Bright, shining promise of China’s solar revolution – Asia Times

Here comes the sun, doo-doo-doo-doo

Here comes the sun, and I say

It’s alright

– The Beatles

In 2023, China showed its cards, delivering one of the most thrilling industrial-technological achievements in decades. A long time in the making, the jaw-dropping display portends many years of even more extraordinary performances and an economy on the verge of utter transformation.

Of course, most media and analysts in the West, in their sublime oblivion, missed it and kicked off 2024 by busily adjusting down China’s reported 5.2% GDP growth based on some “feelzy” proprietary methodology. These are the same people who spent 2023 being shocked… shocked!…by China’s surging car exports.

So what exactly did China do in 2023? It added over 200 GW of solar generating capacity and 300 GW of solar manufacturing capacity. China also made significant strides in wind and nuclear power but let’s put those aside – in time, they will be rounding errors.

According to a detailed study by Lauri Myllyvirta of, clean energy industries accounted for 40% of China’s GDP growth in 2023. While China’s electric vehicle (EV) revolution captivated the world, the consumer-facing segment is only one, and perhaps the least important leg of the “new three” – solar, batteries and EVs – which will transform China’s economy in the coming decades. 

In September 2020, President Xi Jinping announced that China’s CO2 emissions will peak before 2030 and the country would achieve carbon neutrality by 2060. Wind and solar will play a big role with a targeted 2030 generating capacity of 1,200 GW. Coal use is expected to peak in 2025 and be phased out over time.     

China will hit 1,200 GW of wind/solar generating capacity sometime this year – over six years ahead of schedule. Largely because of China’s surging solar supply chain, participants at the United Nation’s COP28 Conference agreed to triple renewable energy output by 2030.

Renewable energy estimates for China in 2030 are now all over the map from 2,400 GW of capacity (tripling that of year-end 2023) to 3,300 from Goldman Sachs to 5,000 GW by prolific X (Twitter) analysts Glenn Luk and TP Huang. The precise number in 2030, on the exponential portion of the s-curve, really doesn’t matter – what matters is where China plateaus.

Assuming Goldman Sachs’ 3,300 GW estimate and a utilization factor of 15%, renewables can generate 75% of the electricity produced by coal in 2023. At 5,000 GW, it’s 114%. The ultimate plateau of usable solar power is expected to be higher – perhaps much, much higher – given rapidly advancing storage technology and new industries that can piggyback on transformed energy economics.

According to the International Energy Agency (IEA), prices for solar photovoltaic (PV) modules declined by almost 50% year-on-year in 2023. Global PV manufacturing capacity has tripled since 2021, driven almost entirely by China.

By the end of 2024, global manufacturing capacity for PV modules will increase another 40% to 1,100 GW, with China maintaining an 80-95% share (depending on the manufacturing segment) of the supply chain.

The sudden acceleration of China’s clean energy plan demonstrates China’s strategic flexibility. When the 2030 renewables target was set in 2020, nobody knew precisely how energy technology and economics would shake out. China had bets placed across the board – wind, solar, nuclear, storage, EVs.

When it became obvious that the price of PV panels could be driven into the ground, all the chips and more were shifted into solar and the industrial/technology stack necessary to milk it for maximum benefit –batteries, ultra-high voltage (UHV) transmission, EVs.

Solar is now cheaper than coal for opportunistic power generation (i.e. when the sun is shining). Solar and storage – the ability to save energy in chemical batteries for cloudy days – is on the cusp of becoming cheaper than coal for baseload power.

Lithium batteries are ready while new sodium ion technology promises to be even cheaper. It’s now a matter of scaling and building out a national grid that adjusts for regional weather and seasonal variations in power demand.

The story starts further back. China is an MMA fighter who has been secretly training in new styles since the mid-2000s. Fight promoters thought the new style was ready for the octagon in 2017 (halting construction of new coal power plants).

This proved premature. By 2019 it was obvious the new style wasn’t winning matches (PV prices still too high, limited wind scalability) and the fighter switched back to the old style (mass coal buildout) but still suffered humiliating defeats (rolling brownouts in 2021). 

But the training continued and breakthroughs were achieved (rapidly dropping PV and battery prices), and now it’s truly ready for showtime. Everyone is dazzled by new fancy takedowns (electric cars) but what they see is only one part of a larger Brazilian Jujitsu ground game.  

At full operating capacity with proper redundancies, a PV and storage-based power generation system will throw off intermittent but predictable bursts of “free electricity” which new industries can absorb. Pared with storage, 5,000 GW of renewable capacity should be able to replace all baseload coal by 2030. Additional solar capacity would be all gravy.  

