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The writer, a professor of government at Harvard University, is author of ‘Destined for War: Can America and China Escape Thucydides’s Trap’
According to the International Energy Agency, global spending on solar energy production in 2023 will for the first time in history outpace spending on oil production: $380bn on solar compared with $370bn on oil.
The geopolitical implications of solar displacing oil as the world’s major source of energy are enormous. Why has the Middle East been a central arena in the “great game” for the past century? Because countries there have been the major suppliers of the oil and gas that powered 20th-century economies. If, over the next decade, photovoltaic cells that capture energy from the sun were to replace a substantial part of the demand for oil and gas, who will the biggest losers be? And even more consequentially: who will be the biggest winner?
The vast majority of the solar panels on which the world will spend more this year than on oil will come from just one nation. China manufactures 80 per cent of all the solar panels produced globally. And, as the IEA notes, China’s dominance is even more pronounced when one examines the entire supply chain. It produces 85 per cent of the global supply of solar cells, 88 per cent of solar-grade polysilicon, and 97 per cent of the silicon ingots and wafers that form the core of solar cells.
China’s rise to dominance in solar has been rapid (see chart). In 2005, Europeans led this race, with Germany accounting for a fifth of global solar manufacturing. By 2010, while Europe installed eight out of every 10 solar panels in the world, it produced only one. This year, China will make eight of every 10 solar panels produced worldwide and add five of those to its grid. In 2023 alone, China will install more new solar capacity than the US has deployed since Americans bought their first panels in the early 1970s.
The factors driving China’s success in this arena are the same ones that have made it the uncontested manufacturing workshop of the world. These include low-cost capital, rapid regulatory approvals, protection from foreign competition, lower labour costs, an unparalleled network of suppliers, and fast-growing domestic demand.
Both the US and Europe have pledged to cut emissions in half by 2030 and to reach net zero by 2050. To achieve these goals, the lion’s share of these emission reductions will have to come from the shift from hydrocarbons to solar power.
Last September, US national security adviser Jake Sullivan identified green technology as a “force multiplier” alongside semiconductors and AI — areas in which the US is levying sanctions against dozens of Chinese companies. Chinese companies have been subject to US and EU tariffs for dumping solar panels on the international market since 2012 and 2013, respectively. But the impact on China’s growing global market share has been limited (see chart).
As the tech war has heated up, China is now demonstrating that two parties can play this game. Beijing has banned procurement of memory chips from Micron, one of America’s leading producers, and delayed the initial public offering of British chip design company Arm. The Chinese ministry of commerce has also announced it is considering restrictions on exports of technology to produce extra-large solar wafers — which are made almost exclusively by China.
The US Inflation Reduction Act includes up to $100bn in subsidies for manufacturers of solar panels and residential consumers, plus as much as another $100bn in tax credits. The EU is on track to outspend the US on green subsidies — the bulk of which go to solar. But given the size of these markets, it is unrealistic to expect that this will have any significant impact on industry trend lines.
While it is painful to recognise and may be politically unacceptable to say so, the brute fact is that in solar, as in other green technologies including electric vehicles, the west’s green future will be red. To be dependent on a nation the EU has declared a “systemic challenge” and the US sees as its principal rival is troubling. Nonetheless, the larger truth is that Europeans, Americans and Chinese inhabit a small planet. Unconstrained greenhouse gas emissions from any of the three can so disrupt the climate that no one can live in it.
To ensure their own citizens’ survival, the leaders of these nations will have to find ways to co-operate alongside the imperative to compete. This will require crafting a strategy that passes what F Scott Fitzgerald defined as the test of a first-class mind: “to hold two opposed ideas in the mind at the same time, and still retain the ability function.” That is their challenge.
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