The International Energy Agency (IEA) identifies several reasons for China’s leading position in the clean energy industry, especially in the manufacturing of key technologies like solar PV, wind, EVs, batteries, electrolysers, and heat pumps.
Highlights of IEA’s insights into China’s prominence include:
#1 Cost Competitiveness
China is the lowest-cost producer of clean technologies, with production costs up to 40 percent lower than in the U.S., 45 percent lower than in the EU, and 25 percent lower than in India. This cost advantage makes Chinese clean technologies highly competitive globally.
#2 Economies of Scale and Market Size
China’s large domestic market and extensive manufacturing scale allow it to achieve cost reductions and efficiency, reinforcing its dominance in clean tech production. Its integrated supply chains streamline production, reducing delays and costs.
#3 High Investment Levels
China has consistently attracted substantial investment in clean energy technology. In 2023, 80 percent of global clean tech manufacturing investment went to solar PV and batteries, with China capturing a significant share of this surge.
#4 Policy Support and Industrial Strategy
While other regions are enacting industrial strategies like the U.S. Inflation Reduction Act, the EU’s Net-Zero Industry Act, and India’s Production Linked Incentive Scheme, China’s longstanding policy support for clean tech manufacturing, combined with infrastructure and skilled workforce availability, sustains its lead.
#5 Market Position and Trade Dominance
China’s exports in clean technologies are set to exceed $340 billion by 2035, close to the projected oil revenue of Saudi Arabia and the UAE in 2024, illustrating its competitive advantage in the global clean energy trade.
Despite China’s lead, the IEA report also notes opportunities for other regions. While Latin America, Africa, and Southeast Asia currently contribute less than 5 percent of global clean tech production, these regions could become cost-effective hubs for key components like polysilicon and wind turbines if infrastructure, policy support, and skills are enhanced.