Signs of Chinese saturation in energy transition

 

China and the rest of the Asia-Pacific region are the backbone of the energy transition, or at least of the supply chains to meet the new demand that will result from the energy transition.

Chinese exports of batteries, electric cars and solar panels hit record levels last year, underscoring its dominance in key green industries and triggering a global slump in prices. Overseas sales of the products, which Beijing has identified as vital to future economic growth, topped $150 billion, according to Australia's Griffith Asia Institute. But the dollar figures will fall by 2024, according to a Bloomberg analysis of Chinese trade data, largely because of falling prices rather than lower shipments.

There are three dynamics behind these numbers, along with other points related to the energy transition: 1) the energy transition is closer to the South-South supply chains led by China, 2) Western companies have a long way to go to compete, and protectionism may not be the smartest solution if they do not want to isolate themselves from the world, 3) regions of the world with high availability of critical materials such as Latin America, Africa, and even small regions of Europe are gaining importance, but what is also preventing the energy transition is the ecological damage caused by extractive mining, which generates not only emissions but also water stress.

Energy transitions are almost never harmless. There are always consequences. It is simply the human footprint. When that footprint is manifested in an emerging middle class, the demographic pressures are even greater, even as fossil fuels are phased out. There are many challenges to be solved and each of these dynamics, in which China is the center of attention, will have geopolitical and geoeconomic consequences, in fact they are already here, of various considerations. This is an issue we need to think about.