US-China solar power rivalry: A global battleground

US-China solar power rivalry: A global battleground

The global race for solar energy dominance has intensified, with the United States and China at the forefront of the competition. As this rivalry escalates, what once was a promising green industry has evolved into a battleground over national security, economic strategy, and environmental leadership. As both nations seek to assert their authority in renewable energy, the solar industry is now the epicenter of a multifaceted conflict that extends far beyond the energy sector.

Moreover, as political scientist Daniel Drezner astutely observed, the “national security bucket has grown into a trough,” with issues like climate change, artificial intelligence (AI), and critical minerals increasingly framed as security threats. Global supply chain vulnerabilities — magnified by geopolitical conflicts, pandemics, and natural disasters — have sharpened the US focus on China’s overwhelming dominance in solar energy, making it a pressing concern in the broader rivalry between the two superpowers.

China’s solar dominance

To understand the stakes involved, it is important to note that China’s dominance in the global solar market is unequivocal. According to the July 2024 Global Energy report, the amount of wind and solar power under construction in China is now nearly twice as much as the rest of the world combined. Notably, in 2023, China nearly doubled its utility-scale solar and wind capacity additions compared to any previous year. 

In the International Energy Agency’s (IEA) renewable energy report, China emerges as a leader in green energy expansion. This leadership is reflected in projections that indicate by 2030 the country will be responsible for more than half of the world’s renewables. 

Between March 2023 and March 2024, China installed more solar power than in the past three years combined, surpassing the total global solar installations for 2023. Nearly half of the distributed solar systems installed in 2023 were on residential rooftops, largely fueled by the country’s “whole county solar” model. This growth underscores the significance of distributed solar, which now represents 41% of China's total solar capacity and has grown faster than centralized solar since 2021, thanks to lower investment costs, ease of installation, and strong policy support.

Moreover, over the past decade, China’s massive investments have led to an 80% reduction in solar PV costs, enabling Chinese firms to dominate every stage of production, from polysilicon manufacturing to final module assembly. With this control, China can set global prices, often undercutting US manufacturers. This competitive edge stems from leveraging lower labor costs, subsidized land from local governments, extensive low-cost financing from state-owned banks, and cheap electricity, Chinese solar companies have solidified their cost competitiveness. Despite enduring financial difficulties and bankruptcies, these firms have perfected the process of building and equipping factories at minimal costs. Although Chinese companies such as Longi and Trina Solar have expanded operations in the US, key components like solar cells and polysilicon continue to be imported from China, Vietnam, and Malaysia. Central to this strategy is Beijing’s approach to localization, which enables Chinese companies to establish a strong presence in international markets. Thus, this tactic not only undermines local industries but also allows them to capitalize on favorable foreign policies, including US incentives.

The US is not the only country grappling with an influx of Chinese solar products. In a similar vein, Europe, the once-vibrant solar industry is experiencing a downturn, exemplified by the bankruptcy of Norwegian Crystals, a major solar panel materials producer, last summer. “We have not forgotten how China’s unfair trade practices crippled our solar sector — many emerging companies were squeezed out by heavily subsidized Chinese competitors,” said Ursula von der Leyen, president of the European Commission, in her State of the Union address last September.

In light of these challenges, the Inflation Reduction Act’s clean energy incentives, which may be boosting Chinese firms in the US solar market as they qualify for the same tax credits as domestic manufacturers, has raised concerns over who truly benefits from America’s clean energy incentives. In response, US companies such as First Solar have petitioned the government, seeking new antidumping and countervailing duties tariffs to protect against Chinese competition benefiting from both low-cost imports and American subsidies. 

In April, US Treasury Secretary Janet Yellen echoed these concerns, highlighting the growing issue of China’s excessive production capacity in sectors such as electric vehicles (EVs) and solar panels. Despite denials from Chinese state media and business leaders, including the CEO of Great Wall Motor International, non-Western nations such as Turkey have introduced tariffs on Chinese exports, particularly EVs. This move further complicates the geopolitical landscape, as in retaliation, China has lodged a case against Turkey at the World Trade Organization (WTO).

