Recently, the Center for Energy and Clean Air Research (CREA) published an article saying that the contribution of the clean energy industry to China's economy in 2023 is estimated at 114 trillion yuan (1$6 trillion), a year-on-year increase of 30%. Clean energy's contribution to economic growth has made it an important part of China's economic and industrial policy. This is likely to support China to accelerate its energy transition and increase financing and development of renewable energy projects overseas.
Clean energy contributed a record 11 percent to China's economy in 20234 trillion yuan (16 trillion dollars),It accounts for a share of total investment growth and accounts for more of economic growth than any other sector.
A new sector analysis based on official data, industry data and a carbon briefing from analytical reports reveals a huge increase in clean energy investment in China last year, in particular:Solar power, electric vehicles (EVS) and batteriesand other so-called "new three" industries.
The analysis shows,Solar power generation and manufacturing capabilities for solar panels, electric vehicles, and batteriesIt is the main focus of China's clean energy investment in 2023.
In this analysis, we used a broad definition of the "clean energy" sector, including renewables, nuclear power, power grids, energy storage, electric vehicles, and railways, among others. These are the technologies and infrastructure needed to decarbonize China's energy production and use. ）
Other key findings from the analysis include:
Clean energy investment increased by 40% year-on-yearUp to 63 trillion yuan ($890 billion), this growth accounted for the entire share of China's economic investment growth in 2023.
China's $890 billion investment in the clean energy sector is almost equal to the total global investment in fossil fuels** in 2023Similar to the gross domestic product (GDP) of Switzerland or Turkey.
Taking into account the production value,The clean energy sector's contribution to China's economy reached 114 trillion yuan（1.$6 trillion), a year-on-year increase of 30%.
As a result, the clean energy sector emerged as the biggest driver of China's overall economic growth, accounting for 40% of GDP expansion in 2023.
Without the growth of the clean energy sector, China's GDP will not be able to meet the growth target of "around 5%", but will only grow by 30% instead of 52%。
The surge in clean energy investment comes as China's real estate sector has contracted for the second year in a row. This shift will:The clean energy industry is positioned as a key part of China's energy and climate sectors, but also in its broader economic and industrial policies.
However, the shadow of excess capacity means that China's clean energy investment growth – and the investment-driven economic model in general – cannot be sustained indefinitely.
The growing importance of these emerging industries gives China an important economic interest in the global transition to clean energy technologies.
However, it also raises questions for overseas policymakers trying to link their climate strategies to domestic industrial growth.
Clean energy is driving China's growth in 2023
China's clean energy investment boom means that this sector accounted for the entire share of the country's economic investment growth in 2023, while spending in other areas is shrinking.
In 2023, China's investment in the clean energy sector is expected to be 63 trillion yuan (US$890 billion).Compared to 4. in 20226 trillion yuan, an increase of 17 trillion yuan, a year-on-year increase of 40%. Overall, clean energy accounted for 13% of China's total fixed asset investment in 2023, up from 9% a year ago.
The analysis shows that although China's total investment has increased by only 15 trillion yuan, but clean energy accounted for all the growth, while investment in sectors such as real estate contracted.
The chart below illustrates this and highlights the concentration of clean energy investment in the so-called "new three" sectors of so-called solar, energy storage, and electric vehicles.
Clean energy is also a major contributor to China's overall economic growth, accounting for about the year-on-year growth of GDP across all sectorsmade a contribution.
The contribution of China's investment growth by sector (left) and overall GDP (right) in 2023 is measured in trillions of yuan. The "new triath" refers to solar, electric vehicles, and energy storage. **Analysis conducted by the Center for Energy and Clean Air Research (CREA) for Carbon Brief. Chart produced by Carbon Brief.
Including the value of goods and services, the clean energy sector's contribution to China's economy in 2023 is estimated at 114 trillion yuan (1$6 trillion), a year-on-year increase of 30%.
This means that clean energy will account for 9 percent of China's gross domestic product (GDP) in 20230%, up from 7. in 2022An increase of 2%.
If the clean energy sector's contribution to China's economic growth is not taken into account, the country's GDP will grow by only 3 percent in 20230% instead of the 5 that was actually recorded2%。
This would miss China's growth targets at a time when it is facing growing concerns about its economic outlook, including the property crisis and a declining population.
The important role that clean energy plays in driving economic growth in 2023 makes it a key component of China's broader economic and industrial development.
This could strengthen China's climate and energy policies, as well as its 2030 and 2060 carbon peaking and carbon neutrality targets, increasing the economic and political importance of the sector.
