Chartbook 386: How China's powerslide is driving the global green electricity transition.

What will the energy transition look like and who will make it happen?

As a general concept the idea of “energy transitions” may be misleading. But as the latest batch of data from the International Renewable Energy Agency (IRENA) make clear, a revolution is underway in generation of electric power.

Electricity generation is only part of the global energy system. It is quite distinct, for instance, from the oil-based complex that continues to dominate transport around the world. But electricity is important. It accounts for perhaps as much as 30 percent of global CO2 emissions and yet our only half-way plausible plan for decarbonization is to electrify everything. Why? Because we know how to generate electricity in clean ways and in electricity-generation, unlike in most hard to abate sectors, a green transition really is under way.

In 2024, according to the IRENA data, new additions of renewables dwarfed fossil additions by a factor of almost twenty. Yes! You read that correctly. The disparity really is that large. The renewable share of new capacity additions in electricity generation worldwide is 90 percent. As far as new capacity is concerned, the transition to solar and wind is a more or less accomplished fact.

Source: IRENA

But, as has been true for a few years, the global data are in, in fact, deceptive.

The huge surge in renewable capacity installation is real enough. But it is not global, in the sense of a common development proceeding at a roughly similar speed, or spreading like a wave around the world. As I pointed out in Chartbook last year and Brett Chrisophers highlighted in the FT, most of the world has seen no dramatic increase in the pace of renewable installation. The rate of expansion has generally been high, but it has not accelerated much and it is, overall, far from dramatic.

The spectacular acceleration in global renewable investment is, in fact, a story about one country: China.

Veiled in regional comparisons this fact is coyly admitted by IRENA in its highlights briefing. If you dig into the underlying data, it screams out loud. In Table 1 below, I have juxtaposed year on year additions to capacity for fossil, wind and solar for China and the Rest of the World ex-China.

Table 1

Author’s compilation from Source: IRENA

Clearly, in the Rest of the World (ROW) ex-China there has also been a huge surge in solar investment since the late 2010s. But this is a spillover effect from China’s boom since the overwhelming majority of PV panels worldwide are sourced from China.

Source: Bloomberg & Ember

Viewed against the backdrop provided by the IRENA data, it becomes clear that since 2020 we have entered a new phase in the history of the global renewable energy industry, the third phase in its quarter-century of existence.

The three phases can be delineated in terms of the balance between Europe, China, the ROW and the USA, shown in Table 2. The metric I am using is the regional share in annual new additions to global wind and solar capacity - a simple measure of the extent to which each region is “driving” the global transition.

Table 2

The first phase between 2000 and 2011 was one of European leadership, with Europe accounting for almost half of newly installed wind and solar capacity throughout this period. The scale of investment in the early 2000s was tiny (see Table 1). But this was the pioneer phase and Europe’s leading role is evident in the data. Wind was the dominant driver at the time. But solar had the more important future and in 2011 Europe’s share of solar capacity worldwide (72 GW) was a remarkable 75 percent.

Then, after 2011 Europe’s years of recession and austerity strangled the growth of the European solar and wind industry. The growth rate in both wind and solar tumbled to single digits in the 2010s. European installation rates would later recover, but never to the rates seen in the late 2000s. Despite its green reputation, the recent rates of expansion in Europe are lack-luster by historical standards and far, far behind China.

In the 2010s, China took over leadership in renewable energy development. In 2015 China’s new wind installation was larger than that of the rest of the world combined. In 2017 China surged ahead of the rest of the world in solar installation, the segment which was now growing explosively.

Like the EU, China too has seen cyclical ups and downs in it rate of renewable energy investment. In the late 2010s China’s renewable investment went through a painful shakeout, as the subsidy regime shifted. But from 2020 China’s renewable investment came roaring back, to usher in the third phase of super-rapid investment. In 2023 and 2024 approaching two thirds of newly installed wind and solar capacity was accounted for by China alone. China is more or less alone in having seen substantial growth in wind power.

