If Europe - and the West - continues with Net Zero it will become geopolitically dependent on China. This is the logical and inevitable outcome of continuing along the current trajectory, and is based purely on the cost structure of renewables: With renewables, energy is harvested from the environment. This means that, unlike with fossil fuels, there are no fuel costs, so the cost of the electricity produced depends largely on equipment cost. And, unlike nuclear, the supply chain isn’t geopolitically protected.
So we buy our wind turbines, batteries, solar panels from where it’s cheapest, as that means lower electricity costs. And right now that overwhelmingly means China. They make 80%+ of solar panels, 75%+ of batteries, and more than 60% of wind turbine components. And they are becoming increasingly dominant.
There’s a vicious cycle here: As we increase the proportion of energy that comes from renewables, we become increasingly sensitive to changes in the cost of renewable energy equipment.
So we become reliant on Chinese manufactured solar panels, batteries, wind turbines, because that’s where they’re cheapest. Any attempt to establish our own domestic manufacturing capacity will result in higher equipment costs, and therefore higher energy costs. This creates a vicious feedback loop: since our energy costs will now be higher - and energy cost is a major component of industrial competitiveness - the cost to produce our own equipment becomes higher still, making domestic manufacturing even less competitive.
Since relative energy costs are both economically crucial for industrial competitiveness and politically sensitive in a democracy, there will be massive internal resistance to adopting domestic renewable manufacturing. This resistance will only intensify as we electrify transport and heating (as our governments are pushing via electric vehicle and heat pump mandates), making energy costs even more visible to voters. The result is that if we continue along our current path we are destined to become dependent on China not just for renewable equipment, but for the very foundation of our energy security.
The potential for China to dominate is the result of their strategic long-term investment. They’ve massively subsidised renewable energy and battery industries. They’ve invested heavily in dirty coal to power their manufacturing because it’s cheap, and cheap means cheaper equipment.
Our politicians talk about regaining industrial and manufacturing leadership, about investing in renewables. But to suggest that we can regain manufacturing leadership through innovation alone is delusional arrogance. China’s massive scale advantages, government subsidies, head start, and lower environmental standards make producing at anywhere near their price extremely difficult without equally massive policy intervention. And they also innovate.
To give an example of what this leverage might look like, look at Ukraine. Germany became overly-dependent on Russian gas. An emboldened Russia invaded Ukraine, and the European sanction response was weak; even today - while sanctioning Russia - they continue to import Russian gas. Imagine, when we are further along this Net Zero path, what would happen if China were to invade Taiwan. Our first response would be to sanction China, but our energy costs - and EV costs - go through the roof as the pipeline for new equipment falters. What would be the appetite for continued sanctions?
Things that are not sustainable cannot be sustained. The geopolitical element of Net Zero can only be ignored for so long.