The evolution of China’s clean energy sector used to be based on a technology catch-up approach, which meant secondary innovation based on imported technologies. Daisy Chi at ECECP looks at the IEA’s recent report, “Tracking Clean Energy Innovation: Focus on China”, to conclude that the nation is now a major force in clean energy innovation. Decades of innovation-focussed policies, strong funding support, institutional reforms, big targets and big home markets are now bearing fruit. Performance breakthroughs in solar PV and EV batteries are at the forefront. International patents are on the rise. China is now second only to the USA for spending on energy research and development (R&D). Though much of that money is spent on fossil fuel R&D, there is a growing focus on cleaner solutions. The IEA notes that international collaboration has been at the core of China’s innovation strategy, learning through joint ventures, investing abroad, or acquiring overseas firms. As Chi reminds us, innovation matters: as many projections point out, half of the emissions savings needed globally must come from technologies that are currently at the demonstration or prototype stage.
Within just a few short years, clean energy technologies in China have moved from the margins to take up centre stage in the nation’s carbon neutrality vision. Thanks to policies increasingly focused on technology innovation, strong support for funding and resources and institutional reforms, China has evolved into a global energy innovator. The IEA’s recent report – Tracking Clean Energy Innovation: Focus on China – offers a detailed survey of China’s clean energy innovation developments. This article presents some of the key points raised at the launch event in China, co-hosted in September by ECECP and the IEA.
Over the past few decades, China has attached great importance to the development of clean energy as a key lever to boost productivity and bring about sustainable development. By the end of June 2022, renewable energy installed generation capacity had reached 1.1 TW in China, accounting for 45% of the capacity mix. China’s grid-connected wind and solar capacity has rocketed 90-fold between 2012-21, and it now represents the leading market for wind and solar. Despite the impact of Covid-19, the development of renewables has shown strong resilience: newly installed generation capacity maintained double digit growth in the first half of 2022, accounting for more than 80% of overall new capacity.
The rapid growth of China’s clean energy development has been supported by its huge production capacity. Within two decades, China has become the leading manufacturer of renewable power equipment. According to Fang Xiaosong, Director of International Affairs Department of Electric Power Planning and Engineering Institute (EPPEI), Chinese companies supply about 70% of PV and 50% of wind equipment globally, making China a key player in the world’s energy transition.
From ‘Made in China’ to ‘Created in China’
China is widely recognised as the ‘World’s Factory’. While ‘Made in China’ used to be a synonym for cheap products, this stereotypical image has undergone radical change, thanks to the country’s focus on technological development and backing for home-grown technology innovation. From solar PV and EV batteries to third generation nuclear reactors and the Experimental Advanced Superconducting Tokamak (EAST) nuclear fusion reactor, Chinese clean innovations are revolutionising the energy markets.
Behind this transformation lies China’s improving innovative capacity, which can be partially explained by the emphasis on patenting and research output over the past few decades. The IEA report ‘Tracking Clean Energy Innovation: Focus on China’ shows that the number of patents relating to energy in China has increased nearly 40-fold between 2000 and 2020.
Quality has also improved. There has been a boom in international patents since the start of the decade, led in particular by strategic technologies such as batteries, solar PV and EV. China’s share of international patenting is now ahead of the US and Europe, and equal with Japan. This reflects a strengthened global presence in energy innovation and a growing awareness of the need to protect homegrown innovation.
Academic and research output
Another sign that China’s clean energy innovation has become fully developed is its academic and research output. The innovation output of China’s research institutions and universities, especially in the fields of natural sciences and new energy technology, ranks among the top in the world. A recent energy-specific bibliometric research report jointly published by Chinese Academy of Sciences and Springer Nature shows that China accounted for more than 25% of global publications between 2015 and 2019 in fields such as solar, wind, biomass, geothermal, nuclear, hydrogen, energy storage and energy internet. The statistic is evidence of China’s burgeoning bank of knowledge relating to clean tech.
The vitality of China’s innovation in clean energy did not develop overnight: it is the result of decades of policy support built on robust institutional foundations, more resource investment in technology R&D, strong marketing pull levers, and most importantly close cooperation with global partners.
The creation of a solid institutional foundation for innovation began decades ago
Over recent years, the Chinese government has attached great importance to the development of clean energy, and has provided solid legal foundations to support energy innovation. Gao Hu, Director General of Energy Economics and Development Strategy Centre at NDRC Energy Research Institute, notes that since China’s Renewable Law came into force in 2006, development of its renewable energy industry has been guided by its Mid- and Long-term Plan for Renewable Energy. This long-term vision has been implemented by means of successive Five-Year Plans (FYPs), along with associated action plans and guidelines.
These FYPs and affiliated policy documents not only set clear priorities and timescales for China’s energy innovation, catering for the realities of industry development, but also map out favourable industrial policies that support the flourishing of clean technologies and industries. They provide clear directions for innovation activities and reassurance for investors from the business sector.
In the 14th FYP period (2021-25), the key policy documents released so far, including 14th FYP for Energy Technology Innovation and the newly introduced sci-tech implementation plan supporting the carbon targets, show an increasing focus on clean energy innovation as a means of meeting China’s dual carbon targets. While the technology innovation plan directly focuses on detailed measures to promote innovation of the energy sector, the sci-tech plan features ten specific actions across different sectors to promote technological breakthroughs and innovation in low-carbon transition.
Together, these documents are facilitating the strong momentum behind clean innovation. According to Jean-Baptiste Le Marois, Energy Technology and Innovation Analyst at IEA, these overarching plans, coupled with China’s coordinated decision-making process, allow the country to ‘quickly align efforts from different actors, public, private and academia for example, so that everyone works towards national priorities, and this is a key strength in China’.
