China is driving the world’s energy transition, but faces criticism – and growing opposition.

The country has long been a major exporter, but now it is shifting from receiving FDI to investing abroad itself.

One instance of this is Mingyang Smart Energy, which is planning to build a wind turbine factory in Scotland.

Such moves are controversial.

One noted supporter of Chinese equipment for the energy transition is Corio Generation’s Jonathan Cole. Speaking at All Energy, in May, he said there is a need for “much more informed and balanced” discussion.

“Every country has the right to protect its national interests and national security, but let’s be honest, it is in every country’s national interest to embrace and deliver the energy transition because without that we have plenty of other problems to solve,” Cole said.

He cited research forecasting supply shortages everywhere except China by 2026-27. “So if we extract China from the supply chain what we’re actually going to do is delay the energy transition and make it more expensive. And that’s not a solution.”

Corporate questions

Norvind’s James Glennie opposed Cole’s perspective. On LinkedIn, Glennie questioned whether Chinese companies had an unfair advantage, especially in accessing cheap capital.

The UK’s plans for its renewables industry must consider a “fundamental question”, he said. “Is the purpose of the CfD to secure the lowest short-term price for clean electricity or should consumers pay a bit more to secure European jobs, a robust domestic & European supply chain, environmental protection, energy & national security, and reciprocal access for domestic companies to the Chinese market?”

Chinese corporate practices are questioned not only in the area of offshore wind.

Alicia Kearns, Conservative MP for Rutland, expressed concerns about the use of Chinese solar panels at the Mallard Pass plant. In April, she urged companies to prove their supply chains were “clean of slave labour”. Kearns said the government should “clean up the UK’s solar industry and ensure our green transition does not come off the back of slavery and genocide”.

Several factors drive opposition to Chinese plans. Mingyang is working with Opergy to enter Scotland.

Opergy Scotland managing director Isla Robb said criticising any other foreign investors would be seen as racist.

“It seems we’re quite comfortable being anti-Chinese. But it’s not just politics, I think there’s also protectionism. The big wind turbine manufacturers don’t want more competition,” she said.

Chinese drivers

China wants to increase its involvement in renewable energy. And the UK’s wind sector offers growth prospects due to its offshore resource and government-set targets.

But there are other opportunities for China, including domestically.

The country is a major manufacturing supplier. Its exports sustain China’s growth, and its renewable energy push provides energy security.

The 12th five-year plan, from 2011-15, called for a new focus on EVs. China now dominates EV manufacturing, with BYD the largest EV builder – surpassing Tesla in 2023.

China is the largest market for cars and EVs. The country’s early advantage has seen it advance up the supply chain, into mines and refining sites for critical minerals.

And EVs help China’s energy security. Veriten’s Arjun Murti said China would “prefer a coal-fired EV over an OPEC- or US shale-fired ICE vehicle”.

China is the world’s largest importer, paying a substantial bill to keep its economy going. As a result, he noted, it is “highly motivated to displace as much future oil demand as possible”.

The pace of new coal installations is slowing. Beijing plans to reach peak emissions before 2030 and carbon neutrality by 2060.

China gets bigger

Solar and wind have followed the push into EVs with domestic demand, which it supplements through exports.

In the first quarter of this year, Chinese solar and wind capacity was reported at 758 GW.

China had 17.6 GW of onshore wind capacity in 2011 and started installing offshore in 2018. In 2020, it installed 71 GW, according to Rystad Energy.

It is making even better progress installing solar capacity. In 2013, the Norwegian consultants reported, China had 16 GW of solar. They expect China to install over 230 GW of new solar capacity this year.

Rystad senior analyst Simeng Deng said China was “on track to shed its reputation as the world’s largest greenhouse gas emitter and power consumer. Solar energy will be central to this transformation, with advancements in supply chains, infrastructure and capacity additions set to surpass coal in future energy production.”

This, Deng continued, could see China transform from a “coal-dependent giant into a leader in clean energy”.

Between 2021 and 2025, the country aims to reduce energy intensity by 13.5% and carbon intensity per unit of GDP by 18%.

But not big enough

Despite China’s extraordinary shift, the country cannot consume enough of its manufacturing. It must export and find new markets for its products.

As long-time China expert Michael Pettis has pointed out, China accounts for 18% of global GDP and an “astonishing” 32% of global investment. In terms of global consumption, though, it claims only 13%.

China recently moved away from yearly growth targets. Based on its 2035 targets, it needs GDP growth of around 4.7% per year.

The recent five-year plan mentioned the need to encourage domestic consumption, but the main focus remains on tapping foreign markets.

For the country to succeed, it must export.

Trade barriers

This has become contested. The US imposed tariffs on Chinese exports under President Donald Trump. The Democrats may now be in power, but they have also targeted Chinese supplies. There is unlikely to be an improvement in these trade ties regardless of the US presidential election.

In May, President Joe Biden imposed tariffs on $18 billion of imports from China. The Whitehouse accused China of “unfair trade practices” around technological transfer and IP, which threaten American businesses and workers.

“China is also flooding global markets with artificially low-priced exports,” the statement said.

The EU has taken steps in this direction. In July, it announced new tariffs on Chinese EVs, recently reducing these slightly.

The EU announced investigations into two Chinese solar panel manufacturers in April. European Commissioner Thierry Breton remarked that solar panels had become “strategically important for Europe: for our clean energy production, jobs in Europe, and security of supply”. He said the aim was to ensure fair play.

The same month, it also began a probe of Chinese wind turbines.

The wind and solar investigations cited concerns over foreign subsidies that distort competition.

WindEurope reported Chinese wind turbines are on offer in Europe for 30-50% less than European supplies. Furthermore, they are also providing deferred payment terms of up to three years.

What competition?

Robb said wind farm developers have been interested in speaking to Mingyang.

“They’re desperate to find new suppliers. Vestas and Siemens Gamesa can’t meet the tidal wave of requirements that’s coming down the track. There needs to be another supplier.”

One area of concern has beenabout the supply of control mechanisms in Mingyang’s proposed Scottish turbine factory. The Opergy executive said the Chinese company was open to using UK suppliers – but was “sitting back and waiting to see what happens”.

The company wants to expand into the UK, but not at any cost, whether political or commercial.

“They’re keen on the UK but if we keep on putting up hurdles it may not happen. They need a minimum number of contracts before they can put a spade in the ground,” Robb said. “The scale of the factory is a risk, there must be ways the public purse could help support this.”

The manufacturing rush

China can support its domestic industry through various ways, including advantageous access to capital, giving it an advantage over manufacturers elsewhere.

But it is also a fact that, for the major push into renewable energy to succeed, the world will need competitively priced equipment.

Not every country needs to replicate all parts of the value chain.

Opergy’s Robb said the idea of reshoring is attractive, but questioned who is taking the plunge. “Where’s the list of inward investors? We love the idea of reshoring, but developers want to get projects moving at pace and at budget.”

There is a need to consider how and where to compete in the move to offshore wind. “And if our strengths aren’t manufacturing at a low price, if it is design and engineering and operations and maintenance, then let’s stick to that.”

There’s a need to think about how smaller companies are succeeding incrementally instead of just focusing on big investments like a new factory.

“We need to credit the smaller companies for growth,” Robb said, “rather than putting all our hopes on the big ones.”

The UK could take steps to bolster its manufacturing outlook. Fleshing out an industrial strategy and integrating the supply chain would have an impact. But government should consider what is actually possible and desirable before leaping.

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