs) to the Paris Agreement in 2025,’ concludes IRENA.