How is China Reshaping the Energy Supply Chain?

China’s position in the clean energy transition is unmatched, blending manufacturing dominance, substantial investments and strategic policies to drive global sustainability.

As nations worldwide intensify efforts to combat climate change, China’s clean energy leadership is reshaping global supply chains and reducing costs for renewable technologies.

A manufacturing titan 

China’s unparalleled manufacturing capacity places it at the heart of the global clean energy supply chain.

The nation produces an estimated 80% of the world’s solar panels, along with a substantial share of wind turbines and lithium-ion batteries essential for electric vehicles (EVs). This dominance is not coincidental; it stems from China’s ability to create tightly integrated, efficient value chains.

Such efficiency reduces production costs, making renewable technologies more affordable worldwide.

As Sverre Alvik, Vice President and Energy Transition Outlook Director at DNV, explains: “Since the end of the Cold War, the world has benefitted from growing global cooperation and trade.

"Achievements and improvements in one region would soon spill over to another and the effect has been a dramatic price drop on almost all technologies, including the technologies we now need for the energy transition.”

China’s clean energy push isn’t limited to exports. Its massive domestic market drives high demand for renewable technologies.

In 2023, the country installed more solar capacity than the rest of the world had achieved collectively in 2022. This scale reinforces China’s leadership in green energy adoption and ensures continuous advancements in its manufacturing capabilities.

Policy, investment and a vision for carbon neutrality

Government policies in China have been instrumental in shaping its clean energy success. Strategic initiatives, such as feed-in tariffs (payments for generating renewable energy), subsidies for EV manufacturers and green bonds for eco-friendly projects, have catalysed rapid growth across the sector.

In 2022, China invested an astonishing US$546bn in clean energy, covering solar, wind, EVs and battery production. This sum represents nearly half of the world’s total low-carbon energy spending, dwarfing the contributions of the United States and the European Union.

However, China’s state-backed approach has not been without controversy. Critics in Western nations accuse it of using subsidies to dominate global markets, particularly with low-cost EVs and solar panels. While these criticisms highlight ongoing trade tensions, they also underline China’s outsized influence in shaping the market for clean technologies.

In recent years, China has started phasing out certain subsidies, including feed-in tariffs for solar and wind, as these technologies have achieved price parity with fossil fuels. This move signals a shift towards balancing government intervention with market dynamics while continuing to lead the transition towards renewable energy.

Challenges and global implications

Despite its achievements, China faces significant challenges in its clean energy journey.

Overcapacity in some sectors, trade disputes and a continued reliance on coal for electricity generation are pressing concerns. Coal remains a dominant source of energy in China, even as the country makes strides in expanding renewables.

Yet, these challenges do not overshadow its contributions to global decarbonisation. By driving down the cost of renewable technologies, China enables other nations to adopt clean energy solutions more readily, making progress towards international climate targets.

China’s leadership also aligns with its domestic goals. The government aims to peak carbon emissions by 2030 and achieve carbon neutrality by 2060. This ambition spurs continued investment in renewable infrastructure and innovation, ensuring China’s central role in the energy transition.

By navigating its internal challenges and refining strategies, China remains pivotal to the global clean energy revolution, balancing its economic ambitions with the urgent need for sustainability.

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