China’s “epic scale” of wind, solar and battery production capacity now presents a greater commercial challenge than ever to foreign manufacturers and governments that want the energy transition to equal more local jobs, said Wood Mackenzie.

China now accounts for almost 70% of global solar module production capacity and 50% for wind turbines, plus 90% of capacity in lithium-ion, according to a new Power Play report from the research group.

PV production capacity is already rising faster than global demand, and with wind manufacturing capability set to expand by another 42% over the next two years and battery by one and a half times, western rivals and policymakers face a “headache”, said Wood Mackenzie research director Alex Whitworth.

“This production of epic proportions is enough to meet what China needs to accelerate decarbonisation while supporting the ambitions of much of the rest of the world.”

“This also creates a political headache for many countries that have announced more ambitious 2030 emissions targets on the promise of jobs and prosperity. Achieving this without greater dependence on China looks harder than ever as its manufacturers expand capacity and drive down costs.

China's manufacturers are looking to further extend global reach.

“And with China’s power demand now cooling on the back of more manageable economic growth, local manufacturers are looking to further extend global reach.”

The Wood Mackenzie report comes as governments wrestle with the challenges of supporting explosive renewables growth without surrendering total dominance to China, prompting fierce debates over tariffs and local manufacturing in nations such as the US and India.

Principal analyst Xiaoyang Li added: “The sheer scale of its manufacturing capacity affords China a major competitive advantage.

“Despite increases in raw material prices since 2020, China’s massive expansion in clean energy manufacturing and ability to scale up output has seen its manufacturing costs decrease relative to its global competitors. Chinese wind turbine prices fell by 24% on the year in 2021 and will drop by a further 20% in 2022.”

However, Wood Mackenzie also flagged several areas where other markets could still steal a march on China, such as alternative battery technologies, carbon capture and green fuels.

Chinese players are also facing “increasing anti-China sentiment in western markets and will have to rebuild its brand as a responsible superpower,” said the report.

“To counter this, Chinese clean energy manufacturers are actively investing overseas to avoid both anti-China sentiment and the barriers to market entry that increasingly come with the ‘Made in China’ label.”