The "New Three Laws" lead clean energy investment
This analysis is based on a combination of published data, industry data, and analyst reports, and the exact methodology varies by sector and will be detailed in subsequent sections.
The table below sets out the estimated contribution of each sector to China's investment and overall gross domestic product (GDP) in 2023, as well as year-on-year growth compared to 2022.
The analysis includes solar, electric vehicles (EVs), energy efficiency, railways, energy storage, power grids, wind power, nuclear power, and hydropower, all of which are needed to decarbonize China's energy** and consumption in the context of the "clean energy sector."
The so-called "new trio" – solar, energy storage and electric vehicles – all feature prominently on the table and have all seen strong growth.
Our analysis shows thatIn 2023, investment in clean energy power generation and energy storage capacity reached 17 trillion yuan (up 48% year-on-year), while investment in solar, electric vehicle and battery manufacturing capacity reached 25 trillion yuan (up 60% year-on-year).
Investment in clean energy infrastructure reached 14 trillion yuan(+9%, including power grids, EV charging piles and railways), with an investment in energy efficiency of CNY600 billion (+15%).
At the same time, our analysis shows that:The value of goods and services produced in the cleantech sector reached 51 trillion yuan, a year-on-year increase of 26%.
This includes the value of power generation, electric vehicle sales, and solar exports, as well as the value of transporting passengers and goods by rail.
Solar
Solar energy is the largest contributor to the growth of China's cleantech economy in 2023. The combined growth value of investment, goods and services in the solar industry reached 1 trillion yuan, up from 1. in 20225 trillion yuan to 25 trillion yuan, a year-on-year increase of 63%.
Although China has dominated the manufacturing and installation of solar panels for many years, the industry's growth in 2023 is unprecedented.
In terms of installation, two major initiatives have driven the increase in production, namely:"Countywide Distributed Solar" and "Clean Energy Base" programs.
In addition, in response to the slowdown in the real estate sector, a new policy was introduced in early 2023Encourage the development of the solar industry on unused and built construction land.
At the same time, during the National Two Sessions in the spring of 2023,15 provincesThe development of the solar industry has been placed at the top of the agenda.
The chart below shows detailed data on the growth of China's solar installations in the first 11 months of 2023. (For the full year, an estimated 200 GW of new capacity was added nationwide, more than double the record of 87 GW set in 2022.) ）
Newly installed solar capacity in China from January to November every year, measured in gigawatts. Data**: National Energy Administration. Chart produced by Carbon Brief.
Meanwhile, China's solar manufacturing sector has shown stronger growth in 2023. According to the International Energy Agency (IEA),China added 340 GW of polysilicon production capacity and 300 GW of wafer, cell, and module production capacity in 2023.
In 2023, China's exports of solar products have increased significantly. According to the China Photovoltaic Industry Association,In the first 10 months of the year, China exported 56 GW of solar wafers, 32 GW of cells and 178 GW of modulesThe year-on-year growth was 34% and 34%, respectively. However, the export value of these solar products increased by only 3% due to falling costs.
In the overall export growth, China's solar exports to countries along the "Belt and Road", Southeast Asian countries and some African countries have increased significantly.
For this analysis, the investment value of new solar manufacturing capacity is estimated by the average capital cost for each step of the chain, compiled from reported project costs. This makes the cost level significantly lower than that reported in other literatures.
The analysis assumes that local** investment in facilities and infrastructure, as well as direct subsidies, increases reported private investment by 30 per cent.
Investment estimates for solar power are derived by multiplying the unit investment costs of Bloomberg New Energy Finance's newly added capacity by the China Photovoltaic Industry Association's rooftop and utility-scale systems.
The value of exported solar equipment is based on data from the China Photovoltaic Industry Association on export growth reported in 2022 and 2023.
Our analysis does not include the value of solar equipment produced for domestic installations to avoid overlapping with the investment costs of domestic solar projects that have already been estimated.
Wind energy
In the first 11 months of 2023, China added 41 GW of wind capacity, up 84% year-on-year. In 2023 alone, 60 GW of onshore wind power is on track to be added, according to China Galaxy**, based on trends from previous years.
In addition, offshore wind capacity increased by 6 GW throughout 2023.
The chart below shows the amount of wind capacity added in the first 11 months of each year.