Substantial flows of resource into innovation
The process of bringing an innovative clean-tech from the research lab to the mass market can be a long one, and favourable policy framework alone cannot guarantee its success. Strong support from public and private funding, and R&D input, are vital as a new technology matures.
It has been shown that government R&D spending in a given field or industry, especially when sustained over long periods, correlates with future innovation in related fields. According to IEA and Mission Innovation statistics, China is now second only to the USA for spending on energy research and development (R&D).
Further energy R&D funding growth is now likely: during the 14th FYP it is set to grow 7% annually. In 2020, China invested USD 8.4 billion of public funds into energy innovation, and of this, the share taken by low-carbon budgets has risen to almost 50%. Although the country does still allocate substantial funds to R&D in fossil-fuel related technologies, the focus is now clearly on cleaner, efficient and flexible use of fossil fuels, in line with the national target of carbon neutrality.
Private investment is supplementing the huge sums of public money. IEA estimates of R&D spending by globally listed companies suggest that Chinese companies–state-owned, private or with mixed ownership–spend more on energy R&D than in any other country. In recent years, China has become a clean energy venture capital powerhouse, notably led by electric transport start-ups. These start-ups have reaped the benefits of support from government, state-owned enterprises and universities, with the latter injecting abundant well-educated R&D talent into the sector. These success stories open significant opportunities to position the country in global supply chains for EVs, and could provide a template for other low-carbon energy technologies.
Strong “marketing pull levers” for innovation
China’s unique market and economic characteristics have enabled the development of effective marketing pull levers to promote innovation. The IEA research demonstrates that China’s huge domestic market size, top-down implementation approach, export-oriented manufacturing, availability of cheap capital for industry development, and comprehensive industry-wide strategies all constitute incentives for innovators to keep developing new, better and cheaper technologies, and trigger feedback loops from users back to innovators.
As clean energy technologies are often costly and technically difficult at the initial stage, a lot of investment and breakthroughs are needed at this point. According to Gao Hu, China attaches great importance to clean energy demonstration projects as a key means of creating a domestic market in a project’s early stages. Various demonstration initiatives, such as ‘Golden Sun’ in distributed solar and ‘10 City 1000 NEV’ for deploying new energy vehicles, have opened up significant business opportunities that have enabled these technologies to develop rapidly at larger scale.
In addition, local governments in China are highly involved in the creation of a clean energy market. They have been taking integrated measures based on local conditions to implement national low-carbon strategies. This means that innovative clean technologies can be tested in diverse situations, which has made a significant contribution to the overall maturing and industrialisation of these technologies.
Where market creation interventions alone have not been enough to stimulate innovation, China has also established comprehensive industry-wide strategies to promote the rapid development of clean energy-related manufacturing industries, which help to bring down overall production costs further, and to encourage subsequent technology improvements.
International cooperation at the core
China’s approach to clean energy used to be based on a technology catch-up approach, which would see secondary innovation based on imported technologies. However, with the growing R&D support for innovation, this situation has changed. Today, China has proactive and close collaborations with international innovators.
As observed by the IEA, international collaboration has been at the core of China’s innovation strategy in the past decades, by learning through joint ventures, investing abroad, or acquiring overseas firms. By collaborating with international partners, China’s domestic innovation capabilities have seen steady improvement.
A classic case in point is the solar PV industry in China. China has successfully moved from being a technology importer to a global innovator. The start of its innovation journey was its development work with foreign universities and this was followed by joint ventures and domestic corporate partnerships, which further helped to achieve economies of scale and cost-based competition for export markets. China has now evolved into the global centre of PV innovation systems, with Chinese manufacturers regularly breaking the conversion efficiency records and making an increasingly important contribution to global patenting.
In recent years, China has proactively engaged in global innovation networks such as IEA Technology Collaboration Programmes, Mission Innovation and the Clean Energy Ministerial. According to Fang Xiaosong, China has established cooperative relationships with more than 30 international organisations and is working with over 100 countries and regions on clean energy projects.
Despite the strong engagement in international energy innovation partnerships, IEA research has found fewer collaborations between Chinese researchers and international peers in terms of filing for co-patented inventions or co-publishing scientific papers. It is clear that more effort will be needed to deepen cooperation on innovation.
Much hope rests on accelerating clean energy innovation
Clean energy innovation is key to delivering the rapid transition needed to meet global climate targets, against a backdrop of rising policy ambitions and a changing technology landscape. Looking forward, about half of the emissions savings necessary will come from technologies that are currently at demonstration or prototype stage. In addition, many of the clean energy technologies that are available today, such as offshore wind, new energy vehicles, green hydrogen and certain applications of CCUS, will need an innovative boost to bring down costs and accelerate deployment.
China’s improving ability to innovate in low-carbon energy technologies is having an important impact on the course of the global energy transition. The country has grown into a global manufacturing powerhouse in several key technology sectors, including solar PV, wind turbines and electric vehicles. These Chinese stories of clean energy innovation illustrate some of the key evolving features of China’s innovation ecosystem, which offer hope to global innovation efforts. They prove that faster innovation can be achieved where policy support is aligned, when targeted resources come from public and private sectors, and with enhanced international cooperation.
In the future, clean energy innovation will continue to play a crucial role in meeting China’s climate objectives and especially in some hard-to-abate sectors such as heavy industry and long distance transport. Here, there is a limited array of available decarbonisation tools, and many more breakthrough innovations are still needed.
This article was first published in the EU-China Energy Magazine – September Issue, available in English and Chinese, and is published here with permission
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