Though rapidly falling costs are beginning to enable smaller and less wealthy countries to start deploying cleantech projects, China, Europe, and the United States still overwhelmingly dominate.
According to a recent report from the Rocky Mountain Institute, 93% of EVs, 87% of batteries, 85% of wind, and 82% of solar have been deployed so far by one of those big three. China leads in electric vehicles, electrification, and the supply chain, but Europe takes the cake for solar and wind share of generation.
Deployment across all three regions has soared since the early 2000s. The report explained that the uptick can be attributed to a few factors. For instance, as electrification fueled in part by EV adoption continues, the demand for fossil fuels decreases. Meanwhile, increased solar and wind market penetration has in turn driven more renewable energy deployment.
To date, China has the highest total installed capacity of solar and wind energy. New deployment jumped to 261 gigawatts in 2023, from 100 GW the previous year. However, solar and wind make up a much higher proportion of total European electricity generation.
China’s supply chain domination
Since the early 2000s, China has secured its place as the leading global producer of key clean technologies like solar PV wafers and battery anodes; the report notes that the rest of the world — including Europe and the U.S. — are all net importers.
And that supply chain dominance has only grown in recent years — the country poured $676 billion into the energy transition in 2023. The country excels in manufacturing renewable energy hardware, particularly due to a strategic decision in the 2010s to prioritize capex and R&D in the sector.
Still, the world as a whole has yet to reach peak capacity when it comes to manufacturing the materials to build renewables projects. The report estimates that “the solar sector is at around 40% of peak capacity, the wind sector at 25%, and the battery sector at 20%” despite increasing deployment over the last few years.
Nonetheless, demand is still rising — and cash is rushing to meet it.
In 2022, China poured 26 times as much money into the clean energy supply chain as the United States and Europe combined; by 2025, the authors found, that multiple is expected to drop to just 2.4.
While that might not be enough to oust China from the top spot, a cascade of new U.S. and European capex investments and policies are designed to help them catch up.
For instance, the U.S. Inflation Reduction Act is already spurring new investment. The analysis found that $282 billion has been invested into 280 clean energy projects announced within the first year of the IRA’s passage. Though estimates vary, total U.S. supply chain capital expenditure is expected to hit $40 billion or more in 2025, according to numbers from BNEF and Rhodium Group.
“The IRA has brought the United States back into the game,” the authors said. “It is highly likely that the United States will lead in many areas of the energy transition.”
Obstacles to electrification
Meanwhile, though 20% of the global final energy demand has been electrified, 80% of that demand remains unmet. The report cautions that “the energy transition is a series of marathons, not a single sprint, and we are only miles into the race.”
China’s share of electricity in final energy demand has skyrocketed, growing to 27% by increasing nearly a percentage point each year. Meanwhile, shares in both Europe and the United States have flatlined at just over 20% for more than a decade. The analysis found that China “caught up” to U.S. and European electrification levels back in 2016 to 2017 — and then kept growing.
Still, the data shows that each region has a differing mix of demand in the three main electrification subsectors: transportation, buildings, and industry.
“Although China clearly leads in terms of electricity as a share of final energy demand…the United States has a much larger share of energy demand from the transport sector where electrification levels are very low, and this pulls down its total average,” the authors wrote, adding that the “United States leads in building electrification, and China and Europe are at similar levels in terms of industry electrification.”
In fact, it was the combination of a U.S. move toward de-electrification of industry due to cheap gas, with a slow creep toward a higher share of electricity in Europe that gave China an opening to outstrip the U.S. in terms of industrial electrification. China now is drawing level with Europe.
Readying for the ‘revolution’
The report frames technological change as occurring in waves. Stemming from economist Carlota Perez’s theory, the idea is basically that technological revolutions occur roughly every 40 to 60 years, and are driven by a central country.
For example, there was the Industrial Revolution; then, there was the Information Technology Revolution. Now, the report concludes, there’s the Renewable Revolution, ushered in by China.
To start, the country can be defined as an electrostate, meaning that over 50% of its energy use goes to electricity production. This status, in addition to its “new three” export drivers — solar, lithium-ion batteries, and EVs — and rapid, government-assisted cleantech deployment have cemented China’s status as decarbonization’s technological leader, the authors argue.
“Chinese leadership will continue to spark a reaction in the other major economic blocs, lest they fall too far behind…for leadership and energy security are powerful forces that will help to overcome the barriers to change,” the report said.
Europe and the United States are certainly responding — and so is the rest of the world.
“In Japan, Korea, India, and across the Global South there is a huge incentive to solve the barriers of the energy transition and build new businesses,” the authors said, noting that as the Chinese solar market grows increasingly saturated, more and more of their solar panels will end up in the Global South at lower costs to consumers.”