China's new wind power capacity from January to November every year, gigawatts. Data**: National Energy Administration. Tabulation: Carbon Brief
By the end of 2023, it is expected that the first "clean energy bases" will be connected to the gridContribute to the growth of onshore wind power in northwest provinces such as Inner Mongolia. The second and third tranches of clean energy bases will continue to drive the growth of onshore wind capacity.
The market is also driven by the "repowering" of old wind farms, which is supported by the best policiesThe policy advocates replacing smaller, older wind turbines with larger ones.
The potential of distributed wind power is also being actively promoted"Village Wind Power Utilization Action".and other items.
Offshore wind construction in 2023 has been slow at first. This reflects the shift from offshore to deep-sea projects, as well as from individual projects to larger bases.
Offshore wind projects also face a complex approval process with multiple regulatory aspects, leading to uncertainty and slower installations.
However, these issues are being addressed, with offshore wind construction in Q4 2023** and 2024 expected to be a significant year for project delivery.
Since 2021, new wind power projects in China are no longer receiving subsidies.
Although technological advances have reduced costs, raw materials*** result in lower profit margins than in the solar industry, so the total investment in wind power is smaller relative to solar.
Electric vehicles
In 2023, China's electric vehicle production increased by 36% year-on-year to 9.6 million units, accounting for 32% of all vehicle production in the country.
The vast majority of electric vehicles produced in China are sold domesticallyAlthough the car purchase subsidy announced in 2020 was completed at the end of 2022, sales still grew strongly.
The National EV Purchase Subsidy is a financial tool that has been boosting the EV market for 13 years. Its disappearance highlights the gradual shift from policy-driven to market-driven demand, making growth more likely to continue.
In 2023, sales of electric vehicles produced in China reached 9.5 million units, a year-on-year increase of 38%. Among them, 8.3 million units were sold domestically, accounting for one-third of China's overall vehicle sales, while 1.2 million electric vehicles were exported, up 78% year-on-year.
The chart below shows the growth in production and sales of "new energy vehicles" (mainly electric vehicles), while also showing their increasing share of all vehicles sold.
Production and sales of all vehicles and "new energy vehicles" (NEVs) in China, data from the National Bureau of Statistics and the China Association through the Wind Financial Terminal. NEVs include battery electric vehicles and plug-in hybrid electric vehicles. The right side shows NEV's share of all new car sales, as well as the cumulative share over the past 10 years, as an indicator of NEV's share of vehicles on the road. Chart produced by Carbon Brief.
China's electric vehicle market is highly competitive, with at least 94 brands offering more than 300 models. Domestic brands account for 81% of the EV market, with BYD, Wuling, Chery, Changan and GAC being the main competitors.
To sustain this growth, significant investments in manufacturing capacity are required.
This analysis estimates investment in EV manufacturing based on a study by the China Association for the Promotion of International Science and Technology (CIAPST), which puts the amount of investment in EV manufacturing at 0 in 20217 trillion yuan.
The analysis assumes that EVs account for all of the growth in investment in automotive manufacturing capacity reported by China's National Bureau of Statistics in 2022 and 2023, while investment in conventional vehicles remains stable.
This means investment in the manufacturing of electric vehiclesIn 2023, it reached 12 trillion RMB. This may be conservative, as the production of gasoline-powered vehicles is declining, implying a corresponding decline in investment.
This analysis separately considers the expansion of battery manufacturing capacity, along with electricity storage, although it is driven by the growth of electric vehicle production.
The analysis estimates the value of EV production based on the INE car production volume and the average EV ** report.
The ** of these EVs includes the value of the battery produced for the EV, so the value of the battery produced is not separately included.
At the same time, the EV charging infrastructure is rapidly expanding, contributing to the growth of the EV market. In 2022, more than 80% of "first-tier" cities, such as megacities such as Beijing, Shanghai and Guangzhou, installed charging stations, and 65% of the country's expressway service areas provided charging facilities.
More than 3 million new charging points will be put into operation in 2023, including 930,000 public charging piles and 2.45 million private charging piles. As of November 2023, the cumulative total reached 8.6 million charging points.
This analysis estimates EV charging infrastructure investment at 0 in 2023RMB 1 trillion, based on an average cost of 30,000 yuan per charging point.
Energy efficiency
China's energy intensity reduction targets have prompted industries to reduce energy use per unit of output and drive investment in more efficient processes.
For this analysis, the size of the ESC market was used as an investment in industrial and building energy efficiency. Based on the revenue growth of the top 10 energy service companies by market capitalization, the market size is estimated to increase from 05 trillion yuan grew to 06 trillion yuan.