This is where magical things happen – mass desalination, indoor crop production, “costless” environmentally friendly smelting of metals. This is truly transformational stuff and given the pace of the buildout, we could start seeing some of it happening within five years.

After China entered the rapid urbanization and infrastructure buildout phase of its development at the turn of the century, primary energy consumption (oil, coal, gas, nuclear, renewables, biomass, etc) quadrupled. China’s primary energy consumption is 75% higher than that of the US. On a per capita basis, however, it is 60% lower.

The expectation is that China’s primary energy consumption will plateau like the US as its economy becomes more service and consumption-oriented. Estimates vary but most analysts would probably expect China’s primary energy consumption to plateau around 2030 at OECD per capita levels, significantly below that of the US (with its penchant for monster trucks and gas-guzzling SUVs).

That may not be the case. With China-sized scaling driving solar economics, how low can electricity prices fall? Will gargantuan EVs become just as popular in China as heavy-duty pick-up trucks are in the US? What new uses of energy will emerge if justified by new economics? Desalinization? Ultra-cheap fertilizer? Hydrogen-based jet fuel? Just how high will China’s solar energy output plateau?           

The answers to the above questions will depend on the pace of battery innovation and the scaling of grid infrastructure. PV module prices have fallen to such a level that the bottleneck in some economies is now the labor costs of installation. If similar trends in storage and transmission can be achieved, then China’s, if not the world’s, economy will be transformed.

In capitalist accounting, the most important line on the income statement is net income. That is the line to maximize. In theory, the combined labor of individuals incentivized to maximize net income will also result in maximized societal welfare.

In communist accounting, the most important line on the income statement is cost of goods sold (COGS). In theory, maximizing COGS prevents capital from hoarding resources by either overcharging customers or underpaying workers. In practice, in the USSR, maximizing COGS disincentivized innovation and, over time, hobbled productivity.

China is trying to have it both ways. And it may be succeeding. In the EV, battery and PV industries, China incentivized investment by offering generous subsidies and tax benefits to all takers (at least all domestic ones) two decades ago.

This resulted in hordes of market entrants who competed ferociously with each other, frantically innovating and driving down prices (as well as net income). Underwritten by China’s massive market, barely profitable industries not only scaled up aggressively but were forced to innovate by the ruthless competition.  

Of course, this hasn’t always worked and the model is not always exactly the same. China is still multiple generations behind in semiconductors despite decades of government support. Commercial aircraft is such a complex undertaking that it’s not possible to incentivize scores of market entrants. Huawei became the industry leader in telecommunications equipment with only one minor domestic competitor (ZTE).

In the EV, battery and PV spaces, however, where no legacy player had an entrenched lead, China has managed to run the tortoise and hare strategy in reverse – scale up so fast and so high that catching up becomes impossible. In industries with entrenched leaders, where China started from behind – semiconductors, commercial aircraft, biotech – the tortoise strategy is the only option.

If success is the utter transformation of China’s economy with desalination plants irrigating indoor solar-powered vegetable farms and Chinese families cruising around in US$15,000 Hummer-sized EVs, what does failure look like?

Battery technology could hit a wall with grid-level storage never becoming economically viable. Scaled UHV transmission could prove to be an unworkable engineering challenge and the deserts of Xinjiang are never terraformed into solar farms.

Even then, paired with coal power plants as backup, solar power should still be able to eliminate much of coal-fired power generation in China with massive benefits for both air quality and climate goals.

Right now, we would like to return to our regularly scheduled programming where China’s clean-adjusted 2023 GDP growth was 1.5% with investments contributing 0%, government spending contributing 0%, household consumption contributing 2% and net exports contributing -0.5%.

All of this is based on the “feelz.” You know, Bloomberg headlines, execrable stock market performance and disgruntled coal barons and property developers who set up shop in Singapore.

We can also change the channel and discover that China can make GDP growth anything it wants by dialing debt up and down, and is so politically hamstrung that it has no choice but to invest wastefully.

It’s all one giant Ponzi scheme that could not possibly have, in fact, delivered the second-highest growth in household consumption since the financial crisis (deep bow to Uzbekistan).

What you are looking at in the above chart is precisely China’s returns from “uneconomic” investment in infrastructure and urbanization (housing, high-speed rail, roads and bridges). Investment in solar infrastructure, batteries and EVs has been and will likely be no different.

In China, looking for returns in the financial statements of companies – or even entire industries – is a fool’s errand. It’s all in the externalities. In the number of cities that can now claim first-tier status. In the second-tier cities that are now cooler – in their own funky way – than first-tier cities. In the ~70% of age cohort who will graduate from college this year.

And, if all goes according to plan, in monster EVs with living room-sized interiors chauffeuring Greta Thunberg and Al Gore around Shanghai’s streets.

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