The Race to the Top in Six Charts and Not Too Many Numbers

Cleantech competition between China, Europe, and the United States

There is a global race to the top to lead the energy technologies of the future. As in past technology waves, the great powers are vying to reap the benefits of new technology ahead of their rivals and to export these technologies and expertise to the rest of the world.

The energy transition today is principally driven by three regions — China, Europe, and the United States — competing across three areas: cleantech supply chains, cleantech deployment (electric vehicles and renewables), and electrification. China currently leads in all three. Despite this lead, the race is still in its early stages, with Europe and the United States catching up, and other countries around the world joining in. Of course, in the end there will be many winners in the new energy economy. Here, we distill six key messages from our report, X-Change: The Race to the Top.

1. China leads cleantech innovation and manufacturing

Over the past decade, China has seen a rapid expansion of cleantech manufacturing. China’s battery and solar manufacturing capacities have grown on average by 78 percent and 26 percent per year, respectively. China has outspent the United States and Europe 10-fold on cleantech in the past five years, to achieve a manufacturing share of 90 percent in solar and 70 percent in batteries.

It’s often argued that the West innovates while China imitates. However, China also leads in cleantech patents. Since 2000, China has increased its share of global clean energy patents from around 5 percent to over 75 percent. China is just as much the science laboratory of the energy transition as its factory.

Exhibit 1: Cleantech innovation and manufacturing

2. All three regions are racing up S-curves of deployment

When it comes to deployment, all three regions are racing up S-curves in the core clean technologies of solar, wind, and electric vehicles (EVs). But China is going the fastest. In 2023, China added more solar capacity and sold more electric vehicles in a single year than the United States has in 30 years.

Exhibit 2: The S-curve of deployment

3. China is the first major electrostate

One of the most underappreciated trends in energy today is the speed of China’s electrification. China is quietly electrifying all its end-use sectors; the United States and Europe are not. China has electrified at 10 percentage points per decade. China has leapfrogged the West to lead in electricity — the energy carrier of the 21^st century.

Exhibit 3: Electricity’s share of final energy

4. China is poised to lead the Renewable Age

After two centuries of the West leading five successive technological waves, China is poised to lead the world into the Renewable Age. To be the geographical center from which cleantech spreads; to push the ceiling of the possible upward; and to be the prime beneficiary of the wealth and geopolitical influence that follow from leading a technology revolution.

Exhibit 4: The Renewable Revolution as the sixth major technology revolution

5. The race has only just begun

However, the race is far from over. The energy transition is a race of races; a marathon made up of many sprints. The distance traveled so far is all but a fraction of the total track ahead. Only 40 percent of electricity is clean, 20 percent of energy is electrified, and 20 percent of car sales are electric. Grid-enhancing technologies and digitalization are just getting going. All the hard-to-electrify areas like aviation, steel, or cement are ripe for disruption.

Exhibit 5: Production today versus growth ahead

6. The United States and Europe are starting to compete

When you are behind in a race, the obvious thing to do is to run faster. The United States and Europe have started to do this, as evidenced by the passing of the Inflation Reduction Act and RepowerEU. The size of each is more in catch-up territory than a bid for leadership, but the signs are nevertheless promising; US and European cleantech supply chain investment is set to grow 16-fold in 2025 relative to 2022. But it is arguably more important to run smarter: to design leading regulatory structures, to unblock the grid, and to make smart, concentrated bets in the many areas of competition that are open now but won’t be for long.

Meanwhile, many other countries from around the world are getting into the race to lead the production and deployment of the energy technologies of the future. And that in turn increases investment and innovation, drives down costs, and makes the energy transition easier.

Exhibit 6: Expected increase in clean energy supply chain investment

Technology leadership is like ice hockey: you want to skate to where the puck is going, not where it has come from. The opportunities lie not in old fossil energy or in the races already lost, but in the many races ahead. There is a risk that the politics of the United States or Europe move backwards to view the energy transition as a threat, not an opportunity. Here the lesson from hockey is as clear as the lesson from history: those who cling to the past instead of embracing the future face a path of decline.