The US response: Industrial strategy and trade measures

To counteract these challenges, the Biden administration has pursued a solar strategy that blends domestic investments with trade measures. Under the Biden administration’s solar industrial strategy, the Department of Energy committed to halving solar electricity costs by 2030, increasing manufacturing capacity by 1 gigawatt per year, and ensuring 40% of the value of installed solar hardware is produced domestically.

The Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) are driving this effort through investments in solar research and development and manufacturing tax credits, which are now making large-scale US solar panel production more viable. This proactive approach has yielded significant results, as since the IRA’s passage in 2022, 49 new solar manufacturing projects have been announced. A 2023 Boston Consulting Group report projects that the IRA’s solar provisions could lower the cost of US-made modules by 25–40 percent compared to imports.

In a testament to this momentum, the US is witnessing a record surge in solar capacity, fueled by substantial public and private investments. In Q1 2024, solar installations jumped 21% compared to the previous year, driving total capacity beyond 100 GW. According to the Solar Energy Industries Association (SEIA), there are approximately 5 million solar projects in progress, with expectations to double to 10 million in the next six years. By 2034, solar installations are projected to triple, positioning solar as the dominant power source by 2050. Nonetheless, a joint study by Wood Mackenzie and SEIA points to a parallel surge in module imports into the U.S. over the past year.

Ironically, these efforts have attracted major Chinese solar panel manufacturers — Longi, Trina, Jinko, JA, Runergy, Boviet, and Hounen — who are expanding into the US, lured by the clean energy subsidies under the IRA. Chinese solar manufacturers in the United States emphasize panel assembly, with core components still imported from China, Vietnam, and Malaysia. Officials in states such as Texas, Arizona, Ohio, and North Carolina have been supportive of Chinese firms establishing factories, seeing them as vital job creators. Chinese investment could accelerate the growth of the American domestic solar manufacturing sector and generate jobs, benefiting from the extensive experience Chinese companies have in factory construction and supply chain management. Despite this, concerns persist that these investments might solidify US reliance on Chinese solar components. 

Against this backdrop, this year, the Biden administration’s tariff increases have included a 50% hike on photovoltaic solar cells, in addition to a 100% levy on electric vehicles (EVs), and a 25% duty on lithium-ion EV batteries. In May 2024, the White House lifted a two-year tariff exemption on double-sided solar panels, a measure previously allowing Chinese firms to bypass some trade restrictions. The administration reinstated tariffs on Chinese panels manufactured in Southeast Asia and made it easier for US projects to claim subsidies when using American-made products. This was followed in July by the introduction of a bipartisan bill, The American Tax Dollars for American Solar Manufacturing Act, aiming to prevent Chinese solar panel manufacturers from claiming subsidies for their American factories — proposed legislation over which the US solar industry itself appears divided. These strategic decisions signal a stronger commitment to fostering domestic production, although the impact on Chinese dominance remains to be seen.

Balancing solar growth and national security

In summary, the ongoing competition between the US and China in the solar industry reflects a larger tension between the urgent need for renewable energy and national security concerns. On one side, US lawmakers recognize the critical importance of transitioning to renewable energy, with solar poised to become the leading power source by 2050. However, the dependence on Chinese imports for this transition poses significant risks. As Treasury Secretary Yellen emphasized, China’s excess manufacturing capacity in solar panels, EVs, and batteries threatens US industries and supply chains.

This situation is further complicated by the history of the solar trade war, which underscores this tension. In the 2010s, the US imposed high tariffs on Chinese solar imports, while China retaliated by targeting American polysilicon producers. This trade conflict enabled China’s solar sector to flourish while US manufacturing struggled. Despite recent developments, although the Biden administration’s solar industrial strategy, supported by the IRA and CHIPS and Science Act, is reviving US solar production, experts warn that stricter trade measures may be necessary to prevent continued American reliance on Chinese imports. 

