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The bright side of Chinese “overinvestment” in clean technology.
As nearly any six year old would be more than happy to tell you, the problem is never that there is too much ice cream, or too many toys, or too much screen time. Yet adults considering the political and economic challenges of decarbonizing energy systems continue to harp on the downsides of “overcapacity” — in China, specifically — of production for clean technologies, namely solar and batteries and EVs.
As Heatmap’s own Robinson Meyer has argued, China’s monumental “overinvestment” in clean technologies may lead to trade difficulties with the United States and European Union, which are attempting to stand up cleantech production either inside their own borders or within others they’ve deemed acceptable (a concept that goes by various names, such as reshoring, nearshoring, and friendshoring) and see Chinese competition as likely to strangle these infant industries before they can stand up on their own.
However accurate that view might be, it’s important to remember that China’s investments in solar and batteries are largely responsible for the immense cost declines in these technologies across the globe. Solar is now the cheapest source of electricity the world has ever seen. Inexpensive batteries allow Chinese automakers like BYD to sell electric vehicles for prices well below those traditional internal combustion vehicles.
If anything, these huge investments represent a breakthrough that allows all of us to envision a clean, abundant future. If Europe and the U.S. are sour about not controlling the said future, the developing world will likely be too busy celebrating the end to their energy poverty to care.
As Heatmap readers likely already know, clean electrification is the skeleton key to global decarbonization. It obviously doesn’t solve everything (hello agriculture), but it’s more of a giant leap along the net zero path than a small, first step. Solar, wind, and batteries are its principal components and all have followed learning curves--with greater production yielding price declines over and over again.
China dominates global cleantech manufacturing today, and it’s investing more in production and deployment than the rest of the world. As for what that means, the International Energy Agency’s recently published Renewables Report helps fill in the picture:
The United States has tried to defend its turf by putting tariffs on Chinese EVs, and the myriad subsidies for clean technologies in the Inflation Reduction Act almost all have restrictions on the country of origin as well as whether components were made by “foreign entities of concern.” The European Union, meanwhile, launched an investigation into Chinese EV subsidies and is in the process of implementing its Carbon Border Adjustment Mechanism to try to put imports on equal footing with its internal carbon pricing scheme.
While China blasts these actions as simple protectionism, there is a strong argument to be made that maintaining a politically durable coalition in favor of decarbonization inside these countries requires some degree of domestic EV production to provide good jobs. Production of these specific tradable goods takes place in factories where the prototypical good job — union, blue collar — has been located, historically. Whether decarbonization efforts should so heavily emphasize these particular high quality jobs instead of less tradable positions in energy installations, grid maintenance, and efficiency is an open question.
Even if we accept that argument, though, it wouldn’t change the fact that what matters most for the planet is building and deploying lots of clean technologies — and continuing to get better at making and using them.
This matters because the rich countries are not going to define the world’s emissions trajectory for the next 75 years. The Rhodium Climate Outlook 2023 projects likely pathways of global emissions to 2100. It forecasts emissions will decrease from the equivalent of around 50 billion metric tons today to around 40 billion by 2060, but then rise again to around 50 billion metric tons by 2100. That reversal comes about because Rhodium sees decarbonization as both more partial and more local than it’s often imagined. Only China and the member countries of the Organisation for Economic Cooperation and Development dramatically reduce their emissions over the next 25 years while most of the world merely holds steady — with the exception of Africa, where emissions grow substantially.
All of this is because Rhodium also assumes that getting the final bits of carbon out of the global economy will be much more difficult than picking off the low-hanging fruit, as we’re doing today by moving from coal to gas and increasingly to renewables. Solar is already so cheap that it is showing up everywhere — in South Africa when citizens are tired of rolling blackouts; in Nigeria, stepping in for generators after diesel subsidies were reduced; even with a random YouTuber rehabbing an abandoned French chateau. Batteries are also getting cheaper and helping grids in stress. Maybe green hydrogen will, as well.
Building clean, resilient electrical grids starting as soon as possible will have immense benefits for the climate. But doing it at scale everywhere in the world is contingent on these technologies being affordable. And to date Chinese prices remain lower than in the rest of the world. Take solar: A December 2023, analysts at Wood MacKenzie priced Chinese modules at 15 cents a watt compared with 40 cents in the U.S., 30 in Europe, and 22 in India.
This isn’t to say that the rest of the world should stop trying to produce more and lower costs — again, more good things are good, and adding resilience and reducing dependence on a single country has real benefits — but rather that we should remember to celebrate a bit how much of a win we’ve already seen. The point, after all, is not to win climate change, but rather to avoid it. How well we manage to do that will depend in no small part on putting rivalries aside.
