Our trade war with other powers has just entered a new chapter. Despite the efforts of the Biden administration, we are losing this one. Renewables in China just set a new record that we should be worried about. The reason? We can beat it now, but it’s not clear what will happen next.
We thought we were going to lead in renewables, but the trend has turned around: what’s happening in the world
The renewable energy industry, solar power in particular, was meant to be led by America. There was a vision of creating a thriving domestic solar sector that would bring innovation, jobs, and energy independence.
However, over the past decade, China has rapidly overtaken the US to become the dominant force globally across the solar supply chain. From manufacturing to installation to R&D spending, China now leads the world.
This reversal is striking, given the high hopes initially held for American solar leadership. What explains China’s stunning rise and America’s decline in solar, the key renewable technology needed to combat climate change?
Several interlocking factors gave China decisive advantages in scaling its solar industry through heavy government support. As a result, America now lags far behind in solar innovation and jobs.
The world has come to depend on China’s solar panels without anyone realizing it
The Chinese manpower was able to seize domination overproduction of solar panels and absorption of solar energy rapidly. The once small country of China is now the world’s leading producer of industry solar panels, with over 70% of the total solar panels they supply to the planet.
Being the scale giant and having an optimized supply chain are 2 main reasons behind the US producers being able to produce solar panels at a cost that is just a fraction compared to Chinese companies.
During the process of building up solar power in China, the government highly invests heavy in the country’s solar industry with incentives as well as subsidies. Therefore, China has seen high degree of solar panel installations in the present time over the last 10 years.
In 2021, China’s newly installed solar capacity broke the world record, hitting 50 gigawatts, which is 9 times the amount that other countries had put together. Besides to install solar domestic, China onto fifth position globally now it is the leading panel seller.
In 2012, only $21 billion of solar export was done by the Chinese battery companies but this surged to over $50 billion in 2021. U.S. and India were at the top of the list of importers from Chinese manufacturers of solar panels in last year.
The situation could be even worse: the project that China has for the next years
China is expected to remain ahead of other countries in both solar technology and manufacturing over the next ten years by evolving towards solar technology at a faster rate. Industry analysts indicate that China, the solar panel manufacturer, could lead the market by 80% by the year 2025.
Through such heavy investments in R&D and production, China’s competitiveness and manufacturing efficiency are both remarkably high, which makes it tough for American competitors.
The US revenues continue to diminish since the inception of the market strategy, mainly blame from the raw materials to finished panels. The US, as it looks for ways to re-establish domestic solar manufacturing, speed is unfortunately sluggish.
The subsidies provided by the Chinese government and the diminishing size of producer provide the Chinese companies with an overwhelming price superiority.
The new US solar factories are significant but still cannot compete with the scale achieved by China, which was already producing on a much larger scale compared to the new plants.
As you can see, this is a priority issue, given that renewables in China are advancing on a large scale and are almost unstoppable. Developing countries – some of them part of the BRICS+ group – are leading the energy transition in this area. It remains to be seen how we in the Americas will do so in order to position ourselves as a powerhouse and achieve the Net Zero goal.