China has outpaced the United States and Europe in a global “race to the top” to transition off fossil fuels, but there is still time for others to close the gap, says a team of U.S. analysts.
“The energy transition is a technology transition led by China, galvanized by competition between the three key regions, and likely to spread rapidly into the rest of the world in the manner of other technology transitions,” write analysts Kingsmill Bond, Sam Butler-Sloss, and Daan Walter in a recent RMI report. Their review covered the three regions responsible for 80 to 90% of global cleantech deployment—their past, their future, and implications of “the changes that are happening.”
“In 2022, the U.S. and Europe woke up to the challenge of Chinese leadership in the energy technologies of the future, and now the race is more even,” they report. “Considering the race is still in its early stages, the future is filled with ample opportunities”—as long as countries can overcome the obstacles slowing the transition.
China has so far “dominated” supply chains and has outspent the other two regions tenfold in the past five years to achieve manufacturing market share of over 90% in solar and 70% in batteries, the RMI report states. It has also “leapfrogged” over other countries in electrification, increasing the electricity share of final energy by one percentage point every year to a level of 27% in 2022—five percentage points higher than the other two regions.
But ongoing shifts could challenge that dominance, suggest the analysts. U.S. and European capital expenditures on supply chains is set to increase 16-fold by 2025, and there are many opportunities for rapid gains.
“Only 20% of final energy demand has been electrified; and technologies to enhance flexibility are still in the early stages,” the three authors write. “In other words, the energy transition is a series of marathons, not a single sprint; and we are only a few miles into the race.”
Right now, China dominates the hardware supply chains of key clean technologies. It has both the largest number of electric vehicle sales and the highest EV market, at around 35%, compared to 25% in Europe and 10% in the U.S. But Europe isn’t that far behind, the analysts note, and though the U.S. has lagged, it is expanding its fleet.
Europe has established itself as the current leader in the solar and wind share of generation, though all three regions “are moving rapidly up the S-curve towards solar and wind dominance.”
Looking ahead, China is expected to maintain its lead, but the other countries could close the gap, with the U.S. “back in the game” after passing the Biden administration’s 2022 Inflation Reduction Act. And what is almost certain is that all three regions will continue competing in this race, where “barriers to change are barriers to geopolitical influence, and leaders will need to find solutions to deploy cleantech if they wish to avoid relative decline.”
The analysts also predict that the competition between the three regions will spur investments and innovation that will eventually expand the transition to the Global South.
“We should expect the major producer of renewable energy technology—China—to sell its technology first at home, and next to wealthy locations,” they write. But “as those markets start to saturate and costs continue to come down, we would expect China to sell its renewable technologies to less wealthy countries.”
Cooperation between regions will still be the key to abating the climate crisis, they add. “Just as on the sports field, competition requires cooperation in standard setting, technology transfer, and trade.”