Over the past 20 years, China's energy services industry has experienced rapid expansion, growing from 1.8 billion yuan in 2003 to 607 billion yuan in 2021. Investment in the industrial services sector has been the main driver, accounting for about 60% of the total investment.
However, there was a significant decline in industrial energy services output in 2022, affected by poor industrial growth, although the building services sector continued to expand.
The analysis puts China's investment in building energy efficiency at 8 billion yuan per year. China's 14th Five-Year Plan sets targets for energy efficiency and "green buildings", with 80 million square meters of green floor area being renovated and newly built each year.
This is a small fraction of the nearly 10 million square meters of floor area completed annually, so the estimate of the total investment is relatively small.
Electricity storage and hydrogen
China is rapidly expanding its power storage capacity. This is expected to significantly reduce China's reliance on coal- and gas-fired power plants to meet peak electricity demand and facilitate the integration of larger-scale wind and solar power into the grid.
The construction of pumped storage power plant capacity has grown significantly over the past yearThe capacity under construction has reached 167GW,That's up from 120GW a year ago.
The chart below shows the growth of pumped storage capacity under construction or in early stages of development as of the end of 2023.
The capacity of pumped storage power stations under construction or in early development at the end of 2023, in kilowatts. Data**: Global Energy Monitor, Global Hydropower Tracker.
Data from the Global Energy Monitor shows another 250GW of projects in the pre-construction phase, suggesting that the current capacity surge is likely to continue.
In this analysis, we assume that the annual investment estimate for pumped hydro is proportional to the capacity under construction, while the reported construction cost of $6 per watt is spread over three years. This means:The investment amount in 2023 is 03 trillion yuan.
The build-up of new battery production capacity is another major investment driver, estimated at 03 trillion yuan. This is based on the new capacity added capacity reported by the China Automotive Power Battery Industry Innovation Alliance and the estimated average investment cost per unit of production capacity based on publicly reported project costs.
The construction of electrolyzers for "green" hydrogen production nearly doubled year-on-year in 2023 to about 90 billion yuanThis is based on data estimated by SWS Research in the first half of the year. In a compilation of projects published in analyst reports and news**, it is generally accepted that China's investment in green hydrogen is larger, but these investments typically include spending on electricity generation, which we account for separately in this analysis.
Investment in "new energy storage technologies", mainly batteries, more than doubled in 2023 to 75 billion yuan. This estimate is based on the 2023 new capacity additions reported by the China Energy Storage Alliance, as well as the average investment cost calculated from the National Energy Administration's data.
Railways
China's Ministry of Transport reported a 7% increase in investment in railway construction between January and November 2023, meaning that the annual investment reached 8 trillion yuan. This includes significant investments in passenger and freight transport. At the same time, investment in roads fell slightly, while overall rail investment increased by 22%.
Due to the rapid development of the railway network, the freight volume of China's rail transportation was 78% rose to 9 in 20212%。
In 2022, China operated about 155,000 kilometers of railway lines, of which 42,000 kilometers were high-speed rail. That's more than 38,000 kilometers out of 146,000 kilometers in 2020.
In 2023, China's total railway passenger and freight traffic increased by 39% year-on-year to nearly 1 trillion yuan.
Nuclear energy
In 2023, China approved 10 nuclear power unitsFor the second year in a row, it exceeded the expected rate of 6-8 units per year set by the China Nuclear Energy Association in 2020.
The total number of nuclear power units currently in operation or under construction in China is 77, the second largest in the world. Based on data from the National Energy Administration from January to November 2023, this analysis estimates:The total annual investment in 2023 will be 87 billion yuan, a year-on-year increase of 45%.
The regions with the largest number of nuclear power projects are located in the coastal provincesThese provinces have a large concentration of heavy industrySuch as Guangdong, Fujian and Zhejiang,The development of inland nuclear power projects remains stagnant.
About 20% of the electricity in these provinces comes from nuclear power and continues to expand the use of nuclear power technology as part of efforts to reduce emissions from the power sector.
Power grid
China's power sector development plans include a significant increase in inter-provincial power transmission capacity and numerous long-distance transmission lines from the west to the east.
State Grid is the largest operator of most of China's electricity transmission networks, with the goal of increasing inter-provincial power transmission capacity to 300GW by 2025, 370GW by 2030, and 230GW in 2021. These programs play an important role in promoting the development of clean energy bases in western China.
The China Electricity Industry Association reportedThe investment in power transmission in 2023 is 05 trillion yuan, a year-on-year increase of 8%.- Slightly exceeding the target level set by the National Grid.