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The Loan Programs Office is good for more than just nuclear funding.
That China has a whip hand over the rare earths mining and refining industry is one of the few things Washington can agree on.
That’s why Alex Jacquez, who worked on industrial policy for Joe Biden’s National Economic Council, found it “astounding”when he read in the Washington Post this week that the White House was trying to figure out on the fly what to do about China restricting exports of rare earth metals in response to President Trump’s massive tariffs on the country’s imports.
Rare earth metals have a wide variety of applications, including for magnets in medical technology, defense, and energy productssuch as wind turbines and electric motors.
Jacquez told me there has been “years of work, including by the first Trump administration, that has pointed to this exact case as the worst-case scenario that could happen in an escalation with China.” It stands to reason, then, that experienced policymakers in the Trump administration might have been mindful of forestalling this when developing their tariff plan. But apparently not.
“The lines of attack here are numerous,” Jacquez said. “The fact that the National Economic Council and others are apparently just thinking about this for the first time is pretty shocking.”
And that’s not the only thing the Trump administration is doing that could hamper American access to rare earths and critical minerals.
Though China still effectively controls the global pipeline for most critical minerals (a broader category that includes rare earths as well as more commonly known metals and minerals such as lithium and cobalt), the U.S. has been at work for at least the past five years developing its own domestic supply chain. Much of that work has fallen to the Department of Energy, whose Loan Programs Office has funded mining and processing facilities, and whose Office of Manufacturing and Energy Supply Chains hasfunded and overseen demonstration projects for rare earths and critical minerals mining and refining.
The LPO is in line for dramatic cuts, as Heatmap has reported. So, too, are other departments working on rare earths, including the Office of Manufacturing and Energy Supply Chains. In its zeal to slash the federal government, the Trump administration may have to start from scratch in its efforts to build up a rare earths supply chain.
The Department of Energy did not reply to a request for comment.
This vulnerability to China has been well known in Washington for years, including by the first Trump administration.
“Our dependence on one country, the People's Republic of China (China), for multiple critical minerals is particularly concerning,” then-President Trump said in a 2020 executive order declaring a “national emergency” to deal with “our Nation's undue reliance on critical minerals.” At around the same time, the Loan Programs Office issued guidance “stating a preference for projects related to critical mineral” for applicants for the office’s funding, noting that “80 percent of its rare earth elements directly from China.” Using the Defense Production Act, the Trump administration also issued a grant to the company operating America's sole rare earth mine, MP Materials, to help fund a processing facility at the site of its California mine.
The Biden administration’s work on rare earths and critical minerals was almost entirely consistent with its predecessor’s, just at a greater scale and more focused on energy. About a month after taking office, President Bidenissued an executive order calling for, among other things, a Defense Department report “identifying risks in the supply chain for critical minerals and other identified strategic materials, including rare earth elements.”
Then as part of the Inflation Reduction Act in 2022, the Biden administration increased funding for LPO, which supported a number of critical minerals projects. It also funneled more money into MP Materials — including a $35 million contract from the Department of Defense in 2022 for the California project. In 2024, it awarded the company a competitive tax credit worth $58.5 million to help finance construction of its neodymium-iron-boron magnet factory in Texas. That facilitybegan commercial operation earlier this year.
The finished magnets will be bought by General Motors for its electric vehicles. But even operating at full capacity, it won’t be able to do much to replace China’s production. The MP Metals facility is projected to produce 1,000 tons of the magnets per year.China produced 138,000 tons of NdFeB magnets in 2018.
The Trump administration is not averse to direct financial support for mining and minerals projects, but they seem to want to do it a different way. Secretary of the Interior Doug Burgum has proposed using a sovereign wealth fund to invest in critical mineral mines. There is one big problem with that plan, however: the U.S. doesn’t have one (for the moment, at least).
“LPO can invest in mining projects now,” Jacquez told me. “Cutting 60% of their staff and the experts who work on this is not going to give certainty to the business community if they’re looking to invest in a mine that needs some government backstop.”
And while the fate of the Inflation Reduction Act remains very much in doubt, the subsidies it provided for electric vehicles, solar, and wind, along with domestic content requirements have been a major source of demand for critical minerals mining and refining projects in the United States.
“It’s not something we’re going to solve overnight,” Jacquez said. “But in the midst of a maximalist trade with China, it is something we will have to deal with on an overnight basis, unless and until there’s some kind of de-escalation or agreement.”
A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.