China set to dominate renewable energy manufacturing

A recently released International Energy Agency (IEA) report states that renewables are set to account for over 90% of global electricity expansion over the next five years, with China retaining a 75-90% share in global renewable manufacturing capacity. China has released its 14th 5-year plan and is expected to account for almost half of the new global renewable power capacity additions over the 2022-2027 period. Meanwhile, the US Inflation Reduction Act has provided new support and long-term visibility for the expansion of renewables in the United States.

Because of the war in Ukraine, many European governments and businesses are looking to rapidly replace Russian gas with alternatives. And according to the IEA, the amount of renewable power capacity added in Europe in the 2022-27 period is forecast to be twice as high as in the previous five-year period. Additionally, India’s biofuel demand and production are projected to increase 70% over 2022- 2027, thanks primarily to its goal of reaching 20% percent ethanol blending by 2025 and rising gasoline demand.

If countries maintain trade policies that limit imports and favor domestically produced photovoltaic (PV) products, greater geographical distribution of production could result in China’s share in global manufacturing capacity shrinking more significantly to 60-75% by 2027 depending on the segment. 

In the report, IEA Executive Director Fatih Birol indicates that the impending depletion of fossil fuels will bring renewables into “an extraordinary new phase of even faster growth” as countries capitalize on their respective energy security benefits. “The world is set to add as much renewable power in the next 5 years as it did in the previous 20 years […] a clear example of how the current energy crisis can be a historic turning point towards a cleaner and more secure energy system” says Birol.

The projections are hopeful. According to the IEA’s report in an accelerated case (where countries big and small address issues grid infrastructure and policy) global renewable capacity can expand by an additional 25% compared with the main forecast. This accelerated case is contingent on whether countries around the globe address regulatory and financing challenges that currently hinder the progress of their transition to renewable energy. This level of increased capacity growth would move the world closer in alignment with reaching net zero emissions by 2050, which offers a chance of limiting global warming to 1.5 °C above pre-industrial levels.