Despite being the world’s biggest polluter, China is also a renewable energy superpower. Following decades of investment, China is the world’s biggest green energy producer, and its renewable energy capacity keeps on growing. The Asian giant is aiming to achieve carbon neutrality by 2060, despite continuing to be heavily reliant on oil, gas and coal. As China’s renewable energy sector continues to expand, how long will this last until the bubble bursts?
In March, China’s National Development and Reform Commission (NDRC) announced the country’s plans to invest in major renewable energy projects, including the development of new offshore wind farms and large-scale clean energy bases combining solar and wind farms. Planned projects include a controversial hydropower project on the Yarlung Tsangpo River in Tibet, which experts worry could harm downstream water flows to India, and a direct power transmission route connecting Tibet with Hong Kong, Macao, and the southeastern Guangdong province.
This is just one of several moves China is making to support a green transition. Unlike most other countries, which have only really grown their renewable energy capacity over the last decade, the Chinese government has long been investing in green energy projects to establish the country’s dominance in the sector.
“Several of the clean energy industries were identified by the government several decades ago as strategic industries, where they really wanted to invest and position themselves as the global leader,” explained the director of the science, technology, and international affairs program at Georgetown University Joanna Lewis. “This has really been a long-term strategic effort on behalf of the government to both put in place policies that would promote the deployment of renewables domestically within China but also build up the industrial capacity to allow them to actually manufacture the technologies as well.”
In 2020, the Chinese government pledged to double its green energy capacity by the end of the decade, a goal that it achieved six years ahead of schedule. Heavy public investment and favourable policies have catapulted China to become the dominant renewable energy force globally. In 2024, China invested more than any other country in the energy transition, funding around two-thirds of the $2.1 trillion spent globally on clean energy projects.
China currently produces 31 percent of its electricity from renewable sources. While the country is still heavily dependent on coal, the government expects solar energy to overtake fossil fuels as China’s main energy source by 2026. In addition, China is supporting the global green transition by developing infrastructure through its Belt and Road Initiative. The government is investing heavily in the development of clean energy and green infrastructure in developing countries worldwide. Meanwhile, its renewable product exports increased by 35 percent between 2019 and 2023.
There is also significant private investment being seen in China’s renewable energy sector. This month, Saudi Arabia’s Acwa Power opened a renewable-energy innovation centre in Shanghai as part of the firm’s plans to expand its presence in China. The centre will focus on photovoltaics, wind, energy storage, green hydrogen, and seawater desalination. Phase I will see $2.8 million in funding for a research and development centre and a green energy laboratory. Acwa Power has signed preliminary deals with Gulf Renewables Laboratory (GRL) and Shanghai Jiao Tong University (SJTU) to develop the project. This follows the signing of agreements by Acwa Power earlier in the year to develop over 1 GW of green energy projects across China. The company expects to invest up to $30 billion in projects in China by 2030.
However, while many assume China’s green energy sector will keep on growing, others are less enthusiasticabout the outlook. The ratings agency S&P Global predicts that China’s clean energy hegemony will begin to decline in the coming years because of its weak domestic economy, slow global demand, export barriers, and overcapacity. It expects China’s share of solar photovoltaic module manufacturing to decrease from 70 percent in 2024 to 65 percent in 2030, and its share of battery-cell manufacturing to drop from 80 percent to 61 percent over the same period.
“As we look towards 2025, manufacturing growth in China is expected to slow down in response to current overcapacity issues, leading to a more diversified cleantech manufacturing footprint by 2030,” S&P said.
China has also announced plans to reduce clean power subsidies in the coming years following several successful years of growth in solar and wind power. Lower subsidies for new solar farms could put pressure on China's solar industry, where overcapacity relative to global demand has prompted plunging solar panel prices and threatened to drive smaller producers into bankruptcy.
China’s renewable energy sector is likely to keep growing over the next decade as the government strives to reduce the country’s dependence on coal and significantly decrease its carbon emissions. However, following more than a decade of sharp green energy capacity growth, the government is beginning to reduce its subsidies for certain renewable energy sectors and, in the long-term, other countries may gradually increase their market share of sectors such as solar module and battery manufacturing as growth in China slows.
By Felicity Bradstock for Oilprice.com
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