At no point in the last quarter century has the USA been the leading force in global renewable deployment. The USA has not been absent from the party, as fossil ideologues on the one hand and their critics in the ranks of the Democratic party might have you believe. The shift out of coal in electricity generation has happened in the US as well. But far more than in Europe, it has been gas that has replaced coal. The relatively slow growth in renewables in the 2010s in the US is accounted for by the huge cost advantages of gas from the fracking revolution.

Presidential administrations set a different tone on energy and climate policy. But if we use national shares of new renewable additions as our metric, then the results are not what we would expect (Table 2).

In the late 2000s under Bush, because of a surge in new wind power, the US share of newly installed renewable capacity worldwide was larger than it would be under Obama. Under Biden, despite all the hullabaloo around the new climate policy and the Inflation Reduction Act, America’s modest pace of renewable installation was dwarfed by that being put into place in China. In 2023 and 2024 the mighty USA was responsible for less than 8 percent of newly installed renewable capacity. This is roughly half what was installed in Europe and less than one eighth of what was coming on line in China, an economy whose electricity system is two times larger than that of the USA.

For all the talk of climate leadership and “green Marshall plans”, even before Trump began his catastrophic Presidency, America had been left far behind.

These modest outcomes are not the result of a strong desire to continue investing in new fossil fuel capacity. The political economy of electricity generation does not have the same power dynamic as the oil-petrol-motor-vehicle complex. If we look at the pipeline of new electricity generation investment in the USA, it includes virtually nothing but wind and solar. Only very limited gas capacity is scheduled to come online between 2025 and 2027. Coal is no longer a matter of serious discussion. Nor is there any realistic chance of much new nuclear capacity coming on stream any time soon.

Source: FERC

In the US today, as everywhere else, wind and solar are not “alternatives”. In future planning for electricity generation, they are the norm. In technological and commercial terms, barring deliberate efforts at sabotage, the future trajectory is clear.

The rate limiting factor is not the composition of new capacity expansion in the US (and in Europe) but the pace. US electricity consumption plateaued in the late 2000s. For two decades, lack-luster demand has provided little incentive for new investment, making it more profitable, instead, to milk existing capacity.

The significance of the hype around AI and its power demands is hugely overdone. But the fact that it may lead to any growth at all is significant.

The same plateauing is true in Europe.

Stagnation in overall demand makes the energy transition into a zero-sum game.

In China, by contrast, growth is king and dominates every other consideration, including focus or efficiency. Over the last 25 years China has not only emerged as the dominant player in green electrification. From the early 2000s onwards it has accounted, for most of the time, as is clear from Table 1, for an even larger share of fossil fuel electricity development. As fossil around the world is squeezed, China’s continuing fossil build-out now entirely dominates the global numbers. But for China’s continued building, global fossil fuel generating capacity would be declining.

There is much head-scratching over China’s continued expansion of its fossil capacity. There is virtually no prospect that China’s new additions of coal-fired capacity will ever achieve viable operating rates. Coal-fired power plants are pushed by a lobby in China too and they may provide a sense of security, if renewables falter. But in China too the balance has decisively shifted. New solar and wind capacity are far larger than coal capacity.

The most optimistic news of recent months are not the “global” numbers for renewables investment, but the gear shift that is happening in China itself. As Lauri Myllyvirta has outlined for CarbonBrief, CO2 emissions in China may have peaked. For the first time, the massive investment in renewable power generation has been more than enough to meet surging electricity demand and to lead to an overall fall in the use of fossil fuels.

Compared to the geriatric maneuvering of Europe and America’s static energy systems, China is attempting a powerslide, steering, breaking and accelerating the most massive energy system the world has ever seen.

***

Thank you for reading Chartbook Newsletter. It is rewarding to write. I love sending it out for free to readers around the world. But it takes a lot of work. What sustains the effort are voluntary subscriptions from paying supporters. If you are enjoying the newsletter and would like to join the group of supporters, click here: