THE NEW CLIMATE
Made-in-China Energy Transition
China will play a role in renewable electricity as defining as the US played in oil. What energy landscape is China defining?
For those of us who live in the sequestered world behind ever-higher US trade and information barriers, it can seem as if the energy transition has stalled out and oil is safe in its supremacy for the indefinite future. The news about EV sales is one long tale of gloom and doom, even though the , at worst. Oil production keeps on growing. Rooftop solar has lost much of its social pizazz.
Although everybody talks about the killingly hot, wet weather, the climate conversation is muted. Most politicians shake their heads at Donald Trump’s absurdist “drill baby drill” routine and try to avoid the subject.
But halfway around the world in the heart of , transition prospects look strikingly different. In Saudi Arabia and the United Arab Emirates (UAE), the world’s first and fourth largest oil exporters, EVs from China are all the rage. These oil states also import solar and wind-generating gear like crazy and are looking to in partnership with Chinese companies. The Saudis recently inked a big deal with Beijing that opened a path to more trade in EVs, oil, and much else in Chinese Yuan, potentially upending the kingdom’s decades-old practice of selling oil only in US dollars. The UAE has had such a swap deal with China for years.
As these clean-energy trends in the world’s biggest oil patch illustrate, the transition is racing ahead in most of the world, including parts that might be considered least receptive. And as few Americans seem to realize, it’s a transition made in China. A transition not only off fossil fuels and onto renewable electricity, but into a whole new world order. An order in which the US and Europe are not the core, and China and the Global South are not the subservient periphery.
Beyond the Oil Age
English was the language, coal and oil the fuels of the two long centuries following Britain’s Industrial Revolution. Through the 19th century, Britain ruled the waves, and lots more besides, on the back of its coal-fired manufacturing might. In the process, it defined the pattern for industrial and colonial development worldwide.
Over the course of the 20th Century’s two world wars, the US grabbed the reins of global leadership from Britain, thanks in large part to its dominance of oil supply and its success in exporting the open-market, long-distance trading practices that oil facilitated. The dollar replaced the pound sterling as the currency of international trade and gold as the assurer of global financial stability.
Climate change, toxic industrial filth, and resource depletion are now bringing that era to a close. And China is positioned for a role in the succeeding Renewable Electricity Era as central as that played by Britain and the US in the Coal and Oil Eras, respectively.
Beijing has been designing and gradually implementing the transition of its gigantic manufacturing sector away from energy-intensive, heavily polluting basic goods and materials since well before 2015, when it laid out its intentions in the 10-year plan. At the heart of the new energy system it envisaged were — and still are — renewable generation, electric vehicles (EVs) and batteries, the “” that will drive China future growth, to use President Xi Jinping’s 2023 phrase.
Washington’s apparently sudden discovery that China has “over-capacity” in these clean energy areas relative to the size of its domestic market, to quote Treasury Secretary Janet Yellen and other senior officials, ignores the strategy clearly laid out in , a national and of the (CCP) to further develop the of . However, China’s choice of clean energy as a central driver of its economy is not recent and was never a secret.
Neither is it a particularly surprising choice, given China’s uncomfortable reliance on fossil fuels imported from unstable and outside its geopolitical control. This starts with the Mideast, an area whose monarchies the US agreed to protect militarily as part of the Petrodollar accords that China is now actively undermining with its requests for a progressive shift to payments in yuan rather than dollars.
Getting off fossil fuels has become not merely an environmental plus, but an energy-security priority for China with potentially large economic advantages. The contrast with the fossil-fuel rich United States could not be sharper: There the transition is mainly seen as a costly and unpleasant environmental clean-up exercise, even by many of those who concede that the climate crisis makes it necessary.
Shape of China’s Transition
China has for decades been the biggest, most dependable source of fossil fuel demand growth worldwide — even as Beijing was openly building an exit ramp from its risky reliance on imported energy and a new energy foundation for “China’s Rise.” While questionable handling of COVID closures and Western trade antagonism since Donald Trump assumed the US presidency in 2017 have slowed that rise, they haven’t stopped it, and the new energy foundation looks increasingly solid.
The winners at this stage in the transition worldwide — solar generation, lithium batteries, and EVs — were the picks in with only occasional adjustments. For example, Chinese manufacturers are now pushing into onshore wind equipment and hydrogen electrolyzer manufacturing, which weren’t on the 2015 list.
Also, China is now developing an integrated chain of generating sources that should function as a reliable system, despite the intermittent nature of solar and wind power — a system not clearly in view in 2015, either.
Hydroelectricity has long had a major role in China’s clean energy planning, but climate change is already reducing its dependability. A plunge in hydro output amid a devastating 2022–23 drought in Southern China and other big floods and droughts have, at times, sharply reduced electricity output from China’s massive network of dams, including the Three Gorges on the Yangtze. As a result, hydro may increasingly be assigned a mid-duration storage role instead of being used for baseload generation.