The dilemma facing the US is vividly illustrated by a new wave of tariffs implemented by the Biden administration in spring 2022, targeting Chinese solar manufacturers that have relocated to Southeast Asia to evade anti-dumping charges. In late March that year, the administration began investigating a complaint from Auxin Solar, a small manufacturer in California, which alleged that these companies were sidestepping trade restrictions. The immediate response from the US solar industry was harsh, with trade groups labeling the investigation as a “disaster” and “devastating,” arguing it would “effectively freeze” solar development at a critical moment for renewable energy demand. The backlash prompted the administration to issue a two-year executive waiver, although this pause was lifted this past June. This conflict underscores the competing interests of domestic solar manufacturers and project developers. Some manufacturing advocates celebrated the crackdown on unfair Chinese trade practices, while clean energy supporters warned of higher prices and slower solar deployments, with the Solar Energy Industries Association (SEIA) highlighting the risks to the livelihoods of hundreds of thousands of Americans and to US clean energy expansion.

China’s internal challenges

The narrative from Washington often points to “unfair trade practices” as the reason for China’s dominance in the solar industry. However, this narrative oversimplifies a complex reality. China’s growth in renewable energy can be traced back to strategic investments made in the mid-2000s, fueled by policymakers’ recognition of the need to address its status as the world’s largest polluter, particularly in the eyes of vulnerable nations. Domestically, the escalating pollution crisis and increasing public discontent were pressing issues for Beijing. Chinese policymakers identified an opportunity to drive technological innovation while tackling environmental challenges, aligning with the global imperative to reduce emissions. Throughout its impressive ascent, China showed unwavering support for renewable energy, while the US and Europe scaled back their solar subsidies.

Amid a slumping real estate market, China is looking to solar energy and other emerging industries to revive its slowing economy. Xi Jinping has identified these sectors as essential “new productive forces” to shape China’s economic trajectory. Nonetheless, heavy state-driven investments and tepid household spending have resulted in many industries producing more than domestic demand can accommodate.

Today, although China remains the global leader in solar power, its industry is not without internal struggles. In fact, China’s vast solar industry is experiencing a period of upheaval. The China Photovoltaic Industry Association has raised concerns that local governments are wasting money by investing in unsustainable solar panel factories to boost employment. In response, the association has called on Beijing to limit such investments. In July, the industry ministry released draft rules aimed at curbing overcapacity, though these regulations remain non-binding and subject to change, leaving uncertainty about how the issue will be resolved.

Financial challenges are also becoming more evident, with leading Chinese solar manufacturers reporting losses in early 2024 due to increased competition within the industry. These challenges raise questions about the long-term sustainability of China’s solar dominance. However, Beijing’s global strategy of establishing manufacturing bases abroad, including in the US, continues to complicate the competitive landscape.

The Road Ahead: Navigating trade and energy transition

The US-China rivalry in solar energy reflects the broader economic and strategic competition between the two countries. While the US strives to strengthen its domestic industry through tariffs and subsidies, China continues to dominate through scale and cost efficiency. Washington faces a difficult balancing act: accelerating the green transition without becoming overly dependent on Chinese imports. Stricter trade measures may protect US companies but could also drive-up solar panel prices, potentially slowing the deployment of renewable energy.

As solar power continues its rapid expansion, both nations will need to navigate the complex intersection of economic strategy, national security, and environmental responsibility. The solar trade war is not merely about technology and energy; it is a pivotal chapter in the ongoing struggle for global influence.

Ultimately, the race to lead in solar power will hinge on more than just trade wars and tariffs. It will require comprehensive strategies that balance economic growth, national security, and the global push for sustainability. Both the US and China have much at stake, and the outcome of this solar rivalry will have far-reaching consequences for the future of energy and geopolitics.