The Rise of the Climatetech Superpowers
The world’s most populous countries, India and China are seeing major breakthroughs in solar energy. China is expecting to see its solar capacity rise by a striking 30 percent in 2023 – allowing it to beat its national target five years early. India is also ramping up its solar capacity, as it tries to break away from the heavily polluting coal power the country depends upon.
In the past India imported foreign solar panels at great cost. Now with help from the government its domestic manufacturing sector is taking off and the entire supply chain is being onshored to prioritise domestic production. India’s rise as a user and creator of solar panels echoes China’s earlier race to dominate the solar energy sector. But India is not the only nation developing its climate tech sector. The race to become a climate tech power has arrived.
2022 The year the US made its big play
For many the passing of the US Inflation Reduction Act (IRA) in 2022 fired the gun in the race to become world leader in emerging climate technology. For a long time, China has led the field, dominating renewable energy technology. 80 percent of solar panels are currently made in Chinese factories. Europe had taken great strides in adopting renewable energy, but had allowed Chinese firms to lead in terms of building solar and wind technology.
How did China enjoy this lead? The country’s ability to suck up all the metals and minerals that are required to build this technology, plus manufacturing prowess and government support have given it the edge for many years. Now challengers are stepping up.
The US and EU have implemented their own manufacturing policies and net-zero targets, giving home grown producers the incentive to develop domestic production of climate tech. At the same time, many other countries such as India are fast developing their own industries.
The Rise of Clean Tech USA
The passing of the IRA legislation was a massive signal to investors that the US is the place to build a climate technology. Companies have flocked to the country attracted by generous tax breaks which encourage building solar, wind and other carbon friendly technology.
The IRA offers US$ 369 billion of grants, loans and subsidies to and beyond 2030 for companies in these sectors. Credit Suisse estimate that up to US$ 1.7 trillion in investment could be generated once private money is also counted.
The US government hopes that this legislation means it can compete with China to build these products for domestic and export, creating high value manufacturing jobs in the process. In short it wants to replace China as the main climate tech power.
Emerging Technologies
Climate technology has usually meant solar and wind turbines, but as the world moves towards net-zero a huge host of climate technologies impacting every sector imaginable are emerging. In energy; hydrogen, carbon capture, thermal and many other new ideas are emerging. The climate tech sector is attracting record funding in companies across virtually every sector, building, transport and of course energy.
The benefits are enormous. Countries can reduce dependence on foreign supplies, decarbonise their economies and develop cutting edge industries. This shift has been delayed by inertia and the power of fossil fuel lobbies.
China the Reigning Clean Tech King
China has a comfortable lead in climate tech. Dominating the production of solar cells and wind turbine blades, electric cars and batteries, as well as the many components needed for each of these products. Naturally, domination of the supply chains of raw materials comes with this. But now China needs to defend its position. Most likely it will continue to enjoy the majority of market share, but it will see its lead erode.
Climate tech is growing so fast globally and other countries are now prioritising its development. This means the like of India creating their own sectors that will eat away at China’s market share. Emerging technologies like carbon capture and hydrogen may also take off outside China. The first carbon removal contract between a US Bank and Swiss DAC company could herald a new industry that promises to suck carbon from the air.
The two kinds of Energy Superpowers
The energy superpowers of the future will be the climate tech manufacturers like China, the US, many EU nations, India and others like South Korea known for their prowess in building new technology. But another kind of power will emerge from places like Scotland, Australia and Morocco. These nations benefit from their geography and ability to produce huge amounts of exportable renewable energy.
Scotland, Australia and other geographically blessed places can emulate present day oil exporters. But instead of exporting fossil fuels, they will host vast wind farms in stormy seas or glittering solar farms in immense deserts.
Australia from king coal to solar supplier?
For many years Australia was climate change villain, exporting and using large amounts of coal. Various governments in the pocket of the coal industry tried to slow down progress on climate talks. A new government has pushed the country toward a more climate-friendly direction. Australia truly has the potential to be an energy super-power. Vast open spaces, combined with a lot of sunshine make it idea for solar farms.
Tapping this energy will help supply its own needs but also allow exports to other countries. Australia is already planning a giant undersea cable to export its huge solar capacity to energy hungry Singapore.
Building Climate Tech
Creating a net-zero economy means a shift in the economy not seen since the industrial revolution. The entire edifice of the fossil fuel industry will have to be pulled down and replaced. Manufacturing renewable energy technologies requires a specialised supply chain, government support and a skilled workforce. Across the world the private sector, often incentivised by governments has started this process.
Industrial Strategy 21st Century Style
If these new industrial strategies work, they will revitalise manufacturing in countries that perhaps saw decline. The winners will be those countries that can compete to produce the best climate technologies, able to export their products and dominate what will be the single most important commercial market of the future.
Laggards will look to import climate technology or rely on increasingly unpopular fossil fuels for energy. Countries that are blessed with geography favourable for renewable energy have an easier task. They just need to host the technology and remain a reliable supplier.
As renewable energy and other climate tech takes off over the next decade new energy powers will emerge. Their power will be built on their ability to build and export this technology and/or use their physical location to harness and utilise renewable energy.