China’s clean energy industries have benefited from strong and sustained policy support Government policy has played a central role in China’s stunning success in expanding its clean energy industries. 

With the Biden administration in the US introducing tariffs on Chinese clean energy and electric vehicle goods and components, and the European Union also imposing duties on electric vehicles because of Chinese state support for these industries, the narrative around China’s dominance in clean energy manufacturing is fixated on the uneven playing field afforded by said state’s largesse. Such narratives are simplistic and underplay the complex combination of factors that have led to China’s rise in cleantech as a dominant producer. True, subsidies and targets have been central to China’s clean energy success, but Western governments – who are now also engaging in policies supportive of clean energy industries – ignore the evolution of China’s policy design and its breadth. 

Governments, companies, and observers also overlook the importance of entrepreneurship in China, and, perhaps most critically, the importance of vertically-integrated industrial clusters. Policy support in China has been significant in helping these industries, but it extends far beyond subsidies or targets, and includes signals for investment, R&D spending, and support for the development of integrated industrial clusters. Yet it is overly simplistic and misleading to reduce China’s advantage solely as arising from these supportive measures, or to assert that China is incapable of innovation. 

At the end of 2023, China had a total installed solar capacity of 610 GW, having grown by 55 per cent over that year. The growth in China’s solar installations in 2023 of over 200 GW accounted for over half the world’s total. For over a decade, China has dominated the manufacture of solar PV equipment. As of 2021, the International Energy Agency estimated China’s share of global production of polysilicon as 79 per cent, wafers 97 per cent, cells 85 per cent, and solar PV modules 75 per cent. Ongoing investment implies China will continue to retain an 80 per cent share in these fields through 2026, according to a 2023 estimate.

In the wind power market, China has also long held the record in total installations and in the size of its domestic market. China’s wind capacity reached 441 GW at year-end 2023, with additional annual capacity reaching over 60 GW. However, on the manufacturing side, although China’s domestic market was almost exclusively supplied by domestic manufacturers, China has only recently achieved a dominant position in global markets, accounting for over half of global wind turbine manufacturing in 2022. For major wind components, such as castings, forgings, slewing bearings, towers, and flanges, China’s share exceeds 70 per cent. 

In offshore wind, where China had lagged Europe for years, larger turbines and domestic feed-in tariffs have led to an explosion in growth, and China has accounted for over half of global additional offshore capacity every year since 2021. China accounts for over 90 per cent of wind turbine installation vessels under construction, and Chinese firms are capable of building offshore wind turbines with world-leading sizes of 16-18 MW – though the size of turbines and blades along with local content requirements make local manufacturing cheaper for many regions such as Europe. In addition, China also accounts for a large share of permanent magnets needed for many of the largest turbines, especially those used for offshore wind. 

These achievements build on decades of government support. China’s central government began to explore research and policies to promote wind and solar power in the 1990s, and deployed solar in poor rural areas as an electrification and development strategy. Its first major steps at large-scale deployment began with the adoption of the Renewable Energy Law in 2005, the 2007 Mid-to-Long Term Renewable Energy Development Plan, and the participation of China’s nascent wind power sector in the Clean Development Mechanism (CDM), an international program under the Kyoto Protocol to promote clean energy investment in developing countries. In the mid-2000s, China captured the majority of CDM-supported wind energy funding, and 74 per cent of China’s wind projects were supported under the CDM scheme. The first subsidized feed-in tariff was adopted for wind in 2009, and set at relatively generous levels that encouraged rapid growth in domestic deployment, aided by a local content requirement.

Strong and sustained policy support for clean energy has been a critical enabling factor, not only for industry growth, but for innovation. While policymakers have reduced subsidies over time, and there have been boom-and-bust cycles for manufacturing players, the overall direction of policy has continued to emphasize renewable energy and new energy vehicles as a national strategy. The large and growing domestic market should continue to underpin China’s strength in these fields, though slowing growth implies its domestic players will need to look abroad for growth.

Technology transfer and global innovation networks have been important to the emergence of all of China’s clean energy sectors, and while there has been an element of forced technology transfer, innovation, and learning have been more multidimensional than is often portrayed. In the future, global learning networks could fracture, but China’s central or dominant position in key technologies implies this may hurt technology catch-up outside of China as much as it affects Chinese players.

/The Oxford Institute for Energy Studies/