A central feature of the new energy landscape in China is likely to be a generating complex in which solar plays the largest role, paired with onshore or coastal wind and batteries for overnight use and short-term storage. Beyond that, hydro can be used as a second-level backup with the potential for power release over a longer period.
Beijing appears to view “green” hydrogen as another integrated element in the renewables generation and storage complex along with solar, wind, batteries, and hydro. China is already the world’s biggest use of hydrogen, and the fuel featured conspicuously in the Made in China 2025 roadmap. But today’s hydrogen is largely made from natural gas, much of which China imports and all of which brings big greenhouse gas emissions.
Alternatively, hydrogen can be made from renewable electricity without such emissions. While Beijing is not actively development as a stand-alone feature, state companies are building green hydrogen capacity alongside huge solar and wind farms in western and northwestern China.
Nuclear still plays a part, with several reactors slated to come online in China over the next five years. However, nuclear construction timetables are notoriously undependable, and even if the plants all appear on time, the pace of nuclear development is much slower than that for solar and other renewables.
EVs are China’s latest, largest . With plug-in hybrids included, EVs — mainly produced by domestic Chinese companies — account for of passenger-vehicle sales in China, and exports are soaring. Gasoline cars sold in China have traditionally been imported or produced in the country by foreign automakers, so this represents a big power shift for the Chinese industry. Even though Chinese EVs are effectively banned in the US and Europe is threatening to do the same, their high quality and low cost ensure they will find a market somewhere.
Transition Outside China
China’s evolving new renewable electricity system will likely be adopted in recognizable form by much of the world, just as happened with Britain’s 19th Century move to coal and the 20th Century US-led shift to oil. The “over-capacity” Washington charges Beijing with developing in solar, batteries, and EVs was clearly developed with export markets in mind. That much of Washington’s version is true. However, as its discussions with the Middle East oil states illustrate, China is also prepared to help other countries build new energy manufacturing capacity.
The US isn’t willing to easily cede the Sole Superpower title that its global oil dominance bought. At a political level, that’s understandable enough. It’s tough on the national ego to go from №1 to an also-ran. The problem is finding an acceptable alternative energy transition policy.
If Washington continues to block clean-energy imports from China and places such as Southeast Asia where Chinese companies operate, and if efforts to develop domestic solar and EV manufacturing despite hefty government subsidies, US electricity consumers will not have access to energy as cheap and efficient as that available to their counterparts in China and other places open to Chinese goods.
The claim is often made in the West that fossil fuels are the cheapest and most efficient energy source. In most of the world, though, it’s now cheaper to generate electricity with solar and onshore wind, even adding the cost of battery backup, than it is to make that electricity with natural gas. It’s cheaper to heat buildings with electric heat pumps than with gas. And it’s cheaper to buy, maintain, and drive an electric car than a gasoline or diesel-fueled vehicle.
All this is not necessarily true in the US, where natural gas is cheaper than virtually anywhere else other than Russia, gasoline taxes are relatively low, the least costly EVs are effectively banned because they come from China, and tariffs and other trade barriers add to solar costs. Even so, solar and wind generation are spreading. And natural gas-fired electricity is cheaper even than coal, so gas has been replacing coal in power generation for years, helping the US to lower its recorded carbon emissions most years.
The Biden Administration’s Inflation Reduction Act (IRA) has yet to accomplish its mission of seeding in solar and EVs, or the batteries both require. Maybe it will eventually, but it’s certainly not happening quickly — as seen from this year’s contraction in planned US spending on EV manufacturing by automakers after Washington published tight rules on Chinese component content. expansion has also nearly stalled.
After decades of factory closures, the US may be unable to build its new-energy manufacturing muscle quickly enough to stave off climate disaster if fully made-in-America supply chains are required for the exercise.
The US can stick with oil and gas for longer, of course. It has plenty of both, and the country’s major political parties seem willing, for now, to build ever-higher tariff walls to protect that continued reliance on fossil fuels as the country ever-so-slowly expands its relatively high-cost solar, battery, and EV manufacturing sectors. But expensive energy will likely make any energy-intensive US manufactured goods uncompetitive beyond its own borders — not to mention unpopular with shoppers at home.
Just as high costs may make the US uncompetitive in trade terms, continued reliance on CO2—and methane-emitting fuels would likely make the country uncompetitive geopolitically. Drought, wildfires, and floods are spreading, and the number of climate refugees is swelling. In such a world, are other countries going to feel all that friendly towards a US that is still contributing to the chaos by burning disproportionate amounts of oil and gas?
Published in The New Climate. Follow for the latest in climate action.