Why clean energy is taking off in 2023
The surge in clean energy investment in 2023 is the result of China's macroeconomic strategy. As this analysis shows, investment has shifted from real estate to manufacturing, with a strong focus on clean energy.
Total investment in the manufacturing sector increased by 9% year-on-year in 2023, while investment in the power and heat sector increased by 23%. These increases are entirely attributable to increased investment in clean energy, while investment in other areas has declined. So, actually,China's manufacturing sector has shifted to clean-tech manufacturing.
The reason for this shift is the tightening of the real estate sector, with real estate investment falling by 10% year-on-year in 2022 and again by 9% in 2023. While this decline is in line with the goal of addressing financial risks and overleverage in the real estate sector, it leaves a huge gap in overall investment demand and local fiscal revenues in China.
Localities** are under pressure to attract investment, which means they offer generous subsidies and help arrange financing.
During the pandemic, the clean energy sector was boosted by easing access to financial markets and bank loans for the private sector.
Unlike state-owned enterprises (SOEs), which dominate traditional industries, low-carbon sectors are largely made up of private companies that have previously received previously restricted access to credit.
The importance of this economic shift is reflected not only in the data revealed in this analysis, but also in the language spoken in China**.
The three major clean energy sectors by value, namely solar, energy storage, and electric vehicles, are known as the "new three" and correspond to the "old three" – clothing, appliances, and furniture.
This shift is possible because China's clean energy policy and broader industrial policy have laid the foundation for these sectors and given them the potential for rapid growth.
The post-pandemic credit "push" for clean energy growth also coincides with a demand "pull" due to falling costs and low-carbon technologies becoming more competitive with fossil fuels due to technological advances.
In addition, the announcement of a 2060 carbon neutrality target announced in 2020 raised expectations and provided a political signal for scale expansion.
The growth of clean energy
What it means for China and the world
Cleantech has long been an important part of China's energy policy, industrial strategy, and climate change efforts. Last year marked the first time that the sector has become a key economic driver for China. This has important implications.
China's reliance on the clean technology sector to drive economic growth and achieve key economic goals has increased the economic and political importance of these sectors. This could also support an accelerated energy transition.
Last year's massive investment in clean technology manufacturing capacity and exports means that China has an important stake in the success of global clean energy and the construction of export markets.
For example, China's chief climate negotiator, Su Wei, recently highlighted the important benefits for China's new energy industry, as agreed at last year's United Nations climate summit (COP28), to triple global renewable energy capacity. It could also mean that China's efforts to finance and develop clean energy projects overseas will be strengthened.
Globally,China's unprecedented clean energy manufacturing boom has weighed down**, with the cost of solar panels falling by 42% year-on-year, a dramatic drop and even a significant drop compared to the historical average (around 17% per year), while the battery** decline was even steeper at 50%.
This, in turn, has led to faster adoption of clean energy technologies.
In particular, the deployment of solar power** has been upended. The International Energy Agency's (IEA)'s latest World Energy Outlook introduces an additional global energy scenario to examine its impacts**, which could see coal use and CO2 emissions in the global power sector be 15% lower than the baseline scenario by 2030 if the global deployment of solar power and grid-connected batteries follows the expansion of manufacturing capacity. In the IEA's revised **, additional solar deployments are mainly concentrated in China.
However, even with increased deployments, the absorptive capacity of solar power, batteries, and other clean technologies is limited, as the expansion of manufacturing has saturated much of the global market.
This means:If it remains the same, the expansion will experience overcapacity. On the other hand, in order to continue to drive investment growth, the cleantech manufacturing sector will need to not only absorb the same capital as it did in 2023, but will need to increase investment year after year.
The clean technology investment boom has given new life to China's investment-led economic model. There is room for expansion in some new clean energy technologies, such as electrolyzers.
Ultimately, however, completely new areas must be found to invest in, or China's economic model must be transformed when investment has nowhere to go. The manufacturing boom has also cemented China's dominance in the clean energy chain. As a result, other countries are faced with a choice as to whether they want to obtain clean energy technologies such as solar cells, batteries, electric vehicles, etc., from China at low cost.
Another option is to diversify and pay for the costs of building new chains, including the need for subsidies and import tariffs to enable domestic producers or producers in third countries to compete with Chinese counterparts. These efforts will increase further and push the world even lower.
*: Carbon Brief, Black Gate Carbon Sink.
Editor: Chen Meishan.
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